TRANSPORTATION LAW CASES
De Guzman v. CA b. Act of the public enemy in war, whether international or civil;
Facts:
Respondent Ernesto Cendana was a junk dealer. He buys scrap
materials and brings those that he gathered to Manila for resale
using 2 six-wheeler trucks. On the return trip to Pangasinan,
respondent would load his vehicle with cargo which various
merchants wanted delivered, charging fee lower than the
commercial rates. Sometime in November 1970, petitioner
Pedro de Guzman contracted with respondent for the delivery
of 750 cartons of Liberty Milk. On December 1, 1970,
respondent loaded the cargo. Only 150 boxes were delivered to
petitioner because the truck carrying the boxes was hijacked
along the way. Petitioner commenced an action claiming the
value of the lost merchandise. Petitioner argues that respondent,
being a common carrier, is bound to exercise extraordinary
diligence, which it failed to do. Private respondent denied that
he was a common carrier, and so he could not be held liable for
force majeure. The trial court ruled against the respondent, but
such was reversed by the Court of Appeals.
Issues:
(1) Whether or not private respondent is a common carrier
(2) Whether private respondent is liable for the loss of the goods
Held:
(1) Article 1732 makes no distinction between one whose
principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary
activity. Article 1732 also carefully avoids making any
distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general
community or population, and one who offers services or
solicits business only from a narrow segment of the general
population. It appears to the Court that private respondent is
properly characterized as a common carrier even though he
merely "back-hauled" goods for other merchants from Manila
to Pangasinan, although such backhauling was done on a
periodic or occasional rather than regular or scheduled manner,
and even though private respondent's principal occupation was
not the carriage of goods for others. There is no dispute that
private respondent charged his customers a fee for hauling their
goods; that fee frequently fell below commercial freight rates is
not relevant here. A certificate of public convenience is not a
requisite for the incurring of liability under the Civil Code
provisions governing common carriers.
(2) Article 1734 establishes the general rule that common
carriers are responsible for the loss, destruction or deterioration
of the goods which they carry, "unless the same is due to any of
the following causes only:
a. Flood, storm, earthquake, lightning, or other natural disaster
or calamity;
c. Act or omission of the shipper or owner of the goods;
d. The character of the goods or defects in the packing or in the
containers; and
e. Order or act of competent public authority."
The hijacking of the carrier's truck - does not fall within any of
the five (5) categories of exempting causes listed in Article
1734. Private respondent as common carrier is presumed to
have been at fault or to have acted negligently. This
presumption, however, may be overthrown by proof of
extraordinary diligence on the part of private respondent. We
believe and so hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are reached
where the goods are lost as a result of a robbery which is
attended by "grave or irresistible threat, violence or force." we
hold that the occurrence of the loss must reasonably be regarded
as quite beyond the control of the common carrier and properly
regarded as a fortuitous event. It is necessary to recall that even
common carriers are not made absolute insurers against all risks
of travel and of transport of goods, and are not held liable for
acts or events which cannot be foreseen or are inevitable,
provided that they shall have complied with the rigorous
standard of extraordinary diligence.
Bascos v. CA
Facts:
Rodolfo Cipriano, representing CIPTRADE, entered into a
hauling contract with Jibfair Shipping Agency Corporation
whereby the former bound itself to haul the latter’s 2000m/tons
of soya bean meal from Manila to Calamba. CIPTRADE
subcontracted with petitioner Estrellita Bascos to transport and
deliver the 400 sacks of soya beans. Petitioner failed to deliver
the cargo, and as a consequence, Cipriano paid Jibfair the
amount of goods lost in accordance with their contract. Cipriano
demanded reimbursement from petitioner but the latter refused
to pay. Cipriano filed a complaint for breach of contract of
carriage. Petitioner denied that there was no contract of carriage
since CIPTRADE leased her cargo truck, and that the hijacking
was a force majeure. The trial court ruled against petitioner.
Issues:
(1) Was petitioner a common carrier?
(2) Was the hijacking referred to a force majeure?
Held:
(1) Article 1732 of the Civil Code defines a common carrier as
"(a) person, corporation or firm, or association engaged in the
business of carrying or transporting passengers or goods or
both, by land, water or air, for compensation, offering their
services to the public." The test to determine a common carrier
is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general
public as his occupation rather than the quantity or extent of the
business transacted." In this case, petitioner herself 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 evidence is required to prove the same.
(2) Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by them.
Accordingly, they are presumed to have been at fault or to have
acted negligently if the goods are lost, destroyed or deteriorated.
There are very few instances when the presumption of
negligence does not attach and these instances are enumerated
in Article 1734. In those cases where the presumption is
applied, the common carrier must prove that it exercised
extraordinary diligence in order to overcome the presumption.
The presumption of negligence was raised against petitioner. It
was petitioner's burden to overcome it. Thus, contrary to her
assertion, private respondent need not introduce any evidence
to prove her negligence. Her own failure to adduce sufficient
proof of extraordinary diligence made the presumption
conclusive against her.
NATIONAL STEEL CORPORATION v.
COURT OF APPEALS
G.R. No. 112287 December 12, 1997
Panganiban, J.
Doctrine:
The stringent provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be applied to a
private carrier.
Facts:
Plaintiff National Steel Corporation (NSC) as Charterer and
defendant Vlasons Shipping, Inc. (VSI) as Owner, entered into
a Contract of Voyage Charter Hire whereby NSC hired VSI’s
vessel, the MV Vlasons I to make one voyage to load steel
products at Iligan City and discharge them at North Harbor,
Manila. The handling, loading and unloading of the cargoes
were the responsibility of the Charterer.
The skids of tinplates and hot rolled sheets shipped were
allegedly found to be wet and rusty. Plaintiff, alleging
negligence, filed a claim for damages against the defendant who
denied liability claiming that the MV Vlasons I was seaworthy
in all respects for the carriage of plaintiff’s cargo; that said
vessel was not a “common carrier” inasmuch as she was under
voyage charter contract with the plaintiff as charterer under the
charter party; that in the course its voyage, the vessel
encountered very rough seas.
Issue:
Whether or not the provisions of the Civil Code on common
carriers pursuant to which there exists a presumption of
negligence against the common carrier in case of loss or damage
to the cargo are applicable to a private carrier.
Held:
No. In a contract of private carriage, the parties may freely
stipulate their duties and obligations which perforce would be
binding on them. Unlike in a contract involving a common
carrier, private carriage does not involve the general public.
Hence, the stringent provisions of the Civil Code on common
carriers protecting the general public cannot justifiably be
applied to a ship transporting commercial goods as a private
carrier.
It has been held that the true test of a common carrier is the
carriage of passengers or goods, provided it has space, for all
who opt to avail themselves of its transportation service for a
fee [Mendoza vs. Philippine Airlines, Inc., 90 Phil. 836, 842-
843 (1952)]. A carrier which does not qualify under the above
test is deemed a private carrier. “Generally, private carriage is
undertaken by special agreement and the carrier does not hold
himself out to carry goods for the general public.
Because the MV Vlasons I was a private carrier, the ship
owner’s obligations are governed by the foregoing provisions
of the Code of Commerce and not by the Civil Code which, as
a general rule, places the prima facie presumption of negligence
on a common carrier.
First Philippine Industrial Corp. vs. CA
Facts:
Petitioner is a grantee of a pipeline concession under Republic
Act No. 387. Sometime in January 1995, petitioner applied for
mayor’s permit in Batangas. However, the Treasurer required
petitioner to pay a local tax based on gross receipts amounting
to P956,076.04. In order not to hamper its operations, petitioner
paid the taxes for the first quarter of 1993 amounting to
P239,019.01 under protest. On January 20, 1994, petitioner
filed a letter-protest to the City Treasurer, claiming that it is
exempt from local tax since it is engaged in transportation
business. The respondent City Treasurer denied the protest,
thus, petitioner filed a complaint before the Regional Trial
Court of Batangas for tax refund. Respondents assert that
pipelines are not included in the term “common carrier” which
refers solely to ordinary carriers or motor vehicles. The trial
court dismissed the complaint, and such was affirmed by the
Court of Appeals.
Issue:
Whether a pipeline business is included in the term “common
carrier” so as to entitle the petitioner to the exemption
Held:
Article 1732 of the Civil Code defines a "common carrier" as
"any person, corporation, firm or association engaged in the
business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their
services to the public."
The test for determining whether a party is a common carrier of
goods is:
(1) He must be engaged in the business of carrying goods for
others as a public employment, and must hold himself out as
ready to engage in the transportation of goods for person
generally as a business and not as a casual occupation;
(2) He must undertake to carry goods of the kind to which his
business is confined;
(3) He must undertake to carry by the method by which his
business is conducted and over his established roads; and
(4) The transportation must be for hire.
Based on the above definitions and requirements, there is no
doubt that petitioner is a common carrier. It is engaged in the
business of transporting or carrying goods, i.e. petroleum
products, for hire as a public employment. It undertakes to carry
for all persons indifferently, that is, to all persons who choose
to employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele
does not exclude it from the definition of a common carrier.
Calvo v. UCPB General Insurance Case Digest
Calvo v. UCPB General Insurance
G.R. No. 148496 March 19, 2002
Facts: Petitioner Virgines Calvo, owner of Transorient
Container Terminal Services, Inc. (TCTSI), and a custom
broker, entered into a contract with San Miguel Corporation
(SMC) for the transfer of 114 reels of semi-chemical fluting
paper and 124 reels of kraft liner board from the port area to the
Tabacalera Compound, Ermita, Manila. The cargo was insured
by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, contained in 30 metal vans, arrived in Manila
on board “M/V Hayakawa Maru”. After 24 hours, they were
unloaded from vessel to the custody of the arrastre operator,
Manila Port Services, Inc. From July 23 to 25, 1990, petitioner,
pursuant to her contract with SMC, withdrew the cargo from the
arrastre operator and delivered it to SMC’s warehouse in
Manila. On July 25, the goods were inspected by Marine Cargo
Surveyors, reported that 15 reels of the semi-chemical fluting
paper were “wet/stained/torn” and 3 reels of kraft liner board
were also torn. The damages cost P93,112.00.
SMC collected the said amount from respondent UCPB under
its insurance contract. Respondent on the other hand, as a
subrogee of SMC, brought a suit against petitioner in RTC,
Makati City. On December 20, 1995, the RTC rendered
judgment finding petitioner liable for the damage to the
shipment. The decision was affirmed by the CA.
Issue: Whether or not Calvo is a common carrier?
Held: In this case the contention of the petitioner, that he is not
a common carrier but a private carrier, has no merit.
Article 1732 makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and
one who does such carrying only as ancillary activity. Article
1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular
or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and
one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1733
deliberately refrained from making such distinction. (De
Guzman v. CA, 68 SCRA 612)
Te concept of “common carrier” under Article 1732 coincide
with the notion of “public service”, under the Public Service
Act which partially supplements the law on common carrier.
Under Section 13, paragraph (b) of the Public Service Act, it
includes:
“ x x x every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or compensation,
with general or limited clientele, whether permanent,
occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction
railway, subway motor vehicle, either for freight or passenger,
or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express
service, steamboat, or steamship line, pontines, ferries and
water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or dock, ice
plant, ice-refrigeration plant, canal, irrigation system, gas,
electric light, heat and power, water supply and power
petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other
similar public services. x x x”
FGU INSURANCE CORPORATION vs. G.P.S
TRUCKING CORPORATION and LAMBERT
M. EROLES
G.R.No. 141910 06August2002
FACTS OF THE CASE:
G.P. Sarmiento Trucking Corporation (GPS) undertook to
deliver on 18 June 1994 thirty (30) units of Condura S.D. white
refrigerators aboard one of its Isuzu truck, driven by Lambert
Eroles. While the truck was traversing the north diversion road
along McArthur highway in Barangay Anupol, Bamban, Tarlac,
it collided with an unidentified truck, causing it to fall into a
deep canal, resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment,
paid to Concepcion Industries, Inc., the value of the covered
cargoes: P204, 450.00. FGU, in turn, being the subrogee of the
rights and interests of the insured sought reimbursement of the
amount, from GPS. Since GPS failed to heed the claim, FGU
filed a complaint for damages and breach of contract of carriage
against GPS and its driver with the Regional Trial Court,
Branch 66, of Makati City. In its answer, respondents asserted
that GPS was the exclusive hauler only of Concepcion
Industries, Inc., since 1988, and it was not so engaged in
business as a common carrier. Respondents further claimed that
the cause of damage was purely accidental. GPS, instead of
submitting its evidence, filed with leave of court a motion to
dismiss the complaint by way of demurrer to evidence on the
ground that petitioner had failed to prove that it was a common
carrier. The RTC and CA both ruled in favor of the
Respondent.
ISSUES OF THE CASE:
WHETHER RESPONDENT GPS, EITHER AS A COMMON
CARRIER OR A PRIVATE CARRIER, MAY BE
PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE
GOODS IT UNDERTOOK TO TRANSPORT SAFELY
WERE SUBSEQUENTLY DAMAGED WHILE IN ITS
PROTECTIVE CUSTODY AND POSSESSION.
- In culpa contractual, upon which the action of petitioner rests
as being the subrogee of Concepcion Industries, Inc., the mere
proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief.
Thus, FGU has a claim for the amount paid out.
- The law, recognizing the obligatory force of contracts, will not
permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a
contravention of the tenor thereof
- GPS recognizes the existence of a contract 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
custody. In such a situation, a default on, or failure of
compliance with, the obligation in this case, the delivery of the
goods in its custody to the place of destination - gives rise to a
presumption of lack of care and corresponding liability on the
part of the contractual obligor the burden being on him to
establish otherwise. GPS has failed to do so.
HELD:
The decision of the lower courts insofar as Lambert M. Eroles
is concerned is affirmed but assailed decision with regard to
GPS trucking is reversed. It, is hereby ordered to pay FGU
Insurance Corporation the value of the damaged and lost
cargoes in the amount of P204, 450.00
Obligations and Contracts Terms:
• expectation interest- the interest in having the benefit of his
bargain by being put in as good a position as he would have
been in had the contract been performed
• reliance interest- the interest in being reimbursed for loss
caused by reliance on the contract by being put in as good a
position as he would have been in had the contract not been
made
• Restitution interest- which is his interest in having restored to
him any benefit that he has conferred on the other party.
• Subrogee- the person or entity that assumes the legal right to
attempt to collect a claim of another (subrogor) in return for
paying the other's expenses or debts which the other claims
against a third party. A subrogee is usually the insurance
company which has insured the party whose expenses were
paid.
Phil Am Gen Insurance Co, Et Al. V. PKS
Shipping Co (2003)
G.R. No. 149038 April 9, 2003
Lessons Applicable: Charter Party (Transportation)
FACTS:
 Davao Union Marketing Corporation (DUMC) contracted
the services of PKS Shipping Company (PKS Shipping)
for the shipment to Tacloban City of 75,000 bags of cement
worth P3,375,000.
 DUMC insured the goods for its full value with Philippine
American General Insurance Company (Philamgen).
 The goods were loaded aboard the dumb barge Limar
I belonging to PKS Shipping.
 December 22, 1988 9 pm: While Limar I was being towed
by PKS’ tugboat MT Iron Eagle, the barge sank a couple
of miles off the coast of Dumagasa Point, in Zamboanga
del Sur, bringing down with it the entire cargo of 75,000
bags of cement.
 DUMC filed a formal claim with Philamgen for the full
amount of the insurance. Philamgen promptly made
payment; it then sought reimbursement from PKS
Shipping of the sum paid to DUMC but the shipping
company refused to pay so Philamgen to file suit against
PKS Shipping
 RTC: dismissed the complaint - fortuitous event
 CA:Affirmed - not a common carrier but a casual
occupation
ISSUE: W/N PKS Shipping is NOT liable since it was NOT a
common carrier
HELD: NO. Petition is DENIED
Article 1732. Common carriers are persons, corporations, firms
or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public
 Complementary is Section 13, paragraph (b), of the Public
Service Act
public service" to be –
"x x x every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street
railway, subway motor vehicle, either for freight or passenger,
or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express
service, steamboat, or steamship, or steamship line, pontines,
ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop,
wharf or dock, ice plant, ice refrigeration plant, canal, irrigation
system, gas, electric light, heat and power, water supply and
power petroleum, sewerage system, wire or wireless
communication systems, wire or wireless broadcasting stations
and other similar public services
 So understood, the concept of `common carrier’ under
Article 1732 may be seen to coincide neatly with the notion
of `public service,’ under the Public Service Act
 distinction between:
 common or public carrier
 private or special carrier - character of the business, such
that if the undertaking is an isolated transaction , not a part
of the business or occupation, and the carrier does not hold
itself out to carry the goods for the general public or to a
limited clientele, although involving the carriage of goods
for a fee
 EX: charter party which includes both the vessel and its
crew, such as in a bareboat or demise, where the charterer
obtains the use and service of all or some part of a ship for
a period of time or a voyage or voyages and gets the control
of the vessel and its crew.
 The regularity of its activities in this area indicates more
than just a casual activity on its part
 The appellate court ruled, gathered from the testimonies
and sworn marine protests of the respective vessel masters
ofLimar I and MT Iron Eagle, that there was no way by
which the barge’s or the tugboat’s crew could have
prevented the sinking of Limar I. The vessel was suddenly
tossed by waves of extraordinary height of 6 to 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 of the barge issued by the Philippine
Coastguard and the Coastwise Load Line Certificate would
attest to the seaworthiness of Limar I and should
strengthen the factual findings of the appellate court.
 Findings of fact of the Court of Appeals generally conclude
this Court; none of the recognized exceptions from the rule
- (1) when the factual findings of the Court of Appeals and
the trial court are contradictory; (2) when the conclusion is
a finding grounded entirely on speculation, surmises, or
conjectures; (3) when the inference made by the Court of
Appeals from its findings of fact is manifestly mistaken,
absurd, or impossible; (4) when there is a grave abuse of
discretion in the appreciation of facts; (5) when the
appellate court, in making its findings, went beyond the
issues of the case and such findings are contrary to the
admissions of both appellant and appellee; (6) when the
judgment of the Court of Appeals is premised on a
misapprehension of facts; (7) when the Court of Appeals
failed to notice certain relevant facts which, if properly
considered, would justify a different conclusion; (8) when
the findings of fact are themselves conflicting; (9) when
the findings of fact are conclusions without citation of the
specific evidence on which they are based; and (10) when
the findings of fact of the Court of Appeals are premised
on the absence of evidence but such findings are
contradicted by the evidence on record – would appear to
be clearly extant in this instance.
Asia Lighterage and Shipping, Inc vs CA
FACTS:
Asia Lighterage and Shipping, Inc was contracted as carrier to
deliver 3,150 metric tons of Better Western White Wheat in
bulk, (US$423,192.35) to the consignee‘s (General Milling
Corporation) warehouse at Bo. Ugong, Pasig City insured by
Prudential Guarantee and Assurance, Inc. against loss/damage
for P14,621,771.75.
It appears that on August 17, 1990, the transport of said cargo
was suspended due to a warning of an incoming typhoon.
PSTSI III was tied down to other barges which arrived ahead of
it while weathering out the storm that night. A few days after,
the barge developed a list because of a hole it sustained after
hitting an unseen protuberance underneath the water. It filed a
Marine Protest on August 28, 1990 and also secured the
services of Gaspar Salvaging Corporation to refloat the barge.
The barge was then towed to ISLOFF terminal before it finally
headed towards the consignee’s wharf on September 5, 1990.
Upon reaching the Sta. Mesa spillways, the barge again ran
aground due to strong current.
7 days later, a bidding was conducted to dispose of the damaged
wheat retrieved & loaded on the 3 other barges. The total
proceeds from the sale of the salvaged cargo was P201,379.75.
ISSUES:
1. Whether petitioner is a common carrier.
2. Assuming petitioner is a common carrier, whether it
exercised extraordinary care and diligence in its care and
custody of the consignee’s cargo.
HELD:
1. Petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as
persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their
services to the public.
In De Guzman vs. CA it was held that the definition of common
carriers in Article 1732 of the Civil Code makes no distinction
between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only
as an ancillary activity. There is also no distinction between a
person or enterprise offering transportation service on a
regular/scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis.]
The test to determine a common carrier is “whether the given
undertaking is a part of the business engaged in by the carrier
which he has held out to the general public as his occupation
rather than the quantity or extent of the business transacted.” In
the case at bar, the petitioner admitted that it is engaged in the
business of shipping, lighterage and drayage, offering its barges
to the public, despite its limited clientele for
carrying/transporting goods by water for compensation.
2. The findings of the lower courts should be upheld. Petitioner
failed to exercise extraordinary diligence in its care and custody
of the consignee’s goods.
Common carriers are bound to observe extraordinary diligence
in the vigilance over the goods transported by them. They are
presumed to have been at fault or to have acted negligently if
the goods are lost, destroyed or deteriorated. To overcome the
presumption of negligence in the case of loss, destruction or
deterioration of the goods, the common carrier must prove that
it exercised extraordinary diligence.There are, however,
exceptions
Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is
due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
In the case at bar, the barge completely sank after its towing bits
broke, resulting in the total loss of its cargo. Petitioner claims
that this was caused by a typhoon, hence, it should not be held
liable for the loss of the cargo. However, petitioner failed to
prove that the typhoon is the proximate and only cause of the
loss of the goods, and that it has exercised due diligence before,
during and after the occurrence of the typhoon to
prevent/minimize the loss. The evidence show that, even before
the towing bits of the barge broke, it had already previously
sustained damage when it hit a sunken object while docked at
the Engineering Island. It even suffered a hole. Clearly, this
could not be solely attributed to the typhoon. Thus, when
petitioner persisted to proceed with the voyage, it recklessly
exposed the cargo to further damage.
Moreover, petitioner still headed to the consignee’s wharf
despite knowledge of an incoming typhoon. During the time
that the barge was heading towards the consignee’s wharf on
September 5, 1990, typhoon “Loleng” has already entered the
Philippine area of responsibility.
Crisostomo v. Court of Appeals
G.R. No. 138334; August 25, 2003
YNARES-SANTIAGO, J.:
FACTS:
In May 1991, petitioner Estela L. Crisostomo contracted the
services of respondent Caravan Travel and Tours International,
Inc. to arrange and facilitate her booking, ticketing and
accommodation in a tour dubbed “Jewels of Europe”. The
package tour included the countries of England, Holland,
Germany, Austria, Liechstenstein, Switzerland and France at a
total cost of P74,322.70. Pursuant to said contract, Menor,
respondent Company’s ticketing manager, went to her aunt’s
residence on June 12, 1991 – Wednesday – to deliver
petitioner’s travel documents and plane tickets. Menor then told
her to be at the Ninoy Aquino International Airport (NAIA) on
Saturday, two hours before her flight on board British Airways.
Without checking her travel documents, petitioner went to
NAIA on Saturday, June 15, 1991, to take the flight for the first
leg of her journey from Manila to Hong Kong. To petitioner’s
dismay, she discovered that the flight she was supposed to take
had already departed the previous day. She learned that her
plane ticket was for the flight scheduled on June 14, 1991. She
thus called up Menor to complain. Subsequently, Menor
prevailed upon petitioner to take another tour the “British
Pageant” which included England, Scotland and Wales in its
itinerary. For this tour package, petitioner was asked anew to
pay US$785.00 or P20,881.00.
She gave respondent US$300 or P7,980.00 as partial payment
and commenced the trip in July 1991. Upon petitioner’s return
from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference
between the sum she paid for “Jewels of Europe” and the
amount she owed respondent for the “British Pageant” tour.
Despite several demands, respondent company refused to
reimburse the amount, contending that the same was non-
refundable. Petitioner was thus constrained to file a complaint
against respondent for breach of contract of carriage and
damages at Regional Trial Court of Makati City.
The trial court held that respondent was negligent in
erroneously advising petitioner of her departure date through its
employee, Menor, who was not presented as witness to rebut
petitioner’s testimony. However, petitioner should have
verified the exact date and time of departure by looking at her
ticket and should have simply not relied on Menor’s verbal
representation. The trial court thus declared that petitioner was
guilty of contributory negligence and accordingly, deducted
10% from the amount being claimed as refund. Respondent
appealed to the Court of Appeals, which likewise found both
parties to be at fault. However, the appellate court held that
petitioner is more negligent than respondent because as a
lawyer and well-traveled person, she should have known better
than to simply rely on what was told to her. This being so, she
is not entitled to any form of damages. Petitioner also forfeited
her right to the “Jewels of Europe” tour and must therefore pay
respondent the balance of the price for the “British Pageant”
tour.
ISSUE:
Is the contract a Contract of Carriage?
HELD:
No. By definition, a contract of carriage or transportation is one
whereby a certain person or association of persons obligate
themselves to transport persons, things, or news from one place
to another for a fixed price.9 Such person or association of
persons are regarded as carriers and are classified as private or
special carriers and common or public carriers. A common
carrier is defined under Article 1732 of the Civil Code as
persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or
both, by land, water or air, for compensation, offering their
services to the public.
It is obvious from the above definition that respondent is not an
entity engaged in the business of transporting either passengers
or goods and is therefore, neither a private nor a common
carrier. Respondent did not undertake to transport petitioner
from one place to another since its covenant with its customers
is simply to make travel arrangements in their behalf.
Respondent’s services as a travel agency include procuring
tickets and facilitating travel permits or visas as well as booking
customers for tours.
While petitioner concededly bought her plane ticket through the
efforts of respondent company, this does not mean that the latter
ipso facto is a common carrier. At most, respondent acted
merely as an agent of the airline, with whom petitioner
ultimately contracted for her carriage to Europe. Respondent’s
obligation to petitioner in this regard was simply to see to it that
petitioner was properly booked with the airline for the
appointed date and time. Her transport to the place of
destination, meanwhile, pertained directly to the airline.
The object of petitioner’s contractual relation with respondent
is the latter’s service of arranging and facilitating petitioner’s
booking, ticketing and accommodation in the package tour. In
contrast, the object of a contract of carriage is the transportation
of passengers or goods. It is in this sense that the contract
between the parties in this case was an ordinary one for services
and not one of carriage. Petitioner’s submission is premised on
a wrong assumption.
SCHMITZ TRANSPORT & BROKERAGE
CORPORATION v. TRANSPORT VENTURE,
INC., INDUSTRIAL INSURANCE COMPANY,
LTD., et al.
456 SCRA 557 (2005)
A common carrier shall exercise extraordinary diligence to
prevent and/or minize the loss or destruction of goods.
SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk,
Russia on board M/V ―Alexander Saveliev‖ (a vessel of
Russian registry and owned by respondent Black Sea) 545 hot
rolled steel sheets. The vessel arrived at the port of Manila and
the Philippine Ports Authority (PPA) assigned it a place of berth
at the outside breakwater at the Manila South Harbor. Petitioner
Schmitz Transport, engaged to secure the requisite clearances,
to receive the cargoes from the shipside, and to deliver them to
Little Giant Steelpipe Corporation‘s warehouse at Cainta, Rizal.
It likewise engaged the services of respondent Transport
Venture Inc. (TVI) to send a barge and tugboat at shipside.
The tugboat, after positioning the barge alongside the vessel,
left and returned to the port terminal. Later on, arrastre operator
commenced to unload 37 of the 545 coils from the vessel unto
the barge. By noon the next day, during which the weather
condition had become inclement due to an approaching storm,
the unloading unto the barge of the 37 coils was accomplished.
However, there was no tugboat that pulled the barge back to the
pier. Eventually, because of the strong waves, the crew of the
barge abandoned it and transferred to the vessel. The barge
capsized, washing the 37 coils into the sea. Earnest efforts on
the part of both the consignee Little Giant and Industrial
Insurance to recover the lost cargoes proved futile.
Industrial Insurance later filed a complaint against Schmitz
Transport, TVI and Black Sea through its representative
Inchcape (the defendants) before the RTC of Manila, for the
recovery of the amount it paid to Little Giant plus adjustment
fees, attorney‘s fees, and litigation expenses. Industrial
Insurance won and the Schmitz et al.’s motion for
reconsideration is denied.
In effect, Schmitz now filed charges against TVI et al. It asserts
that in chartering the barge and tugboat of TVI, it was acting for
its principal, consignee Little Giant, hence, the transportation
contract was by and between Little Giant and TVI. The Court
rendered a decision holding Schmitz and TVI liable.
ISSUES:
Whether or not the liability for the loss may attach to Black Sea,
Schmitz and TVI
HELD:
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 the proximate cause of
the loss. A man of ordinary prudence would not leave 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 any power of its own and is totally
defenseless from the ravages of the sea. That it was nighttime
and, therefore, the members of the crew of a tugboat would be
charging overtime pay did not excuse TVI from calling for one
such tugboat.
As for Schmitz, 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 minimize the loss, before, during
and after the occurrence of the storm in order that it may be
exempted from liability for the loss of the goods.
While Schmitz sent checkers and a supervisor on board the
vessel to counter-check the operations of TVI, it failed to take
all available and reasonable precautions to avoid the loss. After
noting that TVI failed to arrange for the 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.
The Court holds then that Schmitz and TVI are solidarily liable
for the loss of the cargoes. As for Black Sea, its duty as a
common carrier extended only from the time the goods were
surrendered or unconditionally placed in its possession and
received for transportation until they were delivered actually or
constructively to consignee Little Giant
Parties to a contract of carriage may, however, agree upon a
definition of delivery that extends the services rendered by the
carrier. In the case at bar, Bill of Lading No. 2 covering the
shipment provides that delivery be made ―to the port of
discharge or so near thereto as she may safely get, always
afloat.‖ The 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 consignee
contracted the services of petitioner. Since Black Sea had
constructively delivered the cargoes to Little Giant, through
Schmitz, it had discharged its duty.
In fine, no liability may thus attach to Black Sea.
 G.R. No. 165647 Case Digest
G.R. No. 165647, March 26, 2009
Philippines First Insurance Co., Inc.
vs Wallem Phils. Shipping, Inc.
Ponente: Tinga
Facts:
October 1995, Anhui Chemicals Import and Export Corp.
loaded on board M/S Offshore Master a shipment consisting of
sodium sulphate anhydrous, complete and in good order for
transportation to and delivery at the port of Manila for
consignee, covered by a clean bill of lading.
On October 16, 1995, the shipment arrived in port of manila and
was discharged which caused various degrees of spillage and
losses as evidence by the turn over survey of the arrastre
operator. Asia Star Freight delivered the shipments from pier to
the consignees in Quezon City, during the unloading, it was
found by the consignee that the shipment was damaged and in
bad condition.
April 29, 1996, the consignee filed a claim with Wallem for the
value of the damaged shipment, to no avail. Since the shipment
was insured with Phil. First Insurance against all risks in the
amount of P2,470,213.50. The consignee filed a claim against
the First Insurance. First insurance after examining the turn-
over survey, the bad order certificate and other documents paid
the consignee but later on sent a demand letter to Wallem for
the recovery of the amount paid to the consignee (in exercise of
its right of subrogation). Wallem did not respond to the claim.
First Insurance then instituted an action before RTC for
damages against Wallem. RTC held the shipping company and
the arrastre operator solidarily liable since both are charged
with the obligation to deliver the goods in good order condition.
The CA reversed and set aside the RTC's decision. CA says that
there is no solidary liability between the carrier and the arrastre
because it was clearly established that the damage and losses of
the shipment were attributed to the mishandling by the arrastre
operator in the discharge of the shipment.
Issues:
1. Whether or not the Court of Appeals erred in not holding that
as a common carrier, the carriers duties extend to the obligation
to safely discharge the cargo from the vessel;
2. Whether or not the carrier should be held liable for the cost
of the damaged shipment;
3. Whether or not Wallems failure to answer the extra judicial
demand by petitioner for the cost of the lost/damaged shipment
is an implied admission of the formers liability for said goods;
4. Whether or not the courts below erred in giving credence to
the testimony of Mr. Talens.
Ruling:
(1) Yes, the vessel is a common carrier, and thus the
determination of the existence or absence of liability will be
gauged on the degree of diligence required of a common carrier.
(2) The first and second issue will be resolved concurrently.
(3) The damage of the shipment was documented by the
turn0over survey and request for bad order survey, with these
documents, petitioner insist that the shipment incurred damages
while still in the care and responsibility of Wallem before it was
turned over to the arrastre operator. However, RTC found the
testimony of Mr. Talens (cargo surveyor) that the loss was
caused by the mishandling of the arrastre operator. This
mishandling was affirmed by the CA which was the basis for
declaring the arrastre operator solely liable for the damage.
It is established that damage or losses were incurred by the
shipment during the unloading. As common carrier, they are
bound to observe extraordinary diligence in the vigilance over
the goods transported by them. Subject to certain exceptions
enumerated under Article 1734 of the Civil Code, common
carriers are responsible for the loss, destruction, or deterioration
of the goods. The extraordinary responsibility of the common
carrier lasts from the time the goods are unconditionally placed
in the possession of, and received by the carrier for
transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person
who has a right to receive them.
For marine vessels, Article 619 of the Code of Commerce
provides that the ship captain is liable for the cargo from the
time it is turned over to him at the dock or afloat alongside the
vessel at the port of loading, until he delivers it on the shore or
on the discharging wharf at the port of unloading, unless agreed
otherwise.
COGSA provides that under every contract of carriage of goods
by sea, the carrier in relation to the loading, handling, stowage,
carriage, custody, care, and discharge of such goods, shall be
subject to the responsibilities and liabilities and entitled to the
rights and immunities set forth in the Act. Section 3 (2) thereof
then states that among the carriers responsibilities are to
properly and carefully load, handle, stow, carry, keep, care for,
and discharge the goods carried.
On the other hand, the functions of an arrastre operator involve
the handling of cargo deposited on the wharf or between the
establishment of the consignee or shipper and the ship's tackle.
Being the custodian of the goods discharged from a vessel, an
arrastre operator's duty is to take good care of the goods and to
turn them over to the party entitled to their possession.
Handling cargo is mainly the arrastre operator's principal work
so its drivers/operators or employees should observe the
standards and measures necessary to prevent losses and damage
to shipments under its custody. Thus, in this case the appellate
court is correct insofar as it ruled that an arrastre operator and a
carrier may not be held solidarily liable at all times. But the
precise question is which entity had custody of the shipment
during its unloading from the vessel?
The records are replete with evidence which show that the
damage to the bags happened before and after their discharge
and it was caused by the stevedores of the arrastre operator who
were then under the supervision of Wallem.
It is settled in maritime law jurisprudence that cargoes while
being unloaded generally remain under the custody of the
carrier. In the instant case, the damage or losses were incurred
during the discharge of the shipment while under the
supervision of the carrier. Consequently, the carrier is liable for
the damage or losses caused to the shipment. As the cost of the
actual damage to the subject shipment has long been settled, the
trial courts finding of actual damages in the amount of
P397,879.69 has to be sustained.
(4) Mr Talens credibility must be respected.
CA's decision is set aside. Wallem is liable.
G.R. No. 166250 July 26, 2010
UNSWORTH TRANSPORT
INTERNATIONAL (PHILS.), INC., Petitioner,
vs.
COURT OF APPEALS and PIONEER
INSURANCE AND SURETY
CORPORATION, Respondents.
Facts: On August 31, 1992, the shipper Sylvex Purchasing
Corporation delivered to UTI a shipment of 27 drums of various
raw materials for pharmaceutical manufacturing, consisting of:
"1) 3 drums (of) extracts, flavoring liquid, flammable liquid x x
x banana flavoring; 2) 2 drums (of) flammable liquids x x x
turpentine oil; 2 pallets. STC: 40 bags dried yeast; and 3) 20
drums (of) Vitabs: Vitamin B Complex Extract." UTI issued
Bill of Lading No. C320/C15991-2, covering the aforesaid
shipment. The subject shipment was insured with private
respondent Pioneer Insurance and Surety Corporation in favor
of Unilab against all risks in the amount of P1,779,664.77 under
and by virtue of Marine Risk Note Number MC RM UL 0627
92 and Open Cargo Policy No. HO-022-RIU.
On the same day that the bill of lading was issued, the
shipment was loaded in a sealed 1x40 container van, with no.
APLU-982012, boarded on APL’s vessel M/V "Pres. Jackson,"
Voyage 42, and transshipped to APL’s M/V "Pres. Taft" for
delivery to petitioner in favor of the consignee United
Laboratories, Inc. (Unilab).
On September 30, 1992, the shipment arrived at the
port of Manila. On October 6, 1992, petitioner received the said
shipment in its warehouse after it stamped the Permit to Deliver
Imported Goods procured by the Champs Customs Brokerage.
Three days thereafter, or on October 9, 1992, Oceanica Cargo
Marine Surveyors Corporation (OCMSC) conducted a stripping
survey of the shipment located in petitioner’s warehouse.
Consequently, Unilab’s quality control representative
rejected one paper bag containing dried yeast and one steel
drum containing Vitamin B Complex as unfit for the intended
purpose. On November 7, 1992, Unilab filed a formal claim for
the damage against private respondent and UTI. On November
20, 1992, UTI denied liability on the basis of the gate pass
issued by Jardine that the goods were in complete and good
condition; while private respondent paid the claimed amount on
March 23, 1993. By virtue of the Loss and Subrogation
Receipt issued by Unilab in favor of private respondent, the
latter filed a complaint for Damages against APL, UTI and
petitioner with the RTC of Makati.
Issue: Whether or not petitioner is a common carrier.
Held: Admittedly, petitioner is a freight forwarder. The term
"freight forwarder" refers to a firm holding itself out to the
general public (other than as a pipeline, rail, motor, or water
carrier) to provide transportation of property for compensation
and, in the ordinary course of its business, (1) to assemble and
consolidate, or to provide for assembling and consolidating,
shipments, and to perform or provide for break-bulk and
distribution operations of the shipments; (2) to assume
responsibility for the transportation of goods from the place of
receipt to the place of destination; and (3) to use for any part of
the transportation a carrier subject to the federal law pertaining
to common carriers.
A freight forwarder’s liability is limited to damages
arising from its own negligence, including negligence in
choosing the carrier; however, where the forwarder contracts to
deliver goods to their destination instead of merely arranging
for their transportation, it becomes liable as a common carrier
for loss or damage to goods. A freight forwarder assumes the
responsibility of a carrier, which actually executes the transport,
even though the forwarder does not carry the merchandise itself.
Undoubtedly, UTI is liable as a common carrier.
Common carriers, as a general rule, are presumed to have been
at fault or negligent if the goods they transported deteriorated
or got lost or destroyed. That is, unless they prove that they
exercised extraordinary diligence in transporting the goods. In
order to avoid responsibility for any loss or damage, therefore,
they have the burden of proving that they observed such
diligence. Mere proof of delivery of the goods in good order to
a common carrier and of their arrival in bad order at their
destination constitutes a prima facie case of fault or negligence
against the carrier. If no adequate explanation is given as to how
the deterioration, loss, or destruction of the goods happened, the
transporter shall be held responsible.

