Transportation Law

Choco Notes
BA Finance v. CA ................................................. 138
State Regulation art. 1765........................................... 143

Contents

Fisher v. Yangco Steamship ................................... 143

Laws applicable .............................................................. 1

Pantranco v. CA ...................................................... 155

Art. 1753 ..................................................................... 1

PAL v. CAB ........................................................... 161

PAL v. CA .................................................................. 1

Can a common carrier become a private carrier? ....... 169

American Home Insurance v. CA ............................... 5

Home Insurance v. American ................................. 169

Contract of carriage......................................................... 9

Arada v. CA ............................................................ 171

British airways vs. CA ................................................ 9

Planters Products v. CA .......................................... 177

Definition of common carrier Art. 1732 ....................... 14

Loadstar Shipping v. CA ........................................ 183

De Guzman v. CA ..................................................... 14
Bascos v. CA ............................................................. 18
National Steel v. CA ................................................. 24
Fabre v. CA ............................................................... 40

Laws applicable

First Philippine Pipeline v. CA ................................. 46

Calvo v. UCPB.......................................................... 51
FGU Insurance v. Sarmiento ..................................... 56
Philamgen v. PKS Shipping ...................................... 60
Asia Lighterage v. CA .............................................. 63
Crisostomo v. CA...................................................... 68

Art. 1753
PAL v. CA
Republic

of

the

Philippines

SUPREME

COURT

Manila

Schmitz Transport v. TVI ......................................... 73

Loadmaster v. Glodel ................................................ 80

FIRST DIVISION

Nature and Basis of Liability/Breach of Contract art.

1733............................................................................... 87
Cangco v. Manila Railroad ....................................... 87

G.R. No. 92501 March 6, 1992

Medina v. Cresencia.................................................. 95
PAL v. CA ................................................................ 97

PHILIPPINE

AIR

LINES, petitioner,

vs.

DOH v. Lorenzo Shipping ...................................... 108

HON.

Northwest Airlines v. Chiong ................................. 112

CO, respondents.

COURT

OF

APPEALS

and

ISIDRO

Aboitiz v. ICNA ...................................................... 119

Philippines First v. Wallem..................................... 129
Liability of registered owner ....................................... 135

GRIO-AQUINO, J.:

Benedicto v. IAC .................................................... 135

1

Transportation Law
Choco Notes
This is a petition for review of the decision dated July 19,

corresponding to the nine luggages, i.e.,

1989 of the Court of Appeals affirming the decision of the

including the one that was missing.

Regional Trial Court of Pasay City which awarded P72,766.02

as damages and attorney's fees to private respondent Isidro Co

The incontestable evidence further shows

for the loss of his checked-in baggage as a passenger of

that plaintiff lost luggage was a Samsonite

petitioner airline.

suitcase measuring about 62 inches in

length,

worth

about

various

US$200.00
personal

and

The findings of the trial court, which were adopted by the

containing

effects

appellate court, are:

purchased by plaintiff and his wife during

their stay in the United States and similar

"At about 5:30 a.m. on April 17, 1985,

other items sent by their friends abroad to be

plaintiff [Co], accompanied by his wife and

given as presents to relatives in the

son, arrived at the Manila International

Philippines. Plaintiff's invoices evidencing

Airport aboard defendant airline's PAL

their purchases show their missing personal

Flight

Francisco,

effects to be worth US$1,243.01, in addition

California, U.S.A. Soon after his embarking

to the presents entrusted to them by their

(sic), plaintiff proceeded to the baggage

friends which plaintiffs testified to be worth

retrieval area to claim his checks in his

about US$500.00 to US$600.00 (Exhs. "D",

possession. Plaintiff found eight of his

"D-1", to "D-17"; tsn, p. 4, July 11, 1985;

luggage, but despite diligent search, he

pp. 5-14, March 7, 1986).

No.

107

from San

failed to locate ninth luggage, with claim

check number 729113 which is the one in

Plaintiff on several occasions unrelentingly

question in this case.

called at defendant's office in order to

pursue his complaint about his missing

"Plaintiff

then

immediately

notified

luggage but no avail. Thus, on April 15,

defendant company through its employee,

1985, plaintiff through his lawyer wrote a

Willy Guevarra, who was then in charge of

demand letter to defendant company though

the PAL claim counter at the airport. Willy

Rebecca V. Santos, its manager, Central

Guevarra, who testified during the trial court

Baggage Services (Exhs. "B" & "B-1"). On

on April 11, 1986, filled up the printed form

April 17, 1985, Rebecca Santos replied to

known as a Property Irregularity Report

the demand letter (Exh. "B") acknowledging

(Exh. "A"), acknowledging one of the

"that to date we have been unable to locate

plaintiff's luggages to be missing (Exh. "A-

your client's (plaintiff's) baggage despite our

1"), and signed after asking plaintiff himself

careful search" and requesting plaintiff's

to sign the same document (Exh. "A-2"). In

counsel to "please extend to him our sincere

accordance with this procedure in cases of

apologies for the inconvenience he was

this nature, Willy Guevarra asked plaintiff to

caused by this unfortunate incident" (Exh.

surrender to him the nine claim checks

"C"). Despite the letter (Exh. "C"), however,

defendants never found plaintiff's missing

Transportation Law
Choco Notes
luggage or paid its corresponding value.

damage to checked-in baggage to US$20.00

Consequently, on May 3, 1985, plaintiff

based on weight; and

filed his present complaint against said

3. in awarding private respondent Isidro Co

defendants. (pp. 38-40, Rollo.)

actual and exemplary damages, attorney's

Co sued the airline for damages. The Regional Trial Court of

fees, and costs.

Pasay City found the defendant airline (now petitioner) liable,

and rendered judgment on June 3, 1986, the dispositive

The first and third assignments of error raise purely factual

portion of which reads:

issues which are not reviewable by this Court (Sec. 2, Rule 45,
Rules of Court). The Court reviews only questions of law

WHEREFORE,

judgment

is

hereby

which must be distinctly set forth in the petition. (Hodges vs.

rendered sentencing defendant Philippine

People, 68 Phil. 178.) The probative value of petitioner's

Airlines, Inc. to pay plaintiff Isidro Co:

retrieval report was passed upon by the Regional Trial Court

of Pasay City, whose finding was affirmed by the Court of

1) P42,766.02 by way of actual damages;

Appeals as follows:

2) P20,000.00 by way of exemplary

In this respect, it is further argued that

damages;

appellee should produce his claim tag if he

had not surrendered it because there was no

3) P10,000.00 as attorney's fees;

baggage received. It appeared, however, that

appellee surrendered all the nine claim

all in addition to the costs of the suit.

checks corresponding to the nine luggages,

"Defendants'

counterclaim

is

hereby

dismissed for lack of merit."

including the one that was missing, to the

PAL

officer

after

accomplishing

the

Property, Irregularity Report. Therefore, it

(p. 40, Rollo.)

could not be possible for appellee to produce

the same in court. It is now for appellant

On appeal, the Court of Appeals affirmed in toto the trial

airlines to produce the veracity of their

court's award.

Baggage Retrieval Report by corroborating

evidence other than testimonies of their

In his petition for review of the Court of Appeal's decision,

petitioner alleges that the appellate court erred:
1. in affirming the conclusion of the trial
court that the petitioner's retrieval baggage
report was a fabrication;
2. in not applying the limit of liability under

employees. Such document is within the

control of appellant and necessarily requires
other corroborative evidence. Since there is
no compelling reason to reverse the factual
findings of the lower court, this Court
resolves not to disturb the same. (p.
41, Rollo.)

the Warsaw Convention which limits the

liability of an air carrier of loss, delay or

Transportation Law
Choco Notes
Whether or not the lost luggage was ever retrieved by the

diligence in the vigilance over the goods and

passenger, and whether or not the actual and exemplary

for the safety of the passengers transported

damages awarded by the court to him are reasonable, are

by them, according to all the circumstances

factual issues which we may not pass upon in the absence of

of each case.

special circumstances requiring a review of the evidence.

Art. 1735. In all cases other than those
In Alitalia vs. IAC (192 SCRA 9, 18, citing Pan American

mentioned in Nos. 1, 2, 3, 4 and 5 of the

World Airways, Inc. vs. IAC 164 SCRA 268), the Warsaw

preceding article if the goods are lost,

Convention limiting the carrier's liability was applied because

destroyed or deteriorated, common carriers

of a simple loss of baggage without any improper conduct on

are presumed to have been at fault or to have

the part of the officials or employees of the airline, or other

acted negligently, unless they prove that

special injury sustained by the passengers. The petitioner

they observed extraordinary diligence as

therein did not declare a higher value for his luggage, much

required in article 1733.

less did he pay an additional transportation charge.

Art. 1753. The law of the country to which
Petitioner contends that under the Warsaw Convention, its

the goods are to be transported shall govern

liability, if any, cannot exceed US $20.00 based on weight as

the liability of the common carrier for their

private respondent Co did not declare the contents of his

loss, destruction or deterioration.

baggage nor pay traditional charges before the flight (p. 3, tsn,
Since the passenger's destination in this case was the

July 18, 1985).

Philippines, Philippine law governs the liability of the carrier

We find no merit in that contention. In Samar Mining

for the loss of the passenger's luggage.

Company, Inc. vs. Nordeutscher Lloyd (132 SCRA 529), this

In this case, the petitioner failed to overcome, not only the

Court ruled:

presumption, but more importantly, the private respondent's

The liability of the common carrier for the

evidence, proving that the carrier's negligence was the

loss, destruction or deterioration of goods

proximate cause of the loss of his baggage. Furthermore,

transported from a foreign country to the

petitioner acted in bad faith in faking a retrieval receipt to bail

Philippines is governed primarily by the

itself out of having to pay Co's claim. The Court of Appeals

New Civil Code. In all matters not regulated

therefore did not err in disregarding the limits of liability

by said Code, the rights and obligations of

under the Warsaw Convention.

common carriers shall be governed by the

Code of Commerce and by Special Laws.

The award of exemplary damages and attorney's fees to the

private respondent was justified. In the cases ofImperial

The provisions of the New Civil Code on common carriers are

Insurance, Inc. vs. Simon, 122 Phil. 189 and Bert Osmea and

Articles 1733, 1735 and 1753 which provide:

Associates vs. CA, 120 SCRA 396, the appellant was awarded
attorney's fees because of appellee's failure to satisfy the

Art. 1733. Common carriers, from the nature

former's just and valid demandable claim which forced the

of their business and for reasons of public

appellant to litigate. Likewise, in the case of Phil. Surety Ins.

policy, are bound to observe extraordinary

Transportation Law
Choco Notes
Co., Inc. vs. Royal Oil Products, 102 Phil. 326, this Court

The undisputed facts of the case are follows:

justified the grant of exemplary damages and attorney's fees to

the petitioner's failure, even refusal, to pay the private

Both petitioner American Home Assurance Co. and the

respondent's valid claim.

respondent

National

Marine

Corporation

are

foreign

corporations licensed to do business in the Philippines, the

WHEREFORE, the petition for review is DENIED for lack of

former through its branch. The American Home Assurance

merit. Costs against the petitioner.

Company (Philippines), Inc. and the latter through its branch.

The National Marine Corporation (Manila) (Rollo, p. 20,

SO ORDERED.

Annex L, p.1).

Narvasa, C.J. and Medialdea, JJ., concur.

That on or about June 19, 1988, Cheng Hwa Pulp Corporation
shipped 5,000 bales (1,000 ADMT) of bleached kraft pulp
from Haulien, Taiwan on board "SS Kaunlaran", which is
owned and operated by herein respondent National Marine
American Home Insurance v. CA

Corporation with Registration No. PID-224. The said

shipment was consigned to Mayleen Paper, Inc. of Manila,

G.R. No. 94149 May 5, 1992

which insured the shipment with herein petitioner American

Home Assurance Co. as evidenced by Bill of Lading No.

AMERICAN HOME ASSURANCE, COMPANY, petitioner,

HLMN-01.

vs.
THE COURT OF APPEALS and NATIONAL MARINE

On June 22, 1988, the shipment arrived in Manila and was

CORPORATION

discharged into the custody of the Marina Port Services, Inc.,

and/or

NATIONAL

MARINE

CORPORATION (Manila), respondents.

for eventual delivery to the consignee-assured. However, upon

delivery of the shipment to Mayleen Paper, Inc., it was found
that 122 bales had either been damaged or lost. The loss was
calculated to be 4,360 kilograms with an estimated value of

PARAS, J.:

P61,263.41.

This is a petition for review on certiorari which seeks to annul

Mayleen Paper, Inc. then duly demanded indemnification from

and set aside the (a) decision 1 dated May 30, 1990 of the

respondent National Marine Corporation for the aforesaid

Court of Appeals in C.A. G.R. SP. No. 20043 entitled

damages/losses in the shipment but, for apparently no

"American Home Assurance Company v. Hon. Domingo D.

justifiable reason, said demand was not heeded (Petition, p. 4).

Panis, Judge of the Regional Trial Court of Manila, Branch 41

and National Marine Corporation and/or National Marine

As the shipment was insured with petitioner in the amount of

Corporation (Manila)", dismissing petitioner's petition for

US$837,500.00, Mayleen Paper, Inc. sought recovery from the

certiorari, and (b) resolution 2 dated June 29, 1990 of the

former.

Court

documentation, American Home Assurance paid Mayleen

of

Appeals

reconsideration.

denying

petitioner's

motion

for

Upon

demand

and

submission

of

proper

Paper, Inc. the adjusted amount of P31,506.75 for the

Transportation Law
Choco Notes
damages/losses suffered by the shipment, hence, the former

The record shows that last August 8, 1989, defendant through

was subrogated to the rights and interests on Mayleen Paper,

counsel filed a motion to dismiss plaintiff's complaint.

Inc.
Resolving the said motion last September 18, 1989, the court
On June 6, 1989, the petitioner, as subrogee, then brought suit

ruled to defer resolution thereof until after trial on the merits.

against respondent for the recovery of the amount of

In the motion now under consideration, defendant prays for

P31.506.75 and 25% of the total amount due as attorney's fees,

the reconsideration of the order of September 18, 1989 and in

by filing a complaint for recovery of sum of money (Petition,

lieu thereof, another order be entered dismissing plaintiff's

p. 4).

complaint.

Respondent, National Marine Corporation, filed a motion to

There appears to be good reasons for the court to take a

dismiss dated August 7, 1989 stating that American Home

second look at the issues raised by the defendant.

Assurance Company had no cause of action based on Article

848 of the Code of Commerce which provides "that claims for

xxx

xxx

xxx

averages shall not be admitted if they do not exceed 5% of the

interest which the claimant may have in the vessel or in the

It is not disputed defendants that the loss suffered by the

cargo if it be gross average and 1% of the goods damaged if

shipment is only .18% or less that 1% of the interest of the

particular average, deducting in both cases the expenses of

consignee on the cargo Invoking the provision of the Article

appraisal, unless there is an agreement to the contrary." It

848 of the Code of Commerce which reads:

contended that based on the allegations of the complaint, the

loss sustained in the case was P35,506.75 which is only .18%

Claims for average shall not be admitted if they do not exceed

of P17,420,000.00, the total value of the cargo.

five percent of the interest which the claimant may have in the
vessels or cargo if it is gross average, and one percent of the

On the other hand, petitioner countered that Article 848 does

goods damaged if particular average, deducting in both cases

not apply as it refers to averages and that a particular average

the expenses of appraisal, unless there is an agreement to the

presupposes that the loss or damages is due to an inherent

contrary. (Emphasis supplied)

defect of the goods, an accident of the sea, or a force majeure

or the negligence of the crew of the carrier, while claims for

defendant claims that plaintiff is barred from suing for

damages due to the negligence of the common carrier are

recovery.

governed by the Civil Code provisions on Common Carriers.

Decisive in this case in whether the loss suffered by the cargo
In its order dated November 23, 1989, the Regional Trial

in question is a "particular average."

Court sustained private respondent's contention. In part it

stated:

Particular average, is a loss happening to the ship, freight, or

cargo which is not be (sic) shared by contributing among all

Before the Court for resolution is a motion for reconsideration

those interested, but must be borne by the owner of the subject

filed by defendant through counsel dated October 6, 1989.

to which it occurs. (Black's Law Dictionary, Revised Fourth

Transportation Law
Choco Notes
Edition, p. 172, citing Bargett v. Insurance Co. 3 Bosw. [N.Y.]

there are errors of judgment subject to correction by certiorari

395).

as a mode of appeal but the appeal is to the Supreme Court

under Section 17 of the Judiciary Act of 1948 as amended by

as distinguished from general average which

Republic Act No. 5440. Otherwise stated, respondent Court

opined that the proper remedy is a petition for review on

is a contribution by the several interests engaged in the

certiorari with the Supreme Court on pure questions of law

maritime venture to make good the loss of one of them for the

(Rollo, p. 30).

voluntary sacrifice of a part of the ship or cargo to save the

residue of the property and the lives of those on board, or for

Hence, this petition.

extraordinary expenses necessarily incurred for the common

benefit and safety of all (Ibid., citing California Canneries Co.

In a resolution dated December 10, 1990, this Court gave due

v. Canton Ins. Office 25 Cal. App. 303, 143 p. 549-553).

course to the petition and required both parties to file their

respective memoranda (Rollo, p. 58).

From the foregoing definition, it is clear that the damage on

the cargo in question, is in the nature of the "particular

The procedural issue in this case is whether or not certiorari

average." Since the loss is less than 1% to the value of the

was the proper remedy in the case before the Court of

cargo and there appears to be no allegations as to any

Appeals.

agreement defendants and the consignee of the goods to the

contrary, by express provision of the law, plaintiff is barred

The Court of Appeals ruled that appeal is the proper remedy,

from suing for recovery.

for aside from the fact that the two orders dismissing the
complaint for lack of cause of action are final orders within

WHEREOF, plaintiff's complaint is hereby dismissed for lack

the meaning of Rule 41, Section 2 of the Rules of Court,

of cause of action. (Rollo, p. 27; Annex A, pp. 3-4).

subject petition raised questions which if at all, constituting

grave abuse of discretion correctible by certiorari.

The petitioner then filed a motion for reconsideration of the

order of dismissal but same was denied by the court in its

Evidently, the Court of Appeals did not err in dismissing the

order dated January 26, 1990 (supra).

petition for certiorari for as ruled by this Court, an order of

dismissal whether right or wrong is a final order, hence, a

Instead of filing an appeal from the order of the court a quo

proper subject of appeal, not certiorari (Marahay v. Melicor,

dismissing the complaint for recovery of a sum of money,

181 SCRA 811 (1990]). However, where the fact remains that

American Home Assurance Company filed a petition for

respondent Court of Appeals obviously in the broader interests

certiorari with the Court of Appeals to set aside the two orders

of justice, nevertheless proceeded to decide the petition for

or respondent judge in said court (Rollo, p. 25).

certiorari and ruled on specific points raised therein in a

manner akin to what would have been done on assignments of

But the Court of Appeals in its decision dated May 30, 1990,

error in a regular appeal, the petition therein was therefore

dismissed the petition as constituting plain errors of law and

disposed of on the merits and not on a dismissal due to

not grave abuse of discretion correctible by certiorari (a

erroneous choice of remedies or technicalities (Cruz v. I.A.C.,

Special Civil Action). If at all, respondent court ruled that

169 SCRA 14 (1989]). Hence, a review of the decision of the

Transportation Law
Choco Notes
Court of Appeals on the merits against the petitioner in this

observe extraordinary diligence in the vigilance over the

case is in order.

goods and for the safety of passengers transported by them

according to all circumstances of each case. Thus, under

On the main controversy, the pivotal issue to be resolved is the

Article 1735 of the same Code, in all cases other than those

application of the law on averages (Articles 806, 809 and 848

mentioned in Article 1734 thereof, the common carrier shall

of the Code of Commerce).

be presumed to have been at fault or to have acted negligently,

unless it proves that it has observed the extraordinary

Petitioner avers that respondent court failed to consider that

diligence required by law (Ibid., p. 595).

respondent National Marine Corporation being a common

carrier, in conducting its business is regulated by the Civil

But more importantly, the Court ruled that common carriers

Code primarily and suppletorily by the Code of Commerce;

cannot limit their liability for injury or loss of goods where

and that respondent court refused to consider the Bill of

such injury or loss was caused by its own negligence.

Lading as the law governing the parties.

Otherwise stated, the law on averages under the Code of

Commerce cannot be applied in determining liability where

Private respondent countered that in all matters not covered by

there is negligence (Ibid., p. 606).

the Civil Code, the rights and obligations of the parties shall
be governed by the Code of Commerce and by special laws as

Under the foregoing principle and in line with the Civil Code's

provided for in Article 1766 of the Civil Code; that Article

mandatory requirement of extraordinary diligence on common

806, 809 and 848 of the Code of Commerce should be applied

carriers in the car care of goods placed in their stead, it is but

suppletorily as they provide for the extent of the common

reasonable to conclude that the issue of negligence must first

carriers' liability.

be addressed before the proper provisions of the Code of

Commerce on the extent of liability may be applied.

This issue has been resolved by this Court in National

Development Co. v. C.A. (164 SCRA 593 [1988]; citing

The records show that upon delivery of the shipment in

Eastern Shipping Lines, Inc. v. I.A.C., 150 SCRA 469, 470

question of Mayleen's warehouse in Manila, 122 bales were

[1987] where it was held that "the law of the country to which

found to be damaged/lost with straps cut or loose, calculated

the goods are to be transported persons the liability of the

by the so-called "percentage method" at 4,360 kilograms and

common carrier in case of their loss, destruction or

amounting to P61,263.41 (Rollo, p. 68). Instead of presenting

deterioration." (Article 1753, Civil Code). Thus, for cargoes

proof of the exercise of extraordinary diligence as required by

transported to the Philippines as in the case at bar, the liability

law, National Marine Corporation (NMC) filed its Motion to

of the carrier is governed primarily by the Civil Code and in

Dismiss dated August 7, 1989, hypothetically admitting the

all matters not regulated by said Code, the rights and

truth of the facts alleged in the complaint to the effect that the

obligations of common carrier shall be governed by the Code

loss or damage to the 122 bales was due to the negligence or

of Commerce and by special laws (Article 1766, Civil Code).

fault of NMC (Rollo, p. 179). As ruled by this Court, the filing

of a motion to dismiss on the ground of lack of cause of action

Corollary thereto, the Court held further that under Article

carries with it the admission of the material facts pleaded in

1733 of the Civil Code, common carriers from the nature of

the complaint (Sunbeam Convenience Foods, Inc. v. C.A., 181

their business and for reasons of public policy are bound to

Transportation Law
Choco Notes
SCRA 443 [1990]). Such being the case, it is evident that the

Monina P. Lee for private respondent.

Code of Commerce provisions on averages cannot apply.

On the other hand, Article 1734 of the Civil Code provides

that common carriers are responsible for loss, destruction or

NOCON, J.:

deterioration of the goods, unless due to any of the causes

enumerated therein. It is obvious that the case at bar does not

This is a petition for review on certiorari to annul and set aside

fall under any of the exceptions. Thus, American Home

the decision dated November 15, 1989 of the Court of Appeals

Assurance Company is entitled to reimbursement of what it

1 affirming the decision of the trial court 2 in ordering

paid to Mayleen Paper, Inc. as insurer.

petitioner British Airways, Inc. to pay private respondent First

International Trading and General Services actual damages,

Accordingly, it is evident that the findings of respondent Court

moral damages, corrective or exemplary damages, attorney's

of Appeals, affirming the findings and conclusions of the court

fees and the costs as well as the Resolution dated February 15,

a quo are not supported by law and jurisprudence.

1990 3 denying petitioner's Motion for Reconsideration in the

appealed decision.

PREMISES CONSIDERED, (1) the decisions of both the

Court of Appeals and the Regional Trial Court of Manila,

It appears on record that on February 15, 1981, private

Branch 41, appealed from are REVERSED; and (2) private

respondent First International Trading and General Services

respondent National Marine Corporation is hereby ordered to

Co., a duly licensed domestic recruitment and placement

reimburse the subrogee, petitioner American Home Assurance

agency, received a telex message from its principal ROLACO

Company, the amount of P31,506.75.

Engineering and Contracting Services in Jeddah, Saudi Arabia

to recruit Filipino contract workers in behalf of said principal.

SO ORDERED.

During the early part of March 1981, said principal paid to the
Contract of carriage

Jeddah branch of petitioner British Airways, Inc. airfare

tickets for 93 contract workers with specific instruction to

British airways vs. CA

transport said workers to Jeddah on or before March 30, 1981.

G.R. No. 92288 February 9, 1993

As soon as petitioner received a prepaid ticket advice from its
BRITISH AIRWAYS, INC., petitioner,

Jeddah branch to transport the 93 workers, private respondent

vs.

was immediately informed by petitioner that its principal had

THE HON. COURT OF APPEALS, Twelfth Division, and

forwarded 93 prepaid tickets. Thereafter, private respondent

FIRST INTERNATIONAL TRADING AND GENERAL

instructed its travel agent, ADB Travel and Tours. Inc., to

SERVICES, respondents.

book the 93 workers with petitioner but the latter failed to fly
said workers, thereby compelling private respondent to borrow

Quasha, Asperilla, Ancheta, Pea & Nolasco for petitioner.

money in the amount of P304,416.00 in order to purchase

airline tickets from the other airlines as evidenced by the cash

Transportation Law
Choco Notes
vouchers (Exhibits "B", "C" and "C-1 to C-7") for the 93
workers it had recruited who must leave immediately since the

On July 23, 1981, the counsel of private respondent sent

visas of said workers are valid only for 45 days and the

another letter to the petitioner demanding the latter to pay the

Bureau of Employment Services mandates that contract

amount of P350,000.00 representing damages and unrealized

workers must be sent to the job site within a period of 30 days.

profit or income which was denied by the petitioner.

Sometime in the first week of June, 1981, private respondent

On August 8, 1981, private respondent received a telex

was again informed by the petitioner that it had received a

message from its principal cancelling the hiring of the

prepaid ticket advice from its Jeddah branch for the

remaining recruited workers due to the delay in transporting

transportation of 27 contract workers. Immediatety, private

the workers to Jeddah. 5

respondent instructed its travel agent to book the 27 contract

workers with the petitioner but the latter was only able to book

On January 27, 1982, private respondent filed a complaint for

and confirm 16 seats on its June 9, 1981 flight. However, on

damages against petitioner with the Regional Trial Court of

the date of the scheduled flight only 9 workers were able to

Manila, Branch 1 in Civil Case No. 82-4653.

board said flight while the remaining 7 workers were rebooked

to June 30, 1981 which bookings were again cancelled by the

On the other hand, petitioner, alleged in its Answer with

petitioner without any prior notice to either private respondent

counterclaims that it received a telex message from Jeddah on

or the workers. Thereafter, the 7 workers were rebooked to the

March 20, 1981 advising that the principal of private

July 4,1981 flight of petitioner with 6 more workers booked

respondent had prepaid the airfares of 100 persons to transport

for said flight. Unfortunately, the confirmed bookings of the

private respondent's contract workers from Manila to Jeddah

13 workers were again cancelled and rebooked to July 7,

on or before March 30, 1981. However, due to the

1981.

unavailability of space and limited time, petitioner had to

return to its sponsor in Jeddah the prepaid ticket advice

On July 6, 1981, private respondent paid the travel tax of the

consequently not even one of the alleged 93 contract workers

said workers as required by the petitioner but when the receipt

were booked in any of its flights.

of the tax payments was submitted, the latter informed private

respondent that it can only confirm the seats of the 12 workers

On June 5, 1981, petitioner received another prepaid ticket

on its July 7, 1981 flight. However, the confirmed seats of said

advice to transport 16 contract workers of private respondent

workers were again cancelled without any prior notice either

to Jeddah but the travel agent of the private respondent booked

to the private respondent or said workers. The 12 workers

only 10 contract workers for petitioner's June 9, 1981 flight.

were finally able to leave for Jeddah after private respondent

However, only 9 contract workers boarded the scheduled

had bought tickets from the other airlines.

flight with 1 passenger not showing up as evidenced by the

Philippine Airlines' passenger manifest for Flight BA-020

As a result of these incidents, private respondent sent a letter

(Exhibit "7", "7-A", "7-B" and "7-C"). 6

to petitioner demanding compensation for the damages it had

incurred by the latter's repeated failure to transport its contract

Thereafter, private respondent's travel agent booked seats for 5

workers despite confirmed bookings and payment of the

contract workers on petitioner's July 4, 1981 flight but said

corresponding travel taxes.

10

Transportation Law
Choco Notes
travel agent cancelled the booking of 2 passengers while the

4.

Ordering the defendant to pay the plaintiff 30% of its

other 3 passengers did not show up on said flight.

total claim for and as attorney's fees; and

Sometime in July 1981, the travel agent of the private

5.

To pay the costs. 7

respondent booked 7 more contract workers in addition to the

previous 5 contract workers who were not able to board the

On March 13, 1986, petitioner appealed said decision to

July 4, 1981 flight with the petitioner's July 7, 1981 flight

respondent appellate court after the trial court denied its

which was accepted by petitioner subject to reconfirmation.

Motion for Reconsideration on February 28, 1986.

However on July 6, 1981, petitioner's computer system broke

On November 15, 1989, respondent appellate court affirmed

down which resulted to petitioner's failure to get a

the decision of the trial court, the dispositive portion of which

reconfirmation from Saudi Arabia Airlines causing the

reads:

automatic cancellation of the bookings of private respondent's

12 contract workers. In the morning of July 7, 1981, the

WHEREFORE, the decision appealed from is hereby

computer system of the petitioner was reinstalled and

AFFIRMED with costs against the appellant. 8

immediately petitioner tried to reinstate the bookings of the 12

workers with either Gulf Air or Saudi Arabia Airlines but both

On December 9, 1989, petitioner filed a Motion for

airlines replied that no seat was available on that date and had

Reconsideration which was also denied.

to place the 12 workers on the wait list. Said information was

duly relayed to the private respondent and the 12 workers

Hence, this petition.

before the scheduled flight.

It is the contention of petitioner that private respondent has no
After due trial on or on August 27, 1985, the trial court

cause of action against it there being no perfected contract of

rendered its decision, the dispositive portion of which reads as

carriage existing between them as no ticket was ever issued to

follows:

private respondent's contract workers and, therefore, the

obligation of the petitioner to transport said contract workers

WHEREFORE, in view of all the foregoing, this Court renders

did not arise. Furthermore, private respondent's failure to

judgment:

attach any ticket in the complaint further proved that it was

never a party to the alleged transaction.

1.

Ordering the defendant to pay the plaintiff actual

damages in the sum of P308,016.00;

Petitioner's contention is untenable.

2.

Private respondent had a valid cause of action for damages

Ordering defendant to pay moral damages to the

plaintiff in the amount of P20,000.00;

against petitioner. A cause of action is an act or omission of

one party in violation of the legal right or rights of the other. 9

3.

Ordering

the

defendant

to

pay

the

plaintiff

P10,000.00 by way of corrective or exemplary damages;

Petitioner's repeated failures to transport private respondent's

workers in its flight despite confirmed booking of said
workers clearly constitutes breach of contract and bad faith on

11

Transportation Law
Choco Notes
its part. In resolving petitioner's theory that private respondent

The third essential requisite of a contract is an object certain.

has no cause of action in the instant case, the appellate court

In this contract "to carry", such an object is the transport of the

correctly held that:

passengers from the place of departure to the place of

destination as stated in the telex.

In dealing with the contract of common carriage of passengers

for purpose of accuracy, there are two (2) aspects of the same,

Accordingly, there could be no more pretensions as to the

namely: (a) the contract "to carry (at some future time),"

existence of an oral contract of carriage imposing reciprocal

which contract is consensual and is necessarily perfected by

obligations on both parties.

mere consent (See Article 1356, Civil Code of the

Philippines), and (b) the contract "of carriage" or "of common

In the case of appellee, it has fully complied with the

carriage" itself which should be considered as a real contract

obligation, namely, the payment of the fare and its willingness

for not until the carrier is actually used can the carrier be said

for its contract workers to leave for their place of destination.

to have already assumed the obligation of a carrier. (Paras,

Civil Code Annotated, Vol. V, p. 429, Eleventh Ed.)

On the other hand, the facts clearly show that appellant was
remiss in its obligation to transport the contract workers on

In the instant case, the contract "to carry" is the one involved

their flight despite confirmation and bookings made by

which is consensual and is perfected by the mere consent of

appellee's travelling agent.

the parties.
xxx

xxx

xxx

There is no dispute as to the appellee's consent to the said

contract "to carry" its contract workers from Manila to Jeddah.

Besides, appellant knew very well that time was of the essence

The appellant's consent thereto, on the other hand, was

as the prepaid ticket advice had specified the period of

manifested by its acceptance of the PTA or prepaid ticket

compliance therewith, and with emphasis that it could only be

advice that ROLACO Engineering has prepaid the airfares of

used if the passengers fly on BA. Under the circumstances, the

the appellee's contract workers advising the appellant that it

appellant should have refused acceptance of the PTA from

must transport the contract workers on or before the end of

appellee's principal or to at least inform appellee that it could

March, 1981 and the other batch in June, 1981.

not accommodate the contract workers.

Even if a PTA is merely an advice from the sponsors that an

xxx

xxx

xxx

airline is authorized to issue a ticket and thus no ticket was yet

issued, the fact remains that the passage had already been paid

While there is no dispute that ROLACO Engineering

for by the principal of the appellee, and the appellant had

advanced the payment for the airfares of the appellee's

accepted such payment. The existence of this payment was

contract

never objected to nor questioned by the appellant in the lower

Engineering and the said contract workers were the intended

court. Thus, the cause or consideration which is the fare paid

passengers in the aircraft of the appellant, the said contract "to

for the passengers exists in this case.

carry" also involved the appellee for as recruiter he had to see

workers

who

were

recruited

for

ROLACO

to it that the contract workers should be transported to

ROLACO Engineering in Jeddah thru the appellant's

12

Transportation Law
Choco Notes
transportation. For that matter, the involvement of the appellee

said workers. It is undisputed that private respondent had

in the said contract "to carry" was well demonstrated when

consistently admitted that its principal had reimbursed all its

the appellant upon receiving the PTA immediately advised the

expenses.

appellee thereof. 10
Article 2199 of the Civil Code provides that:
Petitioner also contends that the appellate court erred in
awarding actual damages in the amount of P308,016.00 to

Except as provided by law or by stipulations, one is entitled to

private respondent since all expenses had already been

an adequate compensation only for such pecuniary loss

subsequently reimbursed by the latter's principal.

suffered by him as he has duly proved. Such compensation is

referred to as actual or compensatory damages.

In awarding actual damages to private respondent, the

appellate court held that the amount of P308,016.00

Furthermore, actual or compensatory damages cannot be

representing actual damages refers to private respondent's

presumed, but must be duly proved, and proved with

second cause of action involving the expenses incurred by the

reasonable degree of certainty. A court cannot rely on

latter which were not reimbursed by ROLACO Engineering.

speculation, conjecture or guesswork as to the fact and amount

However, in the Complaint 11 filed by private respondent, it

of damages, but must depend upon competent proof that they

was alleged that private respondent suffered actual damages in

have suffered and on evidence of the actual amount thereof. 13

the amount of P308,016.00 representing the money it

borrowed from friends and financiers which is P304,416.00

However, private respondent is entitled to an award of moral

for the 93 airline tickets and P3,600.00 for the travel tax of the

and exemplary damages for the injury suffered as a result of

12 workers. It is clear therefore that the actual damages private

petitioner's failure to transport the former's workers because of

respondent seeks to recover are the airline tickets and travel

the latter's patent bad faith in the performance of its obligation.

taxes it spent for its workers which were already reimbursed

As correctly pointed out by the appellate court:

by its principal and not for any other expenses it had incurred
in the process of recruiting said contract workers. Inasmuch as

As evidence had proved, there was complete failure on the

all expenses including the processing fees incurred by private

part of the appellant to transport the 93 contract workers of the

respondent had already been paid for by the latter's principal

appellee on or before March 30, 1981 despite receipt of the

on a staggered basis as admitted in open court by its managing

payment for their airfares, and acceptance of the same by the

director, Mrs. Bienvenida Brusellas. 12 We do not find

appellant, with specific instructions from the appellee's

anymore justification in the appellate court's decision in

principal to transport the contract workers on or before March

granting actual damages to private respondent.

30, 1981. No previous notice was ever registered by the

appellant that it could not comply with the same. And then

Thus, while it may be true that private respondent was

followed the detestable act of appellant in unilaterally

compelled to borrow money for the airfare tickets of its

cancelling, booking and rebooking unreasonably the flight of

contract workers when petitioner failed to transport said

appellee's contract workers in June to July, 1981 without prior

workers, the reimbursements made by its principal to private

notice. And all of these actuations of the appellant indeed

respondent failed to support the latter's claim that it suffered

constitute malice and evident bad faith which had caused

actual damages as a result of petitioner's failure to transport

13

Transportation Law
Choco Notes
damage and besmirched the reputation and business image of

respondent would bring such material to Manila for resale. He

the appellee. 14

utilized two (2) six-wheeler trucks which he owned for

hauling the material to Manila. On the return trip to

As to the alleged damages suffered by the petitioner as stated

Pangasinan, respondent would load his vehicles with cargo

in its counterclaims, the record shows that no claim for said

which various merchants wanted delivered to differing

damages was ever made by the petitioner immediately after

establishments in Pangasinan. For that service, respondent

their alleged occurrence therefore said counterclaims were

charged freight rates which were commonly lower than

mere afterthoughts when private respondent filed the present

regular commercial rates.

case.
Sometime in November 1970, petitioner Pedro de Guzman a
WHEREFORE, the assailed decision is hereby AFFIRMED

merchant and authorized dealer of General Milk Company

with the MODIFICATION that the award of actual damages

(Philippines), Inc. in Urdaneta, Pangasinan, contracted with

be deleted from said decision.

respondent for the hauling of 750 cartons of Liberty filled

milk from a warehouse of General Milk in Makati, Rizal, to

SO ORDERED.

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:

Definition of common carrier Art. 1732

150 cartons were loaded on a truck driven by respondent

himself, while 600 cartons were placed on board the other
De Guzman v. CA
G.R. No. L-47822

truck which was driven by Manuel Estrada, respondent's

December 22, 1988

driver and employee.

PEDRO DE GUZMAN, petitioner,

Only 150 boxes of Liberty filled milk were delivered to

vs.

petitioner. The other 600 boxes never reached petitioner, since

COURT

OF

APPEALS

and

ERNESTO

CENDANA,

respondents.

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

Vicente D. Millora for petitioner.

the cargo.

Jacinto Callanta for private respondent.

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, plus damages and attorney's

FELICIANO, J.:

fees. Petitioner argued that private respondent, being a

common

carrier,

and

having

failed

to

exercise

the

Respondent Ernesto Cendana, a junk dealer, was engaged in

extraordinary diligence required of him by the law, should be

buying up used bottles and scrap metal in Pangasinan. Upon

held liable for the value of the undelivered goods.

gathering sufficient quantities of such scrap material,

14

Transportation Law
Choco Notes
In his Answer, private respondent denied that he was a

The Civil Code defines "common carriers" in the following

common carrier and argued that he could not be held

terms:

responsible for the value of the lost goods, such loss having
been due to force majeure.

Article 1732.

Common carriers are persons, corporations,

firms or associations engaged in the business of carrying or

On 10 December 1975, the trial court rendered a Decision 1

transporting passengers or goods or both, by land, water, or air

finding private respondent to be a common carrier and holding

for compensation, offering their services to the public.

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

The above article makes no distinction between one whose

2,000.00 as attorney's fees.

principal business activity is the carrying of persons or goods

or both, and one who does such carrying only as an ancillary

On appeal before the Court of Appeals, respondent urged that

activity (in local Idiom as "a sideline"). Article 1732 also

the trial court had erred in considering him a common carrier;

carefully avoids making any distinction between a person or

in finding that he had habitually offered trucking services to

enterprise offering transportation service on a regular or

the public; in not exempting him from liability on the ground

scheduled basis and one offering such service on an

of force majeure; and in ordering him to pay damages and

occasional, episodic or unscheduled basis. Neither does

attorney's fees.

Article 1732 distinguish between a carrier offering its services

to the "general public," i.e., the general community or

The Court of Appeals reversed the judgment of the trial court

population, and one who offers services or solicits business

and held that respondent had been engaged in transporting

only from a narrow segment of the general population. We

return loads of freight "as a casual

think that Article 1733 deliberaom making such distinctions.

occupation a sideline to his scrap iron business" and not as

a common carrier. Petitioner came to this Court by way of a

So understood, the concept of "common carrier" under Article

Petition for Review assigning as errors the following

1732 may be seen to coincide neatly with the notion of "public

conclusions of the Court of Appeals:

service," under the Public Service Act (Commonwealth Act

No. 1416, as amended) which at least partially supplements

1.

that private respondent was not a common carrier;

the law on common carriers set forth in the Civil Code. Under
Section 13, paragraph (b) of the Public Service Act, "public

2.

that the hijacking of respondent's truck was force

service" includes:

majeure; and
... every person that now or hereafter may own, operate,
3.

that respondent was not liable for the value of the

undelivered cargo. (Rollo, p. 111)

manage, or control in the Philippines, for hire or

compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general

We consider first the issue of whether or not private

business purposes, any common carrier, railroad, street

respondent Ernesto Cendana may, under the facts earlier set

railway, traction railway, subway motor vehicle, either for

forth, be properly characterized as a common carrier.

freight or passenger, or both, with or without fixed route and

whatever may be its classification, freight or carrier service of

15

Transportation Law
Choco Notes
any class, express service, steamboat, or steamship line,

safety and well being and property of those members of the

pontines, ferries and water craft, engaged in the transportation

general community who happen to deal with such carrier. The

of passengers or freight or both, shipyard, marine repair shop,

law imposes duties and liabilities upon common carriers for

wharf or dock, ice plant,

the safety and protection of those who utilize their services

ice-refrigeration plant, canal, irrigation system, gas, electric

and the law cannot allow a common carrier to render such

light, heat and power, water supply and power petroleum,

duties and liabilities merely facultative by simply failing to

sewerage system, wire or wireless communications systems,

obtain the necessary permits and authorizations.

wire or wireless broadcasting stations and other similar public

services. ... (Emphasis supplied)

We turn then to the liability of private respondent as a

common carrier.

It appears to the Court that private respondent is properly

characterized as a common carrier even though he merely

Common carriers, "by the nature of their business and for

"back-hauled" goods for other merchants from Manila to

reasons of public policy" 2 are held to a very high degree of

Pangasinan, although such back-hauling was done on a

care and diligence ("extraordinary diligence") in the carriage

periodic or occasional rather than regular or scheduled

of goods as well as of passengers. The specific import of

manner, and even though private respondent's principal

extraordinary diligence in the care of goods transported by a

occupation was not the carriage of goods for others. There is

common carrier is, according to Article 1733, "further

no dispute that private respondent charged his customers a fee

expressed in Articles 1734,1735 and 1745, numbers 5, 6 and

for hauling their goods; that fee frequently fell below

7" of the Civil Code.

commercial freight rates is not relevant here.

Article 1734 establishes the general rule that common carriers
The Court of Appeals referred to the fact that private

are responsible for the loss, destruction or deterioration of the

respondent held no certificate of public convenience, and

goods which they carry, "unless the same is due to any of the

concluded he was not a common carrier. This is palpable

following causes only:

error. A certificate of public convenience is not a requisite for

the incurring of liability under the Civil Code provisions

(1)

governing common carriers. That liability arises the moment a

disaster or calamity;

person or firm acts as a common carrier, without regard to

(2)

whether or not such carrier has also complied with the

or civil;

requirements of the applicable regulatory statute and

(3)

Act or omission of the shipper or owner of the goods;

implementing regulations and has been granted a certificate of

(4)

The character-of the goods or defects in the packing

public convenience or other franchise. To exempt private

or-in the containers; and

respondent from the liabilities of a common carrier because he

(5)

has

not

secured

the

necessary

certificate

of

Flood, storm, earthquake, lightning or other natural

Act of the public enemy in war, whether international

Order or act of competent public authority.

public

convenience, would be offensive to sound public policy; that

It is important to point out that the above list of causes of loss,

would be to reward private respondent precisely for failing to

destruction or deterioration which exempt the common carrier

comply with applicable statutory requirements. The business

for responsibility therefor, is a closed list. Causes falling

of a common carrier impinges directly and intimately upon the

outside the foregoing list, even if they appear to constitute a

16

Transportation Law
Choco Notes
species of force majeure fall within the scope of Article 1735,

As noted earlier, the duty of extraordinary diligence in the

which provides as follows:

vigilance over goods is, under Article 1733, given additional

specification not only by Articles 1734 and 1735 but also by

In all cases other than those mentioned in numbers 1, 2, 3, 4

Article 1745, numbers 4, 5 and 6, Article 1745 provides in

and 5 of the preceding article, if the goods are lost, destroyed

relevant part:

or deteriorated, common carriers are presumed to have been at

fault or to have acted negligently, unless they prove that they

Any of the following or similar stipulations shall be

observed extraordinary diligence as required in Article 1733.

considered unreasonable, unjust and contrary to public policy:

(Emphasis supplied)
xxx

xxx

xxx

firstly that the specific cause alleged in the instant case the

(5)

that the common carrier shall not be responsible for

hijacking of the carrier's truck does not fall within any of

the acts or omissions of his or its employees;

Applying the above-quoted Articles 1734 and 1735, we note

the five (5) categories of exempting causes listed in Article

1734. It would follow, therefore, that the hijacking of the

(6)

that the common carrier's liability for acts committed

carrier's vehicle must be dealt with under the provisions of

by thieves, or of robbers who do not act with grave or

Article 1735, in other words, that the private respondent as

irresistible threat, violence or force, is dispensed with or

common carrier is presumed to have been at fault or to have

diminished; and

acted negligently. This presumption, however, may be

overthrown by proof of extraordinary diligence on the part of

(7)

that the common carrier shall not responsible for the

private respondent.

loss, destruction or deterioration of goods on account of the

defective condition of the car vehicle, ship, airplane or other

Petitioner insists that private respondent had not observed

equipment used in the contract of carriage. (Emphasis

extraordinary diligence in the care of petitioner's goods.

supplied)

Petitioner argues that in the circumstances of this case, private

respondent should have hired a security guard presumably to

Under Article 1745 (6) above, a common carrier is held

ride with the truck carrying the 600 cartons of Liberty filled

responsible and will not be allowed to divest or to diminish

milk. We do not believe, however, that in the instant case, the

such responsibility even for acts of strangers like thieves or

standard

private

robbers, except where such thieves or robbers in fact acted

respondent to retain a security guard to ride with the truck and

"with grave or irresistible threat, violence or force." We

to engage brigands in a firelight at the risk of his own life and

believe and so hold that the limits of the duty of extraordinary

the lives of the driver and his helper.

diligence in the vigilance over the goods carried are reached

of

extraordinary

diligence

required

where the goods are lost as a result of a robbery which is

The precise issue that we address here relates to the specific

attended by "grave or irresistible threat, violence or force."

requirements of the duty of extraordinary diligence in the

vigilance over the goods carried in the specific context of

In the instant case, armed men held up the second truck owned

hijacking or armed robbery.

by private respondent which carried petitioner's cargo. The

record shows that an information for robbery in band was filed

17

Transportation Law
Choco Notes
in the Court of First Instance of Tarlac, Branch 2, in Criminal

SO ORDERED.

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

Bascos v. CA
G.R. No. 101089. April 7, 1993.

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

ESTRELLITA M. BASCOS, petitioners,

vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO,
respondents.

irresistible, threat, violence or force. 3 Three (3) of the five (5)

hold-uppers were armed with firearms. The robbers not only

Modesto S. Bascos for petitioner.

took away the truck and its cargo but also kidnapped the driver
and his helper, detaining them for several days and later

Pelaez, Adriano & Gregorio for private respondent.

releasing them in another province (in Zambales). The

hijacked truck was subsequently found by the police in

SYLLABUS

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.

1.

CIVIL LAW; COMMON CARRIERS; DEFINED;

TEST TO DETERMINE COMMON CARRIER. Article

1732 of the Civil Code defines a common carrier as "(a)
person, corporation or 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 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." . . . The holding of the Court in De
Guzman vs. Court of Appeals is instructive. In referring to

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.

Article 1732 of the Civil Code, it held thus: "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

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.

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 distinguished
between a carrier offering its services to the "general public,"
i.e., the general community or population, and one who offers

18

Transportation Law
Choco Notes
services or solicits business only from a narrow segment of the

of robbers who do not act with grave or irresistible threat,

general population. We think that Article 1732 deliberately

violences or force, is dispensed with or diminished"; In the

refrained from making such distinctions."

same case, the Supreme Court also held that: "Under Article
1745 (6) above, a common carrier is held responsible and

2.

ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE

will not be allowed to divest or to diminish such responsibility

OVER GOODS TRANSPORTED; WHEN PRESUMPTION

even for acts of strangers like thieves or robbers, except

OF

where such thieves or robbers in fact acted "with grave of

NEGLIGENCE

OVERCAME;

ARISES;

WHEN

HOW

PRESUMPTION

PRESUMPTION

MADE

irresistible threat, violence of force," We believe and so hold

ABSOLUTE. Common carriers are obliged to observe

that the limits of the duty of extraordinary diligence in the

extraordinary diligence in the vigilance over the goods

vigilance over the goods carried are reached where the goods

transported by them. Accordingly, they are presumed to have

are lost as a result of a robbery which is attended by "grave or

been at fault or to have acted negligently if the goods are lost,

irresistible threat, violence or force."

destroyed or deteriorated. There are very few instances when

the presumption of negligence does not attach and these

4.

REMEDIAL

LAW;

EVIDENCE;

JUDICIAL

instances are enumerated in Article 1734. In those cases where

ADMISSIONS CONCLUSIVE. In this case, petitioner

the presumption is applied, the common carrier must prove

herself has made the admission that she was in the trucking

that it exercised extraordinary diligence in order to overcome

business, offering her trucks to those with cargo to move.

the presumption . . . The presumption of negligence was raised

Judicial admissions are conclusive and no evidence is required

against petitioner. It was petitioner's burden to overcome it.

to prove the same.

Thus, contrary to her assertion, private respondent need not

introduce any evidence to prove her negligence. Her own

5.

ID.; ID.; BURDEN OF PROOF RESTS WITH

failure to adduce sufficient proof of extraordinary diligence

PARTY WHO ALLEGES A FACT. Petitioner presented

made the presumption conclusive against her.

no other proof of the existence of the contract of lease. He

who alleges a fact has the burden of proving it.

3.

ID.; ID.; HIJACKING OF GOODS; CARRIER

PRESUMED NEGLIGENT; HOW CARRIER ABSOLVED

6.

ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST

FROM LIABILITY. In De Guzman vs. Court of Appeals,

EVIDENCE IF AFFIANTS AVAILABLE AS WITNESSES.

the Court held that hijacking, not being included in the

While the affidavit of Juanito Morden, the truck helper in

provisions of Article 1734, must be dealt with under the

the hijacked truck, was presented as evidence in court, he

provisions of Article 1735 and thus, the common carrier is

himself was a witness as could be gleaned from the contents of

presumed to have been at fault or negligent. To exculpate the

the petition. Affidavits are not considered the best evidence if

carrier from liability arising from hijacking, he must prove

the affiants are available as witnesses.

that the robbers or the hijackers acted with grave or irresistible

threat, violence, or force. This is in accordance with Article

7.

CIVIL LAW; OBLIGATIONS AND CONTRACTS;

1745 of the Civil Code which provides: "Art. 1745. Any of the

CONTRACT IS WHAT LAW DEFINES IT TO BE.

following or

similar stipulations shall be considered

Granting that the said evidence were not self-serving, the same

unreasonable, unjust and contrary to public policy . . . (6) That

were not sufficient to prove that the contract was one of lease.

the common carrier's liability for acts committed by thieves, or

19

Transportation Law
Choco Notes
It must be understood that a contract is what the law defines it

"1.

CIPTRADE shall be held liable and answerable for

to be and not what it is called by the contracting parties.

any loss in bags due to theft, hijacking and non-delivery or

damages to the cargo during transport at market value, . . ." 3

DECISION
Cipriano demanded reimbursement from petitioner but the
CAMPOS, JR., J p:

latter refused to pay. Eventually, Cipriano filed a complaint

for a sum of money and damages with writ of preliminary

This is a petition for review on certiorari of the decision ** of

attachment 4 for breach of a contract of carriage. The prayer

the Court of Appeals in "RODOLFO A. CIPRIANO, doing

for a Writ of Preliminary Attachment was supported by an

business

affidavit 5 which contained the following allegations:

under

the

name

CIPRIANO

TRADING

ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M.

BASCOS, doing business under the name of BASCOS

"4.

That this action is one of those specifically

TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216,

mentioned in Sec. 1, Rule 57 the Rules of Court, whereby a

the dispositive portion of which is quoted hereunder:

writ of preliminary attachment may lawfully issue, namely:

"PREMISES considered, We find no reversible error in the

"(e)

decision appealed from, which is hereby affirmed in toto.

disposed of his property, or is about to do so, with intent to

Costs against appellant." 1

defraud his creditors;"

The facts, as gathered by this Court, are as follows:

5.

in an action against a party who has removed or

That there is no sufficient security for the claim

sought to be enforced by the present action;

Rodolfo A. Cipriano representing Cipriano Trading Enterprise
(CIPTRADE for short) entered into a hauling contract 2 with

6.

That the amount due to the plaintiff in the above-

Jibfair Shipping Agency Corporation whereby the former

entitled case is above all legal counterclaims;"

bound itself to haul the latter's 2,000 m/tons of soya bean meal
from Magallanes Drive, Del Pan, Manila to the warehouse of

The trial court granted the writ of preliminary attachment on

Purefoods Corporation in Calamba, Laguna. To carry out its

February 17, 1987.

obligation,

CIPTRADE,

through

Rodolfo

Cipriano,

subcontracted with Estrellita Bascos (petitioner) to transport

In her answer, petitioner interposed the following defenses:

and to deliver 400 sacks of soya bean meal worth P156,404.00

that there was no contract of carriage since CIPTRADE leased

from the Manila Port Area to Calamba, Laguna at the rate of

her cargo truck to load the cargo from Manila Port Area to

P50.00 per metric ton. Petitioner failed to deliver the said

Laguna; that CIPTRADE was liable to petitioner in the

cargo. As a consequence of that failure, Cipriano paid Jibfair

amount of P11,000.00 for loading the cargo; that the truck

Shipping Agency the amount of the lost goods in accordance

carrying the cargo was hijacked along Canonigo St., Paco,

with the contract which stated that:

Manila on the night of October 21, 1988; that the hijacking

was immediately reported to CIPTRADE and that petitioner
and the police exerted all efforts to locate the hijacked
properties; that after preliminary investigation, an information

20

Transportation Law
Choco Notes
for robbery and carnapping were filed against Jose Opriano, et

WAS CARRIAGE OF GOODS AND NOT LEASE OF

al.; and that hijacking, being a force majeure, exculpated

CARGO TRUCK.

petitioner from any liability to CIPTRADE.

II.

GRANTING, EX GRATIA ARGUMENTI, THAT

After trial, the trial court rendered a decision *** the

THE FINDING OF THE RESPONDENT COURT THAT

dispositive portion of which reads as follows:

THE

CONTRACTUAL

PETITIONER

AND

RELATIONSHIP

PRIVATE

BETWEEN

RESPONDENT

WAS

"WHEREFORE, judgment is hereby rendered in favor of

CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS,

plaintiff and against defendant ordering the latter to pay the

IT

former:

THEREUNDER BECAUSE THE LOSS OF THE CARGO

WAS

1.

The amount of ONE HUNDRED FIFTY-SIX

THOUSAND

FOUR

HUNDRED

FOUR

ERRED

DUE

IN

FINDING

TO

FORCE

PETITIONER

MAJEURE,

LIABLE

NAMELY,

HIJACKING.

PESOS

(P156,404.00) as an (sic) for actual damages with legal

III.

THE

RESPONDENT

COURT

ERRED

IN

interest of 12% per cent per annum to be counted from

AFFIRMING THE FINDING OF THE TRIAL COURT

December 4, 1986 until fully paid;

THAT PETITIONER'S MOTION TO DISSOLVE/LIFT THE

WRIT OF PRELIMINARY ATTACHMENT HAS BEEN

2.

The

amount

of

FIVE

THOUSAND

PESOS

RENDERED

MOOT

AND

ACADEMIC

BY

THE

(P5,000.00) as and for attorney's fees; and

DECISION OF THE MERITS OF THE CASE." 7

3.

The petition presents the following issues for resolution: (1)

The costs of the suit.

was petitioner a common carrier?; and (2) was the hijacking

The

"Urgent

Motion

To

Dissolve/Lift

preliminary

referred to a force majeure?

Attachment" dated March 10, 1987 filed by defendant is

DENIED for being moot and academic.

The Court of Appeals, in holding that petitioner was a

common carrier, found that she admitted in her answer that

SO ORDERED." 6

she did business under the name A.M. Bascos Trucking and
that said admission dispensed with the presentation by private

Petitioner appealed to the Court of Appeals but respondent

respondent, Rodolfo Cipriano, of proofs that petitioner was a

Court affirmed the trial court's judgment.

common carrier. The respondent Court also adopted in toto the

trial court's decision that petitioner was a common carrier,

Consequently, petitioner filed this petition where she makes

Moreover, both courts appreciated the following pieces of

the following assignment of errors; to wit:

evidence as indicators that petitioner was a common carrier:

the fact that the truck driver of petitioner, Maximo Sanglay,

"I.

THE

RESPONDENT

COURT

ERRED

IN

received the cargo consisting of 400 bags of soya bean meal as

HOLDING THAT THE CONTRACTUAL RELATIONSHIP

evidenced by a cargo receipt signed by Maximo Sanglay; the

BETWEEN PETITIONER AND PRIVATE RESPONDENT

fact that the truck helper, Juanito Morden, was also an

21

Transportation Law
Choco Notes
employee of petitioner; and the fact that control of the cargo

people and because the private respondents, plaintiffs in the

was placed in petitioner's care.

lower court, did not object to the presentation of affidavits by

petitioner where the transaction was referred to as a lease

In disputing the conclusion of the trial and appellate courts

contract.

that petitioner was a common carrier, she alleged in this

petition that the contract between her and Rodolfo A.

Regarding the first contention, the holding of the Court in De

Cipriano, representing CIPTRADE, was lease of the truck.

Guzman vs. Court of Appeals 14 is instructive. In referring to

She cited as evidence certain affidavits which referred to the

Article 1732 of the Civil Code, it held thus:

contract as "lease". These affidavits were made by Jesus

Bascos 8 and by petitioner herself. 9 She further averred that

"The above article makes no distinction between one whose

Jesus Bascos confirmed in his testimony his statement that the

principal business activity is the carrying of persons or goods

contract was a lease contract. 10 She also stated that: she was

or both, and one who does such carrying only as an ancillary

not catering to the general public. Thus, in her answer to the

activity (in local idiom, as a "sideline"). Article 1732 also

amended complaint, she said that she does business under the

carefully avoids making any distinction between a person or

same style of A.M. Bascos Trucking, offering her trucks for

enterprise offering transportation service on a regular or

lease to those who have cargo to move, not to the general

scheduled basis and one offering such service on an

public but to a few customers only in view of the fact that it is

occasional, episodic or unscheduled basis. Neither does

only a small business. 11

Article 1732 distinguish between a carrier offering its services

to the "general public," i.e., the general community or

We agree with the respondent Court in its finding that

population, and one who offers services or solicits business

petitioner is a common carrier.

only from a narrow segment of the general population. We

think that Article 1732 deliberately refrained from making

Article 1732 of the Civil Code defines a common carrier as

such distinctions."

"(a) person, corporation or firm, or association engaged in the

business of carrying or transporting passengers or goods or

Regarding the affidavits presented by petitioner to the court,

both, by land, water or air, for compensation, offering their

both the trial and appellate courts have dismissed them as self-

services to the public." The test to determine a common carrier

serving and petitioner contests the conclusion. We are bound

is "whether the given undertaking is a part of the business

by the appellate court's factual conclusions. Yet, granting that

engaged in by the carrier which he has held out to the general

the said evidence were not self-serving, the same were not

public as his occupation rather than the quantity or extent of

sufficient to prove that the contract was one of lease. It must

the business transacted." 12 In this case, petitioner herself has

be understood that a contract is what the law defines it to be

made the admission that she was in the trucking business,

and not what it is called by the contracting parties. 15

offering her trucks to those with cargo to move. Judicial

Furthermore, petitioner presented no other proof of the

admissions are conclusive and no evidence is required to

existence of the contract of lease. He who alleges a fact has

prove the same. 13

the burden of proving it. 16

But petitioner argues that there was only a contract of lease

Likewise, We affirm the holding of the respondent court that

because they offer their services only to a select group of

the loss of the goods was not due to force majeure.

22

Transportation Law
Choco Notes
"Under Article 1745 (6) above, a common carrier is held
Common carriers are obliged to observe extraordinary

responsible and will not be allowed to divest or to diminish

diligence in the vigilance over the goods transported by them.

such responsibility even for acts of strangers like thieves or

17 Accordingly, they are presumed to have been at fault or to

robbers except where such thieves or robbers in fact acted

have acted negligently if the goods are lost, destroyed or

with grave or irresistible threat, violence or force. We believe

deteriorated. 18 There are very few instances when the

and so hold that the limits of the duty of extraordinary

presumption of negligence does not attach and these instances

diligence in the vigilance over the goods carried are reached

are enumerated in Article 1734. 19 In those cases where the

where the goods are lost as a result of a robbery which is

presumption is applied, the common carrier must prove that it

attended by "grave or irresistible threat, violence or force."

exercised extraordinary diligence in order to overcome the

presumption.

To establish grave and irresistible force, petitioner presented

her accusatory affidavit, 22 Jesus Bascos' affidavit, 23 and

In this case, petitioner alleged that hijacking constituted force

Juanito Morden's 24 "Salaysay". However, both the trial court

majeure which exculpated her from liability for the loss of the

and the Court of Appeals have concluded that these affidavits

cargo. In De Guzman vs. Court of Appeals, 20 the Court held

were not enough to overcome the presumption. Petitioner's

that hijacking, not being included in the provisions of Article

affidavit about the hijacking was based on what had been told

1734, must be dealt with under the provisions of Article 1735

her by Juanito Morden. It was not a first-hand account. While

and thus, the common carrier is presumed to have been at fault

it had been admitted in court for lack of objection on the part

or negligent. To exculpate the carrier from liability arising

of private respondent, the respondent Court had discretion in

from hijacking, he must prove that the robbers or the hijackers

assigning weight to such evidence. We are bound by the

acted with grave or irresistible threat, violence, or force. This

conclusion of the appellate court. In a petition for review on

is in accordance with Article 1745 of the Civil Code which

certiorari, We are not to determine the probative value of

provides:

evidence but to resolve questions of law. Secondly, the

affidavit of Jesus Bascos did not dwell on how the hijacking

"Art. 1745.

Any of the following or similar stipulations

took place. Thirdly, while the affidavit of Juanito Morden, the

shall be considered unreasonable, unjust and contrary to public

truck helper in the hijacked truck, was presented as evidence

policy;

in court, he himself was a witness as could be gleaned from

the contents of the petition. Affidavits are not considered the

xxx xxx xxx

best evidence if the affiants are available as witnesses. 25 The

subsequent filing of the information for carnapping and

(6)

That the common carrier's liability for acts committed

robbery against the accused named in said affidavits did not

by thieves, or of robbers who do not act with grave or

necessarily mean that the contents of the affidavits were true

irresistible threat, violences or force, is dispensed with or

because they were yet to be determined in the trial of the

diminished;"

criminal cases.

In the same case, 21 the Supreme Court also held that:

The presumption of negligence was raised against petitioner. It

was petitioner's burden to overcome it. Thus, contrary to her
assertion, private respondent need not introduce any evidence

23

Transportation Law
Choco Notes
to prove her negligence. Her own failure to adduce sufficient
proof of extraordinary diligence made the presumption

Before us are two separate petitions for review filed by

conclusive against her.

National Steel Corporation (NSC) and Vlasons Shipping, Inc.

(VSI), both of which assail the August 12, 1993 Decision of

Having affirmed the findings of the respondent Court on the

the Court of Appeals. [1] The Court of Appeals modified the

substantial issues involved, We find no reason to disturb the

decision of the Regional Trial Court of Pasig, Metro Manila,

conclusion that the motion to lift/dissolve the writ of

Branch 163 in Civil Case No. 23317. The RTC disposed as

preliminary attachment has been rendered moot and academic

follows:

by the decision on the merits.

WHEREFORE, judgment is hereby rendered in favor of
In the light of the foregoing analysis, it is Our opinion that the

defendant and against the plaintiff dismissing the complaint

petitioner's claim cannot be sustained. The petition is

with cost against plaintiff, and ordering plaintiff to pay the

DISMISSED and the decision of the Court of Appeals is

defendant on the counterclaim as follows:

hereby AFFIRMED.
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as
SO ORDERED.

demurrage with interest at the legal rate on both amounts from

April 7, 1976 until the same shall have been fully paid;

National Steel v. CA
[G.R. No. 112287. December 12, 1997]

2. Attorneys fees and expenses of litigation in the sum of

P100,000.00; and

NATIONAL

STEEL

CORPORATION,

petitioner,

vs.

COURT OF APPEALS AND VLASONS SHIPPING, INC.,

3. Cost of suit.

respondents.
[G.R. No. 112350. December 12, 1997]

VLASONS SHIPPING, INC., petitioner, vs. COURT OF

SO ORDERED. [2]

On the other hand, the Court of Appeals ruled:

APPEALS AND NATIONAL STEEL CORPORATION,

respondents.
DECISION
PANGANIBAN, J.:

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

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

AFFIRMED. There is no pronouncement as to costs.

SO ORDERED. [3]

The Facts

Court of Appeals, are binding on this Court.

The Case

24

Transportation Law
Choco Notes
The MV Vlasons I is a vessel which renders tramping service
and, as such, does not transport cargo or shipment for the

8. x x

xx

xx

general public. Its services are available only to specific

persons who enter into a special contract of charter party with

9. Cargo Insurance: Charterers and/or Shippers must insure

its owner. It is undisputed that the ship is a private carrier.

the cargoes. Shipowners not responsible for losses/damages

And it is in this capacity that its owner, Vlasons Shipping,

except on proven willful negligence of the officers of the

Inc., entered into a contract of affreightment or contract of

vessel.

voyage charter hire with National Steel Corporation.

10. Other terms:(a) All terms/conditions of NONYAZAI C/P
The facts as found by Respondent Court of Appeals are as

[sic] or other internationally recognized Charter Party

follows:

Agreement shall form part of this Contract.

(1) On July 17, 1974, plaintiff National Steel Corporation

xxx

xxx

x x x

(NSC) as Charterer and defendant Vlasons Shipping, Inc.

(VSI) as Owner, entered into a Contract of Voyage Charter

The terms F.I.O.S.T. which is used in the shipping business

Hire (Exhibit B; also Exhibit 1) whereby NSC hired VSIs

is a standard provision in the NANYOZAI Charter Party

vessel, the MV VLASONS I to make one (1) voyage to load

which stands for Freight In and Out including Stevedoring

steel products at Iligan City and discharge them at North

and Trading, which means that the handling, loading and

Harbor, Manila, under the following terms and conditions, viz:

unloading of the cargoes are the responsibility of the

Charterer. Under Paragraph 5 of the NANYOZAI Charter

1. x x

xx

x x.

Party, it states, Charterers to load, stow and discharge the

cargo free of risk and expenses to owners.

2. Cargo: Full cargo of steel products of not less than 2,500

x x x

(Underscoring supplied).

