G.R. No.

147079
2004

December 21,

received the cargoes consisting

pieces in good condition.12

A.F.
SANCHEZ
BROKERAGE
INC., petitioners,
vs.
THE HON. COURT OF APPEALS and FGU
INSURANCE CORPORATION, respondents.

Wyeth-Suaco being a regular

customs examiner did not
cargoes13 which were thereupon
the aluminum containers14 and
two transport vehicles hired
Brokerage.15

CARPIO MORALES, J.:

of three

importer, the
inspect the
stripped from
loaded inside
by Sanchez

Among those who witnessed the release of the

cargoes from the PSI warehouse were Ruben
Alonso and Tony Akas,16 employees of Elite
Adjusters and Surveyors Inc. (Elite Surveyors),
a marine and cargo surveyor and insurance
claim adjusters firm engaged by Wyeth-Suaco
on behalf of FGU Insurance.

Before this Court on a petition for Certiorari is

the appellate courts Decision1 of August 10,
2000 reversing and setting aside the judgment
of Branch 133, Regional Trial Court of Makati
City, in Civil Case No. 93-76B which dismissed
the complaint of respondent FGU Insurance
Corporation (FGU Insurance) against petitioner
A.F.
Sanchez
Brokerage,
Inc.
(Sanchez
Brokerage).

Upon instructions of Wyeth-Suaco, the cargoes

were delivered to Hizon Laboratories Inc. in
Antipolo City for quality control check.17 The
delivery receipt, bearing No. 07037 dated July
29, 1992, indicated that the delivery consisted
of one container with 144 cartons of Femenal
and Nordiol and 1 pallet containing Trinordiol. 18

On July 8, 1992, Wyeth-Pharma GMBH shipped

on board an aircraft of KLM Royal Dutch Airlines
at Dusseldorf, Germany oral contraceptives
consisting of 86,800 Blisters Femenal tablets,
14,000 Blisters Nordiol tablets and 42,000
Blisters Trinordiol tablets for delivery to Manila
in favor of the consignee, Wyeth-Suaco
Laboratories, Inc.2The Femenal tablets were
placed in 124 cartons and the Nordiol tablets
were placed in 20 cartons which were packed
together in one (1) LD3 aluminum container,
while the Trinordial tablets were packed in two
pallets, each of which contained 30 cartons. 3

On July 31, 1992, Ronnie Likas, a representative

of Wyeth-Suaco, acknowledged the delivery of
the cargoes by affixing his signature on the
delivery receipt.19 Upon inspection, however,
he, together with Ruben Alonzo of Elite
Surveyors,
discovered
that
44
cartons
containing Femenal and Nordiol tablets were in
bad order.20 He thus placed a note above his
signature on the delivery receipt stating that 44
cartons of oral contraceptives were in bad
order. The remaining 160 cartons of oral
contraceptives were accepted as complete and
in good order.

Wyeth-Suaco insured the shipment against all

risks with FGU Insurance which issued Marine
Risk Note No. 4995 pursuant to Marine Open
Policy No. 138.4

Ruben Alonzo thus prepared and signed, along

with Ronnie Likas, a survey report 21 dated July
31, 1992 stating that 41 cartons of Femenal
tablets and 3 cartons of Nordiol tablets were
"wetted" (sic).22

Upon arrival of the shipment on July 11, 1992 at

the
Ninoy
Aquino
International
Airport
(NAIA),5 it
was
discharged
"without
exception"6 and delivered to the warehouse of
the Philippine Skylanders, Inc. (PSI) located also
at the NAIA for safekeeping.7

The Elite Surveyors later issued Certificate No.

CS-0731-1538/9223 attached to which was an
"Annexed Schedule" whereon it was indicated
that prior to the loading of the cargoes to the
brokers trucks at the NAIA, they were
inspected and found to be in "apparent good
condition."24 Also noted was that at the time of
delivery to the warehouse of Hizon Laboratories
Inc., slight to heavy rains fell, which could
account for the wetting of the 44 cartons of
Femenal and Nordiol tablets.25

In order to secure the release of the cargoes

from the PSI and the Bureau of Customs,
Wyeth-Suaco engaged the services of Sanchez
Brokerage which had been its licensed broker
since 1984.8 As its customs broker, Sanchez
Brokerage calculates and pays the customs
duties, taxes and storage fees for the cargo and
thereafter delivers it to Wyeth-Suaco. 9
On July 29, 1992, Mitzi Morales and Ernesto
Mendoza,
representatives
of
Sanchez
Brokerage, paid PSI storage fee amounting
to P8,572.35 a receipt for which, Official
Receipt No. 016992,10 was issued. On the
receipt, another representative of Sanchez
Brokerage, M. Sison,11 acknowledged that he

On August 4, 1992, the Hizon Laboratories Inc.

issued a Destruction Report26 confirming that
38 x 700 blister packs of Femenal tablets, 3 x
700 blister packs of Femenal tablets and 3 x
700 blister packs of Nordiol tablets were

heavily damaged with water and emitted foul

smell.

good order and condition but were in a

damaged state when delivered to WyethSuaco, the appellate court held that Sanchez
Brokerage is presumed negligent and upon it
rested the burden of proving that it exercised
extraordinary negligence not only in instances
when negligence is directly proven but also in
those cases when the cause of the damage is
not known or unknown. 37

On August 5, 1992, Wyeth-Suaco issued a

Notice of Materials Rejection 27 of 38 cartons of
Femenal and 3 cartons of Nordiol on the ground
that they were "delivered to Hizon Laboratories
with heavy water damaged (sic) causing the
cartons to sagged (sic) emitting a foul order
and easily attracted flies."28

The appellate court thus disposed:

Wyeth-Suaco later demanded, by letter29 of
August 25, 1992, from Sanchez Brokerage the
payment ofP191,384.25 representing the value
of its loss arising from the damaged tablets.

IN THE LIGHT OF ALL THE FOREGOING,

the appeal of the Appellant is GRANTED.
The Decision of the Court a quo is
REVERSED. Another Decision is hereby
rendered in favor of the Appellant and
against the Appellee as follows:

As the Sanchez Brokerage refused to heed the

demand, Wyeth-Suaco filed an insurance claim
against FGU Insurance which paid Wyeth-Suaco
the amount of P181,431.49 in settlement of its
claim under Marine Risk Note Number 4995.

1. The Appellee is hereby

ordered to pay the Appellant the
principal
amount
of
P181,
431.49, with interest thereupon
at the rate of 6% per annum,
from the date of the Decision of
the Court, until the said amount
is paid in full;

Wyeth-Suaco
thus
issued
Subrogation
Receipt30 in favor of FGU Insurance.
On demand by FGU Insurance for payment of
the amount of P181,431.49 it paid WyethSuaco, Sanchez Brokerage, by letter31 of
January 7, 1993, disclaimed liability for the
damaged goods, positing that the damage was
due to improper and insufficient export
packaging; that when the sealed containers
were opened outside the PSI warehouse, it was
discovered that some of the loose cartons were
wet,32 prompting its (Sanchez Brokerages)
representative Morales to inform the ImportExport Assistant of Wyeth-Suaco, Ramir
Calicdan, about the condition of the cargoes
but that the latter advised to still deliver them
to Hizon Laboratories where an adjuster would
assess the damage.33

2. The Appellee is hereby

ordered to pay to the Appellant
the amount of P20,000.00 as and
by way of attorneys fees; and
3. The counterclaims of
Appellee are DISMISSED.38

the

Sanchez
Brokerages
Motion
for
Reconsideration having been denied by the
appellate courts Resolution of December 8,
2000 which was received by petitioner on
January 5, 2001, it comes to this Court on
petition for certiorari filed on March 6, 2001.

Hence, the filing by FGU Insurance of a

complaint for damages before the Regional Trial
Court of Makati City against the Sanchez
Brokerage.

In the main, petitioner asserts that the

appellate court committed grave and reversible
error tantamount to abuse of discretion when it
found petitioner a "common carrier" within the
context of Article 1732 of the New Civil Code.

The trial court, by Decision34 of July 29, 1996,

dismissed the complaint, holding that the
Survey Report prepared by the Elite Surveyors
is bereft of any evidentiary support and a mere
product of pure guesswork.35

Respondent FGU Insurance avers in its

Comment that the proper course of action
which petitioner should have taken was to file a
petition for review on certiorari since the sole
office of a writ of certiorari is the correction of
errors of jurisdiction including the commission
of grave abuse of discretion amounting to lack
or excess of jurisdiction and does not include
correction of the appellate courts evaluation of
the evidence and factual findings thereon.

On appeal, the appellate court reversed the

decision of the trial court, it holding that the
Sanchez Brokerage engaged not only in the
business of customs brokerage but also in the
transportation and delivery of the cargo of its
clients, hence, a common carrier within the
context of Article 1732 of the New Civil Code.36

On the merits, respondent FGU Insurance

contends that petitioner, as a common carrier,
failed to overcome the presumption of

Noting that Wyeth-Suaco adduced evidence

that the cargoes were delivered to petitioner in

negligence, it being documented that petitioner

withdrew from the warehouse of PSI the subject
shipment entirely in good order and condition.39

both, by land, water, or air, for

compensation, offering their services to
the public.

The petition fails.

Anacleto F. Sanchez, Jr., the Manager and

Principal Broker of Sanchez Brokerage, himself
testified that the services the firm offers
include the delivery of goods to the warehouse
of the consignee or importer.

Rule 45 is clear that decisions, final orders or

resolutions of the Court of Appeals in any
case, i.e., regardless of the nature of the action
or proceedings involved, may be appealed to
this Court by filing a petition for review, which
would be but a continuation of the appellate
process over the original case.40

ATTY. FLORES:
Q: What are the functions of these
license brokers, license customs broker?

The Resolution of the Court of Appeals dated

December 8, 2000 denying the motion for
reconsideration of its Decision of August 10,
2000 was received by petitioner on January 5,
2001. Since petitioner failed to appeal within
15 days or on or before January 20, 2001, the
appellate courts decision had become final and
executory. The filing by petitioner of a petition
for certiorari on March 6, 2001 cannot serve as
a substitute for the lost remedy of appeal.

WITNESS:
As customs broker, we calculate the
taxes that has to be paid in cargos, and
those upon approval of the importer, we
prepare
the
entry
together
for
processing and claims from customs and
finally deliver
the
goods
to
the
warehouse of the importer.43

In another vein, the rule is well settled that in a

petition for certiorari, the petitioner must prove
not merely reversible error but also grave
abuse of discretion amounting to lack or excess
of jurisdiction.

Article 1732 does not distinguish between one

whose principal business activity is the carrying
of goods and one who does such carrying only
as an ancillary activity.44 The contention,
therefore, of petitioner that it is not a common
carrier but a customs broker whose principal
function is to prepare the correct customs
declaration and proper shipping documents as
required by law is bereft of merit. It suffices
that petitioner undertakes to deliver the goods
for pecuniary consideration.

Petitioner alleges that the appellate court erred

in reversing and setting aside the decision of
the trial court based on its finding that
petitioner is liable for the damage to the cargo
as a common carrier. What petitioner is
ascribing is an error of judgment, not of
jurisdiction, which is properly the subject of an
ordinary appeal.

In this light, petitioner as a common carrier is

mandated to observe, under Article 173345 of
the Civil Code, extraordinary diligence in the
vigilance over the goods it transports according
to all the circumstances of each case. In the
event that the goods are lost, destroyed or
deteriorated, it is presumed to have been at
fault or to have acted negligently, unless it
proves that it observed extraordinary
diligence.46

Where the issue or question involves or affects

the wisdom or legal soundness of the decision
not the jurisdiction of the court to render said
decision the same is beyond the province of a
petition
for certiorari.41 The
supervisory
jurisdiction of this Court to issue a cert writ
cannot be exercised in order to review the
judgment of lower courts as to its intrinsic
correctness, either upon the law or the facts of
the case.42

The concept of "extra-ordinary diligence" was

explained in Compania Maritima v. Court of
Appeals:47

Procedural technicalities aside, the petition still

fails.

The extraordinary diligence in the

vigilance over the goods tendered for
shipment requires the common carrier
to know and to follow the required
precaution for avoiding damage to, or
destruction of the goods entrusted to it
for sale, carriage and delivery. It
requires common carriers to render
service with the greatest skill and
foresight and "to use all reasonable
means to ascertain the nature and

The appellate court did not err in finding

petitioner, a customs broker, to be also a
common carrier, as defined under Article 1732
of the Civil Code, to wit:
Art. 1732. Common carriers are persons,
corporations, firms or associations
engaged in the business of carrying or
transporting passengers or goods or

characteristics of goods tendered for

shipment, and to exercise due care in
the handling and stowage, including
such
methods
as
their
nature
requires."48

Petitioner goes on to posit that contrary to the

report of Elite Surveyors, no rain fell that day.
Instead, it asserts that some of the cargoes
were already wet on delivery by PSI outside the
PSI warehouse but such notwithstanding
Calicdan directed Morales to proceed with the
delivery to Hizon Laboratories, Inc.

In the case at bar, it was established that

petitioner received the cargoes from the PSI
warehouse in NAIA in good order and
condition;49 and
that
upon
delivery
by
petitioner to Hizon Laboratories Inc., some of
the cargoes were found to be in bad order, as
noted in the Delivery Receipt 50 issued by
petitioner, and as indicated in the Survey
Report of Elite Surveyors51 and the Destruction
Report of Hizon Laboratories, Inc.52

While Calicdan testified that he received the

purported telephone call of Morales on July 29,
1992, he failed to specifically declare what time
he received the call. As to whether the call was
made at the PSI warehouse when the shipment
was stripped from the airport containers, or
when the cargoes were already in transit to
Antipolo, it is not determinable. Aside from that
phone call, petitioner admitted that it had no
documentary evidence to prove that at the
time it received the cargoes, a part of it was
wet, damaged or in bad condition.60

In an attempt to free itself from responsibility

for the damage to the goods, petitioner posits
that they were damaged due to the fault or
negligence of the shipper for failing to properly
pack them and to the inherent characteristics
of the goods53; and that it should not be faulted
for following the instructions of Calicdan of
Wyeth-Suaco to proceed with the delivery
despite information conveyed to the latter that
some of the cartons, on examination outside
the PSI warehouse, were found to be wet.54

The 4-page weather data furnished by

PAGASA61 on request of Sanchez Brokerage
hardly impresses, no witness having identified
it and interpreted the technical terms thereof.
The possibility on the other hand that, as found
by
Hizon
Laboratories,
Inc.,
the
oral
contraceptives were damaged by rainwater
while in transit to Antipolo City is more likely
then. Sanchez himself testified that in the past,
there was a similar instance when the shipment
of Wyeth-Suaco was also found to be wet by
rain.

While paragraph No. 4 of Article 173455 of the

Civil Code exempts a common carrier from
liability if the loss or damage is due to the
character of the goods or defects in the
packing or in the containers, the rule is that if
the improper packing is known to the carrier or
his employees or is apparent upon ordinary
observation, but he nevertheless accepts the
same
without
protest
or
exception
notwithstanding such condition, he is not
relieved of liability for the resulting damage. 56

ATTY. FLORES:
Q: Was there any instance that a
shipment
of
this
nature,
oral
contraceptives, that arrived at the NAIA
were damaged and claimed by the
Wyeth-Suaco without any question?

If the claim of petitioner that some of the

cartons were already damaged upon delivery to
it were true, then it should naturally have
received the cargo under protest or with
reservations duly noted on the receipt issued
by PSI. But it made no such protest or
reservation.57

WITNESS:
A: Yes sir, there was an instance that
one cartoon (sic) were wetted (sic) but
Wyeth-Suaco did not claim anything
against us.

Moreover, as observed by the appellate court, if

indeed petitioners employees only examined
the cargoes outside the PSI warehouse and
found some to be wet, they would certainly
have gone back to PSI, showed to the
warehouseman the damage, and demanded
then and there for Bad Order documents or a
certification confirming the damage.58 Or,
petitioner would have presented, as witness,
the employees of the PSI from whom Morales
and Domingo took delivery of the cargo to
prove that, indeed, part of the cargoes was
already damaged when the container was
allegedly opened outside the warehouse.59

ATTY. FLORES:
Q: HOW IS IT?
WITNESS:
A: We experienced, there
that we experienced that
cartoon (sic) wetted (sic)
bottom are wet specially
season.62

was a time
there was a
up to the
during rainy

Since petitioner received all the cargoes in

good order and condition at the time they were
turned over by the PSI warehouseman, and
upon their delivery to Hizon Laboratories, Inc. a
portion thereof was found to be in bad order, it
was incumbent on petitioner to prove that it
exercised extraordinary diligence in the
carriage of the goods. It did not, however.
Hence, its presumed negligence under Article
1735 of the Civil Code remains unrebutted.

Concepcion negotiated anew with petitioner,

thru its collector, Pacifico Fernandez, on August
28, 1964 for the shipment to Cagayan de Oro
City of one (1) unit payloader, four (4) units 6x6
Reo trucks and two (2) pieces of water tanks.
He was issued Bill of Lading 113 on the same
date upon delivery of the equipment at the
Manila North Harbor. 2
These equipment were loaded aboard the MV
Cebu in its Voyage No. 316, which left Manila
on August 30, 1964 and arrived at Cagayan de
Oro City in the afternoon of September 1, 1964.
The Reo trucks and water tanks were safely
unloaded within a few hours after arrival, but
while the payloader was about two (2) meters
above the pier in the course of unloading, the
swivel pin of the heel block of the port block of
Hatch No. 2 gave way, causing the payloader to
fall. 3 The payloader was damaged and was
thereafter taken to petitioner's compound in
Cagayan de Oro City.

WHEREFORE, the August 10, 2000 Decision of

the Court of Appeals is hereby AFFIRMED.
Costs against petitioner.
G.R. No. L-31379 August 29, 1988
COMPAIA
MARITIMA, petitioner,
vs.
COURT
OF
APPEALS
and
VICENTE
CONCEPCION, respondents.

On
September
7,
1964,
Consolidated
Construction, thru Vicente E. Concepcion, wrote
Compaia Maritima to demand a replacement
of the payloader which it was considering as a
complete loss because of the extent of
damage. 4 Consolidated Construction likewise
notified petitioner of its claim for damages.
Unable to elicit response, the demand was
repeated in a letter dated October 2, 1964. 5

Rafael Dinglasan for petitioner.

Benjamin J. Molina for private respondent.

FERNAN, C.J.:
Petitioner Compaia Maritima seeks to set
aside through this petition for review on
certiorari the decision 1 of the Court of Appeals
dated December 5, 1965, adjudging petitioner
liable to private respondent Vicente E.
Concepcion for damages in the amount of
P24,652.97 with legal interest from the date
said decision shall have become final, for
petitioner's failure to deliver safely private
respondent's payloader, and for costs of suit.
The payloader was declared abandoned in
favor of petitioner.