LOADMASTERS CUSTOMS SERVICES, INC.,
vs. GLODEL BROKERAGE CORPORATION
and R&B INSURANCE CORPORATION, /
G.R. No. 179446 / January 10, 2011
FACTS:
The case is a petition for review on certiorari under Rule
45 of the Revised Rules of Court assailing the August 24, 2007
Decision of the Court of Appeals (CA) in CA-G.R. CV No.
82822.
On August 28, 2001, R&B Insurance issued Marine
Policy No. MN-00105/2001 in favor of Columbia to insure the
shipment of 132 bundles of electric copper cathodes against All
Risks. On August 28, 2001, the cargoes were shipped on board
the vessel "Richard Rey" from Isabela, Leyte, to Pier
10, North Harbor, Manila. They arrived on the same date.
Columbia engaged the services of Glodel for the release
and withdrawal of the cargoes from the pier and the subsequent
delivery to its warehouses/plants. Glodel, in turn, engaged the
services of Loadmasters for the use of its delivery trucks to
transport the cargoes to Columbia’s warehouses/plants in
Bulacan and Valenzuela City.
The goods were loaded on board twelve (12) trucks
owned by Loadmasters, driven by its employed drivers and
accompanied by its employed truck helpers. Of the six (6)
trucks route to Balagtas, Bulacan, only five (5) reached the
destination. One (1) truck, loaded with 11 bundles or 232 pieces
of copper cathodes, failed to deliver its cargo.
Later on, the said truck, was recovered but without the
copper cathodes. Because of this incident, Columbia filed with
R&B Insurance a claim for insurance indemnity in the amount
ofP1,903,335.39. After the investigation, R&B Insurance
paid Columbia the amount ofP1,896,789.62 as insurance
indemnity.
R&B Insurance, thereafter, filed a complaint for
damages against both Loadmasters and Glodel before the
Regional Trial Court, Branch 14, Manila (RTC), It sought
reimbursement of the amount it had paid to Columbia for the
loss of the subject cargo. It claimed that it had been subrogated
"to the right of the consignee to recover from the party/parties
who may be held legally liable for the loss."
On November 19, 2003, the RTC rendered a
decision holding Glodel liable for damages for the loss of the
subject cargo and dismissing Loadmasters’ counterclaim for
damages and attorney’s fees against R&B Insurance.
Both R&B Insurance and Glodel appealed the RTC
decision to the CA.
On August 24, 2007, the CA rendered that the appellee
is an agent of appellant Glodel, whatever liability the latter owes
to appellant R&B Insurance Corporation as insurance
indemnity must likewise be the amount it shall be paid by
appellee Loadmasters. Hence, Loadmasters filed the present
petition for review on certiorari.
ISSUE:
Whether or not Loadmasters and Glodel are common carriers to
determine their liability for the loss of the subject cargo.
RULING:
The petition is PARTIALLY GRANTED. Judgment is
rendered declaring petitioner Loadmasters Customs Services,
Inc. and respondent Glodel Brokerage Corporation jointly and
severally liable to respondent
Under Article 1732 of the Civil Code, common carriers are
persons, corporations, firms, or associations engaged in the
business of carrying or transporting passenger or goods, or both
by land, water or air for compensation, offering their services
to the public. Loadmasters is a common carrier because it is
engaged in the business of transporting goods by land, through
its trucking service. It is a common carrier as distinguished from
a private carrier wherein the carriage is generally undertaken by
special agreement and it does not hold itself out to carry goods
for the general public. Glodel is also considered a common
carrier within the context of Article 1732. For as stated and
well provided in the case of Schmitz Transport & Brokerage
Corporation v. Transport Venture, Inc., a customs broker is
also regarded as a common carrier, the transportation of goods
being an integral part of its business.
Loadmasters and Glodel, being both common carriers, are
mandated from the nature of their business and for reasons of
public policy, to observe the extraordinary diligence in the
vigilance over the goods transported by them according to all
the circumstances of such case, as required by Article 1733 of
the Civil Code. When the Court speaks of extraordinary
diligence, it is that extreme measure of care and caution which
persons of unusual prudence and circumspection observe for
securing and preserving their own property or rights. With
respect to the time frame of this extraordinary responsibility,
the Civil Code provides that the exercise of extraordinary
diligence lasts from the time the goods are unconditionally
placed in the possession of, and received by, the carrier for
transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person
who has a right to receive them.
The Court is of the view that both Loadmasters and Glodel are
jointly and severally liable to R & B Insurance for the loss of
the subject cargo. Loadmasters’ claim that it was never privy to
the contract entered into by Glodel with the
consignee Columbia or R&B Insurance as subrogee, is not a
valid defense.
For under ART. 2180. The obligation imposed by Article 2176
is demandable not only for one’s own acts or omissions, but also
for those of persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged in
any business or industry.
It is not disputed that the subject cargo was lost while in the
custody of Loadmasters whose employees (truck driver and
helper) were instrumental in the hijacking or robbery of the
shipment. As employer, Loadmasters should be made
answerable for the damages caused by its employees who acted
within the scope of their assigned task of delivering the goods
safely to the warehouse.
Glodel is also liable because of its failure to exercise
extraordinary diligence. It failed to ensure that Loadmasters
would fully comply with the undertaking to safely transport the
subject cargo to the designated destination. Glodel should,
therefore, be held liable with Loadmasters. Its defense of force
majeure is unavailing.
For the consequence, Glodel has no one to blame but itself. The
Court cannot come to its aid on equitable grounds. "Equity,
which has been aptly described as ‘a justice outside legality,’ is
applied only in the absence of, and never against, statutory law
or judicial rules of procedure." The Court cannot be a lawyer
and take the cudgels for a party who has been at fault or
negligent.
Malayan Insurance Co., Inc vs Philippines First
Insurance Co., Inc
G.R. No. 184300 July 11, 2012
Facts: Since 1989, Wyeth Philippines, Inc. (Wyeth) and
respondent Reputable Forwarder Services, Inc. (Reputable) had
been annually executing a contract of carriage, whereby the
latter undertook to transport and deliver the former’s products
to its customers, dealers or salesmen. On November 18, 1993,
Wyeth procured Marine Policy No. MAR 13797 (Marine
Policy) from respondent Philippines First Insurance Co., Inc.
(Philippines First) to secure its interest over its own products.
Philippines First thereby insured Wyeth’s nutritional,
pharmaceutical and other products usual or incidental to the
insured’s business while the same were being transported or
shipped in the Philippines. The policy covers all risks of direct
physical loss or damage from any external cause, if by land, and
provides a limit of P6,000,000.00 per any one land vehicle. On
December 1, 1993, Wyeth executed its annual contract of
carriage with Reputable. It turned out, however, that the
contract was not signed by Wyeth’s representative/s.
Nevertheless, it was admittedly signed by Reputable’s
representatives, the terms thereof faithfully observed by the
parties and, as previously stated, the same contract of carriage
had been annually executed by the parties every year since
1989. Under the contract, Reputable undertook to answer for
“all risks with respect to the goods and shall be liable to the
COMPANY (Wyeth), for the loss, destruction, or damage of the
goods/products due to any and all causes whatsoever, including
theft, robbery, flood, storm, earthquakes, lightning, and other
force majeure while the goods/products are in transit and until
actual delivery to the customers, salesmen, and dealers of the
COMPANY”. The contract also required Reputable to secure
an insurance policy on Wyeth’s goods. Thus, on February 11,
1994, Reputable signed a Special Risk Insurance Policy (SR
Policy) with petitioner Malayan for the amount of
P1,000,000.00. On October 6, 1994, during the effectivity of the
Marine Policy and SR Policy, Reputable received from Wyeth
1,000 boxes of Promil infant formula worth P2,357,582.70 to
be delivered by Reputable to Mercury Drug Corporation in
Libis, Quezon City. Unfortunately, on the same date, the truck
carrying Wyeth’s products was hijacked by about 10 armed
men. They threatened to kill the truck driver and two of his
helpers should they refuse to turn over the truck and its contents
to the said highway robbers. The hijacked truck was recovered
two weeks later without its cargo. Malayan questions its
liability based on sections 5 and 12 of the SR Policy.
Issue: Whether or not there is double insurance in this case
such that either Section 5 or Section 12 of the SR Policy may
be applied.
Held: No. By the express provision of Section 93 of the
Insurance Code, double insurance exists where the same person
is insured by several insurers separately in respect to the same
subject and interest. The requisites in order for double insurance
to arise are as follows:
1. The person insured is the same;
2. Two or more insurers insuring separately;
3. There is identity of subject matter;
4. There is identity of interest insured; and
5. There is identity of the risk or peril insured against.
In the present case, while it is true that the Marine Policy and
the SR Policy were both issued over the same subject matter,
i.e. goods belonging to Wyeth, and both covered the same peril
insured against, it is, however, beyond cavil that the said
policies were issued to two different persons or entities. It is
undisputed that Wyeth is the recognized insured of Philippines
First under its Marine Policy, while Reputable is the recognized
insured of Malayan under the SR Policy. The fact that
Reputable procured Malayan’s SR Policy over the goods of
Wyeth pursuant merely to the stipulated requirement under its
contract of carriage with the latter does not make Reputable a
mere agent of Wyeth in obtaining the said SR Policy.
The interest of Wyeth over the property subject matter of both
insurance contracts is also different and distinct from that of
Reputable’s. The policy issued by Philippines First was in
consideration of the legal and/or equitable interest of Wyeth
over its own goods. On the other hand, what was issued by
Malayan to Reputable was over the latter’s insurable interest
over the safety of the goods, which may become the basis of the
latter’s liability in case of loss or damage to the property and
falls within the contemplation of Section 15 of the Insurance
Code.
Therefore, even though the two concerned insurance policies
were issued over the same goods and cover the same risk, there
arises no double insurance since they were issued to two
different persons/entities having distinct insurable interests.
Necessarily, over insurance by double insurance cannot
likewise exist. Hence, as correctly ruled by the RTC and CA,
neither Section 5 nor Section 12 of the SR Policy can be applied.
Spouses Teodoro and Nanette Pereña vs Spouses
Nicolas and Teresita Zarate
Civil Law – Common Carrier – Private School Transport are
Common Carriers
Torts and Damages – Heirs of a high school student may be
awarded damages for loss income
In June 1996, Nicolas and Teresita Zarate contracted Teodoro
and Nanette Pereña to transport their (Zarate’s) son, Aaron
Zarate, to and from school. The Pereñas were owners of a van
being used for private school transport.
At about 6:45am of August 22, 1996, the driver of the said
private van, Clemente Alfaro, while the children were on board
including Aaron, decided to take a short cut in order to avoid
traffic. The usual short cut was a railroad crossing of the
Philippine National Railway (PNR).
Alfaro saw that the barandilla (the pole used to block vehicles
crossing the railway) was up which means it was okay to cross.
He then tried to overtake a bus. However, there was in fact an
oncoming train but Alfaro no longer saw the train as his view
was already blocked by the bus he was trying to overtake. The
bus was able to cross unscathed but the van’s rear end was hit.
During the collision, Aaron, was thrown off the van. His body
hit the railroad tracks and his head was severed. He was only 15
years old.
It turns out that Alfaro was not able to hear the train honking
from 50 meters away before the collision because the van’s
stereo was playing loudly.
The Zarates sued PNR and the Pereñas (Alfaro became at-
large). Their cause of action against PNR was based on quasi-
delict. Their cause of action against the Pereñas was based on
breach of contract of common carriage.
In their defense, the Pereñas invoked that as private carriers they
were not negligent in selecting Alfaro as their driver as they
made sure that he had a driver’s license and that he was not
involved in any accident prior to his being hired. In short, they
observed the diligence of a good father in selecting their
employee.
PNR also disclaimed liability as they insist that the railroad
crossing they placed there was not meant for railroad crossing
(really, that’s their defense!).
The RTC ruled in favor of the Zarates. The Court of Appeals
affirmed the RTC. In the decision of the RTC and the CA, they
awarded damages in favor of the Zarates for the loss of earning
capacity of their dead son.
The Pereñas appealed. They argued that the award was
improper as Aaron was merely a high school student, hence, the
award of such damages was merely speculative. They cited the
case of People vs Teehankee where the Supreme Court did not
award damages for the loss of earning capacity despite the fact
that the victim there was enrolled in a pilot school.
ISSUES: Whether or not the defense of due diligence of a good
father by the Pereñas is untenable. Whether or not the award of
damages for loss of income is proper.
HELD: Yes, in both issues.
Defense of Due Diligence of a Good Father
This defense is not tenable in this case. The Pereñas are
common carriers. They are not merely private carriers. (Prior to
this case, the status of private transport for school services or
school buses is not well settled as to whether or not they are
private or common carriers – but they were generally
regarded as private carriers). Private transport for schools are
common carriers. The Pereñas, as the operators of a school bus
service were: (a) engaged in transporting passengers generally
as a business, not just as a casual occupation; (b) undertaking to
carry passengers over established roads by the method by which
the business was conducted; and (c) transporting students for a
fee. Despite catering to a limited clientèle, the Pereñas operated
as a common carrier because they held themselves out as a
ready transportation indiscriminately to the students of a
particular school living within or near where they operated the
service and for a fee.
Being a common carrier, what is required of the Pereñas is not
mere diligence of a good father. What is specifically required
from them by law is extraordinary diligence – a fact which they
failed to prove in court. Verily, their obligation as common
carriers did not cease upon their exercise of diligently choosing
Alfaro as their employee.
(It is recommended that you read the full text, the Supreme
Court made an elaborate and extensive definition of common
and private carriers as well as their distinctions.)
Award of Damages for Aaron’s loss of earning capacity despite
he being a high school student at the time of his death
The award is proper. Aaron was enrolled in a reputable school
(Don Bosco). He was of normal health and was an able-bodied
person. Further, the basis of the computation of his earning
capacity was not on what he would have become. It was based
on the current minimum wage. The minimum wage was validly
used because with his circumstances at the time of his death, it
is most certain that had he lived, he would at least be a minimum
wage earner by the time he starts working. This is not being
speculative at all.
The Teehankee case was different because in that case, the
reason why no damages were awarded for loss of earning
capacity was that the defendants there were already assuming
that the victim would indeed become a pilot – hence, that made
the assumption speculative. But in the case of Aaron, there was
no speculation as to what he might be – but whatever he’ll
become, it is certain that he will at the least be earning minimum
wage.

