SECOND DIVISION [G.R. No. 125948. December 29, 1998] FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs.

COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO, in her official capacity as City Treasurer of Batangas, respondents. DECISION MARTINEZ, J.: This petition for review on certiorari assails the Decision of the Court of Appeals dated November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners' complaint for a business tax refund imposed by the City of Batangas. Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and operate oil pipelines. The original pipeline concession was granted in 1967[1] and renewed by the Energy Regulatory Board in 1992.[2] Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government Code.[3] The respondent City Treasurer assessed a business tax on the petitioner amounting toP956,076.04 payable in four installments based on the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In order not to hamper its operations, petitioner

paid the tax under protest in the amount of P239,019.01 for the first quarter of 1993. On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the pertinent portion of which reads: "Please note that our Company (FPIC) is a pipeline operator with a government concession granted under the Petroleum Act. It is engaged in the business of transporting petroleum products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, our Company is exempt from paying tax on gross receipts under Section 133 of the Local Government Code of 1991 x x x x "Moreover, Transportation contractors are not included in the enumeration of contractors under Section 131, Paragraph (h) of the Local Government Code. Therefore, the authority to impose tax 'on contractors and other independent contractors' under Section 143, Paragraph (e) of the Local Government Code does not include the power to levy on transportation contractors. "The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 of the Local Government Code. The said section limits the imposition of fees and charges on business to such amounts as may be commensurate to the cost of regulation, inspection, and licensing. Hence, assuming arguendo that FPIC is liable for the license fee, the imposition thereof based on gross receipts is violative of the aforecited provision. The amount of P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of regulation, inspection and licensing. The fee is already a revenue raising measure, and not a mere regulatory imposition."[4] On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot be considered engaged in

transportation business, thus it cannot claim exemption under Section 133 (j) of the Local Government Code.[5] On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint[6] for tax refund with prayer for a writ of preliminary injunction against respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the imposition and collection of the business tax on its gross receipts violates Section 133 of the Local Government Code; (2) the authority of cities to impose and collect a tax on the gross receipts of "contractors and independent contractors" under Sec. 141 (e) and 151 does not include the authority to collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term "contractors" excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously imposed and collected the said tax, thus meriting the immediate refund of the tax paid.[7] Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under Section 133 (j) of the Local Government Code as said exemption applies only to "transportation contractors and persons engaged in the transportation by hire and common carriers by air, land and water." Respondents assert that pipelines are not included in the term "common carrier" which refers solely to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that the term "common carrier" under the said code pertains to the mode or manner by which a product is delivered to its destination.[8] On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise: "xxx Plaintiff is either a contractor or other independent contractor. xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are to be strictly construed

against the taxpayer, taxes being the lifeblood of the government. Exemption may therefore be granted only by clear and unequivocal provisions of law. "Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387, (Exhibit A) whose concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession grant any tax exemption upon the plaintiff. "Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax Code. Such being the situation obtained in this case (exemption being unclear and equivocal) resort to distinctions or other considerations may be of help: 1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as not to overburden the riding public or commuters with taxes. Plaintiff is not a common carrier, but a special carrier extending its services and facilities to a single specific or "special customer" under a "special contract." The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy to local governments than the previous enactments, to make them economically and financially viable to serve the people and discharge their functions with a concomitant obligation to accept certain devolution of powers, x x x So, consistent with this policy even franchise grantees are taxed (Sec. 137) and contractors are also taxed under Sec. 143 (e) and 151 of the Code."[9]

2.

Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27, 1995, we referred the case to the respondent Court of Appeals for consideration and adjudication.[10] On November 29, 1995, the respondent court rendered a decision[11] affirming the trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18, 1996.[12] Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11, 1996.[13] Petitioner moved for a reconsideration which was granted by this Court in a Resolution[14] of January 20, 1997. Thus, the petition was reinstated. Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a common carrier or a transportation contractor, and (2) the exemption sought for by petitioner is not clear under the law. There is merit in the petition. A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of transporting persons or property from place to place, for compensation, offering his services to the public generally. Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public." The test for determining whether a party is a common carrier of goods is: 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. 3. 4.

He must undertake to carry goods of the kind to which his business is confined; He must undertake to carry by the method by which his business is conducted and over his established roads; and The transportation must be for hire.[15]

Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier. In De Guzman vs. Court of Appeals[16] we ruled that: "The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a 'sideline'). Article 1732 x x x avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on 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 1877 deliberately refrained from making such distinctions. So understood, the concept of 'common carrier' under Article 1732 may be seen to coincide neatly with the notion of 'public service,' under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the

Civil Code. Under Section 13, paragraph (b) of the Public Service Act, 'public service' includes: 'every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system gas, electric light heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services.' "(Underscoring Supplied) Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Government Code refers only to common carriers transporting goods and passengers through moving vehicles or vessels either by land, sea or water, is erroneous. As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe line operators are considered common carriers.[17] Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier." Thus, Article 86 thereof provides that:

"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the preferential right to utilize installations for the transportation of petroleum owned by him, but is obligated to utilize the remaining transportation capacity pro rata for the transportation of such other petroleum as may be offered by others for transport, and to charge without discrimination such rates as may have been approved by the Secretary of Agriculture and Natural Resources." Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof provides: "that everything relating to the exploration for and exploitation of petroleum x x and everything relating to the manufacture, refining, storage, or transportation by special methods of petroleum, is hereby declared to be apublic utility." (Underscoring Supplied) The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-83, it declared: "x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum products, it is considered a common carrier under Republic Act No. 387 x x x. Such being the case, it is not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended." From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore, exempt from the business tax as provided for in Section 133 (j), of the Local Government Code, to wit: "Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following : xxx xxx xxx

(j)

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

The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are illuminating: "MR. AQUINO (A). Thank you, Mr. Speaker. Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 [now Sec. 131]. Common Limitations on the Taxing Powers of Local Government Units." x x x MR. AQUINO (A.). Thank you Mr. Speaker. Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one of those being deemed to be exempted from the taxing powers of the local government units. May we know the reason why the transportation business is being excluded from the taxing powers of the local government units? MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16, paragraph 5. It states that local government units may not impose taxes on the business of transportation, except as otherwise provided in this code. Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that provinces have the power to impose a tax on business enjoying a franchise at the rate of not more than onehalf of 1 percent of the gross annual receipts. So, transportation contractors who are enjoying a franchise would be subject to tax by the province. That is the exception, Mr. Speaker.

What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government units on the carrier business. Local government units may impose taxes on top of what is already being imposed by the National Internal Revenue Code which is the so-called "common carriers tax." We do not want a duplication of this tax, so we just provided for an exception under Section 125 [now Sec. 137] that a province may impose this tax at a specific rate. MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x[18] It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax against common carriers is to prevent a duplication of the so-called "common carrier's tax." Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the National Internal Revenue Code.[19] To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local Government Code. WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE. SO ORDERED. Bellosillo, (Chairman), Puno, and Mendoza, JJ., concur.

[1] [2]

Rollo, pp. 90-94.

Decision of the Energy Regulatory Board in ERB Case No. 92-94, renewing the Pipeline Concession of petitioner First Philippine

Industrial Corporation, formerly known as Meralco Securities Industrial Corporation , (Rollo, pp. 95-100).
[3]

Sec. 143. Tax on Business. The municipality may impose taxes on the following business: xxx xxx xxx (e) On contractors and other independent contractors, in accordance with the following schedule: With gross receipts for the preceding Amount of Tax Per Annum Calendar year in the amount: xxx xxx P2,000,000.00 or more at a rate not exceeding fifty Percent (50%) of one (1%)
[4] [5] [6] [7] [8] [9]

Letter Protest dated January 20, 1994, Rollo, pp. 110-111. Letter of respondent City Treasurer, Rollo, p. 112. Complaint, Annex "C", Rollo, pp. 51-56. Rollo, pp. 51-57. Answer, Annex "J", Rollo, pp. 122-127. RTC Decision, Rollo, pp. 58-62. Rollo, p. 84.

[10] [11]

CA-G.R. SP No.36801; Penned by Justice Jose C. De la Rama and concurred in by Justice Jaime M. Lantin and Justice Eduardo G. Montenegro; Rollo, pp. 33-47.
[12] [13]

Rollo, p. 49.

Resolution dated November 11, 1996 excerpts of which are hereunder quoted: "The petition is unmeritorious.

"As correctly ruled by respondent appellate court, petitioner is not a common carrier as it is not offering its services to the public. "Art. 1732 of the Civil Code defines Common Carriers as: persons, corporations, firms 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. "We sustain the view that petitioner is a special carrier. Based on the facts on hand, it appears that petitioner is not offering its services to the public. "We agree with the findings of the appellate court that the claim for exemption from taxation must be strictly construed against the taxpayer. The present understanding of the concept of "common carriers" does not include carriers of petroleum using pipelines. It is highly unconventional to say that the business of transporting petroleum through pipelines involves "common carrier" business. The Local Government Code intended to give exemptions from local taxation to common carriers transporting goods and passengers through moving vehicles or vessels and not through pipelines. The term common carrier under Section 133 (j) of the Local Government Code must be given its simple and ordinary or generally accepted meaning which would definitely not include operators of pipelines."
[14]

G.R. No. 125948 (First Philippine Industrial Corporation vs. Court of Appeals, et. al.)- Considering the grounds of the motion for reconsideration, dated December 23, 1996, filed by counsel for petitioner, of the resolution of November 11, 1996 which denied the petition for review on certiorari, the Court Resolved: (a) to GRANT the motion for reconsideration and to REINSTATE the petition; and (b) to require respondent to COMMENT on the petition, within ten (10) days from notice.
[15]

Agbayani, Commercial Laws of the Phil., 1983 Ed., Vol. 4, p. 5.

[16] [17]

168 SCRA 617-618 [1998].

Giffin v. Pipe Lines, 172 Pa. 580, 33 Alt. 578; Producer Transp. Co. v. Railroad Commission, 241 US 228, 64 L ed 239, 40 S Ct 131.
[18]

Journal and Record of the House of Representatives, Fourth Regular Session, Volume 2, pp. 87-89, September 6, 1990; Underscoring Ours.
[19]

Annex "D" of Petition, Rollo, pp. 101-109.

THIRD DIVISION [G.R. Nos. 121662-64. July 6, 1999] VLASON ENTERPRISES CORPORATION, petitioner, vs. COURT OF APPE ALS and DURAPROOF SERVICES, represented by its General Man ager, CesarUrbino Sr., respondents.

SYNOPSIS Ruling that the judgment sought to be reviewed has become final and executory, the Court of Appeals ordered the Regional Trial Court to take appropriate action on the urgent ex-parte motion for issuance of a writ of execution filed by private respondent. Pursuant thereto, the Regional Trial Court of Manila issued a writ of possession thus placing private respondent in possession of petitioners barge Lawin. Hence, this petition. The case filed by private respondent with the trial court involved multiple defendants. Several defendants entered into a compromise agreement with private respondent. A compromise agreement is immediately final and executory. As to these defendants therefore, the trial court Decision had become final. Nevertheless, said decision cannot be said to have attained finality as to petitioner, which was not a party to the compromise. Moreover, petitioner filed a Motion for Reconsideration two days before the lapse of the reglementary period to appeal. Execution shall issue as matter of right upon the expiration of the period to appeal if no appeal has been duly perfected. The sheriffs return showed that the president of petitioner corporation was served summons through his secretary. A summons

addressed to a corporation and served on the secretary of the President binds that corporation. The secretary however, should be an employee of the corporation sought to be summoned. In the case at bar, the secretary was not an employee of petitioner but of Vlasons Shipping, Inc. Acting under the impression that petitioner had been placed under its jurisdiction, the trial court dispensed with the service on petitioner of new summons for the subsequent amendments of the petition. But the first service of summons on petitioner was invalid. Thus, the trial court never acquired jurisdiction over the petitioner. Not having been validly served summons, it would be legally impossible to declare petitioner to be in default. A default judgment cannot affect the rights of a party who was never declared in default. SYLLABUS 1. REMEDIAL LAW; ACTIONS; JUDGMENT; WHEN DOES A JUDGMENT BECOME FINAL. -- A judgment becomes final and executory by operation of law. Its finality becomes a fact when the reglementary period to appeal lapses, and no appeal is perfected within such period. 2. ID.; ID.; ID.; ID.; DEPENDENT ON DATE OF RECEIPT OF COPY OF JUDGMENT OF EACH DEFENDANT. -- The admiralty case filed by private respondent with the trial court involved multiple defendants. This being the case, it necessarily follows that the period of appeal of the February 18, 1991 RTC Decision depended on the date a copy of the judgment was received by each of the defendants. Elsewise stated, each defendant had a different period within which to appeal, depending on the date of receipt of the Decision. 3. ID.; ID.; ID.; ID.; DEPENDENT ON DATE OF COMPROMISE AGREEMENT. -- Omega, Singkong Trading Co. and M/V Star Ace chose to enter into a compromise agreement with private

respondent. As to these defendants, the trial court Decision had become final, and a writ of execution could be issued against them. Doctrinally, a compromise agreement is immediately final and executory. 4. ID.; ID.; ID.; EFFECT ON PETITIONER WHO FILED MOTION FOR RECONSIDERATION AND NOT PARTY TO COMPROMISE. -Petitioner, however, is not in the same situation. Said Decision cannot be said to have attained finality as to the petitioner, which was not a party to the compromise. Moreover, petitioner filed a timely Motion for Reconsideration with the trial court, thirteen days after it received the Decision or two days before the lapse of the reglementary period to appeal. A motion for reconsideration tolls the running of the period to appeal. Thus, as to petitioner, the trial court Decision had not attained finality. 5. ID.; ID.; MOTIONS; NOTICE OF TIME AND PLACE OF HEARING, MANDATORY. -- The Court has consistently held that a motion which does not meet the requirements of Sections 4 and 5 of Rule 15 of the Rules of Court is considered a worthless piece of paper, which the clerk of court has no right to receive and the trial court has no authority to act upon. Service of a copy of a motion containing a notice of the time and the place of hearing of that motion is a mandatory requirement, and the failure of movants to comply with these requirements renders their motions fatally defective. 6. ID.; ID.; ID.; ID.; EXCEPTIONS. -- However, there are exceptions to the strict application of this rule. These exceptions are as follows: xxx Liberal construction of this rule has been allowed by this Court in cases (1) where a rigid application will result in a manifest failure or miscarriage of justice; especially if a party successfully shows that the alleged defect in the questioned final and executory judgment is not apparent on its face or from the recitals contained therein; (2) where the interest of substantial justice will be served; (3) where

the resolution of the motion is addressed solely to the sound and judicious discretion of the court; and (4) where the injustice to the adverse party is not commensurate [to] the degree of his thoughtlessness in not complying with the procedure prescribed. 7. ID.; ID.; ID.; ID.; ID.; CASE AT BAR. -- The present case falls under the first exception. Petitioner was not informed of any cause of action or claim against it. All of a sudden, the vessels which petitioner used in its salvaging business were levied upon and sold in execution to satisfy a supposed judgment against it. To allow this to happen simply because of a lapse in fulfilling the notice requirement which, as already said, was satisfactorily explained - would be a manifest failure or miscarriage of justice. 8. ID.; ID.; ID.; ID.; AN INTEGRAL COMPONENT OF DUE PROCESS REQUIREMENT. -- A notice of hearing is conceptualized as an integral component of procedural due process intended to afford the adverse parties a chance to be heard before a motion is resolved by the court. Through such notice, the adverse party is permitted time to study and answer the arguments in the motion. 9. ID.; ID.; ID.; ID.; LACK OF NOTICE CURED BY RECEIPT OF COPY OF MOTION IN OPEN COURT. -- Circumstances in the case at bar show that private respondent was not denied procedural due process, and that the very purpose of a notice of hearing had been served. On the day of the hearing, Atty. Desierto did not object to the said Motion for lack of notice to him; in fact, he was furnished in open court with a copy of the motion and was granted by the trial court thirty days to file his opposition to it. These circumstances clearly justify a departure from the literal application of the notice of hearing rule. In other cases, after the trial court learns that a motion lacks such notice, the prompt resetting of the hearing with due notice to all the parties is held to have cured the defect.