Meanwhile, petitioner shipped the payloader to

Manila where it was weighed at the San Miguel
Corporation. Finding that the payloader
weighed 7.5 tons and not 2.5 tons as declared
in the B-111 of Lading, petitioner denied the
claim for damages of Consolidated Construction
in its letter dated October 7, 1964, contending
that had Vicente E. Concepcion declared the
actual weight of the payloader, damage to their
ship as well as to his payloader could have
been prevented. 6
To
replace
the
damaged
payloader,
Consolidated Construction in the meantime
bought a new one at P45,000.00 from
Bormaheco Inc. on December 3, 1964, and on
July 6, 1965., Vicente E. Concepcion filed an
action for damages against petitioner with the
then Court of First Instance of Manila, Branch
VII, docketed as Civil Case No. 61551, seeking
to recover damages in the amount of
P41,225.00 allegedly suffered for the period of
97 days that he was not able to employ a
payloader in the construction job at the rate of
P450.00 a day; P34,000.00 representing the
cost of the damaged payloader; Pl 1, 000. 00
representing the difference between the cost of
the damaged payloader and that of the new
payloader; P20,000.00 representing the losses
suffered by him due to the diversion of funds to
enable him to buy a new payloader; P10,000.00

The facts of the case are as follows:

Private respondent Vicente E. Concepcion, a
civil engineer doing business under the name
and style of Consolidated Construction with
office address at Room 412, Don Santiago
Bldg., Taft Avenue, Manila, had a contract with
the Civil Aeronautics Administration (CAA)
sometime in 1964 for the construction of the
airport in Cagayan de Oro City Misamis
Oriental.
Being a Manila based contractor, Vicente E.
Concepcion had to ship his construction
equipment to Cagayan de Oro City. Having
shipped some of his equipment through
petitioner and having settled the balance of
P2,628.77 with respect to said shipment,

as attorney's fees; P5,000.00 as exemplary

damages; and cost of the suit. 7

Petitioner claims absolute exemption under this

provision upon the reasoning that private
respondent's act of furnishing it with an
inaccurate weight of the payloader constitutes
misrepresentation within the meaning of "act or
omission of the shipper or owner of the goods"
under the above- quoted article. It likewise
faults the respondent Court of Appeals for
reversing the decision of the trial court
notwithstanding that said appellate court also
found that by representing the weight of the
payloader to be only 2.5 tons, private
respondent had led petitioner's officer to
believe that the same was within the 5 tons
capacity of the heel block of Hatch No. 2.
Petitioner would thus insist that the proximate
and only cause of the damage to the payloader
was
private
respondent's
alleged
misrepresentation of the weight of the
machinery in question; hence, any resultant
damage to it must be borne by private
respondent Vicente E. Concepcion.

After trial, the then Court of First Instance of

Manila, Branch VII, dismissed on April 24, 1968
the complaint with costs against therein
plaintiff, herein private respondent Vicente E.
Concepcion, stating that the proximate cause
of the fall of the payloader was Vicente E.
Concepcion's act or omission in having
misrepresented the weight of the payloader as
2.5 tons instead of its true weight of 7.5 tons,
which underdeclaration was intended to
defraud Compaia Maritima of the payment of
the freight charges and which likewise led the
Chief Officer of the vessel to use the heel block
of hatch No. 2 in unloading the payloader. 8
From the adverse decision against him, Vicente
E. Concepcion appealed to the Court of Appeals
which, on December 5, 1965 rendered a
decision, the dispositive portion of which reads:

The general rule under Articles 1735 and 1752

of the Civil Code is that common carriers are
presumed to have been at fault or to have
acted negligently in case the goods transported
by them are lost, destroyed or had
deteriorated. To overcome the presumption of
liability for the loss, destruction or deterioration
of the goods under Article 1735, the common
carriers must prove that they observed
extraordinary diligence as required in Article
1733 of the Civil Code. The responsibility of
observing extraordinary diligence in the
vigilance over the goods is further expressed in
Article 1734 of the same Code, the article
invoked by petitioner to avoid liability for
damages.

IN VIEW WHEREOF, judgment

must have to be as it is hereby
reversed;
defendant
is
condemned to pay unto plaintiff
the
sum
in
damages
of
P24,652.07 with legal interest
from the date the present
decision shall have become final;
the
payloader
is
declared
abandoned to defendant; costs
against the latter. 9
Hence, the instant petition.
The principal issue in the instant case is
whether or not the act of private respondent
Vicente E. Concepcion in furnishing petitioner
Compaia Maritima with an inaccurate weight
of 2.5 tons instead of the payloader's actual
weight of 7.5 tons was the proximate and only
cause of the damage on the Oliver Payloader
OC-12 when it fell while being unloaded by
petitioner's crew, as would absolutely exempt
petitioner from liability for damages under
paragraph 3 of Article 1734 of the Civil Code,
which provides:

Corollary is the rule that mere proof of delivery

of the goods in good order to a common carrier,
and of their arrival at the place of destination in
bad order, makes out prima facie case against
the common carrier, so that if no explanation is
given as to how the loss, deterioration or
destruction of the goods occurred, the common
carrier must be held responsible. 10 Otherwise
stated, it is incumbent upon the common
carrier to prove that the loss, deterioration or
destruction was due to accident or some other
circumstances inconsistent with its liability.

Art. 1734. Common carriers are

responsible
for
the
loss,
destruction, or deterioration of
the goods, unless the same is
due to any of the following
causes only:

In the instant case, We are not persuaded by

the proferred explanation of petitioner alleged
to be the proximate cause of the fall of the
payloader while it was being unloaded at the
Cagayan de Oro City pier. Petitioner seems to
have overlooked the extraordinary diligence
required of common carriers in the vigilance
over the goods transported by them by virtue
of the nature of their business, which is
impressed with a special public duty.

xxx xxx xxx

(3) Act or omission of the shipper
or owner of the goods.

Thus, Article 1733 of the Civil Code provides:

It must be noted that the weight submitted by

private respondent Concepcion appearing at
the left-hand portion of Exhibit 8 12 as an
addendum to the original enumeration of
equipment to be shipped was entered into the
bill of lading by petitioner, thru Pacifico
Fernandez, a company collector, without seeing
the equipment to be shipped. 13 Mr. Mariano
Gupana, assistant traffic manager of petitioner,
confirmed in his testimony that the company
never checked the information entered in the
bill of lading. 14 Worse, the weight of the
payloader as entered in the bill of lading was
assumed to be correct by Mr. Felix Pisang, Chief
Officer of MV Cebu. 15

Art. 1733. Common carriers, from

the nature of their business and
for reason of public policy, are
bound to observe extraordinary
diligence in the vigilance over
the goods and for the safety of
the passengers transported by
them according to all the
circumstances of each case.
Such extraordinary diligence in
the vigilance over the goods is
further expressed in Articles
1734, 1735 and 1745, Nos. 5, 6
and 7, ...

The weights stated in a bill of lading are prima

facie evidence of the amount received and the
fact that the weighing was done by another will
not relieve the common carrier where it
accepted such weight and entered it on the bill
of lading. 16 Besides, common carriers can
protect themselves against mistakes in the bill
of lading as to weight by exercising diligence
before issuing the same. 17

The extraordinary diligence in the vigilance

over the goods tendered for shipment requires
the common carrier to know and to follow the
required precaution for avoiding damage to, or
destruction of the goods entrusted to it for safe
carriage and delivery. It requires common
carriers to render service with the greatest skill
and foresight and "to use all reasonable means
to ascertain the nature and characteristic of
goods tendered for shipment, and to exercise
due care in the handling and stowage including
such
methods
as
their
nature
requires." 11 Under Article 1736 of the Civil
Code,
the
responsibility
to
observe
extraordinary diligence commences and lasts
from the time the goods are unconditionally
placed in the possession of, and received by
the carrier for transportation until the same are
delivered, actually or constructively, by the
carrier to the consignee, or to the person who
has the right to receive them without prejudice
to the provisions of Article 1738.

While petitioner has proven that private

respondent Concepcion did furnish it with an
inaccurate weight of the payloader, petitioner
is nonetheless liable, for the damage caused to
the machinery could have been avoided by the
exercise of reasonable skill and attention on its
part in overseeing the unloading of such a
heavy equipment. And circumstances clearly
show that the fall of the payloader could have
been avoided by petitioner's crew. Evidence on
record sufficiently show that the crew of
petitioner
had
been
negligent
in
the
performance of its obligation by reason of their
having failed to take the necessary precaution
under the circumstances which usage has
established among careful persons, more
particularly its Chief Officer, Mr. Felix Pisang,
who is tasked with the over-all supervision of
loading and unloading heavy cargoes and upon
whom rests the burden of deciding as to what
particular winch the unloading of the payloader
should be undertaken. 18 While it was his duty
to determine the weight of heavy cargoes
before accepting them. Mr. Felix Pisang took
the bill of lading on its face value and
presumed the same to be correct by merely
"seeing" it. 19 Acknowledging that there was a
"jumbo" in the MV Cebu which has the capacity
of lifting 20 to 25 ton cargoes, Mr. Felix Pisang
chose not to use it, because according to him,
since the ordinary boom has a capacity of 5
tons while the payloader was only 2.5 tons, he
did not bother to use the "jumbo" anymore. 20

Where, as in the instant case, petitioner, upon

the testimonies of its own crew, failed to take
the necessary and adequate precautions for
avoiding damage to, or destruction of, the
payloader entrusted to it for safe carriage and
delivery to Cagayan de Oro City, it cannot be
reasonably concluded that the damage caused
to the payloader was due to the alleged
misrepresentation
of
private
respondent
Concepcion as to the correct and accurate
weight of the payloader. As found by the
respondent Court of Appeals, the fact is that
petitioner used a 5-ton capacity lifting
apparatus to lift and unload a visibly heavy
cargo like a payloader. Private respondent has,
likewise, sufficiently established the laxity and
carelessness of petitioner's crew in their
methods of ascertaining the weight of heavy
cargoes offered for shipment before loading
and unloading them, as is customary among
careful persons.

In that sense, therefore, private respondent's

act of furnishing petitioner with an inaccurate
weight of the payloader upon being asked by
petitioner's collector, cannot be used by said

petitioner as an excuse to avoid liability for the

damage caused, as the same could have been
avoided had petitioner utilized the "jumbo"
lifting apparatus which has a capacity of lifting
20 to 25 tons of heavy cargoes. It is a fact
known to the Chief Officer of MV Cebu that the
payloader was loaded aboard the MV Cebu at
the Manila North Harbor on August 28, 1964 by
means of a terminal crane. 21 Even if petitioner
chose not to take the necessary precaution to
avoid damage by checking the correct weight
of the payloader, extraordinary care and
diligence compel the use of the "jumbo" lifting
apparatus as the most prudent course for
petitioner.

delayed and that in spite of his demands,

petitioner failed to take any steps to settle his
valid, just and demandable claim for damages.
We find private respondent's submission
erroneous. It is well- settled that an appellee,
who is not an appellant, may assign errors in
his brief where his purpose is to maintain the
judgment on other grounds, but he may not do
so if his purpose is to have the judgment
modified or reversed, for, in such case, he must
appeal. 22 Since private respondent did not
appeal from the judgment insofar as it limited
the award of damages due him, the reduction
of 20% or 1/5 of the value of the payloader
stands.

While the act of private respondent in

furnishing petitioner with an inaccurate weight
of the payloader cannot successfully be used as
an excuse by petitioner to avoid liability to the
damage thus caused, said act constitutes a
contributory circumstance to the damage
caused on the payloader, which mitigates the
liability for damages of petitioner in accordance
with Article 1741 of the Civil Code, to wit:

WHEREFORE, in view of the foregoing, the

petition is DENIED. The decision of the Court of
Appeals is hereby AFFIRMED in all respects with
costs against petitioner. In view of the length of
time this case has been pending, this decision
is immediately executory.
G.R. No. L-9671

Art. 1741. If the shipper or owner

merely contributed to the loss,
destruction or deterioration of
the goods, the proximate cause
thereof being the negligence of
the common carrier, the latter
shall be liable in damages, which
however, shall be equitably
reduced.

August 23, 1957

CESAR
L.
ISAAC, plaintiff-appellant,
vs.
A. L. AMMEN TRANSPORTATION CO.,
INC., defendant-appellee.
Angel
S.
Gamboa
for
Manuel O. Chan for appellee.

appellant.

BAUTISTA ANGELO, J.:

We find equitable the conclusion of the Court of

Appeals reducing the recoverable amount of
damages by 20% or 1/5 of the value of the
payloader, which at the time the instant case
arose, was valued at P34,000. 00, thereby
reducing the recoverable amount at 80% or 4/5
of P34,000.00 or the sum of P27,200.00.
Considering that the freight charges for the
entire cargoes shipped by private respondent
amounting to P2,318.40 remained unpaid.. the
same would be deducted from the P27,000.00
plus an additional deduction of P228.63
representing the freight charges for the
undeclared weight of 5 tons (difference
between 7.5 and 2.5 tons) leaving, therefore, a
final recoverable amount of damages of
P24,652.97
due
to
private
respondent
Concepcion.

A. L. Ammen Transportation Co., Inc.,

hereinafter referred to as defendant, is a
corporation engaged in the business of
transporting
passengers
by
land
for
compensation in the Bicol provinces and one of
the lines it operates is the one connecting
Legaspi City, Albay with Naga City, Camarines
Sur. One of the buses which defendant was
operating is Bus No. 31. On May 31, 1951,
plaintiff boarded said bus as a passenger
paying the required fare from Ligao, Albay
bound for Pili, Camarines Sur, but before
reaching his destination, the bus collided with a
motor vehicle of the pick-up type coming from
the opposite direction, as a result of which
plaintiff's left arm was completely severed and
the severed portion fell inside the bus. Plaintiff
was rushed to a hospital in Iriga, Camarines Sur
where he was given blood transfusion to save
his life. After four days, he was transferred to
another hospital in Tabaco, Albay, where he
under went treatment for three months. He was
moved later to the Orthopedic Hospital where
he was operated on and stayed there for
another two months. For these services, he
incurred expenses amounting to P623.40,

Notwithstanding the favorable judgment in his

favor, private respondent assailed the Court of
Appeals' decision insofar as it limited the
damages due him to only P24,652.97 and the
cost of the suit. Invoking the provisions on
damages under the Civil Code, more
particularly Articles 2200 and 2208, private
respondent further seeks additional damages
allegedly because the construction project was

excluding medical fees which were paid by

defendant.

mind, appellant seems to imply that once the

contract of carriage is established and there is
proof that the same was broken by failure of
the carrier to transport the passenger safely to
his destination, the liability of the former
attaches. On the other hand, appellee claims
that is a wrong presentation of the rule. It
claims that the decisions of this Court in the
cases cited do not warrant the construction
sought to be placed upon, them by appellant
for a mere perusal thereof would show that the
liability of the carrier was predicated not upon
mere breach of its contract of carriage but
upon the finding that its negligence was found
to be the direct or proximate cause of the injury
complained of. Thus, appellee contends that "if
there is no negligence on the part of the
common carrier but that the accident resulting
in injuries is due to causes which are inevitable
and which could not have been avoided or
anticipated notwithstanding the exercise of that
high degree of care and skill which the carrier is
bound to exercise for the safety of his
passengers", neither the common carrier nor
the driver is liable therefor.

As an aftermath, plaintiff brought this action

against defendants for damages alleging that
the collision which resulted in the loss of his left
arm was mainly due to the gross incompetence
and recklessness of the driver of the bus
operated by defendant and that defendant
incurred in culpa contractual arising from its
non-compliance with its obligation to transport
plaintiff safely to his, destination. Plaintiff prays
for judgment against defendant as follows: (1)
P5,000 as expenses for his medical treatment,
and P3,000 as the cost of an artificial arm, or a
total of P8,000; (2) P6,000 representing loss of
earning; (3) P75,000 for diminution of his
earning capacity; (4) P50,000 as moral
damages; and (5) P10,000 as attorneys' fees
and costs of suit.
Defendant set up as special defense that the
injury suffered by plaintiff was due entirely to
the fault or negligence of the driver of the pickup car which collided with the bus driven by its
driver and to the contributory negligence of
plaintiff himself. Defendant further claims that
the accident which resulted in the injury of
plaintiff is one which defendant could not
foresee or, though foreseen, was inevitable.

We believe that the law concerning the liability

of a common carrier has now suffered a
substantial modification in view of the
innovations introduced by the new Civil Code.
These innovations are the ones embodied in
Articles 1733, 1755 and 1756 in so far as the
relation between a common carrier and its
passengers is concerned, which, for ready
reference, we quote hereunder:

The after trial found that the collision occurred

due to the negligence of the driver of the pickup car and not to that of the driver of the bus it
appearing that the latter did everything he
could
to
avoid
the
same
but
that
notwithstanding his efforts, he was not able to
avoid it. As a consequence, the court dismissed
complaint, with costs against plaintiff. This is an
appeal from said decision.

ART. 1733. Common carriers, from the

nature of their business and for reasons
of public policy, are bound to observe
extra ordinary diligence in the vigilance
over the goods and for the safety of the
passengers
transported
by
them
according to all the circumstances of
each case.

It appears that plaintiff boarded a bus of

defendant as paying passenger from Ligao,
Albay, bound for Pili, Camarines Sur, but before
reaching his destination, the bus collided with a
pick-up car which was coming from the
opposite direction and, as a, result, his left arm
was completely severed and fell inside the back
part of the bus. Having this background in view,
and considering that plaintiff chose to hold
defendant liable on its contractual obligation to
carry him safely to his place of destination, it
becomes important to determine the nature
and extent of the liability of a common carrier
to a passenger in the light of the law applicable
in this jurisdiction.

Such extraordinary diligence in the

vigilance over the goods is further
expressed in articles 1734, 1735, and
1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of
the passengers is further set forth in
articles 1755 and 1756.
ART. 1755. A common carrier is bound to
carry the passengers safely as far as
human care and foresight can provide,
using the utmost diligence of very
cautious persons, with a due regard for
all the circumstances.

In this connection, appellant invokes the rule

that, "when an action is based on a contract of
carriage, as in this case, all that is necessary to
sustain recovery is proof of the existence of the
contract of the breach thereof by act or
omission", and in support thereof, he cites
several Philippine cases.1 With the ruling in

ART. 1756. In case of death of or injuries

to passengers, common carriers are
presumed to have been at fault or to
have acted negligently, unless they

prove that they observed extraordinary

diligence as prescribed in articles 1733
and 1755.

EI hecho de que el demandado, antes

del choque, tuvo que hacer pasar su
truck encima de los montones de grava
que estaban depositados en la orilla del
camino, sin que haya ido mas alla, por
el grave riesgo que corrian las vidas de
sus pasajeros, es prueba concluyente de
lo que tenemos dicho, a saber: que el
cuanto esuba de su parte, para evitar el
accidente, sin que haya podidoevitardo,
por estar fuera de su control.

The Code Commission, in justifying this

extraordinary diligence required of a common
carrier, says the following:
A common carrier is bound to carry the
passengers safely as far as human care
and foresight can provide, using the
utmost deligence of very cautions
persons, with due regard for all
circumstances.
This
extraordinary
diligence required of common carriers is
calculated to protect the passengers
from the tragic mishaps that frequently
occur in connection with rapid modern
transportation. This high standard of
care is imperatively demanded by the
precariousness of human life and by the
consideration that every person must in
every way be safeguarded against all
injury. (Report of the Code Commission,
pp. 35-36)" (Padilla, Civil Code of the
Philippines, Vol. IV, 1956 ed., p. 197).