CAN A COMMON CARRIER BECOME
A PRIVATE CARRIER
Home Insurance vs. American Steamship Case Digest
Home Insurance vs. American Steamship
23 SCRA 24
Facts: The Consorcio Pesquero del Peru of South America
shipped jute bags of Peruvian fishmeal through SS
Crowborough, consigned to San Miguel Brewery, Inc. The
cargo, which was insured by Home Insurance Company, arrived
at the port of Manila and was discharged to the lighters of the
Luzon Stevedoring Corporation. When the same was delivered
to the consignee, there were shortages amounting to P 12,
033.85, prompting the latter to pay against Luzon Stevedoring
Co.
Because the others denied liability, Home Insurance paid San
Miguel the insurance value loss. This cost was brought by the
former to recover indemnity from Luzon Stevedoring and the
ship owner. Luzon Stevedoring raised the defense that it deliver
with due diligence in the same from the carrier. Mexican
Steamship Agencies denied liability on the ground that the
charter party referred to in the bills of lading, the charter, not
the ship owner, was responsible for any loss or damage of the
cargo. Furthermore, it claimed to have exercised due diligence
in stowing the goods and as a mere forwarding agent, it was not
responsible for losses or damages to the cargo.
Issue: Whether or not the stipulation in the charter party to
owner’s non-liability was valid as to absolve the American
Steamship from liability loss?
Held: The Civil Code provision on common carriers should not
be applied where the carrier is not acting as such but as a private
carrier. The stipulation in the charter party absolving the owner
from liability for loss due to the negligence of its agent is void
only if the strict public policy governing common carriers is
applied. Such policy has no force where the public at large is
not involved, as in the case of a ship totally chartered for the use
of a single party.
Arada v. CA
Facts: Alejandro Arada doing business under the name and style
South Negros Enterprises is engaged in the business of small
scale shipping as a common carrier, servicing the hauling of
cargoes of different corporations and companies with 5 vessels
it was operating. It entered into a contract with San Miguel
Corporation to transport as a common carrier cargoes of the
latter from San Carlos City Negros Occidental to Mandaue City
using one of its vessels M/L Maya. The cargoes of San Mig
Corp valued at 176, 824. 80. The master crew applied for
clearance to sail which was denied by the Phil Coast Guard due
to a typhoon. However, the next day, it was granted clearance
as there was no storm and the sea was calm. So, ML Maya left
for Mandaue City. While it was navigating towards Cebu, a
typhoon developed and said vessel sank with whatever was left
if its cargoes. The crew was rescued. The Board of Marine
Inquiry exonerated Arada and his crew from administrative
liability. Meanwhile, San Miguel Corporation filed with the
RTC for the recovery of the value of its cargoes anchored on
breach of contract of carriage. The RTC rendered its decision
dismissing the claim of San Miguel for recovery of the value of
its cargoes. On appeal, the CA reversed the decision of the RTC.
Hence, this petition.
Issue: WON Arada is liable for the loss of the cargo of San
Miguel Corporation.
Held: Yes. South Negros Enterprises was exercising its function
as a common carrier when it entered into a contract with San
Miguel Corp to carry and transport the latter’s cargoes. A
common carrier both from the nature of its business and for
insistent reasons of public policy is burdened by law with the
duty of exercising extraordinary diligence not only in ensuring
the safety of passengers, but in caring for the goods transported
by it. The loss, or deterioration or destruction of goods turned
over to the common carrier for the conveyance to a designated
destination raises instantly a presumption of fault or negligence
on the part of the carrier, save only in cases where such loss,
destruction or deterioration arises from extreme circumstances
such as a natural disaster or calamity. In order that a common
carrier may be exempted from responsibility, the natural
disaster must have been the proximate cause of the loss.
However, the common carrier must exercise due diligence to
prevent or minimize the loss before, during and after the
occurrence of the flood, storm or other natural disaster in order
that the common carrier may be exempted from liability from
the destruction or deterioration of the goods. In the case at bar,
Southern Negros failed to observe extraordinary diligence over
the cargo in question was negligent previous to the sinking of
the carrying vessel. The master crew knew that there was a
typhoon coming before his departure but did not check where it
was. He should have verified first where the typhoon was before
departing. The master crew did not ascertain where the typhoon
was headed by the use of his vessel’s barometer and radio.
Neither did the captain of the vessel monitor and record the
weather conditions as required under Art. 612 of the Code of
Commerce. A common carrier is obliged to observed
extraordinary diligence and the failure of the master crew to
ascertain the direction of the storm and the weather condition of
the path they would be traversing, constitute lack of foresight
and minimum vigilance over its cargoes taking into account the
surrounding circumstances of the case.
Planters Products, Inc. v. CA, Soriamont
Steamship Agencies and Kyosei KisenKabushiki
Kaisha
G.R. No. 101503 September 15, 1993
FACTS:
Planters Products purchased from Mits
ubishi Inter’l Corp. 9.3K metric tons of Urea
(fertilizer), 46% of which the latter shipped in bulk aboard the
cargo vessel M/V “Sun Plum” owned by Kyosei
Kisen Kabushiki Kaisha (KKKK). A T i m e C h a r t e r -
Party on the vessel M/V “Sun Plum” pursuant
to the Uniform General Charter was entered
into between Mitsubishi as shipper/charter and
KKKK as ship owner.
Before loading the fertilizer aboard the
vessel they were inspected by the charterer’s
representative and found fit for loading. After the Urea fertilizer
was loaded in bulk by stevedores (somebody whose job is to
load and unload ships) hired by and under the
supervision of the shipper, the steel hatches were
closed with heavy iron lids, covered with 3 layers of
tarpaulin, then tied with steel bonds. The hatches
remained closed and tightly sealed throughout the entire
voyage.
Port area was windy, certain portions of the
route to the warehouse were sandy and the weather was
variable, raining occasionally while the discharge was in progress. Survey
report revealed a shortage in the cargo of 106.726
M/T and that a portion of the Urea fertilizer approximating
18 M/T was contaminated with sand, rust and dirt. Planters
Products sent a claim letter to Soriamont Steamship Agencies,
the resident agent of the carrier, for damages.
ISSUE: WON a common carrier becomes a private carrier by
reason of a charter-party;
HELD:
Yes. The Supreme Court defined Charter- party as a
“contract by which an entire ship, or some principal part
thereof, is let by the owner to another person for a
specified time or use; a contract of affreightment by
which the owner of a ship or other vessel lets the whole or a part
of her to a merchant or other person for the conveyance of
goods, on a particular voyage, in consideration of the payment
of freight” It went further on discussing the two types
of charter-party:
a. contract of affreightment – involves the use of shipping space
on vessels leased by the owner in part or as a whole, to
carry goods for others; may either be:
i)time charter -vessel is leased to the charterer for a fixed
period of time; or
ii)voyage charter - ship is leased for a single voyage
b.charter by demise or bareboat charter – whole vessel is let to
the charterer with a transfer to him of its entire command
and possession and consequent control over its
navigation, including the master and the crew, who are
his servants
In both types, the charter
party provides for the hire of vessel only, either for a
determinate period of time or for a single or consecutive
voyage, the ship owner to supply the ship’s stores, pay for the
wages of the master and the crew, and defray the expenses for
the maintenance of the ship.
Distinction between a “common or public carrier” and
a “private or special carrier” lies in the character of the
business, such that if the undertaking is a single
transaction, not a part of the general business or occupation,
although involving the carriage of goods for a fee, the person
or corporation offering such service is a private carrier.
Common carrier should observe extraordinary
diligence in the vigilance over the goods they carry; in case of
loss, destruction or deterioration of the goods, it is presumed to
be at fault or to have acted negligently, and the burden
of proving otherwise rests on it. Private carrier -exercise of
ordinary diligence in the carriage of goods will suffice; no such
presumption applies to private carriers only when the charter
includes both the vessel and its crew, as in a bareboat or demise
that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned
when Planters Products chartered the vessel M/V “Sun Plum”,
the ship captain, its officers and compliment were under the
employ of the ship owner and therefore continued to be under
its direct supervision and control. As stranger to the crew and
to the ship, Planters Products did not have the duty of
caring for its cargo as it did not have control of the
means in doing so.
Indeed, we agree with respondent carrier that bulk shipment of
highly soluble goods like fertilizer carries with it the risk of loss
or damage. More so, with a variable weather condition
prevalent during its unloading, as was the case at bar. This is a
risk the shipper or the owner of the goods has to face. Clearly,
respondent carrier has sufficiently proved the inherent character
of the goods which makes it highly vulnerable to deterioration;
as well as the inadequacy of its packaging which further
contributed to the loss. On the other hand, no proof was adduced
by the petitioner showing that the carrier was remise in the
exercise of due diligence in order to minimize the loss or
damage to the goods it carried.
Loadstar Shipping vs CA Case Digest
Loadstar Shipping vs. Court of Appeals
315 SCRA 339, 1999
Facts: On November 19, 1984, loadstar received on board its
M/V “Cherokee” bales of lawanit hardwood, tilewood and
Apitong Bolidenized for shipment. The goods, amounting to
P6,067, 178. Were insured for the same amount with the Manila
Insurance Company against various risks including “Total Loss
by Total Loss of the Vessel”. On November 20, 1984, on its
way to Manila from the port of Nasipit, Agusan Del Norte, the
vessel, along with its cargo, sank off Limasawa Island. As a
result of the total loss of its shipment, the consignee made a
claim with loadstar which, however, ignored the same. As the
insurer, MIC paid to the insured in full settlement of its claim,
and the latter executed a subrogation receipt therefor. MIC
thereafter filed a complaint against loadstar alleging that the
sinking of the vessel was due to fault and negligence of loadstar
and its employees.
In its answer, Loadstar denied any liability for the loss of the
shipper’s goods and claimed that the sinking of its vessel was
due to force majeure. The court a quo rendered judgment in
favor of MIC., prompting loadstar to elevate the matter to the
Court of Appeals, which however, agreed with the trial court
and affirmed its decision in toto. On appeal, loadstar maintained
that the vessel was a private carrier because it was not issued a
Certificate of Public Convenience, it did not have a regular trip
or schedule nor a fixed route, and there was only “one shipper,
one consignee for a special crago”.
Issue: Whether or not M/V Cherokee was a private carrier so
as to exempt it from the provisions covering Common Carrier?
Held: Loadstar is a common carrier.
The Court held that LOADSTAR is a common carrier. It is not
necessary that the carrier be issued a certificate of public
convenience, and this public character is not altered by the fact
that the carriage of the goods in question was periodic,
occasional, episodic or unscheduled. Further, the bare fact that
the vessel was carrying a particular type of cargo for one
shipper, which appears to be purely co-incidental; it is no reason
enough to convert the vessel from a common to a private carrier,
especially where, as in this case, it was shown that the vessel
was also carrying passengers.
Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service
on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services
to the "general public," i.e., the general community or
population, and one who offers services or solicits business only
from a narrow segment of the general population.
Registered Owner Liable for Operation of
Common Carriers; Kabit System
Erezo v Jepte
Gesolgon, Matti and Custodio for appellees.
Aguedo Y. Jepte in his own behalf.
LABRADOR, J.:
Appeal from a judgment of the Court of First Instance of Manila
ordering defendant to pay plaintiff Gaudioso Erezo P3,000 on
the death of Ernesto Erezo, son of plaintiff Gaudioso Erezo.
Defendant-appellant is the registered owner of a six by six
truck bearing plate No. TC-1253. On August, 9, 1949, while the
same was being driven by Rodolfo Espino y Garcia, it collided
with a taxicab at the intersection of San Andres and Dakota
Streets, Manila. As the truck went off the street, it hit Ernesto
Erezo and another, and the former suffered injuries, as a result
of which he died. The driver was prosecuted for homicide
through reckless negligence in criminal case No. 10663 of the
Court of First Instance of Manila. The accused pleaded guilty
and was sentenced to suffer imprisonment and to pay the heirs
of Ernesto Erezo the sum of P3,000. As the amount of the
judgment could not be enforced against him, plaintiff brought
this action against the registered owner of the truck, the
defendant-appellant. The circumstances material to the case
are stated by the court in its decision.
The defendant does not deny at the time of the fatal
accident the cargo truck driven by Rodolfo Espino y
Garcia was registered in his name. He, however,
claims that the vehicle belonged to the Port
Brokerage, of which he was the broker at the time of
the accident. He explained, and his explanation was
corroborated by Policarpio Franco, the manager of
the corporation, that the trucks of the corporation
were registered in his name as a convenient
arrangement so as to enable the corporation to pay
the registration fee with his backpay as a pre-war
government employee. Franco, however, admitted
that the arrangement was not known to the Motor
Vehicle Office.
The trial court held that as the defendant-appellant
represented himself to be the owner of the truck and the
Motor Vehicle Office, relying on his representation, registered
the vehicles in his name, the Government and all persons
affected by the representation had the right to rely on his
declaration of ownership and registration. It, therefore, held
that the defendant-appellant is liable because he cannot be
permitted to repudiate his own declaration. (Section 68 [a],
Rule 123, and Art. 1431, New Civil Code.).
Against the judgment, the defendant has prosecuted this
appeal claiming that at the time of the accident the relation of
employer and employee between the driver and defendant-
appellant was not established, it having been proved at the
trial that the owner of the truck was the Port Brokerage, of
which defendant-appellant was merely a broker. We find no
merit or justice in the above contention. In previous decisions,
We already have held that the registered owner of a certificate
of public convenience is liable to the public for the injuries or
damages suffered by passengers or third persons caused by
the operation of said vehicle, even though the same had been
transferred to a third person. (Montoya vs. Ignacio, 94 Phil.,
182, 50 Off. Gaz., 108; Roque vs. Malibay Transit Inc.,1 G. R. No.
L- 8561, November 18,1955; Vda. de Medina vs. Cresencia, 99
Phil., 506, 52 Off. Gaz., [10], 4606.)The principle upon which
this doctrine is based is that in dealing with vehicles registered
under the Public Service Law, the public has the right to
assume or presume that the registered owner is the actual
owner thereof, for it would be difficult for the public to enforce
the actions that they may have for injuries caused to them by
the vehicles being negligently operated if the public should be
required to prove who the actual owner is. How would the
public or third persons know against whom to enforce their
rights in case of subsequent transfers of the vehicles? We do
not imply by this doctrine, however, that the registered owner
may not recover whatever amount he had paid by virtue of his
liability to third persons from the person to whom he had
actually sold, assigned or conveyed the vehicle.
Under the same principle the registered owner of any vehicle,
even if not used for a public service, should primarily be
responsible to the public or to third persons for injuries caused
the latter while the vehicle is being driven on the highways or
streets. The members of the Court are in agreement that the
defendant-appellant should be held liable to plaintiff-appellee
for the injuries occasioned to the latter because of the
negligence of 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 another. What is the legal
basis for his (defendant-appellant's) liability?.
There is a presumption that the owner of the guilty vehicle is
the defendant-appellant as he is the registered owner in the
Motor Vehicle Office. Should he not be allowed to prove the
truth, that he had sold it to another and thus shift the
responsibility for the injury to the real and actual owner? The
defendant holds the affirmative of this proposition; the trial
court held the negative.
The Revised Motor Vehicle Law (Act No. 3992, as amended)
provides 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 and the requirement
that each machine must carry a registration number,
conspicuously displayed, is one of the precautions taken to
reduce the danger of injury to pedestrians and other travelers
from the careless management of automobiles, and to furnish
a means of ascertaining the identity of persons violating the
laws and ordinances, regulating the speed and operation of
machines upon the highways (2 R. C. L. 1176). Not only are
vehicles to be registered and that no motor vehicles are to be
used or operated without being properly registered for the
current year, but that dealers in motor vehicles shall furnish
the Motor Vehicles Office a report showing the name and
address of each purchaser of motor vehicle during the previous
month and the manufacturer's serial number and motor
number. (Section 5 [c], Act. No. 3992, as amended.).
Registration is required not to make said registration the
operative act by which ownership in vehicles is transferred, as
in land registration cases, because the administrative
proceeding of registration does not bear any essential relation
to the contract of sale between the parties (Chinchilla vs.
Rafael and Verdaguer, 39 Phil. 888), but to permit the use and
operation of the vehicle upon any public highway (section 5
[a], Act No. 3992, as amended).The main aim of motor vehicle
registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the vehicles
on the public highways, responsibility therefore can be fixed
on a definite individual, the registered owner. Instances are
numerous where vehicles running on public highways caused
accidents or injuries to pedestrians or other vehicles without
positive identification of the owner or drivers, or with very
scant means of identification. It is to forestall those
circumstances, so inconvenient or prejudicial to the public,
that the motor vehicle registration is primarily ordained, in the
interest of the determination of persons responsible for
damages or injuries caused on public highways.
One of the principal purposes of motor vehicles
legislation is identification of the vehicle and of the
operator, in case of accident; and another is that the
knowledge that means of detection are always
available may act as a deterrent from lax observance
of the law and of the rules of conservative and safe
operation. Whatever purpose there may be in these
statutes, it is subordinate at the last to the primary
purpose of rendering it certain that the violator of the
law or of the rules of safety shall not escape because
of lack of means to discover him." The purpose of the
statute is thwarted, and the displayed number
becomes a "snare and delusion," if courts will
entertain such defenses as that put forward by
appellee in this case. No responsible person or
corporation could be held liable for the most
outrageous acts of negligence, if they should be
allowed to place a "middleman" between them and
the public, and escape liability by the manner in which
they recompense their servants. (King vs. Brenham
Automobile Co., 145 S. W. 278,279.)
With the above policy in mind, the question that defendant-
appellant poses is: should not be registered owner be allowed
at the trial to prove who the actual and real owner is, and in
accordance with such proof escape or evade responsibility and
lay the same on the person actually owning the vehicle? We
hold with the trial court that the laws does not allow him to do
so; the law, with its aim and policy in mind, does not relieve
him directly of the responsibility that the law fixes and places
upon him as an incident or consequence of registration. Were
a registered owner allowed to evade responsibility by proving
who the supposed transferee or owner is, it would be easy for
him, by collusion with others or otherwise, to escape said
responsibility and transfer the same to an indefinite person, or
to one who possesses no property with which to respond
financially for the damage or injury done. A victim of
recklessness on the public highways is usually without means
to discover or identify the person actually causing the injury or
damage. He has no means other than by a recourse to the
registration in the Motor Vehicles Office to determine who is
the owner. The protection that the law aims to extend to him
would become illusory were the registered owner given the
opportunity to escape liability by disproving his ownership. If
the policy of the law is to be enforced and carried out, the
registered owner should be allowed to prove the contrary to
the prejudice of the person injured that is, to prove that a third
person or another has become the owner, so that he may
thereby be relieved of the responsibility to the injured
person.1âwphïl.nêt
The above policy and application of the law may appear quite
harsh and 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 recourse to a third-party
complaint, in the same action brought against 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 relieving him of liability; said inconvenience is
the price he pays for failure to comply with the registration
that the law demands and requires.
In synthesis, we hold that the registered owner, the defendant-
appellant herein, is primarily responsible for the damage
caused to the vehicle of the plaintiff-appellee, but he
(defendant-appellant) has a right to be indemnified by the real
or actual owner of the amount that he may be required to pay
as damage for the injury caused to the plaintiff-
appellant.1âwphïl.nêt
Benedicto v. Intermediate Appellate Court (G.R. No. 70876
July 19, 1990)
FACTS:
Greenhills Wood Industries - bound itself to sell and deliver
to Blue StarMahogany, Inc. 100,000 board feet of sawn lumber
with the understanding thatan initial delivery would be made.
Greenhills
resident manager in Maddela, Dominador Cruz, contracted Vi
rgilioLicuden, the driver of a cargo truck, to transport its sawn
lumber to the consigneeBlue Star in Valenzuela, Bulacan; this
cargo truck was registered in the name ofMa. Luisa Benedicto,
the proprietor of Macoven Trucking, a business
enterpriseengaged in hauling freight
the Manager of Blue Star called up Greenhills’
president informing him that the sawn lumber on board the
subject cargo truckhad not yet arrived in Valenzuela, Bulacan;
because of the delay in delivery BlueStar was constrained to
look for other suppliers
Greenhill’s filed criminal case against driver Licuden for estafa;
and a civil case
for recovery of the value of the lost sawn lumber plus damages
against Benedicto
Benedicto denied liability as she was a complete
stranger to the contract ofcarriage, the subject truck having
been earlier sold by her to Benjamin Tee; butthe truck had
remained registered in her name because Tee have not yet
fullypaid the amount of the truck; be that as it may, Tee had
been operating the saidtruck in Central Luzon from that and
Licuden was Tee’s employee and not hers
ISSUE:
WoN Benedicto, being the registered owner of the carrier,
should be held liable for thevalue of the undelivered or lost
sawn lumber
HELD:
YES. The registered owner liable for consequences flowing
from the operations of thecarrier, even though the specific
vehicle involved may already have been transferred toanother
person. This doctrine rests upon the principle that in dealing
with vehiclesregistered under the Public Service Law, the
public has the right to assume that theregistered owner is the
actual or lawful owner thereof It would be very difficult and
oftenimpossible as a practical matter, for members of the
general public to enforce the rightsof action that they may
have for injuries inflicted by the vehicles being
negligentlyoperated if they should be required to prove who
the actual owner is. Greenhills is notrequired to go beyond t
he vehicle’s certificate of registration to ascertain the owner of
the carrier.
G.R. No. 98275 November 13, 1992
BA FINANCE CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS, REGIONAL TRIAL COURT OF ANGELES
CITY, BRANCH LVI, CARLOS OCAMPO, INOCENCIO TURLA,
SPOUSES MOISES AGAPITO and SOCORRO M. AGAPITO and
NICOLAS CRUZ, respondents.
MELO, J.:
The question of petitioner's responsibility for damages when on
March 6, 1983, an accident occurred involving petitioner's Isuzu
ten-wheeler truck then driven by an employee of Lino Castro is
the thrust of the petition for review on certiorari now before Us
considering that neither the driver nor Lino Castro appears to
be connected with petitioner.
On October 13, 1988, the disputed decision in the suit below
was rendered by the court of origin in this manner:
1. Ordering Rock B.A. and Rogelio Villar y Amare jointly and