10. ID.; PROCEDURAL RULES; LIBERALLY CONSTRUED. -- Verily, the notice requirement is not a ritual to be followed blindly. Procedural due process is not based solely on a mechanistic and literal application that renders any deviation inexorably fatal. Instead, procedural rules are liberally construed to promote their objective and to assist in obtaining a just, speedy and inexpensive determination of any action and proceeding. 11. ID.; ACTIONS; SUMMONS TO CORPORATIONS; RECEIPT BY SECRETARY OF CORPORATIONS PRESIDENT, BINDING.-- A corporation may be served summons through its agents or officers who under the Rules are designated to accept service of process. A summons addressed to a corporation and served on the secretary of its president binds that corporation. This is based on the rationale that service must be made on a representative so integrated with the corporation sued, that it is safe to assume that said representative had sufficient responsibility and discretion to realize the importance of the legal papers served and to relay the same to the president or other responsible officer of the corporation being sued. The secretary of the president satisfies this criterion. This rule requires, however, that the secretary should be an employee of the corporation sought to be summoned. Only in this manner can there be an assurance that the secretary will bring home to the corporation [the] notice of the filing of the action against it. 12. ID.; ID.; ID.; ID.; SECRETARY IN CASE AT BAR NOT AN EMPLOYEE OF CORPORATION; SERVICE NOT VALID; PIERCING OF VEIL CORPORATE ENTITY NOT RESORTED TO. -- In the present case, Bebero was the secretary of Anglionto, who was president of both VSI and petitioner, but she was an employee of VSI, not of petitioner. The piercing of the corporate veil cannot be resorted to when serving summons. Doctrinally, a corporation is a legal entity distinct and separate from the members and stockholders who compose it. However, when the corporate fiction is used as a

means of perpetrating a fraud, evading an existing obligation, circumventing a statute, achieving or perfecting a monopoly or, in generally perpetrating a crime, the veil will be lifted to expose the individuals composing it. None of the foregoing exceptions has been shown to exist in the present case. Quite the contrary, the piercing of the corporate veil in this case will result in manifest injustice. This we cannot allow. Hence, the corporate fiction remains. 13. ID.; ID.; ID.; AMENDED PLEADINGS; ANOTHER SUMMONS NOT NEEDED WHERE DEFENDANTS ALREADY APPEARED ON ORIGINAL COMPLAINT. -- Although it is well-settled that an amended pleading supersedes the original one, which is thus deemed withdrawn and no longer considered part of the record, it does not follow ipso facto that the service of a new summons for amended petitions or complaints is required. Where the defendant have already appeared before the trial court by virtue of a summons on the original complaint, the amended complaint may be served upon them without need of another summons, even if new causes of action are alleged. After it is acquired, a court's jurisdiction continues until the case is finally terminated. Conversely, when defendants have not yet appeared in court and no summons has been validly served, new summons for the amended complaint must be served on them. It is not the change of cause of action that gives rise to the need to serve another summons for the amended complaint, but rather the acquisition of jurisdiction over the persons of the defendants. If the trial court has not yet acquired jurisdiction over them, a new service of summons for the amended complaint is required. 14. ID.; ID.; ID.; ID.; PARTY NOT PREVIOUSLY SERVED MUST BE SERVE WITH NEW SUMMONS ON AMENDED PLEADING; CASE AT BAR. -In this case, the trial court obviously labored under the erroneous impression that petitioner had already been placed under its

jurisdiction since it had been served summons through the secretary of its president. Thus, it dispensed with the service on petitioner of new summons for the subsequent amendments of the Petition. We have already ruled, however, that the first service of summons on petitioner was invalid. Therefore, the trial court never acquired jurisdiction, and the said court should have required a new service of summons for the amended Petitions. 15. ID.; ID.; AMENDMENT OF PLEADINGS; LIBERALLY ALLOWED. -The judicial attitude has always been favorable and liberal in allowing amendments to pleadings. Pleadings shall be construed liberally so as to render substantial justice to the parties and to determine speedily and inexpensively the actual merits of the controversy with the least regard to technicalities. 16. ID.; ID.; PLEADINGS; INCLUSION OF ALL PARTIES IN COMPLAINT, A FORMAL REQUIREMENT; NON-INCLUSION OF SOME, NOT FATAL. -The inclusion of the names of all the parties in the title of a complaint is a formal requirement under Section 3, Rule 7. However, the rules of pleadings require courts to pierce the form and go into the substance, and not to be misled by a false or wrong name given to a pleading. The averments in the complaint, not the title, are controlling. Although the general rule requires the inclusion of the names of all the parties in the title of a complaint, the non-inclusion of one or some of them is not fatal to the cause of action of a plaintiff, provided there is a statement in the body of the petition indicating that a defendant was made a party to such action. 17. ID.; ID.; ID.; ID.; ID.; CASE AT BAR. -- Private respondent claims that petitioner has always been included in the caption of all the Petitions it filed, which included Antonio Sy, field manager of petitioner. We checked and noted that in the caption and the body of the Amended Petition and Second Amended Petition with Supplemental Petition, Antonio Sy was alleged to be representing

Med Line Philippines, not petitioner. Because it was private respondent who was responsible for the errors, the Court cannot excuse it from compliance, for such action will prejudice petitioner, who had no hand in the preparation of these pleadings. In any event, we reiterate that, as a general rule, mere failure to include the name of a party in the title of a complaint is not fatal by itself. 18. ID.; ID.; JUDGMENT; MUST CONFORM TO PLEADINGS AND THEORY OF ACTION.-- The general rule is allegata et probata -- a judgment must conform to the pleadings and the theory of the action under which the case was tried. But a court may also rule and render judgment on the basis of the evidence before it, even though the relevant pleading has not been previously amended, so long as no surprise or prejudice to the adverse party is thereby caused. 19. ID.; ID.; ID.; ID.; JURISDICTION OVER PERSON, INDISPENSABLE. -In the case at bar, the liability of petitioner was based not on any allegation in the four Petitions filed with the trial court, but on the evidence presented ex parte by the private respondent. Since the trial court had not validly acquired jurisdiction over the person of petitioner, there was no way for the latter to have validly and knowingly waived its objection to the private respondent's presentation of evidence against it. 20. ID.; ID.; DEFAULT; JUDGMENT BY DEFAULT; PARTY MUST HAVE SUBMITTED ITSELF TO JURISDICTION OF COURT; CASE AT BAR. -The reception of evidence ex parte against a non-defaulting party is procedurally indefensible. Without a declaration that petitioner is in default as required in Section 1, Rule 18, the trial court had no authority to order the presentation of evidence ex parte against petitioner to render judgment against it by default. The trial judge must have thought that since it failed to appear despite summons and was in default, it effectively waived any objection to the presentation of evidence against it. This rule, however, would have

applied only if petitioner had submitted itself to the jurisdiction of the trial court. The latter correctly declared, in the Resolution just cited, that the default judgment against the former had been improvidently rendered. 21. ID.; ID.; NONPAYMENT OF DOCKET FEES WILL NOT PREVENT COURT FROM HOLDING PARTY LIABLE FOR DAMAGES; JURISDICTION OVER PERSON REQUIRED. -- Had the trial court validly acquired jurisdiction over petitioner, nonpayment of docket fees would not have prevented it from holding petitioner liable for damages. The Court, in Manchester Development Corporation v. Court of Appeals, ruled that a court acquires jurisdiction over any case only upon the payment of the prescribed docket fee, not upon the amendment of the complaint or the payment of the docket fees based on the amount sought in the amended pleading. This ruling, however, was modified in Sun Insurance Office, Ltd. v. Asuncion, which added: 3. Where the trial court acquires jurisdiction over a claim [through] the filing of the appropriate pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if specified the same has been left for determination by the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the additional fee. Filing fees for damages and awards that cannot be estimated constitute liens on the awards finally granted by the trial court. Their nonpayment alone is not a ground for the invalidation of the award. 22. ID.; ID.; DEFAULT; DECLARATION OR ORDER OF DEFAULT; PUNISHMENT FOR UNNECESSARY DELAY IN JOINING ISSUES. -- A declaration or order of default is issued as a punishment for unnecessary delay in joining issues. In such event, defendants lose their standing in court, they cannot expect the trial court to act

upon their pleadings, and they are not entitled to notice of the proceeding until the final termination of the case. Thus, the trial court proceeds with the reception of the plaintiff's evidence upon which a default judgment is rendered. 23. ID.; ID.; ID.; JUDGMENT BY DEFAULT; SHALL NOT EXCEED AMOUNT OR DIFFERENT IN KIND FROM THAT PRAYED FOR. -Section 1 of Rule 18 provides that after the defendant has been declared in default, the court shall proceed to receive the plaintiff's evidence and render judgment granting him such relief as the complaint and the facts proven may warrant. The reliefs that may be granted, however, are restricted by Section 5, which provides that a judgment entered against a party in default shall not exceed the amount or be different in kind from that prayed for. 24. ID.; ID.; ID.; ID.; CLAIMANT MUST STILL PROVE CLAIM; DEFENDANTS MERELY WAIVED RIGHT TO BE HEARD AND PRESENT EVIDENCE. -- In other words, under Section 1, a declaration of default is not an admission of the truth or the validity of the plaintiff's claims. The claimant must still prove his claim and present evidence. In this sense the law gives defaulting parties some measure of protection because plaintiffs, despite the default of defendants, are still required to substantiate their allegations in the complaint. The judgment of default against defendants who have not appeared or filed their answers does not imply a waiver of all their rights, except their right to be heard and to present evidence in their favor. Their failure to answer does not imply their admission of the facts and the causes of action of the plaintiffs, because the latter are required to adduce evidence to support their allegations. 25. ID.; ID.; ID.; ID.; ID.; COURT NOT ALLOWED TO RECEIVE EVIDENCE TO SHOW RELIEF NOT SOUGHT. -- Moreover, the trial court is not allowed by the Rules to receive evidence that tends to show a relief

not sought or specified in the pleadings. The plaintiff cannot be granted an award greater than or different in kind from that specified in the complaint. 26. ID.; ID.; ID.; ID.; ID.; ID.; DISTINGUISHED FROM DEFENDANT WHO FILED ANSWER BUT ABSENT DURING TRIAL. -- This case should be distinguished, however, from that of defendants, who filed an answer but were absent during trial. In that case, they can be held liable for an amount greater than or different from that originally prayed for, provided that the award is warranted by the proven facts. This rule is premised on the theory that the adverse party failed to object to evidence relating to an issue not raised in the pleadings. 27. ID.; ID.; ID.; ID.; ID.; CASE AT BAR. -- The latter rule, however, is not applicable to the instant case. Admittedly, private respondent presented evidence that would have been sufficient to hold petitioner liable for damages. However, it did not include in its amended Petitions any prayer for damages against petitioner. Therefore, the trial court could not have validly held the latter liable for damages even if it were in default. 28. ID.; ID.; JUDGMENT; EXECUTION; NOT ALLOWED WHERE JUDGMENT HAS NOT BECOME FINAL AND EXECUTORY. -- Section 1 of Rule 39 provides that execution shall issue only upon a judgment that finally disposes of the action or proceeding. Such execution shall issue as a matter of right upon the expiration of the period to appeal it, if no appeal has been duly perfected. In the present case, however, we have already shown that the trial court's Decision has not become final and executory against petitioner. In fact, the judgment does not even bind it. Obviously, Respondent Court committed serious reversible errors when it allowed the execution of the said judgment against petitioner. APPEARANCES OF COUNSEL

Angara Abello Concepcion Regala Cruz for petitioner. Edgardo Q. Galope for private respondent.

DECISION PANGANIBAN, J.: Summons to a domestic or resident corporation should be served on officers, agents or employees, who are responsible enough to warrant the presumption that they will transmit to the corporation notice of the filing of the action against it. Rules on the service of motions should be liberally construed in order to promote the ends of substantial justice. A rigid application that will result in the manifest injustice should be avoided. A default judgment against several defendants cannot affect the rights of one who was never declared in default. In any event, such judgment cannot include an award not prayed for in the complaint, even if proven ex parte.
The Case

These principles were used by this Court in resolving this Petition for Review on Certiorari before us, assailing the July 19, 1993 Decision[1] and the August 15, 1995 Resolution,[2] both promulgated by the Court of Appeals. The assailed Decision disposed as follows:[3] ACCORDINGLY, in view of the foregoing disquisitions, all the three (3) consolidated petitions for certiorari are hereby GRANTED.