The evidence would appear to support the

above finding. Thus, it appears that Bus No. 31,
immediately prior to the collision, was running
at a moderate speed because it had just
stopped at the school zone of Matacong,
Polangui, Albay. The pick-up car was at full
speed and was running outside of its proper
lane. The driver of the bus, upon seeing the
manner in which the pick-up was then running,
swerved the bus to the very extreme right of
the road until its front and rear wheels have
gone over the pile of stones or gravel situated
on the rampart of the road. Said driver could
not move the bus farther right and run over a
greater portion of the pile, the peak of which
was about 3 feet high, without endangering the
safety of his passengers. And notwithstanding
all these efforts, the rear left side of the bus
was hit by the pick-up car.

From the above legal provisions, we can make

the following restatement of the principles
governing the liability of a common carrier: (1)
the liability of a carrier is contractual and arises
upon breach of its obligation. There is breach if
it fails to exert extraordinary diligence
according to all circumstances of each case; (2)
a carrier is obliged to carry its passenger with
the utmost diligence of a very cautious person,
having due regard for all the circumstances; (3)
a carrier is presumed to be at fault or to have
acted negligently in case of death of, or injury
to, passengers, it being its duty to prove that it
exercised extraordinary diligence; and (4) the
carrier is not an insurer against all risks of
travel.

Of course, this finding is disputed by appellant

who cannot see eye to eye with the evidence
for the appellee and insists that the collision
took place because the driver of the bus was
going at a fast speed. He contends that, having
seen that a car was coming from the opposite
direction at a distance which allows the use of
moderate care and prudence to avoid an
accident, and knowing that on the side of the
road along which he was going there was a pile
of gravel, the driver of the bus should have
stopped and waited for the vehicle from the
opposite direction to pass, and should have
proceeded only after the other vehicle had
passed. In other words, according to appellant,
the act of the driver of the bus in squeezing his
way through of the bus in squeezing his way
through between the oncoming pick-up and the
pile of gravel under the circumstances was
considered negligent.

The question that now arises is: Has defendant

observed extraordinary diligence or the utmost
diligence of every cautious person, having due
regard for all circumstances, in avoiding the
collision which resulted in the injury caused to
the plaintiff?
After examining the evidence in connection
with how the collision occurred, the lower court
made the following finding:

But this matter is one of credibility and

evaluation of the evidence. This is evidence.
This is the function of the trial court. The trial
court has already spoken on this matter as we
have pointed out above. This is also a matter of
appreciation of the situation on the part of the
driver. While the position taken by appellant
appeals more to the sense of caution that one
should observe in a given situation to avoid an
accident or mishap, such however can not
always be expected from one who is placed

Hemos examinado muy detenidamente

las pruebas presentadas en la vista,
principalmente, las declaraciones que
hemos acotado arriba, y hernos Ilegado
a la conclusion de que el demandado ha
hecho, todo cuanto estuviere de su
parte para evitar el accidente, pero sin
embargo, no ha podido evitarlo.

10

suddenly in a predicament where he is not

given enough time to take the course of action
as he should under ordinary circumstances.
One who is placed in such a predicament
cannot exercise such coolness or accuracy of
judgment as is required of him under ordinary
circumstances and he cannot therefore be
expected to observe the same judgment, care
and precaution as in the latter. For this reason,
authorities abound where failure to observe the
same degree of care that as ordinary prudent
man
would
exercise
under
ordinary
circumstances when confronted with a sadden
emergency was held to be warranted and a
justification to exempt the carrier from liability.
Thus, it was held that "where a carrier's
employee is confronted with a sudden
emergency, the fact that he is obliged to act
quickly and without a chance for deliberation
must be taken into account, and he is held to
the some degree of care that he would
otherwise be required to exercise in the
absence of such emergency but must exercise
only such care as any ordinary prudent person
would exercise under like circumstances and
conditions, and the failure on his part to
exercise the best judgement the case renders
possible does not establish lack of care and skill
on his part which renders the company, liable. .
. . (13 C. J. S., 1412; 10 C. J.,970). Considering
all the circumstances, we are persuaded to
conclude that the driver of the bus has done
what a prudent man could have done to avoid
the collision and in our opinion this relieves
appellee from legibility under our law.

railroad voluntarily or inadvertently to

protrude his arm, hand, elbow, or any
other part of his body through the
window of a moving car beyond the
outer edge of the window or outer
surface of the car, so as to come in
contact with objects or obstacles near
the track, and that no recovery can be
had for an injury which but for such
negligence would not have been
sustained. (10 C. J. 1139)
Plaintiff, (passenger) while riding on an
interurban car, to flick the ashes, from
his cigar, thrust his hand over the guard
rail a sufficient distance beyond the side
line of the car to bring it in contact with
the trunk of a tree standing beside the
track; the force of the blow breaking his
wrist. Held, that he was guilty of
contributory negligence as a matter of
law. (Malakia vs. Rhode Island Co., 89 A.,
337.)
Wherefore, the decision appealed
affirmed, with cost against appellant.
G.R. No. 153563

from

is

February 07, 2005

NATIONAL TRUCKING AND FORWARDING

CORPORATION, petitioner,
vs.
LORENZO
SHIPPING
CORPORATION, Respondent.

A circumstances which miliates against the

stand of appellant is the fact borne out by the
evidence that when he boarded the bus in
question, he seated himself on the left side
thereof resting his left arm on the window sill
but with his left elbow outside the window, this
being his position in the bus when the collision
took place. It is for this reason that the collision
resulted in the severance of said left arm from
the body of appellant thus doing him a great
damage. It is therefore apparent that appellant
is guilty of contributory negligence. Had he not
placed his left arm on the window sill with a
portion thereof protruding outside, perhaps the
injury would have been avoided as is the case
with the other passenger. It is to be noted that
appellant was the only victim of the collision.

DECISION

It is true that such contributory negligence

cannot relieve appellee of its liability but will
only entitle it to a reduction of the amount of
damage caused (Article 1762, new Civil Code),
but this is a circumstance which further
militates against the position taken by
appellant in this case.

On June 5, 1987, the Republic of the

Philippines, through the Department of Health
(DOH), and the Cooperative for American Relief
Everywhere, Inc. (CARE) signed an agreement
wherein CARE would acquire from the United
States government donations of non-fat dried
milk and other food products from January 1,
1987 to December 31, 1989. In turn, the
Philippines would transport and distribute the

QUISUMBING, J.:
For
review
on certiorari are
the Decision1 dated January 16, 2002, of the
Court of Appeals, in CA-G.R. CV No. 48349, and
its Resolution,2 of May 13, 2002, denying the
motion for reconsideration of herein petitioner
National Trucking and Forwarding Corporation
(NTFC). The impugned decision affirmed in
toto the judgment3 dated November 14, 1994
of the Regional Trial Court (RTC) of Manila,
Branch 53, in Civil Case No. 90-52102.
The undisputed facts, as summarized by the
appellate court, are as follows:

It is the prevailing rule that it is

negligence per se for a passenger on a

11

donated
commodities
to
beneficiaries in the country.

the

intended

in the amount ofP70,000.00, plus the costs of

suit.
SO ORDERED.5

The government entered into a contract of

carriage of goods with herein petitioner
National Trucking and Forwarding Corporation
(NTFC). Thus, the latter shipped 4,868 bags of
non-fat dried milk through herein respondent
Lorenzo Shipping Corporation (LSC) from
September to December 1988. The consignee
named in the bills of lading issued by the
respondent was Abdurahman Jama, petitioners
branch supervisor in Zamboanga City.

Dissatisfied with the foregoing ruling, herein

petitioner appealed to the Court of Appeals. It
faulted the lower court for not holding that
respondent failed to deliver the cargo, and that
respondent failed to exercise the extraordinary
diligence
required
of common
carriers.
Petitioner also assailed the lower court for
denying its claims for actual, moral, and
exemplary damages, and for awarding actual
damages
and
attorneys
fees
to
the
respondent.6

On reaching the port of Zamboanga City,

respondents agent, Efren Ruste4 Shipping
Agency, unloaded the 4,868 bags of non-fat
dried milk and delivered the goods to
petitioners warehouse. Before each delivery,
Rogelio Rizada and Ismael Zamora, both
delivery checkers of Efren Ruste Shipping
Agency, requested Abdurahman to surrender
the original bills of lading, but the latter merely
presented certified true copies thereof. Upon
completion of each delivery, Rogelio and Ismael
asked Abdurahman to sign the delivery
receipts. However, at times when Abdurahman
had to attend to other business before a
delivery was completed, he instructed his
subordinates to sign the delivery receipts for
him.

The Court of Appeals found that the trial court

did not commit any reversible error. It
dismissed the appeal, and affirmed the assailed
decision in toto.
Undaunted, petitioner now
assigning the following errors:

comes

to

us,

I
THE COURT OF APPEALS GRAVELY ERRED WHEN
IT FAILED TO APPRECIATE AND APPLY THE
LEGAL
STANDARD
OF
EXTRAORDINARY
DILIGENCE IN THE SHIPMENT AND DELIVERY OF
GOODS TO THE RESPONDENT AS A COMMON
CARRIER, AS WELL AS THE ACCOMPANYING
LEGAL
PRESUMPTION
OF
FAULT
OR
NEGLIGENCE ON THE PART OF THE COMMON
CARRIER,
IF
THE
GOODS
ARE
LOST,
DESTROYED OR DETERIORATED, AS REQUIRED
UNDER THE CIVIL CODE.

Notwithstanding the precautions taken, the

petitioner allegedly did not receive the subject
goods. Thus, in a letter dated March 11, 1989,
petitioner NTFC filed a formal claim for nondelivery of the goods shipped through
respondent.
In its letter of April 26, 1989, the respondent
explained that the cargo had already been
delivered to Abdurahman Jama. The petitioner
then decided to investigate the loss of the
goods. But before the investigation was over,
Abdurahman
Jama
resigned
as
branch
supervisor of petitioner.

II
THE COURT OF APPEALS GRAVELY ERRED WHEN
IT SUSTAINED THE BASELESS AND ARBITRARY
AWARD OF ACTUAL DAMAGES AND ATTORNEYS
FEES INASMUCH AS THE ORIGINAL COMPLAINT
WAS FILED IN GOOD FAITH, WITHOUT MALICE
AND
WITH
THE
BEST
INTENTION
OF
PROTECTING THE INTEREST AND INTEGRITY OF
THE GOVERNMENT AND ITS CREDIBILITY AND
RELATIONSHIP WITH INTERNATIONAL RELIEF
AGENCIES
AND
DONOR
STATES
AND
ORGANIZATION.7

Noting but disbelieving respondents insistence

that the goods were delivered, the government
through the DOH, CARE, and NTFC as plaintiffs
filed an action for breach of contract of
carriage, against respondent as defendant, with
the RTC of Manila.

The issues for our resolution are: (1) Is

respondent presumed at fault or negligent as
common carrier for the loss or deterioration of
the goods? and (2) Are damages and attorneys
fees due respondent?

After trial, the RTC resolved the case as follows:

WHEREFORE, judgment is hereby rendered in
favor of the defendant and against the
plaintiffs, dismissing the latters complaint, and
ordering the plaintiffs, pursuant to the
defendants counterclaim, to pay, jointly and
solidarily, to the defendant, actual damages in
the amount of P50,000.00, and attorneys fees

Anent the first issue, petitioner contends

the respondent is presumed negligent
liable for failure to abide by the terms
conditions of the bills of lading;

12

that
and
and
that

Abdurahman Jamas failure to testify should not

be held against petitioner; and that the
testimonies of Rogelio Rizada and Ismael
Zamora, as employees of respondents agent,
Efren Ruste Shipping Agency, were biased and
could not overturn the legal presumption of
respondents fault or negligence.

be returned to him, and by virtue of the

exchange of this title with the thing
transported, the respective obligations and
actions shall be considered cancelled, .
In case the consignee, upon receiving the
goods, cannot return the bill of lading
subscribed by the carrier, because of its
loss or of any other cause, he must give
the latter a receipt for the goods
delivered, this receipt producing the same
effects as the return of the bill of lading.
(Emphasis supplied)

For its part, the respondent avers that it

observed extraordinary diligence in the delivery
of the goods. Prior to releasing the goods to
Abdurahman, Rogelio and Ismael required the
surrender of the original bills of lading, and in
their absence, the certified true copies showing
that Abdurahman was indeed the consignee of
the goods. In addition, they required
Abdurahman or his designated subordinates to
sign the delivery receipts upon completion of
each delivery.

Conformably with the aforecited provision, the

surrender of the original bill of lading is not a
condition precedent for a common carrier to be
discharged of its contractual obligation. If
surrender of the original bill of lading is not
possible, acknowledgment of the delivery by
signing the delivery receipt suffices. This is
what respondent did.

We rule for respondent.

Article 17338 of the Civil Code demands that a
common
carrier
observe
extraordinary
diligence over the goods transported by it.
Extraordinary diligence is that extreme
measure of care and caution which persons of
unusual prudence and circumspection use for
securing and preserving their own property or
rights.9 This exacting standard imposed on
common carriers in a contract of carriage of
goods is intended to tilt the scales in favor of
the shipper who is at the mercy of the common
carrier once the goods have been lodged for
shipment. Hence, in case of loss of goods in
transit, the common carrier is presumed under
the
law
to have
been
at
fault
or
negligent.10 However, the presumption of fault
or negligence, may be overturned by
competent evidence showing that the common
carrier has observed extraordinary diligence
over the goods.

We also note that some delivery receipts were

signed by Abdurahmans subordinates and not
by Abdurahman himself as consignee. Further,
delivery checkers Rogelio and Ismael testified
that Abdurahman was always present at the
initial phase of each delivery, although on the
few occasions when Abdurahman could not
stay to witness the complete delivery of the
shipment, he authorized his subordinates to
sign the delivery receipts for him. This, to our
mind, is sufficient and substantial compliance
with the requirements.
We further note that, strangely, petitioner
made no effort to disapprove Abdurahmans
resignation until after the investigation and
after he was cleared of any responsibility for
the loss of the goods. With Abdurahman
outside of its reach, petitioner cannot now pass
to respondent what could be Abdurahmans
negligence, if indeed he were responsible.

In the instant case, we agree with the court a

quo that the respondent adequately proved
that it exercised extraordinary diligence.
Although the original bills of lading remained
with petitioner, respondents agents demanded
from Abdurahman the certified true copies of
the bills of lading. They also asked the latter
and
in
his
absence,
his
designated
subordinates, to sign the cargo delivery
receipts.

On the second issue, petitioner submits there is

no basis for the award of actual damages and
attorneys fees. It maintains that its original
complaint for sum of money with damages for
breach of contract of carriage was not
fraudulent, in bad faith, nor malicious. Neither
was the institution of the action rash nor
precipitate. Petitioner avers the filing of the
action was intended to protect the integrity and
interest of the government and its relationship
and credibility with international relief agencies
and donor states.

This practice, which respondents agents

testified to be their standard operating
procedure, finds support in Article 353 of the
Code of Commerce:

On the other hand, respondent maintains that

petitioners suit was baseless and malicious
because instead of going after its absconding
employee, petitioner wanted to recoup its
losses from respondent. The trial court and the

ART. 353. . . .
After the contract has been complied with, the
bill of lading which the carrier has issued shall

13

Court of Appeals were justified in granting

actual damages and reasonable attorneys fees
to respondent.

This Petition for Review asks us to set aside the

Decision of the then Intermediate Appellate
Court dated 30 January 1985 in A.C.-G.R. CV
No. 01454, which affirmed in toto the decision
of the Regional Trial Court ("RTC") of Dagupan
City in Civil Case No. 5206. There, the RTC held
petitioner Ma. Luisa Benedicto liable to pay
private respondent Greenhills Wood Industries
Company, Inc. ("Greenhills") the amounts of
P16,016.00 and P2,000.00 representing the
cost of Greenhills' lost sawn lumber and
attorney's fees, respectively.

On this point, we agree with petitioner.

The right to litigate should bear no premium.
An adverse decision does not ipso facto justify
an award of attorneys fees to the winning
party.11 When, as in the instant case, petitioner
was compelled to sue to protect the credibility
of
the
government
with
international
organizations, we are not inclined to grant
attorneys fees. We find no ill motive on
petitioners part, only an erroneous belief in the
righteousness of its claim.

Private respondent Greenhills, a lumber

manufacturing firm with business address at
Dagupan City, operates sawmill in Maddela,
Quirino.

Moreover, an award of attorneys fees, in the

concept of damages under Article 2208 of the
Civil
Code,12 requires
factual
and
legal
justifications. While the law allows some degree
of discretion on the part of the courts in
awarding attorneys fees and expenses of
litigation, the discretion must be exercised with
great care approximating as closely as possible,
the instances exemplified by the law. 13 We have
searched but found nothing in petitioners suit
that justifies the award of attorneys fees.

Sometime in May 1980, private respondent

bound itself to sell and deliver to Blue Star
Mahogany, Inc., ("Blue Star") a company with
business operations in Valenzuela, Bulacan
100,000 board feet of sawn lumber with the
understanding that an initial delivery would be
made on 15 May 1980. 1 To effect its first
delivery,
private
respondent's
resident
manager
in
Maddela,
Dominador
Cruz,
contracted Virgilio Licuden, the driver of a
cargo truck bearing Plate No. 225 GA TH to
transport its sawn lumber to the consignee Blue
Star in Valenzuela, Bulacan. This cargo truck
was registered in the name of petitioner Ma.
Luisa Benedicto, the proprietor of Macoven
Trucking, a business enterprise engaged in
hauling freight, with main office in B.F. Homes,
Paraaque.

Respondent failed to show proof of actual

pecuniary loss, hence, no actual damages are
due in favor of respondent.14
WHEREFORE, the petition is PARTIALLY
GRANTED. The assailed decision and resolution
of the Court of Appeals in CA-G.R. CV No. 48349
dated January 16, 2002 and May 13, 2002
respectively, denying petitioners claim for
actual, moral and exemplary damages are
AFFIRMED. The award of actual damages and
attorneys fees to respondent pursuant to the
latters counterclaim in the trial court is
DELETED.

On 15 May 1980, Cruz in the presence and with

the consent of driver Licuden, supervised the
loading of 7,690 board feet of sawn lumber
with invoice value of P16,918.00 aboard the
cargo truck. Before the cargo truck left Maddela
for Valenzuela, Bulacan, Cruz issued to Licuden
Charge Invoices Nos. 3259 and 3260 both of
which were initialed by the latter at the bottom
left corner. 2 The first invoice was for the
amount of P11,822.80 representing the value of
5,374 board feet of sawn lumber, while the
other set out the amount of P5,095.20 as the
value of 2,316 board feet. Cruz instructed
Licuden to give the original copies of the two
(2) invoices to the consignee upon arrival in
Valenzuela,
Bulacan 3and
to
retain
the
duplicate copies in order that he could
afterwards claim the freightage from private
respondent's Manila office. 4

G.R. No. 70876 July 19, 1990

MA.
LUISA
BENEDICTO, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT
and
GREENHILLS
WOOD
INDUSTRIES
COMPANY, INC.respondents.
Britanico,
Panganiban,
Benitez,
Linsangan and Barinaga for petitioner.

Africa,

Abelardo V. Viray for private respondent.