MT, 10% more or less at Masters option.

Under paragraph 10 thereof, it is provided that (o)wners shall,
3. x x

xx

xx

before and at the beginning of the voyage, exercise due

diligence to make the vessel seaworthy and properly manned,

4.

Freight/Payment:

P30.00 /metric ton, FIOST basis.

equipped and supplied and to make the holds and all other

Payment upon presentation of Bill of Lading within fifteen

parts of the vessel in which cargo is carried, fit and safe for its

(15) days.

reception, carriage and preservation.

Owners shall not be

liable for loss of or damage of the cargo arising or resulting

5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.

from: unseaworthiness unless caused by want of due diligence

on the part of the owners to make the vessel seaworthy, and to

6. Loading/Discharging Rate: 750 tons per WWDSHINC.

secure that the vessel is properly manned, equipped and

(Weather Working Day of 24 consecutive hours, Sundays and

supplied and to make the holds and all other parts of the vessel

Holidays Included).

in which cargo is carried, fit and safe for its reception, carriage
and preservation; xxx; perils, dangers and accidents of the sea

7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.

or other navigable waters; xxx; wastage in bulk or weight or

25

Transportation Law
Choco Notes
any other loss or damage arising from inherent defect, quality

while it was still on board the vessel and later at the NDC

or vice of the cargo; insufficiency of packing; xxx; latent

warehouse in Pureza St., Sta. Mesa, Manila where the cargo

defects not discoverable by due diligence; any other cause

was taken and stored. MASCO reported that it found wetting

arising without the actual fault or privity of Owners or without

and rusting of the packages of hot rolled sheets and metal

the fault of the agents or servants of owners.

covers of the tinplates; that tarpaulin hatch covers were noted

torn at various extents; that container/metal casings of the

Paragraph 12 of said NANYOZAI Charter Party also provides

skids were rusting all over. MASCO ventured the opinion that

that (o)wners shall not be responsible for split, chafing and/or

rusting of the tinplates was caused by contact with SEA

any damage unless caused by the negligence or default of the

WATER sustained while still on board the vessel as a

master and crew.

consequence of the heavy weather and rough seas encountered

while en route to destination (Exhibit F).

It was also

(2) On August 6, 7 and 8, 1974, in accordance with the

reported that MASCOs surveyors drew at random samples of

Contract of Voyage Charter Hire, the MV VLASONS I

bad order packing materials of the tinplates and delivered the

loaded at plaintiffs pier at Iligan City, the NSCs shipment of

same to the M.I.T. Testing Laboratories for analysis.

1,677 skids of tinplates and 92 packages of hot rolled sheets or

August 31, 1974, the M.I.T. Testing Laboratories issued

a total of 1,769 packages with a total weight of about 2,481.19

Report No. 1770 (Exhibit I) which in part, states, The

metric tons for carriage to Manila. The shipment was placed

analysis of bad order samples of packing materials xxx shows

in the three (3) hatches of the ship. Chief Mate Gonzalo

that wetting was caused by contact with SEA WATER.

On

Sabando, acting as agent of the vessel[,] acknowledged receipt

of the cargo on board and signed the corresponding bill of

(5)

On September 6, 1974, on the basis of the aforesaid

lading, B.L.P.P. No. 0233 (Exhibit D) on August 8, 1974.

Report No. 1770, plaintiff filed with the defendant its claim
for damages suffered due to the downgrading of the damaged

(3)

The vessel arrived with the cargo at Pier 12, North

Harbor, Manila, on August 12, 1974.

tinplates in the amount of P941,145.18. Then on October 3,

The following day,

1974, plaintiff formally demanded payment of said claim but

August 13, 1974, when the vessels three (3) hatches

defendant VSI refused and failed to pay. Plaintiff filed its

containing the shipment were opened by plaintiffs agents,

complaint against defendant on April 21, 1976 which was

nearly all the skids of tinplates and hot rolled sheets were

docketed as Civil Case No. 23317, CFI, Rizal.

allegedly found to be wet and rusty.

The cargo was

discharged and unloaded by stevedores hired by the Charterer.

(6) In its complaint, plaintiff claimed that it sustained losses

Unloading was completed only on August 24, 1974 after

in the aforesaid amount of P941,145.18 as a result of the act,

incurring a delay of eleven (11) days due to the heavy rain

neglect and default of the master and crew in the management

which interrupted the unloading operations. (Exhibit E)

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

(4) To determine the nature and extent of the wetting and

holds and all other parts of the vessel in which the cargo was

rusting, NSC called for a survey of the shipment by the Manila

carried, fit and safe for its reception, carriage and preservation

Adjusters and Surveyors Company (MASCO). In a letter to

--

the NSC dated March 17, 1975 (Exhibit G), MASCO made a

Contract of Voyage Charter Hire.

all in violation of defendants undertaking under their

report of its ocular inspection conducted on the cargo, both

26

Transportation Law
Choco Notes
(7) In its answer, defendant denied liability for the alleged

(a) That despite the full and proper performance by defendant

damage claiming that the MV VLASONS I was seaworthy

of its obligations under the Voyage Charter Hire Contract,

in all respects for the carriage of plaintiffs cargo; that said

plaintiff failed and refused to pay the agreed charter hire of

vessel was not a common carrier inasmuch as she was under

P75,000.00 despite demands made by defendant;

voyage charter contract with the plaintiff as charterer under

the charter party; that in the course of the voyage from Iligan

(b) That under their Voyage Charter Hire Contract, plaintiff

City to Manila, the MV VLASONS I encountered very

had agreed to pay defendant the sum of P8,000.00 per day for

rough seas, strong winds and adverse weather condition,

demurrage. The vessel was on demurrage for eleven (11) days

causing strong winds and big waves to continuously pound

in Manila waiting for plaintiff to discharge its cargo from the

against the vessel and seawater to overflow on its deck and

vessel. Thus, plaintiff was liable to pay defendant demurrage

hatch covers; that under the Contract of Voyage Charter Hire,

in the total amount of P88,000.00.

defendant shall not be responsible for losses/damages except

on proven willful negligence of the officers of the vessel, that

(c)

For filing a clearly unfounded civil action against

the officers of said MV VLASONS I exercised due diligence

defendant, plaintiff should be ordered to pay defendant

and proper seamanship and were not willfully negligent; that

attorneys fees and all expenses of litigation in the amount of

furthermore the Voyage Charter Party provides that loading

not less than P100,000.00.

and discharging of the cargo was on FIOST terms which

means that the vessel was free of risk and expense in

(8) From the evidence presented by both parties, the trial

connection with the loading and discharging of the cargo; that

court came out with the following findings which were set

the damage, if any, was due to the inherent defect, quality or

forth in its decision:

vice of the cargo or to the insufficient packing thereof or to

latent defect of the cargo not discoverable by due diligence or

(a) The MV VLASONS I is a vessel of Philippine registry

to any other cause arising without the actual fault or privity of

engaged in the tramping service and is available for hire only

defendant and without the fault of the agents or servants of

under special contracts of charter party as in this particular

defendant; consequently, defendant is not liable; that the

case.

stevedores of plaintiff who discharged the cargo in Manila

were negligent and did not exercise due care in the discharge

(b) That for purposes of the voyage covered by the Contract

of the cargo; and that the cargo was exposed to rain and

of Voyage Charter Hire (Exh. 1), the MV VLASONS I was

seawater spray while on the pier or in transit from the pier to

covered by the required seaworthiness certificates including

plaintiffs warehouse after discharge from the vessel; and that

the Certification of Classification issued by an international

plaintiffs

grossly

classification society, the NIPPON KAIJI KYOKAI (Exh.

exaggerated and that the small stain marks or sweat marks on

4); Coastwise License from the Board of Transportation

the edges of the tinplates were magnified and considered total

(Exh. 5); International Loadline Certificate from the

loss of the cargo.

Finally, defendant claimed that it had

Philippine Coast Guard (Exh. 6); Cargo Ship Safety

complied with all its duties and obligations under the Voyage

Equipment Certificate also from the Philippine Coast Guard

Charter Hire Contract and had no responsibility whatsoever to

(Exh. 7); Ship Radio Station License (Exh. 8); Certificate

plaintiff. In turn, it alleged the following counterclaim:

of Inspection by the Philippine Coast Guard (Exh. 12); and

claim

was

highly

speculative

and

Certificate of Approval for Conversion issued by the Bureau

27

Transportation Law
Choco Notes
of Customs (Exh. 9). That being a vessel engaged in both

paper lining and corrugated cardboards could not be affected

overseas and coastwise trade, the MV VLASONS I has a

by water from outside.

higher degree of seaworthiness and safety.

(f) The stevedores hired by the plaintiff to discharge the cargo
(c) Before it proceeded to Iligan City to perform the voyage

of tinplates were negligent in not closing the hatch openings of

called for by the Contract of Voyage Charter Hire, the MV

the MV VLASONS I when rains occurred during the

VLASONS I underwent drydocking in Cebu and was

discharging of the cargo thus allowing rainwater to enter the

thoroughly inspected by the Philippine Coast Guard. In fact,

hatches.

subject voyage was the vessels first voyage after the

temporary tents to cover the hatch openings in case of rain so

drydocking. The evidence shows that the MV VLASONS I

that it would be easy for them to resume work when the rains

was seaworthy and properly manned, equipped and supplied

stopped by just removing the tent or canvas. Because of this

when it undertook the voyage.

improper covering of the hatches by the stevedores during the

It had all the required

certificates of seaworthiness.

It was proven that the stevedores merely set up

discharging and unloading operations which were interrupted

by rains, rainwater drifted into the cargo through the hatch

(d)

The cargo/shipment was securely stowed in three (3)

openings. Pursuant to paragraph 5 of the NANYOSAI [sic]

hatches of the ship. The hatch openings were covered by

Charter Party which was expressly made part of the Contract

hatchboards which were in turn covered by two or double

of Voyage Charter Hire, the loading, stowing and discharging

tarpaulins. The hatch covers were water tight. Furthermore,

of the cargo is the sole responsibility of the plaintiff charterer

under the hatchboards were steel beams to give support.

and defendant carrier has no liability for whatever damage

may occur or maybe [sic] caused to the cargo in the process.

(e)

The claim of the plaintiff that defendant violated the

contract of carriage is not supported by evidence.

The

(g) It was also established that the vessel encountered rough

provisions of the Civil Code on common carriers pursuant to

seas and bad weather while en route from Iligan City to

which there exists a presumption of negligence in case of loss

Manila causing sea water to splash on the ships deck on

or damage to the cargo are not applicable. As to the damage

account of which the master of the vessel (Mr. Antonio C.

to the tinplates which was allegedly due to the wetting and

Dumlao) filed a Marine Protest on August 13, 1974 (Exh.

rusting thereof, there is unrebutted testimony of witness

15) which can be invoked by defendant as a force majeure

Vicente Angliongto that tinplates sweat by themselves when

that would exempt the defendant from liability.

packed even without being in contract (sic) with water from

outside especially when the weather is bad or raining. The

(h) Plaintiff did not comply with the requirement prescribed

rust caused by sweat or moisture on the tinplates may be

in paragraph 9 of the Voyage Charter Hire contract that it was

considered as a loss or damage but then, defendant cannot be

to insure the cargo because it did not. Had plaintiff complied

held liable for it pursuant to Article 1734 of the Civil Case

with the requirement, then it could have recovered its loss or

which exempts the carrier from responsibility for loss or

damage from the insurer. Plaintiff also violated the charter

damage arising from the character of the goods x x x. All

party contract when it loaded not only steel products, i.e.

the 1,769 skids of the tinplates could not have been damaged

steel bars, angular bars and the like but also tinplates and hot

by water as claimed by plaintiff. It was shown as claimed by

rolled sheets which are high grade cargo commanding a higher

plaintiff that the tinplates themselves were wrapped in kraft

28

Transportation Law
Choco Notes
freight. Thus plaintiff was able to ship high grade cargo at a

The trial court erred in exempting VSI from liability on the

lower freight rate.

ground of force majeure.

(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

The trial court erred in finding that NSC violated the contract

upon presentation of the bill of lading within fifteen (15) days.

of voyage charter hire.

Plaintiff has not paid the total freight due of P75,000.00

despite demands. The evidence also showed that the plaintiff

VI

was required and bound under paragraph 7 of the same

Voyage Charter Hire contract to pay demurrage of P8,000.00

The trial court erred in ordering NSC to pay freight,

per day of delay in the unloading of the cargoes. The delay

demurrage and attorneys fees, to VSI.[4]

amounted to eleven (11) days thereby making plaintiff liable

to pay defendant for demurrage in the amount of P88,000.00.

As earlier stated, the Court of Appeals modified the decision

of the trial court by reducing the demurrage from P88,000.00

Appealing the RTC decision to the Court of Appeals, NSC

to P44,000.00 and deleting the award of attorneys fees and

alleged six errors:

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

The trial court erred in finding that the MV VLASONS I was

this Court. On motion of VSI, the Court ordered on February

seaworthy, properly manned, equipped and supplied, and that

14, 1994 the consolidation of these petitions.[6]

there is no proof of willful negligence of the vessels officers.

The Issues
II
In its petition[7] and memorandum,[8] NSC raises the
The trial court erred in finding that the rusting of NSCs

following questions of law and fact:

tinplates was due to the inherent nature or character of the

goods and not due to contact with seawater.

Questions of Law

III

1.

Whether or not a charterer of a vessel is liable for

demurrage due to cargo unloading delays caused by weather

The trial court erred in finding that the stevedores hired by

interruption;

NSC were negligent in the unloading of NSCs shipment.

2.
IV

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

29

Transportation Law
Choco Notes
II. Whether or not the terms and conditions of the Contract of
3. Whether or not a charterers failure to insure its cargo

Voyage Charter Hire, including the Nanyozai Charter, are

exempts the shipowner from liability for cargo damage.

valid and binding on both contracting parties.

Questions of Fact

The foregoing issues raised by the parties will be discussed

under the following headings:

1.

Whether or not the vessel was seaworthy and cargo-

worthy;

1. Questions of Fact

2. Whether or not vessels officers and crew were negligent in

2. Effect of NSCs Failure to Insure the Cargo

handling and caring for NSCs cargo;

3. Admissibility of Certificates Proving Seaworthiness
3. Whether or not NSCs cargo of tinplates did sweat during
the voyage and, hence, rusted on their own; and

4. Demurrage and Attorneys Fees.

(4)

The Courts Ruling

Whether or not NSCs stevedores were negligent and

caused the wetting[/]rusting of NSCs tinplates.

The Court affirms the assailed Decision of the Court of
In its separate petition, [9] VSI submits for the consideration

Appeals, except in respect of the demurrage.

of this Court the following alleged errors of the CA:

Preliminary Matter: Common Carrier or Private Carrier?
A. The respondent Court of Appeals committed an error of
law in reducing the award of demurrage from P88,000.00 to

At the outset, it is essential to establish whether VSI

P44,000.00.

contracted with NSC as a common carrier or as a private

carrier. The resolution of this preliminary question determines

B. The respondent Court of Appeals committed an error of

the law, standard of diligence and burden of proof applicable

law in deleting the award of P100,000 for attorneys fees and

to the present case.

expenses of litigation.
Article 1732 of the Civil Code defines a common carrier as
Amplifying the foregoing, VSI raises the following issues in

persons, corporations, firms or associations engaged in the

its memorandum: [10]

business of carrying or transporting passengers or goods or

both, by land, water, or air, for compensation, offering their

I. Whether or not the provisions of the Civil Code of the

services to the public. It has been held that the true test of a

Philippines on common carriers pursuant to which there

common carrier is the carriage of passengers or goods,

exist[s] a presumption of negligence against the common

provided it has space, for all who opt to avail themselves of its

carrier in case of loss or damage to the cargo are applicable to

transportation service for a fee. [11] A carrier which does not

a private carrier.

qualify under the above test is deemed a private carrier.

Generally, private carriage is undertaken by special

30

Transportation Law
Choco Notes
agreement and the carrier does not hold himself out to carry

the vessel.

The NANYOZAI Charter Party, which was

goods for the general public. The most typical, although not

incorporated in the parties contract of transportation, further

the only form of private carriage, is the charter party, a

provided that the shipowner shall not be liable for loss of or

maritime contract by which the charterer, a party other than

damage to the cargo arising or resulting from unseaworthiness,

the shipowner, obtains the use and service of all or some part

unless the same was caused by its lack of due diligence to

of a ship for a period of time or a voyage or voyages. [12]

make the vessel seaworthy or to ensure that the same was

properly manned, equipped and supplied, and to make the

In the instant case, it is undisputed that VSI did not offer its

holds and all other parts of the vessel in which cargo [was]

services to the general public. As found by the Regional Trial

carried, fit and safe for its reception, carriage and

Court, it carried passengers or goods only for those it chose

preservation. [18] The NANYOZAI Charter Party also

under a special contract of charter party. [13] As correctly

provided that [o]wners shall not be responsible for split,

concluded by the Court of Appeals, the MV Vlasons I was

chafing and/or any damage unless caused by the negligence or

not a common but a private carrier. [14] Consequently, the

default of the master or crew.[19]

rights and obligations of VSI and NSC, including their

respective liability for damage to the cargo, are determined

Burden of Proof

primarily by stipulations in their contract of private carriage or

charter party. [15] Recently, in Valenzuela Hardwood and

In view of the aforementioned contractual stipulations, NSC

Industrial Supply, Inc., vs. Court of Appeals and Seven

must prove that the damage to its shipment was caused by

Brothers Shipping Corporation, [16] the Court ruled:

VSIs willful negligence or failure to exercise due diligence in

making MV Vlasons I seaworthy and fit for holding, carrying

x x x in a contract of private carriage, the parties may freely

and safekeeping the cargo. Ineluctably, the burden of proof

stipulate their duties and obligations which perforce would be

was placed on NSC by the parties agreement.

binding on them. Unlike in a contract involving a common

carrier, private carriage does not involve the general public.

This view finds further support in the Code of Commerce

Hence, the stringent provisions of the Civil Code on common

which pertinently provides:

carriers protecting the general public cannot justifiably be

applied to a ship transporting commercial goods as a private

Art. 361. Merchandise shall be transported at the risk and

carrier. Consequently, the public policy embodied therein is

venture of the shipper, if the contrary has not been expressly

not contravened by stipulations in a charter party that lessen or

stipulated.

remove the protection given by law in contracts involving

common carriers.[17]

Therefore, the damage and impairment suffered by the goods

during the transportation, due to fortuitous event, force

Extent of VSIs Responsibility and Liability Over NSCs

majeure, or the nature and inherent defect of the things, shall

Cargo

be for the account and risk of the shipper.

It is clear from the parties Contract of Voyage Charter Hire,

The burden of proof of these accidents is on the carrier.

dated July 17, 1974, that VSI shall not be responsible for
losses except on proven willful negligence of the officers of

31

Transportation Law
Choco Notes
Art. 362. The carrier, however, shall be liable for damages

of coming forward with evidence, do not alter the burden of

arising from the cause mentioned in the preceding article if

proof which remains on plaintiff, and, where the carrier comes

proofs against him show that they occurred on account of his

forward with evidence explaining the loss or damage, the

negligence or his omission to take the precautions usually

burden of going forward with the evidence is again on

adopted by careful persons, unless the shipper committed

plaintiff.

fraud in the bill of lading, making him to believe that the

goods were of a class or quality different from what they

Where the action is based on the shipowners warranty of

really were.

seaworthiness, the burden of proving a breach thereof and that

such breach was the proximate cause of the damage rests on

Because the MV Vlasons I was a private carrier, the

plaintiff, and proof that the goods were lost or damaged while

shipowners obligations are governed by the foregoing

in the carriers possession does not cast on it the burden of

provisions of the Code of Commerce and not by the Civil

proving seaworthiness. x x x Where the contract of carriage

Code which, as a general rule, places the prima facie

exempts the carrier from liability for unseaworthiness not

presumption of negligence on a common carrier.

discoverable by due diligence, the carrier has the preliminary

It is a

hornbook doctrine that:

burden of proving the exercise of due diligence to make the

vessel seaworthy. [20]

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

In the instant case, the Court of Appeals correctly found that

was negligent or unseaworthy, and the fact that the goods were

NSC has not taken the correct position in relation to the

lost or damaged while in the carriers custody does not put the

question of who has the burden of proof. Thus, in its brief

burden of proof on the carrier.

(pp. 10-11), after citing Clause 10 and Clause 12 of the

NANYOZAI Charter Party (incidentally plaintiff-appellants

Since x x x a private carrier is not an insurer but undertakes

[NSCs] interpretation of Clause 12 is not even correct), it

only to exercise due care in the protection of the goods

argues that a careful examination of the evidence will show

committed to its care, the burden of proving negligence or a

that VSI miserably failed to comply with any of these

breach of that duty rests on plaintiff and proof of loss of, or

obligations as if defendant-appellee [VSI] had the burden of

damage to, cargo while in the carriers possession does not

proof.[21]

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

First Issue: Questions of Fact

contract or bill of lading. However, in discharging the burden

of proof, plaintiff is entitled to the benefit of the presumptions

Based on the foregoing, the determination of the following

and inferences by which the law aids the bailor in an action

factual questions is manifestly relevant:

against a bailee, and since the carrier is in a better position to

exercised due diligence in making MV Vlasons I seaworthy

know the cause of the loss and that it was not one involving its

for the intended purpose under the charter party; (2) whether

liability, the law requires that it come forward with the

the damage to the cargo should be attributed to the willful

information available to it, and its failure to do so warrants an

negligence of the officers and crew of the vessel or of the

inference or presumption of its liability. However, such

stevedores hired by NSC; and (3) whether the rusting of the

(1) whether VSI

inferences and presumptions, while they may affect the burden

32

Transportation Law
Choco Notes
tinplates was caused by its own sweat or by contact with

officers and the crew of MV Vlasons I in making their vessel

seawater.

seaworthy and fit for the carriage of tinplates. NSC failed to

discharge this burden.

These questions of fact were threshed out and decided by the

trial court, which had the firsthand opportunity to hear the

Before us, NSC relies heavily on its claim that MV Vlasons I

parties conflicting claims and to carefully weigh their

had used an old and torn tarpaulin or canvas to cover the

respective evidence.

The findings of the trial court were

hatches through which the cargo was loaded into the cargo

subsequently affirmed by the Court of Appeals. Where the

hold of the ship. It faults the Court of Appeals for failing to

factual findings of both the trial court and the Court of

consider such claim as an uncontroverted fact [26] and

Appeals coincide, the same are binding on this Court. [22] We

denies that MV Vlasons I was equipped with new canvas

stress that, subject to some exceptional instances, [23] only

covers in tandem with the old ones as indicated in the Marine

questions of law -- not questions of fact -- may be raised

Protest xxx. [27] We disagree.

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

The records sufficiently support VSIs contention that the ship

find no reason to disturb the lower courts factual findings, as

used the old tarpaulin, only in addition to the new one used

indeed NSC has not successfully proven the application of any

primarily to make the ships hatches watertight.

of the aforecited exceptions.

foregoing are clear from the marine protest of the master of

The

the MV Vlasons I, Antonio C. Dumlao, and the deposition of

Was MV Vlasons I Seaworthy?

the ships boatswain, Jose Pascua. The salient portions of said

marine protest read:

In any event, the records reveal that VSI exercised due

diligence to make the ship seaworthy and fit for the carriage of

x x x That the M/V VLASONS I departed Iligan City or or

NSCs cargo of steel and tinplates. This is shown by the fact

about 0730 hours of August 8, 1974, loaded with

that it was drydocked and inspected by the Philippine Coast

approximately 2,487.9 tons of steel plates and tin plates

Guard before it proceeded to Iligan City for its voyage to

consigned to National Steel Corporation; that before

Manila under the contract of voyage charter hire. [24] The

departure, the vessel was rigged, fully equipped and cleared by

vessels voyage from Iligan to Manila was the vessels first

the authorities; that on or about August 9, 1974, while in the

voyage after drydocking. The Philippine Coast Guard Station

vicinity of the western part of Negros and Panay, we

in Cebu cleared it as seaworthy, fitted and equipped; it met all

encountered very rough seas and strong winds and Manila

requirements for trading as cargo vessel. [25] The Court of

office was advised by telegram of the adverse weather

Appeals itself sustained the conclusion of the trial court that

conditions encountered; that in the morning of August 10,

MV Vlasons I was seaworthy. We find no reason to modify or

1974, the weather condition changed to worse and strong

reverse this finding of both the trial and the appellate courts.

winds and big waves continued pounding the vessel at her port
side causing sea water to overflow on deck andhatch (sic)

Who Were Negligent: Seamen or Stevedores?

covers and which caused the first layer of the canvass

covering to give way while the new canvass covering still

As noted earlier, the NSC had the burden of proving that the

holding on;

damage to the cargo was caused by the negligence of the

33

Transportation Law
Choco Notes
That the weather condition improved when we reached
Dumali Point protected by Mindoro; that we re-secured the

Q: How was the canvas supported in the middle of the hatch

canvass covering back to position; that in the afternoon of

opening?

August 10, 1974, while entering Maricaban Passage, we were

again exposed to moderate seas and heavy rains; that while

A:

There is a hatch board.

approaching Fortune Island, we encountered again rough seas,

strong winds and big waves which caused the same canvass to

ATTY DEL ROSARIO

give way and leaving the new canvass holding on;

Q: What is the hatch board made of?
xxx

xxx

xxx [28]

A:

And the relevant portions of Jose Pascuas deposition are as

Q:

follows:

material there to cover the hatch?

Q: What is the purpose of the canvas cover?

A:

A:

So that the cargo would not be soaked with water.

Q: What is this beam made of?

A:

And will you describe how the canvas cover was secured

A:

It is made of wood, with a handle.

And aside from the hatch board, is there any other

There is a beam supporting the hatch board.

It is made of steel, sir.

on the hatch opening?

Q: Is the beam that was placed in the hatch opening covering
WITNESS

the whole hatch opening?

A:

A:

It was placed flat on top of the hatch cover, with a little

No, sir.

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

Q:

stopper so that the canvas could not be removed.

opening?

ATTY DEL ROSARIO

A:

Q:

ATTY DEL ROSARIO

And will you tell us the size of the hatch opening? The

How many hatch beams were there placed across the

There are five beams in one hatch opening.

length and the width of the hatch opening.

Q: And on top of the beams you said there is a hatch board.
A:

Forty-five feet by thirty-five feet, sir.

xxx
xxx

How many pieces of wood are put on top?

xxx

A:

Plenty, sir, because there are several pieces on top of the

hatch beam.

34

Transportation Law
Choco Notes
The stevedores employed only a tent-like material to cover the
Q: And is there a space between the hatch boards?

hatches when strong rains occasioned by a passing typhoon

disrupted the unloading of the cargo. This tent-like covering,

A:

There is none, sir.

however, was clearly inadequate for keeping rain and seawater

away from the hatches of the ship. Vicente Angliongto, an

Q: They are tight together?

officer of VSI, testified thus:

A:

ATTY ZAMORA:

Yes, sir.

Q: How tight?

Q:

Now, during your testimony on November 5, 1979, you

stated on August 14 you went on board the vessel upon notice

A:

Very tight, sir.

from the National Steel Corporation in order to conduct the

inspection of the cargo.

Q: Now, on top of the hatch boards, according to you, is the

During the course of the

investigation, did you chance to see the discharging operation?

canvas cover. How many canvas covers?

WITNESS:
A:

Two, sir. [29]

A:

Yes, sir, upon my arrival at the vessel, I saw some of the

That due diligence was exercised by the officers and the crew

tinplates already discharged on the pier but majority of the

of the MV Vlasons I was further demonstrated by the fact that,

tinplates were inside the hall, all the hatches were opened.

despite encountering rough weather twice, the new tarpaulin

did not give way and the ships hatches and cargo holds

Q:

remained waterproof. As aptly stated by the Court of Appeals,

where is the place.

In connection with these cargoes which were unloaded,

xxx we find no reason not to sustain the conclusion of the

lower court based on overwhelming evidence, that the MV

A:

At the Pier.

VLASONS I was seaworthy when it undertook the voyage

on August 8, 1974 carrying on board thereof plaintiff-

Q: What was used to protect the same from weather?

appellants shipment of 1,677 skids of tinplates and 92

packages of hot rolled sheets or a total of 1,769 packages from

ATTY LOPEZ:

NSCs pier in Iligan City arriving safely at North Harbor, Port

Area, Manila, on August 12, 1974; xxx. [30]

We object, your Honor, this question was already asked. This

particular matter . . . the transcript of stenographic notes shows

Indeed, NSC failed to discharge its burden to show negligence

the same was covered in the direct examination.

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

ATTY ZAMORA:

NSC who were negligent in unloading the cargo from the ship.
Precisely, your Honor, we would like to go on detail, this is
the serious part of the testimony.

35

Transportation Law
Choco Notes
COURT:

Q:

As owner of the vessel, did you not advise the National

Steel Corporation [of] the procedure adopted by its stevedores

All right, witness may answer.

in discharging the cargo particularly in this tent covering of

the hatches?

ATTY LOPEZ:
A:
Q:

What was used in order to protect the cargo from the

weather?

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

A:

A base of canvas was used as cover on top of the tin

to them. [31]

plates, and tents were built at the opening of the hatches.

NSC attempts to discredit the testimony of Angliongto by
Q: You also stated that the hatches were already opened and

questioning his failure to complain immediately about the

that there were tents constructed at the opening of the hatches

stevedores negligence on the first day of unloading, pointing

to protect the cargo from the rain. Now, will you describe [to]

out that he wrote his letter to petitioner only seven days later.

the Court the tents constructed.

[32] The Court is not persuaded. Angliongtos candid answer

in his aforequoted testimony satisfactorily explained the delay.

A:

The tents are just a base of canvas which look like a tent

Seven days lapsed because he first called the attention of the

of an Indian camp raise[d] high at the middle with the whole

stevedores, then the NSCs representative, about the negligent

side separated down to the hatch, the size of the hatch and it is

and defective procedure adopted in unloading the cargo. This

soaks [sic] at the middle because of those weather and this can

series of actions constitutes a reasonable response in accord

be used only to temporarily protect the cargo from getting wet

with common sense and ordinary human experience. Vicente

by rains.

Angliongto could not be blamed for calling the stevedores

attention first and then the NSCs representative on location

Q:

Now, is this procedure adopted by the stevedores of

covering tents proper?

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

A:

No, sir, at the time they were discharging the cargo, there

concern for NSC which was ultimately responsible for the

was a typhoon passing by and the hatch tent was not good

stevedores it had hired and the performance of their task to

enough to hold all of it to prevent the water soaking through

unload the cargo.

the canvas and enter the cargo.

We see no reason to reverse the trial and the appellate courts
Q: In the course of your inspection, Mr. Anglingto [sic], did

findings and conclusions on this point, viz:

you see in fact the water enter and soak into the canvas and
tinplates.

In the THIRD assigned error, [NSC] claims that the trial

court erred in finding that the stevedores hired by NSC were

A:

Yes, sir, the second time I went there, I saw it.

negligent in the unloading of NSCs shipment. We do not

36

Transportation Law
Choco Notes
think so.

Such negligence according to the trial court is

evident in the stevedores hired by [NSC], not closing the hatch

The trial court relied on the testimony of Vicente Angliongto

of MV VLASONS I when rains occurred during the

in finding that xxx tinplates sweat by themselves when

discharging of the cargo thus allowing rain water and seawater

packed even without being in contact with water from outside

spray to enter the hatches and to drift to and fall on the cargo.

especially when the weather is bad or raining xxx. [35] The

It was proven that the stevedores merely set up temporary

Court of Appeals affirmed the trial courts finding.

tents or canvas to cover the hatch openings when it rained

during the unloading operations so that it would be easier for

A discussion of this issue appears inconsequential and

them to resume work after the rains stopped by just removing

unnecessary.

said tents or canvass. It has also been shown that on August

tinplates was occasioned not by airborne moisture but by

20, 1974, VSI President Vicente Angliongto wrote [NSC]

contact with rain and seawater which the stevedores

calling attention to the manner the stevedores hired by [NSC]

negligently allowed to seep in during the unloading.

As previously discussed, the damage to the

were discharging the cargo on rainy days and the improper

closing of the hatches which allowed continuous heavy rain

Second Issue: Effect of NSCs Failure to Insure the Cargo

water to leak through and drip to the tinplates covers and

[Vicente Angliongto] also suggesting that due to four (4) days

The obligation of NSC to insure the cargo stipulated in the

continuos rains with strong winds that the hatches be totally

Contract of Voyage Charter Hire is totally separate and

closed down and covered with canvas and the hatch tents

distinct from the contractual or statutory responsibility that

lowered. (Exh 13). This letter was received by [NSC] on 22

may be incurred by VSI for damage to the cargo caused by the

August 1974 while discharging operations were still going on

willful negligence of the officers and the crew of MV Vlasons

(Exhibit 13-A). [33]

I. Clearly, therefore, NSCs failure to insure the cargo will not

affect its right, as owner and real party in interest, to file an

The fact that NSC actually accepted and proceeded to remove

action against VSI for damages caused by the latters willful

the cargo from the ship during unfavorable weather will not

negligence. We do not find anything in the charter party that

make VSI liable for any damage caused thereby. In passing, it

would make the liability of VSI for damage to the cargo

may be noted that the NSC may seek indemnification, subject

contingent on or affected in any manner by NSCs obtaining

to the laws on prescription, from the stevedoring company at

an insurance over the cargo.

fault in the discharge operations.

A stevedore company

engaged in discharging cargo xxx has the duty to load the

Third

Issue:

cargo xxx in a prudent manner, and it is liable for injury to, or

Seaworthiness

Admissibility

of

Certificates

Proving

loss of, cargo caused by its negligence xxx and where the
officers and members and crew of the vessel do nothing and

NSCs contention that MV Vlasons I was not seaworthy is

have no responsibility in the discharge of cargo by stevedores

anchored on the alleged inadmissibility of the certificates of

xxx the vessel is not liable for loss of, or damage to, the cargo

seaworthiness offered in evidence by VSI.

caused by the negligence of the stevedores xxx [34] as in

certificates include the following:

The said

the instant case.

1. Certificate of Inspection of the Philippine Coast Guard at
Do Tinplates Sweat?

Cebu

37

Transportation Law
Choco Notes
vessel VLASONS I was drydocked x x x and PCG
2. Certificate of Inspection from the Philippine Coast Guard

Inspectors were sent on board for inspection x x x. After

completion of drydocking and duly inspected by PCG

3. International Load Line Certificate from the Philippine

Inspectors, the vessel VLASONS I, a cargo vessel, is in

Coast Guard

seaworthy condition, meets all requirements, fitted and

equipped for trading as a cargo vessel was cleared by the

4. Coastwise License from the Board of Transportation

Philippine Coast Guard and sailed for Cebu Port on July 10,
1974. (sic) NSCs claim, therefore, is obviously misleading

5. Certificate of Approval for Conversion issued by the

and erroneous.

Bureau of Customs. [36]

At any rate, it should be stressed that that NSC has the burden
NSC argues that the certificates are hearsay for not having

of proving that MV Vlasons I was not seaworthy.

As

been presented in accordance with the Rules of Court.

It

observed earlier, the vessel was a private carrier and, as such,

points out that Exhibits 3, 4 and 11 allegedly are not written

it did not have the obligation of a common carrier to show that

records or acts of public officers; while Exhibits 5, 6, 7, 8, 9,

it was seaworthy. Indeed, NSC glaringly failed to discharge

11 and 12 are not evidenced by official publications or

its duty of proving the willful negligence of VSI in making the

certified true copies as required by Sections 25 and 26, Rule

ship seaworthy resulting in damage to its cargo. Assailing the

132, of the Rules of Court. [37]

genuineness of the certificate of seaworthiness is not sufficient

proof that the vessel was not seaworthy.

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

Fourth Issue: Demurrage and Attorneys Fees

have not been properly offered as evidence. Exhibits 3 and 4

are certificates issued by private parties, but they have not

The contract of voyage charter hire provides inter alia:

been proven by one who saw the writing executed, or by

evidence of the genuineness of the handwriting of the maker,

xxx

or by a subscribing witness. Exhibits 5, 6, 7, 8, 9, and 12 are

xxx

xxx

photocopies, but their admission under the best evidence rule

have not been demonstrated.

2. Cargo: Full cargo of steel products of not less than 2,500

MT, 10% more or less at Masters option.

We find, however, that Exhibit 11 is admissible under a wellsettled exception to the hearsay rule per Section 44 of Rule

xxx

130 of the Rules of Court, which provides that (e)ntries in

xxx

xxx

official records made in the performance of a duty by a public

officer of the Philippines, or by a person in the performance of

6. Loading/Discharging Rate : 750 tons per WWDSHINC.

a duty specially enjoined by law, are prima facie evidence of

the facts therein stated. [38] Exhibit 11 is an original

7. Demurrage/Dispatch : P8,000.00/P4,000.00 per day. [39]

certificate of the Philippine Coast Guard in Cebu issued by

Lieutenant Junior Grade Noli C. Flores to the effect that the

38

Transportation Law
Choco Notes
The Court defined demurrage in its strict sense as the

VSI assigns as error of law the Court of Appeals deletion of

compensation provided for in the contract of affreightment for

the award of attorneys fees. We disagree. While VSI was

the detention of the vessel beyond the laytime or that period of

compelled to litigate to protect its rights, such fact by itself

time agreed on for loading and unloading of cargo. [40] It is

will not justify an award of attorneys fees under Article 2208

given to compensate the shipowner for the nonuse of the

of the Civil Code when x x x no sufficient showing of bad

vessel. On the other hand, the following is well-settled:

faith would be reflected in a partys persistence in a case other

than an erroneous conviction of the righteousness of his cause

Laytime runs according to the particular clause of the charter

x x x. [44] Moreover, attorneys fees may not be awarded to

party. x x x If laytime is expressed in running days, this

a party for the reason alone that the judgment rendered was

means days when the ship would be run continuously, and

favorable to the latter, as this is tantamount to imposing a

holidays are not excepted.

premium on ones right to litigate or seek judicial redress of

A qualification of weather

permitting excepts only those days when bad weather

legitimate grievances. [45]

reasonably prevents the work contemplated. [41]

Epilogue
In this case, the contract of voyage charter hire provided for a
four-day laytime; it also qualified laytime as WWDSHINC or

At bottom, this appeal really hinges on a factual issue: when,

weather working days Sundays and holidays included. [42]

how and who caused the damage to the cargo?

The running of laytime was thus made subject to the weather,

against NSC are two formidable truths.

and would cease to run in the event unfavorable weather

courts found that such damage was brought about during the

interfered with the unloading of cargo. [43] Consequently,

unloading process when rain and seawater seeped through the

NSC may not be held liable for demurrage as the four-day

cargo due to the fault or negligence of the stevedores

laytime allowed it did not lapse, having been tolled by

employed by it. Basic is the rule that factual findings of the

unfavorable weather condition in view of the WWDSHINC

trial court, when affirmed by the Court of Appeals, are binding

qualification agreed upon by the parties. Clearly, it was error

on the Supreme Court. Although there are settled exceptions,

for the trial court and the Court of Appeals to have found and

NSC has not satisfactorily shown that this case is one of them.

affirmed respectively that NSC incurred eleven days of delay

Second, the agreement between the parties -- the Contract of

in unloading the cargo.

The trial court arrived at this

Voyage Charter Hire -- placed the burden of proof for such

erroneous finding by subtracting from the twelve days,

loss or damage upon the shipper, not upon the shipowner.

specifically August 13, 1974 to August 24, 1974, the only day

Such stipulation, while disadvantageous to NSC, is valid

of unloading unhampered by unfavorable weather or rain

because the parties entered into a contract of private charter,

which was August 22, 1974.

Based on our previous

not one of common carriage. Basic too is the doctrine that

discussion, such finding is a reversible error. As mentioned,

courts cannot relieve a party from the effects of a private

the respondent appellate court also erred in ruling that NSC

contract freely entered into, on the ground that it is allegedly

was liable to VSI for demurrage, even if it reduced the amount

one-sided or unfair to the plaintiff. The charter party is a

by half.

normal commercial contract and its stipulations are agreed

Ranged

First, both lower

upon in consideration of many factors, not the least of which

Attorneys Fees

is the transport price which is determined not only by the

actual costs but also by the risks and burdens assumed by the

39

Transportation Law
Choco Notes
shipper in regard to possible loss or damage to the cargo. In

This is a petition for review on certiorari of the decision of the

recognition of such factors, the parties even stipulated that the

Court of Appeals[1] in CA-GR No. 28245, dated September

shipper should insure the cargo to protect itself from the risks

30, 1992, which affirmed with modification the decision of the

it undertook under the charter party.

That NSC failed or

Regional Trial Court of Makati, Branch 58, ordering

neglected to protect itself with such insurance should not

petitioners jointly and severally to pay damages to private

adversely affect VSI, which had nothing to do with such

respondent Amyline Antonio, and its resolution which denied

failure or neglect.

petitioners motion for reconsideration for lack of merit.

WHEREFORE, premises considered, the instant consolidated

Petitioners Engracio Fabre, Jr. and his wife were owners of a

petitions are hereby DENIED. The questioned Decision of the

1982 model Mazda minibus. They used the bus principally in

Court of Appeals is AFFIRMED with the MODIFICATION

connection with a bus service for school children which they

that the demurrage awarded to VSI is deleted.

operated in Manila. The couple had a driver, Porfirio J. Cabil,

No

pronouncement as to costs.

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.

SO ORDERED.
Fabre v. CA

On November 2, 1984 private respondent Word for the World

[G.R. No. 111127. July 26, 1996]

Christian Fellowship Inc. (WWCF) arranged with petitioners

for the transportation of 33 members of its Young Adults

MR. & MRS. ENGRACIO FABRE, JR.* and PORFIRIO

CABIL, petitioners, vs. COURT OF APPEALS, THE WORD
FOR THE WORLD CHRISTIAN FELLOWSHIP, INC.,

Ministry from Manila to La Union and back in consideration

of which private respondent paid petitioners the amount of
P3,000.00.

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.

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.

LOPEZ, JULIUS CAESAR GARCIA, ROSARIO MA. V.

ORTIZ,

MARIETTA

ROSARIO

C.

CLAVO,

MARA-MARA,

ELVIE

TERESITA

SENIEL,
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.:

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

40

Transportation Law
Choco Notes
kilometers per hour, to skid to the left road shoulder. The bus

Hospital, also in the town of Ba-ay, where she was given

hit the left traffic steel brace and sign along the road and

sedatives. An x-ray was taken and the damage to her spine

rammed the fence of one Jesus Escano, then turned over and

was determined to be too severe to be treated there. She was

landed on its left side, coming to a full stop only after a series

therefore brought to Manila, first to the Philippine General

of impacts. The bus came to rest off the road. A coconut tree

Hospital and later to the Makati Medical Center where she

which it had hit fell on it and smashed its front portion.

underwent an operation to correct the dislocation of her spine.

Several passengers were injured. Private respondent Amyline

In its decision dated April 17, 1989, the trial court found that:

Antonio was thrown on the floor of the bus and pinned down
by a wooden seat which came off after being unscrewed. It

No convincing evidence was shown that the minibus was

took three persons to safely remove her from this position.

properly checked for travel to a long distance trip and that the

She was in great pain and could not move.

driver was properly screened and tested before being admitted

for employment.

Indeed, all the evidence presented have

The driver, petitioner Cabil, claimed he did not see the curve

shown the negligent act of the defendants which ultimately

until it was too late. He said he was not familiar with the area

resulted to the accident subject of this case.

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

Accordingly, it gave judgment for private respondents

on the road. He said that he saw the curve when he was

holding:

already within 15 to 30 meters of it. He allegedly slowed

down to 30 kilometers per hour, but it was too late.

Considering that plaintiffs Word for the World Christian

Fellowship, Inc. and Ms. Amyline Antonio were the only ones

The Lingayen police investigated the incident the next day,

who adduced evidence in support of their claim for damages,

November 3, 1984. On the basis of their finding they filed a

the Court is therefore not in a position to award damages to

criminal complaint against the driver, Porfirio Cabil. The case

the other plaintiffs.

was later filed with the Lingayen Regional Trial Court.

Petitioners Fabre paid Jesus Escano P1,500.00 for the damage

WHEREFORE, premises considered, the Court hereby renders

to the latters fence. On the basis of Escanos affidavit of

judgment against defendants Mr. & Mrs. Engracio Fabre, Jr.

desistance the case against petitioners Fabre was dismissed.

and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180

of the Civil Code of the Philippines and said defendants are

Amyline Antonio, who was seriously injured, brought this

ordered to pay jointly and severally to the plaintiffs the

case in the RTC of Makati, Metro Manila. As a result of the

following amount:

accident, she is now suffering from paraplegia and is

permanently paralyzed from the waist down. During the trial

1) P93,657.11 as compensatory and actual damages;

she described the operations she underwent and adduced

evidence regarding the cost of her treatment and therapy.

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

Immediately after the accident, she was taken to the Nazareth

capacity of plaintiff Amyline Antonio;

Hospital in Ba-ay, Lingayen.

As this hospital was not

adequately equipped, she was transferred to the Sto. Nio

3) P20,000.00 as moral damages;

41

Transportation Law
Choco Notes
II.
4) P20,000.00 as exemplary damages; and

WHETHER OR NOT PETITIONERS WERE LIABLE

FOR

THE

INJURIES

SUFFERED

BY

PRIVATE

RESPONDENTS.
5) 25% of the recoverable amount as attorneys fees;
III. WHETHER OR NOT DAMAGES CAN BE AWARDED
6) Costs of suit.

AND IN THE POSITIVE, UP TO WHAT EXTENT.

SO ORDERED.

Petitioners challenge the

propriety of the award

of

compensatory damages in the amount of P600,000.00. It is

The Court of Appeals affirmed the decision of the trial court

insisted that, on the assumption that petitioners are liable, an

with respect to Amyline Antonio but dismissed it with respect

award

to the other plaintiffs on the ground that they failed to prove

speculative. Amyline Antonio testified that she was a casual

their respective claims. The Court of Appeals modified the

employee of a company called Suaco, earning P1,650.00 a

award of damages as follows:

month, and a dealer of Avon products, earning an average of

of P600,000.00

P1,000.00 monthly.
1) P93,657.11 as actual damages;

is unconscionable

and

highly

Petitioners contend that as casual

employees do not have security of tenure, the award of

P600,000.00, considering Amyline Antonios earnings, is

2) P600,000.00 as compensatory damages;

without factual basis as there is no assurance that she would be

regularly earning these amounts.

3) P50,000.00 as moral damages;

With the exception of the award of damages, the petition is
4) P20,000.00 as exemplary damages;

devoid of merit.

5) P10,000.00 as attorneys fees; and

First, it is unnecessary for our purpose to determine whether to

decide this case on the theory that petitioners are liable for

6) Costs of suit.

breach of contract of carriage or culpa contractual or on the

theory of quasi delict or culpa aquiliana as both the Regional

The Court of Appeals sustained the trial courts finding that

Trial Court and the Court of Appeals held, for although the

petitioner Cabil failed to exercise due care and precaution in

relation of passenger and carrier is contractual both in origin

the operation of his vehicle considering the time and the place

and nature, nevertheless the act that breaks the contract may

of the accident. The Court of Appeals held that the Fabres

be also a tort.[2] In either case, the question is whether the

were themselves presumptively negligent.

bus driver, petitioner Porfirio Cabil, was negligent.

Hence, this

petition. Petitioners raise the following issues:

The finding that Cabil drove his bus negligently, while his
I.

WHETHER OR NOT PETITIONERS WERE

NEGLIGENT.

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

42

Transportation Law
Choco Notes
we regard as final and conclusive, supported as they are by the
evidence. Indeed, it was admitted by Cabil that on the night in

In the case at bar, the Fabres, in allowing Cabil to drive the

question, it was raining, and, as a consequence, the road was

bus to La Union, apparently did not consider the fact that

slippery, and it was dark. He averred these facts to justify his

Cabil had been driving for school children only, from their

failure to see that there lay a sharp curve ahead. However, it is

homes to the St. Scholasticas College in Metro Manila.[7]

undisputed that Cabil drove his bus at the speed of 50

They had hired him only after a two-week apprenticeship.

kilometers per hour and only slowed down when he noticed

They had tested him for certain matters, such as whether he

the curve some 15 to 30 meters ahead.[3] By then it was too

could remember the names of the children he would be taking

late for him to avoid falling off the road. Given the conditions

to school, which were irrelevant to his qualification to drive on

of the road and considering that the trip was Cabils first one

a long distance travel, especially considering that the trip to La

outside of Manila, Cabil should have driven his vehicle at a

Union was his first. The existence of hiring procedures and

moderate speed.

supervisory policies cannot be casually invoked to overturn

There is testimony[4] that the vehicles

passing on that portion of the road should only be running 20

the presumption of negligence on the part of an employer.[8]

kilometers per hour, so that at 50 kilometers per hour, Cabil

was running at a very high speed.

Petitioners argue that they are not liable because (1) an earlier
departure (made impossible by the congregations delayed

Considering the foregoing the fact that it was raining and

meeting) could have averted the mishap and (2) under the

the road was slippery, that it was dark, that he drove his bus at

contract, the WWCF was directly responsible for the conduct

50 kilometers an hour when even on a good day the normal

of the trip. Neither of these contentions hold water. The hour

speed was only 20 kilometers an hour, and that he was

of departure had not been fixed. Even if it had been, the delay

unfamiliar with the terrain, Cabil was grossly negligent and

did not bear directly on the cause of the accident.

should be held liable for the injuries suffered by private

respect to the second contention, it was held in an early case

respondent Amyline Antonio.

that:

Pursuant to Arts. 2176 and 2180 of the Civil Code his

[A] person who hires a public automobile and gives the driver

negligence gave rise to the presumption that his employers,

directions as to the place to which he wishes to be conveyed,

the Fabres, were themselves negligent in the selection and

but exercises no other control over the conduct of the driver, is

supervision of their employee.

not responsible for acts of negligence of the latter or prevented

With

from recovering for injuries suffered from a collision between

Due diligence in selection of employees is not satisfied by

the automobile and a train, caused by the negligence either of

finding that the applicant possessed a professional drivers

the locomotive engineer or the automobile driver.[9]

license. The employer should also examine the applicant for

his qualifications, experience and record of service.[5] Due

As already stated, this case actually involves a contract of

diligence in supervision, on the other hand, requires the

carriage. Petitioners, the Fabres, did not have to be engaged in

formulation of rules and regulations for the guidance of

the business of public transportation for the provisions of the

employees and the issuance of proper instructions as well as

Civil Code on common carriers to apply to them. As this

actual

Court has held:[10]

implementation

and

monitoring

of

consistent

compliance with the rules.[6]

43

Transportation Law
Choco Notes
Art. 1732. Common carriers are persons, corporations, firms

The same circumstances detailed above, supporting the

or associations engaged in the business of carrying or

finding of the trial court and of the appellate court that

transporting passengers or goods or both, by land, water, or air

petitioners are liable under Arts. 2176 and 2180 for quasi

for compensation, offering their services to the public.

delict, fully justify finding them guilty of breach of contract of

carriage under Arts. 1733, 1755 and 1759 of the Civil Code.

The above article makes no distinction between one whose

principal business activity is the carrying of persons or goods

Secondly, we sustain the award of damages in favor of

or both, and one who does such carrying only as an ancillary

Amyline Antonio. However, we think the Court of Appeals

activity (in local idiom, as a sideline). Article 1732 also

erred in increasing the amount of compensatory damages

carefully avoids making any distinction between a person or

because private respondents did not question this award as

enterprise offering transportation service on a regular or

inadequate.[11] To the contrary, the award of P500,000.00 for

scheduled basis and one offering such service on an

compensatory damages which the Regional Trial Court made

occasional, episodic or unscheduled basis.

Neither does

is reasonable considering the contingent nature of her income

Article 1732 distinguish between a carrier offering its services

as a casual employee of a company and as distributor of

to the general public, i.e., the general community or

beauty products and the fact that the possibility that she might

population, and one who offers services or solicits business

be able to work again has not been foreclosed. In fact she

only from a narrow segment of the general population. We

testified that one of her previous employers had expressed

think that Article 1732 deliberately refrained from making

willingness to employ her again.

such distinctions.
With respect to the other awards, while the decisions of the
As common carriers, the Fabres were bound to exercise

trial court and the Court of Appeals do not sufficiently

extraordinary diligence for the safe transportation of the

indicate the factual and legal basis for them, we find that they

passengers to their destination.

This duty of care is not

are nevertheless supported by evidence in the records of this

excused by proof that they exercised the diligence of a good

case. Viewed as an action for quasi delict, this case falls

father of the family in the selection and supervision of their

squarely within the purview of Art. 2219(2) providing for the

employee. As Art. 1759 of the Code provides:

payment of moral damages in cases of quasi delict. On the

theory that petitioners are liable for breach of contract of

Common carriers are liable for the death of or injuries to

carriage, the award of moral damages is authorized by Art.

passengers through the negligence or wilful acts of the

1764, in relation to Art. 2220, since Cabils gross negligence

formers employees, although such employees may have acted

amounted to bad faith.[12] Amyline Antonios testimony, as

beyond the scope of their authority or in violation of the orders

well as the testimonies of her father and co-passengers, fully

of the common carriers.

establish the physical suffering and mental anguish she

endured as a result of the injuries caused by petitioners

This liability of the common carriers does not cease upon

negligence.

proof that they exercised all the diligence of a good father of a

family in the selection and supervision of their employees.

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

44

Transportation Law
Choco Notes
damages, we hold that it was also error for it to increase the

quasi-delict. As early as 1913, we already ruled in Gutierrez

award of moral damages and reduce the award of attorneys

vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger

fees, inasmuch as private respondents, in whose favor the

due to the negligence of the driver of the bus on which he was

awards were made, have not appealed.[13]

riding and of the driver of another vehicle, the drivers as well

as the owners of the two vehicles are jointly and severally

As above stated, the decision of the Court of Appeals can be

liable for damages. Some members of the Court, though, are

sustained either on the theory of quasi delict or on that of

of the view that under the circumstances they are liable on

breach of contract. The question is whether, as the two courts

quasi-delict.[20]

below held, petitioners, who are the owners and driver of the
bus, may be made to respond jointly and severally to private

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of

respondent. We hold that they may be. In Dangwa Trans. Co.

Appeals[21] this Court exonerated the jeepney driver from

Inc. v. Court of Appeals,[14] on facts similar to those in this

liability to the injured passengers and their families while

case, this Court held the bus company and the driver jointly

holding the owners of the jeepney jointly and severally liable,

and severally liable for damages for injuries suffered by a

but that is because that case was expressly tried and decided

passenger.

exclusively on the theory of culpa contractual. As this Court

Again, in Bachelor Express, Inc. v. Court of

Appeals[15] a driver found negligent in failing to stop the bus

there explained:

in order to let off passengers when a fellow passenger ran

amuck, as a result of which the passengers jumped out of the

The trial court was therefore right in finding that Manalo [the

speeding bus and suffered injuries, was held also jointly and

driver] and spouses Mangune and Carreon [the jeepney

severally liable with the bus company to the injured

owners] were negligent.

passengers.

Mangune and Carreon are jointly and severally liable with

However, its ruling that spouses

Manalo is erroneous. The driver cannot be held jointly and

The same rule of liability was applied in situations where the

severally liable with the carrier in case of breach of the

negligence of the driver of the bus on which plaintiff was

contract of carriage.

riding concurred with the negligence of a third party who was

discernible. Firstly, the contract of carriage is between the

the driver of another vehicle, thus causing an accident. In

carrier and the passenger, and in the event of contractual

Anuran v. Buo,[16] Batangas Laguna Tayabas Bus Co. v.

liability, the carrier is exclusively responsible therefore to the

Intermediate Appellate Court,[17] and Metro Manila Transit

passenger, even if such breach be due to the negligence of his

Corporation v. Court of Appeals,[18] the bus company, its

driver (see Viluan v. The Court of Appeals, et al., G.R. Nos.

driver, the operator of the other vehicle and the driver of the

L-21477-81, April 29, 1966, 16 SCRA 742) . . .[22]

The rationale behind this is readily

vehicle were jointly and severally held liable to the injured

passenger or the latters heirs. The basis of this allocation of

As in the case of BLTB, private respondents in this case and

liability was explained in Viluan v. Court of Appeals,[19]

her co-plaintiffs did not stake out their claim against the

thus:

carrier and the driver exclusively on one theory, much less on

that of breach of contract alone. After all, it was permitted for

Nor should it make any difference that the liability of

them to allege alternative causes of action and join as many

petitioner [bus owner] springs from contract while that of

parties as may be liable on such causes of action[23] so long

respondents [owner and driver of other vehicle] arises from

as private respondent and her co-plaintiffs do not recover

45

Transportation Law
Choco Notes
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.

MARTINEZ, J.:
This petition for review on certiorari assails the Decision
of the Court of Appeals dated November 29, 1995, in CAG.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

WHEREFORE, the decision of the Court of Appeals is

tax refund imposed by the City of Batangas.

AFFIRMED with MODIFICATION as to the award of

Petitioners are ORDERED to PAY jointly and

Petitioner is a grantee of a pipeline concession under

severally the private respondent Amyline Antonio the

Republic Act No. 387, as amended, to contract, install and

following amounts:

operate oil pipelines. The original pipeline concession was

damages.

granted in 1967[1] and renewed by the Energy Regulatory

Board in 1992.[2]

1) P93,657.11 as actual damages;

Sometime in January 1995, petitioner applied for a

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

mayor's permit with the Office of the Mayor of Batangas

capacity of plaintiff Amyline Antonio;

City. However, before the mayor's permit could be issued, the

respondent City Treasurer required petitioner to pay a local tax

3) P20,000.00 as moral damages;

based on its gross receipts for the fiscal year 1993 pursuant to
the Local Government Code.[3] The respondent City Treasurer

4) P20,000.00 as exemplary damages;

assessed a business tax on the petitioner amounting

to P956,076.04 payable in four installments based on the gross

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

receipts for products pumped at GPS-1 for the fiscal year 1993
which amounted to P181,681,151.00. In order not to hamper

6) costs of suit.

its operations, petitioner paid the tax under protest in the

amount of P239,019.01 for the first quarter of 1993.

SO ORDERED.
On January 20, 1994, petitioner filed a letter-protest
First Philippine Pipeline v. CA

addressed to the respondent City Treasurer, the pertinent

portion of which reads:
"Please note that our Company (FPIC) is a pipeline operator

[G.R. No. 125948. December 29, 1998]

with a government concession granted under the Petroleum

FIRST

PHILIPPINE
CORPORATION, petitioner,

INDUSTRIAL
vs. COURT

OF

APPEALS, HONORABLE PATERNO V. TACAN, BATANGAS CITY and ADORACION C.

ARELLANO, in her official capacity as City

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 x x

Treasurer of Batangas, respondents.

DECISION

46

Transportation Law
Choco Notes
"Moreover, Transportation contractors are not included in the

and erroneously imposed and collected the said tax, thus

enumeration of contractors under Section 131, Paragraph (h)

meriting the immediate refund of the tax paid.[7]

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.

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

"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

Traversing the complaint, the respondents argued that

(P239,019.01

per

quarter)

is

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

not

commensurate to the cost of regulation, inspection and

"xxx Plaintiff is either a contractor or other independent

licensing. The fee is already a revenue raising measure, and

contractor.

not a mere regulatory imposition."

[4]

xxx the exemption to tax claimed by the plaintiff has become

On March 8, 1994, the respondent City Treasurer denied

unclear. It is a rule that tax exemptions are to be strictly

the protest contending that petitioner cannot be considered

construed against the taxpayer, taxes being the lifeblood of the

engaged in transportation business, thus it cannot claim

government. Exemption may therefore be granted only by

exemption under Section 133 (j) of the Local Government

clear and unequivocal provisions of law.

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

"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:

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

1.

That the exemption granted under

Sec.

133

(j)

encompasses

47

Transportation Law
Choco Notes
only common carriers so as not to

Petitioner claims that the respondent Court of Appeals

overburden the riding public or

erred in holding that (1) the petitioner is not a common carrier

commuters with taxes. Plaintiff is

or a transportation contractor, and (2) the exemption sought

not a common carrier, but a special

for by petitioner is not clear under the law.

carrier extending its services and

There is merit in the petition.

facilities to a single specific or

"special customer" under a "special

A "common carrier" may be defined, broadly, as one

who holds himself out to the public as engaged in the business

contract."

of transporting persons or property from place to place, for

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

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."

to serve the people and discharge

their functions with a concomitant
obligation

to

accept

certain

The test for determining whether a party is a common

carrier of goods is:

devolution of powers, x x x So,

consistent with this policy even

1.

He must be engaged in the business of

carrying goods for others as a public

franchise grantees are taxed (Sec.

employment, and must hold himself out as

137) and contractors are also taxed

ready to engage in the transportation of

under Sec. 143 (e) and 151 of the

goods for person generally as a business and

Code."[9]

not as a casual occupation;

Petitioner assailed the aforesaid decision before this
Court via a petition for review. On February 27, 1995, we

2.

referred the case to the respondent Court of Appeals for

consideration and adjudication.

[10]

He must undertake to carry goods of the kind

to which his business is confined;

On November 29, 1995, the

respondent court rendered a decision[11] affirming the trial

3.

He must undertake to carry by the method by

court's dismissal of petitioner's complaint. Petitioner's motion

which his business is conducted and over his

for reconsideration was denied on July 18, 1996. [12]

established roads; and

Hence, this petition. At first, the petition was denied due

course in a Resolution dated November 11, 1996.

[13]

The transportation must be for hire.[15]

Petitioner

moved for a reconsideration which was granted by this Court

in a Resolution[14] of January 20, 1997. Thus, the petition was
reinstated.

4.

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

48

Transportation Law
Choco Notes
choose to employ its services, and transports the goods by land

ice plant, ice-refrigeration plant, canal, irrigation system gas,

and for compensation. The fact that petitioner has a limited

electric light heat and power, water supply and power

clientele does not exclude it from the definition of a common

petroleum,

carrier. In De Guzman vs. Court of Appeals

[16]

we ruled that:

sewerage

system,

wire

or

wireless

communications systems, wire or wireless broadcasting

stations and other similar public services.' "(Underscoring

"The above article (Art. 1732, Civil Code) makes no

Supplied)

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

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.

such service on an occasional, episodic or unscheduled

As correctly pointed out by petitioner, the definition of

basis. Neither does Article 1732 distinguish between a

"common carriers" in the Civil Code makes no distinction as

carrier offering its services to the 'general public,' i.e., the

to the means of transporting, as long as it is by land, water or

general community or population, and one who offers

air. It does not provide that the transportation of the

services or solicits business only from a narrow segment of

passengers or goods should be by motor vehicle. In fact, in

the general population. We think that Article 1877

the United States, oil pipe line operators are considered

deliberately refrained from making such distinctions.

common carriers.[17]

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,

Under the Petroleum Act of the Philippines (Republic

Act 387), petitioner is considered a "common carrier." Thus,
Article 86 thereof provides that:
"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."
Republic Act 387 also regards petroleum operation as a
public utility. Pertinent portion of Article 7 thereof provides:

with or without fixed route and whatever may be its

classification, freight or carrier service of any class, express

"that everything relating to the exploration for and exploitation

service, steamboat, or steamship line, pontines, ferries and

of petroleum x x and everything relating to the manufacture,

water craft, engaged in the transportation ofpassengers or

refining, storage, or transportation by special methods of

freight or both, shipyard, marine repair shop, wharf or dock,

49

Transportation Law
Choco Notes
petroleum, is hereby declared to be a public utility."

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

(Underscoring Supplied)
Still on page 95, subparagraph 5, on taxes on the business of
The Bureau of Internal Revenue likewise considers the
petitioner a "common carrier." In BIR Ruling No. 069-83, it
declared:

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

"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."

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

From the foregoing disquisition, there is no doubt that

petitioner is a "common carrier" and, therefore, exempt from

on the business of transportation, except as otherwise provided

in this code.

the business tax as provided for in Section 133 (j), of the Local
Now, Mr. Speaker, if the Gentleman would care to go to page

Government Code, to wit:

98 of Book II, one can see there that provinces have the power
"Section 133. Common Limitations on the Taxing Powers of

to impose a tax on business enjoying a franchise at the rate of

Local Government Units. - Unless otherwise provided herein,

not more than one-half of 1 percent of the gross annual

the exercise of the taxing powers of provinces, cities,

receipts. So, transportation contractors who are enjoying a

municipalities, and barangays shall not extend to the levy of

franchise would be subject to tax by the province. That is the

the following :

exception, Mr. Speaker.

xxx
(j)

What we want to guard against here, Mr. Speaker, is the

imposition of taxes by local government units on the

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

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

water, except as provided in this Code."

Sec. 137] that a province may impose this tax at a specific

The

deliberations

conducted

in

the

House

of

rate.

Representatives on the Local Government Code of 1991 are

illuminating:

MR. AQUINO (A.). Thank you for that clarification, Mr.

Speaker. x x x[18]

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

It is clear that the legislative intent in excluding from the
Mr. Speaker, we would like to proceed to page 95, line 1. It

taxing power of the local government unit the imposition of

states : "SEC.121 [now Sec. 131]. Common Limitations on the

business tax against common carriers is to prevent a

Taxing Powers of Local Government Units." x x x

duplication of the so-called "common carrier's tax."

50

Transportation Law
Choco Notes
Petitioner is already paying three (3%) percent common

the Port Area in Manila to SMCs warehouse at the Tabacalera

carrier's tax on its gross sales/earnings under the National

Compound, Romualdez St., Ermita, Manila. The cargo was

Internal Revenue Code.

[19]

To tax petitioner again on its gross

insured by respondent UCPB General Insurance Co., Inc.

receipts in its transportation of petroleum business would

defeat the purpose of the Local Government Code.

On July 14, 1990, the shipment in question, contained in 30

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

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

ASIDE.

contract with SMC, withdrew the cargo from the arrastre

SO ORDERED.

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-

Calvo v. UCPB

chemical fluting paper were wet/stained/torn and 3 reels of

[G.R. No. 148496. March 19, 2002]

kraft liner board were likewise torn. The damage was placed
VIRGINES CALVO doing business under the name and style

at P93,112.00.

TRANSORIENT CONTAINER TERMINAL SERVICES,

INC., petitioner, vs. UCPB GENERAL INSURANCE CO.,
INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent.

SMC collected payment from respondent UCPB under its

insurance contract for the aforementioned amount. In turn,
respondent, as subrogee of SMC, brought suit against

DECISION

petitioner in the Regional Trial Court, Branch 148, Makati

MENDOZA, J.:

City, which, on December 20, 1995, rendered judgment

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

finding petitioner liable to respondent for the damage to the

shipment.

Regional Trial Court, Makati City, Branch 148, which ordered

petitioner to pay respondent, as subrogee, the amount of

The trial court held:

P93,112.00 with legal interest, representing the value of

damaged cargo handled by petitioner, 25% thereof as

damage while in the custody of defendants. Evidence such as

attorneys fees, and the cost of the suit.

the Warehouse Entry Slip (Exh. E); the Damage Report

(Exh. F) with entries appearing therein, classified as TED

The facts are as follows:

and TSN, which the claims processor, Ms. Agrifina De

Petitioner Virgines Calvo is the owner of Transorient

Container

Terminal

Services,

Inc.