THE assailed Order of respondent Judge Arsenio Gonong of the Regional Trial Court of Manila, Branch 8, dated April 5, 1991, in the first petition for certiorari (CA-G.R. SP No. 24669); the assailed Order of Judge Bernardo Pardo, Executive Judge of the Regional Trial Court of Manila, Branch 8, dated July 6, 1992, in the second petition for certiorari (CA-G.R. SP No. 28387); and finally, the assailed order or Resolution en banc of the respondent Court of Tax Appeals Judges Ernesto Acosta, Ramon de Veyra and Manuel Gruba, under date of October 5, 1992, in the third petition for certiorari (CAG.R. SP No. 29317) are all hereby NULLIFIED and SET ASIDE thereby giving way to the entire decision dated February 18, 1991 of the respondent Regional Trial Court of Manila, Branch 8, in Civil Case No. 89-51451 which remains valid, final and executory, if not yet wholly executed. THE writ of preliminary injunction heretofore issued by this Court on March 6, 1992 and reiterated on July 22, 1992 and this date against the named respondents specified in the dispositive portion of the judgment of the respondent Regional Trial Court of Manila, Branch 8 in the first petition for certiorari, which remains valid, existing and enforceable, is hereby MADE PERMANENT without prejudice (1) to the [private respondents+ remaining unpaid obligations to the herein partyintervenor in accordance with the Compromise Agreement or in connection with the decision of the respondent lower court in CA-G.R. SP No. 24669 and (2) to the government, in relation to the forthcoming decision of the respondent Court of Tax Appeals on the amount of taxes, charges, assessments or obligations that are due, as totally secured and fully guaranteed payment by the *private respondents+ bond, subject to the relevant rulings of the Department of Finance and other prevailing laws and jurisprudence. The assailed Resolution ruled:

ACCORDINGLY, in the light of the foregoing disquisitions, as well as considering these clarifications, the three (3) motions aforementioned are hereby DENIED.
The Facts

Poro Point Shipping Services, then acting as the local agent of Omega Sea Transport Company of Honduras & Panama, a Panamanian company, (hereafter referred to as Omega), requested permission for its vesselM/V Star Ace, which had engine trouble, to unload its cargo and to store it at the Philippine Ports Authority (PPA) compound in San Fernando, La Union while awaiting transhipment to Hongkong. The request was approved by the Bureau of Customs.[4] Despite the approval, the customs personnel boarded the vessel when it docked on January 7, 1989, on suspicion that it was the hijacked M/V Silver Med owned by Med Line Philippines Co., and that its cargo would be smuggled into the country.[5] The district customs collector seized said vessel and its cargo pursuant to Section 2301, Tariff and Customs Code. A notice of hearing of SFLU Seizure Identification No. 3-89 was served on its consignee, Singkong Trading Co. of Hongkong, and its shipper, Dusit International Co., Ltd. of Thailand. While seizure proceedings were ongoing, La Union was hit by three typhoons, and the vessel ran aground and was abandoned. On June 8, 1989, its authorized representative, Frank Cadacio, entered into a salvage agreement with private respondent to secure and repair the vessel at the agreed consideration of $1 million and fifty percent (50%) *of+ the cargo after all expenses, cost and taxes.[6] Finding that no fraud was committed, the District Collector of Customs, Aurelio M. Quiray, lifted the warrant of seizure on July 16, 1989.[7] However, in a Second Indorsement dated November 11, 1989, then Customs Commissioner Salvador M. Mison declined to issue a

clearance for Quirays Decision; instead, he forfeited the vessel and its cargo in accordance with Section 2530 of the Tariff and Customs Code.[8]Accordingly, acting District Collector of Customs John S. Sy issued a Decision decreeing the forfeiture and the sale of the cargo in favor of the government.[9] To enforce its preferred salvors lien, herein Private Respondent Duraproof Services filed with the Regional Trial Court of Manila a Petition for Certiorari, Prohibition and Mandamus[10] assailing the actions of Commissioner Mison and District Collector Sy. Also impleaded as respondents were PPA Representative Silverio Mangaoang and Med Line Philippines, Inc. On January 10, 1989, private respondent amended its Petition[11] to include former District Collector Quiray; PPA Port Manager Adolfo Ll. Amor Jr; Petitioner Vlason Enterprises as represented by its president, Vicente Angliongto; Singkong Trading Company as represented by Atty. Eddie Tamondong; Banco Du Brasil; Dusit International Co., Inc.; ThaiNan Enterprises Ltd. and Thai-United Trading Co., Ltd.[12] In both Petitions, private respondent plainly failed to include any allegation pertaining to petitioner, or any prayer for relief against it. Summonses for the amended Petition were served on Atty. Joseph Capuyan for Med Line Philippines: Angliongto (through his secretary, Betty Bebero), Atty. Tamondong and Commissioner Mison. [13] Upon motion of the private respondent, the trial court allowed summons by publication to be served upon the alien defendants who were not residents and had no direct representatives in the country.[14] On January 29, 1990, private respondent moved to declare respondents in default, but the trial court denied the motion in its February 23, 1990 Order,[15] because Mangaoang and Amor had jointly filed a Motion to Dismiss, while Mison and Med Line had moved separately for an extension to file a similar motion.[16] Later it rendered an Order dated July 2, 1990, giving due course to the motions to

dismiss filed by Mangaoang and Amor on the ground of litis pendentia, and by the commissioner and district collector of customs on the ground of lack of jurisdiction.[17] In another Order, the trial court dismissed the action against Med Line Philippines on the ground of litis pendentia.[18] On two other occasions, private respondent again moved to declare the following in default: petitioner, Quiray, Sy and Mison on March 26, 1990;[19] and Banco Du Brazil, Dusit International Co., Inc., Thai-Nan Enterprises Ltd. and Thai-United Trading Co., Ltd. on August 24, 1990.[20] There is no record, however, that the trial court acted upon the motions. On September 18, 1990, petitioner filed another Motion for leave to amend the petition,[21] alleging that its counsel failed to include the following necessary and/or indispensable parties: Omega represented by Cadacio; and M/V Star Ace represented by Capt. Nahon Rada, relief captain. Aside from impleading these additional respondents, private respondent also alleged in the Second (actually, third) Amended Petition[22] that the owners of the vessel intended to transfer and alienate their rights and interests over the vessel and its cargo, to the detriment of the private respondent. The trial court granted leave to private respondent to amend its Petition, but only to exclude the customs commissioner and the district collector.[23] Instead, private respondent filed the Second Amended Petition with Supplemental Petition against Singkong Trading Company; and Omega and M/V Star Ace,[24] to which Cadacio and Rada filed a Joint Answer.[25] Declared in default in an Order issued by the trial court on January 23, 1991, were the following: Singkong Trading Co., Commissioner Mison, M/V Star Ace and Omega.[26] Private respondent filed, and the trial court granted, an ex parte Motion to present evidence against the defaulting respondents.[27] Only private respondent, Atty. Tamondong, Commissioner Mison, Omega and M/V Star Ace appeared in the next pretrial hearing; thus, the trial court declared the other respondents in

default and allowed private respondent to present evidence against them.[28] Cesar Urbino, general manager of private respondent, testified and adduced evidence against the other respondents, including herein petitioner. As regards petitioner, he declared: Vlason Enterprises represented by Atty. Sy and Vicente Angliongto thru constant intimidation and harassment of utilizing the PPA Management of San Fernando, La Union x x x further delayed, and [private respondent] incurred heavy overhead expenses due to direct and incidental expenses xxx causing irreparable damages of aboutP3,000,000 worth of ship tackles, rigs, and appurtenances including radar antennas and apparatuses, which were taken surreptitiously by persons working for Vlason Enterprises or its agents*.+[29] On December 29, 1990, private respondent and Rada, representing Omega, entered into a Memorandum of Agreement stipulating that Rada would write and notify Omega regarding the demand for salvage fees of private respondent; and that if Rada did not receive any instruction from his principal, he would assign the vessel in favor of the salvor.[30] On February 18, 1991, the trial court disposed as follows: WHEREFORE, IN VIEW OF THE FOREGOING, based on the allegations, prayer and evidence adduced, both testimonial and documentary, the Court is convinced, that, indeed, defendants/respondents are liable to [private respondent] in the amount as prayed for in the petition for which it renders judgment as follows: 1. Respondent M/V Star Ace, represented by Capt. Nahum Rada, [r]elief [c]aptain of the vessel and Omega Sea Transport Company, Inc., represented by Frank Cadacio[,] is ordered to refrain from alienating or [transferring] the vessel M/V Star Ace to any third parties; 2. Singkong Trading Company to pay the following:

a.

Taxes due the government;

b. Salvage fees on the vessel in the amount of $1,000,000.00 based on xxx Lloyds Standard Form of Salvage Agreement; c. Preservation, securing and guarding fees on the vessel in the amount of $225,000.00; d. Maintenance fees in the amount of P2,685,000.00;

e. Salaries of the crew from August 16, 1989 to December 1989 in the amount of $43,000.00 and unpaid salaries from January 1990 up to the present; f. Attorneys fees in the amount of P656,000.00;

3. [Vlason] Enterprises to pay [private respondent] in the amount of P3,000,000.00 for damages; 4. Banco [Du] Brazil to pay [private respondent] in the amount of $300,000.00 in damages; and finally, 5. Costs of *s+uit.

Subsequently, upon the Motion of Omega, Singkong Trading Co. and private respondent, the trial court approved a Compromise Agreement[31] among the movants, reducing by 20 percent the amounts adjudged. For their part, respondents-movants agreed not to appeal the Decision.[32] On March 8, 1991, private respondent moved for the execution of judgment, claiming that the trial court Decision had already become final and executory.[33] The Motion was granted[34] and a Writ of Execution was issued.[35] To satisfy the Decision, Sheriffs Jorge Victorino, Amado Sevilla and Dionisio Camagon were deputized on March 13, 1991 to levy and to sell on execution the defendants vessel and personal property.

On March 14, 1991, petitioner filed, by special appearance, a Motion for Reconsideration, on the grounds that it was allegedly not impleaded as a defendant, served summons or declared in default; that private respondent was not authorized to present evidence against it in default; that the judgment in default was fatally defective, because private respondent had not paid filing fees for the award; and that private respondent had not prayed for such award.[36] Private respondent opposed the Motion, arguing that it was a mere scrap of paper due to its defective notice of hearing. On March 18, 1991, the Bureau of Customs also filed an ex parte Motion to recall the execution, and to quash the notice of levy and the sale on execution.[37] Despite this Motion, the auction sale was conducted on March 21, 1991 by Sheriff Camagon, with private respondent submitting the winning bid.[38] The trial court ordered the deputy sheriffs to cease and desist from implementing the Writ of Execution and from levying on the personal property of the defendants.[39] Nevertheless, Sheriff Camagon issued the [40] corresponding Certificate of Sale on March 27, 1991. On April 12, 1991,[41] private respondent filed with the Court of Appeals (CA) a Petition for Certiorari and Prohibition to nullify the cease and desist orders of the trial court.[42] Respondent Court issued on April 26, 1991 a Resolution which reads:[43] MEANWHILE, in order to preserve the status quo and so as not to render the present petition moot and academic, a TEMPORARY RESTRAINING ORDER is hereby ISSUED enjoining the respondent Judge, the Honorable Arsenio M. Gonong, from enforcing and/or implementing the Orders dated 22 March 1991 and 5 April 1991 which ordered respondent Sheriff to cease and desist from implementing the writ of execution and the return thereof, the quashing of the levy xxx on [the] execution [and sale] of the properties levied upon and sold at

public auction by the Sheriff, for reason of grave abuse of discretion and in excess of jurisdiction, until further orders from this Court. WITHIN ten (10) days from notice hereof, respondents *petitioner included] are also required to SHOW CAUSE why the prayer for a writ of preliminary injunction should not be granted. On May 8, 1991, petitioner received from Camagon a notice to pay private respondent P3 million to satisfy the trial court Decision. Not having any knowledge of the CA case to which it was not impleaded, petitioner filed with the trial court a Motion to Dismiss ex abutandi ad cautelam on the grounds that (1) the Petition of private respondent stated no cause of action against it, (2) the trial court had no jurisdiction over the case, and (3) litis pendentia barred the suit.[44] On May 10, 1991, Camagon levied on petitioners properties, which were scheduled for auction later on May 16, 1991. Specific descriptions of the properties are as follows:[45] a) Motor Tugboat DEN DEN ex Emerson-I Length: Depth: 35.67 ms. 3.15 ms. Breadth: Gross Tons: 7.33 ms. 205.71

Net tons: 67.78 Material: Steel License No. 4424

Official Number 213551 Class License: CWL

b) Barge - FC99" ex YD-153 Length: Depth: 34.15 ms. 2.77 m.s. Breadth: Gross Tons: 15.85 m.s. 491.70

Net Tons: 491.70 Material: Steel License No. 83-0012

Official Number 227236 Class License: CWL

c) Barge LAWIN ex Sea Lion 2 Length: Depth: 66.92 ms. 4.52 m.s. Breadth: Gross Tons: 11.28 ms. 1,029.56