On 16 May 1980, the Manager of Blue Star

called up by long distance telephone Greenhills'
president, Henry Lee Chuy, informing him that
the sawn lumber on board the subject cargo
truck had not yet arrived in Valenzuela,
Bulacan. The latter in turn informed Greenhills'
resident manager in its Maddela saw-mill of

FELICIANO, J.:

14

what had happened. In a letter 5 dated 18 May

1980, Blue Star's administrative and personnel
manager, Manuel R. Bautista, formally informed
Greenhills' president and general manager that
Blue Star still had not received the sawn
lumber which was supposed to arrive on 15
May 1980 and because of this delay, "they
were constrained to look for other suppliers."

subject vehicle, Licuden the driver of the truck,

was her employee, and that accordingly
petitioner should be responsible for the
negligence of said driver and bear the loss of
the sawn lumber plus damages. Petitioner
moved for reconsideration, without success. 10
In the present Petition for Review, the sole
issue raised is whether or not under the facts
and applicable law, the appellate court was
correct in finding that petitioner, being the
registered owner of the carrier, should be held
liable for the value of the undelivered or lost
sawn lumber.

On 25 June 1980, after confirming the above

with Blue Star and after trying vainly to
persuade it to continue with their contract,
private respondent Greenhill's filed Criminal
Case No. 668 against driver Licuden for estafa.
Greenhills
also
filed
against
petitioner
Benedicto Civil Case No. D-5206 for recovery of
the value of the lost sawn lumber plus
damages before the RTC of Dagupan City.

Petitioner urges that she could not be held

answerable for the loss of the cargo, because
the doctrine which makes the registered owner
of a common carrier vehicle answerable to the
public for the negligence of the driver despite
the sale of the vehicle to another person,
applies only to cases involving death of or
injury to passengers. What applies in the
present case, according to petitioner, is the rule
that a contract of carriage requires proper
delivery of the goods to and acceptance by the
carrier. Thus, petitioner contends that the
delivery to a person falsely representing
himself to be an agent of the carrier prevents
liability from attaching to the registered owner.

In her answer, 6 petitioner Benedicto denied

liability alleging that she was a complete
stranger to the contract of carriage, the subject
truck having been earlier sold by her to
Benjamin Tee, on 28 February 1980 as
evidenced by a deed of sale. 7She claimed that
the truck had remained registered in her name
notwithstanding its earlier sale to Tee because
the latter had paid her only P50,000.00 out of
the total agreed price of P68,000.00 However,
she averred that Tee had been operating the
said truck in Central Luzon from that date (28
February 1980) onwards, and that, therefore,
Licuden was Tee's employee and not hers.

The Court considers that petitioner has failed to

show that appellate court committed reversible
error in affirming the trial court's holding that
petitioner was liable for the cost of the sawn
lumber plus damages.

On 20 June 1983, based on the finding that

petitioner Benedicto was still the registered
owner of the subject truck, and holding that
Licuden was her employee, the trial court
adjudged as follows:

There is no dispute that petitioner Benedicto

has been holding herself out to the public as
engaged in the business of hauling or
transporting goods for hire or compensation.
Petitioner Benedicto is, in brief, a common
carrier.

WHEREFORE, in the light of the

foregoing considerations, this
Court hereby renders judgment
against defendant Maria Luisa
Benedicto, ordering her to pay
the Greenhills Wood Industries
Co. Inc., thru its President and
General Manager, the amount of
P16,016 cost of the sawn lumber
loaded on the cargo truck, with
legal rate of interest from the
filing of the complaint to pay
attorney's fees in the amount of
P2,000.00; and to pay the costs
of this suit.
SO ORDERED.

The prevailing doctrine on common carriers

makes the registered owner liable for
consequences flowing from the operations of
the carrier, even though the specific vehicle
involved may already have been transferred to
another person. This doctrine rests upon the
principle that in dealing with vehicles
registered under the Public Service Law, the
public has the right to assume that the
registered owner is the actual or lawful owner
thereof It would be very difficult and often
impossible as a practical matter, for members
of the general public to enforce the rights of
action that they may have for injuries inflicted
by the vehicles being negligently operated if
they should be required to prove who the
actual owner is. 11 The registered owner is not
allowed to deny liability by proving the identity
of the alleged transferee. Thus, contrary to
petitioner's claim, private respondent is not

On 30 January 1985, upon appeal by petitioner,

the Intermediate Appellate Court affirmed 9 the
decision of the trial court in toto. Like the trial
court, the appellate court held that since
petitioner was the registered owner of the

15

required to go beyond the vehicle's certificate

of registration to ascertain the owner of the
carrier. In this regard, the letter presented by
petitioner allegedly written by Benjamin Tee
admitting that Licuden was his driver, had no
evidentiary value not only because Benjamin
Tee was not presented in court to testify on this
matter but also because of the aforementioned
doctrine. To permit the ostensible or registered
owner to prove who the actual owner is, would
be to set at naught the purpose or public policy
which infuses that doctrine.

himself or from the character of the goods or

their packaging or container. 14
This presumption may be overcome only by
proof of extraordinary diligence on the part of
the carrier. 15 Clearly, to permit a common
carrier to escape its responsibility for the
passengers or goods transported by it by
proving a prior sale of the vehicle or means of
transportation to an alleged vendee would be
to attenuate drastically the carrier's duty of
extraordinary diligence. It would also open wide
the door to collusion between the carrier and
the supposed vendee and to shifting liability
from the carrier to one without financial
capability to respond for the resulting
damages. In other words, the thrust of the
public policy here involved is as sharp and real
in the case of carriage of goods as it is in the
transporting of human beings. Thus, to sustain
petitioner Benedicto's contention, that is, to
require the shipper to go behind a certificate of
registration of a public utility vehicle, would be
utterly subversive of the purpose of the law
and doctrine.

In fact, private respondent had no reason at all

to doubt the authority of Licuden to enter into a
contract of carriage on behalf of the registered
owner. It appears that, earlier, in the first week
of May 1980, private respondent Greenhills had
contracted Licuden who was then driving the
same cargo truck to transport and carry a load
of sawn lumber from the Maddela sawmill to
Dagupan City. 12 No one came forward to
question that contract or the authority of
Licuden to represent the owner of the carrier
truck.
Moreover, assuming the truth of her story,
petitioner
Benedicto
retained
registered
ownership of the freight truck for her own
benefit and convenience, that is, to secure the
payment of the balance of the selling price of
the truck. She may have been unaware of the
legal security device of chattel mortgage; or
she, or her buyer, may have been unwilling to
absorb the expenses of registering a chattel
mortgage over the truck. In either case,
considerations both of public policy and of
equity require that she bear the consequences
flowing from registered ownership of the
subject vehicle.

Petitioner further insists that there was no

perfected contract of carriage for the reason
that there was no proof that her consent or that
of Tee had been obtained; no proof that the
driver, Licuden was authorized to bind the
registered owner; and no proof that the parties
had agreed on the freightage to be paid.
Once more, we are not persuaded by
petitioner's arguments which appear to be a
transparent attempt to evade statutory
responsibilities. Driver Licuden was entrusted
with possession and control of the freight truck
by the registered owner (and by the alleged
secret owner, for that matter).itc-asl Driver
Licuden, under the circumstances, was clothed
with at least implied authority to contract to
carry goods and to accept delivery of such
goods for carriage to a specified destination.
That the freight to be paid may-not have been
fixed before loading and carriage, did not
prevent the contract of carriage from arising,
since the freight was at least determinable if
not fixed by the tariff schedules in petitioner's
main business office. Put in somewhat different
terms, driver Licuden is in law regarded as the
employee and agent of the petitioner, for
whose acts petitioner must respond. A contract
of carriage of goods was shown; the sawn
lumber was loaded on board the freight truck;
loss or non-delivery of the lumber at Blue Star's
premises in Valenzuela, Bulacan was also
proven; and petitioner has not proven either
that she had exercised extraordinary diligence
to prevent such loss or non-delivery or that the
loss or non-delivery was due to some casualty
or force
majeure inconsistent
with
her
liability. 16 Petitioner's
liability
to
private

Petitioner Benedicto, however, insists that the

said principle should apply only to cases
involving negligence and resulting injury to or
death of passengers, and not to cases involving
merely carriage of goods. We believe
otherwise.
A common carrier, both from the nature of its
business and for insistent reasons of public
policy, is burdened by the law with the duty of
exercising extraordinary diligence not only in
ensuring the safety of passengers but also in
caring for goods transported by it. 13 The loss or
destruction or deterioration of goods turned
over to the common carrier for conveyance to a
designated destination, raises instantly a
presumption of fault or negligence on the part
of the carrier, save only where such loss,
destruction or damage arises from extreme
circumstances such as a natural disaster or
calamity or act of the public enemy in time of
war, or from an act or omission of the shipper

16

respondent Greenhills was thus fixed and

complete, without prejudice to petitioner's right
to proceed against her putative transferee
Benjamin
Tee
and
driver
Licuden
for
reimbursement or contribution. 17

respondents for their failure to transport his

wife and mother of his three minor children
safely to her destination. Respondents denied
liability for the death of Dr. Mariano. They
claimed that the proximate cause of the
accident was the recklessness of the driver of
the trailer truck which bumped their bus while
allegedly at a halt on the shoulder of the road
in its rightful lane. Thus, respondent Callejas
filed a third-party complaint against Liong Chio
Chang, doing business under the name and
style of La Perla Sugar Supply, the owner of the
trailer truck, for indemnity in the event that he
would be held liable for damages to
petitioner.lavvph!l

WHEREFORE, the Petition for Review is DENIED

for lack of merit and the Decision of the former
Intermediate Appellate Court dated 30 January
1985 is hereby AFFIRMED. Costs against
petitioner.
G.R. No. 166640

July 31, 2009

HERMINIO
MARIANO,
JR., Petitioner,
vs.
ILDEFONSO C. CALLEJAS and EDGAR DE
BORJA, Respondents.

Other cases were filed. Callejas filed a

complaint,4 docketed as Civil Case No. NC-397
before the RTC of Naic, Cavite, against La Perla
Sugar Supply and Arcadio Arcilla, the truck
driver, for damages he incurred due to the
vehicular accident. On September 24, 1992,
the said court dismissed the complaint against
La Perla Sugar Supply for lack of evidence. It,
however, found Arcilla liable to pay Callejas the
cost of the repairs of his passenger bus, his lost
earnings, exemplary damages and attorneys
fees.5

DECISION
PUNO, C.J.:
On appeal are the Decision1 and Resolution2 of
the Court of Appeals in CA-G.R. CV No. 66891,
dated May 21, 2004 and January 7, 2005
respectively, which reversed the Decision 3 of
the Regional Trial Court (RTC) of Quezon City,
dated September 13, 1999, which found
respondents jointly and severally liable to pay
petitioner damages for the death of his wife.

A criminal case, Criminal Case No. 2223-92,

was also filed against truck driver Arcilla in the
RTC of Imus, Cavite. On May 3, 1994, the said
court convicted truck driver Arcadio Arcilla of
the crime of reckless imprudence resulting to
homicide, multiple slight physical injuries and
damage to property.6

First, the facts:

Petitioner Herminio Mariano, Jr. is the surviving
spouse of Dr. Frelinda Mariano who was a
passenger of a Celyrosa Express bus bound for
Tagaytay when she met her death. Respondent
Ildefonso C. Callejas is the registered owner of
Celyrosa Express, while respondent Edgar de
Borja was the driver of the bus on which the
deceased was a passenger.

In the case at bar, the trial court, in its Decision

dated September 13, 1999, found respondents
Ildefonso Callejas and Edgar de Borja, together
with Liong Chio Chang, jointly and severally
liable to pay petitioner damages and costs of
suit. The dispositive portion of the Decision
reads:

At around 6:30 p.m. on November 12, 1991,

along Aguinaldo Highway, San Agustin,
Dasmarias, Cavite, the Celyrosa Express bus,
carrying Dr. Mariano as its passenger, collided
with an Isuzu truck with trailer bearing plate
numbers PJH 906 and TRH 531. The passenger
bus was bound for Tagaytay while the trailer
truck came from the opposite direction, bound
for Manila. The trailer truck bumped the
passenger bus on its left middle portion. Due to
the impact, the passenger bus fell on its right
side on the right shoulder of the highway and
caused the death of Dr. Mariano and physical
injuries to four other passengers. Dr. Mariano
was 36 years old at the time of her death. She
left behind three minor children, aged four,
three and two years.

ACCORDINGLY, the defendants are ordered to

pay as follows:
1. The sum of P50,000.00
indemnity for the loss of life;

as

civil

2. The sum of P40,000.00 as actual and

compensatory damages;
3. The sum of P1,829,200.00
foregone income;

as

4. The sum of P30,000.00 as moral

damages;
5. The sum of P20,000.00 as exemplary
damages;

Petitioner filed a complaint for breach of

contract of carriage and damages against

17

6. The costs of suit.

ART. 1733. Common carriers, from the nature of

their business and for reasons of public policy,
are bound to observe extraordinary diligence in
the vigilance over the goods and for the safety
of the passengers transported by them,
according to all the circumstances of each
case.

SO ORDERED.7
Respondents Callejas and De Borja appealed to
the Court of Appeals, contending that the trial
court erred in holding them guilty of breach of
contract of carriage.

ART. 1755. A common carrier is bound to carry

the passengers safely as far as human care and
foresight can provide, using the utmost
diligence of very cautious persons, with a due
regard for all the circumstances.

On May 21, 2004, the Court of Appeals

reversed the decision of the trial court. It
reasoned:
. . . the presumption of fault or negligence
against the carrier is only a disputable
presumption. It gives in where contrary facts
are established proving either that the carrier
had exercised the degree of diligence required
by law or the injury suffered by the passenger
was due to a fortuitous event. Where, as in the
instant case, the injury sustained by the
petitioner was in no way due to any defect in
the means of transport or in the method of
transporting or to the negligent or wilful acts of
private respondent's employees, and therefore
involving no issue of negligence in its duty to
provide safe and suitable cars as well as
competent employees, with the injury arising
wholly from causes created by strangers over
which the carrier had no control or even
knowledge or could not have prevented, the
presumption is rebutted and the carrier is not
and ought not to be held liable. To rule
otherwise would make the common carrier the
insurer of the absolute safety of its passengers
which is not the intention of the lawmakers.8

ART. 1756. In case of death of or injuries to

passengers, common carriers are presumed to
have been at fault or to have acted negligently,
unless they prove that they observed
extraordinary diligence as prescribed in articles
1733 and 1755.
In accord with the above provisions, Celyrosa
Express, a common carrier, through its driver,
respondent De Borja, and its registered owner,
respondent Callejas, has the express obligation
"to carry the passengers safely as far as human
care and foresight can provide, using the
utmost diligence of very cautious persons, with
a due regard for all the circumstances,"11 and
to observe extraordinary diligence in the
discharge of its duty. The death of the wife of
the petitioner in the course of transporting her
to her destination gave rise to the presumption
of negligence of the carrier. To overcome the
presumption, respondents have to show that
they observed extraordinary diligence in the
discharge of their duty, or that the accident
was caused by a fortuitous event.

The dispositive portion of the Decision reads:

This Court interpreted the above quoted

provisions in Pilapil v. Court of Appeals. 12 We
elucidated:

WHEREFORE, the decision appealed from,

insofar as it found defendants-appellants
Ildefonso Callejas and Edgar de Borja liable for
damages to plaintiff-appellee Herminio E.
Mariano, Jr., is REVERSED and SET ASIDE and
another one entered absolving them from any
liability for the death of Dr. Frelinda Cargo
Mariano.9

While the law requires the highest degree of

diligence from common carriers in the safe
transport of their passengers and creates a
presumption of negligence against them, it
does not, however, make the carrier an insurer
of the absolute safety of its passengers.

The appellate court also denied the motion for

reconsideration filed by petitioner.

Article 1755 of the Civil Code qualifies the duty

of extraordinary care, vigilance and precaution
in the carriage of passengers by common
carriers to only such as human care and
foresight can provide. What constitutes
compliance with said duty is adjudged with due
regard to all the circumstances.

Hence, this appeal, relying on the following

ground:
THE DECISION OF THE HONORABLE COURT OF
APPEALS, SPECIAL FOURTEENTH DIVISION IS
NOT IN ACCORD WITH THE FACTUAL BASIS OF
THE CASE.10

Article 1756 of the Civil Code, in creating a

presumption of fault or negligence on the part
of the common carrier when its passenger is
injured, merely relieves the latter, for the time
being, from introducing evidence to fasten the

The following are the provisions of the Civil

Code pertinent to the case at bar:

18

negligence on the former, because the

presumption stands in the place of evidence.
Being a mere presumption, however, the same
is rebuttable by proof that the common carrier
had exercised extraordinary diligence as
required by law in the performance of its
contractual obligation, or that the injury
suffered by the passenger was solely due to a
fortuitous event.

q What is the distance between that

circle which is marked as Exh. 1-c to the
place where you found the same?
a More or less 500 meters.
q Why did you say that the truck has no
brakes?
a I tested it.

In fine, we can only infer from the law the

intention of the Code Commission and
Congress to curb the recklessness of drivers
and operators of common carriers in the
conduct of their business.

q And you found no brakes?

a Yes, sir.

Thus, it is clear that neither the law nor the

nature of the business of a transportation
company makes it an insurer of the passenger's
safety, but that its liability for personal injuries
sustained by its passenger rests upon its
negligence, its failure to exercise the degree of
diligence that the law requires.

xxx

In the case at bar, petitioner cannot succeed in

his contention that respondents failed to
overcome the presumption of negligence
against them. The totality of evidence shows
that the death of petitioners spouse was
caused by the reckless negligence of the driver
of the Isuzu trailer truck which lost its brakes
and bumped the Celyrosa Express bus, owned
and operated by respondents.

COURT:

q When you went to the scene of

accident, what was the position of
Celyrosa bus?
a It was lying on its side.

q Right side or left side?

a Right side.
ATTY. ESTELYDIZ:
q On what part of the road was it lying?

First, we advert to the sketch prepared by PO3

Magno S. de Villa, who investigated the
accident. The sketch13shows the passenger bus
facing the direction of Tagaytay City and lying
on its right side on the shoulder of the road,
about five meters away from the point of
impact. On the other hand, the trailer truck was
on the opposite direction, about 500 meters
away from the point of impact. PO3 De Villa
stated
that
he interviewed De
Borja,
respondent driver of the passenger bus, who
said that he was about to unload some
passengers when his bus was bumped by the
driver of the trailer truck that lost its brakes.
PO3 De Villa checked out the trailer truck and
found that its brakes really failed. He testified
before the trial court, as follows:

a On the shoulder of the road.

COURT:
q How many meters from the point of
impact?
a Near, about 5 meters.14
His police report bolsters his testimony and
states:
Said vehicle 1 [passenger bus] was running
from Manila toward south direction when, in the
course of its travel, it was hit and bumped by
vehicle 2 [truck with trailer] then running fast
from opposite direction, causing said vehicle 1
to fall on its side on the road shoulder, causing
the death of one and injuries of some
passengers thereof, and its damage, after
collission (sic), vehicle 2 continiously (sic) ran
and stopped at approximately 500 meters away
from the piont (sic) of impact.15

ATTY. ESTELYDIZ:
q You pointed to the Isuzu truck beyond
the point of impact. Did you investigate
why did (sic) the Isuzu truck is beyond
the point of impact?
a Because the truck has no brakes.

