Spouses Fabre v CA The usual route to Caba, La Union was through Carmen, Pangasinan.

However, the bridge at Carmen was under repair, so that petitioner Cabil,
I. Recit-ready summary 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.
Spouses Fabre owns a Mazda minibus that they use as a bus service for
school children in Manila. Cabil was hired by the spouses as its driver. Word At 11:30 that night, Cabil came upon a sharp curve on the highway. As it was
for World Christian Fellowship Inc. (WWCF) made a transportation raining, the road was slippery causing the bus, which was running at the
arrangement with spouses Fabre where the latter would transport the 33 speed of 50 kph, to skid to the left road shoulder. The bus hit the left traffic
members of the former’s Young Adults Ministry from Manila to La Union and steel brace and sign along the road, rammed a fence then turned over and
back in the amount of P3,000.00. landed on its left side, coming to a full stop only after a series of impacts. A
A car crash ensued allegedly due to the negligence of Cabil. Several coconut tree which it had hit fell on it and smashed its front portion. Because
passengers were injured. A criminal complaint was filed against Cabil where of the mishap, several passengers were injured.
spouses Fabre were held to be jointly liable due to breach of contract of A criminal complaint was filed against the Cabil and the Spouses Fabres were
carriage, under Arts. 1733, 1755 and 1759 of the Civil Code. Spouses Fabre also made jointly liable for breach of contract of carriage. Spouses Fabre on
contended that these Civil Code provisions on common carriers are not the other hand contended that they are not liable since they are not engaged
applicable to them for they are not engaged in the business of public in the business of public transportation, making the Civil Code provisions on
transportation. common carriers inapplicable to them.
The issue before the Court is whether or not spouses Fabre are common III. Issue
carriers. The Court ruled in the affirmative.
The Court held that this case actually involves a contract of carriage. The Whether or not the spouses Fabre are common carriers?
IV. Ratio/Legal Basis
Fabres did not have to be engaged in the business of public transportation
Yes. Spouses Fabre are common carriers.
for the provisions of the Civil Code on common carriers to apply to them. As
The Supreme Court held that this case actually involves a contract of carriage.
this Court has held: Art. 1732, Common carriers are persons, corporations,
The Fabres did not have to be engaged in the business of public
firms or associations engaged in the business of carrying or transporting
transportation for the provisions of the Civil Code on common carriers to
passengers or goods or both, by land, water, or air for compensation, offering
apply to them. As this Court has held: Art. 1732, Common carriers are
their services to the public.
persons, corporations, firms or associations engaged in the business of
II. Facts of the case
carrying or transporting passengers or goods or both, by land, water, or air
Engracio Fabre, Jr. and his wife were owners of a Mazda minibus. They used
for compensation, offering their services to the public.
the bus principally in connection with a bus service for school children which
The above article makes no distinction between one whose principal business
they operated in Manila. The couple hired Porfirio Cabil as the driver after
activity is the carrying of persons or goods or both, and one who does such
trying him for 2 weeks.
carrying only as an ancillary activity (in local idiom, as "a sideline"). Article
Private respondent Word for the World Christian Fellowship Inc. (WWCF) had
1732 also carefully avoids making any distinction between a person or
an arrangement with the Fabres for the transportation of 33 members of its
enterprise offering transportation service on a regular or scheduled basis and
Young Adults Ministry from Manila to La Union and back in the amount of
one offering such service on an occasional, episodic or unscheduled basis.
P3,000.00.
Neither does Article 1732 distinguish between a carrier offering its services to Is Transorient Container Terminal Services, Inc. a common carrier? YES.
the "general public," i.e., the general community or population, and one who Transorient is a common carrier because the transportation of goods is an
offers services or solicits business only from a narrow segment of the general integral part of her business. To uphold Calvo's contention that she is not a
population. We think that Article 1732 deliberately refrained from making common carrier but a private carrier because, as a customs broker and
such distinctions. warehouseman, she does not indiscriminately hold her services out to the
V. Disposition public but only offers the same to select parties with whom she may contract
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with in the conduct of her business, would be to deprive those with whom she
MODIFICATION as to award of damages. contracts the protection which the law affords them notwithstanding the fact
Petitioners are ORDERED to PAY jointly and severally the private respondent that the obligation to carry goods for her customers, as already noted, is part
Amyline Antonio the following amounts: and parcel of petitioner's business.
1) P93,657.11 as actual damages; As a common carrier, she is bound to observe extraordinary diligence in the
2) P500,000.00 as the reasonable amount of loss of earning capacity of carriage of goods; that to prove extraordinary diligence, Calvo must do more
plaintiff Amyline Antonio; than merely show the possibility that some other party could be responsible
3) P20,000.00 as moral damages; for the damage; and that improper packing of the goods could be a basis to
4) P20,000.00 as exemplary damages; exempt petitioner from liability, but petitioner accepted the cargo without
5) 25% of the recoverable amount as attorney's fees; and exception despite the apparent defects in some of the container vans.
6) costs of suit. II. Facts of the case
SO ORDERED. Virgines Calvo doing business under Transorient Container Terminal Services,
VI. Notes Inc.
Virgines Calvo is the owner of Transorient Container Terminal Services,
Article 1759. Common carriers are liable for the death of or injuries to Inc. (TCTSI), a sole proprietorship customs broker. Calvo entered into a
passengers through the negligence or willful acts of the former’s employees, contract with San Miguel Corporation (SMC) for the transfer of 114 reels of
although such employees may have acted beyond the scope of their semi-chemical Nuting paper and 124 reels of kraft liner board from the Port
authority or in violation of the orders of the common carriers. This liability of Area in Manila to SMC's warehouse at the Tabacalera Compound, Romualdez
the common carriers does not cease upon proof that they exercised all the St., Ermita, Manila. The cargo was insured by UCPB General Insurance Co.
diligence of a good father of a family in the selection and supervision of their The shipment in question contained in 30 metal vans, arrived in Manila on
employees. 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.
Pursuant to her contract with SMC, Calvo withdrew the cargo from the
Calvo v UCPB
arrastre operator and delivered it to SMC's warehouse. The goods were
I. Recit-ready summary
inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-
Virgines Calvo is the owner of Transorient Container Terminal Services, Inc.
chemical Nuting paper were "wet/stained/torn" and 3 reels of kraft liner
(TCTSI), entered into a contract with San Miguel Corporation (SMC) for the
board were likewise torn. The damage was placed at P93,112.00.
transfer of paper and kraft liner board. The cargo was insured by UCPB.
SMC collected payment from respondent UCPB under its insurance contract
However, when the goods arrived at the destination and were inspected,
for the aforementioned amount. In turn, UCPB, as subrogee of SMC, brought
some were damaged and hence, SMC collected payment from UCPB under
suit against Calvo in the Regional Trial Court. RTC rendered judgment finding
the insurance contract. UCPB likewise filed a claim against Calvo/Transorient.
Calvo liable to respondent for the damage to the shipment. CA affirmed.
RTC rendered Calvo/Transorient liable for the damage to the shipment.
 Calvo contends that contrary to the findings of the trial court and the Court ". . . every person that now or hereafter may own, operate, manage,
of Appeals, she is not a common carrier but a private carrier because, as a or control in the Philippines, for hire or compensation, with general
customs broker and warehouseman, she does not indiscriminately hold her or limited clientele, whether permanent, occasional or accidental, and
services out to the public but only offers the same to select parties with done for general business purposes, any common carrier, railroad,
whom she may contract in the conduct of her business. street railway, traction railway, subway motor vehicle, either for
III. Issue freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service of any
Is Transorient Container Terminal Services, owned by Calvo a common class, express service, steamboat, or steamship line, pontines, ferries
carrier? and water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or dock, ice plant,
IV. Ratio/Legal Basis ice-refrigeration plant, canal, irrigation system, gas, electric light, heat
and power, water supply and power petroleum, sewerage system,
In De Guzman v. Court of Appeals, the Court dismissed a similar contention wire or wireless communications systems, wire or wireless
and held the party to be a common carrier, thus — broadcasting stations and other similar public services. . . .
The Civil Code defines "common carriers" in the following terms: There is greater reason for holding petitioner to be a common carrier
"Article 1732. Common carriers are persons, corporations, firms or because the transportation of goods is an integral part of her business. To
associations engaged in the business of carrying or transporting uphold petitioner's contention would be to deprive those with whom she
passengers or goods or both, by land, water, or air for compensation, contracts the protection which the law affords them notwithstanding the fact
offering their services to the public." that the obligation to carry goods for her customers, as already noted, is part
The above article makes no distinction between one whose principal and parcel of petitioner's business.
business activity is the carrying of persons or goods or both, and one As to Calvo's liability, Art. 1733 of the Civil Code provides:
who does such carrying only as an ancillary activity . . . Article 1732 Common carriers, from the nature of their business and for reasons
also carefully avoids making any distinction between a person or of public policy, are bound to observe extraordinary diligence in the
enterprise offering transportation service on a regular or scheduled vigilance over the goods and for the safety of the passengers
basis and one offering such service on an occasional, episodic or transported by them, according to all the circumstances of each case.
unscheduled basis. Neither does Article 1732 distinguish between a ...
carrier offering its services to the "general public," i.e., the general In Compania Maritima v. Court of Appeals, the meaning of "extraordinary
community or population, and one who offers services or solicits diligence in the vigilance over goods" was explained thus:
business only from a narrow segment of the general population. We The extraordinary diligence in the vigilance over the goods tendered
think that Article 1732 deliberately refrained from making such for shipment requires the common carrier to know and to follow the
distinctions. So understood, the concept of "common carrier" under required precaution for avoiding damage to, or destruction of the
Article 1732 may be seen to coincide neatly with the notion of goods entrusted to it for sale, carriage and delivery. It requires
"public service," under the Public Service Act (Commonwealth Act common carriers to render service with the greatest skill and
No. 1416, as amended) which at least partially supplements the law foresight and "to use all reasonable means to ascertain the nature
on common carriers set forth in the Civil Code. Under Section 13, and characteristic of goods tendered for shipment, and to exercise
paragraph (b) of the Public Service Act, "public service" includes: due care in the handling and stowage, including such methods as
their nature requires."
Contrary to Calvo's assertion, the Survey Report (Exh. H) of the Marine Cargo WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is
Surveyors indicates that when the shipper transferred the cargo in question AFFIRMED.
to the arrastre operator, these were covered by clean Equipment Interchange VI. Notes
Report (EIR) and, when Calvo's employees withdrew the cargo from the
arrastre operator, they did so without exception or protest either with regard Guzman v CA
to the condition of container vans or their contents. PETITIONER: Pedro De Guzman
Anent Calvo's insistence that the cargo could not have been damaged while RESPONDENT: CA and Ernesto Cendaña
in her custody as she immediately delivered the containers to SMC's Recit-ready summary
compound, suffice it to say that to prove the exercise of extraordinary Ernesto Cendaña is a junk dealer and owned and used 2 six-wheeler trucks
diligence, petitioner must do more than for hauling material to Manila. On the return trip to Pangasinan, he would
merely show the possibility that some other party could be responsible for load his vehicles with cargo which various merchants wanted delivered to
the damage. It must prove that it used "all reasonable means to ascertain the differing establishments in Pangasinan. For that service, he charged freight
nature and characteristic of rates that are lower than the regular commercial rates. Petitioner de Guzman,
goods tendered for [transport] and that [it] exercise[d] due care in the a merchant and dealer of General Milk Company contracted respondent for
handling [thereof]." Calvo failed to do this. hauling 750 cartons of Liberty filled milk from a warehouse of General Milk in
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which Makati.
provides — Only 150 boxes were delivered to petitioner. The other 600 in the other truck
Common carriers are responsible for the loss, destruction, or was hijacked somewhere along MarArthur Highway in Paniqui Tarlac by
deterioration of the goods, unless the same is due to any of the armed men who took with them the truck, its driver, his helper and cargo.
following causes only: Petitioner filed an action demanding payment of P22,150 and that private
xxx xxx xxx respondent, as a common carrier, failed to exercise extraordinary diligence
(4) The character of the goods or defects in the packing or in the required of him by law and should be held liable for the undelivered goods.
containers. Private respondent denied that he’s a common carrier and said that such the
xxx xxx xxx lost goods was due to a force majeure.
For this provision to apply, the rule is that if the improper packing or, in this W/N Respondent Cendaña is a common carrier? Yes. But he is not liable
case, the defect/s in the container, is/are known to the carrier or his because the hijacking of the truck is considered as force majeure.
employees or apparent upon The Court ruled that private respondent is a common carrier even though
ordinary observation, but he nevertheless accepts the same without protest he merely "back-hauled" goods for other merchants from Manila to
or exception notwithstanding such condition, he is not relieved of liability for Pangasinan, although such backhauling was done on a periodic or occasional
damage resulting therefrom. In this case, petitioner accepted the cargo rather than regular or scheduled manner, and even though private
without exception despite the respondent's principal occupation was not the carriage of goods for others
apparent defects in some of the container vans. Hence, for failure of (see Sec. 13 of Public Service Act in ruling).
petitioner to prove that she exercised extraordinary diligence in the carriage Under Article 1745 (6) [RULING], a common carrier is held responsible — and
of goods in this case or that she is exempt from liability, the presumption of will not be allowed to divest or to diminish such responsibility — even for
negligence as provided under Art. 1735 holds. acts of strangers like thieves or robbers, except where such thieves or robbers
V. Disposition in fact acted "with grave or irresistible threat, violence or force."
We believe and so hold that the limits of the duty of extraordinary diligence common carrier failed to exercise extraordinary diligence required of him by
in the vigilance over the goods carried are reached where the goods are lost law and should be held liable for the undelivered goods.
as a result of a robbery which is attended by "grave or irresistible threat, Private respondent denied that he’s a common carrier and said that such the
violence or force." lost goods was due to a force majeure.
In the instant case, armed men held up the second truck owned by private Trial Court found private respondent to be a common carrier and liable for
respondent which carried petitioner's cargo. In these circumstances, we the value of the undelivered goods.
hold that the occurrence of the loss must reasonably be regarded as CA held that respondent is not a common carrier because the transporting of
quite beyond the control of the common carrier and properly regarded return loads of freight as a “casual occupation – a sideline to his scrap iron
as a fortuitous event. It is necessary to recall that even common carriers are business. It also ordered that the hijacking incident is force majeure and that
not made absolute insurers against all risks of travel and of transport of
respondent is not liable for the value of the lost goods.
goods, and are not held liable for acts or events which cannot be foreseen or
Petitioner filed a Petition for Review.
are inevitable, provided that they shall have complied with the rigorous
ISSUE:
standard of extraordinary diligence.
Private respondent Cendaña is not liable for the value of the undelivered W/N Respondent Cendaña is a common carrier?
merchandise which was lost because of an event entirely beyond private RULING:
respondent's control.
FACTS: The concept of "common carrier" under Article 1732 may be seen to coincide
Ernesto Cendaña is a junk dealer engage in buying up used bottles and scrap neatly with the notion of "public service," under the Public Service Act which
metal in Pangasinan. Once he gathered sufficient scarp metal, he would bring at least partially supplements the law on common carriers set forth in the
the material to Manila for resale. Civil Code. In Section 13, (b) of the Public Service Act, "public service"
He owned and used 2 six-wheeler trucks for hauling the material to Manila. includes:
On the return trip to Pangasinan, he would load his vehicles with cargo which ". . . every person that now or hereafter may own, operate, manage, or
various merchants wanted delivered to differing establishments in control in the Philippines, for hire or compensation, with general or limited
Pangasinan. For that service, he charged freight rates that are lower than the clientele, whether permanent, occasional or accidental, and done for
regular commercial rates. general business purposes, any common carrier, railroad, street railway,
Petitioner de Guzman, a merchant and dealer of General Milk Company traction railway, subway motor vehicle, either for freight or passenger, or
contracted respondent for hauling 750 cartons of Liberty filled milk from a both, with or without fixed route and whatever may be its classification,
warehouse of General Milk in Makati, Rizal, to petitioner’s establishment in freight or carrier service of any class, express service, steamboat, or steamship
Urdaneta before Dec. 4 1970. line, pontines, ferries and water craft, engaged in the transportation of
On Dec. 1 1970, respondent loaded in Makati the merchandise on his trucks. passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice
150 cartons were loaded on a truch driven by respondent while 600 cartons plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat
were on board the other truck driven by Manuel Estrada, petitioner’s driver and power, water supply and power petroleum, sewerage system, wire or
and employee. wireless communications systems, wire or wireless broadcasting stations and
Only 150 boxes were delivered to petitioner. The other 600 in the other truck other similar public services . . ." (Emphasis supplied)
was hijacked somewhere along MarArthur Highway in Paniqui Tarlac by The Court ruled that private respondent is a common carrier even though
armed men who took with them the truck, its driver, his helper and cargo. he merely "back-hauled" goods for other merchants from Manila to
Petitioner filed an action demanding payment of P22,150 – value of the lost Pangasinan, although such backhauling was done on a periodic or occasional
merchandise plus damages. He argued that given that private respondent is rather than regular or scheduled manner, and even though private
respondent's principal occupation was not the carriage of goods for others. It would follow, therefore, that the hijacking of the carrier's vehicle must be
There is no dispute that private respondent charged his customers a fee for dealt with under the provisions of Article 1735, in other words, that the
hauling their goods; that fee frequently fell below commercial freight rates is private respondent as common carrier is presumed to have been at fault or
not relevant here. to have acted negligently. This presumption, however, may be overthrown
The Court of Appeals referred to the fact that private respondent held no by proof of extraordinary diligence on the part of private respondent.
certificate of public convenience, and concluded he was not a common Court does not believe that the extraordinary diligence required private
carrier. This is palpable error. A certificate of public convenience is not a respondent to retain a security guard to ride with the truck and to engage
requisite for the incurring of liability under the Civil Code provisions brigands in a fire fight at the risk of his own life and the lives of the driver and
governing common carriers. To exempt private respondent from the his helper (as petitioner would argue).
liabilities of a common carrier because he has not secured the necessary
The duty of extraordinary diligence in the vigilance over goods is, under
certificate of public convenience, would be offensive to sound public policy;
Article 1733, given additional specification not only by Articles 1734 and
that would be to reward private respondent precisely for failing to comply
1735 but also by Article 1745 in relevant part:
with applicable statutory requirements.
Common carriers, "by the nature of their business and for reasons of public Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy:
policy," are held to a very high degree of care and diligence ("extraordinary
(5) that the common carrier shall not be responsible for the acts or omissions
diligence") in the carriage of goods as well as of passengers.
of his or its employees;
Article 1734 establishes the general rule that common carriers are
(6) that the common carrier's liability for acts committed by thieves, or of
responsible for the loss, destruction or deterioration of the goods which they
robbers who do not act with grave or irresistible threat, violence or force,
carry, "unless the same is due to any of the following causes only:
1. Flood, storm, earthquake, lightning, or other natural disaster or is dispensed with or diminished; and
calamity; (7) that the common carrier shall not responsible for the loss, destruction or
2. Act of the public enemy in war, whether international or civil; deterioration of goods on account of the defective condition of the car,
3. Act or omission of the shipper or owner of the goods; vehicle, ship, airplane or other equipment used in the contract of carriage."
4. The character of the goods or defects in the packing or in the Under Article 1745 (6) above, a common carrier is held responsible — and
containers; will not be allowed to divest or to diminish such responsibility — even for
5. Order or act of competent public authority. acts of strangers like thieves or robbers, except where such thieves or robbers
Causes falling outside the foregoing list, even if they appear to constitute a in fact acted "with grave or irresistible threat, violence or force."
species of force majeure, fall within the scope of Article 1735, which We believe and so hold that the limits of the duty of extraordinary diligence
provides as follows: in the vigilance over the goods carried are reached where the goods are lost
"In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the as a result of a robbery which is attended by "grave or irresistible threat,
preceding article, if the goods are lost, destroyed or deteriorated, common violence or force."
carriers are presumed to have been at fault or to have acted negligently, In the instant case, armed men held up the second truck owned by private
unless they prove that they observed extraordinary diligence as required respondent which carried petitioner's cargo. The record shows that an
in Article 1733." information for robbery in band was filed in the Court. There, the accused
Applying the above-quoted Articles 1734 and 1735, the specific cause alleged were charged with willfully and unlawfully taking and carrying away with
in the instant case — the hijacking of the carrier's truck - does not fall them the second truck, driven by Manuel Estrada and loaded with the 600
within any of the five (5) categories of exempting causes listed in Article cartons of Liberty filled milk destined for delivery at petitioner's store in
1734. Urdaneta, Pangasinan.
 The decision of the trial court shows that the accused acted with grave, if not subcontracted with Estrellita Bascos for the transport and delivery of the soya
irresistible, threat, violence or force. Three (3) of the (5) hold-uppers were bean meal.
armed with firearms. The robbers not only took away the truck and its cargo
but also kidnapped the driver and his helper, detaining them for several days Bascos, however, failed to deliver the cargo from Manila to Laguna. Ciptrade
and later releasing them in another province (in Zambales). The hijacked paid Jibfair the amount of the lost goods. Thereafter, Ciptrade went after
truck was subsequently found by the police in Quezon City. The Court of First Bascos to demand reimbursement from Bascos. Bascos refused to pay
Instance convicted all the accused of robbery, though not of robbery in band. because 1) there was no contract of carriage, only a contract of lease of the
In these circumstances, we hold that the occurrence of the loss must truck and 2) there was a hijacking incident which should be considered as a
reasonably be regarded as quite beyond the control of the common force majeure enough to exculpate Bascos from liability.
carrier and properly regarded as a fortuitous event. It is necessary to
recall that even common carriers are not made absolute insurers against all The RTC and CA both ruled in favor of Ciptrade and ordered Bascos to pay
risks of travel and of transport of goods, and are not held liable for acts or Ciptrade actual damages.
events which cannot be foreseen or are inevitable, provided that they shall
have complied with the rigorous standard of extraordinary diligence. Issue: Is Bascos is a common carrier? (YES)
We, therefore, agree with the Court of Appeals that private respondent
Cendaña is not liable for the value of the undelivered merchandise which The SC held that YES, it is. The test to determine a common carrier is
was lost because of an event entirely beyond private respondent's control. "whether the given undertaking is a part of the business engaged in by the
Disposition carrier which he has held out to the general public as his occupation rather
Petition for Review is DENIED. CA decision AFFIRMED. than the quantity or extent of the business transacted." In this case, petitioner
Notes has made the admission that she was in the trucking business, offering her
trucks to those with cargo to move. Judicial admissions are conclusive and no
Article 1732* makes no distinction between one whose principal business evidence is required to prove the same. As to the issue of hijacking, the SC
activity is carrying of persons or goods or both and one who does such held that it is not force majeure. As such, the presumption of negligence
carrying only as an ancillary activity (aka sideline). It avoids making any stands against Bascos. It was therefore Bascos’ burden to overcome it. As
distinction between a person or enterprise offering transportation service on held by the RTC and CA, the affidavits presented by Bascos were not enough
a regular or scheduled basis and one offering such service on an occasional, to overcome said presumption.
episodic or unscheduled basis. Neither does Article 1732 distinguish between
a carrier offering its services to the "general public," i.e., the general Doctrine: Art. 1732 did not distinguish between a carrier offering its
community or population, and one who offers services or solicits business services to the "general public," i.e., the general community or
only from a narrow segment of the general population. We think that Article population, and one who offers services or solicits business only from a
1733 deliberately refrained from making such distinctions. narrow segment of the general population.

II. Facts of the case

Bascos v CA CIPTRADE (a hauling business) entered into a hauling contract with JIBFAIR
I. Recit ready Shipping Agency --- Ciptrade bound itself to haul soya bean meals from
Jibfair Shipping Agency engaged the services of Ciptrade for the hauling of Manila to Laguna. In carrying out its obligation with JIBFAIR, Ciptrade
the soya bean meal from Manila to Laguna. To fulfill its obligations, Ciptrade
subcontracted with Estelita Bascos of BASCOS TRUCKING to deliver the
aforementioned soya bean meals (400 sacks worth P156k) 1) BASCOS is a common carrier

Bascos failed to deliver the cargo. This forced Ciptrade to pay JIBFAIR the The test to determine a common carrier is “whether the given undertaking is
amount of the lost goods. Ciptrade then demanded reimbursement from a part of the business engaged in by the carrier which he has held out to
Bascos, who in turn refused to pay. Ciptrade was forced to file a collection the general public as his occupation rather than the quantity or extent of
suit with damages for breach of contract of carriage. the business transacted.”

Bascos defense: In this case, Bascos had already made an admission that she was in the
(1) No contract of carriage since Ciptrade leased the cargo-truck to load trucking business, offering her trucks to those with cargo to move. Judicial
the soya bean meals. admissions are conclusive and no evidence is required to prove the same.
(2) Said truck was hijacked along Paco, Manila and was rported to
Ciptrade. As to the contention that Bascos’ services are offered only to a select group
(3) With the help of the police, Bascos exerted all efforts to locate the of people --- The SC cited De Guzman v. CA in ruling that NCC1732 makes no
hijacked properties. (a criminal information was filed against distinction between a person or enterprise offering transportation service on
suspects)
a regular or scheduled basis and one offering such service on occasional,
(4) Hijacking, a force majeure, absolved Bascos from liability to Ciptrade
episodic or unscheduled basis. Neither does it distinguish between a carrier
offering its service to the ‘general public’ and one who offers services
RTC ruled against Bascos. CA Affirmed. Records show that BASCOS admitted
business only from a narrow segment. NCC1732 deliberately refrained from
in its answer that she did business under the name “A.M. Bascos Trucking”.
making such distinction.
Furthermore, the lower courts appreciated the following proof that BASCOS
was a common carrier:
As to the contract of lease ---the affidavits that referred to the contract as
(1) A receipt signed by the truck driver evidencing that he carried a
that of a “lease” were not sufficient to prove the same. A contract is what the
cargo consisting 400 bags of soya bean meal.
(2) The truck ‘helper’ was an employee of BASCOS law defines it to be, not what it is called by the contracting parties.
(3) Control of the cargo was placed under BASCOS’ care.

In its appeal, Bascos argues that the contract b/w she and Ciptrade was a 2) Hijacking not considered a force majeure in this case
lease – evidenced by certain affidavits referring to the contract as “lease”. She
further alleged that she did not cater to the general public, and that her main Common carriers are obliged to observe extraordinary diligence in the
business is offering trucks for lease to only those who have cargo to move. vigilance over the goods transported by them. Accordingly, they are
presumed to have been at fault or to have acted negligently if the goods
III. Issue/s are lost, destroyed or deteriorated. There are very few instances when the
1) Is BASCOS a common carrier? (YES) presumption of negligence does not attach and these instances are
enumerated in NCC1734. In those cases where the presumption is applied,
2) Is the hijacking in this case a force majeure? (NO) the common carrier must prove that it exercised extraordinary diligence
in order to overcome the presumption. The presumption of negligence
IV. Ratio/Legal Basis was raised against petitioner. It was petitioner's burden to overcome it. Thus,
contrary to Bascos’ assertion, private respondent Ciptrade need not introduce Respondent G.P. Sarmiento trucking company (GTS) undertook to
any evidence to prove Bascos’ negligence. Her own failure to adduce transport cargoes for Concepcion Industries, Inc. when it collided with
sufficient proof of extraordinary diligence made the presumption an unidentified truck, causing damage to the cargoes. Petitioner, FGU,
conclusive against her. insurer of the shipment, paid to Concepcion Industries the value of the
covered cargoes. Then, as subrogee of Concepcion Industries, Inc., petitioner
Hijacking. In De Guzman vs. CA, the SC held that hijacking, not being FGU sued GPS for breach of contract of carriage for reimbursement.
included in the provisions of NCC1734, must be dealt with under the Instead of filing an answer, GPS filed a demurrer to evidence, claiming that it
provisions of NCC1735 and thus, the common carrier is presumed to have cannot be held liable as a common carrier because it was only a private
been at fault or negligent. carrier, being the exclusive hauler only of Concepcion Industries, Inc.
To exculpate the carrier from liability arising from hijacking, he must prove since 1988.
that the robbers or the hijackers acted with grave or irresistible threat, The lower court granted the motion, ruling that plaintiff FGU failed to prove
violence, or force. This is in accordance with NCC1745 of the Civil Code which that GPS is a common carrier. The CA affirmed the trial court's order.
provides: "Art. 1745. Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public policy. (6) That the Is GPS liable for breach of contract as a common carrier? No
common carrier's liability for acts committed by thieves, or of robbers who
do not act with grave or irresistible threat, violences or force, is dispensed On appeal, the Supreme Court held; that GPS cannot be considered a
with or diminished"; In the same case, the SC also held that: "Under NCC1745 common carrier as it renders service exclusively to Concepcion
(6) above, a common carrier is held responsible — and will not be Industries; that notwithstanding, GPS cannot escape from liability since in
allowed to divest or to diminish such responsibility — even for acts of culpa contractual, mere proof of the existence of the contract and the
strangers like thieves or robbers, except where such thieves or robbers failure of its compliance justify prima facie a corresponding right of
in fact acted "with grave of irresistible threat, violence of force," We relief. Respondent driver, however, who is not a party to the contract of
believe and so hold that the limits of the duty of extraordinary diligence in carriage, may not be held liable under the agreement without concrete proof
the vigilance over the goods carried are reached where the goods are lost as of his negligence or fault.
a result of a robbery which is attended by "grave or irresistible threat, Hence, the Supreme Court affirmed the assailed order of the trial court and
violence or force." the CA insofar as the respondent driver was concerned but GPS trucking
V. Disposition company was ordered to pay the petitioner FGU the value of the damaged
Petition DISMISSED. CA decision affirmed. and lost cargoes.

VI. Notes II. Facts of the case

FGU Insurance v Sarmiento G.P. Sarmiento Trucking Corporation (GPS) undertook to 30 units of
Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by
- GPS is a private carrier, exclusively servicing Concepcion Eroles, from the plant site of Concepcion Industries, Inc. (Metro Manila) to
Industries. However, it may still be held liable for a breach of the Central Luzon Appliances (Dagupan City). While the truck was
contract. traversing the north diversion road along McArthur highway in Tarlac, it
collided with an unidentified truck, causing it to fall into a deep canal,
I. Recit-ready summary resulting in damage to the cargoes.
FGU Insurance Corporation, an insurer of the shipment, paid to 3. Whether the doctrine of res ipsa loquitur is applicable in the instant
Concepcion Industries, Inc., the value of the covered cargoes in the sum of case. – NO to GPS, YES to driver.
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 IV. Ratio/Legal Basis
paid to the latter from GPS. Since the trucking company failed to heed the
claim, FGU filed a complaint for damages and breach of contract of carriage On Being a Common Carrier
against GPS and its driver Eroles with the RTC of Makati. In its answer, GPS The Court finds the conclusion of the trial court and the Court of Appeals to
asserted that it was the exclusive hauler only of Concepcion Industries, Inc., be amply justified. GPS, being an exclusive contractor and hauler of
since 1988, and it was not so engaged in business as a common carrier. FGU Concepcion Industries, Inc., rendering or offering its services to no other
further claimed that the cause of damage was purely accidental. individual or entity, cannot be considered a common carrier. The true
FGU presented evidence establishing the extent of damage to the cargoes test of a common carrier is the carriage of passengers or goods,
and the amount it had paid to the assured. GPS filed a motion to dismiss the providing space for those who opt to avail themselves of its
complaint by way of demurrer to evidence on the ground that FGU had failed transportation service for a fee. Given accepted standards, GPS scarcely
to prove that it was a common carrier. falls within the term "common carrier."

The trial court granted the motion to dismiss noting that FGU did not present 2. The above conclusion notwithstanding, GPS cannot escape from liability.
any single evidence that would prove that GPS is a common carrier.
In culpa contractual, upon which the action of petitioner rests as being the
Evidence for the FGU shows no proof that defendant was violating any traffic subrogee of Concepcion Industries, Inc., the mere proof of the existence of
regulation. Hence, the presumption of negligence is not obtaining. the contract and the failure of its compliance justify, prima facie, a
Considering that plaintiff failed to adduce evidence that GPS is a common corresponding right of relief. The law, recognizing the obligatory force of
carrier and its driver was the one negligent, defendant cannot be made liable contracts, will not permit a party to be set free from liability for any kind of
for the damages of the subject cargoes." misperformance of the contractual undertaking or a contravention of the
tenor thereof. A breach upon the contract confers upon the injured party a
The Court of Appeals rejected the appeal of FGU and ruled in favor of GPS valid cause for recovering that which may have been lost or suffered. The
holding that the dismissal of the FGU’s complaint by the trial court is justified. remedy serves to preserve the interests of the promisee that may include his
"expectation interest," which is his interest in having the benefit of his
Hence, the instant petition. bargain by being put in as good a position as he would have been in had the
contract been performed, or his "reliance interest," which is his interest in
III. Issue/s being reimbursed for loss caused by reliance on the contract by being put in
as good a position as he would have been in had the contract not been
1. Whether respondent GPS may be considered as a common carrier as made; or his "restitution interest," which is his interest in having restored to
defined under the law and existing jurisprudence. – NO. him any benefit that he has conferred on the other party.
2. Whether respondent GPS, either as a common carrier or a private carrier,
may be presumed to have been negligent when the goods it undertook Indeed, agreements can accomplish little, either for their makers or for
to transport safely were subsequently damaged while in its protective society, unless they are made the basis for action. The effect of every
custody and possession. – YES. infraction is to create a new duty, that is, to make recompense to the one
who has been injured by the failure of another to observe his contractual since obviously the presumption of negligence in culpa contractual, as
obligation unless he can show extenuating circumstances, like proof of his previously so pointed out, immediately attaches by a failure of the covenant
exercise of due diligence (normally that of the diligence of a good father of or its tenor. In the case of the truck driver, whose liability in a civil action is
a family or, exceptionally by stipulation or by law such as in the case of predicated on culpa acquiliana, while he admittedly can be said to have been
common carriers, that of extraordinary diligence) or of the attendance of in control and management of the vehicle which figured in the accident, it is
fortuitous event, to excuse him from his ensuing liability. not equally shown, however, that the accident could have been exclusively
due to his negligence, a matter that can allow, forthwith, res ipsa loquitur
Respondent trucking corporation recognizes the existence of a contract work against him.
of carriage between it and petitioner's assured, and admits that the
cargoes it has assumed to deliver have been lost or damaged while in its If a demurrer to evidence is granted but on appeal the order of dismissal is
custody. In such a situation, a default on, or failure of compliance with, the reversed, the movant shall be deemed to have waived the right to present
obligation — in this case, the delivery of the goods in its custody to the place evidence. Thus, respondent corporation may no longer offer proof to
of destination — gives rise to a presumption of lack of care and establish that it has exercised due care in transporting the cargoes of the
corresponding liability on the part of the contractual obligor the burden assured so as to still warrant a remand of the case to the trial court.
being on him to establish otherwise. GPS has failed to do so.
V. Disposition
. WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court,
Respondent driver, on the other hand, without concrete proof of his Branch 66, of Makati City, and the decision, dated 10 June 1999, of the Court
negligence or fault, may not himself be ordered to pay petitioner. The driver, of Appeals, are AFFIRMED only insofar as respondent Lambert M. Eroles is
not being a party to the contract of carriage between petitioner's principal concerned, but said assailed order of the trial court and decision of the
and defendant, may not be held liable under the agreement. appellate court are REVERSED as regards G.P. Sarmiento Trucking
Corporation which, instead, is hereby ordered to pay FGU Insurance
3. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant Corporation the value of the damaged and lost cargoes in the amount of
liable where the thing which caused the injury complained of is shown to be P204,450.00. No costs.
under the latter's management and the accident is such that, in the ordinary
course of things, cannot be expected to happen if those who have its First Phil Industrial v CA
management or control use proper care. It affords reasonable evidence, in
the absence of explanation by the defendant, that the accident arose I. Recit-ready summary
from want of care.
Petitioner is a GRANTEE of a pipeline concession under Republic Act No.
Res ipsa loquitur generally finds relevance whether or not a contractual 387, as amended, to contract, install and operate oil pipelines. The original
relationship exists between the plaintiff and the defendant, for the inference pipeline concession was granted in 1967 and renewed by the Energy
of negligence arises from the circumstances and nature of the occurrence Regulatory Board in 1992. 
and not from the nature of the relation of the parties. Nevertheless, the
requirement that responsible causes other than those due to defendant's Payment of the local tax
conduct must first be eliminated, for the doctrine to apply, should be Sometime in January 1995, petitioner applied for a mayor's permit with the
understood as being confined only to cases of pure (non-contractual) tort Office of the Mayor of Batangas City. However, before the mayor's permit
could be issued, the respondent City Treasurer required petitioner to pay a Business tax refund
local tax based on its gross receipts for the fiscal year 1993 pursuant to the This petition for review on  certiorari  assails the Decision of the Court of
Local Government Code. Appeals dated November 29, 1995, in CA-G.R. SP No. 36801, affirming the
decision of the Regional Trial Court of Batangas City, Branch 84, in Civil Case
Petitioner argues that since he is a common carrier, he is exempt. The No. 4293, which DISMISSED petitioners' complaint for a business tax refund
Supreme Court ruled that the petitioner is EXEMPT. See Ratio. imposed by the City of Batangas.
Test to determine whether he is a common carrier
Art. 1732 of the Civil Code defines a "common carrier" as "any person, Petitioner is a GRANTEE of a pipeline concession under Republic Act No.
corporation, firm or association engaged in the business of carrying or 387, as amended, to contract, install and operate oil pipelines. The original
transporting passengers or goods or both, by land, water, or air, for pipeline concession was granted in 1967 and renewed by the Energy
compensation, offering their services to the public." Regulatory Board in 1992. 
The test for determining whether a party is a common carrier of goods is:
Payment of the local tax
1. He must be engaged in the business of carrying goods for others as Sometime in January 1995, petitioner applied for a mayor's permit with the
a public employment, and must hold himself out as ready to engage in Office of the Mayor of Batangas City. However, before the mayor's permit
the transportation of goods for person generally as a business and not could be issued, the respondent City Treasurer required petitioner to pay a
as a casual occupation; local tax based on its gross receipts for the fiscal year 1993 pursuant to the
Local Government Code.
2. He must undertake to carry goods of the kind to which his business
is confined; The respondent City Treasurer assessed a business tax on the petitioner
amounting to P956,076.04 payable in four installments based on the gross
3. He must undertake to carry by the method by which his business is receipts for products pumped at GPS-1 for the fiscal year 1993 which
conducted and over his established roads; and amounted to P181,681,151.00.

4. The transportation must be for hire.  In order not to hamper its operations, petitioner paid the tax under protest in
the amount of P239,019.01 for the first quarter of 1993.
Based on the above definitions and requirements, there is no doubt that
petitioner is a common carrier. It is engaged in the business of The letter protest against the local
transporting or carrying goods,  i.e. petroleum products, for hire as a On January 20, 1994, petitioner filed a letter-protest addressed to the
public employment. It undertakes to carry for all persons indifferently, respondent City Treasurer, the pertinent portion of which reads:
that is, to all persons who choose to employ its services, and transports
the goods by land and for compensation. The fact that petitioner has a Please note that our Company (FPIC) is a pipeline operator
limited clientele does not exclude it from the definition of a common with a government concession granted under the Petroleum
carrier. In De Guzman vs. Court of Appeals  16 we ruled that: Act. It is engaged in the business of transporting petroleum
products from the Batangas refineries, via pipeline, to Sucat
II. Facts and JTF Pandacan Terminals. As such, our Company is exempt
 from paying tax on gross receipts under Section 133 of the On October 3, 1994, the trial court rendered a decision dismissing the
Local Government Code of 1991 . . . . complaint, ruling in this wise:

Moreover, Transportation contractors are not included in the 1. That the exemption granted under Sec. 133 (j) encompasses
enumeration of contractors under Section 131, Paragraph (h) only common carriers  so as not to overburden the riding
of the Local Government Code. Therefore, the authority to public or commuters with taxes.  Plaintiff  is not a common
impose tax "on contractors and other independent carrier, but a special carrier extending its services and facilities
contractors" under Section 143, Paragraph (e) of the Local to a single specific or "special customer" under a "special
Government Code does NOT include the power to levy on contract."
transportation contractors.
2. The Local Tax Code of 1992 was basically enacted to give
The imposition and assessment cannot be categorized as a more and effective local autonomy to local governments than
mere fee authorized under Section 147 of the Local the previous enactments, to make them economically and
Government Code. The said section limits the imposition of financially viable to serve the people and discharge their
fees and charges on business to such amounts as may be functions with a concomitant obligation to accept certain
commensurate to the cost of regulation, inspection, and devolution of powers, . . . So, consistent with this policy even
licensing. Hence, assuming arguendo that FPIC is liable for the franchise grantees are taxed (Sec. 137) and contractors are
license fee, the imposition thereof based on gross receipts is also taxed under Sec. 143 (e) and 151 of the Code.
violative of the aforecited provision. The amount of
P956,076.04 (P239,019.01 per quarter) is not commensurate to Petitioner assailed the aforesaid decision before this Court  via  a petition for
the cost of regulation, inspection and licensing. The fee is review. On February 27, 1995, we referred the case to the respondent Court
already a revenue raising measure, and not a mere regulatory of Appeals for consideration and adjudication. 
imposition.
On November 29, 1995, the respondent court rendered a decision 11 affirming
Denial of the City Treasurer the trial court's dismissal of petitioner's complaint. Petitioner's motion for
On March 8, 1994, the respondent City Treasurer DENIED the protest reconsideration was denied on July 18, 1996. 
contending that petitioner cannot be considered engaged in transportation
business, thus it cannot claim exemption under Section 133 (j) of the Local III. Issue/s
Government Code.
Whether or not First Philippine is a common carrier
Tax refund case at the RTC which was dismissed; RTC ruled that petitioner is
NOT a common carrier IV. Ratio/Legal Basis
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas
City a complaint for tax refund with prayer for writ of preliminary injunction There is merit in the petition.
against respondents City of Batangas and Adoracion Arellano in her capacity
as City Treasurer. Definition of A Common Carrier
A "common carrier" may be defined, broadly, as one who holds himself out basis. Neither does Article 1732 distinguish between a carrier offering its
to the public as engaged in the business of transporting persons or property services to the "general public," i.e., the general community or population,
from place to place, for compensation, offering his services to the public and one who offers services or solicits business only from a narrow segment
generally. of the general population. We think that Article 1877 deliberately refrained
from making such distinctions.
Test to determine whether he is a common carrier
Art. 1732 of the Civil Code defines a "common carrier" as "any person, So understood, the concept of "common carrier" under Article 1732 may be
corporation, firm or association engaged in the business of carrying or seen to coincide neatly with the notion of "public service," under the Public
transporting passengers or goods or both, by land, water, or air, for Service Act (Commonwealth Act No. 1416, as amended) which at least
compensation, offering their services to the public." partially supplements the law on common carriers set forth in the Civil Code.
The test for determining whether a party is a common carrier of goods is: Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:
1. He must be engaged in the business of carrying goods for others as
a public employment, and must hold himself out as ready to engage in every person that now or hereafter may own, operate. manage, or
the transportation of goods for person generally as a business and not control in the Philippines, for hire or compensation, with general or
as a casual occupation; limited clientele, whether permanent, occasional or accidental, and
2. He must undertake to carry goods of the kind to which his business done for general business purposes, any common carrier, railroad,
is confined; street railway, traction railway, subway motor vehicle, either for
3. He must undertake to carry by the method by which his business is freight or passenger, or both, with or without fixed route and
conducted and over his established roads; and whatever may be its classification, freight or carrier service of any
4. The transportation must be for hire.  class, express service, steamboat, or steamship line, pontines, ferries
and water craft, engaged in the transportation of  passengers or
Based on the above definitions and requirements, there is no doubt that freight or both, shipyard, marine repair shop, wharf or dock, ice plant,
petitioner is a common carrier. It is engaged in the business of transporting ice-refrigeration plant, canal, irrigation system gas, electric light heat
or carrying goods,  i.e. petroleum products, for hire as a public employment. It and power, water supply and  power petroleum, sewerage system,
undertakes to carry for all persons indifferently, that is, to all persons who wire or wireless communications systems, wire or wireless
choose to employ its services, and transports the goods by land and for broadcasting stations and other similar public services. (Emphasis
compensation. The fact that petitioner has a limited clientele does not Supplied)
exclude it from the definition of a common carrier. In De Guzman vs. Court of
Appeals  16 we ruled that: 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
The above article (Art. 1732, Civil Code) makes no distinction between one transporting goods and passengers through moving vehicles or vessels either
whose principal business activity is the carrying of persons or goods or both, by land, sea or water, is erroneous.
and one who does such carrying only as an ancillary activity (in local idiom, as As correctly pointed out by petitioner, the definition of "common carriers" in
a "sideline"). Article 1732 . . . avoids making any distinction between a person the Civil Code makes no distinction as to the means of transporting, as long
or enterprise offering transportation service on a  regular  or  scheduled as it is by land, water or air. It does not provide that the transportation of the
basis and one offering such service on an  occasional, episodic or unscheduled
passengers or goods should be by motor vehicle. In fact, in the United States, (j) Taxes on the gross receipts of transportation contractors and
oil pipe line operators are considered common carriers. 17 persons engaged in the transportation of passengers or freight
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is by hire and common carriers by air, land or water, except as
considered a "common carrier." Thus, Article 86 thereof provides that: provided in this Code.

Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall have It is clear that the legislative intent in excluding from the taxing power of the
the preferential right to utilize installations for the transportation of local government unit the imposition of business tax against common
petroleum owned by him, but is obligated to utilize the remaining carriers is to prevent a duplication of the so-called "common carrier's tax."
transportation capacity pro rata for the transportation of such other Petitioner is already paying three (3%) percent common carrier's tax on its
petroleum as may be offered by others for transport, and to charge without gross sales/earnings under the National Internal Revenue Code. 19 To tax
discrimination such rates as may have been approved by the Secretary of petitioner again on its gross receipts in its transportation of petroleum
Agriculture and Natural Resources. business would defeat the purpose of the Local Government Code.
Republic Act 387 also regards petroleum operation as a public utility. WHEREFORE, the petition is hereby GRANTED. The decision of the
Pertinent portion of Article 7 thereof provides: respondent Court of Appeals dated November 29, 1995 in CA-G.R. SP No.
36801 is REVERSED and SET ASIDE.
that everything relating to the exploration for and exploitation of SO ORDERED.
petroleum . . . and everything relating to the manufacture, refining, storage, Schmitz v Transport Venue
or transportation by special methods of petroleum, is hereby declared to be
a  public utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common
I. Recit Ready
carrier." In BIR Ruling No. 069-83, it declared: 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
. . . since [petitioner] is a pipeline concessionaire that is engaged only in registry and owned by Black Sea) 545 hot rolled steel sheets in coil.
transporting petroleum products, it is considered a common carrier under
Republic Act No. 387 . . . . Such being the case, it is not subject to withholding The cargoes, which were to be discharged at the port of Manila in favor of the
tax prescribed by Revenue Regulations No. 13-78, as amended. consignee, Little Giant Steel Pipe Corporation (Little Giant), were insured
against all risks with Industrial Insurance Company Ltd. (Industrial Insurance)
From the foregoing disquisition, there is no doubt that petitioner is a
"common carrier" and, therefore, exempt from the business tax as provided Schmitz Transport, whose services the consignee engaged to secure the
for in Section 133 (j), of the Local Government Code, to wit: requisite clearances, to receive the cargoes from the shipside, and to deliver
them to its (the consignee's) warehouse at Cainta, Rizal, in turn engaged the
Sec. 133. Common Limitations on the Taxing Powers of Local services of TVI to send a barge and tugboat at shipside.
Government Units. — Unless otherwise provided herein, the exercise of
the taxing powers of provinces, cities, municipalities, and barangays TVI's tugboat "Lailani" towed the barge "Erika V" to shipside. By 7:00 p.m. also
shall not extend to the levy of the following: of October 26, 1991, the tugboat, after positioning the barge alongside the
x x x           x x x          x x x vessel, left and returned to the port terminal. At 9:00 p.m., arrastre operator
 Ocean Terminal Services Inc. commenced to unload 37 of the 545 coils from
the vessel unto the barge. Contrary to petitioner's insistence, this Court, as did the appellate court, finds
that petitioner is a common carrier. For it undertook to transport the cargoes
On October 27, 1991 during which the weather condition had become from the shipside of "M/V Alexander Saveliev" to the consignee's warehouse at
inclement due to an approaching storm, the unloading unto the barge of the Cainta, Rizal. As the appellate court put it, "as long as a person or corporation
37 coils was accomplished. No tugboat pulled the barge back to the pier, holds [itself] to the public for the purpose of transporting goods as [a]
however. business, [it] is already considered a common carrier regardless if [it] owns the
vehicle to be used or has to hire one." That petitioner is a common carrier, the
At around 5:30 a.m. of October 27, 1991, due to strong waves, the crew of the testimony of its own Vice-President and General Manager Noel Aro that part of
barge abandoned it and transferred to the vessel. The barge pitched and the services it offers to its clients as a brokerage firm includes the
rolled with the waves and eventually capsized, washing the 37 coils into the transportation of cargoes reflects so.
sea. At 7:00 a.m., a tugboat finally arrived to pull the already empty and
damaged barge back to the pier. And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the
transportation of goods is an integral part of a customs broker, the customs
Little Giant thus filed a formal claim against Industrial Insurance which paid it broker is also a common carrier. For to declare otherwise "would be to deprive
the amount of P5,246,113.11. Industrial Insurance later filed a complaint those with whom [it] contracts the protection which the law affords them
against Schmitz Transport, TVI, and Black Sea through its representative notwithstanding the fact that the obligation to carry goods for [its] customers,
Inchcape (the defendants) before the RTC of Manila, for the recovery of the is part and parcel of petitioner's business."
amount it paid to Little Giant plus adjustment fees, attorney's fees, and
litigation expenses. Not being a party to the service contract, Little Giant cannot directly sue TVI
based thereon but it can maintain a cause of action for negligence.
If there was negligence, whether liability for the loss may attach to Black Sea,
petitioner and TVI? Only Petitioner and TVI is liable In the case of TVI, while it acted as a private carrier for which it was under no
duty to observe extraordinary diligence, it was still required to observe ordinary
From a review of the records of the case, there is no indication that there was diligence to ensure the proper and careful handling, care and discharge of the
greater risk in loading the cargoes outside the breakwater. As the defendants carried goods.
proffered, the weather on October 26, 1991 remained normal with moderate
sea condition such that port operations continued and proceeded normally. TVI's failure to promptly provide a tugboat did not only increase the risk that
might have been reasonably anticipated during the shipside operation, but was
That no tugboat towed back the barge to the pier after the cargoes were the proximate cause of the loss. A man of ordinary prudence would not leave
completely loaded by 12:30 in the morning is, however, a material fact which a heavily loaded barge floating for a considerable number of hours, at such a
the appellate court failed to properly consider and appreciate - the proximate precarious time, and in the open sea, knowing that the barge does not have
cause of the loss of the cargoes. Had the barge been towed back promptly to any power of its own and is totally defenseless from the ravages of the sea.
the pier, the deteriorating sea conditions notwithstanding, the loss could have That it was nighttime and, therefore, the members of the crew of a tugboat
been avoided. But the barge was left floating in open sea until big waves set in would be charging overtime pay did not excuse TVI from calling for one such
at 5:30 a.m., causing it to sink along with the cargoes. The loss thus falls tugboat.
outside the "act of God doctrine."
While petitioner sent checkers and a supervisoron board the vessel to counter- The vessel arrived at the port of Manila and the Philippine Ports Authority
check the operations of TVI, it failed to take all available and reasonable (PPA) assigned it a place of berth at the outside breakwater at the Manila
precautions to avoid the loss. After noting that TVI failed to arrange for the South Harbor.
prompt towage of the barge despite the deteriorating sea conditions, it should
have summoned the same or another tugboat to extend help, but it did not. Schmitz Transport, whose services the consignee engaged to secure the
requisite clearances, to receive the cargoes from the shipside, and to deliver
This Court holds then that petitioner and TVI are solidarily liable for the loss of them to its (the consignee's) warehouse at Cainta, Rizal, in turn engaged the
the cargoes. The following pronouncement of the Supreme Court is instructive: services of TVI to send a barge and tugboat at shipside.

The foundation of LRTA's liability is the contract of carriage and its obligation On October 26, 1991, around 4:30 p.m., TVI's tugboat "Lailani" towed the
to indemnify the victim arises from the breach of that contract by reason of its barge "Erika V" to shipside. By 7:00 p.m. also of October 26, 1991, the tugboat,
failure to exercise the high diligence required of the common carrier. In the after positioning the barge alongside the vessel, left and returned to the port
discharge of its commitment to ensure the safety of passengers, a carrier may terminal. At 9:00 p.m., arrastre operator Ocean Terminal Services Inc.
choose to hire its own employees or avail itself of the services of an outsider or commenced to unload 37 of the 545 coils from the vessel unto the barge.
an independent firm to undertake the task. In either case, the common carrier
is not relieved of its responsibilities under the contract of carriage. On October 27, 1991 during which the weather condition had become
inclement due to an approaching storm, the unloading unto the barge of the
Should Prudent be made likewise liable? If at all, that liability could only be for 37 coils was accomplished. No tugboat pulled the barge back to the pier,
tort under the provisions of Article 2176 and related provisions, in conjunction however.
with Article 2180 of the Civil Code. 
At around 5:30 a.m. of October 27, 1991, due to strong waves, the crew of the
As for Black Sea, its duty as a common carrier extended only from the time the barge abandoned it and transferred to the vessel. The barge pitched and
goods were surrendered or unconditionally placed in its possession and rolled with the waves and eventually capsized, washing the 37 coils into the
received for transportation until they were delivered actually or constructively sea. At 7:00 a.m., a tugboat finally arrived to pull the already empty and
to consignee Little Giant. damaged barge back to the pier.

II. Facts of the case Little Giant thus filed a formal claim against Industrial Insurance which paid it
the amount of P5,246,113.11. Industrial Insurance later filed a complaint
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of against Schmitz Transport, TVI, and Black Sea through its representative
Ilyichevsk, Russia on board M/V "Alexander Saveliev" (a vessel of Russian Inchcape (the defendants) before the RTC of Manila, for the recovery of the
registry and owned by Black Sea) 545 hot rolled steel sheets in coil. amount it paid to Little Giant plus adjustment fees, attorney's fees, and
litigation expenses.
The cargoes, which were to be discharged at the port of Manila in favor of the
consignee, Little Giant Steel Pipe Corporation (Little Giant), were insured Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting
against all risks with Industrial Insurance Company Ltd. (Industrial Insurance) for its principal, consignee Little Giant, hence, the transportation contract was
by and between Little Giant and TVI.
III. Issue/s negligence. It thus concluded that the proximate cause of the loss was Black
Whether the loss of the cargoes was due to a fortuitous event, independent of Sea's negligence in deciding to unload the cargoes at an unsafe place and
any act of negligence on the part of petitioner Black Sea and TVI? NO while a typhoon was approaching.

If there was negligence, whether liability for the loss may attach to Black Sea, From a review of the records of the case, there is no indication that there was
petitioner and TVI? Only Petitioner and TVI is liable greater risk in loading the cargoes outside the breakwater. As the defendants
proffered, the weather on October 26, 1991 remained normal with moderate
IV. Legal Basis sea condition such that port operations continued and proceeded normally.

When a fortuitous event occurs, Article 1174 of the Civil Code absolves any That no tugboat towed back the barge to the pier after the cargoes were
party from any and all liability arising therefrom: completely loaded by 12:30 in the morning is, however, a material fact which
the appellate court failed to properly consider and appreciate - the proximate
ART. 1174. Except in cases expressly specified by the law, or when it is cause of the loss of the cargoes. Had the barge been towed back promptly to
otherwise declared by stipulation, or when the nature of the obligation requires the pier, the deteriorating sea conditions notwithstanding, the loss could have
the assumption of risk, no person shall be responsible for those events which been avoided. But the barge was left floating in open sea until big waves set in
could not be foreseen, or which though foreseen, were inevitable. at 5:30 a.m., causing it to sink along with the cargoes. The loss thus falls
outside the "act of God doctrine."
In order, to be considered a fortuitous event, however, (1) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtor to comply The proximate cause of the loss having been determined, who among the
with his obligation, must be independent of human will; (2) it must be parties is/are responsible therefor?
impossible to foresee the event which constitute the caso fortuito, or if it can
be foreseen it must be impossible to avoid; (3) the occurrence must be such as Contrary to petitioner's insistence, this Court, as did the appellate court, finds
to render it impossible for the debtor to fulfill his obligation in any manner; that petitioner is a common carrier. For it undertook to transport the cargoes
and (4) the obligor must be free from any participation in the aggravation of from the shipside of "M/V Alexander Saveliev" to the consignee's warehouse at
the injury resulting to the creditor. Cainta, Rizal. As the appellate court put it, "as long as a person or corporation
holds [itself] to the public for the purpose of transporting goods as [a]
[T]he principle embodied in the act of God doctrine strictly requires that the act business, [it] is already considered a common carrier regardless if [it] owns the
must be occasioned solely by the violence of nature. Human intervention is to vehicle to be used or has to hire one." That petitioner is a common carrier, the
be excluded from creating or entering into the cause of the mischief. When the testimony of its own Vice-President and General Manager Noel Aro that part of
effect is found to be in part the result of the participation of man, whether due the services it offers to its clients as a brokerage firm includes the
to his active intervention or neglect or failure to act, the whole occurrence is transportation of cargoes reflects so.
then humanized and removed from the rules applicable to the acts of God.
And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the
The appellate court, in affirming the finding of the trial court that human transportation of goods is an integral part of a customs broker, the customs
intervention in the form of contributory negligence by all the defendants broker is also a common carrier. For to declare otherwise "would be to deprive
resulted to the loss of the cargoes, held that unloading outside the breakwater, those with whom [it] contracts the protection which the law affords them
instead of inside the breakwater, while a storm signal was up constitutes
notwithstanding the fact that the obligation to carry goods for [its] customers,
is part and parcel of petitioner's business." As for petitioner, for it to be relieved of liability, it should, following Article
1739 of the Civil Code, prove that it exercised due diligence to prevent or
As for petitioner's argument that being the agent of Little Giant, any minimize the loss, before, during and after the occurrence of the storm in order
negligence it committed was deemed the negligence of its principal, it does that it may be exempted from liability for the loss of the goods.
not persuade.
While petitioner sent checkers and a supervisoron board the vessel to counter-
True, petitioner was the broker-agent of Little Giant in securing the release of check the operations of TVI, it failed to take all available and reasonable
the cargoes. In effecting the transportation of the cargoes from the shipside precautions to avoid the loss. After noting that TVI failed to arrange for the
and into Little Giant's warehouse, however, petitioner was discharging its own prompt towage of the barge despite the deteriorating sea conditions, it should
personal obligation under a contact of carriage. have summoned the same or another tugboat to extend help, but it did not.

Petitioner, which did not have any barge or tugboat, engaged the services of This Court holds then that petitioner and TVI are solidarily liable for the loss of
TVI as handler to provide the barge and the tugboat. In their Service the cargoes. The following pronouncement of the Supreme Court is instructive:
Contract, while Little Giant was named as the consignee, petitioner did not
disclose that it was acting on commission and was chartering the vessel for The foundation of LRTA's liability is the contract of carriage and its obligation
Little Giant. Little Giant did not thus automatically become a party to the to indemnify the victim arises from the breach of that contract by reason of its
Service Contract and was not, therefore, bound by the terms and conditions failure to exercise the high diligence required of the common carrier. In the
therein. discharge of its commitment to ensure the safety of passengers, a carrier may
choose to hire its own employees or avail itself of the services of an outsider or
Not being a party to the service contract, Little Giant cannot directly sue TVI an independent firm to undertake the task. In either case, the common carrier
based thereon but it can maintain a cause of action for negligence. is not relieved of its responsibilities under the contract of carriage.

In the case of TVI, while it acted as a private carrier for which it was under no Should Prudent be made likewise liable? If at all, that liability could only be for
duty to observe extraordinary diligence, it was still required to observe ordinary tort under the provisions of Article 2176 and related provisions, in conjunction
diligence to ensure the proper and careful handling, care and discharge of the with Article 2180 of the Civil Code. 
carried goods.
As for Black Sea, its duty as a common carrier extended only from the time the
TVI's failure to promptly provide a tugboat did not only increase the risk that goods were surrendered or unconditionally placed in its possession and
might have been reasonably anticipated during the shipside operation, but was received for transportation until they were delivered actually or constructively
the proximate cause of the loss. A man of ordinary prudence would not leave to consignee Little Giant.
a heavily loaded barge floating for a considerable number of hours, at such a
precarious time, and in the open sea, knowing that the barge does not have Parties to a contract of carriage may, however, agree upon a definition of
any power of its own and is totally defenseless from the ravages of the sea. delivery that extends the services rendered by the carrier. In the case at bar, Bill
That it was nighttime and, therefore, the members of the crew of a tugboat of Lading No. 2 covering the shipment provides that delivery be made "to the
would be charging overtime pay did not excuse TVI from calling for one such port of discharge or so near thereto as she may safely get, always afloat." The
tugboat. delivery of the goods to the consignee was not from "pier to pier" but from the
shipside of "M/V Alexander Saveliev" and into barges, for which reason the and the amount she owed Caravan Travel for the "British Pageant" tour.
consignee contracted the services of petitioner. Since Black Sea had Caravan Travel refused to reimburse the amount, contending it was non-
constructively delivered the cargoes to Little Giant, through petitioner, it had refundable. Crisostomo filed a complaint against Caravan Travel for breach of
discharged its duty. contract of carriage and damages.

In fine, no liability may thus attach to Black Sea. Whether or not Caravan Travel is a common carrier? NO
Whether or not Crisostomo is entitled to a refund? NO
V. Dispositive Portion
Caravan Travel is not an entity engaged in the business of transporting either
WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz passengers or goods and is therefore, neither a private nor a common carrier.
Transport & Brokerage Corporation, and Transport Venture Incorporation Caravan Travel did not undertake to transport Crisostomo from one place to
jointly and severally liable for the amount of P5,246,113.11 with the another since its covenant with its customers is simply to make travel
MODIFICATION that interest at SIX PERCENT per annum of the amount due arrangements in their behalf. Caravan Travel's services as a travel agency
should be computed from the promulgation on November 24, 1997 of the include procuring tickets and facilitating travel permits or visas as well as
decision of the trial court. booking customers for tours. Since the contract between the parties is an
ordinary one for services, the standard of care required of Caravan Travel is
that of a good father of a family under Article 1173 of the Civil Code.
VI. Notes
The test to determine whether negligence attended the performance of an
obligation is: did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person would have
used in the same situation? If not, then he is guilty of negligence.

Crisostomo v CA The Court agrees that Menor was negligent and maintains that Crisostomo's
I. Recit-ready summary assertion is belied by the evidence on record. The date and time of departure
Estela Crisostomo contracted the services of Caravan Travel and Tours was legibly written on the plane ticket and the travel papers were delivered
International, Inc. to arrange and facilitate her booking, ticketing and two days in advance precisely so that Crisostomo could prepare for the trip. It
accommodation in a tour dubbed "Jewels of Europe." Meriam Menor was performed all its obligations to enable Crisostomo to join the tour and
Caravan Travel’s ticketing manager. Menor went to her aunt's residence to exercised due diligence in its dealings with the latter.
deliver Crisostomo's travel documents and plane tickets. Without checking
her travel documents, Crisostomo went to NAIA on Saturday, June 15, 1991, II. Facts of the case
to take the flight for the first leg of her journey from Manila to Hongkong. To Estela L. Crisostomo contracted the services of Caravan Travel and Tours
Crisostomo's dismay, she discovered that the flight she was supposed to take International, Inc. to arrange and facilitate her booking, ticketing and
had already departed the previous day. Subsequently, Menor prevailed upon accommodation in a tour dubbed "Jewels of Europe." The package tour
Crisostomo to take another tour — the "British Pageant." Upon Crisostomo's included the countries of England, Holland, Germany, Austria, Liechtenstein,
return, she demanded from Caravan Travel the reimbursement of P61,421.70, Switzerland and France at a total cost of P74,322.70. Crisostomo was given a
representing the difference between the sum she paid for "Jewels of Europe"
5% discount because Crisostomo’s niece, Meriam Menor was Caravan Travel’s things, or news from one place to another for a fixed price. Such person or
ticketing manager. association of persons are regarded as carriers and are classified as private or
special carriers and common or public carriers. A common carrier is defined
Pursuant to said contract, Menor went to her aunt's residence on June 12, under Article 1732 of the Civil Code as persons, corporations, firms or
1991 — a Wednesday — to deliver Crisostomo's travel documents and plane associations engaged in the business of carrying or transporting passengers
tickets. Crisostomo, gave Menor the full payment for the package tour. or goods or both, by land, water or air, for compensation, offering their
Menor then told her to be at the NAIA on Saturday, 2 hours before her flight services to the public.
on board British Airways.
It is obvious from the above definition that Caravan Travel is not an entity
Without checking her travel documents, Crisostomo went to NAIA on engaged in the business of transporting either passengers or goods and is
Saturday, June 15, 1991, to take the flight for the first leg of her journey from therefore, neither a private nor a common carrier. Caravan Travel did not
Manila to Hongkong. To Crisostomor's dismay, she discovered that the flight undertake to transport Crisostomo from one place to another since its
she was supposed to take had already departed the previous day. She covenant with its customers is simply to make travel arrangements in their
learned that her plane ticket was for the flight scheduled on June 14, 1991. behalf. Caravan Travel's services as a travel agency include procuring tickets
She thus called up Menor to complain. and facilitating travel permits or visas as well as booking customers for tours.

Subsequently, Menor prevailed upon Crisostomo to take another tour — the The nature of the contractual relation between Crisostomo and Caravan
"British Pageant" — which included England, Scotland and Wales in its Travel is determinative of the degree of care required in the performance of
itinerary. For this tour package, Crisostomo was asked anew to pay the latter's obligation under the contract. For reasons of public policy, a
US$785.00 or P20,881.00). She gave Caravan Travel US$300 or P7,980.00 as common carrier in a contract of carriage is bound by law to carry passengers
partial payment and commenced the trip in July 1991. as far as human care and foresight can provide using the utmost diligence of
very cautious persons and with due regard for all the circumstances.
Upon Crisostomo's return from Europe, she demanded from Caravan Travel
the reimbursement of P61,421.70, representing the difference between the Since the contract between the parties is an ordinary one for services, the
sum she paid for "Jewels of Europe" and the amount she owed Caravan standard of care required of Caravan Travel is that of a good father of a
Travel for the "British Pageant" tour. Despite several demands, Caravan Travel family under Article 1173 of the Civil Code. This connotes reasonable care
refused to reimburse the amount, contending that the same was non- consistent with that which an ordinarily prudent person would have observed
refundable. Crisostomo was thus constrained to file a complaint against when confronted with a similar situation. The test to determine whether
Caravan Travelfor breach of contract of carriage and damages. negligence attended the performance of an obligation is: did the defendant
in doing the alleged negligent act use that reasonable care and caution which
III. Issue/s an ordinarily prudent person would have used in the same situation? If not,
Whether or not Caravan Travel is a common carrier? NO then he is guilty of negligence.
Whether or not Crisostomo is entitled to a refund? NO
The Court agrees that Menor was negligent and maintains that Crisostomo's
IV. Ratio/Legal Basis assertion is belied by the evidence on record. The date and time of departure
By definition, a contract of carriage or transportation is one whereby a certain was legibly written on the plane ticket and the travel papers were delivered
person or association of persons obligate themselves to transport persons, two days in advance precisely so that Crisostomo could prepare for the trip. It
performed all its obligations to enable Crisostomo to join the tour and - BA Finance was ordered to pay the victims, it being the registered
exercised due diligence in its dealings with the latter. owner of the truck. It matters not that the truck in question had been
leased to a certain Castro and was under the latter’s control. The
The evidence on record shows that Caravan Travel exercised due diligence in registered owner of any vehicle, even if not used for a public
performing its obligations under the contract and followed standard service, should primarily be responsible to the public or to third
persons for injuries caused the latter while the vehicle is being
procedure in rendering its services to Crisostomo.
driven on the highways or streets

The plane ticket issued to Crisostomo clearly reflected the departure date and
I. Recit-ready summary
time. The travel documents, consisting of the tour itinerary, vouchers and
instructions, were likewise delivered to Crisostomo two days prior to the trip.
BA Finance owned a 10-wheeler truck and leased it to Rock
Caravan Travel also properly booked Crisostomo for the tour, prepared the
Component. The truck figured in an accident.
necessary documents and procured the plane tickets. It arranged
Rogelia Villa y Amare, the driver of the Isuzu ten-wheeler truck, was at
Crisostomo's hotel accommodation as well as food, land transfers and
fault for the accident, and he was found guilty beyond reasonable doubt
sightseeing excursions, in accordance with its avowed undertaking.
reckless imprudence resulting in triple homicide with multiple physical
injuries with damage to property. Petitioner BA Finance Corp was held
Needless to say, after the travel papers were delivered to Crisostomo, it
liable for damages as the truck was registered in its name during the
became incumbent upon her to take ordinary care of her concerns. This
incident. In the same breadth, Rock Component Philippines, Inc. was ordered
undoubtedly would require that she at least read the documents in order to
to reimburse BA Finance for any amount that the latter may be adjudged
assure herself of the important details regarding the trip.
liable to pay the victims due to a stipulation in their contract of lease.

In the case at bar, the evidence on record shows that Caravan Travel
The issue is whether BA Finance can be held responsible to the victims even if
performed its duty diligently and did not commit any contractual breach.
the truck was leased when the incident occurred? YES.
Hence, Crisostomo cannot recover and must bear her own damage.

The registered owner of a certificate of public convenience is liable to

V. Disposition
the public for the injuries or damages suffered by passengers or third
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of
persons caused by the operation of said vehicle, even though the same
the Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly,
had been transferred to a third person. The principle upon which this
petitioner is ordered to pay respondent the amount of P12,901.00
doctrine is based is that in dealing with vehicles registered under the
representing the balance of the price of the British Pageant Package Tour,
Public Service Law, the public has the right to assume or presume that
with legal interest thereon at the rate of 6% per annum, to be computed from
the registered owner is the actual owner thereof, for it would be difficult
the time the counterclaim was filed until the finality of this Decision. After this
for the public to enforce the actions that they may have for injuries caused to
Decision becomes final and executory, the rate of 12% per annum shall be
them by the vehicles being negligently operated if the public should be
imposed until the obligation is fully settled, this interim period being deemed
required to prove who the actual owner is.
to be by then an equivalent to a forbearance of credit.

II. Facts of the case

BA Finance v CA
 Rogelia Villar y Amare, the driver of the Isuzu ten-wheeler truck, was at the public has the right to assume or presume that the registered owner is
fault for the accident, and he was found guilty beyond reasonable doubt the actual owner thereof, for it would be difficult for the public to enforce the
reckless imprudence resulting in triple homicide with multiple physical actions that they may have for injuries caused to them by the vehicles being
injuries with damage to property by RTC Bulacan. Petitioner BA Finance Corp. negligently operated if the public should be required to prove who the actual
was held liable for damages as the truck was registered in its name during owner is.
the incident. In the same breadth, Rock Component Philippines, Inc. was
ordered to reimburse BA Finance for any amount that the latter may be Under the same principle the registered owner of any vehicle, even if
adjudged liable to pay respondents Carlos Ocampo, Moises Ocampo, not used for a public service, should primarily be responsible to the
Nicolas Cruz and Inocencio Turla, Sr. (victims/plaintiffs) or their heirs. This is public or to third persons for injuries caused the latter while the vehicle
because the reimbursement is expressly stipulated in the contract of is being driven on the highways or streets. The members of the Court are
lease between BA Finance and Rock Component. Moreover, the trial court in agreement that the defendant-appellant should be held liable to plaintiff-
applied Article 2194 of the new Civil Code to both of them on solidary appellee for the injuries occasioned to the latter because of the negligence of
accountability of joint tortfeasors insofar as the liability of the driver. the driver, even if the defendant-appellant was no longer the owner of the
vehicle at the time of the damage because he had previously sold it to
BA Finance argues that it was not the employer of the negligent another. The basis for the liability is there is a presumption that the
driver, the driver was under the control and supervision of Lino Castro at owner of the guilty vehicle is the defendant appellant as he is the
the time of the accident. Therefore, Art. 2180 of Civil Code on vicarious registered owner in the Motor Vehicles Office.
liability should not apply to it as there was no employer-employee
relationship. Further, the physical possession was with Rock Component by The Revised Motor vehicles Law (Act No. 3992, as amended) provides
virtue of the lease. that no vehicle may be used or operated upon any public highway unless the
same is properly registered. It has been stated that the system of licensing
III. Issue/s and the requirement that each machine must carry a registration number,
conspicuously displayed, is one of the precautions taken to reduce the
Whether BA Finance can be held responsible to the victims even if the truck danger of injury to pedestrians and other travellers from the careless
was leased when the incident occurred? YES. management of automobiles. Further, dealers in motor vehicles shall furnish
the Motor Vehicles Office a report showing the name and address of each
IV. Ratio/Legal Basis purchaser of motor vehicle during the previous month and the
manufacturer's serial number and motor number.
The Court held that the ruling in Erezo, et. al. v. Jepte is still good law,
thus: Registration is required not to make said registration the operative
act by which ownership in vehicles is transferred… but to permit the use
“In previous decisions, We already have held that the registered owner and operation of the vehicle upon any public highway. The main aim of
of a certificate of public convenience is liable to the public for the motor vehicle registration is to identify the owner so that if any accident
injuries or damages suffered by passengers or third persons caused by happens, or that any damage or injury is caused by the vehicle on the public
the operation of said vehicle, even though the same had been highways, responsibility therefor can be fixed on a definite individual, the
transferred to a third person. The principle upon which this doctrine is registered owner. Identification of the vehicle and the operator may act as a
based is that in dealing with vehicles registered under the Public Service Law,
deterrent from lax observance of the law and of the rules of conservative and - Ford Fiera and Bus accident. The TC awarded damages to Almedilla,
safe operation. even though the Ford was registered under the Sevilla Lines. The
Court held it was correct because the party who stands to benefit or
Should the registered owner be allowed at the trial to prove who the suffer (i.e. party of interest) is the private respondent, not the owner
actual owner is? We hold with the trial court that the law does not allow him of the Ford. Estoppel.
to do so; the law, with its aim and policy in mind, does not relieve him
I. Recit-ready summary
directly of the responsibility that the law fixes and places upon him as an
incident or consequence of registration. Were a registered owner allowed
The case is a situation where a Bus hit a Ford Fiera and the owner of the Ford
to evade responsibility by proving who the supposed transferee or
and its passenger were injured. The bus did not stop and just proceeded.
owner is, it would be easy for him, by collusion with others or otherwise,
There were 2 cases filed. (1) The owner of the passenger bus filed a case
to escape said responsibility and transfer the same to an indefinite
against the registered owner of the Ford [Sevilla Line]; (2) The owner of the
person, or to one who possesses no property with which to respond
Ford filed a case against the owner of the passenger bus.
financially for the damage or injury done. The protection that the law aims to
extend to him would become illusory were the registered owner given the
The 2 cases both found Occidental Land (owner of the passenger bus) liable
opportunity to escape liability by disproving his ownership.
due to the negligence of their Bus driver. The main issue to note is the fact
that in the promulgation of the decision in Case no 2728 (the 2 riders) the
The above policy and application of the law may appear quite harsh and
courts adopted some of the facts found in Case 3156 (The heirs of Carbajosa)
would seem to conflict with truth and justice. We do not think it is so. A
registered owner who has already sold or transferred a vehicle has the
W/N TC erred in taking judicial notice the previous case decided
recourse to a third-party complaint, in the same action brought against
between the parties. NO
him to recover for the damage or injury done, against the vendee or
transferee of the vehicle. The inconvenience of the suit is no justification for
As a general rule, "courts are not authorized to take judicial notice in the
relieving him of liability; said inconvenience is the price he pays for failure to
adjudication of cases pending before them, of the contents of the records of
comply with the registration that the law demands and requires.”
other cases, even when such have been tried or are pending in the same
court, and notwithstanding the fact that both cases may have been heard or
The same rationale is applied in this case. The cases of Duavit and
are actually pending before the same judge."
Duquillo does not apply here because in those two cases, the vehicles were
stolen from their respective owners.
The Court in Tabuena applied the general rule since the conditions necessary
for the exception to be applicable were not established. The same is not true
V. Disposition
in the instant case. Civil Case No. 3156 [prior case], which the lower court in
WHEREFORE, the petition is hereby DISMISSED and decision under Civil Case No. 2728 took judicial notice of, decided the issue of negligence
review AFFIRMED without special pronouncement as to costs. between the driver of the two vehicles involved in the subject collision. It
was therefore a matter of convenience, to consider the decision rendered
in that case. And unlike the factual situation in Tabuena v. CA, the decision in
Civil Case No. 3156 formed part of the records of the instant case (Civil Case
Occidental Transport v CA No. 2728) with the knowledge of the parties and in the absence of their
objection. The lower court did not merely "adopt by reference" the findings
of fact of the court that decided the previous case, but used it in its discourse Carina bus, Edgardo Enerio. Later the heirs of Pacifico Carbajosa filed a
to obtain the conclusions pronounced in its decision. complaint-in- intervention. This case was docketed as Civil Case No. 2728
before the Regional Trial Court of Zamboanga del Norte, Branch VI, Dipolog
TRANSPO ISSUE City. (KEEP NOTE 2 CASES WERE FILED)

Petitioner alleges that the Ford Fiera did not belong to Trencio Almedilla, On July 30, 1977, Judge Rodolfo A. Ortiz of the Oroquieta court rendered a
but to its registered owner — Sevilla Lines, and therefore the grant of decision in Civil Case No. 3156 finding the driver of the Carina passenger
damages for its repair was improperly awarded to private respondent bus and not the driver of the Ford Fiera, as negligent.
Almedilla. This factual matter has already been decided upon in the trial
court. On March 11, 1986, more than ten years after the inception of the case,
The fact that the Fiera was owned by Almedilla though registered with Sevilla Judge Daniel B. Bernaldez rendered the decision in Civil Case No. 2728
Line, will not alter the conclusion arrived at by the lower court. The party against Occidental Land Transportation Company, Inc. and Edgardo
who stands to benefit or suffer from the decision is admittedly private Enerio. They gave damages to Trencio and Alberto.
respondent Almedilla and not Sevilla Lines. William Sevilla admitted that
the real owner of the vehicle was Trencio Almedilla, in the case for What is crucial to note is that in Case No 2728, facts were adopted from the
damages by Occidental Land Transportation against Sevilla Lines and/or facts of Case 3156. To know these facts are irrelevant for the case but will
William Sevilla. Having thus been settled in the lower court, petitioner is include in notes below since it’s primarily a procedural issue.
now no longer in any position to question the ownership of the Fiera or
the award of damages to private respondent Almedilla. III. Issue/s

II. Facts of the case W/N TC erred in taking judicial notice of the previous case? NO
The case began with the collision of a Ford Fiera and a Carina Express No. C- W/N TC Erred in not holding the ford fiesta exclusively responsible? Are you
24 passenger bus in Bunawan, Calamba, Misamis Occidental on November f****** serious????? NO
25, 1975 at about six o'clock a.m. As a result of this, the Ford Fiera was W/N TC Erred in not holding that the ford fiesta did not belong to
thrown into the canal on the right side of the road. Pacifico Carbajosa, the Trencio Almedilla NO
driver, was pinned to the steering wheel and was severely burnt where he IV. Ratio/Legal Basis
died from his injuries. Trencio Almedilla, the owner of the vehicle
registered under Sevilla Line, and Alberto Pingkian were injured. The bus The petition is devoid of merit.
did not stop and just proceeded to continue on.
No error was committed by the respondent court when it upheld the findings
The owner of the Carina passenger bus, Occidental Land Transportation of the trial court in Civil Case No. 2728.
Company filed a case for damages against Sevilla Line and/or William Sevilla,
the registered owner of the Ford Fiera, which case was docketed as Civil Case The reasons advanced by the respondent court in taking judicial notice of
No. 3156 before the Court of First Instance, Branch III, Oroquieta City. Civil Case No. 3156 are valid and not contrary to law. As a general rule,
"courts are not authorized to take judicial notice in the adjudication of cases
Trencio Almedilla and Alberto Pingkian also filed a civil suit for damages pending before them, of the contents of the records of other cases, even
against Occidental Land Transportation Company, Inc. and the driver of the when such have been tried or are pending in the same court, and
notwithstanding the fact that both cases may have been heard or are actually Almedilla. This factual matter has already been decided upon in the trial
pending before the same judge." court.
The fact that the Fiera was owned by Almedilla though registered with Sevilla
The exceptions are: 'in the absence of objection,' 'with the knowledge of the Line, will not alter the conclusion arrived at by the lower court. The party
opposing party,' or 'at the request or with the consent of the parties,' the who stands to benefit or suffer from the decision is admittedly private
case is clearly referred to or 'the original or part of the records of the case are respondent Almedilla and not Sevilla Lines. William Sevilla admitted that
actually withdrawn from the archives' and 'admitted as part of the record of the real owner of the vehicle was Trencio Almedilla, in the case for damages
the case then pending by Occidental Land Transportation against Sevilla Lines and/or William
Sevilla. Having thus been settled in the lower court, petitioner is now no
The Court in Tabuena ruled that the conditions necessary for the exception to longer in any position to question the ownership of the Fiera or the award of
be applicable were not established, such as that ". . ., (t)he petitioner was damages to private respondent Almedilla.
completely unaware that his testimony in Civil Case No. 1327 was being
considered by the trial court in the case then before it. As the petitioner puts V. Disposition
it, the matter was never taken up at the trial and was 'unfairly sprung' upon
him, leaving him no opportunity to counteract." WHEREFORE, finding no error in the decision of the Court of Appeals
dated September 28,1990 (CA-G.R. CV No. 10176) affirming the decision
The same is not true in the instant case. Civil Case No. 3156, which the lower of the trial court dated March 11,1986, the petition for review is denied
court in Civil Case No. 2728 took judicial notice of, decided the issue of for lack of merit with cost against the petitioners.
negligence between the driver of the two vehicles involved in the subject SO ORDERED.
collision. It was therefore a matter of convenience, to consider the decision
rendered in that case.
And unlike the factual situation in Tabuena v. CA, the decision in Civil Case VI. Notes
No. 3156 formed part of the records of the instant case (Civil Case No. 2728)
with the knowledge of the parties and in the absence of their objection. That at about 4:50 o'clock in the morning of November 25, 1975, Trencio
Almedilla, who was the real owner of the Ford Fiera, but attached to the
This being the case, petitioners were aware that Exhibit "O" (Decision in Civil Sevilla Lines of dependant William Sevilla, left for Ozamis City, on board his
Case No. 3156) had formed part of the records of the case and would thereby Ford Fiera, to buy textiles, together with Alberto Pingkian who wanted to visit
be considered by the trial court in its decision. his aunt at Ozamis City. Reaching Dipolog City, Trencio Almedilla, came upon
Pacifico Carbajosa, who wants (sic) to load fish in the Ford Fiera for Ozamis
The lower court did not merely "adopt by reference" the findings of fact of City. As it was an opportune occasion, Trencio agreed to load the fish of
the Oroquieta court, but used it in its discourse to obtain the conclusions Pacifico for a freight of P130.00. So they loaded the fish of Pacifico at
pronounced in its decision. Miputak, then got gasoline at a Caltex Station and proceeded towards
Ozamis City. Trencio, was driving his Ford Fiera, was running slowly as
Third Issue: TRANSPO Pacifico alias "Balodoy" told him not to go fast so that his fish will not get
Petitioner alleges that the Ford Fiera did not belong to Trencio Almedilla, destroyed. After passing Sapang Dalaga, at Misamis Occidental, Trencio
but to its registered owner — Sevilla Lines, and therefore the grant of developed stomach ache. At this, "Balodoy" requested that Trencio allow him
damages for its repair was improperly awarded to private respondent to drive the Ford Fiera as he was an experienced driver. Trencio agreed. And
so, with "Balodoy" on the wheels of the Ford Fiera, they proceeded slowly for - Benedicto, being a common carrier, is liable for the lost cargo of
fear that the fish will get damaged. Reaching Bunawan at Calamba, and while Greenhills Lumber. The prevailing doctrine on common carriers
negotiating a curb at the descending portion of the asphalted national makes the registered owner liable for consequences flowing
highway, which was get, as it was raining, a Carina passenger bus was from the operations of the carrier, even though the specific
running fast in an ascent, zigzagging towards them. Because of this, the Ford vehicle involved may already have been transferred to another
person.
Fiera went towards the extreme right of the road with its right front and rear
- The doctrine of the liability of the registered owner applies not only
tires already running at (sic) the ground shoulder, but even as the Ford Fiera
in cases of death or injury to passengers, but also to the loss and
tried to avoid the zigzagging Carina Express No. C-24, the said Carina bus
deterioration of goods.
jerked towards the left, hitting as a result, the Ford Fiera at the left fender and
hood, throwing it to the canal at the right side, with engine burning. The I. Recit-ready summary
Carina passenger bus continued to swerve towards the left until it turn about,
facing towards the direction of Ozamis City. Balodoy was pinned by the Greenhills bound itself to sell and deliver to Blue Star (from Madella to
steering wheel to his driver's seat and was seriously injured, Pingkian and Valenzuela) sawn lumber with an initial delivery on 15 May 1980. Licuden,
Trencio were also injured, but they were well enough to try to help to the driver of a cargo truck, was contracted by Greenhills to make the
extricate Balodoy, not until Genito Compania got a piece of wood from his delivery. This cargo truck was registered in the name of Benedicto the
house nearby, which he used as a lever to pry out Balodoy. The driver of proprietor of a business enterprise engaged in hauling freight. In a letter
Carina passenger bus, which had three (3) passengers, at that time, did not dated 18 May 1980, Blue Star's administrative and personnel manager
help Balodoy. Instead it proceeded towards Sapang Dalaga. formally informed Greenhills' president and general manager that Blue Star
The accident was reported to the police authorities of Calamba, as a result of still had not received the sawn lumber and because of this delay, "they
which Acting Station Commander Arceno of Calamba Police Station, Police were constrained to look for other suppliers." Greenhills filed a criminal
District No. II, made a Police Report dated November 25 1975 as follows: case against driver Licuden for estafa. Greenhills also filed a case for
'POLICE REPORT recovery of the value of the lost sawn lumber plus damages against
At about 0645 Hrs More or less 25, Nov. Sevilla Line bearing plate No. 8-B940 petitioner Benedicto.
which was driven by Pacifico Carbajosa y Gemillan, 40 years old, married and
a resident of 398 Martines St., Dipolog City, said driver was burned and Benedicto claims she sold the subject truck to Benjamin Tee, on 28
injured seriously when on the way at Bunawan this Municipality, due to a February 1980. She claimed that the truck had remained registered in her
bumping incident. name because the latter had not fully paid the agreed price. However, she
Bus Line marked Carina bearing Plate No. 939 driven by Edgardo Enerio y averred that Tee had been operating the said truck in Central Luzon from that
Paglinawan of Sapang Dalaga, Misamis Occidental, Hit and run and date (28 February 1980) onwards, and that, therefore, Licuden was Tee's
surrendered to Sapang Dalaga office of the Station Commander. employee and not hers.
The Driver of Sevilla Line with his two companions were rushed to the
Calamba Community Hospital for treatment. The scene of the incident was WON Benedicto, being the registered owner of the carrier, should be held liable
investigated by F/Sgt. Pagalaran, Sr.' " for the value of the undelivered or lost sawn lumber. YES.

Benedicto v IAC A common carrier, both from the nature of its business and for insistent
reasons of public policy, is burdened by the law with the duty of exercising
extraordinary diligence not only in ensuring the safety of passengers but also
in caring for goods transported by it. The loss or destruction or Licuden Charge Invoices Nos. 3259 and 3260 both of which were initialed by
deterioration of goods turned over to the common carrier for the latter at the bottom left corner. Cruz instructed Licuden to give the
conveyance to a designated destination, raises instantly a presumption original copies of the two (2) invoices to the consignee upon arrival in
of fault or negligence on the part of the carrier, save only where such loss, Valenzuela, Bulacan 3 and to retain the duplicate copies in order that he
destruction or damage arises from extreme circumstances such as a natural could afterwards claim the freightage from Greenhills’ Manila office.
disaster or calamity or act of the public enemy in time of war, or from an act
In a letter dated 18 May 1980, Blue Star's administrative and personnel
or omission of the shipper himself or from the character of the goods or their
manager formally informed Greenhills' president and general manager that
packaging or container. This presumption may be overcome only by proof of
Blue Star still had not received the sawn lumber and because of this delay,
extraordinary diligence on the part of the carrier.
"they were constrained to look for other suppliers."
There is no dispute that Benedicto has been holding herself out to the public Greenhills filed a criminal case against driver Licuden for estafa. Greenhills
as engaged in the business of hauling or transporting goods for hire or also filed a case for recovery of the value of the lost sawn lumber plus
compensation. Benedicto is, in brief, a common carrier. The prevailing damages against petitioner Benedicto.
doctrine on common carriers makes the registered owner liable for Benedicto’s claim: denied liability alleging that she was a complete
consequences flowing from the operations of the carrier, even though stranger to the contract of carriage, the subject truck having been
the specific vehicle involved may already have been transferred to earlier sold by her to Benjamin Tee, on 28 February 1980 as evidenced by a
another person. Thus, contrary to Greenhills’ claim, Greenhills is not deed of sale. She claimed that the truck had remained registered in her name
required to go beyond the vehicle's certificate of registration to notwithstanding its earlier sale to Tee because the latter had paid her only
ascertain the owner of the carrier. The loss or destruction or deterioration P50,000.00 out of the total agreed price of P68,000.00 However, she averred
of goods turned over to the common carrier for conveyance to a designated
that Tee had been operating the said truck in Central Luzon from that date
destination, raises instantly a presumption of fault or negligence on the part
(28 February 1980) onwards, and that, therefore, Licuden was Tee's employee
of the carrier. This presumption may be overcome only by proof of
and not hers.
extraordinary diligence on the part of the carrier. Thus, Benedicto is held
liable.
III. Issue/s
II. Facts of the case
Whether or not Benedicto, being the registered owner of the carrier, should
Greenhills (operates in Madella, Quirino) bound itself to sell and deliver to be held liable for the value of the undelivered or lost sawn lumber. YES.
Blue Star (operates in Valenzuela, Bulacan) 100,000 board feet of sawn
lumber with the understanding that an initial delivery would be made on 15 IV. Ratio/Legal Basis
May 1980.
To effect its delivery, Greenhill’s resident manager in Madella (Cruz) Benedicto’s claim: Benedicto urges that she could not be held answerable for
the loss of the cargo, because the doctrine which makes the registered
contracted Licuden, the driver of a cargo truck, to transport its sawn lumber
owner of a common carrier vehicle answerable to the public for the
to Blue Star. This cargo truck was registered in the name of Benedicto, the
negligence of the driver despite the sale of the vehicle to another
proprietor of Macoven Trucking, a business enterprise engaged in hauling
person, applies only to cases involving death of or injury to passengers.
freight. What applies in the present case, according to Benedicto, is the rule that a
On 15 May 1980, Cruz in the presence and with the consent of driver Licuden, contract of carriage requires proper delivery of the goods to and acceptance
supervised the loading of 7,690 board feet of sawn lumber aboard the cargo by the carrier. Thus, Benedicto contends that the delivery to a person
truck. Before the cargo truck left Maddela for Valenzuela Cruz issued to
falsely representing himself to be an agent of the carrier prevents DOCTRINE: A common carrier, both from the nature of its business and for
liability from attaching to the registered owner. insistent reasons of public policy, is burdened by the law with the duty of
exercising extraordinary diligence not only in ensuring the safety of
DOCTRINE: The prevailing doctrine on common carriers makes the passengers but also in caring for goods transported by it. The loss or
registered owner liable for consequences flowing from the operations of destruction or deterioration of goods turned over to the common carrier
the carrier, even though the specific vehicle involved may already have for conveyance to a designated destination, raises instantly a
been transferred to another person. This doctrine rests upon the principle presumption of fault or negligence on the part of the carrier, save only
that in dealing with vehicles registered under the Public Service Law, the where such loss, destruction or damage arises from extreme
public has the right to assume that the registered owner is the actual or circumstances such as a natural disaster or calamity or act of the public
lawful owner thereof. It would be very difficult and often impossible as a enemy in time of war, or from an act or omission of the shipper himself
practical matter, for members of the general public to enforce the rights of or from the character of the goods or their packaging or container. This
action that they may have for injuries inflicted by the vehicles being presumption may be overcome only by proof of extraordinary diligence
negligently operated if they should be required to prove who the actual on the part of the carrier. Clearly, to permit a common carrier to escape its
owner is. The registered owner is not allowed to deny liability by proving the responsibility for the passengers or goods transported by it by proving a
identity of the alleged transferee. prior sale of the vehicle or means of transportation to an alleged vendee
would be to attenuate drastically the carrier's duty of extraordinary diligence.
SC Ruling: There is no dispute that Benedicto has been holding herself out to
the public as engaged in the business of hauling or transporting goods for SC Ruling: The thrust of the public policy here involved is as sharp and real in
hire or compensation. Benedicto is, in brief, a common carrier. Thus, contrary the case of carriage of goods as it is in the transporting of human beings.
to Benedicto's claim, Greenhills is not required to go beyond the vehicle's Thus, to sustain Benedicto's contention, that is, to require the shipper to go
certificate of registration to ascertain the owner of the carrier. In this regard, behind a certificate of registration of a public utility vehicle, would be utterly
the letter presented by Benedicto allegedly written by Benjamin Tee subversive of the purpose of the law and doctrine.
admitting that Licuden was his driver, had no evidentiary value not only
because Benjamin Tee was not presented in court to testify on this matter but Benedicto’s claim: Benedicto further insists that there was no perfected
also because of the aforementioned doctrine. To permit the ostensible or contract of carriage for the reason that there was no proof that her consent
registered owner to prove who the actual owner is, would be to set at naught or that of Tee had been obtained; no proof that the driver, Licuden, was
the purpose or public policy which infuses that doctrine. In fact, Greenhills authorized to bind the registered owner; and no proof that the parties had
had no reason at all to doubt the authority of Licuden to enter into a contract agreed on the freightage to be paid.
of carriage on behalf of the registered owner. It appears that, earlier, in the
first week of May 1980, Greenhills had contracted Licuden who was then SC Ruling: Once more, we are not persuaded. Driver Licuden was entrusted
driving the same cargo truck to transport and carry a load of sawn lumber with possession and control of the freight truck by the registered owner (and
from the Maddela sawmill to Dagupan City. No one came forward to by the alleged secret owner, for that matter). Driver Licuden, under the
question that contract or the authority of Licuden to represent the owner of circumstances, was clothed with at least implied authority to contract to carry
the carrier truck. 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
Benedicto’s claim: Benedicto insists that the said principle should apply loading and carriage, did not prevent the contract of carriage from arising,
only to cases involving negligence and resulting injury to or death of since the freight was at least determinable if not fixed by the tariff schedules
passengers, and not to cases involving merely carriage of good in petitioner's main business office.