Net Tons: 1,027/43 Material: Steel License No. 81-0059

Official Number 708069 Class License: Coastwise

Petitioner also filed a special appearance before the CA. It prayed for the lifting of the levy on its properties or, alternatively, for a temporary restraining order against their auction until its Motion for Reconsideration was resolved by the trial court.[46] Acting on petitioners Motion for Reconsideration, the trial court reversed its Decision of February 18, 1991, holding in its May 22, 1991 Resolution as follows:[47] xxx *T+hat xxx Motion For Reconsideration *of the petitioner+ was filed on March 14, 1991 (See: page 584, records, Vol.2) indubitably showing that it was seasonably filed within the 15-day time-frame. Therefore, xxx said default-judgment ha[d] not yet become final and executory when the Writ of Execution was issued on March 13, 1991 xxx The rules [provide] that [the e]xecution shall issue as a matter of right upon the expiration of the period of appeal from a judgment if no appeal has been duly perfected (Sec. 1, R-39, RRC). That being the case, VEC has all the right to file as it did xxx the aforementioned reconsideration

motion calling [the] attention of the Court and pointing therein its supposed error and its correction if, indeed, any [error was] committed. It is in this light that this Court made an in-depth reflection and assessment of the premises or reasons raised by [petitioner], and after a re-examination of the facts and evidence spread on the records, it has come to the considered conclusion that the questioned defaultjudgment has been improvidently issued. By the records, the claim of [private respondent] that his January 29, 1990 Ex-Parte Motion To Declare Defendants In Default (pp. 174-177, records, Vol. 1) including VEC had been granted is belied by the February 23, 1990 Order (pp. 214-215, records, ibid) par. 2, thereof, reading to wit: By the foregoing, for reasons stated thereunder respectively, this Court, in the exercise of its judicious discretion, in the sense that the rules should be liberally construed in order to promote their object and to assist the parties, resolves to DENY petitioners Motion to have the Commissioner of Customs AND OTHER ENUMERATED RESPONDENTS DECLARED IN DEFAULT. *Emphasis ours+. Not even *private respondents+ November 23, 1990 Ex-Parte Motion To Present *Evidence+ Against Defaulting Defendants (page 489, records, Vol.2) [can] be deemed as a remedy of the fact that there never was issued an order of default against respondents including [petitioner] VEC. Having thus established that there [had] been no order of default against VEC as contemplated by Sec. 1, Rule 18, in relation to Sec. 9, Rule 13, Revised Rules of Court, there could not have been any valid default-judgment rendered against it. The issuance of an order of default is a condition sine qua non in order [that] a judgment by default be clothed with validity. Further, records show that this Court never had authorized [private respondent] to adduce evidence ex-parte against [petitioner] VEC. In sum, the February 18, 1991 decision by default is null and void as against [petitioner] VEC. With this considered conclusion of nullity of said default judgment

in question, this Court feels there is no more need for it to resolve Arguments I-A & I-B, as well as III-A & III-B, of the March 14, 1991 Motion for Reconsideration. The Court agrees, however, with said discussions on the non-compliance [with] Sec. 2, Rule 7 (Title of Complaint) and Sec. I, Rule 8 on the requirement of indicating in the complaint the ultimate facts on which the party pleading relies for his claim of defense [--] which is absent in the January 9, Amended Petition (pp. 122-141, records, Vol. I) [--] for it merely mentioned [petitioner] VEC in par. 5 thereof and no more. It abides, likewise, with [Argument] III-B that the Decision in suit award[ed] amounts never asked for in instant petition as regards VEC (Sec. 5, Rule 18, RRC). xxx. WHEREFORE, in view of the foregoing consideration, and as prayed for, the February 18, 1991 Judgment by Default is hereby reconsidered and SET ASIDE. On June 26, 1992, then Executive Judge Bernardo P. Pardo[48] of the Regional Trial Court of Manila issued an Order[49] annulling the Sheriffs Report/Return dated April 1, 1991, and all proceedings taken by Camagon. The CA granted private respondents Motion to file a Supplemental Petition impleading petitioner in CA-GR 24669.[50] In view of the rampant pilferage of the cargo deposited at the PPA compound, private respondent obtained from the appellate court a Writ of Preliminary Injunction dated March 6, 1992. The Writ reads:[51] ACCORDINGLY, in view of the foregoing disquisitions, the urgent verified motion for preliminary injunction dated February 11, 1992 is hereby GRANTED. Therefore, let a writ of preliminary injunction forthwith issue against the respondents and all persons or agents acting in their behalf, enjoining them not to interfere in the transferring of the aforementioned vessel and its cargoes, or in removing said cargoes xxx from *the+ PPA compound.

On September 15, 1992, Sheriff Amado Sevilla seized petitioners motor tugboat Den Den by virtue of the Order[52] dated April 3, 1992, issued by the RTC of Manila, Branch 26.[53] On August 6, 1992, the CA consolidated CA-GR SP No. 28387[54] with CA-GR SP No. 24669.[55] The Court of Tax Appeals issued on October 5, 1992, a Resolution in CTA Case Nos. 4492, 4494 and 4500, which disposed as follows: Confirming the order in open court on October 5, 1992, the Court hereby RESOLVES to: 1. Order Respondent Commissioner of Customs to assign or detail [a] sufficient number of customs police and guards aboard, and around the vicinity of, the vessel M/V Star Ace now in anchor at Mariveles, Bataan or elsewhere, in order to ensure its safety during the pendency of these cases; 2. Direct him to assign personnel and/or representatives to conduct an inventory of part of the vessels cargo now in the possession of Mr. Cesar S. Urbino, Sr. at 197 Heroes del 96 Street, Caloocan City, which inventory may be participated in by all the parties interested in said cargo. To enjoin the CTA from enforcing said Order, private respondent filed before the Court of Appeals another Petition [56] for Certiorari, which was later also consolidated with CA-GR SP No. 24669. On July 19, 1993, the CA rendered the assailed Decision. Petitioner filed (1) a Motion for Clarification, praying for a declaration that the trial court Decision against it was not valid; and (2) a partial Motion for Reconsideration, seeking to set aside the assailed Decision insofar as the latter affected it.

On July 5, 1995, the Court of Appeals issued the following Resolution:[57] Pending resolution of the motions for reconsideration, filed by Vlason Enterprises Corporation and Banco [Du] Brazil, and considering [private respondents+ Motion for Entry of Judgment with respect to respondent PPA having already been granted by this Court as far back as June 17, 1994, pursuant to the resolution of the Supreme Court dated December 8, 1993 in G.R. No. 111270-72 (Philippine Ports Authority vs. Court of Appeals, et al.) informing the parties in said case that the judgment sought to be reviewed has now become final and executory, the lower court may now take appropriate action on the urgent ex-parte motion for issuance of a writ of execution, filed by [private respondent] on July 15, 1994. On August 28, 1995, the Regional Trial Court of Manila, Branch 26, issued a Writ of Possession which resulted in private respondent taking possession of petitioners barge Lawin (formerly Sea Lion 2) on September 1, 1995.[58] Hence, this Petition.[59]
Ruling of the Respondent Court

As already adverted to, Respondent Court granted the Petition for Certiorari of the private respondent, which was consolidated with the latters two other Petitions. The court a quo issued the following rulings: 1. The trial court had jurisdiction over the salvors claim or admiralty case pursuant to Batas Pambansa Bilang 129. 2. Since the Decision of the trial court became final and executory, never having been disputed or appealed to a higher court, the trial judge committed grave abuse of discretion in

recalling the Writ of Execution and in quashing the levy and the execution of the sale of M/V Star Ace and its cargo. 2. Such acts constituted an alteration or a modification of a final and executory judgment and could never be justified under law and jurisprudence. 3. Civil Case 59-51451 dealt only with the salvors claim without passing upon the legality or the validity of the undated Decision of the Commissioner of Customs in the seizure proceeding. 4. Petitioner and his co-respondents could not invoke the jurisdiction of a court to secure affirmative relief against their opponent and, after failing to obtain such relief, question the courts jurisdiction. 5. Petitioner had no recourse through any of the following judicially accepted means to question the final judgment: a. a petition for relief from judgment under Rule 38, b. a direct action to annul and enjoin the enforcement of the questioned judgment, and c. a collateral attack against the questioned judgment which appears void on its face. 6. A court which has already acquired jurisdiction over a case cannot be ousted by a coequal court; the res in this casethe vessel and its cargowere placed under the control of the trial court ahead of the CTA. 7. The admiralty Decision had attained finality while the issue of the validity of the seizure proceedings was still under determination.

In the assailed Resolution, Respondent Court clarified that there was no need to serve summons anew on petitioner, since it had been served summons when the Second Amended Petition (the third) was filed; and that petitioners Motion for Reconsideration was defective and void, because it contained no notice of hearing addressed to the counsel of private respondent in violation of Rule 16, Section 4 of the Rules of Court. To this second motion, [private respondent] contends that there was no need to serve summons anew to VEC when the second amended petition was filed impleading VEC, pursuant to the ruling of the Supreme Court inAsiatic Travel Corp. vs. CA (164 SCRA 623); and that finally, the decision of the court a quo o[n] February 18, 1991 became final and executory, notwithstanding the timely filing of the motion for reconsideration of VEC for the reason that the said motion for reconsideration was defective or void, there being no notice of hearing addressed to the counsel of petitioner. In fact, no motion such as this instant one can be acted upon by the Court without proof of service of the notice thereof, pursuant to Rule 16, Section 4 of the Rules of Court. xxx xxx xxx

Finally, we should never lose sight of the fact that the instant petition for certiorari is proper only to correct errors of jurisdiction committed by the lower court, or grave abuse of discretion which is tantamount to lack of jurisdiction. Where the error is not one of jurisdiction but an error of law or of fact which is a mistake of judgment, appeal is the remedy (Salas vs. Castro, 216 SCRA 198). Here, respondents failed to appeal. Hence, the decision dated February 18, 1991 of the lower court has long become final, executory and unappealable. We do not and cannot therefore review the instant case as if it were on appeal and direct actions on these motions. While the proper remedy is appeal, the action for certiorari will not be entertained. Indeed, certiorari is not a substitute for lapsed appeal.

At any rate, the decision dated July 19, 1993 of this Court on the main petition for certiorari is not yet final (except with respect to respondent PPA), the Bureau of Customs having filed a petition for certiorari and prohibition, under Rule 65 of the Rules of Court, with the Supreme Court, necessitating prudence on Our part to await its final verdict.[60]
Assignment of Errors

Before us, petitioner submits the following assignment of errors on the part of Respondent Court:[61] I The Court of Appeals committed serious error in ruling that the entire decision of the trial court in Civil Case No. 89-51451 dated 18 February 1991 became final and executory because it was never disputed or appealed. A. VEC filed a motion for reconsideration of the said decision two days before deadline, which motion was granted by the trial court. B. The trial court correctly granted VECs motion for reconsideration and set aside the 18 February 1991 decision xxx against VEC, for: 1. The trial court never acquired jurisdiction over the person of VEC as to enable it to render any judgment against it: (i) VEC was not impleaded as a respondent in Civil Case No. 8951451; (ii) Summons was not served on VEC;

2. The trial court improperly rendered judgment by default against VEC; (i) The trial court never issued an order of default against VEC;

(ii) The trial court never authorized ex-parte presentation of evidence against VEC. 3. The Judgment by default was fatally defective because:

(i) No filing fee was paid by [private respondent] for the staggering amount of damages awarded by the trial court. (ii) The 18 February 1991 decision violates the Revised Rules of Court, which prescribe that a judgment by default cannot decree a relief not prayed for. II Since the 18 February 1991 Decision in Civil Case No. 89-51451 is void as against VEC, the recall of the writ of execution was valid, as far as VEC is concerned. The Court believes that the issues can be simplified and restated as follows: 1. Has the February 18, 1991 RTC Decision become final and executory in regard to petitioner? 2. Did the trial court acquire jurisdiction over the petitioner? 3. Was the RTC default judgment binding on petitioner? 4. Was the grant of damages against petitioner procedurally proper? 5. Was private respondent entitled to a writ of execution?

This Courts Ruling

The petition is meritorious.

First Issue: Finality of the RTC Decision

A judgment becomes final and executory by operation of law. Its finality becomes a fact when the reglementary period to appeal lapses, and no appeal is perfected within such period.[62] The admiralty case filed by private respondent with the trial court involved multiple defendants. This being the case, it necessarily follows that the period of appeal of the February 18, 1991 RTC Decision depended on the date a copy of the judgment was received by each of the defendants. Elsewise stated, each defendant had a different period within which to appeal, depending on the date of receipt of the Decision.[63] Omega, Singkong Trading Co. and M/V Star Ace chose to enter into a compromise agreement with private respondent. As to these defendants, the trial court Decision had become final, and a writ of execution could be issued against them.[64] Doctrinally, a compromise agreement is immediately final and executory.[65] Petitioner, however, is not in the same situation. Said Decision cannot be said to have attained finality as to the petitioner, which was not a party to the compromise. Moreover, petitioner filed a timely Motion for Reconsideration with the trial court, thirteen days after it received the Decision or two days before the lapse of the reglementary period to appeal. A motion for reconsideration tolls the running of the period to appeal.[66] Thus, as to petitioner, the trial court Decision had not attained finality.
Exception to the Rule on Notice of Hearing