In fine, the evidence shows that before the

collision, the passenger bus was cruising on its
rightful lane along the Aguinaldo Highway when
the trailer truck coming from the opposite

COURT:

19

direction, on full speed, suddenly swerved and

encroached on its lane, and bumped the
passenger bus on its left middle portion.
Respondent driver De Borja had every right to
expect that the trailer truck coming from the
opposite direction would stay on its proper
lane. He was not expected to know that the
trailer truck had lost its brakes. The swerving of
the trailer truck was abrupt and it was running
on a fast speed as it was found 500 meters
away from the point of collision. Secondly, any
doubt as to the culpability of the driver of the
trailer truck ought to vanish when he pleaded
guilty to the charge of reckless imprudence
resulting to multiple slight physical injuries and
damage to property in Criminal Case No. 222392, involving the same incident.1avvph!1

b) To the plaintiff
Moises Ocampo
P298,500.00
c) To the plaintiff
Nicolas Cruz
P154,740.00
d) To the plaintiff
Inocencio Turla, Sr.
48,000.00
2. Dismissing the case against
Lino Castro
3. Dismissing the third-party
complaint against STRONGHOLD

IN VIEW WHEREOF, the petition is DENIED. The

Decision dated May 21, 2004 and the
Resolution dated January 7, 2005 of the Court
of Appeals in CA-G.R. CV No. 66891 are
AFFIRMED.

4.
Dismissing
all
the
counterclaim of the defendants
and third-party defendants.
5. Ordering ROCK
B.A.
the
total
P622,890.00 which
adjudged to pay to
(p. 46, Rollo)

G.R. No. 98275 November 13, 1992

BA
FINANCE
CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS, REGIONAL
TRIAL COURT OF ANGELES CITY, BRANCH
LVI, CARLOS OCAMPO, INOCENCIO TURLA,
SPOUSES MOISES AGAPITO and SOCORRO
M.
AGAPITO
and
NICOLAS
CRUZ,respondents.

to reimburse
amount
of
the latter is
the plaintiffs.

Respondent Court of Appeals affirmed the

appealed disposition in toto through Justice
Rasul, with Justices De Pano, Jr. and Imperial
concurring, on practically the same grounds
arrived at by the court a quo (p. 28, Rollo).
Efforts exerted towards re-evaluation of the
adverse were futile (p. 37, Rollo). Hence, the
instant petition.

MELO, J.:

The lower court ascertained after due trial that

Rogelio Villar y Amare, the driver of the Isuzu
truck, was at fault when the mishap occurred in
as much as he was found guilty beyond
reasonable doubt of reckless imprudence
resulting in triple homicide with multiple
physical injuries with damage to property in a
decision rendered on February 16, 1984 by the
Presiding Judge of Branch 6 of the Regional Trial
Court stationed at Malolos, Bulacan. Petitioner
was adjudged liable for damages in as much as
the truck was registered in its name during the
incident in question, following the doctrine laid
down by this Court in Perez vs. Gutierrez (53
SCRA 149 [1973]) and Erezo, et al. vs.
Jepte (102 Phil. 103 [1957]). In the same
breadth, Rock Component Philippines, Inc. was
ordered to reimburse petitioner for any amount
that the latter may be adjudged liable to pay
herein private respondents as expressly
stipulated in the contract of lease between
petitioner and Rock Component Philippines, Inc.
Moreover, the trial court applied Article 2194 of
the new Civil Code on solidary accountability of
join tortfeasors insofar as the liability of the
driver, herein petitioner and Rock Component

The question of petitioner's responsibility for

damages when on March 6, 1983, an accident
occurred involving petitioner's Isuzu tenwheeler truck then driven by an employee of
Lino Castro is the thrust of the petition for
review on certiorari now before Us considering
that neither the driver nor Lino Castro appears
to be connected with petitioner.
On October 13, 1988, the disputed decision in
the suit below was rendered by the court of
origin in this manner:
1. Ordering Rock B.A. and Rogelio
Villar y Amare jointly and
severally to pay the plaintiffs as
follows:
a) To the plaintiff
Carlos Ocampo
P121,650.00;

20

Philippines was concerned (pp. 6-7, Decision;

pp. 44-45, Rollo).

damages suffered by passengers

or third persons caused by the
operation of said vehicle, even
though the same had been
transferred to a third person.
(Montoya vs. Ignacio, 94 Phil.,
182 50 Off. Gaz., 108; Roque vs.
Malibay Transit, Inc., G.R. No. L8561, November 18, 1955; Vda.
de Medina vs. Cresencia, 99 Phil.,
506, 52 Off. Gaz., [10], 4606.)
The principle upon which this
doctrine is based is that in
dealing with vehicles registered
under the Public Service Law, the
public has the right to assume or
presumed that the registered
owner is the actual owner
thereof, for it would be difficult
with the public to enforce the
actions that they may have for
injuries caused to them by the
vehicles
being
negligently
operated if the public should be
required to prove who actual the
owner is. How would the public
or third persons know against
whom to enforce their rights in
case of subsequent transfer of
the vehicles? We do not imply by
this doctrine, however, that the
registered
owner
may
not
recover whatever amount he had
paid by virtue of his liability to
third persons from the person to
whom he had actually sold,
assigned
or
conveyed
the
vehicle.

To the question of whether petitioner can be

held responsible to the victim albeit the truck
was leased to Rock Component Philippines
when the incident occurred, the appellate court
answered in the affirmative on the basis of the
jurisprudential dogmas which, as aforesaid,
were relied upon by the trial court although
respondent
court
was
quick
to
add
the caveat embodied in the lease covenant
between petitioner and Rock Component
Philippines relative to the latter's duty to
reimburse any amount which may be adjudged
against petitioner (pp. 32-33, Rollo).
Petitioner asseverates that it should not have
been haled to court and ordered to respond for
the damage in the manner arrived at by both
the trial and appellate courts since paragraph 5
of the complaint lodged by the plaintiffs below
would indicate that petitioner was not the
employer of the negligent driver who was
under the control an supervision of Lino Castro
at the time of the accident, apart from the fact
that the Isuzu truck was in the physical
possession of Rock Component Philippines by
virtue of the lease agreement.
Aside from casting clouds of doubt on the
propriety
of
invoking
the Perez and Erezo doctrines,
petitioner
continue to persist with the idea that the
pronouncements of this Court in Duavit vs.
Court of Appeals (173 SCRA 490 [1989])
and Duquillo vs. Bayot (67 Phil 131 [1939])
dovetail with the factual and legal scenario of
the case at hand. Furthermore, petitioner
assumes, given the so-called hiatus on the
basis for the award of damages as decreed by
the lower and appellate courts, that Article
2180 of the new Civil Code on vicarious liability
will divest petitioner of any responsibility
absent as there is any employer-employee
relationship between petitioner and the driver.

Under the same principle the

registered owner of any vehicle,
even if not used for a public
service,
should
primarily
responsible to the public or to
the third persons for injuries
caused the latter while the
vehicle is being driven on the
highways
or
streets.
The
members of the Court are in
agreement that the defendantappellant should be held liable to
plaintiff-appellee for the injuries
occasioned to the latter because
of the negligence of the driver,
even if the defendant-appellant
was no longer an owner of the
vehicle at the time of the
damage
because
he
had
previously sold it to another.
What is the legal basis for his
(defendants-appellant's) liability?

Contrary to petitioner's expectations, the

recourse instituted from the rebuffs it
encountered may not constitute a sufficient
foundation for reversal of the impugned
judgment of respondent court. Petitioner is of
the impression that the Perez and Erezo cases
are inapplicable due to the variance of the
generative facts in said cases as against those
obtaining in the controversy at bar. A contrario,
the lesson imparted by Justice Labrador
in Erezo is still good law, thus:
. . . In previous decisions, We
already have held that the
registered owner of a certificate
of public convenience is liable to
the public for the injuries or

There is a presumption that the

owner of the guilty vehicle is the

21

defendant-appellant as he is the
registered owner in the Motor
Vehicle Office. Should he not be
allowed to prove the truth, that
he had sold it to another and
thus shift the responsibility for
the injury to the real and the
actual owner? The defendants
hold the affirmative of this
proposition; the trial court hold
the negative.

any accident happens, or that

any damage or injury is caused
by the vehicle on the public
highways, responsibility therefor
can be fixed on a definite
individual, the registered owner.
Instances are numerous where
vehicles
running
on
public
highways caused accidents or
injuries to pedestrians or other
vehicles
without
positive
identification of the owner or
drivers, or with very scant means
of identification. It is to forestall
these
circumstances,
so
inconvenient or prejudicial to the
public, that the motor vehicle
registration is primarily obtained,
in
the
interest
of
the
determinations
of
persons
responsible for damages or
injuries
caused
on
public
highways.

The Revised Motor Vehicle Law

(Act No. 3992, as amended)
provides that the vehicle may be
used or operated upon any public
highway unless the same is
properly registered. It has been
stated that the system of
licensing and the requirement
that each machine must carry a
registration
number,
conspicuously displayed, is one
of the precautions taken to
reduce the danger of injury of
pedestrians and other travelers
from the careless management
of automobiles, and to furnish a
means
of
ascertaining
the
identity of persons violating the
laws and ordinances, regulating
the speed and operation of
machines upon the highways (2
R. C. L. 1176). Not only are
vehicles to be registered and that
no motor vehicles are to be used
or
operated
without
being
properly registered from the
current year, furnish the Motor
Vehicle Office a report showing
the name and address of each
purchaser of motor vehicle
during the previous month and
the manufacturer's serial number
and motor number. (Section 5[c],
Act No. 3992, as amended.)

One of the principle purposes of motor vehicles

legislation is identification of the vehicle and of
the operator, in case of accident; and another
is that the knowledge that means of detection
are always available my act as a deterrent from
lax observance of the law and of the rules of
conservative and safe operation. Whatever
purpose there may be in these statutes, it is
subordinate at the last to the primary purpose
of rendering it certain that the violator of the
law or of the rules of safety shall not escape
because of lack of means to discover him. The
purpose of the statute is thwarted, and the
displayed number becomes a "share and
delusion," if courts would entertain such
defenses as that put forward by appellee in this
case. No responsible person or corporation
could be held liable for the most outrageous
acts of negligence, if they should be allowed to
pace a "middleman" between them and the
public, and escape liability by the manner in
which they recompense their servants. (King
vs. Breham Automobile Co., Inc. 145 S. W. 278,
279.)

Registration is required not to

make
said
registration
the
operative act by which ownership
in vehicles is transferred, as in
land registration cases, because
the administrative proceeding of
registration does not bear any
essential relation to the contract
of sale between the parties
(Chinchilla
vs.
Rafael
and
Verdaguer, 39 Phil. 888), but to
permit the use and operation of
the vehicle upon any public
highway (section 5[a], Act No.
3992, as amended). the main
aim of motor vehicle registration
is to identify the owner so that if

With the above policy in mind,

the question that defendantappellant poses is: should not the
registered owner be allowed at
the trial to prove who the actual
and real owner is, and in
accordance with such proof
escape or evade responsibility
and lay the same on the person
actually owning the vehicle? We
hold with the trial court that the
law does not allow him to do so;
the law, with its aim and policy in
mind, does not relieve him
directly of the responsibility that

22

the law fixes and places upon

him
as
an
incident
or
consequence
of
registration.
Were a registered owner allowed
to
evade
responsibility
by
proving
who
the
supposed
transferee or owner is, it would
be easy for him, by collusion with
others or otherwise, to escape
said responsibility and transfer
the same to an indefinite person,
or to one who possesses no
property with which to respond
financially for the damage or
injury
done.
A
victim
of
recklessness
on
the
public
highways is usually without
means to discover or Identify the
person actually causing the
injury or damage. He has no
means other then by a recourse
to the registration in the Motor
Vehicles Office to determine who
is the owner. The protection that
the law aims to extend to him
would become illusory were the
registered owner given the
opportunity to escape liability by
disproving his ownership. If the
policy of the law is to be
enforced and carried out, the
registered owner should not be
allowed to prove the contrary to
the prejudice of the person
injured, that is, to prove that a
third person or another has
become the owner, so that he
may thereby be relieved of the
responsibility to the injured
person.

responsible for the damage

caused to the vehicle of the
plaintiff-appellee,
but
he
(defendant-appellant) has a right
to be indemnified by the real or
actual owner of the amount that
he may be required to pay as
damage for the injury caused to
the plaintiff-appellant.
If the foregoing words of wisdom were applied
in solving the circumstance whereof the vehicle
had been alienated or sold to another, there
certainly can be no serious exception against
utilizing the same rationale to the antecedents
of this case where the subject vehicle was
merely leased by petitioner to Rock Component
Philippines, Inc., with petitioner retaining
ownership over the vehicle.
Petitioner's reliance on the ruling of this Court
in Duavit vs. Court of Appeals and in Duquillo
vs. Bayot (supra) is legally unpalatable for the
purpose of the present discourse. The vehicles
adverted to in the two cases shared a common
thread, so to speak, in that the jeep and the
truck were driven in reckless fashion without
the consent or knowledge of the respective
owners. Cognizant of the inculpatory testimony
spewed by defendant Sabiniano when he
admitted that he took the jeep from the garage
of defendant Dauvit without the consent or
authority of the latter, Justice Gutierrez, Jr.
in Duavit remarked;
. . . Herein petitioner does not
deny ownership of the vehicle
involved in the mishap but
completely
denies
having
employed the driver Sabiniano or
even having authorized the latter
to drive his jeep. The jeep was
virtually
stolen
from
the
petitioner's garage. To hold,
therefore, the petitioner liable for
the accident caused by the
negligence of Sabiniano who was
neither his driver nor employee
would be absurd as it would be
like holding liable the owner of a
stolen vehicle for an accident
caused by the person who stole
such vehicle. In this regard, we
cannot ignore the many cases of
vehicles forcibly taken from their
owners at gunpoint or stolen
from garages and parking areas
and the instances of service
station attendants or mechanics
of auto repair shops using,
without the owner's consent,
vehicles entrusted to them for
servicing or repair.(at p. 496.)

The above policy and application

of the law may appear quite
harsh and would seem to conflict
with truth and justice. We do not
think it is so. A registered owner
who
has
already
sold
or
transferred a vehicle has the
recourse
to
a
third-party
complaint, in the same action
brought against him to recover
for the damage or injury done,
against the vendee or transferee
of the vehicle. The inconvenience
of the suit is no justification for
relieving him of liability; said
inconvenience is the price he
pays for failure to comply with
the registration that the law
demands and requires.
In synthesis, we hold that the
registered owner, the defendantappellant herein, is primarily

23

In the Duquillo case, the defendant therein

cannot, according to Justice Diaz, be held liable
for anything because of circumstances which
indicated that the truck was driven without the
consent or knowledge of the owner thereof.

expediente No. 53090, asi que se

consideran incorporadas en los mismos
las dos siguientes condiciones:
Que los certificados de conveniencia
publica
y
authorizacion
arriba
mencionados
seran
validos
y
subsistentes solamente durante de
veinticinco (25) anos, contados desde la
fecha de la promulgacion de esta
decision.

Consequently, there is no need for Us to

discuss the matter of imputed negligence
because
petitioner
merely
presumed,
erroneously, however, that judgment was
rendered against it on the basis of such
doctrine embodied under Article 2180 of the
new Civil Code.

Que la empresa de la solicitante porda

ser adquirida por el Commonwealth de
Filipinas o por alguna dependencia del
mismo en cualquier tiempo que lo
deseare previo pago del precio d costo
de
su
equipo
util,
menos
una
depreciacion razonable que se ha fijar
por la Comision al tiempo de su
adquisicion.

WHEREFORE, the petition is hereby DISMISSED

and decision under review AFFIRMED without
special pronouncement as to costs.
G.R. No. 47065

June 26, 1940

PANGASINAN
TRANSPORTATION
CO.,
INC., petitioner,
vs.
THE
PUBLIC
SERVICE
COMMISSION, respondent.

Not being agreeable to the two new conditions

thus incorporated in its existing certificates, the
petitioner filed on October 9, 1939 a motion for
reconsideration which was denied by the Public
Service Commission on November 14, 1939.
Whereupon, on November 20, 1939, the
present petition for a writ of certiorari was
instituted in this court praying that an order be
issued directing the secretary of the Public
Service Commission to certify forthwith to this
court the records of all proceedings in case No.
56641; that this court, after hearing, render a
decision declaring section 1 of Commonwealth
Act No. 454 unconstitutional and void; that, if
this court should be of the opinion that section
1 of Commonwealth Act No. 454 is
constitutional, a decision be rendered declaring
that the provisions thereof are not applicable to
valid and subsisting certificates issued prior to
June 8, 1939. Stated in the language of the
petitioner, it is contended:

C.
de
G.
Alvear
for
petitioner.
Evaristo R. Sandoval for respondent.
LAUREL, J.:
The petitioner has been engaged for the past
twenty years in the business of transporting
passengers in the Province of Pangasinan and
Tarlac and, to a certain extent, in the Province
of Nueva Ecija and Zambales, by means of
motor vehicles commonly known as TPU buses,
in accordance with the terms and conditions of
the certificates of public convenience issued in
its favor by the former Public Utility
Commission in cases Nos. 24948, 30973,
36830, 32014 and 53090. On August 26, 1939,
the petitioner filed with the Public Service
Commission an application for authorization to
operate ten additional new Brockway trucks
(case No. 56641), on the ground that they were
needed to comply with the terms and
conditions of its existing certificates and as a
result of the application of the Eight Hour Labor
Law. In the decision of September 26, 1939,
granting the petitioner's application for
increase of equipment, the Public Service
Commission ordered:

1. That the legislative powers granted to

the Public Service Commission by
section 1 of Commonwealth Act No. 454,
without limitation, guide or rule except
the unfettered discretion and judgment
of the Commission, constitute a
complete and total abdication by the
Legislature of its functions in the
premises, and for that reason, the Act,
in so far as those powers are concerned,
is unconstitutional and void.