severally to pay the plaintiffs as follows:
a) To the plaintiff Carlos Ocampo — P121,650.00;
b) To the plaintiff Moises Ocampo — P298,500.00
c) To the plaintiff Nicolas Cruz — P154,740.00
d) To the plaintiff Inocencio Turla, Sr. — 48,000.00
2. Dismissing the case against Lino Castro
3. Dismissing the third-party complaint against STRONGHOLD
4. Dismissing all the counterclaim of the defendants and third-
party defendants.
5. Ordering ROCK to reimburse B.A. the total amount of
P622,890.00 which the latter is adjudged to pay to the plaintiffs.
(p. 46, Rollo)
Respondent Court of Appeals affirmed the appealed
disposition in toto through Justice Rasul, with Justices De Pano,
Jr. and Imperial concurring, on practically the same grounds
arrived at by the court a quo (p. 28, Rollo). Efforts exerted
towards re-evaluation of the adverse were futile (p. 37, Rollo).
Hence, the instant petition.
The lower court ascertained after due trial that Rogelio Villar y
Amare, the driver of the Isuzu truck, was at fault when the
mishap occurred in as much as he was found guilty beyond
reasonable doubt of reckless imprudence resulting in triple
homicide with multiple physical injuries with damage to
property in a decision rendered on February 16, 1984 by the
Presiding Judge of Branch 6 of the Regional Trial Court stationed
at Malolos, Bulacan. Petitioner was adjudged liable for damages
in as much as the truck was registered in its name during the
incident in question, following the doctrine laid down by this
Court in Perez vs. Gutierrez (53 SCRA 149 [1973]) and Erezo, et
al. vs. Jepte (102 Phil. 103 [1957]). In the same breadth, Rock
Component Philippines, Inc. was ordered to reimburse
petitioner for any amount that the latter may be adjudged liable
to pay herein private respondents as expressly stipulated in the
contract of lease between petitioner and Rock Component
Philippines, Inc. Moreover, the trial court applied Article 2194
of the new Civil Code on solidary accountability of join
tortfeasors insofar as the liability of the driver, herein petitioner
and Rock Component Philippines was concerned (pp. 6-7,
Decision; pp. 44-45, Rollo).
To the question of whether petitioner can be held responsible
to the victim albeit the truck was leased to Rock Component
Philippines when the incident occurred, the appellate court
answered in the affirmative on the basis of the jurisprudential
dogmas which, as aforesaid, were relied upon by the trial court
although respondent court was quick to add
the caveat embodied in the lease covenant between petitioner
and Rock Component Philippines relative to the latter's duty to
reimburse any amount which may be adjudged against
petitioner (pp. 32-33, Rollo).
Petitioner asseverates that it should not have been haled to
court and ordered to respond for the damage in the manner
arrived at by both the trial and appellate courts since paragraph
5 of the complaint lodged by the plaintiffs below would indicate
that petitioner was not the employer of the negligent driver
who was under the control an supervision of Lino Castro at the
time of the accident, apart from the fact that the Isuzu truck
was in the physical possession of Rock Component Philippines
by virtue of the lease agreement.
Aside from casting clouds of doubt on the propriety of invoking
the Perez and Erezo doctrines, petitioner continue to persist
with the idea that the pronouncements of this Court in Duavit
vs. Court of Appeals (173 SCRA 490 [1989]) and Duquillo vs.
Bayot (67 Phil 131 [1939]) dovetail with the factual and legal
scenario of the case at hand. Furthermore, petitioner assumes,
given the so-called hiatus on the basis for the award of
damages as decreed by the lower and appellate courts, that
Article 2180 of the new Civil Code on vicarious liability will
divest petitioner of any responsibility absent as there is any
employer-employee relationship between petitioner and the
driver.
Contrary to petitioner's expectations, the recourse instituted
from the rebuffs it encountered may not constitute a sufficient
foundation for reversal of the impugned judgment of
respondent court. Petitioner is of the impression that
the Perez and Erezo cases are inapplicable due to the variance
of the generative facts in said cases as against those obtaining
in the controversy at bar. A contrario, the lesson imparted by
Justice Labrador in Erezo is still good law, thus:
. . . In previous decisions, We already have held that the
registered owner of a certificate of public convenience is liable
to the public for the injuries or damages suffered by passengers
or third persons caused by the operation of said vehicle, even
though the same had been transferred to a third person.
(Montoya vs. Ignacio, 94 Phil., 182 50 Off. Gaz., 108; Roque vs.
Malibay Transit, Inc., G.R. No. L-8561, November 18, 1955; Vda.
de Medina vs. Cresencia, 99 Phil., 506, 52 Off. Gaz., [10], 4606.)
The principle upon which this doctrine is based is that in dealing
with vehicles registered under the Public Service Law, the public
has the right to assume or presumed that the registered owner
is the actual owner thereof, for it would be difficult with the
public to enforce the actions that they may have for injuries
caused to them by the vehicles being negligently operated if the
public should be required to prove who actual the owner is.
How would the public or third persons know against whom to
enforce their rights in case of subsequent transfer of the
vehicles? We do not imply by this doctrine, however, that the
registered owner may not recover whatever amount he had
paid by virtue of his liability to third persons from the person to
whom he had actually sold, assigned or conveyed the vehicle.
Under the same principle the registered owner of any vehicle,
even if not used for a public service, should primarily responsible
to the public or to the third persons for injuries caused the latter
while the vehicle is being driven on the highways or streets. The
members of the Court are in agreement that the defendant-
appellant should be held liable to plaintiff-appellee for the
injuries occasioned to the latter because of the negligence of the
driver, even if the defendant-appellant was no longer an owner
of the vehicle at the time of the damage because he had
previously sold it to another. What is the legal basis for his
(defendants-appellant's) liability?
There is a presumption that the owner of the guilty vehicle is
the defendant-appellant as he is the registered owner in the
Motor Vehicle Office. Should he not be allowed to prove the
truth, that he had sold it to another and thus shift the
responsibility for the injury to the real and the actual owner?
The defendants hold the affirmative of this proposition; the trial
court hold the negative.
The Revised Motor Vehicle Law (Act No. 3992, as amended)
provides that the 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 and the requirement
that each machine must carry a registration number,
conspicuously displayed, is one of the precautions taken to
reduce the danger of injury of pedestrians and other travelers
from the careless management of automobiles, and to furnish
a means of ascertaining the identity of persons violating the
laws and ordinances, regulating the speed and operation of
machines upon the highways (2 R. C. L. 1176). Not only are
vehicles to be registered and that no motor vehicles are to be
used or operated without being properly registered from the
current year, furnish the Motor Vehicle Office a report showing
the name and address of each purchaser of motor vehicle
during the previous month and the manufacturer's serial
number and motor number. (Section 5[c], Act No. 3992, as
amended.)
Registration is required not to make said registration the
operative act by which ownership in vehicles is transferred, as
in land registration cases, because the administrative
proceeding of registration does not bear any essential relation
to the contract of sale between the parties (Chinchilla vs. Rafael
and Verdaguer, 39 Phil. 888), but to permit the use and
operation of the vehicle upon any public highway (section 5[a],
Act No. 3992, as amended). the main aim of motor vehicle
registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the vehicle
on the public highways, responsibility therefor can be fixed on
a definite individual, the registered owner. Instances are
numerous where vehicles running on public highways caused
accidents or injuries to pedestrians or other vehicles without
positive identification of the owner or drivers, or with very scant
means of identification. It is to forestall these circumstances, so
inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily obtained, in the interest of the
determinations of persons responsible for damages or injuries
caused on public highways.
One of the principle purposes of motor vehicles legislation is
identification of the vehicle and of the operator, in case of
accident; and another is that the knowledge that means of
detection are always available my act as a deterrent from lax
observance of the law and of the rules of conservative and safe
operation. Whatever purpose there may be in these statutes, it
is subordinate at the last to the primary purpose of rendering it
certain that the violator of the law or of the rules of safety shall
not escape because of lack of means to discover him. The
purpose of the statute is thwarted, and the displayed number
becomes a "share and delusion," if courts would entertain such
defenses as that put forward by appellee in this case. No
responsible person or corporation could be held liable for the
most outrageous acts of negligence, if they should be allowed
to pace a "middleman" between them and the public, and
escape liability by the manner in which they recompense their
servants. (King vs. Breham Automobile Co., Inc. 145 S. W. 278,
279.)
With the above policy in mind, the question that defendant-
appellant poses is: should not the registered owner be allowed
at the trial to prove who the actual and real owner is, and in
accordance with such proof escape or evade responsibility and
lay the same on the person actually owning the vehicle? We
hold with the trial court that the law does not allow him to do
so; the law, with its aim and policy in mind, does not relieve him
directly of the responsibility that the law fixes and places upon
him as an incident or consequence of registration. Were a
registered owner allowed to evade responsibility by proving
who the supposed transferee or owner is, it would be easy for
him, by collusion with others or otherwise, to escape said
responsibility and transfer the same to an indefinite person, or
to one who possesses no property with which to respond
financially for the damage or injury done. A victim of
recklessness on the public highways is usually without means to
discover or Identify the person actually causing the injury or
damage. He has no means other then by a recourse to the
registration in the Motor Vehicles Office to determine who is
the owner. The protection that the law aims to extend to him
would become illusory were the registered owner given the
opportunity to escape liability by disproving his ownership. If
the policy of the law is to be enforced and carried out, the
registered owner should not be allowed to prove the contrary
to the prejudice of the person injured, that is, to prove that a
third person or another has become the owner, so that he may
thereby be relieved of the responsibility to the injured person.
The above policy and application of the law may appear quite
harsh and 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 recourse to a third-party
complaint, in the same action brought against 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 relieving him of liability; said inconvenience is the price he
pays for failure to comply with the registration that the law
demands and requires.
In synthesis, we hold that the registered owner, the defendant-
appellant herein, is primarily responsible for the damage
caused to the vehicle of the plaintiff-appellee, but he
(defendant-appellant) has a right to be indemnified by the real
or actual owner of the amount that he may be required to pay
as damage for the injury caused to the plaintiff-appellant.
If the foregoing words of wisdom were applied in solving the
circumstance whereof the vehicle had been alienated or sold to
another, there certainly can be no serious exception against
utilizing the same rationale to the antecedents of this case
where the subject vehicle was merely leased by petitioner to
Rock Component Philippines, Inc., with petitioner retaining
ownership over the vehicle.
Petitioner's reliance on the ruling of this Court in Duavit vs.
Court of Appeals and in Duquillo vs. Bayot (supra) is legally
unpalatable for the purpose of the present discourse. The
vehicles adverted to in the two cases shared a common thread,
so to speak, in that the jeep and the truck were driven in
reckless fashion without the consent or knowledge of the
respective owners. Cognizant of the inculpatory testimony
spewed by defendant Sabiniano when he admitted that he took
the jeep from the garage of defendant Dauvit without the
consent or authority of the latter, Justice Gutierrez, Jr.
in Duavit remarked;
. . . Herein petitioner does not deny ownership of the vehicle
involved in the mishap but completely denies having employed
the driver Sabiniano or even having authorized the latter to
drive his jeep. The jeep was virtually stolen from the petitioner's
garage. To hold, therefore, the petitioner liable for the accident
caused by the negligence of Sabiniano who was neither his
driver nor employee would be absurd as it would be like holding
liable the owner of a stolen vehicle for an accident caused by
the person who stole such vehicle. In this regard, we cannot
ignore the many cases of vehicles forcibly taken from their
owners at gunpoint or stolen from garages and parking areas
and the instances of service station attendants or mechanics of
auto repair shops using, without the owner's consent, vehicles
entrusted to them for servicing or repair.(at p. 496.)
In the Duquillo case, the defendant therein cannot, according
to Justice Diaz, be held liable for anything because of
circumstances which indicated that the truck was driven
without the consent or knowledge of the owner thereof.
Consequently, there is no need for Us to discuss the matter of
imputed negligence because petitioner merely presumed,
erroneously, however, that judgment was rendered against it
on the basis of such doctrine embodied under Article 2180 of
the new Civil Code.
WHEREFORE, the petition is hereby DISMISSED and decision
under review AFFIRMED without special pronouncement as to
costs.
SO ORDERED.
 ABELARDO LIM and ESMADITO
GUNNABAN, petitioners, vs. COURT OF
APPEALS and DONATO H.
GONZALES, respondents.
DECISION
BELLOSILLO, J.:
When a passenger jeepney covered by a certificate of public
convenience is sold to another who continues to operate it under the
same certificate of public convenience under the so-
called kabit system, and in the course thereof the vehicle meets an
accident through the fault of another vehicle, may the new owner sue
for damages against the erring vehicle? Otherwise stated, does the
new owner have any legal personality to bring the action, or is he the
real party in interest in the suit, despite the fact that he is not the
registered owner under the certificate of public convenience?
Sometime in 1982 private respondent Donato Gonzales purchased an
Isuzu passenger jeepney from Gomercino Vallarta, holder of a
certificate of public convenience for the operation of public utility
vehicles plying the Monumento-Bulacan route. While private
respondent Gonzales continued offering the jeepney for public
transport services he did not have the registration of the vehicle
transferred in his name nor did he secure for himself a certificate of
public convenience for its operation. Thus Vallarta remained on
record as its registered owner and operator.
On 22 July 1990, while the jeepney was running northbound along the
North Diversion Road somewhere in Meycauayan, Bulacan, it collided
with a ten-wheeler-truck owned by petitioner Abelardo Lim and
driven by his co-petitioner Esmadito Gunnaban. Gunnaban owned
responsibility for the accident, explaining that while he was traveling
towards Manila the truck suddenly lost its brakes. To avoid colliding
with another vehicle, he swerved to the left until he reached the
center island. However, as the center island eventually came to an
end, he veered farther to the left until he smashed into a Ferroza
automobile, and later, into private respondent's passenger jeepney
driven by one Virgilio Gonzales. The impact caused severe damage to
both the Ferroza and the passenger jeepney and left one (1)
passenger dead and many others wounded.
Petitioner Lim shouldered the costs for hospitalization of the
wounded, compensated the heirs of the deceased passenger, and had
the Ferroza restored to good condition. He also negotiated with
private respondent and offered to have the passenger jeepney
repaired at his shop. Private respondent however did not accept the
offer so Lim offered him P20,000.00, the assessment of the damage
as estimated by his chief mechanic. Again, petitioner Lim's
proposition was rejected; instead, private respondent demanded a
brand-new jeep or the amount of P236,000.00. Lim increased his bid
to P40,000.00 but private respondent was unyielding. Under the
circumstances, negotiations had to be abandoned; hence, the filing of
the complaint for damages by private respondent against petitioners.
In his answer Lim denied liability by contending that he exercised due
diligence in the selection and supervision of his employees. He further
asserted that as the jeepney was registered in Vallartas name, it was
Vallarta and not private respondent who was the real party in
interest.[1] For his part, petitioner Gunnaban averred that the
accident was a fortuitous event which was beyond his control.[2]
Meanwhile, the damaged passenger jeepney was left by the roadside
to corrode and decay. Private respondent explained that although he
wanted to take his jeepney home he had no capability, financial or
otherwise, to tow the damaged vehicle.[3]
The main point of contention between the parties related to the
amount of damages due private respondent. Private respondent
Gonzales averred that per estimate made by an automobile repair
shop he would have to spend P236,000.00 to restore his jeepney to
its original condition.[4] On the other hand, petitioners insisted that
they could have the vehicle repaired for P20,000.00.[5]
On 1 October 1993 the trial court upheld private respondent's claim
and awarded him P236,000.00 with legal interest from 22 July 1990
as compensatory damages and P30,000.00 as attorney's fees. In
support of its decision, the trial court ratiocinated that as vendee and
current owner of the passenger jeepney private respondent stood for
all intents and purposes as the real party in interest. Even Vallarta
himself supported private respondent's assertion of interest over the
jeepney for, when he was called to testify, he dispossessed himself of
any claim or pretension on the property. Gunnaban was found by the
trial court to have caused the accident since he panicked in the face
of an emergency which was rather palpable from his act of directing
his vehicle to a perilous streak down the fast lane of the superhighway
then across the island and ultimately to the opposite lane where it
collided with the jeepney.
On the other hand, petitioner Lim's liability for Gunnaban's
negligence was premised on his want of diligence in supervising his
employees. It was admitted during trial that Gunnaban doubled as
mechanic of the ill-fated truck despite the fact that he was neither
tutored nor trained to handle such task.[6]
Forthwith, petitioners appealed to the Court of Appeals which, on 17
July 1996, affirmed the decision of the trial court. In upholding the
decision of the court a quo the appeals court concluded that while an
operator under the kabit system could not sue without joining the
registered owner of the vehicle as his principal, equity demanded that
the present case be made an exception.[7] Hence this petition.
It is petitioners' contention that the Court of Appeals erred in
sustaining the decision of the trial court despite their opposition to
the well-established doctrine that an operator of a vehicle continues
to be its operator as long as he remains the operator of
record. According to petitioners, to recognize an operator under
the kabit system as the real party in interest and to countenance his
claim for damages is utterly subversive of public policy. Petitioners
further contend that inasmuch as the passenger jeepney was
purchased by private respondent for only P30,000.00, an award
of P236,000.00 is inconceivably large and would amount to unjust
enrichment.[8]
Petitioners' attempt to illustrate that an affirmance of the appealed
decision could be supportive of the pernicious kabit system does not
persuade. Their labored efforts to demonstrate how the questioned
rulings of the courts a quo are diametrically opposed to the policy of
the law requiring operators of public utility vehicles to secure a
certificate of public convenience for their operation is quite
unavailing.
The kabit system is an arrangement whereby a person who has been
granted a certificate of public convenience allows other persons who
own motor vehicles to operate them under his license, sometimes for
a fee or percentage of the earnings.[9] Although the parties to such an
agreement are not outrightly penalized by law, the kabit system is
invariably recognized as being contrary to public policy and therefore
void and inexistent under Art. 1409 of the Civil Code.
In the early case of Dizon v. Octavio[10] the Court explained that one
of the primary factors considered in the granting of a certificate of
public convenience for the business of public transportation is the
financial capacity of the holder of the license, so that liabilities arising
from accidents may be duly compensated. The kabit system renders
illusory such purpose and, worse, may still be availed of by the
grantee to escape civil liability caused by a negligent use of a vehicle
owned by another and operated under his license. If a registered
owner is allowed to escape liability by proving who the supposed
owner of the vehicle is, it would be easy for him to transfer the subject
vehicle to another who possesses no
property with which to respondfinancially for the damage
done. Thus, for the safety of passengers and the public who may have
been wronged and deceived through the baneful kabit system, the
registered owner of the vehicle is not allowed to prove that another
person has become the owner so that he may be thereby relieved of
responsibility. Subsequent cases affirm such basic doctrine.[11]
It would seem then that the thrust of the law in enjoining
the kabit system is not so much as to penalize the parties but to
identify the person upon whom responsibility may be fixed in case of
an accident with the end view of protecting the riding public. The
policy therefore loses its force if the public at large is not deceived,
much less involved.
In the present case it is at once apparent that the evil sought to be
prevented in enjoining the kabit system does not exist. First, neither
of the parties to the pernicious kabit system is being held liable for
damages. Second, the case arose from the negligence of another
vehicle in using the public road to whom no representation, or
misrepresentation, as regards the ownership and operation of the
passenger jeepney was made and to whom no such representation,
or misrepresentation, was necessary. Thus it cannot be said that
private respondent Gonzales and the registered owner of the jeepney
were in estoppel for leading the public to believe that the jeepney
belonged to the registered owner. Third, the riding public was not
bothered nor inconvenienced at the very least by the illegal
arrangement. On the contrary, it was private respondent himself who
had been wronged and was seeking compensation for the damage
done to him. Certainly, it would be the height of inequity to deny him
his right.
In light of the foregoing, it is evident that private respondent has the
right to proceed against petitioners for the damage caused on his
passenger jeepney as well as on his business.Any effort then to
frustrate his claim of damages by the ingenuity with which petitioners
framed the issue should be discouraged, if not repelled.
In awarding damages for tortuous injury, it becomes the sole design
of the courts to provide for adequate compensation by putting the
plaintiff in the same financial position he was in prior to the tort. It is
a fundamental principle in the law on damages that a defendant
cannot be held liable in damages for more than the actual loss which
he has inflicted and that a plaintiff is entitled to no more than the just
and adequate compensation for the injury suffered. His recovery is, in
the absence of circumstances giving rise to an allowance of punitive
damages, limited to a fair compensation for the harm done. The law
will not put him in a position better than where he should be in had
not the wrong happened.[12]
In the present case, petitioners insist that as the passenger jeepney
was purchased in 1982 for only P30,000.00 to award damages
considerably greater than this amount would be improper and
unjustified. Petitioners are at best reminded that indemnification for
damages comprehends not only the value of the loss suffered but also
that of the profits which the obligee failed to obtain. In other words,
indemnification for damages is not limited to damnum emergens or
actual loss but extends to lucrum cessans or the amount of profit
lost.[13]
Had private respondent's jeepney not met an accident it could
reasonably be expected that it would have continued earning from
the business in which it was engaged. Private respondent avers that
he derives an average income of P300.00 per day from his passenger
jeepney and this earning was included in the award of damages made
by the trial court and upheld by the appeals court. The award
therefore of P236,000.00 as compensatory damages is not beyond
reason nor speculative as it is based on a reasonable estimate of the
total damage suffered by private respondent, i.e. damage wrought
upon his jeepney and the income lost from his transportation
business. Petitioners for their part did not offer any substantive
evidence to refute the estimate made by the courts a quo.