Respondent Court and private respondent argue that, although timely filed, petitioners Motion for Reconsideration was a mere scrap of paper, because (1) it did not contain a notice of hearing addressed to the currentcounsel of private respondent, and (2) the notice of hearing addressed to and served on private respondents deceased counsel was not sufficient. Admittedly, this Motion contained a notice of hearing sent to Atty. Jesus C. Concepcion who, according to private respondent, had already died and had since been substituted by its new counsel, Atty. Domingo Desierto. Therefore, the appellate court ruled that the said Motion did not toll the reglementary period to appeal and that the trial court Decision became final. This Court disagrees. Rule 15 of the Rules of Court states: SEC. 4. Notice.Notice of a motion shall be served by the applicant to all parties concerned, at least three (3) days before the hearing thereof, together with a copy of the motion, and of any affidavits and other papers accompanying it. The court, however, for good cause may hear a motion on shorter notice, specially on matters which the court may dispose of on its own motion. SEC. 5. Contents of notice.The notice shall be directed to the parties concerned, and shall state the time and place for the hearing of the motion. [67] Ideally, the foregoing Rule requires the petitioner to address and to serve on the counsel of private respondent the notice of hearing of the Motion for Reconsideration. The case at bar, however, is far from ideal. First, petitioner was not validly summoned and it did not participate in the trial of the case in the lower court; thus, it was understandable that petitioner would not be familiar with the parties and their counsels. Second, Atty. Desierto entered his appearance only as collaborating counsel,[68] who is normally not entitled to notices even from this Court. Third, private respondent made no manifestation on

record that Atty. Concepcion was already dead. Besides, it was Atty. Concepcion who signed the Amended Petition, wherein petitioner was first impleaded as respondent and served a copy thereof. Naturally, petitioners attention was focused on this pleading, and it was within its rights to assume that the signatory to such pleading was the counsel for private respondent. The Court has consistently held that a motion which does not meet the requirements of Sections 4 and 5 of Rule 15 of the Rules of Court is considered a worthless piece of paper, which the clerk of court has no right to receive and the trial court has no authority to act upon. Service of a copy of a motion containing a notice of the time and the place of hearing of that motion is a mandatory requirement, and the failure of movants to comply with these requirements renders their motions fatally defective.[69] However, there are exceptions to the strict application of this rule. These exceptions are as follows:[70] xxx Liberal construction of this rule has been allowed by this Court in cases (1) where a rigid application will result in a manifest failure or miscarriage of justice;[71] especially if a party successfully shows that the alleged defect in the questioned final and executory judgment is not apparent on its face or from the recitals contained therein; (2) where the interest of substantial justice will be served;[72] (3) where the resolution of the motion is addressed solely to the sound and judicious discretion of the court;[73] and (4) where the injustice to the adverse party is not commensurate [to] the degree of his thoughtlessness in not complying with the procedure prescribed.[74] The present case falls under the first exception. Petitioner was not informed of any cause of action or claim against it. All of a sudden, the vessels which petitioner used in its salvaging business were levied upon and sold in execution to satisfy a supposed judgment against it. To allow this to happen simply because of a lapse in fulfilling the notice

requirement which, as already said, was satisfactorily explained would be a manifest failure or miscarriage of justice. A notice of hearing is conceptualized as an integral component of procedural due process intended to afford the adverse parties a chance to be heard before a motion is resolved by the court. Through such notice, the adverse party is permitted time to study and answer the arguments in the motion. Circumstances in the case at bar show that private respondent was not denied procedural due process, and that the very purpose of a notice of hearing had been served. On the day of the hearing, Atty. Desierto did not object to the said Motion for lack of notice to him; in fact, he was furnished in open court with a copy of the motion and was granted by the trial court thirty days to file his opposition to it. These circumstances clearly justify a departure from the literal application of the notice of hearing rule.[75] In other cases, after the trial court learns that a motion lacks such notice, the prompt resetting of the hearing with due notice to all the parties is held to have cured the defect.[76] Verily, the notice requirement is not a ritual to be followed blindly. Procedural due process is not based solely on a mechanistic and literal application that renders any deviation inexorably fatal. Instead, procedural rules are liberally construed to promote their objective and to assist in obtaining a just, speedy and inexpensive determination of any action and proceeding.[77] For the foregoing reasons, we believe that Respondent Court committed reversible error in holding that the Motion for Reconsideration was a mere scrap of paper.
Second Issue: Jurisdiction Over Petitioner

Service of Summons on a Corporation

The sheriffs return shows that Angliongto who was president of petitioner corporation, through his secretary Betty Bebero, was served summons on January 18, 1990.[78] Petitioner claims that this service was defective for two reasons: (1) Bebero was an employee of Vlasons Shipping, Inc., which was an entity separate and distinct from Petitioner Vlason Enterprises Corporation (VEC); and (2) the return pertained to the service of summons for the amended Petition, not for the Second Amended Petition with Supplemental Petition, the latter pleading having superseded the former. A corporation may be served summons through its agents or officers who under the Rules are designated to accept service of process. A summons addressed to a corporation and served on the secretary of its president binds that corporation.[79] This is based on the rationale that service must be made on a representative so integrated with the corporation sued, that it is safe to assume that said representative had sufficient responsibility and discretion to realize the importance of the legal papers served and to relay the same to the president or other responsible officer of the corporation being sued.[80] The secretary of the president satisfies this criterion. This rule requires, however, that the secretary should be an employee of the corporation sought to be summoned. Only in this manner can there be an assurance that the secretary will bring home to the corporation [the] notice of the filing of the action against it. In the present case, Bebero was the secretary of Angliongto, who was president of both VSI and petitioner, but she was an employee of VSI, not of petitioner. The piercing of the corporate veil cannot be resorted to when serving summons.[81] Doctrinally, a corporation is a legal entity distinct and separate from the members and stockholders who compose it. However, when the corporate fiction is used as a means of perpetrating a fraud, evading an existing obligation, circumventing a statute, achieving or perfecting a monopoly or, in generally perpetrating a crime, the veil will be lifted to expose the

individuals composing it. None of the foregoing exceptions has been shown to exist in the present case. Quite the contrary, the piercing of the corporate veil in this case will result in manifest injustice. This we cannot allow. Hence, the corporate fiction remains.
Effect of Amendment of Pleadings on Jurisdiction

Petitioner claims that the trial court did not acquire jurisdiction over it, because the former had not been served summons anew for the Second Amended Petition or for the Second Amended Petition with Supplemental Petition. In the records, it appears that only Atty. Tamondong, counsel for Singkong Trading, was furnished a copy of the Second Amended Petition.[82] The corresponding sheriffs return indicates that only Omega, M/V Star Ace and Capt. Rada were served summons and copies of said Petition.[83] We disagree. Although it is well-settled that an amended pleading supersedes the original one, which is thus deemed withdrawn and no longer considered part of the record, it does not follow ipso facto that the service of a new summons for amended petitions or complaints is required. Where the defendants have already appeared before the trial court by virtue of a summons on the original complaint, the amended complaint may be served upon them without need of another summons, even if new causes of action are alleged.[84] After it is acquired, a courts jurisdiction continues until the case is finally terminated. Conversely, when defendants have not yet appeared in court and no summons has been validly served, new summons for the amended complaint must be served on them.[85] It is not the change of cause of action that gives rise to the need to serve another summons for the amended complaint, but rather the acquisition of jurisdiction over the persons of the defendants. If the trial court has not yet acquired jurisdiction over them, a new service of summons for the amended complaint is required.

In this case, the trial court obviously labored under the erroneous impression that petitioner had already been placed under its jurisdiction since it had been served summons through the secretary of its president. Thus, it dispensed with the service on petitioner of new summons for the subsequent amendments of the Petition. We have already ruled, however, that the first service of summons on petitioner was invalid. Therefore, the trial court never acquired jurisdiction, and the said court should have required a new service of summons for the amended Petitions.
Impleading a Party in the Title of the Complaint

Petitioner further claims that the trial court failed to acquire jurisdiction to render judgment against it because (1) the title of the three Petitions filed by private respondent never included petitioner as a party-defendant, in violation of Rule 7; and (2) the Petitions failed to state any allegation of ultimate facts constituting a cause of action against petitioner. We disagree with petitioner on the first ground. The judicial attitude has always been favorable and liberal in allowing amendments to pleadings. Pleadings shall be construed liberally so as to render substantial justice to the parties and to determine speedily and inexpensively the actual merits of the controversy with the least regard to technicalities.[86] The inclusion of the names of all the parties in the title of a complaint is a formal requirement under Section 3, Rule 7. However, the rules of pleadings require courts to pierce the form and go into the substance, and not to be misled by a false or wrong name given to a pleading. The averments in the complaint, not the title, are controlling. Although the general rule requires the inclusion of the names of all the parties in the title of a complaint, the non-inclusion of

one or some of them is not fatal to the cause of action of a plaintiff, provided there is a statement in the body of the petition indicating that a defendant was made a party to such action. Private respondent claims that petitioner has always been included in the caption of all the Petitions it filed, which included Antonio Sy, field manager of petitioner. We checked and noted that in the caption and the body of the Amended Petition and Second Amended Petition with Supplemental Petition, Antonio Sy was alleged to be representing Med Line Philippines, not petitioner. Because it was private respondent who was responsible for the errors, the Court cannot excuse it from compliance, for such action will prejudice petitioner, who had no hand in the preparation of these pleadings. In any event, we reiterate that, as a general rule, mere failure to include the name of a party in the title of a complaint is not fatal by itself.
Stating a Cause of Action in the Complaint

The general rule is allegata et probata -- a judgment must conform to the pleadings and the theory of the action under which the case was tried.[87] But a court may also rule and render judgment on the basis of the evidence before it, even though the relevant pleading has not been previously amended, so long as no surprise or prejudice to the adverse party is thereby caused.[88] In the case at bar, the liability of petitioner was based not on any allegation in the four Petitions filed with the trial court, but on the evidence presented ex parte by the private respondent. Since the trial court had not validly acquired jurisdiction over the person of petitioner, there was no way for the latter to have validly and knowingly waived its objection to the private respondents presentation of evidence against it.

Third Issue: Judgment By Default

The trial court Decision holding petitioner liable for damages is basically a default judgment. In Section 18, judgment by default is allowed under the following condition:[89] SEC. 1. Judgment by default.If the defendant fails to answer within the time specified in these rules, the court shall, upon motion of the plaintiff and proof of such failure, declare the defendant in default. Thereupon the court shall proceed to receive the plaintiffs evidence and render judgment granting him such relief as the complaint and the facts proven may warrant. xxxx. Thus, it becomes crucial to determine whether petitioner was ever declared in default, and whether the reception of evidence ex parte against it was procedurally valid.
Petitioner Was Never Declared In Default

Petitioner insists that the trial court never declared it in default. We agree. The trial court denied the January 29, 1990 Motion of private respondent to declare all the defendants in default, but it never acted on the latters subsequent Motion to declare petitioner likewise. During the pretrial on January 23, 1993, the RTC declared in default only Atty. Eddie Tamondong, as well as the other defendants Hon. Salvador Mison, M/V Star Ace, Omega Sea Transport Co., Inc. of Panama and Sinkong Trading Co., [but] despite xxx due notice to them, *they+ failed to appear.[90] Even private respondent cannot pinpoint which trial court order held petitioner in default. More important, the trial court, in its Resolution dated May 22, 1991, admitted that it never declared petitioner in default, viz.:

xxx It is in this light that this *c+ourt made an in-depth reflection and assessment of the premises or reasons raised by [petitioner] VEC[;] and after a re-examination of the facts and evidence spread on the records, it has come to the considered conclusion that the questioned defaultjudgment has been improvidently issued. [Based on] the records, the claim of [private respondent] that [its] January 29, 1990 Ex-Parte Motion to Declare Defendants In Default (pp. 174-177, records, Vol. 1) including VEC had been granted is belied by the February 23, 1990 Order (pp. 214-215, records, ibid) par. 2, thereof, xxx xxx xxx xxx

Not even petitioners November 23, 1990 Ex-Parte Motion To Present Evidence Against Defaulting Defendants (page 489, records, Vol. 2) [can] be deemed as a remedy [for] the fact that there never was issued an order of default against respondents including [petitioner] VEC. Having thus established that there ha[d] been no order of default against VEC as contemplated by Sec. 1, Rule 18, in relation to Sec. 9, Rule 13, Revised Rules of Court, there could not have been any valid default-judgment rendered against it. The issuance of an order [o]f default is a condition sine qua non in order [that] a judgment by default be clothed with validity. Further, records show that this [c]ourt never had authorized [private respondent] to adduce evidence ex-parte against [Petitioner] VEC. In sum, the February 18, 1991 decision by default is null and void as against [Petitioner] VEC. xxxx. The aforementioned default judgment refers to the February 18, 1989 Decision, not to the Order finding petitioner in default as contended by private respondent. Furthermore, it is a legal impossibility to declare a party-defendant to be in default before it was validly served summons.
Trial Court Did Not Allow Presentation of Evidence Ex Parte Against Petitioner

The Order of December 10, 1990, which allowed the presentation of evidence ex parte against the defaulting defendants, could not have included petitioner, because the trial court granted private respondents motion praying for the declaration of only the foreign defendants in default. So too, private respondents ex parte Motion to present evidence referred to the foreign defendants only.[91] Furthermore, the reception of evidence ex parte against a nondefaulting party is procedurally indefensible. Without a declaration that petitioner is in default as required in Section 1, Rule 18, the trial court had no authority to order the presentation of evidence ex parte against petitioner to render judgment against it by default. The trial judge must have thought that since it failed to appear despite summons and was in default, it effectively waived any objection to the presentation of evidence against it. This rule, however, would have applied only if petitioner had submitted itself to the jurisdiction of the trial court. The latter correctly declared, in the Resolution just cited, that the default judgment against the former had been improvidently rendered.
Fourth Issue: Awards Not Paid and Prayed For

Additional Filing Fees as Lien on the Judgment

Had the trial court validly acquired jurisdiction over petitioner, nonpayment of docket fees would not have prevented it from holding petitioner liable for damages. The Court, in Manchester Development Corporation v. Court of Appeals,[92] ruled that a court acquires jurisdiction over any case only upon the payment of the prescribed docket fee, not upon the amendment of the complaint or the payment of the docket fees based on the amount sought in the amended

pleading. This ruling, however, was modified in Sun Insurance Office, Ltd. v. Asuncion,[93] which added: 3. Where the trial court acquires jurisdiction over a claim [through] the filing of the appropriate pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if specified the same has been left for determination by the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the additional fee. Filing fees for damages and awards that cannot be estimated constitute liens on the awards finally granted by the trial court. Their nonpayment alone is not a ground for the invalidation of the award.
Judgment by Default Cannot Grant Relief Not Prayed For

A declaration or order of default is issued as a punishment for unnecessary delay in joining issues. In such event, defendants lose their standing in court, they cannot expect the trial court to act upon their pleadings, and they are not entitled to notice of the proceeding until the final termination of the case.[94] Thus, the trial court proceeds with the reception of the plaintiffs evidence upon which a default judgment is rendered. Section 1 of Rule 18 provides that after the defendant has been declared in default, the court shall proceed to receive the plaintiffs evidence and render judgment granting him such relief as the complaint and the facts proven may warrant. The reliefs that may be granted, however, are restricted by Section 5, which provides that a judgment entered against a party in default shall not exceed the amount or be different in kind from that prayed for.