V. Disposition
 Lim completed the payments to cover the full price of the tractor. Thus, a
WHEREFORE, the Petition for Review is DENIED for lack of merit and the Deed of Sale over the tractor was executed by petitioner in favor of Ecatine
Decision of the former Intermediate Appellate Court dated 30 January 1985 is represented by Edwin Lim. However, the Deed was not registered with the
hereby AFFIRMED. Costs against petitioner. LTO. Petitioner is liable for the deaths and the injuries complained of,
because it was the registered owner of the tractor at the time of the
Equitable v Suyon accident. The Court has consistently ruled that, regardless of sales made of
a motor vehicle, the registered owner is the lawful operator insofar as
the public and third persons are concerned. Since Equitable remained the
- Road Tractor crashed into a store, causing multiple deaths and
injuries. Tutor was the driver, an employee of Ecatine, but the registered owner of the tractor, it could not escape primary liability for the
registered owner of the vehicle is Equitable Leasing. Equitable is deaths and the injuries arising from the negligence of the driver.
liable it being the registered owner of the car at the time of the
accident. II. Facts of the case

I. Recit-ready summary On July 17, 1994, a Fuso Road Tractor driven by Raul Tutor rammed into the
house cum store of Myrna Tamayo located at Pier 18, Vitas, Tondo, Manila. A
On July 17, 1994, a Fuso Road Tractor driven by Raul Tutor rammed into portion of the house was destroyed. Pinned to death under the engine of the
the house cum store of Myrna Tamayo in Tondo, Manila. A portion of the tractor were Respondent Myrna Tamayo's son, Reniel Tamayo, and
Respondent Felix Oledan's daughter, Felmarie Oledan. Injured were
house was destroyed which caused death and injury. Tutor was charged
Respondent Oledan himself, Respondent Marissa Enano, and two sons of
with and later convicted of reckless imprudence resulting in multiple
Respondent Lucita Suyom.
homicide and multiple physical injuries.
Tutor was charged with and later convicted of reckless imprudence resulting
Upon verification with the Land Transportation Office, it was in multiple homicide and multiple physical injuries
known that the registered owner of the tractor was Equitable Leasing Registered owner of the tractor was "Equitable Leasing Corporation/leased to
Corporation/leased to Edwin Lim. On April 15, 1995, respondents filed Edwin Lim." On April 15, 1995, respondents filed against Raul Tutor, Ecatine
against Raul Tutor, Ecatine Corporation (Ecatine) and Equitable Leasing Corporation ("Ecatine") and Equitable Leasing Corporation ("Equitable") a
Corporation (Equitable) a Complaint for damages. Complaint for damages docketed as Civil Case No. 95-73522 in the RTC of
The petitioner alleged that the vehicle had already been sold to Ecatine Manila, Branch 14.
and that the former was no longer in possession and control thereof at the RTC rendered its Decision ordering petitioner to pay actual and moral
time of the incident. It also claimed that Tutor was an employee, not of damages and attorney's fees to respondents. It held that since the Deed of
Equitable, but of Ecatine. Sale between petitioner and Ecatine had not been registered with the Land
Transportation Office (LTO), the legal owner was still Equitable. Thus,
petitioner was liable to respondents.
Whether or not the petitioner was liable for damages based on
quasi delict for the negligent acts. Yes
Sustaining the RTC, the CA held that petitioner was still to be legally deemed
The Lease Agreement between petitioner and Edwin Lim stipulated that it is
the owner/operator of the tractor, even if that vehicle had been the subject of
the intention of the parties to enter into a finance lease agreement.
a Deed of Sale in favor of Ecatine on December 9, 1992. The reason cited by
Ownership of the subject tractor was to be registered in the name of the CA was that the Certificate of Registration on file with the LTO still
petitioner, until the value of the vehicle has been fully paid by Edwin Lim. remained in petitioner's name.
 Issue/s clear that the deaths and the injuries suffered by respondents and their kins
were due to the fault of the driver of the Fuso tractor.
Whether or not the petitioner was liable for damages based on quasi delict for
the negligent acts. Ownership of the subject tractor was to be registered in the name of
petitioner, until the value of the vehicle has been fully paid by Edwin Lim.[34]
Ratio/Legal Basis Further, in the "Lease Schedule," the monthly rental for the tractor was
stipulated, and the term of the Lease was scheduled to expire on December
In negligence cases, the aggrieved party may sue the negligent party under 4, 1992. After a few months, Lim completed the payments to cover the full
(1) Article 10 of the Revised Penal Code, for civil liability ex delicto; or under price of the tractor. Thus, on December 9, 1992, a Deed of Sale over the
Article 2176 of the Civil Code, for civil liability ex quasi delicto. tractor was executed by petitioner in favor of Ecatine represented by Edwin
Lim. However, the Deed was not registered with the LTO.
Furthermore, under Article 103 of the Revised Penal Code, employers may be
held subsidiarily liable for felonies committed by their employees in the The Court has consistently ruled that, regardless of sales made of
discharge of the latter's duties. This liability attaches when the employees a motor vehicle, the registered owner is the lawful operator insofar as
who are convicted of crimes committed in the performance of their work are the public and third persons are concerned; consequently, it is directly
found to be insolvent and are thus unable to satisfy the civil liability and primarily responsible for the consequences of its operation. In
adjudged. contemplation of law, the owner/operator of record is the employer of the
driver, the actual operator and employer being considered as merely its
On the other hand, under Article 2176 in relation to Article 2180 of the Civil agent. The same principle applies even if the registered owner of any
Code, an action predicated on quasi delict may be instituted against the vehicle does not use it for public service
employer for an employee's act or omission. The liability for the negligent
conduct of the subordinate is direct and primary, but is subject to the Since Equitable remained the registered owner of the tractor, it
defense of due diligence in the selection and supervision of the employee. could not escape primary liability for the deaths and the injuries arising
from the negligence of the driver
The enforcement of the judgment against the employer for an action based
on Article 2176 does not require the employee to be insolvent, since the True, the LTO Certificate of Registration, dated "5/31/91," qualifies
liability of the former is solidary -- the latter being statutorily considered a the name of the registered owner as "EQUITABLE LEASING
joint tortfeasor. To sustain a claim based on quasi delict, the following CORPORATION/Leased to Edwin Lim." But the lease agreement between
requisites must be proven: Equitable and Lim has been overtaken by the Deed of Sale on December 9,
(a) damage suffered by the plaintiff, 1992, between petitioner and Ecatine. While this Deed does not affect
(b) fault or negligence of the defendant, and respondents in this quasi delict suit, it definitely binds petitioner because,
(c) connection of cause and effect between the fault or negligence of unlike them, it is a party to it.
the defendant and the damage incurred by the plaintiff.
In this case, respondents -- having failed to recover anything in We must stress that the failure of Equitable and/or Ecatine to register
the criminal case -- elected to file a separate civil action for damages, the sale with the LTO should not prejudice respondents, who have the legal
based on quasi delict under Article 2176 of the Civil Code. The evidence is right to rely on the legal principle that the registered vehicle owner is liable
for the damages caused by the negligence of the driver. Petitioner cannot
hide behind its allegation that Tutor was the employee of Ecatine. This will outside the cases mentioned in Article 1734, if the goods are lost,
effectively prevent respondents from recovering their losses on the basis of destroyed or deteriorated, common carriers are presumed to have been
the inaction or fault of petitioner in failing to register the sale. The non- at fault or to have acted negligently, unless they prove that they
registration is the fault of petitioner, which should thus face the legal observed extraordinary diligence. Since Eastern Shipping has failed to
consequences thereof. establish any caso fortuito, the presumption by law of fault or
negligence applies to it. Here, Easter Shipping failed to give evidence
WHEREFORE, the Petition is DENIED and the assailed Decision that it observed extraordinary diligence. Thus it is liable for the
AFFIRMED. Costs against petitioner. damaged cargo.
Facts 1. On September 4, 1978, thirteen coils of uncoated 7-wire stress
Eastern Shipping v CA relieved wire strand for prestressed concrete were shipped on board the
vessel "Japri Venture," owned and operated by Eastern Shipping Lines, Inc.
(Eastern Shipping), at Kobe, Japan, for delivery to Stresstek Post-Tensioning
Thirteen coils of uncoated 7-wire stress relieved wire strand for
Phils., Inc. (Stresstek) in Manila.
prestressed concrete were shipped on board the vessel "Japri Venture,"
2. It was insured by First Nationwide Assurance Corporation (FNAC) for
owned and operated by Eastern Shipping Lines, Inc. (Eastern Shipping),
P171,923.
at Kobe, Japan, for delivery to Stresstek Post-Tensioning Phils., Inc.
3. On September 16, 1978, Japri Venture arrived in Manila and discharged the
(Stresstek) in Manila. It was insured by First Nationwide Assurance
cargo to the custody of E. Razon, Inc. Then it was received by the consignee’s
Corporation (FNAC) for P171,923. It was found out that while enroute: (1) the
custom broker.
vessel encountered "very rough seas and stormy weather"; (2) that lower
4. On February 19, 1979, FNAC indemnified the consignee in the amount of
hatch of the vessel where the coils were stored was flooded with water
P171,923.00 for damage and loss to the insured cargo, whereupon the FNAC
and; (3) that upon survey it was discovered that coils were extremely rusty
was subrogated for the latter.
and totally unsuitable for the intended purpose because of getting wet
• It appears that while enroute from Kobe to Manila, Japri Venture
by the fresh water. So, FNAC indemnified the consignee for the damage and
"encountered very rough seas and stormy weather" for three days. The coils
sought for reimbursement against Eastern Shipping. RTC dismissed the case,
wrapped in burlap cloth and cardboard paper were stored in the lower hold
but CA reversed the decision and held Eastern Shipping liable.
of the hatch of the vessel which was flooded with water about one foot deep.
The issue in this case is W/N Eastern Shipping should be held liable for
That upon survey conducted was found that the "wetting (of the cargo) was
the damaged cargo? YES
caused by fresh water" that entered the hatch when the vessel encountered
The heavy seas and rains were not caso fortuito, but normal occurrences
heavy weather enroute to Manila. And that all thirteen coils were extremely
that an ocean-going vessel, particularly in the month of September which, in
rusty and totally unsuitable for the intended purpose.
our area, is a month of rains and heavy seas would encounter as a matter of
5. FNAC sought to recover from Eastern Shipping the amount it paid to the
routine. These are conditions that ocean-going vessels would encounter and
consignee less P48,293.70 (salvage value of the cargo).
provide for, in the ordinary course of a voyage. That rain water (not sea
Procedural History 1. RTC Manila dismissed the case. 2. CA reversed the RTC
water) found its way into the holds of the Jupri Venture is a clear
decision and ordered Eastern Shipping and E. Razon to pay the damages. ALS
indication that care and foresight did not attend the closing of the ship's
B2021 2 3. Thus, this petition for review filed by Eastern Shipping.
hatches so that rain water would not find its way into the cargo holds of
Points of Contention Eastern Shipping: It should not be held liable as the
the ship.
shipment was discharged and delivered complete into the custody of the
Under the Civil Code, common carriers are bound to observe extra-ordinary
arrastre operator under clean tally sheets.
vigilance over goods, according to all circumstances of each case. And
Issues Delsan Transport v CA (369 SCRA 24)
1. W/N Eastern Shipping should be held liable for the damaged cargo?
Yes
Oil from Batangas- Zamboanga City. Ship sank near the Panay Gulf. Liable?
Rationale 1. Eastern Shipping is liable for the damaged cargo. • While it is
Yes. In the event of loss, destruction or deterioration of the insured
true that the cargo was delivered to the arrastre operator in apparent good
goods, common carriers shall be responsible unless the same is brought
order condition, it is also undisputed that while en route from Kobe to
about, among others, by flood, storm, earthquake, lightning or other
Manila: (1) the vessel encountered "very rough seas and stormy weather"; (2)
natural disaster or calamity. In all other cases, if the goods are lost,
that lower hatch of the vessel where the coils were stored was flooded with
destroyed or deteriorated, common carriers are presumed to have been
water and; (3) that upon survey it was discovered that coils were extremely
at fault or to have acted negligently, unless they prove that they
rusty and totally unsuitable for the intended purpose because of getting wet
observed extraordinary diligence.
by the fresh water.
• From the above facts the CA concluded that: o The heavy seas and rains
Their claim was effectively belied by PAGASA. The ship was not seaworthy.
were not caso fortuito, but normal occurrences that an ocean-going vessel,
particularly in the month of September which, in our area, is a month of rains
and heavy seas would encounter as a matter of routine. o These are
I. Summary
conditions that ocean-going vessels would encounter and provide for, in the
ordinary course of a voyage. o That rain water (not sea water) found its way Caltex entered into a contract of affreightment with the petitioner, Delsan
into the holds of the Jupri Venture is a clear indication that care and foresight Transport Lines, Inc., for a period of one year whereby the said common
did not attend the closing of the ship's hatches so that rain water would not carrier agreed to transport Caltex’s industrial fuel oil from the Batangas-
find its way into the cargo holds of the ship. o Under Article 1733 of the Civil Bataan Refinery to different parts of the country. Under the contract,
Code, common carriers are bound to observe "extraordinary vigilance over petitioner took on board its vessel, MT Maysun 2,277.314 kiloliters of
goods . . . .according to all circumstances of each case. o Also under industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in
Article 1735, it provides that, “In all cases other than those mentioned in Zamboanga City. The shipment was insured with the private respondent,
Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, American Home Assurance Corporation. Then MT Maysum set sail from
destroyed or deteriorated, common carriers are presumed to have been Batangas for Zamboanga City. Unfortunately, the vessel sank in the early
at fault or to have acted negligently, unless they psrove that they morning of August 16, 1986 near Panay Gulf in the Visayas taking with it
observed extraordinary diligence as required in article 1733.” the entire cargo of fuel oil. Subsequently, American Home paid Caltex the
o Since the carrier has failed to establish any caso fortuito, the sum of P5,096,635.67 representing the insured value of the lost cargo.
presumption by law of fault or negligence on the part of the carrier Exercising its right of subrogation under Article 2207 of the New Civil Code, it
applies. Here, Eastern Shipping failed to give evidence that it observed demanded of the petitioner the same amount it paid to Caltex. The RTC
extraordinary diligence. dismissed the case on the basis of force majeure. The CA reversed the
The SC adopted the CA conclusion and stated that the contention that the said decision.
cargo was in apparent good condition when it was delivered by the vessel to
the arrastre operator by the clean tally sheets has been overturned and Is Delsan Transport liable? YES
traversed. The evidence is clear to the effect that the damage to the cargo
was suffered while aboard petitioner's vessel. Disposition Petition is From the nature of their business and for reasons of public policy, common
DISMISSED, with costs against petitioner. carriers are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of passengers transported by them, according to all subrogation under Article 2207 of the New Civil Code, the private respondent
the circumstance of each case. In the event of loss, destruction or demanded of the petitioner the same amount it paid to Caltex.
deterioration of the insured goods, common carriers shall be responsible
unless the same is brought about, among others, by flood, storm, Due to its failure to collect from the petitioner despite prior demand, private
earthquake, lightning or other natural disaster or calamity. In all other respondent filed a complaint with the RTC, for collection of a sum of money,
cases, if the goods are lost, destroyed or deteriorated, common carriers which was dismissed. The trial court found that the vessel, MT Maysum,
are presumed to have been at fault or to have acted negligently, unless was seaworthy to undertake the voyage as determined by the Philippine
they prove that they observed extraordinary diligence. Coast Guard per Survey Certificate Report upon inspection during its
annual dry-docking and that the incident was caused by unexpected
In this case, the tale of strong winds and big waves by the said officers of the inclement weather condition or force majeure, thus exempting the
petitioner however, was effectively rebutted and belied by the weather common carrier from liability for the loss of its cargo.
report from PAGASA showing that from 2:00 o’clock to 8:00 o’clock in the
morning on August 16, 1986, the wind speed remained at 10 to twenty 20 The decision of the trial court, however, was reversed, on appeal, by the CA.
knots per hour while the height of the waves ranged from .7 to 2 meters in The appellate court gave credence to the weather report issued by PAGASA
the vicinity of Cuyo East Pass and Panay Gulf where the subject vessel sank. which showed that from 2:00 o’clock to 8:oo o’clock in the morning on
Thus, as the appellate court correctly ruled, petitioner’s vessel, MT Maysun, August 16, 1986, the wind speed remained at 10 to 20 knots per hour
sank with its entire cargo for the reason that it was not seaworthy. There while the waves measured from .7 to 2 meters in height only in the
was no squall or bad weather or extremely poor sea condition in the vicinity of the Panay Gulf where the subject vessel sank, in contrast to herein
vicinity when the said vessel sank. petitioner’s allegation that the waves were 20 feet high. In the absence of any
explanation as to what may have caused the sinking of the vessel coupled
II. Facts of the case with the finding that the same was improperly manned, the appellate court
ruled that the petitioner is liable on its obligation as common carrier to
Caltex entered into a contract of affreightment with the petitioner, herein private respondent insurance company as subrogate of Caltex.
Delsan Transport Lines, Inc., for a period of one year whereby the said
common carrier agreed to transport Caltex’s industrial fuel oil from the III. Issue/s
Batangas-Bataan Refinery to different parts of the country. Under the
contract, petitioner took on board its vessel, MT Maysun 2,277.314 kiloliters Whether or not the payment made by the private respondent to Caltex
of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in for the insured value of the lost cargo amounted to an admission that
Zamboanga City. The shipment was insured with the private respondent, the vessel was seaworthy, thus precluding any action for recovery
American Home Assurance Corporation. against the petitioner? NO

On August 14, 1986, MT Maysum set sail from Batangas for Zamboanga Is Delsan Transport liable? YES
City. Unfortunately, the vessel sank in the early morning of August 16, 1986
near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil. 3. Whether or not the non-presentation of the marine insurance policy bars
Subsequently, private respondent paid Caltex the sum of P5,096,635.67 the complaint for recovery of sum of money for lack of cause of action? No
representing the insured value of the lost cargo. Exercising its right of
IV. Held
 vessel sank. Thus, as the appellate court correctly ruled, petitioner’s vessel,
1. The fact of payment grants the private respondent subrogatory right which MT Maysun, sank with its entire cargo for the reason that it was not
enables it to exercise legal remedies that would otherwise be available to seaworthy. There was no squall or bad weather or extremely poor sea
Caltex as owner of the lost cargo against the petitioner common carrier. The condition in the vicinity when the said vessel sank.
right of subrogation has its roots in equity. It is designed to promote and to
accomplish justice and is the mode which equity adopts to compel the 3. It is our view and so hold that the presentation in evidence of the marine
ultimate payment of a debt by one who in justice and good conscience ought insurance policy is not indispensable in this case before the insurer may
to pay. Consequently, the payment made by the private respondent to Caltex recover from the common carrier the insured value of the lost cargo in the
operates as an equitable assignment to the former of all the remedies which exercise of its subrogatory right. The subrogation receipt, by itself, is
the latter may have against the petitioner. sufficient to establish not only the relationship of herein private respondent
as insurer and Caltex, as the assured shipper of the lost cargo of industrial
2. From the nature of their business and for reasons of public policy, fuel oil, but also the amount paid to settle the insurance claim. The right of
common carriers are bound to observe extraordinary diligence in the subrogation accrues simply upon payment by the insurance company of the
vigilance over the goods and for the safety of passengers transported by insurance claim
them, according to all the circumstances of each case. In the event of loss,
destruction or deterioration of the insured goods, common carriers shall be V. Dispositive Portion
responsible unless the same is brought about, among others, by flood, storm,
earthquake, lightning or other natural disaster or calamity. In all other cases, WHEREFORE, the instant petition is DENIED. The Decision dated June 17,
if the goods are lost, destroyed or deteriorated, common carriers are 1996 of the Court of Appeals in CA-G.R. CV No. 39836 is AFFIRMED. Costs
presumed to have been at fault or to have acted negligently , unless they against the petitioner. SO ORDERED.
prove that they observed extraordinary diligence.
eyPhil Charter v Chemoil
In order to escape liability for the loss of its cargo of industrial fuel oil
belonging to Caltex, petitioner attributes the sinking of MT Maysun to Two crates. Crate 1 broke because of the defect in the packaging.
fortuitous event or force majeure. From the testimonies of Jaime Jarabe and Arrastre liable? No. The character of the goods or defects in the
Francisco Berina, captain and chief mate, respectively of the ill-fated vessel, it packing or in the containers; To exculpate itself from liability for
appears that a sudden and unexpected change of weather condition the loss/damage to the cargo under any of the causes, the common
occurred in the early morning of August 16, 1986; that at around 3:15 o’clock carrier is burdened to prove any of the aforecited causes claimed
in the morning a squall carrying strong winds with an approximate velocity of by it by a preponderance of evidence. If the carrier succeeds, the
30 knots per hour and big waves averaging 18 to 20 feet high, repeatedly burden of evidence is shifted to the shipper to prove that the carrier is
buffeted MT Maysun causing it to tilt, take in water and eventually sink with negligent.
its cargo. This tale of strong winds and big waves by the said officers of -
the petitioner however, was effectively rebutted and belied by the
weather report from PAGASA showing that from 2:00 o’clock to 8:00 I. Recit-ready summary
o’clock in the morning on August 16, 1986, the wind speed remained at 10 to
twenty 20 knots per hour while the height of the waves ranged from .7 to 2 J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four units of
meters in the vicinity of Cuyo East Pass and Panay Gulf where the subject parts and accessories, in the port of Pusan, Korea, on board the vessel MN
"National Honor," represented in the Philippines by its agent, National 1. Flood, storm, earthquake, lightning or other natural disaster or
Shipping Corporation of the Philippines (NSCP). The shipment was for calamity;
delivery to ultimate consignee Blue Mono International Company, 2. Act of the public enemy in war, whether international or civil;
Incorporated (BMICI), in Binondo, Manila. The shipment was contained in 3. Act or omission of the shipper or owner of the goods;
two wooden crates, namely, Crate No. 1 and Crate No. 2, complete and in 4. The character of the goods or defects in the packing or in the
good order condition. containers;
5. Order or act of competent public authority
The M/V "National Honor" arrived at the Manila International Container
Terminal (MICT). The ICTSI, the arrestre operator, was furnished with a copy To exculpate itself from liability for the loss/damage to the cargo under
of the bill of lading, it knew the contents of the crate. The following day, the any of the causes, the common carrier is burdened to prove any of the
vessel started discharging its cargoes using its winch crane. NSCP and aforecited causes claimed by it by a preponderance of evidence. If the
ICTSI inspected the hatches, checked the cargo and found it in apparent carrier succeeds, the burden of evidence is shifted to the shipper to prove
good condition. ICTSI’s stevedore placed 2 sling cables on each end of that the carrier is negligent.
Crate No. 1. No sling cable was fastened on the mid-portion of the crate.
This was a normal procedure. The petitioner failed to adduce any evidence to counter that of
respondent ICTSI. The petitioner failed to rebut the testimony of Dauz, that
As the crate was being hoisted from the vessel’s hatch, the mid-portion the crates were sealed and that the contents thereof could not be seen from
of the wooden flooring suddenly snapped in the air, about 5ft high from the outside
the vessel’s twin deck, sending all its contents crashing down hard,
resulting in extensive damage to the shipment. Therefore, the respondents are not liable because the damage was due to
weakness of the materials used in the fabrication of the crate.
The ICTSI adduced in evidence that the damage to the cargo could be
attributed to insufficient packing and unbalanced weight distribution of II. Facts of the case
the cargo inside the crate as evidenced by the types and shapes of items J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four units of parts
found. The lower court held that the loss of the shipment contained in Crate and accessories, in the port of Pusan, Korea, on board the vessel MN
No. 1 was due to the internal defect and weakness of the materials used in "National Honor," represented in the Philippines by its agent, National
the fabrication of the crates. The middle wooden batten had a hole (bukong- Shipping Corporation of the Philippines (NSCP). The shipment was for
bukong). delivery to the ultimate consignee Blue Mono International Company,
Incorporated (BMICI), Binondo, Manila. The shipment was contained in two
The issue in this case is whether the respondents (Unknown Owner of the wooden crates, namely, Crate No. 1 and Crate No. 2, complete and in good
Vessel M/V NH, NSCP, and ICTSI) are liable for the damage sustained by order condition.
the shipment – NO Crate No. 1 measured 24 cubic meters and weighed 3,620 kgs. It contained
the following articles:
The SC agrees with the findings of the lower court. - one (1) unit Lathe Machine complete with parts and accessories;
- one (1) unit Surface Grinder complete with parts and accessories;
Under Article 1734 of the NCC, the presumption of negligence does not and
apply to any of the following causes: - one (1) unit Milling Machine complete with parts and accessories.
On the flooring of the wooden crates were three wooden battens placed side BMICI subsequently filed separate claims against the NSCP, the ICTSI,
by side to support the weight of the cargo. and its insurer, the PCIC, for US$61,500.00. When the other companies
denied liability, PCIC paid the claim and was issued a Subrogation Receipt
Crate No. 2, on the other hand, measured 10 cubic meters and weighed for P1,740,634.50.
2,060 kgs. The Lathe Machine was stuffed in the crate. At the trial, Anthony Abarquez, the safety inspector of ICTSI, testified that the
wooden battens placed on the wooden flooring of the crate was of good
The M/V "National Honor" arrived at the Manila International Container material but was not strong enough to support the weight of the
Terminal (MICT) The International Container Terminal Services, Incorporated machines inside the crate. He averred that most stevedores did not know
(ICTSI) was furnished with a copy of the crate cargo list and bill of lading, and how to read and write; hence, he placed the sling cables only on those
it knew the contents of the crate. The following day, the vessel started portions of the crate where the arrow signs were placed, as in the case of
discharging its cargoes using its winch crane. The crane was operated by fragile cargo. He said that unless otherwise indicated by arrow signs, the
Olegario Balsa, a winchman from the ICTSI, the exclusive arrastre operator of ICTSI used only two cable slings on each side of the crate and would not
MICT. place a sling cable in the mid- section. He declared that the crate fell from
the cranes because the wooden batten in the mid-portion was broken as it
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew was being lifted. He concluded that the loss/damage was caused by the
and the surveyor of the ICTSI, conducted an inspection of the cargo. They failure of the shipper or its packer to place wooden battens of strong
inspected the hatches, checked the cargo and found it in apparent good materials under the flooring of the crate, and to place a sign in its mid-
condition. term section where the sling cables would be placed.

Claudio Cansino, the stevedore of the ICTSI, placed two sling cables on each The ICTSI adduced in evidence the report of the R.J. Del Pan & Co., Inc. that
end of Crate No. 1. No sling cable was fastened on the mid-portion of the the damage to the cargo could be attributed to insufficient packing and
crate. In Dauz's experience, this was a normal procedure. As the crate was unbalanced weight distribution of the cargo inside the crate as
being hoisted from the vessel's hatch, the mid-portion of the wooden evidenced by the types and shapes of items found.
flooring suddenly snapped in the air, about five feet high from the
vessel's twin deck, sending all its contents crashing down hard, resulting The trial court rendered judgment for PCIC, the trial court held that the
in extensive damage to the shipment. loss of the shipment contained in Crate No. 1 was due to the internal defect
and weakness of the materials used in the fabrication of the crates. The
BMICI's customs broker, JRM Incorporated, took delivery of the cargo in middle wooden batten had a hole (bukong-bukong). The trial court rejected
such damaged condition. Upon receipt of the damaged shipment, BMICI the certification of the shipper, stating that the shipment was properly
found that the same could no longer be used for the intended purpose. The packed and secured, as mere hearsay and devoid of any evidentiary
Mariners' Adjustment Corporation hired by PCIC conducted a survey and weight, the affiant not having testified.
declared that the packing of the shipment was considered insufficient. It
ruled out the possibility of taxes due to insufficiency of packing. It opined CA affirmed the RTC’s ruling. Hence, this petition.
that three to four pieces of cable or wire rope slings, held in all equal
setting, never by-passing the center of the crate, should have been used, III. Issue/s
considering that the crate contained heavy machinery.
Whether or not the respondents (Unknown Owner of the Vessel M/V NH, were sealed and that the contents thereof could not be seen from the
NSCP, and ICTSI) are liable for the damage sustained by the shipment – outside. While it is true that the crate contained machineries and spare parts,
NO it cannot thereby be concluded that the respondents knew or should have
known that the middle wooden batten had a hole, or that it was not strong
IV. Ratio/Legal Basis enough to bear the weight of the shipment.
Under Article 1734 of the New Civil Code, the presumption of negligence There is no showing in the Bill of Lading that the shipment was in good order
does not apply to any of the following causes: or condition when the carrier received the cargo, or that the three wooden
1. Flood, storm, earthquake, lightning or other natural disaster or calamity; battens under the flooring of the cargo were not defective or insufficient or
2. Act of the public enemy in war, whether international or civil; inadequate.
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the On the other hand, under Bill of Lading No. NSGPBSML512565 issued by the
containers; respondent NSCP and accepted by the petitioner, the latter represented and
5. Order or act of competent public authority. warranted that the goods were properly packed and disclosed in writing the
"condition, nature, quality or characteristic that may cause damage, injury or
It bears stressing that the enumeration in Article 1734 of the New Civil Code detriment to the goods." Absent any signs on the shipment requiring the
which exempts the common carrier for the loss or damage to the cargo is a placement of a sling cable in the mid-portion of the crate, the respondent
closed list.To exculpate itself from liability for the loss/damage to the cargo ICTSI was not obliged to do so.
under any of the causes, the common carrier is burdened to prove any of
the aforecited causes claimed by it by a preponderance of evidence. If The statement in the Bill of Lading, that the shipment was in apparent good
the carrier succeeds, the burden of evidence is shifted to the shipper to condition, is sufficient to sustain a finding of absence of defects in the
prove that the carrier is negligent. merchandise. Case law has it that such a statement will create a prima facie
presumption only as to the external condition and not to that not open to
"Defect" is the want or absence of something necessary for inspection.
completeness or perfection; a lack or absence of something essential to
completeness; a deficiency in something essential to the proper use for V. Disposition
the purpose for which a thing is to be used.
DENIED for lack of merit.
On the other hand, inferior means of poor quality, mediocre, or second
rate. A thing may be of inferior quality but not necessarily defective. In other Philamgen v PKS Shipping
words, "defectiveness" is not synonymous with "inferiority."

- PKS had a limited clientele. Is it a common carrier? Yes. Is it liable for

In the present case, the trial court declared that based on the record, the loss the loss of the cement? No. It exercised the proper diligence
of the shipment was caused by the negligence of the petitioner as the demanded of a common carrier.
shipper. The SC agrees with the trial and appellate courts.
I. Recit-ready summary
The petitioner failed to adduce any evidence to counter that of respondent
ICTSI. The petitioner failed to rebut the testimony of Dauz, that the crates
Davao Union Marketing Corporation (DUMC) contracted the services
of respondent PKS shipping company (PKS) to transport its 75,000 Hence, the Court found no error in the judgment made by the appellate
bags of cement. DUMC insured the full amount of the goods with the court in absolving PKS from liability for the loss of the DUMC cargo.
petitioner insurance company (Philamgen). Ironically, the barge sank
bringing down the entire cargo of 75,000 bags of cement. DUMC filed a II. Facts of the case
formal claim for the entire amount of insurance, to which Philamgen
promptly paid. Philamgen then sought a reimbursement of the amount Davao Union Marketing Corporation (DUMC) contracted the services of
it paid to DUMC but the PKS refused to pay, which prompted Philamgen respondent PKS Shipping Company (PKS Shipping) for the shipment to
to file a suit against PKS. The trial court, finding the cause of the loss to be Tacloban City of 75,000 bags of cement worth P3.375m. DUMC insured the
through a fortuitous event, in which case the ship owner is not liable goods for its full value with Philippine General Insurance Co. (Philamgen). PKS
dismissed the complaint filed. Philamgen interposed an appeal to the Court Shipping loaded the goods with their Limar 1 vessel, and while Limar 1 was
of Appeals which affirmed in toto the decision of the trial court. CA also being towed by PKS Shipping’s tugboat MT Iron Eagle (no mention why) the
held that PKS is not a common carrier since the carrying of goods for entire barge sank along with the 75,000 bags of cement.
others was not generally held out as a business but as a casual
occupation. DUMC filed a formal claim with Philamgen for the full amount of the
insurance. Philamgen promptly made payment; it then sought
In this appeal before the Supreme Court, Philamgen contended that the reimbursement from PKS Shipping of the sum paid to DUMC but the
appellate court committed patent error in ruling that PKS is not a shipping company refused to pay, prompting Philamgen to file suit
common carrier and it is not liable for the loss of the subject cargo. against PKS Shipping with the Makati RTC.

According to the Supreme Court, the issue of whether a carrier is private or RTC: Complaint dismissed because it’s a fortuitous event IN WHICH CASE
common carrier on the basis of facts found by the trial court or the THE SHIP OWNER IS NOT LIABLE.
appellate court can be a valid and reviewable question of law. Contrary to
the conclusion made by the appellate court, its factual findings indicated CA: Affirmed RTC decision, held PKS is not a common carrier and the
that PKS engaged itself in the business of carrying goods for others, incident was a fortuitous event. CA held that PKS is not a common carrier
although for a limited clientele, undertaking to carry such goods for a since the carrying of goods for others was not generally held out as a
fee. Hence, the Court found PKS to be a common carrier. business but as a casual occupation.

However, the Court also found that PKS exercised the proper diligence Philamgen appeal to SC: In the instant appeal, Philamgen contends that the
demanded of a common carrier. There was no way by which the barge’s appellate court has committed a patent error in ruling that PKS Shipping is
or the tugboat’s crew could have prevented the sinking of Limar I. The not a common carrier and that it is not liable for the loss of the subject
vessel was suddenly tossed by waves of extraordinary height of six (6) to cargo.
eight (8) feet and buffeted by strong winds of 1.5 knots resulting in the
entry of water into the barge’s hatches. The official Certificate of Inspection III. Issue/s
of the barge issued by the Philippine Coastguard and the Coastwise Load
Line Certificate would attest to the seaworthiness of Limar I and should WN PKS is a common carrier? (YES)
strengthen the factual findings of the appellate court.
WN PKS exercised the proper diligence required for a common carrier? bareboat or demise, where the charterer obtains the use and service of all or
(YES) some part of a ship for a period of time or a voyage or voyages and gets the
control of the vessel and its crew. Contrary to the conclusion made by the
IV. Ratio/Legal Basis appellate court, its factual findings indicate that PKS Shipping has
engaged itself in the business of carrying goods for others, although for
PKS is a common carrier. First the court discussed the definition of a a limited clientele, undertaking to carry such goods for a fee. The
Common Carrier as found in Article 1732 and Section 13 of the Public Service regularity of its activities in this area indicates more than just a casual
Act( y’all should know this na). The court then applied the ruling in De activity on its part. Neither can the concept of a common carrier change
Guzman v. CA which held that: merely because individual contracts are executed or entered into with
The above article makes no distinction between one patrons of the carrier. Such restrictive interpretation would make it easy for a
whose  principal  business activity is the carrying of persons or common carrier to escape liability by the simple expedient of entering into
goods or both, and one who does such carrying only as those distinct agreements with clients.
an ancillary activity (in local idiom, as 'a sideline'). Article 1732 also
carefully avoids making any distinction between a person or PKS Shipping Exercised proper diligence.
enterprise offering transportation service on a regular or scheduled The appellate court ruled, gathered from the testimonies and sworn marine
basis  and 'one offering such service on an occasional, episodic or protests of the respective vessel masters of Limar I  and MT Iron Eagle, that
unscheduled basis. Neither does Article 1732 distinguish there was no way by which the barge's or the tugboat's crew could have
between a carrier offering its services to the 'general public,' i.e., prevented the sinking of Limar I. The vessel was suddenly tossed by waves of
the general community or population, and one who offers extraordinary height of six (6) to eight (8) feet and buffeted by strong winds
services or solicits business only from a  narrow segment  of the of 1.5 knots resulting in the entry of water into the barge's hatches. The
general population. We think that Article 1732 deliberately refrained official Certificate of Inspection of the barge issued by the Philippine
from making such distinctions. Coastguard and the Coastwise Load Line Certificate would attest to the
seaworthiness of Limar I  and should strengthen the factual findings of
"So understood, the concept of 'common carrier' under Article 1732 the appellate court.
may be seen to coincide neatly with the notion of 'public service,'
under the Public Service Act (Commonwealth Act No. 1416, as Findings of fact of the Court of Appeals generally conclude this Court; none
amended) which at least partially supplements the law on common of the recognized exceptions from the rule — (1) when the factual findings of
carriers set forth in the Civil Code." (De Guzman v. CA) the Court of Appeals and the trial court are contradictory; (2) when the
conclusion is a finding grounded entirely on speculation, surmises, or
Much of the distinction between a "common or public carrier" and a conjectures; (3) when the inference made by the Court of Appeals from its
"private or special carrier" lies in the character of the business, such that findings of fact is manifestly mistaken, absurd, or impossible; (4) when there
if the undertaking is an isolated transaction, not a part of the business is a grave abuse of discretion in the appreciation of facts; (5) when the
or occupation, and the carrier does not hold itself out to carry the goods appellate court, in making its findings, went beyond the issues of the case
for the general public or to a limited clientele, although involving the and such findings are contrary to the admissions of both appellant and
carriage of goods for a fee, the person or corporation providing such appellee; (6) when the judgment of the Court of Appeals is premised on a
service could very well be just a private carrier. A typical case is that of a misapprehension of facts; (7) when the Court of Appeals failed to notice
charter party which includes both the vessel and its crew, such as in a certain relevant facts which, if properly considered, would justify a different
conclusion; (8) when the findings of fact are themselves conflicting; (9) when disposition of the dead body.
the findings of fact are conclusions without citation of the specific evidence Oct. 26 150 Philippine Vice Consul in Chicago sealed the shipping
on which they are based; and (10) when the findings of fact of the Court of 0 case containing the casket that contained Saludo’s
Appeals are premised on the absence of evidence but such findings are remains.
contradicted by the evidence on record — would appear to be clearly extant Oct. 26 Pomierski brought the remains to Continental Mortuary
in this instance.  Air Service at the airport (Chicago).

V. Disposition CMAS made the necessary arrangements (flights,

PETITION DENIED. transfers, etc.)

Saludo v CA PAL Airway Bill 079-01180454 Ordinary was issued

wherein the requested routing was TWA 131 (Chicago to
Body got transported in the wrong place. Carrier liable? No. rt. 1736 of the San Francisco), PAL 107 (San Francisco to Manila), and
Civil Code provides that the extraordinary responsibility of the common PAL 149 (Manila to Cebu).
carrier begins from the time the goods are delivered to the carrier. It is Oct. 27 At the Chicago airport
only when such fact of delivery has been unequivocally established can
the liability for loss, destruction, or deterioration of goods in the TWA 603 (Chicago to Mexico City) – This is the wrong
custody of the carrier be invoked. flight for Crispina Saludo’s remains.

PAL only took possession and control of Crispina Saludo’s remains on Oct. TWA 131 (Chicago to San Francisco) – This is the correct
28. Any switching prior thereto was not caused by them and subsequent flight for Crispina Saludo’s remains. However, another
events caused thereby, private respondents cannot be held liable. dead person’s body is in here.
140 G. Marcial of PAL signed the Air Cargo Transfer Manifest
A carrier has no obligation to inquire into the correctness or sufficiency 0 of TWA.
of such information. There must exist proof that would justify cause for
apprehension that the baggage is dangerous to warrant an exhaustive This act indicated acknowledgment by PAL of transfer
inspection or refusal to accept carriage of the same. from TWA the erroneous cargo.
180 CMAS withdrawn the erroneous cargo from PAL 107 due
5 to a switching in Chicago.
I. Facts of the case Oct. 28 The remains of Crispina Saludo arrived in San Francisco
from Mexico on board American Airlines.
TIMETABLE Oct. 28 194 PAL received the correct cargo, per American Airlines
Date Tim 5 Interline Freight Transfer Manifest No. AA204312.
(1976) e Oct. 30 Crispina Saludo’s body arrived in Manila. (It arrived late.
Oct. 23 Crispina Saludo died in Chicago, Illinois. The expected date was Oct. 29.)
Oct. 25 Pomierski and Son Funeral Home (Chicago) had the TWA = Trans World Airlines
remains embalmed and secured a permit for the PAL = Philippine Airlines
 made for the San Francisco-Manila flight for Oct. 27. It was not until Oct. 28
Petitioners stated that they were holding TWA and PAL liable for the delay in that PAL received the body at San Francisco as evidenced by the manifest.
delivery.
Art. 1736 of the Civil Code provides that the extraordinary responsibility of
II. Issue/s the common carrier begins from the time the goods are delivered to the
carrier. It is only when such fact of delivery has been unequivocally
Whose fault was it? (CMAS) established can the liability for loss, destruction, or deterioration of
Was there contractual breach on the part of TWA and PAL? NO goods in the custody of the carrier be invoked.

III. Ratio/Legal Basis PAL only took possession and control of Crispina Saludo’s remains on Oct.
28. Any switching prior thereto was not caused by them and subsequent
CMAS’ fault events caused thereby, private respondents cannot be held liable.

PETITIONERS. Petitioners alleged that TWA and PAL received the remains of PETITIONERS. TWA’s statement that it had relied on the information
petitioners’ mother as evidenced by the issuance of PAL Air Waybill 079- furnished by the shipper is a lame excuse and that its failure to prove that its
01180454 by Air Care International as carrier’s agent. Thus, TWA and PAL are personnel verified and identified the contents before loading the same is
charged with the responsibility to exercise diligence which they failed to negligence on the part of TWA.
perform.
COURT. A common carrier is entitled to fair representation of the nature and
COURT. A bill of lading is a written acknowledgement of the receipt of the value of the goods to be carried, with the concomitant right to rely thereon,
goods and an agreement to transport and deliver them at a specified place and further noting at this juncture that a carrier has no obligation to
to a person named on his order. It is a receipt as to the quantity and inquire into the correctness or sufficiency of such information. There
description of the goods shipped and a contract to transport the goods to must exist proof that would justify cause for apprehension that the
the consignee or other person therein designated, on the terms specified in baggage is dangerous to warrant an exhaustive inspection or refusal to
such instrument. accept carriage of the same.

Logically, since a bill of lading is an acknowledgement, the delivery of TWA and PAL had no reason to doubt the shipper’s representations. The
the goods normally precedes the bill. However, there is no law to prevent airway bill expressly provided that “carrier certifies goods received below
the inverse order of events. Receipt, while not essential to a complete were received for carriage,” and such cargo contained the “casketed human
delivery of goods, when issued, is competent and prima facie, but not remains of Crispina Saludo.”
conclusive, evidence of delivery to the carrier. The recital of goods
received is not conclusive. It may be contradicted by parol or other evidence. PETITIONERS. Whoever brought the cargo to the airport or loaded it into the
plane did so as agent of respondents.
On Oct. 26, 1976, the cargo containing the remains of Crispina Saludo was
booked for PAL FN PR-107 leaving San Francisco for Manila on Oct. 27, 1976. COURT. To hold that CMAS acted as TWAS and PAL’s agent is inaccurate.
PAL Airway Bill No. 079-01180454 was issued, not as evidence of receipt of CMAS was hired to handle the shipping arrangements. CMAS may be
delivery of the cargo on Oct. 26, but merely as a confirmation of the booking classified as a forwarder which, by accepted commercial practice, is regarded
as agent of shipper, Pomierski & Son Funeral Home, not the carrier. It merely IV. Disposition
contracts for the transportation of goods by carriers, and has no interest in
the freight but receives compensation from the shipper as his agent. WHEREFORE, with the modification that an award of P40,000.00 as and
by way of nominal damages is hereby granted in favor of petitioners to be
THE FACTS OF THE CASE POINT TO CMAS AS THE CULPRIT. paid by respondent Trans World Airlines, the appealed decision is AFFIRMED
in all other respects.
Petitioners had doubts as to CMAS’ possibility of liability as seen in
petitioners’ letter demanding explanation from CMAS. SO ORDERED.

The Court did not rule on the possible liability of CMAS as it was not an issue Melencio-Herrera, Paras, Padilla and Nocon, JJ., concur.
presented. V. Notes

No contractual breach Lorenzo Shipping v BJ Marthel

- There is no delay constituting a breach of contract when the time of
PETITIONER. By agreeing to transport the remains on TWA 131, TWA made delivery is not stipulated and time is not of the essence. In such
itself a party to the contract of carriage and was bound by the terms of the cases, the delivery must be made within reasonable time.
airway bill. By shipping the remains earlier than scheduled, it violated the
agreement in the airway bill. I. Recit-ready summary
Lorenzo Shipping Corporation purchased cylinder liners worth from BJ
There is also no evidence as to who placed the body on TWA 603, that CMAS Marthel International, Inc. covered by two purchase orders on different dates.
actually put the cargo on the flight, that the bodies were transported by the Prior to this, a QUOTATION was sent by Marthel to Lorenzo indicating that
same airline, or that the bodies were received by CMAS. delivery will be two months after receipt of the firm order. The
PURCHASE ORDER did not indicate the dates of delivery. Lorenzo issued
COURT. TWA faithfully complied with its obligation under the airway bill. The in favor of Marthel ten postdated checks which were dishonored by the bank
carrier did not undertake to carry the cargo aboard any specified aircraft. when it was being deposited. The items were paid, except for 2 cylinder
There was no fixed time for completion of carriage stipulated on. The Court liners. A statement of account was sent to Lorenzo demanding the payment
found no ambiguity in the contract when TWA stated these terms. of the 2 cylinder liners. Lorenzo sent a letter offering to pay only P150,000 for
the cylinder liners. It claimed that as the cylinder liners were delivered late
A common carrier undertaking to transport property has the implicit duty to and due to the scrapping of the M/V Dadiangas Express, petitioner would
carry and deliver it within a reasonable time, absent any particular stipulation have to sell the cylinder liners in Singapore and pay the balance from the
regarding time of delivery, and to guard against delay. In case of any proceeds of said sale. It claimed that Marthel should abide by the term of
unreasonable delay, the carrier shall be liable for damages immediately and delivery appearing on the quotation it submitted to Lorenzo.
proximately resulting from such neglect of duty. The TWA could not have The issue is WON Marthel incurred delay in performing its obligation
contributed to the fault in this case as it was the error with CMAS. The fact under the contract of sale - No.
that TWA transported the remains earlier given the notation “Please return
bag first available flight to SFO.” The formal quotation provided by respondent represented the negotiation
phase of the subject contract of sale between the parties. As of that time, the
parties had not yet reached an agreement as regards the terms and order, the second purchase order did not state the date of the cylinder
conditions of the contract of sale of the cylinder liners. When the time of liner's delivery.
delivery is not fixed or is stated in general and indefinite terms, time is
not of the essence of the contract. In such cases, the delivery must be Subsequently, Marthel deposited the postdated check it received from
made within a reasonable time. While Lorenzo alleges that the cylinder Lorenzo. However, the same was dishonored by the drawee bank due to
liners were to be used for dry dock repair and maintenance of its M/V insufficiency of funds. The parties presented disparate accounts of what
Dadiangas Express and time was of the essence, the record is bereft of any happened to the check which was previously dishonored. Lorenzo claimed
indication that Marthel was aware of such fact. The failure of petitioner to that it replaced said check with a good one, the proceeds of which were
notify respondent of said date is fatal to its claim that time was of the applied to its other obligation to respondent. For its part, Marthel insisted
essence in the subject contracts of sale. that it returned said postdated check to petitioner.

Order was placed: January 1990 Marthel thereafter placed the order for the two cylinder liners with its
Received: April 1990 principal in Japan, Daiei Sangyo Co. Ltd.,by opening a letter of credit under its
own name with the First Interstate Bank of Tokyo.
II. Facts of the case
Lorenzo Shipping Corporation (Lorenzo) is a domestic corporation Pajarillo delivered the two cylinder liners at Lorenzo's warehouse in
engaged in coastwise shipping. It used to own the cargo vessel M/V North Harbor, Manila. The sales invoices evidencing the delivery of the
Dadiangas Express. BJ Marthel International, Inc. (Marthel) is a business entity cylinder liners both contain the notation "subject to verification" under which
engaged in trading, marketing, and selling of various industrial commodities. the signature of Eric Go, petitioner's warehouseman, appeared.
It is also an importer and distributor of different brands of engines and spare
parts. A statement of account was then sent to Lorenzo. While the other items
listed in said statement of account were fully paid, the two cylinder liners
From 1987 up to the institution of this case, Marthel supplied Lorenzo delivered remained unsettled. Consequently, Mr. Alejandro Kanaan, Jr.,
with spare parts for marine engines. In 1989, a quotation was sent by respondent's vice-president, sent a demand letter to petitioner requiring the
Marthel to Lorenzo indicating that delivery will be two months after receipt of latter to pay the value of the cylinder liners subjects of this case.
the firm order. Lorenzo sent a purchase order for one set of cylinder liner
valued at P477,000, to be used for M/V Dadiangas Express. Instead of heeding the demand of respondent for the full payment of
the value of the cylinder liners, petitioner sent a letter offering to pay only
Instead of paying the 25% down payment for the first cylinder liner, P150,000 for the cylinder liners. In said letter, Lorenzo claimed that as the
Lorenzo issued in favor of Marthel ten postdated checks to be drawn against cylinder liners were delivered late and due to the scrapping of the M/V
the former's account with Allied Banking Corporation. The checks were Dadiangas Express, petitioner would have to sell the cylinder liners in
supposed to represent the full payment of the aforementioned cylinder liner. Singapore and pay the balance from the proceeds of said sale.

Subsequently, Loreenzo purchased another unit of cylinder liner. The Shortly thereafter, another demand letter was furnished petitioner by
purchase order stated the term of payment to be "25% upon delivery, respondent's counsel requiring the former to settle its obligation to
balance payable in 5 bi-monthly equal installment[s]." Like the first purchase respondent together with accrued interest and attorney's fees.
 Due to the failure of the parties to settle the matter, Marthel filed an
action for sum of money and damages before the Regional Trial Court (RTC) It is a cardinal rule in interpretation of contracts that if the terms thereof
of Makati City. are clear and leave no doubt as to the intention of the contracting parties,
the literal meaning shall control. However, in order to ascertain the intention
Lorenzo alleged that time was of the essence in the delivery of the of the parties, their contemporaneous and subsequent acts should be
cylinder liners and that the delivery of said items was late as respondent considered. While this Court recognizes the principle that contracts are
committed to deliver said items "within two (2) months after receipt of firm respected as the law between the contracting parties, this principle is
order" from petitioner. tempered by the rule that the intention of the parties is primordial and "once
the intention of the parties has been ascertained, that element is deemed as
The trial court held Marthel bound to the quotation it submitted to an integral part of the contract as though it has been originally expressed in
Lorenzo particularly with respect to the terms of payment and delivery of the unequivocal terms."
cylinder liners. It also declared that respondent had agreed to the
cancellation of the contract of sale when it returned the postdated checks In the present case, we cannot subscribe to the position of petitioner
issued by petitioner. The Court of Appeals brushed aside petitioner's claim that the documents, by themselves, embody the terms of the sale of the
that time was of the essence in the contract of sale between the parties cylinder liners. One can easily glean the significant differences in the terms as
herein considering the fact that a significant period of time had lapsed stated in the formal quotation and first purchase order with regard to the due
between respondent's offer and the issuance by petitioner of its purchase date of the down payment for the first cylinder liner and the date of its
orders. delivery as well as the second purchase order with respect to the date of
delivery of the second cylinder liner. While the quotation provided by
III. Issue/s respondent evidently stated that the cylinder liners were supposed to be
1. WON Marthel incurred delay in performing its obligation under the delivered within two months from receipt of the firm order of petitioner and
contract of sale? -- NO that the 25% down payment was due upon the cylinder liners' delivery, the
purchase orders prepared by petitioner clearly omitted these significant
IV. Ratio/Legal Basis items. The petitioner's first purchase order made no mention at all of the due
In determining whether time is of the essence in a contract, the ultimate dates of delivery of the first cylinder liner and of the payment of 25% down
criterion is the actual or apparent intention of the parties and before time payment. The second purchase order likewise did not indicate the due date
may be so regarded by a court, there must be a sufficient manifestation, of delivery of the second cylinder liner.
either in the contract itself or the surrounding circumstances of that
intention. Petitioner insists that although its purchase orders did not A contract undergoes three distinct stages — preparation or
specify the dates when the cylinder liners were supposed to be negotiation, its perfection, and finally, its consummation. Negotiation begins
delivered, nevertheless, respondent should abide by the term of delivery from the time the prospective contracting parties manifest their interest in
appearing on the quotation it submitted to petitioner. Petitioner the contract and ends at the moment of agreement of the parties. The
theorizes that the quotation embodied the offer from respondent while the perfection or birth of the contract takes place when the parties agree upon
purchase order represented its (petitioner's) acceptance of the proposed the essential elements of the contract. The last stage is the consummation of
terms of the contract of sale. Thus, petitioner is of the view that these two the contract wherein the parties fulfill or perform the terms agreed upon in
documents "cannot be taken separately as if there were two distinct the contract, culminating in the extinguishment thereof."
contracts."
 In the instant case, the formal quotation provided by respondent It must be noted that in the purchase orders issued by Lorenzo, no
represented the negotiation phase of the subject contract of sale specific date of delivery was indicated therein. If time was really of the
between the parties. As of that time, the parties had not yet reached an essence as claimed by it, they should have stated the same in the said
agreement as regards the terms and conditions of the contract of sale of the purchase orders, and not merely relied on the quotation issued by
cylinder liners. Petitioner could very well have ignored the offer or tendered a Marthel considering the lapse of time between the quotation issued by
counter-offer to respondent while the latter could have, under the pertinent the appellant and the purchase orders of the appellee.
provision of the Civil Code, withdrawn or modified the same. The parties were
at liberty to discuss the provisions of the contract of sale prior to its In the instant case, Lorenzo should have provided for an allowance of
perfection.. time and made the purchase order earlier if indeed the said cylinder liner was
necessary for the repair of the vessel scheduled on the first week of January,
Notably, petitioner was the one who caused the preparation of the 1990. In fact, the Lorenzoshould have cancelled the first purchase order when
purchase orders yet it utterly failed to adduce any justification as to why the cylinder liner was not delivered on the date it now says was necessary.
said documents contained terms which are at variance with those stated Instead it issued another purchase order for the second set of cylinder liner.
in the quotation provided by respondent. The only plausible reason for This fact negates its claim that time was indeed of the essence in the
such failure on the part of petitioner is that the parties had, in fact, consummation of the contract of sale between the parties.
renegotiated the proposed terms of the contract of sale. Moreover, as the
obscurity in the terms of the contract between respondent and petitioner was As an aside, let it be underscored that "[e]ven where time is of the
caused by the latter when it omitted the date of delivery of the cylinder liners essence, a breach of the contract in that respect by one of the parties may be
in the purchase orders and varied the term with respect to the due date of waived by the other party's subsequently treating the contract as still in
the down payment, said obscurity must be resolved against it. force." Petitioner's receipt of the cylinder liners when they were delivered to
its warehouse on 20 April 1990 clearly indicates that it considered the
When the time of delivery is not fixed or is stated in general and contract of sale to be still subsisting up to that time.
indefinite terms, time is not of the essence of the contract. In such cases,
the delivery must be made within a reasonable time. The law implies, We, therefore, hold that in the subject contracts, time was not of the essence.
however, that if no time is fixed, delivery shall be made within a reasonable The delivery of the cylinder liners was made within a reasonable period of
time, in the absence of anything to show that an immediate delivery time considering that respondent had to place the order for the cylinder
intended. liners with its principal in Japan and that the latter was, at that time, beset by
heavy volume of work. There having been no failure on the part of the
We also find significant the fact that while petitioner alleges that the respondent to perform its obligation, the power to rescind the contract is
cylinder liners were to be used for dry dock repair and maintenance of its unavailing to the petitioner.
M/V Dadiangas Express between the later part of December 1989 to early
January 1990, the record is bereft of any indication that respondent was
aware of such fact. The failure of petitioner to notify respondent of said date V. Disposition
is fatal to its claim that time was of the essence in the subject contracts of WHEREFORE, premises considered, the instant Petition for Review on
sale. Certiorari is DENIED. The Decision of the Court of Appeals, dated 28
April 2000, and its Resolution, dated 06 October 2000, are hereby
AFFIRMED. No costs.
 Sealoader Shipping Corporation (Sealoader) is a domestic corporation
SO ORDERED. engaged in the business of shipping and hauling cargo from one point to
Sealoader Shipping v Grand Cement Manufacturing another using sea-going inter-island barges/ Grand Cement Manufacturing
Corporation (now Taiheiyo Cement Philippines, Inc.) is a domestic
corporation engaged in the business of manufacturing and selling cement
through its authorized distributors and, for which purposes, it maintains its
I. Recit-ready summary
own private wharf in San Fernando, Cebu, Philippines.

Sealoader Shipping Corporation, who was engaged in the business of

Sealoader executed a Time Charter Party Agreement with Joyce Launch
shipping and hauling cargo, entered into a contract with Joyce Launch, owner
and Tug Co., Inc. (Joyce Launch), a domestic corporation, which owned and
and operator of M/T Viper, where the latter would tow Sealoader’s
operated the motor tugboat M/T Viper. Sealoader chartered the M/T Viper
unpropelled barges. Sealoader also entered into a contract with Grand
in order to tow Sealoader’s unpropelled barges for a minimum period of
Cement, which was engaged in the business of manufacturing and selling
fifteen days from the date of acceptance, renewable on a fifteen-day basis
cement, for the loading of cement clinkers and the delivery thereof to
upon mutual agreement of the parties.
Manila. Sealoader’s Barge arrived at the wharf of Grand Cement, tugged by
M/T Viper. The cargo was not immediately loaded, hence the barge remained
Sealoader entered into a contract with Grand Cement for the loading of
at sea. Due to Typhoon Bising’s heavy rains and waves, the barge of
cement clinkers and the delivery thereof to Manila. Sealoader’s barge, the
Sealoader rammed the wharf of Grand Cement causing significant
D/B Toploader, arrived at the wharf of Grand Cement tugged by the M/T
damage thereto. Grand Cement filed a complaint for damages against
Viper.
Sealoader and Joyce Launch. Sealoader contends that there was contributory
negligence on the part of Grand Cement as they did not inform Sealoader of
The D/B Toploader, however, was not immediately loaded with its
the weather and because of their late loading of cargo. Sealoader asserts that
intended cargo as the employees of Grand Cement were still loading
if the cargo was loaded earlier, the barge would not have suffered under the
another vessel, the Cargo Lift Tres.
storm, eventually ramming on the wharf. The issue in this case is who,
● Typhoon Bising struck the Visayas area. Public storm signal
among the parties in this case, should be liable for the damage sustained by
number 3 was raised over the province of Cebu.
the wharf of Grand Cement. The SC held that Sealoader was negligent in
● The D/B Toploader was, at that time, still docked at the wharf of
its operations. It did not have a radio device in its barge, their crew were lax
Grand Cement.
in their duties and failed to inform themselves of the approaching storm. ● As the winds blew stronger and the waves grew higher, the M/T
Grand Central timely informed the crew of the weather conditions, but the Viper tried to tow the D/B Toploader away from the wharf. The
crew refused to acknowledge the same. The doctrine of last clear chance, efforts of the tugboat were foiled, however, as the towing line
which states that where both parties are negligent but the negligent act of connecting the two vessels snapped.
one is appreciably later than that of the other, or where it is impossible to ● This occurred as the mooring lines securing the D/B Toploader to the
determine whose fault or negligence caused the loss, the one who had the wharf were not cast off.
last clear opportunity to avoid the loss but failed to do so, is chargeable with ● The following day, the employees of Grand Cement discovered the
the loss, does not apply to this case. D/B Toploader situated on top of the wharf, apparently having
rammed the same and causing significant damage thereto.
II. Facts of the case
Grand Cement filed a Complaint for Damages against Sealoader; Romulo ● When the typhoon struck, the employees of Grand Cement allegedly
Diantan, the Captain of the M/T Viper; and Johnny Ponce, the Barge Patron of abandoned the wharf, thus, leaving the crew of the M/T Viper
the D/B Toploader. helpless in preventing the D/B Toploader from ramming the wharf.
● Grand Cement claimed, among others, that when the D/B Toploader ● Joyce Launch likewise faulted Grand Cement’s employees for not
arrived at its wharf on March 31, 1994, the same was not properly warning the crew of the M/T Viper early on to seek refuge from the
secured. typhoon.
● Storm warnings for Typhoon Rising were already circled to the public
through radio and print media. RTC declared that Sealoader was negligent
● Grand Cement stated that after it received the weather updates for ● They did not take any precautionary measure as demanded or
that day, it immediately advised Romulo Diantan and Johnny Ponce required of them in complete disregard of the public storm
to move their respective vessels away from the wharf to a safer signal or warning;
berthing area. ● the master or captain or the responsible crew member of the vessel
● Both men allegedly refused to do so, with Romulo Diantan even was not in the vessel, hence, nobody could make any move or action
abandoning the D/B Toploader in the critical hours in the afternoon. for the safety of the vessel at such time of emergency or catastrophe;
Because of the strong winds of Typhoon Bising, the D/B Toploader ● and the vessel was not equipped with a radio or any navigational
was forced to smash against the wharf of Grand Cement. communication facility, which is a mandatory requirement for all
navigational vessels.
Sealoader filed a motion to dismiss the complaint. ● Grand Cement is entitled to recover damages
● Sealoader insisted that Joyce Launch should have been sued in its
stead, as the latter was the owner and operator of the M/T Viper. The CA affirmed the decision of the RTC.
● Having complete physical control of the M/T Viper, as well as the ● MR: CA acknowledged that like Sealoader, Grand Cement did not
towing, docking, mooring and berthing of the D/B Toploader, take any precaution to avoid the damages wrought by the storm.
Sealoader maintained that Joyce Launch should be held liable for the Grand Cement waited until the last possible moment before
negligent acts of the latter’s employees who were manning the M/T informing Sealoader and Joyce about the impending storm.
Viper. ● Grand Cement also did not exercise due diligence in this case and
that its conduct contributed to the damages that it suffered.
[Dec 14, 1994] Before the RTC could hear the above motion, Grand Cement ● CA reduced the amount of recoverable damages.
filed an Amended Complaint, impleading Joyce Launch as one of the party
defendants. III. Issue/s
● Sealoader instituted a cross-claim against Joyce Launch and Romulo
Diantan. Who should be liable for the damage sustained by the wharf of Grand
● Sealoader pleaded that, should it be adjudged liable to pay the Cement- SEALOADER IS GUILTY OF NEGLIGENCE. The acts of its crew in
damages sought by Grand Cement, Joyce Launch should likewise be not appraising themselves on current weather situations caused the accident.
ordered to reimburse Sealoader any and all amounts that the latter is
ordered to pay. IV. Ratio/Legal Basis

Joyce Launch claimed that the damage sustained by the wharf of Grand Sealoader contends that Grand Cement had the last clear chance to prevent
Cement was not due to the gross negligence of the M/T Viper crew but due the damage to the latter’s wharf.
to the force majeure that was Typhoon Bising.
 ● Had Grand Cement cast off the mooring lines attached to the D/B ● Sealoader cannot merely rely on other vessels for weather
Toploader early on, the barge could have been towed away from the updates and warnings on approaching storms, as what
wharf and the damage thereto could have been avoided. apparently happened in this case. Common sense and reason
● As Grand Cement failed to act accordingly, Sealoader argues that the dictates this.
former was barred from recovering damages. ● To do so would be to gamble with the safety of its own
● Grand Cement counters that the determination as to who among the vessel, putting the lives of its crew under the mercy of the sea,
parties had the last clear chance to avoid an impending harm or as well as running the risk of causing damage to the property
accident calls for a re-examination of the evidence adduced by the o for which it would necessarily be liable
parties. ● Contributory negligence of Grand Cement was not
established in this case
As this Court is not a trier of facts, Grand Cement posits that Sealoader’s ● Grand Cement timely informed the D/B Toploader of the
petition may already be dismissed. impending typhoon.
● Furthermore, Grand Cement asserts that the doctrine of last clear ● The Court finds that the evidence proffered by Sealoader to
chance cannot aid Sealoader since the doctrine presumes that prove the negligence of Grand Cement was marred by
Sealoader’s negligence had ceased and the alleged negligence of contradictions and are, thus, weak at best.
Grand Cement came at a later time.
● Thus, an appreciable time must have intervened, which effectively V. Disposition
severed the negligence of Sealoader. Contrarily, Grand Cement
maintains that the negligence of Sealoader did not cease, while its ● The Petition for Review in G.R. No. 167363 is DENIED DENIED;
own negligence was not proven. ● The Petition for Review in G.R. No. 177466 is GRANTED
● The Amended Decision dated March 3, 2005 of the Court of
The doctrine of last clear chance states that where both parties are Appeals in CA-G.R. CV No. 65083 is REVERSED and SET ASIDE;
negligent but the negligent act of one is appreciably later than that of and
the other, or where it is impossible to determine whose fault or ● The Decision dated November 12, 2004 of the Court of
Appeals in CA-G.R. CV No. 65083 is REINSTATED REINSTATED.
negligence caused the loss, the one who had the last clear opportunity
to avoid the loss but failed to do so, is chargeable with the loss.
(Philippine National Railways v Brunty) Mitsui Lines v CA
● Stated differently, the antecedent negligence of plaintiff does not
preclude him from recovering damages caused by the supervening - Loss or damage under the COGSA S3(6) requires physical loss or
negligence of defendant, who had the last fair chance to prevent damage – loss being a situation wherein there is no delivery of goods
the impending harm by the e diligence at all or the same have gone out of commerce or they have
disappeared. Mitsui Lines is liable under breach of contract under the
The Court finds that Sealoader was guilty of negligence in the conduct of Civil Code though.
its affairs during the incident in question
● The lack of a radio navigational communication facility aboard I. Recit- ready summary
the D/B Toploader was negligent of Sealoader. Mitsui is a foreign corporation represented by its agent, Magsaysay
● There is manifest laxity of the crew in monitoring the weather Agencies. It entered into a contract of carriage with private respondent
● The crew failed to keep a watchful eye not the prevailing Lavine Mfg. Co. to transport goods of the latter from Manila to France.
weather conditions. Petitioner failed in its undertaking to transport the goods in 28 days
from initial loading [arrived 3 months after], hence, the private The goods at some point were not transhipped immediately so the goods
respondent filed a case for the recovery of damages before the RTC. only arrived in Le Havre in November 14 of the same year. The consignee
Petitioner moved for the dismissal of the complaint alleging that private allegedly paid only half the value of the said goods on the ground that
respondent cause of action had prescribed under the Carriage of Goods by they did not arrive in France until the "off season" in that country. The
Sea Act (COGSA), which provides only for a period of 1 year. It was denied by remaining half was allegedly charged to the account of private respondent
the RTC. On petition for certiorari, the Court of Appeals sustained the which in turn demanded payment from petitioner through its agent.
trial court's order.
Hence this petition raising the issue  of  whether or not private Respondent filed a case against the petitioner on April 14, 1992 but
respondent's action is for "loss or damage" to goods shipped, within the Petitioner filed a motion to dismiss alleging that the claim against it had
meaning  of  COGSA.  prescribed under the Carriage of Goods by Sea Act.
Precisely, the question before the trial court is not the particular
scene of "damages" as it refers to the physical loss or damage of a III. Issue/s
shipper's goods as specifically covered by §3(6) of COGSA. Within the Whether or not private respondent's action is for "loss or damage" to goods
context of COGSA, loss" contemplates merely a situation where no shipped, within the meaning of §3(6) of the Carriage of Goods by
delivery at all was made by the shipper  of the goods because the same Sea Act (COGSA)? No.
had perished, gone out of commerce, or disappeared in such a way that
their existence is unknown or they cannot be recovered.  IV. Ratio/Legal Basis
But petitioner's potential liability for the damages it has caused in the The court held no. It was held in Ang  v.  American Steamship Agencies, Inc.,
general sense and, as such, the matter is governed by the Civil Code, the the question was whether an action for the value of goods which had been
Code of Commerce and COGSA, for the breach of its contract of carriage with delivered to a party other than the consignee is for "loss or damage" within
private respondent. the meaning of §3(6) of the COGSA. It was held that there was no loss
Supreme Court concluded by holding that as the suit below is not for because the goods had simply been misdelivered. "Loss" refers to the
"loss or damage" to goods contemplated in §3(6), the deterioration or disappearance of goods.
question of prescription of action is governed not by the COGSA but by Art.
1144 of the Civil Code which provides for a prescriptive period of ten years. The court held that as the suit below is not for "loss or damage" to goods
Hence, the filing has not prescribed. contemplated in §3(6), the question of prescription of action is governed not
by the COGSA but by Art. 1144 of the Civil Code which provides for a
II. Facts of the case prescriptive period of ten years.
Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the
Philippines by its agent, Magsaysay Agencies. It entered into a As defined in the Civil Code and as applied to Section 3(6), paragraph
contract of carriage through Meister Transport, Inc., an international freight 4 of the Carriage of Goods by Sea Act, "loss" contemplates merely a
forwarder, with private respondent Lavine Loungewear Manufacturing situation where no delivery at all was made by the shipper  of the goods
Corporation to transport goods of the latter from Manila to Le Havre, because the same had perished, gone out  of commerce, or disappeared
France. Petitioner undertook to deliver the goods to France 28 days from in such a way that their existence is unknown or they cannot be
initial loading. On July 24, 1991, petitioner's vessel loaded private recovered. 
respondent's container van for carriage at the said port of origin.||| 
Conformably with this concept of what constitutes "loss" or "damage," Petitioner contends:
this Court held in another case  that the deterioration of goods due to delay Although we agree that there are places in the section (Article III) in which the
in their transportation constitutes "loss" or "damage" within the phrase need have no broader meaning than loss or physical damage to the
meaning of 3(6), so that as suit was not brought within one year the action goods, we disagree with the conclusion that it must so be limited wherever it
was barred: is used. We take it that the phrase has a uniform meaning, not merely in
Section 3, but throughout the Act; and there are a number of places in which
Whatever damage or injury is suffered by the goods while in transit would the restricted interpretation suggested would be inappropriate. For example
result in loss or damage to either the shipper or the consignee. As long as it Section 4(2) [Article IV(2) (sic) exempts exempts (sic) the carrier, the ship (sic),
is claimed, therefore, as it is done here, that the losses or damages suffered from liability "loss or damage" (sic) resulting from certain courses beyond
by the shipper or consignee were due to the arrival of the goods in damaged their control. 
or deteriorated condition, the action is still basically one for damage to the
goods, and must be filed within the period of one year from delivery or Indeed, what is in issue in this petition is not the liability of petitioner for its
receipt, under the above-quoted provision of the Carriage of Goods by handling of goods as provided by 3(6) of the COGSA, but its liability under
Sea Act.  its contract of carriage with private respondent as covered by
laws of more general application.
But the Court allowed that —
There would be some merit in appellant's insistence that the damages Precisely, the question before the trial court is not the particular
suffered by him as a result of the delay in the shipment of his cargo are sense of "damages" as it refers to the physical loss or damage of a shipper's
not covered by the prescriptive provision of the Carriage of Goods by goods as specifically covered by §3(6) of COGSA but petitioner's potential
Sea Act above referred to, if such damages were due, not to the liability for the damages it has caused in the general sense and, as such, the
deterioration and decay of the goods while in transit, but to other matter is governed by the Civil Code, the Code of Commerce and COGSA, for
causes independent of the condition of the cargo upon arrival, like a the breach of its contract of carriage with private respondent.
drop in their market value.
V. Disposition
The reason for limiting the definitions as held in Ang: Said one-year WHEREFORE, the decision of the Court of Appeals is AFFIRMED.
period of limitation is designed to meet the exigencies of maritime hazards. SO ORDERED.
In a case where the goods shipped were neither lost nor damaged in transit Regalado, Melo, Puno and Martinez, JJ  .,concur.
but were, on the contrary, delivered in port to someone who claimed to be VI. Notes
entitled thereto, the situation is different, and the special need for the short
period of limitation in cases of loss or damage caused by maritime perils Section 3 provides:
does not obtain. (6) Unless notice of loss or damage and the general nature of such loss or
damage be given in writing to the carrier or his agent at the port of discharge
As applied in this case, there’s no deterioration, disappearance not or at the time of the removal of the goods into the custody of the person
destruction of goods caused by the carrier's breach of contract. Whatever entitled to delivery thereof under the contract of carriage, such removal shall
reduction there may have been in the value of the goods is not due to their be prima facie evidence of the delivery by the carrier of the goods as
deterioration or disappearance because they had been damaged in transit. described in the bill of lading. If the loss or damage is not apparent, the
notice must be given within three days of the delivery.
Said notice of loss or damage may be endorsed upon the receipt for the Whether or not, based on the evidence presented during the trial, Taiyo
goods given by the person taking delivery thereof. The notice in writing need incurred damages, and if so, whether Sulpicio Lines is liable for the
not be given if the state of the goods has at the time of their receipt been the same? YES.
subject of joint survey or inspection.
It cannot be denied that the shipment sustained damage while in the custody
In any event the carrier and the ship shall be discharged from all liability in of Sulpicio Lines. It is not disputed that one of the three (3) crates did fall
respect of loss or damage unless suit is brought within one year after from the cargo hatch to the pier apron while Sulpicio was unloading the
delivery of the goods or the date when the goods should have been cargo from its vessel. The falling of the crate during the unloading is evidence
delivered: Provided, that, if a notice of loss or damage, either apparent or of Sulpicio’s negligence in handling the cargo. As a common carrier, it is
concealed, is not given as provided for in this section, that fact shall not expected to observe extraordinary diligence in the handling of goods
affect or prejudice the right of the shipper to bring suit within one year after placed in its possession for transport. Thus, when the shipment suffered
the delivery of the goods or the date when the goods should have been damages as it was being unloaded, Sulpicio is presumed to have been
delivered. negligent in the handling of the damaged cargo.
In the case of any actual or apprehended loss or damage, the carrier and the
receiver shall give all reasonable facilities to each other for inspecting and Sulpicio miserably failed to adduce any shred of evidence of the
tallying the goods. required extraordinary diligence to overcome the presumption that it
Sulpicio v First Lepanto was negligent in transporting the cargo.

SC upholds the ruling of CA that Sulpicio is liable to pay the amount paid by
- Three wooden crates containing cartons of inductors were
transported from Cebu to Singapore. One of the crates dropped from First Lepanto for the damages sustained by Taiyo. However, First Lepanto had
the cargo hatch to the pier apron. Is carrier liable? Yes, because it already been paid the full amount, thus, it will be tantamount to unjust
failed to show evidence of extraordinary diligence on its part. enrichment for it to again recover damages from Sulpicio.

I. Recit-ready summary II. Facts of the case

Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc.
(shipper) entered into a contract to transport shipment of goods. Delbros (shipper) entered into a contract, evidenced by Bill of Lading issued by the
engaged the services of a vessel owned and operated by Sulpicio Lines, latter in favor of the owner of the goods, to transport a shipment of goods
Inc. (carrier). During the unloading of the shipment, one crate dropped consisting of three (3) wooden crates containing one hundred thirty-six (136)
from the cargo hatch to the pier apron and were no longer usable for cartons of inductors from Cebu City to Singapore.
their intended purpose. Taiyo filed a claim against Sulpicio for the recovery
of the value of the rejected cargo which was refused by the latter. Thereafter, For the carriage of said shipment from Cebu City to Manila, Delbros, Inc.
Taiyo sought payment from First Lepanto-Taisho Insurance Corporation engaged the services of the vessel M/V Philippine Princess, owned and
(insurer) under a marine insurance policy. First Lepanto then filed claims operated by Sulpicio Lines, Inc. (carrier).
for reimbursement from Delbros, Inc. and Sulpicio Lines, Inc. which were
subsequently denied.
During the unloading of the shipment, one crate containing forty-two (42) and that two (2) cello bags, each of 50 pieces ferri inductors, were missing
cartons dropped from the cargo hatch to the pier apron. Taiyo examined the from the cargo.
dropped cargo, and upon an alleged finding that the contents of the crate
were no longer usable for their intended purpose, they were rejected as a Sulpicio contends that its liability, if any, is only to the extent of the cargo
total loss and returned to Cebu City. damage or loss and should not include the lack of fitness of the shipment for
transport to Singapore due to the damaged packing. This is erroneous.
Taiyo filed a claim against Sulpicio for the recovery of the value of the According to it, damage to the packaging is not tantamount to damage to
rejected cargo which was refused by the latter. Thereafter, Taiyo sought the cargo. It must be stressed that in the case at bar, the damage sustained
payment from First Lepanto-Taisho Insurance Corporation (insurer) under by the packaging of the cargo while in its custody resulted in unfitness to be
a marine insurance policy issued to the former. First Lepanto paid the claim transported to the consignee in Singapore. Such failure to ship the cargo to
less thirty-five percent (35%) salvage value or P194, 220.31. its final destination because of the ruined packaging, indeed, resulted in
damages on the part of the owner of the goods.
The payment of the insurance claim by the First Lepanto subrogated
whatever right or legal action Taiyo may have against Delbros, Inc. and The falling of the crate during the unloading is evidence of Sulpicio’s
Sulpicio Lines, Inc. Thus, First Lepanto then filed claims for reimbursement negligence in handling the cargo. As a common carrier, it is expected to
from Delbros, Inc. and Sulpicio Lines, Inc. which were subsequently denied. observe extraordinary diligence in the handling of goods placed in its
possession for transport. The standard of extraordinary diligence imposed
First Lepanto filed a suit for damages against Delbros, Inc. and Sulpicio. The upon common carriers is considerably more demanding than the standard of
trial court dismissed the complaint for damages while the Court of Appeals ordinary diligence. A common carrier is bound to transport its cargo and its
reversed the dismissal of the complaint by the lower court. During the passengers safely "as far as human care and foresight can provide, using the
pendency of the appeal before the SC, Delbros, Inc. paid in full the amount of utmost diligence of a very cautious person, with due regard to all
the damages awarded by the appellate court to the First Lepanto. circumstances." The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to know and to follow
III. Issue/s the required precaution for avoiding the damage to, or destruction of, the
goods entrusted to it for safe carriage and delivery. It requires common
Whether or not, based on the evidence presented during the trial, Taiyo carriers to render service with the greatest skill and foresight and "to use all
incurred damages, and if so, whether Sulpicio Lines is liable for the same? reasonable means to ascertain the nature and characteristic of goods
YES. tendered for shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires."
IV. Ratio/Legal Basis
Thus, when the shipment suffered damages as it was being unloaded,
It cannot be denied that the shipment sustained damage while in the custody Sulpicio is presumed to have been negligent in the handling of the damaged
of Sulpicio Lines. It is not disputed that one of the three (3) crates did fall cargo. Under Articles 1735 and 1752 of the Civil Code, common carriers
from the cargo hatch to the pier apron while Sulpicio was unloading the are presumed to have been at fault or to have acted negligently in case
cargo from its vessel. Neither is it impugned that upon inspection, it was the goods transported by them are lost, destroyed or had deteriorated.
found that two (2) cartons were torn on the side and the top flaps were open To overcome the presumption of liability for loss, destruction or deterioration
of goods, the common carrier must prove that they observed extraordinary - A contract of affreightment is one in which the owner of the vessel
diligence as required in Article 1733 of the Civil Code. leases part or all of its space to haul goods for others. It is a
contract for special service to be rendered by the owner of the
Sulpicio miserably failed to adduce any shred of evidence of the required vessel and under such contract the general owner retains the
extraordinary diligence to overcome the presumption that it was negligent in possession, command and navigation of the ship, the charterer
or freighter merely having use of the space in the vessel in
transporting the cargo.
return for his payment of the charter hire. . .
- An owner who retains possession of the ship though the hold is the
The question then is: To what extent is Sulpicio Lines, Inc., as common carrier,
property of the charterer, remains liable as carrier and must answer
liable for the damages suffered by the owner of the goods?
for any breach of duty as to the care, loading and unloading of the
cargo.
Upon First Lepanto’s payment of the alleged amount of loss suffered by the - Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order
insured, the insurer is entitled to be subrogated pro tanto to any right of to carry cargo from one point to another, but the possession,
action which the insured may have against the common carrier whose command and navigation of the vessels remained with petitioner
negligence or wrongful act caused the loss. Coastwise Lighterage.
- It also claims that it was not liable because the PH Coastguard failed
The falling of the crate was negligence on the part of Sulpicio Lines, Inc. for to indicate where the derelicts are located which was the proximate
which it cannot exculpate itself from liability because it failed to prove that it cause of the accident. Valid? No, because the patron navigating the
exercised extraordinary diligence. Hence, SC uphold the ruling of the ship was unlicensed. It cannot claim extraordinary diligence when it
appellate court that Sulpicio is liable to pay the amount paid by First Lepanto placed someone unlicensed at the helm.
for the damages sustained by Taiyo.
I. Recit-ready summary
Pag-asa Sales, Inc. entered into a contract to transport with Coastwise
However, as stated in the manifestation filed by Delbros, Inc, First Lepanto
Lighterage using the latter's dumb barges to transport molasses to Cebu. The
had already been paid the full amount, thus, it will be tantamount to unjust
barges were towed in tandem by the tugboat MT Marica, which is likewise
enrichment for First Lepanto to again recover damages from Sulpicio.
owned by Coastwise.
Upon reaching Manila Bay, while approaching Pier 18, one of the barges,
V. Disposition
"Coastwise 9," struck an unknown sunken object. The forward buoyancy
compartment was damaged, and water gushed in through a hole "two
WHEREFORE, premises considered, the assailed Decision of the Court of
inches wide and twenty-two inches long." As a consequence, the molasses
Appeals dated 26 May 1999 and its Resolution dated 13 October 1999 are
at the cargo tanks were contaminated and rendered unfit for the use it
hereby AFFIRMED. No costs.
was intended. This prompted the consignee, Pag-asa Sales, Inc. to reject the
shipment of molasses as a total loss.
Coastwise Lighterage v CA Coastwise Lighterage contends that the RTC and the Court of Appeals
erred in finding that it was a common carrier. It stresses the fact that it
- Molasses from Cebu to Manila. Molasses were contaminated. contracted with Pag-asa Sales, Inc. to transport the shipment of molasses
Petitioner argues that under its charter agreement with pag-asa from Negros Oriental to Manila and refers to this contract as a "charter
sales, it became a private carrier. Correct? No. agreement." It then proceeds to cite the case of Home Insurance Company
vs. American Steamship Agencies, Inc. where the Supreme Court held: ". . . a
common carrier undertaking to carry a special cargo or chartered to a special The records show that the damage to the barge which carried the
person only becomes a private carrier.” cargo of molasses was caused by its hitting an unknown sunken object as it
was heading for Pier 18. The object turned out to be a submerged derelict
Issue: Whether Coastwise Lighterage was transformed into a private carrier by vessel. Petitioner contends that this navigational hazard was the efficient
virtue of the contract of affreightment which it entered into with Pag-asa sales? cause of the accident. Further, it asserts that the fact that the Philippine
NO Coastguard "has not exerted any effort to prepare a chart to indicate the
location of sunken derelicts within Manila North Harbor to avoid navigational
Under Puromines, Inc. vs. Court of Appeals, wherein we ruled: accidents" effectively contributed to the happening of this mishap. Thus,
"Under the demise or bareboat charter of the vessel, the charterer being unaware of the hidden danger that lies in its path, it became
will generally be regarded as the owner for the voyage or service stipulated. impossible for the petitioner to avoid the same. Nothing could have
The charterer mans the vessel with his own people and becomes the owner prevented the event, making it beyond the pale of even the exercise of
pro hac vice, subject to liability to others for damages caused by negligence. extraordinary diligence. However, the patron that it hired was
To create a demise, the owner of a vessel must completely and exclusively unlicensed.
relinquish possession, command and navigation thereof to the charterer, Clearly, petitioner Coastwise Lighterage's embarking on a voyage
anything short of such a complete transfer is a contract of affreightment with an unlicensed patron violates this rule. It cannot safely claim to have
(time or voyage charter party) or not a charter party at all. exercised extraordinary diligence, by placing a person whose
On the other hand a contract of affreightment is one in which the navigational skills are questionable, at the helm of the vessel which
owner of the vessel leases part or all of its space to haul goods for others. eventually met the fateful accident.
It is a contract for special service to be rendered by the owner of the
vessel and under such contract the general owner retains the possession, II. Facts of the case
command and navigation of the ship, the charterer or freighter merely
having use of the space in the vessel in return for his payment of the Pag-asa Sales, Inc. entered into a contract to transport molasses from
charter hire. . . the province of Negros to Manila with Coastwise Lighterage Corporation
An owner who retains possession of the ship though the hold is the (Coastwise for brevity), using the latter's dumb barges. The barges were
property of the charterer, remains liable as carrier and must answer for any towed in tandem by the tugboat MT Marica, which is likewise owned by
breach of duty as to the care, loading and unloading of the cargo. Coastwise.
Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order Upon reaching Manila Bay, while approaching Pier 18, one of the barges,
to carry cargo from one point to another, but the possession, command "Coastwise 9," struck an unknown sunken object. The forward buoyancy
and navigation of the vessels remained with petitioner Coastwise compartment was damaged, and water gushed in through a hole "two inches
Lighterage. wide and twenty-two inches long." As a consequence, the molasses at the
Pursuant therefore to the ruling in the Puromines case, Coastwise cargo tanks were contaminated and rendered unfit for the use it was
Lighterage, by the contract of affreightment, was not converted into a intended. This prompted the consignee, Pag-asa Sales, Inc. to reject the
private carrier, but remained a common carrier and was still liable as shipment of molasses as a total loss.
such. Thereafter, Pag-asa Sales, Inc. filed a formal claim with the insurer of its
It follows then that the presumption of negligence that attaches to lost cargo, herein private respondent, Philippine General Insurance Company
common carriers, once the goods it transports are lost, destroyed or and against the carrier, Coastwise Lighterage. Coastwise Lighterage denied
deteriorated, applies to the petitioner the claim and it was PhilGen which paid the consignee, Pag-asa Sales, Inc.
 In turn, PhilGen then filed an action against Coastwise Lighterage, owner of a vessel must completely and exclusively relinquish
seeking to recover the amount which it paid to Pag-asa Sales, Inc. for the possession, command and navigation thereof to the charterer,
latter's lost cargo. anything short of such a complete transfer is a contract of
Petitioner contends that the RTC and the Court of Appeals erred in affreightment (time or voyage charter party) or not a charter party at
finding that it was a common carrier. It stresses the fact that it contracted all.
with Pag-asa Sales, Inc. to transport the shipment of molasses from Negros On the other hand a contract of affreightment is one in
Oriental to Manila and refers to this contract as a "charter agreement." It then which the owner of the vessel leases part or all of its space to haul
proceeds to cite the case of Home Insurance Company vs. American goods for others. It is a contract for special service to be rendered by
Steamship Agencies, Inc. where the Supreme Court held: ". . . a common the owner of the vessel and under such contract the general owner
carrier undertaking to carry a special cargo or chartered to a special person retains the possession, command and navigation of the ship, the
only becomes a private carrier.” charterer or freighter merely having use of the space in the vessel in
return for his payment of the charter hire. . .
III. Issue/s An owner who retains possession of the ship though the
hold is the property of the charterer, remains liable as carrier and
Whether Coastwise Lighterage was transformed into a private carrier, by must answer for any breach of duty as to the care, loading and
virtue of the contract of affreightment which it entered into with the unloading of the cargo. . . ."
consignee, Pag-asa Sales, Inc. Corollarily, if it were in fact transformed into a
private carrier, did it exercise the ordinary diligence to which a private carrier Although a charter party may transform a common carrier into a
is in turn bound? private one, the same however is not true in a contract of affreightment on
account of the aforementioned distinctions between the two.
IV. Ratio/Legal Basis Petitioner admits that the contract it entered into with the consignee
was one of affreightment. The Court agrees. Pag-asa Sales, Inc. only leased
Petitioner's reliance on the aforementioned case is misplaced. In its entirety, three of petitioner's vessels, in order to carry cargo from one point to
the conclusions of the Court are as follows: another, but the possession, command and navigation of the vessels
"Accordingly, the charter party contract is one of remained with petitioner Coastwise Lighterage.
affreightment over the whole vessel, rather than a demise. As such, Pursuant therefore to the ruling in the Puromines case, Coastwise
the liability of the shipowner for acts or negligence of its captain and Lighterage, by the contract of affreightment, was not converted into a private
crew, would remain in the absence of stipulation." carrier, but remained a common carrier and was still liable as such.
The law and jurisprudence on common carriers both hold that the
The distinction between the two kinds of charter parties (i.e. bareboat mere proof of delivery of goods in good order to a carrier and the
or demise and contract of affreightment) is more clearly set out in the case of subsequent arrival of the same goods at the place of destination in bad order
Puromines, Inc. vs. Court of Appeals, wherein we ruled: makes for a prima facie case against the carrier.
"Under the demise or bareboat charter of the vessel, the It follows then that the presumption of negligence that attaches
charterer will generally be regarded as the owner for the voyage to common carriers, once the goods it transports are lost, destroyed or
or service stipulated. The charterer mans the vessel with his own deteriorated, applies to the petitioner. This presumption, which is
people and becomes the owner pro hac vice, subject to liability to overcome only by proof of the exercise of extraordinary diligence,
others for damages caused by negligence. To create a demise, the remained unrebutted in this case.
 WHEREFORE, premises considered, this petition is DENIED and the appealed
The records show that the damage to the barge which carried the decision affirming the order of Branch 35 of the Regional Trial Court of
cargo of molasses was caused by its hitting an unknown sunken object as it Manila for petitioner Coastwise Lighterage to pay respondent Philippine
was heading for Pier 18. The object turned out to be a submerged derelict General Insurance Company the "principal amount of P700,000.00 plus
vessel. Petitioner contends that this navigational hazard was the efficient interest thereon at the legal rate computed from March 29, 1989, the date
cause of the accident. Further, it asserts that the fact that the Philippine the complaint was filed until fully paid and another sum of P100,000.00 as
Coastguard "has not exerted any effort to prepare a chart to indicate the attorney's fees and costs" is likewise hereby AFFIRMED.
location of sunken derelicts within Manila North Harbor to avoid navigational
accidents" effectively contributed to the happening of this mishap. Thus, Philippine First Insurance v Wallem First Shipping
being unaware of the hidden danger that lies in its path, it became
impossible for the petitioner to avoid the same. Nothing could have
- Shipment of Na2SO4 in bad condition. Is the carrier liable until the
prevented the event, making it beyond the pale of even the exercise of shipment is safely discharged from the ship? Yes.
extraordinary diligence. - The extraordinary responsibility of the common carrier lasts
However, petitioner's assertion is belied by the evidence on record from the time the goods are unconditionally placed in the
where it appeared that far from having rendered service with the greatest possession of, and received by the carrier for transportation until
skill and outmost foresight, and being free from fault, the carrier was culpably the same are delivered, actually or constructively, by the carrier
remiss in the observance of its duties. to the consignee, or to the person who has a right to receive
Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted them.
that he was not licensed. -
Clearly, petitioner Coastwise Lighterage's embarking on a voyage - The responsibility of the carrier shall commence from the time
with an unlicensed patron violates this rule. It cannot safely claim to when the goods are loaded on board the vessel and shall cease
when they are discharged from the vessel.
have exercised extraordinary diligence, by placing a person whose
-
navigational skills are questionable, at the helm of the vessel which
-
eventually met the fateful accident. It may also logically, follow that a
person without license to navigate, lacks not just the skill to do so, but also
I. Recit-ready summary
the utmost familiarity with the usual and safe routes taken by seasoned and
legally authorized ones. Had the patron been licensed, he could be presumed
Anhui Chemicals Import & Export Corporation loaded on board a
to have both the skill and the knowledge that would have prevented the
shipment of 10,000 bags of sodium sulphate anhydrous 99 PCT Min. to be
vessel's hitting the sunken derelict ship that lay on their way to Pier 18.
delivered to the port of Manila for consignee, L.G. Atkimson Import-Export,
As a common carrier, petitioner is liable for breach of the contract of
Inc. The shipper of the shipment is Shanghai Fareast Ship Business
carriage, having failed to overcome the presumption of negligence with the
Company. Both are foreign firms doing business in the PH, through its local
loss and destruction of goods it transported, by proof of its exercise of
ship agent, Wallem Philippines Shipping, Inc. (Wallem). It was disclosed
extraordinary diligence.
during the discharge of the shipment from the carrier that 2,426 poly bags
were in bad order and condition. Consignee filed a formal claim with Wallem
V. Disposition
for the value of the damaged shipment, to no avail. Consignee filed a formal
claim with petitioner insurer for the damage and losses sustained by the
shipment. Petitioner paid the consignee the sum of almost 400k and the
latter signed a subrogation receipt. Petitioner, in the exercise of its right of The consignee filed a formal claim with Wallem for the value of the damaged
subrogation, sent a demand letter to Wallem for the recovery of the amount shipment, to no avail. The consignee filed a formal claim with petitioner
paid by petitioner to the consignee but despite receipt of the letter, Wallem insurer for the damage and losses sustained by the shipment. Consequently,
did not settle nor even send a response. Petitioner instituted an action before petitioner paid the consignee the sum of P397,879.69 and the latter signed a
the RTC for damages against respondents for the recovery of the actual subrogation receipt. Petitioner, in the exercise of its right of subrogation, sent
damages suffered by petitioner. The RTC granted the petition and held the a demand letter to Wallem for the recovery of the amount paid by petitioner
arrastre operator and the shipping company solidarily liable, but the CA to the consignee. However, despite receipt of the letter, Wallem did not settle
reversed because the damage was due to the mishandling of the arrastre nor even send a response to petitioner's claim.
operator.
Consequently, petitioner instituted an action before the RTC for damages
WON as a common carrier, the carrier’s duties extend to the obligation to against respondents for the recovery of P397,879.69 representing the actual
safely discharge the cargo from the vessel? - YES! damages suffered by petitioner. RTC ordered respondents to pay petitioner
P397,879.69 with 6% interest plus attorney's fees and costs of the suit
The responsibility of the carrier shall commence from the time when the
goods are loaded on board the vessel and shall cease when they are The Court of Appeals reversed and set aside the RTC's decision. According to
discharged from the vessel. CA, there is no solidary liability between the carrier and the arrastre
operator because it was clearly established by the court a quo that the
It is settled in maritime law jurisprudence that cargoes while being unloaded damage and losses of the shipment were attributed to the mishandling
generally remain under the custody of the carrier. In the instant case, the by the arrastre operator in the discharge of the shipment.
damage or losses were incurred during the discharge of the shipment
while under the supervision of the carrier. Consequently, the carrier is III. Issue/s
liable for the damage or losses caused to the shipment. WON as a common carrier, the carrier’s duties extend to the obligation to
safely discharge the cargo from the vessel? - YES!
II. Facts of the case
IV. Ratio/Legal Basis
Anhui Chemicals Import & Export Corporation loaded on board M/S Offshore
Master a shipment consisting of 10,000 bags of sodium sulphate Common carriers, from the nature of their business and for reasons of public
anhydrous 99 PCT Min. (shipment) to be delivered to the port of Manila for policy, are bound to observe extraordinary diligence in the vigilance over the
consignee, L.G. Atkimson Import-Export, Inc., covered by a Clean Bill of goods transported by them. Subject to certain exceptions enumerated under
Lading. The shipper of the shipment is Shanghai Fareast Ship Business Article 1734 of the Civil Code, common carriers are responsible for the loss,
Company. Both are foreign firms doing business in the Philippines, through destruction, or deterioration of the goods. The extraordinary responsibility
its local ship agent, respondent Wallem Philippines Shipping, Inc. (Wallem). of the common carrier lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for
It was disclosed during the discharge of the shipment from the carrier transportation until the same are delivered, actually or constructively,
that 2,426 poly bags were in bad order and condition. by the carrier to the consignee, or to the person who has a right to
receive them.
The responsibility of the carrier shall commence from the time when the ordered to pay petitioner the amount of P20,000.00 for and as attorney's
goods are loaded on board the vessel and shall cease when they are fees, together with the costs of the suit.
discharged from the vessel.
SO ORDERED.
The Carrier shall not be liable of loss of or damage to the goods before
loading and after discharging from the vessel, howsoever such loss or VI. Notes
damage arises.
Wildvalley Shipping v CA
On the other hand, the functions of an arrastre operator involve the
handling of cargo deposited on the wharf or between the establishment - Petitioner seeks to claim damages from unearned profits due to the
of the consignee or shipper and the ship's tackle. Being the custodian of PH Roxas’ obstruction of the Orinoco River.
the goods discharged from a vessel, an arrastre operator's duty is to What is the diligence required of the owners of the vessel? Diligence of a
take good care of the goods and to turn them over to the party entitled good father of a family. Why? There is no pre-existing contractual obligation
to their possession. between the parties. PPL exercised this diligence:
● when the vessel sailed only after the main engine, machineries, and
Handling cargo is mainly the arrastre operator's principal work so its other auxiliaries were checked and found to be in good running
drivers/operators or employees should observe the standards and measures condition
necessary to prevent losses and damage to shipments under its custody. ● when the master left a competent officer, the officer on watch on the
bridge with a pilot who is experienced in navigating the Orinoco
The records are replete with evidence which show that the damage to the River
bags happened before and after their discharge and it was caused by the ● when the master ordered the inspection of the vessel's double
stevedores of the arrastre operator who were then under the supervision bottom tanks when the vibrations occurred anew.
Who is liable? The Pilot. Licensed pilots are in a different class from
of Wallem.
ordinary employees, for they assume to have a skill and a knowledge of
navigation in the particular waters over which their licenses extend
It is settled in maritime law jurisprudence that cargoes while being unloaded
superior to that of the master; pilots are bound to use due diligence and
generally remain under the custody of the carrier. In the instant case, the
reasonable care and skill. A pilot's ordinary skill is in proportion to the pilot's
damage or losses were incurred during the discharge of the shipment while
responsibilities, and implies a knowledge and observance of the usual rules of
under the supervision of the carrier. Consequently, the carrier is liable for the
navigation, acquaintance with the waters piloted in their ordinary condition,
damage or losses caused to the shipment.
and nautical skill in avoiding all known obstructions.
-
V. Disposition
I. Recit-ready summary
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals
dated 22 June 2004 and its Resolution dated 11 October 2004 are REVERSED
The Philippine Roxas is a vessel owned by PH President Lines (PPL).
and SET ASIDE. Wallem is ordered to pay petitioner the sum of P397,879.69,
Vasquez was the official pilot designated to navigate the ship. Later on, the
with interest thereon at 6% per annum from the filing of the complaint on 7
Philippine Roxas ran aground in the Orinoco River, thereby obstructing the
October 1996 until the judgment becomes final and executory. Thereafter, an
ingress and egress of vessels. As a result of the blockage, the Malandrinon, a
interest rate of 12% per annum shall be imposed.48 Respondents are also
vessel owned by Wildvalley was unable to sail out on that day.
Accordingly, it filed a suit against PPL in the form of unearned profits
amounting $400,000. Philippine Roxas, a vessel owned by PH President Lines (PPL) arrived in
Venezuela to load iron ore. Mr. Vasquez, an official pilot, was designated to
The issue in this case is whether there is negligence on the part PPL. navigate the Philippine Roxas through the Orinoco River. The master
The Court held that there was none; (captain) was at the bridge together with the third mate and a helmsman
when the vessel left the port.
in fact, the negligence in the case at bar is attributable to Pilot Vasquez and
not to PPL. There being no contractual obligation between PPL and The Philippine Roxas experienced some vibrations when it entered the San
Wildvalley, PPL is obliged to give only the diligence required of a good Roque Channel. The vessel proceeded on its way, with the pilot assuring the
father of a family. This degree of diligence was manifested by PPL when: watch officer that the vibration was a result of the shallowness of the
● the vessel sailed only after the main engine and were found to be in channel. The vessel again experienced some vibrations. It was then that the
good running condition watch officer called the master, Capt. Colon, to the bridge.
● when the master left a competent officer, the pilot who is
experienced in navigating the river Capt. Colon checked the position of the vessel and verified that it was in the
● when the master ordered the inspection of the vessel's tanks centre of the channel. He then ordered the Chief Officer to check all the
double bottom tanks.
On the other hand, Pilot Vasquez was negligent as should have been
aware of the portions which are shallow and which are not. His failure to
Later on, Philippine Roxas ran aground in the Orinoco River, thus
determine the depth of the said river and his decision to plod on his set
obstructing the ingress and egress of vessels. As a result of the blockage,
course caused damage to the vessel. Thus, he is responsible for the
the Malandrinon, a vessel owned by Wildvalley was unable to sail out on that
shipwreck.
day.