Y de acuerdo con que se provee por el

articulo 15 de la ley No. 146 del
Commonwealth, tal como ha sido
enmendada por el articulo 1 de la Ley
No. 454, por la presente se enmienda
las condiciones de los certificados de
convenciencia publica expedidos en los
expedientes Nos. 24948, 30973, 36831,
32014 y la authorizacion el el

2. That even if it be assumed that

section 1 of Commonwealth Act No. 454,
is valid delegation of legislative powers,
the Public Service Commission has
exceeded its authority because: (a) The
Act applies only to future certificates
and not to valid and subsisting
certificates issued prior to June 8, 1939,

24

when said Act took effect, and (b) the

Act, as applied by the Commission,
violates constitutional guarantees.

authorization to do business will "public

interests in a proper and suitable manner."
Under the second paragraph, one of the
conditions which the Public Service Commission
may prescribed the issuance of the certificate
provided for in the first paragraph is that "the
service can be acquired by the Commonwealth
of the Philippines or by any instrumental
thereof upon payment of the cost price of its
useful
equipment,
less
reasonable
depreciation," a condition which is virtually a
restatement of the principle already embodied
in the Constitution, section 6 of Article XII,
which provides that "the State may, in the
interest of national welfare and defense,
establish and operate industries and means of
transportation and communication, and, upon
payment of just compensation, transfer to
public ownership utilities and other private
enterprises to be operated by the Government.
"Another condition which the Commission may
prescribed, and which is assailed by the
petitioner, is that the certificate "shall be valid
only for a definite period of time." As there is a
relation between the first and second
paragraphs of said section 15, the two
provisions must be read and interpreted
together. That is to say, in issuing a certificate,
the Commission must necessarily be satisfied
that the operation of the service under said
certificate during a definite period fixed
therein "will promote the public interests in a
proper and suitable manner." Under section 16
(a) of Commonwealth Act. No. 146 which is a
complement of section 15, the Commission is
empowered to issue certificates of public
convenience whenever it "finds that the
operation of the public service proposed and
the authorization to do business will promote
the public interests in a proper and suitable
manner." Inasmuch as the period to be fixed by
the Commission under section 15 is inseparable
from the certificate itself, said period cannot be
disregarded by the Commission in determining
the question whether the issuance of the
certificate will promote the public interests in a
proper and suitable manner. Conversely, in
determining "a definite period of time," the
Commission will be guided by "public
interests," the only limitation to its power being
that said period shall not exceed fifty years
(sec. 16 (a), Commonwealth Act No. 146;
Constitution, Art. XIII, sec. 8.) We have already
ruled that "public interest" furnishes a sufficient
standard. (People vs. Fernandez and Trinidad,
G. R. No. 45655, promulgated June 15, 1938;
People vs. Rosenthal and Osmea, G. R. Nos.
46076 and 46077, promulgated June 12, 1939,
citing
New
York
Central
Securities
Corporation vs. U.S.A., 287 U.S. 12, 24, 25, 77
Law. ed. 138, 145, 146; Schenchter Poultry
Corporation vs. I.S., 295, 540, 79 Law. ed.
1570, 1585; Ferrazzini vs. Gsell, 34 Phil., 697,
711-712.)

Section 15 of Commonwealth Act No. 146, as

amended by section 1 of Commonwealth Act
No. 454, invoked by the respondent Public
Service Commission in the decision complained
of in the present proceedings, reads as follows:
With the exception to those enumerated
in the preceding section, no public
service shall operate in the Philippines
without
possessing
a
valid
and
subsisting certificate from the Public
Service
Commission,
known
as
"certificate of public convenience," or
"certificate of convenience and public
necessity," as the case may be, to the
effect that the operation of said service
and the authorization to do business will
promote the public interests in a proper
and suitable manner.
The Commission may prescribed as a
condition for the issuance of the
certificate provided in the preceding
paragraph that the service can be
acquired by the Commonwealth of the
Philippines or by any instrumentality
thereof upon payment of the cost price
of its useful equipment, less reasonable
depreciation; and likewise, that the
certificate shall valid only for a definite
period of time; and that the violation of
any of these conditions shall produce
the immediate cancellation of the
certificate without the necessity of any
express action on the part of the
Commission.
In estimating the depreciation, the
effect of the use of the equipment, its
actual condition, the age of the model,
or other circumstances affecting its
value in the market shall be taken into
consideration.
The foregoing is likewise applicable to
any extension or amendment of
certificates actually force and to those
which may hereafter be issued, to
permits to modify itineraries and time
schedules of public services and to
authorization to renew and increase
equipment and properties.
Under the first paragraph of the aforequoted
section 15 of Act No. 146, as amended, no
public service can operate without a certificate
of public convenience or certificate of
convenience and public necessity to the effect
that the operation of said service and the

25

Section 8 of Article XIII of the Constitution

provides, among other things, that no
franchise, certificate, or any other form of
authorization for the operation of a public utility
shall be "for a longer period than fifty years,"
and when it was ordained, in section 15 of
Commonwealth Act No. 146, as amended by
Commonwealth Act No. 454, that the Public
Service Commission may prescribed as a
condition for the issuance of a certificate that it
"shall be valid only for a definite period of time"
and, in section 16 (a) that "no such certificates
shall be issued for a period of more than fifty
years," the National Assembly meant to give
effect to the aforesaid constitutional mandate.
More than this, it has thereby also declared its
will that the period to be fixed by the Public
Service Commission shall not be longer than
fifty years. All that has been delegated to the
Commission, therefore, is the administrative
function, involving the use discretion, to carry
out the will of the National Assembly having in
view, in addition, the promotion of "public
interests in a proper and suitable manner." The
fact that the National Assembly may itself
exercise the function and authority thus
conferred upon the Public Service Commission
does not make the provision in question
constitutionally objectionable.

the growing complexity of modern life, the

multiplication of the subjects of governmental
regulation, and the increased difficulty of
administering the laws, there is a constantly
growing tendency toward the delegation of
greater powers by the legislature, and toward
the approval of the practice by the court.
(Dillon Catfish Drainage Dist, v. Bank of Dillon,
141 S. E. 274, 275, 143 S. Ct. 178;
State vs. Knox County, 54 S. W. 2d. 973, 976,
165 Tenn. 319.) In harmony with such growing
tendency, this Court, since the decision in the
case of Compaia General de Tabacos de
Filipinas
vs.
Board
of
Public
Utility
Commissioner (34 Phil., 136), relied upon by
the petitioner, has, in instances, extended its
seal of approval to the "delegation of greater
powers
by
the
legislature."
(Inchausti
Steamship Co. vs. Public Utility Commissioner,
44 Phil., Autobus Co. vs. De Jesus, 56 Phil., 446;
People vs. Fernandez & Trinidad, G. R. No.
45655,
promulgated
June
15,
1938;
People vs. Rosenthal & Osmea, G. R. Nos.
46076, 46077, promulgated June 12, 1939; and
Robb and Hilscher vs. People, G. R. No. 45866,
promulgated June 12, 1939.).
Under the fourth paragraph of section 15 of
Commonwealth Act No. 146, as amended by
Commonwealth Act No. 454, the power of the
Public Service Commission to prescribed the
conditions "that the service can be acquired by
the Commonwealth of the Philippines or by any
instrumentality thereof upon payment of the
cost price of its useful equipment, less
reasonable," and "that the certificate shall be
valid only for a definite period of time" is
expressly made applicable "to any extension or
amendment of certificates actually in force"
and "to authorizations to renew and increase
equipment and properties." We have examined
the legislative proceedings on the subject and
have found that these conditions were
purposely
made
applicable
to
existing
certificates of public convenience. The history
of Commonwealth Act No. 454 reveals that
there was an attempt to suppress, by way of
amendment, the sentence "and likewise, that
the certificate shall be valid only for a definite
period of time," but the attempt failed:

The theory of the separation of powers is

designed by its originators to secure action and
at the same time to forestall overaction which
necessarily results from undue concentration of
powers, and thereby obtain efficiency and
prevent deposition. Thereby, the "rule of law"
was established which narrows the range of
governmental action and makes it subject to
control by certain devices. As a corollary, we
find the rule prohibiting delegation of
legislative authority, and from the earliest time
American legal authorities have proceeded on
the theory that legislative power must be
exercised by the legislature alone. It is
frankness, however, to confess that as one
delves into the mass of judicial pronouncement,
he finds a great deal of confusion. One thing,
however, is apparent in the development of the
principle of separation of powers and that is
that the maxim of delegatus non potest
delegari or delegata
potestas
non
potest
delegari, attributed to Bracton (De Legius et
Consuetedinious Angliae, edited by G. E.
Woodbine, Yale University Press, 1922, vol. 2, p.
167) but which is also recognized in principle in
the Roman Law (D. 17.18.3), has been made to
adapt itself to the complexities of modern
governments, giving rise to the adoption,
within certain limits, of the principle of
"subordinate legislation," not only in the United
States and England but in practically all
modern governments. (People vs. Rosenthal
and Osmea, G. R. Nos. 46076 and 46077,
promulgated June 12, 1939.) Accordingly, with

xxx

xxx

xxx

Sr. CUENCO. Seor Presidente, para otra

enmienda. En la misma pagina, lineas
23 y 24, pido que se supriman las
palabras
'and
likewise,
that
the
certificate shall be valid only for a
definite period time.' Esta disposicion
del proyecto autoriza a la Comision de
Servicios Publicos a fijar un plazo de
vigencia certificado de conveniencia
publica. Todo el mundo sabe que bo se
puede determinar cuando los intereses

26

del
servicio
publico
requiren
la
explotacion de un servicio publico y ha
de saber la Comision de Servisios, si en
un tiempo determinado, la explotacion
de algunos buses en cierta ruta ya no
tiene de ser, sobre todo, si tiene en
cuenta; que la explotacion de los
servicios
publicos
depende
de
condiciones flutuantes, asi como del
volumen como trafico y de otras
condiciones. Ademas, el servicio publico
se concede por la Comision de Servicios
Publicos el interes publico asi lo exige. El
interes publico no tiene duracion fija, no
es permanente; es un proceso mas o
menos indefinido en cuanto al tiempo.
Se ha acordado eso en el caucus de
anoche.

corporation, except under the condition that it

shall be subject to amendment, alteration, or
repeal by the National Assembly when the
public interest so requires." The National
Assembly, by virtue of the Constitution,
logically succeeded to the Congress of the
United States in the power to amend, alter or
repeal any franchise or right granted prior to or
after the approval of the Constitution; and
when Commonwealth Acts Nos. 146 and 454
were enacted, the National Assembly, to the
extent therein provided, has declared its will
and purpose to amend or alter existing
certificates of public convenience.
Upon the other hand, statutes enacted for the
regulation of public utilities, being a proper
exercise by the state of its police power, are
applicable not only to those public utilities
coming into existence after its passage, but
likewise to those already established and in
operation.

EL PRESIDENTE PRO TEMPORE. Que

dice el Comite?
Sr. ALANO. El Comite siente tener que
rechazar esa enmienda, en vista de que
esto
certificados
de
conveniencia
publica es igual que la franquicia:
sepuede extender. Si los servicios
presentados por la compaia durante el
tiempo de su certificado lo require,
puede pedir la extension y se le
extendera; pero no creo conveniente el
que nosotros demos un certificado de
conveniencia publica de una manera
que podria pasar de cincuenta anos,
porque seria anticonstitucional.
xxx

xxx

Nor is there any merit in petitioner's

contention, that, because of the
establishment of petitioner's operations
prior to May 1, 1917, they are not
subject to the regulations of the
Commission. Statutes for the regulation
of public utilities are a proper exercise
by the state of its police power. As soon
as the power is exercised, all phases of
operation
of
established
utilities,
become at once subject to the police
power thus called into operation.
Procedures'
Transportation
Co.
v.
Railroad Commission, 251 U. S. 228, 40
Sup. Ct. 131, 64 Law. ed. 239, Law v.
Railroad Commission, 184 Cal. 737, 195
Pac. 423, 14 A. L. R. 249. The statute is
applicable not only to those public
utilities coming into existence after its
passage, but likewise to those already
established and in operation. The 'Auto
Stage and Truck Transportation Act'
(Stats. 1917, c. 213) is a statute passed
in pursuance of the police power. The
only distinction recognized in the statute
between those established before and
those established after the passage of
the act is in the method of the creation
of their operative rights. A certificate of
public convenience and necessity it
required for any new operation, but no
such certificate is required of any
transportation
company
for
the
operation which was actually carried on
in good faith on May 1, 1917, This
distinction in the creation of their
operative rights in no way affects the
power of the Commission to supervise
and regulate them. Obviously the power
of the Commission to hear and dispose
of complaints is as effective against

xxx

By a majority vote the proposed amendment

was defeated. (Sesion de 17 de mayo de 1939,
Asamblea Nacional.)
The petitioner is mistaken in the suggestion
that, simply because its existing certificates
had been granted before June 8, 1939, the date
when Commonwealth Act No. 454, amendatory
of section 15 of Commonwealth Act No. 146,
was approved, it must be deemed to have the
right of holding them in perpetuity. Section 74
of the Philippine Bill provided that "no
franchise, privilege, or concession shall be
granted to any corporation except under the
conditions that it shall be subject to
amendment, alteration, or repeal by the
Congress of the United States." The Jones Law,
incorporating a similar mandate, provided, in
section 28, that "no franchise or right shall be
granted to any individual, firm, or corporation
except under the conditions that it shall be
subject to amendment, alteration, or repeal by
the Congress of the United States." Lastly, the
Constitution of the Philippines provided, in
section 8 of Article XIII, that "no franchise or
right shall be granted to any individual, firm, or

27

companies securing their operative

rights prior to May 1, 1917, as against
those subsequently securing such right
under a certificate of public convenience
and necessity. (Motor Transit Co. et al. v.
Railroad Commission of California et al.,
209 Pac. 586.)

160 N. E. 321; Scheible vs. Hogan, 113 Ohio St.

83, 148 N. E. 581; Martz vs. Curtis [J. L.]
Cartage Co. [1937], 132 Ohio St. 271, 7 N. E.
[d]
220;
Manila
Yellow
Taxicab
Co. vs. Sabellano, 59 Phil., 773.)
Whilst
the
challenged
provisions
of
Commonwealth Act No. 454 are valid and
constitutional, we are, however, of the opinion
that the decision of the Public Service
Commission should be reversed and the case
remanded thereto for further proceedings for
the reason now to be stated. The Public Service
Commission has power, upon proper notice and
hearing, "to amend, modify or revoke at any
time any certificate issued under the provisions
of this Act, whenever the facts and
circumstances on the strength of which said
certificate
was
issued
have
been
misrepresented
or
materially
changed."
(Section 16, par. [m], Commonwealth Act No.
146.) The petitioner's application here was for
an increase of its equipment to enable it to
comply with the conditions of its certificates of
public convenience. On the matter of limitation
to twenty five (25) years of the life of its
certificates of public convenience, there had
been neither notice nor opportunity given the
petitioner to be heard or present evidence. The
Commission appears to have taken advantage
of the petitioner to augment petitioner's
equipment in imposing the limitation of twentyfive (25) years which might as well be twenty
or fifteen or any number of years. This is, to say
the least, irregular and should not be
sanctioned. There are cardinal primary rights
which must be respected even in proceedings
of this character. The first of these rights is the
right to a hearing, which includes the right of
the party interested or affected to present his
own case and submit evidence in support
thereof. In the language of Chief Justice
Hughes, in Morgan v. U.S., (304 U.S. 1, 58 S. Ct.
773, 999, 82 Law. ed. 1129), "the liberty and
property of the citizen shall be protected by the
rudimentary requirements of fair play." Not only
must the party be given an opportunity to
present his case and to adduce evidence
tending to establish the rights which he asserts
but the tribunal must consider the evidence
presented.
(Chief
Justice
Hughes
in
Morgan vs. U.S., 298 U.S. 468, 56 S. Ct. 906, 80
:Law. ed. 1288.) In the language of this Court
in Edwards vs. McCoy (22 Phil., 598), "the right
to adduce evidence, without the corresponding
duty on the part of the board to consider it, is
vain. Such right is conspicuously futile if the
person or persons to whom the evidence is
presented can thrust it aside without or
consideration." While the duty to deliberate
does not impose the obligation to decide right,
it does imply a necessity which cannot be
disregarded, namely, that of having something
to support its decision. A decision with

Moreover, Commonwealth Acts Nos. 146 and

454 are not only the organic acts of the Public
Service Commission but are "a part of the
charter of every utility company operating or
seeking to operate a franchise" in the
Philippines. (Streator Aqueduct Co. v. et al., 295
Fed. 385.) The business of a common carrier
holds such a peculiar relation to the public
interest that there is superinduced upon it the
right of public regulation. When private
property is "affected with a public interest it
ceased
to
be juris
privati only."
When,
therefore, one devotes his property to a use in
which the public has an interest, he, in effect,
grants to the public an interest in that use, and
must submit to be controlled by the public for
the common good, to the extent of the interest
he has thus created. He may withdraw his
grant by discounting the use, but so long as he
maintains the use he must submit to control.
Indeed, this right of regulation is so far beyond
question that it is well settled that the power of
the state to exercise legislative control over
public utilities may be exercised through boards
of commissioners. (Fisher vs.Yangco Steamship
Company, 31 Phil., 1, citing Munn vs. Illinois, 94
U.S. 113; Georgia R. & Bkg. Co. vs. Smith, 128
U.S. 174; Budd vs. New York, 143 U.S. 517; New
York etc. R. Co. vs. Bristol 151 U.S. 556, 571;
Connecticut etc. R. Co. vs. Woodruff, 153 U.S.
689; Louisville etc. Ry Co. vs. Kentucky, 161
U.S. 677, 695.) This right of the state to
regulate public utilities is founded upon the
police power, and statutes for the control and
regulation of utilities are a legitimate exercise
thereof, for the protection of the public as well
as of the utilities themselves. Such statutes
are, therefore, not unconstitutional, either
impairing the obligation of contracts, taking
property without due process, or denying the
equal protection of the laws, especially
inasmuch as the question whether or not
private property shall be devoted to a public
and the consequent burdens assumed is
ordinarily for the owner to decide; and if he
voluntarily places his property in public service
he cannot complain that it becomes subject to
the regulatory powers of the state. (51 C. J.,
sec. 21, pp. 9-10.) in the light of authorities
which hold that a certificate of public
convenience constitutes neither a franchise nor
contract, confers no property right, and is mere
license or privilege. (Burgess vs. Mayor &
Alderman of Brockton, 235 Mass. 95, 100, 126
N.
E.
456;
Roberto vs.Commisioners
of
Department of Public Utilities, 262 Mass. 583,

28

absolutely nothing to support it is a nullity, at

least
when
directly
attacked.
(Edwards vs. McCoy, supra.)
This
principle
emanates from the more fundamental principle
that the genius of constitutional government is
contrary to the vesting of unlimited power
anywhere. Law is both a grant and a limitation
upon power.

after another, until the vehicle was purchased

on January 29, 1953 by Rosario Avorque, the
absolute owner thereof at the time of the
accident.
In
view
of
Cresencias
answer, Plaintiffs filed leave, and was allowed,
to amend their complaint making Rosario
Avorque
a
co-Defendant; chan
roblesvirtualawlibraryand the latter, by way of
answer, admitted having purchased the
aforesaid jeepney on May 31, 1953, but alleged
in defense that she was never the public utility
operator thereof. The case then proceeded to
trial, during which, after the Plaintiffs had
presented their evidence, Defendants Guillermo
Cresencia
and
Rosario
Avorque
made
manifestations admitting that the former was
still the registered operator of the jeepney in
question in the records of the Motor Vehicles
Office and the Public Service Commission, while
the latter was the owner thereof at the time of
the accident; chan roblesvirtualawlibraryand
submitted the case for the decision on the
question of who, as between the two, should be
held liable to Plaintiffs for damages. The lower
court, by Judge Jose Zulueta, held that as far as
the public is concerned, Defendant Cresencia,
in the eyes of the law, continued to be the legal
owner of the jeepney in question; chan
roblesvirtualawlibraryand rendered judgment
against him, jointly and severally with the
driver
Brigido
Avorque,
for
P6,000
compensatory
damages,
P30,000
moral
damages,
P10,000
exemplary
damages,
P10,000 nominal damages, P5,000 attorneys
fees,
and
costs,
while Defendant Rosario
Avorque was absolved from liability. From this
judgment, Defendant Cresencia appealed.

The decision appealed from is hereby reversed

and the case remanded to the Public Service
Commission
for
further
proceedings
in
accordance with law and this decision, without
any pronouncement regarding costs. So
ordered.