However, we are constrained to depart from the conclusion of the
lower courts that upon the award of compensatory damages legal
interest should be imposed beginning 22 July 1990, i.e. the date of the
accident. Upon the provisions of Art. 2213 of the Civil Code, interest
"cannot be recovered upon unliquidated claims or damages, except
when the demand can be established with reasonable certainty." It is
axiomatic that if the suit were for damages, unliquidated and not
known until definitely ascertained, assessed and determined by the
courts after proof, interest at the rate of six percent (6%) per annum
should be from the date the judgment of the court is made (at which
time the quantification of damages may be deemed to be reasonably
ascertained).[14]
In this case, the matter was not a liquidated obligation as the
assessment of the damage on the vehicle was heavily debated upon
by the parties with private respondent's demand for P236,000.00
being refuted by petitioners who argue that they could have the
vehicle repaired easily for P20,000.00. In fine, the amount due private
respondent was not a liquidated account that was already
demandable and payable.
One last word. We have observed that private respondent left his
passenger jeepney by the roadside at the mercy of the
elements. Article 2203 of the Civil Code exhorts parties suffering from
loss or injury to exercise the diligence of a good father of a family to
minimize the damages resulting from the act or omission in
question. One who is injured then by the wrongful or negligent act of
another should exercise reasonable care and diligence to minimize
the resulting damage. Anyway, he can recover from the
wrongdoer money lost in reasonable efforts to preserve the property
injured and for injuries incurred in attempting to prevent damage to
it.[15]
However we sadly note that in the present case petitioners failed to
offer in evidence the estimated amount of the damage caused by
private respondent's unconcern towards the damaged vehicle. It is
the burden of petitioners to show satisfactorily not only that the
injured party could have mitigated his damages but also the amount
thereof; failing in this regard, the amount of damages awarded cannot
be proportionately reduced.
WHEREFORE, the questioned Decision awarding private respondent
Donato Gonzales P236,000.00 with legal interest from 22 July 1990 as
compensatory damages and P30,000.00 as attorney's fees is
MODIFIED. Interest at the rate of six percent (6%) per annum shall be
computed from the time the judgment of the lower court is made
until the finality of this Decision.If the adjudged principal and interest
remain unpaid thereafter, the interest shall be twelve percent (12%)
per annum computed from the time judgment becomes final and
executory until it is fully satisfied.
Costs against petitioners.
SO ORDERED.
State Regulation of Common Carriers
G.R. No. L-8095 March 31, 1915
F.C. FISHER, plaintiff,
vs.
YANGCO STEAMSHIP COMPANY, J.S.
STANLEY, as Acting Collector of Customs of
the Philippine Islands, IGNACIO VILLAMOR,
as Attorney-General of the Philippine Islands,
and W.H. BISHOP, as prosecuting attorney of
the city of Manila, respondents.
Haussermann, Cohn and Fisher for plaintiff.
Office of the Solicitor-General Harvey for respondents.
CARSON, J.:
CARSON, J.:
The real question involved in these proceedings is whether the refusal
of the owners and officers of a steam vessel, duly licensed to engage
in the coastwise trade of the Philippine Islands and engaged in that
trade as a common carrier, to accept for carriage "dynamite, powder
or other explosives" from any and all shippers who may offer such
explosives for carriage can be held to be a lawful act without regard
to any question as to the conditions under which such explosives are
offered to carriage, or as to the suitableness of the vessel for the
transportation of such explosives, or as to the possibility that the
refusal to accept such articles of commerce in a particular case may
have the effect of subjecting any person or locality or the traffic in
such explosives to an undue, unreasonable or unnecessary prejudice
or discrimination.
Summarized briefly, the complaint alleges that plaintiff is a
stockholder in the Yangco Steamship Company, the owner of a large
number of steam vessels, duly licensed to engage in the coastwise
trade of the Philippine Islands; that on or about June 10, 1912, the
directors of the company adopted a resolution which was thereafter
ratified and affirmed by the shareholders of the company, "expressly
declaring and providing that the classes of merchandise to be carried
by the company in its business as a common carrier do not include
dynamite, powder or other explosives, and expressly prohibiting the
officers, agents and servants of the company from offering to carry,
accepting for carriage said dynamite, powder or other explosives;"
that thereafter the respondent Acting Collector of Customs
demanded and required of the company the acceptance and carriage
of such explosives; that he has refused and suspended the issuance of
the necessary clearance documents of the vessels of the company
unless and until the company consents to accept such explosives for
carriage; that plaintiff is advised and believes that should the
company decline to accept such explosives for carriage, the
respondent Attorney-General of the Philippine Islands and the
respondent prosecuting attorney of the city of Manila intend to
institute proceedings under the penal provisions of sections 4, 5, and
6 of Act No. 98 of the Philippine Commission against the company, its
managers, agents and servants, to enforce the requirements of the
Acting Collector of Customs as to the acceptance of such explosives
for carriage; that notwithstanding the demands of the plaintiff
stockholder, the manager, agents and servants of the company
decline and refuse to cease the carriage of such explosives, on the
ground that by reason of the severity of the penalties with which they
are threatened upon failure to carry such explosives, they cannot
subject themselves to "the ruinous consequences which would
inevitably result" from failure on their part to obey the demands and
requirements of the Acting Collector of Customs as to the acceptance
for carriage of explosives; that plaintiff believes that the Acting
Collector of Customs erroneously construes the provisions of Act No.
98 in holding that they require the company to accept such explosives
for carriage notwithstanding the above mentioned resolution of the
directors and stockholders of the company, and that if the Act does in
fact require the company to carry such explosives it is to that extent
unconstitutional and void; that notwithstanding this belief of
complainant as to the true meaning of the Act, the questions involved
cannot be raised by the refusal of the company or its agents to comply
with the demands of the Acting Collector of Customs, without the risk
of irreparable loss and damage resulting from his refusal to facilitate
the documentation of the company's vessels, and without assuming
the company to test the questions involved by refusing to accept such
explosives for carriage.
The prayer of the complaint is as follows:
Wherefore your petitioner prays to this honorable court as follows:
First. That to the due hearing of the above entitled action be issued a
writ of prohibition perpetually restraining the respondent Yangco
Steamship Company, its appraisers, agents, servants or other
representatives from accepting to carry and from carrying, in
steamers of said company dynamite, powder or other explosive
substance, in accordance with the resolution of the board of directors
and of the shareholders of said company.
Second. That a writ of prohibition be issued perpetually enjoining the
respondent J.S. Stanley as Acting Collector of Customs of the
Philippine Islands, his successors, deputies, servants or other
representatives, from obligating the said Yangco Steamship Company,
by any means whatever, to carry dynamite, powder or other explosive
substance.
Third. That a writ of prohibition be issued perpetually enjoining the
respondent Ignacio Villamor as Attorney-General of the Philippine
Islands, and W.H. Bishop as prosecuting attorney of the city of Manila,
their deputies representatives or employees, from accusing the said
Yangco Steamship Company, its officers, agents or servants, of the
violation of Act No. 98 by reason of the failure or omission of the said
company to accept for carriage out to carry dynamite powder or other
explosive.
Fourth. That the petitioner be granted such other remedy as may be
meet and proper.
To this complaint the respondents demurred, and we are of opinion
that the demurrer must be sustained, on the ground that the
complaint does not set forth facts sufficient to constitute a cause of
action.
It will readily be seen that plaintiff seeks in these proceedings to
enjoin the steamship company from accepting for carriage on any of
its vessels, dynamite, powder or other explosives, under any
conditions whatsoever; to prohibit the Collector of Customs and the
prosecuting officers of the government from all attempts to compel
the company to accept such explosives for carriage on any of its
vessels under any conditions whatsoever; and to prohibit these
officials from any attempt to invoke the penal provisions of Act No.
98, in any case of a refusal by the company or its officers so to do; and
this without regard to the conditions as to safety and so forth under
which such explosives are offered for carriage, and without regard
also to any question as to the suitableness for the transportation of
such explosives of the particular vessel upon which the shipper offers
them for carriage; and further without regard to any question as to
whether such conduct on the part of the steamship company and its
officers involves in any instance an undue, unnecessary or
unreasonable discrimination to the prejudice of any person, locality
or particular kind of traffic.
There are no allegations in the complaint that for some special and
sufficient reasons all or indeed any of the company's vessels are
unsuitable for the business of transporting explosives; or that
shippers have declined or will in future decline to comply with such
reasonable regulations and to take such reasonable precautions as
may be necessary and proper to secure the safety of the vessels of
the company in transporting such explosives. Indeed the contention
of petitioner is that a common carrier in the Philippine Islands may
decline to accept for carriage any shipment of merchandise of a class
which it expressly or impliedly declines to accept from all shippers
alike, because as he contends "the duty of a common carrier to carry
for all who offer arises from the public profession he has made, and
limited by it."
In support of this contention counsel cites for a number of English and
American authorities, discussing and applying the doctrine of the
common law with reference to common carriers. But it is unnecessary
now to decide whether, in the absence of statute, the principles on
which the American and English cases were decided would be
applicable in this jurisdiction. The duties and liabilities of common
carriers in this jurisdiction are defined and fully set forth in Act No. 98
of the Philippine Commission, and until and unless that statute be
declared invalid or unconstitutional, we are bound by its provisions.
Sections 2, 3 and 4 of the Act are as follows:
SEC. 2. It shall be unlawful for any common carrier engaged in the
transportation of passengers or property as above set forth to make
or give any unnecessary or unreasonable preference or advantage to
any particular person, company, firm, corporation or locality, or any
particular kind of traffic in any respect whatsoever, or to subject any
particular person, company, firm, corporation or locality, or any
particular kind of traffic, to undue or unreasonable prejudice or
discrimination whatsoever, and such unjust preference or
discrimination is also hereby prohibited and declared to be unlawful.
SEC. 3. No common carrier engaged in the carriage of passengers or
property as aforesaid shall, under any pretense whatsoever, fail or
refuse to receive for carriage, and as promptly as it is able to do so
without discrimination, to carry any person or property offering for
carriage, and in the order in which such persons or property are
offered for carriage, nor shall any such common carrier enter into any
arrangement, contract or agreement with any other person or
corporation whereby the latter is given an exclusive or preferential or
monopolize the carriage any class or kind of property to the exclusion
or partial exclusion of any other person or persons, and the entering
into any such arrangement, contract or agreement, under any form
or pretense whatsoever, is hereby prohibited and declared to be
unlawful.
SEC. 4. Any willful violation of the provisions of this Act by any
common carrier engaged in the transportation of passengers or
property as hereinbefore set forth is hereby declared to be
punishable by a fine not exceeding five thousand dollars money of the
United States, or by imprisonment not exceeding two years, or both,
within the discretion of the court.
The validity of this Act has been questioned on various grounds, and
it is vigorously contended that in so far as it imposes any obligation
on a common carrier to accept for carriage merchandise of a class
which he makes no public profession to carry, or which he has
expressly or impliedly announced his intention to decline to accept
for carriage from all shippers alike, it is ultra vires, unconstitutional
and void.
We may dismiss without extended discussion any argument or
contention as to the invalidity of the statute based on alleged
absurdities inherent in its provisions or on alleged unreasonable or
impossible requirements which may be read into it by a strained
construction of its terms.
We agree with counsel for petitioner that the provision of the Act
which prescribes that, "No common carrier ... shall, under any
pretense whatsoever, fail or refuse to receive for carriage ... to carry
any person or property offering for carriage," is not to be construed
in its literal sense and without regard to the context, so as to impose
an imperative duty on all common carriers to accept for carriage, and
to carry all and any kind of freight which may be offered for carriage
without regard to the facilities which they may have at their disposal.
The legislator could not have intended and did not intend to prescribe
that a common carrier running passenger automobiles for hire must
transport coal in his machines; nor that the owner of a tank steamer,
expressly constructed in small watertight compartments for the
carriage of crude oil must accept common carrier must accept and
carry contraband articles, such as opium, morphine, cocaine, or the
like, the mere possession of which is declared to be a criminal offense;
nor that common carriers must accept eggs offered for transportation
in paper parcels or any merchandise whatever do defectively packed
as to entail upon the company unreasonable and unnecessary care or
risks.
Read in connection with its context this, as well as all the other
mandatory and prohibitory provisions of the statute, was clearly
intended merely to forbid failures or refusals to receive persons or
property for carriage involving any "unnecessary or unreasonable
preference or advantage to any particular person, company, firm,
corporation, or locality, or any particular kind of traffic in any respect
whatsoever," or which would "subject any particular person,
company, firm, corporation or locality, or any particular kind of traffic
to any undue or unreasonable prejudice or discrimination
whatsoever."
The question, then, of construing and applying the statute, in cases of
alleged violations of its provisions, always involves a consideration as
to whether the acts complained of had the effect of making or giving
an "unreasonable or unnecessary preference or advantage" to any
person, locality or particular kind of traffic, or of subjecting any
person, locality, or particular kind of traffic to any undue or
unreasonable prejudice or discrimination. It is very clear therefore
that the language of the statute itself refutes any contention as to its
invalidity based on the alleged unreasonableness of its mandatory or
prohibitory provisions.
So also we may dismiss without much discussion the contentions as
to the invalidity of the statute, which are based on the alleged
excessive severity of the penalties prescribed for violation of its
provisions. Upon general principles it is peculiarly and exclusively
within the province of the legislator to prescribe the pains and
penalties which may be imposed upon persons convicted of violations
of the laws in force within his territorial jurisdiction. With the exercise
of his discretion in this regard where it is alleged that excessive fines
or cruel and unusual punishments have been prescribed, and even in
such cases the courts will not presume to interfere in the absence of
the clearest and most convincing argument and proof in support of
such contentions. (Weems vs. United States, 217 U.S., 349;
U.S. vs.Pico, 18 Phil. Rep., 386.) We need hardly add that there is no
ground upon which to rest a contention that the penalties prescribed
in the statute under consideration are either excessive or cruel and
unusual, in the sense in which these terms are used in the organic
legislation in force in the Philippine Islands.
But it is contended that on account of the penalties prescribed the
statute should be held invalid upon the principles announced in Ex
parte Young (209 U.S., 123, 147, 148); Cotting vs. Goddard (183 U.S.,
79, 102); Mercantile Trust Co. vs. Texas Co. (51 Fed., 529); Louisville
Ry. vs. McCord (103 Fed., 216); Cons. Gas Co. vs. Mayer (416 Fed.,
150). We are satisfied however that the reasoning of those cases is
not applicable to the statute under consideration. The principles
announced in those decisions are fairly indicated in the following
citations found in petitioner's brief:
But when the legislature, in an effort to prevent any inquiry of the
validity of a particular statute, so burdens any challenge thereof in the
courts that the party affected is necessarily constrained to submit
rather than take the chances of the penalties imposed, then it
becomes a serious question whether the party is not deprived of the
equal protection of the laws. (Cotting vs. Goddard, 183 U. S., 79, 102.)
It may therefore be said that when the penalties for disobedience are
by fines so enormous and imprisonment so severe as to intimidate
the company and its officers from resorting to the courts to test the
validity of the legislation, the result is the same as if the law in terms
prohibited the company from seeking judicial construction of laws
which deeply affect its rights.
It is urged that there is no principle upon which to base the claim that
a person is entitled to disobey a statute at least once, for the purpose
of testing its validity, without subjecting himself to the penalties for
disobedience provided by the statute in case it is valid. This is not an
accurate statement of the case. Ordinarily a law creating offenses in
the nature of misdemeanors or felonies relates to a subject over
which the jurisdiction of the legislature is complete in any event. In
the case, however, of the establishment of certain rates without any
hearing, the validity of such rates necessarily depends upon whether
they are high enough to permit at least some return upon the
investment (how much it is not now necessary to state), and an
inquiry as to that fact is a proper subject of judicial investigation. If it
turns out that the rates are too low for that purpose, then they are
illegal. Now, to impose upon a party interested the burden of
obtaining a judicial decision of such a question (no prior hearing
having been given) only upon the condition that, if unsuccessful, he
must suffer imprisonment and pay fines, as provided in these acts, is,
in effect, to close up all approaches to the courts, and thus prevent
any hearing upon the question whether the rates as provided by the
acts are not too low, and therefore invalid. The distinction is obvious
between a case where the validity of the act depends upon the
existence of a fact which can be determined only after investigation
of a very complicated and technical character, and the ordinary case
of a statute upon a subject requiring no such investigation, and over
which the jurisdiction of the legislature is complete in any event.
We hold, therefore, that the provisions of the acts relating to the
enforcement of the rates, either for freight or passengers, by
imposing such enormous fines and possible imprisonment as a result
of an unsuccessful effort to test the validity of the laws themselves,
are unconstitutional on their face, without regard to the question of
the insufficiency of those rates. (Ex parte Young, 209 U.S., 123 147,
148.)
An examination of the general provisions of our statute, of the
circumstances under which it was enacted, the mischief which it
sought to remedy and of the nature of the penalties prescribed for
violations of its terms convinces us that, unlike the statutes under
consideration in the above cited cases, its enactment involved no
attempt to prevent common carriers "from resorting to the courts to
test the validity of the legislation;" no "effort to prevent any inquiry"
as to its validity. It imposes no arbitrary obligation upon the company
to do or to refrain from doing anything. It makes no attempt to
compel such carriers to do business at a fixed or arbitrarily designated
rate, at the risk of separate criminal prosecutions for every demand
of a higher or a different rate. Its penalties can be imposed only upon
proof of "unreasonable," "unnecessary" and "unjust" discriminations,
and range from a maximum which is certainly not excessive for willful,
deliberate and contumacious violations of its provisions by a great
and powerful corporation, to a minimum which may be a merely
nominal fine. With so wide a range of discretion for a contention on
the part of any common carrier that it or its officers are "intimidated
from resorting to the courts to test the validity" of the provisions of
the statute prohibiting such "unreasonable," "unnecessary" and
"unjust" discriminations, or to test in any particular case whether a
given course of conduct does in fact involve such discrimination. We
will presume, for the purpose of declaring the statute invalid, that
there is so real a danger that the Courts of First Instance and this court
on appeal will abuse the discretion thus conferred upon us, as to
intimidate any common carrier, acting in good faith, from resorting to
the courts to test the validity of the statute. Legislative enactments,
penalizing unreasonable discriminations, unreasonable restraints of
trade, and unreasonable conduct in various forms of human activity
are so familiar and have been so frequently sustained in the courts,
as to render extended discussion unnecessary to refute any
contention as to the invalidity of the statute under consideration,
merely it imposes upon the carrier the obligation of adopting one of
various courses of conduct open to it, at the risk of incurring a
prescribed penalty in the event that the course of conduct actually
adopted by it should be held to have involved an unreasonable,
unnecessary or unjust discrimination. Applying the test announced
in Ex parte Young, supra, it will be seen that the validity of the Act
does not depend upon "the existence of a fact which can be
determined only after investigation of a very complicated and
technical character," and that "the jurisdiction of the legislature" over
the subject with which the statute deals "is complete in any event."
There can be no real question as to the plenary power of the
legislature to prohibit and to penalize the making of undue,
unreasonable and unjust discriminations by common carriers to the
prejudice of any person, locality or particular kind of traffic.
(See Munn vs.Illinois, 94 U.S., 113, and other cases hereinafter cited
in support of this proposition.)
Counsel for petitioner contends also that the statute, if construed so
as to deny the right of the steamship company to elect at will whether
or not it will engage in a particular business, such as that of carrying
explosives, is unconstitutional "because it is a confiscation of
property, a taking of the carrier's property without due process of
law," and because it deprives him of his liberty by compelling him to
engage in business against his will. The argument continues as
follows:
To require of a carrier, as a condition to his continuing in said
business, that he must carry anything and every thing is to render
useless the facilities he may have for the carriage of certain lines of
freight. It would be almost as complete a confiscation of such facilities
as if the same were destroyed. Their value as a means of livelihood
would be utterly taken away. The law is a prohibition to him to
continue in business; the alternative is to get out or to go into some
other business — the same alternative as was offered in the case of
the Chicago & N.W. Ry. vs. Dey (35 Fed. Rep., 866, 880), and which
was there commented on as follows:
"Whatever of force there may be in such arguments, as applied to
mere personal property capable of removal and use elsewhere, or in
other business, it is wholly without force as against railroad
corporations, so large a proportion of whose investment is in the soil
and fixtures appertaining thereto, which cannot be removed. For a
government, whether that government be a single sovereign or one
of the majority, to say to an individual who has invested his means in
so laudable an enterprise as the construction of a railroad, one which
tends so much to the wealth and prosperity of the community, that,
if he finds that the rates imposed will cause him to do business at a
loss, he may quit business, and abandon that road, is the very irony of
despotism. Apples of Sodom were fruit of joy in comparison. Reading,
as I do, in the preamble of the Federal Constitution, that it was
ordained to "establish justice," I can never believe that it is within the
property of an individual invested in and used for a purpose in which
even the Argus eyes of the police power can see nothing injurious to
public morals, public health, or the general welfare. I read also in the
first section of the bill of rights of this state that "all men are by nature