Further, the doctrine of res ipsa loquitur does not apply (the occurrence of

Subsequently, Wildvalley filed a suit against PPL and Pioneer Insurance for
an accident implies negligence). For this to apply, the ff. conditions must be
damages in the form of unearned profits, and interest amounting $400,000.
met:
1) the accident was of such character as to warrant an inference that it
The trial court rendered its decision in favor of Wildvalley.
would not have happened except for defendant's negligence
2) the accident must have been caused by an agency or instrumentality
within the exclusive management or control of the person charged
with the negligence complained of III. Issue/s
3) the accident must not have been due to any voluntary action or
contribution on the part of the person injured. Whether there is negligence on the part PPL that would warrant the award of
damages?
In the present case, there was a temporary shift of control over the ship
from the master of the vessel to the pilot on a compulsory pilotage IV. Ratio/Legal Basis
channel. Thus, 2 of the requisites i.e., negligence and control are absent.

II. Facts of the case

There being no contractual obligation, PPL is obliged to give only the testified that he is an official pilot in the Harbour at Port Ordaz, Venezuela,
diligence required of a good father of a family in accordance with the Art. and that he had been a pilot for 12 years. He also had experience in
1173 of the New Civil Code navigating the waters of the Orinoco River.

"Art. 1173. The fault or negligence of the obligor consists in the The law does provide that the master can overrule the of the harbor pilot on
omission of that diligence which is required by the nature of the board. The master of the Philippine Roxas deemed it best not to order the
obligation and corresponds with the circumstances of the persons, pilot to stop the vessel because the latter had assured him that they were
of the time and of the place. When negligence shows bad faith, the navigating normally before the grounding of the vessel.
provisions of articles 1171 and 2201, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be Based on these declarations, it comes as no surprise to us that the master
observed in the performance, that which is expected of a good chose not to regain control of the ship. Admitting his limited knowledge of
father of a family shall be required." the Orinoco River, Captain Colon relied on the knowledge and experience of
pilot Vasquez to guide the vessel safely.
The diligence of a good father of a family requires only that diligence which
an ordinary prudent man would exercise with regard to his own property. In Licensed pilots are in a different class from ordinary employees, for they
the case at bar, PPL exercised this diligence: assume to have a skill and a knowledge of navigation in the particular
● when the vessel sailed only after the main engine, machineries, and waters over which their licenses extend superior to that of the master;
other auxiliaries were checked and found to be in good running pilots are bound to use due diligence and reasonable care and skill. A pilot's
condition ordinary skill is in proportion to the pilot's responsibilities, and implies a
● when the master left a competent officer, the officer on watch on the knowledge and observance of the usual rules of navigation, acquaintance
bridge with a pilot who is experienced in navigating the Orinoco with the waters piloted in their ordinary condition, and nautical skill in
River
avoiding all known obstructions.
● when the master ordered the inspection of the vessel's double
bottom tanks when the vibrations occurred anew.
The grounding of the vessel is attributable to the pilot, not PPL. When
the vibrations were first felt, the watch officer asked him what was going on,
The Philippine rules on pilotage, embodied in Philippine Ports Authority AO
and pilot Vasquez replied that it was merely a result of the shallowness of the
No. 03-85, otherwise known as the Rules and Regulations Governing Pilotage
channel. However, Pilot Vasquez should have been aware of the portions
Services, the Conduct of Pilots and Pilotage Fees in Philippine Ports enunciate
which are shallow and which are not. His failure to determine the depth of
the duties and responsibilities of a master of a vessel and its pilot.
the said river and his decision to plod on his set course caused damage to
the vessel. Thus, we hold him as negligent and liable for its grounding.
Under this law,  the master remains the overall commander of the vessel even
when there is a pilot on board. He remains in control of the ship as he can
If it is compulsive upon the master to take a pilot, and, a fortiori, if he is
still perform the duties conferred upon him by law despite the presence of a
bound to do so under penalty, then, and in such case, neither he nor the
pilot who is temporarily in charge of the vessel.
owner will be liable for injuries occasioned by the negligence of the pilot.

The Orinoco River, being a compulsory pilotage channel, necessitated the

The doctrine of res ipsa loquitur does not apply to the case at bar because
engaging of a pilot who was presumed to be knowledgeable of every shoal,
the circumstances surrounding the injury do not clearly indicate negligence
bank, deep and shallow ends of the river. In his deposition, pilot Vasquez
on the part of PPL. For the said doctrine to apply, the ff. conditions must be - It is a long standing jurisprudential rule that a bill of lading
met: operates both as a receipt and as contract to transport and
1. the accident was of such character as to warrant an inference that it deliver the same a therein stipulated
would not have happened except for defendant's negligence
2. the accident must have been caused by an agency or instrumentality
within the exclusive management or control of the person charged I. Recit-ready summary
with the negligence complained of
3. the accident must not have been due to any voluntary action or
contribution on the part of the person injured. Maersk is engaged in the transportation of goods by sea. Efren is the
proprietor of Ethegal Laboratories. Efren ordered from Eli Lilly of Puerto Rico
In the present case, there was a temporary shift of control over the ship from gelatin capsules for the manufacture of his pharmaceutical products.
the master of the vessel to the pilot on a compulsory pilotage channel. Thus,
two of the requisites necessary for the doctrine to apply, i.e., negligence and Through a Memorandum of Shipment (MOS), Eli Lilly advised Efren that
control, to render the respondent liable, are absent. the gelatin capsules were already shipped on board MV Anders Maerskline.
The specified date of arrival in the MOS was April 3, 1977, and the shipment
As to the claim that the ship was unseaworthy, we hold that it is not. The was to the Philippines via Oakland, California.
Lloyd’s Register of Shipping confirmed the vessel’s seaworthiness.
For some unknown reason, the capsules were miss-shipped and
diverted to Richmond, Virginia and then transported back to Oakland.
V. Disposition
The goods arrived only on June 10, 1977, 2 months from the date specified
in the MOS. Efren alleged that there was gross negligence and undue delay
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is DENIED. in the delivery of goods, and filed an action for damages against Maersk and
Eli Lilly. Eli Lilly likewise filed a cross-claim against Maersk. The case against
Maersk Lines v CA Eli Lilly was dismissed on its motion and it withdrew its cross-claim against
Maersk.
- There was a two month delay on the part of the carrier to deliver
ISSUE: WoN Maersk can be held liable despite the stipulation written in
gelatin capsules. It says that it is not liable because of a stipulation
the bill of lading – YES
under the Bill of Lading which states that the Carrier does not
undertake the delivery of goods at any particular time. Valid? No.
There was a provision in the bill of lading which states “The Carrier
- The Court ruled that although generally, contracts of adhesion are
does not undertake that the goods shall arrive at the port of discharge
valid, the questioned provision in the subject bill of lading has the
or the place of delivery at any particular time or to meet any particular
effect of practically leaving the date of arrival of the subject
market…”
shipment on the sole determination and will of the carrier. While
it is true that common carriers are not obligated by law to carry and
to deliver merchandise, and persons are not vested with the right to The Court ruled that although generally, contracts of adhesion are
prompt delivery, unless such common carriers previously assume valid, the questioned provision in the subject bill of lading has the effect of
the obligation to deliver at a given date or time, delivery of practically leaving the date of arrival of the subject shipment on the sole
shipment or cargo should at least be made within a reasonable determination and will of the carrier. While it is true that common carriers
time. are not obligated by law to carry and to deliver merchandise, and persons are
not vested with the right to prompt delivery, unless such common carriers
previously assume the obligation to deliver at a given date or time, delivery
of shipment or cargo should at least be made within a reasonable time. Efren’s Allegations:
There was gross negligence and undue delay in the delivery of the goods. He
DOCTRINE: When a common carrier undertakes to convey goods, the law filed an action before the court for rescission of contract with damages
implies a contract that they shall be delivered at destination within a against Maersk and Eli Lilly as defendants.
reasonable time, in the absence, of any agreement as to the time of delivery.
But where a carrier has made an express contract to transport and deliver Maersk’s Defence:
properly within a specified time, it is bound to fulfill its contract and is liable
Maersk denied that it committed breach of contract. It alleged in its answer
for any delay, no
that the subject shipment was transported in accordance with the provisions
of the covering bill of lading, and that its liability under the law on
II. Facts of the case
transportation of goods attaches only in case of loss, destruction or
deterioration of the goods under Art. 1734 of the Civil Code.

Maersk Line (Maersk) is engaged in the transportation of goods by sea, Elly Lily’s Defense:
doing business in the Philippines through its general agent Compania
General de Tabacos de Filipinas. It filed its answer alleging that the delay in the arrival of the subject
merchandise was due solely on the gross negligence of Maersk.
Private respondent Efren Castillo (Efren), is the proprietor of Ethegal
Laboratories, a firm engaged in the manufacture of pharmaceutical products. III. Issue

On November 12, 1976, Efren ordered from Eli Lilly of Puerto Rico
through its agent in the Philippines, Elanco Products, 600,000 empty gelatin
WoN Maersk can be held liable despite the stipulation written in the bill
capsules for the manufacture of his pharmaceutical products.
of lading?

These were placed in six drums of 100,000 capsules each, valued at

YES. Although generally contracts of adhesion are valid, the questioned
$1,668.71. Through a Memorandum of Shipment, the shipper Eli Lilly of
provision in the subject bill of lading has the effect of practically leaving the
Puerto Rico advised Efren as consignee that the empty gelatin capsules were
date of arrival of the subject shipment on the sole determination and will of
already shipped on board MV “Anders Maerskline” for shipment to the
the carrier.
Philippines via Oakland, California. The specified date of arrival in the
Memorandum was April 3, 1977.

IV. Ratio/Legal Basis

For reasons unknown, the cargo of capsules were miss-shipped and
diverted to Richmond, Virginia and then transported back to Oakland,
California.
MAERSK’S DEFENSE: It maintains that it cannot be held for damages for
The goods finally arrived in the Philippines on June 10, 1977, two damages for the alleged delay in the delivery in the capsules since it acted in
months from the date specified in the Memorandum. Because of this, Efren good faith and there was no special contract under which it undertook to
as consignee refused to take delivery of the goods on account of its failure to deliver the shipment on or before a specific date.
arrive on time.
EFREN’S CLAIM: Efren claims that during the period before the specified absence of fraud, concealment or improper conduct, known to the
date of arrival of the goods, he had made several commitments and contract shipper, and he is generally bound by his acceptance whether he reads
of adhesion. Therefore, Maersk can be held liable for the damages suffered the bill or not.
by Efren for the cancellation of the contracts he entered into.
The ruling applies only if such contracts will not create an absurd situation as
Both of the decisions of the CA and trial court show that, in finding in the case at bar. The questioned provision in the subject bill of lading
Maersk liable for damages for the delay in the delivery of goods, reliance was has the effect of practically leaving the date of arrival of the subject
made on the rule that contracts of adhesion are void. shipment on the sole determination and will of the carrier.

The bill of lading covering the shipment reads: While it is true that common carriers are not obligated by law to carry and to
The Carrier does not undertake that the goods shall arrive at the port of deliver merchandise, and persons are not vested with the right to prompt
discharge or the place of delivery at any particular time or to meet any delivery, unless such common carriers previously assume the obligation
particular market or use and save as is provided in clause 4 the Carrier shall in to deliver at a given date or time, delivery of shipment or cargo should
no circumstances be liable for any direct, indirect or consequential loss or at least be made within a reasonable time.
damage caused by delay. If the Carrier should nevertheless be held legally
liable for any such direct or indirect or consequential loss or damage caused by Saludo Jr. v. CA:
delay, such liability shall in no event exceed the freight paid for the transport
covered by this Bill of Lading. The oft-repeated rule regarding a carrier's liability for delay is that in the
absence of a special contract, a carrier is not an insurer against delay in
It is undisputed that such provision at the back of the bill of transportation of goods. When a common carrier undertakes to convey goods,
lading is a contract of adhesion. Generally, contracts of adhesion are the law implies a contract that they shall be delivered at destination within a
considered void since almost all the provisions of these types of contracts are reasonable time, in the absence, of any agreement as to the time of delivery.
prepared and drafted only by one party, usually the carrier. The only But where a carrier has made an express contract to transport and deliver
participation left of the other party in such a contract is the affixing of his properly within a specified time, it is bound to fulfill its contract and is liable for
signature thereto, hence the term "Adhesion" any delay, no matter from what cause it may have arisen. This result logically
follows from the well-settled rule that where the law creates a duty or charge,
However, settled is the rule that bills of lading are contracts not and the default in himself, and has no remedy over, then his own contract
entirely prohibited. One who adheres to the contract is in reality free to creates a duty or charge upon himself, he is bound to make it good
reject it in its entirety; if he adheres, he gives his consent. notwithstanding any accident or delay by inevitable necessity because he
might have provided against it by contract. Whether or not there has been
In the case of Magellan, the Court ruled: It is a long standing such an undertaking on the part of the carrier is to be determined from the
jurisprudential rule that a bill of lading operates both as a receipt and as circumstances surrounding the case and by application of the ordinary rules for
contract to transport and deliver the same a therein stipulated. As a the interpretation of contracts.
contract, it names the parties, which includes the consignee, fixes the route,
destination, and freight rates or charges, and stipulates the rights and An examination of the bill of lading shows that the shipment was
obligations assumed by the parties. Being a contract, it is the law between estimated to arrive in Manila on April 3, 1977.
the parties who are bound by its terms and conditions provided that these
are not contrary to law, morals, good customs, public order and public policy. While there was no special contract entered into by the parties
A bill of lading usually becomes effective upon its delivery to and acceptance indicating the date of arrival of the subject shipment, Maersk nevertheless,
by the shipper. It is presumed that the stipulations of the bill were, in the
was very well aware of the specific date when the goods were expected to
arrive as indicated in the bill of lading itself. In this regard, there arises no V. Disposition
need to execute another contract for the purpose as it would be a mere WHEREFORE, with the modification regarding the deletion of item 4 of
superfluity. respondent court`s decision, the appealed decision is is hereby AFFIRMED in
all respects.
A delay in the delivery of the goods spanning a period of two (2)
months and seven (7) days falls was beyond the realm of reasonableness. The FGU Insurance v CA
shipment was delivered to, and left in, the possession and custody of Maersk
for transport to Manila via Oakland, California. - ANCO claims that the storm is a force majeure which relieved it from
liability from damages because of its failure to deliver the cases of
But through petitioner's negligence was mishipped to Richmond, beer to Antique. Correct? No.
Virginia. Maersk’s insistence that it cannot be held liable for the delay finds - SC held that force majeure are extraordinary events not
no merit. foreseeable or avoidable, events that could not be foreseen, or
which though foreseen, were inevitable. It is not enough that the
MAERSK’S CONTENTION: It maintains that the award of actual, moral and event should not have been foreseen or anticipated, as is
exemplary dames and attorney's fees are not valid since there are no commonly believed but it must be one impossible to foresee or
factual findings or legal bases stated in the text of the trial court's to avoid. While the loss of the cargoes was admittedly caused by the
decision to support the award thereof. typhoon Sisang, a natural disaster, ANCO could not escape liability.
The records show the failure of its representatives to exercise the
extraordinary degree of diligence mandated by law. To be
It is settled that actual and compensatory damages requires substantial
exempted, the natural disaster should have been the proximate
proof. In this case, Efren was able to sufficiently prove through an invoice,
and only cause of the loss. There must have been no contributory
certification from the issuer of the letter of credit and Memorandum the negligence on the part of the common carrier
amount he paid as costs of the credit line for the goods.
I. Recit-ready summary
As to the propriety of the award of moral damages, Article 2220 of ANCO was engaged in the shipping business and owned M/T ANCO,
the Civil Code provides that moral damages may be awarded in "breaches of tugboat, and the D/B Lucio, barge. D/B Lucio had no engine of its own and
contract where the defendant acted fraudulently or in bad faith" so it could not maneuver by itself and had to be towed by M/T ANCO for it
to move. SMC contracted ANCO to deliver 40,550 cases of beer to San
Only the testimony of Mr. Ramirez was presented by Maersk. Maersk Jose, Antique from Mandaue City, Cebu. Upon arrival of the vessels in the
did not even bother to explain the cause for the delay in the delivery of the port of San Jose, Antique, M/T ANCO immediately left despite the fact
shipment. that there was an incoming typhoon. Only 10,790 cases of beer were
discharged from D/B Lucio since the waves were getting bigger. SMC’s
Under the circumstances, the Court holds that Maersk is liable for District Sales Supervisor requested ANCO’s representative to transfer the
breach of contract of carriage through gross negligence amounting to bad barge to a safer place because the vessel might not be able to withstand
faith. Thus, the award of moral damages if therefore proper in this case. Gross the big waves but it remained unheeded. Eventually, the barge's rope
carelessness or negligence constitutes wanton misconduct, hence, exemplary attached to the wharf was cut off by the big waves causing the barge to run
damages may be awarded to the aggrieved party. aground and the cargoes of beer to be swept away. As a result, SMC filed a
complaint for breach of contract of carriage and damages against ANCO
and the latter implemented FGU Insurance as 3rd party defendant. ANCO 2 — 15,000 cases Pale Pilsen San Jose, Antique, and 200 cases Cerveza Negra
claimed that the cases of beer were lost by reason of Typhoon Sisang, San Jose, Antique
fortuitous event, which battered and sank the vessel, hence it should not be The consignee for the cargoes covered by Bill of Lading No. 1 was SMC's Beer
held liable. Marketing Division (BMD)-Estancia Beer Sales Office, Estancia, Iloilo, while the
Whether or not ANCO, through its representatives, is negligent in handling the consignee for the cargoes covered by Bill of Lading No. 2 was SMC's BMD-
cargoes of SMC, thus, held liable to pay damages. — YES. San Jose Beer Sales Office, San Jose, Antique.
SC held that force majeure are extraordinary events not foreseeable The D/B Lucio was towed by the M/T ANCO all the way from Mandaue City to
or avoidable, events that could not be foreseen, or which though San Jose, Antique. The vessels arrived at San Jose, Antique, at about one
foreseen, were inevitable. It is not enough that the event should not o'clock in the afternoon of 30 September 1979. The tugboat M/T ANCO left
have been foreseen or anticipated, as is commonly believed but it must the barge immediately after reaching San Jose, Antique.
be one impossible to foresee or to avoid. While the loss of the cargoes was ANCO's representative did not heed the request because he was confident
admittedly caused by the typhoon Sisang, a natural disaster, ANCO could not that the barge could withstand the waves.  This, notwithstanding the fact that
escape liability. The records show the failure of its representatives to at that time, only the M/T ANCO was left at the wharf of San Jose, Antique, as
exercise the extraordinary degree of diligence mandated by law. To be all other vessels already left the wharf to seek shelter. With the waves
exempted, the natural disaster should have been the proximate and only growing bigger and bigger, only Ten Thousand Seven Hundred Ninety
cause of the loss. There must have been no contributory negligence on (10,790) cases of beer were discharged into the custody of the arrastre
the part of the common carrier. In this case, there was blatant negligence operator.
on the part of crewmembers: (1) in leaving the engine-less D/B Lucio at the
mercy of the storm without the assistance of the tug- boat, and (2) in failing At about ten to eleven o'clock in the evening of 01 October 1979, the crew of
to heed the request of SMC’s representatives to have the barge transferred to D/B Lucio abandoned the vessel because the barge's rope attached to the
a safer place, as was done by the other vessels in the port. This makes the wharf was cut off by the big waves.  At around midnight, the barge
blatant negligence the proximate cause of the loss of the cargoes. ran aground and was broken and the cargoes of beer in the barge were
II. Facts of the case swept away.
As a result, ANCO failed to deliver to SMC's consignee Twenty-Nine
Evidence shows that Anco Enterprises Company (ANCO), a partnership Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred
between Ang Gui and Co To, was engaged in the shipping business. It owned Fifty (550) cases of Cerveza Negra. 
the M/T ANCO tugboat and the D/B Lucio barge, which were operated as As a consequence of the incident, SMC filed a complaint for Breach of
common carriers. Since the D/B Lucio had no engine of its own, it could not Contract of Carriage and Damages against ANCO for the amount of One
maneuver by itself and had to be towed by a tugboat for it to move from one Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos
place to another. (P1,346,197.00) plus interest, litigation expenses and Twenty-Five Percent
On 23 September 1979, San Miguel Corporation (SMC) shipped from (25%) of the total claim as attorney's fees.
Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T ANCO, the
following cargoes: Upon Ang Gui's death, ANCO, as a partnership, was dissolved hence, on 26
● Bill of Lading No. Shipment Destination January 1993, SMC filed a second amended complaint which was admitted by
1 — 25,000 cases Pale Pilsen Estancia, Iloilo, and 350 cases Cerveza Negra the Court impleading the surviving partner, Co To and the Estate of Ang Gui
Estancia, Iloilo represented by Lucio, Julian and Jaime, all surnamed Ang.  The substituted
defendants adopted the original answer with counterclaim of ANCO "since
the substantial allegations of the original complaint and the amended from where the barge remained. The transferred vessels were definitely
complaint are practically the same." safer, which ANCO failed to dispute.

ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra ● ANCO’s Claim: Loss of cargoes was due to typhoon Sisang, a
mentioned in the complaint were indeed loaded on the vessel belonging to fortuitous event
ANCO.  It claimed however that it had an agreement with SMC that ANCO ANCO argues tehre was no fault or negligence on their party as they claim
would not be liable for any losses or damages resulting to the cargoes by that their crewmembers exercised due diligence to prevent or minimize the
reason of fortuitous event.  Since the cases of beer Pale Pilsen and Cerveza loss but their efforts were not match to the forces of the typhoon, an act of
Negra were lost by reason of a storm, a fortuitous event which battered and God, the consequences of which they could not be held liable.
sunk the vessel in which they were loaded, they should not be held liable.   Civil Code provides:
ANCO further asserted that there was an agreement between them and SMC 1. Art. 1733 – Common carriers, from the nature of their business and for
to insure the cargoes in order to recover indemnity in case of loss. reasons of public policy, are bound to observe extraordinary diligence in
III. Issue/s the vigilance over the goods and safety of passengers...
2. Art. 1734 (1) – Common carriers are responsible for the loss, destruction
Whether or not ANCO, through its representatives, is negligent in
or deterioration of goods unless the same is due to any of the following
handling the cargoes of SMC, thus, held liable to pay damages. – YES,
causes: (1) Flood, storm, earthquake, lightning, or other natural disaster
since they are blatantly negligent and they failed to exercise extraordinary
or calamity.
degree of diligence required by the law.
3. Art. 1739 – In order that the common carrier may be exempted from
responsibility, the natural disaster must have been the proximate
IV. Ratio/Legal Basis and only cause of the loss. However, the common carrier must
● ANCO’s liability over the cargoes exercise due diligence to prevent or minimize loss before, during
ANCO alleged that CA committed error in concluding that the negligence of and after the occurrence of flood, storm, or other natural disaster in
ANCO’s representative was the proximate cause of the loss. This issue is a order that the common carrier may be exempted from liability for
question of fact, which SC cannot review, especially since they are borne out the loss, destruction, or deterioration of the goods...
by the records or are supported by substantial evidence. A careful study of Caso fortuito or force majeure are extraordinary events not foreseeable or
the records shows that ANCO’s representatives failed to exercise the avoidable (events that could not be foreseen, or which though foreseen, were
extraordinary degree of diligence required by the law to exculpate them inevitable). It is not enough that the event should not have been foreseen or
from liability for the loss of the cargoes. anticipated. It must be one IMPOSSIBLE to foresee or to avoid.
ANCO admitted that they failed to deliver to the consignee the 29,210 In this case, calamity which caused the loss of the cargoes was not
cases of Pale Pilsen and 550 cases of Cerveza Negra. A witness testified unforeseen nor was it unavoidable. In fact, other vessels managed to transfer
that D/B Lucio had no engine of its own and could not maneuver by to a safer place.
itself. Despite this, the tugboat’s captain left D/B Lucio (barge) to fend D/B Lucio had no engine and could not maneuver by itself. Even if the
for itself notwithstanding the signs of the impending storm were crewmembers wanted to transfer it, they no longer had any means to do so.
already manifest upon the arrival of the 2 vessels at the port of San Jose, The captain of the tugboat should have had the foresight not to leave the
Antique. There were already big waves and the area was already dark. barge alone considering the pending storm.
This was corroborated by ANCO’s own witness. While the loss of cargoes was admittedly caused by a natural disaster
D/B Lucio was the only vessel left at San Jose, Antique during said time (typhoon Sisang), ANCO could not escape liability as the records show its
as other vessels transferred and temporarily moved to Malandong, 5 km failure to exercise the extraordinary degree of diligence mandated by law.
To be exempted from responsibility, the natural disaster should have Assurance Co. However, while in transit, the ship caught fire and sunk.
been the proximate and only cause of the loss. There must have been Federal Phoenix Assurance paid Berde Plants the P941,429.61 pursuant to the
NO contributory negligence. insurance policy and received a “Subrogation Receipt” that permitted the
As correctly pointed out by CA, there was blatant negligence on the part insurer to subrogate the insured in its rights. Federal Phoenix Assurance
of M/T ANCO’s crew, which was the proximate cause of the loss of the demanded that C.F. Sharp pay P941,429 by virtue of the “Subrogation
cargoes. The blatant negligence was established by the ff: Leaving the Receipt”, but C.F. Sharp denied any liability on the ground that such liability
engine-less barge D/B Lucio at the mercy of the storm without the was extinguished when the vessel carrying the cargo was gutted by fire.
assistance of the tug-boat. Failing to heed the request of SMC’s
representatives to have the barge transferred to a safer place. ISSUE: Are DSR-Senator Lines and C.F. Sharp liable to pay the insurance
V. Disposition company? Yes

WHEREFORE, premises considered, the Decision of the Court of Appeals Fire is not one of those enumerated under Article 1734, which
dated 24 February 1999 is hereby AFFIRMED with MODIFICATION dismissing exempts a carrier from liability for loss or destruction of the cargo. Since
the third-party complaint. the peril of fire is not comprehended within the exceptions in Article
1734, then the common carrier shall be presumed to have been at fault
SO ORDERED. or to have acted negligently, unless it proves that it has observed the
DSR Senator v Federal extraordinary diligence required by law. Even if fire were to be considered
a natural disaster within the purview of Article 1734, it is required under
- Shipment of artificial trees to Saudi Arabia. While in transit, the ship Article 1739 of the same Code that the natural disaster must have been the
caught fire and sunk. Is the carrier liable? Yes/ proximate and only cause of the loss, and that the carrier has exercised due
- Fire is not one of those enumerated under Article 1734, which diligence to prevent or minimize the loss before, during or after the
exempts a carrier from liability for loss or destruction of the occurrence of the disaster. A common carrier’s duty to observe the requisite
cargo. Since the peril of fire is not comprehended within the diligence in the shipment of goods lasts from the time the articles are
exceptions in Article 1734, then the common carrier shall be surrendered to or unconditionally placed in the possession of, and received
presumed to have been at fault or to have acted negligently, by, the carrier for transportation until delivered to or until the lapse of a
unless it proves that it has observed the extraordinary diligence reasonable time for their acceptance by the person entitled to receive them.
required by law When the goods shipped either are lost or arrive in damaged condition, a
- Respondent Federal Phoenix Assurance raised the presumption of presumption arises against the carrier of its failure to observe that diligence,
negligence against petitioners. However, they failed to overcome it
and there need not be an express finding of negligence to hold it liable.
by sufficient proof of extraordinary diligence
Respondent Federal Phoenix Assurance raised the presumption of
negligence against petitioners. However, they failed to overcome it by
I. Recit-ready summary
sufficient proof of extraordinary diligence

Berde Plants delivered a shipment of artificial trees to C.F. Sharp and

II. Facts of the case
Company, the General Ship Agent of DSR-Senator Lines. C.F. Sharp was
tasked with the transport and delivery of the cargo to Al-Mohr
Berde Plants, Inc. delivered a cargo of 632 units of artificial trees to C.F.
International Group in Riyadh, Saudi Arabia. The cargo had an invoice
Sharp and Company, which was the General Ship Agent of DSR-Senator
value of P941,429.16 and was insured against all risks by Federal Phoenix
Lines, a foreign shipping corporation. C.F. Sharp was to transport and deliver
the trees to the consignee, Al-Mohr International Group, in Riyadh, Saudi IV. Ratio/Legal Basis
Arabia.
Article 1734 of the Civil Code provides:
Under the Bill of Lading, the cargo had an invoice value of $34,579.60.
Federal Phoenix Assurance Company, Inc. insured the cargo against all risks Art. 1734. Common carriers are responsible for the loss, destruction, or
in the amount of P941,429.61. deterioration of the goods, unless the same is due to any of the following
causes only:
The cargo was loaded in the M/S “Arabian Senator.” When the ship
arrived in the port of discharge at Fhor Fakkan Port, the cargo was reloaded 1) Flood, storm, earthquake, lighting, or other natural disaster or
on board DSR-Senator Lines’ feeder vessel, the M/V “Kapitan Sakharov,” calamity;
which would take the cargo to the port of delivery in Port Dammam, Saudi 2) Act of the public enemy in war, whether international or civil;
Arabia. However, while in transit, its cargo caught fire and the vessel sunk. 3) Act or omission of the shipper or owner of the goods;
4) The character of the goods or defects in the packing or in the
containers;
Consequently, Federal Phoenix Assurance paid Berde Plants the
5) Order or act of competent public authority.
P941,419.61 pursuant to the insurance policy. Berde Plants executed a
“Subrogation Receipt” in favor of Federal Phoenix Assurance, which would
Fire is not one of those enumerated under Article 1734, which exempts a
allow the insurance company to subrogate it in its rights and remedies.
carrier from liability for loss or destruction of the cargo.

Federal Phoenix Assurance demanded that C.F. Sharp pay P941,429 by

In Eastern Shipping Lines, Inc. vs. Intermediate Appellate Court, we ruled
virtue of the “Subrogation Receipt”, but C.F. Sharp denied any liability on the
that since the peril of fire is not comprehended within the exceptions in
ground that such liability was extinguished when the vessel carrying the
Article 1734, then the common carrier shall be presumed to have been at
cargo was gutted by fire. Federal Phoenix Assurance then filed a complaint
fault or to have acted negligently, unless it proves that it has observed the
for damages against DSR-Senator Lines and C.F. Sharp with the Regional Trial
extraordinary diligence required by law.
Court of Manila, who awarded judgment in favor of the insurance company.

Even if fire were to be considered a natural disaster within the purview of

The appellant carrier was presumed to have acted negligently for the fire
Article 1734, it is required under Article 1739 of the same Code that the
that gutted the feeder vessel and the consequent loss or destruction of the
natural disaster must have been the proximate and only cause of the loss,
cargo. Contrary to C.F. Sharp’s argument, its liability as a ship agent
and that the carrier has exercised due diligence to prevent or minimize the
continued and remained until the cargo was delivered to the consignee. The
loss before, during or after the occurrence of the disaster.
status of the appellant as ship agent subsisted and its liability as a ship agent
was co-terminous with and subsisted as long as the cargo was not delivered
A common carrier’s duty to observe the requisite diligence in the
to the consignee under the terms of the Bill of Lading.
shipment of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier for
III. Issue/s
transportation until delivered to or until the lapse of a reasonable time for
their acceptance by the person entitled to receive them. When the goods
Were DSR-Senator Lines and C.F. Sharp liable to the insurance company? Yes.
shipped either are lost or arrive in damaged condition, a presumption arises
against the carrier of its failure to observe that diligence, and there need not sinking and loss of the cargo was a natural disaster, a storm which could
be an express finding of negligence to hold it liable. not have been foreseen.
The RTC decided against Central Shipping, decreeing its liability for the loss
Common carriers are obliged to observe extraordinary diligence in the of the cargo as monsoons (or the habagat) were common occurrences during
vigilance over the goods transported by them. Accordingly, they are the said period and it could have been foreseen by an ocean-going vessel.
presumed to have been at fault or to have acted negligently if the goods are This was affirmed by the CA. It also denied the application of the doctrine of
lost, destroyed or deteriorated. There are very few instances when the
limited liability. Hence, this petition before the Supreme Court.
presumption of negligence does not attach and these instances are
The Court ruled against Central Shipping and adjudged its liability for
enumerated in Article 1734. In those cases where the presumption is applied,
the loss of the cargo and reiterated the non-applicability of the doctrine
the common carrier must prove that it exercised extraordinary diligence in
of limited liability.
order to overcome the presumption.

Respondent Federal Phoenix Assurance raised the presumption of Even if the weather encountered by the ship is to be deemed a natural
negligence against petitioners. However, they failed to overcome it by disaster under Article 1739 of the Civil Code, Central Shipping failed to show
sufficient proof of extraordinary diligence. that such natural disaster or calamity was the proximate and only cause of
the loss. As a rule, the damaging effects blamed on the event or
V. Disposition phenomenon must not have been caused, contributed to, or worsened
by the presence of human participation. The defense of fortuitous event
WHEREFORE, the instant petition is DENIED. or natural disaster cannot be successfully made when the injury could
have been avoided by human precaution.
Central Shipping v Insurance In the case, loss of the vessel was caused not only by the southwestern
monsoon, but also by the shifting of the logs for being improperly loaded.
The logs stored in the lower hold were not secured by cable wire,
I. Recit-ready summary because they fitted exactly from floor to ceiling. It is obvious, as a matter of
common sense, that this manner of stowage was not sufficient to secure the
Sometime in July, Central Shipping, owner of the vessel M/V Central Bohol, logs in the event the ship should roll in heavy weather.
agreed to transport a shipment of 376 round logs from Puerto Princesa to The evidence indicated that strong southwest monsoons were common
Manila for delivery to Alaska Lumber. The cargo was insured by the occurrences during the month of July. Thus, the officers and crew of M/V
Insurance Company. During the voyage, the vessel encountered a habagat Central Bohol should have reasonably anticipated heavy rains, strong winds
that caused the loaded logs to shift their positions, resulting in the and rough seas. They should then have taken extra precaution in stowing the
tilting of the ship by 10 degrees and later by 15 degrees. Eventually, the logs in the hold, in consonance with their duty of observing extraordinary
vessel completely sank, causing the total loss of the cargo. diligence in safeguarding the goods. But the carrier took a calculated risk in
Insurance Company paid the insurance claim of Alaska. Now, the former is improperly securing the cargo. Having lost that risk, it cannot now escape
going against Central Shipping to claim the value of the shipment. Central responsibility for the loss.
Shipping raised the defense that the proximate and only cause of the
The doctrine of limited liability under Article 587 of the Code of Central Shipping disclaims responsibility for the loss of the cargo by claiming
Commerce does not apply to situations in which the loss or the injury is the occurrence of a “storm” under Article 1734(1). It attributes the sinking of
due to the concurrent negligence of the shipowner and the captain. its vessel solely to the weather condition at the time of the incident. It further
alleges that it was impossible for the logs to have shifted, because they had
II. Facts of the case fitted exactly in the hold.

In July 1990, petitioner Central Shipping, at Puerto Princesa, received on III. Issue
board its vessel, M/V Central Bohol, 376 pieces of Philippine Apitong Round
Logs and undertook to transport said shipment to Manila for delivery to 1. Whether or not Central Shipping is liable for the loss of the
Alaska Lumber Co., Inc. The cargo was insured by respondent Insurance shipment? Yes.
Company of North America for P3,000,000. 2. Whether or not the doctrine of limited liability is applicable? No.

During its voyage, the vessel encountered southwestern monsoon (habagat).

IV. Ratio/Legal Basis
The loaded logs therein shifted their positions and caused the ship to tilt
From the nature of their business and for reasons of public policy, common
about 10 degrees. When the tilting increased to 15 degrees, the ship captain
carriers are bound to observe extraordinary diligence over the goods they
ordered his men to abandon the ship. Shortly thereafter, the vessel
transport, according to all the circumstances of each case. In the event of
completely sank, causing the total loss of the cargo.
loss, destruction or deterioration of the insured goods, common carriers are
Alaska presented a claim for the value of the shipment against Central
responsible; that is, unless they can prove that such loss, destruction or
Shipping, but the latter refused. As the insurer, Insurance Company paid
deterioration was brought about—among others—by “flood, storm,
Alaska its claim; and sought to be subrogated to all the rights and actions
earthquake, lightning or other natural disaster or calamity.” In all other cases
against Central Shipping. Central Shipping raised as its main defense that the
not specified under Article 1734 of the Civil Code, common carriers are
proximate and only cause of the sinking of its vessel and the loss of its cargo
presumed to have been at fault or to have acted negligently, unless they
was a natural disaster, a tropical storm which neither petitioner nor the
prove that they observed extraordinary diligence.
captain of its vessel could have foreseen.
In the case, Central Shipping failed to prove that the weather encountered
The RTC found Central Shipping liable for the loss of the cargo. It was not
by the vessel was a “storm” as contemplated by Art. 1734 (1). What the vessel
convinced that the sinking of the vessel had been caused by the weather or
encountered was southwestern monsoon (habagat), as admitted by both
any other fortuitous cause. It noted that monsoons, which were common
Central Shipping and the captain of the vessel. Having made such factual
occurrences during the months of July to December, could have been
representation, it cannot now be allowed to retreat and claim that the
foreseen and provided for by an ocean-going vessel.
southwestern monsoon was a “storm” to escape liability.
The CA affirmed the RTC decision. It ruled that given the season of rains and
Even if the weather encountered by the ship is to be deemed a natural
monsoons, the ship captain and his crew should have anticipated the perils of
disaster under Article 1739 of the Civil Code, Central Shipping failed to show
the sea; and that the weather disturbance was not the sole and proximate
that such natural disaster or calamity was the proximate and only cause of
cause of the sinking of the vessel, which was also due to the concurrent
the loss. As a rule, the damaging effects blamed on the event or
shifting of the logs in the hold that could have resulted from the improper
phenomenon must not have been caused, contributed to, or worsened by the
stowage. It concluded that the doctrine of limited liability was not applicable.
presence of human participation. The defense of fortuitous event or natural
Hence, the present petition.
disaster cannot be successfully made when the injury could have been Citadel Lines v CA
avoided by human precaution.
I. Recit-ready summary
Hence, if a common carrier fails to exercise due diligence—or that ordinary Manila Wine Merchants shipped Dunhill cigarettes from England
care that the circumstances of the particular case demand—to prevent or to Manila thru vessel Cardigan Bay/Straight enterprise whose agent is
minimize the loss before, during and after the occurrence of the natural Citadel Lines. The shipment arrived at the Port of Manila and was received
disaster, the carrier shall be deemed to have been negligent. The loss or by E. Razon under a Cargo Receipt. Due to lack of space at the Special
injury is not, in a legal sense, due to a natural disaster under Article 1734(1). Cargo Coral, the good were placed in two containers with two pallets in
In the case, loss of the vessel was caused not only by the southwestern the original container, and four pallets in another container with both
monsoon, but also by the shifting of the logs for being improperly loaded. containers duly padlocked and sealed by the representative of Citadel
The logs stored in the lower hold were not secured by cable wire, because Lines. The next day, however, they found out that the padlock was different
they fitted exactly from floor to ceiling. It is obvious, as a matter of common and the seal was tampered. 90 cases of cigarettes went missing. Manila
Wine filed a formal claim against Citadel asking for the market value of the
sense, that this manner of stowage was not sufficient to secure the logs in the
cigarettes.
event the ship should roll in heavy weather.
WON the value asked for is correct—NO
The evidence indicated that strong southwest monsoons were common
No doubt, Citadel was liable because the shipment was lost while its
occurrences during the month of July. Thus, the officers and crew of M/V
with Citadel’s custody.
Central Bohol should have reasonably anticipated heavy rains, strong winds
The award of damages in the amount of P312,800.00 for the value of
and rough seas. They should then have taken extra precaution in stowing the the goods lost, based on the alleged market value is erroneous. It is clearly
logs in the hold, in consonance with their duty of observing extraordinary and expressly provided under Clause 6 of the aforementioned bills of lading
diligence in safeguarding the goods. But the carrier took a calculated risk in issued by the Citadel Lines that its liability is limited to $2.00 per kilo.
improperly securing the cargo. Having lost that risk, it cannot now escape A stipulation limiting the liability of the carrier to the value of the goods
responsibility for the loss. appearing in the bill of lading, unless the shipper or owner declares a
The doctrine of limited liability under Article 587 of the Code of Commerce greater value, is binding.
does not apply to situations in which the loss or the injury is due to the
concurrent negligence of the shipowner and the captain. II. Facts of the case
In the case, the sinking of M/V Central Bohol had been caused by the fault or Citadel Lines—general agent of the vessel Cardigan Bay/Strait
negligence of the ship captain and the crew, as shown by the improper Enterprise
stowage of the cargo of logs. Closer supervision on the part of the shipowner Manila Wine Merchants—importer of the shipment
could have prevented this fatal miscalculation. As such, the shipowner was
Cardigan Bay/Strait Enterprise loaded on board at Southamptom,
equally negligent. It cannot escape liability by virtue of the limited liability
England, for carriage to Manila, 180 Filbrite cartons of British manufactured
rule.
cigarettes called “Dunhill International Filter” and “Dunhill International
V. Disposition
Menthol” as evidenced by 2 bills of lading. The shipment arrived at the Port
WHEREFORE, the Petition is DENIED, and the assailed Decision and
of Manila and was received by E. Razon under a Cargo Receipt.
Resolution AFFIRMED. Costs against petitioner.
The container van, which contained two shipments was stripped. One
SO ORDERED.
shipment was delivered and the other shipment consisting of the imported
British manufactured cigarettes was palletized. Due to lack of space at the prove that they observed extra ordinary diligence as required in Article 1733
Special Cargo Coral, the aforesaid cigarettes were placed in two containers of the Civil Code.
with two pallets in the original container, and four pallets in another The duty of the consignee is to prove merely that the goods were
container with both containers duly padlocked and sealed by the lost. Thereafter, the burden is shifted to the carrier to prove that it has
representative of Citadel Lines. exercised the extraordinary diligence required by law. And, its
Citadel Lines’ headchecker discovered that one of the container vans extraordinary responsibility lasts from the time the goods are
had a different padlock and the seal was tampered with. unconditionally placed in the possession of, and received by the carrier
The matter was reported to Jose G. Sibucao, Pier Superintendent, Pier for transportation until the same are delivered, actually or
13, and upon verification, it was found that 90 cases of imported British constructively, by the carrier to the consignee or to the person who has
manufactured cigarettes were missing which was confirmed in the report of the right to receive them.
said Superintendent Sibucao to Ricardo Cosme, Assistant Operations The subject shipment was lost while it was still in the custody of herein
Manager and the Official Report/Notice of Claim of Citadel Lines, Inc. to E. petitioner Citadel Lines, and considering further that it failed to prove
Razon, Inc. that the loss was occasioned by an excepted cause, the inescapable
Per investigation conducted by the ARRASTRE, it was revealed that conclusion is that Citadel Lines was negligent and should be held liable
the cargo in question was not formally turned over to it by the Citadel Lines therefor.
but was kept inside container van which was padlocked and sealed by the But the award of damages in the amount of P312,800.00 for the value of
representatives of Citadel Lines without any participation of the ARRASTRE. the goods lost, based on the alleged market value is erroneous. It is clearly
Manila Wine filed a claim against Citadel Citadel Lines, demanding and expressly provided under Clause 6 of the aforementioned bills of lading
the payment of P315,000.00 representing the market value of the missing issued by the Citadel Lines that its liability is limited to $2.00 per kilo.
cargoes. Citadel admitted the loss but alleged that the incident occurred A stipulation limiting the liability of the carrier to the value of the
in the area controlled by the Arrastre. Manila wine field a claim against goods appearing in the bill of lading, unless the shipper or owner
arrastre but said claim was denied/ declares a greater value, is binding.
III. Issue/s A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction or deterioration of the goods is valid, if
WON Citaldel is should pay Manila Merchants—YES it is reasonable and just under the circumstances, and has been fairly
How much would that be—determined in accordance with their and freely agreed upon.
agreement The bill of lading shows that 120 cartons weigh 2,978kilos or 24.82
kilos per carton. Since 90 cartons were lost and the weight of said
IV. Ratio/Legal Basis cartons is 2,233.80 kilos, at $2.00 per kilo Citadel Lines' liability amounts
to only US$4,467.60.
Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the vigilance V. Disposition
over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case. WHEREFORE, the judgment of respondent court is hereby MODIFIED and
If the goods are lost, destroyed or deteriorated, common carriers are petitioner Citadel Lines, Inc. is ordered to pay private respondent Manila
presumed to have been at fault or to have acted negligently, unless they Wine Merchants, Inc. the sum of US$4,465.60 or its equivalent in Philippine
currency at the exchange rate obtaining at the time of payment thereof. In all Hernandez Trading, as consignee is bound by the stipulations
other respects, said judgment of respondent Court is AFFIRMED thereof

Everett Steamship v CA Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court
(supra), the Court held that even if the consignee was not a
signatory to the contract of carriage between the shipper and
I. Recit-ready summary
the carrier, the consignee can still be bound by the contract.
When Hernandez Trading formally claimed reimbursement for
Hernandez Trading Co. Inc, private respondent, imported three crates of
the missing goods from Everett and subsequently filed a case
bus spare parts, from its supplier, Maruman Trading Company, Ltd. The
against the latter based on the very same bill of lading, it
crates were shipped from Nagoya, Japan to Manila on board "ADELFA
(Hernandez) accepted the provisions of the contract and thereby
EVERETTE," a vessel owned by Everett Steamship's principal, Everett Orient
made itself a party thereto, or at least has come to court to
Lines. The crates were covered by a Bill of Lading. Upon arrival in Manila, one
enforce it.
crate was missing. Hernandez Trading demanded Everett to pay the full
Thus, Hernandez Trading cannot now reject or disregard the
amount of the lost cargo. Everett offered to pay only 100,000 yen, the
carrier's limited liability stipulation in the bill of lading.
maximum amount stipulated under the bill of lading which limits the
liability of Everett.
To defeat the carrier's limited liability, the aforecited Clause 18 of the bill of
lading requires that the shipper should have declared in writing a higher
hether or not Everett Steamship liable for the whole amount of the lost
valuation of its goods before receipt thereof by the carrier and insert the said
cargo or just the amount stipulated under the bill of lading?
declaration in the bill of lading , with the extra freight paid. These
Limited Liability Clause in the Bill of Lading valid
requirements in the bill of lading were never complied with by the shipper,
hence, the liability of the carrier under the limited liability clause stands. In
A stipulation in the bill of lading limiting the common carrier's liability
fine, the liability of Everett for the loss of the cargo is limited to 100,000
for loss or destruction of a cargo to a certain sum, unless the shipper or
Yen, pursuant to Clause 18 of the bill of lading.
owner declares a greater value, is sanctioned by law, particularly Articles
1749 and 1750 of the Civil Code. Pursuant to the aforequoted provisions of
II. Facts of the case
law, it is required that the stipulation limiting the common carrier's
liability for loss must be "reasonable and just under the circumstances
 Hernandez Trading Co. Inc, private respondent, imported three crates
and has been freely and fairly agreed upon .”
of bus spare parts marked as MARCO C/No. 12, MARCO C/No. 13
and MARCO C/No. 14, from its supplier, Maruman Trading Company,
The Bill of Lading states that “the carrier shall not be liable of any loss of or
Ltd. (Maruman Trading) based in Japan.
any damage to or in any connection with, goods in an amount exceeding
 The crates were shipped from Nagoya, Japan to Manila on board
100,000 yen unless the value of the goods higher than this amount is
"ADELFAEVERETTE," a vessel owned by Everett Steamship's principal,
declared in writing the by shipper before receipt of the goods by the
Everett Orient Lines.
carrier and inserted in the Bill of Lading. This is held reasonable by the
 The crates were covered by a Bill of Lading
court
 Upon arrival at the port of Manila, it was discovered that the crate
marked MARCO C/No. 14 was missing.
  The loss was confirmed and admitted by Everett Steamship in its  Pursuant to the aforequoted provisions of law, it is required that the
letter addressed to Hernandez Trading Co., which thereafter made a stipulation limiting the common carrier's liability for loss must be
formal claim upon Everett for the value of the lost cargo "reasonable and just under the circumstances and has been freely
amounting to 1,552,500 yen. and fairly agreed upon."
 Everett offered to pay only 100,000 yen, the maximum amount  The bill of lading subject of the present controversy speci􀁈cally
provides, among others:
stipulated under the bill of lading which limits the liability of Everett.
o 18. All claims for which the carrier may be liable shall be
 Hernandez Trading rejected the offer and instituted a suit of
adjusted and settled on the basis of the shipper's net invoice
collection against Everett Steamship.
cost plus freight and insurance premiums, if paid, and in no
 Trial Court ruled in favor of Hernandez Trading and made Everett pay
event shall the carrier be liable for any loss of possible profits
the actual value of the lost cargo and the material and packaging or any consequential loss.
cost. CA affirmed o The carrier shall not be liable for any loss of or any damage
 Everett is now arguing that the CA erred in ruling that to or in any connection with, goods in an amount exceeding
o the consent of the consignee to the terms and conditions of One Hundred Thousand Yen in Japanese Currency
the bill of lading is necessary to make such stipulations (Y100,000.00) or its equivalent in any other currency per
binding upon it; package or customary freight unit (whichever is least) unless
o in holding that the carrier's limited package liability as the value of the goods higher than this amount is declared in
stipulated in the bill of lading does not apply in the instant writing by the shipper before receipt of the goods by the
case; carrier and inserted in the Bill of Lading and extra freight is
paid as required.
o in allowing private respondent to fully recover the full
 The above stipulations are, to our mind, reasonable and just. In
alleged value of its lost cargo.
the bill of lading, the carrier made it clear that its liability would
only be up to One Hundred Thousand (Y100,000.00) Yen.
III. Issue  However, the shipper, Maruman Trading, had the option to
declare a higher valuation if the value of its cargo was higher
Whether or not Everett Steamship liable for the whole amount of the lost than the limited liability of the carrier. Considering that the
cargo or just the amount stipulated under the bill of lading? shipper did not declare a higher valuation, it had itself to blame
1. Is the Limited Liability Clause in the Bill of Lading valid? YES for not complying with the stipulations.
2. Is Hernandez Trading, as consignee and not a signatory to the bill of  The trial court's ratiocination that private respondent could not have
lading, bound by the stipulations thereof? YES "fairly and freely" agreed to the limited liability clause in the bill of
lading because the said conditions were printed in small letters
does not make the bill of lading invalid.
IV. Ratio/Legal Basis  The Court ruled in PAL, Inc vs. Court of Appeals 5 that the
"jurisprudence on the matter reveals the consistent holding of the
1. Validity of the Limited Liability Clause in the Bill of Lading court that contracts of adhesion are not invalid per se and that it
 A stipulation in the bill of lading limiting the common carrier's has on numerous occasions upheld the binding effect thereof.
liability for loss or destruction of a cargo to a certain sum, unless the  Greater vigilance, however, is required of the courts when dealing
shipper or owner declares a greater value, is sanctioned by law, with contracts of adhesion in that the said contracts must be carefully
particularly Articles 1749 and 1750 of the Civil Code (See Notes) scrutinized "in order to shield the unwary (or weaker party) from
 It has also been consistently upheld in a number of cases.
 deceptive schemes contained in ready-made covenants,” such as the stipulation, in this case the delivery of the goods or cargo
bill of lading in question. shipped.
 The stringent requirement which the courts are enjoined to observe o In neither capacity can he assert personally, in bar to any
is in recognition of Article 24 of the Civil Code which mandates that " provision of the bill of lading, the alleged circumstance that
(i)n all contractual, property or other relations, when one of the fair and free agreement to such provision was vitiated by its
parties is at a disadvantage on account of his moral dependence, being in such fine print as to be hardly readable.
ignorance, indigence, mental weakness, tender age or other o There can, therefore, be no doubt or equivocation about the
handicap, the courts must be vigilant for his protection. validity and enforceability of freely-agreed-upon stipulations
 The shipper, Maruman Trading, we assume, has been extensively in a contract of carriage or bill of lading limiting the liability
engaged in the trading business. It cannot be said to be ignorant of the carrier to an agreed valuation unless the shipper
of the business transactions it entered into involving the shipment of declares a higher value and inserts it into said contract or bill.
its goods to its customers. The shipper could not have known or  When Hernandez Trading formally claimed reimbursement for
should know the stipulations in the bill of lading and there it the missing goods from Everett and subsequently filed a case
should have declared a higher valuation of the goods shipped. against the latter based on the very same bill of lading, it
Moreover, Maruman Trading has not been heard to complain that it (Hernandez) accepted the provisions of the contract and thereby
has been deceived or rushed into agreeing to ship the cargo in made itself a party thereto, or at least has come to court to
Everett's vessel. In fact, it was not even impleaded in this case. enforce it.
 Thus, Hernandez Trading cannot now reject or disregard the
2. Hernandez Trading Co., as consignee is bound by the stipulation of carrier's limited liability stipulation in the bill of lading. In other
the bill of lading despite not being a signatory to it. words, Hernandez Trading is bound by the whole stipulations in the
 Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court bill of lading and must respect the same.
(supra), the Court held that even if the consignee was not a signatory  The bill of lading in question confirms Everett's contention that it did
to the contract of carriage between the shipper and the carrier, not know of the contents, quantity and value of "the shipment which
the consignee can still be bound by the contract. Speaking consisted of three pre-packed crates described in Bill of Lading No.
through Mr. Chief Justice Narvasa, the Court ruled: NGO-53MN merely as '3 CASES SPARE PARTS."'
o "To begin with, there is no question of the right, in principle,  To defeat the carrier's limited liability, the aforecited Clause 18 of the
of a consignee in a bill of lading to recover from the carrier bill of lading requires that the shipper should have declared in
or shipper for loss of, or damage to goods being transported writing a higher valuation of its goods before receipt thereof by the
under said bill, although that document may have been — as carrier and insert the said declaration in the bill of lading , with the
in practice it oftentimes is-drawn up only by the consignor extra freight paid.
and the carrier without the intervention of the consignee…  These requirements in the bill of lading were never complied
o . . the right of a party in the same situation as respondent with by the shipper, hence, the liability of the carrier under the
here, to recover for loss of a shipment consigned to him limited liability clause stands.
under a bill of lading drawn up only by and between the  The commercial Invoice No. MTM-941 does not in itself sufficiently
shipper and the carrier, springs from either a relation of and convincingly show that Everett has knowledge of the value of the
agency that may exist between him and the shipper or cargo as contended by Hernandez Trading.
consignor, or his status as stranger in whose favor some  No other evidence was proffered by private respondent to support is
stipulation is made in said contract, and who becomes a contention. Thus, the Court is (not) convinced that Everett should be
party thereto when he demands fulfillment of that liable for the full value of the lost cargo.
  In fine, the liability of Everett for the loss of the cargo is limited to The waves got more intense; and after being hit by 2 big waves, the
100,000 Yen, pursuant to Clause 18 of the bill of lading. boat capsized putting all the passengers underwater. The newlywed
died.
V. Disposition
Petitioner filed a complaint claiming that respondent, as a common carrier,
WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in were guilty of negligence in allowing the boat to travel despite the
C.A.-G.R. CV No. 42803 is hereby REVERSED and SET ASIDE. storm warning bulletins issued by PAGASA. Respondent denied being a
common carrier claiming that they only ferry resort guests and crew
VI. Notes members. And even if they were common carriers, they have exercised
utmost diligence in ensuring their passengers’ safety since there was no
 ART. 1749. A stipulation that the common carrier's liability is limited storm when the left and the coast guard has cleared their voyage. The boat
to the value of the goods appearing in the bill of lading, unless the
was not filled to capacity and everyone had life jackets. Moreover, the captain
shipper or owner declares a greater value, is binding.
of the boat averred that the Resort customarily requires 4 conditions to be
 ART. 1750. A contract fixing the sum that may be recovered by the
met before they sail:
owner or shipper for the loss, destruction, or deterioration of the
goods is valid, if it is reasonable and just under the circumstances, (1) the sea is calm, (2) there is clearance from the Coast Guard, (3) there is
and has been freely and fairly agreed upon clearance from the captain and (4) there is clearance from the Resort's
assistant manager. Here, all conditions were met.

Cruz v Sun Holidays

ISSUE: WON respondents are common carriers and are to be held liable
for the death of the newlywed spouses — YES
I. Recit-ready summary

RATIO:
Petitioners Sps. Cruz filed a complaint against respondent Sun Holidays Inc.
Respondent is a common carrier since its ferry service is so intertwined
for damages arising from the death of their son Ruelito. He died with his
with its main business as to be properly considered ancillary thereto.
wife on board a boat M/B Coco Beach III which capsized when the
Their ferry service is so constant and this is underscored by the fact that the
couple was on their way to Batangas from Puerto Galera, where the
resort having its own Coco Beach boats. Moreover, the tour package it offers
couple stayed at the Coco Beach Island Resort, owned and operated by
includes ferry service. Thus, these services are available to the public.
respondent. On the day of the incident, Matute (a scuba diving instructor
who testified) and 25 other resort guests including the deceased spouses
SC holds that they are not impressed by respondent’s argument that they
trekked to the other side of the Coco Beach mountan that was sheltered from
followed their 4 conditions before setting sail. Evidence show that
the wind. This is where they boarded the boat which was to ferry them to
PAGASA issued a 24-hour forecast advising that there’s a tropical
Batangas. However, shortly after the boat has sailed, it started to rain and as
depression in Northern Luzon which would affect Mindoro, where the
they moved toward the open seas, the wind and rain got stronger, causing
resort is. This was even supported by the testimony of the supervising
the boat to tilt from side to side and the captain to step leave the wheel to
weather specialist who claimed that squalls are to be expected.
one of the crew members.

To be fully free a common carrier from any liability, the fortuitous event
must have been the proximate and only cause of the loss. And it should
have exercised due diligence to prevent or minimize the loss before, during the boat. The captain replied "Iligtas niyo na lang ang sarili niyo" (Just save
and after the occurrence of the fortuitous event. yourselves).

Here, respondents claim that the squall that happened is the proximate cause Help came about 45 minutes later when 2 boats came. These 2 boats
of the incident. But records prove that the occurrence of the squall was for boarded 22 persons consisting of 18 passengers and 4 crew members who
Sept. 11, 2000 (day of accident). Moreover, it was found that the boat were brought to Pisa Island. 8 passengers, including the spouses died. Ruelito
suffered engine trouble before it capsized and sank. Thus, the incident is was only 28 years old when he died, and employed as a contractual worker
NOT completely free from human intervention. for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a
basic monthly salary of $900.
II. Facts of the case
Petitioner spouses demanded indemnification from respondent for the death
Petitioners Sps. Cruz filed a complaint against respondent Sun Holidays Inc. of their son for P4M. Respondents denied any responsibility, claiming that
for damages arising from the death of their son Ruelito. He died with his wife the incident was a fortuitous event but they still offered P10k to petitioners
on board a boat M/B Coco Beach III which capsized when the couple was on as an act of commiseration which the petitioners rejected.
their way to Batangas from Puerto Galera, where the couple stayed at the
Coco Beach Island Resort, owned and operated by respondent. Thus, petitioner filed a complaint claiming that respondent, as a common
carrier, were guilty of negligence in allowing the boat to travel despite the
The newlywed stayed at the Resort of respondent in a tour package-contract storm warning bulletins issued by PAGASA.
that included transportation to and from the resort and the point of
departure in Batangas. Respondent denied being a common carrier claiming that they only ferry
resort guests and crew members. And even if they were common carriers,
On the day of the incident, Matute (a scuba diving instructor who testified) they have exercised utmost diligence in ensuring their passengers’ safety
and 25 other resort guests including the deceased spouses trekked to the since there was no storm when the left and the coast guard has cleared their
other side of the Coco Beach mountan that was sheltered from the wind. This voyage. The boat was not filled to capacity and everyone had life jackets.
is where they boarded the boat which was to ferry them to Batangas. Moreover, the captain of the boat averred that the Resort customarily
requires 4 conditions to be met before they sail:
However, shortly after the boat has sailed, it started to rain and as they (1) the sea is calm, (2) there is clearance from the Coast Guard, (3) there is
moved toward the open seas, the wind and rain got stronger, causing the clearance from the captain and (4) there is clearance from the Resort's
boat to tilt from side to side and the captain to step leave the wheel to one assistant manager. Here, all conditions were met.
of the crew members.
RTC - held that respondents were private carriers who need only to observe
The waves got more intense; and after being hit by 2 big waves, the boat ordinary diligence. CA - affirmed RTC’s findings and even held that
capsized putting all the passengers underwater. The passengers, who had put respondents observed extraordinary diligence and the proximate cause of the
on their life jackets, struggled to get out of the boat. Upon seeing the incident was a fortuitous event.
captain, Matute and the other passengers who reached the surface asked him
what they could do to save the people who were still trapped under Petitioners are now before the SC claiming that respondent is a common
carrier since by its tour package, the transporting of its guests is an integral
part of its resort business. They also inform that another division of the
appellate court has held respondent liable for damages to the other survivors ON DILIGENCE REQUIRED
of the incident. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence for the safety of the
passengers transported by them. When a passenger dies or is injured
III. Issue/s during the discharge of the contract of carriage, it is presumed that the
common carrier is at fault or negligent. This can be rebutted through
WON respondents are common carriers and are to be held liable for the evidence that a carrier has exercised extraordinary diligence.
death of the newlywed spouses — YES
In this case, SC holds that they are not impressed by respondent’s argument
IV. Ratio/Legal Basis that they followed their 4 conditions before setting sail. Evidence show that
PAGASA issued a 24-hour forecast advising that there’s a tropical
ON ART. 1732 depression in Northern Luzon which would affect Mindoro, where the resort
SC held that Art. 1732 makes no distinction between one whose principal is. This was even supported by the testimony of the supervising weather
business activity is the carrying of persons or goods or both, and one who specialist who claimed that squalls are to be expected.
does such carrying only as an ancillary activity (in local idiom, as "a
sideline").Article 1732 also carefully avoids making any distinction between a A very cautious person exercising the utmost diligence would thus not
person or enterprise offering transportation service on a regular or scheduled brave such stormy weather and put other people's lives at risk. The
basis and one offering such service on an occasional, episodic or extraordinary diligence required of common carriers demands that they
unscheduled basis. Neither does Article 1732 distinguish between a carrier take care of the goods or lives entrusted to their hands as if they were
offering its services to the "general public," i.e., the general community or their own. This respondent failed to do.
population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1733 ON FORTUITOUS EVENT ARGUMENT
deliberately refrained from making such distinctions. Moreover, the case cannot be considered a fortuitous event.
The elements of a "fortuitous event" are:
Respondent is a common carrier since its ferry service is so intertwined with (a) the cause of the unforeseen and unexpected occurrence, or the failure of
its main business as to be properly considered ancillary thereto. Their ferry the debtors to comply with their obligations, must have been independent of
service is so constant and this is underscored by the fact that the resort human will;
having its own Coco Beach boats. Moreover, the tour package it offers (b) the event that constituted the caso fortuito must have been impossible to
includes ferry service. Thus, these services are available to the public. foresee or, if foreseeable, impossible to avoid;
(c) the occurrence must have been such as to render it impossible for the
The fact that the respondent doesn’t charge any separate fee for its ferry debtors to fulfill their obligation in a normal manner; and
service is of no moment since it would be imprudent to claim that the resort (d) the obligor must have been free from any participation in the
suffers a loss in providing the service. SC is aware of the practice of beach aggravation of the resulting injury to the creditor.
resort operators to offer tour packages with such transportation fee. Those
who do not avail of it paying the same amount is inconsequential also. These To be fully free a common carrier from any liability, the fortuitous event must
guests may only deemed to have overpaid. have been the proximate and only cause of the loss. And it should have
exercised due diligence to prevent or minimize the loss before, during and Net Earning Capacity = life expectancy x (gross annual income - reasonable
after the occurrence of the fortuitous event. and necessary living expenses).
Life expectancy is determined in accordance with the formula:
Here, respondents claim that the squall that happened is the proximate cause 2/3 x [80 — age of deceased at the time of death] 30
of the incident. But records prove that the occurrence of the squall was for The 􏰚rst factor, i.e., life expectancy, is computed by applying the formula (2/3
Sept. 11, 2000 (day of accident). Moreover, it was found that the boat x [80 — age at death]) adopted in the American Expectancy Table of
suffered engine trouble before it capsized and sank. Thus, the incident is NOT
Mortality or the Actuarial of Combined Experience Table of Mortality. 31
completely free from human intervention.
The second factor is computed by multiplying the life expectancy by the net
earnings of the deceased,i.e., the total earnings less expenses necessary in
ON THE INDEMNITY
the creation of such earnings or income and less living and other incidental
(see notes since it’s not a tranpo topic)
expenses.32 The loss is not equivalent to the entire earnings of the deceased,
Article 1764 27 vis-à-vis Article 2206 28 of the Civil Code holds the common
but only such portion as he would have used to support his dependents or
carrier in breach of its contract of carriage that results in the death of a
heirs. Hence, to be deducted from his gross earnings are the necessary
passenger liable to pay the following: (1) indemnity for death, (2) indemnity
for loss of earning capacity and (3) moral damages. expenses supposed to be used by the deceased for his own needs. 33
In computing the third factor — necessary living expense, Smith Bell Dodwell
V. DISPOSITIVE PORTION Shipping Agency Corp. v. Borja 34 teaches that when, as in this case, there is
no showing that the living expenses constituted the smaller percentage of
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED the gross income, the living expenses are fixed at half of the gross income.
and SET ASIDE. Judgment is rendered in favor of petitioners ordering Applying the above guidelines, the Court determines Ruelito's life expectancy
respondent to pay petitioners the following: (1) P50,000 as indemnity for the as follows:
death of Ruelito Cruz; (2) P8,316,000 as indemnity for Ruelito's loss of earning Life expectancy = 2/3 x [80 — age of deceased at the time of death] 2/3 x [80
capacity; (3) P100,000 as moral damages; (4) P100,000 as exemplary - 28]
damages; (5) 10% of the total amount adjudged against respondent as 2/3 x [52] Life expectancy = 35
attorneys fees; and (6) the costs of suit. Documentary evidence shows that Ruelito was earning a basic monthly salary
of $900 35 which, when converted to Philippine peso applying the annual
The total amount adjudged against respondent shall earn interest at the rate
average exchange rate of $1 = P44 in 2000, 36 amounts to P39,600. Ruelito's
of 12% per annum computed from the finality of this decision until full
net earning capacity is thus computed as follows:
payment.
Net Earning Capacity
Net Earning Capacity
= life expectancy x (gross annual income - reasonable and necessary living
VI. Notes
expenses).
= 35 x (P475,200 - P237,600) = 35 x (P237,600)
Petitioners are entitled to indemnity for the death of Ruelito which is fixed at
= P8,316,000
P50,000.
Respecting the award of moral damages, since respondent common carrier's
As for damages representing unearned income, the formula for its
breach of contract of carriage resulted in the death of petitioners' son,
computation is:
following Article
1764 vis-à-vis Article 2206 of the Civil Code, petitioners are entitled to moral time the quanti􏰚cation of damages may be deemed to have been reasonably
damages. ascertained). The actual base for the
Since respondent failed to prove that it exercised the extraordinary diligence computation of legal interest shall, in any case, be on the amount finally
required of common carriers, it is presumed to have acted recklessly, thus adjudged.
warranting 3. When the judgment of the court awarding a sum of money becomes 􏰚nal
the award too of exemplary damages, which are granted in contractual and executory, the rate of legal interest, whether the case falls under
obligations if paragraph 1 or paragraph 2, above, shall be 12% per annum from such
the defendant acted in a wanton, fraudulent, reckless, oppressive or 􏰚nality until its satisfaction, this interim period being deemed to be by then
malevolent manner. an equivalent to a forbearance of credit. (emphasis supplied).
Under the circumstances, it is reasonable to award petitioners the amount of Since the amounts payable by respondent have been determined with
P100,000 as moral damages and P100,000 as exemplary damages. 38 certainty only in the present petition, the interest due shall be computed
Pursuant to Article 220839 of the Civil Code, attorney's fees may also be upon the 􏰚nality of this decision at the rate of 12% per annum until
awarded where exemplary damages are awarded. The Court 􏰚nds that 10% satisfaction, in accordance with paragraph number 3 of the immediately cited
of the total amount adjudged against respondent is reasonable for the guideline in Easter Shipping Lines, Inc.
purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals 40 teaches that when PAL v CA
an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,
delicts or quasi- delicts is breached, the contravenor can be held liable for
Note: Maritime law - A delay in the arrival of the luggage does not per se
payment of interest in the concept of actual and compensatory damages,
bring rise to a cause of action unless such delay is accompanied with bad
subject to the following rules, to wit —
faith.
1. When the obligation is breached, and it consists in the payment of a sum
of money, i.e., a loan or forbearance of money, the interest due should be
I. Recit Ready
that which may have been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially demanded. In the Co and family were arrived at 5:30 am in Manila International Airport
absence of stipulation, the rate of interest shall be 12% per annum to be aboard PAL’s airplane. Co tried to claim all his nine checked-in luggages
computed from default,i.e., from judicial or extrajudicial demand under and at the retrieval area. However, one of his luggages is missing. The lost
subject to the provisions of Article 1169 of the Civil Code. luggage and its contents were worth collectively around $2000 since it
2. When an obligation, not constituting a loan or forbearance of money, is contained gifts that they were going to gift to their relatives at home. Co
breached, an interest on the amount of damages awarded may be imposed then complained to Willy, one of PAL’s employees at the claim counter. Both
at the discretion of the court at the rate of 6% per annum. No interest, filled up a Property Irregularity Report. Co continued to call within the day, to
however, shall be adjudged on unliquidated claims or damages except when complain about his lost luggage. Eventually, Co asked his lawyer to write a
or until the demand can be established with reasonable certainty. demand to the PAL’s Central Baggage Services. PAL just apologized. PAL
Accordingly, where the demand is established with reasonable certainty, the never found the luggage. Co sued PAL. RTC ruled in favor of Co for
interest shall begin to run from the time the claim is made judicially or P42,766.02 by way of actual damages; P20,000.00 by way of exemplary
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so damages; P10,000.00 as attorney’s fees. CA affirmed. PAL argues that the
reasonably established at the time the demand is made, the interest shall Warsaw Convention, which limits the liability of the aircraft carrier for loss or
begin to run only from the date the judgment of the court is made (at which
damage to checked-in baggage to $20.00 based on weight, should apply checks corresponding to the nine luggages, i.e., including the one that was
for PAL when it comes to damages. missing.

WoN the Warsaw Convention applies? NO Plaintiff’s lost luggage was a Samsonite suitcase measuring about 62 inches
in length, worth about US$200.00 and containing various personal effects
DOCTRINE: The liability of the common carrier for the loss, destruction or purchased by plaintiff and his wife during their stay in the United States and
deterioration of goods transported from a foreign country to the similar other items sent by their friends abroad to be given as presents to
Philippines is governed primarily by the New Civil Code. In all matters not relatives in the Philippines. Plaintiff’s invoices evidences the purchases of the
regulated by said Code, the rights and obligations of common carriers presents amounting to $1243.01 plus presents given to them by friends
shall be governed by the Code of Commerce and by Special Laws. [Art amounting to $600.
1753] The law of the country to which the goods are to be transported
shall govern the liability of the common carrier for their loss, Plaintiff on several occasions unrelentingly called at defendant’s office in
destruction or deterioration. Common carriers practice extraordinary order to pursue his complaint about his missing luggage but to no avail.
diligence which presumes that common carriers are negligent if the goods Plaintiff through his lawyer wrote a demand letter to defendant company
are lost under their care, unless they prove that extraordinary diligence was through Rebecca V. Santos, its manager, Central Baggage Services. Rebecca
observed. Santos replied to the demand letter acknowledging ‘that to date we have
been unable to locate your (plaintiff’s) baggage despite our careful search’ and
IN THIS CASE: : Since the passenger’s destination in this case was the requesting plaintiff’s counsel to ‘please extend to him our sincere apologies for
Philippines, Philippine law governs the liability of the carrier for the loss of the inconvenience he was caused by this unfortunate incident.’ Defendants
the passenger’s luggage. PAL was also not able to refute the evidence of Co never found plaintiff’s missing luggage or paid its corresponding value.
nor prove that PAL exercised due diligence.
RTC found PAL liable to pay Co: P42,766.02 by way of actual damages;
II. Facts of the case P20,000.00 by way of exemplary damages; P10,000.00 as attorney’s fees;. CA
Plaintiff [Co], accompanied by his wife and son, arrived at the Manila affirmed.
International Airport aboard defendant airline’s PAL Flight No. 107 from San
Francisco, California, U.S.A. Soon after his enbarking (sic), plaintiff proceeded Plaintiff claims that Court should have used the Warsaw Convention to limit
to the baggage retrieval area to claim his nine pieces of checked-in luggage the liability of the aircraft carrier for loss or damage to checked-in baggage
with the corresponding claim checks in his possession. Plaintiff found eight of to $20.00 based on weight.
his luggage, but despite diligent search, he failed to locate the ninth luggage,
with claim check number 729113 which is the one in question in this case III. Issue/s
WoN the Warsaw convention should apply? No
Plaintiff then immediately notified defendant company through its employee,
Willy Guevarra, who was then in charge of the PAL claim counter at the IV. Ratio/Legal Basis
airport. Willy Guevarra filled up a printed form known as a Property DOCTRINE: The liability of the common carrier for the loss, destruction or
Irregularity Report acknowledging one of the plaintiff’s luggages to be deterioration of goods transported from a foreign country to the Philippines
missing, and signed it after asking plaintiff himself to sign the same is governed primarily by the New Civil Code. In all matters not regulated by
document. Willy Guevarra asked plaintiff to surrender to him the nine claim said Code, the rights and obligations of common carriers shall be governed
by the Code of Commerce and by Special Laws. [Art 1753] The law of the exhibition in the US. In preparation for his trip abroad, he bought an
country to which the goods are to be transported shall govern the liability of economic class airplane ticket from Pan Am’s Manila Office for passage
the common carrier for their loss, destruction or deterioration. from Manila to Guam.
Two hours before departure, Pangan was at the ticket counter of Pan Am in
IN THIS CASE: Since the passenger’s destination in this case was the Manila International Airpor. He presented his ticket, checked in two
Philippines, Philippine law governs the liability of the carrier for the loss of luggages and was given the baggage claim tickets. These luggages
the passenger’s luggage. the petitioner failed to overcome, not only the contained the promotion advertising materials, clutch bags, barong tagalog
presumption, but more importantly, the private respondent’s evidence, and his personal belongings.
proving that the carrier’s negligence was the proximate cause of the loss of
his luggage. Furthermore, petitioner acted in bad faith in faking a retrieval When he arrived in Guam, his two luggages did not arrive with his flight,
receipt to bail itself out of having to pay Co’s claim. as a consequence of which his agreements with Slutchnick and Quesada for
the exhibition of the films in Guam and in the United States were cancelled.
The award of exemplary damages and attorney’s fees to the private Thereafter, he filed a written claim for his missing luggages.
respondent was justified. The appellant was awarded attorney’s fees because
of appellee’s failure to satisfy the former’s just and valid demandable claim CFI found petitioner liable and order them to pay the plaintiffs for actual
which forced the appellant to litigate. This Court justified the grant of damages in the amount of P83,000 and an additional actual damages
exemplary damages and attorney’s fees for the petitioner’s failure, even P8,123.34. CA affirmed the decision.
refusal, to pay the private respondent’s valid claim.
ISSUE: (1) W/N the lower courts were correct in affixing the award of actual
V. Disposition damages beyond the liability set forth in the Warsaw Convention and the
WHEREFORE, the petition for review is DENIED for lack of merit. Costs contract of carriage?
against the petitioner. SO ORDERED
VI. Notes (2) W/N the lower courts was correct in awarding consisting of alleged
profits despite the court’s ruling on consequential damages set forth in
PANAM v IAC Mendoza vs. Philippine Airlines?

PETITIONER: Pan American World Airways Inc. RULING: Petitioners liability for the lost baggage is limited to $20.00 per
RESPONDENT: INTERMEDIATE APPELLATE COURT, RENE V. PANGAN, kilo or $600.00, as stipulated at the back of the ticket. The declaration of
SOTANG BASTOS PRODUCTIONS and ARCHER PRODUCTIONS the lower court is based on Northwest Airlines, Inc. v. Cuenca . But the said
(Weird hanapin yung case na ‘to. If I used the SCRA based on the syllabus sa did not say that, an air "carrier is liable only" in the event of death of a
CD asia, iba lumalabas na case which has no relation with contract of carriage. passenger or injury suffered by him, or of destruction or loss of, or damages
This is from google. C2020 digest has the same case herein. Take note also na to any checked baggage or any goods, or of delay in the transportation by air
mali yung origs na nalagay sa transpo gdrive) of passengers, baggage or goods. This pretense is not borne out by the
language of said Articles. Neither said provisions nor others in the
Recit-ready summary: aforementioned Convention regulate or exclude liability for other
Pangan entered into a contract with Primo Quesada (in San Francisco breaches of contract by the carrier. Consequently, by no stretch of the
California), and Slutchnick (in Guam), to supply the latter with 3 films for imagination may said quotation from Northwest be considered as supportive
of the appellate court's statement that the provisions of the Warsaw provide the necessary promotional and advertising materials for said films on
Convention limited a carrier's liability are against public policy. or before the exhibition date on May 30,1978.
By virtue of the above agreements, plaintiff Pangan caused the preparation of
(2) Under Art.1107 of the Civil Code, a debtor in good faith like the the requisite promotional handbills and still pictures for which he paid the
defendant herein, may be held liable only for damages that were foreseen total sum of P12,900.00 In preparation for his trip abroad to comply with his
or might have been foreseen at the time the contract of transportation was contracts, Pangan purchased fourteen clutch bags, four capiz lamps and four
entered into. The trial court correctly found that the defendant company barong tagalog, with a total value of P4,400.00.
could not have foreseen the damages that would be suffered by Pangan obtained from defendant Pan Am's Manila Office, through the Your
Mendoza upon failure to deliver the can of film on the 17th of September, Travel Guide, an economy class airplane ticket) for passage from Manila to
1948 for the reason that the plans of Mendoza to exhibit that film during Guam. The Your Travel Guide is a tour and travel office owned and managed
the town fiesta and his preparations, specially the announcement of said by plaintiffs witness Mila de la Rama.
exhibition by posters and advertisement in the newspaper, were not called
to the defendant's attention. Two hours before departure time Pangan was at the defendant's ticket
counter at the Manila International Airport and presented his ticket and
Thus, applying the foregoing ruling from the Fargo case (see ruling): In the checked in his two luggages, for which he was given baggage claim tickets.
absence of a showing that petitioner's attention was called to the special The two luggages contained the promotional and advertising materials, the
circumstances requiring prompt delivery of private respondent Pangan's clutch bags, barong tagalog and his personal belongings. Subsequently,
luggages, petitioner cannot be held liable for the cancellation of private Pangan was informed that his name was not in the manifest and so he could
respondents' contracts as it could not have foreseen such an eventuality not take Flight No. 842 in the economy class. Since there was no space in the
when it accepted the luggages for transit. economy class, Pangan took the first class because he wanted to be on time
in Guam to comply with his commitment, paying an additional sum of
FACTS: $112.00.

Plaintiff Rene Pangan is the president and general manager of Sotang Bastos When Pangan arrived in Guam on the date of May 27, 1978, his two luggages
and Archer Production. While he was in San Francisco, California, he entered did not arrive with his flight, as a consequence of which his agreements with
into a contract with California and Primo Quesada of Prime Films where the Slutchnick and Quesada for the exhibition of the films in Guam and in the
former bound himself to supply the latter with 3 films: “Ang Mabait, Masungit United States were cancelled. Thereafter, he filed a written claim for his
at ang Pangit”, “Big Happening with Chikiting and Iking” and “Kambal missing luggages.
Dragon” for an exhibition in the US. It was also their agreement that plaintiffs
would provide the necessary promotional and advertising materials for said CFI found petitioner liable and order them to pay the plaintiffs for actual
films on or before May 30, 1978. damages in the amount of P83,000 and an additional actual damages
P8,123.34. CA affirmed the decision.
On his way home to the Philippines, Pangan visited Guam where he
contacted Leo Slutchnick of the Hafa Adai Organization. Plaintiff Pangan ISSUE: W/N the lower courts were correct in affixing the award of actual
likewise entered into a verbal agreement with Slutchnick for the exhibition of damages beyond the liability set forth in the Warsaw Convention and the
two of the films above-mentioned at the Hafa Adai Theater in Guam for the contract of carriage?
consideration of P7,000.00 per picture. Plaintiff Pangan undertook to
W/N the lower courts was correct in awarding consisting of alleged profits
despite the court’s ruling on consequential damages set forth in Mendoza vs. Under petitioner's theory, an air carrier would be exempt from any liability for
Philippine Airlines? damages in the event of its absolute refusal, in bad faith, to comply with a
contract of carriage, which is absurd. We deem it unnecessary to pass upon
RULING: the First assignment of error because the same is the basis of the second
The airline ticket contains the following conditions: assignment of error, and the latter is devoid of merit, even if we assumed the
 NOTICE: If the passenger's journey involves an ultimate former to be well taken.
destination or stop in a country other than the country of
departure, the Warsaw Convention may be applicable and the The Court never intended never did rule against the validity of provisions of
Convention governs and in most cases limits the liability of the Warsaw Convention. Consequently, by no stretch of the imagination
carriers for death or personal injury and in respect of loss of may said quotation from Northwest be considered as supportive of the
or damage to baggage….
appellate court's statement that the provisions of the Warsaw
 CONDITIONS OF CONTRACT:  Carriage hereunder is subject to
Convention limited a carrier's liability are against public policy.
the rules and limitations relating to liability established by
the Warsaw Convention unless such carriage is not
"international carriage" as defined by that Convention . 2. The Court does not agree in awarding private respondents damages as and
 NOTICE OF BAGGAGE LIABILITY LIMITATIONS: Liability for loss, for lost profits when their contracts to show the films in Guam and San
delay, or damage to baggage is limited as follows (unless a Francisco, California were cancelled.
higher value is declared in advance and additional charges are Case of Mendoza applies: Under Art.1107 of the Civil Code, a debtor in
paid): good faith like the defendant herein, may be held liable only for damages
o (1)For most international travel (including domestic that were foreseen or might have been foreseen at the time the contract of
portions of international journeys) to approximately $9.07 transportation was entered into.
per pound ($20.00 per kilo) for checked baggage and The trial court correctly found that the defendant company could not have
$400 per passenger for unchecked baggage: foreseen the damages that would be suffered by Mendoza upon failure to
Petitioners liability for the lost baggage is limited to $20.00 per kilo or deliver the can of film on the 17th of September, 1948 for the reason that the
$600.00, as stipulated at the back of the ticket. In order to rectify certain plans of Mendoza to exhibit that film during the town fiesta and his
misconceptions the Court finds it necessary to state that the CA’s reliance on preparations, specially the announcement of said exhibition by posters and
the case of Northwest Airlines, Inc. v. Cuenca  that held the view that "to apply advertisement in the newspaper, were not called to the defendant's
the Warsaw Convention which limits a carrier's liability to US$9.07 per pound attention.
or US$20.00 per kilo in cases of contractual breach of carriage ** is against Chapman vs. Fargo does not apply: Plaintiff delivered motion picture films to
public policy" -- utterly misplaced, to say the least. In said case Northwest Fargo, an express company, consigned and to be delivered to him in Utica.
case: Petitioner argues that pursuant to those provisions, an air "carrier is The attention of the express company was called to the fact that the
liable only" in the event of death of a passenger or injury suffered by him, or shipment involved motion picture films to be exhibited, and that they should
of destruction or loss of, or damages to any checked baggage or any goods, be sent to their destination rush.” The case does not apply because the
or of delay in the transportation by air of passengers, baggage or goods. This attention of the common carrier was called to the nature of the articles
pretense is not borne out by the language of said Articles. Neither said shipped, the purpose, and the desire to rush, circumstances and facts absent
provisions nor others in the aforementioned Convention regulate or in the present case.
exclude liability for other breaches of contract by the carrier.
Generally, notice then of any special circumstances which will show that the ** The Warsaw Convention actually provides: In the transportation of
damages to be anticipated from a breach would be enhanced has been held checked baggage and of goods, the liability of the carrier shall be limited to a
sufficient for this effect. sum of 250 francs per kilogram, unless the consignor has made, at the time
Thus, applying the foregoing ruling to the facts of the instant case, in the when the package was handed over to the carrier, a special declaration of the
absence of a showing that petitioner's attention was called to the special value of delivery and has paid a supplementary sum if the case so requires. In
circumstances requiring prompt delivery of private respondent Pangan's that case, the carrier will be liable to pay a sum not exceeding the declared
luggages, petitioner cannot be held liable for the cancellation of private sum, unless he proves that the sum is greater than the actual value to the
respondents' contracts as it could not have foreseen such an eventuality consignor at delivery.... The sums mentioned above shall be deemed to refer
when it accepted the luggages for transit. to the French franc consisting of 65-1/2 milligrams of gold at the standard of
The evidence reveals that the proximate cause of the cancellation of the fineness of nine hundred thousandths. These sums may be converted into
contracts was private respondent Pangan's failure to deliver the any national currency in round figures.
promotional and advertising materials on the dates agreed upon. For this
petitioner cannot be held liable. Private respondent Pangan had not Cathay Pacific v Ramos
declared the value of the two luggages he had checked in and paid
additional charges. Neither was petitioner privy to respondents' contracts
Note: The limited liability provision of the Warsaw Convention cannot be
nor was its attention called to the condition therein requiring delivery of the
invoked if the carrier is grossly negligent or at fault>
promotional and advertising materials on or before a certain date.
I. Recit ready
3. With the Court's holding that petitioner's liability is limited to the amount
stated in the ticket, the award of attorney's fees, which is grounded on the In 19 October 1975, respondent Tomas L. Alcantara was a first class
alleged unjustified refusal of petitioner to satisfy private respondent's just passenger of petitioner Cathay Pacific Airways, Ltd. on its Flight No. CX-900
and valid claim, loses support and must be set aside. from Manila to Hongkong and onward from Hongkong to Jakarta on Flight
Disposition. Petition is GRANTED and the Decision of the Intermediate No. CX-711. Upon his arrival in Jakarta, Alcantara discovered that his luggage
Appellate Court is SET ASIDE and a new judgment is rendered ordering was missing. When he inquired about his luggage from Cathay's
petitioner to pay private respondents damages in the amount of US representative in Jakarta, Alcantara was told that his luggage was left behind
$600.00 or its equivalent in Philippine currency at the time of actual payment in Hongkong. For this, Alcantara was offered $20.00 as "inconvenience
Notes money" to buy his immediate personal needs until the luggage could be
As used in this contract "ticket" means this passenger ticket and baggage delivered to him. It arrived one day later, however Alcantara decided to file a
check of which these conditions and the notices form part, "carriage" is complaint against Cathay Pacific.
equivalent to "transportation," "carrier" means all air carriers that carry
or undertake to carry the passenger or his baggage hereunder or W/N Cathay is liable? Yes.
perform any other service incidental to such air carriage. "WARSAW
CONVENTION" means the convention for the Unification of Certain Cathay breached its contract of carriage with Alcantara when it failed to
Rules Relating to International Carriage by Air signed at Warsaw, 12th deliver his luggage at the designated place and time, it being the obligation
October 1929, or that Convention as amended at The Hague, 28th of a common carrier to carry its passengers and their luggage safely to their
September 1955, whichever may be applicable. destination, which includes the duty not to delay their transportation, and the
evidence shows that Cathay acted fraudulently or in bad faith.
DOCTRINE: When Cathay misplaced Alcantara’s luggage and failed to deliver Did the CA err in holding Cathay liable to Alcantara for the damages
it to its passenger at the appointed place and time, some special species of prayed for? (NO)
injury must have been caused to him. For sure, the latter underwent profound
distress and anxiety, and the fear of losing the opportunity to fulfill the IV. Ratio/Legal Basis
purpose of his trip. In fact, for want of appropriate clothings for the occasion The lower and appellate courts found Cathay grossly negligent in failing to
brought about by the delay of the arrival of his luggage, to his deliver the luggage at the appointed time and place. While mere failure of
embarrassment and consternation Alcantara had to seek postponement of Cathay to deliver Alcantara’s luggage at the agreed time and place did not
his pre-arranged conference with the Director General of Trade of the host ipso facto amount to willful misconduct since the luggage was eventually
country. He is thus entitled to damages. delivered to Alcantara, albeit belatedly, the SC deems that the employees
acted in bad faith.
II. Facts of the case  Romula Palma, the Attache the PH Embassy in Jakarta testified that
when he called Cathay’s duty officer, the latter said: “What can we
October 19 1975 – Tomas Alcantara was a first class passenger of Cathay do, the baggage is missing, I cannot do anything. Anyhow you
Pacific (Flight No. CX-900). His route was from Manila to Jakarta, with Hong can buy anything you need charged to Cathay”
Kong as a layover.  Palma added that the demeanor of the duty officer was very
indifferent, implying “don’t worry, it can be found”.
The purpose of his trip was to attend an October 20 conference with the
Director of Trade of Indonesia, Alcantara being the (1) Executive VP and
The SC finds such testimony relevant in the case. Cathay’s employees shows
General Manager of Iligan Cement Corporation; (2) Chairman of the Export
the discourteous conduct of Cathay, which warrants the grant of moral
committee of the Philippine Cement Corporation; and (3) representative of
damages. Worse, the conduct can be construed as insulting. The duty officer
the Cement Industry Authority.
simply advised Alcantara to buy anything he wanted.
Alcantara included in his checked-in luggage not only his personal effects but
Moreover, the grant of $20.00 as “inconvenience money” was not even
also papers and documents needed for the conference.
enough to purchase comfortable clothing appropriate for an executive
conference. Cathay’s employees should have been more solicitous to a
Upon arrival in Jakarta, Alcantara learned that his luggage was missing. Upon
passenger in distress.
inquiry with Cathay’s representatives, he was told that his luggage was left
To make matters worse, Cathay even refused to have the luggage delivered
behind in Hongkong. He was offered $20.00 as “inconvenience money” in
to Alcantara’s hotel. Cathay made Alcantara pick it up at the Philippine
order to buy his immediate personal needs for the time being, until his
Embassy.
luggage can be delivered. His luggage arrived 24 hours later but it was not
In breach of contract of carriage cases, when there is no showing of bad faith,
delivered to his hotel. Instead, Cathay required him to pick it up at the
the award for damages is limited to the natural and probable
Philippine Embassy.
consequences of the breach of obligation. In such case, liability does not
March 1, 1976 – Alcantara filed before the CFI of Lanao del Norte a compliant
include moral and exemplary damage. Conversely, if the airline is
for damages against Cathay, praying for temperate, moral, and exemplary
showed to have acted in bad faith, the award of moral and exemplary
damages, plus atty fees. The CFI ordered Cathay to pay the damages prayed
damages is proper.
for. Both parties appealed, hence this petition.
Cathay contends that its liability should be limited according to the
Warsaw Convention. The SC does not agree. Although the Warsaw
III. Issue/s
Convention has the force of law in this country, it does not operate as an
exclusive enumeration of instances declaring a carrier for breach of
contract of carriage. It must NOT be construed to preclude the Thailand vessel. At that instance, he noticed that some repair works were
operation of the Civil Code. being undertaken on the engine of the vessel. The vessel departed at
It does not regulate, much less exempt, the carrier from liability for damages around 11 pm with only one engine running. After an hour of slow voyage,
for violating the rights of its passengers under the contract of carriage, the vessel stopped near Kawit Island and dropped its anchor thereat. After
especially if willful misconduct on the part of the carrier's employees is half an hour of stillness, some passengers demanded that they should be
found or established, which is clearly the case before us. For, the Warsaw allowed to return to Cebu City for they were no longer willing to
Convention itself provides in Art. 25 that: continue their voyage to Cagayan de Oro City. The captain acceded to
(1) The carrier shall not be entitled to avail himself of the provisions their request and thus the vessel headed back to Cebu City. For failure of
of this convention which exclude or limit his liability, if the damage is Trans-Asia to transport him to the place of destination on November 12,
caused by his wilfull misconduct or by such default on his part as, in 1991, Atty. Arroyo filed before the trial court a complaint for damages
accordance with the law of the court to which the case is submitted, is against Trans-Asia alleging that the engines of M/V Asia Thailand
considered to be equivalent to wilfull misconduct." conked out in the open sea, and for more than an hour it was stalled and at
(2) Similarly the carrier shall not be entitled to avail himself of the the mercy of the waves, thus causing fear in the passengers. The Trial court
said provisions, if the damage is caused under the same ruled in favor of Atty. Arroyo. Still unsatisfied, Atty. Arroyo appealed to CA,
circumstances by any agent of the carrier acting within the scope of which reversed the decision of the trial court in terms of legal basis but still
his employment." ruled in favor of Atty. Arroyo. Hence this present petition.