In other words, under Section 1, a declaration of default is not an admission of the truth or the validity of the plaintiffs claims.[95] The claimant must still prove his claim and present evidence. In this sense the law gives defaulting parties some measure of protection because plaintiffs, despite the default of defendants, are still required to substantiate their allegations in the complaint. The judgment of default against defendants who have not appeared or filed their answers does not imply a waiver of all their rights, except their right to be heard and to present evidence in their favor. Their failure to answer does not imply their admission of the facts and the causes of action of the plaintiffs, because the latter are required to adduce evidence to support their allegations. Moreover, the trial court is not allowed by the Rules to receive evidence that tends to show a relief not sought or specified in the pleadings.[96] The plaintiff cannot be granted an award greater than or different in kind from that specified in the complaint.[97] This case should be distinguished, however, from that of defendants, who filed an answer but were absent during trial. In that case, they can be held liable for an amount greater than or different from that originally prayed for, provided that the award is warranted by the proven facts. This rule is premised on the theory that the adverse party failed to object to evidence relating to an issue not raised in the pleadings. The latter rule, however, is not applicable to the instant case. Admittedly, private respondent presented evidence that would have been sufficient to hold petitioner liable for damages. However, it did not include in its amended Petitions any prayer for damages against petitioner. Therefore, the trial court could not have validly held the latter liable for damages even if it were in default.
Fifth Issue: Execution of Final Judgment

Section 1 of Rule 39 provides that execution shall issue only upon a judgment that finally disposes of the action or proceeding. Such execution shall issue as a matter of right upon the expiration of the period to appeal it, if no appeal has been duly perfected.[98] In the present case, however, we have already shown that the trial courts Decision has not become final and executory against petitioner. In fact, the judgment does not even bind it. Obviously, Respondent Court committed serious reversible errors when it allowed the execution of the said judgment against petitioner. WHEREFORE, the appeal is hereby GRANTED, and the assailed Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE insofar as they affect petitioner. The levy and the sale on execution of petitioners properties are declared NULL and VOID. Said properties are ordered RESTORED to petitioner. No pronouncement as to cost. SO ORDERED. Purisima, and Gonzaga-Reyes, JJ., concur. Romero, J., (Chairman), on official business abroad. Vitug, J., concur in the result.

[1]

Penned by J. Jainal D. Rasul and concurred in by JJ. Segundino G. Chu a and Consuelo YnaresSantiago (now an associate justice of the Supreme Court); Rollo, pp. 6579.
[2] [3] [4]

Rollo, pp. 81-85. Rollo, pp. 78-79. Records, Vol. 1, pp. 27-31.

[5] [6] [7]

Records, Vol. 1, p. 32. Records, Vol. 1, pp. 36-39. (Exh. B)

Decision dated July 17, 1989, in SFLU Seizure Identification No. 389; records, Vol. 1, pp. 54-68.
[8] [9] [10]

2nd Indorsement dated November 1989; Records, Vol. 1, pp. 70-71. Decision dated November 17, 1989, Records, Vol. 1, pp. 74-86.

Docketed as Civil Case No. 8951451 and raffled to Branch 8; records, Vol. 1, pp. 1-26.
[11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22]

Ibid., pp. 122-145. Amended Petition, id., pp. 122 & 128-129. Sheriffs Return, id., pp. 160-164 & 171. Id ., pp.153-156. Id., pp. 214-215. Eventually, both separately filed their motions to dismiss. Records, Vol. 1, pp. 325-326. Order dated September 10, 1990; Records, Vol. 2, p. 359. Records, Vol. 1, pp. 237-238. Ibid., pp. 351-352. Records, Vol. 2, pp. 370-371.

Motion for Leave to Admit Second Amended Petition and Suppleme ntal Petition, ibid., p. 370; Second Amended Petition with Supplemental Petition, ibid., pp. 372-398.
[23] [24] [25]

Order dated September 28, 1990, Records, Vol. 2, p. 407. Records, Vol. 2, pp. 414-415. Ibid., pp. 425-488.

[26] [27] [28]

Id., p. 506. Order dated December 10, 1990, id., p. 492.

Order of January 23, 1991, Records, Vol. 2, p. 506. The records (pp. 493495), however, show that only Duraproof Service, Singkong Trading and M/V Star Ace were served summons.
[29]

RTC Decision, p. 7; Rollo, p. 92; penned by Judge Arsenio M. Gonong Memorandum of Agreement, id., pp. 511-512. Records, Vol. 2, pp. 535-538.

.
[30] [31] [32]

Order dated March 6, 1991, ibid., pp. 539541. Private respondent entered into two separate compromise agree ments with Singkong Trading Co. (id., pp. 535536) and another with Omega (id., pp. 537538). Both agreements were dated March 4,1991.
[33] [34] [35] [36] [37] [38] [39]

Id., p. 576. Id., p. 579. Id., pp. 580-581. Records, Vol. 2, pp. 584-596. Ibid., pp. 604-607. Annex I; CA Rollo, pp. 51 & 817.

Order dated March 22, 1991, id., pp. 611612; and Order dated April 5, 1991, id., pp. 654-655.
[40] [41]

CA Rollo, p. 52.

In CA Decision dated July 19, 1993, this petition was filed sometime in December 1991. CA Decision, p. 4; Rollo, p. 68.

[42]

Docketed as CAGR SP No. 24669. The respondents in this case were the RTC of Manila, Br. 8; Bureau of Customs and PPA.
[43] [44] [45] [46] [47] [48] [49] [50] [51] [52] [53]

CA Rollo, pp. 93-94. Records, Vol. 3, pp. 31-40. Receipt, ibid., p. 59. CA Rollo, pp. 100-110; Rollo, pp. 116-126. Records, Vol. 3, pp. 100-101. Now a member of this Court. CA-GR SP No. 28387; Rollo, p. 82. CA Rollo, pp. 199-200. Ibid., pp. 593-596 & 621-622. CA Rollo, p. 106.

Presided by then Judge Corona IbaySomera (now Associate Justice of the Court of Appeals). Private respon dent filed with said court a motion to appoint Sevilla as special sheriff t o implement the Writ of Preliminary Injunction issued by the CA.
[54]

Private respondent filed on July 15, 1992, a Petition for Certiorari, Pr ohibition & Mandamus from the Order dated June 26, 1992 of then Exe cutive Judge Bernardo P. Pardo, nullifying all the acts of Sheriff Camag on including the auction sale of thevessel M/V Star Ace.
[55] [56] [57] [58]

CA Rollo, pp. 1061-1063 Docketed as CA-GR SP No. 29317. Rollo, pp. 208-209.

It was only at that time that petitioner learned of private responden ts urgent ex parte motion for the issuance of a writ of execution, and o f the writ of possession filed with the RTC of Manila, Branch 26.

[59]

This case was deemed submitted for decision upon receipt by this C ourt of the Memorandum for the Private Respondent on September 22, 1997. Petitioners memorandum was received earlier on August 26, 1997.
[60] [61] [62]

Ibid., pp. 82-83 & 84-85. Memorandum; Rollo, pp. 311-312.

City of Manila v. Court of Appeals, 204 SCRA 362, 366, November 29 , 1991; and Teodoro v. Court of Appeals, 258 SCRA 603, 607608, July 11, 1996.
[63]

Bank of the Philippine Islands v. Far East Molasses Corp., 198 SCRA 689, 703-704, July 2, 1991.
[64] [65] [66]

Litton v. Court of Appeals, 263 SCRA 40, 45, October 9, 1996. Inaldo v. Balagot, 203 SCRA 650, 654, November 18, 1991.

Rubio v. MTCC, Branch 4, Cagayan de Oro City; 252 SCRA 172, 183, J anuary 24, 1996.
[67]

The corresponding sections of the 1997 Rules of Court simply provide: SEC. 4. Hearing of motion. Except for motions which the court may act upon without prejudicing t he rights of the adverse party, every written motion shall be set for hea ring by the applicant. Every written motion required to be heard and the notice of the heari ng thereof shall be served in such a manner as to ensure its receipt by t he other party at least three (3) days before the date of hearing, unless the court for good cause sets thehearing on shorter notice.(4a) SEC. 5. Notice of hearing. The notice of hearing shall be addressed to all parties concerned, and s

hall specify the time and date of the hearing, which must not be later th an ten (10) days after the filing of the motion. (5a) SEC. 6. Proof of service necessary. No written motion set for hearing shall be acted upon by the court with out proof of service thereof.
[68] [69]

RTC Records, Vol. 2, p. 369.

Tan v. Bloomberry Mfg., Inc., GR No. 130314, September 22, 1998, pp. 811; People v. Court of Appeals, GR No. 126065, January 21, 1999, pp. 21 -22.
[70] [71]

Id., p. 14.

Goldloop Properties, Inc. vs. Court of Appeals, 212 SCRA 498, 504505, August 11, 1992; Legarda v. Court of Appeals, 195 SCRA 418, 426427, March 18, 1991.
[72] [73]

Tamargo v. Court of Appeals, 209 SCRA 518, 522, June 3, 1992.

Galvez v. Court of Appeals, 237 SCRA 685, 696702, October 24, 1994.
[74] [75]

Galang v. Court of Appeals, 199 SCRA 683, 689, July 29, 1991.

Villanueva Transport Co., Inc. v. Moya, 42 SCRA 157, 161162, October 29, 1971.
[76]

Sunga v. Lacson, 23 SCRA 393, 397, April 29, 1968; De Rapisura v. Ni colas, 16 SCRA 378, 800, April 29, 1966; E & L Mercantile, Inc. v. Interm ediate Appellate Court, 142 SCRA 386, 392, June 25, 1986.
[77] [78] [79]

E & L Mercantile, Inc. v. IAC; supra, p. 392. RTC Records, Vol. 1, p. 164.

G & G Trading Corp. v. Court of Appeals, 158 SCRA 466, 468, Februa ry 29, 1988; Far Corporation v. Francisco, 146 SCRA 197, 203, December 12, 1986; ATM Trucking Incorporated v. Buencamino, 124 SCRA 434, 43

6, August 31, 1983; and SummitTrading & Development Corp. v. Avend ao, 135 SCRA 397, 400, March 18, 1985.
[80]

Kanlaon Construction Enterprises Co., Inc. v. National Labor Relation s Commission, 279 SCRA 337, 346, September 18, 1997; G & G Trading Corp. v. CA, supra; ATM Trucking Incorporated v. Buencamino, supra; Vi lla Rey Transit, Inc. v. Far EastMotor Corp., 81 SCRA 298, 303, January 3 1, 1978; and Delta Motor Sales Corporation v. Mancosing, 70 SCRA 598, 603, April 30, 1976.
[81]

Filmerco Commercial Co., Inc. v. Intermediate Appellate Court, 149 SCRA 194, 203-204, April 9, 1987.
[82] [83] [84]

Compliance; Records, Vol. 2, p. 413. Ibid., p. 423.

Ong Peng v. Custodio, 1 SCRA 780, 783, March 25, 1961; Atkins, Krol l & Co. v. Domingo, 44 Phil. 680, 683, March 24, 1923; and PanAsiatic Travel Corp. v. Court of Appeals, 164 SCRA 623, 627, August 19, 1988.
[85]

De Dios v. Court of Appeals, 212 SCRA 519, 524525, August 12, 1992; and Ong Peng v. Custodio, supra.
[86]

Contech Construction Technology & Development Corp. v. Court of Appeals, 211 SCRA 692, 695-697, July 23, 1992.
[87]

Lazo v. Republic Surety & Ins. Co., Inc., 31 SCRA 329, 334, January 3 0, 1970.
[88]

TalisaySilay Milling Co., Inc. v. Asociacion de Agricultures de TalisaySilay, Inc., 247 SCRA 361, 375378, August 15, 1995; Northern Cement Corporation v. Intermediate Ap pellate Court, 158 SCRA 408, 416417, February 29, 1988; Jacinto v. Courtof Appeals, 198 SCRA 211, 218, June 6, 1991; Pilapil v. Court of Appeals, 216 SCRA 33, 49, November 26

, 1992; Universal Motors Corporation v. Court of Appeals, 205 SCRA 449 , 456, January 27, 1992.
[89]

The corresponding provision in the 1997 Rules of Court reads:

SEC. 3. Default; declaration of. If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the claiming party with notice to the def ending party, and proof of such failure, declare the defending party ind efault. Thereupon, the court shall proceed to render judgment granting the claimant such relief as his pleading may warrant, unless the court i n its discretion requires the claimant to submit evidence. xxx.
[90] [91] [92] [93] [94]

Order dated January 23, 1991; Records, Vol. II, p. 506. Records, Vol. 2, p. 490. 149 SCRA 562, 569, May 7, 1987. 170 SCRA 274, 285, February 13, 1989; per Gancayco, J.

Tan v. Dimayuga et al., 5 SCRA 712, 715, July 31, 1962; and Lim Toco v. Go Fay, 80 Phil 166, 168-169, January 31, 1948. Macondray & Co. v. Eustaquio, 64 Phil 446, 449, July 16, 1937.

[95] [96]

Javelona v. Yulo, 31 Phil 388, 391392, September 3, 1915; and Molina v. De la Riva, 6 Phil 12, 17, March 2 2, 1906.
[97] [98]

Lim Toco v. Go Fay, supra, p. 176. Rubio v. MTCC, supra, pp. 183-184.

THIRD DIVISION [G.R. No. 102316. June 30, 1997] VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY, INC., petitioner, vs. COURT OF APPEALS AND SEVEN BROTHERS SHIPPING CORPORATION, respondents. DECISION PANGANIBAN, J.: Is a stipulation in a charter party that the (o)wners shall not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo[1] valid? This is the main question raised in this petition for review assailing the Decision of Respondent Court of Appeals[2] in CA-G.R. No. CV-20156 promulgated on October 15, 1991. The Court of Appeals modified the judgment of the Regional Trial Court of Valenzuela, Metro Manila, Branch 171, the dispositive portion of which reads: WHEREFORE, Judgment is hereby rendered ordering South Sea Surety and Insurance Co., Inc. to pay plaintiff the sum of TWO MILLION PESOS (P2,000,000.00) representing the value of the policy of the lost logs with legal interest thereon from the date of demand on February 2, 1984 until the amount is fully paid or in the alternative, defendant Seven Brothers Shipping Corporation to pay plaintiff the amount of TWO MILLION PESOS (P2,000,000.00) representing the value of lost logs plus legal interest from the date of demand on April 24, 1984 until full payment thereof; the reasonable attorneys fees in the amount equivalent to five (5) percent of the amount of the claim and the costs of the suit.