free and equal, and have certain inalienable rights, among which are
those of enjoying and defending life and liberty, acquiring, possessing,
and protecting property, and pursuing and obtaining safety and
happiness;" and I know that, while that remains as the supreme law
of the state, no legislature can directly or indirectly lay its withering
or destroying hand on a single dollar invested in the legitimate
business of transportation." (Chicago & N.W. Ry. vs. Dey, 35 Fed. Rep.,
866, 880.)
It is manifest, however, that this contention is directed against a
construction of the statute, which, as we have said, is not warranted
by its terms. As we have already indicated, the statute does not
"require of a carrier, as a condition to his continuing in said business,
that he must carry anything and everything," and thereby "render
useless the facilities he may have for the carriage of certain lines of
freight." It merely forbids failures or refusals to receive persons or
property for carriage which have the effect of giving an "unreasonable
or unnecessary preference or advantage" to any person, locality or
particular kind of traffic, or of subjecting any person, locality or
particular kind of traffic to any undue or unreasonable prejudice or
discrimination.
Counsel expressly admits that the statute, "as a prohibition against
discrimination is a fair, reasonable and valid exercise of government,"
and that "it is necessary and proper that such discrimination be
prohibited and prevented," but he contends that "on the other hand
there is no reasonable warrant nor valid excuse for depriving a person
of his liberty by requiring him to engage in business against his will. If
he has a rolling boat, unsuitable and unprofitable for passenger trade,
he may devote it to lumber carrying. To prohibit him from using it
unless it is fitted out with doctors and stewards and staterooms to
carry passengers would be an invalid confiscation of this property. A
carrier may limit his business to the branches thereof that suit his
convenience. If his wagon be old, or the route dangerous, he may
avoid liability for loss of passengers' lives and limbs by carrying freight
only. If his vehicles require expensive pneumatic tires, unsuitable for
freight transportation, ha may nevertheless carry passengers. The
only limitation upon his action that it is competent for the governing
authority to impose is to require him to treat all alike. His limitations
must apply to all, and they must be established limitations. He cannot
refuse to carry a case of red jusi on the ground that he has carried for
others only jusi that he was green, or blue, or black. But he can refuse
to carry redjusi, if he has publicly professed such a limitation upon his
business and held himself out as unwilling to carry the same for
anyone."
To this it is sufficient answer to say that there is nothing in the statute
which would deprive any person of his liberty "by requiring him to
engage in business against his will." The prohibitions of the statute
against undue, unnecessary or unreasonable regulations which the
legislator has seen fit to prescribe for the conduct of the business in
which the carrier is engaged of his own free will and accord. In so far
as the self-imposed limitations by the carrier upon the business
conducted by him, in the various examples given by counsel, do not
involve an unreasonable or unnecessary discrimination the statute
would not control his action in any wise whatever. It operates only in
cases involving such unreasonable or unnecessary preferences or
discriminations. Thus in the hypothetical case suggested by the
petitioner, a carrier engaged in the carriage of green, blue or
black jusi, and duly equipped therefor would manifestly be guilty of
"giving an unnecessary and unreasonable preference to a particular
kind of traffic" and of subjecting to "an undue and reasonable
prejudice a particular kind of traffic," should he decline to carry
red jusi, to the prejudice of a particular shipper or of those engaged
in the manufacture of that kind of jusi, basing his refusal on the
ground of "mere whim or caprice" or of mere personal convenience.
So a public carrier of passengers would not be permitted under this
statute to absolve himself from liability for a refusal to carry a
Chinaman, a Spaniard, an American, a Filipino, or a mestizo by proof
that from "mere whim or caprice or personal scruple," or to suit his
own convenience, or in the hope of increasing his business and thus
making larger profits, he had publicly announced his intention not to
carry one or other of these classes of passengers.
The nature of the business of a common carrier as a public
employment is such that it is clearly within the power of the state to
impose such just and reasonable regulations thereon in the interest
of the public as the legislator may deem proper. Of course such
regulations must not have the effect of depriving an owner of his
property without due process of law, nor of confiscating or
appropriating private property without just compensation, nor of
limiting or prescribing irrevocably vested rights or privileges lawfully
acquired under a charter or franchise. But aside from such
constitutional limitations, the determination of the nature and extent
of the regulations which should be prescribed rests in the hands of
the legislator.
Common carriers exercise a sort of public office, and have duties to
perform in which the public is interested. Their business is, therefore,
affected with a public interest, and is subject of public regulation.
(New Jersey Steam Nav. Co. vs. Merchants Bank, 6 How., 344, 382;
Munn vs. Illinois, 94 U.S., 113, 130.) Indeed, this right of regulation is
so far beyond question that it is well settled that the power of the
state to exercise legislative control over railroad companies and other
carriers "in all respects necessary to protect the public against danger,
injustice and oppression" may be exercised through boards of
commissioners. (New York etc. R. Co. vs. Bristol, 151 U.S., 556, 571;
Connecticut etc. R. Co. vs. Woodruff, 153 U.S., 689.)
Regulations limiting of passengers the number of passengers that may
be carried in a particular vehicle or steam vessel, or forbidding the
loading of a vessel beyond a certain point, or prescribing the number
and qualifications of the personnel in the employ of a common
carrier, or forbidding unjust discrimination as to rates, all tend to limit
and restrict his liberty and to control to some degree the free exercise
of his discretion in the conduct of his business. But since the Granger
cases were decided by the Supreme Court of the United States no one
questions the power of the legislator to prescribe such reasonable
regulations upon property clothed with a public interest as he may
deem expedient or necessary to protect the public against danger,
injustice or oppression. (Munn vs. Illinois, 94 U.S., 113, 130; Chicago
etc. R. Co. vs. Cutts, 94 U.S., 155; Budd vs. New York, 143 U.S., 517;
Cotting vs. Goddard, 183 U.S., 79.) The right to enter the public
employment as a common carrier and to offer one's services to the
public for hire does not carry with it the right to conduct that business
as one pleases, without regard to the interest of the public and free
from such reasonable and just regulations as may be prescribed for
the protection of the public from the reckless or careless indifference
of the carrier as to the public welfare and for the prevention of unjust
and unreasonable discrimination of any kind whatsoever in the
performance of the carrier's duties as a servant of the public.
Business of certain kinds, including the business of a common carrier,
holds such a peculiar relation to the public interest that there is
superinduced upon it the right of public regulation. (Budd vs. New
York, 143 U.S., 517, 533.) When private property is "affected with a
public interest it ceases to be juris privati only." Property becomes
clothed with a public interest when used in a manner to make it of
public consequence and affect the community at large. "When,
therefore, one devotes his property to a use in which the public has
an interest, he, in effect, grants to the public an interest in that use,
and must submit to be controlled by the public for the common good,
to the extent of the interest he has thus created. He may withdraw
his grant by discontinuing the use, but so long as he maintains the use
he must submit to control." (Munn vs. Illinois, 94 U.S., 113; Georgia R.
& Bkg. Co. vs. Smith, 128 U.S., 174; Budd vs. New York, 143 U.S., 517;
Louisville etc. Ry. Co. vs. Kentucky, 161 U.S., 677, 695.)
Of course this power to regulate is not a power to destroy, and
limitation is not the equivalent of confiscation. Under pretense of
regulating fares and freight the state can not require a railroad
corporation to carry persons or property without reward. Nor can it
do that which in law amounts to a taking of private property for public
use without just compensation, or without due process of law.
(Chicago etc. R. Co. vs. Minnesota, 134 U.S., 418; Minneapolis Eastern
R. Co. vs. Minnesota, 134 U.S., 467.) But the judiciary ought not to
interfere with regulations established and palpably unreasonable as
to make their enforcement equivalent to the taking of property for
public use without such compensation as under all the circumstances
is just both to the owner and to the public, that is, judicial interference
should never occur unless the case presents, clearly and beyond all
doubt, such a flagrant attack upon the rights of property under the
guise of regulations as to compel the court to say that the regulation
in question will have the effect to deny just compensation for private
property taken for the public use. (Chicago etc. R. Co. vs. Wellman,
143 U.S., 339; Smyth vs. Ames, 169 U.S., 466, 524; Henderson Bridge
Co. vs. Henderson City, 173 U.S., 592, 614.)
Under the common law of England it was early recognized that
common carriers owe to the public the duty of carrying indifferently
for all who may employ them, and in the order in which application is
made, and without discrimination as to terms. True, they were
allowed to restrict their business so as to exclude particular classes of
goods, but as to the kinds of property which the carrier was in the
habit of carrying in the prosecution of his business he was bound to
serve all customers alike (State vs. Cincinnati etc. R. Co., 47 Ohio St.,
130, 134, 138; Louisville etc. Ry. Co. vs. Quezon City Coal Co., 13 Ky. L.
Rep., 832); and it is to be observed in passing that these common law
rules are themselves regulations controlling, limiting and prescribing
the conditions under which common carriers were permitted to
conduct their business. (Munn vs. Illinois, 94 U. S., 113, 133.)
It was found, in the course of time, that the correction of abuses
which had grown up with the enormously increasing business of
common carriers necessitated the adoption of statutory regulations
controlling the business of common carriers, and imposing severe and
drastic penalties for violations of their terms. In England, the Railway
Clauses Consolidation Act was enacted in 1845, the Railway and Canal
Traffic Act in 1854, and since the passage of those Acts much
additional legislation has been adopted tending to limit and control
the conduct of their business by common carriers. In the United
States, the business of common carriers has been subjected to a great
variety of statutory regulations. Among others Congress enacted "The
Interstate Commerce Act" (1887) and its amendments, and the Elkins
Act as amended (1906); and most if not all of the States of the Union
have adopted similar legislation regulating the business of common
carriers within their respective jurisdictions. Unending litigation has
arisen under these statutes and their amendments, but nowhere has
the right of the state to prescribe just and reasonable regulations
controlling and limiting the conduct of the business of common
carriers in the public interest and for the general welfare been
successfully challenged, though of course there has been wide
divergence of opinion as to the reasonableness, the validity and
legality of many of the regulations actually adopted.
The power of the Philippine legislator to prohibit and to penalize all
and any unnecessary or unreasonable discriminations by common
carriers may be maintained upon the same reasoning which justified
the enactment by the Parliament of England and the Congress of the
United States of the above mentioned statutes prohibiting and
penalizing the granting of certain preferences and discriminations in
those countries. As we have said before, we find nothing confiscatory
or unreasonable in the conditions imposed in the Philippine statute
upon the business of common carriers. Correctly construed they do
not force him to engage in any business his will or to make use of his
facilities in a manner or for a purpose for which they are not
reasonably adapted. It is only when he offers his facilities as a
common carrier to the public for hire, that the statute steps in and
prescribes that he must treat all alike, that he may not pick and
choose which customer he will serve, and, specifically, that he shall
not make any undue or unreasonable preferences or discriminations
whatsoever to the prejudice not only of any person or locality but also
of any particular kind of traffic.
The legislator having enacted a regulation prohibiting common
carriers from giving unnecessary or unreasonable preferences or
advantages to any particular kind of traffic or subjecting any particular
kind of traffic to any undue or unreasonable prejudice or
discrimination whatsoever, it is clear that whatever may have been
the rule at the common law, common carriers in this jurisdiction
cannot lawfully decline to accept a particular class of goods for
carriage, to the prejudice of the traffic in those goods, unless it
appears that for some sufficient reason the discrimination against the
traffic in such goods is reasonable and necessary. Mere whim or
prejudice will not suffice. The grounds for the discrimination must be
substantial ones, such as will justify the courts in holding the
discrimination to have been reasonable and necessary under all
circumstances of the case.
The prayer of the petition in the case at bar cannot be granted unless
we hold that the refusal of the defendant steamship company to
accept for carriage on any of its vessels "dynamite, gunpowder or
other explosives" would in no instance involve a violation of the
provisions of this statute. There can be little doubt, however, that
cases may and will arise wherein the refusal of a vessel "engaged in
the coastwise trade of the Philippine Islands as a common carrier" to
accept such explosives for carriage would subject some person,
company, firm or corporation, or locality, or particular kind of traffic
to a certain prejudice or discrimination. Indeed it cannot be doubted
that the refusal of a "steamship company, the owner of a large
number of vessels" engaged in that trade to receive for carriage any
such explosives on any of its vessels would subject the traffic in such
explosives to a manifest prejudice and discrimination. The only
question to be determined therefore is whether such prejudice or
discrimination might in any case prove to be undue, unnecessary or
unreasonable.
This of course is, in each case, a question of fact, and we are of the
opinion that the facts alleged in the complaint are not sufficient to
sustain a finding in favor of the contentions of the petitioner. It is not
alleged in the complaint that "dynamite, gunpowder and other
explosives" can in no event be transported with reasonable safety on
board steam vessels engaged in the business of common carriers. It is
not alleged that all, or indeed any of the defendant steamship
company's vessels are unsuited for the carriage of such explosives. It
is not alleged that the nature of the business in which the steamship
company is engaged is such as to preclude a finding that a refusal to
accept such explosives on any of its vessels would subject the traffic
in such explosives to an undue and unreasonable prejudice and
discrimination.
Plaintiff's contention in this regard is as follows:
In the present case, the respondent company has expressly and
publicly renounced the carriage of explosives, and expressly excluded
the same terms from the business it conducts. This in itself were
sufficient, even though such exclusion of explosives were based on no
other ground than the mere whim, caprice or personal scruple of the
carrier. It is unnecessary, however, to indulge in academic discussion
of a moot question, for the decision not a carry explosives rests on
substantial grounds which are self-evident.
We think however that the answer to the question whether such a
refusal to carry explosives involves an unnecessary or unreasonable
preference or advantage to any person, locality or particular kind of
traffic or subjects any person, locality or particular to traffic to an
undue or unreasonable prejudice and discrimination is by no means
"self-evident," and that it is a question of fact to be determined by the
particular circumstances of each case.
The words "dynamite, powder or other explosives" are broad enough
to include matches, and other articles of like nature, and may fairly be
held to include also kerosene oil, gasoline and similar products of a
highly inflammable and explosive character. Many of these articles of
merchandise are in the nature of necessities in any country open to
modern progress and advancement. We are not fully advised as to the
methods of transportation by which they are made commercially
available throughout the world, but certain it is that dynamite,
gunpowder, matches, kerosene oil and gasoline are transported on
many vessels sailing the high seas. Indeed it is a matter of common
knowledge that common carriers throughout the world transport
enormous quantities of these explosives, on both land and sea, and
there can be little doubt that a general refusal of the common carriers
in any country to accept such explosives for carriage would involve
many persons, firms and enterprises in utter ruin, and would
disastrously affect the interests of the public and the general welfare
of the community.
It would be going to far to say that a refusal by a steam vessel engaged
in the business of transporting general merchandise as a common
carrier to accept for carriage a shipment of matches, solely on the
ground of the dangers incident to the explosive quality of this class of
merchandise, would not subject the traffic in matches to an
unnecessary, undue or unreasonable prejudice and discrimination
without proof that for some special reason the particular vessel is not
fitted to carry articles of that nature. There may be and doubtless are
some vessels engaged in business as common carriers of
merchandise, which for lack of suitable deck space or storage rooms
might be justified in declining to carry kerosene oil, gasoline, and
similar products, even when offered for carriage securely packed in
cases; and few vessels are equipped to transport those products in
bulk. But in any case of a refusal to carry such products which would
subject any person, locality or the traffic in such products would be
necessary to hear evidence before making an affirmative finding that
such prejudice or discrimination was or was not unnecessary, undue
or unreasonable. The making of such a finding would involve a
consideration of the suitability of the vessel for the transportation of
such products ; the reasonable possibility of danger or disaster
resulting from their transportation in the form and under the
conditions in which they are offered for carriage; the general nature
of the business done by the carrier and, in a word, all the attendant
circumstances which might affect the question of the reasonable
necessity for the refusal by the carrier to undertake the
transportation of this class of merchandise.
But it is contended that whatever the rule may be as to other
explosives, the exceptional power and violence of dynamite and
gunpowder in explosion will always furnish the owner of a vessel with
a reasonable excuse for his failure or refusal to accept them for
carriage or to carry them on board his boat. We think however that
even as to dynamite and gunpowder we would not be justified in
making such a holding unaided by evidence sustaining the proposition
that these articles can never be carried with reasonable safety on any
vessel engaged in the business of a common carrier. It is said that
dynamite is so erratic an uncontrollable in its action that it is
impossible to assert that it can be handled with safety in any given
case. On the other hand it is contended that while this may be true of
some kinds of dynamite, it is a fact that dynamite can be and is
manufactured so as to eliminate any real danger from explosion
during transportation. These are of course questions of fact upon
which we are not qualified to pass judgment without the assistance
of expert witnesses who have made special studies as to the chemical
composition and reactions of the different kinds of dynamite, or
attained a thorough knowledge of its properties as a result of wide
experience in its manufacture and transportation.
As we construe the Philippine statute, the mere fact that violent and
destructive explosions can be obtained by the use of dynamite under
certain conditions would not be sufficient in itself to justify the refusal
of a vessel, duly licensed as a common carrier of merchandise, to
accept it for carriage, if it can be proven that in the condition in which
it is offered for carriage there is no real danger to the carrier, nor
reasonable ground to fear that his vessel or those on board his vessel
will be exposed to unnecessary and unreasonable risk in transporting
it, having in mind the nature of his business as a common carrier
engaged in the coastwise trade in the Philippine Islands, and his duty
as a servant of the public engaged in a public employment. So also, if
by the exercise of due diligence and the taking of unreasonable
precautions the danger of explosions can be practically eliminated,
the carrier would not be justified in subjecting the traffic in this
commodity to prejudice or discrimination by proof that there would
be a possibility of danger from explosion when no such precautions
are taken.
The traffic in dynamite, gunpowder and other explosives is vitally
essential to the material and general welfare of the people of these
Islands. If dynamite, gunpowder and other explosives are to continue
in general use throughout the Philippines, they must be transported
by water from port to port in the various islands which make up the
Archipelago. We are satisfied therefore that the refusal by a particular
vessel, engaged as a common carrier of merchandise in the coastwise
trade of the Philippine Islands, to accept any or all of these explosives
for carriage would constitute a violation of the prohibitions against
discriminations penalized under the statute, unless it can be shown
by affirmative evidence that there is so real and substantial a danger
of disaster necessarily involved in the carriage of any or all of these
articles of merchandise as to render such refusal a due or a necessary
or a reasonable exercise of prudence and discretion on the part of the
shipowner.
The complaint in the case at bar lacking the necessary allegations
under this ruling, the demurrer must be sustained on the ground that
the facts alleged do not constitute a cause of action.
A number of interesting questions of procedure are raised and
discussed in the briefs of counsel. As to all of these questions we
expressly reserve our opinion, believing as we do that in sustaining
the demurrer on the grounds indicated in this opinion we are able to
dispose of the real issue involved in the proceedings without entering
upon the discussion of the nice questions which it might have been
necessary to pass upon had it appeared that the facts alleged in the
complaint constitute a cause of action.
We think, however, that we should not finally dispose of the case
without indicating that since the institution of these proceedings the
enactment of Acts No. 2307 and No. 2362 (creating a Board of Public
Utility Commissioners and for other purposes) may have materially
modified the right to institute and maintain such proceedings in this
jurisdiction. But the demurrer having been formallly submitted for
judgment before the enactment of these statutes, counsel have not
been heard in this connection. We therefore refrain from any
comment upon any questions which might be raised as to whether or
not there may be another adequate and appropriate remedy for the
alleged wrong set forth in the complaint. Our disposition of the
question raised by the demurrer renders that unnecessary at this
time, though it may not be improper to observe that a careful
examination of those acts confirms us in the holding upon which we
base our ruling on this demurrer, that is to say "That whatever may
have been the rule at the common law, common carriers in this
jurisdiction cannot lawfully decline to accept a particular class of
goods for carriage, to the prejudice of the traffic in those goods,
unless it appears that for some sufficient reason the discrimination
against the traffic in such goods is reasonable and necessary. Mere
prejudice or whim will not suffice. The grounds of the discrimination
must be substantial ones, such as will justify the courts in holding the
discrimination to have been reasonable and necessary under all the
circumstances of the case."
Unless an amended complaint be filed in the meantime, let judgment
be entered ten days hereafter sustaining the demurrer and dismissing
the complaint with costs against the complainant, and twenty days
thereafter let the record be filed in the archives of original actions in
this court. So ordered.
 G.R. No. 47065 June 26, 1940 The Certificate of Public Convenience is neither a
franchise nor contract, confers no property rights and
PANGASINAN TRANSPORTATION CO.,
is a mere license or privilege, subject to governmental
INC., petitioner, control for the good of the public. PSC has the power,
vs. upon notice and hearing, “to amend, modify, or
THE PUBLIC SERVICE revoked at any time any certificate issued, whenever
COMMISSION, respondent. the facts and circumstances so warranted. The
C. de G. Alvear for petitioner. limitation of 25 years was never heard, so the case was
Evaristo R. Sandoval for respondent. remanded to PSC for further proceedings.