Thus, Cathay is entitled to moral and exemplary damages. We however find W/N the right of a passenger affected thereby to be determined and governed
the award by the Court of Appeals of P80,000.00 for moral damages by the Civil Code provision on common carriers or in the absence of a specific
excessive, hence, We reduce the amount to P30,000.00. provision, governed by Article 698 of the Code of Commerce? (In case of
interruption of a vessel’s voyage and the consequent delay in that vessel’s
V. Disposition arrival at its port of destination) – Both govern.

WHEREFORE, the assailed decision of respondent Court of Appeals is The court ruled that there was between Atty. Arroyo and Trans-Asia, a
AFFIRMED with the exception of the award of temperate damages of contract of common carriage. Under Article 1733 of the Civil Code, Trans-
P10,000.00 which is deleted, while the award of moral damages of P80,000.00 Asia was bound to observe extraordinary diligence in ensuring the safety
is reduced to P30,000.00. The award of P20,000.00 for exemplary damages is of Atty. Arroyo. That meant that Trans-Asia was, pursuant to Article 1755 of
maintained as reasonable together with the attorney's fees of P25,000.00. The the said Code, bound to carry Atty. Arroyo safely as far as human care and
moral and exemplary damages shall earn interest at the legal rate from 1 foresight could provide, using the utmost diligence of very cautious
March 1976 when the complaint was filed until full payment. persons, with due regard for all the circumstances. In this case, Trans- Asia
Trans-Asia Shipping v CA failed to discharge this obligation. Before commencing the contracted
voyage, Trans-Asia undertook some repairs on the cylinder head of one of
I. Recit-ready summary the engines. But even before it could finish these repairs, it allowed the
Atty. Renato Arroyo (Private Respondent), a public attorney, bought a ticket vessel to leave the port of origin on only one functioning engine,
from Trans-Asia Shipping Lines, Inc. (Trans-Asia) for the voyage of M/V Asia instead of two. Moreover, even the lone functioning engine was not in
Thailand vessel to Cagayan de Oro from Cebu City on November 12, 1991. perfect condition as sometime after it had run its course, it conked out. This
At around 5:30 pm of November 12, 1991, Atty. Arroyo boarded the M/V Asia caused the vessel to stop and remain adrift at sea, thus in order to prevent
the ship from capsizing, it had to drop anchor. Plainly, the vessel was After an hour of slow voyage, the vessel stopped near Kawit Island and
unseaworthy even before the voyage began. dropped its anchor thereat. After half an hour of stillness, some passengers
The CA did not grant Atty. Arroyo actual or compensatory damages, demanded that they should be allowed to return to Cebu City for they were
reasoning that no delay was incurred since there was no demand as required no longer willing to continue their voyage to Cagayan de Oro City. The
by Article 1169 of the Civil Code. This article, however, finds no application in captain acceded to their request and thus the vessel headed back to Cebu
this case because as found by the CA, there was in fact no delay in the City
commencement of the contracted voyage. If any delay was incurred, it was At Cebu City, Atty. Arroyo together with the other passengers who requested
after the commencement of such voyage, more specifically, when the voyage to be brought back to Cebu City, were allowed to disembark. Thereafter, the
was subsequently interrupted when the vessel had to stop near Kawit Island vessel proceeded to Cagayan de Oro City. Atty. Arroyo, the next day, boarded
after the only functioning engine conked out. As to the rights and duties of the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of
the parties strictly arising out of such delay, the Civil Code is silent. However, Trans-Asia
as correctly pointed out by Trans-Asia, Article 698 of the Code of For failure of Trans-Asia to transport him to the place of destination on
Commerce specifically provides for a situation. Article 698 must be read November 12, 1991, Atty. Arroyo filed before the trial court a complaint for
together with Articles 2199, 2200, 2201, and 2208 in relation to Article damages against Trans-Asia alleging that the engines of M/V Asia Thailand
21 of the Civil Code. So read, it means that Trans-Asia is liable for any conked out in the open sea, and for more than an hour it was stalled and at
pecuniary loss or loss of profits which the private respondent may have the mercy of the waves, thus causing fear in the passengers.
suffered by reason thereof. For Atty. Arroyo, such would be the loss of After due trial, the trial court ruled in favor of Atty. Arroyo but said that it was
income if unable to report to his office on the day he was supposed to arrive only for breach of contract, with Articles 1170, 1172, and 1173 of the Civil
were it not for the delay. This, however, assumes that he stayed on the vessel Code as applicable law, not Article 2180 of the same code. Moreover, the
and was with it when it thereafter resumed its voyage; but he did not. As he court ruled that pursuant to Article 2201 of the same code, to be entitled to
and some passengers resolved not to complete the voyage, the vessel damages, the non-performance of the obligation must have been tainted not
had to return to its port of origin and allow them to disembark. Any only by fraud, negligence, or delay, but also bad faith, malice, and wanton
further delay in Atty. Arroyo’s arrival at the port of destination was attitude. The court found that Trans-Asia by leaving Atty. Arroyo in Cebu
caused by his decision to disembark. But actual or compensatory damages could hardly be considered as acting in bad faith, negligence, malice, and
must be proved, which Atty. Arroyo failed to do so. There is no convincing wanton attitude. Unsatisfied, Atty. Arroyo appealed to the CA. The CA
evidence that he did not receive his salary for November 13, 1991 nor his reversed the trial court’s decision by applying Article 1775 in relation to
absence was not excused. Articles 2201, 2208, 2217, and 2232 of the Civil Code and accordingly,
awarded compensatory, moral, and exemplary damages. Hence the present
II. Facts of the case petition.
Atty. Renato Arroyo (Private Respondent), a public attorney, bought a ticket
from Trans-Asia Shipping Lines, Inc. (Trans-Asia), a corporation engaged in III. Issue/s
inter-island shipping, for the voyage of M/V Asia Thailand vessel to Cagayan Whether or not the right of a passenger affected thereby to be determined
de Oro from Cebu City on November 12, 1991 and governed by the Civil Code provision on common carriers or in the
At around 5:30 pm of November 12, 1991, Atty. Arroyo boarded the M/V Asia absence of a specific provision, governed by Article 698 of the Code of
Thailand vessel. At that instance, he noticed that some repair works were Commerce? (In case of interruption of a vessel’s voyage and the consequent
being undertaken on the engine of the vessel The vessel departed at around delay in that vessel’s arrival at its port of destination)—Both.
11 pm with only one engine running
IV. Ratio/Legal Basis Moral Damages include moral suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social
The right of a passenger affected thereby will be determined and governed humiliation, or similar injury
by the Civil Code provision on common carriers and in the absence of a Exemplary damages are imposed by way of example or correction for the
specific provision, governed by Article 698 of the Code of Commerce? (In public good, in addition to moral, temperate, liquidated or compensatory
case of interruption of a vessel’s voyage and the consequent delay in that damages
vessel’s arrival at its port of destination). In contracts and quasi-contracts, exemplary damages may be awarded if the
defendant acted in wanton-fraudulent, reckless, oppressive, or malevolent
The court ruled that there was between Atty. Arroyo and Trans-Asia, a manner. It cannot be considered as a matter of right; the court having to
contract of common carriage. Under Article 1733 of the Civil Code, Trans-Asia decide whether or not they should be adjudicated
was bound to observe extraordinary diligence in ensuring the safety of Atty.
Arroyo. That meant that Trans-Asia was, pursuant to Article 1755 of the said The CA did not grant Atty. Arroyo actual or compensatory damages,
Code, bound to carry Atty. Arroyo safely as far as human care and foresight reasoning that no delay was incurred since there was no demand as
could provide, using the utmost diligence of very cautious persons, with due required by Article 1169 of the Civil Code. This article, however, finds no
regard for all the circumstances. In this case, Trans-Asia failed to discharge application in this case because as found by the CA, there was in fact no
this obligation delay in the commencement of the contracted voyage. If any delay was
incurred, it was after the commencement of such voyage, more specifically,
Before commencing the contracted voyage, Trans-Asia undertook some when the voyage was subsequently interrupted when the vessel had to stop
repairs on the cylinder head of one of the engines. But even before it could near Kawit Island after the only functioning engine conked out
finish these repairs, it allowed the vessel to leave the port of origin on only
one functioning engine, instead of two Moreover, even the lone functioning As to the rights and duties of the parties strictly arising out of such delay, the
engine was not in perfect condition as sometime after it had run its course, it Civil Code is silent. However, as correctly pointed out by Trans-Asia, Article
conked out. This caused the vessel to stop and remain adrift at sea, thus in 698 of the Code of Commerce specifically provides for a situation, it reads:
order to prevent the ship from capsizing, it had to drop anchor. Plainly, the
vessel was unseaworthy even before the voyage began. For a vessel to be “In case a voyage already begun should be interrupted, the passengers shall
seaworthy, it must be adequately equipped for the voyage and manned with be obliged to pay the fare in proportion to the distance covered,
a sufficient number of competent officers and crew. The failure of a common without right to recover for losses and damages if the interruption due
carrier to maintain in seaworthy condition its vessel involved a contract of to fortuitous event or force majeure, but with a right to indemnity if the
carriage is a clear breach of its duty prescribed in Article 1755 of the Civil interruption should have been caused by the captain exclusively. If the
Code. interruption should be caused by the disability of the vessel and a
Actual or compensatory damages represent the adequate compensation or passenger should agree to await the repairs, he may not be required to
pecuniary loss suffered and for profits the oblige failed to obtain pay any increased price of passage, but his living expenses during the
In contracts or quasi-contracts, the obligor is liable for the damages which stay shall be for his own account”
may be reasonably attributed to the non-performance of the obligation if he
is guilty of fraud, bad faith, malice, or wanton attitude Article 698 must be read together with Articles 2199, 2200, 2201, and 2208 in
relation to Article 21 of the Civil Code. So read, it means that Trans-Asia is
liable for any pecuniary loss or loss of profits which the private respondent
may have suffered by reason thereof. For Atty. Arroyo, such would be the loss of two days in Cebu. Respondent Pantejo requested instead that he be
of income if unable to report to his office on the day he was supposed to billeted in a hotel at the PAL's expense because he did not have cash with
arrive were it not for the delay. This, however, assumes that he stayed on the him at that time, but PAL refused.
vessel and was with it when it thereafter resumed its voyage; but he did not. Thus, respondent Pantejo was forced to seek and accept the generosity of a
As he and some passengers resolved not to complete the voyage, the vessel co-passenger, an engineer named Andoni Dumlao, and he shared a room
had to return to its port of origin and allow them to disembark. with the latter at Sky View Hotel with the promise to pay his share of the
expenses upon reaching Surigao.
Any further delay in Atty. Arroyo’s arrival at the port of destination was On October 25, 1988 when the flight for Surigao was resumed, respondent
caused by his decision to disembark. Had he remained on the first vessel, Pantejo came to know that the hotel expenses of his co-passengers, one
he would have reached his destination at noon of November 13, 1991, thus Superintendent Ernesto Gonzales and a certain Mrs. Gloria Rocha, an Auditor
been able to report to his office in the afternoon. He, therefore, would have of the Philippine National Bank, were reimbursed by PAL.
lost only the salary for half of a day. But actual or compensatory damages At this point, respondent Pantejo informed Oscar Jereza, PAL's Manager for
must be proved, which Atty. Arroyo failed to do so. There is no convincing Departure Services at Mactan Airport and who was in charge of cancelled
evidence that he did not receive his salary for November 13, 1991 nor his flights, that he was going to sue the airline for discriminating against him.
absence was not excused. It was only then that Jereza offered to pay respondent Pantejo P300.00 which,
due to the ordeal and anguish he had undergone, the latter declined.
The Court also agreed with the CA that Trans-Asia is liable for moral and The RTC then ordered a judgment against PAL ordering the latter to pay
exemplary damages. In allowing its unseaworthy M/V Asia Thailand to Pantejo P300 for actual damages, P150,000 as moral damages, P100,000 as
leave the port of origin and undertake the contracted voyage, with full exemplary damages, P15,000 as attorney’s fees.
awareness that it was exposed to perils of the sea, it deliberately In ruling for respondent Pantejo, both the trial court and the Court of
disregarded its solemn duty to exercise extraordinary diligence and Appeals found that herein petitioner acted in bad faith in refusing to provide
obviously acted with bad faith and in a wanton and reckless manner hotel accommodations for respondent Pantejo or to reimburse him for hotel
expenses incurred despite and in contrast to the fact that other passengers
V. Disposition were so favored.
Petition denied. CA decision affirmed 1) Cash assistance was given because there were no available rooms in the
hotels. However, evidence shows Sky View Hotel had had plenty of
vacant rooms.
PAL v CA
2) It is not true that the payment made by PAL to Gonzales was a refund for
the ticket, but it was actually a reimbursement for hotel and meal
Note: A different benefit given does not necessarily give rise to a ground for expenses.
damages. There only arises a ground when there is unfair treatment. 3) Respondent and Gonzales only came to know about the reimbursements
Philippine Airlines vs CA because Mrs. Rocha told them so.
Respondent boarded a PAL plane in Manila and disembarked in Cebu City 4) Petitioner offered to pay P300.00 to private respondent only after he had
where he was supposed to take his connecting flight to Surigao City. confronted the airline's manager about the discrimination committed
However, due to typhoon Osang, the connecting flight to Surigao City was against him, which the latter realized was an actionable wrong.
cancelled. 5) Service Voucher presented by petitioner to prove that it gave cash
To accommodate the needs of its stranded passengers, PAL initially gave out assistance to its passengers, was based merely on the list of passengers
cash assistance of P 100.00 and, the next day, P200.00, for their expected stay already given cash assistance and was purportedly prepared at around
 10:00 A.M. of October 23, 1988. This was two hours before respondent such emergency assistance as being merely ex gratia and not ex
came to know of the cancellation of his flight to Surigao, hence private debito.
respondent could not have possibly refused the same.  While petitioner now insists that the passengers were duly informed
Petitioner theorizes that the hotel accommodations or cash assistance given that they would be reimbursed for their hotel expenses, it miserably
in case a flight is cancelled is in the nature of an amenity and is merely a and significantly failed to explain why the other passengers were
privilege that may be extended at its own discretion, but never a right that given reimbursements while private respondent was not.
may be demanded by its passengers. Thus, when respondent Pantejo was o Although Gonzales was subsequently given a refund, this
offered cash assistance and he refused it, petitioner cannot be held liable for was only so because he came to know about it by accident
whatever befell respondent Pantejo on that fateful day, because it was merely through Mrs. Rocha, as earlier explained.
 On the bases of all the foregoing, the inescapable conclusion is that
exercising its discretion when it opted to just give cash assistance to its
petitioner acted in bad faith in disregarding its duties as a common
passengers.
carrier to its passengers and in discriminating against herein
Issue: Whether PAL acted in bad faith when it failed and refused to provide
respondent Pantejo. It was even oblivious to the fact that this
hotel accommodations for respondent Pantejo or to reimburse him for hotel respondent was exposed to humiliation and embarrassment
expenses incurred by reason of the cancellation of its connecting flight to especially because of his government position and social
Surigao City due to force majeure. prominence, which altogether necessarily subjected him to ridicule,
Assuming arguendo that the airline passengers have no vested right to this shame and anguish.
amenities in case a flight is cancelled due to force majeure, what makes  It is likewise claimed that the moral and exemplary damages awarded
petitioner liable for damages in this particular case and under the facts to respondent Pantejo are excessive and unwarranted on the ground
obtaining herein is its blatant refusal to accord the so-called amenities that respondent is not totally blameless because of his refusal to
equally to all its stranded passengers who were bound for Surigao City. No accept the P100.00 cash assistance which was inceptively offered to
compelling or justifying reason was advanced for such discriminatory and him. It bears emphasis that respondent Pantejo had every right to
make such refusal since it evidently could not meet his needs and
prejudicial conduct.
that was all that PAL claimed it could offer.
Moreover, it was established that it is petitioner's standard company policy,
o His refusal to accept the P300.00 proffered as an
whenever a flight has been cancelled, to extend to its hapless passengers
afterthought when he threatened suit was justified by his
cash assistance or to provide them accommodations in hotels with which it
resentment when he belatedly found out that his co-
has existing tie-ups. passengers were reimbursed for hotel expenses and he was
o In fact, petitioner's Mactan Airport Manager for departure not.
services, admitted that the PAL has an existing arrangement  The discriminatory act of petitioner against respondent ineludibly
with hotel to accommodate stranded passengers, and that makes the former liable for moral damages under Article 21 in
the hotel bills of Ernesto Gonzales were reimbursed relation to Article 2219 (10) of the Civil Code.
obviously pursuant to that policy.
o 2 witnesses were also presented which said that when their
flight with PAL were cancelled, they were billeted at Rajah
Calalas v CA
Hotel for 2 nights and 3 days at the expense of PAL.
 Gonzales also testified that based on his previous experience hotel I. Recit Ready
accommodations were extended by PAL to its stranded passengers Sunga filed a complaint for damages against Calalas, alleging violation of the
either in Magellan or Rajah Hotels, or even in Cebu Plaza. Thus, we contract of carriage by the former in failing to exercise the diligence required
view as impressed with dubiety PAL's present attempt to represent of him as a common carrier. Calalas, on the other hand, filed a third-party
 complaint against Francisco Salva, the owner of the Isuzu truck that On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to
bumped their passenger jeepney. The lower court rendered judgment let a passenger off. As she was seated at the rear of the vehicle, Sunga gave
against Salva as third-party defendant and absolved Calalas of liability, way to the outgoing passenger. Just as she was doing so, an Isuzu truck
holding that it was the driver of the Isuzu truck who was responsible for driven by Iglecerio Verena and owned by Francisco Salva bumped the left
the accident. It took cognizance of another case (Civil Case No. 3490), filed rear portion of the jeepney. As a result, Sunga was injured. She sustained a
by Calalas against Salva and Verena for quasi-delict, in which Branch 37 of fracture of the "distal third of the left tibia-fibula with severe necrosis of the
the same court held Salva and his driver Verena jointly liable underlying skin." Closed reduction of the fracture, long leg circular casting,
to Calalas for the damage to his jeepney. On appeal, the Court of Appeals and case wedging were done under sedation. Her confinement in the
reversed the ruling of the lower court on the ground that Sunga's cause of hospital lasted from August 23 to September 7, 1989. Her attending
action was based on a contract of carriage, not quasi-delict, and that the physician, Dr. Danilo V. Oligario, an orthopedic surgeon, certified she would
common carrier failed to exercise the diligence required under the Civil remain on a cast for a period of three months and would have to ambulate in
Code. The appellate court dismissed the third-party complaint against Salva crutches during said period.
and adjudged Calalas liable for damages to Sunga. Hence, this petition.
It is immaterial that the proximate cause of the collision between On October 9, 1989, Sunga filed a complaint for damages against Calalas,
the jeepney and the truck was the negligence of the truck driver. The alleging violation of the contract of carriage by the former in failing to
doctrine of proximate cause is applicable only in actions for  quasi-delict, exercise the diligence required of him as a common carrier. Calalas, on the
not in actions involving breach of contract. In the case at bar, upon the other hand, filed a third-party complaint against Francisco Salva, the owner of
happening of the accident, the presumption of negligence at once arose, the Isuzu truck.
and it became the duty of petitioner to prove that he had observed
extraordinary diligence in the care of his passengers. The fact that Sunga The lower court rendered judgment, against Salva as third-party defendant
was seated in an "extension seat" placed her in a peril greater than that to and absolved Calalas of liability, holding that it was the driver of the Isuzu
which the other passengers were exposed. Therefore, not only was petitioner truck who was responsible for the accident. It took cognizance of another
unable to overcome the presumption of negligence imposed on him for the case (Civil Case No. 3490), filed by Calalas against Salva and Verena,
injury sustained by Sunga, but also, the evidence showed he was actually for quasi-delict, in which Branch 37 of the same court held Salva and his
negligent in transporting passengers. The decision of the Court of Appeals driver Verena jointly liable to Calalas for the damage to his jeepney
was, affirmed, with the modification that the award of moral damages was
deleted. Petitioner contends that the ruling in Civil Case No. 3490 that the negligence
of Verena was the proximate cause of the accident negates his liability and
II. Facts of the case that to rule otherwise would be to make the common carrier an insurer of the
safety of its passengers.
At 10 o'clock in the morning, private respondent Eliza Jujeurche G. Sunga,
took a passenger jeepney owned and operated by petitioner Vicente Calalas. III. Issue/s
As the jeepney was filled to capacity of about 24 passengers, Sunga was
given by the conductor an "extension seat," a wooden stool at the back of W/N petitioner is liable on his contract of carriage? YES
the door at the rear end of the vehicle.
IV. Legal Basis
The issue in Civil Case No. 3490 was whether Salva and his driver Verena were diligence in the vigilance over the goods and for the safety of the
liable for quasi-delict for the damage caused to petitioner's jeepney. On the passengers transported by them, according to all the circumstances
other hand, the issue in this case is whether petitioner is liable on his contract of each case.
of carriage. The first, quasi-delict, also known as culpa aquiliana or culpa extra
contractual, has as its source the negligence of the tortfeasor. The second, Such extraordinary diligence in the vigilance over the goods is further
breach of contract or culpa contractual, is premised upon the negligence in expressed in Articles 1734, 1735, and 1746, Nos. 5, 6, and 7, while the
the performance of a contractual obligation. extraordinary diligence for the safety of the passengers is further set
Consequently, in quasi-delict, the negligence or fault should be clearly forth in Articles 1755 and 1756. 
established because it is the basis of the action, whereas in breach of ARTICLE 1755. A common carrier is bound to carry the passengers
contract, the action can be prosecuted merely by proving the existence of the safely as far as human care and foresight can provide, using the
contract and the fact that the obligor, in this case the common carrier, failed utmost diligence of very cautious persons, with due regard for all the
to transport his passenger safely to his destination.  In case of death or circumstances.
injuries to passengers, Art. 1756 of the Civil Code provides that common
carriers are presumed to have been at fault or to have acted negligently ARTICLE 1756. In case of death of or injuries to passengers, common
unless they prove that they observed extraordinary diligence as defined carriers are presumed to have been at fault or to have acted
in Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the negligently, unless they prove that they observed extraordinary
common carrier the burden of proof. diligence as prescribed by Articles 1733 and 1755.

There is, thus, no basis for the contention that the ruling in Civil Case No. In the case at bar, upon the happening of the accident, the presumption of
3490, finding Salva and his driver Verena liable for the damage to petitioner's negligence at once arose, and it became the duty of petitioner to prove that
jeepney, should be binding on Sunga. It is immaterial that the proximate he had to observe extraordinary diligence in the care of his passengers.
cause of the collision between the jeepney and the truck was the
negligence of the truck driver. The doctrine of proximate cause is Now, did the driver of jeepney carry Sunga "safely as far as human care and
applicable only in actions for quasi-delict, not in actions involving foresight could provide, using the utmost diligence of very cautious persons,
breach of contract. The doctrine is a device for imputing liability to a with due regard for all the circumstances" as required by Art. 1755? We do
person where there is no relation between him and another party. In such a not think so. Several factors militate against petitioner's contention.
case, the obligation is created by law itself. But, where there is a pre-
existing contractual relation between the parties, it is the parties First, as found by the Court of Appeals, the jeepney was not properly
themselves who create the obligation, and the function of the law is parked, its rear portion being exposed about two meters from the broad
merely to regulate the relation thus created. Insofar as contracts of shoulders of the highway, and facing the middle of the highway in a diagonal
carriage are concerned, some aspects regulated by the Civil Code are those angle. This is a violation of the R.A. No. 4136, as amended, or the Land
respecting the diligence required of common carriers with regard to the Transportation and Traffic Code, which provides:
safety of passengers as well as the presumption of negligence in cases of
death or injury to passengers. It provides: SECTION 54. Obstruction of Traffic. — No person shall drive his motor
vehicle in such a manner as to obstruct or impede the passage of any
ARTICLE 1733. Common carriers, from the nature of their business vehicle, nor, while discharging or taking on passengers or loading or
and for reasons of public policy, are bound to observe extraordinary
 unloading freight, obstruct the free passage of other vehicles on the flights were to make an overnight stopover at Narita, Japan, at the airlines
highway.  expense, thereafter proceeding to Manila the following day.
Second, it is undisputed that petitioner's driver took in more
passengers than the allowed seating capacity of the jeepney, a When they were supposed to fly to Manila from Japan, NAIA was closed
violation of §32(a) of the same law. It provides: because of the Mount Pinatubo Eruption. Hence the trip to Manila was
Exceeding registered capacity. — No person operating any motor cancelled indefinitely. JAL paid for their hotel expenses until June 16, but their
vehicle shall allow more passengers or more freight or cargo in his flight was again cancelled because NAIA was still closed. JAL told them that it
vehicle than its registered capacity. won’t pay for their hotel expenses anymore. NAIA reopened on June 22.
Miranda et al filed an action for damages against JAL arguing that JAL failed
The fact that Sunga was seated in an "extension seat" placed her in a peril to live up to its duty to provide care and comfort to its stranded passengers
greater than that to which the other passengers were exposed. Therefore, not when it refused to pay for their hotel and accommodation expenses from
only was petitioner unable to overcome the presumption of negligence June 16 to 21. JAL used the defense of force majeure.
imposed on him for the injury sustained by Sunga, but also, the evidence
shows he was actually negligent in transporting passengers. WON JAL, as a common carrier has the obligation to shoulder the hotel
and meal expenses of its stranded passengers until they have reached
We find it hard to give serious thought to petitioner's contention that their final destination, even if the delay were caused by force majeure?
Sunga's taking an "extension seat" amounted to an implied assumption NO
of risk. It is akin to arguing that the injuries to the many victims of the
tragedies in our seas should not be compensated merely because those When JAL was prevented from resuming its flight to Manila due to the effects
passengers assumed a greater risk of drowning by boarding an overloaded of Mt. Pinatubo eruption, whatever losses or damages in the form of hotel
ferry. This is also true of petitioner's contention that the jeepney being and meal expenses the stranded passengers incurred, cannot be charged to
bumped while it was improperly parked constitutes caso fortuito. A caso JAL. However, they were awarded nominal damages. SC said that JAL had the
fortuito is an event which could not be foreseen, or which, though duty to make the necessary arrangements to transport private respondents
foreseen, was inevitable. 3 This requires that the following requirements be on the first available connecting flight to Manila. JAL reneged on its
present: (a) the cause of the breach is independent of the debtor's will; (b) obligation to look after the comfort and convenience of its passengers
the event is unforeseeable or unavoidable; (c) the event is such as to render it when it declassified private respondents from transit passengers to new
impossible for the debtor to fulfill his obligation in a normal manner, and (d) passengers as a result of which private respondents were obliged to
the debtor did not take part in causing the injury to the creditor. Petitioner make the necessary arrangements themselves for the next flight to
should have foreseen the danger of parking his jeepney with its body Manila.
protruding two meters into the highway.
Airline passengers must take such risks incident to the mode of travel. In this
Japan Airlines v CA regard, adverse weather conditions or extreme climatic changes are some of
the perils involved in air travel, the consequences of which the passenger
must assume or expect. After all, common carriers are not the insurer of all
I. Recit-ready summary
risks. Nominal damages are adjudicated in order that a right of a plaintiff,
Jose Miranda boarded JAL flight No. JL 001 in San Francisco bound for
which has been violated or invaded by the defendant, may be vindicated or
Manila. On the same day Miranda et al left Los Angeles, California for Manila
recognized and not for the purpose of indemnifying any loss suffered by him.
via JAL flight No. JL 061. As an incentive for travelling on the said airline, both
 obligated to shoulder their expenses as long as they were still stranded in
II. Facts of the case Narita.
On June 13, 1991, Jose Miranda boarded JAL flight No. JL 001 in San
Francisco, California bound for Manila. Likewise, on the same day private JAL denied this allegation and averred that airline passengers have no vested
respondents Enrique Agana, Maria Angela Nina Agana and Adelia Francisco right to these amenities in case a flight is cancelled due to force majeure.
(Miranda et al) left Los Angeles, California for Manila via JAL flight No. JL 061.
As an incentive for travelling on the said airline, both flights were to make an On June 18, 1992, the trial court rendered its judgment in favor of private
overnight stopover at Narita, Japan, at the airlines expense, thereafter respondents holding JAL liable for damages.
proceeding to Manila the following day.
JAL appealed the decision before the CA, which, with the exception of
Upon arrival at Narita, Japan on June 14, 1991, they were billeted at Hotel lowering the damages awarded affirmed the trial courts finding. JAL filed MR
Nikko Narita for the night. The next day, on the final leg of their journey, they which proved futile and unavailing. JAL has now filed this instant petition.
went to the airport to take their flight to Manila. However, due to the Mt.
Pinatubo eruption, unrelenting ashfall blanketed Ninoy Aquino International III. Issue/s
Airport (NAIA), rendering it inaccessible to airline traffic. Hence the trip to WON JAL, as a common carrier has the obligation to shoulder the hotel and
Manila was cancelled indefinitely. meal expenses of its stranded passengers until they have reached their final
destination, even if the delay were caused by force majeure? NO
To accommodate the needs of its stranded passengers, JAL rebooked all the
Manila-bound passengers on flight No. 741 due to depart on June 16, 1991 IV. Ratio/Legal Basis
and also paid for the hotel expenses for their unexpected overnight stay. On The Mt. Pinatubo eruption prevented JAL from proceeding to Manila on
June 16, 1991, their long anticipated flight to Manila was again cancelled due schedule. Miranda et al concede that such event can be considered as force
to NAIAs indefinite closure. At this point, JAL informed them that it would no majeure since their delayed arrival in Manila was not imputable to JAL.
longer defray their hotel and accommodation expense during their stay in
Narita. In a plethora of cases the Court have consistently ruled that a contract to
transport passengers is quite different in kind and degree from any other
Since NAIA was only reopened to airline traffic on June 22, 1991, they were contractual relation. It is safe to conclude that it is a relationship imbued with
forced to pay for their accommodations and meal expenses from their public interest. Failure on the part of the common carrier to live up to the
personal funds from June 16 to June 21, 1991. Their unexpected stay in Narita exacting standards of care and diligence renders it liable for any damages
ended on June 22, 1991 when they arrived in Manila on board JL flight No. that may be sustained by its passengers. However, this is not to say that
741. common carriers are absolutely responsible for all injuries or damages even if
the same were caused by a fortuitous event. To rule otherwise would render
Miranda et al, on July 25, 1991, commenced an action for damages against the defense of force majeure, as an exception from any liability, illusory and
JAL before the RTC of Quezon City. ineffective.

Miranda et al asserted that JAL failed to live up to its duty to provide care Accordingly, there is no question that when a party is unable to fulfill his
and comfort to its stranded passengers when it refused to pay for their hotel obligation because of force majeure, the general rule is that he cannot be
and accommodation expenses from June 16 to 21. They insisted that JAL was held liable for damages for non-performance. Corollarily, when JAL was
prevented from resuming its flight to Manila due to the effects of Mt. in Narita on account of the fortuitous event, JAL had the duty to make
Pinatubo eruption, whatever losses or damages in the form of hotel and meal the necessary arrangements to transport private respondents on the first
expenses the stranded passengers incurred, cannot be charged to JAL. Yet it available connecting flight to Manila. JAL reneged on its obligation to look
is undeniable that JAL assumed the hotel expenses of respondents for their after the comfort and convenience of its passengers when it declassified
unexpected overnight stay on June 15, 1991. private respondents from transit passengers to new passengers as a result of
which private respondents were obliged to make the necessary arrangements
Admittedly, to be stranded for almost a week in a foreign land was an themselves for the next flight to Manila. Private respondents were placed on
exasperating experience for the private respondents. To be sure, they the waiting list from June 20 to June 24. To assure themselves of a seat on an
underwent distress and anxiety during their unanticipated stay in Narita, but available flight, they were compelled to stay in the airport the whole day of
their predicament was not due to the fault or negligence of JAL but the June 22, 1991 and it was only at 8:00 p.m. of the aforesaid date that they
closure of NAIA to international flights. Indeed, to hold JAL, in the absence of were advised that they could be accommodated in said flight which flew at
bad faith or negligence, liable for the amenities of its stranded passengers by about 9:00 a.m. the next day.
reason of a fortuitous event is too much of a burden to assume.
The cancellation of JAL flights to Manila from June 15 to June 21, 1991
Furthermore, it has been held that airline passengers must take such risks caused considerable disruption in passenger booking and reservation. In fact,
incident to the mode of travel. In this regard, adverse weather conditions or it would be unreasonable to expect, considering NAIAs closure, that JAL flight
extreme climatic changes are some of the perils involved in air travel, the operations would be normal on the days affected. Nevertheless, this does not
consequences of which the passenger must assume or expect. After all, excuse JAL from its obligation to make the necessary arrangements to
common carriers are not the insurer of all risks. transport private respondents on its first available flight to Manila. After all, it
had a contract to transport private respondents from the United States to
CA, despite the presence of force majeure, still ruled against JAL relying in Manila as their final destination.
our decision in PAL v. Court of Appeals. The factual background of the PAL
case is different from the instant petition. In that case there was indeed a Consequently, the award of nominal damages is in order. Nominal damages
fortuitous event resulting in the diversion of the PAL flight. However, the are adjudicated in order that a right of a plaintiff, which has been violated or
unforeseen diversion was worsened when the passengers were left at the invaded by the defendant, may be vindicated or recognized and not for the
airport and could not even hitch a ride in a Ford Fiera loaded with PAL purpose of indemnifying any loss suffered by him. The court may award
personnel, not to mention the apparent apathy of the PAL station manager as nominal damages in every obligation arising from any source enumerated in
to the predicament of the stranded passengers. In light of these Article 1157, or in every case where any property right has been invaded.
circumstances, the Court held that if the fortuitous event was accompanied
by neglect and malfeasance by the carriers employees, an action for damages V. Disposition
against the carrier is permissible. Unfortunately, for private respondents, WHEREFORE, in view of the foregoing, the decision of the Court of Appeals
none of these conditions are present in the instant petition. dated December 22, 1993 is hereby MODIFIED. The award of actual moral
and exemplary damages is hereby DELETED. Petitioner JAL is ordered to pay
The Court is not prepared, however, to completely absolve JAL from any each of the private respondents nominal damages in the sum of P100,000.00
liability. It must be noted that private respondents bought tickets from the each including attorney's fees of P50,000.00 plus costs. 
United States with Manila as their final destination. While JAL was no longer Northwest Airlines v Catapang
required to defray private respondents living expenses during their stay
Note: Take note of the circumstances of the person in considering the
damages due the person. FUT informed him, via telephone, that Northwest Airlines, Inc.
I. Recit-ready summary (petitioner) was willing to accommodate his request provided he would
pay an additional US$50 for every rebooking or rerouting of flight. He
Respondent Catapang requested First United Travel, Inc. (FUT) to issue agreed and was given a ticket covering the New York to Los Angeles via
him a ticket that would allow rebooking or rerouting of flights within Detroit and the Los Angeles to Manila segments of his travel. The
the United States. FUT informed him that Northwest Airlines, Inc. rebooking/rerouting scheme was annotated on the restriction portion of the
(petitioner) was willing to accommodate his request provided he would ticket:
pay an additional US$50 for every rebooking or rerouting of flight. He
agreed. When Catapang arrived in New York, he called Northwest’s office No end./7 days adv. Purchase
which informed him that his ticket was not "rebookable or reroutable".
Catapang proceeded to Northwest’s ticket office where he was treated in a US$50 — rebooking/re-routing/cancellation fee
rude manner by an employee who informed him that his ticket was not
rebookable or reroutable. He filed a complaint for damages. RTC awarded When Catapang arrived in New York, he called Northwest’s office
Catapang damages and CA affirmed. which informed him that his ticket was not "rebookable or reroutable".
Catapang proceeded to Northwest’s ticket office at the World Trade Center
The issue is whether award for damages is correct? where he was treated in a rude manner by an employee who informed
YES, except for filing fees and attorney’s fees. him that his ticket was not rebookable or reroutable since it was of a
"restricted type", and that unless he upgraded it by paying US$644.00, he
Instead of civilly informing respondent that his ticket could not be rebooked, could not rebook. Left with no choice, respondent paid that amount for
petitioner's agent in New York exhibited rudeness in the presence of rebooking.
respondent's brother-in-law and other customers. Passengers have the
right to be treated by a carrier's employees with kindness, respect, Upon his return to the Philippines, Catapang wrote to petitioner in a
courtesy and due consideration. Any discourteous conduct on the part of letter (see notes). His letter of demand remained unanswered, so he filed a
these employees toward a passenger gives the latter an action for damages complaint for damages against Northwest. Northwest claimed that
against the carrier. The award of moral and exemplary damages to respondent's ticket was a discounted one, subject to the rules which
respondent is thus justified. petitioner's agents have to abide by. Thus, with respect to the annotation
on respondent's ticket of the US$50.00 rebooking charge, petitioner
II. Facts of the case explained that the same was subject to the "rules of applicability", which
rules could not be reflected on the ticket.
Respondent Delfin Catapang is a lawyer and at the time of the case,
Assistant Vice President and Head of the Special Projects Department, RTC ruled in favor of Catapang and awarded actual (including filing
Corporate Services Division of the United Coconut Planters Bank (UCPB). He fees), moral, exemplary damages, attorney’s fees, and cost of suit. CA
was directed by UCPB to go to Paris for a business trip. He intended to go to affirmed except it reduced the moral damages, totalling now to P700,000.
US to visit his siblings after Paris. So, he requested First United Travel, Inc.
(FUT) to issue him a ticket that would allow rebooking or rerouting of flights III. Issue/s
within the United States.
Whether the award for damages is correct? YES, except for filing fees and But the inclusion of filing fees as part of the actual damages is
attorney’s fees. superfluous, if not erroneous, as it is already chargeable in the “cost of
suit” as per Secs. 8 and 10 of the Rules of Court. As for the award of
IV. Ratio/Legal Basis attorney's fees, the trial court did not state the factual and legal basis thereof.
The transcript of stenographic notes of the lower court's proceedings do not
Northwest assails that moral damages should not be awarded as show that respondent adduced proof to sustain his general averment of a
there is no breach of contract and exemplary damages as it did not retainer agreement in the amount of P200,000.00. The award must thus be
commit wanton or malevolent conduct. Further, attorney’s fees cannot be deleted.
recovered under Art. 2208 of the Civil Code, there is no pecuniary loss so
actual damages could not be recovered, the reimbursement of filing fees V. Disposition
has no basis and P700,000 in damages is excessive.
WHEREFORE, the Court of Appeals Decision of June 30, 2006 is
The Court disagrees. When respondent inquired from petitioner's agent AFFIRMED with MODIFICATION in that the award of attorney's fees is deleted
FUT if he would be allowed to rebook/reroute his flight, FUT advised him for lack of basis. And the award of actual damages of P7,372.50 representing
that he could, on the condition that he would pay $50 for every filing fees is deleted.
rebooking. He was not told by FUT and the ticket did not reflect it that
the ticket being issued to him was a "restricted type" to call for its VI. Notes
upgrading before a rebooking/rerouting. But Northwest’s reservation
supervisor, Amelia Merris, admitted that the only restriction on the ticket At about 9:30 in the morning of March 11, 1992, I went to the sales
refers to non-endorsement. (It means ticket cannot be transferred to office in the World Trade Center where I explained to your black woman
another airline) representative my predicament. Your representative rudely told me that my
ticket is the restrictive type and that my flight can not be rebooked or
Petitioner's breach in this case was aggravated by the undenied rerouted. I explained that the only restriction on my ticket is that I should pay
treatment received by respondent when he tried to rebook his ticket. Instead US$50.00 if I have to rebook or reroute my flight and asked your
of civilly informing respondent that his ticket could not be rebooked, representative to read the restriction. Your representative rudely and
petitioner's agent in New York exhibited rudeness in the presence of impolitely retorted that I could not understand English and that unless I
respondent's brother-in-law and other customers, insulting respondent pay the amount of US$644.00, I cannot get a rebooking and rerouting.
by telling him that he could not understand English. Despite my appeal and protestation, she did not reconsider her decision. As I
was badly needed in Detroit on the evening of the same day and had to be
Passengers have the right to be treated by a carrier's employees with back in Manila on the 14th of March, I was compelled to pay, under protest,
kindness, respect, courtesy and due consideration. They are entitled to be the amount of US$644.00 using my American Express Card as my cash was
protected against personal misconduct, injurious language, indignities and insufficient to cover the amount. It was only then that I was issued ticket no.
abuses from such employees. So it is that any discourteous conduct on the 012:4488:504:099.
part of these employees toward a passenger gives the latter an action for
damages against the carrier. The award of moral and exemplary damages to Considering that my ticket was cleared with you prior to its issuance
respondent is thus justified. and that FUT is your duly accredited agent, you are bound by the terms
of the ticket issued by FUT in your behalf. You have no right to
unilaterally change the tenor of your contract during its effectivity down. Now the family of Pedrito is filing a case against Dangwa (owner of
without my consent. the bus) for negligence.

Your airline’s willful breach of the terms and conditions of my ticket Is Dangwa liable? Yes
and the shabby treatment that I received from your personnel hurt my
feeling, humiliated and embarrassed me in the presence of my brother-in-law Even if Cudiamat was entering the bus while it was moving, this alone
and other people nearby who witnessed the incident. The fact that your cannot singlehandedly call him negligent. Evidence also proved that the
employee did that to a bank officer and a lawyer like me only shows that your bus was clearly not moving in this case based upon the testimonies of
airline can also do the same to others, not to mention the poor and hapless witnesses.
persons.
And as a common carrier, the moment the passenger stepped on the vehicle
Because I could not bear my wounded feeling, the shabby treatment, was the time he became a passenger thus the extraordinary diligence
the humiliation and the embarrassment that I received from your employee, I required to take their passengers to their destination safely was present.
asked for the cancellation and refund of my ticket covering my trip from Los
Angeles to the Philippines for which I was given a refund application slip no. As the driver was found to be negligent Dangwa is also negligent for being
012 0230189256 3 by your ticket counter at the Los Angeles airport on March the common carrier not practicing extraordinary Dilligence
12, 1992.
II. Facts of the case
To compensate me for the expenses that I incurred, and the
wounded feeling, humiliation and embarrassment that were caused by your On May 13, 1985, private respondents filed a complaint 1 for damages
airline’s willful breach of contract with me, I demand that you pay me against petitioners for the death of Pedrito Cudiamat as a result of a vehicular
damages in the amount of ₱1,000,000.00 within a period of five (5) days accident which occurred on March 25, 1985 at Marivic, Sapid, Mankayan,
from your receipt hereof. Otherwise, I shall have no alternative but to Benguet. Among others, it was alleged that on said date, while petitioner
seek redress from our court of justice and to hold you liable for all other Theodore M. Lardizabal was driving a passenger bus belonging to
expenses attendant thereto. petitioner corporation in a reckless and imprudent manner and without
Dangwa v CA due regard to traffic rules and regulations and safety to persons., it ran
over its passenger, PEDRO CUDIAMAT.

Note: Take note – the presumption of negligence will attach in case of injury
Before taking the passenger to the nearest hospital, the said driver, in utter
or death except in cases enumerated under 1734.
bad faith and without regard to the welfare of the victim, first brought
his other passengers and cargo to their respective destinations before
I. Recit-ready summary
banging said victim to the Lepanto Hospital where he expired.

In the case at bar, pedrito Cudiamat unfortunately died due to injuries

Dangwa and other petitioners then claimed that they are not liable as they
suffered as he was trying to enter a bus. The bus driver claimed that he
were exercising extraordinary diligence and that it was due to the
did not see and thus he accidentally ran over the passenger. They tried to
victim’s own negligence in entering a moving vehicle that caused the
bring him to the hospital but the driver still stopped to let a passenger
accident.
 IV. Ratio/Legal Basis
RTC ruled in favor of Dangwa. CA reversed, hence this petition with the After a careful review of the evidence on record, we find no reason to disturb
central issue herein being whether respondent court erred in reversing the the above holding of the Court of Appeals. Its aforesaid findings are
decision of the trial court and in finding petitioners negligent and liable for supported by the testimony of petitioners' own witnesses. Virginia Abalos,
the damages claimed. one of the witnesses, testified that this incident occurred in the 53 and 54
bunkerhouse. The bus conductor also said that the incident occurred at the
TRIAL COURT. The trial court in this case found the victim negligent due to same place where he saw the victim lying down asking for help.
his acts of entering a moving vehicle with one hand on an umbrella. There
was a lack of any signs or signal to let the driver or conductor know that he The foregoing testimonies show that the place of the accident and the place
was entering the vehicle as well. where one of the passengers alighted were both between Bunkhouses 53
and 54, hence the finding of the Court of Appeals that the bus was at full
CA. From the testimony of appellee's own witness in the person of Vitaliano stop when the victim boarded the same is correct. They further confirm
Safarita, it is evident that the subject bus was at full stop when the victim the conclusion that the victim fell from the platform of the bus when it
Pedrito Cudiamat boarded the same as it was precisely on this instance where suddenly accelerated forward and was run over by the rear right tires of
a certain Miss Abenoja alighted from the bus. Moreover, contrary to the the vehicle, as shown by the physical evidence on where he was thereafter
assertion of the appellees, the victim did indicate his intention to board found in relation to the bus when it stopped. Under such circumstances, it
the bus as can be seen from the testimony of the said witness when he cannot be said that the deceased was guilty of negligence.
declared that Pedrito Cudiamat was no longer walking and made a sign to
board the bus when the latter was still at a distance from him. It was at the The contention of petitioners that the driver and the conductor had no
instance when Pedrito Cudiamat was closing his umbrella at the platform knowledge that the victim would ride on the bus, since the latter had
of the bus when the latter made a sudden jerk movement (as) the driver supposedly not manifested his intention to board the same, does not merit
commenced to accelerate the bus. consideration. When the bus is not in motion there is no necessity for a
person who wants to ride the same to signal his intention to board. A
Evidently, the incident took place due to the gross negligence of the public utility bus, once it stops, is in effect making a continuous offer to
appellee-driver in prematurely stepping on the accelerator and in not waiting bus riders. Hence, it becomes the duty of the driver and the conductor, every
for the passenger to first secure his seat especially so when we take into time the bus stops, to do no act that would have the effect of increasing the
account that the platform of the bus was at the time slippery and wet peril to a passenger while he was attempting to board the same. The
because of a drizzle. The defendants-appellees utterly failed to observe their premature acceleration of the bus in this case was a breach of such duty
duty and obligation as common carrier to the end that they should observe
extra-ordinary diligence in the vigilance over the goods and for the safety of It is the duty of common carriers of passengers, including common
the passengers transported by them according to the circumstances of each carriers by railroad train, streetcar, or motorbus, to stop their
case conveyances a reasonable length of time in order to afford passengers
an opportunity to board and enter, and they are liable for injuries
III. Issue/s suffered by boarding passengers resulting from the sudden starting up
or jerking of their conveyances while they are doing so.
Is Dangwa liable as a common carrier? YES
Further, even assuming that the bus was moving, the act of the victim in WHEREFORE, subject to the above modifications, the challenged judgment
boarding the same cannot be considered negligent under the circumstances. and resolution of respondent Court of Appeals are hereby AFFIRMED in all
As clearly explained in the testimony of the aforestated witness for other respects. SO ORDERED.
petitioners, Virginia Abalos, th bus had "just started" and "was still in slow Aboitiz Shipping v CA
motion" at the point where the victim had boarded and was on its platform.
13
Note: Take note of the issue on reasonable time. This is a matter of evidence.
I. Recit-ready summary
It is not negligence per se, or as a matter of law, for one attempt to
board a train or streetcar which is moving slowly. 14 An ordinarily
Anacleto Viana boarded the vessel M/V Antonia, owned by Aboitiz, at
prudent person would have made the attempt board the moving
the port at San Jose, Occidental Mindoro, bound for Manila. Said vessel
conveyance under the same or similar circumstances. The fact that
arrived at Pier 4, North Harbor, Manila, and the passengers therein
passengers board and alight from slowly moving vehicle is a matter of
disembarked. The crane owned by Pioneer and operated by its crane
common experience both the driver and conductor in this case could not
operator was placed alongside the vessel and one (1) hour after the
have been unaware of such an ordinary practice.
passengers of said vessel had disembarked, it started operation by
As soon as he stepped on the platform of the bus, the victim instantly
unloading the cargoes from said vessel. While the crane was being
became a passenger thus is afforded all the rights of a passenger of a
operated, Anacleto who had already disembarked from said vessel went
common carrier.
back to the vessel, and the crane hit him, pinning him between the side
of the vessel and the crane. He died. Private respondents Vianas filed a
Moreover, the circumstances under which the driver and the conductor
complaint 3 for damages against Aboitiz for breach of contract of carriage.
failed to bring the gravely injured victim immediately to the hospital for
medical treatment is a patent and incontrovertible proof of their
WON Anacleto was still a passenger of Aboitiz at the time of the incident? YES.
negligence. It defies understanding and can even be stigmatized as callous
indifference. The evidence shows that after the accident the bus could have
Doctrine. By the very nature of petitioner's business as a shipper, the
forthwith turned at Bunk 56 and thence to the hospital, but its driver instead
passengers of vessels are allotted a longer period of time to disembark
opted to first proceed to Bunk 70 to allow a passenger to alight and to
from the ship than other common carriers such as a passenger bus.
deliver a refrigerator, despite the serious condition of the victim. The vacuous
When the accident occurred, the victim was in the act of unloading his
reason given by petitioners that it was the wife of the deceased who caused
cargoes, which he had every right to do, from petitioner's vessel. It is not
the delay was tersely and correctly confuted by respondent court:
de􏰀finitely shown that one (1) hour prior to the incident, the victim had
already disembarked from the vessel.
... The pretension of the appellees that the delay was due to the fact that they
had to wait for about twenty minutes for Inocencia Cudiamat to get dressed
ISSUE: WON Aboitiz is negligent for Anacleto’s death? YES.
deserves scant consideration. It is rather scandalous and deplorable for a wife
whose husband is at the verge of dying to have the luxury of dressing herself
Doctrine. Presumption is established by law that in case of a passenger's
up for about twenty minutes before attending to help her distressed and
death or injury the operator of the vessel was at fault or negligent, having
helpless husband.
failed to exercise extraordinary diligence, and it is incumbent upon it to rebut
the same.
V. Disposition
Definitely, even assuming the existence of the supposed cordon of drums cargoes were still loaded in the vessel, went back to the vessel, and it
loosely placed around the unloading area and the guard's admonitions was while he was pointing to the crew of the said vessel to the place
against entry therein, these were at most insufficient precautions which pale where his cargoes were loaded that the crane hit him, pinning him
into insignificance if considered vis-a-vis the gravity of the danger to which between the side of the vessel and the crane. He was thereafter brought to
the deceased was exposed. There is no showing that petitioner was the hospital where he later expired three (3) days thereafter.
extraordinarily diligent in requiring or seeing to it that said
precautionary measures were strictly and actually enforced to subserve Private respondents Vianas filed a complaint 3 for damages against Aboitiz
their purpose of preventing entry into the forbidden area. for breach of contract of carriage.

WON Pioneer is negligent for Anacleto’s death? NO. Aboitiz, as third-party plaintiff, filed a third-party complaint against Pioneer
imputing liability thereto for Anacleto Viana's death as having been allegedly
Aboitiz joined Pioneer in proving the alleged gross negligence of the victim, caused by the negligence of the crane operator who was an employee of
hence its present contention that the death of the passenger was due to the Pioneer under its exclusive control and supervision.
negligence of the crane operator cannot be sustained both on grounds of
estoppel and for lack of evidence on its present theory. Both the trial court and respondent Court of Appeals found the victim
Anacleto Viana guilty of contributory negligence, but holding that it was
II. Facts of the case the negligence of Aboitiz in prematurely turning over the vessel to the
arrastre operator for the unloading of cargoes which was the direct,
Anacleto Viana boarded the vessel M/V Antonia, owned by Aboitiz, at the immediate and proximate cause of the victim's death.
port at San Jose, Occidental Mindoro, bound for Manila. Said vessel arrived at
Pier 4, North Harbor, Manila, and the passengers therein disembarked, a III. Issue/s
gangplank having been provided connecting the side of the vessel to the 1. WON Anacleto was still a passenger of Aboitiz at the time of the
pier. Instead of using said gangplank, Anacleto disembarked on the third incident? YES.
deck which was on the level with the pier. 2. WON Aboitiz is negligent for Anacleto’s death? YES.
3. WON Pioneer is negligent for Anacleto’s death? NO.
After said vessel had landed, the Pioneer Stevedoring Corporation took over
IV. Ratio/Legal Basis
the exclusive control of the cargoes loaded on said vessel pursuant to the
Memorandum of Agreement dated July 26, 1975 (Exh. '2') between the third
Anacleto was Aboitiz’s passenger
party defendant Pioneer Stevedoring Corporation and defendant Aboitiz
Shipping Corporation.
Petitioner contends that since one (1) hour had already elapsed from the
time Anacleto Viana disembarked from the vessel and that he was given
The crane owned by Pioneer and operated by its crane operator was placed
more than ample opportunity to unload his cargoes prior to the operation of
alongside the vessel and one (1) hour after the passengers of said vessel had
the crane, his presence on the vessel was no longer reasonable and he
disembarked, it started operation by unloading the cargoes from said vessel.
consequently ceased to be a passenger.

While the crane was being operated, Anacleto who had already
DOCTRINE: The rule is that the relation of carrier and passenger
disembarked from said vessel obviously remembering that some of his
continues until the passenger has landed at the port of destination and
has left the vessel owner's dock or premises. Once created, the retrieve his baggage. Yet, even if he had already disembarked an hour earlier,
relationship will not ordinarily terminate until the passenger has, after his presence in petitioner's premises was not without cause. The victim had to
reaching his destination, safely alighted from the carrier's conveyance or claim his baggage which was possible only one (1) hour after the vessel
had a reasonable opportunity to leave the carrier's premises. All persons arrived since it was admittedly standard procedure in the case of petitioner's
who remain on the premises a reasonable time after leaving the vessels that the unloading operations shall start only after that time.
conveyance are to be deemed passengers, and what is a reasonable time
or a reasonable delay within this rule is to be determined from all the Aboitiz is negligent
circumstances, and includes a reasonable time to see after his baggage
and prepare for his departure. The carrier-passenger relationship is not DOCTRINE: Presumption is established by law that in case of a passenger's
terminated merely by the fact that the person transported has been carried death or injury the operator of the vessel was at fault or negligent, having
to his destination if, for example, such person remains in the carrier's failed to exercise extraordinary diligence, and it is incumbent upon it to rebut
premises to claim his baggage. That reasonableness of time should be the same.
made to depend on the attending circumstances of the case, such as the
kind of common carrier, the nature of its business, the customs of the We cannot in reason deny that petitioner failed to rebut the
place, and so forth, and therefore precludes a consideration of the time presumption against it. Under the facts obtaining in the present case, it
element per se without taking into account such other factors. The cannot be gainsaid that petitioner had inadequately complied with the
primary factor to be considered is the existence of a reasonable cause as required degree of diligence to prevent the accident from happening.
will justify the presence of the victim on or near the petitioner's vessel. As found by the Court of Appeals, the evidence does not show that there was
a cordon of drums around the perimeter of the crane, as claimed by
By the very nature of petitioner's business as a shipper, the passengers of petitioner. It also adverted to the fact that the alleged presence of visible
vessels are allotted a longer period of time to disembark from the ship than warning signs in the vicinity was disputable and not indubitably established.
other common carriers such as a passenger bus. With respect to the bulk of Thus, we are not inclined to accept petitioner's explanation that the
cargoes and the number of passengers it can load, such vessels are capable victim and other passengers were su􏰁ciently warned that merely
of accommodating a bigger volume of both as compared to the capacity of a venturing into the area in question was fraught with serious peril.
regular commuter bus. Consequently, a ship passenger will need at least Definitely, even assuming the existence of the supposed cordon of drums
an hour as is the usual practice, to disembark from the vessel and claim loosely placed around the unloading area and the guard's admonitions
his baggage whereas a bus passenger can easily get off the bus and against entry therein, these were at most insufficient precautions which pale
retrieve his luggage in a very short period of time. Anacleto Viana was still into insignificance if considered vis-a-vis the gravity of the danger to which
a passenger at the time of the incident. When the accident occurred, the the deceased was exposed. There is no showing that petitioner was
victim was in the act of unloading his cargoes, which he had every right to extraordinarily diligent in requiring or seeing to it that said
do, from petitioner's vessel. precautionary measures were strictly and actually enforced to subserve
their purpose of preventing entry into the forbidden area. While the
It is not definitely shown that one (1) hour prior to the incident, the victim was admittedly contributorily negligent, still petitioner's
victim had already disembarked from the vessel. Petitioner failed to prove aforesaid failure to exercise extraordinary diligence was the proximate
this. In consonance with common shipping procedure as to the minimum and direct cause of, because it could de􏰀nitely have prevented, the
time of one (1) hour allowed for the passengers to disembark, it may be former's death.
presumed that the victim had just gotten off the vessel when he went to
 Pioneer not liable presumption may only be overcome by evidence that the carrier exercised
extraordinary diligence.
Aboitiz joined Pioneer in proving the alleged gross negligence of the victim,
hence its present contention that the death of the passenger was due to IN THIS CASE. petitioner, as common carrier, failed to establish
the negligence of the crane operator cannot be sustained both on sufficient evidence to rebut the presumption of negligence. The findings
grounds of estoppel and for lack of evidence on its present theory. Even of the trial court, as affirmed by the Court of Appeals, showed that the
in its answer filed in the court below it readily alleged that Pioneer had taken accident which led to the death of Sherly Moneño was caused by the
the necessary safeguards insofar as its unloading operations were concerned, reckless speed and gross negligence of petitioner's driver who
a fact which appears to have been accepted by the plaintiff therein by not demonstrated no regard for the safety of his passengers. It was thus
impleading Pioneer as a defendant, and likewise inceptively by Aboitiz by correct to hold petitioner guilty of breach of the contract of carriage.
filing its third-party complaint only after ten (10) months from the institution
of the suit against it. Parenthetically, Pioneer is not within the ambit of II. Facts of the case
the rule on extraordinary diligence required of, and the corresponding
presumption of negligence foisted on, common carriers like Aboitiz. DIAZ operated a common carrier a tamaraw FX taxi plying the route of
Cagayan de Oro City. This was driven by Arman Retes the tamaraw was
V. Disposition moving at a very fast speed then it rammed a HINO cargo truck the rear
portion this was owned by LANTORIA and driven by Rogelio Francisco
WHEREFORE, the petition is DENIED and the judgment appealed from is
hereby AFFIRMED in toto. 9 people died b/c of this including Sherly Moneno. Heirs of Shirley filed a
case for Breach of contract of carriage and damages against DIAZ AND
ARMAN then Diaz filed a 3rd party complaint against Lantoria and Francisco.
Diaz v CA
RTC RULED IN FAVOR OF RESPONDENTS….. CA AFFIRM
I. Recit-ready summary( Really short case)
III. Issues
Diaz operated a common carrier tamaraw FX in Cagayan. It rammed into Whether or not the Court of Appeals committed grave abuse of discretion in
a HINO truck from behind and 9 people died including Sherley then her heirs affirming the trial court's decision holding petitioner liable for breach of
instituted an action for Breach of Contract of carriage and Damages. contract NO

WON the Court of Appeals committed grave abuse of discretion in IV. Ratio/Legal Basis
affirming the trial court's decision holding petitioner liable for breach of .
contract NO A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very
DOCTRINE: In a contract of carriage, it is presumed that the common cautious persons, with a due regard for all the circumstances.
carrier is at fault or is negligent when a passenger dies or is injured. In
fact, there is even no need for the court to make an express finding of In a contract of carriage, it is presumed that the common carrier is at
fault or negligence on the part of the common carrier. This statutory fault or is negligent when a passenger dies or is injured. In fact, there is
even no need for the court to make an express finding of fault or
negligence on the part of the common carrier. This statutory
presumption may only be overcome by evidence that the carrier Under Articles 2180 and 2176 of the Civil Code, when an injury is caused by
exercised extraordinary diligence. the negligence of a servant or an employee, the master or employer is
presumed to be negligent either in the selection or in the supervision of that
In the case at bar, petitioner, as common carrier, failed to establish employee. This presumption may be overcome only by satisfactorily showing
sufficient evidence to rebut the presumption of negligence. The findings that the employer exercised the care and the diligence of a good father of a
of the trial court, as affirmed by the Court of Appeals, showed that the family in the selection and the supervision of its employee. The negligence
accident which led to the death of Sherly Moneño was caused by the reckless alluded to here is in its supervision over its driver, not in that which
speed and gross negligence of petitioner's driver who demonstrated no directly caused the accident. The fact that Pestaño was able to use a bus
regard for the safety of his passengers. It was thus correct to hold petitioner with a faulty speedometer shows that Metro Cebu was remiss in the
guilty of breach of the contract of carriage. supervision of its employees and in the proper care of its vehicles. It had
Pestano v Sumayang thus failed to conduct its business with the diligence required by law.

II. Facts of the case

I. Summary
(this includes all of the testimonies in the case)
Ananias Sumayang was riding a motorcycle along the national highway in
Ananias Sumayang was riding a motorcycle along the national highway
Ilihan, Tabagon, Cebu. Riding with him was his friend Manuel Romagos. As
in Ilihan, Tabagon, Cebu. Riding with him was his friend Manuel
they came upon a junction where the highway connected with the road
Romagos. As they came upon a junction where the highway connected with
leading to Tabagon, they were hit by a passenger bus driven by Gregorio
the road leading to Tabagon, they were hit by a passenger bus driven by
Pestaño and owned by Metro Cebu Autobus Corporation (Metro Cebu),
Gregorio Pestaño and owned by Metro Cebu, which had tried to
which had tried to overtake them, sending the motorcycle and its passengers
overtake them, sending the motorcycle and its passengers hurtling upon
hurtling upon the pavement. Both Ananias Sumayang and Manuel Romagos
the pavement. Both Ananias Sumayang and Manuel Romagos were rushed
were rushed to the hospital in Sogod, where Sumayang was pronounced
to the hospital but later died. The trial court and the CA found the petitioners
dead on arrival. Romagos was transferred to the Cebu Doctors’ Hospital, but
to be liable. Hence, this petition.
he succumbed to his injuries the day after.

W/N the negligence of the driver is the proximate cause of the injury. YES
Apart from the institution of criminal charges against Gregorio Pestaño,
Teotimo and Paz Sumayang, as heirs of Ananias Sumayang, filed this civil
The testimonies said that as the two vehicles approached the junction, the
action for damages against Gregorio Pestaño, as driver, Metro Cebu, as
victim raised his left arm to signal that he was turning left to Tabagon, but
owner and operator of the said bus, and Perla Compania de Seguros, as
that the latter and his companion were thrown off the motorcycle after it
insurer of Metro Cebu.
was bumped by the overspeeding bus. We find no cogent reason to
reverse or modify their factual findings. The CA agreed with the trial court
Joint trial of the two cases thereafter ensued, where the following assertions
that the vehicular collision was caused by Pestaño’s negligence when he
were made:
attempted to overtake the motorcycle. As a professional driver operating a
public transport bus, he should have anticipated that overtaking at a
Respondents rely mainly on the testimonies of Ignacio Neis, and Pat. Aquilino
junction was a perilous maneuver and should thus have exercised
Dinoy. Neis declared that he saw the incident while he was sitting on a bench
extreme caution.
beside the highway; that both vehicles came from the North; that as the corroborated Pestaño’s testimony that his driving ability was thoroughly
motorcycle approached the junction to Tabagon, the driver Ananias tested, and that all drivers underwent periodic lecture on various aspects of
Sumayang signalled with his left arm to indicate that he was taking the safety driving including pertinent traffic regulations. They also confirmed
Tabagon Road; that the motorcycle did turn left but as it did so, it was the thorough checkup of every vehicle before it would depart and that
bumped by an overspeeding bus; that the force of the impact threw the performance of the drivers was being monitored by several
Ananias Sumayang and his companion Manuel Romagos about 14 meters inspectors posted at random places along the route.
away. The motorcycle, Neis continued, was badly damaged as it was dragged
by the bus. The trial court and the CA found the petitioners to be liable. Hence, this
petition. Petitioners contend that Pestaño was not under any obligation to
Pat. Dinoy testified that he was in the nearby house when he heard the slow down when he overtook the motorcycle, because the deceased had
sound or noise caused by the collision; that he took note of the various given way to him upon hearing the bus horn. Seeing that the left side of the
distances that the probable point of impact was at the left lane of the road was clearly visible and free of oncoming traffic, Pestaño accelerated his
highway and right at the junction to Tabagon; that he based his conclusion speed to pass the motorcycle. Having given way to the bus, the
on the ‘scratches’ caused by the motorcycle’s footrest on the asphalt motorcycle driver should have slowed down until he had been
pavement; that on the part of the bus, the right end of its front bumper was overtaken.
bent and the right portion of the radiator grill was dented.
They further contend that the motorcycle was not in the middle of the road
On the contrary, Pestaño blamed Sumayang for the accident. He testified that nearest to the junction as found by the trial and the appellate courts, but was
when he first blew the horn the motorcycle which was about 15 or 20 on the inner lane. This explains why the damage on the bus were all on the
meters ahead went to the right side of the highway that he again blew right side — the right end of the bumper and the right portion of the radiator
the horn and accelerated in order to overtake the motorcycle; that when grill were bent and dented. Hence, they insist that it was the victim who was
he was just one meter behind, the motorcycle suddenly turned left negligent.
towards the Tabagon Road and was bumped by his bus; that he was able
to apply his break only after the impact. Pestaño’s testimony was III. Issue/s
corroborated by one of the passengers of the bus; that the motorcycle
suddenly turned left towards Tabagon Road without giving any signal to W/N the negligence of the driver is the proximate cause of the injury? YES
indicate its maneuver; that the bus was going at 40 kph when the
accident occurred. IV. Held

For the defense of the corporation, Gregorio Pestaño explained how his We disagree. Petitioners are raising a question of fact based on Pestaño’s
driving experience and ability were tested by the company before he was testimony contradicting that of Eyewitness Ignacio Neis and on the location
hired. Also, the management gave regular lectures to drivers and of the dents on the bumper and the grill. Neis testified that as the two
conductors touching on topics like speeding, parking, loading and vehicles approached the junction, the victim raised his left arm to signal that
treatment of passengers, and that before he took to the road he checked he was turning left to Tabagon, but that the latter and his companion were
together with the mechanic the tires, brake, signal lights as well as the thrown off the motorcycle after it was bumped by the overspeeding bus.
tools to be brought along. The corporation also presented its maintenance
supervisor, Agustin Pugeda, Jr., and its manager, Alfonso Corominas, Jr. who
We find no cogent reason to reverse or modify their factual findings. The CA WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution
agreed with the trial court that the vehicular collision was caused by AFFIRMED. Cost against petitioners.
Pestaño’s negligence when he attempted to overtake the motorcycle. As a
professional driver operating a public transport bus, he should have SO ORDERED.
anticipated that overtaking at a junction was a perilous maneuver and should Ludo v CA
thus have exercised extreme caution.

I. Recit-ready summary
Factual findings of the CA affirming those of the trial court are conclusive and
binding on this Court. Petitioners failed to demonstrate that this case falls While docking, Gabisan Shipping’s vessel, MV Miguela, rammed into the
under any of the recognized exceptions to this rule. Indeed, the issue of fender pile cluster of the private wharf owned and operated by Ludo for
negligence is basically factual and, in quasi-delicts, crucial in the award of the loading and unloading of copra and other processed products. The
damages. damage to the pile clusters is undisputed. Ludo contends that the damage
was due directly due to MV Miguela’s ramming into the pile clusters
Petitioners aver that the CA was wrong in attributing the accident to a during docking – after it was rammed, an independent marine surveyor
faulty speedometer and in implying that the accident could have been was hired and he found that 1 post was uprooted while 2 others were
avoided had this instrument been properly functioning. loosened and that the pile cluster was leaning shoreward; a skin diver
hired by the marine surveyor further found that 1 post was broken at about
This contention has no factual basis. Under Articles 2180 and 2176 of the Civil 7in from the seabed and 2 other posts rose and cracked at the bottom.
Code, owners and managers are responsible for damages caused by their
employees. When an injury is caused by the negligence of a servant or an Gabisan argues that the damage could have been caused by prior and
employee, the master or employer is presumed to be negligent either in subsequent vessels which likewise docked in Ludo’s private wharf – the
the selection or in the supervision of that employee. This presumption vessel’s captain testified that he ordered his bodega man to check any
may be overcome only by satisfactorily showing that the employer exercised damage done, and that the latter told him that there was no damage;
the care and the diligence of a good father of a family in the selection and the bodega man, however on cross-examination, testified that he did find a
the supervision of its employee. crack on the post but added that he found seashells and seaweeds under the
uprooted post (which is allegedly evidence that the damage happened a long
The CA said that allowing Pestaño to ply his route with a defective time ago).
speedometer showed laxity on the part of Metro Cebu in the operation
of its business and in the supervision of its employees. The negligence The RTC ruled in favor of Ludo, the CA reversed.
alluded to here is in its supervision over its driver, not in that which directly
caused the accident. The fact that Pestaño was able to use a bus with a faulty ISSUE: WON the doctrine of res ipsa loquitur applies. – YES
speedometer shows that Metro Cebu was remiss in the supervision of its First, MV Miguela was under the exclusive control of its officers and
employees and in the proper care of its vehicles. It had thus failed to conduct crew. Ludo did not have direct evidence on what transpired within as the
its business with the diligence required by law. officers and crew maneuvered the vessel to its berthing place. We note the
Court of Appeals' finding that Naval and Espina were not
V. Dispositive Portion knowledgeable on the vessel's maneuverings, and could not testify on
the negligence of the officers and crew.
Second, aside from the testimony that MV Miguela rammed the cluster pile,
private respondent did not show persuasively other possible causes of Petitioner's evidence during trial showed MV Miguela came to dock at
the damage. petitioner's wharf. Ireneo Naval, petitioner's employee, guided the vessel to
Applying now the above, there exists a presumption of negligence against its docking place. After the guide (small rope) was thrown from the vessel
private respondents which we opine the latter failed to overcome. and while the petitioner's security guard was pulling the big rope to be tied
Additionally, petitioner presented tangible proof that demonstrated private to the bolar, MV Miguela did not slow down. The crew did not release the
respondents' negligence. As testified by Capt. Olasiman, from command of vessel's anchor. Naval shouted "Reverse" to the vessel's crew, but it was too
"slow ahead" to "stop engine", the vessel will still travel 100 meters before it late when the latter responded, for the vessel already rammed the pile
finally stops. However, he ordered "stop engine" when the vessel was only 50 cluster. The impact disinclined the pile cluster and deformed the cable wires
meters from the pier. Further, he testified that before the vessel is put to slow wound around it.
astern, the engine has to be restarted. However, Olasiman can not estimate
how long it takes before the engine goes to slow astern after the engine is Marine surveyor Carlos Degamo inspected the damage on the pile cluster
restarted. From these declarations, the conclusion is that it was already too and found that one post was uprooted while two others were loosened and
late when the captain ordered reverse. By then, the vessel was only 4 that the pile cluster was leaning shoreward. Degamo hired skin diver Marvin
meters from the pier, and thus rammed it. Alferez, who found that one post was broken at about 7 inches from the
seabed and two other posts rose and cracked at the bottom. Based on these
Respondent company's negligence consists in allowing incompetent findings, Degamo concluded that the two raised posts were also broken
crew to man its vessel. As shown also by petitioner, both Captain Olasiman under the seabed and estimated the cost of repair and replacement at
and Chief Mate Gabisan did not have a formal training in marine P95,000.00.
navigation. The former was a mere elementary graduate while the latter is a
high school graduate. Their experience in navigation was only as a Private respondents denied the incident and the damage. Their witnesses
watchman and a quartermaster, respectively. claimed that the damage, if any, must have occurred prior to their
arrival and caused by another vessel or by ordinary wear and tear. They
II. Facts of the case averred that MV Miguela started to slow down at 100 meters and the crew
stopped the engine at 50 meters from the pier; that Capt. Anselmo Olasiman
Petitioner Ludo & Luym Corporation is a domestic corporation engaged in did not order the anchor's release and chief mate Manuel Gabisan did not
copra processing. Private Respondent Gabisan Shipping Lines was the hear Naval shout "Reverse". Respondents claimed that Naval had no business
registered owner and operator of the motor vessel MV Miguela, while the in the vessels' maneuvering. When Naval informed the vessel's officers of the
other private respondent, Anselmo Olasiman, was its captain. Petitioner owns incident, Olasiman sent their bodega man, Ronilo Lazara, to dive on the same
and operates a private wharf used by vessels for loading and unloading of afternoon to check on the alleged damage. Lazara told Olasiman that there
copra and other processed products. Among its wharf's facilities are fender was no damage. However, during direct examination, Lazara testified that he
pile clusters for docking and mooring. found a crack on the side of the pile cluster, one post detached from the
seabed at a distance of about 7 inches, and seashells and seaweeds directly
MV Miguela was docking at petitioner's wharf, it rammed and destroyed a underneath the uprooted post. There were scattered pieces of copra at the
fender pile cluster. Petitioner demanded damages from private place where MV Miguela docked, which indicated the prior docking by other
respondents. The latter refused. Hence, petitioner filed a complaint for vessels.
damages before the RTC.
The trial court found that it was able to prove by preponderance of evidence In our view, all the requisites for recourse to this doctrine exist.
that MV Miguela rammed and damaged the pile cluster; that petitioner's 1. First, MV Miguela was under the exclusive control of its officers and
witnesses, Naval and Espina, actually saw the incident; that respondents failed crew. Petitioner did not have direct evidence on what transpired
to refute the testimony of marine surveyor Degamo and skin diver Alferez on within as the officers and crew maneuvered the vessel to its berthing
the damages; that the officers and crew of MV Miguela were negligent; and place. We note the Court of Appeals' finding that Naval and Espina
that respondents are solidarily liable for the damages. were not knowledgeable on the vessel's maneuverings, and could
not testify on the negligence of the officers and crew.
The Court of Appeals reversed the decision of the trial court. The CA found
2. Second, aside from the testimony that MV Miguela rammed the
that petitioner's eyewitness Naval was incompetent to testify on the
cluster pile, private respondent did not show persuasively other
negligence of the crew and officers of MV Miguela; that there were other
possible causes of the damage.
vessels that used the wharf for berthing and petitioner's evidence did not Applying now the above, there exists a presumption of negligence against
positively prove that it was MV Miguela that rammed the pile cluster; that the private respondents which we opine the latter failed to overcome.
photographs of the pile cluster taken after the incident showed no visible Additionally, petitioner presented tangible proof that demonstrated private
damages; that, as shown by private respondents' witness, there were respondents' negligence. As testified by Capt. Olasiman, from command of
seashells and seaweeds directly under the uprooted post, which indicated "slow ahead" to "stop engine", the vessel will still travel 100 meters before it
that the breaking happened a long time ago. finally stops. However, he ordered "stop engine" when the vessel was only 50
III. Issue/s meters from the pier. Further, he testi􏰀ed that before the vessel is put to slow
Is the doctrine of res ipsa loquitur applicable to this case?
astern, the engine has to be restarted. However, Olasiman can not estimate
how long it takes before the engine goes to slow astern after the engine is
IV. Ratio/Legal Basis
restarted. From these declarations, the conclusion is that it was already too
Finally, is the doctrine of res ipsa loquitur applicable to this case?
late when the captain ordered reverse. By then, the vessel was only 4 meters
Petitioner argues that the Court of Appeals erred when it reversed the trial
from the pier, and thus rammed it.
court for the latter's heavy reliance on Naval's testimony. The appellate court
Respondent company's negligence consists in allowing incompetent crew to
overlooked the fact that aside from Naval's testimony, the trial court also
man its vessel. As shown also by petitioner, both Captain Olasiman and Chief
relied on the principle of res ipsa loquitur to establish private respondents'
Mate Gabisan did not have a formal training in marine navigation. The former
negligence.
was a mere elementary graduate while the latter is a high school graduate.
The doctrine of res ipsa loquitur was explained in Batiquin vs. Court of
Their experience in navigation was only as a watchman and a quartermaster,
Appeals, 258 SCRA 334 (1996), thus:
respectively.
Where the thing which causes injury is shown to be under the
management of the defendant, and the accident is such as in the
V. Disposition
ordinary course of things does not happen if those who have the
Granted.
management use proper care, it affords reasonable evidence, in the
absence of an explanation by the defendant, that the accident arose
from want of care.
The doctrine recognizes that parties may establish prima facie negligence Ong Yiu v CA
without direct proof and allows the principle to substitute for specific proof
of negligence. This is invoked when under the circumstances, direct evidence Recit-ready summary
is absent and not readily available.
Ong Yiu was a passenger of PAL who was on board a flight from Cebu en Ong Yiu (Petitioner) was a passenger of a PAL flight on August 26 from
route to Butuan, he was scheduled to attend a civil and specpro case. He Mactan Cebu, bound for Butuan City. He was scheduled to attend a civil case
checked in one piece of luggage. When he arrived, he claimed his luggage, it and a SpecPro case set for hearing. He checked in one piece of luggage, a
could not be found. PAL Butuan messaged PAL Cebu and in turn PAL Cebu blue “maleta” for which he was issued a claim check. When the passenger
messaged PAL Manila. PAL Manila notified PAL Cebu that the luggage was arrived at the Butuan airport, he claimed his luggage but it could not be
with them and they would be forwarding it to the earliest flight to Cebu, in found. It was only after reacting indigently when the porter clerk Maximo
turn would forward it to Butuan on the earliest flight possible. Ong Yiu went Gomez attended to petitioner’s missing luggage.
to the airport to inquire but he did not wait for the 10AM flight (where his
luggage was). A former driver of Ong Yiu instead volunteered to take it to PAL Butuan sent a message concerning the lost luggage to PAL Cebu. After
him. When the luggage arrived it was opened and some documents were receiving the message, PAL Cebu relayed it to the Mactan Airport teletype
missing so Ong Yiu returned it to the airport and demanded the complete operator. Around 3:59 PM, PAL Manila informed PAL Cebu advising that the
contents of the luggage and also wanted an investigation. Petitioner inquired luggage was carried by a Manila bound flight. PAL Manila informed PAL Cebu
about the investigation but PAL said they couldn’t pinpoint who it was. that the luggage would be forwarded on the next flight to Cebu and in turn,
Petitioner thus filed a case for damages against PAL. CFI ruled in favor of PAL Cebu informed PAL Butuan that the luggage it would receive from PAL
Ong Yiu. CA reversed CFI decision and limited the liability of PAL to 100. Manila would be boarded on earliest flight on the following day (August
27. Take note: the entire mishap happened August 26). However this
W/N CA erred in ruling that PAL was only guilty of simple negligence message was not received by PAL Butuan as all the personnel had already left
and not bad faith in the breach of its contract of transportation. (NO) because there were no more incoming flights that afternoon

W/N CA erred when it removed the award for damages and instead Petitioner was worried about the luggage because the documents for the
ordered PAL Cebu to pay P100 only. (NO) hearing the next day was in the luggage. Petitioner wired PAL Cebu
demanding delivery of the luggage or else he would file a case for damages
against PAL Cebu. PAL Cebu received the message but felt no need to wire
DOCTRINE: Bad faith means a breach of a known duty through some motive the petitioner that his luggage had already been forwarded on the
of interest or ill will. It was the duty of PAL to look for petitioner's luggage assumption that it would arrive to Butuan city on time.
which had been miscarried. PAL exerted due diligence in complying with such
duty. Early in the morning of August 27, Petitoner went to the airport to inquire
about his luggage. He then left the airport before the 10 AM flight which
DOCTRINE: while it may be true that petitioner had not signed the plane he came from Cebu and carried the missing baggage. Maximo Gomez paged
is nevertheless bound by the provisions thereof. These are akin to a the petitioner but he already left. A certain Emilio Dagoro, a former driver of
contract of adhesion wherein one party imposes a ready made form of petitioner, volunteered to take the luggage to the petitioner. Maximo
contract on the other, as the plane ticket in the case at bar, are contracts recognized him as the petitioner’s driver and so he placed it on the counter.
not entirely prohibited. The one who adheres to the contract is in reality Dagorro examined the lock, pressed it, and it opened. After calling the
free to reject it entirely; if he adheres, he gives his consent. attention of Maximo Gomez, the "maleta" was opened, Gomez took a look at
its contents, but did not touch them. Dagorro then delivered the "maleta" to
Facts of the case petitioner, with the information that the lock was open. Upon inspection,
petitioner found that a folder containing certain exhibits, transcripts and
private documents in the civil and specpro case were missing, aside from two Simple negligence or Bad faith?
gift items for his parents-in-law. Petitioner refused to accept the luggage.
Dagorro returned the luggage to the porter clerk, Maximo Gomez, who PAL did not act in bad faith. Bad faith means a breach of a known duty
sealed it and forwarded the same to PAL Cebu. through some motive of interest or ill will. It was the duty of PAL to look for
petitioner's luggage which had been miscarried. PAL exerted due diligence in
Petitioner asked for postponement of the hearing which was granted. He complying with such duty. Court relied on CA facts (IMPT SEE NOTES)
then sent a telegram to PAL demanding that his luggage be produced intact
and to be compensated for actual and moral damages (250,000) or else he Furthermore, the failure of PAL Cebu to reply to the Petitioner’s telegram was
will file a suit. not indicative of bad faith. Petitioner sent the letter at 10 PM, the PAL
supervisor was only notified the day after. At that time the luggage was
Officers of PAL Cebu went to Petitioner’s office to deliver the “maleta” In the already to be forwarded to Butuan City. There was no bad faith, therefore, in
presence of Mr. Jose Yap and Atty. Manuel Maranga the contents were listed the assumption made by said supervisor that the plane carrying the bag
and receipted for by petitioner. Afterwards, Petitioner sent a tracer letter to would arrive at Butuan earlier than a reply telegram. Had petitioner waited or
PAL Cebu inquiring about the investigation PAL Cebu’s officers promised to caused someone to wait at the airport for the arrival of the morning flight, he
conduct to pinpoint responsibility for the unauthorized opening of the would have been able to retrieve his luggage sooner.
maleta. As a response, PAL Cebu (See notes for letter) said they were not
able to pinpoint who was responsible. In the absence of a wrongful act or omission or of fraud or bad faith,
petitioner is not entitled to moral damages.
CFI: Petitioner filed a complaint against PAL for damages and breach of
contract of transportation. CFI ruled in favor of Petitioner and found PAL to Limit of PAL’s carriage liability
have acted in bad faith and malice.
Petitioner failed to declare a higher value for his luggage. As a general
CA: Reversed CFI decision. Said PAL was only guilty of simple negligence so proposition, the plaintiff's maleta having been pilfered while in the custody of
the award of damages was removed but ordered PAL to pay plaintiff the sum the defendant, it is presumed that the defendant had been negligent. The
of P100.00, the baggage liability assumed by it under the condition of liability, however, of PAL for the loss, in accordance with the stipulation
carriage printed at the back of the ticket. written on the back of the ticket, Exhibit 12, is limited to P100.00 per
baggage, plaintiff not having declared a greater value, and not having called
Issue/s the attention of the defendant on its true value and paid the tariff therefor.
The validity of this stipulation is not questioned by the plaintiff. They are
W/N CA erred in ruling that PAL was only guilty of simple negligence and not printed in reasonably and fairly big letters, and are easily readable. Moreover,
bad faith in the breach of its contract of transportation. (NO) plaintiff had been a frequent passenger of PAL from Cebu to Butuan City and
back, and he, being a lawyer and businessman, must be fully aware of these
W/N CA erred when it removed the award for damages and instead ordered conditions.
PAL Cebu to pay P100 only. (NO)
Petitioner argues that there is nothing in the evidence to show that he had
Ratio/Legal Basis actually entered into a contract with PAL limiting the latter's liability for loss
or delay of the baggage of its passengers, and that Article 1750 of the Civil have we been able to pinpoint the personnel who allegedly pilferred
Code has not been complied with. your baggage.

while it may be true that petitioner had not signed the plane he is You must realize that no inventory was taken of the cargo upon loading
nevertheless bound by the provisions thereof. These are akin to a contract them on any plane. Consequently, we have no way of knowing the real
of adhesion wherein one party imposes a ready made form of contract contents of your baggage when same was loaded.
on the other, as the plane ticket in the case at bar, are contracts not
entirely prohibited. The one who adheres to the contract is in reality free to We realized the inconvenience you encountered of this incident but we trust
reject it entirely; if he adheres, he gives his consent. that you will give us another opportunity to be of better service to you.

Considering, therefore, that petitioner had failed to declare a higher value for Very truly yours,
his baggage, he cannot be permitted a recovery in excess of P100.00.Besides,
passengers are advised not to place valuable items inside their baggage but PHILIPPINE AIR LINES, INC.
"to avail of our V-cargo service. I t is likewise to be noted that there is
nothing in the evidence to show the actual value of the goods allegedly lost (Sgd) JEREMIAS S. AGUSTIN
by petitioner.
Branch Supervisor
Disposition
Cebu
WHEREFORE, for lack of merit, the instant Petition is hereby denied, and
the judgment sought to be reviewed hereby affirmed in toto. CA FACTS

Notes We do not find any evidence of bad faith in this. On the contrary, We find
that the defendant had exerted diligent effort to locate plaintiff's baggage.
PAL LETTER The trial court saw evidence of bad faith because PAL sent the telegraphic
message to Mactan only at 3:00 o'clock that same afternoon, despite
Dear Atty. Ong Yiu: plaintiff's indignation for the non-arrival of his baggage. The message was
sent within less than one hour after plaintiff's luggage could not be located.
This is with reference to your September 5, 1967, letter to Mr. Ricardo G. Efforts had to be exerted to locate plaintiff's maleta. Then the Bancasi airport
Paloma, Acting Manager, Southern Philippines. had to attend to other incoming passengers and to the outgoing passengers.
Certainly, no evidence of bad faith can be inferred from these facts. Cebu
First of all, may we apologize for the delay in informing you of the result of office immediately wired Manila inquiring about the missing baggage of the
our investigation since we visited you in your office last August 31, 1967. plaintiff. At 3:59 P.M., Manila station agent at the domestic airport wired
Since there are stations other than Cebu which are involved in your case, we Cebu that the baggage was over carried to Manila. And this message was
have to communicate and await replies from them. We regret to inform you received in Cebu one minute thereafter, or at 4:00 P.M. The baggage was in
that to date we have not found the supposedly lost folder of papers nor fact sent back to Cebu City that same afternoon. His Honor stated that the
fact that the message was sent at 3:59 P.M. from Manila and completely
relayed to Mactan at 4:00 P.M., or within one minute, made the message The private respondents were able to prove that the accident was due to the
appear spurious. This is a forced reasoning. A radio message of about 50 fault or negligence of the two pick-up truck drivers whom the carrier had no
words can be completely transmitted in even less than one minute supervision or control. It is now incumbent upon the petitioner to rebut such
depending upon atmospheric conditions. Even if the message was sent from proof which he failed to do so.
Manila or other distant places, the message can be received within a minute.
that is a scientific fact which cannot be questioned. Facts of the case
Estrada v Consolacion
PLAINTIFF’S ALLEGATIONS. Simeona Estrada (wife of plaintiff) was a
passenger of the AC Jeep owned and operated by Corazon Uy and driven by
Recit-ready summary
Lucio Galaura. The AC Jeep was cruising along CM Recto when the vehicle
collided with a Ford pick-up truck. Simeona sustained a fractured left
A Ford pick-up and a Toyota pick-up were speeding over CM Recto. The two
humerus (pulmonary) embolism and shock due to respiratory failure. She
collided and the Ford pick-up truck bumped the AC Jeep which Simeona
died in San Pedro Hospital.
Estrada, wife of plaintiff, was riding. Simeona died as a result of the accident.

Plaintiff asked for actual damages, indemnification for the death of his wife,
May Uy and Galaura be held liable for the accident caused by persons whom
moral damages, and attorney’s fees.
they had no supervision or control? (No)

DEFENDANTS’ ALLEGATIONS. While admitting that Simeona was a passenger

Under the contract of carriage, Uy and Galaura assumed the express
and died as a result of the accident, the defendants alleged that the
obligation to transport Simeona to her destination safely and to observe
proximate and only cause was the negligence of third persons. Danilo Ang,
extraordinary diligence with due regard for all circumstances, and that any
driver of a Toyota pick-up truck, and Rodolfo Endino, driver of a Ford pick-up
injury suffered by her is immediately attributable to the negligence of the
truck, were driving their vehicles at a fast rate of speed. The two vehicles
carrier.
collided. Then, the Ford-pick up truck deviated from its lane and hit the AC
Jeep.
To overcome the presumption, it must be shown that the carrier observed
extraordinary diligence (utmost diligence of very cautious persons as far as
Defendants set up a counterclaim for damages by reason that the suit is
human care and foresight can provide) or that the accident
clearly unfounded.
was caused by a fortuitous event.