Plaintiff is hereby ordered to pay defendant Seven Brothers Shipping Corporation the sum of TWO HUNDRED THIRTY THOUSAND PESOS (P230,000.00) representing the balance of the stipulated freight charges. Defendant South Sea Surety and Insurance Companys counterclaim is hereby dismissed. In its assailed Decision, Respondent Court of Appeals held: WHEREFORE, the appealed judgment is hereby AFFIRMED except in so far (sic) as the liability of the Seven Brothers Shipping Corporation to the plaintiff is concerned which is hereby REVERSED and SET ASIDE.[3] The Facts The factual antecedents of this case as narrated in the Court of Appeals Decision are as follows: It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood and Industrial Supply, Inc.) entered into an agreement with the defendant Seven Brothers (Shipping Corporation) whereby the latter undertook to load on board its vessel M/V Seven Ambassador the formers lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila. On 20 January 1984, plaintiff insured the logs against loss and/or damage with defendant South Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine Cargo Insurance Policy No. 84/24229 for P2,000,000.00 on said date. On 24 January 1984, the plaintiff gave the check in payment of the premium on the insurance policy to Mr. Victorio Chua.

In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss of the plaintiffs insured logs. On 30 January 1984, a check for P5,625.00 (Exh. E) to cover payment of the premium and documentary stamps due on the policy was tendered due to the insurer but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of the inception for non-payment of the premium due in accordance with Section 77 of the Insurance Code. On 2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the payment of the proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but the latter denied the claim. After due hearing and trial, the court a quo rendered judgment in favor of plaintiff and against defendants. Both defendants shipping corporation and the surety company appealed. Defendant-appellant Seven Brothers Shipping Corporation impute (sic) to the court a quo the following assignment of errors, to wit: A. The lower court erred in holding that the proximate cause of the sinking of the vessel Seven Ambassadors, was not due to fortuitous event but to the negligence of the captain in stowing and securing the logs on board, causing the iron chains to snap and the logs to roll to the portside. B. The lower court erred in declaring that the non-liability clause of the Seven Brothers Shipping Corporation from logs (sic) of the cargo stipulated in the charter party is void for being contrary to public policy invoking article 1745 of the New Civil Code.

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

D. The trial court erred in disregarding the receipt of payment clause attached to and forming part of the Marine Cargo Insurance Policy No. 84/24229. E. The trial court in disregarding the statement of account or bill stating the amount of premium and documentary stamps to be paid on the policy by the plaintiff-appellee. F. The trial court erred in disregarding the indorsement of cancellation of the policy due to non-payment of premium and documentary stamps. G. The trial court erred in ordering defendant-appellant South Sea Surety and Insurance Company, Inc. to pay plaintiffappellee P2,000,000.00 representing value of the policy with legal interest from 2 February 1984 until the amount is fully paid, H. The trial court erred in not awarding to the defendantappellant the attorneys fees alleged and proven in its counterclaim. The primary issue to be resolved before us is whether defendants shipping corporation and the surety company are liable to the plaintiff for the latters lost logs.[4] The Court of Appeals affirmed in part the RTC judgment by sustaining the liability of South Sea Surety and Insurance Company (South Sea), but modified it by holding that Seven Brothers Shipping Corporation (Seven Brothers) was not liable for the lost cargo. [5] In modifying the RTC judgment, the respondent appellate court ratiocinated thus: It appears that there is a stipulation in the charter party that the ship owner would be exempted from liability in case of loss.

The court a quo erred in applying the provisions of the Civil Code on common carriers to establish the liability of the shipping corporation. The provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability even for the negligence of its agent is valid (Home Insurance Company, Inc. vs. American Steamship Agencies, Inc., 23 SCRA 24). The shipping corporation should not therefore be held liable for the loss of the logs.[6] South Sea and herein Petitioner Valenzuela Hardwood and Industrial Supply, Inc. (Valenzuela) filed separate petitions for review before this Court. In a Resolution dated June 2, 1995, this Court denied the petition of South Sea.[7] There the Court found no reason to reverse the factual findings of the trial court and the Court of Appeals that Chua was indeed an authorized agent of South Sea when he received Valenzuelas premium payment for the marine cargo insurance policy which was thus binding on the insurer.[8] The Court is now called upon to resolve the petition for review filed by Valenzuela assailing the CA Decision which exempted Seven Brothers from any liability for the lost cargo. The Issue Petitioner Valenzuelas arguments revolve around a single issue: whether or not respondent Court (of Appeals) committed a reversible error in upholding the validity of the stipulation in the charter party

executed between the petitioner and the private respondent exempting the latter from liability for the loss of petitioners logs arising from the negligence of its (Seven Brothers) captain.[9] The Courts Ruling The petition is not meritorious. Validity of Stipulation is Lis Mota The charter party between the petitioner and private respondent stipulated that the (o)wners shall not be responsible for loss, sp lit, short-landing, breakages and any kind of damages to the cargo. [10] The validity of this stipulation is the lis mota of this case. It should be noted at the outset that there is no dispute between the parties that the proximate cause of the sinking of M/V Seven Ambassadors resulting in the loss of its cargo was the snapping of the iron chains and the subsequent rolling of the logs to the portside due to the negligence of the captain in stowing and securing the logs on board the vessel and not due to fortuitous event.[11] Likewise undisputed is the status of Private Respondent Seven Brothers as a private carrier when it contracted to transport the cargo of Petitioner Valenzuela. Even the latter admits this in its petition.[12] The trial court deemed the charter party stipulation void for being contrary to public policy,[13] citing Article 1745 of the Civil Code which provides: Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:

(1) That the goods are transported at the risk of the owner or shipper; (2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods; (3) That the common carrier need not observe any diligence in the custody of the goods; (4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movables transported; (5) That the common carrier shall not be responsible for the acts or omissions of his or its employees; (6) That the common carriers liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; (7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage. Petitioner Valenzuela adds that the stipulation is void for being contrary to Articles 586 and 587 of the Code of Commerce[14] and Articles 1170 and 1173 of the Civil Code. Citing Article 1306 and paragraph 1, Article 1409 of the Civil Code,[15] petitioner further contends that said stipulation gives no duty or obligation to the private respondent to observe the diligence of a good father of a family in the custody and transportation of the cargo." The Court is not persuaded. As adverted to earlier, it is undisputed that private respondent had acted as a private carrier in transporting

petitioners lauan logs. Thus, Article 1745 and other Civil Code provisions on common carriers which were cited by petitioner may not be applied unless expressly stipulated by the parties in their charter party.[16] In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the ship captain. Pursuant to Article 1306[17] of the Civil Code, such stipulation is valid because it is freely entered into by the parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of private carriage is not even a contract of adhesion. We stress that in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in contracts involving common carriers. The issue posed in this case and the arguments raised by petitioner are not novel; they were resolved long ago by this Court in Home Insurance Co. vs. American Steamship Agencies, Inc.[18] In that case, the trial court similarly nullified a stipulation identical to that involved in the present case for being contrary to public policy based on Article 1744 of the Civil Code and Article 587 of the Code of Commerce. Consequently, the trial court held the shipowner liable for damages resulting from the partial loss of the cargo. This Court reversed the trial court and laid down, through Mr. Justice Jose P. Bengzon, the following well-settled observation and doctrine:

The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy, and is deemed valid. Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void only if the strict public policy governing common carriers is applied. Such policy has no force where the public at large is not involved, as in this case of a ship totally chartered for the use of a single party.[19] (Underscoring supplied.) Indeed, where the reason for the rule ceases, the rule itself does not apply. The general public enters into a contract of transportation with common carriers without a hand or a voice in the preparation thereof. The riding public merely adheres to the contract; even if the public wants to, it cannot submit its own stipulations for the approval of the common carrier. Thus, the law on common carriers extends its protective mantle against one-sided stipulations inserted in tickets, invoices or other documents over which the riding public has no understanding or, worse, no choice. Compared to the general public, a charterer in a contract of private carriage is not similarly situated. It can -- and in fact it usually does -- enter into a free and voluntary agreement. In practice, the parties in a contract of private carriage can stipulate the carriers obligations and liabilities over the shipment which, in turn, determine the price or consideration of the charter. Thus, a charterer, in exchange for convenience and economy, may opt to set aside the protection of the law on common

carriers. When the charterer decides to exercise this option, he takes a normal business risk. Petitioner contends that the rule in Home Insurance is not applicable to the present case because it covers only a stipulation exempting a private carrier from liability for the negligence of his agent, but it does not apply to a stipulation exempting a private carrier like private respondent from the negligence of his employee or servant which is the situation in this case.[20] This contention of petitioner is bereft of merit, for it raises a distinction without any substantive difference. The case of Home Insurance specifically dealt with the liability of the shipowner for acts or negligence of its captain and crew[21] and a charter party stipulation which exempts the owner of the vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of the captain or crew or some other person employed by the owner on board, for whose acts the owner would ordinarily be liable except for said [22] paragraph. Undoubtedly, Home Insurance is applicable to the case at bar. The naked assertion of petitioner that the American rule enunciated in Home Insurance is not the rule in the Philippines[23] deserves scant consideration. The Court there categorically held that said rule was reasonable and proceeded to apply it in the resolution of that case. Petitioner miserably failed to show such circumstances or arguments which would necessitate a departure from a well-settled rule. Consequently, our ruling in said case remains a binding judicial precedent based on the doctrine of stare decisis and Article 8 of the Civil Code which provides that (j)udicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines. In fine, the respondent appellate court aptly stated that *in the case of] a private carrier, a stipulation exempting the owner from liability even for the negligence of its agent is valid.[24]

Other Arguments On the basis of the foregoing alone, the present petition may already be denied; the Court, however, will discuss the other arguments of petitioner for the benefit and satisfaction of all concerned. Articles 586 and 587, Code of Commerce Petitioner Valenzuela insists that the charter party stipulation is contrary to Articles 586 and 587 of the Code of Commerce which confer on petitioner the right to recover damages from the shipowner and ship agent for the acts or conduct of the captain.[25] We are not persuaded. Whatever rights petitioner may have under the aforementioned statutory provisions were waived when it entered into the charter party. Article 6 of the Civil Code provides that (r)ights may be waived, unless the waiver is contrary to law, public order, public policy, morals, or good customs, or prejudicial to a person with a right recognized by law. As a general rule patrimonial rights may be waived as opposed to rights to personality and family rights which may not be made the subject of waiver.[26] Being patently and undoubtedly patrimonial, petitioners right conferred under said articles may be waived. This, the petitioner did by acceding to the contractual stipulation that it is solely responsible for any damage to the cargo, thereby exempting the private carrier from any responsibility for loss or damage thereto. Furthermore, as discussed above, the contract of private carriage binds petitioner and private respondent alone; it is not imbued with public policy considerations for the general public or third persons are not affected thereby.

Articles 1170 and 1173, Civil Code Petitioner likewise argues that the stipulation subject of this controversy is void for being contrary to Articles 1170 and 1173 of the Civil Code[27] which read: Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2201, shall apply. If the law does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. The Court notes that the foregoing articles are applicable only to the obligor or the one with an obligation to perform. In the instant case, Private Respondent Seven Brothers is not an obligor in respect of the cargo, for this obligation to bear the loss was shifted to petitioner by virtue of the charter party. This shifting of responsibility, as earlier observed, is not void. The provisions cited by petitioner are, therefore, inapplicable to the present case. Moreover, the factual milieu of this case does not justify the application of the second paragraph of Article 1173 of the Civil Code which prescribes the standard of diligence to be observed in the event the law or the contract is silent. In the instant case, Article 362 of the Code of Commerce[28] provides the standard of ordinary diligence for the carriage of goods by a carrier. The standard of diligence under this

statutory provision may, however, be modified in a contract of private carriage as the petitioner and private respondent had done in their charter party. Cases Cited by Petitioner Inapplicable Petitioner cites Shewaram vs. Philippine Airlines, Inc.[29] which, in turn, quoted Juan Ysmael & Co. vs. Gabino Barreto & Co.[30] and argues that the public policy considerations stated therevis--vis contractual stipulations limiting the carriers liability be applied with equal force to this case.[31] It also cites Manila Railroad Co. vs. Compaia Transatlantica[32] and contends that stipulations exempting a party from liability for damages due to negligence should not be countenanced and should be strictly construed against the party claiming its benefit.[33] We disagree. The cases of Shewaram and Ysmael both involve a common carrier; thus, they necessarily justify the application of such policy considerations and concomitantly stricter rules. As already discussed above, the public policy considerations behind the rigorous treatment of common carriers are absent in the case of private carriers. Hence, the stringent laws applicable to common carriers are not applied to private carriers. The case of Manila Railroad is also inapplicable because the action for damages there does not involve a contract for transportation. Furthermore, the defendant therein made a promise to use due care in the lifting operations and, consequently, it was bound by its undertaking; besides, the exemption was intended to cover accidents due to hidden defects in the apparatus or other unforseeable occurrences not caused by its personal negligence. This promise was thus construed to make sense together with the stipulation against liability for damages.[34] In the present case, we stress that the private respondent made no such promise. The agreement of the parties to exempt the shipowner from responsibility

for any damage to the cargo and place responsibility over the same to petitioner is the lone stipulation considered now by this Court. Finally, petitioner points to Standard Oil Co. of New York vs. Lopez Costelo,[35] Walter A. Smith & Co. vs. Cadwallader Gibson Lumber Co.,[36] N. T. Hashim and Co. vs. Rocha and Co.,[37]Ohta Development Co. vs. SteamshipPompey[38] and Limpangco Sons vs. Yangco Steamship Co.[39] in support of its contention that the shipowner be held liable for damages.[40] These however are not on all fours with the present case because they do not involve a similar factual milieu or an identical stipulation in the charter party expressly exempting the shipowner from responsibility for any damage to the cargo. Effect of the South Sea Resolution In its memorandum, Seven Brothers argues that petitioner has no cause of action against it because this Court has earlier affirmed the liability of South Sea for the loss suffered by petitioner. Private respondent submits that petitioner is not legally entitled to collect twice for a single loss.[41] In view of the above disquisition upholding the validity of the questioned charter party stipulation and holding that petitioner may not recover from private respondent, the present issue is moot and academic. It suffices to state that the Resolution of this Court dated June 2, 1995[42] affirming the liability of South Sea does not, by itself, necessarily preclude the petitioner from proceeding against private respondent. An aggrieved party may still recover the deficiency from the person causing the loss in the event the amount paid by the insurance company does not fully cover the loss. Article 2207 of the Civil Code provides: ART. 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the

insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. WHEREFORE, premises considered, the petition is hereby DENIED for its utter failure to show any reversible error on the part of Respondent Court. The assailed Decision is AFFIRMED. SO ORDERED. Narvasa, JJ., concur. C.J., (Chairman), Davide, Jr., Melo, and Francisco,

[1] [2]

Charter Party, p. 2; Record of the Regional Trial Court, p. 202. Seventeenth Division, composed of J. Fernando A. Santiago, ponente, and JJ. Pedro A. Ramirez, Chairman, and Fermin A. Martin, Jr., concurring. Rollo, p. 24. Decision of the Court of Appeals, pp. 1-4; Rollo, pp. 19-22. Ibid., p. 6; rollo, p. 24. Ibid., p. 4; rollo, p. 22. South Sea Surety and Insurance Company, Inc. vs. Hon. Court of Appeals and Valenzuela Hardwood and Industrial Supply, Inc., G.R. No. 102253, p. 4, June 2, 1995. Ibid., pp. 5-7. Memorandum for Petitioner, p. 5; rollo, p. 47.