(TCTSI),

sole

proprietorship customs broker. At the time material to this

case,

It cannot be denied . . . that the subject cargoes sustained

petitioner entered into a contract with San Miguel

Corporation (SMC) for the transfer of 114 reels of semichemical fluting paper and 124 reels of kraft liner board from

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:

51

Transportation Law
Choco Notes
. . . we opine that damages sustained by shipment is

Defendant, being a customs brother, warehouseman and at the

attributable to improper handling in transit presumably whilst

same time a common carrier is supposed [to] exercise [the]

in the custody of the broker . . . .

extraordinary

diligence

required

by

law,

hence

the

extraordinary responsibility lasts from the time the goods are

is a finding which cannot be traversed and overturned.

unconditionally placed in the possession of and received by

the carrier for transportation until the same are delivered

The evidence adduced by the defendants is not enough to

actually or constructively by the carrier to the consignee or to

sustain [her] defense that [she is] are not liable. Defendant by

the person who has the right to receive the same.[3]

reason of the nature of [her] business should have devised

ways and means in order to prevent the damage to the cargoes

Accordingly, the trial court ordered petitioner to pay the

which it is under obligation to take custody of and to forthwith

following amounts

deliver to the consignee. Defendant did not present any

evidence on what precaution [she] performed to prevent [the]

1. The sum of P93,112.00 plus interest;

said incident, hence the presumption is that the moment the

defendant accepts the cargo [she] shall perform such

2. 25% thereof as lawyers fee;

extraordinary diligence because of the nature of the cargo.

3. Costs of suit.[4]
. . . .
The decision was affirmed by the Court of Appeals on appeal.
Generally speaking under Article 1735 of the Civil Code, if

Hence this petition for review on certiorari.

the goods are proved to have been lost, destroyed or

deteriorated, common carriers are presumed to have been at

Petitioner contends that:

fault or to have acted negligently, unless they prove that they

have observed the extraordinary diligence required by law.

I. THE COURT OF APPEALS COMMITTED SERIOUS

The burden of the plaintiff, therefore, is to prove merely that

AND REVERSIBLE ERROR [IN] DECIDING THE CASE

the goods he transported have been lost, destroyed or

NOT ON THE EVIDENCE PRESENTED BUT ON PURE

deteriorated. Thereafter, the burden is shifted to the carrier to

SURMISES,

prove that he has exercised the extraordinary diligence

MISTAKEN INFERENCE.

SPECULATIONS

AND

MANIFESTLY

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

II. THE COURT OF APPEALS COMMITTED SERIOUS

at the place of destination in bad order, makes out a prima

AND REVERSIBLE ERROR IN CLASSIFYING THE

facie case against the carrier, so that if no explanation is given

PETITIONER AS A COMMON CARRIER AND NOT AS

as to how the injury occurred, the carrier

PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD

must be held

responsible. It is incumbent upon the carrier to prove that the

ITS SERVICES TO THE PUBLIC.[5]

loss was due to accident or some other circumstances

inconsistent with its liability. (cited in Commercial Laws of

It will be convenient to deal with these contentions in the

the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)

inverse order, for if petitioner is not a common carrier,

52

Transportation Law
Choco Notes
although both the trial court and the Court of Appeals held

general population. We think that Article 1732 deliberately

otherwise, then she is indeed not liable beyond what ordinary

refrained from making such distinctions.

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

So understood, the concept of common carrier under Article

fault or negligence.

1732 may be seen to coincide neatly with the notion of public

service, under the Public Service Act (Commonwealth Act

Petitioner contends that contrary to the findings of the trial

No. 1416, as amended) which at least partially supplements

court and the Court of Appeals, she is not a common carrier

the law on common carriers set forth in the Civil Code. Under

but a private carrier because, as a customs broker and

Section 13, paragraph (b) of the Public Service Act, public

warehouseman, she does not indiscriminately hold her

service includes:

services out to the public but only offers the same to select
parties with whom she may contract in the conduct of her

x x x every person that now or hereafter may own, operate,

business.

manage, or control in the Philippines, for hire or

compensation, with general or limited clientele, whether

The contention has no merit. In De Guzman v. Court of

permanent, occasional or accidental, and done for general

Appeals,[7] the Court dismissed a similar contention and held

business purposes, any common carrier, railroad, street

the party to be a common carrier, thus

railway, traction railway, subway motor vehicle, either for

freight or passenger, or both, with or without fixed route and

The Civil Code defines common carriers in the following

whatever may be its classification, freight or carrier service of

terms:

any class, express service, steamboat, or steamship line,

pontines, ferries and water craft, engaged in the transportation

Article 1732. Common carriers are persons, corporations,

of passengers or freight or both, shipyard, marine repair shop,

firms or associations engaged in the business of carrying or

wharf or dock, ice plant, ice-refrigeration plant, canal,

transporting passengers or goods or both, by land, water, or air

irrigation system, gas, electric light, heat and power, water

for compensation, offering their services to the public.

supply and power petroleum, sewerage system, wire or

wireless

The above article makes no distinction between one whose

principal business activity is the carrying of persons or goods

communications

systems,

wire

or

wireless

broadcasting stations and other similar public services. x x x

[8]

or both, and one who does such carrying only as an ancillary

activity . . . Article 1732 also carefully avoids making any

There is greater reason for holding petitioner to be a common

distinction

offering

carrier because the transportation of goods is an integral part

transportation service on a regular or scheduled basis and one

of her business. To uphold petitioners contention would be to

offering such service on an occasional, episodic or

deprive those with whom she contracts the protection which

unscheduled basis.

the law affords them

between

person

or

enterprise

Neither does Article 1732 distinguish

notwithstanding the fact that the

between a carrier offering its services to the general public,

obligation to carry goods for her customers, as already noted,

i.e., the general community or population, and one who offers

is part and parcel of petitioners business.

services or solicits business only from a narrow segment of the

53

Transportation Law
Choco Notes
Now, as to petitioners liability, Art. 1733 of the Civil Code
provides:

PERU-204209-4

with pinholes on roof panel right

portion
Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary

TOLU-213674-3

diligence in the vigilance over the goods and for the safety of

signs of water soaked

wood flooring we[t] and/or with

with dent/crack on roof

the passengers transported by them, according to all the

circumstances of each case. . . .

MAXU-201406-0
panel

In Compania Maritima v. Court of Appeals,[9] the meaning of

extraordinary diligence in the vigilance over goods was

ICSU-412105-0

explained thus:

panel partly detached loosened.[10]

The extraordinary diligence in the vigilance over the goods

In addition, petitioner claims that Marine Cargo Surveyor

tendered for shipment requires the common carrier to know

Ernesto Tolentino testified that he has no personal knowledge

and to follow the required precaution for avoiding damage to,

on whether the container vans were first stored in petitioners

or destruction of the goods entrusted to it for sale, carriage and

warehouse prior to their delivery to the consignee.

delivery. It requires common carriers to render service with

likewise claims that after withdrawing the container vans from

the greatest skill and foresight and to use all reasonable

the arrastre operator, her driver, Ricardo Nazarro, immediately

means to ascertain the nature and characteristic of goods

delivered the cargo to SMCs warehouse in Ermita, Manila,

tendered for shipment, and to exercise due care in the handling

which is a mere thirty-minute drive from the Port Area where

and stowage, including such methods as their nature requires.

the cargo came from. Thus, the damage to the cargo could not

rubber gasket on left side/door

She

have taken place while these were in her custody.[11]

In the case at bar, petitioner denies liability for the damage to
the cargo. She claims that the spoilage or wettage took

Contrary to petitioners assertion, the Survey Report (Exh. H)

place while the goods were in the custody of either the

of the Marine Cargo Surveyors indicates that when the shipper

carrying vessel M/V Hayakawa Maru, which transported the

transferred the cargo in question to the arrastre operator, these

cargo to Manila, or the arrastre operator, to whom the goods

were covered by clean Equipment Interchange Report (EIR)

were unloaded and who allegedly kept them in open air for

and, when petitioners employees withdrew the cargo from the

nine days from July 14 to July 23, 1998 notwithstanding the

arrastre operator, they did so without exception or protest

fact that some of the containers were deformed, cracked, or

either with regard to the condition of container vans or their

otherwise damaged, as noted in the Marine Survey Report

contents. The Survey Report pertinently reads

(Exh. H), to wit:

Details of Discharge:
MAXU-2062880

rain gutter deformed/cracked

Shipment, provided with our protective supervision was noted

ICSU-363461-3
distorted/partly loose

left side rubber gasket on door

discharged ex vessel to dock of Pier #13 South Harbor, Manila

on 14 July 1990, containerized onto 30 x 20 secure metal

54

Transportation Law
Choco Notes
vans, covered by clean EIRs. Except for slight dents and paint

the loss (or damage) was due to his fault, unless there is proof

scratches on side and roof panels, these containers were

to the contrary. No proof was proffered to rebut this legal

deemed to have [been] received in good condition.

presumption and the presumption of negligence attached to a

common carrier in case of loss or damage to the goods.[13]

. . . .
Anent petitioners insistence that the cargo could not have
Transfer/Delivery:

been damaged while in her custody as she immediately

delivered the containers to SMCs compound, suffice it to say

On July 23, 1990, shipment housed onto 30 x 20 cargo

containers

was

[withdrawn]

by Transorient

Container

Services, Inc. . . . without exception.

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

[The cargo]
storage

was finally delivered to the consignees

warehouse

located

at

Tabacalera

Compound,

characteristic of goods tendered for [transport] and that [it]

exercise[d] due care in the handling [thereof].

Petitioner

Romualdez Street, Ermita, Manila from July 23/25, 1990.[12]

failed to do this.

As found by the Court of Appeals:

Nor is there basis to exempt petitioner from liability under Art.

1734(4), which provides

From the [Survey Report], it [is] clear that the shipment was
discharged from the vessel to the arrastre, Marina Port

Common carriers are responsible for the loss, destruction, or

Services Inc., in good order and condition as evidenced by

deterioration of the goods, unless the same is due to any of the

clean Equipment Interchange Reports (EIRs). Had there been

following causes only:

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

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

former without exception, that is, without any report of

the containers.

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

For this provision to apply, the rule is that if the improper

Entry Slip (WES).

To put it

packing or, in this case, the defect/s in the container, is/are

simply, the defendant-appellant received the shipment in good

known to the carrier or his employees or apparent upon

order and condition and delivered the same to the consignee

ordinary observation, but he nevertheless accepts the same

damaged. We can only conclude that the damages to the

without protest or exception notwithstanding such condition,

cargo occurred while it was in the possession of the defendant-

he is not relieved of liability for damage resulting

appellant. Whenever the thing is lost (or damaged) in the

therefrom.[14] In this case, petitioner accepted the

possession of the debtor (or obligor), it shall be presumed that

without exception despite the apparent defects in some of the

None of these took place.

cargo

55

Transportation Law
Choco Notes
container vans. Hence, for failure of petitioner to prove that

Lambert Eroles with the Regional Trial Court, Branch 66, of

she exercised extraordinary diligence in the carriage of goods

Makati City. In its answer, respondents asserted that GPS was

in this case or that she is exempt from liability, the

the exclusive hauler only of Concepcion Industries, Inc., since

presumption of negligence as provided under Art. 1735[15]

1988, and it was not so engaged in business as a common

holds.

carrier. Respondents further claimed that the cause of damage

was purely accidental.

WHEREFORE, the decision of the Court of Appeals, dated

May 31, 2001, is AFFIRMED.

The issues having thus been joined, FGU presented its

evidence, establishing the extent of damage to the cargoes and

SO ORDERED.

the amount it had paid to the assured.

GPS, instead of

submitting its evidence, filed with leave of court a motion to

FGU Insurance v. Sarmiento

dismiss the complaint by way of demurrer to evidence on the

[G.R. No. 141910. August 6, 2002]

ground that petitioner had failed to prove that it was a

common carrier.

FGU INSURANCE CORPORATION, petitioner, vs. G.P.

SARMIENTO

TRUCKING

CORPORATION

and

LAMBERT M. EROLES, respondents.

The trial court, in its order of 30 April 1996,[1] granted the

motion to dismiss, explaining thusly:

DECISION
VITUG, J.:

Under Section 1 of Rule 131 of the Rules of Court, it is

provided that Each party must prove his own affirmative

G.P. Sarmiento Trucking Corporation (GPS) undertook to

allegation, xxx.

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,

In the instant case, plaintiff did not present any single

evidence that would prove that defendant is a common carrier.

Inc., along South Superhighway in Alabang, Metro Manila, to

the Central Luzon Appliances in Dagupan City. While the

x x x x x x

xxx

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.

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

FGU Insurance Corporation (FGU), an insurer of the

Code is not availing.

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

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.

and breach of contract of carriage against GPS and its driver

56

Transportation Law
Choco Notes
Under the law on obligation and contract, negligence or fault

"x x x x x x

xxx

is not presumed. The law on quasi delict provides for some

presumption of negligence but only upon the attendance of

"Because it is the appellant who insists that the appellees can

some circumstances. Thus, Article 2185 provides:

still be considered as a common carrier, despite its `limited

clientele, (assuming it was really a common carrier), it

Art. 2185.

Unless there is proof to the contrary, it is

follows that it (appellant) has the burden of proving the same.

presumed that a person driving a motor vehicle has been

It (plaintiff-appellant) `must establish his case by a

negligent if at the time of the mishap, he was violating any

preponderance of evidence, which means that the evidence as

traffic regulation.

a whole adduced by one side is superior to that of the other.

(Summa Insurance Corporation vs. Court of Appeals, 243

Evidence for the plaintiff shows no proof that defendant was

SCRA 175). This, unfortunately, the appellant failed to do --

violating any traffic regulation. Hence, the presumption of

hence, the dismissal of the plaintiffs complaint by the trial

negligence is not obtaining.

court is justified.

Considering that plaintiff failed to adduce evidence that

"x x x x x x

xxx

defendant is a common carrier and defendants driver was the

one negligent, defendant cannot be made liable for the

"Based on the foregoing disquisitions and considering the

damages of the subject cargoes.[2]

circumstances that the appellee trucking corporation has been

`its exclusive contractor, hauler since 1970, defendant has no

The subsequent motion for reconsideration having been

choice but to comply with the directive of its principal, the

denied,[3] plaintiff interposed an appeal to the Court of

inevitable conclusion is that the appellee is a private carrier.

Appeals, contending that the trial court had erred (a) in

holding that the appellee corporation was not a common

"x x x x x x

xxx

carrier defined under the law and existing jurisprudence; and

(b) in dismissing the complaint on a demurrer to evidence.

"x x x the lower court correctly ruled that 'the application of

the law on common carriers is not warranted and the

The Court of Appeals rejected the appeal of petitioner and

presumption of fault or negligence on the part of a common

ruled in favor of GPS. The appellate court, in its decision of

carrier in case of loss, damage or deterioration of good[s]

10 June 1999, [4] discoursed, among other things, that -

during transport under [article] 1735 of the Civil Code is not

availing.' x x x.

"x x x in order for the presumption of negligence provided for

under the law governing common carrier (Article 1735, Civil

"Finally, We advert to the long established rule that

Code) to arise, the appellant must first prove that the appellee

conclusions and findings of fact of a trial court are entitled to

is a common carrier. Should the appellant fail to prove that

great weight on appeal and should not be disturbed unless for

the appellee is a common carrier, the presumption would not

strong and valid reasons."[5]

arise; consequently, the appellant would have to prove that the

carrier was negligent.

57

Transportation Law
Choco Notes
Petitioner's motion for reconsideration was likewise denied;[6]

standards, GPS scarcely falls within the term common

hence, the instant petition,[7] raising the following issues:

carrier.

The above conclusion nothwithstanding, GPS cannot escape

from liability.

WHETHER RESPONDENT GPS MAY BE CONSIDERED

AS A COMMON CARRIER AS DEFINED UNDER THE

In culpa contractual, upon which the action of petitioner rests

LAW AND EXISTING JURISPRUDENCE.

as being the subrogee of Concepcion Industries, Inc., the mere

proof of the existence of the contract and the failure of its

II

compliance justify, prima facie, a corresponding right of

relief.[11] The law, recognizing the obligatory force of

WHETHER RESPONDENT GPS, EITHER AS A COMMON

contracts,[12] will not permit a party to be set free from

CARRIER

BE

liability for any kind of misperformance of the contractual

PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE

undertaking or a contravention of the tenor thereof.[13] A

GOODS IT UNDERTOOK TO TRANSPORT SAFELY

breach upon the contract confers upon the injured party a valid

WERE SUBSEQUENTLY DAMAGED WHILE IN ITS

cause for recovering that which may have been lost or

PROTECTIVE CUSTODY AND POSSESSION.

suffered. The remedy serves to preserve the interests of the

OR

PRIVATE

CARRIER,

MAY

promisee that may include his expectation interest, which is

III

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

WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS

been performed, or his reliance interest, which is his interest

APPLICABLE IN THE INSTANT CASE.

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

On the first issue, the Court finds the conclusion of the trial

had the contract not been made; or his restitution interest,

court and the Court of Appeals to be amply justified. GPS,

which is his interest in having restored to him any benefit that

being an exclusive contractor and hauler of Concepcion

he has conferred on the other party.[14] Indeed, agreements

Industries, Inc., rendering or offering its services to no other

can accomplish little, either for their makers or for society,

individual or entity, cannot be considered a common carrier.

unless they are made the basis for action.[15] The effect of

Common carriers are persons, corporations, firms or

every infraction is to create a new duty, that is, to make

associations engaged in the business of carrying or

recompense to the one who has been injured by the failure of

transporting passengers or goods or both, by land, water, or

another to observe his contractual obligation[16] unless he can

air, for hire or compensation, offering their services to the

show extenuating circumstances, like proof of his exercise of

public,[8] whether to the public in general or to a limited

due diligence (normally that of the diligence of a good father

clientele in particular, but never on an exclusive basis.[9] The

of a family or, exceptionally by stipulation or by law such as

true test of a common carrier is the carriage of passengers or

in the case of common carriers, that of extraordinary

goods, providing space for those who opt to avail themselves

diligence) or of the attendance of fortuitous event, to excuse

of its transportation service for a fee.[10] Given accepted

him from his ensuing liability.

58

Transportation Law
Choco Notes
Respondent trucking corporation recognizes the existence of a

simply places on the defendant the burden of going forward

contract of carriage between it and petitioners assured, and

with the proof.[20] Resort to the doctrine, however, may be

admits that the cargoes it has assumed to deliver have been

allowed only when (a) the event is of a kind which does not

lost or damaged while in its custody. In such a situation, a

ordinarily occur in the absence of negligence; (b) other

default on, or failure of compliance with, the obligation in

responsible causes, including the conduct of the plaintiff and

this case, the delivery of the goods in its custody to the place

third persons, are sufficiently eliminated by the evidence; and

of destination - gives rise to a presumption of lack of care and

(c) the indicated negligence is within the scope of the

corresponding liability on the part of the contractual obligor

defendant's duty to the plaintiff.[21] Thus, it is not applicable

the burden being on him to establish otherwise. GPS has

when an unexplained accident may be attributable to one of

failed to do so.

several causes, for some of which the defendant could not be

responsible.[22]

Respondent driver, on the other hand, without concrete proof

of his negligence or fault, may not himself be ordered to pay

Res ipsa loquitur generally finds relevance whether or not a

petitioner. The driver, not being a party to the contract of

contractual relationship exists between the plaintiff and the

carriage between petitioners principal and defendant, may not

defendant, for the inference of negligence arises from the

be held liable under the agreement. A contract can only bind

circumstances and nature of the occurrence and not from the

the parties who have entered into it or their successors who

nature of the relation of the parties.[23] Nevertheless, the

have assumed their personality or their juridical position.[17]

requirement that responsible causes other than those due to

Consonantly with the axiom res inter alios acta aliis neque

defendants conduct must first be eliminated, for the doctrine

nocet prodest, such contract can neither favor nor prejudice a

to apply, should be understood as being confined only to cases

third person. Petitioners civil action against the driver can

of pure (non-contractual) tort since obviously the presumption

only be based on culpa aquiliana, which, unlike culpa

of negligence in culpa contractual, as previously so pointed

contractual, would require the claimant for damages to prove

out, immediately attaches by a failure of the covenant or its

negligence or fault on the part of the defendant.[18]

tenor. In the case of the truck driver, whose liability in a civil

action is predicated on culpa acquiliana, while he admittedly

A word in passing.

Res ipsa loquitur, a doctrine being

can be said to have been in control and management of the

invoked by petitioner, holds a defendant liable where the thing

vehicle which figured in the accident, it is not equally shown,

which caused the injury complained of is shown to be under

however, that the accident could have been exclusively due to

the latters management and the accident is such that, in the

his negligence, a matter that can allow, forthwith, res ipsa

ordinary course of things, cannot be expected to happen if

loquitur to work against him.

those who have its management or control use proper care. It

affords reasonable evidence, in the absence of explanation by

If a demurrer to evidence is granted but on appeal the order of

the defendant, that the accident arose from want of care.[19] It

dismissal is reversed, the movant shall be deemed to have

is not a rule of substantive law and, as such, it does not create

waived the right to present evidence.[24] Thus, respondent

an independent ground of liability. Instead, it is regarded as a

corporation may no longer offer proof to establish that it has

mode of proof, or a mere procedural convenience since it

exercised due care in transporting the cargoes of the assured

furnishes a substitute for, and relieves the plaintiff of, the

so as to still warrant a remand of the case to the trial court.

burden of producing specific proof of negligence. The maxim

59

Transportation Law
Choco Notes
WHEREFORE, the order, dated 30 April 1996, of the

December 1988, about nine oclock, while Limar I was being

Regional Trial Court, Branch 66, of Makati City, and the

towed by respondents tugboat, MT Iron Eagle, the barge

decision, dated 10 June 1999, of the Court of Appeals, are

sank a couple of miles off the coast of Dumagasa Point, in

AFFIRMED only insofar as respondent Lambert M. Eroles is

Zamboanga del Sur, bringing down with it the entire cargo of

concerned, but said assailed order of the trial court and

75,000 bags of cement.

decision of the appellate court are REVERSED as regards

G.P. Sarmiento Trucking Corporation which, instead, is

DUMC filed a formal claim with Philamgen for the full

hereby ordered to pay FGU Insurance Corporation the value of

amount of the insurance. Philamgen promptly made payment;

the damaged and lost cargoes in the amount of P204,450.00.

it then sought reimbursement from PKS Shipping of the sum

No costs.

paid to DUMC but the shipping company refused to pay,

prompting Philamgen to file suit against PKS Shipping with

SO ORDERED.

the Makati RTC.

Philamgen v. PKS Shipping

The RTC dismissed the complaint after finding that the total

[G.R. No. 149038. April 9, 2003]

loss of the cargo could have been caused either by a fortuitous

event, in which case the ship owner was not liable, or through

PHILIPPINE

AMERICAN

GENERAL

INSURANCE

COMPANY, petitioner, vs. PKS SHIPPING COMPANY,

respondent.

the negligence of the captain and crew of the vessel and that,
under Article 587 of the Code of Commerce adopting the
Limited Liability Rule, the ship owner could free itself of

DECISION

liability by abandoning, as it apparently so did, the vessel with

VITUG, J.:

all her equipment and earned freightage.

The petition before the Court seeks a review of the decision of

the Court of Appeals in C.A. G.R. CV No. 56470,
promulgated on 25 June 2001, which has affirmed in toto the
judgment of the Regional Trial Court (RTC), Branch 65, of
Makati, dismissing the complaint for damages filed by
petitioner insurance corporation against respondent shipping
company.

Philamgen interposed an appeal to the Court of Appeals which

affirmed in toto the decision of the trial court. The appellate
court ruled that evidence to establish that PKS Shipping was a
common carrier at the time it undertook to transport the bags
of cement was wanting because the peculiar method of the
shipping companys carrying goods for others was not
generally held out as a business but as a casual occupation. It
then concluded that PKS Shipping, not being a common

Davao Union Marketing Corporation (DUMC) contracted the

services of respondent PKS Shipping Company (PKS
Shipping) for the shipment to Tacloban City of seventy-five
thousand (75,000) bags of cement worth Three Million Three
Hundred Seventy-Five Thousand Pesos (P3,375,000.00).
DUMC insured the goods for its full value with petitioner
Philippine

American

General

Insurance

carrier,

was

not

expected

to

observe

the

stringent

extraordinary diligence required of common carriers in the

care of goods. The appellate court, moreover, found that the
loss of the goods was sufficiently established as having been
due to fortuitous event, negating any liability on the part of
PKS Shipping to the shipper.

Company

(Philamgen). The goods were loaded aboard the dumb barge

Limar I belonging to PKS Shipping. On the evening of 22

60

Transportation Law
Choco Notes
In the instant appeal, Philamgen contends that the appellate

issues in a petition for review before this Court. Thus, an

court has committed a patent error in ruling that PKS Shipping

issue whether a carrier is private or common on the basis of

is not a common carrier and that it is not liable for the loss of

the facts found by a trial court or the appellate court can be a

the subject cargo.

valid and reviewable question of law.

The fact that respondent has a limited

clientele, petitioner argues, does not militate against

respondents being a common carrier and that the only way by

The Civil Code defines common carriers in the following

which such carrier can be held exempt for the loss of the cargo

terms:

would be if the loss were caused by natural disaster or

calamity. Petitioner avers that typhoon "APIANG" has not

Article 1732. Common carriers are persons, corporations,

entered the Philippine area of responsibility and that, even if it

firms or associations engaged in the business of carrying or

did, respondent would not be exempt from liability because its

transporting passengers or goods or both, by land, water, or air

employees, particularly the tugmaster, have failed to exercise

for compensation, offering their services to the public.

due diligence to prevent or minimize the loss.

Complementary to the codal definition is Section 13,
PKS Shipping, in its comment, urges that the petition should

paragraph (b), of the Public Service Act; it defines public

be denied because what Philamgen seeks is not a review on

service to be

points or errors of law but a review of the undisputed factual

findings of the RTC and the appellate court. In any event,

x x x every person that now or hereafter may own, operate,

PKS Shipping points out, the findings and conclusions of both

manage, or control in the Philippines, for hire or

courts find support from the evidence and applicable

compensation, with general or limited clientele, whether

jurisprudence.

permanent, occasional or accidental, and done for general

business purposes, any common carrier, railroad, street

The determination of possible liability on the part of PKS

railway, subway motor vehicle, either for freight or passenger,

Shipping boils down to the question of whether it is a private

or both, with or without fixed route and whatever may be its

carrier or a common carrier and, in either case, to the other

classification, freight or carrier service of any class, express

question of whether or not it has observed the proper diligence

service, steamboat, or steamship, or steamship line, pontines,

(ordinary, if a private carrier, or extraordinary, if a common

ferries and water craft, engaged in the transportation of

carrier) required of it given the circumstances.

passengers or freight or both, shipyard, marine repair shop,

wharf or dock, ice plant, ice refrigeration plant, canal,

The findings of fact made by the Court of Appeals,

irrigation system, gas, electric light, heat and power, water

particularly when such findings are consistent with those of

supply and power petroleum, sewerage system, wire or

the trial court, may not at liberty be reviewed by this Court in

wireless

a petition for review under Rule 45 of the Rules of Court.[1]

broadcasting stations and other similar public services. x x x.

The conclusions derived from those factual findings, however,

(Underscoring supplied).

communication

systems,

wire

or

wireless

are not necessarily just matters of fact as when they are so

linked to, or inextricably intertwined with, a requisite

The prevailing doctrine on the question is that enunciated in

appreciation of the applicable law.

the leading case of De Guzman vs. Court of Appeals.[2]

In such instances, the

conclusions made could well be raised as being appropriate

61

Transportation Law
Choco Notes
Applying Article 1732 of the Code, in conjunction with

has engaged itself in the business of carrying goods for others,

Section 13(b) of the Public Service Act, this Court has held:

although for a limited clientele, undertaking to carry such

goods for a fee. The regularity of its activities in this area

The above article makes no distinction between one whose

indicates more than just a casual activity on its part.[6] Neither

principal business activity is the carrying of persons or goods

can the concept of a common carrier change merely because

or both, and one who does such carrying only as an ancillary

individual contracts are executed or entered into with patrons

activity (in local idiom, as `a sideline). Article 1732 also

of the carrier. Such restrictive interpretation would make it

carefully avoids making any distinction between a person or

easy for a common carrier to escape liability by the simple

enterprise offering transportation service on a regular or

expedient of entering into those distinct agreements with

scheduled basis and one offering such service on an

clients.

occasional, episodic or unscheduled basis.

Neither does

Article 1732 distinguish between a carrier offering its services

Addressing now the issue of whether or not PKS Shipping has

to the `general public, i.e., the general community or

exercised the proper diligence demanded of common carriers,

population, and one who offers services or solicits business

Article 1733 of the Civil Code requires common carriers to

only from a narrow segment of the general population. We

observe extraordinary diligence in the vigilance over the

think that Article 1732 deliberately refrained from making

goods they carry. In case of loss, destruction or deterioration

such distinctions.

of goods, common carriers are presumed to have been at fault

or to have acted negligently, and the burden of proving

So understood, the concept of `common carrier under Article

otherwise rests on them.[7] The provisions of Article 1733,

1732 may be seen to coincide neatly with the notion of `public

notwithstanding, common carriers are exempt from liability

service, under the Public Service Act (Commonwealth Act

for loss, destruction, or deterioration of the goods due to any

No. 1416, as amended) which at least partially supplements

of the following causes:

the law on common carriers set forth in the Civil Code.

(1) Flood, storm, earthquake, lightning, or other natural
Much of the distinction between a common or public carrier

disaster or calamity;

and a private or special carrier lies in the character of the

business, such that if the undertaking is an isolated transaction,

(2) Act of the public enemy in war, whether international or

not a part of the business or occupation, and the carrier does

civil;

not hold itself out to carry the goods for the general public or
to a limited clientele, although involving the carriage of goods

(3) Act or omission of the shipper or owner of the goods;

for a fee,[3] the person or corporation providing such service

could very well be just a private carrier. A typical case is that

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

of a charter party which includes both the vessel and its crew,

the containers; and

such as in a bareboat or demise, where the charterer obtains

the use and service of all or some part of a ship for a period of

(5) Order or act of competent public authority.[8]

time or a voyage or voyages[4] and gets the control of the

vessel and its crew.[5] Contrary to the conclusion made by the

The appellate court ruled, gathered from the testimonies and

appellate court, its factual findings indicate that PKS Shipping

sworn marine protests of the respective vessel masters of

62

Transportation Law
Choco Notes
Limar I and MT Iron Eagle, that there was no way by which

WHEREFORE, the petition is DENIED. No costs.

the barges or the tugboats crew could have prevented the

sinking of Limar I. The vessel was suddenly tossed by waves

SO ORDERED.

of extraordinary height of six (6) to eight (8) feet and buffeted

by strong winds of 1.5 knots resulting in the entry of water
into the barges hatches. The official Certificate of Inspection

Asia Lighterage v. CA
[G.R. No. 147246. August 19, 2003]

of the barge issued by the Philippine Coastguard and the

Coastwise Load Line Certificate would attest to the
seaworthiness of Limar I and should strengthen the factual
findings of the appellate court.

ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs.

COURT OF APPEALS and PRUDENTIAL GUARANTEE
AND ASSURANCE, INC., respondents.
DECISION

Findings of fact of the Court of Appeals generally conclude

this Court; none of the recognized exceptions from the rule (1) when the factual findings of the Court of Appeals and the
trial court are contradictory; (2) when the conclusion is a
finding grounded entirely on speculation, surmises, or
conjectures; (3) when the inference made by the Court of
Appeals from its findings of fact is manifestly mistaken,
absurd, or impossible; (4) when there is a grave abuse of

PUNO, J.:
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.

discretion in the appreciation of facts; (5) when the appellate

court, in making its findings, went beyond the issues of the

First, the facts.

case and such findings are contrary to the admissions of both

appellant and appellee; (6) when the judgment of the Court of
Appeals is premised on a misapprehension of facts; (7) when
the Court of Appeals failed to notice certain relevant facts
which, if properly considered, would justify a different
conclusion; (8)

when the findings of fact are themselves

conflicting; (9)

when the findings of fact are conclusions

without citation of the specific evidence on which they are

based; and (10) when the findings of fact of the Court of
Appeals are premised on the absence of evidence but such

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]

findings are contradicted by the evidence on record would

appear to be clearly extant in this instance.

On July 25, 1990, the carrying vessel arrived in Manila and

the cargo was transferred to the custody of the petitioner Asia

All given then, the appellate court did not err in its judgment
absolving PKS Shipping from liability for the loss of the
DUMC cargo.

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.

63

Transportation Law
Choco Notes
On August 15, 1990, 900 metric tons of the shipment was
loaded on barge PSTSI III, evidenced by Lighterage Receipt

On January 30, 1991, the private respondent indemnified the

No. 0364[7] for delivery to consignee. The cargo did not

consignee in the amount of P4,104,654.22.[15] Thereafter, as

reach its destination.

subrogee, it sought recovery of said amount from the

petitioner, but to no avail.

It appears that on August 17, 1990, the transport of said cargo

was suspended due to a warning of an incoming typhoon. On

On July 3, 1991, the private respondent filed a complaint

August 22, 1990, the petitioner proceeded to pull the barge to

against the petitioner for recovery of the amount of indemnity,

Engineering Island off Baseco to seek shelter from the

attorney's fees and cost of suit.[16] Petitioner filed its answer

approaching typhoon.

with counterclaim.[17]

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

The Regional Trial Court ruled in favor of the private

because of a hole it sustained after hitting an unseen

respondent. The dispositive portion of its Decision states:

protuberance underneath the water.

The petitioner filed a

Marine Protest on August 28, 1990.[8] It likewise secured the

WHEREFORE, premises considered, judgment is hereby

services of Gaspar Salvaging Corporation which refloated the

rendered ordering defendant Asia Lighterage & Shipping, Inc.

barge.[9] The hole was then patched with clay and cement.

liable to pay plaintiff Prudential Guarantee & Assurance Co.,

Inc. the sum of P4,104,654.22 with interest from the date

The barge was then towed to ISLOFF terminal before it finally

complaint was filed on July 3, 1991 until fully satisfied plus

headed towards the consignee's wharf on September 5, 1990.

10% of the amount awarded as and for attorney's fees.

Upon reaching the Sta. Mesa spillways, the barge again ran

Defendant's counterclaim is hereby DISMISSED. With costs

aground due to strong current. To avoid the complete sinking

against defendant.[18]

of the barge, a portion of the goods was transferred to three

other barges.[10]

Petitioner appealed to the Court of Appeals insisting that it is

not a common carrier.

The appellate court affirmed the

The next day, September 6, 1990, the towing bits of the barge

decision of the trial court with modification. The dispositive

broke. It sank completely, resulting in the total loss of the

portion of its decision reads:

remaining cargo.[11] A second Marine Protest was filed on

September 7, 1990.[12]

WHEREFORE, the decision appealed from is hereby

AFFIRMED with modification in the sense that the salvage

On September 14, 1990, a bidding was conducted to dispose

value of P201,379.75 shall be deducted from the amount of

of the damaged wheat retrieved and loaded on the three other

P4,104,654.22. Costs against appellant.

barges.[13] The total proceeds from the sale of the salvaged

cargo was P201,379.75.[14]

SO ORDERED.

On the same date, September 14, 1990, consignee sent a claim

Petitioners Motion for Reconsideration dated June 3, 2000

letter to the petitioner, and another letter dated September 18,

was likewise denied by the appellate court in a Resolution

1990 to the private respondent for the value of the lost cargo.

promulgated on February 21, 2001.

64

Transportation Law
Choco Notes
Article 1732 of the Civil Code defines common carriers as
Hence, this petition. Petitioner submits the following errors

persons, corporations, firms or associations engaged in the

allegedly committed by the appellate court, viz:[19]

business of carrying or transporting passengers or goods or

both, by land, water, or air, for compensation, offering their

(1)

THE COURT OF APPEALS DECIDED THE CASE A

services to the public.

QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR

WITH THE APPLICABLE DECISIONS OF THE SUPREME

Petitioner contends that it is not a common carrier but a

COURT WHEN IT HELD THAT PETITIONER IS A

private carrier. Allegedly, it has no fixed and publicly known

COMMON CARRIER.

route, maintains no terminals, and issues no tickets. It points

out that it is not obliged to carry indiscriminately for any

(2)

THE COURT OF APPEALS DECIDED THE CASE A

person. It is not bound to carry goods unless it consents. In

QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR

short, it does not hold out its services to the general

WITH THE APPLICABLE DECISIONS OF THE SUPREME

public.[20]

COURT WHEN IT AFFIRMED THE FINDING OF THE

LOWER COURT A QUO THAT ON THE BASIS OF THE

We disagree.

PROVISIONS OF THE CIVIL CODE APPLICABLE TO

COMMON CARRIERS, THE LOSS OF THE CARGO IS,

In De Guzman vs. Court of Appeals,[21] we held that the

THEREFORE, BORNE BY THE CARRIER IN ALL CASES

definition of common carriers in Article 1732 of the Civil

EXCEPT IN THE FIVE (5) CASES ENUMERATED.

Code makes no distinction between one whose principal

business activity is the carrying of persons or goods or both,

(3)

THE COURT OF APPEALS DECIDED THE CASE A

and one who does such carrying only as an ancillary activity.

QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR

We also did not distinguish between a person or enterprise

WITH THE APPLICABLE DECISIONS OF THE SUPREME

offering transportation service on a regular or scheduled basis

COURT WHEN IT EFFECTIVELY CONCLUDED THAT

and one offering such service on an occasional, episodic or

PETITIONER FAILED TO EXERCISE DUE DILIGENCE

unscheduled basis. Further, we ruled that Article 1732 does

AND/OR

not distinguish between a carrier offering its services to the

WAS

NEGLIGENT

IN

ITS

CARE

AND

CUSTODY OF THE CONSIGNEES CARGO.

general public, and one who offers services or solicits business

only from a narrow segment of the general population.

The issues to be resolved are:

In the case at bar, the principal business of the petitioner is
(1)

Whether the petitioner is a common carrier; and,

that of lighterage and drayage[22] and it offers its barges to

the public for carrying or transporting goods by water for

(2)

Assuming the petitioner is a common carrier,

compensation. Petitioner is clearly a common carrier. In De

whether it exercised extraordinary diligence in its care and

Guzman, supra,[23] we considered private respondent Ernesto

custody of the consignees cargo.

Cendaa to be a common carrier even if his principal

occupation was not the carriage of goods for others, but that of

On the first issue, we rule that petitioner is a common carrier.

buying used bottles and scrap metal in Pangasinan and selling

these items in Manila.

65

Transportation Law
Choco Notes
(1)
We therefore hold that petitioner is a common carrier whether

Flood, storm, earthquake, lightning, or other natural

disaster or calamity;

its carrying of goods is done on an irregular rather than

scheduled manner, and with an only limited clientele.

common carrier need not have fixed and publicly known

(2)

Act of the public enemy in war, whether international

or civil;

routes. Neither does it have to maintain terminals or issue

tickets.

(3)

Act or omission of the shipper or owner of the goods;

To be sure, petitioner fits the test of a common carrier as laid

(4)

The character of the goods or defects in the packing

down in Bascos vs. Court of Appeals.[24] The test to

or in the containers;

determine a common carrier is whether the given undertaking

is a part of the business engaged in by the carrier which he has

(5)

Order or act of competent public authority.

held out to the general public as his occupation rather than the
quantity or extent of the business transacted.[25] In the case

In the case at bar, the barge completely sank after its towing

at bar, the petitioner admitted that it is engaged in the business

bits broke, resulting in the total loss of its cargo. Petitioner

of shipping and lighterage,[26] offering its barges to the

claims that this was caused by a typhoon, hence, it should not

public, despite its limited clientele for carrying or transporting

be held liable for the loss of the cargo. However, petitioner

goods by water for compensation.[27]

failed to prove that the typhoon is the proximate and only

cause of the loss of the goods, and that it has exercised due

On the second issue, we uphold the findings of the lower

diligence before, during and after the occurrence of the

courts that petitioner failed to exercise extraordinary diligence

typhoon to prevent or minimize the loss.[30] The evidence

in its care and custody of the consignees goods.

show that, even before the towing bits of the barge broke, it
had already previously sustained damage when it hit a sunken

Common carriers are bound to observe extraordinary diligence

object while docked at the Engineering Island.

It even

in the vigilance over the goods transported by them.[28] They

suffered a hole. Clearly, this could not be solely attributed to

are presumed to have been at fault or to have acted negligently

the typhoon. The partly-submerged vessel was refloated but

if the goods are lost, destroyed or deteriorated.[29]

To

its hole was patched with only clay and cement. The patch

overcome the presumption of negligence in the case of loss,

work was merely a provisional remedy, not enough for the

destruction or deterioration of the goods, the common carrier

barge to sail safely.

must prove that it exercised extraordinary diligence. There

proceed with the voyage, it recklessly exposed the cargo to

are, however, exceptions to this rule. Article 1734 of the Civil

further damage.

Code enumerates the instances when the presumption of

Alfredo Cunanan, cargo-surveyor of Tan-Gatue Adjustment

negligence does not attach:

Co., Inc., states:

Art. 1734. Common carriers are responsible for the loss,

CROSS-EXAMINATION BY ATTY. DONN LEE:[31]

Thus, when petitioner persisted to

A portion of the cross-examination of

destruction, or deterioration of the goods, unless the same is

due to any of the following causes only:

xxx

xxx

xxx

66

Transportation Law
Choco Notes
qq - Can you tell us what else transpired after that incident?

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 - After the first accident, through the initiative of the barge

owners, they tried to pull out the barge from the place of the

a -

Since that time that the Barge was refloated, GMC

accident, and bring it to the anchor terminal for safety, then

(General Milling Corporation, the consignee) as I have said

after deciding if the vessel is stabilized, they tried to pull it to

was in a hurry for their goods to be delivered at their Wharf

the consignees warehouse, now while on route another

since they needed badly the wheat that was loaded in PSTSI-3.

accident occurred, now this time the barge totally hitting

It was needed badly by the consignee.

something in the course.

qq -

You said there was another accident, can you tell the

And this is the reason why you towed the Barge as you

did?

court the nature of the second accident?

a - Yes, sir.
a - The sinking, sir.
xxx
q - Can you tell the nature . . . can you tell the court, if you

xxx

xxx

know what caused the sinking?

CROSS-EXAMINATION BY ATTY. IGNACIO:[34]
a-

Mostly it was related to the first accident because there

was already a whole (sic) on the bottom part of the barge.

xxx

xxx

xxx
xxx

xxx

xxx

q-

And then from ISLOFF Terminal you proceeded to the

premises of the GMC? Am I correct?

This is not all. Petitioner still headed to the consignees wharf
despite knowledge of an incoming typhoon. During the time

a-

The next day, in the morning, we hired for additional

that the barge was heading towards the consignee's wharf on

two (2) tugboats as I have stated.

September 5, 1990, typhoon Loleng has already entered the

Philippine area of responsibility.[32] A part of the testimony

q-

Despite of the threats of an incoming typhoon as you

of Robert Boyd, Cargo Operations Supervisor of the

testified a while ago?

petitioner, reveals:
aDIRECT-EXAMINATION BY ATTY. LEE:[33]

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.

xxx
xxx

xxx
q-

But the fact is, the typhoon was incoming? Yes or no?

67

Transportation Law
Choco Notes
a-

Yes.

Crisostomo v. CA
[G.R. No. 138334. August 25, 2003]

q -

And yet as a standard operating procedure of your

Company, you have to secure a sort of Certification to

ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT OF

determine the weather condition, am I correct?

APPEALS

and

CARAVAN

TRAVEL

&

TOURS

INTERNATIONAL, INC., respondents.

a-

Yes, sir.

DECISION
YNARES-SANTIAGO, J.:

q-

So, more or less, you had the knowledge of the incoming

typhoon, right?

In May 1991, petitioner Estela L. Crisostomo contracted the

services

a-

Yes, sir.

of

respondent

Caravan

Travel

and

Tours

International, Inc. to arrange and facilitate her booking,

ticketing and accommodation in a tour dubbed Jewels of

q-

And yet you proceeded to the premises of the GMC?

Europe. The package tour included the countries of England,

Holland, Germany, Austria, Liechstenstein, Switzerland and

a-

ISLOFF Terminal is far from Manila Bay and anytime

France at a total cost of P74,322.70. Petitioner was given a

even with the typhoon if you are already inside the vicinity or

5% discount on the amount, which included airfare, and the

inside Pasig entrance, it is a safe place to tow upstream.

booking fee was also waived because petitioners niece,

Meriam Menor, was respondent companys ticketing manager.

Accordingly, the petitioner cannot invoke the occurrence of

the typhoon as force majeure to escape liability for the loss

Pursuant to said contract, Menor went to her aunts residence

sustained by the private respondent.

Surely, meeting a

on June 12, 1991 a Wednesday to deliver petitioners

typhoon head-on falls short of due diligence required from a

travel documents and plane tickets. Petitioner, in turn, gave

common carrier.

More importantly, the officers/employees

Menor the full payment for the package tour. Menor then told

themselves of petitioner admitted that when the towing bits of

her to be at the Ninoy Aquino International Airport (NAIA) on

the vessel broke that caused its sinking and the total loss of the

Saturday, two hours before her flight on board British

cargo upon reaching the Pasig River, it was no longer affected

Airways.

by the typhoon. The typhoon then is not the proximate cause

of the loss of the cargo; a human factor, i.e., negligence had

Without checking her travel documents, petitioner went to

intervened.

NAIA on Saturday, June 15, 1991, to take the flight for the
first leg of her journey from Manila to Hongkong. To

IN VIEW THEREOF, the petition is DENIED. The Decision

petitioners dismay, she discovered that the flight she was

of the Court of Appeals in CA-G.R. CV No. 49195 dated May

supposed to take had already departed the previous day. She

11, 2000 and its Resolution dated February 21, 2001 are

learned that her plane ticket was for the flight scheduled on

hereby AFFIRMED. Costs against petitioner.

June 14, 1991. She thus called up Menor to complain.

SO ORDERED.

Subsequently, Menor prevailed upon petitioner to take another

tour the British Pageant which included England,

68

Transportation Law
Choco Notes
Scotland and Wales in its itinerary. For this tour package,

Respondent explained that it can no longer reimburse the

petitioner was asked anew to pay US$785.00 or P20,881.00

amount paid for Jewels of Europe, considering that the same

(at the then prevailing exchange rate of P26.60). She gave

had already been remitted to its principal in Singapore, Lotus

respondent US$300 or P7,980.00 as partial payment and

Travel Ltd., which had already billed the same even if

commenced the trip in July 1991.

petitioner did not join the tour.

Lotus European tour

organizer, Insight International Tours Ltd., determines the cost

Upon petitioners return from Europe, she demanded from

of a package tour based on a minimum number of projected

respondent the reimbursement of P61,421.70, representing the

participants. For this reason, it is accepted industry practice to

difference between the sum she paid for Jewels of Europe

disallow refund for individuals who failed to take a booked

and the amount she owed respondent for the British Pageant

tour.[3]

tour. Despite several demands, respondent company refused to

reimburse the amount, contending that the same was non-

Lastly, respondent maintained that the British Pageant was

refundable.[1]

Petitioner was thus constrained to file a

not a substitute for the package tour that petitioner missed.

complaint against respondent for breach of contract of carriage

This tour was independently procured by petitioner after

and damages, which was docketed as Civil Case No. 92-133

realizing that she made a mistake in missing her flight for

and raffled to Branch 59 of the Regional Trial Court of Makati

Jewels of Europe. Petitioner was allowed to make a partial

City.

payment of only US$300.00 for the second tour because her

niece was then an employee of the travel agency.

In her complaint,[2] petitioner alleged that her failure to join

Consequently, respondent prayed that petitioner be ordered to

Jewels of Europe was due to respondents fault since it did

pay the balance of P12,901.00 for the British Pageant

not clearly indicate the departure date on the plane ticket.

package tour.

Respondent was also negligent in informing her of the wrong

flight schedule through its employee Menor. She insisted that

After due proceedings, the trial court rendered a decision,[4]

the British Pageant was merely a substitute for the Jewels

the dispositive part of which reads:

of Europe tour, such that the cost of the former should be

properly set-off against the sum paid for the latter.

WHEREFORE, premises considered, judgment is hereby

rendered as follows:

For its part, respondent company, through its Operations

Manager, Concepcion Chipeco, denied responsibility for

1.

petitioners failure to join the first tour. Chipeco insisted that

plaintiff the amount of Fifty Three Thousand Nine Hundred

petitioner was informed of the correct departure date, which

Eighty Nine Pesos and Forty Three Centavos (P53,989.43)

was clearly and legibly printed on the plane ticket. The travel

with legal interest thereon at the rate of twelve percent (12%)

documents were given to petitioner two days ahead of the

per annum starting January 16, 1992, the date when the

scheduled trip.

complaint was filed;

Petitioner had only herself to blame for

Ordering the defendant to return and/or refund to the

missing the flight, as she did not bother to read or confirm her
flight schedule as printed on the ticket.

2.

Ordering the defendant to pay the plaintiff the amount

of Five Thousand (P5,000.00) Pesos as and for reasonable

attorneys fees;

69

Transportation Law
Choco Notes
this decision becomes final and executory, the rate of
3.

Dismissing the defendants counterclaim, for lack of

merit; and

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.

4.

With costs against the defendant.

Costs against the plaintiff-appellee.

SO ORDERED.[5]

SO ORDERED.[6]

The trial court held that respondent was negligent in

Upon denial of her motion for reconsideration,[7] petitioner

erroneously advising petitioner of her departure date through

filed the instant petition under Rule 45 on the following

its employee, Menor, who was not presented as witness to

grounds:

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

It is respectfully submitted that the Honorable Court of

guilty of contributory negligence and accordingly, deducted

Appeals committed a reversible error in reversing and setting

10% from the amount being claimed as refund.

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

Respondent appealed to the Court of Appeals, which likewise

Europe tour she being equally, if not more, negligent than the

found both parties to be at fault. However, the appellate court

private respondent, for in the contract of carriage the common

held that petitioner is more negligent than respondent because

carrier is obliged to observe utmost care and extra-ordinary

as a lawyer and well-traveled person, she should have known

diligence which is higher in degree than the ordinary diligence

better than to simply rely on what was told to her. This being

required of the passenger. Thus, even if the petitioner and

so, she is not entitled to any form of damages. Petitioner also

private respondent were both negligent, the petitioner cannot

forfeited her right to the Jewels of Europe tour and must

be considered to be equally, or worse, more guilty than the

therefore pay respondent the balance of the price for the

private respondent. At best, petitioners negligence is only

British Pageant tour.

contributory while the private respondent [is guilty] of gross

The dispositive portion of the

judgment appealed from reads as follows:

negligence making the principle of pari delicto inapplicable in

the case;

WHEREFORE, premises considered, the decision of the

Regional Trial Court dated October 26, 1995 is hereby

II

REVERSED and SET ASIDE. A new judgment is hereby

ENTERED requiring the plaintiff-appellee to pay to the

The Honorable Court of Appeals also erred in not ruling that

defendant-appellant the amount of P12,901.00, representing

the Jewels of Europe tour was not indivisible and the

the balance of the price of the British Pageant Package Tour,

amount paid therefor refundable;

the same to earn legal interest at the rate of SIX PERCENT

(6%) per annum, to be computed from the time the

III

counterclaim was filed until the finality of this decision. After

70

Transportation Law
Choco Notes
The Honorable Court erred in not granting to the petitioner the
consequential damages due her as a result of breach of

While petitioner concededly bought her plane ticket through

contract of carriage.[8]

the efforts of respondent company, this does not mean that the
latter ipso facto is a common carrier. At most, respondent

Petitioner contends that respondent did not observe the

acted merely as an agent of the airline, with whom petitioner

standard of care required of a common carrier when it

ultimately contracted for her carriage to Europe. Respondents

informed her wrongly of the flight schedule. She could not be

obligation to petitioner in this regard was simply to see to it

deemed more negligent than respondent since the latter is

that petitioner was properly booked with the airline for the

required by law to exercise extraordinary diligence in the

appointed date and time. Her transport to the place of

fulfillment of its obligation. If she were negligent at all, the

destination, meanwhile, pertained directly to the airline.

same is merely contributory and not the proximate cause of

the damage she suffered. Her loss could only be attributed to

The object of petitioners contractual relation with respondent

respondent as it was the direct consequence of its employees

is the latters service of arranging and facilitating petitioners

gross negligence.

booking, ticketing and accommodation in the package tour. In

contrast, the object of a contract of carriage is the

Petitioners contention has no merit.

transportation of passengers or goods. It is in this sense that

the contract between the parties in this case was an ordinary

By definition, a contract of carriage or transportation is one

one for services and not one of carriage. Petitioners

whereby a certain person or association of persons obligate

submission is premised on a wrong assumption.

themselves to transport persons, things, or news from one

place to another for a fixed price.[9]

Such person or

The nature of the contractual relation between petitioner and

association of persons are regarded as carriers and are

respondent is determinative of the degree of care required in

classified as private or special carriers and common or public

the performance of the latters obligation under the contract.

carriers.[10] A common carrier is defined under Article 1732

For reasons of public policy, a common carrier in a contract of

of the Civil Code as persons, corporations, firms or

carriage is bound by law to carry passengers as far as human

associations engaged in the business of carrying or

care and foresight can provide using the utmost diligence of

transporting passengers or goods or both, by land, water or air,

very cautious persons and with due regard for all the

for compensation, offering their services to the public.

circumstances.[11] As earlier stated, however, respondent is

not a common carrier but a travel agency. It is thus not bound

It is obvious from the above definition that respondent is not

under the law to observe extraordinary diligence in the

an entity engaged in the business of transporting either

performance of its obligation, as petitioner claims.

passengers or goods and is therefore, neither a private nor a

common carrier. Respondent did not undertake to transport

Since the contract between the parties is an ordinary one for

petitioner from one place to another since its covenant with its

services, the standard of care required of respondent is that of

customers is simply to make travel arrangements in their

a good father of a family under Article 1173 of the Civil

behalf. Respondents services as a travel agency include

Code.[12] This connotes reasonable care consistent with that

procuring tickets and facilitating travel permits or visas as well

which an ordinarily prudent person would have observed

as booking customers for tours.

when confronted with a similar situation. The test to determine

71

Transportation Law
Choco Notes
whether negligence attended the performance of an obligation

employee, but also petitioners niece. It was thus error for the

is: did the defendant in doing the alleged negligent act use that

lower court to invoke the presumption that respondent

reasonable care and caution which an ordinarily prudent

willfully suppressed evidence under Rule 131, Section 3(e).

person would have used in the same situation? If not, then he

Said presumption would logically be inoperative if the

is guilty of negligence.[13]

evidence is not intentionally omitted but is simply unavailable,

or when the same could have been obtained by both

In the case at bar, the lower court found Menor negligent

parties.[16]

when she allegedly informed petitioner of the wrong day of

departure. Petitioners testimony was accepted as indubitable

In sum, we do not agree with the finding of the lower court

evidence of Menors alleged negligent act since respondent

that Menors negligence concurred with the negligence of

did not call Menor to the witness stand to refute the allegation.

petitioner and resultantly caused damage to the latter.

The lower court applied the presumption under Rule 131,

Menors negligence was not sufficiently proved, considering

Section 3 (e)[14] of the Rules of Court that evidence willfully

that the only evidence presented on this score was petitioners

suppressed would be adverse if produced and thus considered

uncorroborated narration of the events. It is well-settled that

petitioners uncontradicted testimony to be sufficient proof of

the party alleging a fact has the burden of proving it and a

her claim.

mere allegation cannot take the place of evidence.[17] If the

plaintiff, upon whom rests the burden of proving his cause of

On the other hand, respondent has consistently denied that

action, fails to show in a satisfactory manner facts upon which

Menor was negligent and maintains that petitioners assertion

he bases his claim, the defendant is under no obligation to

is belied by the evidence on record. The date and time of

prove his exception or defense.[18]

departure was legibly written on the plane ticket and the travel
papers were delivered two days in advance precisely so that

Contrary to petitioners claim, the evidence on record shows

petitioner could prepare for the trip. It performed all its

that respondent exercised due diligence in performing its

obligations to enable petitioner to join the tour and exercised

obligations under the contract and followed standard

due diligence in its dealings with the latter.

procedure in rendering its services to petitioner. As correctly

observed by the lower court, the plane ticket[19] issued to

We agree with respondent.

petitioner clearly reflected the departure date and time,

contrary to petitioners contention. The travel documents,

Respondents failure to present Menor as witness to rebut

consisting of the tour itinerary, vouchers and instructions,

petitioners testimony could not give rise to an inference

were likewise delivered to petitioner two days prior to the trip.

unfavorable to the former. Menor was already working in

Respondent also properly booked petitioner for the tour,

France at the time of the filing of the complaint,[15] thereby

prepared the necessary documents and procured the plane

making it physically impossible for respondent to present her

tickets. It arranged petitioners hotel accommodation as well

as a witness. Then too, even if it were possible for respondent

as food, land transfers and sightseeing excursions, in

to secure Menors testimony, the presumption under Rule 131,

accordance with its avowed undertaking.

Section 3(e) would still not apply.

The opportunity and

possibility for obtaining Menors testimony belonged to both

Therefore, it is clear that respondent performed its prestation

parties, considering that Menor was not just respondents

under the contract as well as everything else that was essential

72

Transportation Law
Choco Notes
to book petitioner for the tour. Had petitioner exercised due

No. 51932 is AFFIRMED. Accordingly, petitioner is ordered

diligence in the conduct of her affairs, there would have been

to pay respondent the amount of P12,901.00 representing the

no reason for her to miss the flight. Needless to say, after the

balance of the price of the British Pageant Package Tour, with

travel papers were delivered to petitioner, it became

legal interest thereon at the rate of 6% per annum, to be

incumbent upon her to take ordinary care of her concerns. This

computed from the time the counterclaim was filed until the

undoubtedly would require that she at least read the

finality of this Decision. After this Decision becomes final

documents in order to assure herself of the important details

and executory, the rate of 12% per annum shall be imposed

regarding the trip.

until the obligation is fully settled, this interim period being

deemed to be by then an equivalent to a forbearance of

The negligence of the obligor in the performance of the

credit.[23]

obligation renders him liable for damages for the resulting loss
suffered by the obligee. Fault or negligence of the obligor

SO ORDERED.

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

Schmitz Transport v. TVI

[G.R. No. 150255. April 22, 2005]

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]

SCHMITZ

TRANSPORT

&

BROKERAGE

CORPORATION, petitioner, vs. TRANSPORT VENTURE,

INC., INDUSTRIAL INSURANCE COMPANY, LTD., and
BLACK SEA SHIPPING AND DODWELL now INCHCAPE
SHIPPING SERVICES, respondents.
DECISION

The lower court declared that respondents employee was

CARPIO-MORALES, J.:

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]

On petition for review is the June 27, 2001 Decision[1] of the

Court of Appeals, as well as its Resolution[2] dated September
28, 2001 denying the motion for reconsideration, which
affirmed that of Branch 21 of the Regional Trial Court (RTC)
of Manila in Civil Case No. 92-63132[3] holding petitioner
Schmitz

Transport

Brokerage

Corporation

(Schmitz

Transport), together with Black Sea Shipping Corporation

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

(Black Sea), represented by its ship agent Inchcape Shipping

Inc. (Inchcape), and Transport Venture (TVI), solidarily liable
for the loss of 37 hot rolled steel sheets in coil that were
washed overboard a barge.

On September 25, 1991, SYTCO Pte Ltd. Singapore shipped

from the port of Ilyichevsk, Russia on board M/V Alexander
Saveliev (a vessel of Russian registry and owned by Black

73

Transportation Law
Choco Notes
Sea) 545 hot rolled steel sheets in coil weighing 6,992,450

7:00 a.m., a tugboat finally arrived to pull the already empty

metric tons.

and damaged barge back to the pier.[13]

The cargoes, which were to be discharged at the port of

Earnest efforts on the part of both the consignee Little Giant

Manila in favor of the consignee, Little Giant Steel Pipe

and Industrial Insurance to recover the lost cargoes proved

Corporation (Little Giant),[4] were insured against all risks

futile.[14]

with Industrial Insurance Company Ltd. (Industrial Insurance)

under Marine Policy No. M-91-3747-TIS.[5]

Little Giant thus filed a formal claim against Industrial

Insurance which paid it the amount of P5,246,113.11. Little

The vessel arrived at the port of Manila on October 24, 1991

Giant thereupon executed a subrogation receipt[15] in favor of

and the Philippine Ports Authority (PPA) assigned it a place of

Industrial Insurance.

berth at the outside breakwater at the Manila South Harbor.[6]

Industrial Insurance later filed a complaint against Schmitz
Schmitz Transport, whose services the consignee engaged to

Transport, TVI, and Black Sea through its representative

secure the requisite clearances, to receive the cargoes from the

Inchcape (the defendants) before the RTC of Manila, for the

shipside, and to deliver them to its (the consignees)

recovery of the amount it paid to Little Giant plus adjustment

warehouse at Cainta, Rizal,[7] in turn engaged the services of

fees, attorneys fees, and litigation expenses.[16]

TVI to send a barge and tugboat at shipside.

Industrial Insurance faulted the defendants for undertaking the
On October 26, 1991, around 4:30 p.m., TVIs tugboat

unloading of the cargoes while typhoon signal No. 1 was

Lailani towed the barge Erika V to shipside.[8]

raised in Metro Manila.[17]

By 7:00 p.m. also of October 26, 1991, the tugboat, after

By Decision of November 24, 1997, Branch 21 of the RTC

positioning the barge alongside the vessel, left and returned to

held all the defendants negligent for unloading the cargoes

the port terminal.[9] At 9:00 p.m., arrastre operator Ocean

outside of the breakwater notwithstanding the storm

Terminal Services Inc. commenced to unload 37 of the 545

signal.[18] The dispositive portion of the decision reads:

coils from the vessel unto the barge.

WHEREFORE, premises considered, the Court renders
By 12:30 a.m. of October 27, 1991 during which the weather

judgment in favor of the plaintiff, ordering the defendants to

condition had become inclement due to an approaching storm,

pay plaintiff jointly and severally the sum of P5,246,113.11

the unloading unto the barge of the 37 coils was

with interest from the date the complaint was filed until fully

accomplished.[10] No tugboat pulled the barge back to the

satisfied, as well as the sum of P5,000.00 representing the

pier, however.

adjustment fee plus the sum of 20% of the amount recoverable

from the defendants as attorneys fees plus the costs of suit.

At around 5:30 a.m. of October 27, 1991, due to strong

The counterclaims and cross claims of defendants are hereby

waves,[11] the crew of the barge abandoned it and transferred

DISMISSED for lack of [m]erit.[19]

to the vessel. The barge pitched and rolled with the waves and
eventually capsized, washing the 37 coils into the sea.[12] At

74

Transportation Law
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To the trial courts decision, the defendants Schmitz Transport

Petitioner asserts that in chartering the barge and tugboat of

and TVI filed a joint motion for reconsideration assailing the

TVI, it was acting for its principal, consignee Little Giant,

finding that they are common carriers and the award of

hence, the transportation contract was by and between Little

excessive attorneys fees of more than P1,000,000. And they

Giant and TVI.[28]

argued that they were not motivated by gross or evident bad

faith and that the incident was caused by a fortuitous event.

By Resolution of January 23, 2002, herein respondents

[20]

Industrial Insurance, Black Sea, and TVI were required to file

their respective Comments.[29]

By resolution of February 4, 1998, the trial court denied the

motion for reconsideration. [21]

By its Comment, Black Sea argued that the cargoes were

received by the consignee through petitioner in good order,

All the defendants appealed to the Court of Appeals which, by

hence, it cannot be faulted, it having had no control and

decision of June 27, 2001, affirmed in toto the decision of the

supervision thereover.[30]

trial court, [22] it finding that all the defendants were common
carriers Black Sea and TVI for engaging in the transport of

For its part, TVI maintained that it acted as a passive party as

goods and cargoes over the seas as a regular business and not

it merely received the cargoes and transferred them unto the

as an isolated transaction,[23] and Schmitz Transport for

barge upon the instruction of petitioner.[31]

entering into a contract with Little Giant to transport the

cargoes from ship to port for a fee.[24]

In issue then are:

In holding all the defendants solidarily liable, the appellate

(1) Whether the loss of the cargoes was due to a fortuitous

court ruled that each one was essential such that without each

event, independent of any act of negligence on the part of

others contributory negligence the incident would not have

petitioner Black Sea and TVI, and

happened and so much so that the person principally liable

cannot be distinguished with sufficient accuracy.[25]

(2) If there was negligence, whether liability for the loss may
attach to Black Sea, petitioner and TVI.

In discrediting the defense of fortuitous event, the appellate

court held that although defendants obviously had nothing to

When a fortuitous event occurs, Article 1174 of the Civil Code

do with the force of nature, they however had control of where

absolves any party from any and all liability arising therefrom:

to anchor the vessel, where discharge will take place and even
when the discharging will commence.[26]

ART. 1174. Except in cases expressly specified by the law, or

when it is otherwise declared by stipulation, or when the

The defendants respective motions for reconsideration having

nature of the obligation requires the assumption of risk, no

been denied by Resolution[27] of September 28, 2001,

person shall be responsible for those events which could not

Schmitz Transport (hereinafter referred to as petitioner) filed

be foreseen, or which though foreseen, were inevitable.

the present petition against TVI, Industrial Insurance and

Black Sea.

In order, to be considered a fortuitous event, however, (1) the

cause of the unforeseen and unexpected occurrence, or the

75

Transportation Law
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failure of the debtor to comply with his obligation, must be

signal No. 1 was hoisted over Metro Manila on October 23-31,

independent of human will; (2) it must be impossible to

1991, the sea condition at the port of Manila at 5:00 p.m. -

foresee the event which constitute the caso fortuito, or if it can

11:00 p.m. of October 26, 1991 was moderate. It cannot,

be foreseen it must be impossible to avoid; (3) the occurrence

therefore, be said that the defendants were negligent in not

must be such as to render it impossible for the debtor to fulfill

unloading the cargoes upon the barge on October 26, 1991

his obligation in any manner; and (4) the obligor must be free

inside the breakwater.

from any participation in the aggravation of the injury

resulting to the creditor.[32]

That no tugboat towed back the barge to the pier after the
cargoes were completely loaded by 12:30 in the morning[39]

[T]he principle embodied in the act of God doctrine strictly

is, however, a material fact which the appellate court failed to

requires that the act must be occasioned solely by the violence

properly consider and appreciate[40] the proximate cause

of nature. Human intervention is to be excluded from creating

of the loss of the cargoes. Had the barge been towed back

or entering into the cause of the mischief. When the effect is

promptly to the pier, the deteriorating sea conditions

found to be in part the result of the participation of man,

notwithstanding, the loss could have been avoided. But the

whether due to his active intervention or neglect or failure to

barge was left floating in open sea until big waves set in at

act, the whole occurrence is then humanized and removed

5:30 a.m., causing it to sink along with the cargoes.[41] The

from the rules applicable to the acts of God.[33]

loss thus falls outside the act of God doctrine.

The appellate court, in affirming the finding of the trial court

The proximate cause of the loss having been determined, who

that human intervention in the form of contributory negligence

among the parties is/are responsible therefor?

by all the defendants resulted to the loss of the cargoes,[34]

held that unloading outside the breakwater, instead of inside

Contrary to petitioners insistence, this Court, as did the

the breakwater, while a storm signal was up constitutes

appellate court, finds that petitioner is a common carrier. For

negligence.[35] It thus concluded that the proximate cause of

it undertook to transport the cargoes from the shipside of

the loss was Black Seas negligence in deciding to unload the

M/V Alexander Saveliev to the consignees warehouse at

cargoes at an unsafe place and while a typhoon was

Cainta, Rizal. As the appellate court put it, as long as a

approaching.[36]

person or corporation holds [itself] to the public for the

purpose of transporting goods as [a] business, [it] is already

From a review of the records of the case, there is no indication

considered a common carrier regardless if [it] owns the

that there was greater risk in loading the cargoes outside the

vehicle to be used or has to hire one.[42] That petitioner is a

breakwater.