Defendants filed a motion for summary judgment against plaintiff on the

In order for case fortuito to exempt a person from responsibility, the
ground that there is no genuine issue as to any material fact in the case
following must concur:
except as to the amount of damages defendants are seeking from plaintiff by
1. The event is independent of the human will
2. The occurrence must render it impossible for the obligor to way of counterclaim.
fulfull his obligation in a normal manner;
3. The obligor must be free of a concurrent or contributory fault or Plaintiff opposed the motion relying on the presumption that in case of the
negligence death of the passenger the common carrier is presumed to have acted
negligently.
Respondent judge found that there is no genuine issue. The judge ordered of a preliminary point or directing some steps in the proceeding but not a
that defendants have judgment summarily against the plaintiff for such disposition on the merits. In the absence of any findings of fact and
amount as may be found due them for damages to be ascertained by trial conclusions of law, the order cannot be considered a judgment. There being
upon that issue alone. no judgment, the present petition is premature.]

Issue/s Disposition

May Uy and Galaura be held liable for the accident caused by persons whom ACCORDINGLY, the petition for certiorari with prohibition is dismissed,
they had no supervision or control? (No) without
special pronouncement as to costs.
Ratio/Legal Basis
Savellano v Northwest Airlines
Under the contract of carriage, Uy and Galaura assumed the express
obligation to transport Simeona to her destination safely and to observe
Recit-ready summary
extraordinary diligence with due regard for all circumstances, and that any
On 27 October 1991, the Savellanos departed from San Francisco, USA
injury suffered by her is immediately attributable to the negligence of the
on board Northwest (NW) Airlines Business Class bound for Manila on a 12-
carrier.
hour flight. After being airborne for approximately 2 ½ hours, NW’s pilot
made an emergency landing in Seattle after announcing that a fire had
To overcome the presumption, it must be shown that the carrier observed
started in one of the plane's engines. Respondent's shuttle bus thereafter
extraordinary diligence (utmost diligence of very cautious persons as far as
brought all passengers to the Seattle Red Lion Hotel where they were billeted
human care and foresight can provide) or that the accident was caused by a
by, and at the expense of respondent. The Savellanos were subsequently
fortuitous event.
informed that they are scheduled for a flight to Manila the following day.
Prior to leaving the hotel, however, petitioners met at the lobby Col. Roberto
In order for case fortuito to exempt a person from responsibility, the
Delfin, a Filipino co-passenger who was also travelling Business Class, who
following must concur:
informed them that he and some passengers were leaving the next day,
1. The event is independent of the human will
October 29, 1991, on board the same plane with the same itinerary. When
2. The occurrence must render it impossible for the obligor to
petitioners reached the Seattle Airport, respondent's ground stewardess
fulfull his obligation in a normal manner;
belatedly advised them that instead of flying to Manila they would have to
3. The obligor must be free of a concurrent or contributory fault or
negligence board a 3-hour flight to Los Angeles for a connecting flight to Manila via
Seoul. Upon arrival, petitioners saw their other co-passengers from the
The private respondents were able to prove that the accident was due to the distressed flight, who unlike them, left Seattle on 29 October instead of
fault or negligence of the two pick-up truck drivers whom the carrier had no October 28. They were teased for taking the longer and tiresome route to the
supervision or control. It is now incumbent upon the petitioner to rebut such Philippines. Further, when petitioners claimed their luggage at the
proof which he failed to do so. baggage carousel, they discovered that the would-have-been
handcarried items which were not allowed to be placed inside the
[NOTE: Not relevant at all for Transpo pero this case revolved around the passengers' baggage compartment had been ransacked and the
interlocutory order of the respondent judge. It is a determination of the court contents thereof stolen.
 round-trip tickets which were issued at Northwest Airlines’s Manila ticketing
WON there was breach of contract of air carriage by Northwest Airlines? YES office.

There is nothing in the contractual provisions printed in the airline Petitioners were expected to arrive at the Ninoy Aquino International
ticket authorizing Northwest to decide unilaterally, after the distressed Airport (NAIA), Manila on October 29, 1991 (Manila time) or after twelve
flight landed in Seattle, what other stopping places petitioners should hours of travel.
take and when they should fly. True, Condition 9 on the ticket allowed
respondent to substitute alternate carriers or aircraft without notice. After being airborne for approximately two and one-half (2 1/2) hours or
However, nothing there permits shuttling passengers to stopping places at about 4:15 p.m. of the same day, October 27, 1991 (Seattle, USA time), NW
that they have not been previously notified of, much less agreed to or Flight 27's pilot made an emergency landing in Seattle after announcing that
been prepared for. Substituting aircrafts or carriers without notice is a fire had started in one of the plane's engines. Respondent's shuttle bus
entirely different from changing stopping places or connecting cities thereafter brought all passengers to the Seattle Red Lion Hotel where they
without notice. Furthermore, the change in petitioners' flight itinerary does were billeted by, and at the expense of respondent.
not fall under the situation covered by the phrase "may alter or omit
stopping places shown on the ticket in case of necessity." A case of Petitioners who were travelling as a family were assigned one room at
necessity must first be proven. The burden of proving it necessarily fell on the hotel. At around 12:00 midnight, they were awakened by a phone call
respondent. This responsibility it failed to discharge. Northwest failed to from respondent's personnel who advised them to be at the Seattle Airport
show a "case of necessity" for changing the stopping place from Tokyo to Los by 7:00 a.m. (Seattle time) the following day, October 28, 1991, for departure.
Angeles and Seoul. It is a fact that some of the passengers on the distressed To reach the airport on time, the NW shuttle bus fetched them early, making
flight continued on to the Tokyo (Narita) connecting place. No explanation them skip the 6:30 a.m. hotel breakfast.
whatsoever was given to petitioners as to why they were not similarly allowed
to do so. However, only nominal damages may be awarded as the Prior to leaving the hotel, however, petitioners met at the lobby Col.
records show that respondent was impelled by sincere motives to get Roberto Delfin, a Filipino co-passenger who was also travelling Business
petitioners to their final destination by whatever was the most Class, who informed them that he and some passengers were leaving the
expeditious course in its judgment. Neither will actual damages be next day, October 29, 1991, on board the same plane with the same itinerary.
granted in the absence of convincing and timely proof of loss.
When petitioners reached the Seattle Airport, respondent's ground
Facts of the case stewardess belatedly advised them that instead of flying to Manila they
Victorino Savellano (Savellano) was a Cabugao, Ilocos Sur mayor for would have to board NW Flight 94, a DC-10 plane, bound for a 3-hour flight
many terms, former Chairman of the Commission on Elections and RTC to Los Angeles for a connecting flight to Manila. When Savellano insisted for
judge. His wife, Virginia is a businesswoman and operates several rural banks a direct flight to Manila, the female ground stewardess just told them to
in Ilocos Sur. The couple's son, Deogracias was, at the time of the incident hurry up as they were the last passengers to board.
subject of the case, the Vice-Governor of Ilocos Sur.
In Los Angeles, petitioners and the other passengers became confused
On October 27, 1991, at around 1:45 p.m., the family of Savellano for a while as board indicated a Seoul-Bangkok flight, none was posted for a
including him, departed from San Francisco, USA on board Northwest Airlines Manila flight. It was only after they complained to the NW personnel that the
(NW) Flight 27, Business Class, bound for Manila, Philippines using the NW latter finally changed the board to include Manila.
 Angeles and Los Angeles to Seoul enroute to Manila which took off on
Before boarding NW Flight 23 for Manila via Seoul, petitioners October 28, 1991. The subpoena duces tecum was not complied with by
encountered another problem. Their three small handcarried items which respondent, it proffering that its Minneapolis head office retains documents
were not padlocked as they were merely closed by zippers were not allowed only for one year after which they are destroyed.
to be placed inside the passengers' baggage compartments of the plane by
an arrogant NW ground stewardess. RTC of Cabugao, Ilocos Sur rendered judgment in favor of petitioners.
The CA ruled that petitioners had failed to show respondent's bad faith,
On petitioners' arrival at the NAIA, Manila, they saw Col. Delfin and his negligence or malice in transporting them via the Seattle-Los Angeles-Seoul-
wife as well as the other passengers of the distressed flight, who unlike them Manila route. Hence, it held that there was no basis for the RTC's award of
who left Seattle on October 28, 1991, left Seattle on October 29, 1991. They moral and exemplary damages. Neither did it find any reason to grant
were teased for taking the longer and tiresome route to the Philippines. attorney's fees. It further rules that the testimonial claim of losses is
unsupported by any other evidence at all. It is odd and even contrary to
When petitioners claimed their luggage at the baggage carousel, they human experience for [petitioner] Virginia not to have taken out a
discovered that the would-have-been handcarried items which were not P300,000.00 pair of diamond earrings from an unlocked small luggage after
allowed to be placed inside the passengers' baggage compartment had been such luggage was not allowed to be placed inside the passenger's baggage
ransacked and the contents thereof stolen. Virginia was later to claim having compartment, given the ease with which it could have been done as the small
lost her diamond earrings costing P300,000.00, two (2) Perry Gan shoes worth luggage was merely closed by zipper. Just as it is odd why no receipts for
US$250.00, four (4) watches costing US$40.00 each, two (2) pieces of Tag alleged purchases for valuable pasalubongs including Tag Huer watches,
Heuer watch and three (3) boxes of Elizabeth Arden perfumes. Deogracias, on camera and personal computer were presented.
the other hand, claimed to have lost two (2) pairs of Cole Haan shoes which
he bought for his wife, and the clothes, camera, personal computer, and jeans Issue/s
he bought for his children. WON there was breach of contract of air carriage by Northwest Airlines? --
YES
Petitioners demanded from respondent the amount of P3,000,000.00 as
damages for what they claimed to be the humiliation and inconvenience they Ratio/Legal Basis
suffered in the hands of its personnel. Respondent did not accede to the Breach of Contract
demand. Petitioners' contract of carriage with Northwest was for the San
Francisco-Tokyo (Narita)-Manila flights scheduled for October 27, 1991. This
Petitioners concede that they were not downgraded in any of the flights itinerary was not followed when the aircraft used for the first segment of the
on their way home to Manila. Their only complaint is that they suffered journey developed engine trouble. Petitioners stress that they are
inconvenience, embarrassment, and humiliation for taking a longer route. questioning, not the cancellation of the original itinerary, but its substitution,
which they allegedly had not contracted for or agreed to. They insist that, like
During the trial, a subpoena duces tecum was issued directing the other passengers of the distressed flight, they had the right to be placed
respondent to submit the passengers' manifest of the distressed flight from on Flight 27, which had a connecting flight from Japan to Manila. They add
San Francisco to Tokyo on October 27, 1991, the passengers' manifest of the that in being treated differently and shabbily, they were being discriminated
same distressed plane from Seattle to Tokyo which took off on October 29, against.
1991, and the passenger manifest of the substitute plane from Seattle to Los
 A contract is the law between the parties. Thus, in determining whether shown on the ticket in case of necessity." A case of necessity must first be
petitioners' rights were violated, we must look into its provisions, which are proven. The burden of proving it necessarily fell on respondent. This
printed on the airline ticket. Condition 9 in the agreement states that “a responsibility it failed to discharge.
carrier may without notice substitute alternate carriers or aircraft, and may
alter or omit stopping places shown on the ticket in case of necessity." Petitioners do not question the stop in Seattle, so we will not delve into
this matter. The airplane engine trouble that developed during the flight
The basis of the Complaint was the way respondent allegedly treated bound for Tokyo from San Francisco definitely merited the "necessity" of
petitioners like puppets that could be shuttled to Manila via Los Angeles and landing the plane at some place for repair — in this case, Seattle — but not
Seoul without their consent. Undeniably, it did not take the time to explain that of shuttling petitioners to other connecting points thereafter without
how it would be meeting its contractual obligation to transport them to their their consent.
final destination. Its employees merely hustled the confused petitioners into
boarding one plane after another without giving the latter a choice from Northwest failed to show a "case of necessity" for changing the stopping
other courses of action that were available. It unilaterally decided on the place from Tokyo to Los Angeles and Seoul. It is a fact that some of the
most expedient way for them to reach their final destination. passengers on the distressed flight continued on to the Tokyo (Narita)
connecting place. No explanation whatsoever was given to petitioners as to
Passenger’s Consent why they were not similarly allowed to do so. It may be that the Northwest
After an examination of the conditions printed on the airline ticket, we connecting flight from Seattle to Tokyo to Manila could no longer
find nothing there authorizing Northwest to decide unilaterally, after the accommodate them. Yet it may also be that there were other carriers that
distressed flight landed in Seattle, what other stopping places petitioners could have accommodated them for these sectors of their journey, and
should take and when they should fly. True, Condition 9 on the ticket allowed whose route they might have preferred to the more circuitous one
respondent to substitute alternate carriers or aircraft without notice. unilaterally chosen for them by respondent.
However, nothing there permits shuttling passengers — without so much as
a by your-leave — to stopping places that they have not been previously Damages
notified of, much less agreed to or been prepared for. Substituting aircrafts
or carriers without notice is entirely different from changing stopping places Petitioners impute oppression, discrimination, recklessness and
or connecting cities without notice. malevolence to respondent. We are not convinced. There is no persuasive
evidence that they were maliciously singled out to fly the Seattle-Los
The ambiguities in the contract, being one of adhesion, should be Angeles-Seoul-Manila route. It appears that the passengers of the distressed
construed against the party that caused its preparation — in this case, flight were randomly divided into two groups. One group was made to take
respondent. Since the conditions enumerated on the ticket do not specifically the Tokyo-Manila flight; and the other, the Los Angeles-Seoul-Manila flight.
allow it to change stopping places or to fly the passengers to alternate The selection of who was to take which flight was handled via the computer
connecting cities without consulting them, then it must be construed to reservation system, which took into account only the passengers' final
mean that such unilateral change was not permitted. destination.

Proof of Necessity of Alteration The records show that respondent was impelled by sincere motives to
Furthermore, the change in petitioners' flight itinerary does not fall get petitioners to their final destination by whatever was the most
under the situation covered by the phrase "may alter or omit stopping places expeditious course — in its judgment, if not in theirs. Though they claim that
they were not accommodated on Flight 27 from Seattle to Tokyo because “2. Carriage hereunder is subject to the rules and limitations relating to
respondent had taken on Japanese passengers, petitioners failed to present liability established by the Warsaw Convention unless such carriage is not
convincing evidence to back this allegation. In the absence of convincing 'International carriage' as defined by that Convention.
evidence, we cannot find respondent guilty of bad faith.
7. Checked baggage will be delivered to bearer of the baggage check. In
The unexpected and sudden requirement of having to arrange the case of damage to baggage moving in international transportation complaint
connecting flights of every single person in the distressed plane in just a few must be made in writing to carrier forthwith after discovery of damage, and
hours, in addition to the Northwest employees' normal workload, was difficult at the latest, within 7 days from receipt; in case of delay, complaint must be
to satisfy perfectly. We cannot find respondent liable for exemplary damages made within 21 days from date the baggage was delivered."
for its imperfection of neglecting to consult with the passengers beforehand.
The pertinent provisions of the Rules Relating to International Carriage
Nevertheless, herein petitioners will not be totally deprived of by Air (Warsaw Convention) state:
compensation. Nominal damages may be awarded as provided by the Civil
Code. Nominal damages are recoverable if no actual, substantial or specific "Article 26
damages were shown to have resulted from the breach. The amount of such
damages is addressed to the sound discretion of the court, taking into 1. Receipt by the person entitled to delivery of luggage or goods
account the relevant circumstances. without complaint is prima facie evidence that the same have been delivered
in good condition and in accordance with the document of carriage.
In the present case, we must consider that petitioners suffered the
inconvenience of having to wake up early after a bad night and having to 2. In case of damage, the person entitled to delivery must complain to
miss breakfast; as well as the fact that they were business class passengers. the carrier forthwith after the discovery of the damage, and, at the latest,
They paid more for better service; thus, rushing them and making them miss within three days from the date of receipt in the case of luggage and seven
their small comforts was not a trivial thing. We also consider their social and days from date of receipt in the case of goods. In the case of delay the
official status. Victorino Savellano was a former mayor, regional trial court complaint must be made at the latest within fourteen days from the date on
judge and chairman of the Commission on Elections. Virginia B. Savellano which the luggage or goods have been placed at his disposal.
was the president of five rural banks, and Deogracias Savellano was then the
incumbent vice governor of Ilocos Sur. Hence, it will be proper to grant one 3. Every complaint must be made in writing upon the document of
hundred fifty thousand pesos (P150,000) as nominal damages to each of carriage or by separate notice in writing dispatched within the times
them, in order to vindicate and recognize their right to be notified and aforesaid.
consulted before their contracted stopping place was changed.
4. Failing complaint within the times aforesaid, no action shall lie against
A claim for the alleged lost items from the baggage of petitioners the carrier, save in the case of fraud on his part."
cannot prosper, because they failed to give timely notice of the loss to
respondent. The Conditions printed on the airline ticket plainly read: After allegedly finding that their luggage had been ransacked,
petitioners never lodged a complaint with any Northwest airport personnel.
Neither did they mention the alleged loss of their valuables in their
November 22, 1991 demand letter. Hence, in accordance with the parties'
contract of carriage, no claim can be heard or admitted against respondent Maria, Agusan del Sur, the left front tire of the bus exploded. The bus fell into
with respect to alleged damage to or loss of petitioners' baggage. a ravine around three (3) feet from the road and struck a tree. The incident
resulted in the death of 28-year-old Tito Tumboy, and physical injuries to
Disposition other passengers.
WHEREFORE, the Petition is hereby PARTIALLY GRANTED, and the
assailed Decision MODIFIED. Respondent is ORDERED to pay one hundred The plaintiffs asserted that violation of the contract of carriage between
fifty thousand pesos (P150,000) to each of the three petitioners as nominal them and the defendants was brought about by the driver's failure to
damages. No. pronouncement as to costs. exercise the diligence required of the carrier in transporting passengers safely
SO ORDERED. to their place of destination. According to Leny Tumboy, the bus left
Mangagoy at 3:00 o'clock in the afternoon. The winding road it traversed was
Yobido v CA not cemented and was wet due to the rain; it was rough with crushed rocks.
The bus which was full of passengers had cargoes on top. Since it was
"running fast," she cautioned the driver to slow down but he merely stared at
Recit-ready summary
her through the mirror. At around 3:30 p.m., in Trento, she heard something
explode and immediately, the bus fell into a ravine.
Tito and Leny Tumboy and their children boarded a Yobido bus bound from
Surigao del Sur to Davao City. While travelling, the left front tire of the bus
For their part, the defendants tried to establish that the accident was
suddenly exploded, causing it to fall into a ravine. Tito died. Yobido insists
due to a fortuitous event. Abundio Salce, who was the bus conductor when
that the tire blowout that caused the death of Tito Tumboy was a caso
the incident happened, testified that the 42-seater bus was not full as there
fortuito.
were only 32 passengers, such that he himself managed to get a seat. He
added that the bus was running at a speed of "60 to 50" and that it was
The issue is whether or not Yobido should be held liable? – Yes.
going slow because of the zigzag road. He affirmed that the left front tire
that exploded was a "brand new tire" that he mounted on the bus on April
The SC ruled that the blow out was not a fortuitous event. There are human
21, 1988 or only five (5) days before the incident. The Yobido Liner secretary,
factors involved in the situation. The fact that the tire was new did not imply
Minerva Fernando, bought the new Goodyear tire from Davao Toyo Parts on
that it was entirely free from manufacturing defects or that it was properly
April 20, 1988 and she was present when it was mounted on the bus by Salce.
mounted on the vehicle. Neither may the fact that the tire bought and used
She stated that all driver applicants in Yobido Liner underwent actual driving
in the vehicle is of a brand name noted for quality, resulting in the
tests. before they were employed. Defendant Cresencio Yobido underwent
conclusion that it could not explode within five days' use. Be that as it
such test and submitted his professional driver's license and clearances from
may, it is settled that an accident caused either by defects in the
the barangay, the fiscal and the police.
automobile or through the negligence of its driver is not a caso
fortuito that would exempt the carrier from liability for damages.
Lower courts ruled in favor of Yobido saying the blow out of the tire was
a fortuitous event. It held that the ruling in the La Mallorca and Pampanga
Facts of the case
Bus Co. v. De Jesus that a tire blowout is "a mechanical defect of the
conveyance or a fault in its equipment which was easily discoverable if the
On April 26, 1988, spouses Tito and Leny Tumboy and their minor
bus had been subjected to a more thorough or rigid check-up before it took
children named Ardee and Jasmin, boarded at Mangagoy, Surigao del Sur, a
to the road that morning" is inapplicable to this case. It reasoned out that in
Yobido Liner bus bound for Davao City. Along Picop Road in Km. 17, Sta.
said case, it was found that the blowout was caused by the established fact and (d) the obligor must be free from any participation in the
that the inner tube of the left front tire "was pressed between the inner circle aggravation of the injury resulting to the creditor. As Article 1174
of the left wheel and the rim which had slipped out of the wheel." In this case, provides, no person shall be responsible for a fortuitous event which could
however, "the cause of the explosion remains a mystery until at present." not be foreseen, or which, though foreseen, was inevitable. In other words,
Court of Appeals however reversed the decision saying the explosion of the there must be an entire exclusion of human agency from the cause of injury
tire is not in itself a fortuitous event. On the other hand, there may have been or loss.
adverse conditions on the road that were unforeseeable and/or inevitable,
which could make the blow-out a caso fortuito. The fact that the cause of the Under the circumstances of this case, the explosion of the new tire may
blow-out was not known does not relieve the carrier of liability. not be considered a fortuitous event. There are human factors involved in the
situation. The fact that the tire was new did not imply that it was entirely free
Issue/s from manufacturing defects or that it was properly mounted on the vehicle.
Neither may the fact that the tire bought and used in the vehicle is of a brand
W/N the common carrier Yobido is liable? - Yes name noted for quality, resulting in the conclusion that it could not explode
within five days' use. Be that as it may, it is settled that an accident caused
Ratio/Legal Basis either by defects in the automobile or through the negligence of its
driver is not a caso fortuito that would exempt the carrier from liability
As a rule, when a passenger boards a common carrier, he takes the risks for damages.
incidental to the mode of travel he has taken. After all, a carrier is not an
insurer of the safety of its passengers and is not bound absolutely and at all Moreover, a common carrier may not be absolved from liability in case
events to carry them safely and without injury. However, when a passenger of force majeure or fortuitous event alone. The common carrier must still
is injured or dies, while traveling, the law presumes that the common prove that it was not negligent in causing the death or injury resulting from
carrier is negligent. an accident.

This disputable presumption may only be overcome by evidence It is interesting to note that petitioners proved through the bus
that the carrier had observed extraordinary diligence as prescribed by conductor, Salce, that the bus was running at "60-50" kilometers per hour
Articles 1733, 1755 and 1756 of the Civil Code or that the death or injury only or within the prescribed lawful speed limit. However, they failed to rebut
of the passenger was due to a fortuitous event. Consequently, the court the testimony of Leny Tumboy that the bus was running so fast that she
need not make an express finding of fault or negligence on the part of cautioned the driver to slow down. These contradictory facts must, therefore,
the carrier to hold it responsible for damages sought by the passenger. be resolved in favor of liability in view of the presumption of negligence of
the carrier in the law. Coupled with this is the established condition of the
A fortuitous event is possessed of the following characteristics: (a) road — rough, winding and wet due to the rain. It was incumbent upon the
the cause of the unforeseen and unexpected occurrence, or the failure of defense to establish that it took precautionary measures considering partially
the debtor to comply with his obligations, must be independent of dangerous condition of the road.
human will; (b) it must be impossible to foresee the event which
constitutes the caso fortuito, or if it can be foreseen, it must be Disposition
impossible to avoid; (c) the occurrence must be such as to render it
impossible for the debtor to fulfill his obligation in a normal manner;
 WHEREFORE, the Decision of the Court of Appeals is hereby AFFIRMED (non-endorsable and valid on AF only) on the ticket, it was not
subject to the modi􏰀cation that petitioners shall, in addition to the monetary unreasonable for AF to deny the request. AF employees in Hamburg
awards therein, be liable for the award of exemplary damages in the amount informed Morales that his tickets were partly stamped "non-endorsable" and
of P20,000.00. Costs against petitioners. "valid on AF only." Mere refusal to accede to the passenger's wishes does
not necessarily translate into damages in the absence of bad faith. Of
Air France v CA importance is the fact that Morales is a lawyer, and the restriction box
clearly indicated the non-endorsable character of the ticket. Omissions by
ordinary passengers may be condoned but more is expected of members of
Recit-ready summary
the bar who cannot feign ignorance of such limitations and restrictions.

Morales bought an Air France (AF) ticket covering 17 cities. The itinerary
I. Facts of the case
included several cities wherein certain segments were restricted by markings
of “non-endorsable” and “valid on AF only.” While in New York, Morales
[Oct 1977] Narciso Morales thru his representative,Ms. Janet Tolentino,
obtained 3 medical certificates attesting to ear infection which necessitated
purchased an airline ticket from Aspac Management Corporation, Air France’s
medical treatment. Due to such ear infection, he informed Air France’ office
General Sales Agent in Makati, for P9,426.00 plus P413.90 travel tax, of which
to shorten his trip by deleting some of the cities in the itinerary. His first
P413.90 was later refunded to Ms. Tolentino.
request to shorten trip was denied. After reiterating his need to fly home on a The itinerary covered by the ticket included several cities certain segments
shorter route, AF Amsterdam made another request to AF Manila but it was thereof restricted by markings of “non-endorsable” and “valid on AF (Air
again denied. Despite Morales’ protest and offer to pay any fare difference, France) only.”
Air France did not relent in its position. Morales, therefore, had to buy an Original Route: New York – Paris – Stockholm – Copenhagen – London –
entirely new set of tickets for the homeward route. Amsterdam – Hamburg – Frankfurt – Paris – Geneva – Madrid – Nice – Rome
Upon arrival in Manila, Morales sent a letter-complaint to AF. He was advised – Athens – Tel Aviv – Bangkok – Manila.
to surrender the unused flight coupons for a refund but Morales instead filed While in New York, Morales obtained 3 medical certificates attesting to
a complaint for breach of contract of carriage and damages. CFI ruled in favor ear infection which necessitated medical treatment.
of Morales and ruled that AF is in evident bad faith for violation of the From New York, he flew to Paris, Stockholm, and then Copenhagen where he
made representations with AF’s office to shorten his trip by deleting some of
contract of carriage. CFI also considered the social and economic standing of
the cities in the itinerary.
Morales as chairman of the Board of a multi-million corporation in awarding
Morales was informed that, as a matter of procedure, confirmation of AF’s
damages. CA affirmed CFI but reduced the award of damages.
office in Manila must be secured before shortening of the route (already paid
for)
The issue is W/N there was a breach of contract of carriage on the part of AF AF Amsterdam telefaxed AF Manila requesting for rerouting of the passenger
as to justify the award to Morales of actual, moral, and exemplary damages – to Amsterdam, Hamburg, Geneva, Rome, Hongkong, Manila.
NO. As there was no immediate response to the telefax, Morales proceeded to
Hamburg where he was informed of AF Manila’s negative reply.
AF refutes this conclusion, claiming that the original ticket was discounted After reiterating his need to fly home on a shorter route due to his ear
and non-endorsable on certain segments. Voluntary changes to tickets, while infection and presentation of supporting medical certificates, AF Amsterdam
allowable, are also covered by IATA Resolution No. 1013, Art. II, which made the necessary request to AF Manila.
provides: "1. changes to the ticket requested by the passenger will be
subject to carriers regulations." Considering the original restrictions
Morales’ request: Shorten his trip with this proposed route: Hamburg – Paris Endorsements/Restrictions box of the applicable flight coupon(s); or attached
– Geneva – Rome – Paris – Hong Kong – Manila. DENIED. Despite Morales’ thereto by use of an appropriate notice."
protest and offer to pay any fare difference, AF did not relent in its position. Voluntary changes to tickets, while allowable, are also covered by IATA
Morales bought an entirely new set of tickets, paying 1,914 German marks Resolution No. 1013, Art. II, which provides: "1. changes to the ticket
for the homeward route: Hamburg – Frankfurt – Geneva – Rome – Hongkong requested by the passenger will be subject to carriers regulations."
– Manila. Morales wanted a rerouting which shortened the original itinerary on the
Upon arrival in Manila, Morales sent a letter-complaint to AF. He was advised ticket issued by AF Manila through ASPAC, its general sales agent.
to surrender the unused flight coupons for a refund of its value but he kept Considering the original restrictions (non-endorsable and valid on AF only)
the same and instead filed a complaint for breach of contract of carriage and on the ticket, it was not unreasonable for AF to deny the request.
damages. Besides, a recurring ear infection was pleaded as the reason necessitating
CFI: AF is in evident bad faith for violation of the contract of carriage, urgent return to Manila. Assuming arguendo a worsening pain or discomfort,
aggravated by the threatening attitude of its employees in Hamburg. Morales appears to have still proceeded to four (4) other cities covering a
Considering the social and economic standing of Morales, who is a chairman period of at least six (6) days and leaving open his date of departure from
of the board of directors of a multi-million corporation and a member of Hongkong to Manila. And, even if he claimed to have undergone medical
several civic and business organization, an award of moral and exemplary examination upon arrival in Manila, no medical certificate was presented. He
damages, in addition to the actual damages, was deemed proper. (P1M – failed to even remember his date of arrival in Manila.
moral, P800k – exemplary, attorney’s fees) With a claim for a large amount of damages, the Court finds it unusual for
CA: The award of damages was modified. Actual damages – 1,914 German Morales, a lawyer, to easily forget vital information to substantiate his
marks in peso at prevailing rate of exchange, Moral damages – P500k, plea. It is also essential before an award of damages that the claimant must
Exemplary damages – 150k, attorney’s fees) satisfactorily prove during the trial the existence of the factual basis of the
Questioning the factual findings of the respondent Court, AF cites 3 errors: damages and its causal connection to defendant's acts.
1. Conclusion of breach of contract is premised on a misapprehension Unlike in the KLM Royal Dutch Airline v CA case where the breach of contract
of facts was aggravated by the discourteous and arbitrary conduct of an official of
2. Failure to apply the doctrine of avoidable consequence the Aer Lingus which the KLM had engaged to transport the respondents,
3. Award of exorbitant damages and attorney’s fees here - AF employees in Hamburg informed Morales that his tickets were
partly stamped "non-endorsable" and "valid on AF only." condition was
Issue/s printed in letters so small that one would have to use a magnifying glass to
read the words. KLM was chargeable with the duty and responsibility of
W/N there was a breach of contract of carriage on the part of Air France as to specifically informing the respondents of conditions prescribed in their tickets
justify the award to Morales of actual, moral, and exemplary damages – NO. or in the very least, to ascertain that the respondent read them before they
Mere refusal to accede to the passenger’s wishes does not necessarily accepted their passage tickets.
translate into damages in the absence of bad faith Mere refusal to accede to the passenger's wishes does not necessarily
translate into damages in the absence of bad faith. Morales has failed to
II. Ratio/Legal Basis show wanton, malevolent or reckless misconduct imputable to AF in its
refusal to reroute. AF Manila acted upon the advice of ASPAC in denying
Morales’ request. There was no evident bad faith when it followed the advice
International Air Transportation Association (IATA) Resolution No. 275 e, 2.,
not to authorize rerouting. At worst, the situation can be considered a case of
special note, reads: "Where a fare is restricted and such restrictions are not
inadvertence on the part of ASPAC in not explaining the non-endorsable
clearly evident from the required entries on the ticket, such restrictions may
character of the ticket.
be written, stamped or reprinted in plain language in the
Morales is a lawyer, and the restriction box clearly indicated the non- There is no “legally sufficient” proof that the accused was negligent
endorsable character of the ticket. Omissions by ordinary passengers in driving his jeep. The star witness of the prosecution, Dolores Balcita who
may be condoned but more is expected of members of the bar who was one of the passengers in the jeep, testified that the accused-petitioner,
cannot feign ignorance of such limitations and restrictions. An award of Saturnino Bayasen was driving his jeep moderately just before the accident
moral and exemplary damages cannot be sustained under the circumstances, and categorically stated that she did not know what caused the jeep to fall
but AF has to refund the unused coupons in the AF ticket to Morales.
into the precipice. When asked whether the jeep hit anything before it
fell into the precipice, the witness answered that she did not feel any
Disposition
bump or jolt. These answers of Dolores Balcita are all in the negative and
equivocal. They do not deny or preclude the truth of the positive testimony
● REVERSED and SET ASIDE
of the accused. As held by this Court:
The testimony of a credible witness that he saw or heard at a particular
Bayasen v CA time and place is more reliable than that of an equally credible witness
who with the same opportunities, testified that he did not see or hear
Recit-ready summary the same thing at the same time and place. 
Saturnino Bayasen was found guilty of Homicide through reckless Hence as to the relative weight to be given to the positive and consistent.
imprudence. testimony of the accused and to the negative and equivocal answers of
Dolores Balcita, the former is more worthy of credence .
On the morning of August 15, 1963, Saturnino Bayasen, the Rural Health
Physician in Sagada, Mountain Province, went to barrio Ambasing to visit a It is a well known physical tact that cars may skid on greasy or slippery roads,
patient. Two nurses from the Saint Theodore's Hospital in Sagada, viz., Elena as in the instant case, without fault on account of the manner of handling the
Awichen and Dolores Balcita, rode with him in the jeep assigned for the use car. Skidding means partial or complete loss of control of the car under
of the Rural Health Unit as they had requested for a ride to Ambasing. Later, circumstances not necessarily implying negligence.
at Ambasing, the girls, who wanted to gather flowers, again asked if they
could ride with him up to a certain place on the way to barrio Suyo which he Under the particular circumstances of the instant case, the petitioner-
intended to visit anyway. Dr. Bayasen again allowed them to ride, Elena driver who skidded could not be regarded as negligent, the skidding
sitting herself between him and Dolores. On the way, at barrio Langtiw, the being an unforeseen event, so that the petitioner had a valid excuse for
jeep went over a precipice About 8 feet below the road, it was blocked by a his departure from his regular course. The negligence of the petitioner
pine tree. The three were thrown out of the jeep. Elena was found lying in a not having been sufficiently established, his guilt of the crime charged
creek further below. Among other injuries, she suffered a skull fracture which has not been proven beyond reasonable doubt.
caused her death.
Facts of the case
Issue: Whether petitioner is should be acquitted on the ground that the CA Saturnino Bayasen was charged by the Fiscal of Mountain Province of
finding that petitioner’s negligence in driving at an unreasonable was the Homicide through Reckless Imprudence. allegedly committed as follows:
proximate cause of the accident is contrary to the evidence of the prosecution? After trial, the petitioner was found guilty. The petitioner then appealed to
Yes he should be acquitted. the CA which affirmed the TC decision with modifications: the indemnity was
increased to P6,000.00; the award of attorney's fees was set aside, and the
maximum of the prison term was raised to One (1) Year, Seven (7) Months, have distracted the attention of the accused while driving the jeep. As to the
and Seventeen (17) Days of prision correccional.  condition of the jeep, Dolores said that she "did not notice anything
wrong" with it from the time they drove from Sagada to Ambasing, and from
The facts, as found by the Court of Appeals, are: there to the place where the jeep fell off the road. Regarding the road, she
said that it was fair enough to drive on, but that it was moist or wet, and the
On the morning of August 15, 1963, Saturnino Bayasen, the Rural Health weather was fair, too.  As to whether the accused-petitioner was under the
Physician in Sagada, Mountain Province, went to barrio Ambasing to visit a influence of liquor at the time of the accident, she testified that he was not.
patient. Two nurses from the Saint Theodore's Hospital in Sagada, viz., Elena
Awichen and Dolores Balcita, rode with him in the jeep assigned for the use The petitioner testified that before reaching the portion of the road where
of the Rural Health Unit as they had requested for a ride to Ambasing. Later, the jeep fell he noticed that the rear wheel skidded, while driving from 8 to
at Ambasing, the girls, who wanted to gather flowers, again asked if they 10 kilometers per hour; that as a precautionary measure, he directed the jeep
could ride with him up to a certain place on the way to barrio Suyo which he towards the side of the mountain, along the side of the mountain, but not
intended to visit anyway. Dr. Bayasen again allowed them to ride, Elena touching the mountain; that while doing so, the late Elena Awichen suddenly
sitting herself between him and Dolores. On the way, at barrio Langtiw, the held the steering wheel and he felt that her foot stepped on his right foot
jeep went over a precipice About 8 feet below the road, it was blocked by a which was pressed then on the accelerator; and that immediately after, the
pine tree. The three were thrown out of the jeep. Elena was found lying in a jeep suddenly swerved to the right and went off. The prosecution witness
creek further below. Among other injuries, she suffered a skull fracture which (Dolores) when asked whether this was true, claimed she did not see. These
caused her death. answers of Dolores Balcita are all in the negative and equivocal. They do not
deny or preclude the truth of the positive testimony of the accused. As held
Issue/s by this Court:
Whether petitioner is should be acquitted on the ground that the CA The testimony of a credible witness that he saw or heard at a particular time
finding that petitioner’s negligence in driving at an unreasonable was and place is more reliable than that of an equally credible witness who with
the proximate cause of the accident is contrary to the evidence of the the same opportunities, testified that he did not see or hear the same thing
prosecution? Yes he should be acquitted. at the same time and place. 
Hence as to the relative weight to be given to the positive and consistent.
Ratio/Legal Basis testimony of the accused and to the negative and equivocal answers of
There is no “legally sufficient” proof that the accused was negligent in Dolores Balcita, the former is more worthy of credence .
driving his jeep. The star witness of the prosecution, Dolores Balcita who was
one of the passengers in the jeep, testified that the accused-petitioner, Furthermore , the statement of Dolores Balcita that the accused was driving
Saturnino Bayasen was driving his jeep moderately just before the accident at moderate speed and not "an unreasonable ,speed' is bolstered by the
and categorically stated that she did not know what caused the jeep to fall testimony, of Pablo Lizardo. then mayor of Sagada, Mountain Province, who
into the precipice. When asked whether the jeep hit anything before it found the jeep at second gear when he examined it not long after the
fell into the precipice, the witness answered that she did not feel any incident.  Such fact shows that the accused-petitioner could not have been
bump or jolt. driving the jeep at a fast rate of speed.

It is clear from the last part of the Testimony of the witness, Dolores Balcita, Mr. Justice Gatmaitan, in voting to grant the motion for reconsideration, said:
that there was no conversation between the passengers in the jeep that could
“... but that statement of the Majority would most clearly show that its information in Criminal Case No. 1056 of the Court of First Instance of
position is that appellant's negligence, the proximate cause of the tragedy, Mountain Province, with costs de oficio.
was appellant's unreasonable speed which has been refuted by the very SO ORDERED.
evidence of prosecution, for here, it can hardly be debated that the Teehankee (Chairman), Makasiar, Guerrero and Melencio-Herrera, JJ., concur
proximate cause was the skidding of the rear wheels, — there is nothing,
absolutely nothing in the entire record which would pin upon him the fault Gatchalian v Delim
for that, prosecution witnesses concede that he was driving moderately, —
the skidding of the rear wheels was to my mind, undisputably an unforeseen
Recit-ready summary
cause, because of this, I cannot rest easy on conviction and therefore register
Gatchalian boarded, as a paying passenger, respondent's "Thames" mini bus
my final vote for acquittal.”
at a point in San Eugenio, Aringay, La Union, bound for Bauang, of the same
province. On the way, while the bus was running along the highway in Barrio
It is obvious that the proximate cause of the tragedy was the skidding of the
Payocpoc, Bauang, Union, "a snapping sound" was suddenly heard at one
rear wheels of the jeep and not the "unreasonable speed" of the petitioner
part of the bus and, shortly thereafter, the vehicle bumped a cement flower
because there is no evidence on record to prove or support the finding that
pot on the side of the road, went off the road, turned turtle and fell into a
the petitioner was driving a at "an unreasonable speed".
ditch. Several passengers, including petitioner Gatchalian, were injured. Mrs.
Delim had the injured passengers, including petitioner, sign an already
It is a well known physical tact that cars may skid on greasy or slippery roads,
prepared Joint Affidavit.
as in the instant case, without fault on account of the manner of handling the
car. Skidding means partial or complete loss of control of the car under
Whether or not there is a valid waiver? NO.
circumstances not necessarily implying negligence. It may occur without fault.

A waiver, to be valid and effective, must in the first place be couched in clear
No negligence as a matter of law can, therefore, be charged to the petitioner.
and unequivocal terms which leave no doubt as to the intention of a person
In fact, the moment he felt that the rear wheels of the jeep skidded, he
to give up a right or benefit which legally pertains to him. A waiver may not
promptly drove it to the left hand side of the road, parallel to the slope of the
casually be attributed to a person when the terms thereof do not explicitly
mountain, because as he said, he wanted to play safe and avoid the
and clearly evidence an intent to abandon a right vested in such person.
embankment. 

Whether or not the common carrier is liable? YES.

Under the particular circumstances of the instant case, the petitioner-
driver who skidded could not be regarded as negligent, the skidding
To exempt a common carrier from liability for death or physical injuries to
being an unforeseen event, so that the petitioner had a valid excuse for
passengers upon the ground of force majeure, the carrier must clearly show
his departure from his regular course. The negligence of the petitioner not
not only that the efficient cause of the casualty was entirely independent of
having been sufficiently established, his guilt of the crime charged has not
the human will, but also that it was impossible to avoid. Any participation by
been proven beyond reasonable doubt. He is, therefore, entitled to acquittal.
the common carrier in the occurrence of the injury will defeat the defense of
force majeure.
Disposition
WHEREFORE, the decision of the Court of Appeals sought to be reviewed is
Upon the other hand, the record yields affirmative evidence of fault or
hereby set aside and the petitioner is ACQUITTED of the crime charged in the
negligence on the part of respondent common carrier. The obvious
continued failure of respondent to look after the roadworthiness and safety That we are no longer interested to file a complaint, criminal or civil
of the bus, coupled with the driver's refusal or neglect to stop the mini-bus against the said driver and owner of the said Thames, because it was
after he had heard once again the "snapping sound" and the cry of alarm an accident and the said driver and owner of the said Thames have
from one of the passengers, constituted wanton disregard of the physical gone to the extent of helping us to be treated upon our injuries.
safety of the passengers, and hence gross negligence on the part of
respondent and his driver. Notwithstanding this document, Gathalian filed with the then Court of First
Instance of La Union an action extra contractu to recover compensatory and
Facts of the case moral damages.
Gatchalian boarded, as a paying passenger, respondent's "Thames" mini bus
at a point in San Eugenio, Aringay, La Union, bound for Bauang, of the same In defense, respondent averred that the vehicular mishap was due to force
province. On the way, while the bus was running along the highway in Barrio majeure, and that petitioner had already been paid and moreover had waived
Payocpoc, Bauang, Union, "a snapping sound" was suddenly heard at one any right to institute any action against him (private respondent) and his
part of the bus and, shortly thereafter, the vehicle bumped a cement flower driver, when petitioner Gatchalian signed the Joint Affidavit
pot on the side of the road, went off the road, turned turtle and fell into a
ditch. Several passengers, including petitioner Gatchalian, were injured. They After trial, the trial court dismissed the complaint upon the ground that when
were promptly taken to Bethany Hospital at San Fernando, La Union, for petitioner Gatchalian signed the Joint Affidavit, she relinquished any right of
medical treatment. Upon medical examination, petitioner was found to have action (whether criminal or civil) that she may have had against respondent
sustained physical injuries on the leg, arm and forehead, specifically and the driver of the mini-bus.
described as follows: lacerated wound, forehead; abrasion, elbow, left;
abrasion, knee, left; abrasion, lateral surface, leg, left. On appeal by petitioner, the Court of Appeals reversed the trial court's
conclusion that there had been a valid waiver, but affirmed the dismissal of
While injured. passengers were confined in the hospital, Mrs. Adela Delim, the case by denying petitioner's claim for damages
wife of respondent, visited them and later paid for their hospitalization and
medical expenses. She also gave petitioner P12.00 with which to pay her VII. Issue/s
transportation expense in going home from the hospital. However, before
Mrs. Delim left, she had the injured passengers, including petitioner, sign an Whether or not there is a valid waiver? NO.
already prepared Joint Affidavit which stated, among other things: Whether or not the common carrier is liable? YES.

That we were passengers of Thames with Plate No. 52-222 PUJ Phil. VIII. Ratio/Legal Basis
73 and victims after the said Thames met an accident at Barrio
Payocpoc Norte, Bauang, La Union while passing through the INVALID WAIVER
National Highway No. 3;
We agree with the majority of the Court of Appeals who held that no valid
That after a thorough investigation the said Thames met the accident waiver of her cause of action had been made by petitioner. The relevant
due to mechanical defect and went off the road and turned turtle to language of the Joint Affidavit may be quoted again:
the east canal of the road into a creek causing physical injuries to us;
 That we are no longer interested to file a complaint, criminal or civil and whether she actually intended thereby to waive any right of action
against the said driver and owner of the said Thames, because it was against private respondent.
an accident and the said driver and owner of the said Thames have
gone to the extent of helping us to be treated upon our injuries. Finally, because what is involved here is the liability of a common carrier
for injuries sustained by passengers in respect of whose safety a
A waiver, to be valid and effective, must in the first place be couched in common carrier must exercise extraordinary diligence, we must construe
clear and unequivocal terms which leave no doubt as to the intention of any such purported waiver most strictly against the common carrier. For
a person to give up a right or benefit which legally pertains to him. A a waiver to be valid and effective, it must not be contrary to law, morals,
waiver may not casually be attributed to a person when the terms public policy or good customs. To uphold a supposed waiver of any right to
thereof do not explicitly and clearly evidence an intent to abandon a claim damages by an injured passenger, under circumstances like those
right vested in such person. exhibited in this case, would be to dilute and weaken the standard of
extraordinary diligence exacted by the law from common carriers and hence
The degree of explicitness which this Court has required in purported waivers to render that standard unenforceable. We believe such a purported waiver is
is illustrated in Yepes and Susaya v. Samar Express Transit (supra), where the offensive to public policy.
Court in reading and rejecting a purported waiver said:

. . . It appears that before their transfer to the Leyte Provincial COMMON CARRIER LIABILITY
Hospital, appellees were asked to sign as, in fact, they signed the
document Exhibit I wherein they stated that "in consideration of the We have already noted that a duty to exercise extraordinary diligence in
expenses which said operator has incurred in properly giving us the protecting the safety of its passengers is imposed upon a common carrier. In
proper medical treatment, we hereby manifest our desire to waive case of death or injuries to passengers, a statutory presumption arises that
any and all claims against the operator of the Samar Express Transit." the common carrier was at fault or had acted negligently "unless it proves
that it [had] observed extraordinary diligence as prescribed in Articles 1733
If we apply the standard used in Yepes and Susaya, we would have to and 1755." In fact, because of this statutory presumption, it has been held
conclude that the terms of the Joint Affidavit in the instant case cannot that a court need not even make an express finding of fault or negligence on
be regarded as a waiver cast in "clear and unequivocal" terms. Moreover, the part of the common carrier in order to hold it liable. To overcome this
the circumstances under which the Joint Affidavit was signed by petitioner presumption, the common carrier must slow to the court that it had exercised
Gatchalian need to be considered. Petitioner testified that she was still reeling extraordinary diligence to prevent the injuries.
from the effects of the vehicular accident, having been in the hospital for only
three days, when the purported waiver in the form of the Joint Affidavit was Thus, the question which must be addressed is whether or not private
presented to her for signing; that while reading the same, she experienced respondent has successfully proved that he had exercised extraordinary
dizziness but that, seeing the other passengers who had also suffered injuries diligence to prevent the mishap involving his mini-bus. The records before
sign the document, she too signed without bothering to read the Joint the Court are bereft of any evidence showing that respondent had exercised
Affidavit in its entirety. Considering these circumstances there appears the extraordinary diligence required by law. Curiously, respondent did not
substantial doubt whether petitioner understood fully the import of the Joint even attempt, during the trial before the court a quo, to prove that he
Affidavit (prepared by or at the instance of private respondent) she signed had indeed exercised the requisite extraordinary diligence. Respondent
did try to exculpate himself from liability by alleging that the mishap
was the result of force majeure. But allegation is not proof and here again, "snapping sound" and the cry of alarm from one of the passengers,
respondent utterly failed to substantiate his defense of force majeure. To constituted wanton disregard of the physical safety of the passengers,
exempt a common carrier from liability for death or physical injuries to and hence gross negligence on the part of respondent and his driver.
passengers upon the ground of force majeure, the carrier must clearly
show not only that the efficient cause of the casualty was entirely Disposition
independent of the human will, but also that it was impossible to avoid.
Any participation by the common carrier in the occurrence of the injury will WHEREFORE, the Decision of the Court of Appeals dated 24 October 1980, as
defeat the defense of force majeure. well as the decision of the then Court of First Instance of La Union dated 4
December 1975 are hereby REVERSED and SET ASIDE.Respondent is hereby
In legal sense and, consequently, also in relation to contracts, a "caso ORDERED to pay petitioner Reynalda Gatchalian the following sums: 1)
fortuito" presents the following essential characteristics: (1) the cause of P15,000.00 as actual or compensatory damages to cover the cost of plastic
the unforeseen and unexpected occurence, or of the failure of the surgery for the removal of the scar on petitioner's forehead; 2) P30,000.00 as
debtor to comply with his obligation, must be independent of the moral damages; and 3) P1,000.00 as attorney's fees, the aggregate amount to
human will; (2) it must be impossible to foresee the event which bear interest at the legal rate of 6% per annum counting from the
constitutes the "caso fortuito", or if it can be foreseen, it must be promulgation of this decision until full payment thereof. Costs against private
impossible to avoid; (3) the occurrence must be such as to render it respondent.
impossible for the debtor to fulfill his obligation in a normal manner; Fortune Express v CA
and (4) the obligor must be free from any participation in the
aggravation of the injury resulting to the creditor.
Recit-ready summary

Upon the other hand, the record yields affirmative evidence of fault or
Petitioner’s bus got into an accident with a jeepney which resulted in the
negligence on the part of respondent common carrier. In her direct
death of several passengers of the jeepney. After the investigation, it was
examination, petitioner Gatchalian narrated that shortly before the vehicle
found that the owner of the jeepney was a Maranao residing in Delabayan,
went off the road and into a ditch, a "snapping sound" was suddenly heard at
Lanao del Norte and that certain Maranaos were planning to take revenge on
one part of the bus. One of the passengers, an old woman, cried out, "What
the petitioner by burning some of its buses. Upon the instruction of Sgt.
happened?" The driver replied, nonchalantly, "That is only normal". The driver
Bastasa, the investigator went to see, the operations manager of petitioner, at
did not stop to check if anything had gone wrong with the bus. Moreover,
its main office in Cagayan de Oro City. Bravo assured him that the necessary
the driver's reply necessarily indicated that the same "snapping sound" had
precautions to insure the safety of lives and property would be taken.
been heard in the bus on previous occasions. This could only mean that the
bus had not been checked physically or mechanically to determine what was
Later, three armed Maranaos pretended to be passengers and seized
causing the "snapping sound" which had occurred so frequently that the
one of the buses owned by petitioner. Among the passengers of the bus was
driver had gotten accustomed to it. Such a sound is obviously alien to a
Atty. Caorong. The leader of the Maranaos, ordered the driver, to stop the
motor vehicle in good operating condition, and even a modicum of concern
bus on the side of the highway. Cabatuan was then shot on the arm, which
for life and limb of passengers dictated that the bus be checked and repaired.
caused him to slump on the steering wheel. Then one of the companions of
The obvious continued failure of respondent to look after the
Mananggolo started pouring gasoline inside the bus, as the other held the
roadworthiness and safety of the bus, coupled with the driver's refusal
passengers at bay with a handgun. Mananggolo then ordered the passengers
or neglect to stop the mini-bus after he had heard once again the
to get off the bus. The passengers stepped out of the bus and went behind a common carrier can be held liable for failing to prevent a hijacking by
the bushes in a field some distance from the highway. frisking passengers and inspecting their baggages.

However, Atty. Caorong returned to the bus to retrieve something from It is also not a fortuitous event because it was not unforeseeable.
the overhead rack. Cabatuan, who had meantime regained consciousness, As already stated, despite the report of PC agent Generalao that the
heard Atty. Caorong pleading with the armed men to spare the driver as he Maranaos were planning to burn some of petitioner's buses and the
was innocent of any wrong doing and was only trying to make a living. The assurance of petitioner's operations manager (Diosdado Bravo) that the
armed men were, however, adamant as they repeated their warning that they necessary precautions would be taken, nothing was really done by
were going to burn the bus along with its driver. During this exchange petitioner to protect the safety of passengers.
between Atty. Caorong and the assailants, Cabatuan climbed out of the left
window of the bus and crawled to the canal on the opposite side of the Facts of the case
highway. He heard shots from inside the bus. De la Cruz, one of the
passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Petitioner is a bus company while private respondent Paulie Caorong is
the widow of Atty. Caorong, and the other respondents are their minor
Whether there is a breach of contract of carriage. YES children.

Art. 1763 of the Civil Code provides that a common carrier is On 18 November 1989, a bus of petitioner got into an accident with a
responsible for injuries suffered by a passenger on account of the wilful jeepney which resulted in the death of several passengers of the jeepney. A
acts of other passengers, if the employees of the common carrier could volunteer field agent of the Constabulary Regional Security Unit No. X,
have prevented the act through the exercise of the diligence of a good conducted an investigation of the accident. He found that the owner of the
father of a family. In the present case, it is clear that because of the jeepney was a Maranao residing in Delabayan, Lanao del Norte and that
negligence of petitioner's employees, the seizure of the bus by Mananggolo certain Maranaos were planning to take revenge on the petitioner by burning
and his men was made possible. some of its buses. Upon the instruction of Sgt. Bastasa, the investigator went
to see Bravo, the operations manager of petitioner, at its main office in
Despite warning by the Philippine Constabulary at Cagayan de Oro that Cagayan de Oro City. Bravo assured him that the necessary precautions to
the Maranaos were planning to take revenge on the petitioner by burning insure the safety of lives and property would be taken.
some of its buses and the assurance of petitioner's operation manager,
Diosdado Bravo, that the necessary precautions would be taken, petitioner At about 6:45 P.M. on November 22, 1989, three armed Maranaos who
did nothing to protect the safety of its passengers. pretended to be passengers, seized a bus of petitioner at Linamon, Lanao del
Norte while on its way to Iligan City. Among the passengers of the bus was
Had petitioner and its employees been vigilant they would not have Atty. Caorong. The leader of the Maranaos, Mananggolo, ordered the driver,
failed to see that the malefactors had a large quantity of gasoline with them. Cabatuan, to stop the bus on the side of the highway. Cabatuan was then
Under the circumstances, simple precautionary measures to protect the shot on the arm, which caused him to slump on the steering wheel. Then one
safety of passengers, such as frisking passengers and inspecting their of the companions of Mananggolo started pouring gasoline inside the bus,
baggages, preferably with non-intrusive gadgets such as metal detectors, as the other held the passengers at bay with a handgun. Mananggolo then
before allowing them on board could have been employed without violating ordered the passengers to get off the bus. The passengers, including Atty.
the passenger's constitutional rights. As this Court intimated in Gacal v. PAL.,
Caorong, stepped out of the bus and went behind the bushes in a field some some of its buses and the assurance of petitioner's operation manager,
distance from the highway. Diosdado Bravo, that the necessary precautions would be taken, petitioner
did nothing to protect the safety of its passengers.
However, Atty. Caorong returned to the bus to retrieve something from
the overhead rack. Cabatuan, who had meantime regained consciousness, Had petitioner and its employees been vigilant they would not have
heard Atty. Caorong pleading with the armed men to spare the driver as he failed to see that the malefactors had a large quantity of gasoline with them.
was innocent of any wrong doing and was only trying to make a living. The Under the circumstances, simple precautionary measures to protect the
armed men were, however, adamant as they repeated their warning that they safety of passengers, such as frisking passengers and inspecting their
were going to burn the bus along with its driver. During this exchange baggages, preferably with non-intrusive gadgets such as metal detectors,
between Atty. Caorong and the assailants, Cabatuan climbed out of the left before allowing them on board could have been employed without violating
window of the bus and crawled to the canal on the opposite side of the the passenger's constitutional rights. As this Court intimated in Gacal v. PAL.,
highway. He heard shots from inside the bus. De la Cruz, one of the a common carrier can be held liable for failing to prevent a hijacking by
passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. frisking passengers and inspecting their baggages.
Some of the passengers were able to pull Atty. Caorong out of the burning
bus and rush him to the Mercy Community Hospital in Iligan City, but he died From the foregoing, it is evident that petitioner's employees failed to
while undergoing operation. prevent the attack on one of petitioner's buses because they did not exercise
the diligence of a good father of a family. Hence, petitioner should be held
The private respondents brought this suit for breach of contract of liable for the death of Atty. Caorong.
carriage with the RTC.
Seizure of Petitioner's Bus not a Case of Force Majeure
Issue/s Art. 1174 of the Civil Code defines a fortuitous event as an
occurrence which could not be foreseen or which though foreseen, is
Whether there is a breach of contract of carriage. inevitable. To be considered as force majeure, it is necessary that: (1) the
cause of the breach of the obligation must be independent of the human will;
Ratio/Legal Basis (2) the event must be either unforeseeable or unavoidable; (3) the occurrence
must be such as to render it impossible for the debtor to fulfill the obligation
Breach of Contract of Carriage in a normal manner; and (4) the obligor must be free of participation in, or
Art. 1763 of the Civil Code provides that a common carrier is responsible aggravation of, the injury to the creditor. The absence of any of the requisites
for injuries suffered by a passenger on account of the willful acts of other mentioned above would prevent the obligor from being excused from
passengers, if the employees of the common carrier could have prevented liability.
the act through the exercise of the diligence of a good father of a family. In
the present case, it is clear that because of the negligence of petitioner's In this case, despite the report of PC agent Generalao that the
employees, the seizure of the bus by Mananggolo and his men was made Maranaos were going to attack its buses, petitioner took no steps to
possible. safeguard the lives and properties of its passengers. The seizure of the bus of
the petitioner was foreseeable and, therefore, was not a fortuitous event
Despite warning by the Philippine Constabulary at Cagayan de Oro that which would exempt petitioner from liability.
the Maranaos were planning to take revenge on the petitioner by burning
 Petitioner invokes the ruling in Pilapil v. CA and De Guzman v. CA in attempt to help the driver of the bus by pleading for his life. He was playing
support of its contention that the seizure of its bus by the assailants the role of the good Samaritan. Certainly, this act cannot be considered an
constitutes force majeure. In Pilapil v. CA, it was held that a common carrier is act of negligence, let alone recklessness.
not liable for failing to install window grills on its buses to protect passengers
from injuries caused by rocks hurled at the bus by lawless elements. On the DISPOSITION
other hand, in De Guzman v. CA, it was ruled that a common carrier is not
responsible for goods lost as a result of a robbery which is attended by grave WHEREFORE, the decision, dated July 29, 1994, of the Court of
or irresistible threat, violence, or force. Appeals is hereby AFFIRMED with the MODIFICATION that petitioner Fortune
Express, Inc. is ordered to pay the following amounts to private respondents
It is clear that the cases of Pilapil and De Guzman do not apply to the Paulie, Yasser King, Rose Heinni, and Prince Alexander Caorong:
present case. Art. 1755 of the Civil Code provides that "a common carrier is 1. death indemnity in the amount of fifty thousand pesos
(P50,000.00);
bound to carry the passengers as far as human care and foresight can
2. actual damages in the amount of thirty thousand pesos
provide, using the utmost diligence of very cautious persons, with due regard
(P30,000.00);
for all the circumstances." Thus, we held in Pilapil and De Guzman that the
3. moral damages in the amount of one hundred thousand pesos
respondents therein were not negligent in failing to take special precautions (P100,000.00);
against threats to the safety of passengers which could not be foreseen, such 4. exemplary damages in the amount of one hundred thousand
as tortious or criminal acts of third persons. In the present case, this factor of pesos (P100,000.00);
unforeseeability (the second requisite for an event to be considered force 5. attorney's fees in the amount of fifty thousand pesos (P50,000.00);
majeure) is lacking. 6. compensation for loss of earning capacity in the amount of two
million one hundred twenty-one thousand four hundred four pesos and
As already stated, despite the report of PC agent Generalao that the ninety centavos (P2,121,404.90); and
Maranaos were planning to burn some of petitioner's buses and the 7. costs of suits.
assurance of petitioner's operations manager (Diosdado Bravo) that the SO ORDERED.
necessary precautions would be taken, nothing was really done by petitioner Tan v Northwest Airlines
to protect the safety of passengers.
Recit-ready summary
Deceased not Guilty of Contributory Negligence
The petitioner contends that Atty. Caorong was guilty of contributory Priscilla Tanand Connie Tan boarded a Northwest Airlines plane in Chicago
negligence in returning to the bus to retrieve something. But Atty. Caorong bound to the PH with a stop-over at Detroit. Upon arrival, they found out
did not act recklessly. It should be pointed out that the intended targets of that their baggage was missing. On June 3, they recovered the baggage
the violence were petitioner and its employees, not its passengers. The and discovered that some were destroyed and soiled. They filed an action
assailant's motive was to retaliate for the loss of life of two Maranaos as a for damages, claiming that they suffered mental anguish, sleepless nights and
result of the collision between petitioner's bus and the jeepney in which the great damage. Northwest offered to to either (1) reimburse the cost or repair
two Maranaos were riding. Mananggolo, the leader of the group which had of the bags; or (2) reimburse the cost for the purchase of new bags, upon
hijacked the bus, ordered the passengers to get off the bus as they intended submission of receipts. RTC awarded actual, moral and exemplary damages,
to burn it and its driver. The armed men actually allowed Atty. Caorong to and also attorney’s fees. CApartially affirmed the decision by deleting moral
retrieve something from the bus. What apparently angered them was his and exemplary damages. Hence, Tan filed this instant petition.
WON respondent Airline is liable for moral and exemplary damages for willful When petitioner received her baggages in damaged condition, Northwest
misconduct and breach of contract of carriage? - NO offered to either (1) reimburse the cost or repair of the bags; or (2) reimburse
the cost for the purchase of new bags, upon submission of receipts.
SC agree with CA that respondent was not guilty of willful misconduct. For
willful misconduct to exist there must be a showing that the acts complained RTC awarded actual, moral and exemplary damages, and also attorney’s fees.
of were impelled by an intention to violate the law, or were in persistent CA partially affirmed the decision by deleting moral and exemplary damages.
disregard of one's rights. There was no showing of malice in such failure. By Hence, Tan filed this instant petition.
its concern for safety, respondent had to ship the baggages in another flight
with the same date of arrival. Issue/s
WON respondent Airline is liable for moral and exemplary damages for willful
Facts of the case misconduct and breach of contract of carriage- NO

Priscilla Tan and Connie Tan boarded Northwest Airlines Flight 29 in Chicago, Ratio/Legal Basis
U.S.A. bound for the Philippines, with a stop-over at Detroit, U.S.A. They The Supreme Courts agrees with the Court of Appeals that respondent
arrived at NAIA on June 1, 1994 at about 10:40 pm. Northwest Airlines was not guilty of willful misconduct.

Upon arrival, petitioner and Connie found that their baggages were missing. For willful misconduct to exist there must be a showing that the acts
They returned to the airport in the evening of the following day and they complained of were impelled by an intention to violate the law, or were in
were informed that their baggages might still be in another plane in Tokyo, persistent disregard of one's rights. It must be evidenced by a flagrantly or
Japan. shamefully wrong or improper conduct.

On June 3, 1994, they recovered their baggages and discovered that some of Contrary to petitioner's contention, there was nothing in the conduct of
its contents were destroyed and soiled. respondent which showed that they were motivated by malice or bad
faith in loading her baggages on another plane. Due to weight and
Claiming that they "suffered mental anguish, sleepless nights and great balance restrictions, as a safety measure, respondent airline had to
damage" because of Northwest’s failure to inform them in advance that their transport the baggages on a different flight, but with the same expected
baggages would not be loaded on the same flight they boarded and because date and time of arrival in the Philippines. It is admitted that respondent
of their delayed arrival, they demanded from the Airlines compensation for failed to deliver petitioner's luggages on time. However, there was no
the damages they suffered. Petitioner sent demand letters to the Airlines, but showing of malice in such failure. By its concern for safety, respondent had to
the latter did not respond. Hence, the filing of the case with RTC. ship the baggages in another flight with the same date of arrival.

Respondent Northwest Airlines did not deny that the baggages of petitioners
were not loaded on Northwest Flight 29. Petitioner’s baggages could not be Disposition
carried on the same flight because of "weight and balance restrictions”.
However, the baggages were loaded in another Northwest Airlines flight, WHEREFORE, the petition is PARTIALLY GRANTED. The July 23, 2010
which arrived in the evening of June 2, 1994. Amended Decision and the October 31, 2012 Resolution of the Twentieth
Division of the Court of Appeals in CA G.R. SP No. 02636 are AFFIRMED with terminate its services; this amounted to accepting the benefit of
MODIFICATION. Morelia's services without paying for it.
China Airlines v CA
On the whole, CAL's negligence is not so gross to amount to bad faith.
Not every case of mental anguish, fright or serious anxiety calls for the award
Recit-ready summary
of moral damages.

Initially, Salvador & Lao engaged the services of Morelia to book their flight
Facts of the case
with CAL. But upon discovering that Morelia charged higher rates, Salvador &
Lao hired Amexco instead. Amexco used the record locator number,
Salvador & Lao planned to travel to LA, California to pursue a cable business
previously issued by Morelia. CAL confirmed the booking. However, on the
deal involving the distribution of Filipino films. Initially, Morelia Travel Agency
same day, CAL called up Morelia to reconfirm, but Morelia cancelled.
booked their flight with China Airlines, LTD (CAL). But upon discovering that
Morelia charged higher rates than Amexco, Salvador & Lao dropped the
On the day of their flight, CAL personnel prevented Salvador & Lao from
services of Morelia, and engaged the services of Amexco.
boarding the airplane. Accordingly, Salvador & Lao demanded from the
payment of moral damages in the amount of P500k. The RTC and CA
Amexco used the record locator number, previously issued by Morelia, in
wondered why CAL still called Morelia on the same afternoon that Amexco
confirming their reservations, and subsequently issued to Salvador & Lao the
had already finalized and the reservations.
tickets. On the same day, CAL called up Morelia to reconfirm the reservations,
but Morelia cancelled.
The chief issue is whether there was bad faith, amounting to gross
negligence, on the part of CAL, so as to warrant the grant of moral damages.
On the day of their flight, CAL personnel prevented Salvador & Lao from
The Court ruled in the negative.
boarding the airplane because their names were not in the passengers'
manifest. Salvador & Lao were only able to leave for Los Angeles the
Bad faith does not simply connote bad judgment or negligence. It
following day on a different airline, Northwest Airlines.
imports a dishonest purpose or some moral obliquity and conscious
doing of a wrong. It means breach of a known duty through some
Accordingly, Salvador & Lao demanded from the payment of moral damages
motive, interest or ill will that partakes of the nature of fraud. It should
in the amount of P500k. CAL explained that since Salvador & Lao failed to
be established by clear and convincing evidence since the law always
pick up their tickets from its offices, CAL caused the cancellation of their
presumes good faith.
bookings. Thus, Salvador & Lao’s own negligence caused their failure to
board CAL.
In this case, it is the standard practice of CAL to re-confirm reservations by
calling up the travel agency or passenger 2 days or even as close as a day
The RTC found that CAL's cancellation of the reservations despite knowledge
before the intended departure date. This is the pre-flight checking procedure
of the prior confirmation by Amexco was unjustified and tainted with bad
of CAL. There is therefore nothing unusual or suspicious in CAL's initiative in
faith. It wondered why CAL took the initiative of calling up Morelia on the
calling up Morelia.
same afternoon that Amexco had already finalized and the reservations. Lea,
the booking agent of Amexco called up CAL, but CAL thought that Lea was
CAL was only guilty of simple negligence. Besides, Lao is also negligent
from Morelia.
in giving Morelia's record locator number to Amexco, after deciding to
 CAL and Salvador & Lao. The passenger then has every right to expect that
Issue/s he would fly on that flight and on that date. If he does not, then the carrier
opens itself to a suit for breach of contract of carriage.
1. Whether there was a breach of contract of carriage? YES
2. Whether there was bad faith, amounting to gross negligence, on Bad faith does not simply connote bad judgment or negligence. It
the part of CAL? NO imports a dishonest purpose or some moral obliquity and conscious
3. Whether the award of damages is proper? NO doing of a wrong. It means breach of a known duty through some
motive, interest or ill will that partakes of the nature of fraud. A finding
Ratio/Legal Basis
of bad faith entitles the offended party to moral damages.

The confusion with the confirmation and cancellation of the reservations

The confluence of the ff. circumstances proves that CAL acted in bad
began when Lao gave to Amexco the record locator number that CAL had
faith:
already assigned to Morelia. Industry practice prohibits a travel agency to
(1) Lea identified herself as "Lea-Amexco" when she called up CAL to
use the record locator number of another travel agency. It would have
confirm the reservations
been perfectly all right for Salvador & Lao to switch to Amexco, until (2) Lea was not a familiar caller of Morelia and yet CAL entertained her call
Lao gave to Amexco the record locator number previously assigned to (3) CAL called up Morelia on the very same afternoon that CAL had already
Morelia. confirmed the reservations made by Amexco
(4) CAL called up Morelia looking for a certain Joel to reconfirm the
Lao should have made it known to Amexco that the record locator number reservations
belonged to another travel agency, Morelia. On the other hand, Amexco (5) CAL told Joel that it was hesitant to cancel because the seating
should not have hastily presumed that Salvador & Lao obtained the record arrangements had already been finalized with Lea
locator number from CAL. Amexco should have inquired how Lao got hold of (6) CAL did not notify private respondents or Amexco that it was cancelling
the record locator number considering that it was difficult for a travel agency the reservations
at that time to secure reservations with the various airlines.
Bad faith should be established by clear and convincing evidence since the
law always presumes good faith. The person who seeks damages has the
Lao and Amexco are not blameless. Lao's act in giving Morelia's record
burden of proving that the other has acted in bad faith or with ill motive. Bad
locator number to Amexco, after deciding to terminate its services, amounted
faith is in essence a question of intention; hence, the courts must carefully
to accepting the benefit of Morelia's services without paying for it.
examine the evidence as to the conduct and outward acts from which the
inward motive may be determined.
However, the greater blame falls on CAL. When CAL confirmed the
reservations of Salvador & Lao, a contract of carriage arose between them.
Based on the testimonies of the reservations officers of CAL, not 1 but 2
The airline business is intended to serve the traveling public primarily and is
officers made the confirmation and pre-flight checking of the airline:
thus imbued with public interest. In an action based on breach of contract, all
Chang and Melo.
that the aggrieved party has to prove is the existence of the contract and the
fact of its non-performance by the carrier.
We will now point out why the circumstances mentioned by the RTC and
CA are inadequate to prove CAL's bad faith.
In this case, the confirmed tickets issued by Amexco upon CAL's confirmation
of the reservations is an undeniable proof of the contract of carriage between
 First, the RTC and CA stress that Lea identified herself as “Lea-Amexco”. CAL's negligence is not so gross to amount to bad faith. Mere negligence,
However, the testimonies of Chang and Melo do not show that they even if it causes the plaintiff to suffer mental anguish or serious fright, is not
heard or recorded that "Lea-Amexco" made the confirmation. What the a ground for awarding moral damages.
computer monitor recorded was the name Lea, not “Lea-Amexco.” Absent fraud or bad faith on defendant's party, his liability for damages
Second, CAL should not have accepted the confirmation of Lea who is is limited to the natural and probable consequences of the breach of the
not a familiar caller from Morelia. CAL should have verified the name of obligation, which the parties had foreseen or could have reasonably
the person or travel agency. CAL should have informed Amexco to foreseen. This does not include moral damages. Not every case of mental
secure first the endorsement of Morelia. However, both courts erred in anguish, fright or serious anxiety calls for the award of moral damages.
readily imputing bad faith when CAL was only guilty of simple
negligence. CAL was not in bad faith and its employees did not act in a wanton,
fraudulent, reckless, oppressive or malevolent manner. The award of
Third, it is the standard practice of CAL to re-confirm reservations by exemplary damages is therefore unwarranted.
calling up the travel agency or passenger 2 days or even as close as a
day before the intended departure date. This is the pre-flight checking As for actual damages, Salvador & Lao did not shell out any money for their
procedure of CAL. There is therefore nothing unusual or suspicious in CAL tickets. Amexco voided the CAL tickets and then booked their flight with
CAL's initiative in calling up Morelia. Northwest. Salvador & Lao would have been entitled to the price difference
between the tickets of CAL and Northwest had the latter cost more than the
Fourth, Melo first tried to contact private respondents, showing CAL's former; but it didn’t.
lack of malice. Since the number was not the contact number of
Salvador & Lao or Lea, Melo had no recourse but to check with Joel of Undeniably, however, Salvador & Lao soldered some form of injury when
Morelia. they went through the trouble of going to the airport at the appointed time
expecting that they would be able to fly. Thus, the court awarded nominal
Fifth, Melo did express to Joel her reluctance to cancel the reservations damages in the amount of P5k.
because Lea had already ended the seating arrangements. CA took
Melo's reluctance to cancel the reservations as an indication of CAL's Ultimately, when there is no basis to award moral and exemplary damages,
bad faith, when such fact is a badge of good faith. Despite Melo's there is also no basis to award attorney's fees
hesitation, the cancellation still pushed through for 3 reasons:
• Joel insisted on it Disposition
• Lea was not from Morelia
• Melo failed to contact Salvador & Lao and Lea WHEREFORE, we AFFIRM the decision of the CAwith MODIFICATION by
deleting the award of moral and exemplary damages as well as attorney's
Finally, CAL did not have the addresses of Salvador & Lao. CAL still exerted its fees. CAL shall pay nominal damages.
best efforts to notify Salvador & Lao. In reconfirming the reservations, Melo
Singson v CA
called up Morelia twice.

Recit-ready summary
CARLOS SINGSON and his cousin Crescentino Tiongson bought from Whether the carrier was liable not only for actual damages but also for
respondent Cathay Pacific Airways two (2) open-dated, identically routed, moral and exemplary damages, and attorney’s fees? YES
round trip plane tickets (Manila to LA and vice versa). Each ticket consisted of
six (6) flight coupons, each would be detached at the start of each leg of the There are situations where the negligence of the carrier is so gross and
trip. reckless as to virtually amount to bad faith, in which case, the passenger
likewise becomes entitled to recover moral damages. Giving the
Singson failed to obtain a booking in LA for their trip to Manila; apparently, circumstances attendant in this case, Cathay was clearly grossly negligent.
the coupon corresponding to the 5th leg of the trip was missing and instead However, the awards made by the trial court of the moral and exemplary
the 3rd was still attached. It was not until few days later that the defendant damages have to be reduced. The petition was therefore granted and the
finally was able to arrange for his return to Manila. Singson commenced an Cathay was ordered to pay actual damages and a reduced amount of moral
action for damages based on breach of contract of carriage against CATHAY and exemplary damages and attorney's fees.
before the Regional Trial Court.
Attorney’s fees may be awarded when the defendant’s act or omission has
CATHAY alleged that there was no contract of carriage since he was compelled the plaintiff to litigate with third persons or to incur expenses to
holding an open book ticket, which meant he was not booked on a protect his interest.
specific flight on a particular date yet existing such that CATHAY’s refusal
to immediately book him could not be construed as breach of contract of
carriage since he was holding an open. Facts of the case
Petitioner CARLOS SINGSON and his cousin Crescentino Tiongson bought
Whether a breach of contract was committed by CATHAY when it failed from respondent Cathay Pacific Airways two (2) open-dated, identically
to confirm the booking of petitioner Singson? YES routed, round trip plane tickets (Manila to LA and vice versa). Each ticket
consisted of six (6) flight coupons:
To begin with, the round trip ticket issued by the carrier to the passenger was
in itself a complete written contract by and between the carrier and the Flight coupon no. 1 — Manila to Hongkong; flight coupon no. 2 —
passenger. Hongkong to San Francisco; flight coupon no. 3 — San Francisco to Los
a. CONSENT: manifested by the fact that the passenger agreed to be Angeles; flight coupon no. 4 — Los Angeles back to San Francisco; flight
transported by the carrier. coupon no. 5 — San Francisco to Hongkong; and, finally, flight coupon no. 6
b. CONSIDERATION: fare paid by the passenger as stated in his ticket. — Hongkong to Manila.
c. OBJECT: transportation of the passenger from the place of departure to
the place of destination and back
The procedure was that at the start of each leg of the trip a flight coupon
corresponding to the particular sector of the travel would be removed from
It also appears that CATHAY was responsible for the loss of the ticket.
the ticket booklet so that at the end of the trip no more coupon would be
One of two (2) things may be surmised from the circumstances of this case:
left in the ticket booklet.
first, US Air (CATHAY's agent) had mistakenly detached the San Francisco-
Hongkong flight coupon thinking that it was the San Francisco-Los Angeles
Singson failed to obtain a booking in LA for their trip to Manila; apparently,
portion; or, second, petitioner's booklet of tickets did not from issuance
the coupon corresponding to the 5th leg (San Francisco to HK) of the trip
include a San Francisco-Hongkong flight coupon.
was missing and instead the 3rd (San Francisco to LA) was still attached.
It was not until few days later that the defendant finally was able to arrange Whether a breach of contract was committed by CATHAY when it failed to
for his return to Manila. confirm the booking of petitioner Singson? YES

Singson commenced an action for damages based on breach of contract of Whether the carrier was liable not only for actual damages but also for moral
carriage against CATHAY before the Regional Trial Court. and exemplary damages, and attorney’s fees? YES

CATHAY denied these allegations and averred that since SINGSON was Ratio/Legal Basis
holding an open dated ticket, which meant that he was not booked on a
specific flight on a particular date, there was no contract of carriage yet On Breach of Contract
existing such that CATHAY's refusal to immediately book him could not
be construed as breach of contract of carriage. The round trip ticket issued by the carrier to the passenger was in itself a
complete written contract by and between the carrier and the passenger. It
It further alleged that in an attempt to verify the status of the lost ticket, had all the elements of a complete written contract, to wit:
CATHAY tried to contact its Hong Kong Headquarters, but no response was
immediately received. (a) the consent of the contracting parties manifested by the fact that the
passenger agreed to be transported by the carrier to and from Los Angeles
Moreover, SINGSON claims that CATHAY was guilty of gross negligence via San Francisco and Hong Kong back to the Philippines, and the carrier’s
amounting to malice and bad faith in: (a) detaching the wrong coupon; (b) acceptance to bring him to his destination and then back home;
using that error to deny confirmation of his return flight; and, (c) directing (b) cause or consideration, which was the fare paid by the passenger as
petitioner to prematurely return to San Francisco to verify his missing stated in his ticket; and,
coupon. He also underscores the scornful and demeaning posture of (c) object, which was the transportation of the passenger from the place of
CATHAY's employees toward him. departure to the place of destination and back, which are also stated in his
ticket.
TC: rendered a decision in favor of petitioner herein holding that CATHAY
In fact, the contract of carriage in the instant case was already partially
was guilty of gross negligence amounting to malice and bad faith for which it
executed as the carrier complied with its obligation to transport the
was adjudged to pay petitioner P20,000.00 for actual damages with interest
passenger to his destination, i.e., Los Angeles.
at the legal rate of twelve percent (12%) per annum from 26 August 1988
when the complaint was filed until fully paid, P500,000.00 for moral damages,
The loss of the coupon was attributable to the negligence of CATHAY’s
P400,000.00 for exemplary damages, P100,000.00 for attorney’s fees, and, to
agents and was the proximate cause of the non-confirmation of
pay the costs.
petitioner's return flight.

CA: reversed the trial court’s finding that there was gross negligence
It also appears that CATHAY was responsible for the loss of the ticket.
amounting to bad faith or fraud and, accordingly, modified its judgment by
One of two (2) things may be surmised from the circumstances of this case:
deleting the awards for moral and exemplary damages, and the attorney’s first, US Air (CATHAY's agent) had mistakenly detached the San Francisco-
fees as well. Hongkong flight coupon thinking that it was the San Francisco-Los Angeles
portion; or, second, petitioner's booklet of tickets did not from issuance
Issue include a San Francisco-Hongkong flight coupon.
 These circumstances reflect the carrier’s utter lack of care and sensitivity
In either case, the loss of the coupon was attributable to the negligence of to the needs of its passengers, clearly constitutive of gross negligence,
CATHAY's agents and was the proximate cause of the non-confirmation of recklessness and wanton disregard of the rights of the latter, acts
petitioner's return flight on 1 July 1988. evidently indistinguishable or no different from fraud, malice and bad
faith. As the rule now stands, where in breaching the contract of
Had CATHAY been more diligent, there would be no reason for CATHAY not carriage the defendant airline is shown to have acted fraudulently, with
to confirm petitioner's booking, as in the case of his cousin, Tiongson who malice or in bad faith, the award of moral and exemplary damages, in
had no problems addition to actual damages, is proper.

On Damages However, the P500,000.00 moral damages and P400,000.00 exemplary

damages awarded by the trial court have to be reduced. The well-entrenched
Although the rule is that moral damages predicated upon a breach of principle is that the grant of moral damages depends upon the discretion of
contract of carriage may only be recoverable in instances where the mishap the court based on the circumstances of each case. This discretion is limited
results in the death of a passenger, or where the carrier is guilty of fraud or by the principle that the "amount awarded should not be palpably and
bad faith, there are situations where the negligence of the carrier is so gross scandalously excessive" as to indicate that it was the result of prejudice or
and reckless as to virtually amount to bad faith, in which case, the passenger corruption on the part of the trial court. Damages are not intended to enrich
likewise becomes entitled to recover moral damages. the complainant at the expense of the defendant. They are awarded only to
alleviate the moral suffering that the injured party had undergone by reason
In this case, the ff. circumstances are attendant: of the defendant's culpable action. There is no hard-and-fast rule in the
1. The ticket coupon corresponding to the San Francisco-Hongkong determination of what would be a fair amount of moral damages since each
flight was missing either due to the negligence of CATHAY's agents in
case must be governed by its own peculiar facts.
improperly detaching petitioner's flight coupons or failing to issue
the flight coupon for San Francisco-Hongkong in the ticket booklet;
In the instant case, the injury suffered by petitioner is not so serious
2. SINGSON and his cousin presented their respective ticket booklets
or extensive as to warrant an award amounting to P900,000.00. The
bearing identical itineraries to prove that there had been a mistake in
removing the coupons of petitioner. assessment of P200,000.00 as moral damages and P50,000.00 as exemplary
3. CATHAYs reservation and ticketing agent was even able to ascertain damages in his favor is, in our view, reasonable and realistic.
from his flight reservations computer that SINGSON indeed had
reservations booked for travel on their return flight. On the issue of actual damages, we agree with the Court of Appeals that
4. CATHAY endeavored to show that it undertook the verification of the the amount of P20,000.00 granted by the trial court to petitioner should not
lost coupon by sending a telex to its Hong Kong office. The SC noted, be disturbed. 
however, that CATHAY already had access to all records and facilities
that would enable them to verify in a matter of minutes, yet it still With regard to attorney's fees, they may be awarded when the
took CATHAY 24 hrs to verify. defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest. It was therefore
To be stranded for five (5) days in a foreign land because of an air carrier's erroneous for the Court of Appeals to delete the award made by the trial
negligence is too exasperating an experience for a plane passenger. court; consequently, petitioner should be awarded attorney's fees and the
SINGSON, for sure, underwent profound distress and anxiety.
amount of P25,000.00, instead of P100,000.00 earlier awarded, may be However, in order that a common carrier may be absolved from liability
considered rational, fair and reasonable. in case of force majeure, it is not enough that the accident was caused
by force majeure. The common carrier must still prove that it was not
Disposition negligent in causing the injuries resulting from such accident.
WHEREFORE, the petition is GRANTED and the 14 July 1994 Decision of the
Court of Appeals is REVERSED. Private respondent is ordered to pay Considering the factual findings of the Court of Appeals, the bus driver did
petitioner P20,000.00 for actual damages as fixed by the trial court, plus not immediately stop the bus at the height of the commotion; the bus was
P200,000.00 for moral damages, P50,000.00 for exemplary damages and speeding from a full stop; the victims fell from the bus door when it was
P25,000.00 for attorney's fees. No costs. opened or gave way while the bus was still running; the conductor panicked
and blew his whistle after people had already fallen off the bus; and the bus
Bachelor Express Inc v CA was not properly equipped with doors in accordance with law. It is clear that
the petitioners have failed to overcome the presumption of fault and
negligence found in the law governing common carriers.
Recit-ready summary

Facts of the case

A passenger on a Bachelor Express, Inc. bus stabbed another passenger,
Bachelor Express, Inc.’s Bus No. 800, which was being driven at the time by
causing commotion and panic as the passengers pushed and shoved each
Cresencio Rivera, was en route from Davao City and passing through Butuan
other in a rush to get off the vehicle. After the commotion, passengers
City to get to Cagayan de Oro. While at Tabon-Tabon, Butuan City, the bus
Ornominio Beter and Narcisa Rautraut were discovered on the road,
picked up a passenger. Fifteen minutes later, a passenger at the rear
presumably having died after falling off the vehicle.
suddenly stabbed a Philippine Constabulary soldier, causing a commotion
and panic among the other passengers.
Is Bachelor Express liable? Yes.

A stampede ensued, and when the bus stopped, two passengers – Ornominio
The liability, if any, of Bachelor Express is anchored on culpa contractual
Beter and Narcisa Rautraut – were found lying on the road. Beter was already
or breach of contract of carriage. There is no question that Bachelor Express,
dead as a result of head injuries, while Rautraut was suffering from severe
Inc. is a common carrier. Hence, from the nature of its business and for
injuries that eventually resulted in her death. The assailant alighted from the
reasons of public policy, Bachelor Express, Inc. is bound to carry its
bus and ran towards the bushes but was later killed by the police.
passengers safely as far as human care and foresight can provide using
the utmost diligence of very cautious persons, with a due regard for all
The heirs of the deceased filed a complaint for a sum of money against
the circumstances. The running amuck of the passenger was the proximate
Bachelor Express, its owner Samson Yasay, and the driver Rivera. Bachelor
cause of the incident as it triggered commotion and panic among the
Express denied liability for the deaths of the two passengers. They alleged
passengers who started running to the sole exit. The passengers shoving
that the driver was able to transport his passengers safely to their places of
each other in a rush to get off the bus resulted in Beter and Rautraut falling
destination, except for Beter and Rautraut, who jumped off the bus without
off the bus, causing them fatal injuries. The sudden act of the passenger
the knowledge, consent, and (much less) the fault of the driver and
who stabbed another passenger in the bus is within the context of force
conductor.
majeure.
Bachelor Express argued that it was necessary first to answer several reasons of public policy, Bachelor Express, Inc. is bound to carry its
questions to arrive at a fair, just, and equitable judgment – passengers safely as far as human care and foresight can provide using the
utmost diligence of very cautious persons, with a due regard for all the
1) What was the proximate cause of the whole incident? circumstances.
2) Why did the passengers on board the bus panic and why were they
shoving each other? In the case at bar, Ornominio Beter and Narcisa Rautraut were
3) Why did Narcisa Rautraut and Ornominio Beter jump off the running passengers of a bus belonging to petitioner Bachelor Express, Inc. and, while
bus? passengers of the bus, suffered injuries which caused their death.
Consequently, pursuant to Article 1756 of the Civil Code, petitioner Bachelor
With respect to proximate cause, Bachelor Express argued that it was the act
Express, Inc. is presumed to have acted negligently unless it can prove that it
of the passenger who ran amuck and stabbed another passenger. Bachelor
had observed extraordinary diligence in accordance with Articles 1733 and
Express maintained that they should not be made liable for damages arising
1755 of the New Civil Code.
from acts of a third person over whom they had no control or supervision.
They contended that the stabbing incident triggered the commotion and
Bachelor Express, denies liability on the ground that the deaths of the
panic, leading the passengers to push each other. Beter and Rautraut jumped
passengers were caused by a third person who was beyond its control and
off the bus while it was still moving presumably out of fear and moved by the
supervision. In effect, the company, in order to overcome the
human instinct of self-preservation, which led to their untimely death.
presumption of fault or negligence under the law, states that the
vehicular incident resulting in the death of the passengers was caused
Considering the circumstances, Bachelor Express asseverate that they were
by force majeure or caso fortuito over which the common carrier did not
not negligent in the performance of their duties and that the incident was
have any control.
completely and absolutely attributable to a third person – the passenger who
ran amuck – for without his criminal act, the two victims would not have been
The running amuck of the passenger was the proximate cause of the
subjected to fear and shock that eventually compelled them to jump off the
incident as it triggered commotion and panic among the passengers who
moving bus.
started running to the sole exit. The passengers shoving each other in a rush
to get off the bus resulted in Beter and Rautraut falling off the bus, causing
Further, Bachelor Express argued that the driver of the bus was driving
them fatal injuries. The sudden act of the passenger who stabbed another
cautiously before, during, and after the incident, cautiously giving due regard
passenger in the bus is within the context of force majeure.
to traffic rules, laws, and regulations. Moreover, they were not insurers of
their passengers.
However, in order that a common carrier may be absolved from
liability in case of force majeure, it is not enough that the accident was
Issue/s
caused by force majeure. The common carrier must still prove that it was
Is Bachelor Express liable? Yes.
not negligent in causing the injuries resulting from such accident.

Ratio/Legal Basis
Therefore, the next question to be determined is whether or not the
Bachelor Express observed extraordinary diligence to safeguard the lives of
The liability, if any, of Bachelor Express is anchored on culpa contractual
its passengers. The trial court and the appellate court, however, arrived at
or breach of contract of carriage. There is no question that Bachelor Express,
conflicting factual findings.
Inc. is a common carrier. Hence, from the nature of its business and for
 clearly stated that the conductor opened the door when the
The trial court held that the two deceased could have fallen off the passengers were shouting that the bus stop while they were in a
bus when their own witnesses testified that when the commotion state of panic. Sergia Beter categorically stated that she actually
ensued inside the bus, the passengers pushed and shoved each saw her son fall from the bus as the door was forced open by the
other towards the door apparently in order to get off from the bus force of the onrushing passengers.
through the door. But the passengers also could not pass through
the door because according to the evidence the door was locked. Pedro Collango, on the other hand, testified that he shut the
door after the last passenger had boarded the bus. But he had
The trial court also gave credence to the evidence adduced by quite conveniently neglected to say that when the passengers
Bachelor Express showing that when the commotion ensued inside had panicked, he himself panicked and had gone to open the
the bus, the two deceased panicked and, in state of shock and fear, door.
they jumped off from the bus by passing through the window.
Considering the factual findings of the Court of Appeals, the bus driver
It is the prevailing rule and settled jurisprudence that transportation did not immediately stop the bus at the height of the commotion; the
companies are not insurers of their passengers. The evidence on bus was speeding from a full stop; the victims fell from the bus door when it
record does not show that defendants' personnel were negligent in was opened or gave way while the bus was still running; the conductor
their duties. The defendants' personnel have every right to accept panicked and blew his whistle after people had already fallen off the
passengers absent any manifestation of violence or drunkenness. If bus; and the bus was not properly equipped with doors in accordance
and when such passengers harm other passengers without the with law. It is clear that the petitioners have failed to overcome the
knowledge of the transportation company's personnel, the latter presumption of fault and negligence found in the law governing common
should not be faulted. carriers.

The appellate court, however, held that there were material facts ignored Bachelor Express’ argument that the petitioners "are not insurers of their
by the trial court showing that the petitioner common carrier was negligent passengers" deserves no merit in view of the failure of the petitioners to
in the provision of safety precautions so that its passengers may be prove that the deaths of the two passengers were exclusively due to force
transported safely to their destinations. The appellate court states: majeure and not to the failure of the petitioners to observe extraordinary
diligence in transporting safely the passengers to their destinations as
The lower court concluded that the door of the bus was closed; warranted by law.
secondly, the passengers, specifically the two deceased, jumped out
of the window. The lower court therefore concluded that the Disposition
defendant common carrier is not liable for the death of the said
passengers which it implicitly attributed to the unforeseen acts of WHEREFORE, lower court’s orders are reversed.
the unidentified passenger who went amuck.