[G.R. No. L-8194. July 11, 1956.]

EMERENCIANA M. VDA. DE MEDINA, ET
AL., Plaintiffs-Appellees, vs. GUILLERMO
CRESENCIA,
ET
AL., Defendants.
GUILLERMO CRESENCIA, Appellant.
DECISION
REYES, J.B.L., J.:
Appeal by Defendant Guillermo Cresencia from
the judgment of the Court of First Instance of
Manila
in
its
civil
case
No.
19890,
sentencing Appellant, jointly and severally with
his
co-Defendant Brigido
Avorque,
to
pay Plaintiffs Emerencia M. Vda. de Medina and
her minor children damages in the total amount
of P56,000, P5,000 attorneys fees, and costs.

We have already held in the case of Montoya

vs. Ignacio, 94 Phil., 182 (December 29, 1953),
which the court below cited, that the law
(section 20 [g], C. A. No. 146 as amended)
requires the approval of the Public Service
Commission in order that a franchise, or any
privilege pertaining thereto, may be sold or
leased without infringing the certificate issued
to the grantee; chan roblesvirtualawlibraryand
that if property covered by the franchise is
transferred or leased without this requisite
approval, the transfer is not binding against the
public or the Service Commission; chan
roblesvirtualawlibraryand in contemplation of
law, the grantee of record continues to be
responsible under the franchise in relation to
the Commission and to the public. There we
gave the reason for this rule to be as
follows:chanroblesvirtuallawlibrary

It appears that on May 31, 1953, passenger

jeepney bearing plate No. TPU-2232 (Manila),
driven by Brigido Avorque, smashed into a
Meralco post on Azcarraga Street, resulting in
the death of Vicente Medina, one of its
passengers. A criminal case for homicide
through reckless imprudence was filed against
Avorque (criminal case No. 22775 of the Court
of First Instance of Manila), to which he pleaded
guilty on September 9, 1953. The heirs of the
deceased, however, reserved their right to file
a separate action for damages, and on June 16,
1953, brought suit against the driver Brigido
Avorque and Appellant Guillermo Cresencia, the
registered owner and operator of the jeepney in
question. Defendant Brigido Avorque did not
file
any
answer; chan
roblesvirtualawlibrarywhile Defendant Cresenci
a answered, disclaiming liability on the ground
that he had sold the jeepney in question on
October
14,
1950
to
one
Maria
A.
Cudiamat; chan roblesvirtualawlibrarythat the
jeepney had been repeatedly sold by one buyer

cralaw Since a franchise is personal in nature

any transfer or lease thereof should be notified
to the Public Service Commission so that the
latter may take proper safeguards to protect
the interest of the public. In fact, the law
requires that, before the approval is granted,
there should be a public hearing, with notice to
all interested parties, in order that the

29

Commission may determine if there are good

and reasonable grounds justifying the transfer
or lease of the property covered by the
franchise, or if the sale or lease is detrimental
to public interest cralaw .

recognition that Plaintiffs right was violated,

the award of nominal damages is unnecessary
and improper. Anyway, ten thousand pesos
cannot, in common sense, be deemed
nominal.

The above ruling was later reiterated in the

cases of Timbol vs. Osias, L-7547, April 30,
1955 and Roque vs. Malibay Transit Inc., L8561, November 18, 1955.

With the modification that the award of

P10,000 nominal damages be eliminated, the
decision appealed from is affirmed. Costs
against Appellant

As the sale of the jeepney here in question was

admittedly without the approval of the Public
Service
Commission, Appellant herein,
Guillermo Cresencia, who is the registered
owner and operator thereof, continued to be
liable to the Commission and the public for the
consequences incident to its operation.
Wherefore, the lower court did not err in
holding him, and not the buyer Rosario
Avorque,
responsible
for
the
damages
sustained by Plaintiff by reason of the death of
Vicente Medina resulting from the reckless
negligence of the jeepneys driver, Brigido
Avorque.

G.R. No. 119528 March 26, 1997

PHILIPPINE
AIRLINES,
INC., petitioner,
vs.
CIVIL AERONAUTICS BOARD and GRAND
INTERNATIONAL
AIRWAYS,
INC., respondents.

TORRES, JR., J.:

This Special Civil Action for Certiorari and
Prohibition under Rule 65 of the Rules of Court
seeks to prohibit respondent Civil Aeronautics
Board from exercising jurisdiction over private
respondent's Application for the issuance of a
Certificate
of
Public
Convenience
and
Necessity, and to annul and set aside a
temporary operating permit issued by the Civil
Aeronautics
Board
in
favor
of
Grand
International Airways (GrandAir, for brevity)
allowing the same to engage in scheduled
domestic
air
transportation
services,
particularly the Manila-Cebu, Manila-Davao,
and converse routes.

Appellant also
argues
that
the
basis
of Plaintiffs action being the employers
subsidiary liability under the Revised Penal
Code for damages arising from his employees
criminal acts, it is Defendant Rosario Avorque
who should answer subsidiarily for the
damages sustained byPlaintiffs, since she
admits that she, and not Appellant, is the
employer of the negligent driver Brigido
Avorque.
The
argument
is
untenable,
because Plaintiffs action for damages is
independent of the criminal case filed against
Brigido Avorque, and based, not on the
employers subsidiary liability under the
Revised Penal Code, but on a breach of the
carriers contractual obligation to carry his
passengers safely to their destination (culpa
contractual). And it is also for this reason that
there is no need of first proving the insolvency
of the driver Brigido Avorque before damages
can be recovered from the carrier, for in culpa
contractual, the liability of the carrier is not
merely subsidiary or secondary, but direct and
immediate (Articles 1755, 1756, and 1759, New
Civil Code).

The main reason submitted by petitioner

Philippine Airlines, Inc. (PAL) to support its
petition is the fact that GrandAir does not
possess a legislative franchise authorizing it to
engage in air transportation service within the
Philippines or elsewhere. Such franchise is,
allegedly, a requisite for the issuance of a
Certificate of Public Convenience or Necessity
by the respondent Board, as mandated under
Section 11, Article XII of the Constitution.
Respondent GrandAir, on the other hand, posits
that a legislative franchise is no longer a
requirement for the issuance of a Certificate of
Public Convenience and Necessity or a
Temporary Operating Permit, following the
Court's pronouncements in the case of Albano
vs. Reyes, 1 as restated by the Court of Appeals
in
Avia
Filipinas
International
vs. Civil
Aeronautics
Board 2 and Silangan
Airways,
Inc. vs. Grand International Airways, Inc., and
the Hon. Civil Aeronautics Board. 3

The propriety of the damages awarded has not

been questioned, Nevertheless, it is patent
upon the record that the award of P10,000 by
way of nominal damages is untenable as a
matter of law, since nominal damages cannot
co-exist with compensatory damages. The
purpose of nominal damages is to vindicate or
recognize a right that has been violated, in
order to preclude further contest thereon; chan
roblesvirtualawlibraryand not for the purpose
of indemnifying the Plaintiff for any loss
suffered by him (Articles 2221, 2223, new Civil
Code.) Since the court below has already
awarded
compensatory
and
exemplary
damages that are in themselves a judicial

On November 24, 1994, private respondent

GrandAir applied for a Certificate of Public
Convenience and Necessity with the Board,

30

which application was docketed as CAB Case

No. EP-12711. 4 Accordingly, the Chief Hearing
Officer of the CAB issued a Notice of Hearing
setting the application for initial hearing on
December 16, 1994, and directing GrandAir to
serve a copy of the application and
corresponding notice to all scheduled Philippine
Domestic operators. On December 14, 1994,
GrandAir filed its Compliance, and requested
for the issuance of a Temporary Operating
Permit. Petitioner, itself the holder of a
legislative franchise to operate air transport
services, filed an Opposition to the application
for a Certificate of Public Convenience and
Necessity on December 16, 1995 on the
following grounds:

schedule,
contracts
on
facilities (hangars,
maintenance, lot)
etc.
C.
Approval
of
petitioner's
application would violate the
equal protection clause of the
constitution.
D. There is no urgent need and
demand for the services applied
for.
E.
To
grant
petitioner's
application would only result in
ruinous competition contrary to
Section 4(d) of R.A. 776. 5

A. The CAB has no jurisdiction to

hear the petitioner's application
until the latter has first obtained
a franchise to operate from
Congress.

At the initial hearing for the application,

petitioner raised the issue of lack of jurisdiction
of the Board to hear the application because
GrandAir did not possess a legislative franchise.

B. The petitioner's application is

deficient in form and substance
in that:

On December 20, 1994, the Chief Hearing

Officer of CAB issued an Order denying
petitioner's Opposition. Pertinent portions of
the Order read:

1. The application
does not indicate a
route
structure
including
a
computation
of
trunkline,
secondary
and
rural available seat
kilometers
(ASK)
which shall always
be maintained at a
monthly level at
least 5% and 20%
of the ASK offered
into and out of the
proposed base of
operations for rural
and
secondary,
respectively.

PAL alleges that the CAB has no

jurisdiction
to
hear
the
petitioner's application until the
latter has first obtained a
franchise
to
operate
from
Congress.
The Civil Aeronautics Board has
jurisdiction to hear and resolve
the application. In Avia Filipina
vs.CAB, CA G.R. No. 23365, it has
been ruled that under Section 10
(c) (I) of R.A. 776, the Board
possesses this specific power
and duty.
In view thereof, the opposition of
PAL on this ground is hereby
denied.

2. It does not
contain
a
project/feasibility
study,
projected
profit
and
loss
statements,
projected balance
sheet,
insurance
coverage, list of
personnel, list of
spare
parts
inventory,
tariff
structure,
documents
supportive
of
financial capacity,
route
flight

SO ORDERED.
Meantime, on December 22, 1994, petitioner
this time, opposed private respondent's
application for a temporary permit maintaining
that:
1. The applicant does
possess the required fitness
capability
of
operating
services applied for under
776; and,

31

not
and
the
RA

2. Applicant has failed to prove

that there is clear and urgent
public need for the services
applied for.6

vs. Reyes (175 SCRA 264) which

provides (inter alia) that:
a) Franchises by Congress are
not required before each and
every public utility may operate
when the law has granted certain
administrative
agencies
the
power to grant licenses for or to
authorize the operation of certain
public utilities;

On December 23, 1994, the Board promulgated

Resolution No. 119(92) approving the issuance
of a Temporary Operating Permit in favor of
Grand Air 7 for a period of three months, i.e.,
from December 22, 1994 to March 22, 1994.
Petitioner moved for the reconsideration of the
issuance of the Temporary Operating Permit on
January 11, 1995, but the same was denied in
CAB Resolution No. 02 (95) on February 2,
1995. 8 In the said Resolution, the Board
justified its assumption of jurisdiction over
GrandAir's application.

b) The Constitutional provision in

Article XII, Section 11 that the
issuance
of
a
franchise,
certificate or other form of
authorization for the operation of
a
public
utility
does
not
necessarily imply that only
Congress has the power to grant
such authorization since our
statute books are replete with
laws granting specified agencies
in the Executive Branch the
power to issue such authorization
for certain classes of public
utilities.

WHEREAS
,
the
CAB
is
specifically
authorized
under
Section 10-C (1) of Republic Act
No. 776 as follows:
(c) The Board shall have the
following specific powers and
duties:
(1) In accordance with the
provision of Chapter IV of this
Act, to issue, deny, amend
revise, alter, modify, cancel,
suspend or revoke, in whole or in
part, upon petitioner-complaint,
or upon its own initiative, any
temporary operating permit or
Certificate of Public Convenience
and
Necessity;
Provided,
however; that in the case of
foreign air carriers, the permit
shall be issued with the approval
of the President of the Republic
of the Philippines.

WHEREAS, Executive Order No.

219 which took effect on 22
January 1995, provides in Section
2.1 that a minimum of two (2)
operators in each route/link shall
be
encouraged
and
that
routes/links presently serviced by
only one (1) operator shall be
open for entry to additional
operators.
RESOLVED, (T)HEREFORE, that
the Motion for Reconsideration
filed by Philippine Airlines on
January 05, 1995 on the Grant by
this Board of a Temporary
Operating Permit (TOP) to Grand
International
Airways,
Inc.
alleging among others that the
CAB has no such jurisdiction, is
hereby DENIED, as it hereby
denied, in view of the foregoing
and considering that the grounds
relied upon by the movant are
not indubitable.

WHEREAS, such authority was

affirmed in PAL vs. CAB, (23
SCRA 992), wherein the Supreme
Court held that the CAB can even
on its own initiative, grant a TOP
even before the presentation of
evidence;
WHEREAS, more recently, Avia
Filipinas vs. CAB, (CA-GR No.
23365), promulgated on October
30, 1991, held that in accordance
with its mandate, the CAB can
issue not only a TOP but also a
Certificate of Public Convenience
and Necessity (CPCN) to a
qualified applicant therefor in the
absence
of
a
legislative
franchise, citing therein as basis
the
decision
of Albano

On March 21, 1995, upon motion by private

respondent,
the
temporary
permit was
extended for a period of six (6) months or up to
September 22, 1995.
Hence this petition, filed on April 3, 1995.
Petitioners argue that the respondent Board
acted beyond its powers and jurisdiction in

32

taking cognizance of GrandAir's application for

the issuance of a Certificate of Public
Convenience and Necessity, and in issuing a
temporary operating permit in the meantime,
since GrandAir has not been granted and does
not possess a legislative franchise to engage in
scheduled domestic air transportation. A
legislative franchise is necessary before anyone
may engage in air transport services, and a
franchise may only be granted by Congress.
This is the meaning given by the petitioner
upon a reading of Section 11, Article XII, 9 and
Section 1, Article VI, 10 of the Constitution.

predecessor-in-office,
this
Department observed that,
. . . it is useful to note the
distinction between the franchise
to operate and a permit to
commence operation. The former
is sovereign and legislative in
nature; it can be conferred only
by the lawmaking authority (17
W and P, pp. 691-697). The latter
is administrative and regulatory
in character (In re Application of
Fort Crook-Bellevue Boulevard
Line, 283 NW 223); it is granted
by an administrative agency,
such as the Public Service
Commission [now Board of
Transportation], in the case of
land transportation, and the Civil
Aeronautics Board, in case of air
services. While a legislative
franchise is a pre-requisite to a
grant of a certificate of public
convenience and necessity to an
airline company, such franchise
alone cannot constitute the
authority
to
commence
operations, inasmuch as there
are still matters relevant to such
operations
which
are
not
determined in the franchise, like
rates, schedules and routes, and
which matters are resolved in the
process of issuance of permit by
the administrative. (Secretary of
Justice opn No. 45, s. 1981)

To support its theory, PAL submits Opinion No.

163, S. 1989 of the Department of Justice,
which reads:
Dr.
Arturo
C.
Corona
Executive
Director
Civil
Aeronautics
Board
PPL Building, 1000 U.N. Avenue
Ermita, Manila
Sir:
This has reference to your
request for opinion on the
necessity
of
a
legislative
franchise
before
the
Civil
Aeronautics Board ("CAB") may
issue a Certificate of Public
Convenience
and
Necessity
and/or permit to engage in air
commerce or air transportation
to an individual or entity.
You state that during the hearing
on the application of Cebu Air for
a congressional franchise, the
House
Committee
on
Corporations
and
Franchises
contended
that
under
the
present Constitution, the CAB
may not issue the abovestated
certificate or permit, unless the
individual or entity concerned
possesses a legislative franchise.
You believe otherwise, however,
for the reason that under R.A. No.
776, as amended, the CAB is
explicitly empowered to issue
operating permits or certificates
of
public
convenience
and
necessity and that this statutory
provision is not inconsistent with
the current charter.

Indeed, authorities are agreed

that a certificate of public
convenience and necessity is an
authorization issued by the
appropriate
governmental
agency for the operation of
public services for which a
franchise is required by law
(Almario,
Transportation
and
Public Service Law, 1977 Ed., p.
293; Agbayani, Commercial Law
of the Phil., Vol. 4, 1979 Ed., pp.
380-381).
Based on the foregoing, it is clear
that a franchise is the legislative
authorization to engage in a
business activity or enterprise of
a public nature, whereas a
certificate of public convenience
and necessity is a regulatory
measure which constitutes the
franchise's
authority
to
commence operations. It is thus
logical that the grant of the
former should precede the latter.

We concur with the view

expressed
by
the
House
Committee on Corporations and
Franchises.
In
an
opinion
rendered in favor of your

33

Please be guided accordingly.

(SGD.) SEDFREY A. ORDONEZ
Secretary of Justice

The issue in this petition is whether or not

Congress, in enacting Republic Act 776, has
delegated the authority to authorize the
operation of domestic air transport services to
the respondent Board, such that Congressional
mandate for the approval of such authority is
no longer necessary.

Respondent GrandAir, on the other hand, relies

on its interpretation of the provisions of
Republic
Act
776,
which
follows
the
pronouncements of the Court of Appeals in the
cases of Avia Filipinas vs. Civil Aeronautics
Board, andSilangan Airways, Inc. vs. Grand
International Airways (supra).

Congress has granted certain administrative

agencies the power to grant licenses for, or to
authorize the operation of certain public
utilities. With the growing complexity of
modern life, the multiplication of the subjects of
governmental regulation, and the increased
difficulty of administering the laws, there is a
constantly growing tendency towards the
delegation of greater powers by the legislature,
and towards the approval of the practice by the
courts. 14 It is generally recognized that a
franchise may be derived indirectly from the
state through a duly designated agency, and to
this extent, the power to grant franchises has
frequently been delegated, even to agencies
other than those of a legislative nature. 15 In
pursuance of this, it has been held that
privileges conferred by grant by local
authorities as agents for the state constitute as
much a legislative franchise as though the
grant had been made by an act of the
Legislature. 16

In both cases, the issue resolved was whether

or not the Civil Aeronautics Board can issue the
Certificate of Public Convenience and Necessity
or Temporary Operating Permit to a prospective
domestic air transport operator who does not
possess a legislative franchise to operate as
such. Relying on the Court's pronouncement
in Albano vs.Reyes (supra), the Court of
Appeals upheld the authority of the Board to
issue such authority, even in the absence of a
legislative franchise, which authority is derived
from Section 10 of Republic Act 776, as
amended by P.D. 1462. 11
The Civil Aeronautics Board has jurisdiction
over GrandAir's Application for a Temporary
Operating Permit. This rule has been
established in the case of Philippine Air Lines
Inc., vs. Civil Aeronautics Board, promulgated
on June 13, 1968. 12 The Board is expressly
authorized by Republic Act 776 to issue a
temporary operating permit or Certificate of
Public Convenience and Necessity, and nothing
contained in the said law negates the power to
issue said permit before the completion of the
applicant's evidence and that of the oppositor
thereto on the main petition. Indeed, the CAB's
authority to grant a temporary permit "upon its
own initiative" strongly suggests the power to
exercise said authority, even before the
presentation of said evidence has begun.
Assuming arguendo that a legislative franchise
is prerequisite to the issuance of a permit, the
absence of the same does not affect the
jurisdiction of the Board to hear the application,
but tolls only upon the ultimate issuance of the
requested permit.