[3] [4] [5] [6] [7]

[8] [9]

[10]

Charter Party of January 16, 1984; Petitioners Memorandum, p. 2; rollo, p. 62. See first, second, and third versions of charter party in Record of the Regional Trial Court, pp. 201-206. Decision of the Regional Trial Court, p. 17; Record of the Regional Trial Court, p. 383. Petition, p. 13; rollo, p. 14. Decision of the Regional Trial Court, p. 17; Record of the Regional Trial Court, p. 383. Petition, p. 2, rollo, p. 9. The Code of Commerce provides:

[11]

[12] [13]

[14]

Art. 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair equip, and provision the vessel, provided the creditors prove that the amount claimed was invested therein. Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the vigilance over the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freight he may have earned during the voyage.
[15] [16]

Ibid., p. 11; rollo, p. 53. See Hernandez, Eduardo F. and Peasales, Antero A., Philippine Admiralty and Maritime Law, p. 250, (1987). Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. See also, Section 10, Article III, Constitution; People vs. Pomar, 46 Phil. 440, 449, (1924). 23 SCRA 24, April 4, 1968.

[17]

[18]

[19] [20] [21]

Ibid., pp. 27-28. Petitioners Memorandum, p. 12; rollo, p. 57. Home Insurance Co. vs. American Steamship Agencies, Inc., supra, p. 27. Ibid. Petitioners Memorandum, pp. 8-9; rollo, pp. 50-51. Decision, p. 4; rollo, p. 22. Petitioners Memorandum, p. 15; rollo, p. 57. Art. 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested therein. By ship agent is understood the person intrusted with the provisioning of a vessel, or who represents her in port in which she may be found. Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the vigilance over the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight he may have earned during the voyage.

[22] [23] [24] [25]

[26]

Tolentino, Arturo M., Commentaries and Jurisprudence on the Civil Code of the Philippines, p. 29, Volume I, (1990). Petitioners Memorandum, p. 15; rollo, p. 54.

[27] [28]

Art. 362. Nevertheless, the carrier shall be liable for the losses and damages resulting from causes mentioned in the preceding article if it is proved, as against him, that they arose through his negligence or

by reason of his having failed to take the precautions which usage has established among careful persons, unless the shipper has committed fraud in the bill of lading, representing the goods to be of a kind or quality different from what they really were. If notwithstanding the precautions referred to in this article, the goods transported run the risk of being lost, on account of their nature or by reason of unavoidable accident, there being no time for their owners to dispose of them, the carrier may proceed to sell them, placing them for the purpose at the disposal of the judicial authority or of the officials designated by special provisions.
[29] [30] [31] [32] [33] [34] [35] [36] [37] [38] [39] [40] [41] [42]

17 SCRA 606, July 7, 1966. 51 Phil. 90, (1927). Petitioners Memorandum, pp. 9-10; rollo, pp. 51-52. 38 Phil.875, (1918). Petitioners Memorandum, p. 13, rollo, p. 55. Manila Railroad vs. Compaia Transatlantica, supra, pp. 886-887. 42 Phil. 256, (1921). 55 Phil. 517 (1930). 18 Phil. 315, (1911). 49 Phil. 117, (1926). 34 Phil. 597, (1916). Petitioners Memorandum, p. 7; rollo, p. 49. Memorandum For Private Respondent, p. 8; rollo, p. 68. Supra.

FIRST DIVISION G.R. No. 150403 January 25, 2007

CEBU SALVAGE CORPORATION, Petitioner, vs. PHILIPPINE HOME ASSURANCE CORPORATION, Respondent. DECISION CORONA, J.: May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not own? This is the issue presented for the Courts resolution in this petition for review on certiorari1 assailing the March 16, 2001 decision2 and September 17, 2001 resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 40473 which in turn affirmed the December 27, 1989 decision4 of the Regional Trial Court (RTC), Branch 145, Makati, Metro Manila.5 The pertinent facts follow. On November 12, 1984, petitioner Cebu Salvage Corporation (as carrier) and Maria Cristina Chemicals Industries, Inc. [MCCII] (as charterer) entered into a voyage charter6 wherein petitioner was to load 800 to 1,100 metric tons of silica quartz on board the M/T Espiritu Santo7 at Ayungon, Negros Occidental for transport to and discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils., Inc.8 Pursuant to the contract, on December 23, 1984, petitioner received and loaded 1,100 metric tons of silica quartz on board the M/T Espiritu Santo which left Ayungon for Tagoloan the next day.9 The shipment never reached its destination, however, because the M/T Espiritu Santo

sank in the afternoon of December 24, 1984 off the beach of Opol, Misamis Oriental, resulting in the total loss of the cargo.10 MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home Assurance Corporation.11Respondent paid the claim in the amount of P211,500 and was subrogated to the rights of MCCII.12 Thereafter, it filed a case in the RTC13 against petitioner for reimbursement of the amount it paid MCCII. After trial, the RTC rendered judgment in favor of respondent. It ordered petitioner to pay respondent P211,500 plus legal interest, attorneys fees equivalent to 25% of the award and costs of suit. On appeal, the CA affirmed the decision of the RTC. Hence, this petition. Petitioner and MCCII entered into a "voyage charter," also known as a contract of affreightment wherein the ship was leased for a single voyage for the conveyance of goods, in consideration of the payment of freight.14 Under a voyage charter, the shipowner retains the possession, command and navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment of freight.15 An owner who retains possession of the ship remains liable as carrier and must answer for loss or non-delivery of the goods received for transportation.16 Petitioner argues that the CA erred when it affirmed the RTC finding that the voyage charter it entered into with MCCII was a contract of carriage.17 It insists that the agreement was merely a contract of hire wherein MCCII hired the vessel from its owner, ALS Timber Enterprises (ALS).18 Not being the owner of the M/T Espiritu Santo, petitioner did not have control and supervision over the vessel, its master and crew.19 Thus, it could not be held liable for the loss of the shipment caused by the sinking of a ship it did not own.

We disagree. Based on the agreement signed by the parties and the testimony of petitioners operations manager, it is clear that it was a contract of carriage petitioner signed with MCCII. It actively negotiated and solicited MCCIIs account, offered its services to ship the silica quartz and proposed to utilize the M/T Espiritu Santo in lieu of the M/T Seebees or the M/T Shirley (as previously agreed upon in the voyage charter) since these vessels had broken down.20 There is no dispute that petitioner was a common carrier. At the time of the loss of the cargo, it was engaged in the business of carrying and transporting goods by water, for compensation, and offered its services to the public.21 From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they transport according to the circumstances of each case.22 In the event of loss of the goods, common carriers are responsible, unless they can prove that this was brought about by the causes specified in Article 1734 of the Civil Code.23 In all other cases, common carriers are presumed to be at fault or to have acted negligently, unless they prove that they observed extraordinary diligence.24 Petitioner was the one which contracted with MCCII for the transport of the cargo. It had control over what vessel it would use. All throughout its dealings with MCCII, it represented itself as a common carrier. The fact that it did not own the vessel it decided to use to consummate the contract of carriage did not negate its character and duties as a common carrier. The MCCII (respondents subrogor) could not be reasonably expected to inquire about the ownership of the vessels which petitioner carrier offered to utilize. As a practical matter, it is very difficult and often impossible for the general public to enforce its rights of action under a contract of carriage if it should be required

to know who the actual owner of the vessel is.25 In fact, in this case, the voyage charter itself denominated petitioner as the "owner/operator" of the vessel.26 Petitioner next contends that if there was a contract of carriage, then it was between MCCII and ALS as evidenced by the bill of lading ALS issued.27 Again, we disagree. The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had been received for transportation. It was not signed by MCCII, as in fact it was simply signed by the supercargo of ALS.28 This is consistent with the fact that MCCII did not contract directly with ALS. While it is true that a bill of lading may serve as the contract of carriage between the parties,29 it cannot prevail over the express provision of the voyage charter that MCCII and petitioner executed: [I]n cases where a Bill of Lading has been issued by a carrier covering goods shipped aboard a vessel under a charter party, and the charterer is also the holder of the bill of lading, "the bill of lading operates as the receipt for the goods, and as document of title passing the property of the goods, but not as varying the contract between the charterer and the shipowner." The Bill of Lading becomes, therefore, only a receipt and not the contract of carriage in a charter of the entire vessel, for the contract is the Charter Party, and is the law between the parties who are bound by its terms and condition provided that these are not contrary to law, morals, good customs, public order and public policy. 30 Finally, petitioner asserts that MCCII should be held liable for its own loss since the voyage charter stipulated that cargo insurance was for the charterers account.31 This deserves scant consideration. This simply meant that the charterer would take care of having the goods insured.

It could not exculpate the carrier from liability for the breach of its contract of carriage. The law, in fact, prohibits it and condemns it as unjust and contrary to public policy.32 To summarize, a contract of carriage of goods was shown to exist; the cargo was loaded on board the vessel; loss or non-delivery of the cargo was proven; and petitioner failed to prove that it exercised extraordinary diligence to prevent such loss or that it was due to some casualty or force majeure. The voyage charter here being a contract of affreightment, the carrier was answerable for the loss of the goods received for transportation.33 The idea proposed by petitioner is not only preposterous, it is also dangerous. It says that a carrier that enters into a contract of carriage is not liable to the charterer or shipper if it does not own the vessel it chooses to use. MCCII never dealt with ALS and yet petitioner insists that MCCII should sue ALS for reimbursement for its loss. Certainly, to permit a common carrier to escape its responsibility for the goods it agreed to transport (by the expedient of alleging non-ownership of the vessel it employed) would radically derogate from the carrier's duty of extraordinary diligence. It would also open the door to collusion between the carrier and the supposed owner and to the possible shifting of liability from the carrier to one without any financial capability to answer for the resulting damages.34 WHEREFORE, the petition is hereby DENIED. Costs against petitioner. SO ORDERED. RENATO C. CORONA Associate Justice WE CONCUR:

REYNATO S. PUNO Chief Justice Chairperson ANGELINA SANDOVAL-GUTIERREZ Associate Justice CANCIO C. GARCIA Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice ADOLFO S. AZCUNA Asscociate Justice

Footnotes
1 2

Under Rule 45 of the Rules of Court.

Penned by Associate Justice Ramon A. Barcelona (retired) and concurred in by Associate Justices Rodrigo V. Cosico and Alicia L. Santos (retired) of the Seventh Division of the Court of Appeals; rollo, pp. 34-46.
3 4

Id., pp. 32-33. RTC records, pp. 414-419.

5 6

Now, Makati City.

MCCII was represented by its marketing manager Tessie Cu while petitioner was represented by its operations manager Eduardo Y. Romeo; rollo, p. 24.
7

Originally, the vessels named were M/T Seebees IV and M/T Shirley but these were erased (a line put over the words) and replaced with M/T Espiritu Santo; RTC records, p. 5.
8 9

Id., pp. 5-6; rollo, p. 24 and records, pp. 70-71, 414. Rollo, pp. 24-25. Records, p. 2; rollo, p. 25. Under marine risk note no. FD-14331; id. Id.

10 11 12 13

Docketed as Civil Case No. 11915. Judge Job B. Madayag, Branch 145, RTC of Makati.
14

Caltex (Philippines), Inc. v. Sulpicio Lines, Inc., 374 Phil. 325, 333 (1999). Citations omitted.
15

Puromines, Inc. v. Court of Appeals, G.R. No. 91228, 22 March 1993, 220 SCRA 281, 288, citing US v. Shea, 152 US 178, 38 Led 403, 14 S ct 579.
16 17

Id., p. 289.

Rollo, pp. 16-17. A contract of carriage is a contract by which the carrier assumes the express obligation to transport the passenger or goods to his/her/its destination. A voyage charter is a type of contract of carriage of goods wherein the owner of the

ship leases the whole or part of the ship to another for the conveyance of goods, on a particular voyage, in consideration of the payment of freight.
18 19 20 21 22 23

Id. Id. Id., p. 26. Civil Code, Article 1732. Id., Article 1733.

Article 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority.
24 25

Article 1735, Civil Code.

See Benedicto v. Intermediate Appellate Court, G.R. No. 70876, 19 July 1990, 187 SCRA 547, 553, citations omitted.
26

RTC records, p. 5.

27 28 29

Rollo, p. 17. RTC records, p. 70.

Keng Hua Paper Products Co., Inc. v. CA, 349 Phil. 925, 932-933 (1998).
30

National Union Fire Insurance Company Of Pittsburg v. StoltNielsen Philippines, Inc., G.R. No. 87958, 26 April 1990, 184 SCRA 682, 688-689, citations omitted.
31 32

Rollo, pp. 17-18; RTC records, p. 5. Article 1745 of the Civil Code states: Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy: (1) That the goods are transported at the risk of the owner or shipper; (2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods; xxx xxx xxx

33 34

Supra note 15, at 288-289. Supra note 25, at 554.