There is nothing in the record to support the conclusion that the Nocum v BLTB
solitary door of the bus was locked as to prevent the passengers
from passing through. Leonila Cullano, testifying for the defense, Recit-ready summary
Nocum was a passenger in LTBC’s Bus No. 120 then making a trip within the There is need for evidence of circumstances indicating cause or causes for
barrio of Dita, Municipality of Bay, Laguna, was injured as a consequence of apprehension that the passenger's baggage is dangerous and that it is failure
the explosion of firecrackers, contained in a box, loaded in said bus and of the common carrier's employee to act in the face of such evidence that
declared to its conductor as containing clothes and miscellaneous items by a constitutes the cornerstone of the common carrier's liability.
co-passenger. Nocum sued Laguna Tayabas for breach of contract of
carriage. Facts of the case

The lower court ruled that Laguna Tayabas was liable since it did not observe Nocum, who was a passenger in Laguna Tayabas Bus Company (LTBC)’s Bus
the extraordinary or utmost diligence of a very cautious person required by No. 120 then making a trip within the barrio of Dita, Municipality of Bay,
the Civil Code. Laguna, was injured as a consequence of the explosion of firecrackers,
contained in a box, loaded in said bus. A total of 37 passengers were injured.
The issue before the Court is whether or not LTBC failed to exercise The bus conductor testified that the box belonged to a passenger whose
extraordinary diligence, thereby making it liable for damages? The name he does not know and who told him that it contained
Court ruled in the negative. miscellaneous items and clothes. He also said that from its appearance
there was no indication at all that the contents were explosives or
Fairness demands that in measuring a common carrier's duty towards its firecrackers. Neither did he open the box because he just relied on the
passengers, allowance must be given to the reliance that should be word of the owner.
reposed on the sense of responsibility of all the passengers in regard to
their common safety. It is to be presumed that a passenger will not take Dispatcher Nicolas Cornista added that they were not authorized to open the
with him anything dangerous to the lives and limbs of his co- baggages of passengers because instruction from the management was to
passengers, not to speak of his own. Not to be lightly considered must call the police if there were packages containing articles which were against
be the right to privacy to which each passenger is entitled, he cannot be regulations.
subjected to any unusual search, when he protests the innocuousness of
his baggage and nothing appears to indicate the contrary, as in the case The trial court ruled in favor of Nocum, making LTBC liable for damages. It
at bar. declared that LTBC did not observe the extraordinary or utmost diligence of a
very cautious person as required by the articles 1733, 1755, & 1756 of the
In other words, inquiry may be verbally made as to the nature of a Civil Code. Hence, this case before the Supreme Court.
passenger's baggage when such is not outwardly perceptible, but
beyond this, constitutional boundaries are already in danger of being Issue
transgressed. Calling a policeman to his aid, as suggested by the service
Whether or not Laguna Tayabas Bus Company is liable for damages for
manual invoked by the trial judge, in compelling the passenger to submit to
failing to exercise extraordinary diligence? No.
more rigid inspection, after the passenger had already declared that the box
contained mere clothes and other miscellaneous, could not have justified
Ratio/Legal Basis
invasion of a constitutionally protected domain.
We are not convinced that the exacting criterion of said provisions has not carrier, through its employees, was aware of the nature of the article or had
been met by appellant in the circumstances of this particular case. any reason to anticipate danger therefrom.
Since We hold that appellant has succeeded in rebutting the
Article 1755 provides: "A common carrier is bound to carry the passengers presumption of negligence by showing that it has exercised
safely as far as human care and foresight can provide, using the utmost extraordinary diligence for the safety of its passengers, "according to the
diligence of very cautious persons, with due regard for all the circumstances of the (each) case," We deem it unnecessary to rule whether or
circumstances." not there was any fortuitous event in this case.

In this particular case before Us, it must be considered that while it is true the Disposition
passengers of appellant's bus should not be made to suffer for something ACCORDINGLY, the appealed judgment of the trial court is reversed and the
over which they had no control, as enunciated in the decision of this Court case is dismissed, without costs.
SO ORDERED.
cited by His Honor, fairness demands that in measuring a common
carrier's duty towards its passengers, allowance must be given to the
Notes
reliance that should be reposed on the sense of responsibility of all the
passengers in regard to their common safety. It is to be presumed that a ART. 1733. Common carriers, from the nature of their business and for
passenger will not take with him anything dangerous to the lives and reasons of public policy, are bound to observe extraordinary diligence in the
limbs of his co-passengers, not to speak of his own . Not to be lightly vigilance over the goods and for the safety of the passengers transported by
considered must be the right to privacy to which each passenger is entitled. them, according to all the circumstances of each case. Such extraordinary
He cannot be subjected to any unusual search, when he protests the diligence in the vigilance over the goods is further expressed in articles 1734,
innocuousness of his baggage and nothing appears to indicate the contrary, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the
as in the case at bar. In other words, inquiry may be verbally made as to safety of the passengers is further set forth in articles 1755 and 1756.
the nature of a passenger's baggage when such is not outwardly
perceptible, but beyond this, constitutional boundaries are already in ART. 1755. A common carrier is bound to carry the passengers safely as far as
danger of being transgressed. human care and foresight can provide, using the utmost diligence of very
cautious persons, with a due regard for all the circumstances.
Decisions in other jurisdictions cited by appellant in its brief, evidently
because of the paucity of local precedents squarely in point, emphasize that
ART 1756. In case of death of or injuries to passengers, common carriers are
there is need, as We hold here, for evidence of circumstances indicating
presumed to have been at fault or to have acted negligently, unless they
cause or causes for apprehension that the passenger's baggage is dangerous
prove that they observed extraordinary diligence as prescribed in articles
and that it is failure of the common carrier's employee to act in the face of
1733 and 1755.
such evidence that constitutes the cornerstone of the common carrier's
liability in cases similar to the present one.
Smith Bell v Borja
Explosive or Dangerous Contents. — A carrier is ordinarily not liable for
injuries to passengers from fires or explosions caused by articles brought into
Recit-ready summary
its conveyances by other passengers, in the absence of any evidence that the
Smith Bell filed a written request with the Bureau of Customs for the damage: and injuries: (1) chemical burns of the face and arms; (2) inhalation
attendance of the latter's inspection team on vessel M/T King Family of fumes from burning chemicals; (3) exposure to the elements [while]
which was due to arrive at the port of Manila containing 750 metric tons of floating in sea water for about three (3) hours; (4) homonymous hemianopsia
alkyl benzene and methyl methacrylate monomer. Catalino Borja, the or blurring of the right eye which was of possible toxic origin; and (5) cerebral
customs inspector of the Bureau of Customs boarded said vessel to perform infract with neo-vascularization, left occipital region with right sided
his duties as inspector upon the vessel's arrival until its departure. At about headache and the blurring of vision of right eye.
11 o'clock in the morning on September 24, 1987, while M/T King Family Hence, the owner or the person in possession and control of a vessel
was unloading chemicals unto two (2) barges owned by [Respondent] and the vessel are liable for all natural and proximate damage caused to
ITTC, a sudden explosion occurred setting the vessel afire. Upon hearing persons and property by reason of negligent management or navigation.
the explosion, Borja who was inside the cabin preparing reports, ran
outside to check what happened. Borja jumped overboard and swam for Facts of the case
one hour until he was rescued by the people living in the squatters area and
sent to San Juan De Dios Hospital. As a result of the fire and the explosion Smith Bell filed a request with the. Bureau of Customs for the inspection
during the unloading of the chemicals from petitioner's vessel, on vessel M/T King Family due to arrive at the port of Manila on September
Respondent Borja suffered the following damage and injuries such as 24, 1987, containing 750 metric tons of alkyl benzene and methyl
chemical burns of the face and arms and inhalation of fumes from methacrylate monomer.
burning chemicals. On the same day, Supervising Customs Inspector Manuel Ma. D. Nalgan
instructed Catalino Borja to board said vessel and perform his duties as
WON Smith Bell is liable for Borja’s injuries. inspector upon the vessels arrival until its departure.
At about 11 oclock in the morning on September 24, 1987, while M/T
Negligence is conduct that creates undue risk of harm to another. It is King Family was unloading chemicals unto two (2) barges ITTC 101 and CLC-
the failure to observe that degree of care, precaution and vigilance that 1002 owned by ITTC, a sudden explosion occurred setting the vessels afire.
the circumstances justly demand, whereby that other person suffers Borja, who was at that time inside the cabin preparing reports, ran outside to
injury. Petitioners vessel was carrying chemical cargo (alkyl benzene and check what happened. Again, another explosion was heard. Borja jumped
methyl methacrylate monomer), its officers and crew failed to take all the over board to save himself. However, the water was likewise on fire due
necessary precautions to prevent an accident. Petitioner was, therefore, mainly to the spilled chemicals. Borja swam his way for one (1) hour until he
negligent. was rescued by the people living in the squatters area and sent to San Juan
Elements of QD: De Dios Hospital.
(1) damages suffered by the plaintiff, Borja was diagnosed to be permanently disabled due to the incident. He
(2) fault or negligence of the defendant, and made demands against Smith Bell and ITTC for the damages caused by the
(3) the connection of cause and effect between the fault or explosion. However, both denied liabilities and attributed to each other
negligence of the defendant and the damages inflicted on negligence.
the plaintiff. RTC ruled in favor of Borja and held Smith Bell liable for damages and
All these elements were established in this case. Knowing fully well that it was
loss of income.
carrying dangerous chemicals, petitioner was negligent in not taking all the
CA affirmed. Contrary to the claim of petitioner that no physical
necessary precautions in transporting the cargo.
evidence was shown to prove that the explosion had originated from its
As a result of the fire and the explosion during the unloading of
vessel, the CA held that the fire had originated from M/T King Family. This
the chemicals from petitioners vessel, Borja suffered the following
conclusion was amply supported by the testimonies of Borja and Eulogio As a result of the fire and the explosion during the unloading of the
Laurente (the eyewitness of International Towage and Transport Corporation chemicals from petitioners vessel, Borja suffered the following damage: and
or ITTC) as well as by the investigation conducted by the Special Board of injuries: (1) chemical burns of the face and arms; (2) inhalation of fumes from
Marine Inquiry and affirmed by the secretary of the Department of National burning chemicals; (3) exposure to the elements [while] floating in sea water
Defense. for about three (3) hours; (4) homonymous hemianopsia or blurring of the
right eye which was of possible toxic origin; and (5) cerebral infract with neo-
Issue/s vascularization, left occipital region with right sided headache and the
blurring of vision of right eye.
WoN Smith Bell is liable for Borja’s injuries? Hence, the owner or the person in possession and control of a vessel
and the vessel are liable for all natural and proximate damage caused to
Ratio/Legal Basis persons and property by reason of negligent management or navigation.
Smith Bell claims that the documents adduced in the RTC conclusively
revealed that the explosion that caused the fire on M/T King Family had Disposition
originated from the barge ITTC-101.
The attempts of Smith Bell to shift the blame on ITTC were all for WHEREFORE, the Petition is PARTLY GRANTED. The assailed Decision is
naught. AFFIRMED with the following MODIFICATIONS: petitioner is ordered to pay
1. testimony of its alleged eyewitness was stricken off the record the heirs of the victim damages in the amount of P320,240 as loss of earning
for his failure to appear for cross-examination capacity, moral damages in the amount of P100,000, plus another P50,000 as
2. the documents offered to prove that the fire originated from attorneys fees. Costs against petitioner.
barge ITTC-101 were all denied admission by the court for being
hearsay SO ORDERED.
There is nothing in the record to support the contention that the fire and
explosion originated from barge ITTC-101.
Negligence is conduct that creates undue risk of harm to another. It Philippine First Insurance v Wallem Philippine
is the failure to observe that degree of care, precaution and vigilance that the Shipping
circumstances justly demand, whereby that other person suffers injury.
Petitioners vessel was carrying chemical cargo (alkyl benzene and methyl Recit-ready summary
methacrylate monomer), its officers and crew failed to take all the necessary
precautions to prevent an accident. Petitioner was, therefore, negligent. Anhui Chemicals Import & Export Corporation loaded on board M/S Offshore
Elements of QD: Master a shipment consisting of 10,000 bags of sodium sulphate
(4) damages suffered by the plaintiff, anhydrous 99 PCT Min., complete and in good order for transportation to
(5) fault or negligence of the defendant, and and delivery at the port of Manila for consignee, L.G. Atkimson Import-
(6) the connection of cause and effect between the fault or Export, Inc., covered by a Clean Bill of Lading. 2,426 poly bags were in bad
negligence of the defendant and the damages inflicted on the
order and condition, having sustained various degrees of spillages and
plaintiff.
losses. This is evidenced by the Turn Over Survey of Bad Order Cargoes of
All these elements were established in this case. Knowing fully well that it was
the arrastre operator, Asian Terminals, Inc. Asia Star Freight Services, Inc.
carrying dangerous chemicals, petitioner was negligent in not taking all the
undertook the delivery of the subject shipment from the pier to L.G.
necessary precautions in transporting the cargo.
Atkimson’s warehouse in Quezon City. During the unloading, it was found L.G. Atkimson Import-Export, Inc. (consignee), covered by a Clean Bill of
and noted that the bags had been discharged in damaged and bad order Lading.
condition L. G. Atkimson filed a formal claim with Wallem for the value of the The Owner and/or Charterer of M/V Offshore Master is unknown while the
damaged shipment, to no avail. Since the shipment was insured with shipper of the shipment is Shanghai Fareast Ship Business Company. Both
petitioner Philippines First Insurance Co., Inc. against all risks . G. Atkimson foreign firms are doing business in the Philippines, thru its local ship agent,
filed a formal claim with Phil First Insurance for the damage and losses respondent Wallem Philippines Shipping, Inc. (Wallem).
sustained by the shipment. Phil First Insurance, in the exercise of its right of On October 16, the shipment arrived at the port of Manila on board the
subrogation, sent a demand letter to Wallem for the recovery of the amount vessel M/S Offshore Master from which it was subsequently discharged.
paid to no avail. Phil First Insurance instituted an action before the RTC for It was disclosed during the discharge of the shipment from the carrier that
damages against Wallem for its recovery. 2,426 poly bags (bags) were in bad order and condition, having sustained
various degrees of spillages and losses.
Issue is WoN Wallem Shipping’s vessel as a common carrier should be Asia Star Freight Services, Inc. undertook the delivery of the subject shipment
held liable for the cost of the damaged shipment? from the pier to the consignee's warehouse in Quezon City, while the final
inspection was conducted jointly by the consignee's representative and the
SC held that it is because the duty of care of the cargo is non-delegable, cargo surveyor.
and the carrier is accordingly responsible for the acts of the master, the During the unloading, it was found and noted that the bags had been
crew, the stevedore, and his other agents. The records are replete with discharged in damaged and bad order condition.
evidence which show that the damage to the bags happened before and The consignee filed a formal claim with Wallem for the value of the damaged
after their discharge and it was caused by the stevedores of the arrastre shipment, to no avail. Since the shipment was insured with Philippines First
operator who were then under the supervision of Wallem. It is settled in Insurance Co., Inc. against all risks in the amount of P2,470,213.50, 12 the
maritime law jurisprudence that cargoes while being unloaded generally consignee filed a formal claim with Phil First for the damage and losses
remain under the custody of the carrier. In the instant case, the damage sustained by the shipment.
or losses were incurred during the discharge of the shipment while Phil First, in the exercise of its right of subrogation, sent a demand letter to
under the supervision of the carrier. Consequently, the carrier is liable Wallem for the recovery of the amount paid by petitioner to the consignee.
for the damage or losses caused to the shipment. However, despite receipt of the letter, Wallem did not settle nor even send a
response to Phil First's claim.
Doctrine: It is settled in maritime law jurisprudence that cargoes while RTC ruled in favor of Phil. First stating. CA set aside and reversed the RTC
being unloaded generally remain under the custody of the carrier. In the decision.
instant case, the damage or losses were incurred during the discharge of the
shipment while under the supervision of the carrier. Consequently, the carrier Issue
is liable for the damage or losses caused to the shipment. Whether or not the Court of Appeals erred in not holding that as a common
carrier, the carrier's duties extend to the obligation to safely discharge the
Facts of the case cargo from the vessel?
On or about 2 October 1995, Anhui Chemicals Import & Export Corporation
loaded on board M/S Offshore Master a shipment consisting of 10,000 bags Whether or not the carrier should be held liable for the cost of the damaged
of sodium sulphate anhydrous 99 PCT Min. (shipment), complete and in good shipment;
order for transportation to and delivery at the port of Manila for consignee, Ratio/Legal Basis
 Section 3 (2) thereof then states that among the carriers' responsibilities are
It is beyond question that Wallem's vessel is a common carrier. Thus, the to properly and carefully load, handle, stow, carry, keep, care for, and
standards for determining the existence or absence of the Wallem’s liability discharge the goods carried.
will be gauged on the degree of diligence required of a common carrier. Lastly, Section 2 of the COGSA provides that under every contract of carriage
Moreover, as the shipment was an exercise of international trade, the of goods by sea, the carrier in relation to the loading, handling, stowage,
provisions of the Carriage of Goods by Sea Act 21 (COGSA), together with the carriage, custody, care, and discharge of such goods, shall be subject to the
Civil Code and the Code of Commerce, shall apply responsibilities and liabilities and entitled to the rights and immunities set
It is undisputed that the shipment was damaged prior to its receipt by the forth in the Act. 30 Section 3 (2) thereof then states that among the carriers'
insured consignee. The damage to the shipment was documented by the responsibilities are to properly and carefully load, handle, stow, carry, keep,
turn-over survey and Request for Bad Order Survey. care for, and discharge the goods carried.
The turn-over survey, in particular, expressly stipulates that 2,426 bags of the The above doctrines are in fact expressly incorporated in the bill of lading
shipment were received by the arrastre operator in damaged condition. While between the shipper Shanghai Fareast Business Co., and the consignee.
it is established that damage or losses were incurred by the shipment during On the other hand, the functions of an arrastre operator involve the handling
the unloading, it is disputed who should be liable for the damage incurred at of cargo deposited on the wharf or between the establishment of the
that point of transport. consignee or shipper and the ship's tackle.
Common carriers, from the nature of their business and for reasons of public Being the custodian of the goods discharged from a vessel, an arrastre
policy, are bound to observe extraordinary diligence in the vigilance over the operator's duty is to take good care of the goods and to turn them over to
goods transported by them. Subject to certain exceptions enumerated under the party entitled to their possession. Handling cargo is mainly the arrastre
Article 1734 of the Civil Code, common carriers are responsible for the loss, operator's principal work so its drivers/operators or employees should
destruction, or deterioration of the goods. observe the standards and measures necessary to prevent losses and damage
The extraordinary responsibility of the common carrier lasts from the time the to shipments under its custody.
goods are unconditionally placed in the possession of and received by the The liability of the arrastre operator was reiterated in Eastern Shipping Lines,
carrier for transportation until the same are delivered, actually or Inc. v. Court of Appeals with the clarification that the arrastre operator and
constructively, by the carrier to the consignee, or to the person who has a the carrier are not always and necessarily solidarily liable as the facts of
right to receive them. a case may vary the rule.
For marine vessels, Article 619 of the Code of Commerce provides that the Thus, in this case the appellate court is correct insofar as it ruled that an
ship captain is liable for the cargo from the time it is turned over to him at arrastre operator and a carrier may not be held solidarily liable at all
the dock or afloat alongside the vessel at the port of loading, until he delivers times.
it on the shore or on the discharging wharf at the port of unloading, unless In a case decided by a U.S. Circuit Court, Nichimen Company v. M./V. Farland,
agreed otherwise. it was ruled that like the duty of seaworthiness, the duty of care of the
Lastly, Section 2 of the COGSA provides that under every contract of carriage cargo is nondelegable, and the carrier is accordingly responsible for the
of goods by sea, the carrier in relation to the loading, handling, stowage, acts of the master, the crew, the stevedore, and his other agents.
carriage, custody, care, and discharge of such goods, shall be subject to the It has also been held that it is ordinarily the duty of the master of a vessel to
responsibilities and liabilities and entitled to the rights and immunities set unload the cargo and place it in readiness for delivery to the consignee, and
forth in the Act. there is an implied obligation that this shall be accomplished with sound
machinery, competent hands, and in such manner that no unnecessary injury
shall be done thereto. And the fact that a consignee is required to furnish
persons to assist in unloading a shipment may not relieve the carrier of its Manila. The cargo had to be kept at a temperature of 0 degrees Celsius.
duty as to such unloading. The exercise of the carrier's custody and This was insured by Netherlands Insurance. When it arrived in Manila, it was
responsibility over the subject shipment during the unloading actually plugged in the power terminal of the pier. The surveyors found that the
transpired in the instant case during the unloading of the shipment. temperature was constant on a certain date but when the cargo was
The records are replete with evidence which show that the damage to the unloaded from the ship, the temperature fluctuated. It was believed that
bags happened before and after their discharge and it was caused by the the cause was the burnt condenser fan of the refrigerated container. Due
stevedores of the arrastre operator who were then under the supervision of to this, when Temic received the cargo, it was damaged. Netherlands
Wallem. It is settled in maritime law jurisprudence that cargoes while being Insurance paid for it was subrogated to the rights of Temic. When it was
unloaded generally remain under the custody of the carrier. demanding for payment, it was refused. So, they filed a complaint against
In the instant case, the damage or losses were incurred during the discharge EDSA Shipping RCL, Eagle Liner Shipping Agencies, U-Freight Signapore, and
of the shipment while under the supervision of the carrier. Consequently, the U-Ocean Phils, Inc. (U-Ocean) and Pacific Eagle in substitution of Eagle Liner
carrier is liable for the damage or losses caused to the shipment. As the cost Shipping Agencies.
of the actual damage to the subject shipment has long been settled, the trial
court's finding of actual damages in the amount of P397,879.69 has to be WON CA correctly held that RCL and EDSA Shipping liable as common carriers
sustained. under the theory of presumption of negligence – YES
Disposition
RCL and EDSA Shipping failed to prove that they did exercise that
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals degree of diligence required by law over the goods they transported.
dated 22 June 2004 and its Resolution dated 11 October 2004 are REVERSED There is sufficient evidence showing that the fluctuation of the
and SET ASIDE. Wallem is ordered to pay petitioner the sum of P397,879.69, temperature in the refrigerated container van, as recorded in the
with interest thereon at 6% per annum from the filing of the complaint on 7 temperature chart, occurred after the cargo had been discharged from
October 1996 until the judgment becomes final and executory. Thereafter, an the vessel and was already under the custody of the arrastre operator,
interest rate of 12% per annum shall be imposed. Respondents are also ICTSI. This evidence, however, does not disprove that the condenser fan
ordered to pay petitioner the amount of P20,000.00 for and as attorney's — which caused the fluctuation of the temperature in the refrigerated
fees, together with the costs of the suit. container — was not damaged while the cargo was being unloaded from
the ship. It is settled in maritime law jurisprudence that cargoes while being
SO ORDERED. unloaded generally remain under the custody of the carrier; RCL and EDSA
Shipping failed to dispute this.
Regional Container Lines v Netherlands Insurance Facts of the case
Parties: RCL is a foreign corporation based in Singapore. It does business in
Recit-ready summary the Philippines through its agent, EDSA Shipping, a domestic corporation
organized and existing under Philippine laws. Respondent Netherlands
Petitioner RCL had a charter agreement with Pacific Eagle Lines PTE. Ltd. Insurance Company (Philippines), Inc. (Netherlands Insurance) is likewise a
(Pacific Eagle who, in turn, was was contracted by U-Freight Singapore PTE domestic corporation engaged in the marine underwriting business.
Ltd. (U-Freight Singapore), a forwarding agent based in Singapore, to
transport 405 cartons of Epoxy Molding Compound for Temic Telefuncken Petitioner RCL had a charter agreement with Pacific Eagle Lines PTE. Ltd.
Microelectronics Philippines (Temic), to be shipped from Singapore to (Pacific Eagle who, in turn, was was contracted by U-Freight Singapore PTE
Ltd. (U-Freight Singapore), a forwarding agent based in Singapore, to (U-Ocean) as additional defendants. A 3rd Amended Complaint was filed
transport 405 cartons of Epoxy Molding Compound for Temic Telefuncken impleading Pacific Eagle in substitution of Eagle Liner Shipping Agencies.
Microelectronics Philippines (Temic), to be shipped from Singapore to Manila.
The defendants all disclaimed liability for the damage caused to the cargo.
The cargo was packed, stored, and sealed by Pacific Eagle in their refrigerator, RCL and EDSA Shipping denied negligence in the transport and imputed any
which had to be kept at a temperature of 0 degree Celsius. Pacfic Eagle then negligence to their co-defendnats. They also asserted that no valid
loaded the refrigerated container on board the M/V Piya Bhum, a vessel subrogation exists since the payment made by Netherlands to the consignee
owned by RCL. RCL duly issued its own Bill of Lading in favor of Pacific Eagle. was invalid. RCL and EDSA also averred that Netherlands has no cause of
action and is not the real party-in-interest and that the claim was already
To insure the cargo against loss and damage, Netherlands Insurance issued a barred by laches/prescription.
Marine Open Policy in favor of Temic and Marine Risk Note MRN-21 14022,
to cover all losses/damages to the shipment. Trial court held that while there was a valid subrogation, the defendants can’t
be held liable for the loss or damage since their respective liabilities ended at
On October 25, 1995, the M/V Piya Bhum docked in Manila. After unloading the time of the discharge of the cargo from the ship at the Port of Manila. CA
the refrigerated container, it was plugged to the power terminal of the pier to reversed the findings of the RTC and ordered RCL and EDSA Shipping Agency
keep its temperature constant. Fidel Rocha (Rocha), Vice-President for to reimburse the plaintiff the sum of the insurance with interest. CA
Operations of Marines Adjustment Corporation, accompanied by two dismissed Netherland Insurance's complaint against the other defendants
surveyors, conducted a protective survey of the cargo. They found that based after finding that the claim had already been barred by prescription.
on the temperature chart, the temperature reading was constant from
October 18, 1995 to October 25, 1995 at 0 degrees Celsius. However, at Issue/s
midnight of October 25, 1995 — when the cargo had already been unloaded WON CA correctly held that RCL and EDSA Shipping liable as common
from the ship — the temperature fluctuated with a reading of 33 degrees carriers under the theory of presumption of negligence – YES
Celsius. Rocha believed the fluctuation was caused by the burnt condenser
fan motor of the refrigerated container. Ratio/Legal Basis
SC doesn’t find the arguments of RCL and EDSA Shipping meritorious.
When Temic received it, they found that it was completely damaged.
Netherlands Insurance paid Temic the sum of P1,036,497.00 under the terms RCL and EDSA Shipping contend that the cause of the damage to the cargo
of the Marine Open Policy. Temic then executed a loss and subrogation was the "fluctuation of the temperature in the reefer van", which fluctuation
receipt in favor of Netherlands Insurance. 7 months from the delivery of the occurred after the cargo had already been discharged from the vessel. They
cargo, Netherlands filed a complaint for subrogation of insrance settlement hold that no fluctuation arose when the cargo was still on board M/V Piya
with the RTC of Manila, against "the unknown owner of M/V Piya Bhum" and Bhum. As the cause of the damage to the cargo occurred after the same was
TMS Ship Agencies (TMS), the latter thought to be the local agent of M/V already discharged from the vessel and was under the custody of the arrastre
Piya Bhum's unknown owner. operator (International Container Terminal Services, Inc. or ICTSI), RCL and
EDSA Shipping argue that the presumption of negligence provided in Article
Netherlands filed an amended complaint to implead EDSA Shipping RCL, 1735 of the Civil Code should not apply.
Eagle Liner Shipping Agencies, U-Freight Signapore, and U-Ocean Phils, Inc.
They hold that what applies in this case is Article 1734, particularly the handling of the goods, but they opted to file a demurrer to
paragraphs 3 and 4 thereof, which exempts the carrier from liability for loss evidence. As the order granting their demurrer was reversed on appeal, the
or damage to the cargo when it is caused either by an act or omission of the CA correctly ruled that they are deemed to have waived their right to present
shipper or by the character of the goods or defects in the packing or in the evidence, and the presumption of negligence must stand.
containers. Thus, RCL and EDSA Shipping seek to lay the blame at the feet of
other parties. To exculpate itself from liability for the loss/damage to the cargo under
any of the causes, the common carrier is burdened to prove any of the
A common carrier is presumed to have been negligent if it fails to prove that causes in Article 1734 claimed by it by a preponderance of evidence. If
it exercised extraordinary vigilance over the goods it transported. When the the carrier succeeds, the burden of evidence is shifted to the shipper to
goods shipped are either lost or arrived in damaged condition, a prove that the carrier is negligent.
presumption arises against the carrier of its failure to observe that diligence,
and there need not be an express finding of negligence to hold it liable RCL and EDSA Shipping, however, failed to satisfy this standard of evidence
and in fact offered no evidence at all on this point; a reversal of a dismissal
To overcome such presumption, the common carrier must establish based on a demurrer to evidence bars the defendant from presenting
adequate proof that it exercised extraordinary diligence over the goods. evidence supporting its allegations.
It must do more than merely show that some other party could be
responsible for the damage. Dispositive Portion

In the present case, RCL and EDSA Shipping failed to prove that they did WHEREFORE, we DENY the petition for review on certiorari 􏰙led by the
exercise that degree of diligence required by law over the goods they Regional Container Lines of Singapore and EDSA Shipping Agency. The
transported. There is sufficient evidence showing that the fluctuation of the decision of the Court of Appeals dated May 26, 2004 in CA-G.R. CV No.
temperature in the refrigerated container van, as recorded in the temperature 76690 is AFFIRMED IN TOTO. Costs against the petitioners.
chart, occurred after the cargo had been discharged from the vessel and was
already under the custody of the arrastre operator, ICTSI. This evidence, SO ORDERED.
however, does not disprove that the condenser fan — which caused the
fluctuation of the temperature in the refrigerated container — was not
damaged while the cargo was being unloaded from the ship. It is settled in
maritime law jurisprudence that cargoes while being unloaded generally Sulpicio v Curso
remain under the custody of the carrier; RCL and EDSA Shipping failed to
dispute this.

Recit Ready
RCL and EDSA Shipping could have offered evidence before the trial
Dr. Curso went on a voyage on the MV Dona Marilyn (operated by Sulpicio
court to show that the damage to the condenser fan did not occur: (1)
Lines) from Manila to Tacloban City. Unfortunately, Typhoon Unsang hit them
while the cargo was in transit; (2) while they were in the act of
while on transit and the ship sank. He didn’t survive. Now the brothers and
discharging it from the vessel; or (3) while they were delivering it
sisters (since he had no other closer relatives) are asking for moral damages
actually or constructively to the consignee. They could have presented
from Sulpicio Lines (CC). The CC argues that brothers and sisters can’t get
proof to show that they exercised extraordinary care and diligence in
moral damages.
 Common carrier argued force majeure (Typhoon) and that the MV Dona
WoN the brothers and sisters can make a claim for moral damages for the Marylin was sea worthy, cleared by the Cost Guard for voyage. They also
death of the deceased? NO conducted operations for search and rescue, and aid for the victims.

DOCTRINE: As a general rule, moral damages are not recoverable in actions CC also argued that moral damages should not be given to the brothers and
for damages predicated on a breach of contract, unless there is fraud or bad sisters of Dr. Curso, going against Art 1764 and 2206 and the ruling in
faith. As an exception, moral damages may be awarded in case of breach of Receiver for North Negros Sugar Co., Inc. v. Ybañez , whereby the Supreme
contract of carriage that results in the death of a passenger in accordance Court disallowed the award of moral damages in favor of the brothers and
with 1764 and 2206 (3). The persons that may claim moral damages is found sisters of a deceased passenger in an action upon breach of a contract of
in 2219. Brothers and Sisters are not included in 2219 carriage.

IN THIS CASE: Brothers and Sisters were claiming even if they were not RTC: In favor of common carrier due to force majeure and acted with
persons specified in 2219. They do not have a right based on law to recover diligence.
moral damages. Art 1003 is not concerned with the recovery of moral CA: In favor of the brothers and sisters (reversed the ruling): CC didn’t
damages. (Art 1003 talks about entitlement to the estate of the deceased.) CC practice the diligence required since:
wins.  The crew didn’t apprise themselves of the incoming storm.
 Ship’s hydraulic system failed and had to be repaired mid
Facts of the case voyage.
Dr. Curso boarded at the port of Manila the MV Doña Marilyn, an inter-
island vessel owned and operated by petitioner Sulpicio Lines, Inc., bound for Issues
Tacloban City. Unfortunately, the MV Doña Marilyn sank in the afternoon of W/N the brothers and sisters of the deceased are entitled to moral damages of
October 24, 1988 while at sea due to the inclement sea and weather Dr. Curso? NO
conditions brought about by Typhoon Unsang.
Ratio/Legal Basis
The body of Dr. Curso was not recovered, along with hundreds of other DOCTRINE: As a general rule, moral damages are not recoverable in actions
passengers of the ill-fated vessel. At the time of his death, Dr. Curso was 48 for damages predicated on a breach of contract, unless there is fraud or bad
years old, and employed as a resident physician at the Naval District Hospital faith. As an exception, moral damages may be awarded in case of breach of
in Naval, Biliran. He had a basic monthly salary of P3,940.00, and would have contract of carriage that results in the death of a passenger in accordance
retired from government service by December 20, 2004 at the age of 65. with 1764 and 2206 (3).

The surviving brothers and sisters of Dr. Curso, sued the petitioner in the RTC 2206 “(3) The spouse, legitimate and illegitimate descendants and
in Naval, Biliran to claim damages based on breach of contract of carriage by ascendants of the deceased may demand moral damages for
sea, averring that the petitioner had acted negligently in transporting Dr. mental anguish by reason of the death of the deceased.”
Curso and the other passengers.
The omission from Article 2206 (3) of the brothers and sisters of the
deceased passenger reveals the legislative intent to exclude them from
the recovery of moral damages for mental anguish by reason of the (10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34 and
death of the deceased 35.

Elements of awarding moral damages (Villanueva v. Salvador): The parents of the female seduced, abducted, raped or abused referred to in
1. there must be an injury, whether physical, mental, or No. 3 of this article, may also recover moral damages.
psychological, clearly substantiated by the claimant;
2. there must be a culpable act or omission factually established; The spouse, descendants, ascendants and brothers and sisters may bring the
3. the wrongful act or omission of the defendant must be the action mentioned in No. 9 of this article, in the order named.
proximate cause of the injury sustained by the claimant; and
4. the award of damages is predicated on any of the cases stated in Air France v Gillego
Article 2219 of the Civil Code (check notes for 2219)
Co, Calvin O.
IN THIS CASE: It was the brothers and sisters making a claim for moral
damages. While the brothers and sisters argue that Art 1003 of the Civil Code AIR FRANCE vs. BONIFACIO H. GILLEGO, substituted by his
says that they succeded to the entire estate of Dr. Curso in the absence of the surviving heirs represented by DOLORES P. GILLEGO
other relatives, the brothers and sisters ARE NOT included among those
Facts:
entitled to moral damages in Art 2219.
Respondent Congressman Gillego was invited to participate as one of the
keynote speakers at the 89th Inter-Parliamentary Conference Symposium on
Disposition Parliament Guardian of Human Rights to be held in Budapest, Hungary and
WHEREFORE, the petition for review on certiorari is granted, and the award Tokyo, Japan on May 19 to 22, 1993.
made to the respondents in the decision dated September 16, 2002 of the
Court of Appeals of moral damages amounting to P100,000.00 is deleted and On May 16, 1993, respondent left Manila on board petitioner Air France’s
set aside. aircraft bound for Paris, France. He arrived in Paris early 5 in the morning
of May 17th. While waiting for his connecting flight to Budapest, respondent
learned that petitioner had another aircraft bound for Budapest with an
Notes
earlier departure time than his scheduled flight. He then went to
petitioner’s counter at the airport and made arrangements for the change in
Article 2219. Moral damages may be recovered in the following and his booking. He was given a corresponding ticket and boarding pass for
analogous cases: and also a new baggage claim stub for his checked-in luggage. However,
(1) A criminal offense resulting in physical injuries; upon arriving in Budapest, respondent was unable to locate his luggage at
(2) Quasi-delicts causing physical injuries; the claiming section. He sought assistance from petitioner’s counter at the
airport and was advised to just wait for his luggage at his hotel and that
(3) Seduction, abduction, rape or other lascivious acts;
petitioner’s representatives would take charge of delivering the same to him
(4) Adultery or concubinage; that same day. But said luggage was never despite follow-up inquiries.
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search; Upon his return to the Philippines, respondent immediately wrote petitioner’s
(7) Libel, slander or any other form of defamation; Station Manager complaining about the lost luggage and the resulting
(8) Malicious prosecution; damages he suffered while in Budapest; that his single luggage contained his
personal effects such as clothes, toiletries, medicines for his hypertension,
(9) Acts mentioned in article 309;
and the speeches he had prepared, He was thus left with only his travel
documents, pocket money and the clothes he was wearing. Respondent was That respondent’s checked-in luggage was not found upon arrival at his
forced to shop for personal items including new clothes and his medicines. destination and was not returned to him until about two years later is
Aside from these unnecessary expenditures of about $1,000, respondent had not disputed. The action filed by the respondent is founded on such breach
to prepare another speech, in which he had difficulty due to lack of data and of the contract of carriage with petitioner who offered no satisfactory
information. Petitioner continued to ignore respondent’s repeated follow- explanation for the unreasonable delay in the delivery of respondent’s
ups regarding his lost luggage. baggage. The presumption of negligence was not overcome by the
petitioner and hence its liability for the delay was sufficiently
Respondent filed a complaint for damages against the petitioner alleging established. However, upon receipt of the said luggage during the pendency
that by reason of its negligence and breach of obligation to transport and of the case in the trial court, respondent did not anymore press on his claim
deliver his luggage, respondent suffered inconvenience, serious anxiety, for actual or compensatory damages and neither did he adduce evidence of
physical suffering and sleepless nights. Petitioner averred that it has taken all the actual amount of loss and damage incurred by such delayed delivery of
necessary measures to avoid loss of respondent’s baggage, the contents of his luggage. Consequently, the trial court proceeded to determine only the
which respondent did not declare, and that it has no intent to cause such propriety of his claim for moral and exemplary damages, and attorney’s fees.
loss, much less knew that such loss could occur. The loss of respondent’s
luggage is due to or occasioned by force majeure or fortuitous event or other In awarding moral damages for breach of contract of carriage, the
causes beyond the carrier’s control. Diligent, sincere and timely efforts were breach must be wanton and deliberately injurious or the one responsible
exerted by petitioner to locate respondent’s missing luggage and attended acted fraudulently or with malice or bad faith. Not every case of mental
to his problem with utmost courtesy, concern and dispatch. Petitioner further anguish, fright or serious anxiety calls for the award of moral damages.
asserted that it exercised due diligence in the selection and supervision of its Where in breaching the contract of carriage the airline is not shown to have
employees and acted in good faith in denying respondent’s demand for acted fraudulently or in bad faith, liability for damages is limited to the
damages. The claims for actual, moral and exemplary damages and attorney’s natural and probable consequences of the breach of the obligation which the
fees therefore have no basis in fact and in law, and are, moreover speculative parties had foreseen or could have reasonably foreseen. In such a case the
and unconscionable. liability does not include moral and exemplary damages.

Issue: In repeatedly ignoring respondent’s inquiries, petitioner’s employees

Was there legal and factual basis that Air France's actions were attended by exhibited an indifferent attitude without due regard for the
gross negligence, bad faith and willful misconduct and that it acted in a inconvenience and anxiety he experienced after realizing that his
wanton, fraudulent, reckless, oppressive or malevolent manner to justify luggage was missing. Petitioner was thus guilty of bad faith in breaching
award of moral and exemplary damages? its contract of carriage with the respondent, which entitles the latter to the
award of moral damages. However, we agree with petitioner that the sum of
₱1,000,000.00 awarded by the trial court is excessive and not proportionate
Ruling:
to the loss or suffering inflicted on the passenger under the circumstances.
The petition is partly meritorious. A business intended to serve the travelling
public primarily, a contract of carriage is imbued with public interest. The law
governing common carriers consequently imposes an exacting standard.
Article 1735 of the Civil Code provides that in case of lost or damaged Northwest Airlines v Catapang
goods, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary
Recit-ready summary
diligence as required by Article 1733. Thus, in an action based on a
breach of contract of carriage, the aggrieved party does not have to
prove that the common carrier was at fault or was negligent. All that he Respondent Catapang requested First United Travel, Inc. (FUT) to issue
has to prove is the existence of the contract and the fact of its non- him a ticket that would allow rebooking or rerouting of flights within the
performance by the carrier. United States. FUT informed him that Northwest Airlines, Inc. (petitioner)
was willing to accommodate his request provided he would pay an No end./7 days adv. Purchase
additional US$50 for every rebooking or rerouting of flight. He agreed.
When Catapang arrived in New York, he called Northwest’s office which US$50 — rebooking/re-routing/cancellation fee
informed him that his ticket was not "rebookable or reroutable". Catapang
proceeded to Northwest’s ticket office where he was treated in a rude When Catapang arrived in New York, he called Northwest’s office which
manner by an employee who informed him that his ticket was not informed him that his ticket was not "rebookable or reroutable". Catapang
rebookable or reroutable. He filed a complaint for damages. RTC awarded proceeded to Northwest’s ticket office at the World Trade Center where he
Catapang damages and CA affirmed. was treated in a rude manner by an employee who informed him that his
ticket was not rebookable or reroutable since it was of a "restricted type", and
The issue is whether award for damages is correct? YES, except for filing that unless he upgraded it by paying US$644.00, he could not rebook. Left
fees and attorney’s fees. with no choice, respondent paid that amount for rebooking.
Instead of civilly informing respondent that his ticket could not be
rebooked, petitioner's agent in New York exhibited rudeness in the Upon his return to the Philippines, Catapang wrote to petitioner in a letter
presence of respondent's brother-in-law and other customers. (see notes). His letter of demand remained unanswered, so he filed a
Passengers have the right to be treated by a carrier's employees with complaint for damages against Northwest. Northwest claimed that
kindness, respect, courtesy and due consideration. Any discourteous conduct respondent's ticket was a discounted one, subject to the rules which
on the part of these employees toward a passenger gives the latter an action petitioner's agents have to abide by. Thus, with respect to the annotation on
for damages against the carrier. The award of moral and exemplary damages respondent's ticket of the US$50.00 rebooking charge, petitioner explained
to respondent is thus justified. that the same was subject to the "rules of applicability", which rules could not
be reflected on the ticket.
Facts of the case
RTC ruled in favor of Catapang and awarded actual (including filing
Respondent Delfin Catapang is a lawyer and at the time of the case, fees), moral, exemplary damages, attorney’s fees, and cost of suit. CA
Assistant Vice President and Head of the Special Projects Department, affirmed except it reduced the moral damages, totalling now to P700,000.
Corporate Services Division of the United Coconut Planters Bank (UCPB). He
was directed by UCPB to go to Paris for a business trip. He intended to go to Issue/s
US to visit his siblings after Paris. So, he requested First United Travel, Inc.
(FUT) to issue him a ticket that would allow rebooking or rerouting of flights Whether the award for damages is correct? YES, except for filing fees and
within the United States. attorney’s fees.

FUT informed him, via telephone, that Northwest Airlines, Inc. Ratio/Legal Basis
(petitioner) was willing to accommodate his request provided he would pay
an additional US$50 for every rebooking or rerouting of flight. He agreed and Northwest assails that moral damages should not be awarded as there is
was given a ticket covering the New York to Los Angeles via Detroit and the no breach of contract and exemplary damages as it did not commit wanton
Los Angeles to Manila segments of his travel. The rebooking/rerouting or malevolent conduct. Further, attorney’s fees cannot be recovered under
scheme was annotated on the restriction portion of the ticket: Art. 2208 of the Civil Code, there is no pecuniary loss so actual damages
could not be recovered, the reimbursement of filing fees has no basis and I. Disposition
P700,000 in damages is excessive.
WHEREFORE, the Court of Appeals Decision of June 30, 2006 is
The Court disagrees. When respondent inquired from petitioner's AFFIRMED with MODIFICATION in that the award of attorney's fees is deleted
agent FUT if he would be allowed to rebook/reroute his flight, FUT for lack of basis. And the award of actual damages of P7,372.50 representing
advised him that he could, on the condition that he would pay $50 for filing fees is deleted.
every rebooking. He was not told by FUT and the ticket did not reflect it
that the ticket being issued to him was a "restricted type" to call for its II. Notes
upgrading before a rebooking/rerouting. But Northwest’s reservation
supervisor, Amelia Merris, admitted that the only restriction on the ticket At about 9:30 in the morning of March 11, 1992, I went to the sales
refers to non-endorsement. (It means ticket cannot be transferred to another office in the World Trade Center where I explained to your black woman
airline) representative my predicament. Your representative rudely told me that my
ticket is the restrictive type and that my flight can not be rebooked or
Petitioner's breach in this case was aggravated by the undenied rerouted. I explained that the only restriction on my ticket is that I should pay
treatment received by respondent when he tried to rebook his ticket. Instead US$50.00 if I have to rebook or reroute my flight and asked your
of civilly informing respondent that his ticket could not be rebooked, representative to read the restriction. Your representative rudely and
petitioner's agent in New York exhibited rudeness in the presence of impolitely retorted that I could not understand English and that unless I pay
respondent's brother-in-law and other customers, insulting respondent by the amount of US$644.00, I cannot get a rebooking and rerouting. Despite
telling him that he could not understand English. my appeal and protestation, she did not reconsider her decision. As I was
badly needed in Detroit on the evening of the same day and had to be back
Passengers have the right to be treated by a carrier's employees in Manila on the 14th of March, I was compelled to pay, under protest, the
with kindness, respect, courtesy and due consideration. They are entitled amount of US$644.00 using my American Express Card as my cash was
to be protected against personal misconduct, injurious language, insufficient to cover the amount. It was only then that I was issued ticket no.
indignities and abuses from such employees. So it is that any discourteous 012:4488:504:099.
conduct on the part of these employees toward a passenger gives the latter
an action for damages against the carrier. The award of moral and exemplary Considering that my ticket was cleared with you prior to its issuance
damages to respondent is thus justified. and that FUT is your duly accredited agent, you are bound by the terms of
the ticket issued by FUT in your behalf. You have no right to unilaterally
But the inclusion of filing fees as part of the actual damages is change the tenor of your contract during its effectivity without my consent.
superfluous, if not erroneous, as it is already chargeable in the “cost of suit”
as per Secs. 8 and 10 of the Rules of Court. As for the award of attorney's Your airline’s willful breach of the terms and conditions of my ticket
fees, the trial court did not state the factual and legal basis thereof. The and the shabby treatment that I received from your personnel hurt my
transcript of stenographic notes of the lower court's proceedings do not feeling, humiliated and embarrassed me in the presence of my brother-in-law
show that respondent adduced proof to sustain his general averment of a and other people nearby who witnessed the incident. The fact that your
retainer agreement in the amount of P200,000.00. The award must thus be employee did that to a bank officer and a lawyer like me only shows that your
deleted. airline can also do the same to others, not to mention the poor and hapless
persons.
 Because I could not bear my wounded feeling, the shabby treatment, Whether the authority granted by LTFB to provincial buses to set a fare range
the humiliation and the embarrassment that I received from your employee, I above existing authorized fare range is unconstitutional and invalid.
asked for the cancellation and refund of my ticket covering my trip from Los The grant of power by LTFRB of its delegated authority is
Angeles to the Philippines for which I was given a refund application slip no. unconstitutional.
012 0230189256 3 by your ticket counter at the Los Angeles airport on March
12, 1992. The doctrine of Potestas delegate non delegari (what has been delegated
cannot be delegated) is applicable because a delegated power constitutes
To compensate me for the expenses that I incurred, and the not only a right but a duty to be performed by the delegate thru
wounded feeling, humiliation and embarrassment that were caused by your instrumentality of his own judgment. To delegate this power is a negation of
airline’s willful breach of contract with me, I demand that you pay me the duty in violation of the trust reposed in the delegate mandated to
damages in the amount of ₱1,000,000.00 within a period of five (5) days from discharge such duty. Also, to give provincial buses the power to charge their
your receipt hereof. Otherwise, I shall have no alternative but to seek redress fare rates will result to a chaotic state of affairs and this would leave the
from our court of justice and to hold you liable for all other expenses riding public at the mercy of transport operators who can increase their rates
attendant thereto. arbitrarily whenever it pleases or when they deem it necessary.
Main takeaway from the case: A memorandum issued by the DOTC and
KMU v Garcia LTFRB allowing provincial bus operators, except those operating in Metro
Manila, to charge passengers rates within a range of 15% above and 15%
below the LTFRB official rate or a period of 1 year is unconstitutional, invalid
Recit-ready summary
and illegal as it is tantamount to an undue delegation of legislative authority.
In 1990, DOTC Sec. Oscar Orbos issued Memo Circular to LTFRB Chair
Remedios Fernando to allow provincial bus to change passenger rates
Facts of the case
w/in a fare range of 15% above or below the LTFRB official rate for a
On June 26, 1990 Secretary of DOTC issued Memorandum Circular No. 90-
1yr. period. This is in line with the liberalization of regulation in the
395 to LTFRB Chairman allowing provincial bus operators to charge
transport sector which the government intends to implement and to
passengers rates within a range of 15% above and 15% below the LTFRB
make progress towards greater reliance on free market forces.
official rate for a period of one (1) year.
Fernando respectfully called attention of DOTC Sec. that the Public Service
Fernando respectfully called attention of DOTC Sec. that the Public Service
Act requires publication and notice to concerned parties and public
Act requires publication and notice to concerned parties and public hearing.
hearing. In Dec. 1990, Provincial Bus Operators Assoc. of the Phils.
In Dec. 1990, Provincial Bus Operators Assoc. of the Phils. (PBOAP) filed an
(PBOAP) filed an application for across the board fare rate increase,
application for across the board fare rate increase, which was granted by
which was granted by LTFRB. In 1992, then DOTC Sec. Garcia issued a memo
LTFRB. Private respondent PBOAP, availing itself of the deregulation policy of
to LTFRB suggesting a swift action on adoption of procedures to implement
the DOTC allowing provincial bus operators to collect plus 20% and minus
the Department Order & to lay down deregulation policies. Pursuant to
25% of the prescribed fare without first having filed a petition for the
LTFRB Guideline, PBOAP, w/o benefit of public hearing announced a
purpose and without the benefit of a public hearing, announced a fare
20% fare rate increase.
increase of twenty (20%) percent of the existing fares. Said increased fares
Petitioner Kilusang Mayo Uno (KMU) opposed the move and filed a petition
were to be made effective on March 16, 1994.
before LTFRB w/c was denied. Hence the instant petition for certiorari w/
urgent prayer for a TRO, w/c was readily granted by the Supreme Court.
On March 16, 1994, petitioner KMU filed a petition before the LTFRB trust reposed in the delegate mandated to discharge it directly. The policy of
opposing the upward adjustment of bus fares. allowing the provincial bus operators to change and increase their fares
LTFRB issued one of the assailed orders dismissing the petition for lack of at will would result not only to a chaotic situation but to an anarchic
merit. state of affairs. This would leave the riding public at the mercy of
transport operators who may increase fares every hour, every day, every
Issue/s month or every year, whenever it pleases them or whenever they deem
Whether or not administrative issuances and orders of the LTFRB and DOT it “necessary” to do so.
giving public utilities the power to determine rate fare is valid and Moreover, rate making, or rate fixing is not an easy task. It is a delicate and
constitutional—NO. sensitive government function that requires dexterity of judgment and sound
discretion with the settled goal of arriving at a just and reasonable rate
Ratio/Legal Basis acceptable to both the public utility and the public. Several factors, in fact,
The Legislature delegated to the defunct Public Service Commission the have to be taken into consideration before a balance could be achieved. A
power of fixing the rates of public services. Respondent LTFRB, the existing rate should not be confiscatory as would place an operator in a situation
regulatory body today, is likewise vested with the same under Executive where he will continue to operate at a loss. Hence, the rate should enable
Order No. 202 dated June 19, 1987. Section 5(c) of the said executive public utilities to generate revenues sufficient to cover operational costs and
order authorizes LTFRB “to determine, prescribe, approve and periodically provide reasonable return on the investments. On the other hand, a rate
review and adjust, reasonable fares, rates and other related charges, relative which is too high becomes discriminatory. It is contrary to public
to the operation of public land transportation services provided by motorized interest. A rate, therefore, must be reasonable and fair and must be
vehicles.” affordable to the end user who will utilize the services.
Such delegation of legislative power to an administrative agency is permitted Given the complexity of the nature of the function of rate-fixing and its far-
in order to adapt to the increasing complexity of modern life. With this reaching effects on millions of commuters, government must not relinquish
authority, an administrative body and in this case, the LTFRB, may this important function in favor of those who would benefit and profit from
implement broad policies laid down in a statute by “filling in” the details the industry. Neither should the requisite notice and hearing be done away
which the Legislature may neither have time or competence to provide. with. The people, represented by reputable oppositors, deserve to be given
However, nowhere under the aforesaid provisions of law are the full opportunity to be heard in their opposition to any fare increase.
regulatory bodies, the PSC and LTFRB alike, authorized to delegate that
power to a common carrier, a transport operator, or other public Disposition
service. Petition is hereby GRANTED and the challenged administrative issuances and
In the case at bench, the authority given by the LTFRB to the provincial orders, namely: DOTC Department Order No. 92-587, LTFRB Memorandum
bus operators to set a fare range over and above the authorized existing Circular
fare, is illegal and invalid as it is tantamount to an undue delegation of No. 92-009, and the order dated March 24, 1994 issued by respondent LTFRB
legislative authority. Potestas delegata non delegari potest. What has been are hereby DECLARED contrary to law and invalid insofar as they affect
delegated cannot be delegated. This doctrine is based on the ethical principle provisions therein (a) delegating to provincial bus and jeepney operators
that such a delegated power constitutes not only a right but a duty to be the authority to increase or decrease the duly prescribed transportation
performed by the delegate through the instrumentality of his own judgment fares; and (b) creating a presumption of public need for a service in favor
and not through the intervening mind of another. A further delegation of of the applicant for a certificate of public convenience and placing the
such power would indeed constitute a negation of the duty in violation of the
burden of proving that there is no need for the proposed service to the 1. 1987 Constitution: "Each local government unit shall have the power to
oppositor. create its own sources of revenues and to levy taxes, fees, and charges
subject to such guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy. Such taxes, fees, and
charges shall accrue exclusively to the local governments."
LTO v City of Butuan 2. Local Government Code:
SEC. 129. Power to Create Sources of Revenue. - Each local government unit
SUMMARY: Pursuant to the LGC, the City of Butuan enacted an Ordinance shall exercise its power to create its own sources of revenue and to levy taxes,
which provides for the payment of franchise fees for the grant of the fees, and charges subject to the provisions herein, consistent with the basic
franchise of tricycle-for-hire, fees for the registration of the vehicle, and fees policy of local autonomy. Such taxes, fees, and charges shall accrue
for the issuance of a permit for the driving thereof. Since these functions exclusively to the local government units.
belong to the LTO, LTO contested the Ordinance. LTO conceded that the SEC. 133. Common Limitations on the Taxing Powers of Local Government
franchising authority over tricycles-form-hire of the LTFRB had been Units. - Unless otherwise provided herein, the exercise of the taxing powers
transferred to the LGUs, however, that is not the case with the authority of of provinces, cities, municipalities, and barangays shall not extend to the levy
LTO to register all motor vehicles and to issue to qualified persons licenses of of
such vehicles. The City Mayor filed a petition praying for the declaration of the following:
the validity of Ordinance and to enjoin the LTO from performing the said xxx.......xxx.......xxx
functions. The RTC ruled in favor of the City of Butuan holding that the (I) Taxes, fees or charges for the registration of motor vehicles and for the
authority to register tricycles, the grant of the corresponding franchise, the issuance of all kinds of licenses or permits for the driving thereof, except
issuance of tricycle drivers’ license, and the collection of fees therefor had all tricycles."
been vested in the LGUs. On appeal, the CA sustained the trial court.
3. Pursuant to the above provisions, the Sangguniang Panglungsod of Butuan
Issue is whether the power of the LTO to register, tricycles in particular, as well passed an Ordinance entitled “An Ordinance Regulating the Operation of
as to issue licenses for the driving thereof, has devolved to local government Tricycles-for-Hire, providing mechanism for the issuance of Franchise,
units. Registration and Permit, and Imposing Penalties for Violations thereof and for
NO because the LGC clearly provides that what has been granted to the LGUs other Purposes. The ordinance provided for, among others, the payment of
is the authority to regulate the operation of tricycles and the grant of franchise fees for the grant of the franchise of tricycles-for-hire, fees for the
franchises. registration of the vehicle, and fees for the issuance of a permit for the
driving thereof.
The Court ruled that under the LGC, certain functions of the DOTC were
transferred to the LGUs. According to Sec. 458, LGUs have the authority to 4. LTO contested this Ordinance. LTO concedes that the franchising
regulate the operation of tricycles and grant franchises for the operation authority over tricycles-for-hire of the Land Transportation Franchising and
thereof within the territorial jurisdiction of the city, subject to the Regulatory Board (LTFRB) had been transferred from the national
guidelines prescribed by the DOTC. The devolution of the functions of the government to the local government units. However, the same is not true
DOTC, performed by the LTFRB, to the LGU is aimed at curbing the alarming with regard to the authority of the LTO to register all motor vehicles and
increase of accidents in national highways involving tricycles. It has been the to issue to qualified persons of licenses of such vehicles.
perception that local governments are in good position to achieve the end
desired by the law-making body because of their proximity to the situation. 5. The City Mayor filed a petition seeking the declaration of the validity of the
ordinance and the prohibition of the registration of tricycles-for-hire and the
FACTS: issuance of licenses for the driving thereof by the LTO.
 3. Under the LGC, certain functions of the DOTC were transferred to the LGUs.
6. The RTC of Butuan City held that the authority to register tricycles, the According to Sec. 458, LGUs have the authority to regulate the operation
grant of the corresponding franchise, the issuance of tricycle drivers’ license, of tricycles and grant franchises for the operation thereof within the
and the collection of fees therefor had all been vested in the LGUs. The lower territorial jurisdiction of the city, subject to the guidelines prescribed by
court issued a permanent writ of injunction prohibiting and enjoining LTO the DOTC.
from registering tricycles and issuing licenses to drivers of tricycles.
4. “To regulate” means to fix, establish, or control; to adjust by rule, method,
7. On appeal, the CA sustained the rulings of the lower court. Hence, the or established mode; to direct by rule or restriction; or to subject to
instant petition. Hence, LTO filed the instant petition to annul and set aside governing principles or laws. A franchise is defined to be a special privilege to
the decision of the CA. do certain things conferred by government on an individual or corporation,
and which does not belong to citizens generally of common right. On the
8. City of Butuan’s arguments: other hand, "to register" means to record formally and exactly, to enroll, or to
a. One of the salient provisions introduced by the Local Government Code enter precisely in a list or the like, and a "driver's license" is the certificate or
(LGC) is in the area of local taxation which allows LGUs to collect registration license issued by the government which authorizes a person to operate a
fees or charges along with, in its view, the corresponding issuance of all kinds motor vehicle.
of licenses or permits for the driving of tricycles.
5. The devolution of the functions of the DOTC, performed by the LTFRB,
ISSUE: to the LGU is aimed at curbing the alarming increase of accidents in
national highways involving tricycles. It has been the perception that
Whether the power of the LTO to register, tricycles in particular, as well as to local governments are in good position to achieve the end desired by
issue licenses for the driving thereof, has devolved to local government units. the law-making body because of their proximity to the situation that can
NO because the LGC clearly provides that what has been granted to the enable them to address that serious concern better than the national
LGUs is the authority to regulate the operation of tricycles and the grant government.
of franchises.
6. As can be gleaned from the explicit language of the statute, the newly
RULING: The assailed decision which enjoins the LTO from requiring the due delegated powers pertain to the franchising and regulatory powers
registration of tricycles and a license for the driving thereof is REVERSED and exercised by the LTFRB and not to the functions of the LTO relative to
SET ASIDE. the registration of motor vehicles and issuance of licenses for the
driving thereof.
RATIO:
1. While the Constitution seeks to strengthen local units and ensure their 7. Moreover, if the functions of the LTO were to devolve to local
viability, clearly, however, it has never been the intention of that organic law governments, there will be unnecessary consequences and ineffectiveness.
to create an imperium in imperio and install an intra sovereign political For instance, if the tricycle registration function of LTO is decentralized, the
subdivision independent of a single sovereign state. incidence of theft of tricycles will most certainly go up, and stolen tricycles
registered in one local government could be registered in another with ease.
2. Both the LTO and LTFRB are gover”nment agencies under the Department Also, fake driver’s license will proliferate. This will likely unfold when a tricycle
of Transportation and Communication (DOTC). Registration and licensing driver, not qualified by LTO’s testing, could secure a license from one
functions are vested in the LTO while franchising and regulatory municipality, and when the same is confiscated, could just go to another
responsibilities had been vested in the LTFRB. municipality to secure another license.
8. The reliance made by respondents on the broad taxing power of local 4 wheel vehicles greater than 4 tons and where normal speed exceed 40 KPH.
government units, specifically under Section 133 of the Local Government However, the SB/SP may provide exceptions if there is no alternative routs.
Code, is tangential. Police power and taxation, along with eminent domain, 2. Zones must be within the boundaries of the municipality/city. However,
are inherent powers of sovereignty which the State might share with local existing zones within more than one municipality/city shall be maintained,
government units by delegation given under a constitutional or a statutory provided that operators serving said zone shall secure MTOP's from each of
fiat. All these inherent powers are for a public purpose and legislative in the
nature but the similarities just about end there municipalities/cities having jurisdiction over the areas covered by the zone.
3. A common color for tricycles-for-hire operating in the same zone may be
9. Although correlative to each other in many respects, the grant of one imposed. Each unit shall be assigned and bear an identification number, aside
power does not necessarily carry with it the grant of the other. The two from its LTO license plate number.
powers are, by tradition and jurisprudence, separate and distinct powers, 4. An operator wishing to stop service completely, or to suspend service for
varying in their respective concepts, character, scopes and limitations. To more
construe the tax provisions of Section 133(1) indistinctively would result in than one month, should report in writing such termination or suspension to
the repeal to that extent of LTO's regulatory power which evidently has not the
been intended. SB/SP which originally granted the MTOP prior thereto. Transfer to another
zone may be permitted upon application.
10. The power over tricycles granted under Section 458(a)(3)(VI) of the Local 5. The MTOP shall be valid for three (3) years, renewable for the same period.
Government Code to LGUs is the power to regulate their operation and to Transfer to another zone, change of ownership of unit or transfer of MTOP
grant franchises for the operation thereof is still subject to the guidelines shall be construed as an amendment to an MTOP and shall require
prescribed by the DOTC. appropriate
approval of the SB/SP.
11. The exclusionary clause contained in the tax provisions of Section 133(1) 6. Operators shall employ only drivers duly licensed by LTO for tricycles-
of the Local Government Code must not be held to have had the effect of forhire.
withdrawing the express power of LTO to cause the registration of all motor 7. No tricycle-for-hire shall be allowed to carry more passengers and/or
vehicles and the issuance of licenses for the driving thereof. These functions goods
of the LTO are essentially regulatory in nature, exercised pursuant to the than it is designed for.
police power of the State, whose basic objectives are to achieve road safety. 8. A tricycle-for-hire shall be allowed to operate like a taxi service, i.e., service
is
12. In compliance therewith, the DOTC issued "Guidelines to Implement the rendered upon demand and without a fixed route within a zone."
Devolution of LTFRBs Franchising Authority over Tricycles-For-Hire to Local
Government units pursuant to the Local Government Code." Pertinent 13. The newly delegated powers pertain to the franchising and
provisions of the guidelines state: regulatory powers theretofore exercised by the LTFRB and not to the
In lieu of the LTFRB in the DOTC, the Sangguniang Bayan/Sangguniang functions of the LTO relative to the registration of motor vehicles and
Panglungsod (SB/SP) shall perform the following: issuance of licenses for the driving thereof. Clearly unaffected by the Local
(a) Issue, amend, revise, renew, suspend, or cancel MTOP and prescribe the Government Code are the powers of LTO under R.A. No.4136 requiring the
appropriate terms and conditions therefor; registration of all kinds of motor vehicles "used or operated on or upon any
xxx public highway" in the country.
Operating Conditions: SEC. 5. All motor vehicles and other vehicles must be registered. - (a) No
1. For safety reasons, no tricycles should operate on national highways motor vehicle shall be used or operated on or upon any public highway of
utilized by the Philippines unless the same is properly registered for the current year in
accordance with the provisions of this Act (Article 1, Chapter II, R.A. No. transportation service, and to encourage and develop commercial air
4136). transportation, RESOLVED, to grant, as the Board hereby grants, the said
Filipinas Orient Airways, Inc., provisional authority to operate scheduled
14. The Commissioner of Land Transportation and his deputies are and non-scheduled domestic air services with the use of DC- 3 aircraft,
empowered at anytime to examine and inspect such motor vehicles to subject to the following conditions:
determine whether said vehicles are registered, or are unsightly, unsafe,
improperly marked or equipped, or otherwise unfit to be operated on
The term of the provisional authority herein granted shall be until such time
because of possible excessive damage to highways, bridges and other
as the main application for a certificate of public convenience and
infrastructures. The LTO is additionally charged with being the central
repository and custodian of all records of all motor vehicles necessity is finally decided or for such period as the Board may at any
time determine;
21. These functions of the LTO are essentially regulatory in nature, exercised
A reconsideration of this resolution having been denied, PAL filed the present
pursuant to the police power of the state, whose basic objectives are to
civil action alleging that, in issuing said resolution, CAB had acted illegally
achieve road safety by insuring the road worthiness of these motor vehicles
and in excess of its jurisdiction or with grave abuse of discretion, because:
and the competence of drivers prescribed by RA 4136. Not insignificant is the
rule that a statute must not be construed in isolation but must be taken in
harmony with the extent body of laws. (1) CAB is not empowered to grant any provisional authority to operate,
prior to the submission for decision of the main application for a
22. The Court cannot end this decision without expressing its own serious certi􏰁cate of public convenience and necessity;
concern over the seeming laxity in the grant of franchises for the operation of
tricycles-for-hire and in allowing the indiscriminate use by such vehicles on (2) CAB had no evidence before it that could have justified the granting
public highways and principal thoroughfares. of the provisional authority complained of;

23. Sen. Aquilino Pimentel: Tricycles are a popular means of transportation, (3) PAL was denied due process when CAB granted said authority before the
specially in the countryside. They are, unfortunately, being allowed to drive presentation of its evidence on Fairways' main application; and
along highways and principal thoroughfares where they pose hazards to their
passengers arising from potential collisions with buses, cars and jeepneys.
(4) In granting said provisional authority, the CAB had prejudged the merits
The operation of tricycles within a municipality may be regulated by the
of said application.
Sangguniang Bayan. In this connection, the Sangguniang concerned would
do well to consider prohibiting the operation of tricycles along or across
highways invite collisions with faster and bigger vehicles and impede the flow Whether or not in issuing said resolution, CAB has acted illegally and in excess of
of traffic. its jurisdictions or with grave abuse of discretion? NO

The law explicitly authorizes CAB to issue a "temporary operating

PAL v Civil Aeronautics Board
permit," and nothing contained, either in said section, or in Chapter IV of
Republic Act No. 776, negates the power to issue said "permit", before
Recit Ready
the completion of the applicant's evidence and that of the oppositor
"Filipinas Orient Airways, Inc., (FAIRWAYS) having presented to the Board
thereto on the main petition. Indeed, the CAB's authority to grant a
evidence showing prima facie its fitness, willingness and ability to
temporary permit "upon its own initiative," strongly suggests the power
operate the services applied for and the public need for more air
to exercise said authority, even before the presentation of said evidence (1) CAB is not empowered to grant any provisional authority to operate, prior
has begun. to the submission for decision of the main application for a certi􏰁cate of
public convenience and necessity;
Facts of the case (2) CAB had no evidence before it that could have justified the granting of
the provisional authority complained of;
Pursuant to Republic Act No. 4147, granting thereto "a franchise to (3) PAL was denied due process when CAB granted said authority before the
establish, operate and maintain transport services for the carriage of presentation of its evidence on Fairways' main application; and
passengers, mail, industrial flights and cargo by air in and between any (4) In granting said provisional authority, the CAB had prejudged the merits
and all points and places throughout the Philippines and other of said application.
countries", on September 16, 1964, Fairways filed with CAB the Issue/s
corresponding application for a "certificate of public convenience and
necessity", which was docketed as economic proceedings (EP) No. 625, and Whether or not in issuing said resolution, CAB has acted illegally and in excess of
was objected to by herein petitioner, Philippine Air Lines, Inc., hereinafter its jurisdictions or with grave abuse of discretion? NO
referred to as PAL. Subsequently, a CAB hearing officer began to receive
evidence on said application. After several hearings before said officer, or on Legal Basis
December 14, 1964, Fairways filed an "urgent petition for provisional The first ground is devoid of merit. Section 10-C(1) of Republic Act No. 776,
authority to operate" under a detailed "program of implementation" reading:
attached to said petition, and for the approval of its bond therefor, as well "(C) The Board shall have the following specific powers and duties:
as the provisional approval of its "tariff regulations and the conditions of (1) In accordance with the provisions of Chapter IV of this Act, to issue, deny,
carriage to be printed at the back of the passenger tickets." Despite PAL's amend, revise, alter, modify, cancel, suspend or revoke, in whole or in
opposition thereto, in a resolution issued on January 5, 1965, CAB granted part, upon petitioner complaint, or upon its own initiative, any
said urgent petition of Fairways. The pertinent part of said resolution temporary operating permit or Certi􏰁cate of Public Convenience and
provides: Necessity; Provided, however, That in the case of foreign air carriers, the
"Filipinas Orient Airways, Inc., (FAIRWAYS) having presented to the Board permit shall be issued with the approval of the President of the Republic of
evidence showing prima facie its fitness, willingness and ability to operate the the Philippines . . ."
services applied for and the public need for more air transportation service, explicitly authorizes CAB to issue a "temporary operating permit," and
and to encourage and develop commercial air transportation, RESOLVED, to nothing contained, either in said section, or in Chapter IV of Republic Act No.
grant, as the Board hereby grants, the said Filipinas Orient Airways, Inc., 776, negates the power to issue said "permit", before the completion of the
provisional authority to operate scheduled and non-scheduled domestic air applicant's evidence and that of the oppositor thereto on the main petition.
services with the use of DC- 3 aircraft, subject to the following conditions: Indeed, the CAB's authority to grant a temporary permit "upon its own
1. The term of the provisional authority herein granted shall be until initiative," strongly suggests the power to exercise said authority, even before
such time as the main application for a certificate of public the presentation of said evidence has begun.
convenience and necessity is finally decided or for such period as the Moreover, we perceive no cogent reason to depart, in connection with
Board may at any time determine; the commercial air transport service, from the policy of our public
A reconsideration of this resolution having been denied, PAL filed the present service law, which sanctions the issuance of temporary or provisional
civil action alleging that, in issuing said resolution, CAB had acted illegally permits or certificates of public convenience and necessity, before the
and in excess of its jurisdiction or with grave abuse of discretion, because: submission of a case for decision on the merits. The overriding
considerations in both instances are the same, namely, that the service be Republic v Express Telecom
required by public convenience and necessity, and, that the applicant is
FIt, as well as willing and able to render such service properly, in
Recit-ready summary
conformity with law and the pertinent rules, regulations and
requirements.
International Communications Corp. (now Bayantel) filed an application
As regards PAL's second contention, we have no more than PAL's assertion
with the National Telecommunications Commission (NTC) for a
and conclusion regarding the absence of substantial evidence in support of
Certificate of Public Convenience or Necessity (CPCN) to install, operate
the finding, in the order complained of, to the effect that Fairways' evidence
and maintain a digital Cellular Mobile Telephone System/Service (CMTS)
had established " prima facie" its fitness, willingness and ability to operate the
with prayer for a Provisional Authority (PA).
services applied for and the public need for more transportation service . . ."
Apart from PAL's assertion being contradicted by the tenor of said order,
NTC issued an Order archiving the case until the requisite frequency
there is the legal presumption that official duty has been duly performed.
becomes available. NTC then re-allocated extra frequencies.
Such presumption is particularly strong as regards administrative agencies,
Subsequently, Bayantel filed an Ex-Parte Motion to Revive Case which was
like the CAB, vested with powers said to be quasi-judicial in nature, in
granted along with a provisional authority. Extelcomm opposed this revival,
connection with the enforcement of laws affecting particular fields of activity,
arguing that no public need for the service applied for by Bayantel as
the proper regulation and/or promotion of which requires a technical or
special training, aside from a good knowledge and grasp of the overall the present five CMTS operators, that there were no available
conditions, relevant to said 􏰁eld, obtaining in the nation. The consequent frequencies that could accommodate a BayanTel as the frequency bands
policy and practice underlying our Administrative Law is that courts of justice allocated were intended for and had in fact been applied for by the
should respect the findings of fact of said administrative agencies, unless existing CMTS operators.
there is absolutely no evidence in support thereof or such evidence is clearly,
manifestly and patently insubstantial. This, in turn, is but a recognition of WON the NTC erred in granting Bayantel’s provisional authority?
the necessity of permitting the executive department to adjust law No because NTC has the sole discretion whether to grant it or not.
enforcement to changing conditions, without being unduly hampered
by the rigidity and the delays often attending ordinary court The NTC has the sole authority to issue Certificates of CPCNs for the
proceedings or the enactment of new or amendatory legislations. In the
installation, operation, and maintenance of communications facilities
case at bar, petitioner has not satisfactorily shown that the aforementioned
and services, radio communications systems, telephone and telegraph
findings of the CAB are lacking in the necessary evidentiary support.
systems. This includes the authority to determine the areas of operations
Lastly, the provisional nature of the permit granted to Fairways refutes the
of applicants for telecommunications services.
assertion that it prejudges the merits of Fairways' application and PAL's
Section 16 of the Public Service Act authorizes the then PSC, upon notice and
opposition thereto. As stated in the questioned order, CAB's findings therein
hearing, to issue Certificates of Public Convenience for the operation of
made re􏰃ect its view merely on the prima facie effect of the evidence so far
public services within the Philippines "whenever the Commission finds
introduced and do not connote a pronouncement or an advanced expression
that the operation of the public service proposed and the authorization
of opinion on the merits of the case.
to do business will promote the public interests in a proper and suitable
|||Dispositive Portion
manner."
WHEREFORE, the petition herein should be, as it is hereby dismissed, and the
writ prayed for denied, with costs against petitioner, Philippine Air Lines, Inc.
Furthermore, Extelcom does not enjoy the grant of any vested interest
It is so ordered.
on the right to render a public service. Art. XII, Sec. 11 of the Constitution
provides: No franchise, certificate, or any other form of authorization for the that this case may not remain pending for an indefinite period of
operation of a public utility shall be granted to citizens of the Philippines or time, let this case be ordered archived without prejudice to its
to corporations organized under the laws of the Philippines at least sixty per reinstatement when the requisite frequency becomes available.
centum of whose capital is owned by such citizens, nor shall such franchise,
certificate or authorization be exclusive in character or for a longer period NTC issued Memorandum Circular No. 5-6-98 re-allocating five (5)
than fifty years. Neither shall any such franchise or right be granted except megahertz (MHz) of the radio frequency spectrum for the expansion of CMTS
under the condition that it shall be subject to amendment, alteration, or networks.
repeal by the Congress when the common good so requires. On March 23, 1999, Memorandum Circular No. 3-3-99 was issued by the NTC
re-allocating an additional five (5) MHz frequencies for CMTS service.
Among the declared national policies under Republic Act No. 7925, otherwise On May 17, 1999, Bayantel filed an Ex-Parte Motion to Revive Case, citing the
known as the Public Telecommunications Policy Act of the Philippines, is the availability of new frequency bands for CMTS operators. NTC granted
healthy competition among telecommunications carriers. The NTC has BayanTel's motion to revive the latter's application and set the case for
sufficient discretion to act on matters solely within its competence. The need hearings on February 9, 10, 15, 17 and 22, 2000. Express Telecommunication
for a healthy competitive environment in telecommunications is sufficient for Co., Inc. (Extelcom) filed a case in the NTC praying for the dismissal of
the NTC to consider all those applicants who are willing to offer competition, Bayantel's application.
develop the market and provide the environment necessary for greater public Extelcom argued that:
service. 1. Bayantel's motion sought the revival of an archived application filed
almost eight years ago. The documentary evidence and the allegations
of respondent Bayantel in this application are all outdated and should no
Facts of the case
longer be used as basis of the necessity for the proposed CMTS service.
On December 29, 2992, International Communications Corporation (now
2. There was no public need for the service applied for by Bayantel as the
Bayantel) filed an application with the National Telecommunications
present five CMTS operators —Extelcom, Globe Telecom, Inc., Smart
Commission (NTC) for a Certificate of Public Convenience or Necessity Communication, Inc., Pilipino Telephone Corporation, and Isla
(CPCN) to install, operate and maintain a digital Cellular Mobile Telephone Communication Corporation, Inc. — adequately addressed the market
System/Service (CMTS) with prayer for a Provisional Authority (PA). demand, and all are in the process of enhancing and expanding their
On January 22, 1993, the NTC issued Memorandum Circular No. 4-1-93 networks based on technological developments.
directing all applicants for a CMTS to file their applications before the NTC, 3. There were no available frequencies that could accommodate a BayanTel
and deferring the acceptance of any application thereafter until further as the frequency bands allocated were intended for and had in fact been
orders. Prior to the notice of hearing by the NTC with respect to Bayantel's applied for by the existing CMTS operators.
original application, Bayantel filed an amended application. 4. Bayantel is its substantial stockholder to the extent of about 46% of its
On May 17, 1993, the notice of hearing issued by the NTC was published in outstanding capital stock, and Bayantel's application undermines the very
the Manila Chronicle. Copies of the application and as the notice of hearing operations of Extelcom.
were mailed to all affected parties. Hearings were conducted on the
On March 13, 2000, Bayantel filed a Consolidated Reply/Comment, stating
amended application. Before Bayantel could complete the presentation of its
that the opposition sought a reconsideration of the NTC Order reviving the
evidence, the NTC issued an Order dated December 19, 1993 stating:
instant application, and cannot dwell on the material allegations or the merits
● In view of the recent grant of two Provisional Authorities in favor of
ISLACOM and GMCR, Inc., which resulted in the closing of all of the case. Also, Extelcom cannot claim that frequencies were not available
available frequencies for the service being applied for , and in order inasmuch as the allocation and assignment thereof rest solely on the
discretion of the NTC.
In the meantime, the NTC issued Memorandum Circular No. 9-3-2000, on the number of subscribers Extelcom has, there seems to be no
reallocating the following radio frequency bands for assignment to existing congestion in its network - a condition that is necessary for an
CMTS operators and to telecommunication entities which shall be authorized applicant to be assigned additional frequencies. Globe has yet to
to install, operate and maintain CMTS networks. prove that there is congestion in its network considering its merger
On May 3, 2000, the NTC issued an Order granting in favor of Bayantel a with Islacom.
c) 48% of the total number of cities and municipalities are still without
provisional authority to operate CMTS service which stated:
telephone service despite the more than 3 million installed lines
a) BayanTel was formerly named International Communications Corp.
waiting to be subscribed.
Bayantel and ICC Telecoms, Inc. are the same entity, and it follows
that what legal capacity ICC Telecoms has acquired is also the legal
NTC’s Conclusions:
capacity that Bayantel possesses.
b) On the allegation that the Commission has committed an error in d) To ensure effective competition in the CMTS market, new CMTS
allowing the revival of the instant application, it appears that the operators must be allowed to provide the service.
Order archiving the same was based on the non-availability of e) The re-allocated frequencies for CMTS is sufficient for the number of
frequencies for CMTS. It was expressly stated that the archival was applicants.
without prejudice to its reinstatement "if and when the requisite f) There is a need to provide service to some or all of the remaining
frequency becomes available." It is the prerogative of the cities and municipalities without telephone service.
Commission to revive the same, subject to prevailing conditions. The g) The submitted documents are sufficient to determine compliance to
previous Order, cited the availability of frequencies for CMTS, and the technical requirements. BayanTel appears to be technically
based thereon, the Commission, revived the application. The fact that qualified to undertake the project and offer the service.
the motion for revival hereof was made ex-parte by the applicant is
immaterial, so long as the oppositors are given the opportunity to be Extelcom filed with the CA a petition for certiorari and prohibition, seeking
later heard and present the merits of their respective oppositions. the annulment of the revival of the application of Bayantel, and granting
c) On the allegation that the instant application is already obsolete and Bayantel a provisional authority maintain a nationwide CMTS, and the order
overtaken by developments, the issue is whether applicant has the allocating frequency bands to new telecommunication entities which are
legal, financial and technical capacity to undertake the project. The authorized to maintain CMTS. The CA granted this so BayanTel and NTC, via
determination of such capacity lies solely within the discretion of the OSG, filed an MR.
Commission. The oppositors are not precluded from showing Issue/s
evidence disputing their capacity. On the non-availability of
frequencies for the proposed service, the Commission takes note that
WON NTC erred in giving BayanTel a provisional authority?
it has issued Memorandum.
No because NTC has the sole discretion whether to grant it or not.

The NTC also made the following comments:

Ratio/Legal Basis
a) Due to the mergers between Smart and Piltel and between Globe
and Islacom, free and effective competition in the CMTS market is
Nature and Functions of the NTC;
threatened. The fifth operator, Extelcom, cannot provide good
competition in as much as it provides service using the analog AMPS. Powers and Authority; Rules and Regulations
The GSM system dominates the market. In the regulatory telecommunications industry, the NTC has the sole
b) There are two applicants for the assignment of the frequencies in the authority to issue Certificates of CPCNs for the installation, operation,
1.7 Ghz and 1.8 Ghz allocated to CMTS - Globe and Extelcom. Based and maintenance of communications facilities and services, radio
communications systems, telephone and telegraph systems. Such power
includes the authority to determine the areas of operations of applicants The CA also erred when it said that the NTC's Order archiving Bayantel's
for telecommunications services. Section 16 of the Public Service Act application was null and void. The archiving of cases is a widely accepted
authorizes the then PSC, upon notice and hearing, to issue Certificates of measure designed to shelve cases in which no immediate action is expected
Public Convenience for the operation of public services within the Philippines but no grounds exist for their outright dismissal, even without prejudice. It
"whenever the Commission finds that the operation of the public service saves the applicant from the added trouble and expense of re-filing a
proposed and the authorization to do business will promote the public dismissed case. Under this scheme, an inactive case is kept alive but held in
interests in a proper and suitable manner." abeyance until the situation obtains wherein action thereon can be taken.
In granting Bayantel the provisional authority to operate a CMTS, the NTC Here, the said application was archived because of lack of available
applied Rule 15, Section 3 of its 1978 Rules of Practice and Procedure, which frequencies at the time, and was subject to reinstatement upon
provides: availability of the requisite frequency. There was nothing irregular in the
Sec. 3. Provisional Relief. --- Upon the filing of an application, revival of the application after the condition therefor was fulfilled.
complaint or petition or at any stage thereafter, the Board may Rule 1, Section 2 of the 1978 Rules, states:
grant on motion of the pleader or on its own initiative, the relief Sec. 2. Scope.— These rules govern pleadings, practice and
prayed for, based on the pleading, together with the affidavits and procedure before the NTC in all matters of hearing, investigation
supporting documents attached thereto, without prejudice to a final and proceedings within the jurisdiction of the Board. However, in
decision after completion of the hearing which shall be called within the broader interest of justice and in order to best serve the public
thirty (30) days from grant of authority asked for. interest, the Board may, in any particular matter, except it from these
The 1978 Rules rules and apply such suitable procedure to improve the service in
Extelcom contends that the NTC should have applied the Revised Rules which the transaction of the public business.
were filed with the Office of the National Administrative Register on February Sec. 5 states:
3, 1993. These Revised Rules deleted the phrase "on its own initiative;". Sec. 5. Ex-parte Motions. --- Except for motions for provisional
Therefore a provisional authority may be issued only upon filing of the authorization of proposed services and increase of rates, ex-parte
proper motion. Since there was no publication, the NTC was still governed by motions shall be acted upon by the Board only upon showing of
the 1978 Rules. urgent necessity therefor and the right of the opposing party is not
This issue has already been settled in Tañada v. Tuvera which stated that all substantially impaired.
statutes must be published as a condition for their effectivity. It begins fifteen Therefore, the NTC may entertain ex-parte motions only where there is an
days after publication unless a different effectivity is fixed by the law. urgent necessity to do so and no rights of the opposing parties are impaired.
This also covers by this rule are presidential decrees and executive orders The CA ruled that there was a violation of Extelcom’s right to due process
promulgated by the President in the exercise of legislative power or, at when it was not afforded the opportunity to question the motion for the
present, directly conferred by the Constitution. Administrative Rules and revival of the application. However, NTC’s Order was only a simple revival of
Regulations must also be published if their purpose is to enforce or the archived application of Bayantel. At this stage, it cannot be said that
implement existing law pursuant also to a valid delegation. Extelcom's right to procedural due process was prejudiced. It still has the
Until the 1993 Rules are published in the Official Gazette or in a newspaper of opportunity to be heard during the full-blown hearings.
general circulation, it cannot take effect. Regardless, BayanTel’s application NTC has scheduled several hearing dates mainly for this purpose, at which all
included a motion for the issuance of a provisional authority anyway. interested parties shall be allowed to raise their opposition. There is no denial
of due process where full-blown adversarial proceedings are conducted
before an administrative body.
With Extelcom fully participating in the proceedings, one given the No Exclusive Right over a Public Utility
opportunity to file its opposition to the application, there was clearly no Furthermore, Extelcom does not enjoy the grant of any vested interest on the
denial of its right to due process. Extelcom entered its appearance as a party right to render a public service. Art. XII, Sec. 11 of the Constitution provides:
and filed its opposition to the application. It was neither precluded nor No franchise, certificate, or any other form of authorization for the
barred from participating in the hearings. The revival was a preliminary step operation of a public utility shall be granted to citizens of the
for the resumption of the hearings on the application of Bayantel. The latter Philippines or to corporations organized under the laws of the
will still have to prove its capability to undertake the proposed CMTS. Notice Philippines at least sixty per centum of whose capital is owned by
of these hearings were sent to all parties concerned, including Extelcom. such citizens, nor shall such franchise, certificate or authorization be
exclusive in character or for a longer period than fifty years. Neither
NTC with the Discretion to Grant the CMTS shall any such franchise or right be granted except under the
Among the declared national policies under Republic Act No. 7925, condition that it shall be subject to amendment, alteration, or repeal
otherwise known as the Public Telecommunications Policy Act of the by the Congress when the common good so requires.
Philippines, is the healthy competition among telecommunications carriers. The Constitution mandates that a franchise cannot be exclusive in nature nor
The NTC has sufficient discretion to act on matters solely within its can a franchise be granted except that it must be subject to amendment,
competence. The need for a healthy competitive environment in alteration, or even repeal by the legislature when the common good so
telecommunications is sufficient for the NTC to consider all those requires.
applicants who are willing to offer competition, develop the market and The CA was also wrong in annulling Bayantel’s provisional authority. The
provide the environment necessary for greater public service. general rule is that purely administrative and discretionary functions may
This memorandum circular enumerated the conditions prevailing and the not be interfered with by the courts. Courts have no supervising power
reasons which necessitated its issuance as follows: over the proceedings and actions of the administrative departments of
a) The international accounting rates are rapidly declining, threatening the government. This is true with respect to acts involving the exercise of
the subsidy to the local exchange service as mandated in EO 109 and judgement or discretion and findings of fact.
RA 7925;
b) The public telecommunications entities which were obligated to An exception to this is where the issuing authority has gone beyond its
install, operate and maintain local exchange network have performed statutory authority, exercised unconstitutional powers or clearly acted
their obligations in varying degrees;
arbitrarily and without regard to his duty or with grave abuse of discretion.
c) After more than three years from the performance of the obligations
This does not apply here.
only 52% of the total number of cities and municipalities are
Courts will not interfere in matters which are addressed to the sound
provided with local telephone service.
d) There are mergers and consolidations among the existing cellular discretion of the government agency entrusted with the regulation of
mobile telephone service (CMTS) providers threatening the efficiency activities coming under the special and technical training and knowledge of
of competition; such agency.
e) There is a need to hasten the installation of local exchange lines in It has also been held that the exercise of administrative discretion is a policy
unserved areas; decision and a matter that can best be discharged by the government agency
f) There are existing CMTS operators which are experiencing concerned, and not by the courts.
congestion in the network resulting to low grade of service; As found by the NTC, Bayantel has been granted several provisional and
g) The consumers/customers shall be given the freedom to choose permanent authorities before to operate various telecommunications
CMTS operators from which they could get the service. services. It was established that Bayantel was the first company to comply
with its obligation to install local exchange lines pursuant to E.O. 109 television Channel 25 was approved and would be released upon
and R.A. 7925. payment of the prescribed fee of P3,600.00. After paying said amount,
\The provisional authority awarded in favor of Bayantel to operate Local however, the NTC refused to release to petitioner its renewed permit.
Exchange Services in Quezon City, Malabon, Valenzuela and the entire Bicol Instead, the NTC commenced against petitioner Administrative Case No. 98-
region was made permanent and a CPCN for the said service was granted in 009. In January 1999, NTC rendered a decision on Administrative Case No.
its favor. There is also prima facie evidence showing Bayantel's legal, financial 98-009 against petitioner which recalled Channel 25 and denied the
and technical capacity to undertake the service. renewal of their temporary permit to operate Channel 25. Thus, this
Disposition petition for review on certiorari.