As the defendants proffered, the weather on

common carrier, the testimony of its own Vice-President and

October 26, 1991 remained normal with moderate sea

General Manager Noel Aro that part of the services it offers to

condition such that port operations continued and proceeded

its clients as a brokerage firm includes the transportation of

normally.[37]

cargoes reflects so.

The weather data report,[38] furnished and verified by the

Atty. Jubay: Will you please tell us what [are you] functions x

Chief of the Climate Data Section of PAG-ASA and marked

x x as Executive Vice-President and General Manager of said

as a common exhibit of the parties, states that while typhoon

Company?

76

Transportation Law
Choco Notes
Mr. Aro: Well, I oversee the entire operation of the brokerage

Q: Now, in connection with this work which you are doing,

and transport business of the company.

I also handle the

Mr. Witness, you are supposed to perform, what equipment do

various division heads of the company for operation matters,

(sic) you require or did you use in order to effect this

and all other related functions that the President may assign to

unloading, transfer and delivery to the warehouse?

me from time to time, Sir.

A: Actually, we used the barges for the ship side operations,
Q: Now, in connection [with] your duties and functions as you

this unloading [from] vessel to lighter, and on this we hired or

mentioned, will you please tell the Honorable Court if you

we sub-contracted with [T]ransport Ventures, Inc. which [was]

came to know the company by the name Little Giant Steel

in-charged (sic) of the barges. Also, in BASECO compound

Pipe Corporation?

we are leasing cranes to have the cargo unloaded from the

barge to trucks, [and] then we used trucks to deliver [the

A: Yes, Sir. Actually, we are the brokerage firm of that

cargoes] to the consignees warehouse, Sir.

Company.
Q: And whose trucks do you use from BASECO compound to
Q: And since when have you been the brokerage firm of that

the consignees warehouse?

company, if you can recall?

A: We utilized of (sic) our own trucks and we have some other
A: Since 1990, Sir.

contracted trucks, Sir.

Q: Now, you said that you are the brokerage firm of this

xxx

Company. What work or duty did you perform in behalf of

this company?

ATTY. JUBAY: Will you please explain to us, to the

Honorable Court why is it you have to contract for the barges

A: We handled the releases (sic) of their cargo[es] from the

of Transport Ventures Incorporated in this particular

Bureau of Customs. We [are] also in-charged of the delivery

operation?

of the goods to their warehouses.

We also handled the

clearances of their shipment at the Bureau of Customs, Sir.

A: Firstly, we dont own any barges. That is why we hired the

services of another firm whom we know [al]ready for quite

xxx

sometime, which is Transport Ventures, Inc.

(Emphasis

supplied)[43]
Q: Now, what precisely [was] your agreement with this Little
Giant Steel Pipe Corporation with regards to this shipment?

It is settled that under a given set of facts, a customs broker

What work did you do with this shipment?

may be regarded as a common carrier. Thus, this Court, in

A.F. Sanchez Brokerage, Inc. v. The Honorable Court of

A: We handled the unloading of the cargo[es] from vessel to

Appeals,[44] held:

lighter and then the delivery of [the] cargo[es] from lighter to

BASECO then to the truck and to the warehouse, Sir.

77

Transportation Law
Choco Notes
The appellate court did not err in finding petitioner, a customs

Giants warehouse, however, petitioner was discharging its

broker, to be also a common carrier, as defined under Article

own personal obligation under a contact of carriage.

1732 of the Civil Code, to wit,

Petitioner, which did not have any barge or tugboat, engaged
Art. 1732. Common carriers are persons, corporations, firms

the services of TVI as handler[48] to provide the barge and the

or associations engaged in the business of carrying or

tugboat. In their Service Contract,[49] while Little Giant was

transporting passengers or goods or both, by land, water, or

named as the consignee, petitioner did not disclose that it was

air, for compensation, offering their services to the public.

acting on commission and was chartering the vessel for Little

Giant.[50] Little Giant did not thus automatically become a

xxx

party to the Service Contract and was not, therefore, bound by

the terms and conditions therein.

Article 1732 does not distinguish between one whose principal

business activity is the carrying of goods and one who does

Not being a party to the service contract, Little Giant cannot

such carrying only as an ancillary activity. The contention,

directly sue TVI based thereon but it can maintain a cause of

therefore, of petitioner that it is not a common carrier but a

action for negligence.[51]

customs broker whose principal function is to prepare the

correct customs declaration and proper shipping documents as

In the case of TVI, while it acted as a private carrier for which

required by law is bereft of merit. It suffices that petitioner

it was under no duty to observe extraordinary diligence, it was

undertakes

still required to observe ordinary diligence to ensure the

to

deliver

the

goods

for

pecuniary

consideration.[45]

proper and careful handling, care and discharge of the carried

goods.

And in Calvo v. UCPB General Insurance Co. Inc.,[46] this

Court held that as the transportation of goods is an integral

Thus, Articles 1170 and 1173 of the Civil Code provide:

part of a customs broker, the customs broker is also a common

carrier. For to declare otherwise would be to deprive those

ART. 1170. Those who in the performance of their obligations

with whom [it] contracts the protection which the law affords

are guilty of fraud, negligence, or delay, and those who in any

them notwithstanding the fact that the obligation to carry

manner contravene the tenor thereof, are liable for damages.

goods for [its] customers, is part and parcel of petitioners

business.[47]

ART. 1173. The fault or negligence of the obligor consists in

the omission of that diligence which is required by the nature

As for petitioners argument that being the agent of Little

of the obligation and corresponds with the circumstances of

Giant, any negligence it committed was deemed the

the persons, of the time and of the place. When negligence

negligence of its principal, it does not persuade.

shows bad faith, the provisions of articles 1171 and 2202,

paragraph 2, shall apply.

True, petitioner was the broker-agent of Little Giant in

securing the release of the cargoes.

In effecting the

If the law or contract does not state the diligence which is to

transportation of the cargoes from the shipside and into Little

be observed in the performance, that which is expected of a

good father of a family shall be required.

78

Transportation Law
Choco Notes
The foundation of LRTAs liability is the contract of carriage
Was the reasonable care and caution which an ordinarily

and its obligation to indemnify the victim arises from the

prudent person would have used in the same situation

breach of that contract by reason of its failure to exercise the

exercised by TVI?[52]

high diligence required of the common carrier.

In the

discharge of its commitment to ensure the safety of

This Court holds not.

passengers, a carrier may choose to hire its own employees or

avail itself of the services of an outsider or an independent

TVIs failure to promptly provide a tugboat did not only

firm to undertake the task. In either case, the common carrier

increase the risk that might have been reasonably anticipated

is not relieved of its responsibilities under the contract of

during the shipside operation, but was the proximate cause of

carriage.

the loss.

A man of ordinary prudence would not leave a

heavily loaded barge floating for a considerable number of

Should Prudent be made likewise liable? If at all, that liability

hours, at such a precarious time, and in the open sea, knowing

could only be for tort under the provisions of Article 2176 and

that the barge does not have any power of its own and is

related provisions, in conjunction with Article 2180 of the

totally defenseless from the ravages of the sea. That it was

Civil Code. x x x [O]ne might ask further, how then must the

nighttime and, therefore, the members of the crew of a tugboat

liability of the common carrier, on one hand, and an

would be charging overtime pay did not excuse TVI from

independent contractor, on the other hand, be described? It

calling for one such tugboat.

would be solidary. A contractual obligation can be breached

by tort and when the same act or omission causes the injury,

As for petitioner, for it to be relieved of liability, it should,

one resulting in culpa contractual and the other in culpa

following Article 1739[53] of the Civil Code, prove that it

aquiliana, Article 2194 of the Civil Code can well apply. In

exercised due diligence to prevent or minimize the loss,

fine, a liability for tort may arise even under a contract, where

before, during and after the occurrence of the storm in order

tort is that which breaches the contract. Stated differently,

that it may be exempted from liability for the loss of the

when an act which constitutes a breach of contract would have

goods.

itself constituted the source of a quasi-delictual liability had no

contract existed between the parties, the contract can be said to

While petitioner sent checkers[54] and a supervisor[55] on

have been breached by tort, thereby allowing the rules on tort

board the vessel to counter-check the operations of TVI, it

to apply.[57]

failed to take all available and reasonable precautions to avoid

the loss. After noting that TVI failed to arrange for the prompt

As for Black Sea, its duty as a common carrier extended only

towage of the barge despite the deteriorating sea conditions, it

from the time the goods were surrendered or unconditionally

should have summoned the same or another tugboat to extend

placed in its possession and received for transportation until

help, but it did not.

they were delivered actually or constructively to consignee

Little Giant.[58]

This Court holds then that petitioner and TVI are solidarily
liable[56] for the loss of the cargoes.

The following

pronouncement of the Supreme Court is instructive:

Parties to a contract of carriage may, however, agree upon a

definition of delivery that extends the services rendered by the
carrier. In the case at bar, Bill of Lading No. 2 covering the

79

Transportation Law
Choco Notes
shipment provides that delivery be made to the port of
discharge or so near thereto as she may safely get, always

WHEREFORE, judgment is hereby rendered ordering

afloat.[59] The delivery of the goods to the consignee was

petitioner Schmitz Transport & Brokerage Corporation, and

not from pier to pier but from the shipside of M/V

Transport Venture Incorporation jointly and severally liable

Alexander Saveliev and into barges, for which reason the

for the amount of P5,246,113.11 with the MODIFICATION

consignee contracted the services of petitioner. Since Black

that interest at SIX PERCENT per annum of the amount due

Sea had constructively delivered the cargoes to Little Giant,

should be computed from the promulgation on November 24,

through petitioner, it had discharged its duty.[60]

1997 of the decision of the trial court.

In fine, no liability may thus attach to Black Sea.

Costs against petitioner.

Respecting the award of attorneys fees in an amount over

SO ORDERED

P1,000,000.00 to Industrial Insurance, for lack of factual and

legal basis, this Court sets it aside. While Industrial Insurance

Loadmaster v. Glodel

was compelled to litigate its rights, such fact by itself does not
justify the award of attorneys fees under Article 2208 of the
Civil Code. For no sufficient showing of bad faith would be
reflected in a partys persistence in a case other than an

LOADMASTERS CUSTOMS SERVICES, INC.,

Petitioner,

erroneous conviction of the righteousness of his cause.[61] To

award attorneys fees to a party just because the judgment is
rendered in its favor would be tantamount to imposing a
premium on ones right to litigate or seek judicial redress of
legitimate grievances.[62]

- versus -

On the award of adjustment fees: The adjustment fees and

expense of divers were incurred by Industrial Insurance in its
voluntary but unsuccessful efforts to locate and retrieve the
lost cargo. They do not constitute actual damages.[63]

GLODEL BROKERAGE CORPORATION and

R&B INSURANCE CORPORATION,
Respondents.

As for the court a quos award of interest on the amount

claimed, the same calls for modification following the ruling
in Eastern Shipping Lines, Inc. v. Court of Appeals[64] that

G.R. No. 179446

when the demand cannot be reasonably established at the time

the demand is made, the interest shall begin to run not from

Present:

the time the claim is made judicially or extrajudicially but

from the date the judgment of the court is made (at which the
time the quantification of damages may be deemed to have
been reasonably ascertained).[65]

CARPIO, J., Chairperson,

NACHURA,
PERALTA,
ABAD, and

80

Transportation Law
Choco Notes
MENDOZA, JJ.

All Risks. On August 28, 2001, the cargoes were shipped on

board the vessel Richard Rey from Isabela, Leyte, to Pier
10, North Harbor, Manila. They arrived on the same date.

Columbia engaged the services of Glodel for the release and

withdrawal of the cargoes from the pier and the subsequent
Promulgated:

delivery to its warehouses/plants. Glodel, in turn, engaged the

services of Loadmasters for the use of its delivery trucks to

January 10, 2011

transport the cargoes to Columbias warehouses/plants in

Bulacan and Valenzuela City.

X ------------------------------------------------------------------------------------- X

The goods were loaded on board twelve (12) trucks owned by

Loadmasters, driven by its employed drivers and accompanied

DECISION

by its employed truck helpers. Six (6) truckloads of copper

cathodes were to be delivered to Balagtas, Bulacan, while the
other six (6) truckloads were destined for Lawang Bato,

MENDOZA, J.:

Valenzuela City. The cargoes in six truckloads for Lawang

Bato were duly delivered in Columbias warehouses there. Of
the six (6) trucks en route to Balagtas, Bulacan, however, only

This is a petition for review on certiorari under Rule 45

five (5) reached the destination. One (1) truck, loaded with 11

of the Revised Rules of Court assailing the August 24, 2007

bundles or 232 pieces of copper cathodes, failed to deliver its

Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No.

cargo.

82822, entitled R&B Insurance Corporation v. Glodel

Brokerage Corporation and Loadmasters Customs Services,

Later on, the said truck, an Isuzu with Plate No. NSD-

Inc., which held petitioner Loadmasters Customs Services,

117, was recovered but without the copper cathodes. Because

Inc. (Loadmasters) liable to respondent Glodel Brokerage

of this incident, Columbia filed with R&B Insurance a claim

Corporation (Glodel) in the amount of P1,896,789.62

for insurance indemnity in the amount of P1,903,335.39.

representing the insurance indemnity which R&B Insurance

After the requisite investigation and adjustment, R&B

Corporation (R&B Insurance) paid to the insured-consignee,

Insurance paid Columbia the amount of P1,896,789.62 as

Columbia Wire and Cable Corporation (Columbia).

insurance indemnity.

R&B Insurance, thereafter, filed a complaint for damages

THE FACTS:

against both Loadmasters and Glodel before the Regional

Trial Court, Branch 14, Manila (RTC), docketed as Civil Case
No. 02-103040. It sought reimbursement of the amount it had

On August 28, 2001, R&B Insurance issued Marine

paid to Columbia for the loss of the subject cargo. It claimed

Policy No. MN-00105/2001 in favor of Columbia to insure the

that it had been subrogated to the right of the consignee to

shipment of 132 bundles of electric copper cathodes against

81

Transportation Law
Choco Notes
recover from the party/parties who may be held legally liable
for the loss.[2]
Both R&B Insurance and Glodel appealed the RTC decision to
On November 19, 2003, the RTC rendered a decision[3]

the CA.

holding Glodel liable for damages for the loss of the subject
cargo and dismissing Loadmasters counterclaim for damages

On August 24, 2007, the CA rendered the assailed decision

and attorneys fees against R&B Insurance. The dispositive

which reads in part:

portion of the decision reads:

Considering that appellee is an agent of appellant Glodel,
WHEREFORE, all premises considered, the plaintiff having

whatever liability the latter owes to appellant R&B Insurance

established by preponderance of evidence its claims against

Corporation as insurance indemnity must likewise be the

defendant Glodel Brokerage Corporation, judgment is hereby

amount it shall be paid by appellee Loadmasters.

rendered ordering the latter:

WHEREFORE, the foregoing considered, the appeal is
PARTLY GRANTED in that the appellee Loadmasters is
1.

To pay plaintiff R&B Insurance Corporation the sum of

likewise held liable to appellant Glodel in the amount of

P1,896,789.62 as actual and compensatory damages, with

P1,896,789.62 representing the insurance indemnity appellant

interest from the date of complaint until fully paid;

Glodel has been held liable to appellant R&B Insurance

Corporation.

2.

To pay plaintiff R&B Insurance Corporation the amount

equivalent to 10% of the principal amount recovered as and

Appellant Glodels appeal to absolve it from any liability is

for attorneys fees plus P1,500.00 per appearance in Court;

herein DISMISSED.

3.

SO ORDERED.[5]

To pay plaintiff R&B Insurance Corporation the sum of

P22,427.18 as litigation expenses.

Hence, Loadmasters filed the present petition for review on
certiorari before this Court presenting the following
WHEREAS, the defendant Loadmasters Customs Services,
Inc.s counterclaim for damages and attorneys fees against

ISSUES

plaintiff are hereby dismissed.

1. Can Petitioner Loadmasters be held liable to Respondent

Glodel in spite of the fact that the latter respondent Glodel did
not file a cross-claim against it (Loadmasters)?

2. Under the set of facts established and undisputed in the

With costs against defendant Glodel Brokerage Corporation.

case, can petitioner Loadmasters be legally considered as an

SO ORDERED.[4]

Agent of respondent Glodel?[6]

82

Transportation Law
Choco Notes
rights of the insured to the extent of the amount it paid the
consignee under the marine insurance, as provided under
Article 2207 of the Civil Code, which reads:
To totally exculpate itself from responsibility for the lost
goods, Loadmasters argues that it cannot be considered an
agent of Glodel because it never represented the latter in its

ART. 2207. If the plaintiffs property has been insured, and

dealings with the consignee. At any rate, it further contends

he has received indemnity from the insurance company for the

that Glodel has no recourse against it for its (Glodels) failure

injury or loss arising out of the wrong or breach of contract

to file a cross-claim pursuant to Section 2, Rule 9 of the 1997

complained of, the insurance company shall be subrogated to

Rules of Civil Procedure.

the rights of the insured against the wrong-doer or the person

who has violated the contract. If the amount paid by the

Glodel, in its Comment,[7] counters that Loadmasters is

insurance company does not fully cover the injury or loss, the

liable to it under its cross-claim because the latter was grossly

aggrieved party shall be entitled to recover the deficiency from

negligent in the transportation of the subject cargo.

the person causing the loss or injury.

With

respect to Loadmasters claim that it is already estopped from

filing a cross-claim, Glodel insists that it can still do so even

As subrogee of the rights and interest of the consignee, R&B

for the first time on appeal because there is no rule that

Insurance has the right to seek reimbursement from either

provides otherwise. Finally, Glodel argues that its relationship

Loadmasters or Glodel or both for breach of contract and/or

with Loadmasters is that of Charter wherein the transporter

tort.

(Loadmasters) is only hired for the specific job of delivering

the merchandise. Thus, the diligence required in this case is

The

issue

now

is

who,

between

Glodel

and

merely ordinary diligence or that of a good father of the

Loadmasters, is liable to pay R&B Insurance for the amount of

family, not the extraordinary diligence required of common

the indemnity it paid Columbia.

carriers.
At the outset, it is well to resolve the issue of whether
R&B Insurance, for its part, claims that Glodel is

Loadmasters and Glodel are common carriers to determine

deemed to have interposed a cross-claim against Loadmasters

their liability for the loss of the subject cargo. Under Article

because it was not prevented from presenting evidence to

1732 of the Civil Code, common carriers are persons,

prove its position even without amending its Answer. As to

corporations, firms, or associations engaged in the business of

the relationship between Loadmasters and Glodel, it contends

carrying or transporting passenger or goods, or both by land,

that a contract of agency existed between the two

water or air for compensation, offering their services to the

corporations.[8]

public.

Subrogation is the substitution of one person in the place of

Based on the aforecited definition, Loadmasters is a common

another with reference to a lawful claim or right, so that he

carrier because it is engaged in the business of transporting

who is substituted succeeds to the rights of the other in

goods by land, through its trucking service. It is a common

relation to a debt or claim, including its remedies or

carrier as distinguished from a private carrier wherein the

securities.[9] Doubtless, R&B Insurance is subrogated to the

carriage is generally undertaken by special agreement and it

83

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does not hold itself out to carry goods for the general

been at fault or to have acted negligently.[17]

This

public.[10] The distinction is significant in the sense that the

presumption of fault or negligence, however, may be rebutted

rights and obligations of the parties to a contract of private

by proof that the common carrier has observed extraordinary

carriage are governed principally by their stipulations, not by

diligence over the goods.

the law on common carriers.[11]

With respect to the time frame of this extraordinary
In the present case, there is no indication that the undertaking

responsibility, the Civil Code provides that the exercise of

in the contract between Loadmasters and Glodel was private in

extraordinary diligence lasts from the time the goods are

character. There is no showing that Loadmasters solely and

unconditionally placed in the possession of, and received by,

exclusively rendered services to Glodel.

the carrier for transportation until the same are delivered,

actually or constructively, by the carrier to the consignee, or to

In fact, Loadmasters admitted that it is a common carrier.[12]

the person who has a right to receive them.[18]

In the same vein, Glodel is also considered a common carrier

Premises considered, the Court is of the view that both

within the context of Article 1732. In its Memorandum,[13] it

Loadmasters and Glodel are jointly and severally liable to R &

states that it is a corporation duly organized and existing

B Insurance for the loss of the subject cargo. Under Article

under the laws of the Republic of the Philippines and is

2194 of the New Civil Code, the responsibility of two or

engaged in the business of customs brokering. It cannot be

more persons who are liable for a quasi-delict is solidary.

considered otherwise because as held by this Court in Schmitz

Transport & Brokerage Corporation v. Transport Venture,

Loadmasters claim that it was never privy to the contract

Inc.,[14] a customs broker is also regarded as a common

entered into by Glodel with the consignee Columbia or R&B

carrier, the transportation of goods being an integral part of its

Insurance as subrogee, is not a valid defense. It may not have

business.

a direct contractual relation with Columbia, but it is liable for

tort under the provisions of Article 2176 of the Civil Code on

Loadmasters and Glodel, being both common carriers, are

quasi-delicts which expressly provide:

mandated from the nature of their business and for reasons of

public policy, to observe the extraordinary diligence in the

ART. 2176. Whoever by act or omission causes damage to

vigilance over the goods transported by them according to all

another, there being fault or negligence, is obliged to pay for

the circumstances of such case, as required by Article 1733 of

the damage done. Such fault or negligence, if there is no pre-

the Civil Code.

existing contractual relation between the parties, is called a

When the Court speaks of extraordinary

diligence, it is that extreme measure of care and caution which

quasi-delict and is governed by the provisions of this Chapter.

persons of unusual prudence and circumspection observe for

securing and preserving their own property or rights.[15] This
exacting standard imposed on common carriers in a contract of
carriage of goods is intended to tilt the scales in favor of the

Pertinent is the ruling enunciated in the case of Mindanao

shipper who is at the mercy of the common carrier once the

Terminal and Brokerage Service, Inc. v. Phoenix Assurance

goods have been lodged for shipment.[16] Thus, in case of

Company of New York,/McGee & Co., Inc.[19] where this

loss of the goods, the common carrier is presumed to have

84

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Court held that a tort may arise despite the absence of a

their assigned tasks, even though the former are not engaged

contractual relationship, to wit:

in any business or industry.

We agree with the Court of Appeals that the complaint

filed by Phoenix and McGee against Mindanao Terminal,

It is not disputed that the subject cargo was lost while in the

from which the present case has arisen, states a cause of

custody of Loadmasters whose employees (truck driver and

action. The present action is based on quasi-delict, arising

helper) were instrumental in the hijacking or robbery of the

from the negligent and careless loading and stowing of the

shipment.

cargoes belonging to Del Monte Produce. Even assuming that

answerable for the damages caused by its employees who

both Phoenix and McGee have only been subrogated in the

acted within the scope of their assigned task of delivering the

rights of Del Monte Produce, who is not a party to the contract

goods safely to the warehouse.

As employer, Loadmasters should be made

of service between Mindanao Terminal and Del Monte, still

the insurance carriers may have a cause of action in light of

Whenever an employees negligence causes damage or injury

the Courts consistent ruling that the act that breaks the

to another, there instantly arises a presumption juris tantum

contract may be also a tort. In fine, a liability for tort may

that the employer failed to exercise diligentissimi patris

arise even under a contract, where tort is that which breaches

families in the selection (culpa in eligiendo) or supervision

the contract. In the present case, Phoenix and McGee are not

(culpa in vigilando) of its employees.[20] To avoid liability

suing for damages for injuries arising from the breach of the

for a quasi-delict committed by its employee, an employer

contract of service but from the alleged negligent manner by

must overcome the presumption by presenting convincing

which Mindanao Terminal handled the cargoes belonging to

proof that he exercised the care and diligence of a good father

Del Monte Produce. Despite the absence of contractual

of a family in the selection and supervision of his

relationship between Del Monte Produce and Mindanao

employee.[21] In this regard, Loadmasters failed.

Terminal, the allegation of negligence on the part of the

defendant should be sufficient to establish a cause of action

Glodel is also liable because of its failure to exercise

arising from quasi-delict. [Emphases supplied]

extraordinary diligence. It failed to ensure that Loadmasters

would fully comply with the undertaking to safely transport
the subject cargo to the designated destination. It should have

In connection therewith, Article 2180 provides:

been more prudent in entrusting the goods to Loadmasters by

taking precautionary measures, such as providing escorts to

ART. 2180.

The obligation imposed by Article 2176 is

accompany the trucks in delivering the cargoes.

Glodel

demandable not only for ones own acts or omissions, but also

should, therefore, be held liable with Loadmasters. Its defense

for those of persons for whom one is responsible.

of force majeure is unavailing.

xxxx

At this juncture, the Court clarifies that there exists no

principal-agent relationship between Glodel and Loadmasters,

Employers shall be liable for the damages caused by their

as erroneously found by the CA. Article 1868 of the Civil

employees and household helpers acting within the scope of

Code provides: By the contract of agency a person binds

himself to render some service or to do something in

85

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representation or on behalf of another, with the consent or

circumstances of the case, it may appear that one of them was

authority of the latter. The elements of a contract of agency

more culpable, and that the duty owed by them to the injured

are: (1) consent, express or implied, of the parties to establish

person was not the same. No actor's negligence ceases to be a

the relationship; (2) the object is the execution of a juridical

proximate cause merely because it does not exceed the

act in relation to a third person; (3) the agent acts as a

negligence of other actors. Each wrongdoer is responsible for

representative and not for himself; (4) the agent acts within the

the entire result and is liable as though his acts were the sole

scope of his authority.[22]

cause of the injury.

There is no contribution between joint tortfeasors whose

Accordingly, there can be no contract of agency between the

liability is solidary since both of them are liable for the total

parties. Loadmasters never represented Glodel. Neither was it

damage. Where the concurrent or successive negligent acts or

ever authorized to make such representation. It is a settled

omissions of two or more persons, although acting

rule that the basis for agency is representation, that is, the

independently, are in combination the direct and proximate

agent acts for and on behalf of the principal on matters within

cause of a single injury to a third person, it is impossible to

the scope of his authority and said acts have the same legal

determine in what proportion each contributed to the injury

effect as if they were personally executed by the principal. On

and either of them is responsible for the whole injury. Where

the part of the principal, there must be an actual intention to

their concurring negligence resulted in injury or damage to a

appoint or an intention naturally inferable from his words or

third party, they become joint tortfeasors and are solidarily

actions, while on the part of the agent, there must be an

liable for the resulting damage under Article 2194 of the Civil

intention to accept the appointment and act on it.[23] Such

Code. [Emphasis supplied]

mutual intent is not obtaining in this case.

The Court now resolves the issue of whether Glodel can
What then is the extent of the respective liabilities of

collect from Loadmasters, it having failed to file a cross-claim

Loadmasters and Glodel? Each wrongdoer is liable for the

against the latter.

total damage suffered by R&B Insurance. Where there are

several causes for the resulting damages, a party is not

Undoubtedly, Glodel has a definite cause of action against

relieved from liability, even partially. It is sufficient that the

Loadmasters for breach of contract of service as the latter is

negligence of a party is an efficient cause without which the

primarily liable for the loss of the subject cargo. In this case,

damage would not have resulted. It is no defense to one of the

however, it cannot succeed in seeking judicial sanction against

concurrent tortfeasors that the damage would not have resulted

Loadmasters because the records disclose that it did not

from his negligence alone, without the negligence or wrongful

properly interpose a cross-claim against the latter. Glodel did

acts of the other concurrent tortfeasor. As stated in the case of

not even pray that Loadmasters be liable for any and all claims

Far Eastern Shipping v. Court of Appeals,[24]

that it may be adjudged liable in favor of R&B Insurance.

Under the Rules, a compulsory counterclaim, or a cross-claim,

X x x. Where several causes producing an injury are

not set up shall be barred.[25] Thus, a cross-claim cannot be

concurrent and each is an efficient cause without which the

set up for the first time on appeal.

injury would not have happened, the injury may be attributed

to all or any of the causes and recovery may be had against

For the consequence, Glodel has no one to blame but itself.

any or all of the responsible persons although under the

The Court cannot come to its aid on equitable grounds.

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Equity, which has been aptly described as a justice outside

MANILA RAILROAD CO., defendant-appellee.

legality, is applied only in the absence of, and never against,

statutory law or judicial rules of procedure.[26] The Court

Ramon Sotelo for appellant.

cannot be a lawyer and take the cudgels for a party who has

Kincaid & Hartigan for appellee.

been at fault or negligent.

FISHER, J.:

WHEREFORE, the petition is PARTIALLY GRANTED. The

At the time of the occurrence which gave rise to this litigation

August 24, 2007 Decision of the Court of Appeals is

the plaintiff, Jose Cangco, was in the employment of Manila

MODIFIED to read as follows:

Railroad Company in the capacity of clerk, with a monthly

wage of P25. He lived in the pueblo of San Mateo, in the

WHEREFORE, judgment is rendered declaring petitioner

province of Rizal, which is located upon the line of the

Loadmasters Customs Services, Inc. and respondent Glodel

defendant railroad company; and in coming daily by train to

Brokerage Corporation jointly and severally liable to

the company's office in the city of Manila where he worked,

respondent R&B Insurance Corporation for the insurance

he used a pass, supplied by the company, which entitled him

indemnity it paid to consignee Columbia Wire & Cable

to ride upon the company's trains free of charge. Upon the

Corporation and ordering both parties to pay, jointly and

occasion in question, January 20, 1915, the plaintiff arose

severally, R&B Insurance Corporation a] the amount of

from his seat in the second class-car where he was riding and,

P1,896,789.62 representing the insurance indemnity; b] the

making, his exit through the door, took his position upon the

amount equivalent to ten (10%) percent thereof for attorneys

steps of the coach, seizing the upright guardrail with his right

fees; and c] the amount of P22,427.18 for litigation expenses.

hand for support.

The cross-claim belatedly prayed for by respondent Glodel

On the side of the train where passengers alight at the San

Brokerage

Mateo station there is a cement platform which begins to rise

Corporation

against

petitioner

Loadmasters

Customs Services, Inc. is DENIED.

with a moderate gradient some distance away from the

company's office and extends along in front of said office for a

SO ORDERED.

distance sufficient to cover the length of several coaches. As

the train slowed down another passenger, named Emilio
Zuiga, also an employee of the railroad company, got off the

Nature and Basis of Liability/Breach of Contract art. 1733

same car, alighting safely at the point where the platform

begins to rise from the level of the ground. When the train had

Cangco v. Manila Railroad

proceeded a little farther the plaintiff Jose Cangco stepped off

G.R. No. L-12191

also, but one or both of his feet came in contact with a sack of

October 14, 1918

watermelons with the result that his feet slipped from under
JOSE CANGCO, plaintiff-appellant,

him and he fell violently on the platform. His body at once

vs.

rolled from the platform and was drawn under the moving car,

87

Transportation Law
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where his right arm was badly crushed and lacerated. It

Upon August 31, 1915, he instituted this proceeding in the

appears that after the plaintiff alighted from the train the car

Court of First Instance of the city of Manila to recover

moved forward possibly six meters before it came to a full

damages of the defendant company, founding his action upon

stop.

the negligence of the servants and employees of the defendant

in placing the sacks of melons upon the platform and leaving

The accident occurred between 7 and 8 o'clock on a dark

them so placed as to be a menace to the security of passenger

night, and as the railroad station was lighted dimly by a single

alighting from the company's trains. At the hearing in the

light located some distance away, objects on the platform

Court of First Instance, his Honor, the trial judge, found the

where the accident occurred were difficult to discern

facts substantially as above stated, and drew therefrom his

especially to a person emerging from a lighted car.

conclusion to the effect that, although negligence was

attributable to the defendant by reason of the fact that the

The explanation of the presence of a sack of melons on the

sacks of melons were so placed as to obstruct passengers

platform where the plaintiff alighted is found in the fact that it

passing to and from the cars, nevertheless, the plaintiff himself

was the customary season for harvesting these melons and a

had failed to use due caution in alighting from the coach and

large lot had been brought to the station for the shipment to

was therefore precluded form recovering. Judgment was

the market. They were contained in numerous sacks which has

accordingly entered in favor of the defendant company, and

been piled on the platform in a row one upon another. The

the plaintiff appealed.

testimony shows that this row of sacks was so placed of

melons and the edge of platform; and it is clear that the fall of

It can not be doubted that the employees of the railroad

the plaintiff was due to the fact that his foot alighted upon one

company were guilty of negligence in piling these sacks on the

of these melons at the moment he stepped upon the platform.

platform in the manner above stated; that their presence

His statement that he failed to see these objects in the darkness

caused the plaintiff to fall as he alighted from the train; and

is readily to be credited.

that they therefore constituted an effective legal cause of the

injuries sustained by the plaintiff. It necessarily follows that

The plaintiff was drawn from under the car in an unconscious

the defendant company is liable for the damage thereby

condition, and it appeared that the injuries which he had

occasioned unless recovery is barred by the plaintiff's own

received were very serious. He was therefore brought at once

contributory negligence. In resolving this problem it is

to a certain hospital in the city of Manila where an

necessary that each of these conceptions of liability, to-wit, the

examination was made and his arm was amputated. The result

primary responsibility of the defendant company and the

of this operation was unsatisfactory, and the plaintiff was then

contributory negligence of the plaintiff should be separately

carried to another hospital where a second operation was

examined.

performed and the member was again amputated higher up

near the shoulder. It appears in evidence that the plaintiff

It is important to note that the foundation of the legal liability

expended the sum of P790.25 in the form of medical and

of the defendant is the contract of carriage, and that the

surgical fees and for other expenses in connection with the

obligation to respond for the damage which plaintiff has

process of his curation.

suffered arises, if at all, from the breach of that contract by

reason of the failure of defendant to exercise due care in its
performance. That is to say, its liability is direct and

88

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immediate, differing essentially, in legal viewpoint from that

This distinction is of the utmost importance. The liability,

presumptive responsibility for the negligence of its servants,

which, under the Spanish law, is, in certain cases imposed

imposed by article 1903 of the Civil Code, which can be

upon employers with respect to damages occasioned by the

rebutted by proof of the exercise of due care in their selection

negligence of their employees to persons to whom they are not

and supervision. Article 1903 of the Civil Code is not

bound by contract, is not based, as in the English Common

applicable to obligations arising ex contractu, but only to

Law, upon the principle of respondeat superior if it were,

extra-contractual obligations or to use the technical form of

the master would be liable in every case and unconditionally

expression, that article relates only to culpa aquiliana and not

but upon the principle announced in article 1902 of the

to culpa contractual.

Civil Code, which imposes upon all persons who by their fault
or negligence, do injury to another, the obligation of making

Manresa (vol. 8, p. 67) in his commentaries upon articles 1103

good the damage caused. One who places a powerful

and 1104 of the Civil Code, clearly points out this distinction,

automobile in the hands of a servant whom he knows to be

which was also recognized by this Court in its decision in the

ignorant of the method of managing such a vehicle, is himself

case of Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil. rep.,

guilty of an act of negligence which makes him liable for all

359). In commenting upon article 1093 Manresa clearly points

the consequences of his imprudence. The obligation to make

out

and

good the damage arises at the very instant that the unskillful

independent, which of itself constitutes the source of an

servant, while acting within the scope of his employment

obligation between persons not formerly connected by any

causes the injury. The liability of the master is personal and

legal tie" and culpa considered as an accident in the

direct. But, if the master has not been guilty of any negligence

performance of an obligation already existing . . . ."

whatever in the selection and direction of the servant, he is not

the

difference

between

"culpa,

substantive

liable for the acts of the latter, whatever done within the scope
In the Rakes case (supra) the decision of this court was made

of his employment or not, if the damage done by the servant

to rest squarely upon the proposition that article 1903 of the

does not amount to a breach of the contract between the

Civil Code is not applicable to acts of negligence which

master and the person injured.

constitute the breach of a contract.

It is not accurate to say that proof of diligence and care in the
Upon this point the Court said:

selection and control of the servant relieves the master from

liability for the latter's acts on the contrary, that proof

The acts to which these articles [1902 and 1903 of the Civil

shows that the responsibility has never existed. As Manresa

Code] are applicable are understood to be those not growing

says (vol. 8, p. 68) the liability arising from extra-contractual

out of pre-existing duties of the parties to one another. But

culpa is always based upon a voluntary act or omission which,

where relations already formed give rise to duties, whether

without willful intent, but by mere negligence or inattention,

springing from contract or quasi-contract, then breaches of

has caused damage to another. A master who exercises all

those duties are subject to article 1101, 1103, and 1104 of the

possible care in the selection of his servant, taking into

same code. (Rakes vs. Atlantic, Gulf and Pacific Co., 7 Phil.

consideration the qualifications they should possess for the

Rep., 359 at 365.)

discharge of the duties which it is his purpose to confide to

them, and directs them with equal diligence, thereby performs
his duty to third persons to whom he is bound by no

89

Transportation Law
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contractual ties, and he incurs no liability whatever if, by

notable peculiarity of the Spanish law of negligence. It is, of

reason of the negligence of his servants, even within the scope

course, in striking contrast to the American doctrine that, in

of their employment, such third person suffer damage. True it

relations with strangers, the negligence of the servant in

is that under article 1903 of the Civil Code the law creates a

conclusively the negligence of the master.

presumption that he has been negligent in the selection or

direction of his servant, but the presumption is rebuttable and

The opinion there expressed by this Court, to the effect that in

yield to proof of due care and diligence in this respect.

case of extra-contractual culpa based upon negligence, it is

necessary that there shall have been some fault attributable to

The supreme court of Porto Rico, in interpreting identical

the defendant personally, and that the last paragraph of article

provisions, as found in the Porto Rico Code, has held that

1903 merely establishes a rebuttable presumption, is in

these articles are applicable to cases of extra-contractual culpa

complete accord with the authoritative opinion of Manresa,

exclusively. (Carmona vs. Cuesta, 20 Porto Rico Reports,

who says (vol. 12, p. 611) that the liability created by article

215.)

1903 is imposed by reason of the breach of the duties inherent

in the special relations of authority or superiority existing

This distinction was again made patent by this Court in its

between the person called upon to repair the damage and the

decision in the case of Bahia vs. Litonjua and Leynes, (30

one who, by his act or omission, was the cause of it.

Phil. rep., 624), which was an action brought upon the theory
of the extra-contractual liability of the defendant to respond

On the other hand, the liability of masters and employers for

for the damage caused by the carelessness of his employee

the negligent acts or omissions of their servants or agents,

while acting within the scope of his employment. The Court,

when such acts or omissions cause damages which amount to

after citing the last paragraph of article 1903 of the Civil

the breach of a contact, is not based upon a mere presumption

Code, said:

of the master's negligence in their selection or control, and

proof of exercise of the utmost diligence and care in this

From this article two things are apparent: (1) That when an

regard does not relieve the master of his liability for the breach

injury is caused by the negligence of a servant or employee

of his contract.

there instantly arises a presumption of law that there was

negligence on the part of the master or employer either in

Every legal obligation must of necessity be extra-contractual

selection of the servant or employee, or in supervision over

or contractual. Extra-contractual obligation has its source in

him after the selection, or both; and (2) that that presumption

the breach or omission of those mutual duties which civilized

is juris tantum and not juris et de jure, and consequently, may

society imposes upon it members, or which arise from these

be rebutted. It follows necessarily that if the employer shows

relations, other than contractual, of certain members of society

to the satisfaction of the court that in selection and supervision

to others, generally embraced in the concept of status. The

he has exercised the care and diligence of a good father of a

legal rights of each member of society constitute the measure

family, the presumption is overcome and he is relieved from

of the corresponding legal duties, mainly negative in

liability.

character, which the existence of those rights imposes upon all

other members of society. The breach of these general duties

This theory bases the responsibility of the master ultimately on

whether due to willful intent or to mere inattention, if

his own negligence and not on that of his servant. This is the

productive of injury, give rise to an obligation to indemnify

90

Transportation Law
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the injured party. The fundamental distinction between

pleadings whether the breach of the contract is due to willful

obligations of this character and those which arise from

fault or to negligence on the part of the defendant, or of his

contract, rests upon the fact that in cases of non-contractual

servants or agents. Proof of the contract and of its

obligation it is the wrongful or negligent act or omission itself

nonperformance is sufficient prima facie to warrant a

which creates the vinculum juris, whereas in contractual

recovery.

relations the vinculum exists independently of the breach of

the voluntary duty assumed by the parties when entering into

As a general rule . . . it is logical that in case of extra-

the contractual relation.

contractual culpa, a suing creditor should assume the burden

of proof of its existence, as the only fact upon which his action

With respect to extra-contractual obligation arising from

is based; while on the contrary, in a case of negligence which

negligence, whether of act or omission, it is competent for the

presupposes the existence of a contractual obligation, if the

legislature to elect and our Legislature has so elected

creditor shows that it exists and that it has been broken, it is

whom such an obligation is imposed is morally culpable, or,

not necessary for him to prove negligence. (Manresa, vol. 8, p.

on the contrary, for reasons of public policy, to extend that

71 [1907 ed., p. 76]).

liability, without regard to the lack of moral culpability, so as

to include responsibility for the negligence of those person

As it is not necessary for the plaintiff in an action for the

who acts or mission are imputable, by a legal fiction, to others

breach of a contract to show that the breach was due to the

who are in a position to exercise an absolute or limited control

negligent conduct of defendant or of his servants, even though

over them. The legislature which adopted our Civil Code has

such be in fact the actual cause of the breach, it is obvious that

elected to limit extra-contractual liability with certain well-

proof on the part of defendant that the negligence or omission

defined exceptions to cases in which moral culpability can

of his servants or agents caused the breach of the contract

be directly imputed to the persons to be charged. This moral

would not constitute a defense to the action. If the negligence

responsibility may consist in having failed to exercise due care

of servants or agents could be invoked as a means of

in the selection and control of one's agents or servants, or in

discharging the liability arising from contract, the anomalous

the control of persons who, by reason of their status, occupy a

result would be that person acting through the medium of

position of dependency with respect to the person made liable

agents or servants in the performance of their contracts, would

for their conduct.

be in a better position than those acting in person. If one

delivers a valuable watch to watchmaker who contract to

The position of a natural or juridical person who has

repair it, and the bailee, by a personal negligent act causes its

undertaken by contract to render service to another, is wholly

destruction, he is unquestionably liable. Would it be logical to

different from that to which article 1903 relates. When the

free him from his liability for the breach of his contract, which

sources of the obligation upon which plaintiff's cause of action

involves the duty to exercise due care in the preservation of

depends is a negligent act or omission, the burden of proof

the watch, if he shows that it was his servant whose

rests upon plaintiff to prove the negligence if he does not

negligence caused the injury? If such a theory could be

his action fails. But when the facts averred show a contractual

accepted, juridical persons would enjoy practically complete

undertaking by defendant for the benefit of plaintiff, and it is

immunity from damages arising from the breach of their

alleged that plaintiff has failed or refused to perform the

contracts if caused by negligent acts as such juridical persons

contract, it is not necessary for plaintiff to specify in his

can of necessity only act through agents or servants, and it

91

Transportation Law
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would no doubt be true in most instances that reasonable care

adduced in the trial court that the defendant had been

had been taken in selection and direction of such servants. If

negligent in the employment of the driver, or that he had any

one delivers securities to a banking corporation as collateral,

knowledge of his lack of skill or carefulness.

and they are lost by reason of the negligence of some clerk

employed by the bank, would it be just and reasonable to

In the case of Baer Senior & Co's Successors vs. Compania

permit the bank to relieve itself of liability for the breach of its

Maritima (6 Phil. Rep., 215), the plaintiff sued the defendant

contract to return the collateral upon the payment of the debt

for damages caused by the loss of a barge belonging to

by proving that due care had been exercised in the selection

plaintiff which was allowed to get adrift by the negligence of

and direction of the clerk?

defendant's servants in the course of the performance of a

contract of towage. The court held, citing Manresa (vol. 8, pp.

This distinction between culpa aquiliana, as the source of an

29, 69) that if the "obligation of the defendant grew out of a

obligation, and culpa contractual as a mere incident to the

contract made between it and the plaintiff . . . we do not think

performance of a contract has frequently been recognized by

that the provisions of articles 1902 and 1903 are applicable to

the supreme court of Spain. (Sentencias of June 27, 1894;

the case."

November 20, 1896; and December 13, 1896.) In the decisions

of November 20, 1896, it appeared that plaintiff's action arose

In the case of Chapman vs. Underwood (27 Phil. Rep., 374),

ex contractu, but that defendant sought to avail himself of the

plaintiff sued the defendant to recover damages for the

provisions of article 1902 of the Civil Code as a defense. The

personal injuries caused by the negligence of defendant's

Spanish Supreme Court rejected defendant's contention,

chauffeur while driving defendant's automobile in which

saying:

defendant was riding at the time. The court found that the
damages were caused by the negligence of the driver of the

These are not cases of injury caused, without any pre-existing

automobile, but held that the master was not liable, although

obligation, by fault or negligence, such as those to which

he was present at the time, saying:

article 1902 of the Civil Code relates, but of damages caused

by the defendant's failure to carry out the undertakings

. . . unless the negligent acts of the driver are continued for a

imposed by the contracts . . . .

length of time as to give the owner a reasonable opportunity to

observe them and to direct the driver to desist therefrom. . . .

A brief review of the earlier decision of this court involving

The act complained of must be continued in the presence of

the liability of employers for damage done by the negligent

the owner for such length of time that the owner by his

acts of their servants will show that in no case has the court

acquiescence, makes the driver's acts his own.

ever decided that the negligence of the defendant's servants

has been held to constitute a defense to an action for damages

In the case of Yamada vs. Manila Railroad Co. and Bachrach

for breach of contract.

Garage & Taxicab Co. (33 Phil. Rep., 8), it is true that the
court rested its conclusion as to the liability of the defendant

In the case of Johnson vs. David (5 Phil. Rep., 663), the court

upon article 1903, although the facts disclosed that the injury

held that the owner of a carriage was not liable for the

complaint of by plaintiff constituted a breach of the duty to

damages caused by the negligence of his driver. In that case

him arising out of the contract of transportation. The express

the court commented on the fact that no evidence had been

ground of the decision in this case was that article 1903, in

92

Transportation Law
Choco Notes
dealing with the liability of a master for the negligent acts of

court would have held that it would have been a good defense

his servants "makes the distinction between private individuals

to the action, if presented squarely upon the theory of the

and public enterprise;" that as to the latter the law creates a

breach of the contract, for defendant to have proved that it did

rebuttable presumption of negligence in the selection or

in fact exercise care in the selection and control of the servant.

direction of servants; and that in the particular case the

presumption of negligence had not been overcome.

The true explanation of such cases is to be found by directing

the attention to the relative spheres of contractual and extra-

It is evident, therefore that in its decision Yamada case, the

contractual obligations. The field of non- contractual

court treated plaintiff's action as though founded in tort rather

obligation is much more broader than that of contractual

than as based upon the breach of the contract of carriage, and

obligations, comprising, as it does, the whole extent of

an examination of the pleadings and of the briefs shows that

juridical human relations. These two fields, figuratively

the questions of law were in fact discussed upon this theory.

speaking, concentric; that is to say, the mere fact that a person

Viewed from the standpoint of the defendant the practical

is bound to another by contract does not relieve him from

result must have been the same in any event. The proof

extra-contractual liability to such person. When such a

disclosed beyond doubt that the defendant's servant was

contractual relation exists the obligor may break the contract

grossly negligent and that his negligence was the proximate

under such conditions that the same act which constitutes the

cause of plaintiff's injury. It also affirmatively appeared that

source of an extra-contractual obligation had no contract

defendant had been guilty of negligence in its failure to

existed between the parties.

exercise proper discretion in the direction of the servant.

Defendant was, therefore, liable for the injury suffered by

The contract of defendant to transport plaintiff carried with it,

plaintiff, whether the breach of the duty were to be regarded as

by implication, the duty to carry him in safety and to provide

constituting culpa aquiliana or culpa contractual. As Manresa

safe means of entering and leaving its trains (civil code, article

points out (vol. 8, pp. 29 and 69) whether negligence occurs

1258). That duty, being contractual, was direct and immediate,

an incident in the course of the performance of a contractual

and its non-performance could not be excused by proof that

undertaking or its itself the source of an extra-contractual

the fault was morally imputable to defendant's servants.

undertaking obligation, its essential characteristics are

identical. There is always an act or omission productive of

The railroad company's defense involves the assumption that

damage due to carelessness or inattention on the part of the

even granting that the negligent conduct of its servants in

defendant. Consequently, when the court holds that a

placing an obstruction upon the platform was a breach of its

defendant is liable in damages for having failed to exercise

contractual obligation to maintain safe means of approaching

due care, either directly, or in failing to exercise proper care in

and leaving its trains, the direct and proximate cause of the

the selection and direction of his servants, the practical result

injury suffered by plaintiff was his own contributory

is identical in either case. Therefore, it follows that it is not to

negligence in failing to wait until the train had come to a

be inferred, because the court held in the Yamada case that

complete stop before alighting. Under the doctrine of

defendant was liable for the damages negligently caused by its

comparative negligence announced in the Rakes case (supra),

servants to a person to whom it was bound by contract, and

if the accident was caused by plaintiff's own negligence, no

made reference to the fact that the defendant was negligent in

liability is imposed upon defendant's negligence and plaintiff's

the selection and control of its servants, that in such a case the

negligence merely contributed to his injury, the damages

93

Transportation Law
Choco Notes
should be apportioned. It is, therefore, important to ascertain if

Or, it we prefer to adopt the mode of exposition used by this

defendant was in fact guilty of negligence.

court in Picart vs. Smith (37 Phil. rep., 809), we may say that
the test is this; Was there anything in the circumstances

It may be admitted that had plaintiff waited until the train had

surrounding the plaintiff at the time he alighted from the train

come to a full stop before alighting, the particular injury

which would have admonished a person of average prudence

suffered by him could not have occurred. Defendant contends,

that to get off the train under the conditions then existing was

and cites many authorities in support of the contention, that it

dangerous? If so, the plaintiff should have desisted from

is negligence per se for a passenger to alight from a moving

alighting; and his failure so to desist was contributory

train. We are not disposed to subscribe to this doctrine in its

negligence.1awph!l.net

absolute form. We are of the opinion that this proposition is

too badly stated and is at variance with the experience of

As the case now before us presents itself, the only fact from

every-day life. In this particular instance, that the train was

which a conclusion can be drawn to the effect that plaintiff

barely moving when plaintiff alighted is shown conclusively

was guilty of contributory negligence is that he stepped off the

by the fact that it came to stop within six meters from the

car without being able to discern clearly the condition of the

place where he stepped from it. Thousands of person alight

platform and while the train was yet slowly moving. In

from trains under these conditions every day of the year, and

considering the situation thus presented, it should not be

sustain no injury where the company has kept its platform free

overlooked that the plaintiff was, as we find, ignorant of the

from dangerous obstructions. There is no reason to believe

fact that the obstruction which was caused by the sacks of

that plaintiff would have suffered any injury whatever in

melons piled on the platform existed; and as the defendant was

alighting as he did had it not been for defendant's negligent

bound by reason of its duty as a public carrier to afford to its

failure to perform its duty to provide a safe alighting place.

passengers facilities for safe egress from its trains, the plaintiff
had a right to assume, in the absence of some circumstance to

We are of the opinion that the correct doctrine relating to this

warn him to the contrary, that the platform was clear. The

subject is that expressed in Thompson's work on Negligence

place, as we have already stated, was dark, or dimly lighted,

(vol. 3, sec. 3010) as follows:

and this also is proof of a failure upon the part of the

defendant in the performance of a duty owing by it to the

The test by which to determine whether the passenger has

plaintiff; for if it were by any possibility concede that it had

been guilty of negligence in attempting to alight from a

right to pile these sacks in the path of alighting passengers, the

moving railway train, is that of ordinary or reasonable care. It

placing of them adequately so that their presence would be

is to be considered whether an ordinarily prudent person, of

revealed.

the age, sex and condition of the passenger, would have acted
as the passenger acted under the circumstances disclosed by

As pertinent to the question of contributory negligence on the

the evidence. This care has been defined to be, not the care

part of the plaintiff in this case the following circumstances

which may or should be used by the prudent man generally,

are to be noted: The company's platform was constructed upon

but the care which a man of ordinary prudence would use

a level higher than that of the roadbed and the surrounding

under similar circumstances, to avoid injury." (Thompson,

ground. The distance from the steps of the car to the spot

Commentaries on Negligence, vol. 3, sec. 3010.)

where the alighting passenger would place his feet on the

platform was thus reduced, thereby decreasing the risk

94

Transportation Law
Choco Notes
incident to stepping off. The nature of the platform,
constructed as it was of cement material, also assured to the

The decision of lower court is reversed, and judgment is

passenger a stable and even surface on which to alight.

hereby rendered plaintiff for the sum of P3,290.25, and for the

Furthermore, the plaintiff was possessed of the vigor and

costs of both instances. So ordered.

agility of young manhood, and it was by no means so risky for

him to get off while the train was yet moving as the same act

Arellano, C.J., Torres, Street and Avancea, JJ., concur.

would have been in an aged or feeble person. In determining

the question of contributory negligence in performing such act
that is to say, whether the passenger acted prudently or
recklessly the age, sex, and physical condition of the

Medina v. Cresencia
[G.R. No. L-8194. July 11, 1956.]

passenger are circumstances necessarily affecting the safety of

the passenger, and should be considered. Women, it has been
observed, as a general rule are less capable than men of
alighting with safety under such conditions, as the nature of

EMERENCIANA M. VDA. DE MEDINA, ET AL.,

Plaintiffs-Appellees, vs. GUILLERMO CRESENCIA, ET
AL., Defendants. GUILLERMO CRESENCIA, Appellant.

their wearing apparel obstructs the free movement of the

limbs. Again, it may be noted that the place was perfectly
familiar to the plaintiff as it was his daily custom to get on and
of the train at this station. There could, therefore, be no

DECISION

uncertainty in his mind with regard either to the length of the

step which he was required to take or the character of the

REYES, J.B.L., J.:

platform where he was alighting. Our conclusion is that the

conduct of the plaintiff in undertaking to alight while the train
was yet slightly under way was not characterized by
imprudence and that therefore he was not guilty of
contributory negligence.

Appeal by Defendant Guillermo Cresencia from the judgment

of the Court of First Instance of Manila in its civil case No.
19890, sentencing Appellant, jointly and severally with his coDefendant Brigido Avorque, to pay Plaintiffs Emerencia M.
Vda. de Medina and her minor children damages in the total

The evidence shows that the plaintiff, at the time of the

amount of P56,000, P5,000 attorneys fees, and costs.

accident, was earning P25 a month as a copyist clerk, and that

the injuries he has suffered have permanently disabled him
from continuing that employment. Defendant has not shown
that any other gainful occupation is open to plaintiff. His
expectancy of life, according to the standard mortality tables,
is approximately thirty-three years. We are of the opinion that
a fair compensation for the damage suffered by him for his
permanent disability is the sum of P2,500, and that he is also
entitled to recover of defendant the additional sum of P790.25
for medical attention, hospital services, and other incidental
expenditures connected with the treatment of his injuries.

It appears that on May 31, 1953, passenger jeepney bearing

plate No. TPU-2232 (Manila), driven by Brigido Avorque,
smashed into a Meralco post on Azcarraga Street, resulting in
the death of Vicente Medina, one of its passengers. A criminal
case for homicide through reckless imprudence was filed
against Avorque (criminal case No. 22775 of the Court of First
Instance of Manila), to which he pleaded guilty on September
9, 1953. The heirs of the deceased, however, reserved their
right to file a separate action for damages, and on June 16,
1953, brought suit against the driver Brigido Avorque and
Appellant Guillermo Cresencia, the registered owner and

95

Transportation Law
Choco Notes
operator of the jeepney in question. Defendant Brigido

that the law (section 20 [g], C. A. No. 146 as amended)

Avorque

chan

requires the approval of the Public Service Commission in

roblesvirtualawlibrarywhile Defendant Cresencia answered,

order that a franchise, or any privilege pertaining thereto, may

disclaiming liability on the ground that he had sold the

be sold or leased without infringing the certificate issued to

jeepney in question on October 14, 1950 to one Maria A.

the grantee; chan roblesvirtualawlibraryand that if property

Cudiamat; chan roblesvirtualawlibrarythat the jeepney had

covered by the franchise is transferred or leased without this

been repeatedly sold by one buyer after another, until the

requisite approval, the transfer is not binding against the

vehicle was purchased on January 29, 1953 by Rosario

public

Avorque, the absolute owner thereof at the time of the

roblesvirtualawlibraryand in contemplation of law, the grantee

accident. In view of Cresencias answer, Plaintiffs filed leave,

of record continues to be responsible under the franchise in

and was allowed, to amend their complaint making Rosario

relation to the Commission and to the public. There we gave

Avorque a co-Defendant; chan roblesvirtualawlibraryand the

the

latter, by way of answer, admitted having purchased the

follows:chanroblesvirtuallawlibrary

did

not

file

any

answer;

or

reason

the

for

Service

this

Commission;

rule

to

chan

be

as

aforesaid jeepney on May 31, 1953, but alleged in defense that

she was never the public utility operator thereof. The case then

cralaw Since a franchise is personal in nature any transfer or

proceeded to trial, during which, after the Plaintiffs had

lease thereof should be notified to the Public Service

presented their evidence, Defendants Guillermo Cresencia and

Commission so that the latter may take proper safeguards to

Rosario Avorque made manifestations admitting that the

protect the interest of the public. In fact, the law requires that,

former was still the registered operator of the jeepney in

before the approval is granted, there should be a public

question in the records of the Motor Vehicles Office and the

hearing, with notice to all interested parties, in order that the

Public Service Commission, while the latter was the owner

Commission may determine if there are good and reasonable

thereof

chan

grounds justifying the transfer or lease of the property covered

roblesvirtualawlibraryand submitted the case for the decision

by the franchise, or if the sale or lease is detrimental to public

on the question of who, as between the two, should be held

interest cralaw .

at

the

time

of

the

accident;

liable to Plaintiffs for damages. The lower court, by Judge

Jose Zulueta, held that as far as the public is concerned,

The above ruling was later reiterated in the cases of Timbol

Defendant Cresencia, in the eyes of the law, continued to be

vs. Osias, L-7547, April 30, 1955 and Roque vs. Malibay

the

Transit Inc., L- 8561, November 18, 1955.

legal

owner

of

the

jeepney in

question;

chan

roblesvirtualawlibraryand rendered judgment against him,

jointly and severally with the driver Brigido Avorque, for

As the sale of the jeepney here in question was admittedly

P6,000 compensatory damages, P30,000 moral damages,

without the approval of the Public Service Commission,

P10,000 exemplary damages, P10,000 nominal damages,

Appellant herein, Guillermo Cresencia, who is the registered

P5,000 attorneys fees, and costs, while Defendant Rosario

owner and operator thereof, continued to be liable to the

Avorque was absolved from liability. From this judgment,

Commission and the public for the consequences incident to

Defendant Cresencia appealed.

its operation. Wherefore, the lower court did not err in holding
him, and not the buyer Rosario Avorque, responsible for the

We have already held in the case of Montoya vs. Ignacio, 94

damages sustained by Plaintiff by reason of the death of

Phil., 182 (December 29, 1953), which the court below cited,

96

Transportation Law
Choco Notes
Vicente Medina resulting from the reckless negligence of the

With the modification that the award of P10,000 nominal

jeepneys driver, Brigido Avorque.

damages be eliminated, the decision appealed from is

affirmed. Costs against Appellant. SO ORDERED.

Appellant also argues that the basis of Plaintiffs action being

the employers subsidiary liability under the Revised Penal

Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A.,

Code for damages arising from his employees criminal acts, it

Bautista Angelo, Labrador, Concepcion and Endencia, JJ.,

is Defendant Rosario Avorque who should answer subsidiarily

concur.

for the damages sustained by Plaintiffs, since she admits that

she, and not Appellant, is the employer of the negligent driver
Brigido Avorque. The argument is untenable, because

PAL v. CA
[G.R. No. L-46558 : July 31, 1981.]

Plaintiffs action for damages is independent of the criminal

case filed against Brigido Avorque, and based, not on the
employers subsidiary liability under the Revised Penal Code,

PHILIPPINE AIR LINES, INC., Petitioner, vs. THE COURT

OF APPEALS and JESUS V. SAMSON, Respondents.

but on a breach of the carriers contractual obligation to carry

his passengers safely to their destination (culpa contractual).
And it is also for this reason that there is no need of first
proving the insolvency of the driver Brigido Avorque before

DECISION

damages can be recovered from the carrier, for in culpa

contractual, the liability of the carrier is not merely subsidiary
or secondary, but direct and immediate (Articles 1755, 1756,
GUERRERO, J.:

and 1759, New Civil Code).

The propriety of the damages awarded has not been

questioned, Nevertheless, it is patent upon the record that the
award of P10,000 by way of nominal damages is untenable as
a matter of law, since nominal damages cannot co-exist with
compensatory damages. The purpose of nominal damages is to
vindicate or recognize a right that has been violated, in order
to

preclude

further

roblesvirtualawlibraryand

contest
not

for

thereon;
the

purpose

chan
of

indemnifying the Plaintiff for any loss suffered by him

(Articles 2221, 2223, new Civil Code.) Since the court below
has already awarded compensatory and exemplary damages
that are in themselves a judicial recognition that Plaintiffs
right was violated, the award of nominal damages is
unnecessary and improper. Anyway, ten thousand pesos
cannot, in common sense, be deemed nominal.

This is a petition for review on Certiorari of the decision of the

Court of Appeals 1 dated April 18, 1977, affirming with
modification the decision of the Court of First Instance of
Albay in Civil Case No. 1279, entitled Jesus V. Samson,
plaintiff, vs. Philippine Air Lines, Inc., defendant, for
damages.
The dispositive portion of the trial courts decision reads:
WHEREFORE,

for

all

the

foregoing

considerations,

judgment is hereby rendered in favor of the plaintiff and

against the defendant ordering the defendant to pay the
plaintiff, the following sums: P1988,000.00 as unearned
income or damages; P50,000.00 for moral damages;
P20,000.00 as attorneys fees and P5,000.00 as expenses of

97

Transportation Law
Choco Notes
litigation, or a total of P273,000.00. Costs against the

Philippine Air Lines called back the plaintiff to active duty as

defendant.

co-pilot, and inspite of the latters repeated request for expert

medical assistance, defendant had not given him any

The appellate court modified the above decision, to wit:

cranad(par. 8, complaint); that as a consequence of the brain

injury sustained by plaintiff from the crash, he had been

However, Plaintiff-Appellee, who has been deprived of his

having periodic dizzy spells and had been suffering from

job since 1954, is entitled to the legal rate of interest on the

general debility and nervousness cranad(par. 9, complaint);

P198,000.00 unearned income from the filing of the complaint

that defendant airline company instead of submitting the

cranad(Sec. 8, Rule 51, Rules of Court).

plaintiff to expert medical treatment, discharged the latter

from its employ on December 21, 1953 on grounds of physical

WHEREFORE, with the modification indicated above, the

disability, thereby causing plaintiff not only to lose his job but

judgment appealed from is affirmed, with costs against

to become physically unfit to continue as aviator due to

defendant-appellant.

defendants negligence in not giving him the proper medical

attention cranad(pars. 10-11, complaint). Plaintiff prayed for

The complaint filed on July 1, 1954 by plaintiff Jesus V.

damages in the amount of P180,000.00 representing his

Samson, private respondent herein, averred that on January 8,

unearned income, P50,000.00 as moral damages, P20,000.00

1951, he flew as co-pilot on a regular flight from Manila to

as attorneys fees and P5,000.00 as expenses, or a total of

Legaspi with stops at Daet, Camarines Norte and Pili,

P255,000.00.

Camarines

Sur,

with

Captain

Delfin

Bustamante

as

commanding pilot of a C-47 plane belonging to defendant

In its answer filed on July 28, 1954, defendant PAL denied the

Philippine Air Lines, Inc., now the herein petitioner; that on

substantial averments in the complaint, alleging among others,

attempting to land the plane at Daet airport, Captain Delfin

that the accident was due solely and exclusively to inevitable

Bustamante due to his very slow reaction and poor judgment

unforeseen circumstances whereby plaintiff sustained only

overshot the airfield and as a result, notwithstanding the

superficial wounds and minor injuries which were promptly

diligent efforts of the plaintiff co-pilot to avert an accident, the

treated by defendants medical personnel cranad(par. 5,

airplane crashlanded beyond the runway; that the jolt caused

answer); that plaintiff did not sustain brain injury or cerebral

the head of the plaintiff to hit and break through the thick front

concussion from the accident since he passed the annual

windshield of the airplane causing him severe brain

physical and medical examination given thereafter on April

concussion, wounds and abrasions on the forehead with

24, 1951; that the headaches and dizziness experienced by

intense pain and suffering cranad(par. 6, complaint).:onad

plaintiff were due to emotional disturbance over his inability

to pass the required up-grading or promotional course given

The complaint further alleged that instead of giving plaintiff

by defendant company cranad(par. 6, answer), and that, as

expert and proper medical treatment called for by the nature

confirmed by an expert neuro-surgeon, plaintiff was suffering-

and severity of his injuries, defendant simply referred him to a

from

company physician, a general medical practitioner, who

disqualification from continuing as a pilot, defendant had to

limited the treatment to the exterior injuries without

terminate plaintiffs employment cranad(pars. 7, 9, answer).

neurosis

and

in

view

of

this

unfitness

and

examining the severe brain concussion of plaintiff cranad(par.

7, complaint); that several days after the accident, defendant

98

Transportation Law
Choco Notes
Further, defendant alleged that by the very nature of its

On April 18, 1977, the Court of Appeals rendered its decision

business as a common carrier, it is bound to employ only

affirming the judgment of the lower court but modified the

pilots who are proficient and in good mental, emotional and

award of damages by imposing legal rate of interest on the

physical condition; that the pilot, Captain Delfin Bustamante,

P198,000.00 unearned income from the filing of the

was a competent and proficient pilot, and although he was

complaint, citing Sec. 8, Rule 51 of the Rules of Court.

already afflicted with a tumor of the nasopharynx even before

the accident of January 8, 1951, the Civil Aeronautics

Its motion for reconsideration of the above judgment having

Administration, in passing upon the fitness of pilots, gave

been denied, Philippine Air Lines, Inc. filed this instant

Capt. Bustamante a waiver of physical standards to enable him

petition for Certiorari on the ground that the decision is not in

to retain his first class airman certificate since the affliction

accord with law or with the applicable jurisprudence, aside

had not in the least affected his proficiency cranad(pars. 16-

from its being replete with findings in the nature of

17, answer). By way of counterclaim, defendant prayed for

speculation, surmises and conjectures not borne out by the

P10,000.00 as expenses for the litigation.

evidence on record thereby resulting to misapprehension of

facts and amounting to a grave abuse of discretion cranad(p. 7,

On March 25, 1958, defendant filed a Motion to Dismiss on

Petition).

the ground that the complaint is essentially a Workmens

Compensation claim, stating a cause of action not cognizable

Petitioner raises the fundamental question in the case at bar as

within the general jurisdiction of the court. The Motion to

follows: Is there a causal connection between the injuries

Dismiss was denied in the order of April 14, 1958. After the

suffered by private respondent during the accident on 8

reception of evidence, the trial court rendered on January 15,

January 1951 and the subsequent periodic dizzy spells,

1973 the decision, the dispositive portion of which has been

headache and general debility of which private respondent

earlier cited.

complained every now and then, on the one hand, and such
periodic dizzy spells, headache and general debility

The defendant Philippine Air Lines, Inc. appealed the decision

allegedly caused by the accident and private respondents

to the Court of Appeals as being contrary to law and

eventual discharge from employment, on the other? PAL

unsupported by the evidence. It raised as errors of the trial

submits that respondent courts award of damages to private

court cranad(a) the holding that the damages allegedly

respondent is anchored on findings in the nature of

suffered by plaintiff are attributable to the accident of January

speculations, surmises and conjectures and not borne out by

8, 1951 which was due to the negligence of defendant in

the evidence on record, thereby resulting in a misapprehension

having allowed Capt. Delfin Bustamante to continue flying

of facts and amounting to a grave abuse of discretion.

despite his alleged slow reaction and poor judgment; cranad(b)

the finding that defendant was negligent in not having given

Petitioners submission is without merit.

plaintiff proper and adequate expert medical treatment and

assistance for the injuries allegedly sustained in the accident of

As found by the respondent court, the following are the

January 8, 1951; and cranad(c) in ordering defendant to pay

essential facts of the case:

actual or compensatory damages, moral damages and

attorneys fees to the plaintiff.