Pangasinan Transport Co. vs. Public Service In addition, the Court ruled that, “the liberty and
Commission property of the citizens should be protected by the
GR NO. 47065, June 26, 1940 rudimentary requirements of fair play. Not only must
the party be given an opportunity to present his case
FACTS: and to adduce evidence tending to establish the rights
that he asserts but the tribunal must consider the
This is a case on the certificate of public convenience evidence presented. When private property is
of petitioner Pangasinan Transportation Co. Inc affected with a public interest, it ceased to be juris
(Pantranco). The petitioner has been engaged for the privati or private use only.
past twenty years in the business of transporting
passengers in the province of Pangasinan and Tarlac,
Nueva Ecija and Zambales. On August 26, 1939,
Pantranco filed with the Public Service Commission
(PSC) an application to operate 10 additional buses.
PSC granted the application with 2 additional
conditions which was made to apply also on their
existing business. Pantranco filed a motion for
reconsideration with the Public Service Commission.
Since it was denied, Pantranco then filed a petition/
writ of certiorari.

ISSUES:

Whether the legislative power granted to Public

Service Commission:
- is unconstitutional and void because it is
without limitation
- constitutes undue delegation of powers

HELD:

The challenged provisions of Commonwealth Act No.

454 are valid and constitutional because it is a proper
delegation of legislative power, so called “Subordinate
Legislation”. It is a valid delegation because of the
growing complexities of modern government, the
complexities or multiplication of the subjects of
governmental regulation and the increased difficulty
of administering the laws. All that has been delegated
to the Commission is the administrative function,
involving the use of discretion to carry out the will of
the National Assembly having in view, in addition, the
promotion of public interests in a proper and suitable
manner.

PHILIPPINE AIRLINES, INC., petitioner, vs.
CIVIL AERONAUTICS BOARD and GRAND
INTERNATIONAL AIRWAYS,
INC., respondents.
DECISION
IV. Statement of Facts:
On Novermber 24, 1994, Grand International Airways, Inc.
(GrandAir) applied for a Certificate of Public Convenience and
Necessity with the Civil Aeronautics Board (CAB). The Chief
Hearing Officer of the CAB issued a Notice of Hearing setting
the application for initial hearing on December 16, 1994 and
directing GrandAir to serve a copy of the application and
corresponding notice to all scheduled Philippine Domestic
operators.
On December 14, 1994, GrandAir filed its Compliance, and
requested for the issuance of a Temporary Operating
Permit(TOP).
V. Statement of the Case:
On December 16, 1995, Philippine Airlines, Inc. (PAL), the
holder of a legislative franchise to operate air transport
services, filed an Opposition to the application for a Certificate
of Public Convenience and Necessity on the following grounds:
(a) the CAB has no jurisdiction to hear GranAir’s application
until the latter has first obtained a franchise to operate from
Congress; (b) GrandAir’s application is deficient in form and
substance; (c) approval of GrandAir’s application would violate
the equal protection clause of the constitution; (d) There is no
urgent need and demand for the services applied for; (e) to
grant GrandAir’s application would only result in ruinous
competition contrary to Section 4(d) of R.A. 776.
VII. Held: 1. Yes. Section 10 of R.A. No. 776 reveals the clear
intent of Congress to delegate the authority to regulate the
issuance of a license to operate domestic air transport
services. It states that:
SECTION 10. Powers and Duties of the Board- (A) Except as
otherwise provided therein, the Board shall have the power to
regulate the economic aspect of air transportation, and shall
have general supervision and regulation of, the jurisdiction and
control over air carriers, general sales agents, cargo sales
agents, and air freight forwarders as well as their property
rights, equipment, facilities and franchise, insofar as may be
necessary for the purpose of carrying out the provision of this
Act.
In support of the Board’s authority as stated above, it is given
the following specific powers and duties:
(c) The Board shall have the following specific powers and
duties: (1) In accordance with the provisions of Chapter IV of
this Act, to issue, deny, amend, revise, alter, modify, cancel,
suspend or revoke in whole or in part upon petition or
complaint or upon its own initiative any Temporary Operating
Permit or Certificate of Public Convenience and Necessity:
Provided, however, that in the case of foreign air carriers, the
permit shall be issued with the approval of the President of the
Republic of the Philippines.
VIII. Dispositive Portion
ACCORDINGLY, in view of the foregoing considerations, the
Court RESOLVED to DISMISS the instant petition for lack of
merit. The respondent Civil Aeronautics Board is hereby
DIRECTED to CONTINUE hearing the application of respondent
Grand International Airways, Inc. for the issuance of the
Certificate of Public Convenience and Necessity.

PAL raised the issue of lack of jurisdiction of the CAB to hear

the application because GrandAir did not possess a legislative
franchise. On December 20, 1994, The Chief Hearing Officer of
CAB issued an Order denying petitioner’s Opposition.

On December 22, 1994, petitioner opposed private

respondent’s application for a temporary permit. On
December 23, 1994, The CAB promulgated Resolution
approving the issuance of a TOP in favor of GrandAir.
Petitioner moved for the reconsideration of the issuance of the
TOP but the same was denied.

Hence this petition.

VI. Issue: 1. Whether or not the CAB has the authority to issue
a Certificate of Public Convenience and Necessity, or
Temporary Operating Permit to a domestic air transport
operator, who, though not possessing a legislative franchise,
meets all the other requirement prescribed by the law.
 Nature and Basis of the Liability
Cangco v Manila RailRoad
On January 20, 1915, Cangco was riding the train of
Manila Railroad Co (MRC). He was an employee of the
latter and he was given a pass so that he could ride the
train for free. When he was nearing his destination at
about 7pm, he arose from his seat even though the train
was not at full stop. When he was about to alight from
the train (which was still slightly moving) he accidentally
stepped on a sack of watermelons which he failed to
notice due to the fact that it was dim. This caused him to
lose his balance at the door and he fell and his arm was
crushed by the train and he suffered other serious
injuries. He was dragged a few meters more as the train
slowed down.
It was established that the employees of MRC were
negligent in piling the sacks of watermelons. MRC raised
as a defense the fact that Cangco was also negligent as
he failed to exercise diligence in alighting from the train
as he did not wait for it to stop.
ISSUE: Whether or not Manila Railroad Co is liable for
damages.
HELD: Yes. Alighting from a moving train while it is
slowing down is a common practice and a lot of people
are doing so every day without suffering injury. Cangco
has the vigor and agility of young manhood, and it was
by no means so risky for him to get off while the train was
yet moving as the same act would have been in an aged
or feeble person. He was also ignorant of the fact that
sacks of watermelons were there as there were no
appropriate warnings and the place was dimly lit.
The Court also elucidated on the distinction between the
liability of employers under Article 2180 and their liability
for breach of contract [of carriage]:
NOTES: But, if the master has not been guilty of any
negligence whatever in the selection and direction of the
servant, he is not liable for the acts of the latter,
whatever done within the scope of his employment or
not, if the damage done by the servant does not amount
to a breach of the contract between the master and the
person injured.
The liability arising from extra-contractual culpa is always
based upon a voluntary act or omission which, without
willful intent, but by mere negligence or inattention, has
caused damage to another.
These two fields, figuratively speaking, concentric; that is
to say, the mere fact that a person is bound to another
by contract does not relieve him from extra-contractual
liability to such person. When such a contractual relation
exists the obligor may break the contract under such
conditions that the same act which constitutes the
source of an extra-contractual obligation had no contract
existed between the parties.
Manresa: Whether negligence occurs an incident in the
course of the performance of a contractual undertaking
or in itself the source of an extra-contractual undertaking
obligation, its essential characteristics are identical.
Vinculum Juris: (def) It means “an obligation of law”, or
the right of the obligee to enforce a civil matter in a court
of law.
 [ G.R. No. L-8194, July 11, 1956 ] immediate (Articles 1755, 1756, and 1759, New Civil
EMERENCIANA M. VDA. DE MEDINA, ET Code).
AL., PLAINTIFFS AND APPELLEES VS.
GUILLERMO CRESENCIA, ET AL.,
DEFENDANTS. GUILLERMO CRESENCIA,
APPELLANT.

DECISION
Medina vs. Cresencia
Facts:
A passenger jeepney driven by Brigido Avorque smashed
into a Meralco post resulting in the death of Vicente
Medina, one of its passengers. Guillermo Cresencia is the
registered owner of the jeepney as well as the registered
operator. On the other hand, Rosario Avorque, after the
jeepney having been repeatedly sold from one buyer
after another, is its current absolute owner as well as the
employer of driver Brigido.
Issue:
(1) Who should be held liable for the death of Medina –
the registered owner or the absolute owner?
(2) WON Rosario Avorque has a subsidiary liability under
the RPC for damages arising from her driver’s criminal
act.
Held:
(1) The registered owner.
The requires the approval of the Public Service
Commission in order that a franchise, or any privilege
pertaining thereto, may be sold or leased without
infringing the certificate issued to the grantee x x x As the
sale of the jeepney was admittedly without the approval
of the Public Service Commission, Guillermo Cresencia,
who is the registered owner and operator thereof,
continued to be liable to the Commission and the public
for the consequences incident to its operation.
(2) No, she has no subsidiary liability.

Medina’s action for damages is independent of the

criminal case filed against Brigido Avorque, and based,
not on the employer’s subsidiary liability under the
Revised Penal Code, but on a breach of the carrier’s
contractual obligation to carry his passengers safely to
their destination (culpa contractual). And it is also for this
reason that there is no need of first proving the
insolvency of the driver Brigido Avorque before damages
can be recovered from the carrier, for in culpa
contractual, the liability of the carrier is not merely
subsidiary or secondary, but direct and
 PAL v CA And this must be so for any omission, lapse or neglect
PAL vs. CA thereof will certainly result to the damage, prejudice,
nay injuries and even death to all aboard the plane,
Facts:
passengers and crew members alike.
Private respondent Jesus Samson was a regular co-pilot
of PAL. During one of his flights from Manila to Legazpi
with Captain Delfin Bustamante, they made a crash
landing at Daet where Samson suffered physical injuries
in the head. Samson alleges that the accident was due
to the gross negligence of PAL in allowing Bustamante
who was suffering from a long standing tumor of the
Nasopharynx but was also allowed by the Civil
Aeronautics Administration to fly as a co-pilot; and that
because of the tumor Bustamante has a slow reaction
and poor judgment.