WHEREFORE, in view of the foregoing, the consolidated petitions are The issue is whether a franchise is a condition sine qua non in the operation of
GRANTED. The Court of Appeals' Decision dated September 13, 2000 and a radio and television broadcasting system? YES.
Resolution dated February 9, 2001 are REVERSED and SET ASIDE. The
permanent injunction issued by the Court of Appeals is LIFTED. The Orders of Petitioner argues that Act. 3846 does not mention television stations. In
the NTC dated February 1, 2000 and May 3, 2000 are REINSTATED. No upholding the NTC decision, CA held that franchise requirement under
pronouncement as to costs. Act No. 3846 was not expressly repealed by P.D. No. 576-A nor E.O. No.
546. CA correctly ruled that a congressional franchise is necessary for
petitioner to operate television Channel 25. Even assuming that Act No.
3846 applies only to radio stations and not to television stations as petitioner
adamantly insists, the subsequent P.D. No. 576-A clearly shows in Section 1
Associated Communication v NTC that a franchise is required to operate radio as well as television stations,
“No radio station or television channel…”
Recit-ready summary Dispensing the requirement of a congressional franchise is not in line
with the declared purposes of P.D. No. 576-A. The purpose was because
Congress enacted RA 4551 granting Marcos J. Villaverde, Jr. and some public utilities, especially radio and television stations, have a tendency
Winfred E. Villaverde a franchise to operate a public radiotelephone and toward monopoly in ownership. Therefore, it is necessary to regulate the
radiotelegraph stations. The franchise is for 50 years. In 1969, the franchise ownership and operation of radio and television stations.
was transferred to petitioner Associated Communications & Wireless
Services — United Broadcasting Network, Inc. (ACWS). P.D. No. 576-A I. Facts of the case
was issued that stated existing franchises will terminate on Dec. 31,
1981. Petitioner’s franchise expired. It filed for an application of a new On November 11, 1931, Act No. 3846, entitled "An Act Providing for
franchise and pending approval, it was issued a temporary permit by the Regulation of Radio Stations and Radio Communications in the
NTC. In 1996, the NTC authorized petitioner to increase the power output Philippines and for Other Purposes," was enacted. Sec. 1 of the law reads,
of Channel 25 from 1.0 kilowatt to 25 kilowatts after finding it financially and “No person, firm, company, association, or corporation shall construct,
technically capable. Before the expiration of its temporary permit, it applied install, establish, or operate a radio transmitting station, or a radio
for a renewal in May 1997. receiving station used for commercial purposes, or a radio broadcasting
Despite the absence of a franchise, NTC notified petitioner that its May station, without having first obtained a franchise therefor from the
1997 application for renewal of its temporary permit to operate Congress of the Philippines. . ."
Pursuant to the provision, Congress enacted RA 4551 granting Marcos J. stations. Stated in the MOU that “such temporary permits or
Villaverde, Jr. and Winfred E. Villaverde a franchise to operate a public authorization to operate shall be valid for two (2) years within which the
radiotelephone and radiotelegraph stations. The franchise is for 50 years. In permittee shall be required to file an application for legislative franchise
1969, the franchise was transferred to petitioner Associated Communications with Congress not later than December 31, 1994; provided finally, that if
& Wireless Services — United Broadcasting Network, Inc. (ACWS) through the permittee of the temporary permit or authorization to operate fails
Congress' Concurrent Resolution No. 58. to secure the legislative franchise with Congress within this period, the
In 1974, P.D. No. 576-A, "Regulating the Ownership and Operation of NTC shall not extend or renew its permit or authorization to operate any
Radio and Television Stations and for other Purposes" was issued which further.”
stated in its provision that no radio station or television channel may obtain a Prior to the Dec. 31 deadline, petitioner filed an application for franchise.
franchise unless it has sufficient capital for its operation for at least one year. Pending approval, the NTC issued a temporary permit. In 1996, the NTC
Another provision stated that “All franchises, grants, licenses, permits, authorized petitioner to increase the power output of Channel 25 from 1.0
certificates or other forms of authority to operate radio or television kilowatt to 25 kilowatts after finding it financially and technically capable.
broadcasting systems shall terminate on December 31, 1981. Thereafter, Before the expiration of its temporary permit, it applied for a renewal in May
irrespective of any franchise, grant, license, permit, certificate or other forms 1997.
of authority to operate granted by any office, agency or person, no radio or On Oct. 1997, the House Committee on Legislative Franchises of Congress
television station shall be authorized to operate without the authority of the replied to an inquiry of the NTC's Broadcast Division Chief regarding the
Board of Communications and the Secretary of Public Works and franchise application of ACWS filed on December 20, 1994. The Committee
Communications or their successors…” certified that petitioner's franchise application was not deliberated on
In 1979, EO 546 was issued. It integrated the Board of Communications by the 9th Congress because petitioner failed to submit the required
and the Telecommunications Control Bureau under the Integrated supporting documents. In the next Congress, petitioner did not refile its
Reorganization Plan of 1972 into the NTC. The NTC was given the power application. The next month, November 1997, NTC wrote to petitioner
to issue Certificate of Public Convenience for the operation of informing it that pending compliance of a franchise, its application for
communication utilities and services, radio communications systems, temporary permit would be held in abeyance. Petitioner claims it did not
wire or wireless telephone or telegraph system, radio and television receive the letter.
broadcasting system and other similar public utilities. Despite the absence of a franchise, NTC notified petitioner that its May 1997
Upon termination of petitioner’s franchise on Dec. 31, 1981, it continued application for renewal of its temporary permit to operate television Channel
operating its radio stations under permits granted by NTC. As the 25 was approved and would be released upon payment of the prescribed fee
mentioned laws caused confusion whether NTC could issue permits of P3,600.00. After paying said amount, however, the NTC refused to release
without legislative franchise, the NTC sought the opinion of DOJ on the to petitioner its renewed permit. Instead, the NTC commenced against
matter. The DOJ answered, “We believe that E.O. No. 546 is one law which petitioner Administrative Case No. 98-009 based on the November 1997
authorizes an administrative agency, the NTC, to issue authorizations for letter. Petitioner was also directed to cease and desist from operating
the operation of radio and television broadcasting systems without need Channel 25 unless subsequently authorized by the NTC.
of a prior franchise issued by Congress.” In the meantime, the NTC issued Memorandum Circular No. 14-10-98 which
However, NTC, the Committee on Legislative Franchises of Congress, and the states that “existing broadcast operators who were not able to secure a
Kapisanan ng mga Brodkaster sa Pilipinas of which petitioner is a member of legislative franchise up to this date are given up to December 31, 1999
good standing, entered into a Memorandum of Understanding (MOU) within which to have their application for a legislative franchise bill
that requires a congressional franchise to operate radio and television approved by Congress. The franchise bill must be filed immediately but not
later than November 30th of this year to give both Houses time to deliberate which granted the power to issue CPCs for the operation of communications
upon and recommend approval/disapproval thereof.” The Circular was utilities and services, radio communications systems, etc. Thus, it was no
published in the Philippine Star. longer sufficient to secure authorization from the Secretary of Public Works
Before the Nov. 30, 1998 deadline, House Bill No. 3216, entitled "An Act and Communications as provided in Act No. 3846. The Board's authorization
Granting the ACWS-United Broadcasting Network, Inc. a Franchise to was also necessary. Thus, P.D. No. 576-A provides in Section 6 that radio and
Construct, Install, Operate and Maintain Radio and Television television station operators must secure authorization from both the
Broadcasting Stations within the Philippines, and for other Purposes," Secretary of Public Works and Communications and the Board of
was filed with the Congress. Communications.
Dispensing the requirement of a congressional franchise is not in line
In January 1999, NTC rendered a decision on Administrative Case No. 98-009 with the declared purposes of P.D. No. 576-A. The purpose was because
against petitioner which recalled Channel 25 and denied the renewal of their some public utilities, especially radio and television stations, have a tendency
temporary permit to operate Channel 25. Thus, this petition for review on toward monopoly in ownership. Therefore, it is necessary to regulate the
certiorari. ownership and operation of radio and television stations.
Issue/s Contrary to the opinion of the Secretary of Justice in DOJ Opinion No.
Whether or not a franchise is a condition sine qua non in the operation of a 98, Series of 1991, the appellate court was correct in ruling that E.O. No. 546
radio and television broadcasting system? YES. which came after P.D. No. 576-A did not dispense with the requirement of a
congressional franchise. It merely abolished the Board of Communications
Ratio/Legal Basis and the Telecommunications Control Bureau under the Reorganization Plan
and transferred their functions to the NTC, including the power to issue
Petitioner argues that Act. 3846 does not mention television stations. Certificates of Public Convenience (CPC) and grant permits for the use of
The law was enacted in 1931 where there were no television stations in the frequencies.
Philippines yet. Therefore, television stations are excluded. In Radio Communication of the Philippines case, the Court held that a
franchise is distinguished from a CPC in that the former is a grant or privilege
In upholding the NTC decision, CA held that franchise requirement from the sovereign power, while the latter is a form of regulation through the
under Act No. 3846 was not expressly repealed by P.D. No. 576-A nor E.O. administrative agencies. “A franchise started out as a "royal privilege or (a)
No. 546. CA correctly ruled that a congressional franchise is necessary for branch of the King's prerogative, subsisting in the hands of a subject.”
petitioner to operate television Channel 25. Even assuming that Act No. 3846 Even prior to E.O. No. 546, the NTC's precursor, i.e., the Board of
applies only to radio stations and not to television stations as petitioner Communications, already had the function of issuing CPC. The function
adamantly insists, the subsequent P.D. No. 576-A clearly shows in Section 1 of the NTC to issue CPC under E.O. No. 546 is thus nothing new and
that a franchise is required to operate radio as well as television stations, “No exists alongside the requirement of a congressional franchise under P.D.
radio station or television channel…” No. 576-A. The cardinal rule in statutory construction that statutes in pare
materia, although in apparent conflict, or containing apparent
Shortly after the declaration of Martial Law, then President Marcos inconsistencies, should, as far as reasonably possible, be construed in
issued P.D. No. 1 dated September 24, 1972, through which the Integrated harmony with each other, so as to give force and effect to each.
Reorganization Plan for the executive branch was adopted. Under the Plan, Petitioner argues that DOJ Opinion No. 98 was binding and conclusive.
the Public Service Commission was abolished and its functions transferred to The Court held that this opinion is merely persuasive and not necessarily
special regulatory boards, among which was the Board of Communications controlling. As shown above, the opinion is erroneous insofar as it holds that
E.O. No. 546 dispenses with the requirement of a congressional franchise to
operate radio and television stations. Petitioner argues that the NTC decision on the admin case “slammed the
door” on its application for a franchise. The Court held that the process of
In Albano where the Court held that a congressional franchise is not securing a congressional franchise is separate and distinct from the
required before "each and every public utility may operate." The Court process of applying for renewal of a temporary permit with the NTC.
clarified that where there is a law such as P.D. No. 576-A which requires a The latter is not a prerequisite to the former. In fact, in the normal course
franchise for the operation of radio and television stations, that law must be of securing authorizations to operate a television and radio station, the
followed until subsequently repealed. In Albano, the law applicable for the application for a CPC with the NTC comes after securing a franchise
Philippine Ports Authority to take over, manage and operate the Manila from Congress. The CPC is not a condition for the grant of a
International Port Complex and undertake the providing of cargo handling congressional franchise.
and port related services does not require a franchise. A franchise is also not The criticism against the requirement of a franchise is expressed by a public
necessary for the operation of domestic air transport. Thus, while it is correct utilities lawyer, “What exactly is the reason or rationale for imposing a prior
to say that specifoed agencies in the Executive Branch have the power to congressional franchise? There seems to be no valid reason for it except to
issue authorization for certain classes of public utilities, this does not mean impose added burden and expenses on the part of the applicant. The
that the authorization or CPC issued by the NTC dispenses with the justification appears to be simply because this was required in the past so it is
requirement of a franchise as this is clearly required under P.D. No. 576-A. now.”
The legislative intent is to continue requiring a franchise for the The call to dispense with the requisite legislative franchise must,
operation of radio and television broadcasting stations is clear from the however, be addressed to Congress as the lawmaker of the land for the
franchises granted by Congress after the effectivity of E.O. No. 546. It Court's function is to interpret and not to rewrite the law. As long as the
granted franchises to Iddes Broadcast Group, Inc., Hypersonic Broadcatting law remains unchanged, the requirement of a franchise to operate a
Center, Inc., and Digital Telecommunication Philippines. All three franchises television station must be upheld.
require the grantees to secure a CPCN/license/permit to construct and Disposition
operate their stations/systems. Also, the Tax Reform Act of 1997 provides in WHEREFORE, the petition is DENIED and the Court of Appeals' January
Section 119 for tax on franchise of radio and/or television broadcasting 13, 2000 decision and February 21, 2000 resolution are AFFIRMED. No costs.
companies.
Petitioner argues that the cancellation of its permit to operated when it was PLDT v National Telecommunication
already approved was unreasonable. The Court held that the 1994 MOU
states in unmistakable terms that petitioner's temporary permit to operate
Recit-ready summary
Channel 25 would be valid for only two years, i.e., from June 29, 1995 to June
28, 1997. During these two years, petitioner was supposed to have secured a
Petitioner Philippine Long Distance Telephone Company (PLDT) assails, by
congressional franchise, otherwise "the NTC shall not extend or renew its
way of certiorari and Prohibition under Rule 65, two (2) Orders of public
permit or authorization to operate any further." The NTC's approval of
respondent National Telecommunications Commission (NTC), namely, the
petitioner's application to renew its temporary permit in January 1998 was
Order of 12 December 1988 granting private respondent Express
thus erroneous. Further, petitioner had the opportunity to present its case
Telecommunications Co., Inc. (ETCI) provisional authority to install, operate
and submit evidence on why its assigned frequency Channel 25 should not
and maintain a Cellular Mobile Telephone System in Metro-Manila.
be recalled and its application for renewal denied. The requirements of due
Rep. Act No. 2090, was enacted, otherwise known as "An Act Granting Felix
process were satisfied therefore, it is not unreasonable.
Alberto and Company, Incorporated, a Franchise to Establish Radio
Stations for Domestic and Transoceanic Telecommunications." Felix The final outcome of the application rests within the exclusive
Alberto & Co., Inc. (FACI) was the original corporate name, which was prerogative of the NTC. Whether or not a CPCN would eventually issue
changed to ETCI with the amendment of the Articles of Incorporation in 1964. would depend on the evidence to be presented during the hearings still to be
Much later, "CELLCOM, Inc." was the name sought to be adopted before conducted, and only after a full evaluation of the proof thus presented.
the Securities and Exchange Commission, but this was withdrawn and The sale of shares of stock of a public utility is governed by another law,
abandoned.  i.e., Section 20(h) of the Public Service Act (Commonwealth Act No.
ETCI then filed with the NTC an application for a CPCN which PLDT filed 146). Pursuant thereto, the Public Service Commission (now the NTC) is
an opposition. the government agency vested with the authority to approve the
Does NTC have jurisdiction to hear? transfer of more than 40% of the subscribed capital stock of a
Yes, NTC has provisional jurisdiction and did not act beyond its telecommunications company to a single transferee.
authority. In other words, transfers of shares of a public utility corporation need
only NTC approval, not Congressional authorization. What transpired in
Is the same order validated stock transactions of a public service enterprise ETCI were a series of transfers of shares starting in 1964 until 1987. The
contrary to and/or in direct violation of Section 20(h) of the Public Service Act? approval of the NTC may be deemed to have been met when it
No authorized the issuance of the provisional authority to ETCI. There was
The provisional authority was issued after due hearing, reception of evidence full disclosure before the NTC of the transfers. In fact, the NTC Order of 12
and evaluation thereof, with the hearings attended by various oppositors, November 1987 required ETCI to submit its "present capital and ownership
including PLDT. It was granted only after a prima facie showing that ETCI has structure." Further, ETCI even filed a Motion before the NTC, dated 8
the necessary legal, financial and technical capabilities and that public December 1987, or more than a year prior to the grant of provisional
interest, convenience and necessity so demanded.  authority, seeking approval of the increase in its capital stock from
PLDT argues, however, that a provisional authority is nothing short of a P360,000.00 to P40M, and the stock transfers made by its stockholders.
Certificate of Public Convenience and Necessity (CPCN) and that it is A distinction should be made between shares of stock, which are owned
merely a "distinction without a difference." That is not so. Basic by stockholders, the sale of which requires only NTC approval, and the
differences do exist, which need not be elaborated on. What should be franchise itself which is owned by the corporation as the grantee
borne in mind is that provisional authority would be meaningless if the thereof, the sale or transfer of which requires Congressional sanction.
grantee were not allowed to operate. Moreover, it is clear from the very Since stockholders own the shares of stock, they may dispose of the same as
Order of 12 December 1988 itself that its scope is limited only to the first they see fit. They may not, however, transfer or assign the property of a
phase, out of four, of the proposed nationwide telephone system. The corporation, like its franchise. In other words, even if the original stockholders
installation and operation of an alpha numeric paging system was not had transferred their shares to another group of shareholders, the franchise
authorized. The provisional authority is not exclusive. Its lifetime is granted to the corporation subsists as long as the corporation, as an
limited and may be revoked by the NTC at any time in accordance with entity, continues to exist The franchise is not thereby invalidated by the
law. The initial expenditure of P130M more or less, is rendered necessary transfer of the shares. A corporation has a personality separate and distinct
even under a provisional authority to enable ETCI to prove its capability. And from that of each stockholder. It has the right of continuity or perpetual
as pointed out by the Solicitor General, on behalf of the NTC, if what had succession
been granted were a CPCN, it would constitute a final order or award To all appearances, the stock transfers were not just for the purpose of
reviewable only by ordinary appeal to the Court of Appeals pursuant to acquiring the ETCI franchise, considering that, as heretofore stated, a series of
Section 9(3) of BP Blg. 129, and not by certiorari before this Court.  transfers was involved from 1964 to 1987. And, contrary to PLDT's
assertion, the franchise was not the only property of ETCI of meaningful
value. The "zero" book value of ETCI assets, as reflected in its balance sheet, PLDT filed an Opposition with a Motion to Dismiss, based primarily on the
was plausibly explained as due to the accumulated depreciation over the following grounds: (1) ETCI is not capacitated or qualified under its legislative
years entered for accounting purposes and was not reflective of the actual franchise to operate a systemwide telephone or network of telephone service
value that those assets would command in the market. such as the one proposed in its application; (2) ETCI lacks the facilities needed
But again, whether ETCI has offended against a provision of its franchise, or and indispensable to the successful operation of the proposed cellular mobile
has subjected it to misuse or abuse, may more properly be inquired into telephone system; (3) PLDT has itself a pending application with NTC, Case
in quo warranto  proceedings instituted by the State. It is the condition of No. 86-86, to install and operate a Cellular Mobile Telephone System for
every franchise that it is subject to amendment, alteration, or repeal when the domestic and international service not only in Manila but also in the
common good so requires (1987 Constitution, Article XII, Section 11). provinces and that under the "prior operator" or "protection of investment"
doctrine, PLDT has the priority or preference in the operation of such service;
Facts of the case and (4) the provisional authority, if granted, will result in needless,
uneconomical and harmful duplication, among others.
Petitioner Philippine Long Distance Telephone Company (PLDT) assails, by NTC overruled PLDT's Opposition and declared that Rep. Act No. 2090 (1958)
way of certiorari and Prohibition under Rule 65, two (2) Orders of public should be liberally construed as to include among the services under said
respondent National Telecommunications Commission (NTC), namely, the franchise the operation of a cellular mobile telephone service.
Order of 12 December 1988 granting private respondent Express On 12 December 1988, NTC issued the first challenged Order. Opining that
Telecommunications Co., Inc. (ETCI) provisional authority to install, operate "public interest, convenience and necessity further demand a second cellular
and maintain a Cellular Mobile Telephone System in Metro-Manila (Phase A) mobile telephone service provider and finds PRIMA FACIE evidence showing
in accordance with specified conditions, and the Order, dated 8 May 1988, applicant's legal, financial and technical capabilities to provide a cellular
denying reconsideration. mobile service using the AMPS system," NTC granted ETCI provisional
authority to install, operate and maintain a cellular mobile telephone system
Rep. Act No. 2090, was enacted, otherwise known as "An Act Granting Felix initially in Metro Manila, Phase A only, subject to the terms and conditions set
Alberto and Company, Incorporated, a Franchise to Establish Radio Stations forth in the same Order. One of the conditions prescribed (Condition No. 5)
for Domestic and Transoceanic Telecommunications." Felix Alberto & Co., Inc. was that, within ninety (90) days from date of the acceptance by ETCI of the
(FACI) was the original corporate name, which was changed to ETCI with the terms and conditions of the provisional authority, ETCI and PLDT "shall enter
amendment of the Articles of Incorporation in 1964. Much later, "CELLCOM, into an interconnection agreement for the provision of adequate
Inc." was the name sought to be adopted before the Securities and Exchange interconnection facilities between applicant's cellular mobile telephone switch
Commission, but this was withdrawn and abandoned.  and the public switched telephone network and shall jointly submit such
interconnection agreement to the Commission for approval." 
On 13 May 1987, alleging urgent public need, ETCI filed an application with In a "Motion to Set Aside the Order" granting provisional authority, PLDT
public respondent NTC (docketed as NTC Case No. 87-89) for the issuance of alleged essentially that the interconnection ordered was in violation of due
a Certificate of Public Convenience and Necessity (CPCN) to construct, install, process and that the grant of provisional authority was jurisdictionally and
establish, operate and maintain a Cellular Mobile Telephone System and an procedurally infirm. On 8 May 1989, NTC denied reconsideration and set the
Alpha Numeric Paging System in Metro Manila and in the Southern Luzon date for continuation of the hearings on the main proceedings. This is the
regions, with a prayer for provisional authority to operate Phase A of its second questioned Order. 
proposal within Metro Manila.
PLDT urges us now to annul the NTC Orders of 12 December 1988 and 8 May is legally clothed with authority and given ample discretion to grant a
1989 and to order ETCI to desist from, suspend, and/or discontinue any and provisional permit or authority. In fact, NTC may, on its own initiative, grant
all acts intended for its implementation.  such relief even in the absence of a motion from an applicant.
On 15 June 1989, we resolved to dismiss the petition for its failure to comply What the NTC granted was such a provisional authority, with a definite expiry
fully with the requirements of Circular No. 1-88. Upon satisfactory showing, period of eighteen (18) months unless sooner renewed, and which may be
however, that there was, in fact, such compliance, we reconsidered the order, revoked, amended or revised by the NTC. It is also limited to Metro Manila
reinstated the Petition, and required the respondents NTC and ETCI to submit only. What is more, the main proceedings are clearly to continue as stated in
their respective Comments. the NTC Order of 8 May 1989.
On 27 February 1990, we issued a Temporary Restraining Order enjoining The provisional authority was issued after due hearing, reception of evidence
NTC to "Cease and Desist from all or any of its on-going proceedings and and evaluation thereof, with the hearings attended by various oppositors,
ETCI from continuing any and all acts intended or related to or which will including PLDT. It was granted only after a prima facie showing that ETCI has
amount to the implementation/execution of its provisional authority." This the necessary legal, financial and technical capabilities and that public
was upon PLDT's urgent manifestation that it had been served an NTC Order, interest, convenience and necessity so demanded. 
dated 14 February 1990, directing immediate compliance with its Order of 12
December 1988, "otherwise the Commission shall be constrained to take the PLDT argues, however, that a provisional authority is nothing short of a
necessary measures and bring to bear upon PLDT the full sanctions provided Certificate of Public Convenience and Necessity (CPCN) and that it is merely a
by law."  "distinction without a difference." That is not so. Basic differences do exist,
We required PLDT to post a bond of P 5M. It has complied, with the which need not be elaborated on. What should be borne in mind is that
statement that it was "post(ing) the same on its agreement and/or consent to provisional authority would be meaningless if the grantee were not allowed
have the same forfeited in favor of Private Respondent ETCI/CELLCOM should to operate. Moreover, it is clear from the very Order of 12 December 1988
the instant Petition be dismissed for lack of merit." ETCI took exception to the itself that its scope is limited only to the first phase, out of four, of the
sufficiency of the bond considering its initial investment of approximately P proposed nationwide telephone system. The installation and operation of an
225M, but accepted the forfeiture proferred.  alpha numeric paging system was not authorized. The provisional authority is
ETCI moved to have the TRO lifted, which we denied on 6 March 1990. We not exclusive. Its lifetime is limited and may be revoked by the NTC at any
stated, however, that the inaugural ceremony ETCI had scheduled for that day time in accordance with law. The initial expenditure of P130M more or less, is
could proceed, as the same was not covered by the TRO. rendered necessary even under a provisional authority to enable ETCI to
Issue/s prove its capability. And as pointed out by the Solicitor General, on behalf of
the NTC, if what had been granted were a CPCN, it would constitute a final
Does NTC have jurisdiction? Yes order or award reviewable only by ordinary appeal to the Court of Appeals
Is the same order validated stock transactions of a public service pursuant to Section 9(3) of BP Blg. 129, and not by certiorari before this
enterprise contrary to and/or in direct violation of Section 20(h) of the Court. 
Public Service Act? No The final outcome of the application rests within the exclusive prerogative of
the NTC. Whether or not a CPCN would eventually issue would depend on
Ratio/Legal Basis the evidence to be presented during the hearings still to be conducted, and
only after a full evaluation of the proof thus presented.
There can be no question that the NTC is the regulatory agency of the The Coverage of ETCI's Franchise
national government with jurisdiction over all telecommunications entities. It
Rep. Act No. 2090 grants ETCI (formerly FACI) "the right and privilege of Moreover, neither Section 4, Rep. Act No. 2090 nor Pres. Decree No. 36
constructing, installing, establishing and operating in the entire Philippines should be construed as self-executing in working a forfeiture. Franchise
radio stations for reception and transmission of messages on radio stations in holders should be given an opportunity to be heard, particularly so, where, as
the foreign and domestic public fixed point-to-point and public base, in this case, ETCI does not admit any breach, in consonance with the
aeronautical and land mobile stations, ... with the corresponding relay rudiments of fair play. 
stations for the reception and transmission of wireless messages on The determination of the right to the exercise of a franchise, or whether the
radiotelegraphy and/or radiotelephony ...." PLDT maintains that the scope of right to enjoy such privilege has been forfeited by non-user, is more properly
the franchise is limited to "radio stations" and excludes telephone services the subject of the prerogative writ of quo warranto, the right to assert which,
such as the establishment of the proposed Cellular Mobile Telephone System as a rule, belongs to the State "upon complaint or otherwise" and cannot be
(CMTS). However, in its Order of 12 November 1987, the NTC construed the attacked collaterally
technical term "radiotelephony" liberally as to include the operation of a
cellular mobile telephone system. ETCI's Stock Transactions
ETCI admits that in 1964, the Albertos, as original owners of more than 40%
The foregoing is the construction given by an administrative agency of the outstanding capital stock sold their holdings to the Orbes. In 1968, the
possessed of the necessary special knowledge, expertise and experience and Albertos re-acquired the shares they had sold to the Orbes. In 1987, the
deserves great weight and respect (Asturias Sugar Central, Inc. v. Albertos sold more than 40% of their shares to Horacio Yalung. Thereafter,
Commissioner of Customs, et al., L-19337, September 30, 1969, 29 SCRA 617). the present stockholders acquired their ETCI shares. Moreover, in 1964, ETCI
It can only be set aside on proof of gross abuse of discretion, fraud, or error had increased its capital stock from P40,000.00 to P360,000.00; and in 1987,
of law (Tupas Local Chapter No. 979 v. NLRC, et al., L-60532-33, November 5, from P360,000.00 to P40M.
1985, 139 SCRA 478). We discern none of those considerations sufficient to PLDT contends that the transfers in 1987 of the shares of stock to the new
warrant judicial intervention. stockholders amount to a transfer of ETCI's franchise, which needs
The Status of ETCI Franchise Congressional approval pursuant to Rep. Act No. 2090, and since such
PLDT alleges that the ETCI franchise had lapsed into nonexistence for failure approval had not been obtained, ETCI's franchise had been invalidated.
of the franchise holder to begin and complete construction of the radio It should be noted, however, that the foregoing provision is, directed to the
system authorized under the franchise as explicitly required in Section 4 of its "grantee" of the franchise, which is the corporation itself and refers to a sale,
franchise, Rep. Act No. 2090. lease, or assignment of that franchise. It does not include the transfer or sale
PLDT also invokes Pres. Decree No. 36, enacted on 2 November 1972, which of shares of stock of a corporation by the latter's stockholders.
legislates the mandatory cancellation or invalidation of all franchises for the The sale of shares of stock of a public utility is governed by another law, i.e.,
operation of communications services, which have not been availed of or Section 20(h) of the Public Service Act (Commonwealth Act No. 146).
used by the party or parties in whose name they were issued. Pursuant thereto, the Public Service Commission (now the NTC) is the
However, whether or not ETCI, and before it FACI, in contravention of its government agency vested with the authority to approve the transfer of
franchise, started the first of its radio telecommunication stations within (2) more than 40% of the subscribed capital stock of a telecommunications
years from the grant of its franchise and completed the construction within company to a single transferee, thus: 
ten (10) years from said date; and whether or not its franchise had remained SEC. 20. Acts requiring the approval of the Commission. Subject to
unused from the time of its issuance, are questions of fact beyond the established stations and exceptions and saving provisions to the
province of this Court, besides the well-settled procedural consideration that contrary, it shall be unlawful for any public service or for the owner,
factual issues are not subjects of a special civil action for certiorari 
 lessee or operator thereof, without the approval and authorization of To all appearances, the stock transfers were not just for the purpose of
the Commission previously had  acquiring the ETCI franchise, considering that, as heretofore stated, a series of
xxx xxx xxx transfers was involved from 1964 to 1987. And, contrary to PLDT's assertion,
(h) To sell or register in its books the transfer or sale of shares of its the franchise was not the only property of ETCI of meaningful value. The
capital stock, if the result of that sale in itself or in connection with "zero" book value of ETCI assets, as reflected in its balance sheet, was
another previous sale, shall be to vest in the transferee more than forty plausibly explained as due to the accumulated depreciation over the years
per centum of the subscribed capital of said public service. Any transfer entered for accounting purposes and was not reflective of the actual value
made in violation of this provision shall be void and of no effect and that those assets would command in the market.
shall not be registered in the books of the public service corporation.
Nothing herein contained shall be construed to prevent the holding of But again, whether ETCI has offended against a provision of its franchise, or
shares lawfully acquired. (As amended by Com. Act No. 454). has subjected it to misuse or abuse, may more properly be inquired into
in quo warranto  proceedings instituted by the State. It is the condition of
In other words, transfers of shares of a public utility corporation need only every franchise that it is subject to amendment, alteration, or repeal when the
NTC approval, not Congressional authorization. What transpired in ETCI were common good so requires (1987 Constitution, Article XII, Section 11).
a series of transfers of shares starting in 1964 until 1987. The approval of the
NTC may be deemed to have been met when it authorized the issuance of Ultimate Considerations 
the provisional authority to ETCI. There was full disclosure before the NTC of The decisive consideration are public need, public interest, and the common
the transfers. In fact, the NTC Order of 12 November 1987 required ETCI to good. Those were the overriding factors which motivated NTC in granting
submit its "present capital and ownership structure." Further, ETCI even filed a provisional authority to ETCI. Article II, Section 24 of the 1987 Constitution,
Motion before the NTC, dated 8 December 1987, or more than a year prior to recognizes the vital role of communication and information in nation
the grant of provisional authority, seeking approval of the increase in its building. It is likewise a State policy to provide the environment for the
capital stock from P360,000.00 to P40M, and the stock transfers made by its emergence of communications structures suitable to the balanced flow of
stockholders. information into, out of, and across the country (Article XVI, Section 10, Ibid.).
A modern and dependable communications network rendering efficient and
A distinction should be made between shares of stock, which are owned by reasonably priced services is also indispensable for accelerated economic
stockholders, the sale of which requires only NTC approval, and the franchise recovery and development. To these public and national interests, public
itself which is owned by the corporation as the grantee thereof, the sale or utility companies must bow and yield. 
transfer of which requires Congressional sanction. Since stockholders own the Despite the fact that there is a virtual monopoly of the telephone system in
shares of stock, they may dispose of the same as they see fit. They may not, the country at present. service is sadly inadequate. Customer demands are
however, transfer or assign the property of a corporation, like its franchise. In hardly met, whether fixed or mobile. There is a unanimous cry to hasten the
other words, even if the original stockholders had transferred their shares to development of a modern, efficient, satisfactory and continuous
another group of shareholders, the franchise granted to the corporation telecommunications service not only in Metro Manila but throughout the
subsists as long as the corporation, as an entity, continues to exist The archipelago. The need therefor was dramatically emphasized by the
franchise is not thereby invalidated by the transfer of the shares. A destructive earthquake of 16 July 1990. It may be that users of the cellular
corporation has a personality separate and distinct from that of each mobile telephone would initially be limited to a few and to highly
stockholder. It has the right of continuity or perpetual succession commercialized areas. However, it is a step in the right direction towards the
(Corporation Code, Sec. 2). enhancement of the telecommunications infrastructure, the expansion of
telecommunications services in, hopefully, all areas of the country, with To make crystal clear what the Court is now holding in granting the Motions
chances of complete disruption of communications minimized. It will thus for Reconsideration, for the guidance of our courts, administrative agencies
impact on, the total development of the country's telecommunications and the general public, and in the hope that the basic issues with which the
systems and redound to the benefit of even those who may not be able to Court has grappled in the present case may finally be laid at rest, those issues
subscribe to ETCI.  are canvassed once again below.

Private respondent Eastern, filed, on 16 July 1987, with the NTC an

Free competition in the industry may also provide the answer to a much-
application for a CPCN, to construct, maintain and operate an IGF, which
desired improvement in the quality and delivery of this type of public utility,
is estimated to cost US$5 Million. Eastern is a 60% Filipino owned
to improved technology, fast and handy mobile service, and reduced user
corporation 2 organized under Philippine law and holder of a legislative
dissatisfaction. After all, neither PLDT nor any other public utility has a franchise under R.A. No. 808, as amended by R.A. No. 5002, in relation to
constitutional right to a monopoly position in view of the Constitutional P.D. No. 489 granting it the right and privilege to:
proscription that no franchise certificate or authorization shall be exclusive in
character or shall last longer than fifty (50) years (ibid., Section 11; Article XIV . . . land, construct, maintain and
Section 5, 1973 Constitution; Article XIV, Section 8, 1935 Constitution). operate telecommunication  systems by cable  or any other
Additionally, the State is empowered to decide whether public interest means now known to science  or which in the future may be
demands that monopolies be regulated or prohibited (1987 Constitution. developed  for the reception and transmission of
Article XII, Section 19). messages between any point in the Philippines to points
exterior thereto, including airplanes, airships or vessels even
Disposition though such airplanes, airships or vessels may be located
within territorial limits of the Philippines. (Emphasis supplied)
WHEREFORE, finding no grave abuse of discretion, tantamount to lack
Eastern is successor to Eastern Extension Australasia and China
of or excess of jurisdiction, on the part of the National
Telegraph Company, a British company which had been in the
Telecommunications Commission in issuing its challenged Orders of 12
Philippines since the Spanish colonial period. Together with other
December 1988 and 8 May 1989 in NTC Case No. 87-39, this Petition is
companies, Eastern invested in the Philippines US$25 Million in submarine
DISMISSED for lack of merit. The Temporary Restraining Order cable and related facilities, and installed, owns, maintains and operates
heretofore issued is LIFTED. The bond issued as a condition for the submarine cables between the Philippines and Hongkong-Japan, the
issuance of said restraining Order is declared forfeited in favor of private Philippines and Taiwan, and the Philippines and Singapore.
respondent Express Telecommunications Co., Inc. Costs against
petitioner.  We turn first to the scope of the franchise authority of Eastern. The
SO ORDERED. contention of PLDT is that an IGF is inherently part of "a telephone
system" since it is "useful only for a telephone system." Thus, PLDT
contends that in effect Eastern is asking for a CPCN to establish
a telephone system. But Eastern has no franchise to establish a
telephone system. Hence, PLDT continues, Eastern cannot be granted the
CPCN it seeks.
FELICIANO, J.:
The IGF facility which NTC authorized Eastern to install and operate is 4. The proposed gateway shall initially be capable of switching
described in the following technical terms, in the NTC decision of 14 international telephone traffic to countries where applicant has
November 1989: international correspondents.3

A. System Components In its original decision, the Court, adopting PLDT's theory, said that "the
gateway facility is part of a telephone  system and that Eastern wants to
The international gateway shall consist of the international switching engage in combined international and substantially extensive domestic
maintenance center (ISMC), internationaltransmission center (ITMC), telephone system  without any legislative authority."4 We reject PLDT's
international network maintenance management center (INMC), and theory and now reconsider the Court's original holding upon the
traffic operations center (TOC). The ISMC shall provide the switching grounds set out below.
operations including the maintenance thereof. The ITMC shall provide for the
international links and the maintenance of the international circuits. The What is clear from the foregoing technical description by the NTC is that an
INMC shall see to it that traffic [is] routed via the best route-possible. The IGF comprises equipment which makes possible the interfacing or
management of the entire network is undertaken by the INMC. The traffic interconnection between (1) a domestic telecommunication system, like
operations center shall be where the positions are situated. The TOC shall that of PLDT, and (2) the cables or other equipment for transmitting
among others provide for operator-assisted international calls. electronically messages from points within the Philippines to points
outside the Philippines, as well as messages originating from points
B. System Capability outside to points inside the Philippines. The IGF constitutes a
telecommunications exchange that in effect connects PLDT's subscribers or
1. The proposed ITMC shall be equipped to accommodate terminating users with the subscribers and users of tele-communications systems located
circuits as well as transit facilities. It shall have the capability to interface with in different parts of the outside world. The IGF is not in itself a telephone
domestic broadband transmission and switching networks operated by other or telecommunication system  but it is not, in any case necessary to try
carriers either the analog or digital levels. It will also provide cost effective to determine what constitutes a telephone system.
manner of terminating/processing and cross connecting digital capacities. It
is designed to support transmission standards for ISDN channels. In the first place, the existing legislative franchise of Eastern authorizes it
to land, construct, maintain and operate "telecommunications systems"
2. The proposed ISMC shall be fully ISDN compatible switching system that for the purpose of effecting "the reception and transmission of
will carry both broadband and voice band message, data and information messages between any point in the Philippines to points exterior [to the
switching. It will support various international telephone signaling Philippines]." "Telecommunication" is, in itself, a comprehensive term.
eguipments, i.e. C5, C6, C7 as well as transparent circuit switching and Etymologically (tele  [from the Greek] + communication), 5 it means
data/records signalling protocols. It can also provide manual switching simply communication over distance, making no  limiting reference to the
capability both for voice and non-voice services. It will also be equipped to means or mode of such communication. In the second place, the legislative
act as a tandem switch providing the international switching interface to franchise of Eastern itself expressly elaborates that the
domestic service carriers. "telecommunication  systems" which Eastern may install, maintain and
operate may be "by cable  or any other means now known to science  or
3. The INMC shall be equipped with the latest in network management which in the future may be developed." It is very difficult to craft language
technology that can perform automatic rerouting of circuits and quick more comprehensive in scope than the foregoing phrase.
mapping of capacities while ensuring a minimum degree of interruption.
Clearly, the species of method or the particular modality
of reception  and transmission  of messages across the territorial
boundaries of the Philippines, was of secondary importance to the well allow messages incoming from abroad through Eastern's carrying
legislative authority which granted the franchise. facilities to enter PLDT's domestic system.

In the third place, there is no basis at all in Eastern's legislative We believe and so hold that there is ample legal authority on the part of
franchise  for a supposed distinction (which PLDT tries very hard to Eastern to install, maintain and operate the IGF that it seeks.
suggest) between voice and non-voice transmissions or messages and
for a supposed limitation upon Eastern to transmit and receive only From another point of view, it is important to note the conclusion reached in
non-voice messages. The statute simply does not  distinguish between voice the 15-page decision of the NTC:
or oral and data or non-voice messages or transmissions: the statutory text
speaks simply of "messages." There is a basic and well-known scientific reason After careful consideration of all the evidence submitted in this case, pro and
why the statute makes no such distinction. Voice messages do not travel via con, the Commission is convinced that applicant is legally,
wires (cables whether submarine or underground or aerial) or any other technically  and  financially capable  to install operate and maintain
media qua voice (i.e., as sound waves); voice transmissions, exactly like data an international digital gateway facilities incorporating transmission,
(or non-voice) messages, travel in the form of electronic impulses through switching and traffic operations facilities. The Commission is also
cables (or any other media) and are simply converted at the point of convinced that while there may be complexities involved in interconnection
reception or destination into other forms visually or audibly perceptible by and in having three (3) operators of an international digital gateway, it finds
human beings."6 out that another system is technically and economically feasible. The
Commission is fully convinced that the advantages of installing,
Fourthly, PLDT's own legislative franchise provides no support for the operating and maintaining another gateway by another
selective reading that PLDT would have the Court place upon the word carrier outweighs the disadvantages  and that ultimately, public interest
"telephone  system."7 The portion of PLDT's legislative franchise defining the will be served and the growth, development and expansion of
scope of PLDT's franchise authority does not  even use the word "telephone" telecommunications services in the country will be accelerated. For lack
except in referring to PLDT by name) nor the phrase of merit, the opposition of PLDT is hereby OVERRULED. 10 (Emphasis
"telephone  system;" instead the oft-repeated and operative term supplied)
is  "telecommunications." It is not by accident that PLDT advertises itself
in the broadcast media as a telecommunications company  rather than as Thus, the NTC did not only address the legal capability  of, or franchise
a telephone company.8 Even the original 1928 legislative franchise of authority vested in Eastern;11 it also explicitly considered the technical
PLDT did no limit a  "telephone company"  to the transmission and requirements of the IGF and acknowledged the technical  and  financial
reception of voice or oral messages.9 ability  of Eastern to install, maintain and operate the facility. 12

Fifthly, and perhaps most importantly, Eastern in its application In attacking the NTC decision, what PLDT was apparently really trying to
was not  asking for authority to install and operate a domestic  telephone say was that the NTC had failed to indicate the necessity or desirability
or other telecommunications system, understood as a system for of another international digital gateway facility, considering that PLDT
carrying messages from one point in the Philippines to another point itself already owns and operates three (3) IGFs. Implicitly, PLDT's
also in the Philippines. Eastern was merely asking for authority to install contention appears to be that to grant Eastern's application for another
and operate an international  gateway facility, which would mediate facility would be to approve an unnecessary duplication of facilities. The NTC
between the domestic telephone system of PLDT and the transmitting addressed this broad contention in the following manner:
and carrying facilities of Eastern. The gateway facility will permit
messages originating from a person using PLDT's domestic telephone As testified to by the applicant, the establishment by it of a new international
system to enter the transmitting and carrying facilities of Eastern, and as digital gateway will complement existing as well as planned switching and
transmission  to provide continuity and security  of international service in the The above quoted NTC order makes clear that, while PLDT complains
event of major facility failure. It will use the latest digital technology  and strenuously about having to compete with Eastern and Philippine Global
incorporate the  most modern very large scale integrated  (VLSI) circuit Communications (the other two international gateway operators granted
technology  which will result in a significant reduction in per termination authority by the NTC at the time this case began), in fact NTC is very
installed capital costs. This will result in more efficient and less protective of PLDT. For the approved combined capacity of the gateway
expensive  switching, operational and maintenance costs thru benefiting both facilities of Philcom and Eastern will amount to only one-third (1/3) of PLDT's
national carriers and telephone subscribers  in the Philippines. existing gateway capacity. PLDT was obviously not satisfied with two-thirds
(2/3) of the international end of telecommunications business.
xxx xxx xxx
The record shows that additional compelling considerations support the
Applicant strongly advances that the Philippines will be the direct and Decision and Order of the NTC which would make possible the establishment
principal beneficiary of [Eastern's] proposed gateway since the existing of alternative international gateway facilities — that is, non-PLDT-owned
facilities will be enhanced  and the role of the Philippines as a major facilities. During the hearings before the NTC, it was brought out that PLDT
telecommunications center for international traffic  will be maintained. Since had in the past suffered a major facility breakdown, resulting in the
applicant is technically and financially capable of constructing, maintaining disruption of long distance telephone service between the Philippines and
and operating an international gateway; that its proposed gateway facility is the outside world. On 9 November 1987, for instance, such a breakdown
technically and operationally feasible, and that PLDT by its acts and conduct occurred with the result that 85% of the country's telecommunications to and
appears to have [the] intention to take over the business of [Eastern],  it from the outside world were out of commission for about 17 to 18 hours.
is imperative  to the stability and survival of [Eastern] as an international Again, on 21 December 1987, a nationwide strike paralyzed PLDT operations,
telecommunications carrier; that it be able to establish and operate its own threatening the security and reliability of international communications
international gateway. 13 (Emphasis supplied) between the Philippines and the rest of the world. 15 Undeniably, the
availability of alternative gateway facilities when interconnected with existing
Moreover, in its 16 July 1990 Order, the NTC said: local telephone networks (including but not limited to PLDT's own network
and gateway), will substantially increase the reliability and continuity of
As to the allegation that the decision did not consider PLDT's evidence, the international telecommunications service in the Philippines.
same is inaccurate. The brief prepared by the Technical and Financial Staff of
this Commission and the discussions held by the staff with the then Still another consideration fully reflected in the record of this case supports
Commissioner which were the basis of the conclusion/decision took into the decision reached by the NTC. PLDT, in the words of the Solicitor General,
consideration the volumes of evidence presented by all parties. It also took "appear[ed] to have abused its monopoly over the country's only gateway
into consideration the fact that with PLDT's cut-over of its Makati gateway facility to the detriment of public service." 16 In 1988, PLDT unilaterally
facility it will have a total of 4575 international switch termination.  The stopped collect-call service from the Philippines to Hongkong in an attempt
combined capacity of the new international gateway operators, namely to pressure Cable Wireless Hongkong (the telephone administration in
Philcom and ETPI will only be amount to 33% of PLDT's  capacity. It is the Hongkong) to appoint PLDT as its Philippine correspondent to the prejudice,
Commission's position that in the event,  therefore, that any of PLDT's in particular, of families and friends of Philippine overseas workers in
gateway facilities become inoperative, relief can be provided by the gateway Hongkong who rely substantially on such service. The NTC had to order PLDT
facilities of Philcom and the applicant. The possibility that any two of the to restore the collect-call service through a Memorandum dated 13 April
gateway operator's facilities would fail at the same time is very 1988.17 This utilization of its monopoly position was delicately described as
remote. 14 (Emphasis supplied) "business leverage" by PLDT First Vice President Ramon Santiago in his
testimony during the hearings. 18
The record also shows that PLDT exercised its power or "leverage" based on allow interconnection of its facilities, for both local and international,
its gateway monopoly position to compel Eastern's with other duly authorized telecommunications
telephone correspondents in Singapore and Taiwan to accede to dual operators and conversely of the former with the latter under such terms
correspondentships.  and conditions as the Commission may deem proper and reasonable in
the interest of public good.  (Emphasis supplied)
It is important to recall that NTC, as the governmental agency charged
with passing upon applications for Certificates of Public Convenience Eastern is, as we have already concluded, a "duly authorized
and Necessity (CPCNs) in the field of telecommunications, is authorized telecommunications operator," considering the comprehensive scope of the
to determine what the specific operating and technical requirements of authority granted to it by its legislative franchise.
"public convenience and necessity" are in the field of
telecommunications, subject of course to relevant limitations In the second place, there is no physical or technical economic basis for
established by legislative enactments, if any. The NTC is also authorized restricting the notion of interconnection to the linking up of two (2)
to examine and assess the legal, technical and financial qualifications of separate telephone systems. Section 13 of PLDT's own franchise makes clear
an applicant for a CPCN and in doing so exercises the special capabilities that interconnection may; and in fact does, relate to connecting or linking up
and skills and institutional experience it has accumulated. Courts should a telephone  or other telecommunications system  and a telecommunications
not intervene in that administrative process, save upon a very clear showing facility  for transmitting messages from the Philippines to points outside the
of serious violation of law or of fraud, personal malice or wanton oppression. Philippines and vice-versa. The NTC found as a fact  that interconnection can
Courts have none of the technical and economic or financial competence be physically and technically effected between a gateway facility operated by
which specialized administrative agencies have at their disposal, and in an international carrier and a telephone or other telecommunications system
particular must be wary of intervening in matters which are at their core operated by another, local, carrier. 21 Eastern pointed out that its IGF can be
technical and economic in nature but disguised, more or less artfully, in the and is in fact required to be interconnected not only with the PLDT domestic
habiliments of a "question of legal interpretation." telephone system but also with other domestic telecommunications systems.

We turn to the issue of interconnection between PLDT's domestic In the third place, PLDT, exhibiting extraordinary proprietary feelings in
telephone system or network and Eastern's IGF. PLDT strenuously respect of people using its telephone system, managed to ignore that
contends that interconnection is proper only  between two (2) international calls from the outside world will be transmitted into the
discrete telephone  systems; this argument now makes clear why PLDT Philippines through Eastern's cable system and IGF and fed into PLDT's and
contended so arduously that Eastern was not a telephone  system and other national domestic telephone systems. The number or frequency of calls
therefore not entitled to apply for interconnection with PLDT's system originating from outside the Philippines as compared with the frequency of
and that NTC was not authorized to require such interconnection calls originating within the Philippines, does not appear in the record.
between PLDT and Eastern. PLDT went on to contend that Considering, however, among other things, the number of Filipinos living or
interconnection with Eastern "was not directed to meet or satisfy a working overseas in different continents, and the growing business and
public need for it but rather, and exclusively, to allow [Eastern] to financial relations between Philippine enterprises and international
exploit PLDT's present telephone subscribers." 20 companies, international calls from the outside world may well be at least as
heavy in volume as, and might in fact be or become heavier than, those
In the first place, PLDT's contention collides frontally with Section 13 of PLDT's originating from the Philippines. In other words, there may be expected
own legislative franchise. Section 13 of R.A. No. 7082 reads: reciprocal flows in a higher aggregate volume of international traffic and
more efficient service, at more moderate cost, should come about with the
Sec. 13. The National Telecommunications Commission is hereby interconnection required by the NTC.
authorized, after due notice and hearing, to order the grantee PLDT to
In Philippine Long Distance Telephone Company v.  National Department of Transportation and Communication (DOTC)
22
Telecommunications Company, et al.,  PLDT made comparable argument in Circular No. 87-188, issued in 1987, also decrees:
resisting an NTC interconnection order. In over ruling these objections, the
majority of the Court, speaking through Melencio-Herrera, J., said: 12. All public communications carriers shall interconnect their
facilities pursuant to comparatively efficient interconnection
. . . Such regulation of the use and ownership of (CEI) as defined by the NTC in the interest of economic
telecommunications systems is in the exercise of the plenary efficiency. 23 (Emphasis supplied)
police power of the State for the promotion of the general
welfare. The 1987 Constitution recognizes the existence of We here reaffirm and underscore the continuing validity and vitality of
that power when it provides: the doctrine above set out: the requirement of interconnection between
telecommunications carriers found in both legislation and
Sec. 6. The use of property bears a social administrative regulations constitutes a legitimate exercise of the
function, and all economic agents shall plenary police power of the State for the securing of the general
contribute to the common welfare.
good. Individuals and private groups
including corporations, cooperatives, and It is important to note that Eastern, contrary to PLDT's egregious
similar collective organizations, shall have pleading does not seek, nor has it been allowed by NTC, a "free ride" on
the right to own, establish, and operate PLDT'S (domestic) telephone network. The IGF will be paid for by
economic enterprises, subject to the duty of Eastern itself. Revenues derived from international calls originating from or
the State to promote distributive justice and destined to a subscriber in PLDT's telephone network are required to
to intervene when the common good so be shared by Eastern with PLDT  in proportions to be negotiated and agreed
demands (Article XII). upon between PLDT and Eastern with the approval of NTC. There is, in
particular, no "appropriation" of property of the PLDT without payment of
The interconnection  which has been required of PLDT is a just or reasonable compensation.
form of  "intervention"  with property rights dictated by  "the
objective of government to promote the rapid expansion of It is also appropriate to note that at least one other non-PLDT IGF which has
telecommunications services  in all areas of the been approved by the NTC, the Philippine Global Communications Company,
Philippines, . . . to maximize the use of telecommunications Inc. ("Philglobcom") gateway facility, has in fact been installed,
facilities available, . . . in recognition of the vital role of interconnected with PLDT's domestic telephone network and is presently in
communications in nation building . . . and to ensure that all operation. We must assume, therefore, that not only was interconnection
users of the public telecommunications service have access to found physically and technically feasible, but also that an economically
all other users of the service wherever they may be within the acceptable sharing of revenues between PLDT on one hand and Philglobcom
Philippines at an acceptable standard of service and at on the other, was in fact reached and is being implemented. There is no
reasonable cost." (DOTC Circular No. 90-248). Undoubtedly, relevant distinction between the Philglobcom franchise authority and that of
the encompassing objective is the common good. The NTC, Eastern. 24
as the regulatory agency of the State, merely exercised its
delegated authority to regulate the use of telecommunications Through the interpretation it urges, PLDT in effect seeks to monopolize the
networks when it decreed interconnection. external transmission and reception of telecommunications
messages, i.e., the sending and receiving of such messages across the
xxx xxx xxx boundaries of the Philippines. The argument made by PLDT will result in local
users of PLDT telephones having no choice but to go to PLDT even for the Narvasa, Bidin, Regalado, Davide, Jr., and Melo, JJ., dissent.
external portion of international  telecommunications. Presumably, PLDT
cannot object if its subscribers were to walk to offices or branches of Eastern Francisco, J., took no part.
and there make direct telephone calls to countries outside the Philippines.
Yet PLDT, would prevent its own subscribers from using any IGF and facilities
for transmission and reception of international messages, except those owned
by PLDT. PLDT's view, in refusing interconnection; would logically compel a
telecommunication company, wishing to install an international gateway
facility (IGF) to duplicate (however wastefully) the already existing domestic Lucena Grand Central v Jac Liner
telecommunications lines of PLDT, and to restrict an IGF operator to
transmitting messages originating in land or domestic lines established by Recit-ready summary
that operator itself. While protective of the monopolistic position and
profitability of PLDT, such a narrow and restrictive view completely disregards JAC Liner, Inc.,a common carrier operating buses which ply various routes to
the broader interests of the general public consisting of the users of and from Lucena City, assailed City Ordinance Nos. 1631 and 1778 as
telecommunications services. Such view must accordingly, and once again, be unconstitutional on the ground that the same constituted an invalid exercise
rejected and the inherent authority of the State to secure the interests of the of police power, an undue taking of private property, and a violation of the
general public in the conserving and efficient utilization of finite or scarce
constitutional prohibition against monopolies.
resources, sustained.
These ordinances, by granting an exclusive franchise for 25 years,
renewable for another 25 years, to one entity [Lucena Grand Central] for
PLDT has no right to treat its subscribers as its proprietary assets to be
the construction and operation of one common bus and jeepney
"exploited" 25 by PLDT alone, rather than as customers to be served in the
manner that a public utility is supposed to serve the public. Both local terminal facility in Lucena City, to be located outside the city proper,
subscribers of PLDT or any other domestic telephone system, as well as were professedly aimed towards alleviating the traffic congestion
callers from across the oceans, should be accorded a choice. The alleged to have been caused by the existence of various bus and jeepney
fundamental point is that customers' choice and free competition among terminals within the city. Passenger buses, mini-buses, and jeepney type
carriers are essential if reasonable prices and efficient and satisfactory service mini-buses coming from other municipalities and/or local government units
are to be achieved and maintained and the public's rapidly growing needs shall utilize the facilities of the Lucena Grand Central Terminal and no other
adequately served, in the area of telecommunications, an area so vital to terminals shall be situated inside or within the City of Lucena
national social and economic development.
Whether the City of Lucena properly exercised its police power when it enacted
WHEREFORE, for all the foregoing, the Motions for Reconsideration of public the subject ordinances. NO.
and private respondents are hereby GRANTED and the Petition
for Certiorari  DISMISSED for failure to show any grave abuse of discretion or
The proper exercise of police power involves the concurrence of 2 elements
any act without or in excess of jurisdiction on the part of public respondent
(a) lawful subject and (b) lawful method.
NTC. The decision of the NTC dated 14 November 1989 and its order dated
16 July 1990 are hereby declared VALID and EFFECTIVE. No pronouncement Lawful subject: The questioned ordinances having been enacted with the
as to costs. objective of relieving traffic congestion in the City of Lucena, they involve
public interest warranting the interference of the State.
Padilla, Romero, Bellosillo, Quiason, Puno, Vitug, Kapunan, and Mendoza, JJ., Not a lawful method: the ordinances assailed herein are characterized by
concur. overbreadth. They go beyond what is reasonably necessary to solve the traffic
problem. What should have been done was to determine exactly where Respondent, who had maintained a terminal within the city, was one of those
the problem lies and then to stop it right there. Bus terminals per se do affected by the ordinances.
not, however, impede or help impede the flow of traffic. How the outright RTC rendered judgment declaring City Ordinance No. 1631 as valid insofar as
proscription against the existence of all terminals, apart from that franchised the grant of franchise to the Lucena Grand Central Terminal, Inc., to construct,
to petitioner, can be considered as reasonably necessary to solve the traffic finance, establish, operate and maintain common bus-jeepney terminal
problem, this Court has not been enlightened. If terminals lack adequate facility in the City of Lucena;
space such that bus drivers are compelled to load and unload passengers on But however, declaring the provision of Sec. 4(c) of Ordinance No. 1631
the streets instead of inside the terminals, then reasonable specifications for to the effect that the City Government shall not grant any third party
the size of terminals could be instituted, with permits to operate the same any privilege and/or concession to operate a bus, mini-bus and/or
denied those which are unable to meet the specifications. jeepney terminal, as illegal and ultra vires.
Absent any showing, nay allegation, that the terminals are encroaching upon Declaring City Ordinance No. 1778 as null and void, the same being also an
public roads, they are not obstacles. The buses which indiscriminately load ultra vires act of the City Government of Lucena cease and desist from
and unload passengers on the city streets are. The power then of the implementing Ordinance No. 1778 insofar as said ordinance prohibits or
Sangguniang Panlungsod to prohibit encroachments and obstacles does not curtails petitioner from maintaining and operating its own bus terminal
extend to terminals. insofar as said ordinance directs and compels the petitioner to use the
Not public nuisance per se: For their operation is a legitimate business which, Lucena Grand Central Terminal Inc., and furthermore, insofar as it declares
by itself, cannot be said to be injurious to the rights of property, health, or that no other terminals shall be situated, constructed, maintained or
comfort of the community. But even assuming that terminals are nuisances established inside or within the City of Lucena.
due to their alleged indirect effects upon the flow of traffic, at most they are
nuisance per accidens, not per se. Unless a thing is nuisance per se, however, Issue/s
it may not be abated via an ordinance, without judicial proceedings.
Whether the City of Lucena properly exercised its police power when it
Facts of the case enacted the subject ordinances. NO.

JAC Liner, Inc., a common carrier operating buses which ply various routes to Ratio/Legal Basis
and from Lucena City, assailed, via a petition for prohibition and injunction
against the City of Lucena, its Mayor, and the Sangguniang Panlungsod of As with the State, the local government may be considered as having
Lucena before the Regional Trial Court, City Ordinance Nos. 1631 and 1778 as properly exercised its police power only if the following requisites are met:
unconstitutional on the ground that, inter alia, the same constituted an Lawful subject: the interests of the public generally, as distinguished from
invalid exercise of police power, an undue taking of private property, and a those of a particular class, require the interference of the State, and Lawful
method: the means employed are reasonably necessary for the attainment of
violation of the constitutional prohibition against monopolies.
the object sought to be accomplished and not unduly oppressive upon
These ordinances, by granting an exclusive franchise for 25 years, renewable
individuals.
for another 25 years, to one entity for the construction and operation of one
common bus and jeepney terminal facility in Lucena City, to be located
Lawful subject
outside the city proper, were professedly aimed towards alleviating the traffic
That traffic congestion is a public, not merely a private, concern, cannot be
congestion alleged to have been caused by the existence of various bus and gainsaid. In enacting said law, therefore, the National Assembly was
jeepney terminals within the city prompted by considerations of public convenience and welfare. It was
inspired by a desire to relieve congestion of traffic, which is, to say the least, a Petitioner’s contention: other solutions for the traffic problem have
menace to public safety. Calalang v Williams already been tried but proven ineffective.
he questioned ordinances having been enacted with the objective of relieving SC: But the grant of an exclusive franchise to petitioner has not been
traffic congestion in the City of Lucena, they involve public interest shown to be the only solution to the problem. The Sangguniang
warranting the interference of the State. The first requisite for the proper Panlungsod was not without remedy. It could have defined, among
exercise of police power is thus present. other considerations, in a more precise manner, the area of relocation to
Respondent's suggestion to have this Court look behind the explicit objective avoid such consequences.
of the ordinances which, to it, was actually to benefit the private interest of Petitioner’s contention: the challenged ordinances were enacted pursuant to
petitioner by coercing all bus operators to patronize its terminal does not lie. the power of the Sangguniang Panlungsod to "[r]egulate traffic on all
Lim v. Pacquing instructs: The examination of legislative motivation is streets and bridges; prohibit encroachments or obstacles thereon and,
generally prohibited.
when necessary in the interest of public welfare, authorize the removal
of encroachments and illegal constructions in public places"
Not lawful method
SC: Absent any showing, nay allegation, that the terminals are encroaching
As in De la Cruz and Lupangco, the ordinances assailed herein are
upon public roads, they are not obstacles. The buses which indiscriminately
characterized by overbreadth. They go beyond what is reasonably
load and unload passengers on the city streets are. The power then of the
necessary to solve the traffic problem. Additionally, since the compulsory use
Sangguniang Panlungsod to prohibit encroachments and obstacles does not
of the terminal operated by petitioner would subject the users thereof to
extend to terminals.
fees, rentals and charges, such measure is unduly oppressive, as correctly
found by the appellate court. What should have been done was to determine
Petitioner’s contention: terminals are public nuisances
exactly where the problem lies and then to stop it right there.
SC: For their operation is a legitimate business which, by itself, cannot be said
A due deference to the rights of the individual thus requires a more careful
to be injurious to the rights of property, health, or comfort of the community.
formulation of solutions to societal problems.
But even assuming that terminals are nuisances due to their alleged indirect
effects upon the flow of traffic, at most they are nuisance per accidens, not
From the memorandum filed before this Court by petitioner, it is gathered
per se. Unless a thing is nuisance per se, however, it may not be abated via an
that the Sangguniang Panlungsod had identified the cause of traffic
ordinance, without judicial proceedings
congestion to be the indiscriminate loading and unloading of passengers by
buses on the streets of the city proper, hence, the conclusion that the
terminals contributed to the proliferation of buses obstructing traffic on the Petitioner’s contention: the challenged ordinances have actually been proven
city streets. effective in easing traffic congestion:
SC: Whether an ordinance is effective is an issue different from whether
Bus terminals per se do not, however, impede or help impede the flow of it is reasonably necessary. It is its reasonableness, not its effectiveness,
traffic. How the outright proscription against the existence of all terminals, which bears upon its constitutionality. If the constitutionality of a law were
apart from that franchised to petitioner, can be considered as reasonably measured by its effectiveness, then even tyrannical laws may be justified
necessary to solve the traffic problem, this Court has not been enlightened. If whenever they happen to be effective.
terminals lack adequate space such that bus drivers are compelled to load
and unload passengers on the streets instead of inside the terminals, then Disposition
reasonable specifications for the size of terminals could be instituted, with
permits to operate the same denied those which are unable to meet the WHEREFORE, the petition is hereby DENIED.
specifications.
Republic v Meralco While the power to fix rates is a legislative function, a determination of
whether the rates so fixed are reasonable and just is a purely judicial question
and is subject to the review of the courts.
Recit-ready summary
In the fixing of rates, the only standard which the legislature is required to
prescribe for the guidance of the ad-of an express requirement as to
MERALCO filed with petitioner ERB an application for the revision of its rate
reasonableness, this standard may be implied. What is a just and
schedules to reflect an average increase of 0.21 per kilowatt hour in its
reasonable rate is a question of fact calling for the exercise of discretion,
distribution charge. ERB granted a provisional increase subject to the
good sense, and a fair, enlightened and independent judgment. The
condition that after hearing and should the COA thru its audit report
requirement of reasonableness comprehends such rates which must not be
find MERALCO is entitled to a lesser increase, all excess amounts
so low as to be confiscatory, or too high as to be oppressive. In determining
collected from the latter’s customers shall either be refunded to them or
whether a rate is confiscatory, it is essential also to consider the given
correspondingly credited in their favor. The COA report found that
situation, requirements and opportunities of the utility.
MERALCO is entitled to a lesser increase, thus ERB ordered the refund or
In the cases at bar, findings and conclusions of the ERB on the rate that
crediting of the excess amounts.
can be charged by MERALCO to the public should be respected. The
On appeal, the CA set aside the ERB decision. MRs were denied.
function of the court, in exercising its power of judicial review, is to determine
whether under the facts and circumstances, the final order entered by the
Whether or not the regulation of ERB as to the adjustment of rates of
administrative agency is unlawful or unreasonable. Thus, to the extent that
MERALCO is valid. YES
the administrative agency has not been arbitrary or capricious in the exercise
of its power, the time-honored principle is that courts should not interfere.
The regulation of rates to be charged by public utilities is founded upon
The principle of separation of powers dictates that courts should hesitate to
the police powers of the State and statutes prescribing rules for the
review the acts of administrative officers except in clear cases of grave abuse
control and regulation of public utilities are a valid exercise thereof.
of discretion.
When private property is used for a public purpose and is affected with
In determining the just and reasonable rates to be charged by a public
public interest, it ceases to be juris privati only and becomes subject to
utility, three major factors are considered by the regulating agency: a)
regulation. The regulation is to promote the common good. Submission
rate of return; b) rate base; and c) the return itself or the computed
to regulation may be withdrawn by the owner by discontinuing use; but
revenue to be earned by the public utility based on the rate of return
as long as use of the property is continued, the same is subject to public
and rate base. The ERB correctly ruled that income tax should not be
regulation.
included in the computation of operating expenses of a public utility .
In regulating rates charged by public utilities, the State protects the
Income tax paid by a public utility is inconsistent with the nature of operating
public against arbitrary and excessive rates while maintaining the
expenses. Income tax, it should be stressed, is imposed on an individual
efficiency and quality of services rendered. However, the power to regulate
or entity as a form of excise tax or a tax on the privilege of earning
rates does not give the State the right to prescribe rates which are so
income. In exchange for the protection extended by the State to the
low as to deprive the public utility of a reasonable return on investment .
taxpayer, the government collects taxes as a source of revenue to finance its
Thus, the rates prescribed by the State must be one that yields a fair
activities. Clearly, by its nature, income tax payments of a public utility are not
return on the public utility upon the value of the property performing the
expenses which contribute to or are incurred in connection with the
service and one that is reasonable to the public for the services rendered.
production of profit of a public utility.
The fixing of just and reasonable rates involves a balancing of the
I. Facts of the case
investor and the consumer interests.
 recipients of the income or profits realized from the operation of
1. MERALCO Cled with the ERB an application for the revision of its rate their business" hence, should not be passed on to the consumers
schedules. The application projected an average increase of 21
centavos per kilowatt hour (kwh) in its distribution charge. The 7. CA SET ASIDE THE ERB DECISION insofar that it directed Meralco to
application also included a prayer for provisional approval of the reduce their rates of 0.167 per kwh and the refund of such amount to
increase pursuant to Section 16(c) of the Public Service Act and Meralco customers beginning feb 1994 until feb 1998
Section 8 of Executive Order No. 172.
Respondent’s Contention:
2. ERB granted this provisional increase. Subject to a condition: “after In its Motion for Reconsideration, respondent MERALCO contends that:
hearing and submission by the Commission on Audit of an audit (1) the deduction of income tax from revenues allowed for rate determination
report on the books and records of the applicant that the latter is of public utilities is part of its constitutional right to property;
entitled to a lesser increase in rates, all excess amounts collected (2) it correctly used the "average investment method" or the "simple average"
from the applicant's customers as a result of this Order shall either be
in computing the value of its properties entitled to a return instead of the
refunded to them or correspondingly credited in their favor for
"net average investment method" or the "number of months use method";
application to electric bills covering future consumptions”
and
(3) the decision of the ERB ordering the refund of P0.167 per kwh to its
3. in rates, all excess amounts collected by MERALCO shall be refunded
to its customers or credited in their favor. The Commission on Audit customers should not be given retroactive effect
(COA) conducted an examination of the books of accounts and
records of MERALCO and thereafter recommended, among others, Petitioners’ Contention:
that: (1) income taxes paid by MERALCO should not be included as ERC: the ERC proffered a divergent view from the Office of the Solicitor
part of MERALCO's operating expenses and (2) the "net average General. The ERC submits that income taxes are not operating expenses but
investment method" or the "number of months use method" should are reasonable costs that may be recoverable from the consuming public.
be applied in determining the proportionate value of the properties While the ERC admits that "there is still no categorical determination on
used by MERALCO during the test year. whether income tax should indeed be deducted from revenues of a public
utility," it agrees with MERALCO that to disallow public utilities from
4. COA authorized Meralco to adopt a rate adjustment of 0.017 per kwh recovering its income tax payments will effectively lower the return on rate
for its 1994 billing cycles base enjoyed by a public utility to 8%. The ERC, however, agrees with this
Court's ruling that the use of the "net average investment method" or the
5. ERB further ordered that he provisional relief in the amount of P0.184
"number of months use method" is not unreasonable
per kilowatthour granted under the Board's Order dated January 28,
1994 is hereby superseded and modified and the excess average
Issue/s
amount of P0.167 per kilowatthour starting with [MERALCO's] billing
cycles beginning February 1994 until its billing cycles beginning WON the finding of the ERB on the rate that can be charged by
February 1998, be refunded to [MERALCO's] customers or MERALCO to its consumers is proper. YES
correspondingly credited in their favor for future consumption Ratio/Legal Basis
. YES. The regulation of rates to be charged by public utilities is
6. The ERB held that income tax should not be treated as operating founded upon the police powers of the State and statutes prescribing
expense as this should be "borne by the stockholders who are rules for the control and regulation of public utilities are a valid exercise
thereof. When private property is used for a public purpose and is
affected with public interest, it ceases to be juris privati only and cautioned that courts should “refrain from substituting their discretion on the
becomes subject to regulation. The regulation is to promote the weight of the evidence for the discretion of the Public Service Commission on
common good. questions of fact and will only reverse or modify such orders of the Public
Submission to regulation may be withdrawn by the owner by Service Commission when it really appears that the evidence is insufficient to
discontinuing use; but as long as use of the property is continued, the same support their conclusions.”
is subject to public regulation.
In the cases at bar, findings and conclusions of the ERB on the
In regulating rates charged by public utilities, the State protects the rate that can be charged by MERALCO to the public should be respected.
public against arbitrary and excessive rates while maintaining the efficiency The function of the court, in exercising its power of judicial review, is to
and quality of services rendered. However, the power to regulate rates does determine whether under the facts and circumstances, the final order
not give the State the right to prescribe rates which are so low as to deprive entered by the administrative agency is unlawful or unreasonable. Thus,
the public utility of a reasonable return on investment. Thus, the rates to the extent that the administrative agency has not been arbitrary or
prescribed by the State must be one that yields a fair return on the public capricious in the exercise of its power, the time-honored principle is that
utility upon the value of the property performing the service and one that is courts should not interfere. The principle of separation of powers dictates
reasonable to the public for the services rendered. The fixing of just and that courts should hesitate to review the acts of administrative officers except
reasonable rates involves a balancing of the investor and the consumer in clear cases of grave abuse of discretion.
interests. In determining the just and reasonable rates to be charged by a public utility,
three major factors are considered by the regulating agency: a) rate of return;
While the power to fix rates is a legislative function, whether b) rate base; and c) the return itself or the computed revenue to be earned by
exercised by the legislature itself or delegated through an administrative the public utility based on the rate of return and rate base. The rate of return
agency, a determination of whether the rates so fixed are reasonable and just is a judgment percentage which, if multiplied with the rate base, provides a
is a purely judicial question and is subject to the review of the courts. fair return on the public utility for the use of its property for service to the
public. The rate of return of a public utility is not prescribed by statute but by
In the fixing of rates, the only standard which the legislature is required to administrative and judicial pronouncements. This Court has consistently
prescribe for the guidance of the ad-of an express requirement as to adopted a 12% rate of return for public utilities.
reasonableness, this standard may be implied. What is a just and reasonable The ERB correctly ruled that income tax should not be included in the
rate is a question of fact calling for the exercise of discretion, good sense, computation of operating expenses of a public utility. Income tax paid by a
and a fair, enlightened and independent judgment. The requirement of public utility is inconsistent with the nature of operating expenses. In general,
reasonableness comprehends such rates which must not be so low as to be operating expenses are those which are reasonably incurred in connection
confiscatory, or too high as to be oppressive. In determining whether a rate is with business operations to yield revenue or income. They are items of
confiscatory, it is essential also to consider the given situation, requirements expenses which contribute or are attributable to the production of income or
and opportunities of the utility. revenue. As correctly put by the ERB, operating expenses “should be a
requisite of or necessary in the operation of a utility, recurring, and that it
Settled jurisprudence holds that factual findings of administrative redounds to the service or benefit of customers.”
bodies on technical matters within their area of expertise should be accorded
not only respect but even finality if they are supported by substantial Income tax, it should be stressed, is imposed on an individual or entity as a
evidence even if not overwhelming or preponderant. In one case, we form of excise tax or a tax on the privilege of earning income. In exchange for
the protection extended by the State to the taxpayer, the government with the settled rule in rate regulation that the determination of the rate base
collects taxes as a source of revenue to finance its activities. Clearly, by its of a public utility entitled to a return must be based on properties and
nature, income tax payments of a public utility are not expenses which equipment actually being used or are useful to the operations of the public
contribute to or are incurred in connection with the production of profit of a utility.
public utility. Income tax should be borne by the taxpayer alone as they are
payments made in exchange for benefits received by the taxpayer from the
State. WHEREFORE, in view of the foregoing, the petitioner's Motion for
Reconsideration is DENIED WITH FINALITY.
ERB’s se of "Net Average Investment Method" is Not Unreasonable
In the determination of the rate base, property used in the operation of the Philcomsat v Alcuaz
public utility must be subject to appraisal and evaluation to determine the
I. Summary
fair value thereof entitled to a fair return. With respect to those properties
which have not been used by the public utility for the entire duration of the PHILCOMSAT was granted a franchise by the law to establish and
test year, i.e., the year subject to audit examination for rate-making purposes, operate in the Philippines, stations and facilities for international
a valuation method must be adopted to determine the proportionate value satellite communications. Previously, PHILCOMSAT was exempt from the
of the property. Petitioners maintain that the net average investment method jurisdiction of the NTC. However, pursuant to EO 196, NTC now covers
(also known as "actual number of months use method") recommended by PHILCOMSAT, and required the latter to apply for a certificate of public
COA and adopted by the ERB should be used, while MERALCO argues that convenience and necessity as well as the corresponding authority to
the average investment method (also known as the "trending method") to charge. PHILCOMSAT filed an application, and pending such application,
determine the proportionate value of properties should be applied. applied for a provisional authority to continue its operation, which was
Under the "net average investment method," properties and equipment used granted for a period of 6 months, and was renewed for another 6
in the operation of a public utility are entitled to a return only on the actual months. Thereafter, the NTC issued an order, which is being assailed in this
number of months they are in service during the period. In contrast, the case, allowing PHILCOMSAT to continue operations for another 6
"average investment method" computes the proportionate value of the months, but reduced the rate that may be charged by 15%. Hence, this
property by adding the value of the property at the beginning and at the end petition.
of the test year with the resulting sum divided by two.
The ERB did not abuse its discretion when it applied the net average Whether or not NTC has been delegated the power to fix rates? Yes
investment method. The reasonableness of net average investment method is Whether or not NTC could fix rates without any hearing? NO
borne by the records of the case. In its report, the COA explained that the Whether or not NTC exercised its power in a confiscatory manner? Yes
computation of the proportionate value of the property and equipment in The SC held that as to the 1st issue, there was actually a reasonable standard
accordance with the actual number of months such property or equipment is set for the guidance of the NTC in the exercise of its rate-fixing power –
in service for purposes of determining the rate base is favored, as against the public safety, public interest, reasonable feasibility and reasonable rates,
trending method employed by MERALCO, "to reflect the real status of the which conjointly more than satisfy the requirements of a valid
property." By using the net average investment method, the ERB and the delegation of legislative power. As to the 2nd issue, although the NTC
COA considered for determination of the rate base the value of properties indeed has the power to exercise quasi-legislative measures, it may not
and equipment used by MERALCO in proportion to the period that the same do so without following the constitutionally granted right of notice and
were actually used during the period in question. This treatment is consistent hearing. In this case, the NTC did not even substantiate the reasonableness
of the reduction of the 15% charge of rate by PHILCOMSAT, nor did it even Implementing said Executive Order No. 196, respondents required petitioner
provide notice and hearing. to apply for the requisite certificate of public convenience and necessity
As to the 3rd issue, a commission has no power to fix rates which are covering its facilities and the services it renders, as well as the corresponding
unreasonable or to regulate them arbitrarily. In determining whether a authority to charge rates therefor.
rate is confiscatory, it is essential also to consider the given situation,
requirements and opportunities of the utility. A method often employed Consequently, petitioner filed with respondent NTC an application for
in determining reasonableness is the fair return upon the value of the authority to continue operating and maintaining the same facilities it has
property to the public utility. Competition is also a very important factor in been continuously operating and maintaining since 1967 and to charge the
determining the reasonableness of rates since a carrier is allowed to make current rates applied for in rendering such services. Petitioner was granted a
such rates as are necessary to meet competition. In this case, no provisional authority to continue operating its existing facilities, to render the
rationalization was offered, which prompted respondents to impose as services it was then offering, and to charge the rates it was then charging,
much as a 15% rate reduction. The power to regulate is not the power to which was granted for a period of 6 months, and was renewed for another 6
destroy. months. The NTC order now in controversy had further extended the
provisional authority of the petitioner for another 6 months but it directed
II. Facts of the case the petitioner to charge modified reduced rates through a reduction of 15%
on the present authorized rates.
This case is posed as one of first impression in the sense that it involves the The petition before us seeks to annul and set aside such Order  issued by
public utility services of the petitioner Philippine Communications Satellite respondent Commissioner Alcuaz of the NTC for being violative of the
Corporation (PHILCOMSAT, for short) which is the only one rendering such constitutional prohibition against undue delegation of legislative power and
services in the Philippines. a denial of procedural, as well as substantive, due process of law.
By virtue of Republic Act No. 5514, PHILCOMSAT was granted "a franchise to PHILCOMSAT contends that (1) the NTC order is violative because it is an
establish, construct, maintain and operate in the Philippines, at such places as undue delegation of power granted to the NTC, particularly quasi-legislative
the grantee may select, station or stations and associated equipment and powers; (2) violation of due process because the order was issued motu
facilities for international satellite communications." Under this franchise, it proprio, without notice and hearing; and (3) the reduced rate is confiscatory,
was likewise granted the authority to "construct and operate such ground because it in effect results to the cessation of operations by PHILCOMSAT.
facilities as needed to deliver telecommunications services from the
communications satellite system and ground terminal or terminals." III. Issue/s
The satellite services thus provided by petitioner enable said international
carriers to serve the public with indispensable communication services, such Whether or not NTC has been delegated the power to fix rates? Yes
as overseas telephone, telex, facsimile, telegrams, high speed data, live Whether or not NTC could fix rates without any hearing? NO
television in full color, and television standard conversion from European to Whether or not NTC exercised its power in a confiscatory manner? Yes
American or vice versa. IV. Held
Under Section 5 of Republic Act No. 5514, petitioner was exempt from the
jurisdiction of the then Public Service Commission, now respondent NTC. 1. There was a reasonable standard set for the guidance of the NTC in the
However, pursuant to Executive Order No. 196 issued on June 17, 1987, exercise of its rate-fixing power – public safety, public interest, reasonable
petitioner was placed under the jurisdiction, control and regulation of feasibility and reasonable rates, which conjointly more than satisfy the
respondent NTC, including all its facilities and services and the fixing of rates. requirements of a valid delegation of legislative power. When the
administrative agency concerned, respondent NTC in this case, establishes a afforded the opportunity to cross-examine the inspector who issued the
rate, its act must both be non- confiscatory and must have been established report on which respondent NTC based its questioned order.
in the manner prescribed by the legislature; otherwise, in the absence of a While respondents may fix a temporary rate pending final determination of
fixed standard, the delegation of power becomes unconstitutional. the application of petitioner, such rate-fixing order, temporary though it may
Pursuant to Executive Orders Nos. 546 and 196, respondent NTC is be, is not exempt from the statutory procedural requirements of notice and
empowered, to determine and prescribe rates pertinent to the operation of hearing, as well as the requirement of reasonableness. Assuming that such
public service communications which necessarily include the power to power is vested in NTC, it may not exercise the same in an arbitrary and
promulgate rules and regulations in connection therewith. And, under confiscatory manner.
Section 15(g) of Executive Order No. 546, respondent NTC should be guided 3. There is no question that petitioner is a mere grantee of a legislative
by the requirements of public safety, public interest and reasonable feasibility franchise which is subject to amendment, alteration, or repeal by Congress
of maintaining effective competition of private entities in communications when the common good so requires. Such grant cannot be unilaterally
and broadcasting facilities. Likewise, in Section 6(d) thereof, which provides revoked absent a showing that the termination of the operation of said utility
for the creation of the Ministry of Transportation and Communications with is required by the common good. The rule is that the power of the State to
control and supervision over respondent NTC, it is specifically provided that regulate the conduct and business of public utilities is limited by the
the national economic viability of the entire network or components of the consideration that it is not the owner of the property of the utility. The power
communications systems contemplated therein should be maintained at to regulate is not the power to destroy useful and harmless enterprises, but is
reasonable rates. the power to protect, foster, promote, preserve, and control with due regard
2. The order in question which was issued by respondent Alcuaz no doubt for the interest, first and foremost, of the public, then of the utility and of its
contains all the attributes of a quasi-judicial adjudication. Foremost is the fact patrons. Any regulation, therefore, which operates as an effective confiscation
that said order pertains exclusively to petitioner and to no other. Further, it is of private property or constitutes an arbitrary or unreasonable infringement
premised on a finding of fact, although patently superficial, that there is merit of property rights is void, because it is repugnant to the constitutional
in a reduction of some of the rates charged- based on an initial evaluation of guaranties of due process and equal protection of the laws.
petitioner's financial statements-without affording petitioner the benefit of A commission has no power to fix rates which are unreasonable or to
an explanation as to what particular aspect or aspects of the financial regulate them arbitrarily. This basic requirement of reasonableness
statements warranted a corresponding rate reduction. No rationalization was comprehends such rates which must not be so low as to be confiscatory, or
offered nor were the attending contingencies, if any, discussed, which too high as to be oppressive. What is a just and reasonable rate is not a
prompted respondents to impose as much as a 15% rate reduction. It is not question of formula but of sound business judgment based upon the
far-fetched to assume that petitioner could be in a better position to evidence it is a question of fact calling for the exercise of discretion, good
rationalize its rates vis-a-vis the viability of its business requirements. The sense, and a fair, enlightened and independent judgment. In determining
rates it charges result from an exhaustive and detailed study it conducts of whether a rate is confiscatory, it is essential also to consider the given
the multi-faceted intricacies attendant to a public service undertaking of such situation, requirements and opportunities of the utility. A method often
nature and magnitude. We are, therefore, inclined to lend greater credence employed in determining reasonableness is the fair return upon the value of
to petitioner's ratiocination that an immediate reduction in its rates would the property to the public utility. Competition is also a very important factor
adversely affect its operations and the quality of its service to the public in determining the reasonableness of rates since a carrier is allowed to make
considering the maintenance requirements, the projects it still has to such rates as are necessary to meet competition.
undertake and the financial outlay involved. Notably, petitioner was not even
A cursory perusal of the assailed order reveals that the rate reduction is solely cited provision of the Administrative Code which indicates that it bars
and primarily based on the initial evaluation made on the financial the regulatory body from approving rates without prior COA audit,
statements of petitioner, contrary to respondent NTC's allegation that it has neither does it give a hint that it effectively repeals the pertinent
several other sources of information without, however, divulging such provision of Commonwealth Act No. 325.
sources. Furthermore, it did not as much as make an attempt to elaborate on The established rule in this jurisdiction is that findings of administrative or
regulatory agencies on matters within their technical area of expertise are
how it arrived at the prescribed rates. It just perfunctorily declared that based
generally accorded not only respect but finality if such findings are
on the financial statements, there is merit for a rate reduction without any
elucidation on what implications and conclusions were necessarily inferred by supported by substantial evidence. Rate-fixing calls for a technical
examination and a specialized review of specific details which the courts
it from said statements. Nor did it deign to explain how the data reflected in
are ill-equipped to enter; hence, such matters are primarily entrusted to
the financial statements influenced its decision to impose a rate reduction.
the administrative or regulating authority. Thus, this Court finds no
V. Dispositive Portion
reversible error on the part of ERC in rendering its assailed decision and
order.
WHEREFORE, the writ prayed for is GRANTED and the order of respondents, HOWEVER: The SC is mindful that this has far-reaching effects and is of
dated September 2, 1988, in NTC Case No. 87-94 is hereby SET ASIDE. The utmost significance to the public, especially to the poor. The concern for the
temporary restraining order issued under our resolution of September 13, poor is recognized as a public duty, and the protection of the rights of those
1988, as specifically directed against the aforesaid order of respondents on marginalized members of society have always dutifully been pursued by the
the matter of existing rates on petitioner's present authorized services, is Court as a sacred mission. Consistent with this duty and mission, the
hereby made permanent. Court deems it proper to approve the rate increases applied for by
MERALCO provisionally, i.e., MERALCO to impose provisional rate
Meralco v Lualhati
increases while directing the ERC, at the same time, to seek the
assistance of COA in conducting a complete audit on the books, records
Recit-ready summary and accounts of MERALCO to see to it that the rate increases that
MERALCO filed before the former Energy Regulatory Board (ERB), now the MERALCO has asked for are reasonable and justified. Stated otherwise,
ERC, an "Application for Approval of Revision of Rate Schedules and the provisional rate increases will continue to be subject to its being
Appraisal of Properties with Prayer for Provisional Authority" which reasonable and just until after the ERC has taken the appropriate action
would result in an increase in its basic charge by about thirty centavos per on the COA Report.
kilowatt hour (Php 0.30/kwh). The Energy Regulatory Commission is, thus, directed to request the COA to
After conducting several public hearings with the oppositors having been undertake a complete audit on the books, records and accounts of MERALCO
given opportunity to participate therein, ERC rendered its consolidated relative to its provisionally-approved rate increases and unbundled rates.
Decision which approved the applications for rate increase and rate II. Facts of the case
unbundling of MERALCO. MERALCO filed before the former Energy Regulatory Board (ERB), now the
Respondents filed a petition for review before the Court of Appeals. The ERC, an "Application for Approval of Revision of Rate Schedules and Appraisal
Court of Appeals annulled the decision and order of the ERC mainly on the of Properties with Prayer for Provisional Authority" which would result in an
ground that COA should first conduct an audit of the books, records and increase in its basic charge by about thirty centavos per kilowatt hour (Php
accounts of MERALCO before ERC can fix rates. 0.30/kwh).
W/N COA Audit is required before ERC can approve of MERALCO’s While the aforesaid application was still pending, Republic Act No. 9136,
application? NO otherwise known as the "Electric Power Industry Reform Act of 2001 (EPIRA),"
In the case of Municipality of Daet, the SC held that the GAO (now COA) took effect on 26 June 2001. It abolished the ERB and created ERC to succeed
audit was not a prerequisite in the fixing of rates. There is nothing in the the former. Section 36 of EPIRA required all electric distribution utilities
to file their application for the unbundling of their rates for the report. Believing that a GAO audit is a condition sine qua non before the
approval of the ERC. Board can act on the application of Hidalgo, petitioner therein sought the
On 30 October 2001, pursuant to Section 36 of EPIRA, the ERC issued an nullification of the decision of the Board and cited Section 2 of
order requiring all electric distribution utilities to file their application for Commonwealth Act No. 325. The Court was not convinced. It ruled that
unbundled rates. In compliance thereof, MERALCO filed its application with the GAO audit was not a prerequisite in the fixing of rates. The Court
emphasized:
the ERC for the approval of its unbundled rates and appraisal of its
Without discounting the fact that public interest may be better
properties. This application also proposed an increase of P1.1228/kwh in served with a GAO audit of the applicant's valuation of its properties
MERALCO's electricity rates. and equipment, we nevertheless find nothing in the phraseology of
Several oppositors objected to the said application, including Mr. Genaro the above-quoted provision that makes such audit mandatory or
Lualhati, Bagong Alyansang Makabayan (BAYAN), Kilusang Mayo Uno (KMU), obligatory. A GAO valuation is merely advisory. It is neither final nor
Gabriela, Kalipunan ng Damayang Mahihirap (KADAMAY), and BAYAN binding, as illustrated in MERALCO v. Public Service Commission,
MUNA. where this Court upheld the decision of the Public Service
After conducting several public hearings with the oppositors having been Commission to fix rates on the basis of Meralco's own valuation of its
given opportunity to participate therein, ERC rendered its consolidated properties, rather than on the assessment made by the GAO. Upon
Decision which approved the applications for rate increase and rate this premise, the appraisal made by respondent Hidalgo, which the
respondent Board found to be fair and reasonable, can serve as
unbundling of MERALCO.
proper basis for fixing the allowable rate of return and the
Respondents filed a petition for review before the Court of Appeals. The
corresponding increase in its charges.
Court of Appeals annulled the decision and order of the ERC mainly on the
The Court of Appeals ruled that the Municipality of Daet case was
ground that COA should first conduct an audit of the books, records and
inapplicable to the case under consideration as it was rendered before the
accounts of MERALCO before ERC can fix rates.
promulgation of the Administrative Code of 1987. The Court of Appeals,
Court of Appeals ruled that the Section 22, Chapter 4, Subtitle B, Title I, Book
however, did not bother to explain how Section 22, Chapter 4, Subtitle B,
V of the Administrative Code of 1987 specifically provides that COA has a
Book V of the Administrative Code could have repealed Section 2 of
mandatory duty to "audit financial operations of public utilities and
Commonwealth Act No. 325. There is nothing in the cited provision of the
franchise grantee for rate determination and franchise tax purposes". It
Administrative Code which indicates that it bars the regulatory body
likewise held that the case of Municipality of Daet is not controlling since
from approving rates without prior COA audit, neither does it give a hint
it was decided prior to the promulgation of the Administrative Code of 1987.
that it effectively repeals the pertinent provision of Commonwealth Act
III. Issue/s
No. 325.
Going to the merits of the instant controversy, the Court of Appeals merely
W/N COA Audit is required before ERC can approve of MERALCO’s
echoed the position of respondents alleging that MERALCO's data in support
application? NO
of both applications for rate increase and rate unbundling, particularly its rate
base, was unsubstantiated and misrepresented. Among the items in
IV. Ratio/Legal Basis
MERALCO's rate base which are contested include: Leased Property on
The Court of Appeals is wrong.
Customer Premises; Construction Work in Progress; Plants for Future Use;
In the case of Municipality of Daet, the then Board of Power and Waterworks
Utility Plant Appraisal and Two-month Cash Working Capital. Taking into
rendered a decision approving the rate increase application of Hidalgo
consideration the data presented by MERALCO on the questioned items in
Enterprises, Inc., which is an electric utility. Even as the Board requested the
the rate base, as well as the objections to said data.
Government Auditing Office (GAO), now the COA, to cause the audit of the
However, contrary to the Court of Appeals' insinuation that the ERC did not
books and records of the utility, and submit a report thereon, said Board
perform its legal mandate to protect the public, the disquisitions of the ERC
nonetheless decided on Hidalgo's application without waiting for the GAO
speak otherwise. MERALCO's proposed revenue requirement and rate base GRANTED.
for purposes of fixing its rates were, after having been assumed to be
carefully considered, adjusted downwards. MERALCO did not get what it Batangas CATV v CA
prayed for, which was a rate higher than that approved by the ERC.
The established rule in this jurisdiction is that findings of administrative or
I. Recit-ready summary
regulatory agencies on matters within their technical area of expertise are
The Sanggunian Panglungsod of Batangas enacted a resolution granting
generally accorded not only respect but finality if such findings are supported
Batangas (Community Antenna Television) CATV a permit to operate a CATV
by substantial evidence. Rate-fixing calls for a technical examination and a
system in Batangas City. Section 8 of the resolution provides that Batangas
specialized review of specific details which the courts are ill-equipped to
CATV should seek the approval of the Sangguniang Panglungsod if it
enter; hence, such matters are primarily entrusted to the administrative or
regulating authority. Thus, this Court finds no reversible error on the part of wants to increase its rates.
ERC in rendering its assailed decision and order. Eventually, Batangas CATV increased its rates from P88 per month to P180
However, while ruling in said manner, this Court is cognizant that such ruling per month. As a result, the Mayor wrote Batangas CATV a letter
has far-reaching effects and is of utmost significance to the public, especially threatening to cancel its permit unless it secures the required
to the poor, who face the threat of deeper wallowing in the quagmire of Sanggunian Resolution. This prompted Batangas CATV to file a petition for
financial distress once the burden of electricity rate increases is passed on to injunction, arguing that the Sanggunian has no authority to regulate the
them. Better judgment, therefore, calls for this Court to temper the rigidity of subscriber rates of Batangas CATV because under EO 205, it is the
its decision. National Telecommunications Commission (NTC) has the sole authority
Although affirming the decision and the order of the ERC approving the rate to regulate CATV operation in the Philippines. So Batangas CATV filed a
increases for electricity, this Court is not closing its eyes to the fundamental
petition for injunction arguing that the Sanggunian has no authority to
principle of social justice so emphatically expressed by the late President
regulate subscriber rates as it is the NTC that has authority.
Magsaysay in his statement: "He who has less in life should have more in
W/N an LGU may regulate the subscriber rates charged by CATV
law."
The concern for the poor is recognized as a public duty, and the protection of operators. NO
the rights of those marginalized members of society have always dutifully From President Marcos, President Cory Aquino, to President Fidel Ramos,
been pursued by the Court as a sacred mission. Consistent with this duty they all upheld the authority of NTC to have the sole authority to regulate
and mission, the Court deems it proper to approve the rate increases CATV operations in the Philippines. It must be emphasized that when E.O. No.
applied for by MERALCO provisionally, i.e., MERALCO to impose 436 decrees that the "regulatory power" shall be vested "solely" in the
provisional rate increases while directing the ERC, at the same time, to NTC, it pertains to the "regulatory power" over those matters which are
seek the assistance of COA in conducting a complete audit on the books, peculiarly within the NTC's competence, such as, the: (1) determination
records and accounts of MERALCO to see to it that the rate increases of rates, (2) issuance of "certificates of authority, (3) establishment of
that MERALCO has asked for are reasonable and justified. Stated areas of operation, (4) examination and assessment of the legal,
otherwise, the provisional rate increases will continue to be subject to its technical and financial qualifications of applicant operators, (5) granting
being reasonable and just until after the ERC has taken the appropriate
of permits for the use of frequencies, (6) regulation of ownership and
action on the COA Report.
operation, (7) adjudication of issues arising from its functions, and (8)
The Energy Regulatory Commission is, thus, directed to request the COA to
other similar matters. Within these areas, the NTC reigns supreme as it
undertake a complete audit on the books, records and accounts of MERALCO
relative to its provisionally-approved rate increases and unbundled rates. possesses the exclusive power to regulate - - a power comprising varied
V. Disposition acts, such as "to fix, establish, or control; to adjust by rule, method or
established mode; to direct by rule or restriction; or to subject to governing the LGC (see NOTES). Furthermore, Under cover of the General Welfare
principles or laws. Clause in the LGC, the LGUs can perform just about any power that will
II. Facts of the case benefit their constituencies. Thus, local government units can exercise powers
that are: (1) expressly granted; (2) necessarily implied from the power that is
John Walson, an appliance dealer in Pennsylvania, suffered from a decline in expressly granted; (3) necessary, appropriate or incidental for its efficient and
the sale of TV sets because of poor signal in his community. Troubled, he effective governance; and (4) essential to the promotion of the general
built an antenna on top of a nearby mountain. Using coaxial cable lines, he welfare of their inhabitants. Thus the increasing of subscriber rates by
distributed the tv signals from the antenna to the homes of his customers. Batangas CATV was without approval and gives the Mayor the right to
Walson's innovative idea improved his sales and at the same time gave birth withdraw the permit.
to a new telecommunication system - - the Community Antenna Television
(CATV) or Cable Television. CATV reached the Philippines and was Issue
eventually caught up in legal controversy, in this case specifically the W/N an LGU may regulate the subscriber rates charged by CATV
question is May an LGU regulate the subscriber rates charged by CATV operators. NO
operators?
On July 1986, the Sangguniang Panglungsod (Sanggunian) enacted a Point of Contentions
Resolution granting Batangas CATV a permit to construct, install, and operate Batangas CATV: Only the NTC has authority to regulate CATV operations
a CATV system in Batangas City. Section 8 of the Resolution provides that Batangas City LGU (Sanggunian and Mayor): LGC gives them the authority
petitioner is authorized to charge its subscribers the maximum rates to regulate CATV operations. Furthermore, the Resolution was in the nature
specified therein, "provided, however, that any increase of rates shall be of a contract between Batangas LGU and Batangas CATV and to hold that EO
subject to the approval of the Sangguniang Panlungsod. 205 (NTC authority) amended the resolution would result to impairment of
Sometime in November 1993, Batangas CATV increased its subscriber rates contract which is prohibited.
from P88 to P180 per month. As a result, the Mayor wrote Batangas CATV a Ratio/ Legal Basis
letter threatening to cancel its permit unless it secures the required Petition is meritorious.
Sanggunian Resolution. This prompted Batangas CATV to file a petition for Longass discussion on the History of CATV regulation vis a vis the
injunction, arguing that the Sanggunian has no authority to regulate the Government (THE IMPORTANT ONE I THINK)
subscriber rates of Batangas CATV because under EO 205, it is the National President Ferdinand E. Marcos was the first one to place the CATV industry
Telecommunications Commission (NTC) has the sole authority to regulate under the regulatory power of the national government by issuing PD 1512
CATV operation in the Philippines. which granted Sining Makulay an exclusive franchise to operate CATV
RTC: Ruled in favor of Batangas CATV, enjoining the Sanggunian from systems in the Philippines and also prescribed the subscriber rates charged.
cancelling Batangas CATV’s permit to operate a CATV system in Batangas As a consequence, all other CATV operators with permits granted by LGUs
City, also ruling that the Sanggunian is interfering with the NTC’s sole and other Government instrumentalities had their permits cancelled. Marcos
authority and power to regulate CATV operations. then issued an LOI which vested on the Chairman of the Board of
Communications the direct supervision of Sining Makulay. He then issued EO
CA: Reversed RTC ruling. The CA stated that although NTC does have the 546 which fused the Board of Communications with the Telecoms Control
authority to regulate CATV operators, this does not preclude the Sanggunian Bureau to form the National Telecommunications Commission.
from regulating the operation of CATVs in their localities, under the powers When Cory Aquino took over, she issued EO 205 opening the CATV industry
vested to it by the Local Government Code (LGC) specifically Section 177 of to all citizens in the Philippines and also mandated the NTC to grant
certificates of authority to CATV operators and to issue the necessary IRR.
On September 1997, Fidel Ramos issued EO 436 which restated the NTC’s The apparent defect in Resolution No. 210 is that it contravenes E.O. No.
SOLE regulatory powers over CATV operators. 205 and E.O. No. 436 insofar as it permits respondent Sangguniang
[IMPORTANT] Clearly, it has been more than two decades now since our Panlungsod to usurp a power exclusively vested in the NTC, i.e., the
national government, through the NTC, assumed regulatory power over the power to fix the subscriber rates charged by CATV operators. As earlier
CATV industry. Changes in the political arena did not alter the trend. Instead, discussed, the fixing of subscriber rates is definitely one of the matters within
subsequent presidential issuances further reinforced the NTC's power. The the NTC's exclusive domain. Since E.O. No. 205, a general law, mandates that
logical conclusion, therefore, is that in light of the above laws and E.O. the regulation of CATV operations shall be exercised by the NTC, an LGU
No. 436, the NTC exercises regulatory power over CATV operators to the cannot enact an ordinance or approve a resolution in violation of the said
exclusion of other bodies. It must be emphasized that when E.O. No. 436 law.It is a fundamental principle that municipal ordinances are inferior in
decrees that the "regulatory power" shall be vested "solely" in the NTC, it status and subordinate to the laws of the state. An ordinance in conflict with
pertains to the "regulatory power" over those matters which are peculiarly a state law of general character and statewide application is universally held
within the NTC's competence, such as, the: (1) determination of rates, (2) to be invalid. The principle is frequently expressed in the declaration that
issuance of "certificates of authority, (3) establishment of areas of operation, municipal authorities, under a general grant of power, cannot adopt
(4) examination and assessment of the legal, technical and financial ordinances which infringe the spirit of a state law or repugnant to the general
qualifications of applicant operators, (5) granting of permits for the use of policy of the state.
frequencies, (6) regulation of ownership and operation, (7) adjudication of Respondent LGU argues that RA 7160 (LGC) repealed EO 205 but looking at
issues arising from its functions, and (8) other similar matters. Within these the repealing clause of RA 7160, EO 205 is not among those mentioned as
areas, the NTC reigns supreme as it possesses the exclusive power to repealed by RA 7160. Neither is there an indication that E.O. No. 205 was
regulate - - a power comprising varied acts, such as "to fix, establish, or impliedly repealed by R.A. No. 7160. It is a settled rule that implied repeals
control; to adjust by rule, method or established mode; to direct by rule are not lightly presumed in the absence of a clear and unmistakable showing
or restriction; or to subject to governing principles or laws. of such intentions. It is a canon of legal hermeneutics that instead of
[IMPORTANT] What can an LGU do? Like any other enterprise, CATV pitting one statute against another in an inevitably destructive
operation maybe regulated by LGUs under the general welfare clause. This is confrontation, courts must exert every effort to reconcile them,
primarily because the CATV system commits the indiscretion of crossing remembering that both laws deserve a becoming respect as the
public properties. (It uses public properties in order to reach subscribers.) handiwork of coordinate branches of the government. On the assumption
The physical realities of constructing CATV system - the use of public of a conflict between E.O. No. 205 and R.A. No. 7160, the proper action is not
streets, rights of ways, the founding of structures, and the parceling of to uphold one and annul the other but to give effect to both by harmonizing
large regions - allow an LGU a certain degree of regulation over CATV them if possible.
operators. This is the same regulation that it exercises over all private The grant of regulatory power to the NTC is easily understandable. CATV
enterprises within its territory. system is not a mere local concern. The complexities that characterize this
But, while we recognize the LGUs' power under the general welfare clause, we new technology demand that it be regulated by a specialized agency.
cannot sustain Resolution No. 210. We are convinced that respondents This is particularly true in the area of rate-fixing. Rate fixing involves a
strayed from the well recognized limits of its power. The flaws in Resolution series of technical operations.
No. 210 are: (1) it violates the mandate of existing laws and (2) it violates the
State's deregulation policy over the CATV industry. Impairment of Contract?
National Law/Statute > Ordinance There is no law specifically authorizing the LGUs to grant franchises to
operate CATV system. Whatever authority the LGUs had before, the same had
been withdrawn when President Marcos issued P.D. No. 1512 "terminating all 3. there is a decline not an increase in the volume of sales in the area
franchises, permits or certificates for the operation of CATV system previously BEU dismissed the application on jurisdictional grounds. Later, the
granted by local governments." Today, pursuant to Section 3 of E.O. No. 436, Energy Regulatory Board (ERB) was created and the regulatory and
"only persons, associations, partnerships, corporations or cooperatives adjudicatory functions of the BEU were transferred to the ERB. ERB
granted a Provisional Authority or Certificate of Authority by the NTC may granted the application. CA reversed.
install, operate and maintain a cable television system or render cable During the pendency of the proceedings, Caltex filed a similar application for
television service within a service area." It is clear that in the absence of the construction of a service station in the same area with ERB. ERB approved
constitutional or legislative authorization, municipalities have no power to the Caltex application. PDSC likewise opposed the application.
grant franchises. Consequently, the protection of the constitutional provision
as to impairment of the obligation of a contract does not extend to Would the proposed service station cause ruinous competition to PDSC’s
privileges, franchises and grants given by a municipality in excess of its outlet? (NO)
powers, or ultra vires.
One last word. The devolution of powers to the LGUs, pursuant to the Rule V Section 1 of the Rules and Regulations Governing the Establishment,
Constitutional mandate of ensuring their autonomy, has bred jurisdictional Construction, Operation, Remodeling, and/or Refurbishing of Petroleum
tension between said LGUs and the State. LGUs must be reminded that they Products Retail Outlets enumerates the following factors determining the
merely form part of the whole. Thus, when the Drafters of the 1987 allowance or disallowance of an application for outlet construction:
Constitution enunciated the policy of ensuring the autonomy of local 1. Operation of the proposed petroleum products retail outlet will
governments,55 it was never their intention to create an imperium in imperio promote public interest in a proper and suitable manner
and install an intra-sovereign political subdivision independent of a single considering the need and convenience of the end-users
sovereign state. 2. Reasonable expectation of a commercially viable operation
III. Disposition 3. The establishment and operation thereof will not result in a
WHEREFORE, the petition is GRANTED. The assailed Decision of the monopoly combination in restraint of trade and ruinous competition
4. The requirements of public safety and sanitation are properly
Court of Appeals dated February 12, 1999 as well as its Resolution dated
observed
May 26, 1999 in CA-G.R. CV No. 52461, are hereby REVERSED. The RTC
5. Generally, the establishment and operation thereof will help promote
Decision in Civil Case No. 4254 is AFFIRMED.
and achieve the purposes of RA 6173 [Oil Industry Commission Act]