It appears that plaintiff, a licensee aviator, was employed by

defendant a few years prior to January 8, 1951 as a regular co-

99

Transportation Law
Choco Notes
pilot on a guaranteed basic salary of P750.00 a month. He was

On July 1, 1954, plaintiff filed a complaint for damages.

assigned to and/or paired with pilot Delfin Bustamante.

Defendant vainly sought to dismiss the complaint after filing

an answer. Then, the judgment and this appeal.

Sometime in December 1950, he complained to defendant

through its authorized official about the slow reaction and

Continuing, the respondent Court of Appeals further held:

poor judgment of pilot Delfin Bustamante. Notwithstanding

said complaint, defendant allowed the pilot to continue flying.

There is no question about the employment of plaintiff by

defendant, his age and salary, the overshooting by pilot

On January 8, 1951, the two manned the regular afternoon

Bustamante of the airfield and crashlanding in a mangrove, his

flight of defendants plane from Manila to Legaspi, with stops

hitting his head on the front windshield of the plane, his

at Daet, Camarines Norte, and Pili, Camarines Sur. Upon

intermittent dizzy spells, headache and general debility for

making a landing at Daet, the pilot, with his slow reaction and

which he was discharged from his employment on December

poor judgment, overshot the airfield and, as a result of and

21, 1953. As the lower court aptly stated:

notwithstanding diligent efforts of plaintiff to avert an

accident, the airplane crash-landed beyond the runway into a

From the evidence adduced by the parties, the Court finds the

mangrove. The jolt and impact caused plaintiff to hit his head

following facts to be uncontroverted: That the plaintiff Jesus

upon the front windshield of the plane thereby causing his

V. Samson, on January 8, 1951 and a few years prior thereto,

brain concussions and wounds on the forehead, with

December 21, 1953, was a duly licensed pilot employed as a

concomittant intense pain.

regular co-pilot of the defendant with assignment in its

domestic air service in the Philippines; that on January 8,

Plaintiff was not given proper medical attention and treatment

1951, the defendants airplane met an accident in crashlanding

demanded by the nature and severity of his injuries. Defendant

at the Daet Airport, Camarines Norte by overshooting the

merely referred him to its clinic attended by general

runway and reaching the mangroves at the edge of the landing

practitioners on his external injuries. His brain injury was

strip; that the jolt caused plaintiffs head to hit the front

never examined, much less treated. On top of that negligence,

windshield of the airplane causing him to suffer wounds and

defendant recalled plaintiff to active duty as a co-pilot,

abrasion on the forehead; that the defendant, instead of giving

completely ignoring his plea for expert medical assistance.

the plaintiff expert and proper medical treatment called for by

the nature and severity of the injuries of the plaintiff, simply

Suffering periodic dizzy spells, headache and general debility,

referred him to the clinic of the defendants physicians who

plaintiff every now and then complained to defendant. To

are only general medical practitioners and not brain

make matters worst for plaintiff, defendant discharged him

specialists; that the defendants physicians limited their

from his employment on December 21, 1953. In consequence,

treatment to the exterior injuries on the forehead of the

plaintiff has been beset with additional worries, basically

plaintiff and made no examination of the severe concussion of

financial. He is now a liability instead of a provider, of his

the brain of the plaintiff; that the Medical Director and Flight

family.

Surgeon of the defendant were not able to definitely determine

the cause of the complaint of the plaintiff as to the periodic
attack of dizziness, spells and headache; that due to this laxity
of the defendants physician and the continuous suffering of

100

Transportation Law
Choco Notes
the ailment of the plaintiff complained of, he demanded for

which he was grounded from flight duty. In short, that at that

expert medical assistance for his brain injury and to send him

time, or approximately from November 1953 up to the date of

to the United States, which demand was turned down and in

his discharge on 21 December 1953, plaintiff was actually

effect denied by the defendant; that instead the defendant

physically unfit to discharge his duties as pilot.

referred the plaintiff to a neurologist, Dr. Victor Reyes; that

from the time that said accident occurred on January 21, 1953,

(4) Fourth, that plaintiffs unfitness for flight duty was

he was ordered grounded on several occasions because of his

properly established after a thorough medical examination by

complaint of dizzy spells and headache; that instead of

competent

submitting the plaintiff to expert medical treatment as

appellants brief)

medical

experts.cralaw

cranad(pp.

11-12,

demanded by him and denied by the defendant, he was

discharged from its employment on December 21, 1953 on the

hence, there can hardly be an issue, factual, legal or medical.

ground of physical disability, and that the plaintiff, at the time

when the defendants plane met the accident, up to the time he

Taking exception from the rest of the essential facts of the

was discharged, was regularly employed as a co-pilot and

case as found by the respondent court PAL claims said facts

receiving a basic salary of P750.00 a month plus extra pay for

are not fully borne out by the evidence on record and insists

flying time, and bonuses amounting to P300.00 a month.

that the injuries suffered by private respondent during the

accident on January 8, 1951 were superficial in nature; that the

Even defendant-appellant itself admits as not controverted the

periodic spells, headache, and general debility complaint of

following facts which generally admit what have been stated

every now and then by private respondent subsequent to the

above as not controverted.

Jan. 8, 1951 incident were due to emotional disturbances and

that no negligence can be attributed to Capt. Delfin

In the case at bar, the following facts are not the subject of

Bustamante much less to PAL for the occurrence on January

controversy:

8, 1951, hence PAL cannot be held liable for damages.

(1) First, that from July 1950 to 21 December 1953, plaintiff

Petitioner claims absence of any causal connection between

was employed with defendant company as a first officer or co-

private respondents superficial injuries and his alleged

pilot and served in that capacity in defendants domestic

subsequent periodic spells, headache and general debility,

services.

pointing out that these subsequent ailments were found by

competent physician, including an expert neuro-surgeon, to be

(2) Second, that on January 1951, plaintiff did fly on

due to emotional disturbances insights the conclusions of Dr.

defendants PI-C 94, as first officer or co-pilot, with the late

Trajano V. Bernardo that respondents complaints were

Capt. Delfin Bustamante in command as pilot; that while

psychosomatic symptoms on the basis of declarations made

making a landing at the Daet airport on that date, PI-C 94 did

by respondent himself, which conclusions are supported by

meet an accident as stated above.

similar diagnosis made by Drs. Damaceno J. Ago and

Villaraza stating that respondent Samson was suffering from

(3) Third, that at or about the time of the discharge from

neurosis as well as the report of Dr. Victor Reyes, a

defendant company, plaintiff had complained of spells of

neurological specialist, indicating that the symptoms were

dizziness, headaches and nervousness, by reason of

101

Transportation Law
Choco Notes
probably, most probably due to psychogenic factors and have

Samson was an after-effect of the crash-landing and We find

no organic basis.

that such holding is supported by substantial evidence, which

We quote from the courts decision, to wit:

In claiming that there is no factual basis for the finding of the

respondent court that the crash-landing caused respondents

Defendant would imply that plaintiff suffered only superficial

brain concussion . cra ., with concomittant intense pain, for

wounds which were treated and not brain injury. It would, by

on

the

the opinion of its company doctors, Dr. Bernardo and Dr.

superficiality of the injuries sustained by respondent during

Reyes, attribute the dizzy spells and headache to organic or as

the accident of January 8, 1951, petitioner quotes portions of

phychosomatic, neurasthenic or psychogenic, which we find

the testimony of Dr. Manuel S. Sayas, who declared that he

outlandishly exaggerated.

the

contrary,

testimonial

evidence

establish

removed the band-aid on the forehead of respondent and that

he found out after removal that the latter had two contussed

That plaintiffs condition as psychosomatic rather than organic

superficial wounds over the supra orbiter regions or just above

in nature is allegedly confirmed by the fact that on six

the eyes measuring one centimeter long and one millimeter

cranad(6) separate occasions after the accident he passed the

deep. He examined and found his blood pressure normal, no

required CAA physical examination for airmans certificate.

discharges from the nose and ears. Dr. Trajano V. Bernardo

cranad(Exhs. 78, 79, 80, 81, 83 and 92). We noticed, however,

also testified that when he examined respondent Samson three

that there were other similar physical examinations conducted

days after the accident, the wound was already healed and

by the CAA on the person of plaintiff the report on which

found nothing wrong with his ears, nose and throat so that he

were not presented in evidence. Obviously, only those which

was declared fit for duty after the sixth day.

suited defendants cause were hand-picked and offered in

evidence.

Petitioner goes further. It contends that there is no causal

connection between respondents superficial injuries sustained

We hesitate to accept the opinion of the defendants two

during the accident on January 8, 1951 and plaintiffs

physicians, considering that Dr. Bernardo admittedly referred

discharge from employment with PAL on December 21, 1953.

to Dr. Reyes because he could not determine the cause of the

According to PAL, it was the repeated recurrence of

dizzy spells and headache and the latter admitted that it is

respondents neurasthenic symptoms cranad(dizzy spells,

extremely hard to be certain of the cause of his dizzy spells,

headache, nervousness) which prompted PALs Flight

and suggested a possibility that it was due to postraumatic

Surgeon, Dr. Bernardo, to recommend that plaintiff be

syndrome, evidently due to the injuries suffered by the

grounded permanently as respondent was psychologically

plaintiff in hitting the forehead against the windshield of the

unfit to resume his duties as pilot. PAL concludes that

plane during the accident. Judgment are not based on

respondents eventual discharge from employment with PAL

possibilities.

was effected for absolutely valid reasons, and only after he

was thoroughly examined and found unfit to carry out his

The admitted difficulty of defendants doctors in determining

responsibilities and duties as a pilot.:onad

the cause of the dizzy spells and headache cannot be a sound

basis for finding against the plaintiff and in favor of defendant.

We agree with the respondent court in finding that the dizzy

Whatever it might be, the fact is that such dizzy spells,

spells, headache and general debility of private respondent

headache and general debility was an after-effect of the crash-

102

Transportation Law
Choco Notes
landing. Be it brain injury or psychosomatic, neurasthenic or

did not agree and that plaintiff was completely ignored by the

psychogenic, there is no gainsaying the fact that it was caused

defendant in his plea for expert medical assistance. They

by the crash-landing. As an effect of the cause, not fabricated

admitted that they could not determine definitely the cause of

or concocted, plaintiff has to be indemnified. The fact is that

the fainting spells, dizziness and headache, which justifies the

such effect caused his discharge.

demand for expert medical assistance.

We are prone to believe the testimony of the plaintiffs

We also find the imputation of gross negligence by respondent

doctors.

court to PAL for having allowed Capt. Delfin Bustamante to

fly on that fateful day of the accident on January 8, 1951 to be

Dr. Morales, a surgeon, found that blood was coming from

correct, and We affirm the same, duly supported as it is by

plaintiffs ears and nose. He testified that plaintiff was

substantial evidence, clearly established and cited in the

suffering from cerebral concussion as a result of traumatic

decision of said court which states as follows:

injury to the brain caused by his head hitting on the windshield

of the plane during the crash-landing cranad(Exhibit G).

The pilot was sick. He admittedly had tumor of the

nasopharynx cranad(nose). He is now in the Great Beyond.

Dr. Conrado Aramil, a neurologist and psychiatrist with

The spot is very near the brain and the eyes. Tumor on the

experience in two hospitals abroad, found abnormality

spot will affect the sinus, the breathing, the eyes which are

reflected by the electroencephalogram examination in the

very near it. No one will certify the fitness to fly a plane of

frontal area on both sides of plaintiffs head cranad(Exhibits

one suffering from the disease.

K, K-1).
. cra . The fact First Pilot Bustamante has a long standing
The opinion of these two specialist renders unnecessary that of

tumor of the Nasopharynx for which reason he was grounded

plaintiffs wife who is a physician in her own right and

since November 1947 is admitted in the letter cranad(Exh. 69-

because of her relation to the plaintiff, her testimony and

A) of Dr. Bernardo to the Medical Director of the CAA

opinion may not be discussed here, although her testimony is

requesting waiver of physical standards. The request for

crystallized by the opinions of Dr. Ador Dionisio, Dr.

waiver of physical standards is itself a positive proof that the

Marquez, Dr. Jose O. Chan, Dr. Yambao and Dr. Sandico.

physical condition of Capt. Bustamante is short of the standard

set by the CAA. The Deputy Administrator of the CAA

Even the doctors presented by defendant admit vital facts

granted the request relying on the representation and

about plaintiffs brain injury. Dr. Bernardo admits that due to

recommendation made by Dr. Bernardo cranad(See Exh. 69).

the incident, the plaintiff continuously complained of his

We noted, however, that the request cranad(Exh. 69-A) says

fainting spells, dizziness and headache everytime he flew as a

that it is believed that his continuing to fly as a co-pilot does

co-pilot and everytime he went to defendants clinic no less

not involve any hazard.cralaw cranad(Italics supplied). Flying

than 25 times cranad(Exhibits 15 to 36), that he

as a First Officer entails a very different responsibility than

complained of the same to Dr. Reyes; that he promised to help

flying as a mere co-pilot. Defendant requested the CAA to

send plaintiff to the United States for expert medical

allow Capt. Bustamante to fly merely as a co-pilot and it is

assistance provided that whatever finding thereat should not

safe to conclude that the CAA approved the request thus

be attributed to the crash-landing incident to which plaintiff

allowing Bustamante to fly only as a co-pilot. For having

103

Transportation Law
Choco Notes
allowed Bustamante to fly as a First Officer on January 8,

accidents,

matters which are beyond Dr. Bernardos

1951, defendant is guilty of gross negligence and therefore

competence anyway.

should be made liable for the resulting accident.

Assuming that the pilot was not sick or that the tumor did not
As established by the evidence, the pilot used to get treatments

affect the pilot in managing the plane, the evidence shows that

from Dr. Sycangco. He used to complain of pain in the face

the overshooting of the runway and crash-landing at the

more particularly in the nose which caused him to have

mangrove was caused by the pilot for which acts the defendant

sleepless nights. Plaintiffs observation of the pilot was

must answer for damages caused thereby. And for this

reported to the Chief Pilot who did nothing about it. Captain

negligence

Carbonel of the defendant corroborated plaintiff of this matter.

cranad(Joaquin vs. Aniceto, 12 SCRA 308). At least, the law

The complaint against the slow reaction of the pilot at least

presumes the employer negligent imposing upon it the burden

proved the observation. The observation could be disregarded.

of proving that it exercised the diligence of a good father of a

The fact that the complaint was not in writing does not detract

family in the supervision of its employees.

of

defendants

employee,

it

is

liable

anything from the seriousness thereof, considering that a

miscalculation would not only cause the death of the crew but

Defendant would want to tie plaintiff to the report he signed

also of the passengers.

about the crash-landing. The report was prepared by his pilot

and because the latter pleaded that he had a family too and

One month prior to the crash-landing, when the pilot was

would have nowhere to go if he lost his job, plaintiffs

preparing to land in Daet, plaintiff warned him that they were

compassion would not upturn the truth about the crash-

not in the vicinity of Daet but above the town of Ligao. The

landing. We are for the truth not logic of any argumentation.

plane hit outside the airstrip. In another instance, the pilot

would hit the Mayon Volcano had not plaintiff warned him.

At any rate, it is incorrect to say that the Accident Report

These more than prove what plaintiff had complained of.

cranad(Exh. 12 & 12-A), signed by plaintiff, exculpated Capt.

Disregard thereof by defendant is condemnable.

Bustamante from any fault. We observed that the Report does

not categorically state that Capt. Bustamante was not at fault.

To bolster the claim that Capt. Bustamante has not suffered

It merely relates in chronological sequence what Capt.

from any kind of sickness which hampered his flying ability,

Bustamante and plaintiff did from the take-off from Manila to

appellant contends that for at least one or more years

the landing in Daet which resulted in an accident. On the

following the accident of January 8, 1951, Capt. Bustamante

contrary, we may infer the negligence of Bustamante from the

continued to fly for defendant company as a pilot, and did so

following portion of the Report, to wit:

with great skill and proficiency, and without any further

accident or mishap, citing tsn. pp. 756-765, January 20, 1965.

. cra . I felt his brakes strong but as we neared the intersection

We have painstakingly perused the records, particularly the

of the NE-SW runway, the brakes were not as strong and I

transcript of stenographic notes cited, but found nothing

glanced at the system pressure which indicated 900 lbs. per sq.

therein to substantiate appellants contention. Instead, We

m.

discovered that the citation covers the testimony of Dr.

Bernardo on the physical condition of Bustamante and nothing

It was during the above precise instance that Capt. Bustamante

about his skills or proficiency to fly nor on the mishaps or

lost his bearing and disposition. Had he maintained the

104

Transportation Law
Choco Notes
pressure on the brakes the plane would not have overshot the

the utmost diligence of very cautious persons, with a due

runway. Verily, Bustamante displayed slow reaction and poor

regard for all the circumstances.

judgment. cranad(CA decision, pp. 8-12).

Art. 1756. In case of death of or injuries to passengers,
This Court is not impressed by, much less can We accept

common carriers are presumed to have been at fault or to have

petitioners invocation to calibrate once again the evidence

acted negligently, unless they prove that they observed

testified to in detail and plucked from the voluminous

extraordinary diligence as prescribed in Articles 1733 and

transcript to support petitioners own conclusion. It is not the

1755.

task of this Court to discharge the functions of a trier of facts

much less to enter into a calibration of the evidence,

The duty to exercise the utmost diligence on the part of

notwithstanding petitioners wail that the judgment of the

common carriers is for the safety of passengers as well as for

respondent court is based entirely on speculations, surmises

the members of the crew or the complement operating the

and conjectures. We are convinced that respondent courts

carrier, the airplane in the case at bar. And this must be so for

judgment is supported by strong, clear and substantial

any omission, lapse or neglect thereof will certainly result to

evidence.:onad

the damage, prejudice, nay injuries and even death to all

aboard the plane, passengers and crew members alike.

Petitioner is a common carrier engaged in the business of

carrying or transporting passengers or goods or both, by land,

Now to the damages. The Court of Appeals affirmed the

water, or air, for compensation, offering their services to the

award of damages made by the trial court, stating that the

public, as defined in Art. 1732, New Civil Code. The law is

damages awarded plaintiff by the lower court are in

clear in requiring a common carrier to exercise the highest

accordance with the facts, law and jurisprudence. The court

degree of care in the discharge of its duty and business of

further observed that defendant-appellant is still fortunate,

carriage and transportation under Arts. 1733, 1755 and 1756

considering that the unearned income was reckoned with only

of the New Civil Code. These Articles provide:

up to 1968 and not up to the present as plaintiff-appellee is

still living. Whatever mathematical error defendant-appellant

Art. 1733. Common carriers, from the nature of their business

could show by abstract argumentation, the same must be

and for reasons of public policy, are bound to observe

compensated by such deficiency of the damages awarded to

extraordinary diligence in the vigilance over the goods and for

plaintiff-appellee.

the safety of the passengers transported by them, according to

all the circumstances of each case.

As awarded by the trial court, private respondent was entitled

to P198,000.00 as unearned income or compensatory

Such extraordinary diligence in the vigilance over the goods is

damages; P50,000.00 for moral damages, P20,000.00 as

further expressed in Articles 1734, and 1745, Nos. 5, 6, and 7,

attorneys fees and P5,000.00 as expenses of litigation, or a

while the extraordinary diligence for the safety of the

total of P273,000.00.

passengers is further set forth in articles 1755 and 1756.

The trial court arrived at the sum of P198,000.00 as unearned
Art. 1755. A common carrier is bound to carry the passenger

income or damages by considering that respondent Samson

safely as far as human care and foresight can provide, using

could have continued to work as airline pilot for fifteen more

105

Transportation Law
Choco Notes
years, he being only 38 years at the time the services were

before the trial court does not fall under any of the cases

terminated by the defendant cranad(PAL) and he would have

enumerated in the law cranad(Art. 2219 of the New Civil

earned P120,000.00 from 1954 to 1963 or a period of ten

Code) for which moral damages are recoverable and that

cranad(10) years at the rate of one thousand per month

although private respondents action gives the appearance that

cranad(P750.00 basic salary plus P300.00 extra pay for extra

it is covered under quasi-delict as provided in Art. 21 of the

flying time and bonuses; and considering further that in 1964

New Civil Code, the definition of quasi-delict in Art. 2176 of

the basic pay of defendants pilot was increased to P12,000.00

the New Civil Code expressly excludes cases where there is a

annually, the plaintiff could have earned from 1964 to 1968

pre-existing contractual relation between the parties, as in the

the sum of P60,000.00 in the form of salaries and another

case under consideration, where an employer-employee

P18,000.00 as bonuses and extra pay for extra flying time at

relationship existed between PAL and private respondent. It is

the same rate of P300 a month, or a grand total of P198,000.00

further argued that private respondents action cannot be

for the entire period. This claim of the plaintiff for loss or

deemed to be covered by Art. 21, inasmuch as there is no

impairment of earning capacity is based on the provision of

evidence on record to show that PAL wilfully cause(d) loss

Article 2205 of the New Civil Code of the Philippines which

or injury to cranad(private respondent) in a manner that is

provides that damages may be recovered for loss or

contrary to morals, good customs or public policy . cra . Nor

impairment of earning capacity in cases of temporary or

can private respondents action be considered analogous to

permanent personal injury. This provision of law has been

either of the foregoing, for the reasons are obvious that it is

construed and interpreted in the case of Aureliano Ropato, et

not. chanroblesvirtualawlibrary(Memorandum of petitioner,

al. vs. La Mallorca General Partnership, 56 O.G., 7812, which

pp. 418-421, Records)

rules that law allows the recovery of damages for loss or

impairment of earning capacity in cases of temporary or

Having affirmed the gross negligence of PAL in allowing

permanent

injury.

Capt. Delfin Bustamante to fly the plane to Daet on January 8,

chanroblesvirtualawlibrary(Decision, CFI, pp. 98-99, Record

1951 whose slow reaction and poor judgment was the cause of

on Appeal)

the crash-landing of the plane which resulted in private

personal

respondent Samson hitting his head against the windshield and

The respondent appellate court modified the above award by

causing him injuries for which reason PAL terminated his

ordering payment of legal interest on the P198,000.00

services and employment as pilot after refusing to provide him

unearned income from the filing of the claim, citing Sec. 8,

with the necessary medical treatment of respondents periodic

Rule 51 of the Rules of Court.

spells, headache and general debility produced from said

injuries, We must necessarily affirm likewise the award of

Petitioner assails the award of the total sum of P198,000.00 as

damages or compensation under the provisions of Art. 1711

unearned income up to 1968 as being tenuous because firstly,

and Art. 1712 of the New Civil Code which provide:

the trial courts finding affirmed by the respondent court is

allegedly based on pure speculation and conjecture and

Art. 1711. Owners of enterprises and other employers are

secondly, the award of P300.00 a month as extra pay for extra

obliged to pay compensation for the death or injuries to their

flying time from 1954 to 1968 is likewise speculative. PAL

laborers, workmen, mechanics or other employees, even

likewise rejects the award of moral damages in the amount of

though the event may have been purely accidental or entirely

P50,000.00 on the ground that private respondents action

due to a fortuitous cause, if the death or personal injury arose

106

Transportation Law
Choco Notes
out of and in the course of the employment. The employer is
also liable for compensation if the employee contracts any

None of the essential facts material to the determination of

illness or disease caused by such employment or as the result

the case have been seriously assailed: the overshooting of

of the nature of the employment. If the mishap was due to the

runway and crash-landing into the mangroves; the hitting of

employees own notorious negligence, or voluntary act, or

plaintiffs head to the front windshield of the plane; the oozing

drunkenness,

for

of blood out of his ears, nose and mouth; the intermittent dizzy

compensation. When the employees lack of due care

spells, headaches and general debility thereafter for which he

contributed to his death or injury, the compensation shall be

was discharged from his employment; the condition of not to

equitably reduced.

attribute the cause of the ailment to the crash-landing imposed

the

employer

shall

not

be

liable

in bad faith for a demanded special medical service abroad;

Art. 1712. If the death or injury is due to the negligence of a

and the resultant brain injury which defendants doctors could

fellow-worker, the latter and the employer shall be solidarily

not understand nor diagnose.

liable for compensation. If a fellow-workers intentional or

malicious act is the only cause of the death or injury, the

xxx

employer shall not be answerable, unless it should be shown

that the latter did not exercise due diligence in the selection or

The act of defendant-appellant in unjustly refusing plaintiff-

supervision of the plaintiffs fellow-worker.

appellees demand for special medical service abroad for the

reason that plaintiff-appellees deteriorating physical condition

The grant of compensatory damages to the private respondent

was not due to the accident violates the provisions of Article

made by the trial court and affirmed by the appellate court by

19 of the Civil Code on human relations to act with justice,

computing his basic salary per annum at P750.00 a month as

give everyone his due, and observe honesty and good faith.

basic salary and P300.00 a month for extra pay for extra flying

chanroblesvirtualawlibrary(CA

time including bonus given in December every year is

Records)

Resolution,

pp.

151-152,

justified. The correct computation however should be P750

plus P300 x 12 months = P12,600 per annum x 10 years =

We reject the theory of petitioner that private respondent is not

P126,000.00 cranad(not P120,000.00 as computed by the court

entitled to moral damages. Under the facts found by the trial

a quo). The further grant of increase in the basic pay of the

court and affirmed by the appellate court and under the law

pilots to P12,000 annually for 1964 to 1968 totalling

and jurisprudence cited and applied, the grant of moral

P60,000.00 and another P18,000.00 as bonuses and extra pay

damages in the amount of P50,000.00 is proper and justified.

for extra flying time at the same rate of P300.00 a month totals
P78,000.00. Adding P126,000.00 cranad(1964 to 1968

The fact that private respondent suffered physical injuries in

compensation) makes a grand total of P204,000.00 cranad(not

the head when the plane crash-landed due to the negligence of

P198,000.00 as originally computed).

Capt. Bustamante is undeniable. The negligence of the latter is

clearly a quasi-delict and therefore Article 2219, cranad(2)

As to the grant of moral damages in the sum of P50,000.00

New Civil Code is applicable, justifying the recovery of moral

We also approve the same. We have noted and considered the

damages.

holding of the appellate court in the matter of bad faith on the

part of PAL, stated hereunder, this wise:

107

Transportation Law
Choco Notes
Even from the standpoint of the petitioner that there is an
employer-employee relationship between it and private

Lastly, the defendant-appellant claims that the legal rate of

respondent arising from the contract of employment, private

interest on the unearned compensation should be computed

respondent is still entitled to moral damages in view of the

from the date of the judgment in the lower court, not from the

finding of bad faith or malice by the appellate court, which

filing of the complaint, citing a case where the issue raised in

finding We hereby affirm, applying the provisions of Art.

the Supreme Court was limited to when the judgment was

2220, New Civil Code which provides that willful injury to

rendered in the lower court or in the appellate court, which

property may be a legal ground for awarding moral damages if

does not mean that it should not be computed from the filing

the court should find that, under the circumstances, such

of the complaint.

damages are justly due. The same rule applies to breaches of

contract where the defendant acted fraudulently or in bad

Articles 1169, 2209 and 2212 of the Civil Code govern when

faith.

interest shall be computed. Thereunder interest begins to

accrue upon demand, extrajudicial or judicial. A complaint is a

The justification in the award of moral damages under Art. 19

judicial demand cranad(Cabarroguis vs. Vicente, 107 Phil.

of the New Civil Code on Human Relations which requires

340). Under Article 2212 of the Civil Code, interest due shall

that every person must, in the exercise of his rights and in the

earn legal interest from the time it is judicially demanded,

performance of his duties, act with justice, give everyone his

although the obligation may be silent upon this point.

due, and observe honesty and good faith, as applied by

chanroblesvirtualawlibrary(CA

respondent court is also well-taken and We hereby give Our

Records).

Resolution,

pp.

153-154,

affirmance thereto.
The correct amount of compensatory damages upon which
With respect to the award of attorneys fees in the sum of

legal interest shall accrue from the filing of the complaint is

P20,000.00 the same is likewise correct. As pointed out in the

P204,000.00 as herein computed and not P198,000.00.

decision of the Court of Appeals, the plaintiff is entitled to

attorneys fees because he was forced to litigate in order to

WHEREFORE, in view of all the foregoing, the judgment of

enforce his valid claim cranad(Ganaban vs. Bayle, 30 SCRA

the appellate court is hereby affirmed with slight modification

365; De la Cruz vs. De la Cruz, 22 SCRA 33; and many

in that the correct amount of compensatory damages is

others); defendant acted in bad faith in refusing plaintiffs

P204,000.00. With costs against petitioner.

valid claim cranad(Filipino Pipe Foundry Corporation vs.

Central Bank, 23 SCRA 1044); and plaintiff was dismissed

SO ORDERED.

and was forced to go to court to vindicate his right

cranad(Nadura vs. Benguet Consolidated, Inc., 5 SCRA 879).

DOH v. Lorenzo Shipping

[G.R. No. 153563. February 07, 2005]

We also agree with the modification made by the appellate

court in ordering payment of legal interest from the date
judicial demand was made by Pilot Samson against PAL with
the filing of the complaint in the lower court. We affirm the
ruling of the respondent court which reads:

NATIONAL

TRUCKING

AND

FORWARDING

CORPORATION, petitioner, vs. LORENZO SHIPPING

CORPORATION, respondent.
DECISION
QUISUMBING, J.:

108

Transportation Law
Choco Notes
of lading, but the latter merely presented certified true copies
For review on certiorari are the Decision[1] dated January 16,

thereof.

2002, of the Court of Appeals, in CA-G.R. CV No. 48349, and

Ismael asked Abdurahman to sign the delivery receipts.

its Resolution,[2] of May 13, 2002, denying the motion for

However, at times when Abdurahman had to attend to other

reconsideration of herein petitioner National Trucking and

business before a delivery was completed, he instructed his

Forwarding Corporation (NTFC).

subordinates to sign the delivery receipts for him.

The impugned decision

Upon completion of each delivery, Rogelio and

affirmed in toto the judgment[3] dated November 14, 1994 of

the Regional Trial Court (RTC) of Manila, Branch 53, in Civil

Notwithstanding the precautions taken, the petitioner allegedly

Case No. 90-52102.

did not receive the subject goods. Thus, in a letter dated

March 11, 1989, petitioner NTFC filed a formal claim for non-

The undisputed facts, as summarized by the appellate court,

delivery of the goods shipped through respondent.

are as follows:
In its letter of April 26, 1989, the respondent explained that
On June 5, 1987, the Republic of the Philippines, through the

the cargo had already been delivered to Abdurahman Jama.

Department of Health (DOH), and the Cooperative for

The petitioner then decided to investigate the loss of the

American Relief Everywhere, Inc. (CARE) signed an

goods. But before the investigation was over, Abdurahman

agreement wherein CARE would acquire from the United

Jama resigned as branch supervisor of petitioner.

States government donations of non-fat dried milk and other

food products from January 1, 1987 to December 31, 1989. In

Noting but disbelieving respondents insistence that the goods

turn, the Philippines would transport and distribute the

were delivered, the government through the DOH, CARE, and

donated commodities to the intended beneficiaries in the

NTFC as plaintiffs filed an action for breach of contract of

country.

carriage, against respondent as defendant, with the RTC of

Manila.

The government entered into a contract of carriage of goods

with herein petitioner National Trucking and Forwarding

After trial, the RTC resolved the case as follows:

Corporation (NTFC). Thus, the latter shipped 4,868 bags of

non-fat dried milk through herein respondent Lorenzo

WHEREFORE, judgment is hereby rendered in favor of the

Shipping Corporation (LSC) from September to December

defendant and against the plaintiffs, dismissing the latters

1988. The consignee named in the bills of lading issued by the

complaint, and ordering the plaintiffs, pursuant to the

respondent was Abdurahman Jama, petitioners branch

defendants counterclaim, to pay, jointly and solidarily, to the

supervisor in Zamboanga City.

defendant, actual damages in the amount of P50,000.00, and

attorneys fees in the amount of P70,000.00, plus the costs of

On reaching the port of Zamboanga City, respondents agent,

suit.

Efren Ruste[4] Shipping Agency, unloaded the 4,868 bags of

non-fat dried milk and delivered the goods to petitioners

SO ORDERED.[5]

warehouse. Before each delivery, Rogelio Rizada and Ismael

Zamora, both delivery checkers of Efren Ruste Shipping

Dissatisfied with the foregoing ruling, herein petitioner

Agency, requested Abdurahman to surrender the original bills

appealed to the Court of Appeals. It faulted the lower court

109

Transportation Law
Choco Notes
for not holding that respondent failed to deliver the cargo, and

INTERNATIONAL RELIEF AGENCIES AND DONOR

that respondent failed to exercise the extraordinary diligence

STATES AND ORGANIZATION.[7]

required of common carriers. Petitioner also assailed the lower

court for denying its claims for actual, moral, and exemplary

The issues for our resolution are: (1) Is respondent presumed

damages, and for awarding actual damages and attorneys fees

at fault or negligent as common carrier for the loss or

to the respondent.[6]

deterioration of the goods? and (2) Are damages and

attorneys fees due respondent?

The Court of Appeals found that the trial court did not commit
any reversible error. It dismissed the appeal, and affirmed the

Anent the first issue, petitioner contends that the respondent is

assailed decision in toto.

presumed negligent and liable for failure to abide by the terms

and conditions of the bills of lading; that Abdurahman Jamas

Undaunted, petitioner now comes to us, assigning the

failure to testify should not be held against petitioner; and that

following errors:

the testimonies of Rogelio Rizada and Ismael Zamora, as

employees of respondents agent, Efren Ruste Shipping

Agency, were biased and could not overturn the legal

presumption of respondents fault or negligence.

THE COURT OF APPEALS GRAVELY ERRED WHEN IT

FAILED TO APPRECIATE AND APPLY THE LEGAL

For its part, the respondent avers that it observed extraordinary

STANDARD OF EXTRAORDINARY DILIGENCE IN THE

diligence in the delivery of the goods. Prior to releasing the

SHIPMENT AND DELIVERY OF GOODS TO THE

goods to Abdurahman, Rogelio and Ismael required the

RESPONDENT AS A COMMON CARRIER, AS WELL AS

surrender of the original bills of lading, and in their absence,

THE ACCOMPANYING LEGAL PRESUMPTION OF

the certified true copies showing that Abdurahman was indeed

FAULT OR NEGLIGENCE ON THE PART OF THE

the consignee of the goods.

COMMON CARRIER, IF THE GOODS ARE LOST,

Abdurahman or his designated subordinates to sign the

DESTROYED OR DETERIORATED, AS REQUIRED

delivery receipts upon completion of each delivery.

In addition, they required

UNDER THE CIVIL CODE.

We rule for respondent.
II
Article 1733[8] of the Civil Code demands that a common
THE COURT OF APPEALS GRAVELY ERRED WHEN IT

carrier observe extraordinary diligence over the goods

SUSTAINED

transported by it.

THE

BASELESS

AND

ARBITRARY

Extraordinary diligence is that extreme

AWARD OF ACTUAL DAMAGES AND ATTORNEYS

measure of care and caution which persons of unusual

FEES INASMUCH AS THE ORIGINAL COMPLAINT

prudence and circumspection use for securing and preserving

WAS FILED IN GOOD FAITH, WITHOUT MALICE AND

their own property or rights.[9]

WITH THE BEST INTENTION OF PROTECTING THE

imposed on common carriers in a contract of carriage of goods

INTEREST AND INTEGRITY OF THE GOVERNMENT

is intended to tilt the scales in favor of the shipper who is at

AND ITS CREDIBILITY AND RELATIONSHIP WITH

the mercy of the common carrier once the goods have been
lodged for shipment.

This exacting standard

Hence, in case of loss of goods in

110

Transportation Law
Choco Notes
transit, the common carrier is presumed under the law to have
been at fault or negligent.[10] However, the presumption of

We also note that some delivery receipts were signed by

fault or negligence, may be overturned by competent evidence

Abdurahmans subordinates and not by Abdurahman himself

showing that the common carrier has observed extraordinary

as consignee. Further, delivery checkers Rogelio and Ismael

diligence over the goods.

testified that Abdurahman was always present at the initial

phase of each delivery, although on the few occasions when

In the instant case, we agree with the court a quo that the

Abdurahman could not stay to witness the complete delivery

respondent adequately proved that it exercised extraordinary

of the shipment, he authorized his subordinates to sign the

diligence. Although the original bills of lading remained with

delivery receipts for him. This, to our mind, is sufficient and

petitioner, respondents agents demanded from Abdurahman

substantial compliance with the requirements.

the certified true copies of the bills of lading. They also asked
the latter and in his absence, his designated subordinates, to

We further note that, strangely, petitioner made no effort to

sign the cargo delivery receipts.

disapprove

Abdurahmans

resignation

until

after

the

investigation and after he was cleared of any responsibility for

This practice, which respondents agents testified to be their

the loss of the goods. With Abdurahman outside of its reach,

standard operating procedure, finds support in Article 353 of

petitioner cannot now pass to respondent what could be

the Code of Commerce:

Abdurahmans negligence, if indeed he were responsible.

ART. 353. . . .

On the second issue, petitioner submits there is no basis for

the award of actual damages and attorneys fees. It maintains

After the contract has been complied with, the bill of lading

that its original complaint for sum of money with damages for

which the carrier has issued shall be returned to him, and by

breach of contract of carriage was not fraudulent, in bad faith,

virtue of the exchange of this title with the thing transported,

nor malicious. Neither was the institution of the action rash

the respective obligations and actions shall be considered

nor precipitate. Petitioner avers the filing of the action was

cancelled, .

intended to protect the integrity and interest of the government

and its relationship and credibility with international relief

In case the consignee, upon receiving the goods, cannot return

agencies and donor states.

the bill of lading subscribed by the carrier, because of its loss

or of any other cause, he must give the latter a receipt for the

On the other hand, respondent maintains that petitioners suit

goods delivered, this receipt producing the same effects as the

was baseless and malicious because instead of going after its

return of the bill of lading. (Emphasis supplied)

absconding employee, petitioner wanted to recoup its losses

from respondent. The trial court and the Court of Appeals

Conformably with the aforecited provision, the surrender of

were justified in granting actual damages and reasonable

the original bill of lading is not a condition precedent for a

attorneys fees to respondent.

common carrier to be discharged of its contractual obligation.

If surrender of the original bill of lading is not possible,

On this point, we agree with petitioner.

acknowledgment of the delivery by signing the delivery

receipt suffices. This is what respondent did.

111

Transportation Law
Choco Notes
The right to litigate should bear no premium. An adverse

DECISION

decision does not ipso facto justify an award of attorneys fees

to the winning party.[11] When, as in the instant case,

NACHURA, J.:

petitioner was compelled to sue to protect the credibility of the

government with international organizations, we are not

Before us is a petition for review on certiorari under Rule 45

inclined to grant attorneys fees. We find no ill motive on

of the Rules of Court seeking the reversal of the Court of

petitioners part, only an erroneous belief in the righteousness

Appeals (CA) Decision1 in CA-G.R. CV No. 503082 which

of its claim.

affirmed in toto the Regional Trial Court (RTC) Decision3

holding petitioner Northwest Airlines, Inc. (Northwest) liable

Moreover, an award of attorneys fees, in the concept of

for breach of contract of carriage.

damages under Article 2208 of the Civil Code,[12] requires

factual and legal justifications. While the law allows some

On March 14, 1989, Philimare Shipping and Seagull Maritime

degree of discretion on the part of the courts in awarding

Corporation (Philimare), as the authorized Philippine agent of

attorneys fees and expenses of litigation, the discretion must

TransOcean Lines (TransOcean), hired respondent Steven

be exercised with great care approximating as closely as

Chiong as Third Engineer of TransOceans vessel M/V Elbia

possible, the instances exemplified by the law.[13] We have

at the San Diego, California Port. Under the service crew

searched but found nothing in petitioners suit that justifies the

agreement, Chiong was guaranteed compensation at a monthly

award of attorneys fees.

salary of US$440.00 and a monthly overtime pay of

US$220.00, or a total of US$7,920.00 for one year.

Respondent failed to show proof of actual pecuniary loss,

hence, no actual damages are due in favor of respondent.[14]

Subsequently, on March 27, 1989, Philimare dispatched a

Letter of Guarantee to CL Hutchins & Co., Inc., TransOceans

WHEREFORE, the petition is PARTIALLY GRANTED. The

agent at the San Diego Port, confirming Chiongs arrival

assailed decision and resolution of the Court of Appeals in

thereat in time to board the M/V Elbia which was set to sail on

CA-G.R. CV No. 48349 dated January 16, 2002 and May 13,

April 1, 1989 (California, United States time). For this

2002 respectively, denying petitioners claim for actual, moral

purpose, Philimare purchased for Chiong a Northwest plane

and exemplary damages are AFFIRMED. The award of actual

ticket for San Diego, California with a departure date of April

damages and attorneys fees to respondent pursuant to the

1, 1989 from Manila. Ten (10) days before his scheduled

latters counterclaim in the trial court is DELETED.

departure, Chiong fetched his entire family from Samar and

brought them to Manila to see him off at the airport.

SO ORDERED.
On April 1, 1989, Chiong arrived at the Manila International
Northwest Airlines v. Chiong
G.R. No. 155550

January 31, 2008

Airport4 (MIA), at about 6:30 a.m., three (3) hours before the
scheduled time of departure. Marilyn Calvo, Philimares
Liaison Officer, met Chiong at the departure gate, and the two

NORTHWEST AIRLINES, INC., petitioner,

vs.
STEVEN P. CHIONG, respondent.

proceeded to the Philippine Coast Guard (PCG) Counter to

present Chiongs seaman service record book for clearance.
Thereafter, Chiongs passport was duly stamped, after

112

Transportation Law
Choco Notes
complying with government requirements for departing

Northwest demurred. Thus, on May 24, 1989, Chiong filed a

seafarers.

Complaint for breach of contract of carriage before the RTC.

Northwest filed a Motion to Dismiss9 the complaint citing the

Calvo remained at the PCG Counter while Chiong proceeded

trial courts lack of jurisdiction over the subject matter of the

to queue at the Northwest check-in counter. When it was

case, but the trial court denied the same.10

Chiongs turn, the Northwest personnel5 informed him that his

name did not appear in the computers list of confirmed

In its Answer,11 Northwest contradicted the claim that it

departing passengers. Chiong was then directed to speak to a

breached its contract of carriage with Chiong, reiterating that

"man in barong" standing outside Northwests counters from

Chiong had no cause of action against it because per its

whom Chiong could allegedly obtain a boarding pass.

records, Chiong was a "no-show" passenger for Northwest

Posthaste, Chiong approached the "man in barong" who

Flight No. 24 on April 1, 1989.

demanded US$100.00 in exchange therefor. Without the said

amount, and anxious to board the plane, Chiong queued a

In the RTCs Pre-trial Order12 based on the parties respective

number of times at Northwests Check-in Counter and

Pre-trial Briefs,13 the triable issues were limited to the

presented his ticket. However, the Northwest personnel at the

following:

counter told him to simply wait and that he was being a pest.
(a) Whether [Chiong] was bumped-off by [Northwest] from
Frustrated, Chiong went to Calvo at the PCG counter and

Flight NW 24 or whether [Chiong] "no-showed" for said

inquired if she had money so he could obtain a boarding pass

flight.

from the "man in barong." Calvo, who already saw that

something was amiss, insisted that Chiongs plane ticket was

(b) If defendant is found guilty of having breached its contract

confirmed and as such, he could check-in smoothly and board

of carriage with plaintiff, what damages are awardable to

the plane without shelling out US$100.00 for a boarding pass.

plaintiff and how much.

Ultimately, Chiong was not allowed to board Northwest Flight

No. 24 bound for San Diego that day and, consequently, was

In the course of proceedings, Northwest, on September 14,

unable to work at the M/V Elbia by April 1, 1989 (California,

1990, filed a separate criminal complaint for False

U.S.A. time).

Testimony14 against Chiong based on the latters testimony

that he did not leave the Philippines after April 1, 1989

It appears that Chiongs name was crossed out and substituted

contrary to the notations in his seaman service record book

with "W. Costine" in Northwests Air Passenger Manifest.6

that he had left the country on April 17, 1989, and returned on
October 5 of the same year. Chiong did not participate in the

In a letter dated April 3, 1989, Chiongs counsel demanded as

preliminary investigation; thus, on December 14, 1990, the

recompense: (1) the amount equivalent to Chiongs salary

City Prosecutor of Manila filed an Information against Chiong

under the latters Crew Agreement7 with TransOcean; (2)

with the RTC Manila, Branch 54, docketed as Criminal Case

P15,000.00 for Chiongs expenses in fetching and bringing his

No. 90-89722.

family from Samar to Manila; (3) P500,000.00 as moral

damages; and (4) P500,000.00 as legal fees.8

In the meantime, after a flurry of motions filed by Northwest

in the civil case were denied by the RTC, Northwest filed a

113

Transportation Law
Choco Notes
Petition for Certiorari before the CA imputing grave abuse of

4) P200,000.00, Philippine Currency, representing exemplary

discretion to the RTC.15 Correlatively, Northwest moved for a

or punitive damages due to plaintiff from defendant, owing to

suspension of the proceedings before the trial court. However,

the latters breach of contract of carriage with malice and

both the Petition for Certiorari and Motion for Suspension of

fraud; and

the proceedings were denied by the CA and RTC,

5) P200,000.00, Philippine Currency, for and as attorneys

respectively.16

fees, plus costs of suit.

After

trial,

the

RTC

rendered

Decision

finding

preponderance of evidence in favor of Chiong, and holding

SO ORDERED.

Northwest liable for breach of contract of carriage. The RTC

ruled that the evidence adduced by the parties supported the

On appeal, the CA affirmed in toto the ruling of the RTC.

conclusion that Chiong was deliberately prevented from

Identical to the RTCs findings, those of the CA were as

checking-in and his boarding pass unjustifiably withheld to

follows: on April 1, 1989, Chiong was at the MIA three hours

accommodate an American passenger by the name of W.

before the 10:15 a.m. departure time for Northwest Flight No.

Costine.

24. Contrary to Northwests claim that Chiong was a "noshow" passenger, the CA likewise concluded, as the RTC did,

The dispositive portion of the RTC decision reads:

that Chiong was not allowed to check-in and was not issued a
boarding pass at the Northwest check-in counter to

WHEREFORE, premises considered, in consideration of all

accommodate a certain W. Costine. As for Northwests

the foregoing, judgment is hereby rendered, ordering the

defense that Chiong had left the country after April 1, 1989

defendant liable to plaintiff in damages by reason of the

and worked for M/V Elbia, the CA ruled that Northwests

latters inability to take defendants NW Flight No. 24 on

failure to raise this defense in its Answer or Motion to Dismiss

April 1, 1989, for the following amounts:

is equivalent to a waiver thereof. The CA declared that, in any

event, Northwest failed to present any evidence to prove that

1) U.S.$8,447.0017 or its peso equivalent at the time of

Chiong had worked under the original crew agreement.

finality of this judgment with legal interests until fully paid,

representing compensatory damages due to plaintiffs loss of

Hence, this recourse.

income for one (1) year as a direct result of defendants breach

of contract of carriage;

Northwest ascribes grievous errors to the CA when the

appellate court ruled that: (1) Northwest breached the contract

2) P15,000.00, Philippine Currency, representing plaintiffs

of carriage with Chiong who was present at the MIA on April

actual incurred damages as a consequence of his failure to

1, 1989 to board Northwests Flight No. 24; (2) As a result of

avail of defendants Flight No. 24 on April 1, 1989;

the breach, Northwest is liable to Chiong for compensatory,

actual, moral and exemplary damages, attorneys fees, and

3) P200,000.00, Philippine Currency, representing moral

costs of suit; and (3) Northwests Exhibits "2" and "3," the

damages suffered and sustained by the plaintiff as a result of

Flight Manifest and the Passenger Name Record, respectively,

defendants breach of contract of carriage;

were hearsay evidence and ought to be excluded from the

records.

114

Transportation Law
Choco Notes
of their testimony, their interest or want of interest, and also
The petition must fail.

their personal credibility so far as the same may legitimately

appear upon the trial. The court may also consider the number

We are in complete accord with the common ruling of the

of witnesses, though preponderance is not necessarily with the

lower courts that Northwest breached the contract of carriage

greater number.

with Chiong, and as such, he is entitled to compensatory,

actual, moral and exemplary damages, attorneys fees and

In this regard, the Court notes that, in addition to his

costs of suit.

testimony, Chiongs evidence consisted of a Northwest ticket

for the April 1, 1989 Flight No. 24, Chiongs passport and

Northwest contends that Chiong, as a "no-show" passenger on

seaman service record book duly stamped at the PCG counter,

April 1, 1989, already defaulted in his obligation to abide by

and the testimonies of Calvo, Florencio Gomez,19 and

the terms and conditions of the contract of carriage;18 and

Philippine Overseas Employment and Administration (POEA)

thus, Northwest could not have been in breach of its reciprocal

personnel who all identified the signature and stamp of the

obligation to transport Chiong. In sum, Northwest insists that

PCG on Chiongs passport.

Chiongs testimony is a complete fabrication, supposedly

demonstrated by the following: (1) Chiongs seaman service

We have scoured the records, and found no reason to depart

record book reflects that he left the Philippines after April 1,

from the well-settled rule that factual findings of the lower

1989, specifically on April 17, 1989, to board the M/V Elbia,

courts deserve the utmost respect and are not to be disturbed

and was discharged therefrom upon his personal request; (2)

on appeal.20 Indeed, Chiongs Northwest ticket for Flight No.

the Information filed against Chiong for False Testimony; and

24 on April 1, 1989, coupled with the PCG stamps on his

(3) the Flight Manifest and the Passenger Name Record both

passport showing the same date, is direct evidence that he was

indicate that he was a "no-show" passenger.

present at MIA on said date as he intended to fly to the United

States on board that flight. As testified to by POEA personnel

We are not convinced.

and officers, the PCG stamp indicates that a departing seaman

has passed through the PCG counter at the airport, surrendered

The records reveal that Chiong, as plaintiff in the trial court,

the exit pass, and complied with government requirements for

satisfied the burden of proof required in civil cases, i.e.,

departing seafarers. Calvo, Philimares liaison officer tasked

preponderance of evidence. Section 1 of Rule 133 provides:

to assist Chiong at the airport, corroborated Chiongs

testimony on the latters presence at the MIA and his check-in

SECTION 1. Preponderance of evidence, how determined.

at the PCG counter without a hitch. Calvo further testified that

In civil cases, the party having the burden of proof must

she purposely stayed at the PCG counter to confirm that

establish his case by a preponderance of evidence. In

Chiong was able to board the plane, as it was part of her duties

determining where the preponderance or superior weight of

as Philimares liaison officer, to confirm with their principal,

evidence on the issues involved lies, the court may consider all

TransOcean in this case, that the seafarer had left the country

the facts and circumstance of the case, the witnesses manner

and commenced travel to the designated port where the vessel

of testifying, their intelligence, their means and opportunity of

is docked.21 Thus, she had observed that Chiong was unable

knowing the facts to which they are testifying, the nature of

to check-in and board Northwest Flight No. 24, and was

the facts to which they testify, the probability or improbability

actually being given the run-around by Northwest personnel.

115

Transportation Law
Choco Notes
It is true that Chiongs passport and seaman service record
It is of no moment that Chiongs witnesses who all

book indicate that he had left the country on April 17, 1989

corroborated his testimony on his presence at the airport on,

and come back on October 5 of the same year. However, this

and flight details for, April 1, 1989, and that he was

evidence fails to debunk the facts established to have

subsequently bumped-off are, likewise, employees of

transpired on April 1, 1989, more particularly, Chiongs

Philimare which may have an interest in the outcome of this

presence at the airport and his subsequent bumping-off by

case. We intoned in Philippine Airlines, Inc. v. Court of

Northwest despite a confirmed ticket. Although initially, the

Appeals,22 thus:

burden of proof was with Chiong to prove that there was a

breach of contract of carriage, the burden of evidence shifted

(T)his Court has repeatedly held that a witness relationship to

to Northwest when Chiong adduced sufficient evidence to

the victim does not automatically affect the veracity of his or

prove the facts he had alleged. At that point, Northwest had

her testimony. While this principle is often applied in criminal

the burden of going forward23 to controvert Chiongs prima

cases, we deem that the same principle may apply in this case,

facie case. As the party asserting that Chiong was a "no-show"

albeit civil in nature. If a witness relationship with a party

passenger, Northwest then had the burden of evidence to

does not ipso facto render him a biased witness in criminal

establish its claim. Regrettably, Northwest failed to do so.

cases where the quantum of evidence required is proof beyond

reasonable doubt, there is no reason why the same principle

Furthermore, it has not escaped our attention that Northwest,

should not apply in civil cases where the quantum of evidence

despite the declaration in its Pre-Trial Brief, did not present as

is only preponderance of evidence.

a witness their check-in agent on that contentious date.24 This

omission was detrimental to Northwests case considering its

The foregoing documentary and testimonial evidence, taken

claim that Chiong did not check-in at their counters on said

together, amply establish the fact that Chiong was present at

date. It simply insisted that Chiong was a "no-show"

MIA on April 1, 1989, passed through the PCG counter

passenger and totally relied on the Flight Manifest, which,

without delay, proceeded to the Northwest check-in counter,

curiously, showed a horizontal line drawn across Chiongs

but when he presented his confirmed ticket thereat, he was not

name, and the name W. Costine written above it. The reason

issued a boarding pass, and ultimately barred from boarding

for the insertion, or for Chiongs allegedly being a "no-show"

Northwest Flight No. 24 on that day.

passenger, is not even recorded on the remarks column of the

Flight Manifest beside the Passenger Name column. Clearly,

In stark contrast is Northwests bare-faced claim that Chiong

the categorical declaration of Chiong and his other witnesses,

was a "no-show" passenger, and was scheduled to leave the

coupled with the PCG stamp on his passport and seaman

country only on April 17, 1989. As previously discussed, the

service record book, prevails over Northwests evidence,

records belie this assertion. It is also noteworthy that

particularly the Flight Manifest. Thus, we are perplexed why,

Northwest did not present any evidence to support its belated

despite the evidence presented by Chiong, and the RTCs

defense that Chiong departed from the Philippines on April

specific order to Northwests counsel to present the person(s)

17, 1989 to work as Third Engineer on board M/V Elbia under

who prepared the Flight Manifest and Passenger Name Record

the original crew agreement.

for a proper identification of, and to testify on, those

documents, Northwest still insisted on presenting Gonofredo

116

Transportation Law
Choco Notes
Mendoza and Amelia Meris who were, admittedly, not

PCG counter without delay, then reached and was at the

competent to testify thereon.25

Northwest check-in counters on time for the scheduled flight.

In its desperate attempt to evade liability for the breach,

Essentially, Northwest argues that Chiong was a "no-show"

Northwest claims that Chiong worked at M/V Elbia when he

passenger on two (2) separate occasions, March 28 and April

left the Philippines on April 17, 1989. The argument was not

1, 1989 because he was actually scheduled to depart for the

only belatedly raised, as we have repeatedly stated, but is off-

US on April 17, 1989 as ostensibly evidenced by his passport

tangent.

and seaman record book. Had this new matter alleged been
proven by Northwest, it would prevent or bar recovery by

On this point, we uphold the RTCs and CAs ruling that the

Chiong. Unfortunately, Northwest was unsuccessful in

failure of Northwest to raise the foregoing defense in its

proving not only the "no-show" claim, but that Chiong,

Motion to Dismiss or Answer constituted a waiver thereof.

likewise, worked under the original crew agreement.

Section 1, Rule 9 of the Rules of Court provides:

Northwest likewise insists now that there is a pending
SECTION 1. Defenses and objections not pleaded.

criminal case for False Testimony against Chiong that a

Defenses and objections not pleaded either in a motion to

falsified part of Chiongs testimony would indicate the falsity

dismiss or in the answer are deemed waived. However, when

of his entire testimony, consistent with the "falsus in uno,

it appears from the pleadings or the evidence on record that

falsus in omnibus"26 doctrine. Following Northwests flawed

the court has no jurisdiction over the subject matter, that there

logic, this would invariably lead to the conclusion that the

is another action pending between the same parties for the

corroborating testimonies of Chiongs witnesses are also false.

same cause, or that the action is barred by a prior judgment or

by statute of limitations, the court shall dismiss the claim.

The legal maxim falsus in uno, falsus in omnibus, cited by

(Emphasis supplied)

Northwest, is not a positive rule of law and is not strictly

applied in this jurisdiction. Before this maxim can be applied,

Similarly, Section 8, Rule 15 of the Rules of Court reads:

the witness must be shown to have willfully falsified the truth

on one or more material points. The principle presupposes the

SECTION 8. Omnibus Motion. Subject to the provisions of

existence of a positive testimony on a material point contrary

section 1 of Rule 9, a motion attacking a pleading, order,

to subsequent declarations in the testimony. However, the

judgment, or proceeding shall include all objections then

records show that Chiongs testimony did not contain

available, and all objections not so included shall be deemed

inconsistencies on what occurred on April 1, 1989. Yet,

waived.

Northwest never even attempted to explain or impugn the

evidence that Chiong passed through the PCG counter on

Moreover, Northwest paints a scenario that ostensibly

April 1, 1989, and that his passport was accordingly stamped,

transpired on a different date. Even if Chiong left the

obviously for purposes of his departure on that day.

Philippines on April 17, 1989, it would not necessarily prove

that Chiong was a "no-show" on April 1, 1989. Neither does it

As to the criminal case, it is well to note that there is no final

negate the already established fact that Chiong had a

determination, as yet, of Chiongs guilt by the courts. But even

confirmed ticket for April 1, 1989, and first passed through the

117

Transportation Law
Choco Notes
if Chiong is adjudged guilty, it will have little effect on the
outcome of this case. As we held in Leyson v. Lawa:27

From the foregoing disquisition, the ineluctable conclusion is

that Northwest breached its contract of carriage with Chiong.

The testimony of a witness must be considered in its entirety

instead of in truncated parts. The technique in deciphering a

Time and again, we have declared that a contract of carriage,

testimony is not to consider only its isolated parts and anchor a

in this case, air transport, is primarily intended to serve the

conclusion on the basis of said parts. In ascertaining the facts

traveling public and thus, imbued with public interest. The law

established by a witness, everything stated by him on direct,

governing common carriers consequently imposes an exacting

cross and redirect examinations must be calibrated and

standard of conduct. As the aggrieved party, Chiong only had

considered.

to prove the existence of the contract and the fact of its nonperformance by Northwest, as carrier, in order to be awarded

It must be stressed that facts imperfectly or erroneously stated

compensatory and actual damages.

in answer to one question may be supplied or explained as

qualified by his answer to other question. The principle falsus

We reiterate that Northwest failed to prove its claim that

in uno, falsus in omnibus is not strictly applied in this

Chiong worked on M/V Elbia from April 17 to October 5,

jurisdiction. The doctrine deals only with the weight of

1989 under the original crew agreement. Accordingly, we

evidence and is not a positive rule of law, and the same is not

affirm the lower courts finding on Chiongs entitlement to

an inflexible one of universal application. The testimony of a

actual and compensatory damages.

witness can be believed as to some facts and disbelieved as to

others:

We, likewise, uphold the findings of both courts on

Northwests liability for moral and exemplary damages, and
attorneys fees.

xxxx

Professor

Wigmore

gives

the

following

enlightening

commentary:

Under Article 2220 of the Civil Code of the Philippines, an

award of moral damages, in breaches of contract, is in order
upon a showing that the defendant acted fraudulently or in bad

It may be said, once for all, that the maxim is in itself

faith. Bad faith does not simply connote bad judgment or

worthless first, in point of validity, because in one form it

negligence.28 It imports a dishonest purpose or some moral

merely contains in loose fashion a kernel of truth which no

obliquity and conscious doing of a wrong.29 It means breach

one needs to be told, and in the others, it is absolutely false as

of a known duty through some motive, interest or ill will that

a maxim of life; and secondly, in point of utility, because it

partakes of the nature of fraud.30 Bad faith is in essence a

merely tells the jury what they may do in any event, not what

question of intention.31

they must do or must not do, and therefore it is a superfluous

form of words. It is also in practice pernicious, first, because

In the case at bench, the courts carefully examined the

there is frequently a misunderstanding of its proper force, and

evidence as to the conduct and outward acts of Northwest

secondly, because it has become in the hands of many counsel

indicative of its inward motive. It is borne out by the records

a mere instrument for obtaining new trials upon points wholly

that Chiong was given the run-around at the Northwest check-

unimportant in themselves.

in counter, instructed to deal with a "man in barong" to obtain

118

Transportation Law
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a boarding pass, and eventually barred from boarding

entries in his professional capacity or in the performance of a

Northwest Flight No. 24 to accommodate an American, W.

duty and in the ordinary or regular course of business or duty".

Costine, whose name was merely inserted in the Flight

[Rule 130, Section 43, Revised Rules of Court]

Manifest, and did not even personally check-in at the

counter.32

Otherwise stated, in order to be admissible as entries in the

course of business, it is necessary that: (a) the person who

Under the foregoing circumstances, the award of exemplary

made the entry must be dead or unable to testify; (b) the

damages is also correct given the evidence that Northwest

entries were made at or near the time of the transactions to

acted in an oppressive manner towards Chiong.33

which they refer; (c) the entrant was in a position to know the
facts stated in the entries; (d) the entries were made in his

As for the award of attorneys fees, while we recognize that it

professional capacity or in the performance of a duty; and (e)

is sound policy not to set a premium on the right to litigate,34

the entries were made in the ordinary or regular course of

we sustain the lower courts award thereof.

business or duty.

Attorneys fees may be awarded when a party is compelled to

Tested by these requirements, we find the manifest and

litigate or incur expenses to protect his interest,35 or where the

passenger name record to be mere hearsay evidence. While

defendant acted in gross and evident bad faith in refusing to

there is no necessity to bring into court all the employees who

satisfy the plaintiffs plainly valid, just and demandable

individually made the entries, it is sufficient that the person

claim.36 In the case at bench, Northwest deliberately breached

who supervised them while they were making the entries

its contract of carriage with Chiong and then repeatedly

testify that the account was prepared under his supervision and

refused to satisfy Chiongs valid, just and demandable claim.

that the entries were regularly entered in the ordinary course

This unjustified refusal constrained Chiong to not only lose

of business. In the case at bench, while MENDOZA was the

income under the crew agreement, but to further incur

supervisor on-duty on April 1, 1989, he has no personal

expenses and exert effort for almost two (2) decades in order

knowledge of the entries in the manifest since he did not

to protect his interests and vindicate his right. Therefore, this

supervise the preparation thereof. More importantly, no

Court deems it just and equitable to grant Chiong P200,000.00

evidence was presented to prove that the employee who made

as attorneys fees. The award is reasonable in view of the time

the entries was dead nor did the defendant-appellant set forth

it has taken for this case to be resolved.37

the circumstances that would show the employees inability to

testify.38

Finally, the issue of the exclusion of Northwests Exhibits "2"

and "3" need not detain us long. Suffice it to state that the

WHEREFORE, premises considered, the petition is hereby

RTC and CA correctly excluded these documents as hearsay

DENIED. The ruling of the Court of Appeals in CA-G.R. CV

evidence. We quote with favor the CAs holding thereon, thus:

No. 50308 is hereby AFFIRMED. Costs against the petitioner.

As a rule, "entries made at, or near the time of the transactions

SO ORDERED.

to which they refer, by a person deceased, or unable to testify,

who was in a position to know the facts therein stated, may be
received as prima facie evidence, if such person made the

Aboitiz v. ICNA
ABOITIZ SHIPPING

G.R. No. 168402

CORPORATION,

119

Transportation Law
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Petitioner,

Present:

The Facts

YNARES-

Culled from the records, the facts are as follows:

SANTIAGO, J.,
Chairperson,
-

versus

On June 20, 1993, MSAS Cargo International Limited

AUSTRIA-

MARTINEZ,

and/or Associated and/or Subsidiary Companies (MSAS)

procured a marine insurance policy from respondent ICNA

CHICO-

UK Limited of London.

NAZARIO,

The insurance was for a

transshipment of certain wooden work tools and workbenches

NACHURA, and

purchased for the consignee Science Teaching Improvement

REYES, JJ.

Project (STIP), Ecotech Center, Sudlon Lahug, Cebu City,

Philippines.[3]

INSURANCE COMPANY OF

Promulgated:

ICNA issued an all-risk open marine

policy,[4] stating:

NORTH AMERICA,
Respondent.

August 6, 2008

This Company, in consideration of a premium as agreed and

subject to the terms and conditions printed hereon, does insure

x------------------------------------------

for MSAS Cargo International Limited &/or Associated &/or

--------x

Subsidiary Companies on behalf of the title holder: Loss, if

any, payable to the Assured or order.[5]

DECISION
The cargo, packed inside one container van, was
shipped freight prepaid from Hamburg, Germany on board
REYES, R.T., J.:

M/S Katsuragi.

A clean bill of lading[6] was issued by

Hapag-Lloyd which stated the consignee to be STIP, Ecotech

Center, Sudlon Lahug, Cebu City.
THE RIGHT of subrogation attaches upon payment by
the insurer of the insurance claims by the assured.

As

The container van was then off-loaded at Singapore and

subrogee, the insurer steps into the shoes of the assured and

transshipped on board M/S Vigour Singapore. On July 18,

may exercise only those rights that the assured may have

1993, the ship arrived and docked at the Manila International

against the wrongdoer who caused the damage.

Container Port where the container van was again off-loaded.

On July 26, 1993, the cargo was received by petitioner Aboitiz

Before Us is a petition for review on certiorari of the

Shipping Corporation (Aboitiz) through its duly authorized

Decision[1] of the Court of Appeals (CA) which reversed the

booking representative, Aboitiz Transport System. The bill of

Decision[2] of the Regional Trial Court (RTC).

lading[7] issued by Aboitiz contained the notation grounded

The CA

ordered petitioner Aboitiz Shipping Corporation to pay the

outside warehouse.

sum of P280,176.92 plus interest and attorneys fees in favor

of respondent Insurance Company of North America (ICNA).

120

Transportation Law
Choco Notes
The container van was stripped and transferred to

In a letter dated August 15, 1993, Willig informed

another crate/container van without any notation on the

Aboitiz of the damage noticed upon opening of the cargo.[12]

condition of the cargo on the Stuffing/Stripping Report.[8] On

The letter stated that the crate was broken at its bottom part

August 1, 1993, the container van was loaded on board

such that the contents were exposed. The work tools and

petitioners vessel, MV Super Concarrier I. The vessel left

workbenches were found to have been completely soaked in

Manila en route to Cebu City on August 2, 1993.

water with most of the packing cartons already disintegrating.

The crate was properly sealed off from the inside with

On August 3, 1993, the shipment arrived in Cebu City

tarpaper sheets. On the outside, galvanized metal bands were

and discharged onto a receiving apron of the Cebu

nailed onto all the edges. The letter concluded that apparently,

International Port. It was then brought to the Cebu Bonded

the damage was caused by water entering through the broken

Warehousing Corporation pending clearance from the

parts of the crate.