Issue:

WON PAL was negligent as a common carrier in allowing

Bustamante to fly as a First Officer the day of the
accident. Or, WON the same carrier is liable for the
accident even if Bustamante was not sick.

Held: YES and YES.

For having allowed Bustamante to fly as a First Officer

on January 8, 1951, defendant is guilty of gross
negligence and therefore should be made liable for the
resulting accident.

(Even) assuming that the pilot was not sick or that the
tumor did not affect the pilot in managing the plane,
the evidence shows that overshooting of the runway
and crash-landing at the mangrove was caused by the
pilot for which acts the defendant must answer for
damages caused thereby. And for the negligence of
defendant’s employee, it is liable. At least, the law
presumes the employer negligent imposing upon it the
burden of proving that it exercised the diligence of a
good father of a family in the supervision of its
employees.

As defined in Art. 1732, NCC, petitioner is a common

carrier. The law is clear in requiring a common carrier to
exercise the highest degree of care in the discharge of
its duty and business of carriage and transportation
under Art. 1733, 1755 and 1756, NCC.

The duty to exercise the utmost diligence on the part of

common carriers is for the safety of passengers as well
as for the members of the crew or the complement
operating the carrier, the airplane in the case at bar.
 NTFC v Lorenzo Shipping
REPUBLIC VS. LORENZO SHIPPING CORPORATION
450 SCRA 550, G.R. NO. 153563 FEBRUARY 7, 2005
FACTS
Republic of the Philippines, through the
Department of Health (DOH), and the Cooperative for
American Relief Everywhere, Inc. (CARE) signed an
agreement wherein CARE would acquire from the United
States government donations of non-fat dried milk and
other food products from January 1, 1987 to December
31, 1989. In turn, the Philippines would transport and
distribute the donated commodities to the intended
beneficiaries in the country.
The government entered into a contract of
carriage of goods with petitioner National Trucking and
Forwarding Corporation (NTFC) and the latter shipped
4,868 bags of non-fat dried milk through respondent
Lorenzo Shipping Corporation (LSC). The consignee
named in the bills of lading issued by the respondent was
Abdurahman Jama, petitioner’s branch supervisor in
Zamboanga City.
On reaching the port of Zamboanga City,
respondent’s agent, Efren Ruste Shipping Agency,
unloaded the 4,868 bags of non-fat dried milk and
delivered the goods to petitioner’s warehouse. Before
each delivery, the delivery checkers of Efren Ruste
Shipping Agency, requested Abdurahman to surrender
the original bills of lading, but the latter merely
presented certified true copies thereof. Upon
completion of each delivery, the checkers asked
Abdurahman to sign the delivery receipts. However, at
times when Abdurahman had to attend to other business
before a delivery was completed, he instructed his
subordinates to sign the delivery receipts for him.
The petitioner allegedly did not receive the
subject goods. Thus, petitioner NTFC filed a formal claim
for non-delivery of the goods shipped through
respondent. In reply, the respondent explained that the
cargo had already been delivered to Abdurahman. The
petitioner then decided to investigate the loss of the
goods. But before the investigation was over,
Abdurahman resigned as branch supervisor of petitioner.
Disbelieving respondent’s insistence that the
goods were delivered, the government through the DOH,
CARE, and NTFC as plaintiffs filed an action for breach of
contract of carriage, against respondent as defendant,
with the RTC of Manila.
After trial, the RTC resolved the case in favor of
the defendant. Petitioner appealed to the Court of
Appeals on the grounds that the lower court faulted for
not holding that respondent failed to deliver the cargo,
and that respondent failed to exercise the extraordinary
diligence required of common carriers. The Court of
Appeals found that the trial court did not commit any
error. It dismissed the appeal, and affirmed the assailed
decision in toto. Hence, this petition.
ISSUE
Whether the respondent is negligent as common
carrier for the loss or deterioration of the goods.
RULING
We rule for respondent.
Article 1733 of the Civil Code demands that a
common carrier observe extraordinary diligence over the
goods transported by it. Extraordinary diligence is that
extreme measure of care and caution which persons of
unusual prudence and circumspection use for securing
and preserving their own property or rights. This exacting
standard imposed on common carriers in a contract of
carriage of goods is intended to tilt the scales in favor of
the shipper who is at the mercy of the common carrier
once the goods have been lodged for shipment. Hence,
in case of loss of goods in transit, the common carrier is
presumed under the law to have been at fault or
negligent. However, the presumption of fault or
negligence, may be overturned by competent evidence
showing that the common carrier has observed
extraordinary diligence over the goods.
In the instant case, we agree with the court a
quo that the respondent adequately proved that it
exercised extraordinary diligence. Although the original
bills of lading remained with petitioner, respondent’s
agents demanded from Abdurahman the certified true
copies of the bills of lading. They also asked the latter and
in his absence, his designated subordinates, to sign the
cargo delivery receipts.
This practice, which respondent’s agents
testified to be their standard operating procedure, finds
support in Article 353 of the Code of Commerce:
ART. 353. . . .
 After the contract has been complied
with, the bill of lading which the carrier
has issued shall be returned to him and by
virtue of the exchange of this title with
the thing transported, the respective
obligations and actions shall be
considered cancelled.
In case the consignee, upon receiving the goods,
cannot return the bill of lading subscribed by the carrier,
because of its loss or of any other cause, he must give the
latter a receipt for the goods delivered, this receipt
producing the same effects as the return of the bill of
lading. (Emphasis supplied)
Conformably with the aforecited provision, the
surrender of the original bill of lading is not a condition
precedent for a common carrier to be discharged of its
contractual obligation. If surrender of the original bill of
lading is not possible, acknowledgment of the delivery by
signing the delivery receipt suffices. This is what
respondent did.
JAPAN AIRLINES VS. SIMANGAN
552 SCRA 341, G.R. NO. 170141 APRIL 22, 2008
FACTS
Jesus Simangan needed to go to the USA to
donate a kidney to his ailing cousin, Loreto Simangan. He
was issued an emergency U.S. visa by the American
Embassy in Manila. Then respondent purchased a round
trip plane ticket from petitioner JAL. On July 29, 1992, the
date of his flight, respondent went to Ninoy Aquino
International Airport and after passing through said
immigration and security procedures, respondent was
allowed by JAL to enter its airplane. While inside the
airplane, JAL's airline crew suspected respondent of
carrying a falsified travel document and imputed that he
would only use the trip to the United States as a pretext
to stay and work in Japan. The stewardess asked
respondent to show his travel documents and was
ordered to stand up and leave the plane. Respondent
pleaded but his pleas were ignored. The plane took off
and he was left behind.
Respondent filed an action for damages against
JAL with the Regional Trial Court. He claimed he was not
able to donate his kidney to Loreto; and that he suffered
terrible embarrassment and mental anguish. He prayed
that he be awarded damages. JAL denied the material
allegations of the complaint. It argued, among others,
that its failure to allow respondent to fly on his scheduled
departure was due to "a need for his travel documents
to be authenticated by the United States
Embassy" because no one from JAL's airport staff had
encountered a parole visa before. The RTC rendered its
decision in favor of the respondent. JAL appealed to the
CA contending that it is not guilty of breach of contract
of carriage, hence, not liable for damages. The CA
affirmed the decision of the RTC. Hence, this petition.
ISSUE
Whether JAL is guilty of breach of contract of
carriage.
RULING
Yes, JAL is guilty of contract of carriage.
JAL did not allow respondent to fly. It informed
respondent that there was a need to first check the
authenticity of his travel documents with the U.S.
Embassy. As admitted by JAL, “the flight could not wait
for Mr. Simangan because it was ready to depart.” Since
JAL definitely declared that the flight could not wait for
respondent, it gave respondent no choice but to be left
behind. The latter was unceremoniously bumped off
despite his protestations and valid travel documents and
notwithstanding his contract of carriage with JAL.
Damage had already been done when respondent was
offered to fly the next day on July 30, 1992. Said offer did
not cure JAL’s default.
Apart from the fact that respondent’s plane
ticket, boarding pass, travel authority and personal
articles already passed the rigid immigration and security
routines, JAL, as a common carrier, ought to know the
kind of valid travel documents respondent carried. As
provided in Article 1755 of the New Civil Code: “A
common carrier is bound to carry the passengers safely
as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due
regard for all the circumstances.” Thus, We find
untenable JAL’s defense of “verification of respondent’s
documents” in its breach of contract of carriage. It bears
repeating that the power to admit or not an alien into the
country is a sovereign act which cannot be interfered
with even by JAL.
In an action for breach of contract of carriage, all
that is required of plaintiff is to prove the existence of
such contract and its non-performance by the carrier
through the latter’s failure to carry the passenger safely
to his destination. Respondent has complied with these
twin requisites.
Northwest Airlines v CHiong
1. Northwest Airlines v Chiong, January 31, 2008
Facts
Philimare, as the authorized Philippine agent of
TransOcean, hired Chiong as third engineer of
TransOcean’s vessel M/V Elbia. Subsequently, Philmare
dispatched a letter of guarantee to CL Hutchins and Co.,
TranOcean’s agent at the San Diego Port, confirming
Chiong’s arrival in time to board the vessel. For this
purpose, Philimare purchased for Chiong a Northwest
plane ticket for San Diego from Manila. Chiong, on queue
at the check-in counter, was informed that his name did
not appear in the list of confirmed departing passengers.
He was directed to speak to a man standing outside the
Northwest’s counters from whom Chiong could allegedly
obtain a boarding pass. Posthaste, Chiong approached the
man but having no $100 to pay for the boarding pass he
went on queue at the check-in counter again and
presented his ticket where he was made to wait. When
Chiong approached Calvo if she had money for the
boarding pass, the latter found something amiss because
his plane ticket was already confirmed. Ultimately, Chiong
was not allowed to board the flight and was unable to
work at the M/V Elbia.
It appears that Chiong’s name was crossed out and
substituted with "W. Costine" in Northwest’s Air
Passenger Manifest.
Chiong demanded as recompense: (1) the amount
equivalent to Chiong’s salary under the latter’s Crew
Agreement with TransOcean; (2) P15,000 for Chiong’s
expenses in fetching and bringing his family from Samar to
Manila; (3) P500,000 as moral damages; and (4) P500,000
as legal fees. When Northwest demurred, Chiong filed a
complaint for breach of contract of carriage.
Northwest contradicted the claim that it breached its
contract of carriage with Chiong, reiterating that Chiong
had no cause of action against it because per its records,
Chiong was a "no-show" passenger.
The RTC rendered a Decision finding preponderance
of evidence in favor of Chiong, and holding Northwest
liable for breach of contract of carriage. The RTC ruled that
the evidence adduced by the parties supported the
conclusion that Chiong was deliberately prevented from
checking-in and his boarding pass unjustifiably withheld to
accommodate an American passenger by the name of W.
Costine. The CA affirmed the RTC ruling.
Issue
Whether Northwest breached its contract of carriage
with Chiong and if so, whether it is liable for
compensatory, actual, moral and exemplary damages,
attorney’s fees, and costs of suit
Ruling
In addition to his testimony, Chiong’s evidence
consisted of a Northwest ticket, Chiong’s passport and
seaman service record book duly stamped at the PCG
counter, and the testimonies of Calvo, Florencio Gomez,
and Philippine Overseas Employment and Administration
(POEA) personnel who all identified the signature and
stamp of the PCG on Chiong’s passport.
Northwest did not present any evidence to support its
belated defense that Chiong departed from the
Philippines on April 17, 1989 to work as Third Engineer on
board M/V Elbia under the original crew agreement. Its
bare-faced claim that Chiong was a no-show passenger
was belied by the records.
Even if Chiong left the Philippines on April 17, 1989, it
would not necessarily prove that Chiong was a "no-show"
on April 1, 1989. Neither does it negate the already
established fact that Chiong had a confirmed ticket for
April 1, 1989, and first passed through the PCG counter
without delay, then reached and was at the Northwest
check-in counters on time for the scheduled flight.
Northwest breached its contract of carriage with
Chiong.
Time and again, we have declared that a contract of
carriage, in this case, air transport, is primarily intended to
serve the traveling public and thus, imbued with public
interest. The law governing common carriers
consequently imposes an exacting standard of conduct. As
the aggrieved party, Chiong only had to prove the
existence of the contract and the fact of its non-
performance by Northwest, as carrier, in order to be
awarded compensatory and actual damages.
Article 2220 of the Civil Code of the Philippines, an
award of moral damages, in breaches of contract, is in
order upon a showing that the defendant acted
fraudulently or in bad faith. Bad faith does not simply
connote bad judgment or negligence. It imports a
dishonest purpose or some moral obliquity and conscious
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.
 The award of exemplary damages is also correct given
the evidence that Northwest acted in an oppressive
manner towards Chiong.
Attorney’s fees may be awarded when a party is
compelled to litigate or incur expenses to protect his
interest, or where the defendant acted in gross and
evident bad faith in refusing to satisfy the plaintiff’s plainly
valid, just and demandable claim.
Aboitiz v ICNA
ABOITIZ SHIPPING CORPORATION, vs. INSURANCE COMPANY
OF
NORTH AMERICA,
G.R. No. 168402 August 6, 2008
Facts:
1. MSAS Cargo International Limited and/or Associated
and/or Subsidiary Companies (MSAS) procured a
marine insurance policy from respondent ICNA UK
Limited of London and the insurance was for a
transshipment of certain wooden work tools and
workbenches purchased for the consignee Science
Teaching Improvement Project
(STIP), Ecotech Center, Sudlon Lahug, Cebu
City, Philippines.
2. When the cargo reached Manila, it was received by
petitioner Aboitiz Shipping Corporation (Aboitiz)
through its duly authorized booking representative,
Aboitiz Transport System and the bill of lading issued
by Aboitiz contained the notation grounded outside
warehouse.
3. The shipment arrived in Cebu City and discharged
onto a receiving apron of the Cebu International Port
and it was then brought to the Cebu Bonded
Warehousing Corporation pending clearance from
the Customs authorities where petitioner’s checker
noted that the crates were slightly broken or cracked
at the bottom.
4. Subsequently, then Claims Head of petitioner,
received a telephone call from Bernhard Willig, the
representative of consignee who received the
shipment, informing him that the cargo sustained
water damage.
5. ICNA paid the amount of P280,176.92 to consignee
and ICNA formally advised Aboitiz of the claim and
subrogation receipt executed in its favor but despite
follow-ups, no reply was received from Aboitiz.
Issues:
1. Is respondent ICNA the real party-in-interest that
possesses the right of subrogation to claim
reimbursement from petitioner Aboitiz?
2. Was there a timely filing of the notice of claim as
required under Article 366 of the Code of
Commerce?
3. If so, can petitioner be held liable on the claim for
damages?
Ruling:
1. Yes, payment by the insurer to the assured operates
as an equitable assignment of all remedies the
assured may have against the third party who
caused the damage. Subrogation is not dependent
upon, nor does it grow out of, any privity of contract
or upon written assignment of claim. It accrues
simply upon payment of the insurance claim by the
insurer. Upon payment to the consignee of
indemnity for damage to the insured goods, ICNAs
entitlement to subrogation equipped it with a cause
of action against petitioner in case of a contractual
breach or negligence.
2. Yes, provisions specifying a time to give notice of
damage to common carriers are ordinarily to be
given a reasonable and practical, rather than a strict
construction. The call to petitioner was made two
days from delivery, a reasonable period considering
that the goods could not have corroded instantly
overnight such that it could only have sustained the
damage during transit. Moreover, petitioner was
able to immediately inspect the damage while the
matter was still fresh. In so doing, the main objective
of the prescribed time period was fulfilled. Thus,
there was substantial compliance with the notice
requirement in this case
3. Yes, The rule as stated in Article 1735 of the Civil
Code is that in cases where the goods are lost,
destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted
negligently, unless they prove that they observed
extraordinary diligence required by law. Petitioner
is thus liable for the water damage sustained by the
goods due to its failure to satisfactorily prove that it
exercised the extraordinary diligence required of
common carriers.
 Philippines First v Wallem
G.R. No. 165647, March 26, 2009
Philippines First Insurance Co., Inc.
vs Wallem Phils. Shipping, Inc.
Ponente: Tinga
Facts:
October 1995, Anhui Chemicals Import and Export Corp.
loaded on board M/S Offshore Master a shipment consisting
of sodium sulphate anhydrous, complete and in good order
for transportation to and delivery at the port of Manila for
consignee, covered by a clean bill of lading.
On October 16, 1995, the shipment arrived in port of manila
and was discharged which caused various degrees of spillage
and losses as evidence by the turn over survey of the arrastre
operator. Asia Star Freight delivered the shipments from pier
to the consignees in Quezon City, during the unloading, it was
found by the consignee that the shipment was damaged and
in bad condition.
April 29, 1996, the consignee filed a claim with Wallem for
the value of the damaged shipment, to no avail. Since the
shipment was insured with Phil. First Insurance against all
risks in the amount of P2,470,213.50. The consignee filed a
claim against the First Insurance. First insurance after
examining the turn-over survey, the bad order certificate and
other documents paid the consignee but later on sent a
demand letter to Wallem for the recovery of the amount paid
to the consignee (in exercise of its right of subrogation).
Wallem did not respond to the claim.
First Insurance then instituted an action before RTC for
damages against Wallem. RTC held the shipping company and
the arrastre operator solidarily liable since both are charged
with the obligation to deliver the goods in good order
condition.
The CA reversed and set aside the RTC's decision. CA says that
there is no solidary liability between the carrier and
the arrastre because it was clearly established that the
damage and losses of the shipment were attributed to the
mishandling by the arrastre operator in the discharge of the
shipment.
Issues:
1. Whether or not the Court of Appeals erred in not holding
that as a common carrier, the carriers duties extend to the
obligation to safely discharge the cargo from the vessel;
2. Whether or not the carrier should be held liable for the
cost of the damaged shipment;
3. Whether or not Wallems failure to answer the extra judicial
demand by petitioner for the cost of the lost/damaged
shipment is an implied admission of the formers liability for
said goods;
4. Whether or not the courts below erred in giving credence
to the testimony of Mr. Talens.
Ruling:
(1) Yes, the vessel is a common carrier, and thus the
determination of the existence or absence of liability will be
gauged on the degree of diligence required of a common
carrier. (2) The first and second issue will be resolved
concurrently.
(3) The damage of the shipment was documented by the
turn0over survey and request for bad order survey, with
these documents, petitioner insist that the shipment incurred
damages while still in the care and responsibility of Wallem
before it was turned over to the arrastre operator. However,
RTC found the testimony of Mr. Talens (cargo surveyor) that
the loss was caused by the mishandling of the arrastre
operator. This mishandling was affirmed by the CA which was
the basis for declaring the arrastre operator solely liable for
the damage.
It is established that damage or losses were incurred by the
shipment during the unloading. As common carrier, they are
bound to observe extraordinary diligence in the vigilance over
the goods transported by them. Subject to certain exceptions
enumerated under Article 1734 of the Civil Code, common
carriers are responsible for the loss, destruction, or
deterioration of the goods. The extraordinary responsibility of
the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by
the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or
to the person who has a right to receive them.
For marine vessels, Article 619 of the Code of Commerce
provides that the ship captain is liable for the cargo from the
time it is turned over to him at the dock or afloat alongside
the vessel at the port of loading, until he delivers it on the
shore or on the discharging wharf at the port of unloading,
unless agreed otherwise.
COGSA provides that under every contract of carriage of
goods by sea, the carrier in relation to the loading, handling,
stowage, carriage, custody, care, and discharge of such
goods, shall be subject to the responsibilities and liabilities
and entitled to the rights and immunities set forth in the Act.
Section 3 (2) thereof then states that among the carriers
responsibilities are to properly and carefully load, handle,
stow, carry, keep, care for, and discharge the goods carried.
On the other hand, the functions of an arrastre operator
involve the handling of cargo deposited on the wharf or
between the establishment of the consignee or shipper and
the ship's tackle. Being the custodian of the goods discharged
from a vessel, an arrastre operator's duty is to take good care
of the goods and to turn them over to the party entitled to
their possession.

Handling cargo is mainly the arrastre operator's principal

work so its drivers/operators or employees should observe
the standards and measures necessary to prevent losses and
damage to shipments under its custody. Thus, in this case the
appellate court is correct insofar as it ruled that an arrastre
operator and a carrier may not be held solidarily liable at all
times. But the precise question is which entity had custody of
the shipment during its unloading from the vessel?

The records are replete with evidence which show that the
damage to the bags happened before and after their
discharge and it was caused by the stevedores of the arrastre
operator who were then under the supervision of Wallem.

It is settled in maritime law jurisprudence that cargoes while

being unloaded generally remain under the custody of the
carrier. In the instant case, the damage or losses were
incurred during the discharge of the shipment while under
the supervision of the carrier. Consequently, the carrier is
liable for the damage or losses caused to the shipment. As
the cost of the actual damage to the subject shipment has
long been settled, the trial courts finding of actual damages in
the amount of P397,879.69 has to be sustained.

(4) Mr Talens credibility must be respected.

CA's decision is set aside. Wallem is liable.