Energy Regulatory Board v CA Ruinous competition. The mere possibility of reduction in the earnings
of a business is not sufficient to prove ruinous competition. It must be
I. Recit-ready summary shown that the business would not have sufficient gains to pay a fair
rate of interest on its capital investment.
Shell filed an application for authority to relocate its Shell Service Station at ● PDSC failed to show that its business would not have sufficient
Tambo, Paranaque to Imelda Marcos Ave. of the Same municipality. This was profit to have a fair return of its investment.
initially rejected by the BEU but was subsequently given due course. Caltex, PDSC’s principal, never filed any opposition to Shell’s application. A
Petroleum Distributors & Service Corp [PSDC] opposed on these grounds: climate of fear and pessimism generated by unsubstantiated claims of
1. there are adequate service stations in the trading area covered by the ruinous competition should not be made to retard free competition.
application
2. ruinous competition will result from the establishment of the new station II. Facts of the case
 During the pendency of the proceedings, Caltex filed a similar application for
Shell: engaged in the business of importing crude oil, refining crude oil, and the construction a service station in the same area with ERB. PDSC opposed
selling petroleum products through a network of service stations throughout the application.
the country ERB approved the Caltex application. The ERB was challenged by PDSC in the
Petroleum Distributors and Service Corp. (PSDC): owns and operates a Caltex CA but CA dismissed PDSC’s petition.
Service station at the corner of MIA and Domestic Roads in Pasay City
Shell filed with the Bureau of Energy Utilization an application for authority to III. Issue/s
relocate its Tambo service station to Imelda Marcos Avenue. The application
was initially rejected by the BEU because the old site had been closed for five 1. Is there substantial evidence to support ERB’s finding of public necessity to
years and the relocation would amount to a new construction of a gasoline warrant approval of Shell’s application? (Yes)
outlet, which construction was then subject of a moratorium. Subsequently, 2. Is the feasibility study submitted by Shell stale for it was submitted two
BEU relaxed its position and gave due course to the application. years after it was prepared in 1988? (No)
PSDC opposed the application on these grounds: 3. Would the proposed service station cause ruinous competition to PDSC’s
1. there are adequate service stations in the trading area covered by the outlet? (No)
application IV. Ratio/Legal Basis
2. ruinous competition will result from the establishment of the new station The interpretation of an administrative government agency like the ERB,
3. there is a decline not an increase in the volume of sales in the area which is tasked to implement a statute, is accorded great respect and
Petrophil and Caltex opposed on the ground that Shell failed to comply with ordinarily controls the construction of the courts. 8 A long line of cases
jurisdictional requirements. establish the basic rule that the courts will not interfere in matters which are
BEU dismissed the application on jurisdictional grounds and for lack of full addressed to the sound discretion of government agencies entrusted with
title of the lessor over the proposed site. the regulation of activities coming under the special technical knowledge and
BEU reinstated the same application. training of such agencies
BEU denied Shell’s application finding that there is no necessity for another Issue 1: There is substantial evidence to support ERB’s findings.
outlet in Imelda Marcos Avenue. Shell appealed to the Office of Energy ERB Decision approving Shell's application was based on hard economic
Affairs. data on developmental projects, residential subdivision listings,
The Energy Regulatory Board (ERB) was created and the regulatory and population count, public conveyances, commercial establishments,
adjudicatory functions of the BEU were transferred to the ERB. traffic count, fuel demand, growth of private cars, public utility vehicles
OEA denied Shell’s appeal. Shell moved for reconsideration and submitted a and commercial vehicles, etc., rather than empirical evidence to support
new feasibility study to justify its application. its conclusions.
OEA remanded the case to ERB. Imelda Marcos Ave. is renamed to Benigno The record shows that the feasibility study 31 is accompanied by the
Aquino Avenue. following data, namely: 1.] Annual Projection of Estimated Fuel Demand, Base
ERB allowed Shell to establish the service station in Benigno Aquino avenue. Area; 2.] Projected Volume of the Proposed Shell Station; 3.] Projected Fuel
PDSC moved for reconsideration but was denied. Volume Derived From Base Area; 4.] Estimated Fuel Demand Base Projection
The Court of Appeals reversed ERB’s judgment. — 1993; 5.] Estimated Fuel Demand Base Projection — 1994; 6.] Annual
A motion for reconsideration was denied by the CA. Projection of Population; 7.] Annual Projection Growth of Private Cars in the
Area; 8.] Annual Projection Growth of Public Utilities in the Area; and 9]
Annual Projected Growth of Commercial Vehicles in the Area32 — projects a 3. The establishment and operation thereof will not result in a
market scenario from 1989 to 1994. monopoly combination in restraint of trade and ruinous
ERB’s findings: competition
● Shell’s feasibility study projects a scenario of growth well up to 1994. 4. The requirements of public safety and sanitation are properly
● Shell is servicing 35 commercial establishments; PDSC is servicing 65 observed
● Development of subdivisions provides for a buffer of market 5. Generally, the establishment and operation thereof will help
potential that could readily be tapped by the applicant service. promote and achieve the purposes of RA 6173 [Oil Industry
● Proposed Shell station expects to target a total volume of 460,151 Commission Act]
liters per month with a projected increase of 2.6% per annum; PDSC
The mere possibility of reduction in the earnings of a business is not
expects to suffer income loss even with a projected volume of
sufficient to prove ruinous competition. It must be shown that the business
600,000 – 800,000 liters per month
would not have sufficient gains to pay a fair rate of interest on its capital
● Board believes that the construction and operation of the Shell
station will not lead to ruinous competition investment.
PDSC failed to show that its business would not have sufficient profit to have
In reviewing admin decisions, the findings of fact made therein must be a fair return of its investment.
respected as long as they are supported by substantial evidence, even if It would not be remiss to point out that Caltex, PDSC's principal, whose
not overwhelming or preponderant. A litany of cases has consistently held products are being retailed by private respondent in the service outlet it
that substantial evidence is all that is needed to support an admin finding of operates along the MIA/Domestic Road in Pasay City, never 􏰂led any
fact. opposition to Shell's application. All told, a climate of fear and pessimism
Therefore, it is proven that there is necessity to build such a gasoline retail generated by unsubstantiated claims of ruinous competition already rejected
outlet in the vicinity subject of the application. in the past should not be made to retard free competition, consistently with
Issue 2 legislative policy of deregulating and liberalizing the oil industry to ensure a
The court cited the CA Caltex decision. Unless the petitioner is able to prove truly competitive market under a regime of fair prices, adequate and
by competent evidence that significant changes have occurred sufficient to continuous supply, environmentally clean and high-quality petroleum
invalidate the afore-stated study, the presumption is that the study remains products.
valid, as found by the ERB decision. Base and self-serving manifestations
cannot be accepted as proof. V. Disposition
Issue 3
Rule V Section 1 of the Rules and Regulations Governing the Establishment, WHEREFORE, in view of all the foregoing, the challenged Decision of the
Construction, Operation, Remodeling, and/or Refurbishing of Petroleum Court of Appeals dated November 8, 1993, as well as the subsequent
Products Retail Outlets enumerates the following factors determining the Resolution dated April 6, 1994, in CA-G.R. SP No. 27661, is REVERSED and SET
allowance or disallowance of an application for outlet construction: ASIDE, and another one rendered REINSTATING the Order dated September
1. Operation of the proposed petroleum products retail outlet will 17, 1991 of the Energy Regulatory Board in ERB Case No. 89-57, granting the
promote public interest in a proper and suitable manner amended application of Pilipinas Shell Petroleum Corporation to relocate its
considering the need and convenience of the end-users service station to Benigno Aquino Jr., Avenue, Paranaque, Metro Manila.
2. Reasonable expectation of a commercially viable operation
Padua v Ranada
I. Recit-ready summary We have ruled in a number of cases that an administrative agency may be
The Citra Metro Manila Tollways Corporation (CITRA) filed with the Toll empowered to approve provisionally, when demanded by urgent public
Regulatory Board (TRB) an application for an interim adjustment of the toll need, rates of public utilities without a hearing. The reason is easily discerned
rates at the Metro Manila Skyway Project – Stage 1. Claiming that the peso from the fact that provisional rates are by their nature temporary and subject
exchange rate to a U.S. dollar had devaluated, CITRA alleged that there was a to adjustment in conformity with the definitive rates approved after final
compelling need for the increase of the toll rates to meet the loan hearing.
obligations of the Project and the substantial increase in debt-service burden. CITRA's right stems from the STOA which was entered into by no less than
Toll Regulatory Board (TRB) then issued Resolution No. 2001-89 authorizing the Republic of the Philippines and by the PNCC. Section 7.04 of the STOA
provisional toll rate adjustments at the Metro Manila Skyway. Petitioners provides that the Investor, CITRA,and/or the Operator, PNCC, shall be entitled
[toll payers] assail that said resolution is invalid for suffering from several to apply for and if warranted, to be granted an interim adjustment of toll
procedural and substantive infirmities, one of which is that it was issued rates in case of force majeure and a significant currency valuation. Now,
without a hearing. unless set aside through proper action, the STOA has the force and effect of
IWON Resolution No. 2001-89 issued by the Toll Regulatory Board is valid – law between the contracting parties, and is entitled to recognition by this
YES Court.
The provisional toll rate adjustments were properly published prior to
its implementation. Records show that they were published in three II. Facts of the case
newspapers of general circulation. For another, it is not true that it was TRB The Citra Metro Manila Tollways Corporation (CITRA) filed with the Toll
Executive Director Dumlao, Jr. alone who issued Resolution No. 2001-89. The Regulatory Board (TRB) an application for an interim adjustment of the toll
Resolution itself contains the signature of the four TRB Directors. Further, rates at the Metro Manila Skyway Project – Stage 1. CITRA moored its
TRB's authority to grant provisional toll rate adjustments does not require the petition on the provisions of the "Supplemental Toll Operation
conduct of a hearing. P.D. No. 1112 created the TRB which was tasked to Agreement" (STOA), authorizing it, as the investor, to apply for and if
supervise the collection of toll fees and the operation of toll facilities. To warranted, to be granted an interim adjustment of toll rates in the event of a
clarify the intent of P.D. No. 1112 as to the extent of the TRB's power, LOI No. "significant currency devaluation."
1334-A was issued which expressly allows the TRB to grant ex-parte Claiming that the peso exchange rate to a U.S. dollar had devaluated
provisional or temporary increase in toll rates. A hearing is not necessary from P26.1671 in 1995 to P48.00 in 2000, CITRA alleged that there was a
for the grant of provisional toll rate adjustment. All that is necessary is compelling need for the increase of the toll rates to meet the loan
that it be issued upon obligations of the Project and the substantial increase in debt-service burden.
1. a finding that the main petition is sufficient in form and Due to heavy opposition, CITRA's petition remained unresolved. This
substance; prompted CITRA to file an "Urgent Motion for Provisional Approval," this
2. the submission of an affidavit showing that the increase in rates time, invoking Section 3, Rule 10 of the "Rules of Practice and Procedure
substantially conforms to the formula, if any is stipulated in the Governing Hearing Before the Toll Regulatory Board" (TRB Rules of
franchise or toll operation agreement, and that failure to immediately Procedure). However, it later on moved moved to withdraw it.
impose and collect the increase in rates would result in great
CITRA subsequently wrote a letter to TRB expressing its concern over the
irreparable injury to the petitioner; and
undue delay in the proceeding, stressing that any further setback would bring
3. the submission of a bond.
the Project's financial condition, as well as the Philippine banking system, to a
total collapse. CITRA recounted that out of the US$354 million funding from
Again, whether or not CITRA complied with these requirements is an issue
creditors, two-thirds (2/3) thereof came from the Philippine banks and
that must be addressed to the TRB. The practice is not something peculiar.
financial institutions, such as the Landbank of the Philippines and the petitioner Padua cannot assail the validity of the STOA because he is not a
Government Service Insurance Services. Thus, CITRA requested TRB to find a party thereto.
timely solution to its predicament. Upon the other hand, petitioner Eduardo Zialcita, as a taxpayer and as
TRB granted CITRA's motion to withdraw the Urgent Motion for Congressman of Parañaque City, filed the present petition for prohibition
Provisional Approval and, at the same time, issued Resolution No. 2001-89. with prayer for a temporary restraining order and/or writ of preliminary
Hence, petitioners Ceferino Padua and Eduardo Zialcita assail before this injunction against TRB and CITRA, impugning the same Resolution No. 2001-
Court the validity and legality of TRB Resolution No. 2001-89 authorizing 89.
provisional toll rate adjustments at the Metro Manila Skyway. Petitioner Zialcita asserts that the provisional toll rate adjustments are
Petitioner Ceferino Padua, as a toll payer, seeks the issuance of a writ of exorbitant and that the TRB violated its own Charter, Presidential Decree No.
execution for the enforcement of the Court of Appeals' Decision ordering the 1112, when it promulgated Resolution No. 2001-89 without the benefit of
exclusion of certain portions of the expressways (from Villamor Air Base to any public hearing. He also maintains that the TRB violated the Constitution
Alabang in the South, and from Balintawak to Tabang in the North) from the when it did not express clearly and distinctly the facts and the law on which
franchise of the PNCC. Resolution No. 2001-89 was based. And lastly, he claims that Section 3, Rule
In his urgent motion, petitioner Padua claims that: (1) Resolution No. 10 of the TRB Rules of Procedure is not sanctioned by P.D. No. 1112.
2001-89 was issued without the required publication and in violation of due Private respondent CITRA, in its comment on Congressman Zialcita's
process; (2) alone, TRB Executive Director Jaime S. Dumlao, Jr.,could not petition, counters that: (1) the TRB has primary administrative jurisdiction
authorize the provisional toll rate adjustments because the TRB is a collegial over all matters relating to toll rates; (2) prohibition is an inappropriate
body; and (3) CITRA has no standing to apply for a toll fee increase since it is remedy because its function is to restrain acts about to be done and not acts
an "investor" and not a "franchisee-operator." already accomplished; (3) Resolution No. 2001-89 was issued in accordance
Petitioner Padua filed a "Supplemental Urgent Motion for a TRO against with law; (4) Section 3, Rule 10 of the TRB Rules is constitutional; and (5)
Toll Fee Increases," 13 arguing further that: (1) Resolution 2001-89 refers private respondent and the Republic of the Philippines would suffer more
exclusively to the Metro Manila Skyway Project, hence, there is no legal basis irreparable damages than petitioner.
for the imposition of the increased rate at the at-grade portions; (2)
Resolution No. 2001-89 was issued without basis considering that while it III. Issue/s
was signed by three (3) of the five members of the TRB, none of them 1. WON Resolution No. 2001-89 issued by the Toll Regulatory Board is
actually attended the hearing; and 3) the computation of the rate adjustment valid? -- YES
under the STOA is inconsistent with the rate adjustment formula under
Presidential Decree No. 1894. IV. Ratio/Legal Basis
The Office of the Solicitor General (OSG) filed, in behalf of public Procedural Infirmities
respondent TRB, Philippine National Construction Corporation (PNCC), Petitioner Padua's motion is a leap to a legal contest of different
Department of Public Works and Highways (DPWH) and Judge Ranada of the dimension. He initiated a petition for mandamus seeking the issuance of a
RTC, a "Consolidated Comment" contending that: (1) the TRB has the writ of execution for the enforcement of the Court of Appeal's Decision. The
exclusive jurisdiction over all matters relating to toll rates; (2) Resolution No. issue therein is whether the application for a writ of execution should be by a
2001-89 covers both the Skyway and the at-grade level of the South Luzon mere motion or by an action for revival of judgment. Thus, for petitioner
Expressway as provided under the STOA; (3) that while Resolution No. 2001- Padua to suddenly interject in the same petition the issue of whether
89 does not mention any factual basis to justify its issuance, however, it does Resolution No. 2001-89 is valid is to drag this Court to his web of legal
not mean that TRB's finding of facts is not supported by evidence; and (4) convolution. Courts cannot, as a case progresses, resolve the intrinsic merit of
every issue that comes along its way, particularly those which bear no newspaper of general publication at least once a week for three consecutive
relevance to the resolution of the case. weeks." At any rate, it must be pointed out that under Letter of Instruction
The remedy of prohibition initiated by petitioner Zialcita also suffers No. 1334-A, 28 the TRB may grant and issue ex parte to any petitioner,
several infirmities. Initially, it violates the twin doctrine of primary without need of notice, publication or hearing, provisional authority to
administrative jurisdiction and non-exhaustion of administrative remedies. collect, pending hearing and decision on the merits of the petition, the
P.D. No. 1112 explicitly provides that "the decisions of the TRB on increase in rates prayed for or such lesser amount as the TRB may in its
petitions for the increase of toll rate shall be appealable to the Office of the discretion provisionally grant.
President within ten (10) days from the promulgation thereof." These same For another, it is not true that it was TRB Executive Director Dumlao, Jr.
provisions are incorporated in the TRB Rules of Procedure, particularly in alone who issued Resolution No. 2001-89. The Resolution itself contains the
Section 6, Rule 5 and Section 1, Rule 12 thereof. signature of the four TRB Directors. Petitioner Padua would argue that while
Obviously, the laws and the TRB Rules of Procedure have provided the these Directors signed the Resolution, none of them personally attended the
remedies of an interested Expressways user. The initial proper recourse is hearing. This argument is misplaced. Under our jurisprudence, an
to file a petition for review of the adjusted toll rates with the TRB. The administrative agency may employ other persons, such as a hearing officer,
need for a prior resort to this body is with reason. The TRB, as the agency examiner or investigator, to receive evidence, conduct hearing and make
assigned to supervise the collection of toll fees and the operation of toll reports, on the basis of which the agency shall render its decision. Such a
facilities, has the necessary expertise, training and skills to judiciously decide procedure is practical necessity.
matters of this kind. As may be gleaned from the petition, the main thrust of Be that as it may, we must stress that the TRB's authority to grant
petitioner Zialcita's argument is that the provisional toll rate adjustments are provisional toll rate adjustments does not require the conduct of a
exorbitant, oppressive, onerous and unconscionable. This is obviously a hearing. Pertinent laws and jurisprudence support this conclusion.
question of fact requiring knowledge of the formula used and the factors It may be recalled that Former President Ferdinand E. Marcos promulgated
considered in determining the assailed rates. Definitely, this task is within the P.D. No. 1112 creating the TRB on March 31, 1977. The end in view was to
province of the TRB. authorize the collection of toll fees for the use of certain public
Moreover, petitioner Zialcita's resort to prohibition is intrinsically improvements in order to attract private sector investment in the
inappropriate. It bears stressing that the office of this remedy is not to correct government infrastructure projects. The TRB was tasked to supervise the
errors of judgment but to prevent or restrain usurpation of jurisdiction or collection of toll fees and the operation of toll facilities. One of its powers is
authority by inferior tribunals and to compel them to observe the limitation to "issue, modify and promulgate from time to time the rates of toll that will
of their jurisdictions. be charged the direct users of toll facilities and upon notice and hearing, to
approve or disapprove petitions for the increase thereof."
Resolution No. 2001-89 is VALID To clarify the intent of P.D. No. 1112 as to the extent of the TRB's power,
Even granting that petitioners' recourse to the instant remedies is in Former President Marcos further issued LOI No. 1334-A expressly allowing
order, still, we cannot rule in their favor. the TRB to grant ex-parte provisional or temporary increase in toll rates.
For one, it is not true that the provisional toll rate adjustments were A hearing is not necessary for the grant of provisional toll rate
not published prior to its implementation. Records show that they were adjustment. The language of LOI No. 1334-A is not susceptible of
published in three newspapers of general circulation, particularly the equivocation. It "directs, orders and instructs" the TRB to issue
Philippine Star, Philippine Daily Inquirer and The Manila Bulletin. Surely, such provisional toll rates adjustment ex-parte without the need of notice,
publications sufficiently complied with Section 5 of P.D. No. 1112 which hearing and publication.
mandates that "no new rates shall be collected unless published in a
All that is necessary is that it be issued upon (1) a finding that the main At this point, let it be stressed that we are not passing upon the
petition is sufficient in form and substance; (2) the submission of an affidavit reasonableness of the provisional toll rate adjustments. As we have earlier
showing that the increase in rates substantially conforms to the formula, if mentioned, this matter is best addressed to the TRB.
any is stipulated in the franchise or toll operation agreement, and that failure WHEREFORE, petitioner Padua's "Urgent Motion for Temporary
to immediately impose and collect the increase in rates would result in great Restraining Order to Stop Arbitrary Toll Fee Increases" is DENIED and
irreparable injury to the petitioner; and (3) the submission of a bond. Again, petitioner Zialcita's "Petition for Prohibition" is DISMISSED.
whether or not CITRA complied with these requirements is an issue that must
be addressed to the TRB. MIAA v Airspan Corporation
The practice is not something peculiar. We have ruled in a number of
cases that an administrative agency may be empowered to approve
Recit-ready summary
provisionally, when demanded by urgent public need, rates of public
utilities without a hearing. The reason is easily discerned from the fact that
MIAA, a GOCC that owns, operates, and manages NAIA, issued several
provisional rates are by their nature temporary and subject to adjustment in
resolutions increasing the following:
conformity with the definitive rates approved after final hearing.
1. rentals of terminal buildings, VIP lounge, other airport buildings and
Anent petitioner Padua's contention that CITRA has no standing to apply for land, as well as check-in and concessions counters.
a toll fee increase, suffice it to say that CITRA's right stems from the STOA 2. Business concessions, particularly concessionaire privilege
which was entered into by no less than the Republic of the Philippines and by 3. Airport fees and charges
the PNCC. Section 7.04 of the STOA provides that the Investor, CITRA,and/or
the Operator, PNCC, shall be entitled to apply for and if warranted, to be Respondents (lessees, users, and occupants of MIAA’s properties, facilities
granted an interim adjustment of toll rates in case of force majeure and a and services) requested that the implementation of the new fees, charges,
significant currency valuation. Now, unless set aside through proper action, and rates be deferred due to lack of prior notice and hearing.
the STOA has the force and effect of law between the contracting parties, and The RTC nullified the subject resolutions.
is entitled to recognition by this Court. On the same breath, we cannot
sustain Padua's contention that the term "Metro Manila Skyway" Project Can petitioner MIAA validly raise — without prior notice and public
excludes the at-grade portions of the South Luzon Expressway considering hearing — the fees, charges, and rates subject of its Resolutions Nos. 98-
that under the same STOA the "Metro Manila Skyway" includes: "(a) the 30 and 99-11? – No.
South Metro Manila Skyway, coupled with the rehabilitated at grade portion
of the South Luzon Expressway,from Alabang to Quirino Avenue; (b) the The resolutions are not valid for 2 reasons:
Central Metro Manila Skyway, from Quirino Avenue to A. Bonifacio 1. MIAA is not the agency authorized to issue the assailed
Avenue; ...." resolution (should be DOTC)
Petitioner Zialcita faults the TRB for not stating the facts and the law on 2. It violates the Administrative Code, which requires notice and
which Resolution No. 2001-89 is based. Petitioner is wrong. Suffice it to state hearing in fixing of rates.
that while Section 14, Article VIII of the 1987 Constitution provides that "no
decision shall be rendered by any court without expressing therein clearly Under the original Charter of the MIAA, petitioner was given blanket
and distinctly the facts and the law on which it is based," this rule applies only authority to adjust its fees, charges, and rates. However, E.O. No. 903
to a decision of a court of justice, not TRB. limited such authority to a mere recommendatory power. Hence,
petitioner's Charter itself, as amended, directly vests the power to determine
revision of fees, charges, and rates in the "ministry head" [now DOTC Respondents requested that the implementation of the new fees,
Seretary] and even requires approval of the Cabinet. It follows that the charges, and rates be deferred due to lack of prior notice and hearing. The
rate increases imposed by petitioner are invalid for lack of the required prior request was denied. MIAA likewise refused to renew the identification cards
notice and public hearing. They are also ultra vires because, to begin with, of respondents' personnel, and vehicle stickers to prevent entry to the
petitioner is not the official authorized to increase the subject fees, charges, premises.
or rates, but rather the DOTC Secretary.
MIAA is also an attached agency of the DOTC. As an attached agency of II. Issue/s
the DOTC, the MIAA is governed by the Administrative Code of 1987.
The Administrative Code specifically requires notice and public hearing Can petitioner MIAA validly raise — without prior notice and public hearing
in the fixing of rates. — the fees, charges, and rates subject of its Resolutions Nos. 98-30 and 99-
11? – No
I. Facts of the case III. Ratio/Legal Basis

Petitioner Manila International Airport Authority (MIAA) is a Thus, under the original Charter of the MIAA, petitioner was given
government-owned and controlled corporation that owns, operates, and blanket authority to adjust its fees, charges, and rates. However, E.O. No. 903
manages the Ninoy Aquino International Airport (NAIA). Petitioner's limited such authority to a mere recommendatory power. Hence, petitioner's
properties, facilities, and services are available for public use subject to such Charter itself, as amended, directly vests the power to determine revision of
fees, charges, and rates as may be fixed in accordance with law. Herein fees, charges, and rates in the "ministry head" and even requires approval of
respondents are the users, lessees and occupants of petitioner's properties, the Cabinet.
facilities, and services (i.e. Airspan Corporation, Lbc Express Inc., A. Soriano Worth noting, its Charter established MIAA as an attached agency of the
Aviation, Inc., Flying Medical Samaritans, Inc., Aboitiz Air Transport Corp., Asia Ministry of Transportation and Communications (now Department of
Aircraft Overseas Phils., Inc., Asian Aerospace Corp., Pacific Jet Maintenance Transportation and Communications). Hence, the "ministry head" who has
Services, Inc., General Aviation Supplies Trading, Inc., Airworks Aviation Corp., the power to determine the revision of fees, charges, and rates of the MIAA is
Federation Of Aviation Organizations Of The Phils., Inc., Subic International now the DOTC Secretary. Clearly, petitioner has no authority to increase its
Air Charter, Inc., Normal Holdings And Development Corporation And fees, charges, or rates as the power to do so is vested solely in the DOTC
Columbian Motor Sales Corporation). Secretary, although petitioner's prerogative to recommend possible
The schedule of aggregate dues collectible for the use of petitioner's increases thereon is of course recognized.
properties, facilities, and services are divided into: (1) aeronautical fees; (2) As an attached agency of the DOTC, the MIAA is governed by the
rentals; (3) business concessions; (4) other airport fees and charges; and (5) Administrative Code of 1987. The Administrative Code specifically requires
utilities. notice and public hearing in the fixing of rates.
On May 19, 1997, MIAA issued Resolution No. 97-51 announcing an It follows that the rate increases imposed by petitioner are invalid
increase in the rentals of its terminal buildings, VIP lounge, other airport for lack of the required prior notice and public hearing. They are also
buildings and land, as well as check-in and concessions counters. Business ultra vires because, to begin with, petitioner is not the official
concessions, particularly concessionaire privilege fees, were also increased. authorized to increase the subject fees, charges, or rates, but rather the
Resolutions No. 98-30, which is a 20% rental increase, and 99-11, increasing DOTC Secretary.
airport fees and charges, were also issued. To conclude, petitioner's Resolutions Nos. 98-30 and 99-11 and the
corresponding administrative orders, which increased the fees, charges, and
rates specified therein, without the required prior notice and hearing as well losses/damages except on proven willful negligence of the officers
as approval of the DOTC Secretary, are null and void. The RTC Decision, which of the vessel,
permanently enjoined petitioner from collecting said increases and ordered
refund to respondents of the amounts paid pursuant to the said Resolutions, Thereafter, in accordance with the voyage charter hire, NSC's shipment
must be upheld. However, any refund should cover only the differential of 1,677 skids of tin plates and 92 packages of hot rolled sheets were
brought about by the unauthorized increases contained in said Resolutions.In loaded to MV Vlasons I for carriage to Manila. The vessel arrived safely
our view, considering the clear mandate of the applicable provisions of law, at North Harbor, Manila but upon opening the three hatches containing
petitioner's theory that its fees, charges, and rates are contractual in nature the shipment, nearly all the skids of tin plates and hot rolled sheets
and thus, respondents are free to terminate the lease contracts should they were allegedly found to be wet and rusty. Inspection revealed that
be unable to pay the increased dues is unacceptable. As the country's the wetting and rusting were caused by contact with sea water.
principal airport for both international and domestic air transport, petitioner's
properties, facilities, and services are imbued with paramount public and NSC sought to collect from VSI but VSI refused to pay. On the basis of this
even national interest. Petitioner is not at liberty to increase fees, charges, or incident, NSC filed a complaint against VSI for damages due to the
rates at will, without due regard to parameters set by laws and regulations. downgrading of the damaged tin plates in the amount of P941,145.18.
Among the considerations mentioned in E.O. No. 903 are that fees and CFI. After trial on the merits, the court a quo rendered judgment
charges should reflect adequately the costs and increases in price levels and dismissing the complaint and ordering NSC to pay VSI on the
the volume of traffic. For any change in its fees, charges, or rates without due counterclaim prayed for by the latter. NSC seasonably filed an appeal
regard to valid limitations can create a profound impact on the country's to the CA, but the said court just modified the appealed decision by
economy in general and air transport in particular. reducing the award of demurrage and deleting the award of attorney's
IV. Disposition fees and expenses of litigation. Both parties led their separate motions
for reconsideration, but the appellate court denied both motions. Hence,
WHEREFORE, the petition is DENIED for lack of merit. The Decision, this petition.
dated February 17, 2003, of the Regional Trial Court of Makati City, Branch The SC affirms the assailed decision of the CA, except in respect with
58, in Civil Case No. 99-1293, is AFFIRMED. No pronouncement as to costs. the demurrage.
Vlasons Shippinng v CA It is undisputed that VSI did not offer its services to the general
public. As correctly concluded by the CA, MV Vlasons I was not a
I. Recit-ready summary common but a private carrier. Verily, the extent of VSI's
responsibility and liability over NSC's cargo are determined
This is a consolidation of two separate petitions for review filed by primarily by the stipulations in the contract of carriage or charter
National Steel Corporation (NSC) and Vlasons Shipping Inc. (VSI), both party and the Code of Commerce. In the instant case, the burden of
assailing the decision of the CA. proof lies on the part of NSC and not the VSI. Additionally, the Court
The records of the case reveal that NSC hired MV Vlasons I, a private ruled that since the problems raised by NSC were all factual issues
vessel owned by VSI. They entered into a contract of affreightment already threshed out and decided by the trial court and subsequently
or contract of voyage charter hire wherein the contract states that armed by the CA, the factual findings of both courts are binding on
NSC hired VSI's vessel to make one voyage to load steel products at this Court. However, the Court disagrees with the findings of both
Iligan City and discharge them at North Harbor, Manila. Under the courts to have found and armed respectively that NSC incurred eleven
Contract of Voyage Charter Hire, VSI shall not be responsible for days of delay in unloading the cargo. In this case, the contract of
voyage charter hire provided four-day laytime; it also qualified The MV 'VLASONS I' loaded at NSC’s pier at Iligan City, the NSC's
laytime as WWDSHINC or weather working days Sundays and shipment of 1,677 skids of tin plates and 92 packages of hot rolled
holidays included. Consequently, NSC cannot be held liable for sheets or a total of 1,769 packages with a total weight of about
demurrage as the four-day laytime allowed it did not lapse, having 2,481.19 metric tons for carriage to Manila. The shipment was placed in
been tolled by unfavorable weather condition in view of the 3 hatches of the ship.
WWDSHINC qualification agreed upon by the parties. In view - The vessel arrived with the cargo at Pier 12, North Harbor,
thereof, the consolidated petitions are denied and the questioned Manila. The following day, when the vessel's 3 hatches
decision is affirmed with modification that the award of demurrage containing the shipment were opened by NSC’s agents, nearly
awarded to VSI is deleted. all the skids of tin plates and hot rolled sheets were
allegedly found to be wet and rusty. The cargo was
discharged and unloaded by stevedores hired by the Charterer.
II. Facts of the case
Unloading was completed, incurring a delay of eleven (11)
days due to the heavy rain which interrupted the unloading
National Steel Corporation (NSC) and Vlasons Shipping Inc. (VSI), in separate
operations.
petitions for review assails the Aug 12, 1993 CA decision which modified the ● MASCO (surveyor) found wetting and rusting of the packages of
RTC decision by reducing the demurrage award and deleted attorney’s fees hot rolled sheets and metal covers of the tin plates; that
and litigation expenses. tarpaulin hatch covers were noted torn at various extents; that
MV Vlasons I is a vessel which renders tramping service and, as such, container/metal casings of the skids were rusting all over.
does not transport cargo or shipment for the general public. MASCO opined that 'rusting of the tinplates was caused by
- Its services are available only to specific persons who enter into contact with SEA WATER sustained while still on board the
a special contract of charter party with its owner. vessel as a consequence of the heavy weather and rough seas
- It is undisputed that the ship is a private carrier. encountered while en route to destination. Further, based on
- It is in this capacity that its owner, Vlasons Shipping, Inc., the testing of samples, “The analysis of bad order samples
entered into a contract of affreightment or contract of voyage of packing materials ... shows that wetting was caused by
charter hire with National Steel Corporation contact with SEA WATER'.

[July 17, 1974] NSC as Charterer and VSI as owner entered into a contract of NSC filed with the VSI its claim for damages. NSC formally
voyage charter hire whereby NSC hired VSI's vessel, the MV 'VLASONS demanded payment but VSI refused. NSC filed its complaint. NSC
I' to make one (1) voyage to load steel products at Iligan City and claimed that it sustained losses in the amount of P941,145.18 as a
discharge them at North Harbor, Manila under conditions [1] result of the act, neglect and default of the master and crew in the
- FOIST- Freight In and Out including Stevedoring and Trading management of the vessel as well as the want of due diligence of VSI
- means that the handling, loading and unloading of the cargoes to make the vessel seaworthy and to make the holds and all other
are the responsibility of the Charterer parts of the vessel in which the cargo was carried, fit and safe for its
- The NANYOZAI Charter Party is incorporated in their contract. Under reception, carriage and preservation — all in violation of VSI’s
Paragraph 5 of the NANYOZAI Charter Party, it states, undertaking under their Contract of Voyage Charter Hire.
'Charterers to load, stow and discharge the cargo free of
risk and expenses to owners
VSI denied liability claiming that the MV 'VLASONS I' was seaworthy;
that said vessel was not a 'common carrier' inasmuch as she was
under voyage charter contract with the plaintiff as charterer under the
charter party; that in the course of the voyage from Iligan City to d. The cargo/shipment was securely stowed in 3 hatches of the
Manila, the MV 'VLASONS I' encountered very rough seas, strong winds ship. The hatch openings were covered by hatch boards which
and adverse weather condition, causing strong winds and big waves to were in turn covered by two or double tarpaulins. The hatch
continuously pound against the vessel and seawater to overflow on its covers were water tight. Furthermore, under the hatch boards
deck and hatch covers; that under the Contract of Voyage Charter Hire, were steel beams to give support.
e. The provisions of the Civil Code on common carriers are not
VSI shall not be responsible for losses/damages except on proven
applicable. As to the damage to the tin plates which was
willful negligence of the officers of the vessel, that the officers of
allegedly due to the wetting and rusting thereof, there is
said MV 'VLASONS I' exercised due diligence and proper seamanship
unrebutted testimony of witness Angliongto that tin plates
and were not willfully negligent; that furthermore the Voyage Charter 'sweat' by themselves when packed even without being in
Party provides that loading and discharging of the cargo was on FIOST contract (sic) with water from outside especially when the
terms which means that the vessel was free of risk and expense in weather is bad or raining. The rust caused by sweat or moisture
connection with the loading and discharging of the cargo; that the on the tin plates may be considered as a loss or damage but
damage, if any, was due to the inherent defect, quality or vice of the then, VSI cannot be held liable for it pursuant to Article 1734
cargo or to the insufficient packing thereof or to latent defect of the of the Civil Case which exempts the carrier from responsibility
cargo not discoverable by due diligence; that the stevedores of plaintiff for loss or damage arising from the 'character of the goods...'
who discharged the cargo in Manila were negligent and did not All the 1,769 skids of the tin plates could not have been
exercise due care in the discharge of the cargo; and that the cargo damaged by water. The tin plates themselves were wrapped in
was exposed to rain and seawater spray while on the pier or in transit kraft paper lining and corrugated cardboards could not be
affected by water from outside.
from the pier to NSC’s warehouse after discharge from the vessel.
f. The stevedores hired by NSC to discharge the cargo of tin
plates were negligent in not closing the hatch openings of the
The trial court ruled in favor of VSI and dismissed the complaint
MV 'VLASONS I' when rains occurred during the discharging of
and awarded demurrage to VSI. RTC made the following findings: the cargo thus allowing rainwater to enter the hatches. The
a. The MV 'VLASONS I' is a vessel of Philippine registry engaged stevedores merely set up temporary tents to cover the hatch
in the tramping service and is available for hire only under openings in case of rain so that it would be easy for them to
special contracts of charter party as in this particular case. resume work when the rains stopped by just removing the tent
b. For purposes of the voyage covered by the Contract of Voyage or canvas. Because of this improper covering of the hatches by
Charter Hire, the MV 'VLASONS I' was covered by the required the stevedores during the discharging and unloading operations
seaworthiness certificates. Being a vessel engaged in both which were interrupted by rains, rainwater drifted into the cargo
overseas and coastwise trade, the MV 'VLASONS I' has a higher through the hatch openings. Pursuant to paragraph 5 of the
degree of seaworthiness and safety. NANYOSAI [sic] Charter Party which was expressly made part of
c. Before it proceeded to Iligan City to perform the voyage called the Contract of Voyage Charter Hire, the loading, stowing and
for by the Contract of Voyage Charter Hire, the MV 'VLASONS discharging of the cargo is the sole responsibility of the plaintiff
I' underwent drydocking in Cebu and was thoroughly inspected charterer and defendant carrier has no liability for whatever
by the Philippine Coast Guard. In fact, the subject voyage was damage may occur or maybe [sic] caused to the cargo in the
the vessel's first voyage after the drydocking. The MV 'VLASONS process.
I' was seaworthy and properly manned, equipped and supplied g. The vessel encountered rough seas and bad weather while en
when it undertook the voyage. route from Iligan City to Manila causing sea water to splash on
 the ship's deck on account of which the master filed a 'Marine seawater spray to enter the hatches and to drift to and fall on the
Protest' which can be invoked as a force majeure. cargo.
h. NSC did not comply with the requirement in paragraph 9 of W/N the failure to insure the cargo will affect NSC’s right to file an
the Voyage Charter Hire contract that it was to insure the action? –
cargo. NSC also violated the charter party contract when it NO. This obligation is separate from the contractual responsibility
loaded not only 'steel products', i.e. steel bars, angular bars and that may be incurred by VSI for damages.
the like but also tin plates and hot rolled sheets which are high
grade cargo commanding a higher freight. Thus NSC was able W/N NSC is liable for demurrage? –
to ship high grade cargo at a lower freight rate. NO. The four-day laytime allowed it did not lapse, having been tolled by
i. As regards VSI’s counterclaim, the contract of voyage charter unfavorable weather conditions in view of the WWDSHINC qualification
hire under paragraph 4 thereof, fixed the freight at P30.00 per agreed upon by the parties.
metric ton payable to defendant carrier upon presentation of
the bill of lading within fifteen (15) days. NSC has not paid the IV. Ratio/Legal Basis
total freight due of P75,000.00 despite demands. NSC was
required and bound under paragraph 7 of the same Voyage Common Carrier or Private Carrier?
Charter Hire contract to pay demurrage of P8,000.00 per day of Article 1732 of the Civil Code defines a common carrier as "persons,
delay in the unloading of the cargoes. The delay amounted to corporations, firms or associations engaged in the business of carrying
eleven (11) days thereby making NSC liable to pay the defendant
or transporting passengers or goods or both, by land, water, or air, for
for demurrage in the amount of P88,000.00.
compensation, offering their services to the public." The true test of a
common carrier is the carriage of passengers or goods, provided it
CA modified the RTC decision by reducing the demurrage from
has space, for all who opt to avail themselves of its transportation
P88,000.00 to P44,000.00 and deleting the award of attorney's fees and
service for a fee.
expenses of litigation
Generally, private carriage is undertaken by special agreement and
the carrier does not hold himself out to carry goods for the
III. Issue/s
general public. The most typical, although not the only form of private
carriage, is the charter party, a maritime contract by which the
W/N VSI is a common carrier or private carrier? –
charterer, a party other than the shipowner, obtains the use and service
Private carrier. VSI did not offer its services to the general public.
It carried passengers or goods only for those it chose under a of all or some part of a ship for a period of time or a voyage or
"special contract of charter party. voyages.
VSI did not offer its services to the general public. It carried
W/N MV Vlasons I is seaworthy? – passengers or goods only for those it chose under a "special contract
YES. It was drydocked and harbored by the Philippine Coast Guard of charter party." The MV Vlasons I "was not a common but a private
before it proceeded to Iligan City for its voyage to Manila under carrier." Consequently, the rights and obligations of VSI and NSC,
the contract of voyage charter hire. including their respective liability for damage to the cargo, are
Who were negligent, the seamen or the stevedores? – determined primarily by stipulations in their contract of private
Stevedores. Such negligence is evident in the stevedores hired by carriage or charter party.
NSC, not closing the hatch of MV 'VLASONS I' when rains occurred Extent of VSI's Responsibility and Liability Over NSC's Cargo. It is
during the discharging of the cargo thus allowing rainwater and
clear from the parties' Contract of Voyage Charter Hire that VSI "shall
not be responsible for losses except on proven willful negligence Because the MV Vlasons I was a private carrier, the shipowner's
of the officers of the vessel." The NANYOZAI Charter Party, which obligations are governed by the Code of Commerce and not by
was incorporated in the parties' contract of transportation further the Civil Code. It is a hornbook doctrine that: "In an action against a
provided that the shipowner shall not be liable for loss of or private carrier for loss of, or injury to, cargo, the burden is on the
damage to the cargo arising or resulting from unseaworthiness, plaintiff to prove that the carrier was negligent or unseaworthy,
unless the same was caused by its lack of due diligence to make and the fact that the goods were lost or damaged while in the
the vessel seaworthy or to ensure that the same was "properly carrier's custody does not put the burden of proof on the carrier .
manned, equipped and supplied," and to "make the holds and all - Where the action is based on the shipowner's warranty of
other parts of the vessel in which cargo [was] carried, fit and safe seaworthiness, the burden of proving a breach thereof and that
for its reception, carriage and preservation." The NANYOZAI Charter such breach was the proximate cause of the damage rests on
Party also provided that owners shall not be responsible for split, plaintiff, and proof that the goods were lost or damaged while
chafing and/or any damage unless caused by the negligence or default in the carrier's possession does not cast on it the burden of
proving seaworthiness... Where the contract of carriage exempts
of the master or crew.
the carrier from liability for unseaworthiness not discoverable by
due diligence, the carrier has the preliminary burden of proving
Burden of Proof. In view of the contractual stipulations, NSC must
the exercise of due diligence to make the vessel seaworthy.
prove that the damage to its shipment was caused by VSI's willful
negligence or failure to exercise due diligence in making MV Vlasons I Was MV Vlasons I seaworthy?
seaworthy and fit for holding, carrying and safekeeping the cargo.
Ineluctably, the burden of proof was placed on NSC by the parties' VSI exercised due diligence to make the ship seaworthy and fit for
agreement. the carriage of NSC's cargo of steel and tin plates. This is shown by
- Art. 361 of the Code of Commerce. the fact that it was drydocked and harbored by the Philippine Coast
- Merchandise shall be transported at the risk and venture
Guard before it proceeded to Iligan City for its voyage to Manila under
of the shipper, if the contrary has not been expressly
the contract of voyage charter hire. The vessel's voyage from Iligan to
stipulated.
Manila was the vessel's first voyage after drydocking. The Philippine
- Therefore, the damage and impairment suffered by the
goods during the transportation, due to fortuitous event, Coast Guard Station in Cebu cleared it as seaworthy, fitted and
force majeure, or the nature and inherent defect of the equipped; it met all requirements for trading as cargo vessel.
things, shall be for the account and risk of the shipper.
- The burden of proof of these accidents is on the Who was Negligent: Seamen or Stevedores?
carrier.
- "Art. 362. The carrier, however, shall be liable for damages NSC had the burden of proving that the damage to the cargo was
arising from the cause mentioned in the preceding article if caused by the negligence of the officers and the crew of MV Vlasons I
proofs against him show that they occurred on account of his in making their vessel seaworthy and fit for the carriage of tinplates.
negligence or his omission to take the precautions usually NSC failed to discharge this burden. NSC argues that MV Vlasons I had
adopted by careful persons, unless the shipper committed fraud
used an old and torn tarpaulin or canvas to cover the hatches through
in the bill of lading, making him to believe that the goods
which the cargo was loaded into the cargo hold of the ship. It faults
were of a class or quality different from what they really were."
the Court of Appeals for failing to consider such claim as an
"uncontroverted fact and denies that MV Vlasons I "was equipped with
new canvas covers in tandem with the old ones as indicated in the - Such negligence is evident in the stevedores hired by NSC, not
Marine Protest..." SC DISAGREED closing the hatch of MV 'VLASONS I' when rains occurred
during the discharging of the cargo thus allowing rainwater and
The records sufficiently support VSI's contention that the ship used seawater spray to enter the hatches and to drift to and fall on
the old tarpaulin, only in addition to the new one used primarily the cargo. The stevedores merely set up temporary tents or
canvas to cover the hatch openings when it rained during the
to make the ship's hatches watertight. The foregoing are clear from
unloading operations so that it would be easier for them to
the marine protest of the master of the MV Vlasons I, Antonio C.
resume work after the rains stopped by just removing said tents
Dumlao, and the deposition of the ship's boatswain, Jose Pascua. That
or canvass. It has also been shown that VSI President Vicente
due diligence was exercised by the officers and the crew of the MV Angliongto wrote NSC calling attention to the manner the
Vlasons I was further demonstrated by the fact that, despite stevedores hired by NSC were discharging the cargo on rainy
encountering rough weather twice, the new tarpaulin did not give way days and the improper closing of the hatches which allowed
and the ship's hatches and cargo holds remained waterproof. It was continuous heavy rain water to leak through and drip to the tin
the stevedores of NSC who were negligent in unloading the cargo plates' covers and Angliongto also suggesting that due to 4
from the ship. The stevedores employed only the tent-like material days continuous rains with strong winds that the hatches be
to cover the hatches when strong rains occasioned by a passing totally closed down and covered with canvas and the hatch
typhoon disrupted the loading of the cargo. This tent-like covering, tents lowered. This letter was received by NSC while discharging
however, was clearly inadequate for keeping rain and seawater operations were still going on.
away from the hatches of the ship. Vicente Angliongto, an officer
of VSI, testified. The fact that NSC actually accepted and proceeded to remove the
cargo from the ship during unfavorable weather will not make VSI
NSC attempts to discredit the testimony of Angliongto by questioning liable for any damage caused thereby. The NSC may seek
his failure to complain immediately about the stevedores' negligence indemnification from the stevedoring company at fault in the
on the first day of unloading, pointing out that he wrote his letter to discharge operations. "A. stevedore company engaged in discharging
petitioner only seven days later. The Court is not persuaded. cargo... has the duty to load the cargo ... in a prudent manner, and it
- Angliongto's candid answer in his testimony satisfactorily is liable for injury to, or loss of, cargo caused by its negligence ... and
explained the delay. Seven days lapsed because he first called where the officers and members and crew of the vessel do nothing
the attention of the stevedores, then the NSC's representative, and have no responsibility in the discharge of cargo by stevedores ...
about the negligent and defective procedure adopted in the vessel is not liable for loss of, or damage to, the cargo caused by
unloading the cargo. This series of actions constitutes a the negligence of the stevedores..."
reasonable response in accord with common sense and ordinary
human experience. Angliongto could not be blamed for calling Do Tin Plates sweat? A discussion of this issue appears inconsequential
the stevedores' attention first and then the NSC's representative and unnecessary. The damage to the tin plates was occasioned not
on location before formally informing NSC of the negligence he by airborne moisture but by contact with rain and seawater which the
had observed, because he was not responsible for the stevedores negligently allowed to seep in during the unloading.
stevedores or the unloading operations. In fact, he was merely
expressing concern for NSC which was ultimately responsible for
Effect of NSC's Failure to Insure the Cargo. The obligation of NSC
the stevedores it had hired and the performance of their task
to insure the cargo stipulated in the Contract of Voyage Charter Hire is
to unload the cargo.
totally separate and distinct from the contractual or statutory
responsibility that may be incurred by VSI for damage to the cargo cargo vessel, is in seaworthy condition, meets all requirements,
caused by the willful negligence of the officers and the crew of fitted and equipped for trading as a cargo vessel was cleared
MV Vlasons I. NSC's failure to insure the cargo will not affect its by the Philippine Coast Guard and sailed for Cebu Port on July
right, as owner and real party in interest, to file an action against 10, 1974." 4. At any rate, it should be stressed that NSC has
VSI for damages caused by the latter's willful negligence. the burden of proving that MV Vlasons I was not seaworthy.

Demurrage
- We do not find anything in the charter party that would make
the liability of VSI for damage to the cargo contingent on or
affected in any manner by NSC's obtaining an insurance over The contract of voyage charter hire provides inter alia:
the cargo. 2. Cargo : Full cargo of steel products of not less than 2,500 MT, 10%
more or less at Master's option.
Admissibility of Certificates Proving Seaworthiness 6. Loading/Discharging Rate : 750 tons per WWDSHINC.
- NSC argues that the certificates are hearsay for not having been 7. Demurrage/Dispatch : P8,000.00/P4,000.00 per day."
presented in accordance with the Rules of Court. It points out
that Exhibits 3, 4 and 11 allegedly are "not written records or The Court defined demurrage in its strict sense as the compensation
acts of public officers"; while Exhibits 5, 6, 7, 8, 9, 11 and 12 provided for in the contract of affreightment for the detention of
are not "evidenced by official publications or certified true the vessel beyond the laytime or that period of time agreed on for
copies" as required by Sections 25 and 26, Rule 132, of the loading and unloading of cargo. It is given to compensate the
Rules of Court.
shipowner for the nonuse of the vessel.
- Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are inadmissible, for they
have not been properly offered as evidence. Exhibits 3 and 4
On the other hand, the following is well-settled: "Laytime runs
are certificates issued by private parties, but they have not been
proven by one who saw the writing executed, or by evidence of according to the particular clause of the charter party... If laytime is
the genuineness of the handwriting of the maker, or by a expressed in 'running days,' this means days when the ship would be
subscribing witness. Exhibits 5, 6, 7, 8, 9, and 12 are run continuously, and holidays are not excepted. A qualification of
photocopies, but their admission under the best evidence rule 'weather permitting' excepts only those days when bad weather
have not been demonstrated. reasonably prevents the work contemplated."
- We find, however, that Exhibit 11 is admissible under a well-
settled exception to the hearsay rule per Section 44 of Rule The contract of voyage charter hire provided for a four-day laytime; it
130 of the Rules of Court, which provides that "(e)ntries in also qualified laytime as WWDSHINC or weather working days Sundays
official records made in the performance of a duty by a and holidays included. The running of laytime was thus made subject
public officer of the Philippines, or by a person in the to the weather, and would cease to run in the event unfavorable
performance of a duty specially enjoined by law, are prima
weather interfered with the unloading of cargo. NSC may not be
facie evidence of the facts therein stated." Exhibit 11 is an
held liable for demurrage as the four-day laytime allowed it did
original certificate of the Philippine Coast Guard in Cebu issued
not lapse, having been tolled by unfavorable weather condition in
by Lieutenant Junior Grade Noli C. Flores to the effect that "the
vessel 'VLASONS I', was drydocked... and PCG Inspectors were view of the WWDSHINC qualification agreed upon by the parties.
sent on board for inspection... After completion of drydocking
and duly inspected by PCG Inspectors, the vessel 'VLASONS I', a It was an error for the trial court and the CA to have found and
affirmed respectively that NSC incurred eleven days of delay in
unloading the cargo. The trial court arrived at this erroneous finding 10. Other terms: (a) All terms/conditions of NONYAZAI C/P
by subtracting from the twelve days, specifically August 13, 1974 to [sic] or other internationally recognized Charter Party Agreement shall
August 24, 1974, the only day of unloading unhampered by unfavorable form part of this Contract.
weather or rain which was August 22, 1974.

Attorney’s Fees. While VSI was compelled to litigate to protect its Valenzuela Hardwood v CA
rights, such fact by itself will not justify an award of attorney's fees
under Article 2208 of the Civil Code when "... no sufficient showing of
Recit-ready summary
bad faith would be reflected in a party's persistence in a case other than
an erroneous conviction of the righteousness of his cause..." Moreover,
Valenzuela Hardwood and Industrial Supply, Inc. (VHIS) entered into an
attorney's fees may not be awarded to a party for the reason alone
agreement with the Seven Brothers whereby the latter undertook to load on
that the judgment rendered was favorable to the latter, as this is
board its vessel M/V Seven Ambassador the former’s lauan round logs
tantamount to imposing a premium on one's right to litigate or seek
numbering 940 at the port of Maconacon, Isabela for shipment to Manila.
judicial redress of legitimate grievances.
VHIS insured the logs against loss and/or damage with South Sea Surety
and Insurance Co. The contract between the parties had a stipulation which
V. Disposition
says “owners (ship owner) shall not be responsible for loss, split, short-
landing, breakages and any kind of damages to the cargo.”
● CA decision AFFIRMED
● MODIFICATION: demurrage awarded to VSA deleted
VHIS demanded payment from the insurer and the ship owner. The said
vessel sank resulting in the loss of VHIS’ insured logs. VHIS demanded
VI. Notes
from South Sea Surety the payment of the proceeds of the policy but the
1. 1.. . latter denied liability under the policy for non-payment of premium. VHIS
2. Cargo: Full cargo of steel products of not less than 2,500 likewise filed a formal claim with Seven Brothers for the value of the lost logs
MT, 10% more or less at Master's option. but the latter denied the claim.
3. . .
4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment The parties agree that the proximate cause of the sinking of M/V Seven
upon presentation of Bill of Lading within fifteen (15) days. Ambassadors resulting in the loss of its cargo was the "snapping of the
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974 iron chains and the subsequent rolling of the logs to the portside due to
6. Loading/Discharging Rate: 750 tons per WWDSHINC. the negligence of the captain in stowing and securing the logs on board the
(Weather Working Day of 24 consecutive hours, Sundays and Holidays vessel and not due to fortuitous event."
Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day. VHIS alleges that it can still recover damages from respondent because
8. . . . the stipulation in the contract is void for being contrary to Article 586
9. Cargo Insurance: Charterer's and/or Shipper's must insure and 587 of the Code of Commerce and Articles 1170 and 1173 of the
the cargoes. Shipowners not responsible for losses/damages except on Civil Code. Citing Article 1306 and paragraph 1, Article 1409 of the Civil
proven willful negligence of the officers of the vessel. Code, petitioner is saying that the stipulation "gives no duty or obligation
to the private respondent to observe the diligence of a good father of a any damage to the cargo, thereby exempting the private carrier from
family in the custody and transportation of the cargo." any responsibility for loss or damage thereto.

Whether the the stipulation valid? I. Facts of the case

Yes because it’s a contract of private carriage.
Valenzuela Hardwood entered into a contract with the Seven Brothers
In a contract of private carriage, the parties may validly stipulate that whereby the latter undertook to load on board its vessel M/V Seven
responsibility for the cargo rests solely on the charterer, exempting the Ambassador the former’s lauan round logs numbering 940 at the port of
shipowner from liability for loss of or damage to the cargo caused even by Maconacon, Isabela for shipment to Manila.
the negligence of the ship captain. Pursuant to Article 1306 of the Civil
Code, such stipulation is valid because it is freely entered into by the parties On 20 January 1984, plaintiff insured the logs against loss and/or damage
and the same is not contrary to law, morals, good customs, public order, or with defendant South Sea Surety and Insurance Co., Inc. for P2,000,000.00
public policy. Indeed, their contract of private carriage is not even a and the latter issued its Marine Cargo Insurance Policy. The check for the
contract of adhesion. We stress that in a contract of private carriage, the premium payment was subsequently given to by the petitioner Victorio Chua.
parties may freely stipulate their duties and obligations which perforce In the meantime, the said vessel M/V Seven Ambassador sank on 25 January
would be binding on them. 1984 resulting in the loss of the petitioner’s insured logs. 5 days after the
sinking of the ship, a check for P5,625.00 to cover payment of the premium
Whether there was a valid waiver. and documentary stamps due on the policy was tendered due to the insurer
YES but was not accepted. South Sea Surety and Insurance Co., Inc. cancelled the
insurance policy it issued as of the date of the inception for non-payment of
VHIS is alleging that the charter party stipulation is contrary to Articles 586 the premium due in accordance with Section 77 of the Insurance Code.
and 587 of the Code of Commerce which confer on petitioner the right to
recover damages from the shipowner and ship agent for the acts or conduct RTC found that the insurance company was liable as well as Seven Brothers.
of the captain. This reached the Court of Appeals which then affirmed the RTC judgment by
sustaining the liability of South Sea Surety and Insurance Company ("South
According to the SC, the rights petitioner may have under such statutory Sea"), but modified it by holding that Seven Brothers Shipping Corporation
provisions were waived when it entered into the charter party. Under Article 6 ("Seven Brothers") was not liable for the lost cargo. The CA stated that “It
of the Civil Code provides that "rights may be waived, unless the waiver is appears that there is a stipulation in the charter party that the ship owner
contrary to law, public order, public policy, morals, or good customs, or would be exempted from liability in case of loss. The trial court erred in
prejudicial to a person with a right recognized by law." applying the provisions of the Civil Code on common carriers to establish the
liability of the shipping corporation. The provisions on common carriers
General rule: patrimonial rights may be waived as opposed to rights to should not be applied where the carrier is not acting as such but as a private
personality and family rights which may not be made the subject of carrier.”
waiver. Being patently and undoubtedly patrimonial, petitioner's right
conferred under said articles may be waived. This, the petitioner did by The parties agree that the proximate cause of the sinking of M/V Seven
acceding to the contractual stipulation that it is solely responsible for Ambassadors resulting in the loss of its cargo was the "snapping of the iron
chains and the subsequent rolling of the logs to the portside due to the
negligence of the captain in stowing and securing the logs on board the
vessel and not due to fortuitous event." Unlike in a contract involving a common carrier, private carriage does not
involve the general public. Hence, the stringent provisions of the Civil Code
The provision in the charter party is “owners shall not be responsible for loss, on common carriers protecting the general public cannot justifiably be
split, short-landing, breakages and any kind of damages to the cargo.” VHIS applied to a ship transporting commercial goods as a private carrier.
alleges that it can still recover damages from respondent because the Consequently, the public policy embodied therein is not contravened by
stipulation in the contract is void for being contrary to Article 586 and 587 of stipulations in a charter party that lessen or remove the protection given by
the Code of Commerce and Articles 1170 and 1173 of the Civil Code. Citing law in contracts involving common carriers.
Article 1306 and paragraph 1, Article 1409 of the Civil Code, petitioner is
saying that the stipulation "gives no duty or obligation to the private As held in a similar case of Home Insurance v. American Steamhsip, “x x x As a
respondent to observe the diligence of a good father of a family in the private carrier, a stipulation exempting the owner from liability for the
custody and transportation of the cargo." negligence of its agent is not against public policy, and is deemed valid. x x x
The Civil Code provisions on common carriers should not be applied where
II. Issue the carrier is not acting as such but as a private carrier. x x x Such policy has
no force where the public at large is not involved, as in this case of a ship
1. Whether the the stipulation valid?Yes because it’s a contract of private totally chartered for the use of a single party.”
carriage
2. Whether there was a valid waiver? Yes there was a valid waiver. VHSI contends that the rule in Home Insurance is not applicable to the
present case because it "covers only a stipulation exempting a private carrier
IV. Ratio from liability for the negligence of his agent, but it does not apply to a
stipulation exempting a private carrier like private respondent from the
1. Yes the stipulation is valid in a contract of private carriage. The parties negligence of his employee or servant which is the situation in this case." This
agree that the proximate cause of the sinking of M/V Seven Ambassadors contention of petitioner is bereft of merit. The case of Home Insurance
resulting in the loss of its cargo was the "snapping of the iron chains and the specifically dealt with "the liability of the shipowner for acts or negligence of
subsequent rolling of the logs to the portside due to the negligence of the its captain and crew" and a charter party stipulation which "exempts the
captain in stowing and securing the logs on board the vessel and not due to owner of the vessel from any loss or damage or delay arising from any other
fortuitous event." It was also undisputed that Seven Brothers was a private source, even from the neglect or fault of the captain or crew or some other
carrier when it was hired to transport the cargo of Petitioner Valenzuela. person employed by the owner on board, for whose acts the owner would
ordinarily be liable except for said paragraph."
In a contract of private carriage, the parties may validly stipulate that
responsibility for the cargo rests solely on the charterer, exempting the Compared to a common carrier offering its services to the general public, a
shipowner from liability for loss of or damage to the cargo caused even by charterer in a contract of private carriage is not similarly situated. In practice,
the negligence of the ship captain. Pursuant to Article 1306 of the Civil Code, the parties in a contract of private carriage can stipulate the carrier's
such stipulation is valid because it is freely entered into by the parties and the obligations and liabilities over the shipment which, in turn, determine the
same is not contrary to law, morals, good customs, public order, or public price or consideration of the charter. Thus, a charterer, in exchange for
policy. In a contract of private carriage, the parties may freely stipulate their convenience and economy, may opt to set aside the protection of the law on
duties and obligations which perforce would be binding on them.
common carriers. When the charterer decides to exercise this option, he takes
a normal business risk. WHEREFORE, premises considered, the petition is hereby DENIED for its utter
failure to show any reversible error on the part of Respondent Court. The
Petitioner Valenzuela insists that the charter party stipulation is contrary to assailed Decision is AFFIRMED.
Articles 586 and 587 of the Code of Commerce which confer on petitioner SO ORDERED.
the right to recover damages from the shipowner and ship agent for the acts Narvasa, C  .J  .,  Davide,  Jr.,  Melo and Francisco, JJ  ., concur.
or conduct of the captain. |||  (Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals, G.R.
No. 102316, [June 30, 1997], 340 PHIL 745-765)
Petitioner argues that the stipulation is void for being contrary to Articles
1170 and 1173 of the Civil Code. The Court notes that the foregoing articles Torres-Madrid v FEB-Mitsui
are applicable only to the obligor or the one with an obligation to perform. In
the instant case, Private Respondent Seven Brothers is not an obligor in
I. Recit-ready Summary
respect of the cargo, for this obligation to bear the loss was shifted to
Sony contracted with TMBI to facilitate, process, withdraw and deliver the
petitioner by virtue of the charter party. This shifting of responsibility, as
shipment of electronic goods from the port of Manila to its warehouse. TMBI,
earlier observed, is not void. The provisions cited by petitioner are, therefore,
not owning any delivery truck, subcontracted BMT for the usage of trucks in
inapplicable to the present case.
order to transport the shipment to the warehouse. 4 BMT trucks picked the
shipment but only 3 trucks arrived at the warehouse. The other truck
Moreover, the factual milieu of this case does not justify the application of
was found to be abandoned with the driver and goods missing.
the second paragraph of Article 1173 of the Civil Code which prescribes the
standard of diligence to be observed in the event the law or the contract is
TMBI notified Sony of the loss through a letter. It also sent BMT a letter
silent. In the instant case, Article 362 of the Code of Commerce provides the
demanding payment for the lost shipment. BMT refused to pay, insisting
standard of ordinary diligence for the carriage of goods by a carrier. The
that the goods were "hijacked."
standard of diligence under this statutory provision may, however, be
modified in a contract or private carriage as the petitioner and private
In the meantime, Sony filed an insurance claim with the Mitsui, the
respondent had done in their charter party.
insurer of the goods. After being subrogated to Sony's rights, Mitsui
sent TMBI a demand letter for payment of the lost goods. TMBI refused
2. Yes the waiver was valid. Whatever rights petitioner may have under such
to pay Mitsui's claim. As a result, Mitsui filed a complaint against TMBI.
statutory provisions were waived when it entered into the charter party.
The RTC held that TMBI was a common carrier and had acted
Article 6 of the Civil Code provides that "(r)ights may be waived, unless the
negligently.
waiver is contrary to law, public order, public policy, morals, or good customs,
or prejudicial to a person with a right recognized by law." As a general rule,
TMBI raised the defense that the hijacking was a fortuitous event. TMBI
patrimonial rights may be waived as opposed to rights to personality and
denies being a common carrier because it does not own a single truck to
family rights which may not be made the subject of waiver. Being patently
transport its shipment and it does not offer transport services to the
and undoubtedly patrimonial, petitioner's right conferred under said articles
public for compensation.
may be waived.

Whether or not a brokerage may be considered a common carrier if it

V. Disposition
also undertakes to deliver the goods for its customers--YES
 Instead of showing that it had acted with extraordinary diligence, TMBI
In A.F. Sanchez Brokerage Inc. v. Court of Appeals, the Court held that a simply argued that it was not a common carrier bound to observe
customs broker - whose principal business is the preparation of the extraordinary diligence. Its failure to successfully establish this premise
correct customs declaration and the proper shipping documents - is still carries with it the presumption of fault or negligence, thus rendering it liable
considered a common carrier if it also undertakes to deliver the goods to Sony/Mitsui for breach of contract.
for its customers. The law does not distinguish between one whose principal
business activity is the carrying of goods and one who undertakes this task Result. Only TMBI is liable to Mitsui for breach of contract of carriage with
only as an ancillary activity. Sony. BMT cannot be held liable because the cause of action that Sony can
possible have against it quasi-delict, but BMT’s negligence was not proved. It
Despite TMBI's present denials, the Court find that the delivery of the came into the picture when TMBI sued it as a party-defendant.
goods is an integral, albeit ancillary, part of its brokerage services. TMBI
admitted that it was contracted to facilitate, process, and clear the shipments TMBI’s remedy. The remedy of TMBI is to demand payment from BMT for
from the customs authorities, withdraw them from the pier, then transport breach of contract. By subcontracting the cargo delivery to BMT, TMBI
and deliver them to Sony's warehouse in Laguna. entered into its own contract of carriage with a fellow common carrier

That TMBI does not own trucks and has to subcontract the delivery of its II. Facts of the case
clients' goods, is immaterial. As long as an entity holds itself to the public for
the transport of goods as a business, it is considered a common carrier A shipment of various electronic goods from Thailand and Malaysia arrived at
regardless of whether it owns the vehicle used or has to actually hire one. the Port of Manila for Sony Philippines, Inc. (Sony). Previous to the arrival,
Sony had engaged the services of TMBI to facilitate, process, withdraw, and
Lastly, TMBI's customs brokerage services - including the deliver the shipment from the port to its warehouse in Binan, Laguna
transport/delivery of the cargo - are available to anyone willing to pay
its fees. Given these circumstances, we find it undeniable that TMBI is a TMBI - who did not own any delivery trucks - subcontracted the services of
common carrier. Benjamin Manalastas' company, BMT Trucking Services (BMT), to transport
the shipment from the port to the Binan warehouse. Incidentally, TMBI
Whether or not hijacking is a fortuitous event--NO. notified Sony who had no objections to the arrangement.
Consequently, Whether or not TMBI is liable-- YES.
Four BMT trucks picked up the shipment from the port at about 11:00 a.m. of
The theft or the robbery of the goods is not considered a fortuitous event or October 7, 2000. However, BMT could not immediately undertake the delivery
a force majeure. Nevertheless, a common carrier may absolve itself of because of the truck ban and because the following day was a Sunday. Thus,
liability for a resulting loss: (1) if it proves that it exercised extraordinary BMT scheduled the delivery on October 9, 2000.
diligence in transporting and safekeeping the goods; or (2) if it
stipulated with the shipper/owner of the goods to limit its liability for In the early morning of October 9, 2000, the four trucks left BMT's garage for
the loss, destruction, or deterioration of the goods to a degree less than Laguna. However, only three trucks arrived at Sony's Binan warehouse.
extraordinary diligence.
At around 12:00 noon, the truck driven by Rufo Reynaldo Lapesura was found TMBI denies being a common carrier because it does not own a single truck
abandoned along the Diversion Road in Filinvest, Alabang, Muntinlupa City. to transport its shipment and it does not offer transport services to the public
Both the driver and the shipment were missing. for compensation. It emphasizes that Sony knew TMBI did not have its own
vehicles and would subcontract the delivery to a third-party.
Later that evening, BMT's Operations Manager Melchor Manalastas informed
Victor Torres, TMBI's General Manager, of the development. TMBI solely blames BMT as it had full control and custody of the cargo when
it was lost. BMT, as a common carrier, is presumed negligent and should be
Victor Torres also filed a complaint with the National Bureau of Investigation responsible for the loss.
(NBI) against Lapesura for "hijacking." The complaint resulted in a
recommendation by the NBI to the Manila City Prosecutor's Office to BMT Argument
prosecute Lapesura for qualified theft.
BMT insists that it observed the required standard of care. Like the petitioner,
TMBI notified Sony of the loss through a letter. It also sent BMT a letter BMT maintains that the hijacking was a fortuitous event - a force majeure -
demanding payment for the lost shipment. BMT refused to pay, insisting that that exonerates it from liability. It points out that Lapesura has never been
the goods were "hijacked." seen again and his fate remains a mystery. BMT likewise argues that the loss
of the cargo necessarily showed that the taking was with the use of force or
In the meantime, Sony filed an insurance claim with the Mitsui, the insurer of intimidation. If there was any attendant negligence, BMT points the finger on
the goods. After evaluating the merits of the claim, Mitsui paid Sony TMBI who failed to send a representative to accompany the shipment.
PHP7,293,386.23 corresponding to the value of the lost goods.
Mitsui Argument
After being subrogated to Sony's rights, Mitsui sent TMBI a demand letter for
payment of the lost goods. TMBI refused to pay Mitsui's claim. As a result, Mitsui counters that neither TMBI nor BMT alleged or proved during the trial
Mitsui filed a complaint against TMBI. that the taking of the cargo was accompanied with grave or irresistible threat,
violence, or force. Hence, the incident cannot be considered "force majeure"
At the trial, it was revealed that BMT and TMBI have been doing business with and TMBI remains liable for breach of contract.
each other since the early 80's. It also came out that there had been a
previous hijacking incident involving Sony's cargo in 1997, but neither Sony Mitsui emphasizes that TMBI's theory - that force or intimidation must have
nor its insurer filed a complaint against BMT or TMBI. been used because Lapesura was never found - was only raised for the first
time before this Court. It also discredits the theory as a mere conjecture for
TMBI Argument lack of supporting evidence.

TMBI insists that the hijacking of the truck was a fortuitous event. It contests III. Issue/s
the CA's finding that neither force nor intimidation was used in the taking of
the cargo. Considering Lapesura was never found, the Court should not Whether or not a brokerage may be considered a common carrier if it also
discount the possibility that he was a victim rather than a perpetrator. undertakes to deliver the goods for its customers? YES.

Whether or not hijacking is a fortuitous event? NO.

 Consequently, Whether or not TMBI is liable? YES. for a resulting loss: (1) if it proves that it exercised extraordinary diligence in
transporting and safekeeping the goods; or (2) if it stipulated with the
Whether or not TMBI and BMT are solidary liable to Mitsui? NO. shipper/owner of the goods to limit its liability for the loss, destruction, or
deterioration of the goods to a degree less than extraordinary diligence.
Whether or not a 3rd party may recover from a common carrier for QD? YES.
However, a stipulation diminishing or dispensing with the common carrier's
IV. Ratio/Legal Basis liability for acts committed by thieves or robbers who do not act with grave
or irresistible threat, violence, or force is void under Article 1745 of the Civil
Brokerage is a Common Carrier Code for being contrary to public policy. Jurisprudence, too, has expanded
Article 1734's five exemptions. De Guzman v. Court of Appeals interpreted
In A.F. Sanchez Brokerage Inc. v. Court of Appeals, the Court held that a Article 1745 to mean that a robbery attended by "grave or irresistible threat,
customs broker - whose principal business is the preparation of the correct violence or force" is a fortuitous event that absolves the common carrier from
customs declaration and the proper shipping documents - is still considered liability.
a common carrier if it also undertakes to deliver the goods for its customers.
The law does not distinguish between one whose principal business activity is In the present case, the shipper, Sony, engaged the services of TMBI, a
the carrying of goods and one who undertakes this task only as an ancillary common carrier, to facilitate the release of its shipment and deliver the goods
activity. to its warehouse. In turn, TMBI subcontracted a portion of its obligation - the
delivery of the cargo - to another common carrier, BMT.
Despite TMBI's present denials, the Court find that the delivery of the goods
is an integral, albeit ancillary, part of its brokerage services. TMBI admitted Despite the subcontract, TMBI remained responsible for the cargo. Under
that it was contracted to facilitate, process, and clear the shipments from the Article 1736, a common carrier's extraordinary responsibility over the
customs authorities, withdraw them from the pier, then transport and deliver shipper's goods lasts from the time these goods are unconditionally placed in
them to Sony's warehouse in Laguna. the possession of, and received by, the carrier for transportation, until they
are delivered, actually or constructively, by the carrier to the consignee.
That TMBI does not own trucks and has to subcontract the delivery of its
clients' goods, is immaterial. As long as an entity holds itself to the public for That the cargo disappeared during transit while under the custody of BMT -
the transport of goods as a business, it is considered a common carrier TMBI's subcontractor - did not diminish nor terminate TMBFs responsibility
regardless of whether it owns the vehicle used or has to actually hire one. over the cargo. Article 1735 of the Civil Code presumes that it was at fault.

Lastly, TMBI's customs brokerage services - including the transport/delivery Instead of showing that it had acted with extraordinary diligence, TMBI
of the cargo - are available to anyone willing to pay its fees. Given these simply argued that it was not a common carrier bound to observe
circumstances, we find it undeniable that TMBI is a common carrier. extraordinary diligence. Its failure to successfully establish this premise carries
with it the presumption of fault or negligence, thus rendering it liable to
Hijacking not a Fortuitous Event Sony/Mitsui for breach of contract.

The theft or the robbery of the goods is not considered a fortuitous event or TMBI's current theory - that the hijacking was attended by force or
a force majeure. Nevertheless, a common carrier may absolve itself of liability intimidation - is untenable.
 carriage with Sony/Mitsui. Accordingly, there is no basis to directly hold BMT
First, TMBI alleged in its Third Party Complaint against BMT that Lapesura was liable to Mitsui for quasi-delict.
responsible for hijacking the shipment. Further, Victor Torres filed a criminal
complaint against Lapesura with the NBI. These actions constitute direct and BMT liable to TMBI for Breach of Contract
binding admissions that Lapesura stole the cargo. Justice and fair play dictate
that TMBI should not be allowed to change its legal theory on appeal. By subcontracting the cargo delivery to BMT, TMBI entered into its own
contract of carriage with a fellow common carrier.
Second, neither TMBI nor BMT succeeded in substantiating this theory
through evidence. Thus, the theory remained an unsupported allegation no The cargo was lost after its transfer to BMT's custody based on its contract of
better than speculations and conjectures. The CA therefore correctly carriage with TMBI. Following Article 1735, BMT is presumed to be at fault.
disregarded the defense of force majeure. Since BMT failed to prove that it observed extraordinary diligence in the
performance of its obligation to TMBI, it is liable to TMBI for breach of their
TMBI and BMT not Solidarily Liable contract of carriage.

TMBI's liability to Mitsui does not stem from a quasi-delict (culpa aquiliana) In these lights, TMBI is liable to Sony (subrogated by Mitsui) for breaching
but from its breach of contract (culpa contractual). The tie that binds TMBI the contract of carriage. In turn, TMBI is entitled to reimbursement from BMT
with Mitsui is contractual, albeit one that passed on to Mitsui as a result of due to the latter's own breach of its contract of carriage with TMBI. The
TMBI's contract of carriage with Sony to which Mitsui had been subrogated proverbial buck stops with BMT who may either: (a) absorb the loss, or (b)
as an insurer who had paid Sony's insurance claim. The legal reality that proceed after its missing driver, the suspected culprit, pursuant to Article
results from this contractual tie precludes the application of quasi-delict 2181
based Article 2194.
V. Disposition
3rd Party may recover from Common Carrier for Quasi-Delict
WHEREFORE, the Court hereby ORDERS petitioner Torres- Madrid Brokerage,
While it is undisputed that the cargo was lost under the actual custody of Inc. to pay the respondent FEB Mitsui Marine Insurance Co., Inc. the
BMT (whose employee is the primary suspect in the hijacking or robbery of following:
the shipment), no direct contractual relationship existed between Sony/Mitsui
and BMT. If at all, Sony/Mitsui's cause of action against BMT could only arise a. Actual damages in the amount of PHP 7,293,386.23 plus legal
from quasi-delict, as a third party suffering damage from the action of interest from the time the complaint was filed until it is fully paid;
another due to the latter's fault or negligence, pursuant to Article 2176 of the b. Attorney's fees in the amount of PHP 200,000.00; and
Civil Code. c. Costs of suit.

Respondent Benjamin P. Manalastas is in turn ORDERED to REIMBURSE

In the present case, Mitsui's action is solely premised on TMBl's breach of
Torres-Madrid Brokerage, Inc. of the above-mentioned amounts.
contract. Mitsui did not even sue BMT, much less prove any negligence on its
part. If BMT has entered the picture at all, it 'is because TMBI sued it for
reimbursement for the liability that TMBI might incur from its contract of
Cokaliong Shipping v UCPB Yes, liable. To the extent of value in bill of lading

Having originated from an unchecked crack in the fuel oil service tank,
the fire could not have been caused by force majeure. Broadly speaking,
I. Recit-ready summary
force majeure generally applies to a natural accident, such as that caused by
Cargoes [Christmas decor and plastic toys] were delivered to Cokaliong lightning, an earthquake, a tempest or a public enemy. Hence, fire is not
for shipment from Cebu to Surigao Del Sur. The 2 cargoes were covered considered a natural disaster or calamity.
by bills of lading 58 and 59. On bill of lading 58, the value of the goods as
stated on its face was P6,500. On bill of lading 59, the value of the goods as The law provides that a common carrier is presumed to have been
stated on its face was P14,000. Bills of Lading covering the lost goods negligent if it fails to prove that it exercised extraordinary vigilance over
contain the stipulation that in case of claim for loss or for damage to the the goods it transported. Here, petitioner failed to show that it exercised
shipped merchandise or property, "[t]he liability of the common carrier . extraordinary diligence over the goods transported. Ensuring the
. . shall not exceed the value of the goods as appearing in the bill of seaworthiness of the vessel is the first step in exercising the required
lading." vigilance. Petitioner did not present sufficient evidence showing what
Feliciano Legaspi insured the cargo for the amount of P50,000 for the goods measures or acts it had undertaken to ensure the seaworthiness of the
covered under bill of lading 58 and P100,000 for the goods covered under vessel. It failed to show when the last inspection and care of the auxiliary
bill of lading 59. engine fuel oil service tank was made, what the normal practice was for its
The vessel, while on its voyage, burned down despite earnest efforts of maintenance, or some other evidence to establish that it had exercised
the officers and crew of the vessel. The cargo was also destroyed along extraordinary diligence. It merely stated that constant inspection and care
with the vessel. were not possible, and that the last time the vessel was dry-docked was in
Feliciana Legaspi then filed a claim with respondent UCPB and the latter November 1990. Necessarily, in accordance with Article 1735 17 of the Civil
issued checks for the insurance policy proceeds. Feliciana Legaspi in return, Code, we hold petitioner responsible for the loss of the goods covered
also executed subrogation receipts/deeds for the amount received. by Bills of Lading Nos. 58 and 59.

Now, respondents as subrogee of Feliciana Legaspi filed a complaint Extent of liability

anchored on torts against petitioner for the collection of the total A stipulation that limits liability is valid as long as it is not against public
principal amount of P148,500 which it paid to Feliciana Legaspi for the policy. In the present case, the stipulation limiting petitioner's liability is
loss of the cargo. not contrary to public policy. In fact, it is just and reasonable character is
evident. The shippers/consignees may recover the full value of the goods
If petitioner would be held liable, respondent contends that petitioner's by the simple expedient of declaring the true value of the shipment in
liability should be based on the actual insured value of the goods, the Bill of Lading. Other than the payment of a higher freight, there was
subject of this case. On the other hand, petitioner claims that its liability nothing to stop them from placing the actual value of the goods therein.
should be limited to the value declared by the shipper/consignee in the
Bill of Lading. The SC also agreed with the CA which said “respondent is not bound by the
valuation of the cargo under the Bills of Lading, ...nor is the value of the cargo
Whether the petitioner is liable for the loss of the goods; if yes, under said Bills of Lading conclusive on the respondent. This is so because, in
what is the extent of its liability. the first place, the goods were insured with the respondent for the total
amount of P150,000.00, which amount may be considered as the face Now, respondents as subrogee of Feliciana Legaspi filed a complaint
value of the goods.” anchored on torts against petitioner for the collection of the total principal
amount of P148,500 which it paid to Feliciana Legaspi for the loss of the
The liability of a common carrier for the loss of goods may, by cargo.
stipulation in the bill of lading, be limited to the value declared by the If petitioner would be held liable, respondent contends that petitioner's
shipper. On the other hand, the liability of the insurer is determined by liability should be based on the actual insured value of the goods, subject of
the actual value covered by the insurance policy and the insurance this case. On the other hand, petitioner claims that its liability should be
premiums paid therefor, and not necessarily by the value declared in the limited to the value declared by the shipper/consignee in the Bill of Lading.
bill of lading.
III. Issue/s
II. Facts of the case
Whether petitioner is liable for the loss of the goods; if yes, what is the extent
Petitioner – COKALIONG SHIPPING LINES of its liability.
Respondent – UCPB GENERAL INSURANCE
IV. Ratio/Legal Basis
Nestor Angelia delivered to Edgar Cokaliong Shipping Lines cargo
consisting of 1 carton of Christmas décor and 2 sacks of plastic toys to be Cause of the loss was not due to force majeure
transported on board MV Tandag on its Voyage T-189. It is scheduled to
depart on 12 December 1991 from Cebu City to Surigao Del Sur. This was The uncontroverted findings of the Philippine Coast Guard show that the
covered by bill of lading no. 58 the value on the face thereof was P6,500. M/V Tandag sank due to a fire, which resulted from a crack in the auxiliary
Zosimo Mercado also loaded cargo on board petitioner’s vessel 2 engine fuel oil service tank. Fuel spurted out of the crack and dripped to the
cartons of plastic toys, Christmas décor, floor mat, and a bundle of various heating exhaust manifold, causing the ship to burst into flames. The crack
assorted goods from Cebu to Surigao Del Sur. This was covered by bill of was located on the side of the fuel oil tank, which had a mere two-inch gap
lading no. 59 and the value on the face thereof was P14,000. from the engine room walling, thus precluding constant inspection and care
Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59 , by the crew. Having originated from an unchecked crack in the fuel oil service
with the respondent for the amount of P100,000.00 'against all-risks’ tank, the fire could not have been caused by force majeure. Broadly speaking,
under Open Policy No. 002/91/254 for which she was issued, by respondent, force majeure generally applies to a natural accident, such as that caused by
Marine Risk Note No. 18409 on said date. She also insured the cargo covered a lightning, an earthquake, a tempest or a public enemy. Hence, fire is not
by Bill of Lading No. 58,with respondent, for the amount of P50,000.00, considered a natural disaster or calamity.
under Open Policy No. 002/91/254 on the basis of which respondent
issued Marine Risk Note No. 18410 on said date. The law provides that a common carrier is presumed to have been negligent
The vessel while on its voyage burned down despite earnest efforts of if it fails to prove that it exercised extraordinary vigilance over the goods it
the officers and crew of the vessel. The cargo were also list along with the transported. Ensuring the seaworthiness of the vessel is the first step in
vessel. So, the Captain filed the required marine protest. exercising the required vigilance. Petitioner did not present sufficient
Feliciana Legaspi then filed a claim with respondent and the latter issued evidence showing what measures or acts it had undertaken to ensure the
checks for the insurance policy proceeds. Feliciana Legaspi in return, also seaworthiness of the vessel. It failed to show when the last inspection and
executed subrogation receipts/deeds for the amount received. care of the auxiliary engine fuel oil service tank was made, what the normal
practice was for its maintenance, or some other evidence to establish that it ruling, petitioner should not be held liable for more than what was declared
had exercised extraordinary diligence. It merely stated that constant by the shippers/consignees as the value of the goods in the bills of lading.
inspection and care were not possible, and that the last time the vessel was
dry-docked was in November 1990. Necessarily, in accordance with Article Payment to whom
1735 17 of the Civil Code, we hold petitioner responsible for the loss of the
goods covered by Bills of Lading Nos. 58 and 59. Feliciana Legaspi was the owner of the goods covered by Bills of
Lading Nos. 58 and 59. Undoubtedly, the goods were merely consigned to
Extent of Liability Nestor Angelia and Zosimo Mercado, respectively; thus, Feliciana Legaspi or
The record sshow that the Bills of Lading covering the lost goods contain the her subrogee (respondent) was entitled to the goods or, in case of loss, to
stipulation that in case of claim for loss or for damage to the shipped compensation therefor. There is no evidence showing that petitioner paid her
merchandise or property, "[t]he liability of the common carrier . . . shall for the loss of those goods. It does not even claim to have paid her.
not exceed the value of the goods as appearing in the bill of lading." On the other hand, Legaspi Marketing filed with petitioner a claim for
A stipulation that limits liability is valid as long as it is not against public the lost goods under Bill of Lading No. 59, for which the latter subsequently
policy. In the present case, the stipulation limiting petitioner's liability is not paid P14,000. But nothing in the records convincingly shows that the former
contrary to public policy. In fact, it is just and reasonable character is evident. was the owner of the goods. Respondent was, however, able to prove that it
The shippers/consignees may recover the full value of the goods by the was Feliciana Legaspi who owned those goods, and who was thus entitled to
simple expedient of declaring the true value of the shipment in the Bill of payment for their loss. Hence, the claim for the goods under Bill of Lading
Lading. Other than the payment of a higher freight, there was nothing to stop No. 59 cannot be deemed to have been extinguished, because payment was
them from placing the actual value of the goods therein. In fact, they made to a person who was not entitled thereto.
committed fraud against the common carrier by deliberately undervaluing
the goods in their Bill of Lading, thus depriving the carrier of its proper and Extent of liability
just transport fare. With regard to the claim for the goods that were covered by Bill of
Concededly, the purpose of the limiting stipulation in the Bill of Lading No. 58 and valued at P6,500, the parties have not convinced us to
Lading is to protect the common carrier. Such stipulation obliges the disturb the findings of the CA that compensation could not validly take place.
shipper/consignee to notify the common carrier of the amount that the latter Thus, we uphold the appellate court's ruling on this point. This is what the CA
may be liable for in case of loss of the goods. The common carrier can then said: “Finally, it ruled that respondent "is not bound by the valuation of the
take appropriate measures — getting insurance, if needed, to cover or cargo under the Bills of Lading, ...nor is the value of the cargo under said Bills
protect itself. This precaution on the part of the carrier is reasonable and of Lading conclusive on the respondent. This is so because, in the first place,
prudent. Hence, a shipper/consignee that undervalues the real worth of the the goods were insured with the respondent for the total amount of
goods it seeks to transport does not only violate a valid contractual P150,000.00, which amount may be considered as the face value of the
stipulation, but commits a fraudulent act when it seeks to make the common goods.”
carrier liable for more than the amount it declared in the bill of lading. The liability of a common carrier for the loss of goods may, by
In Aboitiz v. CA, the description of the nature and the value of the stipulation in the bill of lading, be limited to the value declared by the
goods shipped were declared and reflected in the bill of lading, like in the shipper. On the other hand, the liability of the insurer is determined by the
present case. The Court therein considered this declaration as the basis of the actual value covered by the insurance policy and the insurance premiums
carrier's liability and ordered payment based on such amount. Following this paid therefor, and not necessarily by the value declared in the bill of lading.
It is well to point out that, for assuming a higher risk (the alleged actual value
of the goods) the insurance company was paid the correct higher premium
by Feliciana Legaspi; while petitioner was paid a fee lower than what it was
entitled to for transporting the goods that had been deliberately undervalued
by the shippers in the Bill of Lading. Between the two of them, the insurer
should bear the loss in excess of the value declared in the Bills of Lading. This
is the just and equitable solution.

V. Notes