Customs authorities. In the Stripping Report[9] dated August

5, 1993, petitioners checker noted that the crates were slightly
broken or cracked at the bottom.

The consignee contacted the Philippine office of ICNA

for insurance claims. On August 21, 1993, the Claimsmen
Adjustment

On August 11, 1993, the cargo was withdrawn by the

representative

of

the

consignee,

Science

Teaching

Improvement Project (STIP) and delivered to Don Bosco

Corporation

(CAC)

conducted

an

ocular

inspection and survey of the damage. CAC reported to ICNA

that the goods sustained water damage, molds, and corrosion
which were discovered upon delivery to consignee.[13]

Technical High School, Punta Princesa, Cebu City. It was

received by Mr. Bernhard Willig. On August 13, 1993, Mayo

On September 21, 1993, the consignee filed a formal

B. Perez, then Claims Head of petitioner, received a telephone

claim[14] with Aboitiz in the amount of P276,540.00 for the

call from Willig informing him that the cargo sustained water

damaged condition of the following goods:

damage. Perez, upon receiving the call, immediately went to

the bonded warehouse and checked the condition of the

ten (10) wooden workbenches

container and other cargoes stuffed in the same container. He

three (3) carbide-tipped saw blades

found that the container van and other cargoes stuffed there

one (1) set of ball-bearing guides

were completely dry and showed no sign of wetness.[10]

one (1) set of overarm router bits

twenty (20) rolls of sandpaper for stroke sander

Perez found that except for the bottom of the crate

which was slightly broken, the crate itself appeared to be
completely dry and had no water
marks. But he confirmed that the tools which were stored

In a Supplemental Report dated October 20, 1993,[15]

inside the crate were already corroded. He further explained

CAC reported to ICNA that based on official weather report

that the grounded outside warehouse notation in the bill of

from

lading referred only to the container van bearing the

Astronomical Services Administration, it would appear that

cargo.[11]

heavy rains on July 28 and 29, 1993 caused water damage to

the

Philippine

the shipment.

Atmospheric,

Geophysical

and

CAC noted that the shipment was placed

outside the warehouse of Pier No. 4, North Harbor, Manila

121

Transportation Law
Choco Notes
when it was delivered on July 26, 1993. The shipment was

complaint

is

hereby

DISMISSED.

The

defendants

placed outside the warehouse as can be gleaned from the bill

counterclaims are, likewise, DISMISSED for lack of

of lading issued by Aboitiz which contained the notation

basis.[18]

grounded outside warehouse. It was only on July 31, 1993

when the shipment was stuffed inside another container van

The RTC ruled that ICNA failed to prove that it is the real

for shipment to Cebu.

party-in-interest to pursue the claim against Aboitiz. The trial

court noted that Marine Policy No. 87GB 4475 was issued by

Aboitiz refused to settle the claim. On October 4, 1993,

ICNA paid the amount of P280,176.92 to consignee.

ICNA UK Limited with address at Cigna House, 8 Lime

Street, London EC3M 7NA. However, complainant ICNA

subrogation receipt was duly signed by Willig. ICNA formally

Phils. did not present any evidence to show that ICNA UK is

advised Aboitiz of the claim and subrogation receipt executed

its predecessor-in-interest, or that ICNA UK assigned the

in its favor.

insurance policy to ICNA Phils.

Despite follow-ups, however, no reply was

received from Aboitiz.

Moreover, ICNA Phils.

claim that it had been subrogated to the rights of the consignee

must fail because the subrogation receipt had no probative

RTC Disposition

value for being hearsay evidence. The RTC reasoned:

ICNA filed a civil complaint against Aboitiz for

While it is clear that Marine Policy No. 87GB 4475 was

collection of actual damages in the sum of P280,176.92, plus

issued by Insurance Company of North America (U.K.)

interest and attorneys fees.[16]

ICNA alleged that the

Limited (ICNA UK) with address at Cigna House, 8 Lime

damage sustained by the shipment was exclusively and solely

Street, London EC3M 7NA, no evidence has been adduced

brought about by the fault and negligence of Aboitiz when the

which would show that ICNA UK is the same as or the

shipment was left grounded outside its warehouse prior to

predecessor-in-interest of plaintiff Insurance Company of

delivery.

North America ICNA with office address at Cigna-Monarch

Bldg., dela Rosa cor. Herrera Sts., Legaspi Village, Makati,

Aboitiz disavowed any liability and asserted that the

Metro Manila or that ICNA UK assigned the Marine Policy to

claim had no factual and legal bases. It countered that the

ICNA. Second, the assured in the Marine Policy appears to be

complaint stated no cause of action, plaintiff ICNA had no

MSAS Cargo International Limited &/or Associated &/or

personality to institute the suit, the cause of action was barred,

Subsidiary Companies.

and the suit was premature there being no claim made upon

Francisco, claims that the signature below the name MSAS

Aboitiz.

Cargo International is an endorsement of the marine policy in

Plaintiffs witness, Francisco B.

favor of Science Teaching Improvement Project. Plaintiffs

On November 14, 2003, the RTC rendered judgment

witness, however, failed to identify whose signature it was and

against ICNA. The dispositive portion of the decision[17]

plaintiff did not present on the witness stand or took (sic) the

states:

deposition of the person who made that signature. Hence, the

claim that there was an endorsement of the marine policy has
WHEREFORE, premises considered, the court holds

no probative value as it is hearsay.

that plaintiff is not entitled to the relief claimed in the

complaint for being baseless and without merit.

The

122

Transportation Law
Choco Notes
Plaintiff, further, claims that it has been subrogated to the

On the other hand, Aboitiz reiterated that ICNA lacked

rights and interest of Science Teaching Improvement Project

a cause of action. It argued that the formal claim was not filed

as shown by the Subrogation Form (Exhibit K) allegedly

within the period required under Article 366 of the Code of

signed by a representative of Science Teaching Improvement

Commerce; that ICNA had no right of subrogation because the

Project. Such representative, however, was not presented on

subrogation receipt should have been signed by MSAS, the

the witness stand.

assured in the open policy, and not Willig, who is merely the

Hence, the Subrogation Form is self-

serving and has no probative value.[19] (Emphasis supplied)

representative of the consignee.

The trial court also found that ICNA failed to produce

evidence that it was a foreign corporation duly licensed to do
business in the Philippines. Thus, it lacked the capacity to sue

On March 29, 2005, the CA reversed and set aside the

RTC ruling, disposing as follows:

before Philippine Courts, to wit:

WHEREFORE, premises considered, the present appeal
Prescinding from the foregoing, plaintiff alleged in its

is hereby GRANTED. The appealed decision of the Regional

complaint that it is a foreign insurance company duly

Trial Court of Makati City in Civil Case No. 94-1590 is

authorized to do business in the Philippines. This allegation

hereby REVERSED and SET ASIDE.

was, however, denied by the defendant. In fact, in the Pre-

hereby rendered ordering defendant-appellee Aboitiz Shipping

Trial Order of 12 March 1996, one of the issues defined by the

Corporation to pay the plaintiff-appellant Insurance Company

court is whether or not the plaintiff has legal capacity to sue

of North America the sum of P280,176.92 with interest

and be sued. Under Philippine law, the condition is that a

thereon at the legal rate from the date of the institution of this

foreign insurance company must obtain licenses/authority to

case until fully paid, and attorneys fees in the sum of

do business in the Philippines. These licenses/authority are

P50,000, plus the costs of suit.[21]

A new judgment is

obtained from the Securities and Exchange Commission, the

Board of Investments and the Insurance Commission. If it
fails

to

obtain

these

licenses/authority,

such

foreign

The CA opined that the right of subrogation accrues

simply upon payment by the insurance company of the

corporation doing business in the Philippines cannot sue

insurance claim.

before Philippine courts.

reimbursement from Aboitiz, even assuming that it is an

Mentholatum Co., Inc. v.

Mangaliman, 72 Phil. 524. (Emphasis supplied)

CA Disposition

As subrogee, ICNA is entitled to

unlicensed foreign corporation. The CA ruled:

At any rate, We find the ground invoked for the dismissal

of the complaint as legally untenable. Even assuming

ICNA appealed to the CA. It contended that the trial

arguendo that the plaintiff-insurer in this case is an unlicensed

court failed to consider that its cause of action is anchored on

foreign corporation, such circumstance will not bar it from

the right of subrogation under Article 2207 of the Civil Code.

claiming reimbursement from the defendant carrier by virtue

ICNA said it is one and the same as the ICNA UK Limited as

of subrogation under the contract of insurance and as

made known in the dorsal portion of the Open Policy.[20]

recognized by Philippine courts. x x x

xxxx

123

Transportation Law
Choco Notes
Plaintiff insurer, whether the foreign company or its duly

(3)

THE HONORABLE COURT OF APPEALS

authorized Agent/Representative in the country, as subrogee

COMMITTED A REVERSIBLE ERROR IN RULING THAT

of the claim of the insured under the subject marine policy, is

THERE WAS

therefore the real party in interest to bring this suit and recover

INSURANCE POLICY FROM THE ORIGINAL ASSURED

the full amount of loss of the subject cargo shipped by it from

MSAS CARGO INTERNATIONAL LIMITED (MSAS) IN

Manila to the consignee in Cebu City. x x x[22]

FAVOR OF THE CONSIGNEE STIP, AND THAT THE

PROPER INDORSEMENT OF THE

SUBROGATION RECEIPT ISSUED BY STIP IN FAVOR

The CA ruled that the presumption that the carrier was

OF ICNA IS VALID NOTWITHSTANDING THE FACT

at fault or that it acted negligently was not overcome by any

THAT IT HAS NO PROBATIVE VALUE AND IS

countervailing evidence.

MERELY

Hence, the trial court erred in

HEARSAY

AND

SELF-SERVING

dismissing the complaint and in not finding that based on the

DOCUMENT FOR FAILURE OF ICNA TO PRESENT A

evidence on record and relevant provisions of law, Aboitiz is

REPRESENTATIVE

liable for the loss or damage sustained by the subject cargo.

AUTHENTICATE THE SAME.

(4)

OF

STIP

TO

IDENTIFY

AND

THE HONORABLE COURT OF APPEALS

COMMITTED A REVERSIBLE ERROR IN RULING THAT

Issues

THE EXTENT AND KIND OF DAMAGE SUSTAINED BY

THE SUBJECT CARGO WAS CAUSED BY THE FAULT

The following issues are up for Our consideration:

OR NEGLIGENCE OF ABOITIZ.[23]

(Underscoring

supplied)
(1)

THE HONORABLE COURT OF APPEALS

COMMITTED A REVERSIBLE ERROR IN RULING THAT

Elsewise stated, the controversy rotates on three (3)

ICNA HAS A CAUSE OF ACTION AGAINST ABOITIZ

central questions: (a) Is respondent ICNA the real party-in-

BY VIRTUE OF THE RIGHT OF SUBROGATION BUT

interest that possesses the right of subrogation to claim

WITHOUT CONSIDERING THE ISSUE CONSISTENTLY

reimbursement from petitioner Aboitiz?

RAISED BY ABOITIZ THAT THE FORMAL CLAIM OF

timely filing of the notice of claim as required under Article

STIP

366 of the Code of Commerce? (c) If so, can petitioner be

WAS

NOT

MADE

WITHIN

THE

PERIOD

PRESCRIBED BY ARTICLE 366 OF THE CODE OF

(b) Was there a

held liable on the claim for damages?

COMMERCE; AND, MORE SO, THAT THE CLAIM WAS

MADE BY A WRONG CLAIMANT.

(2)

THE HONORABLE COURT OF APPEALS

Our Ruling

We answer the triple questions in the affirmative.

COMMITTED A REVERSIBLE ERROR IN RULING THAT

THE SUIT FOR REIMBURSEMENT AGAINST ABOITIZ

A foreign corporation not licensed to do business in the

WAS PROPERLY FILED BY ICNA AS THE LATTER

Philippines is not absolutely incapacitated from filing a suit in

WAS AN AUTHORIZED AGENT OF THE INSURANCE

local courts. Only when that foreign corporation is

COMPANY OF NORTH AMERICA (U.K.) (ICNA UK).

transacting or doing business in the country will a license

124

Transportation Law
Choco Notes
be necessary before it can institute suits.[24] It may, however,

The Company, in consideration of a premium as agreed and

bring suits on isolated business transactions, which is not

subject to the terms and conditions printed hereon, does insure

prohibited under Philippine law.[25] Thus, this Court has held

MSAS Cargo International Limited &/or Associates &/or

that a foreign insurance company may sue in Philippine courts

Subsidiary Companies in behalf of the title holder: Loss, if

upon the marine insurance policies issued by it abroad to

any, payable to the Assured or Order.

cover international-bound cargoes shipped by a Philippine

carrier, even if it has no license to do business in this country.

The policy benefits any subsequent assignee, or holder,

It is the act of engaging in business without the prescribed

including the consignee, who may file claims on behalf of the

license, and not the lack of license per se, which bars a foreign

assured. This is in keeping with Section 57 of the Insurance

corporation from access to our courts.[26]

Code which states:

In any case, We uphold the CA observation that while it

A policy may be so framed that it will inure to the benefit of

was the ICNA UK Limited which issued the subject marine

whosoever, during the continuance of the risk, may become

policy, the present suit was filed by the said companys

the owner of the interest insured. (Emphasis added)

authorized agent in Manila. It was the domestic corporation

Its

Respondents cause of action is founded on it being

authority is expressly provided for in the open policy which

subrogated to the rights of the consignee of the damaged

includes the ICNA office in the Philippines as one of the

shipment. The right of subrogation springs from Article 2207

foreign companys agents.

of the Civil Code, which states:

As found by the CA, the RTC erred when it ruled that there

Article 2207. If the plaintiffs property has been insured, and

was no proper indorsement of the insurance policy by MSAS,

he has received indemnity from the insurance company for the

the shipper, in favor of STIP of Don Bosco Technical High

injury or loss arising out of the wrong or breach of contract

School, the consignee.

complained of, the insurance company shall be subrogated to

that brought the suit and not the foreign company.

the rights of the insured against the wrongdoer or the person

The terms of the Open Policy authorize the filing of any

who has violated the contract. If the amount paid by the

claim on the insured goods, to be brought against ICNA UK,

insurance company does not fully cover the injury or loss, the

the company who issued the insurance, or against any of its

aggrieved party shall be entitled to recover the deficiency from

listed agents worldwide.[27] MSAS accepted said provision

the person causing the loss or injury. (Emphasis added)

when it signed and accepted the policy.

The acceptance

operated as an acceptance of the authority of the agents.

Hence, a formal indorsement of the policy to the agent in the

As this Court held in the case of Pan Malayan Insurance

Philippines was unnecessary for the latter to exercise the rights

Corporation v. Court of Appeals,[28] payment by the insurer

of the insurer.

to the assured operates as an equitable assignment of all

remedies the assured may have against the third party who

Likewise, the Open Policy expressly provides that:

caused the damage. Subrogation is not dependent upon, nor

does it grow out of, any privity of contract or upon written

125

Transportation Law
Choco Notes
assignment of claim. It accrues simply upon payment of the

damage or average which give rise to the claim cannot be

insurance claim by the insurer.[29]

ascertained from the outside part of such packages, in which

case the claim shall be admitted only at the time of receipt.

Upon payment to the consignee of indemnity for

damage to the insured goods, ICNAs entitlement to

After

subrogation equipped it with a cause of action against

transportation charges have been paid, no claim shall be

petitioner in case of a contractual breach or negligence.[30]

admitted against the carrier with regard to the condition in

This right of subrogation, however, has its limitations. First,

which the goods transported were delivered.

both the insurer and the consignee are bound by the

supplied)

the

periods

mentioned

have

elapsed,

or

the

(Emphasis

contractual stipulations under the bill of lading.[31] Second,

the insurer can be subrogated only to the rights as the insured

The periods above, as well as the manner of giving notice may

may have against the wrongdoer. If by its own acts after

be modified in the terms of the bill of lading, which is the

receiving payment from the insurer, the insured releases the

contract between the parties. Notably, neither of the parties in

wrongdoer who caused the loss from liability, the insurer loses

this case presented the terms for giving notices of claim under

its claim against the latter.[32]

the bill of lading issued by petitioner for the goods.

The giving of notice of loss or injury is a condition

The shipment was delivered on August 11, 1993. Although

precedent to the action for loss or injury or the right to enforce

the letter informing the carrier of the damage was dated

the carriers liability. Circumstances peculiar to this case lead

August 15, 1993, that letter, together with the notice of claim,

Us to conclude that the notice requirement was complied with.

was received by petitioner only on September 21, 1993. But

As held in the case of Philippine American General Insurance

petitioner admits that even before it received the written notice

Co., Inc. v. Sweet Lines, Inc.,[33] this notice requirement

of claim, Mr. Mayo B. Perez, Claims Head of the company,

protects the carrier by affording it an opportunity to make an

was informed by telephone sometime in August 13, 1993. Mr.

investigation of the claim while the matter is still fresh and

Perez then immediately went to the warehouse and to the

easily investigated. It is meant to safeguard the carrier from

delivery site to inspect the goods in behalf of petitioner.[34]

false and fraudulent claims.

Under the Code of Commerce, the notice of claim must be

made within twenty four (24) hours from receipt of the cargo

In the case of Philippine Charter Insurance Corporation

if the damage is not apparent from the outside of the package.

(PCIC) v. Chemoil Lighterage Corporation,[35] the notice was

For damages that are visible from the outside of the package,

allegedly made by the consignee through telephone.

the claim must be made immediately. The law provides:

claim for damages was denied. This Court ruled that such a

The

notice did not comply with the notice requirement under the
Article 366. Within twenty four hours following the receipt of

law. There was no evidence presented that the notice was

the merchandise, the claim against the carrier for damages or

timely given. Neither was there evidence presented that the

average which may be found therein upon opening the

notice was relayed to the responsible authority of the carrier.

packages, may be made, provided that the indications of the

126

Transportation Law
Choco Notes
As adverted to earlier, there are peculiar circumstances in the

still fresh. In so doing, the main objective of the prescribed

instant case that constrain Us to rule differently from the PCIC

time period was fulfilled.

case, albeit this ruling is being made pro hac vice, not to be

compliance with the notice requirement in this case.

Thus, there was substantial

made a precedent for other cases.

To recapitulate, We have found that respondent, as
Stipulations requiring notice of loss or claim for damage as a

subrogee of the consignee, is the real party in interest to

condition precedent to the right of recovery from a carrier

institute the claim for damages against petitioner; and pro hac

must be given a reasonable and practical construction, adapted

vice, that a valid notice of claim was made by respondent.

to the circumstances of the case under adjudication, and their

application is limited to cases falling fairly within their object

We now discuss petitioners liability for the damages

and purpose.[36]

sustained by the shipment. The rule as stated in Article 1735

of the Civil Code is that in cases where the goods are lost,

Bernhard Willig, the representative of consignee who received

destroyed or deteriorated, common carriers are presumed to

the shipment, relayed the information that the delivered goods

have been at fault or to have acted negligently, unless they

were discovered to have sustained water damage to no less

prove that they observed extraordinary diligence required by

than the Claims Head of petitioner, Mayo B. Perez.

law.[38] Extraordinary diligence is that extreme measure of

Immediately, Perez was able to investigate the claims himself

care and caution which persons of unusual prudence and

and he confirmed that the goods were, indeed, already

circumspection use for securing and preserving their own

corroded.

property rights.[39] This standard is intended to grant favor to

the shipper who is at the mercy of the common carrier once

Provisions specifying a time to give notice of damage to

the goods have been entrusted to the latter for shipment.[40]

common carriers are ordinarily to be given a reasonable and

practical, rather than a strict construction.[37] We give due

Here, the shipment delivered to the consignee sustained water

consideration to the fact that the final destination of the

damage. We agree with the findings of the CA that petitioner

damaged cargo was a school institution where authorities are

failed to overturn this presumption:

bound by rules and regulations governing their actions.

Understandably, when the goods were delivered, the necessary

x x x upon delivery of the cargo to the consignee Don Bosco

clearance had to be made before the package was opened.

Technical High School by a representative from Trabajo

Upon opening and discovery of the damaged condition of the

Arrastre, and the crates opened, it was discovered that the

goods, a report to this effect had to pass through the proper

workbenches and work tools suffered damage due to

channels before it could be finalized and endorsed by the

wettage although by then they were already physically dry.

institution to the claims department of the shipping company.

Appellee carrier having failed to discharge the burden of

proving that it exercised extraordinary diligence in the

The call to petitioner was made two days from delivery, a

vigilance over such goods it contracted for carriage, the

reasonable period considering that the goods could not have

presumption of fault or negligence on its part from the time

corroded instantly overnight such that it could only have

the goods were unconditionally placed in its possession (July

sustained the damage during transit. Moreover, petitioner was

26, 1993) up to the time the same were delivered to the

able to immediately inspect the damage while the matter was

consignee (August 11, 1993), therefore stands.

The

127

Transportation Law
Choco Notes
presumption that the carrier was at fault or that it acted

On the other hand, the supplemental report submitted

negligently was not overcome by any countervailing evidence.

by the surveyor has confirmed that it was rainwater that

x x x[41] (Emphasis added)

seeped into the cargo based on official data from the

PAGASA that there was, indeed, rainfall in the Port Area of

The shipment arrived in the port of Manila and was received

Manila from July 26 to 31, 1993. The Surveyor specifically

by petitioner for carriage on July 26, 1993. On the same day,

noted that the subject cargo was under the custody of appellee

it was stripped from the container van. Five days later, on

carrier from the time it was delivered by the shipper on July

July 31, 1993, it was re-stuffed inside another container van.

26, 1993 until it was stuffed inside Container No. ACCU-

On August 1, 1993, it was loaded onto another vessel bound

213798-4 on July 31, 1993. No other inevitable conclusion

for Cebu. During the period between July 26 to 31, 1993, the

can be deduced from the foregoing established facts that

shipment was outside a container van and kept in storage by

damage from wettage suffered by the subject cargo was

petitioner.

caused by the negligence of appellee carrier in grounding the

shipment outside causing rainwater to seep into the cargoes.

The bill of lading issued by petitioner on July 31, 1993

contains

the

notation

grounded

outside

warehouse,

Appellees witness, Mr. Mayo tried to disavow any

suggesting that from July 26 to 31, the goods were kept

responsibility for causing wettage to the subject goods by

outside the warehouse. And since evidence showed that rain

claiming that the notation GROUNDED OUTSIDE WHSE.

fell over Manila during the same period, We can conclude that

actually refers to the container and not the contents thereof or

this was when the shipment sustained water damage.

the cargoes.

And yet it presented no evidence to explain

where did they place or store the subject goods from the time
To prove the exercise of extraordinary diligence, petitioner

it accepted the same for shipment on July 26, 1993 up to the

must do more than merely show the possibility that some other

time the goods were stripped or transferred from the container

party could be responsible for the damage. It must prove that

van to another container and loaded into the vessel M/V

it used all reasonable means to ascertain the nature and

Supercon Carrier I on August 1, 1993 and left Manila for

characteristic of the goods tendered for transport and that it

Cebu City on August 2, 1993. x x x If the subject cargo was

exercised due care in handling them.[42]

Extraordinary

not grounded outside prior to shipment to Cebu City, appellee

diligence must include safeguarding the shipment from

provided no explanation as to where said cargo was stored

damage coming from natural elements such as rainfall.

from July 26, 1993 to July 31, 1993. What the records showed
is that the subject cargo was stripped from the container van of

Aside from denying that the grounded outside warehouse

the shipper and transferred to the container on August 1, 1993

notation referred not to the crate for shipment but only to the

and finally loaded into the appellees vessel bound for Cebu

carrier van, petitioner failed to mention where exactly the

City on August 2, 1993.

goods were stored during the period in question. It failed to

(Exhibit D) at the Manila port did not indicate any such

show that the crate was properly stored indoors during the

defect or damage, but when the container was stripped upon

time when it exercised custody before shipment to Cebu. As

arrival in Cebu City port after being discharged from

amply explained by the CA:

appellees vessel, it was noted that only one (1) slab was

The Stuffing/Stripping Report

slightly broken at the bottom allegedly hit by a forklift blade

(Exhibit F).[43] (Emphasis added)

128

Transportation Law
Choco Notes
DECISION

Petitioner is thus liable for the water damage sustained by the

TINGA, J.:

goods due to its failure to satisfactorily prove that it exercised

the extraordinary diligence required of common carriers.
Before us is a Rule 45 petition[1] which seeks the
WHEREFORE, the petition is DENIED and the
appealed Decision AFFIRMED.

reversal of the Decision[2] and Resolution[3] of the Court of

Appeals in CA-G.R. No. 61885. The Court of Appeals
reversed the Decision[4] of the Regional Trial Court (RTC) of

SO ORDERED.

Manila, Branch 55 in Civil Case No. 96-80298, dismissing the

complaint for sum of money.

Philippines First v. Wallem

PHILIPPINES FIRST INSURANCE G.R. No. 165647

The facts of the case follow.[5]

CO., INC.,
Petitioner,

Present:

On or about 2 October 1995, Anhui Chemicals Import &

Export Corporation loaded on board M/S Offshore Master a

MARTINEZ,*
CORONA,**
-

versus -

shipment consisting of 10,000 bags of sodium sulphate

anhydrous 99 PCT Min. (shipment), complete and in good

TINGA,
Acting

Chairperson,

order for transportation to and delivery at the port of Manila

for consignee, L.G. Atkimson Import-Export, Inc. (consignee),
covered by a Clean Bill of Lading. The Bill of Lading reflects

VELASCO, JR., and

the gross weight of the total cargo at 500,200 kilograms.[6]

BRION, JJ.

The Owner and/or Charterer of M/V Offshore Master is

unknown while the shipper of the shipment is Shanghai
Fareast Ship Business Company. Both are foreign firms doing

WALLEM PHILS. SHIPPING,

INC., UNKNOWN OWNER AND/OR

business in the Philippines, thru its local ship agent,

Promulgated:

respondent Wallem Philippines Shipping, Inc. (Wallem).[7]

UNKNOWN CHARTERER OF THE

VESSEL M/S OFFSHORE MASTER March 26, 2009
AND SHANGHAI FAREAST SHIP
BUSINESS COMPANY,
Respondents.

On or about 16 October 1995, the shipment arrived at the port

of Manila on board the vessel M/S Offshore Master from
which it was subsequently discharged. It was disclosed during
the discharge of the shipment from the carrier that 2,426 poly
bags (bags) were in bad order and condition, having sustained
various degrees of spillages and losses. This is evidenced by
the Turn Over Survey of Bad Order Cargoes (turn-over

x---------------------------------------------------------------------------x

survey) of the arrastre operator, Asian Terminals, Inc. (arrastre

operator).[8] The bad state of the bags is also evinced by the
arrastre operators Request for Bad Order Survey.[9]

129

Transportation Law
Choco Notes
Asia Star Freight Services, Inc. undertook the delivery of the
subject shipment from the pier to the consignees warehouse
in Quezon City,[10] while the final inspection was conducted

In a decision[16] dated 3 November 1998, the RTC ordered

jointly by the consignees representative and the cargo

respondents to pay petitioner P397,879.69 with 6% interest

surveyor. During the unloading, it was found and noted that

plus attorneys fees and costs of the suit. It attributed the

the bags had been discharged in damaged and bad order

damage and losses sustained by the shipment to the

condition. Upon inspection, it was discovered that 63,065.00

arrastre operators mishandling in the discharge of the

kilograms of the shipment had sustained unrecovered

shipment. Citing Eastern Shipping Lines, Inc. v. Court of

spillages, while 58,235.00 kilograms had been exposed and

Appeals,[17] the RTC held the shipping company and the

contaminated, resulting in losses due to depreciation and

arrastre operator solidarily liable since both the arrastre

downgrading.[11]

operator and the carrier are charged with and obligated to

deliver the goods in good order condition to the consignee. It

On 29 April 1996, the consignee filed a formal claim with

also ruled that the ship functioned as a common carrier and

Wallem for the value of the damaged shipment, to no avail.

was obliged to observe the degree of care required of a

Since the shipment was insured with petitioner Philippines

common carrier in handling cargoes. Further, it held that a

First Insurance Co., Inc. against all risks in the amount of

notice of loss or damage in writing is not required in this case

P2,470,213.50,[12] the consignee filed a formal claim[13]

because said goods already underwent a joint inspection or

with petitioner for the damage and losses sustained by the

survey at the time of receipt thereof by the consignee, which

shipment. After evaluating the invoices, the turn-over survey,

dispensed with the notice requirement.

the bad order certificate and other documents,[14] petitioner

found the claim to be in order and compensable under the

The Court of Appeals reversed and set aside the RTCs

marine insurance policy. Consequently, petitioner paid the

decision.[18] According to the appellate court, there is no

consignee the sum of P397,879.69 and the latter signed a

solidary liability between the carrier and the arrastre operator

subrogation receipt.

because it was clearly established by the court a quo that the

damage and losses of the shipment were attributed to the

Petitioner, in the exercise of its right of subrogation, sent a

mishandling by the arrastre operator in the discharge of the

demand letter to Wallem for the recovery of the amount paid

shipment. The appellate court ruled that the instant case

by petitioner to the consignee. However, despite receipt of the

falls under an exception recognized in Eastern

letter, Wallem did not settle nor even send a response to

petitioners claim.[15]
Shipping Lines.[19] Hence, the arrastre operator was held
Consequently, petitioner instituted an action before the RTC

solely liable to the consignee.

for damages against respondents for the recovery of

P397,879.69 representing the actual damages suffered by

Petitioner raises the following issues:

petitioner plus legal interest thereon computed from the time

of the filing of the complaint until fully paid and attorneys
fees equivalent to 25% of the principal claim plus costs of suit.

130

Transportation Law
Choco Notes
1.

Whether or not the Court of Appeals erred in not holding

The trial court, however, found through the testimony of Mr.

that as a common carrier, the carriers duties extend to the

Maximino Velasquez Talens, a cargo surveyor of Oceanica

obligation to safely discharge the cargo from the vessel;

Cargo Marine Surveyors Corporation, that the losses and

2.

damage to the cargo were caused by the mishandling of the

Whether or not the carrier should be held liable for the

cost of the damaged shipment;

arrastre operator. Specifically, that the torn cargo bags resulted

3.

Whether or not Wallems failure to answer the extra

from the use of steel hooks/spikes in piling the cargo bags to

judicial demand by petitioner for the cost of the lost/damaged

the pallet board and in pushing the bags by the stevedores of

shipment is an implied admission of the formers liability for

the arrastre operator to the tug boats then to the ports.[25] The

said goods;

appellate court affirmed the finding of mishandling in the

4.

discharge of cargo and it served as its basis for exculpating

Whether or not the courts below erred in giving credence

to the testimony of Mr. Talens.

respondents from liability, rationalizing that with the fault of

the arrastre operator in the unloading of the cargo established

It is beyond question that respondents vessel is a common

it should bear sole liability for the cost of the damaged/lost

carrier.[20] Thus, the standards for determining the existence

cargo.

or absence of the respondents liability will be gauged on the

degree of diligence required of a common carrier. Moreover,

While it is established that damage or losses were incurred by

as the shipment was an exercise of international trade, the

the shipment during the unloading, it is disputed who should

provisions of the Carriage of Goods

be liable for the damage incurred at that point of transport. To

address this issue, the pertinent laws and jurisprudence are
examined.

by Sea Act[21] (COGSA), together with the Civil Code and

the Code of Commerce, shall apply.[22]

Common carriers, from the nature of their business and for

reasons of public policy, are bound to observe extraordinary

The first and second issues raised in the petition will be

diligence in the vigilance over the goods transported by

resolved concurrently since they are interrelated.

them.[26] Subject to certain exceptions enumerated under

Article 1734[27] of the Civil Code, common carriers are

It is undisputed that the shipment was damaged prior to its

responsible for the loss, destruction, or deterioration of the

receipt by the insured consignee. The damage to the shipment

goods. The extraordinary responsibility of the common carrier

was documented by the turn-over survey[23] and Request for

lasts from the time the goods are unconditionally placed in the

Bad Order Survey.[24] The turn-over survey, in particular,

possession of, and received by the carrier for transportation

expressly stipulates that 2,426 bags of the shipment were

until the same are delivered, actually or constructively, by the

received by the arrastre operator in damaged condition. With

carrier to the consignee, or to the person who has a right to

these documents, petitioner insists that the shipment incurred

receive them.[28]

damage or losses while still in the care and responsibility of

Wallem and before it was turned over and delivered to the

For marine vessels, Article 619 of the Code of Commerce

arrastre operator.

provides that the ship captain is liable for the cargo from the
time it is turned over to him at the dock or afloat alongside the
vessel at the port of loading, until he delivers it on the shore or

131

Transportation Law
Choco Notes
on the discharging wharf at the port of unloading, unless

Handling cargo is mainly the arrastre operator's principal work

agreed otherwise. In Standard Oil Co. of New York v. Lopez

so its drivers/operators or employees should observe the

Castelo,[29] the Court interpreted the ship captains liability as

standards and measures necessary to prevent losses and

ultimately that of the shipowner by regarding the captain as

damage to shipments under its custody.[34]

the representative of the ship owner.

In Firemans Fund Insurance Co. v. Metro Port Service,
Lastly, Section 2 of the COGSA provides that under every

Inc.[35] the Court explained the relationship and responsibility

contract of carriage of goods by sea, the carrier in relation to

of an arrastre operator to a consignee of a cargo, to quote:

the loading, handling, stowage, carriage, custody, care, and

discharge of such goods, shall be subject to the responsibilities

The legal relationship between the consignee and the arrastre

and liabilities and entitled to the rights and immunities set

operator is akin to that of a depositor and warehouseman. The

forth in the Act.[30] Section 3 (2) thereof then states that

relationship between the consignee and the common carrier is

among the carriers responsibilities are to properly and

similar to that of the consignee and the arrastre operator. Since

carefully load, handle, stow, carry, keep, care for, and

it is the duty of the ARRASTRE to take good care of the

discharge the goods carried.

goods that are in its custody and to deliver them in good

condition to the consignee, such responsibility also devolves

The above doctrines are in fact expressly incorporated in the

upon the CARRIER. Both the ARRASTRE and the CARRIER

bill of lading between the shipper Shanghai Fareast Business

are therefore charged with and obligated to deliver the goods

Co., and the consignee, to wit:

in good condition to the consignee.(Emphasis supplied)

4. PERIOD OF RESPONSIBILITY. The responsibility of the

(Citations omitted)

carrier shall commence from the time when the goods are
loaded on board the vessel and shall cease when they are
discharged from the vessel.

The liability of the arrastre operator was reiterated in Eastern

Shipping Lines, Inc. v. Court of Appeals[36] with the

The Carrier shall not be liable of loss of or damage to the

clarification that the arrastre operator and the carrier are not

goods before loading and after discharging from the vessel,

always and necessarily solidarily liable as the facts of a case

howsoever such loss or damage arises.[31]

may vary the rule.

Thus, in this case the appellate court is correct insofar as it

On the other hand, the functions of an arrastre operator

ruled that an arrastre operator and a carrier may not be held

involve the handling of cargo deposited on the wharf or

solidarily liable at all times. But the precise question is which

between the establishment of the consignee or shipper and the

entity had custody of the shipment during its unloading from

ship's tackle.[32] Being the custodian of the goods discharged

the vessel?

from a vessel, an arrastre operator's duty is to take good care

of the goods and to turn them over to the party entitled to their

The aforementioned Section 3(2) of the COGSA states that

possession.[33]

among the carriers responsibilities are to properly and

carefully load, care for and discharge the goods carried. The
bill of lading covering the subject shipment likewise stipulates

132

Transportation Law
Choco Notes
that the carriers liability for loss or damage to the goods

ceases after its discharge from the vessel. Article 619 of the

cargo, where was the master of the vessel?

Code of Commerce holds a ship captain liable for the cargo

On board the vessel, supervising, sir.

And, observed the discharging operation?

Yes, sir.

Mr. Witness, during the discharging operation of this

from the time it is turned over to him until its delivery at the
port of unloading.

In a case decided by a U.S. Circuit Court, Nichimen Company

v. M./V. Farland,[37]

it was ruled that like the duty of

And, what did the master of the vessel do when the

seaworthiness, the duty of care of the cargo is non-

cargo was being unloaded from the vessel?

delegable,[38] and the carrier is accordingly responsible for

He would report to the head checker, sir.

the acts of the master, the crew, the stevedore, and his other
agents. It has also been held that it is ordinarily the duty of the

He did not send the stevedores to what manner in the

master of a vessel to unload the cargo and place it in readiness

discharging of the cargo from the vessel?

for delivery to the consignee, and there is an implied

obligation that this shall be accomplished with sound

trabaho sa loob ng barko, sir.[42]

And head checker po and siyang nagpapatakbo ng

machinery, competent hands, and in such manner that no

unnecessary injury shall be done thereto.[39] And the fact that

xxx

a consignee is required to furnish persons to assist in

unloading a shipment may not relieve the carrier of its duty as

to such unloading.[40]

Is he [the head checker] an employee of the company?

He is a contractor/checker of Wallem Philippines,

sir.[43]
The exercise of the carriers custody and responsibility over
the subject shipment during the unloading actually transpired
in the instant case during the unloading of the shipment as

Moreover, the liability of Wallem is highlighted by Mr.

testified by Mr. Talens, the cargo surveyor, to quote:

Talens notes in the Bad Order Inspection, to wit:

Atty. Repol:

Do you agree with me that Wallem Philippines is a

shipping [company]?
A

Yes, sir.

The bad order torn bags, was due to stevedores[]

utilizing steel hooks/spikes in piling the cargo to [the] pallet

And, who hired the services of the stevedores?

board at the vessels cargo holds and at the pier designated

The checker of the vessel of Wallem, sir.[41]

area before and after discharged that cause the bags to torn
[sic].[44] (Emphasis supplied)

xxx

133

Transportation Law
Choco Notes
The records are replete with evidence which show that the
damage to the bags happened before and after their
discharge[45] and it was caused by the stevedores of the

Contrary to petitioners stance on the third issue, Wallems

arrastre operator who were then under the supervision of

failure to respond to its demand letter does not constitute an

Wallem.

implied admission of liability. To borrow the words of Mr.

Justice Oliver Wendell Holmes, thus:

It is settled in maritime law jurisprudence that cargoes while

being unloaded generally remain under the custody of the

A man cannot make evidence for himself by writing a letter

carrier. In the instant case, the damage or losses were incurred

containing the statements that he wishes to prove. He does not

during the discharge of the shipment while under the

make the letter evidence by sending it to the party against

supervision of the carrier. Consequently, the carrier is liable

whom he wishes to prove the facts [stated therein]. He no

for the damage or losses caused to the shipment. As the cost of

more can impose a duty to answer a charge than he can

the actual damage to the subject shipment has long been

impose a duty to pay by sending goods. Therefore a failure to

settled, the trial courts finding of actual damages in the

answer such adverse assertions in the absence of further

amount of P397,879.69 has to be sustained.

circumstances making an answer requisite or natural has no

effect as an admission.[47]

On the credibility of Mr. Talens which is the fourth issue, the

general rule in assessing credibility of witnesses is well-

With respect to the attorneys fees, it is evident that petitioner

settled:

was compelled to litigate this matter to protect its interest. The

RTCs award of P20,000.00 as attorneys fees is reasonable.

x x x the trial court's evaluation as to the credibility of

WHEREFORE, the petition is GRANTED. The Decision of

witnesses is viewed as correct and entitled to the highest

the Court of Appeals dated 22 June 2004 and its Resolution

respect because it is more competent to so conclude, having

dated 11 October 2004 are REVERSED and SET ASIDE.

had the opportunity to observe the witnesses' demeanor and

Wallem is ordered to pay petitioner the sum of P397,879.69,

deportment on the stand, and the manner in which they gave

with interest thereon at 6% per annum from the filing of the

their testimonies. The trial judge therefore can better

complaint on 7 October 1996 until the judgment becomes final

determine if such witnesses were telling the truth, being in the

and executory. Thereafter, an interest rate of 12% per annum

ideal position to weigh conflicting testimonies. Therefore,

shall be imposed.[48] Respondents are also ordered to pay

unless the trial judge plainly overlooked certain facts of

petitioner the amount of P20,000.00 for and as attorneys fees,

substance and value which, if considered, might affect the

together with the costs of the suit.

result of the case, his assessment on credibility must be

respected.[46]

SO ORDERED.

134

Transportation Law
Choco Notes
its first delivery, private respondent's resident manager in

Liability of registered owner

Maddela, Dominador Cruz, contracted Virgilio Licuden, the

Benedicto v. IAC

driver of a cargo truck bearing Plate No. 225 GA TH to

G.R. No. 70876 July 19, 1990

transport its sawn lumber to the consignee Blue Star in

Valenzuela, Bulacan. This cargo truck was registered in the

MA. LUISA BENEDICTO, petitioner,

name of petitioner Ma. Luisa Benedicto, the proprietor of

vs.
HON.

Macoven Trucking, a business enterprise engaged in hauling

INTERMEDIATE

APPELLATE

COURT

and

freight, with main office in B.F. Homes, Paraaque.

GREENHILLS WOOD INDUSTRIES COMPANY, INC.

respondents.

On 15 May 1980, Cruz in the presence and with the consent of

driver Licuden, supervised the loading of 7,690 board feet of

Britanico, Panganiban, Benitez, Africa, Linsangan and

Barinaga for petitioner.

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

Abelardo V. Viray for private respondent.

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

FELICIANO, J.:

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

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

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

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.

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

Private respondent Greenhills, a lumber manufacturing firm

with business address at Dagupan City, operates sawmill in
Maddela, Quirino.

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

Sometime in May 1980, private respondent bound itself to sell

and deliver to Blue Star Mahogany, Inc., ("Blue Star") a

and because of this delay, "they were constrained to look for

other suppliers."

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

135

Transportation Law
Choco Notes
On 25 June 1980, after confirming the above with Blue Star

trial court in toto. Like the trial court, the appellate court held

and after trying vainly to persuade it to continue with their

that since petitioner was the registered owner of the subject

contract, private respondent Greenhill's filed Criminal Case

vehicle, Licuden the driver of the truck, was her employee,

No. 668 against driver Licuden for estafa. Greenhills also filed

and that accordingly petitioner should be responsible for the

against petitioner Benedicto Civil Case No. D-5206 for

negligence of said driver and bear the loss of the sawn lumber

recovery of the value of the lost sawn lumber plus damages

plus damages. Petitioner moved for reconsideration, without

before the RTC of Dagupan City.

success. 10

In her answer, 6 petitioner Benedicto denied liability alleging

In the present Petition for Review, the sole issue raised is

that she was a complete stranger to the contract of carriage,

whether or not under the facts and applicable law, the

the subject truck having been earlier sold by her to Benjamin

appellate court was correct in finding that petitioner, being the

Tee, on 28 February 1980 as evidenced by a deed of sale. 7

registered owner of the carrier, should be held liable for the

She claimed that the truck had remained registered in her

value of the undelivered or lost sawn lumber.

name notwithstanding its earlier sale to Tee because the latter

had paid her only P50,000.00 out of the total agreed price of

Petitioner urges that she could not be held answerable for the

P68,000.00 However, she averred that Tee had been operating

loss of the cargo, because the doctrine which makes the

the said truck in Central Luzon from that date (28 February

registered owner of a common carrier vehicle answerable to

1980) onwards, and that, therefore, Licuden was Tee's

the public for the negligence of the driver despite the sale of

employee and not hers.

the vehicle to another person, applies only to cases involving

death of or injury to passengers. What applies in the present

On 20 June 1983, based on the finding that petitioner

case, according to petitioner, is the rule that a contract of

Benedicto was still the registered owner of the subject truck,

carriage requires proper delivery of the goods to and

and holding that Licuden was her employee, the trial court

acceptance by the carrier. Thus, petitioner contends that the

adjudged as follows:

delivery to a person falsely representing himself to be an agent

of the carrier prevents liability from attaching to the registered

WHEREFORE, in the light of the foregoing considerations,

owner.

this Court hereby renders judgment against defendant Maria

Luisa Benedicto, ordering her to pay the Greenhills Wood

The Court considers that petitioner has failed to show that

Industries Co. Inc., thru its President and General Manager,

appellate court committed reversible error in affirming the

the amount of P16,016 cost of the sawn lumber loaded on the

trial court's holding that petitioner was liable for the cost of

cargo truck, with legal rate of interest from the filing of the

the sawn lumber plus damages.

complaint to pay attorney's fees in the amount of P2,000.00;

and to pay the costs of this suit.

There is no dispute that petitioner Benedicto has been holding

herself out to the public as engaged in the business of hauling

SO ORDERED. 8

or transporting goods for hire or compensation. Petitioner

Benedicto is, in brief, a common carrier.

On 30 January 1985, upon appeal by petitioner, the

Intermediate Appellate Court affirmed 9 the decision of the

136

Transportation Law
Choco Notes
The prevailing doctrine on common carriers makes the

payment of the balance of the selling price of the truck. She

registered owner liable for consequences flowing from the

may have been unaware of the legal security device of chattel

operations of the carrier, even though the specific vehicle

mortgage; or she, or her buyer, may have been unwilling to

involved may already have been transferred to another person.

absorb the expenses of registering a chattel mortgage over the

This doctrine rests upon the principle that in dealing with

truck. In either case, considerations both of public policy and

vehicles registered under the Public Service Law, the public

of equity require that she bear the consequences flowing from

has the right to assume that the registered owner is the actual

registered ownership of the subject vehicle.

or lawful owner thereof It would be very difficult and often

impossible as a practical matter, for members of the general

Petitioner Benedicto, however, insists that the said principle

public to enforce the rights of action that they may have for

should apply only to cases involving negligence and resulting

injuries inflicted by the vehicles being negligently operated if

injury to or death of passengers, and not to cases involving

they should be required to prove who the actual owner is. 11

merely carriage of goods. We believe otherwise.

The registered owner is not allowed to deny liability by

proving the identity of the alleged transferee. Thus, contrary to

A common carrier, both from the nature of its business and for

petitioner's claim, private respondent is not required to go

insistent reasons of public policy, is burdened by the law with

beyond the vehicle's certificate of registration to ascertain the

the duty of exercising extraordinary diligence not only in

owner of the carrier. In this regard, the letter presented by

ensuring the safety of passengers but also in caring for goods

petitioner allegedly written by Benjamin Tee admitting that

transported by it. 13 The loss or destruction or deterioration of

Licuden was his driver, had no evidentiary value not only

goods turned over to the common carrier for conveyance to a

because Benjamin Tee was not presented in court to testify on

designated destination, raises instantly a presumption of fault

this matter but also because of the aforementioned doctrine.

or negligence on the part of the carrier, save only where such

To permit the ostensible or registered owner to prove who the

loss, destruction or damage arises from extreme circumstances

actual owner is, would be to set at naught the purpose or

such as a natural disaster or calamity or act of the public

public policy which infuses that doctrine.

enemy in time of war, or from an act or omission of the

shipper himself or from the character of the goods or their

In fact, private respondent had no reason at all to doubt the

packaging or container. 14

authority of Licuden to enter into a contract of carriage on

behalf of the registered owner. It appears that, earlier, in the

This presumption may be overcome only by proof of

first week of May 1980, private respondent Greenhills had

extraordinary diligence on the part of the carrier. 15 Clearly,

contracted Licuden who was then driving the same cargo truck

to permit a common carrier to escape its responsibility for the

to transport and carry a load of sawn lumber from the Maddela

passengers or goods transported by it by proving a prior sale

sawmill to Dagupan City. 12 No one came forward to question

of the vehicle or means of transportation to an alleged vendee

that contract or the authority of Licuden to represent the owner

would be to attenuate drastically the carrier's duty of

of the carrier truck.

extraordinary diligence. It would also open wide the door to

collusion between the carrier and the supposed vendee and to

Moreover, assuming the truth of her story, petitioner

shifting liability from the carrier to one without financial

Benedicto retained registered ownership of the freight truck

capability to respond for the resulting damages. In other

for her own benefit and convenience, that is, to secure the

words, the thrust of the public policy here involved is as sharp

137

Transportation Law
Choco Notes
and real in the case of carriage of goods as it is in the

putative transferee Benjamin Tee and driver Licuden for

transporting of human beings. Thus, to sustain petitioner

reimbursement or contribution. 17

Benedicto's contention, that is, to require the shipper to go

behind a certificate of registration of a public utility vehicle,

WHEREFORE, the Petition for Review is DENIED for lack

would be utterly subversive of the purpose of the law and

of merit and the Decision of the former Intermediate Appellate

doctrine.

Court dated 30 January 1985 is hereby AFFIRMED. Costs

against petitioner.

Petitioner further insists that there was no perfected contract of

carriage for the reason that there was no proof that her consent

SO ORDERED.

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.

BA Finance v. CA
[G.R. No. 102998. July 5, 1996]

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

BA FINANCE CORPORATION, petitioner vs. HON.

COURT OF APPEALS and ROBERTO M. REYES,
respondents.
DECISION
VITUG, J.:

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

The case at bar is a suit for replevin and damages.

The

petition for review on certiorari assails the decision of the

Court of Appeals[1] in CA- G.R. CV No. 23605 affirming that
of the Regional Trial Court of Manila, Branch XX,[2] which
has disposed of its Civil Case No. 87-42270 in this wise:

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

"WHEREFORE, the case against defendant-spouses (sic)

Reynaldo Manahan is hereby dismissed without prejudice, for
failure to prosecute.

Plaintiff having failed to show the

liability of defendant John Doe in the person of Roberto M.

Reyes, the case against the latter should likewise be dismissed.
Moreover, plaintiff is hereby directed to return the vehicle
seized by virtue of the order of seizure issued by this Court
with all its accessories to the said Roberto M. Reyes."[3]

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

The decisions of both the appellate court and the court a quo
are based on a like finding of the facts hereinafter briefly
narrated.

138

Transportation Law
Choco Notes
The spouses Reynaldo and Florencia Manahan executed, on

complaint,[10] in Sorsogon, Sorsogon.[11] On 20 October

15 May 1980, a promissory note[4] binding themselves to pay

1987, the lower court came out with an order of seizure.

Carmasters, Inc., the amount of P83,080.00 in thirty-six

monthly installments commencing 01 July 1980. To secure

Alleging possession in good faith, private respondent filed, on

payment, the Manahan spouses executed a deed of chattel

26 October 1987, a motion for an extension of time within

mortgage[5] over a motor vehicle, a Ford Cortina 1.6 GL, with

which to file his answer and/or a motion for intervention. The

motor and serial number CUBFWE-801010. Carmasters later

court granted the motion.

assigned[6] the promissory note and the chattel mortgage to

petitioner BA Finance Corporation with the conformity of the

A few months later, or on 18 February 1988, the court issued

Manahans. When the latter failed to pay the due installments,

an order which, in part, stated:

petitioner sent demand letters. The demands not having been

heeded, petitioner, on 02 October 1987, filed a complaint for

"Perusal of the record shows that an order for the seizure of

replevin with damages against the spouses, as well as against a

personal property was issued on October 20, 1987 in

John Doe, praying for the recovery of the vehicle with an

pursuance to a previous order of the Court dated October 13,

alternative prayer for the payment of a sum of money should

1987. However, to date, there is no showing that the principal

the vehicle not be returned. Upon petitioner's motion and the

defendants were served with summons inspite of the lapse of

filing of a bond in the amount of P169,161.00, the lower court

four (4) months.

issued a writ of replevin.

The court, however, cautioned

petitioner that should summons be not served on the

"Considering, this is a replevin case and to forestall the evils

defendants within thirty (30) days from the writ's issuance, the

that arise from this practice, plaintiff failing to heed the Order

case would be dismissed for failure to prosecute.[7] The

dated October 13, 1987, particularly second paragraph thereof,

warning was based on what the court perceived to be the

the above-entitled case is hereby ordered DISMISSED for

deplorable practice of some mortgagees of "freezing (the)

failure to prosecute and further ordering the plaintiff to return

foreclosure or replevin cases" which they would so

the property seized with all its accessories to defendant John

"conveniently utilize as a leverage for the collection of unpaid

Doe in the person of Roberto M. Reyes.

installments on mortgaged chattels."[8]

"SO ORDERED."[12]
The service of summons upon the spouses Manahan was
caused to be served by petitioner at No. 35 Lantana St.,

On 26 February 1988, petitioner filed a notice of dismissal of

Cubao, Quezon City. The original of the summons had the

the case "without prejudice and without pronouncement as to

name and the signature of private respondent Roberto M.

costs, before service of Summons and Answer, under Section

Reyes indicating that he received, on 14 October 1987, a copy

1, Rule 17, of the Rules of Court."[13] It also sought in

of the summons and the complaint.[9] Forthwith, petitioner,

another motion the withdrawal of the replevin bond. In view

through its Legal Assistant, Danilo E. Solano, issued a

of the earlier dismissal of the case (for petitioner's failure to

certification to the effect that it had received from Orson R.

prosecute), the court, on 02 March 1988, merely noted the

Santiago, the deputy sheriff of the Regional Trial Court of

notice of dismissal and denied the motion to withdraw the

Manila, Branch 20, the Ford Cortina seized from private

replevin bond considering that the writ of replevin had

respondent Roberto M. Reyes, the John Doe referred to in the

meanwhile been implemented.[14]

139

Transportation Law
Choco Notes
On 27 February 1989, the trial court rendered a decision
On 09 March 1988, private respondent filed a motion praying

dismissing the complaint against the Manahans for failure of

that petitioner be directed to comply with the court order

petitioner to prosecute the case against them. It also dismissed

requiring petitioner to return the vehicle to him.

In turn,

the case against private respondent for failure of petitioner to

petitioner filed, on 14 March 1988, a motion for the

show any legal basis for said respondent's liability. The court

reconsideration of the orders of 18 February 1988 and 02

ratiocinated:

March 1988 contending that: (a) the dismissal of the case was
tantamount to adjudication on the merits that thereby deprived

"x x x. Roberto M. Reyes is merely ancillary debtor in this

it with the remedy to enforce the promissory note, the chattel

case. The defendant spouses Manahan being the principal

mortgage and the deed of assignment, under Section 3, Rule

debtor(s) and as there is no showing that the latter has been

117, of the Rules of Court; (b) the order to return the vehicle

brought before the jurisdiction of this court, it must

to private respondent was a departure from jurisprudence

necessarily follow that the plaintiff has no cause of action

recognizing the right of the mortgagor to foreclose the

against said Roberto M. Reyes herein before referred to as

property to respond to the unpaid obligation secured by the

defendant John Doe. Under the circumstances, it is incumbent

chattel mortgage, and (c) there were no legal and factual bases

upon the plaintiff to return the seized vehicle unto the said

for the court's view that the filing of the replevin case was

Roberto M. Reyes."[18]

"characterized (by) evil practices."[15]

In its appeal to the Court of Appeals, petitioner has asserted
On 20 April 1988, the court granted petitioner's motion for

that a suit for replevin aimed at the foreclosure of the chattel is

reconsideration and accordingly recalled the order directing

an action quasi in rem which does not necessitate the presence

the return of the vehicle to private respondent, set aside the

of the principal obligors as long as the court does not render

order dismissing the case, directed petitioner "to cause the

any personal judgment against them. This argument did not

service of summons together with a copy of the complaint on

persuade the appellate court, the latter holding that-

the principal defendants within five (5) days from receipt"[16]

thereof at petitioner's expense, and ordered private respondent

"x x x. In action quasi in rem an individual is named as

to answer the complaint.

defendant and the purpose of the proceeding is to subject his

interest therein to the obligation or lien burdening the

A few months later, or on 02 August 1988, petitioner filed a

property, such as proceedings having for their sole object the

motion to declare private respondent in default. The court

sale or disposition of the property of the defendant, whether by

granted the motion on that same day and declared private

attachment, foreclosure, or other form of remedy (Sandejas vs.

respondent "in default for his failure to file the x x x answer

Robles, 81 Phil. 421). In the case at bar, the court cannot

within the reglementary period."[17] The court likewise

render any judgment binding on the defendants spouses for

granted petitioner's motion to set the case for the presentation,

having allegedly violated the terms and conditions of the

ex parte, of evidence. Petitioner, thereupon, submitted the

promissory note and the contract of chattel mortgage on the

promissory note, the deed of chattel mortgage, the deed of

ground that the court has no jurisdiction over their persons, no

assignment, a statement of account in the name of Florencia

summons having been served on them. That judgment, if

Manahan and two demand letters.

rendered, is void for having denied the defendants spouses due

process of law which contemplates notice and opportunity to

140

Transportation Law
Choco Notes
be heard before judgment is rendered, affecting one's person

object of a chattel mortgage even if the latter were not a party

or property (Macabingkil vs. Yatco, 26 SCRA 150, 157).

to the mortgage.

"It is next contended by appellant that as between appellant, as

Replevin, broadly understood, is both a form of principal

mortgagee, and John Doe, whose right to possession is

remedy and of a provisional relief. It may refer either to the

dubious if not totally non-existent, it is the former which has

action itself, i.e., to regain the possession of personal chattels

the superior right of possession.

being wrongfully detained from the plaintiff by another, or to

the provisional remedy that would allow the plaintiff to retain

"We cannot agree.

the thing during the pendency of the action and hold it

pendente lite.[20] The action is primarily possessory in nature

"It is an undisputed fact that the subject motor vehicle was

and generally determines nothing more than the right of

taken from the possession of said Roberto M. Reyes, a third

possession.

person with respect to the contract of chattel mortgage

action, being partly in rem and partly in personam-in rem

between the appellant and the defendants spouses Manahan.

insofar as the recovery of specific property is concerned, and

Replevin is so usually described as a mixed

in personam as regards to damages involved. As an "action in

"The Civil Code expressly provides that every possessor has a

rem," the gist of the replevin action is the right of the plaintiff

right to be respected in his possession (Art. 539, New Civil

to obtain possession of specific personal property by reason of

Code); that good faith is always presumed, and upon him who

his being the owner or of his having a special interest

alleges bad faith on the part of a possessor rests the burden of

therein.[21] Consequently, the person in possession of the

proof (Art. 527, ibid.); and that the possession of movable

property sought to be replevied is ordinarily the proper and

property acquired in good faith is equivalent to a title;

only necessary party defendant, and the plaintiff is not

nevertheless, one who has lost any movable or has been

required to so join as defendants other persons claiming a right

unlawfully deprived thereof, may recover it from the person in

on the property but not in possession thereof. Rule 60 of the

possession of the same (Art. 559, ibid.). Thus, it has been held

Rules of Court allows an application for the immediate

that a possessor in good faith is entitled to be respected and

possession of the property but the plaintiff must show that he

protected in his possession as if he were the true owner thereof

has a good legal basis, i.e., a clear title thereto, for seeking

until a competent court rules otherwise (Chus Hai vs.

such interim possession.

Kapunan, 104 Phil. 110; Yu, et al. vs. Hon. Honrado, etc., et
al., 99 SCRA 237). In the case at bar, the trial court did not

Where the right of the plaintiff to the possession of the

err in holding that the complaint does not state any cause of

specific property is so conceded or evident, the action need

action against Roberto M. Reyes, and in ordering the return of

only be maintained against him who so possesses the property.

the subject chattel to him."[19]

In rem actio est per quam rem nostram quae ab alio possidetur
petimus, et semper adversus eum est qui rem possidet. In

The appellate court, subsequently, denied petitioner's motion

Northern Motors, Inc. vs. Herrera,[22] the Court has said:

for reconsideration.
"There can be no question that persons having a special right
In the instant appeal, petitioner insists that a mortgagee can

of property in the goods the recovery of which is sought, such

maintain an action for replevin against any possessor of the

as a chattel mortgagee, may maintain an action for replevin

141

Transportation Law
Choco Notes
therefor. Where the mortgage authorizes the mortgagee to

thereof. The plaintiff need not be the owner so long as he is

take possession of the property on default, he may maintain an

able to specify his right to the possession of the property and

action to recover possession of the mortgaged chattels from

his legal basis therefor. The question then, insofar as the

the mortgagor or from any person in whose hands he may find

matter finds relation to the instant case, is whether or not the

them."[23]

plaintiff (herein petitioner) who has predicated his right on

being the mortgagee of a chattel mortgage should implead the

In effect then, the mortgagee, upon the mortgagor's default, is

mortgagor in his complaint that seeks to recover possession of

constituted an attorney-in-fact of the mortgagor enabling such

the encumbered property in order to effect its foreclosure.

mortgagee to act for and in behalf of the owner. Accordingly,

that the defendant is not privy to the chattel mortgage should

"The answer has to be in the affirmative.

In a suit for

be inconsequential. By the fact that the object of replevin is

replevin, a clear right of possession must be established. A

traced to his possession, one properly can be a defendant in an

foreclosure under a chattel mortgage may properly be

action for replevin. It is here assumed that the plaintiff's right

commenced only once there is default on the part of the

to possess the thing is not or cannot be disputed.

mortgagor of his obligation secured by the mortgage. The

replevin in the instant case has been sought to pave the way

In case the right of possession on the part of the plaintiff, or

for the foreclosure of the object covered by the chattel

his authority to claim such possession or that of his principal,

mortgage. The conditions essential for that foreclosure would

is put to great doubt (a contending party might contest the

be to show, firstly, the existence of the chattel mortgage and,

legal bases for plaintiff's cause of action or an adverse and

secondly, the default of the mortgagor. These requirements

independent claim of ownership or right of possession is

must be established since the validity of the plaintiff's exercise

raised by that party), it could become essential to have other

of the right of foreclosure are inevitably dependent thereon. It

persons involved and accordingly impleaded for a complete

would thus seem, considering particularly an adverse and

determination and resolution of the controversy. For instance,

independent claim of ownership by private respondent, that

in Servicewide Specialists, Inc., vs. Court of Appeals, et al.,

the lower court acted improvidently when it granted the

G.R. No. 103301, 08 December 1995, this Court ruled:

dismissal of the complaint against Dollente, albeit on

petitioner's (then plaintiff) plea, on the ground that the non-

"While, in its present petition for review on certiorari,

service of summons upon Ernesto Dollente (would) only delay

Servicewide has raised a number of points, the crucial issue

the determination of the merits of the case, to the prejudice of

still remains, however, to be whether or not an action filed by

the parties' In Imson v. Court of Appeals, we have explained:

the mortgagee for replevin to effect a foreclosure of the

property covered by the chattel mortgage would require that

x x x. An indispensable party is one whose interest will be

the mortgagor be so impleaded as an indispensable party

affected by the court's action in the litigation, and without

thereto.

whom no final determination of the case can be had. The

party's interest in the subject matter of the suit and in the relief

"Rule 60 of the Rules of Court allows a plaintiff, in an action

sought are so inextricably intertwined with the other parties

for the recovery of possession of personal property, to apply

that his legal presence as a party to the proceeding is an

for a writ of replevin if it can be shown that he is `the owner of

absolute necessity. In his absence there cannot be a resolution

the property claimed x x x or is entitled to the possession

142

Transportation Law
Choco Notes
of the dispute of the parties before the court which is effective,

WHEREFORE, the decision of the Court of Appeals is

complete, or equitable.

AFFIRMED. No costs.

`Conversely, a party is not indispensable to the suit if his

SO ORDERED.

interest in the controversy or subject matter is distinct and

divisible from the interest of the other parties and will not

State Regulation art. 1765

necessarily be prejudiced by a judgment which does complete

justice to the parties in court. He is not indispensable if his

Fisher v. Yangco Steamship

presence would merely permit complete relief between him

G.R. No. L-8095

March 31, 1915

and those already parties to the action or will simply avoid

F.C. FISHER, plaintiff,

multiple litigation.'

vs.
"Without the presence of indispensable parties to a suit or

YANGCO STEAMSHIP COMPANY, J.S. STANLEY, as

proceeding, a judgment of a court cannot attain real finality."

Acting Collector of Customs of the Philippine Islands,

(Footnotes omitted.)

IGNACIO

VILLAMOR,

as

Attorney-General

of

the

Philippine Islands, and W.H. BISHOP, as prosecuting attorney

A chattel mortgagee, unlike a pledgee, need not be in, nor

of the city of Manila, respondents.

entitled to, the possession of the property unless and until the
mortgagor defaults and the mortgagee thereupon seeks to

Haussermann, Cohn and Fisher for plaintiff.

foreclose thereon. Since the mortgagee's right of possession is

Office of the Solicitor-General Harvey for respondents.

conditioned upon the actual fact of default which itself may be

controverted, the inclusion of other parties, like the debtor or

CARSON, J.:

the mortgagor himself, may be required in order to allow a full

When the

The real question involved in these proceedings is whether the

mortgagee seeks a replevin in order to effect the eventual

refusal of the owners and officers of a steam vessel, duly

foreclosure of the mortgage, it is not only the existence of, but

licensed to engage in the coastwise trade of the Philippine

also the mortgagor's default on, the chattel mortgage that,

Islands and engaged in that trade as a common carrier, to

among other things, can properly uphold the right to replevy

accept for carriage "dynamite, powder or other explosives"

the property. The burden to establish a valid justification for

from any and all shippers who may offer such explosives for

that action lies with the plaintiff. An adverse possessor, who

carriage can be held to be a lawful act without regard to any

is not the mortgagor, cannot just be deprived of his possession,

question as to the conditions under which such explosives are

let alone be bound by the terms of the chattel mortgage

offered to carriage, or as to the suitableness of the vessel for

contract, simply because the mortgagee brings up an action for

the transportation of such explosives, or as to the possibility

replevin.

that the refusal to accept such articles of commerce in a

and conclusive determination of the case.

particular case may have the effect of subjecting any person or

The appellate court, accordingly, acted well in arriving at its

locality or the traffic in such explosives to an undue,

now questioned judgment.

unreasonable or unnecessary prejudice or discrimination.

143

Transportation Law
Choco Notes
Summarized briefly, the complaint alleges that plaintiff is a

require the company to accept such explosives for carriage

stockholder in the Yangco Steamship Company, the owner of

notwithstanding the above mentioned resolution of the

a large number of steam vessels, duly licensed to engage in the

directors and stockholders of the company, and that if the Act

coastwise trade of the Philippine Islands; that on or about June

does in fact require the company to carry such explosives it is

10, 1912, the directors of the company adopted a resolution

to that extent unconstitutional and void; that notwithstanding

which was thereafter ratified and affirmed by the shareholders

this belief of complainant as to the true meaning of the Act,

of the company, "expressly declaring and providing that the

the questions involved cannot be raised by the refusal of the

classes of merchandise to be carried by the company in its

company or its agents to comply with the demands of the

business as a common carrier do not include dynamite,

Acting Collector of Customs, without the risk of irreparable

powder or other explosives, and expressly prohibiting the

loss and damage resulting from his refusal to

officers, agents and servants of the company from offering to

facilitate the documentation of the company's vessels, and

carry, accepting for carriage said dynamite, powder or other

without assuming the company to test the questions involved

explosives;" that thereafter the respondent Acting Collector of

by refusing to accept such explosives for carriage.

Customs demanded and required of the company the

acceptance and carriage of such explosives; that he has refused

The prayer of the complaint is as follows:

and suspended the issuance of the necessary clearance

documents of the vessels of the company unless and until the

Wherefore your petitioner prays to this honorable court as

company consents to accept such explosives for carriage; that

follows:

plaintiff is advised and believes that should the company

decline to accept such explosives for carriage, the respondent

First. That to the due hearing of the above entitled action be

Attorney-General of the Philippine Islands and the respondent

issued a writ of prohibition perpetually restraining the

prosecuting attorney of the city of Manila intend to institute

respondent Yangco Steamship Company, its appraisers,

proceedings under the penal provisions of sections 4, 5, and 6

agents, servants or other representatives from accepting to

of Act No. 98 of the Philippine Commission against the

carry and from carrying, in steamers of said company

company, its managers, agents and servants, to enforce the

dynamite, powder or other explosive substance, in accordance

requirements of the Acting Collector of Customs as to the

with the resolution of the board of directors and of the

acceptance

shareholders of said company.

of

such

explosives

for

carriage;

that

notwithstanding the demands of the plaintiff stockholder, the

manager, agents and servants of the company decline and

Second. That a writ of prohibition be issued perpetually

refuse to cease the carriage of such explosives, on the ground

enjoining the respondent J.S. Stanley as Acting Collector of

that by reason of the severity of the penalties with which they

Customs of the Philippine Islands, his successors, deputies,

are threatened upon failure to carry such explosives, they

servants or other representatives, from obligating the said

cannot subject themselves to "the ruinous consequences which

Yangco Steamship Company, by any means whatever, to carry

would inevitably result" from failure on their part to obey the

dynamite, powder or other explosive substance.

demands and requirements of the Acting Collector of Customs

as to the acceptance for carriage of explosives; that plaintiff

Third. That a writ of prohibition be issued perpetually

believes that the Acting Collector of Customs erroneously

enjoining the respondent Ignacio Villamor as Attorney-

construes the provisions of Act No. 98 in holding that they

General of the Philippine Islands, and W.H. Bishop as

144

Transportation Law
Choco Notes
prosecuting attorney of the city of Manila, their deputies

vessels are unsuitable for the business of transporting

representatives or employees, from accusing the said Yangco

explosives; or that shippers have declined or will in future

Steamship Company, its officers, agents or servants, of the

decline to comply with such reasonable regulations and to take

violation of Act No. 98 by reason of the failure or omission of

such reasonable precautions as may be necessary and proper to

the said company to accept for carriage out to carry dynamite

secure the safety of the vessels of the company in transporting

powder or other explosive.

such explosives. Indeed the contention of petitioner is that a

common carrier in the Philippine Islands may decline to

Fourth. That the petitioner be granted such other remedy as

accept for carriage any shipment of merchandise of a class

may be meet and proper.

which it expressly or impliedly declines to accept from all

shippers alike, because as he contends "the duty of a common

To this complaint the respondents demurred, and we are of

carrier to carry for all who offer arises from the public

opinion that the demurrer must be sustained, on the ground

profession he has made, and limited by it."

that the complaint does not set forth facts sufficient to

constitute a cause of action.

In support of this contention counsel cites for a number of

English and American authorities, discussing and applying the

It will readily be seen that plaintiff seeks in these proceedings

doctrine of the common law with reference to common

to enjoin the steamship company from accepting for carriage

carriers. But it is unnecessary now to decide whether, in the

on any of its vessels, dynamite, powder or other explosives,

absence of statute, the principles on which the American and

under any conditions whatsoever; to prohibit the Collector of

English cases were decided would be applicable in this

Customs and the prosecuting officers of the government from

jurisdiction. The duties and liabilities of common carriers in

all attempts to compel the company to accept such explosives

this jurisdiction are defined and fully set forth in Act No. 98 of

for carriage on any of its vessels under any conditions

the Philippine Commission, and until and unless that statute be

whatsoever; and to prohibit these officials from any attempt to

declared invalid or unconstitutional, we are bound by its

invoke the penal provisions of Act No. 98, in any case of a

provisions.

refusal by the company or its officers so to do; and this

without regard to the conditions as to safety and so forth under

Sections 2, 3 and 4 of the Act are as follows:

which such explosives are offered for carriage, and without

regard also to any question as to the suitableness for the

SEC. 2. It shall be unlawful for any common carrier engaged

transportation of such explosives of the particular vessel upon

in the transportation of passengers or property as above set

which the shipper offers them for carriage; and further without

forth to make or give any unnecessary or unreasonable

regard to any question as to whether such conduct on the part

preference or advantage to any particular person, company,

of the steamship company and its officers involves in any

firm, corporation or locality, or any particular kind of traffic in

instance an undue, unnecessary or unreasonable discrimination

any respect whatsoever, or to subject any particular person,

to the prejudice of any person, locality or particular kind of

company, firm, corporation or locality, or any particular kind

traffic.

of traffic, to undue or unreasonable prejudice or discrimination

whatsoever, and such unjust preference or discrimination is

There are no allegations in the complaint that for some special

also hereby prohibited and declared to be unlawful.

and sufficient reasons all or indeed any of the company's

145

Transportation Law
Choco Notes
SEC. 3. No common carrier engaged in the carriage of

We agree with counsel for petitioner that the provision of the

passengers or property as aforesaid shall, under any pretense

Act which prescribes that, "No common carrier ... shall, under

whatsoever, fail or refuse to receive for carriage, and as

any pretense whatsoever, fail or refuse to receive for carriage

promptly as it is able to do so without discrimination, to carry

... to carry any person or property offering for carriage," is not

any person or property offering for carriage, and in the order

to be construed in its literal sense and without regard to the

in which such persons or property are offered for carriage, nor

context, so as to impose an imperative duty on all common

shall any such common carrier enter into any arrangement,

carriers to accept for carriage, and to carry all and any kind of

contract or agreement with any other person or corporation

freight which may be offered for carriage without regard to the

whereby the latter is given an exclusive or preferential or

facilities which they may have at their disposal. The legislator

monopolize the carriage any class or kind of property to the

could not have intended and did not intend to prescribe that a

exclusion or partial exclusion of any other person or persons,

common carrier running passenger automobiles for hire must

and the entering into any such arrangement, contract or

transport coal in his machines; nor that the owner of a tank

agreement, under any form or pretense whatsoever, is hereby

steamer,

prohibited and declared to be unlawful.

compartments for the carriage of crude oil must accept

expressly

constructed

in

small

watertight

common carrier must accept and carry contraband articles,

SEC. 4. Any willful violation of the provisions of this Act by

such as opium, morphine, cocaine, or the like, the mere

any common carrier engaged in the transportation of

possession of which is declared to be a criminal offense; nor

passengers or property as hereinbefore set forth is hereby

that common carriers must accept eggs offered for

declared to be punishable by a fine not exceeding five

transportation in paper parcels or any merchandise whatever

thousand dollars money of the United States, or by

do defectively packed as to entail upon the company

imprisonment not exceeding two years, or both, within the

unreasonable and unnecessary care or risks.

discretion of the court.

Read in connection with its context this, as well as all the
The validity of this Act has been questioned on various

other mandatory and prohibitory provisions of the statute, was

grounds, and it is vigorously contended that in so far as it

clearly intended merely to forbid failures or refusals to receive

imposes any obligation on a common carrier to accept for

persons or property for carriage involving any "unnecessary or

carriage merchandise of a class which he makes no public

unreasonable preference or advantage to any particular person,

profession to carry, or which he has expressly or impliedly

company, firm, corporation, or locality, or any particular kind

announced his intention to decline to accept for carriage from

of traffic in any respect whatsoever," or which would "subject

all shippers alike, it is ultra vires, unconstitutional and void.

any particular person, company, firm, corporation or locality,

or any particular kind of traffic to any undue or unreasonable

We may dismiss without extended discussion any argument or

prejudice or discrimination whatsoever."

contention as to the invalidity of the statute based on alleged

absurdities inherent

in its provisions or

on alleged

The question, then, of construing and applying the statute, in

unreasonable or impossible requirements which may be read

cases of alleged violations of its provisions, always involves a

into it by a strained construction of its terms.

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

146

Transportation Law
Choco Notes
kind of traffic, or of subjecting any person, locality, or

But when the legislature, in an effort to prevent any inquiry of

particular kind of traffic to any undue or unreasonable

the validity of a particular statute, so burdens any challenge

prejudice or discrimination. It is very clear therefore that the

thereof in the courts that the party affected is necessarily

language of the statute itself refutes any contention as to its

constrained to submit rather than take the chances of the

invalidity based on the alleged unreasonableness of its

penalties imposed, then it becomes a serious question whether

mandatory or prohibitory provisions.

the party is not deprived of the equal protection of the laws.

(Cotting vs. Goddard, 183 U. S., 79, 102.)

So also we may dismiss without much discussion the

contentions as to the invalidity of the statute, which are based

It may therefore be said that when the penalties for

on the alleged excessive severity of the penalties prescribed

disobedience are by fines so enormous and imprisonment so

for violation of its provisions. Upon general principles it is

severe as to intimidate the company and its officers from

peculiarly and exclusively within the province of the legislator

resorting to the courts to test the validity of the legislation, the

to prescribe the pains and penalties which may be imposed

result is the same as if the law in terms prohibited the

upon persons convicted of violations of the laws in force

company from seeking judicial construction of laws which

within his territorial jurisdiction. With the exercise of his

deeply affect its rights.

discretion in this regard where it is alleged that excessive fines

or cruel and unusual punishments have been prescribed, and

It is urged that there is no principle upon which to base the

even in such cases the courts will not presume to interfere in

claim that a person is entitled to disobey a statute at least once,

the absence of the clearest and most convincing argument and

for the purpose of testing its validity, without subjecting

proof in support of such contentions. (Weems vs. United

himself to the penalties for disobedience provided by the

States, 217 U.S., 349; U.S. vs. Pico, 18 Phil. Rep., 386.) We

statute in case it is valid. This is not an accurate statement of

need hardly add that there is no ground upon which to rest a

the case. Ordinarily a law creating offenses in the nature of

contention that the penalties prescribed in the statute under

misdemeanors or felonies relates to a subject over which the

consideration are either excessive or cruel and unusual, in the

jurisdiction of the legislature is complete in any event. In the

sense in which these terms are used in the organic legislation

case, however, of the establishment of certain rates without

in force in the Philippine Islands.

any hearing, the validity of such rates necessarily depends

upon whether they are high enough to permit at least some

But it is contended that on account of the penalties prescribed

return upon the investment (how much it is not now necessary

the statute should be held invalid upon the principles

to state), and an inquiry as to that fact is a proper subject of

announced in Ex parte Young (209 U.S., 123, 147, 148);

judicial investigation. If it turns out that the rates are too low

Cotting vs. Goddard (183 U.S., 79, 102); Mercantile Trust Co.

for that purpose, then they are illegal. Now, to impose upon a

vs. Texas Co. (51 Fed., 529); Louisville Ry. vs. McCord (103

party interested the burden of obtaining a judicial decision of

Fed., 216); Cons. Gas Co. vs. Mayer (416 Fed., 150). We are

such a question (no prior hearing having been given) only

satisfied however that the reasoning of those cases is not

upon the condition that, if unsuccessful, he must suffer

applicable to the statute under consideration. The principles

imprisonment and pay fines, as provided in these acts, is, in

announced in those decisions are fairly indicated in the

effect, to close up all approaches to the courts, and thus

following citations found in petitioner's brief:

prevent any hearing upon the question whether the rates as

provided by the acts are not too low, and therefore invalid.

147

Transportation Law
Choco Notes
The distinction is obvious between a case where the validity of

or to test in any particular case whether a given course of

the act depends upon the existence of a fact which can be

conduct does in fact involve such discrimination. We will

determined only after investigation of a very complicated and

presume, for the purpose of declaring the statute invalid, that

technical character, and the ordinary case of a statute upon a

there is so real a danger that the Courts of First Instance and

subject requiring no such investigation, and over which the

this court on appeal will abuse the discretion thus conferred

jurisdiction of the legislature is complete in any event.

upon us, as to intimidate any common carrier, acting in good

faith, from resorting to the courts to test the validity of the

We hold, therefore, that the provisions of the acts relating to

statute. Legislative enactments, penalizing unreasonable

the enforcement of the rates, either for freight or passengers,

discriminations,

by imposing such enormous fines and possible imprisonment

unreasonable conduct in various forms of human activity are

as a result of an unsuccessful effort to test the validity of the

so familiar and have been so frequently sustained in the courts,

laws themselves, are unconstitutional on their face, without

as to render extended discussion unnecessary to refute any

regard to the question of the insufficiency of those rates. (Ex

contention as to the invalidity of the statute under

parte Young, 209 U.S., 123 147, 148.)

consideration, merely it imposes upon the carrier the

unreasonable

restraints

of

trade,

and

obligation of adopting one of various courses of conduct open

An examination of the general provisions of our statute, of the

to it, at the risk of incurring a prescribed penalty in the event

circumstances under which it was enacted, the mischief which

that the course of conduct actually adopted by it should be

it sought to remedy and of the nature of the penalties

held to have involved an unreasonable, unnecessary or unjust

prescribed for violations of its terms convinces us that, unlike

discrimination. Applying the test announced in Ex parte

the statutes under consideration in the above cited cases, its

Young, supra, it will be seen that the validity of the Act does

enactment involved no attempt to prevent common carriers

not depend upon "the existence of a fact which can be

"from resorting to the courts to test the validity of the

determined only after investigation of a very complicated and

legislation;" no "effort to prevent any inquiry" as to its

technical character," and that "the jurisdiction of the

validity. It imposes no arbitrary obligation upon the company

legislature" over the subject with which the statute deals "is

to do or to refrain from doing anything. It makes no attempt to

complete in any event." There can be no real question as to the

compel such carriers to do business at a fixed or arbitrarily

plenary power of the legislature to prohibit and to penalize the

designated rate, at the risk of separate criminal prosecutions

making of undue, unreasonable and unjust discriminations by

for every demand of a higher or a different rate. Its penalties

common carriers to the prejudice of any person, locality or

can be imposed only upon proof of "unreasonable,"

particular kind of traffic. (See Munn vs. Illinois, 94 U.S., 113,

"unnecessary" and "unjust" discriminations, and range from a

and other cases hereinafter cited in support of this

maximum which is certainly not excessive for willful,

proposition.)

deliberate and contumacious violations of its provisions by a

great and powerful corporation, to a minimum which may be a

Counsel for petitioner contends also that the statute, if

merely nominal fine. With so wide a range of discretion for a

construed so as to deny the right of the steamship company to

contention on the part of any common carrier that it or its

elect at will whether or not it will engage in a particular

officers are "intimidated from resorting to the courts to test the

business,

validity" of the provisions of the statute prohibiting such

unconstitutional "because it is a confiscation of property, a

"unreasonable," "unnecessary" and "unjust" discriminations,

taking of the carrier's property without due process of law,"

such

as

that

of

carrying

explosives,

is

148

Transportation Law
Choco Notes
and because it deprives him of his liberty by compelling him

liberty, acquiring, possessing, and protecting property, and

to engage in business against his will. The argument continues

pursuing and obtaining safety and happiness;" and I know that,

as follows:

while that remains as the supreme law of the state, no

legislature can directly or indirectly lay its withering or

To require of a carrier, as a condition to his continuing in said

destroying hand on a single dollar invested in the legitimate

business, that he must carry anything and every thing is to

business of transportation." (Chicago & N.W. Ry. vs. Dey, 35

render useless the facilities he may have for the carriage of

Fed. Rep., 866, 880.)

certain lines of freight. It would be almost as complete a

confiscation of such facilities as if the same were destroyed.

It is manifest, however, that this contention is directed against

Their value as a means of livelihood would be utterly taken

a construction of the statute, which, as we have said, is not

away. The law is a prohibition to him to continue in business;

warranted by its terms. As we have already indicated, the

the alternative is to get out or to go into some other business

statute does not "require of a carrier, as a condition to his

the same alternative as was offered in the case of the

continuing in said business, that he must carry anything and

Chicago & N.W. Ry. vs. Dey (35 Fed. Rep., 866, 880), and

everything," and thereby "render useless the facilities he may

which was there commented on as follows:

have for the carriage of certain lines of freight." It merely

forbids failures or refusals to receive persons or property for

"Whatever of force there may be in such arguments, as applied

carriage which have the effect of giving an "unreasonable or

to mere personal property capable of removal and use

unnecessary preference or advantage" to any person, locality

elsewhere, or in other business, it is wholly without force as

or particular kind of traffic, or of subjecting any person,

against railroad corporations, so large a proportion of whose

locality or particular kind of traffic to any undue or

investment is in the soil and fixtures appertaining thereto,

unreasonable prejudice or discrimination.

which cannot be removed. For a government, whether that

government be a single sovereign or one of the majority, to

Counsel expressly admits that the statute, "as a prohibition

say to an individual who has invested his means in so laudable

against discrimination is a fair, reasonable and valid exercise

an enterprise as the construction of a railroad, one which tends

of government," and that "it is necessary and proper that such

so much to the wealth and prosperity of the community, that,

discrimination be prohibited and prevented," but he contends

if he finds that the rates imposed will cause him to do business

that "on the other hand there is no reasonable warrant nor

at a loss, he may quit business, and abandon that road, is the

valid excuse for depriving a person of his liberty by requiring

very irony of despotism. Apples of Sodom were fruit of joy in

him to engage in business against his will. If he has a rolling

comparison. Reading, as I do, in the preamble of the Federal

boat, unsuitable and unprofitable for passenger trade, he may

Constitution, that it was ordained to "establish justice," I can

devote it to lumber carrying. To prohibit him from using it

never believe that it is within the property of an individual

unless it is fitted out with doctors and stewards and staterooms

invested in and used for a purpose in which even the Argus

to carry passengers would be an invalid confiscation of this

eyes of the police power can see nothing injurious to public

property. A carrier may limit his business to the branches

morals, public health, or the general welfare. I read also in the

thereof that suit his convenience. If his wagon be old, or the

first section of the bill of rights of this state that "all men are

route dangerous, he may avoid liability for loss of passengers'

by nature free and equal, and have certain inalienable rights,

lives and limbs by carrying freight only. If his vehicles require

among which are those of enjoying and defending life and

expensive

pneumatic

tires,

unsuitable

for

freight

149

Transportation Law
Choco Notes
transportation, ha may nevertheless carry passengers. The only

convenience, or in the hope of increasing his business and thus

limitation upon his action that it is competent for the

making larger profits, he had publicly announced his intention

governing authority to impose is to require him to treat all

not to carry one or other of these classes of passengers.

alike. His limitations must apply to all, and they must be

established limitations. He cannot refuse to carry a case of red

The nature of the business of a common carrier as a public

jusi on the ground that he has carried for others only jusi that

employment is such that it is clearly within the power of the

he was green, or blue, or black. But he can refuse to carry red

state to impose such just and reasonable regulations thereon in

jusi, if he has publicly professed such a limitation upon his

the interest of the public as the legislator may deem proper. Of

business and held himself out as unwilling to carry the same

course such regulations must not have the effect of depriving

for anyone."

an owner of his property without due process of law, nor of

confiscating or appropriating private property without just

To this it is sufficient answer to say that there is nothing in the

compensation, nor of limiting or prescribing irrevocably

statute which would deprive any person of his liberty "by

vested rights or privileges lawfully acquired under a charter or

requiring him to engage in business against his will." The

franchise. But aside from such constitutional limitations, the

prohibitions of the statute against undue, unnecessary or

determination of the nature and extent of the regulations which

unreasonable regulations which the legislator has seen fit to

should be prescribed rests in the hands of the legislator.

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-

Common carriers exercise a sort of public office, and have

imposed limitations by the carrier upon the business

duties to perform in which the public is interested. Their

conducted by him, in the various examples given by counsel,

business is, therefore, affected with a public interest, and is

do not involve an unreasonable or unnecessary discrimination

subject of public regulation. (New Jersey Steam Nav. Co. vs.

the statute would not control his action in any wise whatever.

Merchants Bank, 6 How., 344, 382; Munn vs. Illinois, 94 U.S.,

It operates only in cases involving such unreasonable or

113, 130.) Indeed, this right of regulation is so far beyond

unnecessary preferences or discriminations. Thus in the

question that it is well settled that the power of the state to

hypothetical case suggested by the petitioner, a carrier

exercise legislative control over railroad companies and other

engaged in the carriage of green, blue or black jusi, and duly

carriers "in all respects necessary to protect the public against

equipped therefor would manifestly be guilty of "giving an

danger, injustice and oppression" may be exercised through

unnecessary and unreasonable preference to a particular kind

boards of commissioners. (New York etc. R. Co. vs. Bristol,

of traffic" and of subjecting to "an undue and reasonable

151 U.S., 556, 571; Connecticut etc. R. Co. vs. Woodruff, 153

prejudice a particular kind of traffic," should he decline to

U.S., 689.)

carry red jusi, to the prejudice of a particular shipper or of

those engaged in the manufacture of that kind of jusi, basing

Regulations limiting of passengers the number of passengers

his refusal on the ground of "mere whim or caprice" or of

that may be carried in a particular vehicle or steam vessel, or

mere personal convenience. So a public carrier of passengers

forbidding the loading of a vessel beyond a certain point, or

would not be permitted under this statute to absolve himself

prescribing the number and qualifications of the personnel in

from liability for a refusal to carry a Chinaman, a Spaniard, an

the employ of a common carrier, or forbidding unjust

American, a Filipino, or a mestizo by proof that from "mere

discrimination as to rates, all tend to limit and restrict his

whim or caprice or personal scruple," or to suit his own

liberty and to control to some degree the free exercise of his

150

Transportation Law
Choco Notes
discretion in the conduct of his business. But since the

Of course this power to regulate is not a power to destroy, and

Granger cases were decided by the Supreme Court of the

limitation is not the equivalent of confiscation. Under pretense

United States no one questions the power of the legislator to

of regulating fares and freight the state can not require a

prescribe such reasonable regulations upon property clothed

railroad corporation to carry persons or property without

with a public interest as he may deem expedient or necessary

reward. Nor can it do that which in law amounts to a taking of

to protect the public against danger, injustice or oppression.

private property for public use without just compensation, or

(Munn vs. Illinois, 94 U.S., 113, 130; Chicago etc. R. Co. vs.

without due process of law. (Chicago etc. R. Co. vs.

Cutts, 94 U.S., 155; Budd vs. New York, 143 U.S., 517;

Minnesota, 134 U.S., 418; Minneapolis Eastern R. Co. vs.

Cotting vs. Goddard, 183 U.S., 79.) The right to enter the

Minnesota, 134 U.S., 467.) But the judiciary ought not to

public employment as a common carrier and to offer one's

interfere

services to the public for hire does not carry with it the right to

unreasonable as to make their enforcement equivalent to the

conduct that business as one pleases, without regard to the

taking of property for public use without such compensation

interest of the public and free from such reasonable and just

as under all the circumstances is just both to the owner and to

regulations as may be prescribed for the protection of the

the public, that is, judicial interference should never occur

public from the reckless or careless indifference of the carrier

unless the case presents, clearly and beyond all doubt, such a

as to the public welfare and for the prevention of unjust and

flagrant attack upon the rights of property under the guise of

unreasonable discrimination of any kind whatsoever in the

regulations as to compel the court to say that the regulation in

performance of the carrier's duties as a servant of the public.

question will have the effect to deny just compensation for

with

regulations

established

and

palpably

private property taken for the public use. (Chicago etc. R. Co.
Business of certain kinds, including the business of a common

vs. Wellman, 143 U.S., 339; Smyth vs. Ames, 169 U.S., 466,

carrier, holds such a peculiar relation to the public interest that

524; Henderson Bridge Co. vs. Henderson City, 173 U.S.,

there is superinduced upon it the right of public regulation.

592, 614.)

(Budd vs. New York, 143 U.S., 517, 533.) When private
property is "affected with a public interest it ceases to be juris

Under the common law of England it was early recognized

privati only." Property becomes clothed with a public interest

that common carriers owe to the public the duty of carrying

when used in a manner to make it of public consequence and

indifferently for all who may employ them, and in the order in

affect the community at large. "When, therefore, one devotes

which application is made, and without discrimination as to

his property to a use in which the public has an interest, he, in

terms. True, they were allowed to restrict their business so as

effect, grants to the public an interest in that use, and must

to exclude particular classes of goods, but as to the kinds of

submit to be controlled by the public for the common good, to

property which the carrier was in the habit of carrying in the

the extent of the interest he has thus created. He may withdraw

prosecution of his business he was bound to serve all

his grant by discontinuing the use, but so long as he maintains

customers alike (State vs. Cincinnati etc. R. Co., 47 Ohio St.,

the use he must submit to control." (Munn vs. Illinois, 94 U.S.,

130, 134, 138; Louisville etc. Ry. Co. vs. Quezon City Coal

113; Georgia R. & Bkg. Co. vs. Smith, 128 U.S., 174; Budd

Co., 13 Ky. L. Rep., 832); and it is to be observed in passing

vs. New York, 143 U.S., 517; Louisville etc. Ry. Co. vs.

that these common law rules are themselves regulations

Kentucky, 161 U.S., 677, 695.)

controlling, limiting and prescribing the conditions under

which common carriers were permitted to conduct their
business. (Munn vs. Illinois, 94 U. S., 113, 133.)

151

Transportation Law
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business his will or to make use of his facilities in a manner or
It was found, in the course of time, that the correction of

for a purpose for which they are not reasonably adapted. It is

abuses which had grown up with the enormously increasing

only when he offers his facilities as a common carrier to the

business of common carriers necessitated the adoption of

public for hire, that the statute steps in and prescribes that he

statutory regulations controlling the business of common

must treat all alike, that he may not pick and choose which

carriers, and imposing severe and drastic penalties for

customer he will serve, and, specifically, that he shall not

violations of their terms. In England, the Railway Clauses

make

Consolidation Act was enacted in 1845, the Railway and

discriminations whatsoever to the prejudice not only of any

Canal Traffic Act in 1854, and since the passage of those Acts

person or locality but also of any particular kind of traffic.

any

undue

or

unreasonable

preferences

or

much additional legislation has been adopted tending to limit

and control the conduct of their business by common carriers.

The legislator having enacted a regulation prohibiting

In the United States, the business of common carriers has been

common carriers from giving unnecessary or unreasonable

subjected to a great variety of statutory regulations. Among

preferences or advantages to any particular kind of traffic or

others Congress enacted "The Interstate Commerce Act"

subjecting any particular kind of traffic to any undue or

(1887) and its amendments, and the Elkins Act as amended

unreasonable prejudice or discrimination whatsoever, it is

(1906); and most if not all of the States of the Union have

clear that whatever may have been the rule at the common

adopted similar legislation regulating the business of common

law, common carriers in this jurisdiction cannot lawfully

carriers within their respective jurisdictions. Unending

decline to accept a particular class of goods for carriage, to the

litigation

their

prejudice of the traffic in those goods, unless it appears that

amendments, but nowhere has the right of the state to

for some sufficient reason the discrimination against the traffic

prescribe just and reasonable regulations controlling and

in such goods is reasonable and necessary. Mere whim or

limiting the conduct of the business of common carriers in the

prejudice will not suffice. The grounds for the discrimination

public interest and for the general welfare been successfully

must be substantial ones, such as will justify the courts in

challenged, though of course there has been wide divergence

holding the discrimination to have been reasonable and

of opinion as to the reasonableness, the validity and legality of

necessary under all circumstances of the case.

has

arisen

under

these

statutes

and

many of the regulations actually adopted.

The prayer of the petition in the case at bar cannot be granted
The power of the Philippine legislator to prohibit and to

unless we hold that the refusal of the defendant steamship

penalize

unreasonable

company to accept for carriage on any of its vessels

discriminations by common carriers may be maintained upon

"dynamite, gunpowder or other explosives" would in no

the same reasoning which justified the enactment by the

instance involve a violation of the provisions of this statute.

Parliament of England and the Congress of the United States

There can be little doubt, however, that cases may and will

of the above mentioned statutes prohibiting and penalizing the

arise wherein the refusal of a vessel "engaged in the coastwise

granting of certain preferences and discriminations in those

trade of the Philippine Islands as a common carrier" to accept

countries. As we have said before, we find nothing

such explosives for carriage would subject some person,

confiscatory or unreasonable in the conditions imposed in the

company, firm or corporation, or locality, or particular kind of

Philippine statute upon the business of common carriers.

traffic to a certain prejudice or discrimination. Indeed it cannot

Correctly construed they do not force him to engage in any

be doubted that the refusal of a "steamship company, the

all

and

any

unnecessary

or

152

Transportation Law
Choco Notes
owner of a large number of vessels" engaged in that trade to

or particular kind of traffic or subjects any person, locality or

receive for carriage any such explosives on any of its vessels

particular to traffic to an undue or unreasonable prejudice and

would subject the traffic in such explosives to a manifest

discrimination is by no means "self-evident," and that it is a

prejudice and discrimination. The only question to be

question of fact to be determined by the particular

determined

circumstances of each case.

therefore

is

whether

such

prejudice

or

discrimination might in any case prove to be undue,

unnecessary or unreasonable.

The words "dynamite, powder or other explosives" are broad

enough to include matches, and other articles of like nature,

This of course is, in each case, a question of fact, and we are

and may fairly be held to include also kerosene oil, gasoline

of the opinion that the facts alleged in the complaint are not

and similar products of a highly inflammable and explosive

sufficient to sustain a finding in favor of the contentions of the

character. Many of these articles of merchandise are in the

petitioner. It is not alleged in the complaint that "dynamite,

nature of necessities in any country open to modern progress

gunpowder and other explosives" can in no event be

and advancement. We are not fully advised as to the methods

transported with reasonable safety on board steam vessels

of transportation by which they are made commercially

engaged in the business of common carriers. It is not alleged

available throughout the world, but certain it is that dynamite,

that all, or indeed any of the defendant steamship company's

gunpowder, matches, kerosene oil and gasoline are transported

vessels are unsuited for the carriage of such explosives. It is

on many vessels sailing the high seas. Indeed it is a matter of

not alleged that the nature of the business in which the

common knowledge that common carriers throughout the

steamship company is engaged is such as to preclude a finding

world transport enormous quantities of these explosives, on

that a refusal to accept such explosives on any of its vessels

both land and sea, and there can be little doubt that a general

would subject the traffic in such explosives to an undue and

refusal of the common carriers in any country to accept such

unreasonable prejudice and discrimination.

explosives for carriage would involve many persons, firms and

enterprises in utter ruin, and would disastrously affect the

Plaintiff's contention in this regard is as follows:

interests of the public and the general welfare of the

community.

In the present case, the respondent company has expressly and

publicly renounced the carriage of explosives, and expressly

It would be going to far to say that a refusal by a steam vessel

excluded the same terms from the business it conducts. This in

engaged in the business of transporting general merchandise

itself were sufficient, even though such exclusion of

as a common carrier to accept for carriage a shipment of

explosives were based on no other ground than the mere

matches, solely on the ground of the dangers incident to the

whim, caprice or personal scruple of the carrier. It is

explosive quality of this class of merchandise, would not

unnecessary, however, to indulge in academic discussion of a

subject the traffic in matches to an unnecessary, undue or

moot question, for the decision not a carry explosives rests on

unreasonable prejudice and discrimination without proof that

substantial grounds which are self-evident.

for some special reason the particular vessel is not fitted to

carry articles of that nature. There may be and doubtless are

We think however that the answer to the question whether

some vessels engaged in business as common carriers of

such a refusal to carry explosives involves an unnecessary or

merchandise, which for lack of suitable deck space or storage

unreasonable preference or advantage to any person, locality

rooms might be justified in declining to carry kerosene oil,

153

Transportation Law
Choco Notes
gasoline, and similar products, even when offered for carriage

knowledge of its properties as a result of wide experience in

securely packed in cases; and few vessels are equipped to

its manufacture and transportation.

transport those products in bulk. But in any case of a refusal to

carry such products which would subject any person, locality

As we construe the Philippine statute, the mere fact that

or the traffic in such products would be necessary to hear

violent and destructive explosions can be obtained by the use

evidence before making an affirmative finding that such

of dynamite under certain conditions would not be sufficient

prejudice or discrimination was or was not unnecessary, undue

in itself to justify the refusal of a vessel, duly licensed as a

or unreasonable. The making of such a finding would involve

common carrier of merchandise, to accept it for carriage, if it

a consideration of the suitability of the vessel for the

can be proven that in the condition in which it is offered for

transportation of such products ; the reasonable possibility of

carriage there is no real danger to the carrier, nor reasonable

danger or disaster resulting from their transportation in the

ground to fear that his vessel or those on board his vessel will

form and under the conditions in which they are offered for

be exposed to unnecessary and unreasonable risk in

carriage; the general nature of the business done by the carrier

transporting it, having in mind the nature of his business as a

and, in a word, all the attendant circumstances which might

common carrier engaged in the coastwise trade in the

affect the question of the reasonable necessity for the refusal

Philippine Islands, and his duty as a servant of the public

by the carrier to undertake the transportation of this class of

engaged in a public employment. So also, if by the exercise of

merchandise.

due diligence and the taking of unreasonable precautions the

danger of explosions can be practically eliminated, the carrier

But it is contended that whatever the rule may be as to other

would not be justified in subjecting the traffic in this

explosives, the exceptional power and violence of dynamite

commodity to prejudice or discrimination by proof that there

and gunpowder in explosion will always furnish the owner of

would be a possibility of danger from explosion when no such

a vessel with a reasonable excuse for his failure or refusal to

precautions are taken.

accept them for carriage or to carry them on board his boat.

We think however that even as to dynamite and gunpowder

The traffic in dynamite, gunpowder and other explosives is

we would not be justified in making such a holding unaided by

vitally essential to the material and general welfare of the

evidence sustaining the proposition that these articles can

people of these Islands. If dynamite, gunpowder and other

never be carried with reasonable safety on any vessel engaged

explosives are to continue in general use throughout the

in the business of a common carrier. It is said that dynamite is

Philippines, they must be transported by water from port to

so erratic an uncontrollable in its action that it is impossible to

port in the various islands which make up the Archipelago.

assert that it can be handled with safety in any given case. On

We are satisfied therefore that the refusal by a particular

the other hand it is contended that while this may be true of

vessel, engaged as a common carrier of merchandise in the

some kinds of dynamite, it is a fact that dynamite can be and is

coastwise trade of the Philippine Islands, to accept any or all

manufactured so as to eliminate any real danger from

of these explosives for carriage would constitute a violation of

explosion during transportation. These are of course questions

the prohibitions against discriminations penalized under the

of fact upon which we are not qualified to pass judgment

statute, unless it can be shown by affirmative evidence that

without the assistance of expert witnesses who have made

there is so real and substantial a danger of disaster necessarily

special studies as to the chemical composition and reactions of

involved in the carriage of any or all of these articles of

the different kinds of dynamite, or attained a thorough

merchandise as to render such refusal a due or a necessary or a

154

Transportation Law
Choco Notes
reasonable exercise of prudence and discretion on the part of

appears that for some sufficient reason the discrimination

the shipowner.

against the traffic in such goods is reasonable and necessary.

Mere prejudice or whim will not suffice. The grounds of the

The complaint in the case at bar lacking the necessary

discrimination must be substantial ones, such as will justify

allegations under this ruling, the demurrer must be sustained

the courts in holding the discrimination to have been

on the ground that the facts alleged do not constitute a cause

reasonable and necessary under all the circumstances of the

of action.

case."

A number of interesting questions of procedure are raised and

Unless an amended complaint be filed in the meantime, let

discussed in the briefs of counsel. As to all of these questions

judgment be entered ten days hereafter sustaining the

we expressly reserve our opinion, believing as we do that in

demurrer and dismissing the complaint with costs against the

sustaining the demurrer on the grounds indicated in this

complainant, and twenty days thereafter let the record be filed

opinion we are able to dispose of the real issue involved in the

in the archives of original actions in this court. So ordered.

proceedings without entering upon the discussion of the nice

questions which it might have been necessary to pass upon

Arellano, C.J., and Trent, J., concur.

had it appeared that the facts alleged in the complaint

Torres and Johnson, JJ., concur in the result.

constitute a cause of action.

Pantranco v. CA
We think, however, that we should not finally dispose of the

G.R. No. 47065

June 26, 1940

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

PANGASINAN TRANSPORTATION CO., INC., petitioner,

vs.
THE PUBLIC SERVICE COMMISSION, respondent.

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

C. de G. Alvear for petitioner.

Evaristo R. Sandoval for respondent.

not been heard in this connection. We therefore refrain from

any comment upon any questions which might be raised as to

LAUREL, J.:

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

The petitioner has been engaged for the past twenty years in
the business of transporting passengers in the Province of
Pangasinan and Tarlac and, to a certain extent, in the Province
of Nueva Ecija and Zambales, by means of motor vehicles
commonly known as TPU buses, in accordance with the terms
and conditions of the certificates of public convenience issued
in its favor by the former Public Utility Commission in cases
Nos. 24948, 30973, 36830, 32014 and 53090. On August 26,
1939, the petitioner filed with the Public Service Commission
an application for authorization to operate ten additional new

155

Transportation Law
Choco Notes
Brockway trucks (case No. 56641), on the ground that they

No. 454 unconstitutional and void; that, if this court should be

were needed to comply with the terms and conditions of its

of the opinion that section 1 of Commonwealth Act No. 454 is

existing certificates and as a result of the application of the

constitutional, a decision be rendered declaring that the

Eight Hour Labor Law. In the decision of September 26, 1939,

provisions thereof are not applicable to valid and subsisting

granting the petitioner's application for increase of equipment,

certificates issued prior to June 8, 1939. Stated in the language

the Public Service Commission ordered:

of the petitioner, it is contended:

Y de acuerdo con que se provee por el articulo 15 de la ley

1. That the legislative powers granted to the Public Service

No. 146 del Commonwealth, tal como ha sido enmendada por

Commission by section 1 of Commonwealth Act No. 454,

el articulo 1 de la Ley No. 454, por la presente se enmienda las

without limitation, guide or rule except the unfettered

condiciones de los certificados de convenciencia publica

discretion and judgment of the Commission, constitute a

expedidos en los expedientes Nos. 24948, 30973, 36831,

complete and total abdication by the Legislature of its

32014 y la authorizacion el el expediente No. 53090, asi que

functions in the premises, and for that reason, the Act, in so far

se consideran incorporadas en los mismos las dos siguientes

as those powers are concerned, is unconstitutional and void.

condiciones:
2. That even if it be assumed that section 1 of Commonwealth
Que los certificados de conveniencia publica y authorizacion

Act No. 454, is valid delegation of legislative powers, the

arriba mencionados seran validos y subsistentes solamente

Public Service Commission has exceeded its authority

durante de veinticinco (25) anos, contados desde la fecha de la

because: (a) The Act applies only to future certificates and not

promulgacion de esta decision.

to valid and subsisting certificates issued prior to June 8, 1939,

when said Act took effect, and (b) the Act, as applied by the

Que la empresa de la solicitante porda ser adquirida por el

Commission, violates constitutional guarantees.

Commonwealth de Filipinas o por alguna dependencia del

mismo en cualquier tiempo que lo deseare previo pago del

Section 15 of Commonwealth Act No. 146, as amended by

precio d costo de su equipo util, menos una depreciacion

section 1 of Commonwealth Act No. 454, invoked by the

razonable que se ha fijar por la Comision al tiempo de su

respondent Public Service Commission in the decision

adquisicion.

complained of in the present proceedings, reads as follows:

Not being agreeable to the two new conditions thus

With the exception to those enumerated in the preceding

incorporated in its existing certificates, the petitioner filed on

section, no public service shall operate in the Philippines

October 9, 1939 a motion for reconsideration which was

without possessing a valid and subsisting certificate from the

denied by the Public Service Commission on November 14,

Public Service Commission, known as "certificate of public

1939. Whereupon, on November 20, 1939, the present petition

convenience," or "certificate of convenience and public

for a writ of certiorari was instituted in this court praying that

necessity," as the case may be, to the effect that the operation

an order be issued directing the secretary of the Public Service

of said service and the authorization to do business will

Commission to certify forthwith to this court the records of all

promote the public interests in a proper and suitable manner.

proceedings in case No. 56641; that this court, after hearing,

render a decision declaring section 1 of Commonwealth Act

156

Transportation Law
Choco Notes
The Commission may prescribed as a condition for the

transportation and communication, and, upon payment of just

issuance of the certificate provided in the preceding paragraph

compensation, transfer to public ownership utilities and other

that the service can be acquired by the Commonwealth of the

private enterprises to be operated by the Government.

Philippines or by any instrumentality thereof upon payment of

"Another condition which the Commission may prescribed,

the cost price of its useful equipment, less reasonable

and which is assailed by the petitioner, is that the certificate

depreciation; and likewise, that the certificate shall valid only

"shall be valid only for a definite period of time." As there is a

for a definite period of time; and that the violation of any of

relation between the first and second paragraphs of said

these conditions shall produce the immediate cancellation of

section 15, the two provisions must be read and interpreted

the certificate without the necessity of any express action on

together. That is to say, in issuing a certificate, the

the part of the Commission.

Commission must necessarily be satisfied that the operation of

the service under said certificate during a definite period fixed

In estimating the depreciation, the effect of the use of the

therein "will promote the public interests in a proper and

equipment, its actual condition, the age of the model, or other

suitable manner." Under section 16 (a) of Commonwealth Act.

circumstances affecting its value in the market shall be taken

No. 146 which is a complement of section 15, the Commission

into consideration.

is empowered to issue certificates of public convenience

whenever it "finds that the operation of the public service

The foregoing is likewise applicable to any extension or

proposed and the authorization to do business will promote the

amendment of certificates actually force and to those which

public interests in a proper and suitable manner." Inasmuch as

may hereafter be issued, to permits to modify itineraries and

the period to be fixed by the Commission under section 15 is

time schedules of public services and to authorization to renew

inseparable from the certificate itself, said period cannot be

and increase equipment and properties.

disregarded by the Commission in determining the question

whether the issuance of the certificate will promote the public

Under the first paragraph of the aforequoted section 15 of Act

interests in a proper and suitable manner. Conversely, in

No. 146, as amended, no public service can operate without a

determining "a definite period of time," the Commission will

certificate of public convenience or certificate of convenience

be guided by "public interests," the only limitation to its power

and public necessity to the effect that the operation of said

being that said period shall not exceed fifty years (sec. 16 (a),

service and the authorization to do business will "public

Commonwealth Act No. 146; Constitution, Art. XIII, sec. 8.)

interests in a proper and suitable manner." Under the second

We have already ruled that "public interest" furnishes a

paragraph, one of the conditions which the Public Service

sufficient standard. (People vs. Fernandez and Trinidad, G. R.

Commission may prescribed the issuance of the certificate

No. 45655, promulgated June 15, 1938; People vs. Rosenthal

provided for in the first paragraph is that "the service can be

and Osmea, G. R. Nos. 46076 and 46077, promulgated June

acquired by the Commonwealth of the Philippines or by any

12, 1939, citing New York Central Securities Corporation vs.

instrumental thereof upon payment of the cost price of its

U.S.A., 287 U.S. 12, 24, 25, 77 Law. ed. 138, 145, 146;

useful equipment, less reasonable depreciation," a condition

Schenchter Poultry Corporation vs. I.S., 295, 540, 79 Law. ed.

which is virtually a restatement of the principle already

1570, 1585; Ferrazzini vs. Gsell, 34 Phil., 697, 711-712.)

embodied in the Constitution, section 6 of Article XII, which

provides that "the State may, in the interest of national welfare

Section 8 of Article XIII of the Constitution provides, among

and defense, establish and operate industries and means of

other things, that no franchise, certificate, or any other form of

157

Transportation Law
Choco Notes
authorization for the operation of a public utility shall be "for

University Press, 1922, vol. 2, p. 167) but which is also

a longer period than fifty years," and when it was ordained, in

recognized in principle in the Roman Law (D. 17.18.3), has

section 15 of Commonwealth Act No. 146, as amended by

been made to adapt itself to the complexities of modern

Commonwealth Act No. 454, that the Public Service

governments, giving rise to the adoption, within certain limits,

Commission may prescribed as a condition for the issuance of

of the principle of "subordinate legislation," not only in the

a certificate that it "shall be valid only for a definite period of

United States and England but in practically all modern

time" and, in section 16 (a) that "no such certificates shall be

governments. (People vs. Rosenthal and Osmea, G. R. Nos.

issued for a period of more than fifty years," the National

46076 and 46077, promulgated June 12, 1939.) Accordingly,

Assembly meant to give effect to the aforesaid constitutional

with the growing complexity of modern life, the multiplication

mandate. More than this, it has thereby also declared its will

of the subjects of governmental regulation, and the increased

that the period to be fixed by the Public Service Commission

difficulty of administering the laws, there is a constantly

shall not be longer than fifty years. All that has been delegated

growing tendency toward the delegation of greater powers by

to the Commission, therefore, is the administrative function,

the legislature, and toward the approval of the practice by the

involving the use discretion, to carry out the will of the

court. (Dillon Catfish Drainage Dist, v. Bank of Dillon, 141 S.

National Assembly having in view, in addition, the promotion

E. 274, 275, 143 S. Ct. 178; State vs. Knox County, 54 S. W.

of "public interests in a proper and suitable manner." The fact

2d. 973, 976, 165 Tenn. 319.) In harmony with such growing

that the National Assembly may itself exercise the function

tendency, this Court, since the decision in the case of

and authority thus conferred upon the Public Service

Compaia General de Tabacos de Filipinas vs. Board of

Commission does not make the provision in question

Public Utility Commissioner (34 Phil., 136), relied upon by

constitutionally objectionable.

the petitioner, has, in instances, extended its seal of approval

to the "delegation of greater powers by the legislature."

The theory of the separation of powers is designed by its

(Inchausti Steamship Co. vs. Public Utility Commissioner, 44

originators to secure action and at the same time to forestall

Phil., Autobus Co. vs. De Jesus, 56 Phil., 446; People vs.

overaction which necessarily results from undue concentration

Fernandez & Trinidad, G. R. No. 45655, promulgated June 15,

of powers, and thereby obtain efficiency and prevent

1938; People vs. Rosenthal & Osmea, G. R. Nos. 46076,

deposition. Thereby, the "rule of law" was established which

46077, promulgated June 12, 1939; and Robb and Hilscher vs.

narrows the range of governmental action and makes it subject

People, G. R. No. 45866, promulgated June 12, 1939.).

to control by certain devices. As a corollary, we find the rule

prohibiting delegation of legislative authority, and from the

Under the fourth paragraph of section 15 of Commonwealth

earliest time American legal authorities have proceeded on the

Act No. 146, as amended by Commonwealth Act No. 454, the

theory that legislative power must be exercised by the

power of the Public Service Commission to prescribed the

legislature alone. It is frankness, however, to confess that as

conditions "that the service can be acquired by the

one delves into the mass of judicial pronouncement, he finds a

Commonwealth of the Philippines or by any instrumentality

great deal of confusion. One thing, however, is apparent in the

thereof upon payment of the cost price of its useful equipment,

development of the principle of separation of powers and that

less reasonable," and "that the certificate shall be valid only

is that the maxim of delegatus non potest delegari or delegata

for a definite period of time" is expressly made applicable "to

potestas non potest delegari, attributed to Bracton (De Legius

any extension or amendment of certificates actually in force"

et Consuetedinious Angliae, edited by G. E. Woodbine, Yale

and "to authorizations to renew and increase equipment and

158

Transportation Law
Choco Notes
properties." We have examined the legislative proceedings on

certificado de conveniencia publica de una manera que podria

the subject and have found that these conditions were

pasar de cincuenta anos, porque seria anticonstitucional.

purposely made applicable to existing certificates of public

convenience. The history of Commonwealth Act No. 454

xxx

xxx

xxx

reveals that there was an attempt to suppress, by way of

amendment, the sentence "and likewise, that the certificate

By a majority vote the proposed amendment was defeated.

shall be valid only for a definite period of time," but the

(Sesion de 17 de mayo de 1939, Asamblea Nacional.)

attempt failed:
The petitioner is mistaken in the suggestion that, simply
xxx

xxx

xxx

because its existing certificates had been granted before June

8, 1939, the date when Commonwealth Act No. 454,

Sr. CUENCO. Seor Presidente, para otra enmienda. En la

amendatory of section 15 of Commonwealth Act No. 146, was

misma pagina, lineas 23 y 24, pido que se supriman las

approved, it must be deemed to have the right of holding them

palabras 'and likewise, that the certificate shall be valid only

in perpetuity. Section 74 of the Philippine Bill provided that

for a definite period time.' Esta disposicion del proyecto

"no franchise, privilege, or concession shall be granted to any

autoriza a la Comision de Servicios Publicos a fijar un plazo

corporation except under the conditions that it shall be subject

de vigencia certificado de conveniencia publica. Todo el

to amendment, alteration, or repeal by the Congress of the

mundo sabe que bo se puede determinar cuando los intereses

United States." The Jones Law, incorporating a similar

del servicio publico requiren la explotacion de un servicio

mandate, provided, in section 28, that "no franchise or right

publico y ha de saber la Comision de Servisios, si en un

shall be granted to any individual, firm, or corporation except

tiempo determinado, la explotacion de algunos buses en cierta

under the conditions that it shall be subject to amendment,

ruta ya no tiene de ser, sobre todo, si tiene en cuenta; que la

alteration, or repeal by the Congress of the United States."

explotacion de los servicios publicos depende de condiciones

Lastly, the Constitution of the Philippines provided, in section

flutuantes, asi como del volumen como trafico y de otras

8 of Article XIII, that "no franchise or right shall be granted to

condiciones. Ademas, el servicio publico se concede por la

any individual, firm, or corporation, except under the

Comision de Servicios Publicos el interes publico asi lo exige.

condition that it shall be subject to amendment, alteration, or

El interes publico no tiene duracion fija, no es permanente; es

repeal by the National Assembly when the public interest so

un proceso mas o menos indefinido en cuanto al tiempo. Se ha

requires." The National Assembly, by virtue of the

acordado eso en el caucus de anoche.

Constitution, logically succeeded to the Congress of the

United States in the power to amend, alter or repeal any

EL PRESIDENTE PRO TEMPORE. Que dice el Comite?

franchise or right granted prior to or after the approval of the

Constitution; and when Commonwealth Acts Nos. 146 and

Sr. ALANO. El Comite siente tener que rechazar esa

454 were enacted, the National Assembly, to the extent therein

enmienda, en vista de que esto certificados de conveniencia

provided, has declared its will and purpose to amend or alter

publica es igual que la franquicia: sepuede extender. Si los

existing certificates of public convenience.

servicios presentados por la compaia durante el tiempo de su

certificado lo require, puede pedir la extension y se le

Upon the other hand, statutes enacted for the regulation of

extendera; pero no creo conveniente el que nosotros demos un

public utilities, being a proper exercise by the state of its

159

Transportation Law
Choco Notes
police power, are applicable not only to those public utilities

are "a part of the charter of every utility company operating or

coming into existence after its passage, but likewise to those

seeking to operate a franchise" in the Philippines. (Streator

already established and in operation.

Aqueduct Co. v. et al., 295 Fed. 385.) The business of a

common carrier holds such a peculiar relation to the public

Nor is there any merit in petitioner's contention, that, because

interest that there is superinduced upon it the right of public

of the establishment of petitioner's operations prior to May 1,

regulation. When private property is "affected with a public

1917, they are not subject to the regulations of the

interest it ceased to be juris privati only." When, therefore, one

Commission. Statutes for the regulation of public utilities are a

devotes his property to a use in which the public has an

proper exercise by the state of its police power. As soon as the

interest, he, in effect, grants to the public an interest in that

power is exercised, all phases of operation of established

use, and must submit to be controlled by the public for the

utilities, become at once subject to the police power thus

common good, to the extent of the interest he has thus created.

called into operation. Procedures' Transportation Co. v.

He may withdraw his grant by discounting the use, but so long

Railroad Commission, 251 U. S. 228, 40 Sup. Ct. 131, 64

as he maintains the use he must submit to control. Indeed, this

Law. ed. 239, Law v. Railroad Commission, 184 Cal. 737, 195

right of regulation is so far beyond question that it is well

Pac. 423, 14 A. L. R. 249. The statute is applicable not only to

settled that the power of the state to exercise legislative

those public utilities coming into existence after its passage,

control over public utilities may be exercised through boards

but likewise to those already established and in operation. The

of commissioners. (Fisher vs. Yangco Steamship Company,

'Auto Stage and Truck Transportation Act' (Stats. 1917, c.

31 Phil., 1, citing Munn vs. Illinois, 94 U.S. 113; Georgia R.

213) is a statute passed in pursuance of the police power. The

& Bkg. Co. vs. Smith, 128 U.S. 174; Budd vs. New York, 143

only distinction recognized in the statute between those

U.S. 517; New York etc. R. Co. vs. Bristol 151 U.S. 556, 571;

established before and those established after the passage of

Connecticut etc. R. Co. vs. Woodruff, 153 U.S. 689;

the act is in the method of the creation of their operative

Louisville etc. Ry Co. vs. Kentucky, 161 U.S. 677, 695.) This

rights. A certificate of public convenience and necessity it

right of the state to regulate public utilities is founded upon the

required for any new operation, but no such certificate is

police power, and statutes for the control and regulation of

required of any transportation company for the operation

utilities are a legitimate exercise thereof, for the protection of

which was actually carried on in good faith on May 1, 1917,

the public as well as of the utilities themselves. Such statutes

This distinction in the creation of their operative rights in no

are, therefore, not unconstitutional, either impairing the

way affects the power of the Commission to supervise and

obligation of contracts, taking property without due process,

regulate them. Obviously the power of the Commission to

or denying the equal protection of the laws, especially

hear and dispose of complaints is as effective against

inasmuch as the question whether or not private property shall

companies securing their operative rights prior to May 1,

be devoted to a public and the consequent burdens assumed is

1917, as against those subsequently securing such right under

ordinarily for the owner to decide; and if he voluntarily places

a certificate of public convenience and necessity. (Motor

his property in public service he cannot complain that it

Transit Co. et al. v. Railroad Commission of California et al.,

becomes subject to the regulatory powers of the state. (51 C.

209 Pac. 586.)

J., sec. 21, pp. 9-10.) in the light of authorities which hold that
a certificate of public convenience constitutes neither a

Moreover, Commonwealth Acts Nos. 146 and 454 are not

franchise nor contract, confers no property right, and is mere

only the organic acts of the Public Service Commission but

license or privilege. (Burgess vs. Mayor & Alderman of

160

Transportation Law
Choco Notes
Brockton, 235 Mass. 95, 100, 126 N. E. 456; Roberto vs.

evidence tending to establish the rights which he asserts but

Commisioners of Department of Public Utilities, 262 Mass.

the tribunal must consider the evidence presented. (Chief

583, 160 N. E. 321; Scheible vs. Hogan, 113 Ohio St. 83, 148

Justice Hughes in Morgan vs. U.S., 298 U.S. 468, 56 S. Ct.

N. E. 581; Martz vs. Curtis [J. L.] Cartage Co. [1937], 132

906, 80 :Law. ed. 1288.) In the language of this Court in

Ohio St. 271, 7 N. E. [d] 220; Manila Yellow Taxicab Co. vs.

Edwards vs. McCoy (22 Phil., 598), "the right to adduce

Sabellano, 59 Phil., 773.)

evidence, without the corresponding duty on the part of the

board to consider it, is vain. Such right is conspicuously futile

Whilst the challenged provisions of Commonwealth Act No.

if the person or persons to whom the evidence is presented can

454 are valid and constitutional, we are, however, of the

thrust it aside without or consideration." While the duty to

opinion that the decision of the Public Service Commission

deliberate does not impose the obligation to decide right, it

should be reversed and the case remanded thereto for further

does imply a necessity which cannot be disregarded, namely,

proceedings for the reason now to be stated. The Public

that of having something to support its decision. A decision

Service Commission has power, upon proper notice and

with absolutely nothing to support it is a nullity, at least when

hearing, "to amend, modify or revoke at any time any

directly attacked. (Edwards vs. McCoy, supra.) This principle

certificate issued under the provisions of this Act, whenever

emanates from the more fundamental principle that the genius

the facts and circumstances on the strength of which said

of constitutional government is contrary to the vesting of

certificate was issued have been misrepresented or materially

unlimited power anywhere. Law is both a grant and a

changed." (Section 16, par. [m], Commonwealth Act No. 146.)

limitation upon power.

The petitioner's application here was for an increase of its

equipment to enable it to comply with the conditions of its

The decision appealed from is hereby reversed and the case

certificates of public convenience. On the matter of limitation

remanded to the Public Service Commission for further

to twenty five (25) years of the life of its certificates of public

proceedings in accordance with law and this decision, without

convenience, there had been neither notice nor opportunity

any pronouncement regarding costs. So ordered.

given the petitioner to be heard or present evidence. The

Commission appears to have taken advantage of the petitioner

Avancea, C.J., Imperial, Diaz, Concepcion and Moran, JJ.,

to augment petitioner's equipment in imposing the limitation

concur.

of twenty-five (25) years which might as well be twenty or

fifteen or any number of years. This is, to say the least,
irregular and should not be sanctioned. There are cardinal

PAL v. CAB
[G.R. No. 119528. March 26, 1997]

primary rights which must be respected even in proceedings of

this character. The first of these rights is the right to a hearing,
which includes the right of the party interested or affected to
present his own case and submit evidence in support thereof.
In the language of Chief Justice Hughes, in Morgan v. U.S.,
(304 U.S. 1, 58 S. Ct. 773, 999, 82 Law. ed. 1129), "the liberty

PHILIPPINE

AIRLINES,

INC.,

petitioner,

vs.

CIVIL

AERONAUTICS BOARD and GRAND INTERNATIONAL

AIRWAYS, INC., respondents.
DECISION
TORRES, JR., J.:

and property of the citizen shall be protected by the

rudimentary requirements of fair play." Not only must the
party be given an opportunity to present his case and to adduce

This Special Civil Action for Certiorari and Prohibition under

Rule 65 of the Rules of Court seeks to prohibit respondent
Civil Aeronautics Board from exercising jurisdiction over

161

Transportation Law
Choco Notes
private respondent's Application for the issuance of a

services, filed an Opposition to the application for a

Certificate of Public Convenience and Necessity, and to annul

Certificate of Public Convenience and Necessity on December

and set aside a temporary operating permit issued by the Civil

16, 1995 on the following grounds:

Aeronautics Board in favor of Grand International Airways

(GrandAir, for brevity) allowing the same to engage in

"A. The CAB has no jurisdiction to hear the petitioner's

scheduled domestic air transportation services, particularly the

application until the latter has first obtained a franchise to

Manila-Cebu, Manila-Davao, and converse routes.

operate from Congress.

The main reason submitted by petitioner Philippine Airlines,

B. The petitioner's application is deficient in form and

Inc. (PAL) to support its petition is the fact that GrandAir does

substance in that:

not possess a legislative franchise authorizing it to engage in

air transportation service within the Philippines or elsewhere.

1. The application does not indicate a route structure including

Such franchise is, allegedly, a requisite for the issuance of a

a computation of trunkline, secondary and rural available seat

Certificate of Public Convenience or Necessity by the

kilometers (ASK) which shall always be maintained at a

respondent Board, as mandated under Section 11, Article XII

monthly level at least 5% and 20% of the ASK offered into

of the Constitution.

and out of the proposed base of operations for rural and

secondary, respectively.

Respondent GrandAir, on the other hand, posits that a

legislative franchise is no longer a requirement for the

2. It does not contain a project/feasibility study, projected

issuance of a Certificate of Public Convenience and Necessity

profit and loss statements, projected balance sheet, insurance

or a Temporary Operating Permit, following the Court's

coverage, list of personnel, list of spare parts inventory, tariff

pronouncements in the case of Albano vs. Reyes,[1] as

structure, documents supportive of financial capacity, route

restated by the Court of Appeals in Avia Filipinas

flight schedule, contracts on facilities (hangars, maintenance,

International vs. Civil Aeronautics Board[2] and Silangan

lot) etc.

Airways, Inc. vs. Grand International Airways, Inc., and the

Hon. Civil Aeronautics Board.[3]

C. Approval of petitioner's application would violate the equal

protection clause of the constitution.

On November 24, 1994, private respondent GrandAir applied

for a Certificate of Public Convenience and Necessity with the

D. There is no urgent need and demand for the services

Board, which application was docketed as CAB Case No. EP-

applied for.

12711.[4] Accordingly, the Chief Hearing Officer of the CAB

issued a Notice of Hearing setting the application for initial

E. To grant petitioner's application would only

result in

hearing on December 16, 1994, and directing GrandAir to

ruinous competition contrary to Section 4(d) of R.A. 776."[5]

serve a copy of the application and corresponding notice to all

scheduled Philippine Domestic operators. On December 14,

At the initial hearing for the application, petitioner raised the

1994, GrandAir filed its Compliance, and requested for the

issue of lack of jurisdiction of the Board to hear the

issuance of a Temporary Operating Permit. Petitioner, itself

application because GrandAir did not possess a legislative

the holder of a legislative franchise to operate air transport

franchise.

162

Transportation Law
Choco Notes
2, 1995.[8] In the said Resolution, the Board justified its
On December 20, 1994, the Chief Hearing Officer of CAB

assumption of jurisdiction over GrandAir's application.

issued an Order denying petitioner's Opposition. Pertinent

portions of the Order read:

"WHEREAS, the CAB is specifically authorized under

Section 10-C (1) of Republic Act No. 776 as follows:

"PAL alleges that the CAB has no jurisdiction to hear the

petitioner's application until the latter has first obtained a

'(c) The Board shall have the following specific powers and

franchise to operate from Congress.

duties:

The Civil Aeronautics Board has jurisdiction to hear and

(1) In accordance with the provision of Chapter IV of this

resolve the application. In Avia Filipina vs. CAB, CA G.R.

Act, to issue, deny, amend revise, alter, modify, cancel,

No. 23365, it has been ruled that under Section 10 (c) (I) of

suspend or revoke, in whole or in part, upon petitioner-

R.A. 776, the Board possesses this specific power and duty.

complaint, or upon its own initiative, any temporary operating

permit or Certificate of Public Convenience and Necessity;

In view thereof, the opposition of PAL on this ground is

Provided, however; that in the case of foreign air carriers, the

hereby denied.

permit shall be issued with the approval of the President of the

Republic of the Philippines."

SO ORDERED."
WHEREAS, such authority was affirmed in PAL vs. CAB,
Meantime, on December 22, 1994, petitioner this time,

(23 SCRA 992), wherein the Supreme Court held that the

opposed private respondent's application for a temporary

CAB can even on its own initiative, grant a TOP even before

permit maintaining that:

the presentation of evidence;

"1. The applicant does not possess the required fitness and

WHEREAS, more recently, Avia Filipinas vs. CAB, (CA-GR

capability of operating the services applied for under RA 776;

No. 23365), promulgated on October 30, 1991, held that in

and,

accordance with its mandate, the CAB can issue not only a
TOP but also a Certificate of Public Convenience and

2. Applicant has failed to prove that there is clear and urgent

Necessity (CPCN) to a qualified applicant therefor in the

public need for the services applied for."[6]

absence of a legislative franchise, citing therein as basis the

decision of Albano vs. Reyes (175 SCRA 264) which provides

On December 23, 1994, the Board promulgated Resolution

(inter alia) that:

No. 119(92) approving the issuance of a Temporary Operating

Permit in favor of Grand Air[7] for a period of three months,

a) Franchises by Congress are not required before each and

i.e., from December 22, 1994 to March 22, 1994. Petitioner

every public utility may operate when the law has granted

moved for the reconsideration of the issuance of the

certain administrative agencies the power to grant licenses for

Temporary Operating Permit on January 11, 1995, but the

or to authorize the operation of certain public utilities;

same was denied in CAB Resolution No. 02 (95) on February

163

Transportation Law
Choco Notes
b) The Constitutional provision in Article XII, Section 11 that

transport services, and a franchise may only be granted by

the issuance of a franchise, certificate or other form of

Congress. This is the meaning given by the petitioner upon a

authorization for the operation of a public utility does not

reading of Section 11, Article XII,[9] and Section 1, Article

necessarily imply that only Congress has the power to grant

VI,[10] of the Constitution.

such authorization since our statute books are replete with

laws granting specified agencies in the Executive Branch the

To support its theory, PAL submits Opinion No. 163, S. 1989

power to issue such authorization for certain classes of public

of the Department of Justice, which reads:

utilities.
Dr. Arturo C. Corona
WHEREAS, Executive Order No. 219 which took effect on 22

Executive Director

January 1995, provides in Section 2.1 that a minimum of two

Civil Aeronautics Board

(2) operators in each route/link shall be encouraged and that

PPL Building, 1000 U.N. Avenue

routes/links presently serviced by only one (1) operator shall

Ermita, Manila

be open for entry to additional operators.

Sir:
This has reference to your request for opinion on the necessity

RESOLVED,

(T)HEREFORE,

that

the

Motion

for

of a legislative franchise before the Civil Aeronautics Board

Reconsideration filed by Philippine Airlines on January 05,

(CAB) may issue a Certificate of Public Convenience and

1995 on the Grant by this Board of a Temporary Operating

Necessity and/or permit to engage in air commerce or air

Permit (TOP) to Grand International Airways, Inc. alleging

transportation to an individual or entity.

among others that the CAB has no such jurisdiction, is hereby

DENIED, as it hereby denied, in view of the foregoing and

You state that during the hearing on the application of Cebu

considering that the grounds relied upon by the movant are not

Air for a congressional franchise, the House Committee on

indubitable."

Corporations and Franchises contended that under the present

Constitution, the CAB may not issue the abovestated

On March 21, 1995, upon motion by private respondent, the

certificate or permit, unless the individual or entity concerned

temporary permit was extended for a period of six (6) months

possesses a legislative franchise. You believe otherwise,

or up to September 22, 1995.

however, for the reason that under R.A. No. 776, as amended,
the CAB is explicitly empowered to issue operating permits or

Hence this petition, filed on April 3, 1995.

certificates of public convenience and necessity and that this

statutory provision is not inconsistent with the current charter.

Petitioners argue that the respondent Board acted beyond its

powers and jurisdiction in taking cognizance of GrandAirs

We concur with the view expressed by the House Committee

application for the issuance of a Certificate of Public

on Corporations and Franchises. In an opinion rendered in

Convenience and Necessity, and in issuing a temporary

favor of your predecessor-in-office, this Department observed

operating permit in the meantime, since GrandAir has not

that,-

been granted and does not possess a legislative franchise to

engage in scheduled domestic air transportation. A legislative

xxx it is useful to note the distinction between the franchise

franchise is necessary before anyone may engage in air

to operate and a permit to commence operation. The former is

164

Transportation Law
Choco Notes
sovereign and legislative in nature; it can be conferred only by
the lawmaking authority (17 W and P, pp. 691-697). The

Respondent GrandAir, on the other hand, relies on its

latter is administrative and regulatory in character (In re

interpretation of the provisions of Republic Act 776, which

Application of Fort Crook-Bellevue Boulevard Line, 283 NW

follows the pronouncements of the Court of Appeals in the

223); it is granted by an administrative agency, such as the

cases of Avia Filipinas vs. Civil Aeronautics Board, and

Public Service Commission [now Board of Transportation], in

Silangan Airways, Inc. vs. Grand International Airways

the case of land transportation, and the Civil Aeronautics

(supra).

Board, in case of air services. While a legislative franchise is a

pre-requisite to a grant of a certificate of public convenience

In both cases, the issue resolved was whether or not the Civil

and necessity to an airline company, such franchise alone

Aeronautics Board can issue the Certificate of Public

cannot constitute the authority to commence operations,

Convenience and Necessity or Temporary Operating Permit to

inasmuch as there are still matters relevant to such operations

a prospective domestic air transport operator who does not

which are not determined in the franchise, like rates, schedules

possess a legislative franchise to operate as such. Relying on

and routes, and which matters are resolved in the process of

the Court's pronouncement in Albano vs. Reyes (supra), the

issuance of permit by the administrative. (Secretary of Justice

Court of Appeals upheld the authority of the Board to issue

opn No. 45, s. 1981)

such authority, even in the absence of a legislative franchise,

which authority is derived from Section 10 of Republic Act

Indeed, authorities are agreed that a certificate of public

776, as amended by P.D. 1462.[11]

convenience and necessity is an authorization issued by the

appropriate governmental agency for the operation of public

The Civil Aeronautics Board has jurisdiction over GrandAir's

services for which a franchise is required by law (Almario,

Application for a Temporary Operating Permit. This rule has

Transportation and Public Service Law, 1977 Ed., p. 293;

been established in the case of Philippine Air Lines Inc., vs.

Agbayani, Commercial Law of the Phil., Vol. 4, 1979 Ed., pp.

Civil Aeronautics Board, promulgated on June 13, 1968.[12]

380-381).

The Board is expressly authorized by Republic Act 776 to

issue a temporary operating permit or Certificate of Public

Based on the foregoing, it is clear that a franchise is the

Convenience and Necessity, and nothing contained in the said

legislative authorization to engage in a business activity or

law negates the power to issue said permit before the

enterprise of a public nature, whereas a certificate of public

completion of the applicant's evidence and that of the

convenience and necessity is a regulatory measure which

oppositor thereto on the main petition. Indeed, the CAB's

constitutes the franchises authority to commence operations.

authority to grant a temporary permit "upon its own initiative"

It is thus logical that the grant of the former should precede

strongly suggests the power to exercise said authority, even

the latter.

before the presentation of said evidence has begun. Assuming

arguendo that a legislative franchise is prerequisite to the

Please be guided accordingly.

issuance of a permit, the absence of the same does not affect

the jurisdiction of the Board to hear the application, but tolls

(SGD.) SEDFREY A. ORDOEZ

only upon the ultimate issuance of the requested permit.

Secretary of Justice"

165

Transportation Law
Choco Notes
The power to authorize and control the operation of a public

the exercise of that discretion when it is just and reasonable

utility is admittedly a prerogative of the legislature, since

and founded upon a legal right.[17]

Congress is that branch of government vested with plenary

powers of legislation.

It is this policy which was pursued by the Court in Albano vs.

Reyes. Thus, a reading of the pertinent issuances governing

"The franchise is a legislative grant, whether made directly by

the Philippine Ports Authority,[18] proves that the PPA is

the legislature itself, or by any one of its properly constituted

empowered to undertake by itself the operation and

instrumentalities. The grant, when made, binds the public, and

management of the Manila International Container Terminal,

is, directly or indirectly, the act of the state."[13]

or to authorize its operation and management by another by

contract or other means, at its option. The latter power having

The issue in this petition is whether or not Congress, in

been delegated to the PPA, a franchise from Congress to

enacting Republic Act 776, has delegated the authority to

authorize an entity other than the PPA to operate and manage

authorize the operation of domestic air transport services to

the MICP becomes unnecessary.

the respondent Board, such that Congressional mandate for the

approval of such authority is no longer necessary.

Given the foregoing postulates, we find that the Civil

Aeronautics Board has the authority to issue a Certificate of

Congress has granted certain administrative agencies the

Public Convenience and Necessity, or Temporary Operating

power to grant licenses for, or to authorize the operation of

Permit to a domestic air transport operator, who, though not

certain public utilities. With the growing complexity of

possessing a legislative franchise, meets all the other

modern life, the multiplication of the subjects of governmental

requirements prescribed by the law. Such requirements were

regulation, and the increased difficulty of administering the

enumerated in Section 21 of R.A. 776.

laws, there is a constantly growing tendency towards the

delegation of greater powers by the legislature, and towards

There is nothing in the law nor in the Constitution, which

the approval of the practice by the courts.[14] It is generally

indicates that a legislative franchise is an indispensable

recognized that a franchise may be derived indirectly from the

requirement for an entity to operate as a domestic air transport

state through a duly designated agency, and to this extent, the

operator. Although Section 11 of Article XII recognizes

power to grant franchises has frequently been delegated, even

Congress' control over any franchise, certificate or authority to

to agencies other than those of a legislative nature.[15] In

operate a public utility, it does not mean Congress has

pursuance of this, it has been held that privileges conferred by

exclusive authority to issue the same. Franchises issued by

grant by local authorities as agents for the state constitute as

Congress are not required before each and every public utility

much a legislative franchise as though the grant had been

may operate.[19] In many instances, Congress has seen it fit to

made by an act of the Legislature.[16]

delegate this function to government agencies, specialized

particularly in their respective areas of public service.

The trend of modern legislation is to vest the Public Service

Commissioner with the power to regulate and control the

A reading of Section 10 of the same reveals the clear intent of

operation of public services under reasonable rules and

Congress to delegate the authority to regulate the issuance of a

regulations, and as a general rule, courts will not interfere with

license to operate domestic air transport services:

166

Transportation Law
Choco Notes
SECTION 10. Powers and Duties of the Board. (A) Except as

This submission relies on the premise that the authority to

otherwise provided herein, the Board shall have the power to

issue a certificate of public convenience and necessity is a

regulate the economic aspect of air transportation, and shall

regulatory measure separate and distinct from the authority to

have general supervision and regulation of, the jurisdiction

grant a franchise for the operation of the public utility subject

and control over air carriers, general sales agents, cargo sales

of this particular case, which is exclusively lodged by

agents, and air freight forwarders as well as their property

petitioner in Congress.

rights, equipment, facilities and franchise, insofar as may be

necessary for the purpose of carrying out the provision of this

We do not agree with the petitioner.

Act.
Many and varied are the definitions of certificates of public
In support of the Board's authority as stated above, it is given

convenience which courts and legal writers have drafted.

the following specific powers and duties:

Some statutes use the terms "convenience and necessity" while

others use only the words "public convenience." The terms

(C) The Board shall have the following specific powers and

"convenience and necessity", if used together in a statute, are

duties:

usually held not to be separable, but are construed together.

Both words modify each other and must be construed together.

(1) In accordance with the provisions of Chapter IV of this

The word 'necessity' is so connected, not as an additional

Act, to issue, deny, amend, revise, alter, modify, cancel,

requirement but to modify and qualify what might otherwise

suspend or revoke in whole or in part upon petition or

be taken as the strict significance of the word necessity. Public

complaint or upon its own initiative any Temporary Operating

convenience and necessity exists when the proposed facility

Permit or Certificate of Public Convenience and Necessity:

will meet a reasonable want of the public and supply a need

Provided however, That in the case of foreign air carriers, the

which the existing facilities do not adequately afford. It does

permit shall be issued with the approval of the President of the

not mean or require an actual physical necessity or an

Republic of the Philippines.

indispensable thing.[21]

Petitioner argues that since R.A. 776 gives the Board the

"The terms 'convenience' and 'necessity' are to be construed

authority to issue "Certificates of Public Convenience and

together, although they are not synonymous, and effect must

Necessity", this, according to petitioner, means that a

be given both. The convenience of the public must not be

legislative franchise is an absolute requirement. It cites a

circumscribed by according to the word 'necessity' its strict

number of authorities supporting the view that a Certificate of

meaning or an essential requisites."[22]

Public Convenience and Necessity is issued to a public service

for which a franchise is required by law, as distinguished from

The use of the word "necessity", in conjunction with "public

an

convenience" in a certificate of authorization to a public

authorization issued for the operation of public services for

service entity to operate, does not in any way modify the

which no franchise, either municipal or legislative, is required

nature of such certification, or the requirements for the

by law.[20]

issuance of the same. It is the law which determines the

"Certificate

of

Public

Convenience"

which

is

requisites for the issuance of such certification, and not the

title indicating the certificate.

167

Transportation Law
Choco Notes
future of foreign and domestic commerce of the Philippines,
Congress, by giving the respondent Board the power to issue

of the Postal Service and of the National Defense;

permits for the operation of domestic transport services, has

delegated to the said body the authority to determine the

(c) The regulation of air transportation in such manner as to

capability and competence of a prospective domestic air

recognize and preserve the inherent advantages of, assure the

transport operator to engage in such venture. This is not an

highest degree of safety in, and foster sound economic

instance of transforming the respondent Board into a mini-

condition in, such transportation, and to improve the relations

legislative body, with unbridled authority to choose who

between, and coordinate transportation by, air carriers;

should be given authority to operate domestic air transport

services.

(d) The promotion of adequate, economical and efficient

service by air carriers at reasonable charges, without unjust

"To be valid, the delegation itself must be circumscribed by

discriminations, undue preferences or advantages, or unfair or

legislative restrictions, not a "roving commission" that will

destructive competitive practices;

give the delegate unlimited legislative authority. It must not

be a delegation "running riot" and "not canalized with banks

(e) Competition between air carriers to the extent necessary to

that keep it from overflowing." Otherwise, the delegation is in

assure the sound development of an air transportation system

legal

effect an abdication of legislative authority, a total

properly adapted to the need of the foreign and domestic

surrender by the legislature of its prerogatives in favor of the

commerce of the Philippines, of the Postal Service, and of the

delegate."[23]

National Defense;

Congress, in this instance, has set specific limitations on how

(f) To promote safety of flight in air commerce in the

such authority should be exercised.

Philippines; and,

Firstly, Section 4 of R.A. No. 776, as amended, sets out the

(g) The encouragement and development of civil aeronautics.

following guidelines or policies:

More importantly, the said law has enumerated the
"SECTION 4. Declaration of policies. In the exercise and

requirements to determine the competency of a prospective

performance of its powers and duties under this Act, the Civil

operator to engage in the public service of air transportation.

Aeronautics Board and the Civil Aeronautics Administrator

shall consider the following, among other things, as being in

SECTION 12. Citizenship requirement. Except as otherwise

the public interest, and in accordance with the public

provided in the Constitution and existing treaty or treaties, a

convenience and necessity:

permit authorizing a person to engage in domestic air

commerce and/or air transportation shall be issued only to

(a) The development and utilization of the air potential of the

citizens of the Philippines.[24]

Philippines;
SECTION 21. Issuance of permit. The Board shall issue a
(b) The

encouragement and

development of an

air

permit authorizing the whole or any part of the service

transportation system properly adapted to the present and

covered by the application, if it finds: (1) that the applicant is

168

Transportation Law
Choco Notes
fit, willing and able to perform such service properly in

William H. Quasha and Associates for plaintiff-appellee.

conformity with the provisions of this Act and the rules,

Ross, Selph, Salcedo and Associates for defendant-appellant.

regulations, and requirements issued thereunder; and (2) that

such service is required by the public convenience and

BENGZON, J.P., J.:

necessity; otherwise the application shall be denied.

"Consorcio Pesquero del Peru of South America" shipped
Furthermore, the procedure for the processing of the

freight pre-paid at Chimbate, Peru, 21,740 jute bags of

application of a Certificate of Public Convenience and

Peruvian fish meal through SS Crowborough, covered by

Necessity had been established to ensure the weeding out of

clean bills of lading Numbers 1 and 2, both dated January 17,

those entities that are not deserving of public service.[25]

1963. The cargo, consigned to San Miguel Brewery, Inc., now

San Miguel Corporation, and insured by Home Insurance

In sum, respondent Board should now be allowed to continue

Company for $202,505, arrived in Manila on March 7, 1963

hearing the application of GrandAir for the issuance of a

and was discharged into the lighters of Luzon Stevedoring

Certificate of Public Convenience and Necessity, there being

Company. When the cargo was delivered to consignee San

no legal obstacle to the exercise of its jurisdiction.

Miguel Brewery Inc., there were shortages amounting to

P12,033.85, causing the latter to lay claims against Luzon

ACCORDINGLY, in view of the foregoing considerations, the

Stevedoring Corporation, Home Insurance Company and the

Court RESOLVED to DISMISS the instant petition for lack of

American Steamship Agencies, owner and operator of SS

merit. The respondent Civil Aeronautics Board is hereby

Crowborough.

DIRECTED to CONTINUE hearing the application of

respondent Grand International Airways, Inc. for the issuance

Because the others denied liability, Home Insurance Company

of a Certificate of Public Convenience and Necessity.

paid the consignee P14,870.71 the insurance value of the

loss, as full settlement of the claim. Having been refused

SO ORDERED.

reimbursement by both the Luzon Stevedoring Corporation

and

American

Steamship

Agencies,

Home

Insurance

Company, as subrogee to the consignee, filed against them on

Can a common carrier become a private carrier?

March 6, 1964 before the Court of First Instance of Manila a

complaint for recovery of P14,870.71 with legal interest, plus

Home Insurance v. American

G.R. No. L-25599

attorney's fees.

April 4, 1968
In answer, Luzon Stevedoring Corporation alleged that it

HOME INSURANCE COMPANY, plaintiff-appellee,

delivered with due diligence the goods in the same quantity

vs.

and quality that it had received the same from the carrier. It

AMERICAN STEAMSHIP AGENCIES, INC. and LUZON

also claimed that plaintiff's claim had prescribed under Article

STEVEDORING CORPORATION, defendants,

366 of the Code of Commerce stating that the claim must be

AMERICAN STEAMSHIP AGENCIES, INC., defendant-

made within 24 hours from receipt of the cargo.

appellant.

169

Transportation Law
Choco Notes
American Steamship Agencies denied liability by alleging that

Disagreeing with such judgment, American Steamship

under the provisions of the Charter party referred to in the bills

Agencies appealed directly to Us. The appeal brings forth for

of lading, the charterer, not the shipowner, was responsible for

determination this legal issue: Is the stipulation in the charter

any loss or damage of the cargo. Furthermore, it claimed to

party of the owner's non-liability valid so as to absolve the

have exercised due diligence in stowing the goods and that as

American Steamship Agencies from liability for loss?

a mere forwarding agent, it was not responsible for losses or

damages to the cargo.

The bills of lading,1 covering the shipment of Peruvian fish

meal provide at the back thereof that the bills of lading shall

On November 17, 1965, the Court of First Instance, after trial,

be governed by and subject to the terms and conditions of the

absolved Luzon Stevedoring Corporation, having found the

charter party, if any, otherwise, the bills of lading prevail over

latter to have merely delivered what it received from the

all the agreements.2 On the of the bills are stamped "Freight

carrier in the same condition and quality, and ordered

prepaid as per charter party. Subject to all terms, conditions

American Steamship Agencies to pay plaintiff P14,870.71

and exceptions of charter party dated London, Dec. 13, 1962."

with legal interest plus P1,000 attorney's fees. Said court cited
the following grounds:

A perusal of the charter party3 referred to shows that while the

possession and control of the ship were not entirely transferred

(a) The non-liability claim of American Steamship Agencies

to the charterer,4 the vessel was chartered to its full and

under the charter party contract is not tenable because Article

complete capacity (Exh. 3). Furthermore, the, charter had the

587 of the Code of Commerce makes the ship agent also

option to go north or south or vice-versa,5 loading, stowing

civilly liable for damages in favor of third persons due to the

and discharging at its risk and expense.6 Accordingly, the

conduct of the captain of the carrier;

charter party contract is one of affreightment over the whole

vessel rather than a demise. As such, the liability of the

(b) The stipulation in the charter party contract exempting the

shipowner for acts or negligence of its captain and crew,

owner from liability is against public policy under Article

would remain in the absence of stipulation.

1744 of the Civil Code;

Section 2, paragraph 2 of the charter party, provides that the
(c) In case of loss, destruction or deterioration of goods,

owner is liable for loss or damage to the goods caused by

common carriers are presumed at fault or negligent under

personal want of due diligence on its part or its manager to

Article 1735 of the Civil Code unless they prove extraordinary

make the vessel in all respects seaworthy and to secure that

diligence, and they cannot by contract exempt themselves

she be properly manned, equipped and supplied or by the

from liability resulting from their negligence or that of their

personal act or default of the owner or its manager. Said

servants; and

paragraph, however, exempts the owner of the vessel from any

loss or damage or delay arising from any other source, even

(d) When goods are delivered to the carrier in good order and

from the neglect or fault of the captain or crew or some other

the same are in bad order at the place of destination, the carrier

person employed by the owner on board, for whose acts the

is prima facie liable.

owner would ordinarily be liable except for said paragraph..

170

Transportation Law
Choco Notes
Regarding the stipulation, the Court of First Instance declared

likewise abide by the terms of the charter party. And as stated,

the contract as contrary to Article 587 of the Code of

recovery cannot be had thereunder, for loss or damage to the

Commerce making the ship agent civilly liable for indemnities

cargo, against the shipowners, unless the same is due to

suffered by third persons arising from acts or omissions of the

personal acts or negligence of said owner or its manager, as

captain in the care of the goods and Article 1744 of the Civil

distinguished from its other agents or employees. In this case,

Code under which a stipulation between the common carrier

no such personal act or negligence has been proved.

and the shipper or owner limiting the liability of the former for
loss or destruction of the goods to a degree less than

WHEREFORE, the judgment appealed from is hereby

extraordinary diligence is valid provided it be reasonable, just

reversed and appellant is absolved from liability to plaintiff.

and not contrary to public policy. The release from liability in

No costs. So ordered.

this case was held unreasonable and contrary to the public

policy on common carriers.

Reyes, J.B.L., Makalintal, Zaldivar, Sanchez, Castro, Angeles

and Fernando, JJ., concur.

The provisions of our Civil Code on common carriers were

Dizon J., took no part.

taken

Concepcion, C.J., is on leave.

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

Arada v. CA
G.R. No. 98243 July 1, 1992

owner from liability for the negligence of its agent is not

against public policy,9 and is deemed valid.

ALEJANDRO ARADA, doing business under the name and

style "SOUTH NEGROS ENTERPRISES", petitioner,

Such doctrine We find reasonable. The Civil Code provisions

on common carriers should not be applied where the carrier is

vs.
HONORABLE COURT OF APPEALS, respondents.

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.

PARAS, J.:

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.

This is a petition for review on certiorari which seeks to annul

and set aside the decision * of the Court of Appeals dated
April 8, 1991 in CA-G.R. CV No. 20597 entitled "San Miguel

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

Corporation v. Alejandro Arada, doing business under the

name and style "South Negros Enterprises", reversing the
decision of the RTC, Seventh Judicial Region, Branch XII,
Cebu City, ordering petitioner to pay the private respondent
tho amount of P172,284.80 representing the value of the cargo
lost on board the ill-fated, M/L Maya with interest thereon at
the legal rate from the date of the filing of the complaint on
March 25, 1983 until fully paid, and the costs.

171

Transportation Law
Choco Notes
The undisputed facts of the case are as follows: Alejandro

1,276.00

Arada, herein petitioner, is the proprietor and operator of the

firm South Negros Enterprises which has been organized and

24 CS

established for more than ten (10) years. It is engaged in the

business of small scale shipping as a common carrier,

PLP MTS

servicing the hauling of cargoes of different corporations and

companies with the five (5) vessels it was operating (Rollo, p.

456.00

121).
37 CS
On March 24, 1982. petitioner entered into a contract with
private respondent to safely transport as a common carrier,

CS WOODEN MTS

cargoes of the latter from San Carlos City, Negros Occidental

to Mandaue City using one of petitioner's vessels, M/L Maya.

673.40

The cargoes of private respondent consisted of 9,824 cases of

beer empties valued at P176,824.80, were itemized as follows:

8 CS

NO. OF CASES

LAGERLITE PLASTIC MTS

CARGO

128.00

VALUE

640 CS

7,515 CS

STENEI PLASTIC MTS

PPW STENIE MTS

14,080.00

P136.773.00

9,824 CS

1,542 CS

PLW GRANDE MTS

P176,824.80

23,438.40

On March 24, 1982, petitioner thru its crew master, Mr.

Vivencio Babao, applied for a clearance with the Philippine

58 CS

Coast Guard for M/L Maya to leave the port of San Carlos
City, but due to a typhoon, it was denied clearance by SNI

G.E. PLASTIC MTS

172

Transportation Law
Choco Notes
Antonio Prestado PN who was then assigned at San Carlos

recovery of the value of the cargoes anchored on breach of

City Coast Guard Detachment (Rollo, p. 122).

contract of carriage. After due hearing, said court rendered a

decision dated July 18, 1988, the dispositive portion of which

On March 25, 1982 M/L Maya was given clearance as there

reads

was no storm and the sea was calm. Hence, said vessel left for
Mandaue City. While it was navigating towards Cebu, a

WHEREFORE, judgment is hereby rendered as follows:

typhoon developed and said vessel was buffeted on all its

sides by big waves. Its rudder was destroyed and it drifted for

(1)

With respect to the first cause of action, claim of

sixteen (16) hours although its engine was running.

plaintiff is hereby dismissed;

On March 27, 1982 at about 4:00 a.m., the vessel sank with

(2)

whatever was left of its cargoes. The crew was rescued by a

plaintiff the sum of P2,000.00;

Under the second cause of action, defendant must pay

passing pump boat and was brought to Calanggaman Island.

Later in the afternoon, they were brought to Palompon, Leyte,

(3)

In the third cause of action, the defendant must pay

where Vivencio Babao filed a marine protest (Rollo, p. 10).

plaintiff the sum of P2,849.20;

On the basis of such marine protest, the Board of Marine

(4)

Inquiry conducted a hearing of the sinking of M/L Maya

P12,997.47 due the defendynt, the plaintiff should deduct the

wherein private respondent was duly represented. Said Board

amount of P4,849.20 from the P12,997.47 and the balance of

made its findings and recommendation dated November 7,

P8,148.27 must be paid to the defendant; and

Since the plaintiff has withheld the payment of

1983, the dispositive portion of which reads as:

(5)

Defendant's

counterclaim

not

having

been

WHEREFORE, premises considered, this Board recommends

substantiated by evidence is likewise dismissed. NO COSTS.

as it is hereby recommended that the owner/operator, officers

(Orig. Record, pp. 193-195).

and crew of M/L Maya be exonerated or absolved from any

administrative liability on account of this incident (Exh. 1).

Thereafter, private respondent appealed said decision to the

Court of Appeals claiming that the trial court erred in

The

Board's

report

containing

its

findings

and

recommendation was then forwarded to the headquarters of

(1)

holding that nothing was shown that the defendant, or

the Philippine Coast Guard for appropriate action. On the

any of his employees who manned the M/L Maya was

basis of such report, the Commandant of the Philippine Coast

negligent in any way nor did they fail to observe extraordinary

Guard rendered a decision dated December 21, 1984 in SBMI

diligence over the cargoes of the plaintiff; and

Adm. Case No. 88-82 exonerating the owner/operator officers

and crew of the ill-fated M/L Maya from any administrative

(2)

holding that the sinking of said vessel was caused by

liability on account of said incident (Exh. 2).

the storm, consequently, dismissing the claim of plaintiff in its

first cause of action for breach of contract of carriage of goods

On March 25, 1983, Private respondent filed a complaint in

(Rollo, pp. 33-34; Decision, pp. 3-4).

the Regional Trial Court its first cause of action being for the

173

Transportation Law
Choco Notes
In its decision Promulgated on April 8, 1991, the Court of

vigilance over their cargoes makes Petitioner liable for the

Appeals reversed the decision of the court a quo, the

value of said cargoes.

dispositive portion and the dispositive part of its decision

reads as:

The petition is devoid of merit.

WHEREFORE, that part of the Judgment appeal6d from is

Common carriers are persons, corporations, firms or

REVERSED and the appellee Aleiandro Arada, doing

associations engaged in the business of carrying or

business by the name and style, "South Negros Enterprises",

transporting passengers or goods or both, by land, water or air,

ordered (sic) to pay unto the appellant San Miguel Corporation

for compensation offering their services to the public (Art.

the amount of P176,824.80 representing the value of the cargo

1732 of the New Civil Code).

lost on board the ill-fated vessel, M/L Maya, with interest

thereon at the legal rate from date of the filing of the

In the case at bar, there is no doubt that petitioner was

complaint on March 25, 1983, until fully paid, and the costs.

exercising its function as a common carrier when it entered

(Rollo, p. 37)

into a contract with private respondent to carry and transport

the latter's cargoes. This fact is best supported by the

The Court of Appeals ruled that "in view of his failure to

admission of petitioner's son, Mr. Eric Arada, who testified as

observe extraordinary diligence over the cargo in question and

the officer-in-charge for operations of South Negros

his negligence previous to the sinking of the carrying vessel,

Enterprises in Cebu City. In substance his testimony on

as above shown, the appellee is liable to the appellant for the

January 14, 1985 is as follows:

value of the lost cargo.

Q.

How many vessels are you operating?

A.

There were all in all around five (5).

petition. The pivotal issue to be resolved is whether or not

Q.

And you were entering to service hauling of cargoes

petitioner is liable for the value of the lost cargoes.

to different companies, is that correct?

Petitioner contends that it was not in the exercise of its

A.

Yes, sir.

with private respondent,but was then acting as a private carrier

Q.

In one word, the South Negros Enterprises is engaged

not bound by the requirement of extraordinary diligence

in the business of common carriers, is that correct?

Hence the present recourse.

On November 20, 1991, this Court gave due course to the

function as a common carrier when it entered into a contract

(Rollo, p. 15) and that the factual findings of the Board of

Marine Inquiry and the Special Board of Marine Inquiry are

A.

Yes, sir,

Q.

And in fact, at the time of the hauling of the San

binding and conclusive on the Court (Rollo, pp. 16-17).

Private respondent counters that M/L Maya was in the

Miguel Beer, it was also in the same category as a common

exercise of its function as a common carrier and its failure to

carrier?

observe the extraordinary diligence required of it in the

174

Transportation Law
Choco Notes
A.

Yes, sir,

If only for the fact that he was first denied clearance to depart
on March 24, 1982, obviously because of a typhoon coming,

(TSN. pp. 3-4, Jan. 29, 1985)

Babao, as master of the vessel, should have verified first

where the typhoon was before departing on March 25, 1982.

A common carrier, both from the nature of its business and for

True, the sea was calm at departure time. But that might be the

insistent reasons of public policy is burdened by law with the

calm before the storm. Prudence dictates that he should have

duty of exercising extraordinary diligence not only in ensuring

ascertained first where the storm was before departing as it

the safety of passengers, but in caring for the goods

might be on his path. (Rollo, pp. 35-36)

transported by it. The loss or destruction or deterioration of

goods turned over to the common carrier for the conveyance

Respondent court's conclusion as to the negligence of

to a designated destination raises instantly a presumption of

petitioner is supported by evidence. It will be noted that

fault or negligence on the part of the carrier, save only where

Vivencio Babao knew of the impending typhoon on March 24,

such loss, destruction or damage arises from extreme

1982 when the Philippine Coast Guard denied M/L Maya the

circumstances such as a natural disaster or calamity ...

issuance of a clearance to sail. Less than 24 hours elapsed

(Benedicto v. IAC, G.R. No. 70876, July 19, 1990, 187 SCRA

since the time of the denial of said clearance and the time a

547) (Emphasis supplied).

clearance to sail was finally issued on March 25, 1982.

Records will show that Babao did not ascertain where the

In order that the common carrier may be exempted from

typhoon was headed by the use of his vessel's barometer and

responsibility, the natural disaster must have been the

radio (Rorlo, p. 142). Neither did the captain of the vessel

proximate and only cause of the loss. However, the common

monitor and record the weather conditions everyday as

carrier must exercise due diligence to prevent or minimize the

required by Art, 612 of the Code of Commerce (Rollo, pp.

loss before, during and after the occurrence of flood, storm or

142-143). Had he done so while navigating for 31 hours, he

other natural disaster in order that the common carrier may be

could have anticipated the strong winds and big waves and

exempted from liability for the destruction or deterioration of

taken shelter (Rollo, pp- 36; 145). His testimony on May 4,

the goods (Article 1739, New Civil Code).

1982 is as follows:

In the instant case, the appellate court was correct in finding

Q.

that petitioner failed to observe the extraordinary diligence

was?

Did you not check on your own where the typhoon

over the cargo in question and he or the master in his employ

was negligent previous to the sinking of the carrying vessel. In

A.

No. sir. (TSN, May 4, 1982, pp. 58-59)

substance, the decision reads:

Noteworthy is the fact that as Per official records of the
... VIVENCIO BABAO, the master of the carrying vessel,

Climatological Division of the Philippine Atmospheric,

knew that there was a typboon coming before his departure

Geophysical and Astronomical Services Administration

but did not check where it was.

(PAG-ASA for brevity) issued by its Chief of Climatological

Division, Primitivo G. Ballan, Jr. as to the weather and sea

xxx

xxx

xxx

conditions that prevailed in the vicinity of Catmon, Cebu

during the period March 25-27, 1982, the sea conditions on

175

Transportation Law
Choco Notes
March 25, 1982 were slight to rough and the weather

2 AM

conditions then prevailing during those times were cloudy

30

skies with rainshowers and the small waves grew larger and

3.7

larger, to wit:
rough
SPEED

sea heaps up

WAVE HT.

white foam from

SEA

breaking waves

WEATHER

begin to be blown

KNOTS

in streaks along

(METERS)

the direction of the wind;

CONDITIONS

Spindrift begins

March 25
8 AM

(Exh. 3)

15
1-2

A common carrier is obliged to observe extraordinary

slight

diligence and the failure of Babao to ascertain the direction of

cloudy skies

the storm and the weather condition of the path they would be

w/ rainshowers

traversing, constitute lack of foresight and minimum vigilance

2 PM

over its cargoes taking into account the surrounding

20-25

circumstances of the case.

2.0-3.0
moderate

While the goods are in the possession of the carrier, it is but

overcast skies

fair that it exercises extraordinary diligence in protecting them

to rough

from loss or damage, and if loss occurs, the law presumes that

w/ some rains

it was due to the carrier's fault or negligence; that is necessary

8 PM

to protect the interest of the shipper which is at the mercy of

30

the carrier (Art. 1756, Civil Code, Aboitiz Shipping

3.7

Corporation v. Court of Appeals, G.R. No. 89757, Aug. 6,

rough

1990, 188 SCRA 387).

sea heaps up
white foam from

Furthermore, the records show that the crew of M/L Maya did

breaking waves

not have the required qualifications provided for in P.D. No.

begin to be blown

97 or the Philippine Merchant Marine Officers Law, all of

in streaks along

whom were unlicensed. While it is true that they were given

the direction of

special permit to man the vessel, such permit was issued at the

the wind;

risk and responsibility of the owner (Rollo, p. 36).

Spindrift begins

176

Transportation Law
Choco Notes
Finally, petitioner claims that the factual findings of the

COURT

Special

AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA,

Board

of

Marine

Inquiry

exonerating

the

owner/operator, crew officers of the ill-fated vessel M/L Maya

OF

APPEALS,

SORIAMONT

STEAMSHIP

respondents.

from any administrative liability is binding on the court.

Gonzales, Sinense, Jimenez & Associates for petitioner.
In rejecting petitioner's claim, respondent court was correct in
ruling that "such exoneration was but with respect to the

Siguion Reyna, Montecillo & Ongsiako Law Office for private

administrative liability of the owner/operator, officers and

respondents.

crew of the ill-fated" vessel. It could not have meant

exoneration of appellee from liability as a common carrier for
his failure to observe extraordinary diligence in the vigilance
over the goods it was transporting and for the negligent acts or

BELLOSILLO, J.:

omissions of his employees. Such is the function of the Court,

not the Special Board of Marine Inquiry." (Rollo, P. 37,

Does a charter-party 1 between a shipowner and a charterer

Annex A, p. 7)

transform a common carrier into a private one as to negate the

civil law presumption of negligence in case of loss or damage

The Philippine Merchant Marine Rules and Regulations

particularly

Chapter

XVI

thereof

entitled

to its cargo?

"Marine

Investigation and Suspension and Revocation Proceedings"

Planters Products, Inc. (PPI), purchased from Mitsubishi

prescribes the Rules governing maritime casualties or

International Corporation (MITSUBISHI) of New York,

accidents, the rules and Procedures in administrative

U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer

investigation of all maritime cases within the jurisdiction or

which the latter shipped in bulk on 16 June 1974 aboard the

cognizance of the Philippine Coast Guard and the grounds for

cargo vessel M/V "Sun Plum" owned by private respondent

suspension and revocation of licenses/certificates of marine

Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska,

officers and seamen (1601 SCOPE); clearly, limiting the

U.S.A., to Poro Point, San Fernando, La Union, Philippines, as

jurisdiction of the Board of Marine Inquiry and Special Board

evidenced by Bill of Lading No. KP-1 signed by the master of

of Marine Inquiry to the administrative aspect of marine

the vessel and issued on the date of departure.

casualties in so far as it involves the shipowners and officers.

On 17 May 1974, or prior to its voyage, a time charter-party
PREMISES

CONSIDERED,

the

appealed

AFFIRMED.

decision

is

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

SO ORDERED.

Riders to the aforesaid charter-party starting from par. 16 to 40

were attached to the pre-printed agreement. Addenda Nos. 1,

Planters Products v. CA
G.R. No. 101503 September 15, 1993

2, 3 and 4 to the charter-party were also subsequently entered

into on the 18th, 20th, 21st and 27th of May 1974,
respectively.

PLANTERS PRODUCTS, INC., petitioner,

vs.

177

Transportation Law
Choco Notes
Before loading the fertilizer aboard the vessel, four (4) of her

raining occasionally while the discharge was in progress. 8

holds 4 were all presumably inspected by the charterer's

The petitioner's warehouse was made of corrugated galvanized

representative and found fit to take a load of urea in bulk

iron (GI) sheets, with an opening at the front where the dump

pursuant to par. 16 of the charter-party which reads:

trucks entered and unloaded the fertilizer on the warehouse

floor. Tarpaulins and GI sheets were placed in-between and

16.

. . . At loading port, notice of readiness to be

alongside the trucks to contain spillages of the ferilizer. 9

accomplished by certificate from National Cargo Bureau

inspector or substitute appointed by charterers for his account

It took eleven (11) days for PPI to unload the cargo, from 5

certifying the vessel's readiness to receive cargo spaces. The

July to 18 July 1974 (except July 12th, 14th and 18th). 10 A

vessel's hold to be properly swept, cleaned and dried at the

private marine and cargo surveyor, Cargo Superintendents

vessel's expense and the vessel to be presented clean for use in

Company Inc. (CSCI), was hired by PPI to determine the

bulk to the satisfaction of the inspector before daytime

"outturn" of the cargo shipped, by taking draft readings of the

commences. (emphasis supplied)

vessel prior to and after discharge. 11 The survey report

submitted by CSCI to the consignee (PPI) dated 19 July 1974

After the Urea fertilizer was loaded in bulk by stevedores

revealed a shortage in the cargo of 106.726 M/T and that a

hired by and under the supervision of the shipper, the steel

portion of the Urea fertilizer approximating 18 M/T was

hatches were closed with heavy iron lids, covered with three

contaminated with dirt. The same results were contained in a

(3) layers of tarpaulin, then tied with steel bonds. The hatches

Certificate of Shortage/Damaged Cargo dated 18 July 1974

remained closed and tightly sealed throughout the entire

prepared by PPI which showed that the cargo delivered was

voyage. 5

indeed short of 94.839 M/T and about 23 M/T were rendered

unfit for commerce, having been polluted with sand, rust and

Upon arrival of the vessel at her port of call on 3 July 1974,

dirt. 12

the steel pontoon hatches were opened with the use of the
vessel's boom. Petitioner unloaded the cargo from the holds

Consequently, PPI sent a claim letter dated 18 December 1974

into its steelbodied dump trucks which were parked alongside

to Soriamont Steamship Agencies (SSA), the resident agent of

the berth, using metal scoops attached to the ship, pursuant to

the carrier, KKKK, for P245,969.31 representing the cost of

the terms and conditions of the charter-partly (which provided

the alleged shortage in the goods shipped and the diminution

for an F.I.O.S. clause). 6 The hatches remained open

in value of that portion said to have been contaminated with

throughout the duration of the discharge. 7

dirt. 13

Each time a dump truck was filled up, its load of Urea was

Respondent SSA explained that they were not able to respond

covered with tarpaulin before it was transported to the

to the consignee's claim for payment because, according to

consignee's warehouse located some fifty (50) meters from the

them, what they received was just a request for shortlanded

wharf. Midway to the warehouse, the trucks were made to

certificate and not a formal claim, and that this "request" was

pass through a weighing scale where they were individually

denied by them because they "had nothing to do with the

weighed for the purpose of ascertaining the net weight of the

discharge of the shipment." 14 Hence, on 18 July 1975, PPI

cargo. The port area was windy, certain portions of the route

filed an action for damages with the Court of First Instance of

to the warehouse were sandy and the weather was variable,

Manila. The defendant carrier argued that the strict public

178

Transportation Law
Choco Notes
policy governing common carriers does not apply to them

prove the negligence of the defendant carrier as alleged in its

because they have become private carriers by reason of the

complaint. It is an old and well settled rule that if the plaintiff,

provisions of the charter-party. The court a quo however

upon whom rests the burden of proving his cause of action,

sustained the claim of the plaintiff against the defendant

fails to show in a satisfactory manner the facts upon which he

carrier for the value of the goods lost or damaged when it

bases his claim, the defendant is under no obligation to prove

ruled thus: 15

his exception or defense (Moran, Commentaries on the Rules

of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202).

. . . Prescinding from the provision of the law that a common

carrier is presumed negligent in case of loss or damage of the

But, the record shows that the plaintiff-appellee dismally

goods it contracts to transport, all that a shipper has to do in a

failed to prove the basis of its cause of action, i.e. the alleged

suit to recover for loss or damage is to show receipt by the

negligence of defendant carrier. It appears that the plaintiff

carrier of the goods and to delivery by it of less than what it

was under the impression that it did not have to establish

received. After that, the burden of proving that the loss or

defendant's negligence. Be that as it may, contrary to the trial

damage was due to any of the causes which exempt him from

court's finding, the record of the instant case discloses ample

liability is shipted to the carrier, common or private he may

evidence showing that defendant carrier was not negligent in

be. Even if the provisions of the charter-party aforequoted are

performing its obligation . . . 18 (emphasis supplied).

deemed valid, and the defendants considered private carriers,

it was still incumbent upon them to prove that the shortage or

Petitioner PPI appeals to us by way of a petition for review

contamination sustained by the cargo is attributable to the fault

assailing the decision of the Court of Appeals. Petitioner

or negligence on the part of the shipper or consignee in the

theorizes that the Home Insurance case has no bearing on the

loading, stowing, trimming and discharge of the cargo. This

present controversy because the issue raised therein is the

they failed to do. By this omission, coupled with their failure

validity of a stipulation in the charter-party delimiting the

to destroy the presumption of negligence against them, the

liability of the shipowner for loss or damage to goods cause by

defendants are liable (emphasis supplied).

want of due deligence on its part or that of its manager to

make the vessel seaworthy in all respects, and not whether the

On appeal, respondent Court of Appeals reversed the lower

presumption of negligence provided under the Civil Code

court and absolved the carrier from liability for the value of

applies only to common carriers and not to private carriers. 19

the cargo that was lost or damaged. 16 Relying on the 1968

Petitioner further argues that since the possession and control

case of Home Insurance Co. v. American Steamship Agencies,

of the vessel remain with the shipowner, absent any stipulation

Inc., 17 the appellate court ruled that the cargo vessel M/V

to the contrary, such shipowner should made liable for the

"Sun Plum" owned by private respondent KKKK was a

negligence of the captain and crew. In fine, PPI faults the

private carrier and not a common carrier by reason of the time

appellate court in not applying the presumption of negligence

charterer-party. Accordingly, the Civil Code provisions on

against respondent carrier, and instead shifting the onus

common carriers which set forth a presumption of negligence

probandi on the shipper to show want of due deligence on the

do not find application in the case at bar. Thus

part of the carrier, when he was not even at hand to witness

what transpired during the entire voyage.

. . . In the absence of such presumption, it was incumbent

upon the plaintiff-appellee to adduce sufficient evidence to

179

Transportation Law
Choco Notes
As earlier stated, the primordial issue here is whether a

transporting passengers or both for compensation as a public

common carrier becomes a private carrier by reason of a

employment and not as a casual occupation. The distinction

charter-party; in the negative, whether the shipowner in the

between a "common or public carrier" and a "private or

instant case was able to prove that he had exercised that

special carrier" lies in the character of the business, such that

degree of diligence required of him under the law.

if the undertaking is a single transaction, not a part of the

general business or occupation, although involving the

It is said that etymology is the basis of reliable judicial

carriage of goods for a fee, the person or corporation offering

decisions in commercial cases. This being so, we find it fitting

such service is a private carrier. 24

to first define important terms which are relevant to our

discussion.

Article 1733 of the New Civil Code mandates that common

carriers, by reason of the nature of their business, should

A "charter-party" is defined as a contract by which an entire

observe extraordinary diligence in the vigilance over the

ship, or some principal part thereof, is let by the owner to

goods they carry. 25 In the case of private carriers, however,

another person for a specified time or use; 20 a contract of

the exercise of ordinary diligence in the carriage of goods will

affreightment by which the owner of a ship or other vessel lets

suffice. Moreover, in the case of loss, destruction or

the whole or a part of her to a merchant or other person for the

deterioration of the goods, common carriers are presumed to

conveyance of goods, on a particular voyage, in consideration

have been at fault or to have acted negligently, and the burden

of the payment of freight; 21 Charter parties are of two types:

of proving otherwise rests on them. 26 On the contrary, no

(a) contract of affreightment which involves the use of

such presumption applies to private carriers, for whosoever

shipping space on vessels leased by the owner in part or as a

alleges damage to or deterioration of the goods carried has the

whole, to carry goods for others; and, (b) charter by demise or

onus of proving that the cause was the negligence of the

bareboat charter, by the terms of which the whole vessel is let

carrier.

to the charterer with a transfer to him of its entire command

and possession and consequent control over its navigation,

It is not disputed that respondent carrier, in the ordinary course

including the master and the crew, who are his servants.

of business, operates as a common carrier, transporting goods

Contract of affreightment may either be time charter, wherein

indiscriminately for all persons. When petitioner chartered the

the vessel is leased to the charterer for a fixed period of time,

vessel M/V "Sun Plum", the ship captain, its officers and

or voyage charter, wherein the ship is leased for a single

compliment were under the employ of the shipowner and

voyage. 22 In both cases, the charter-party provides for the

therefore continued to be under its direct supervision and

hire of vessel only, either for a determinate period of time or

control. Hardly then can we charge the charterer, a stranger to

for a single or consecutive voyage, the shipowner to supply

the crew and to the ship, with the duty of caring for his cargo

the ship's stores, pay for the wages of the master and the crew,

when the charterer did not have any control of the means in

and defray the expenses for the maintenance of the ship.

doing so. This is evident in the present case considering that

the steering of the ship, the manning of the decks, the

Upon the other hand, the term "common or public carrier" is

determination of the course of the voyage and other technical

defined in Art. 1732 of the Civil Code. 23 The definition

incidents of maritime navigation were all consigned to the

extends to carriers either by land, air or water which hold

officers and crew who were screened, chosen and hired by the

themselves out as ready to engage in carrying goods or

shipowner. 27

180

Transportation Law
Choco Notes
by one or many. The master and the crew are in each case his
It is therefore imperative that a public carrier shall remain as

servants, the freighter in each case is usually without any

such, notwithstanding the charter of the whole or portion of a

representative on board the ship; the same opportunities for

vessel by one or more persons, provided the charter is limited

fraud or collusion occur; and the same difficulty in

to the ship only, as in the case of a time-charter or voyage-

discovering the truth as to what has taken place arises . . .

charter. It is only when the charter includes both the vessel

and its crew, as in a bareboat or demise that a common carrier

In an action for recovery of damages against a common carrier

becomes private, at least insofar as the particular voyage

on the goods shipped, the shipper or consignee should first

covering the charter-party is concerned. Indubitably, a

prove the fact of shipment and its consequent loss or damage

shipowner in a time or voyage charter retains possession and

while the same was in the possession, actual or constructive,

control of the ship, although her holds may, for the moment,

of the carrier. Thereafter, the burden of proof shifts to

be the property of the charterer. 28

respondent to prove that he has exercised extraordinary

diligence required by law or that the loss, damage or

Respondent carrier's heavy reliance on the case of Home

deterioration of the cargo was due to fortuitous event, or some

Insurance Co. v. American Steamship Agencies, supra, is

other circumstances inconsistent with its liability. 31

misplaced for the reason that the meat of the controversy

therein was the validity of a stipulation in the charter-party

To our mind, respondent carrier has sufficiently overcome, by

exempting the shipowners from liability for loss due to the

clear and convincing proof, the prima facie presumption of

negligence of its agent, and not the effects of a special charter

negligence.

on common carriers. At any rate, the rule in the United States

that a ship chartered by a single shipper to carry special cargo

The master of the carrying vessel, Captain Lee Tae Bo, in his

is not a common carrier, 29 does not find application in our

deposition taken on 19 April 1977 before the Philippine

jurisdiction, for we have observed that the growing concern

Consul and Legal Attache in the Philippine Embassy in

for safety in the transportation of passengers and /or carriage

Tokyo, Japan, testified that before the fertilizer was loaded,

of goods by sea requires a more exacting interpretation of

the four (4) hatches of the vessel were cleaned, dried and

admiralty laws, more particularly, the rules governing

fumigated. After completing the loading of the cargo in bulk

common carriers.

in the ship's holds, the steel pontoon hatches were closed and
sealed with iron lids, then covered with three (3) layers of

We quote with approval the observations of Raoul Colinvaux,

serviceable tarpaulins which were tied with steel bonds. The

the learned barrister-at-law 30

hatches remained close and tightly sealed while the ship was
in transit as the weight of the steel covers made it impossible

As a matter of principle, it is difficult to find a valid

for a person to open without the use of the ship's boom. 32

distinction between cases in which a ship is used to convey the

goods of one and of several persons. Where the ship herself is

It was also shown during the trial that the hull of the vessel

let to a charterer, so that he takes over the charge and control

was in good condition, foreclosing the possibility of spillage

of her, the case is different; the shipowner is not then a carrier.

of the cargo into the sea or seepage of water inside the hull of

But where her services only are let, the same grounds for

the vessel. 33 When M/V "Sun Plum" docked at its berthing

imposing a strict responsibility exist, whether he is employed

place, representatives of the consignee boarded, and in the

181

Transportation Law
Choco Notes
presence of a representative of the shipowner, the foreman, the

meaning, that the loading, stowing, trimming and discharge of

stevedores, and a cargo surveyor representing CSCI, opened

the cargo was to be done by the charterer, free from all risk

the hatches and inspected the condition of the hull of the

and expense to the carrier. 35 Moreover, a shipowner is liable

vessel. The stevedores unloaded the cargo under the watchful

for damage to the cargo resulting from improper stowage only

eyes of the shipmates who were overseeing the whole

when the stowing is done by stevedores employed by him, and

operation on rotation basis. 34

therefore under his control and supervision, not when the same
is done by the consignee or stevedores under the employ of the

Verily, the presumption of negligence on the part of the

latter. 36

respondent carrier has been efficaciously overcome by the

showing of extraordinary zeal and assiduity exercised by the

Article 1734 of the New Civil Code provides that common

carrier in the care of the cargo. This was confirmed by

carriers are not responsible for the loss, destruction or

respondent appellate court thus

deterioration of the goods if caused by the charterer of the

goods or defects in the packaging or in the containers. The

. . . Be that as it may, contrary to the trial court's finding, the

Code of Commerce also provides that all losses and

record of the instant case discloses ample evidence showing

deterioration which the goods may suffer during the

that defendant carrier was not negligent in performing its

transportation by reason of fortuitous event, force majeure, or

obligations. Particularly, the following testimonies of plaintiff-

the inherent defect of the goods, shall be for the account and

appellee's own witnesses clearly show absence of negligence

risk of the shipper, and that proof of these accidents is

by the defendant carrier; that the hull of the vessel at the time

incumbent upon the carrier. 37 The carrier, nonetheless, shall

of the discharge of the cargo was sealed and nobody could

be liable for the loss and damage resulting from the preceding

open the same except in the presence of the owner of the cargo

causes if it is proved, as against him, that they arose through

and the representatives of the vessel (TSN, 20 July 1977, p.

his negligence or by reason of his having failed to take the

14); that the cover of the hatches was made of steel and it was

precautions which usage has established among careful

overlaid with tarpaulins, three layers of tarpaulins and

persons. 38

therefore their contents were protected from the weather

(TSN, 5 April 1978, p. 24); and, that to open these hatches, the

Respondent carrier presented a witness who testified on the

seals would have to be broken, all the seals were found to be

characteristics of the fertilizer shipped and the expected risks

intact (TSN, 20 July 1977, pp. 15-16) (emphasis supplied).

of bulk shipping. Mr. Estanislao Chupungco, a chemical

engineer working with Atlas Fertilizer, described Urea as a

The period during which private respondent was to observe

chemical compound consisting mostly of ammonia and carbon

the degree of diligence required of it as a public carrier began

monoxide compounds which are used as fertilizer. Urea also

from the time the cargo was unconditionally placed in its

contains 46% nitrogen and is highly soluble in water.

charge after the vessel's holds were duly inspected and passed

However, during storage, nitrogen and ammonia do not

scrutiny by the shipper, up to and until the vessel reached its

normally evaporate even on a long voyage, provided that the

destination and its hull was reexamined by the consignee, but

temperature inside the hull does not exceed eighty (80)

prior to unloading. This is clear from the limitation clause

degrees centigrade. Mr. Chupungco further added that in

agreed upon by the parties in the Addendum to the standard

unloading fertilizer in bulk with the use of a clamped shell,

"GENCON" time charter-party which provided for an F.I.O.S.,

losses due to spillage during such operation amounting to one

182

Transportation Law
Choco Notes
percent (1%) against the bill of lading is deemed "normal" or

The Court notes that it was in the month of July when the

"tolerable." The primary cause of these spillages is the

vessel arrived port and unloaded her cargo. It rained from time

clamped shell which does not seal very tightly. Also, the wind

to time at the harbor area while the cargo was being

tends to blow away some of the materials during the unloading

discharged according to the supply officer of PPI, who also

process.

testified that it was windy at the waterfront and along the

shoreline where the dump trucks passed enroute to the

The dissipation of quantities of fertilizer, or its daterioration in

consignee's warehouse.

value, is caused either by an extremely high temperature in its

place of storage, or when it comes in contact with water.

Indeed, we agree with respondent carrier that bulk shipment of

When Urea is drenched in water, either fresh or saline, some

highly soluble goods like fertilizer carries with it the risk of

of its particles dissolve. But the salvaged portion which is in

loss or damage. More so, with a variable weather condition

liquid form still remains potent and usable although no longer

prevalent during its unloading, as was the case at bar. This is a

saleable in its original market value.

risk the shipper or the owner of the goods has to face. Clearly,
respondent carrier has sufficiently proved the inherent

The probability of the cargo being damaged or getting mixed

character of the goods which makes it highly vulnerable to

or contaminated with foreign particles was made greater by

deterioration; as well as the inadequacy of its packaging which

the fact that the fertilizer was transported in "bulk," thereby

further contributed to the loss. On the other hand, no proof

exposing it to the inimical effects of the elements and the

was adduced by the petitioner showing that the carrier was

grimy condition of the various pieces of equipment used in

remise in the exercise of due diligence in order to minimize

transporting and hauling it.

the loss or damage to the goods it carried.

The evidence of respondent carrier also showed that it was

WHEREFORE, the petition is DISMISSED. The assailed

highly improbable for sea water to seep into the vessel's holds

decision of the Court of Appeals, which reversed the trial

during the voyage since the hull of the vessel was in good

court, is AFFIRMED. Consequently, Civil Case No. 98623 of

condition and her hatches were tightly closed and firmly

the then Court of the First Instance, now Regional Trial Court,

sealed, making the M/V "Sun Plum" in all respects seaworthy

of Manila should be, as it is hereby DISMISSED.

to carry the cargo she was chartered for. If there was loss or
contamination of the cargo, it was more likely to have

Costs against petitioner.

occurred while the same was being transported from the ship
to the dump trucks and finally to the consignee's warehouse.

SO ORDERED.

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

Loadstar Shipping v. CA
[G.R. No. 131621. September 28, 1999]

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.

LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT

OF APPEALS and THE MANILA INSURANCE CO., INC.,
respondents.
DECISION
DAVIDE, JR., C.J.:

183

Transportation Law
Choco Notes
P6,075,000 to the insured in full settlement of its claim, and
Petitioner

Loadstar

Shipping

Co.,

Inc.

(hereafter

the latter executed a subrogation receipt therefor.

LOADSTAR), in this petition for review on certiorari under

Rule 45 of the 1997 Rules of Civil Procedure, seeks to reverse

On 4 February 1985, MIC filed a complaint against

and set aside the following:

(a) the 30 January 1997

LOADSTAR and PGAI, alleging that the sinking of the vessel

decision[1] of the Court of Appeals in CA-G.R. CV No.

was due to the fault and negligence of LOADSTAR and its

36401, which affirmed the decision of 4 October 1991[2] of

employees. It also prayed that PGAI be ordered to pay the

the Regional Trial Court of Manila, Branch 16, in Civil Case

insurance proceeds from the loss of the vessel directly to MIC,

No. 85-29110, ordering LOADSTAR to pay private

said amount to be deducted from MICs claim from

respondent Manila Insurance Co. (hereafter MIC) the amount

LOADSTAR.

of P6,067,178, with legal interest from the filing of the

complaint until fully paid, P8,000 as attorneys fees, and the

In its answer, LOADSTAR denied any liability for the loss of

costs of the suit; and (b) its resolution of 19 November

the shippers goods and claimed that the sinking of its vessel

1997,[3] denying LOADSTARs motion for reconsideration of

was due to force majeure. PGAI, on the other hand, averred

said decision.

that MIC had no cause of action against it, LOADSTAR being

the party insured. In any event, PGAI was later dropped as a

The facts are undisputed.

party defendant after it paid the insurance proceeds to

LOADSTAR.

On 19 November 1984, LOADSTAR received on board its

M/V Cherokee (hereafter, the vessel) the following goods

As stated at the outset, the court a quo rendered judgment in

for shipment:

favor of MIC, prompting LOADSTAR to elevate the matter to

the Court of Appeals, which, however, agreed with the trial

a) 705 bales of lawanit hardwood;

court and affirmed its decision in toto.

b) 27 boxes and crates of tilewood assemblies and others; and

In dismissing LOADSTARs appeal, the appellate court made

the following observations:

c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.

1) LOADSTAR cannot be considered a private carrier on the
The goods, amounting to P6,067,178, were insured for the

sole ground that there was a single shipper on that fateful

same amount with MIC against various risks including

voyage. The court noted that the charter of the vessel was

TOTAL LOSS BY TOTAL LOSS OF THE VESSEL. The

limited to the ship, but LOADSTAR retained control over its

vessel, in turn, was insured by Prudential Guarantee &

crew.[4]

Assurance, Inc. (hereafter PGAI) for P4 million.

On 20

November 1984, on its way to Manila from the port of Nasipit,

2) As a common carrier, it is the Code of Commerce, not the

Agusan del Norte, the vessel, along with its cargo, sank off

Civil Code, which should be applied in determining the rights

Limasawa Island. As a result of the total loss of its shipment,

and liabilities of the parties.

the consignee made a claim with LOADSTAR which,

however, ignored the same.

As the insurer, MIC paid

184

Transportation Law
Choco Notes
3) The vessel was not seaworthy because it was undermanned
on the day of the voyage. If it had been seaworthy, it could

The errors assigned by LOADSTAR boil down to a

have withstood the natural and inevitable action of the sea

determination of the following issues:

on 20 November 1984, when the condition of the sea was

moderate. The vessel sank, not because of force majeure, but

(1) Is the M/V Cherokee a private or a common carrier?

because it was not seaworthy. LOADSTARS allegation that

the sinking was probably due to the convergence of the

(2) Did LOADSTAR observe due and/or ordinary diligence in

winds, as stated by a PAGASA expert, was not duly proven

these premises?

at the trial.

The limited liability rule, therefore, is not

applicable considering that, in this case, there was an actual

Regarding the first issue, LOADSTAR submits that the vessel

finding of negligence on the part of the carrier.[5]

was a private carrier because it was not issued a certificate of

public convenience, it did not have a regular trip or schedule

4) Between MIC and LOADSTAR, the provisions of the Bill

nor a fixed route, and there was only one shipper, one

of Lading do not apply because said provisions bind only the

consignee for a special cargo.

shipper/consignee and the carrier. When MIC paid the shipper

for the goods insured, it was subrogated to the latters rights as

In refutation, MIC argues that the issue as to the classification

against the carrier, LOADSTAR.[6]

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

5) There was a clear breach of the contract of carriage when

board only the cargo of wood products for delivery to one

the

destination.

consignee, it was also carrying passengers as part of its regular

LOADSTARs defense of diligence of a good father of a

business. Moreover, the bills of lading in this case made no

family in the training and selection of its crew is unavailing

mention of any charter party but only a statement that the

because this is not a proper or complete defense in culpa

vessel was a general cargo carrier. Neither was there any

contractual.

special arrangement between LOADSTAR and the shipper

shippers

goods

never

reached

their

regarding the shipment of the cargo. The singular fact that the
6) Art. 361 (of the Code of Commerce) has been judicially

vessel was carrying a particular type of cargo for one shipper

construed to mean that when goods are delivered on board a

is not sufficient to convert the vessel into a private carrier.

ship in good order and condition, and the shipowner delivers

them to the shipper in bad order and condition, it then

As regards the second error, LOADSTAR argues that as a

devolves upon the shipowner to both allege and prove that the

private carrier, it cannot be presumed to have been negligent,

goods were damaged by reason of some fact which legally

and the burden of proving otherwise devolved upon MIC.[8]

exempts him from liability.

Transportation of the

merchandise at the risk and venture of the shipper means that

LOADSTAR also maintains that the vessel was seaworthy.

the latter bears the risk of loss or deterioration of his goods

Before the fateful voyage on 19 November 1984, the vessel

arising from fortuitous events, force majeure, or the inherent

was allegedly dry docked at Keppel Philippines Shipyard and

nature and defects of the goods, but not those caused by the

was duly inspected by the maritime safety engineers of the

presumed negligence or fault of the carrier, unless otherwise

Philippine Coast Guard, who certified that the ship was fit to

proved.[7]

undertake a voyage. Its crew at the time was experienced,

185

Transportation Law
Choco Notes
licensed and unquestionably competent.

With all these

precautions, there could be no other conclusion except that

November 1984; yet, the case for recovery was filed only on 4
February 1985.

LOADSTAR exercised the diligence of a good father of a

family in ensuring the vessels seaworthiness.

MIC, on the other hand, claims that LOADSTAR was liable,

notwithstanding that the loss of the cargo was due to force

LOADSTAR further claims that it was not responsible for the

majeure, because the same concurred with LOADSTARs

loss of the cargo, such loss being due to force majeure. It

fault or negligence.

points out that when the vessel left Nasipit, Agusan del Norte,
on 19 November 1984, the weather was fine until the next day

Secondly, LOADSTAR did not raise the issue of prescription

when the vessel sank due to strong waves. MICs witness,

in the court below; hence, the same must be deemed waived.

Gracelia Tapel, fully established the existence of two

typhoons,

WELFRING

and

YOLING,

inside

the

Thirdly, the limited liability theory is not applicable in the

Philippine area of responsibility. In fact, on 20 November

case at bar because LOADSTAR was at fault or negligent, and

1984, signal no. 1 was declared over Eastern Visayas, which

because it failed to maintain a seaworthy vessel. Authorizing

includes Limasawa Island.

the voyage notwithstanding its knowledge of a typhoon is

Tapel also testified that the

convergence of winds brought about by these two typhoons

tantamount to negligence.

strengthened wind velocity in the area, naturally producing

strong waves and winds, in turn, causing the vessel to list and

We find no merit in this petition.

eventually sink.
Anent the first assigned error, we hold that LOADSTAR is a
LOADSTAR goes on to argue that, being a private carrier, any

common carrier. It is not necessary that the carrier be issued a

agreement limiting its liability, such as what transpired in this

certificate of public convenience, and this public character is

case, is valid. Since the cargo was being shipped at owners

not altered by the fact that the carriage of the goods in

risk, LOADSTAR was not liable for any loss or damage to

question was periodic, occasional, episodic or unscheduled.

the same. Therefore, the Court of Appeals erred in holding

that the provisions of the bills of lading apply only to the

In support of its position, LOADSTAR relied on the 1968 case

shipper and the carrier, and not to the insurer of the goods,

of Home Insurance Co. v. American Steamship Agencies,

which conclusion runs counter to the Supreme Courts ruling

Inc.,[11] where this Court held that a common carrier

in the case of St. Paul Fire & Marine Insurance Co. v.

transporting special cargo or chartering the vessel to a special

Macondray & Co., Inc.,[9] and National Union Fire Insurance

person becomes a private carrier that is not subject to the

Company of Pittsburg v. Stolt-Nielsen Phils., Inc.[10]

provisions of the Civil Code. Any stipulation in the charter

party absolving the owner from liability for loss due to the

Finally, LOADSTAR avers that MICs claim had already

negligence of its agent is void only if the strict policy

prescribed, the case having been instituted beyond the period

governing common carriers is upheld. Such policy has no

stated in the bills of lading for instituting the same suits

force where the public at large is not involved, as in the case

based upon claims arising from shortage, damage, or non-

of a ship totally chartered for the use of a single party.

delivery of shipment shall be instituted within sixty days from

LOADSTAR also cited Valenzuela Hardwood and Industrial

the accrual of the right of action. The vessel sank on 20

Supply, Inc. v. Court of Appeals[12] and National Steel Corp.

186

Transportation Law
Choco Notes
v. Court of Appeals,[13] both of which upheld the Home

scheduled basis and one offering such service on an

Insurance doctrine.

occasional, episodic or unscheduled basis.

Neither does

Article 1732 distinguish between a carrier offering its services

These cases invoked by LOADSTAR are not applicable in the

to the general public, i.e., the general community or

case at bar for simple reason that the factual settings are

population, and one who offers services or solicits business

different.

The records do not disclose that the M/V

only from a narrow segment of the general population. We

Cherokee, on the date in question, undertook to carry a

think that Article 1733 deliberately refrained from making

special cargo or was chartered to a special person only. There

such distinctions.

was no charter party. The bills of lading failed to show any

special arrangement, but only a general provision to the effect

xxx

that the M/V Cherokee was a general cargo carrier.[14]

Further, the bare fact that the vessel was carrying a particular

It appears to the Court that private respondent is properly

type of cargo for one shipper, which appears to be purely

characterized as a common carrier even though he merely

coincidental, is not reason enough to convert the vessel from a

back-hauled goods for other merchants from Manila to

common to a private carrier, especially where, as in this case,

Pangasinan, although such backhauling was done on a

it was shown that the vessel was also carrying passengers.

periodic or occasional rather than regular or scheduled

manner, and even though private respondents principal

Under the facts and circumstances obtaining in this case,

occupation was not the carriage of goods for others. There is

LOADSTAR fits the definition of a common carrier under

no dispute that private respondent charged his customers a fee

Article 1732 of the Civil Code. In the case of De Guzman v.

for hauling their goods; that that fee frequently fell below

Court of Appeals,[15] the Court juxtaposed the statutory

commercial freight rates is not relevant here.

definition

of

common

carriers

with

the

peculiar

circumstances of that case, viz.:

The Court of Appeals referred to the fact that private

respondent held no certificate of public convenience, and

The Civil Code defines common carriers in the following

concluded he was not a common carrier. This is palpable

terms:

error. A certificate of public convenience is not a requisite for

the incurring of liability under the Civil Code provisions

Article 1732. Common carriers are persons, corporations,

governing common carriers. That liability arises the moment

firms or associations engaged in the business of carrying or

a person or firm acts as a common carrier, without regard to

transporting passengers or goods or both, by land, water, or air

whether or not such carrier has also complied with the

for compensation, offering their services to the public.

requirements of the applicable regulatory statute and

implementing regulations and has been granted a certificate of

The above article makes no distinction between one whose

public convenience or other franchise.

principal business activity is the carrying of persons or goods

respondent from the liabilities of a common carrier because he

or both, and one who does such carrying only as an ancillary

has

activity (in local idiom, as a sideline. Article 1732 also

convenience, would be offensive to sound public policy; that

carefully avoids making any distinction between a person or

would be to reward private respondent precisely for failing to

enterprise offering transportation service on a regular or

comply with applicable statutory requirements. The business

not

secured

the

necessary

To exempt private

certificate

of

public

187

Transportation Law
Choco Notes
of a common carrier impinges directly and intimately upon the

Insurance v. Stolt-Nielsen Phils., Inc.[19] It was ruled in these

safety and well being and property of those members of the

two cases that after paying the claim of the insured for

general community who happen to deal with such carrier. The

damages under the insurance policy, the insurer is subrogated

law imposes duties and liabilities upon common carriers for

merely to the rights of the assured, that is, it can recover only

the safety and protection of those who utilize their services

the amount that may, in turn, be recovered by the latter. Since

and the law cannot allow a common carrier to render such

the right of the assured in case of loss or damage to the goods

duties and liabilities merely facultative by simply failing to

is limited or restricted by the provisions in the bills of lading, a

obtain the necessary permits and authorizations.

suit by the insurer as subrogee is necessarily subject to the

same limitations and restrictions. We do not agree. In the

Moving on to the second assigned error, we find that the M/V

first place, the cases relied on by LOADSTAR involved a

Cherokee was not seaworthy when it embarked on its

limitation on the carriers liability to an amount fixed in the

voyage on 19 November 1984.

bill of lading which the parties may enter into, provided that

The vessel was not even

sufficiently manned at the time.

For a vessel to be

the same was freely and fairly agreed upon (Articles 1749-

seaworthy, it must be adequately equipped for the voyage and

1750). On the other hand, the stipulation in the case at bar

manned with a sufficient number of competent officers and

effectively reduces the common carriers liability for the loss

crew.

The failure of a common carrier to maintain in

or destruction of the goods to a degree less than extraordinary

seaworthy condition its vessel involved in a contract of

(Articles 1744 and 1745), that is, the carrier is not liable for

carriage is a clear breach of its duty prescribed in Article 1755

any loss or damage to shipments made at owners risk.

of the Civil Code.[16]

Such stipulation is obviously null and void for being contrary

to public policy.[20] It has been said:

Neither do we agree with LOADSTARs argument that the

limited liability theory should be applied in this case. The

Three kinds of stipulations have often been made in a bill of

doctrine of limited liability does not apply where there was

lading. The first is one exempting the carrier from any and all

negligence on the part of the vessel owner or agent.[17]

liability for loss or damage occasioned by its own negligence.

LOADSTAR was at fault or negligent in not maintaining a

The second is one providing for an unqualified limitation of

seaworthy vessel and in having allowed its vessel to sail

such liability to an agreed valuation. And the third is one

despite knowledge of an approaching typhoon. In any event,

limiting the liability of the carrier to an agreed valuation

it did not sink because of any storm that may be deemed as

unless the shipper declares a higher value and pays a higher

force majeure, inasmuch as the wind condition in the area

rate of freight. According to an almost uniform weight of

where it sank was determined to be moderate. Since it was

authority, the first and second kinds of stipulations are invalid

remiss in the performance of its duties, LOADSTAR cannot

as being contrary to public policy, but the third is valid and

hide behind the limited liability doctrine to escape

enforceable.[21]

responsibility for the loss of the vessel and its cargo.

Since the stipulation in question is null and void, it follows
LOADSTAR also claims that the Court of Appeals erred in

that when MIC paid the shipper, it was subrogated to all the

holding it liable for the loss of the goods, in utter disregard of

rights which the latter has against the common carrier,

this Courts pronouncements in St. Paul Fire & Marine Ins.

LOADSTAR.

Co. v. Macondray & Co., Inc.,[18] and National Union Fire

188

Transportation Law
Choco Notes
Neither is there merit to the contention that the claim in this

Moreover, a stipulation reducing the one-year period is null

case was barred by prescription. MICs cause of action had

and void;[23] it must, accordingly, be struck down.

not yet prescribed at the time it was concerned. Inasmuch as

neither the Civil Code nor the Code of Commerce states a

WHEREFORE, the instant petition is DENIED and the

specific prescriptive period on the matter, the Carriage of

challenged decision of 30 January 1997 of the Court of

Goods by Sea Act (COGSA) which provides for a one-year

Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs

period of limitation on claims for loss of, or damage to,

against petitioner.

cargoes sustained during transit may be applied suppletorily

to the case at bar.

This one-year prescriptive period also

SO ORDERED.

applies to the insurer of the good.[22] In this case, the period

for filing the action for recovery has not yet elapsed.

189