The trend of modern legislation is to vest the

Public Service Commissioner with the power to
regulate and control the operation of public
services
under
reasonable
rules
and
regulations, and as a general rule, courts will
not interfere with the exercise of that discretion
when it is just and reasonable and founded
upon a legal right. 17
It is this policy which was pursued by the Court
in Albano vs. Reyes. Thus, a reading of the
pertinent issuances governing the Philippine
Ports Authority, 18 proves that the PPA is
empowered to undertake by itself the operation
and management of the Manila International
Container Terminal, or to authorize its operation
and management by another by contract or
other means, at its option. The latter power
having been delegated to the to PPA, a
franchise from Congress to authorize an entity
other than the PPA to operate and manage the
MICP becomes unnecessary.

The power to authorize and control the

operation of a public utility is admittedly a
prerogative of the legislature, since Congress is
that branch of government vested with plenary
powers of legislation.

Given the foregoing postulates, we find that the

Civil Aeronautics Board has the authority to
issue a Certificate of Public Convenience and
Necessity, or Temporary Operating Permit to a
domestic air transport operator, who, though
not possessing a legislative franchise, meets all
the other requirements prescribed by the law.
Such requirements were enumerated in Section
21 of R.A. 776.

The franchise is a legislative

grant, whether made directly by
the legislature itself, or by any
one of its properly constituted
instrumentalities.
The
grant,
when made, binds the public,
and is, directly or indirectly, the
act of the state. 13

34

There is nothing in the law nor in the

Constitution, which indicates that a legislative
franchise is an indispensable requirement for
an entity to operate as a domestic air transport
operator. Although Section 11 of Article XII
recognizes
Congress'
control
over
any
franchise, certificate or authority to operate a
public utility, it does not mean Congress has
exclusive authority to issue the same.
Franchises issued by Congress are not required
before each and every public utility may
operate. 19 In many instances, Congress has
seen it fit to delegate this function to
government agencies, specialized particularly
in their respective areas of public service.

Petitioner argues that since R.A. 776 gives the

Board the authority to issue "Certificates of
Public Convenience and Necessity", this,
according to petitioner, means that a legislative
franchise is an absolute requirement. It cites a
number of authorities supporting the view that
a Certificate of Public Convenience and
Necessity is issued to a public service for which
a franchise is required by law, as distinguished
from a "Certificate of Public Convenience"
which is an authorization issued for the
operation of public services for which no
franchise, either municipal or legislative, is
required by law. 20
This submission relies on the premise that the
authority to issue a certificate of public
convenience and necessity is a regulatory
measure separate and distinct from the
authority to grant a franchise for the operation
of the public utility subject of this particular
case, which is exclusively lodged by petitioner
in Congress.

A reading of Section 10 of the same reveals the

clear intent of Congress to delegate the
authority to regulate the issuance of a license
to operate domestic air transport services:
Sec. 10. Powers and Duties of the
Board. (A) Except as otherwise
provided herein, the Board shall
have the power to regulate the
economic
aspect
of
air
transportation, and shall have
general
supervision
and
regulation of, the jurisdiction and
control over air carriers, general
sales agents, cargo sales agents,
and air freight forwarders as well
as
their
property
rights,
equipment,
facilities
and
franchise, insofar as may be
necessary for the purpose of
carrying out the provision of this
Act.

We do not agree with the petitioner.

Many and varied are the definitions of
certificates of public convenience which courts
and legal writers have drafted. Some statutes
use the terms "convenience and necessity"
while others use only the words "public
convenience." The terms "convenience and
necessity", if used together in a statute, are
usually held not to be separable, but are
construed together. Both words modify each
other and must be construed together. The
word 'necessity' is so connected, not as an
additional requirement but to modify and
qualify what might otherwise be taken as the
strict significance of the word necessity. Public
convenience and necessity exists when the
proposed facility will meet a reasonable want of
the public and supply a need which the existing
facilities do not adequately afford. It does not
mean or require an actual physical necessity or
an indispensable thing. 21

In support of the Board's authority as stated

above, it is given the following specific powers
and duties:
(C) The Board shall have the
following specific powers and
duties:

The terms "convenience" and

"necessity" are to be construed
together, although they are not
synonymous, and effect must be
given both. The convenience of
the
public
must
not
be
circumscribed by according to
the word "necessity" its strict
meaning
or
an
essential
requisites. 22

(1) In accordance with the

provisions of Chapter IV of this
Act, to issue, deny, amend,
revise, alter, modify, cancel,
suspend or revoke in whole or in
part upon petition or complaint
or upon its own initiative any
Temporary Operating Permit or
Certificate of Public Convenience
and Necessity: Provided however,
That in the case of foreign air
carriers, the permit shall be
issued with the approval of the
President of the Republic of the
Philippines.

The use of the word "necessity", in conjunction

with "public convenience" in a certificate of
authorization to a public service entity to
operate, does not in any way modify the nature
of such certification, or the requirements for
the issuance of the same. It is the law which

35

determines the requisites for the issuance of

such certification, and not the title indicating
the certificate.

(c)
The
regulation
of
air
transportation in such manner as
to recognize and preserve the
inherent advantages of, assure
the highest degree of safety in,
and foster sound economic
condition in, such transportation,
and to improve the relations
between,
and
coordinate
transportation by, air carriers;

Congress, by giving the respondent Board the

power to issue permits for the operation of
domestic transport services, has delegated to
the said body the authority to determine the
capability and competence of a prospective
domestic air transport operator to engage in
such venture. This is not an instance of
transforming the respondent Board into a minilegislative body, with unbridled authority to
choose who should be given authority to
operate domestic air transport services.

(d) The promotion of adequate,

economical and efficient service
by air carriers at reasonable
charges,
without
unjust
discriminations,
undue
preferences or advantages, or
unfair or destructive competitive
practices;

To be valid, the delegation itself

must
be
circumscribed
by
legislative restrictions, not a
"roving commission" that will
give the delegate unlimited
legislative authority. It must not
be a delegation "running riot"
and "not canalized with banks
that keep it from overflowing."
Otherwise, the delegation is in
legal effect an abdication of
legislative authority, a total
surrender by the legislature of its
prerogatives in favor of the
delegate. 23

(e) Competition between air

carriers to the extent necessary
to assure the sound development
of an air transportation system
properly adapted to the need of
the
foreign
and
domestic
commerce of the Philippines, of
the Postal Service, and of the
National Defense;
(f) To promote safety of flight in
air commerce in the Philippines;
and,

Congress, in this instance, has set specific

limitations on how such authority should be
exercised.

(g) The encouragement and

development of civil aeronautics.

Firstly, Section 4 of R.A. No. 776, as amended,

sets out the following guidelines or policies:

More importantly, the said law has enumerated

the requirements to determine the competency
of a prospective operator to engage in the
public service of air transportation.

Sec. 4. Declaration of policies. In

the exercise and performance of
its powers and duties under this
Act, the Civil Aeronautics Board
and
the
Civil
Aeronautics
Administrator shall consider the
following, among other things, as
being in the public interest, and
in accordance with the public
convenience and necessity:

Sec. 12. Citizenship requirement.

Except as otherwise provided in
the Constitution and existing
treaty or treaties, a permit
authorizing a person to engage
in domestic air commerce and/or
air transportation shall be issued
only
to
citizens
of
the
Philippines 24

(a)
The
development
and
utilization of the air potential of
the Philippines;

Sec. 21. Issuance of permit. The

Board shall issue a permit
authorizing the whole or any part
of the service covered by the
application, if it finds: (1) that the
applicant is fit, willing and able to
perform such service properly in
conformity with the provisions of
this
Act
and
the
rules,
regulations, and requirements
issued thereunder; and (2) that

(b) The encouragement and

development
of
an
air
transportation system properly
adapted to the present and
future of foreign and domestic
commerce of the Philippines, of
the Postal Service and of the
National Defense;

36

Before us is a Petition for Review 1 under Rule

45 of the Rules of Court, assailing the October
9, 2002 Decision2and the December 29, 2003
Resolution3 of the Court of Appeals (CA) in CAGR CV No. 66028. The challenged Decision
disposed as follows:

such service is required by the

public
convenience
and
necessity;
otherwise
the
application shall be denied.
Furthermore, the procedure for the processing
of the application of a Certificate of Public
Convenience
and
Necessity
had
been
established to ensure the weeding out of those
entities that are not deserving of public
service. 25

"WHEREFORE, the appeal is GRANTED. The

December 7, 1999 decision of the Regional Trial
Court of Manila, Branch 42 in Civil Case No. 9263159 is hereby REVERSED and SET ASIDE.
[Petitioner] is ordered to pay the [herein
respondent] the value of the lost cargo in the
amount of P565,000.00. Costs against the
[herein petitioner]."4

In sum, respondent Board should now be

allowed to continue hearing the application of
GrandAir for the issuance of a Certificate of
Public Convenience and Necessity, there being
no legal obstacle to the exercise of its
jurisdiction.

The assailed Resolution denied reconsideration.

The Facts

ACCORDINGLY, in view of the foregoing

considerations, the Court RESOLVED to DISMISS
the instant petition for lack of merit. The
respondent Civil Aeronautics Board is hereby
DIRECTED to CONTINUE hearing the application
of respondent Grand International Airways, Inc.
for the issuance of a Certificate of Public
Convenience and Necessity.

Ilian Silica Mining entered into a contract of

carriage with Lea Mer Industries, Inc., for the
shipment of 900 metric tons of silica sand
valued at P565,000.5 Consigned to Vulcan
Industrial and Mining Corporation, the cargo
was to be transported from Palawan to Manila.
On October 25, 1991, the silica sand was
placed on board Judy VII, a barge leased by Lea
Mer.6 During the voyage, the vessel sank,
resulting in the loss of the cargo.7

SO ORDERED.

Malayan Insurance Co., Inc., as insurer, paid

Vulcan the value of the lost cargo. 8 To recover
the amount paid and in the exercise of its right
of
subrogation,
Malayan
demanded
reimbursement from Lea Mer, which refused to
comply. Consequently, Malayan instituted a
Complaint with the Regional Trial Court (RTC) of
Manila on September 4, 1992, for the collection
of P565,000 representing the amount that
respondent had paid Vulcan.9

G.R. No. 161745 September 30, 2005

LEA MER INDUSTRIES, INC., Petitioners,
vs.
MALAYAN INSURANCE CO.,
INC.,* Respondent.

On October 7, 1999, the trial court dismissed

the Complaint, upon finding that the cause of
the loss was a fortuitous event.10 The RTC noted
that the vessel had sunk because of the bad
weather condition brought about by Typhoon
Trining. The court ruled that petitioner had no
advance knowledge of the incoming typhoon,
and that the vessel had been cleared by the
Philippine Coast Guard to travel from Palawan
to Manila.11

DECISION
PANGANIBAN, J.:
ommon carriers are bound to observe
extraordinary diligence in their vigilance over
the goods entrusted to them, as required by
the nature of their business and for reasons of
public policy. Consequently, the law presumes
that common carriers are at fault or negligent
for any loss or damage to the goods that they
transport. In the present case, the evidence
submitted by petitioner to overcome this
presumption was sorely insufficient.

Ruling of the Court of Appeals

Reversing the trial court, the CA held that the
vessel was not seaworthy when it sailed for
Manila. Thus, the loss of the cargo was
occasioned by petitioners fault, not by a
fortuitous event.12
Hence, this recourse.13

The Case

37

The Issues

Common carriers are persons, corporations,

firms or associations engaged in the business
of carrying or transporting passengers or
goods, or both -- by land, water, or air -- when
this service is offered to the public for
compensation.17 Petitioner is clearly a common
carrier, because it offers to the public its
business of transporting goods through its
vessels.18

Petitioner states the issues in this wise:

"A. Whether or not the survey report of the
cargo surveyor, Jesus Cortez, who had not been
presented as a witness of the said report during
the trial of this case before the lower court can
be admitted in evidence to prove the alleged
facts cited in the said report.

Thus, the Court corrects the trial courts finding

that petitioner became a private carrier when
Vulcan chartered it.19 Charter parties are
classified as contracts of demise (or bareboat)
and affreightment, which are distinguished as
follows:

"B. Whether or not the respondent, Court of

Appeals, had validly or legally reversed the
finding of fact of the Regional Trial Court which
clearly and unequivocally held that the loss of
the cargo subject of this case was caused by
fortuitous event for which herein petitioner
could not be held liable.

"Under the demise or bareboat charter of the

vessel, the charterer will generally be
considered as owner for the voyage or service
stipulated. The charterer mans the vessel with
his own people and becomes, in effect, the
owner pro hac vice, subject to liability to others
for damages caused by negligence. To create a
demise, the owner of a vessel must completely
and
exclusively
relinquish
possession,
command and navigation thereof to the
charterer; anything short of such a complete
transfer is a contract of affreightment (time or
voyage charter party) or not a charter party at
all."20

"C. Whether or not the respondent, Court of

Appeals, had committed serious error and
grave abuse of discretion in disregarding the
testimony of the witness from the MARINA,
Engr. Jacinto Lazo y Villegal, to the effect that
the vessel Judy VII was seaworthy at the time
of incident and further in disregarding the
testimony of the PAG-ASA weather specialist,
Ms. Rosa Barba y Saliente, to the effect that
typhoon Trining did not hit Metro Manila or
Palawan."14
In the main, the issues are as follows: (1)
whether petitioner is liable for the loss of the
cargo, and (2) whether the survey report of
Jesus Cortez is admissible in evidence.

The distinction is significant, because a demise

or bareboat charter indicates a business
undertaking
that
isprivate in
character. 21 Consequently, the rights and
obligations of the parties to a contract of
private carriage are governed principally by
their stipulations, not by the law on common
carriers.22

The Courts Ruling

The Petition has no merit.
First Issue:

The Contract in the present case was one of

affreightment, as shown by the fact that it was
petitioners crew that manned the tugboat M/V
Ayalit and
controlled
the
barge Judy
VII.23 Necessarily, petitioner was a common
carrier, and the pertinent law governs the
present factual circumstances.

Liability for Loss of Cargo

Question of Fact
The resolution of the present case hinges on
whether the loss of the cargo was due to a
fortuitous event. This issue involves primarily a
question of fact, notwithstanding petitioners
claim that it pertains only to a question of law.
As a general rule, questions of fact may not be
raised in a petition for review. 15 The present
case serves as an exception to this rule,
because the factual findings of the appellate
and the trial courts vary. 16 This Court
meticulously reviewed the records, but found
no reason to reverse the CA.

Extraordinary Diligence Required

Common
carriers
are
bound
to
observe extraordinary diligence
in
their
vigilance over the goods and the safety of the
passengers they transport, as required by the
nature of their business and for reasons of
public policy.24Extraordinary diligence requires
rendering service with the greatest skill and
foresight to avoid damage and destruction to
the goods entrusted for carriage and delivery.25

Rule on Common Carriers

Common carriers are presumed to have been at

fault or to have acted negligently for loss or

38

damage to the goods that they have

transported.26 This
presumption
can
be
rebutted only by proof that they observed
extraordinary diligence, or that the loss or
damage was occasioned by any of the following
causes:27

occasioned by a fortuitous
exempting circumstance.

"(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;
or

act

of

competent

--

an

It was precisely this circumstance that

petitioner cited to escape liability. Lea Mer
claimed that the loss of the cargo was due to
the bad weather condition brought about by
Typhoon Trining.32 Evidence was presented to
show that petitioner had not been informed of
the incoming typhoon, and that the Philippine
Coast Guard had given it clearance to begin the
voyage.33 On October 25, 1991, the date on
which the voyage commenced and the barge
sank, Typhoon Trining was allegedly far from
Palawan, where the storm warning was only
"Signal No. 1."34

"(1) Flood, storm, earthquake, lightning, or

other natural disaster or calamity;

"(5) Order
authority."28

event

The evidence presented by petitioner in

support of its defense of fortuitous event was
sorely insufficient. As required by the pertinent
law, it was not enough for the common carrier
to show that there was an unforeseen or
unexpected occurrence. It had to show that it
was free from any fault -- a fact it miserably
failed to prove.

public

Rule on Fortuitous Events

Article 1174 of the Civil Code provides that "no
person shall be responsible for a fortuitous
event which could not be foreseen, or which,
though foreseen, was inevitable." Thus, if the
loss or damage was due to such an event, a
common carrier is exempted from liability.

First, petitioner presented no evidence that it

had attempted to minimize or prevent the loss
before, during or after the alleged fortuitous
event.35 Its witness, Joey A. Draper, testified
that he could no longer remember whether
anything had been done to minimize loss when
water started entering the barge.36 This fact
was confirmed during his cross-examination, as
shown by the following brief exchange:

Jurisprudence defines the elements of a

"fortuitous event" as follows: (a) the cause of
the unforeseen and unexpected occurrence, or
the failure of the debtors to comply with their
obligations, must have been independent of
human will; (b) the event that constituted
the caso fortuito must have been impossible to
foresee or, if foreseeable, impossible to avoid;
(c) the occurrence must have been such as to
render it impossible for the debtors to fulfill
their obligation in a normal manner; and (d) the
obligor must have been free from any
participation in the aggravation of the resulting
injury to the creditor.29

"Atty. Baldovino, Jr.:

Other than be[a]ching the barge Judy VII, were
there other precautionary measure[s] exercised
by you and the crew of Judy VII so as to prevent
the los[s] or sinking of barge Judy VII?
xxxxxxxxx
Atty. Baldovino, Jr.:

To excuse the common carrier fully of any

liability, the fortuitous event must have been
the proximate and only cause of the
loss.30 Moreover, it should have exercised due
diligence to prevent or minimize the loss
before, during and after the occurrence of the
fortuitous event.31

Your Honor, what I am asking [relates to the]

action taken by the officers and crew of tugboat
Ayalit and barge Judy VII x x x to prevent the
sinking of barge Judy VII?
xxxxxxxxx

Loss in the Instant Case

Court:

There is no controversy regarding the loss of

the cargo in the present case. As the common
carrier, petitioner bore the burden of proving
that it had exercised extraordinary diligence to
avoid the loss, or that the loss had been

Mr. witness, did the captain of that tugboat give

any instruction on how to save the barge Judy
VII?
Joey Draper:

39

where the sinking occurred.49 Evidently, the

existence of the holes was proved by the
testimonies of the witnesses, not merely by
Cortez Survey Report.

I can no longer remember sir, because that

happened [a] long time ago."37
Second, the alleged fortuitous event was not
the sole and proximate cause of the loss. There
is a preponderance of evidence that the barge
was not seaworthy when it sailed for
Manila.38 Respondent was able to prove that, in
the hull of the barge, there were holes that
might have caused or aggravated the
sinking.39 Because
the
presumption
of
negligence or fault applied to petitioner, it was
incumbent upon it to show that there were no
holes; or, if there were, that they did not
aggravate the sinking.

Rule on Independently
Relevant Statement
That witnesses must be examined and
presented during the trial,50 and that their
testimonies must be confined to personal
knowledge is required by the rules on evidence,
from which we quote:
"Section 36. Testimony generally confined to
personal knowledge; hearsay excluded. A
witness can testify only to those facts which he
knows of his personal knowledge; that is, which
are derived from his own perception, except as
otherwise provided in these rules."51

Petitioner offered no evidence to rebut the

existence of the holes. Its witness, Domingo A.
Luna, testified that the barge was in "tip-top" or
excellent condition,40 but that he had not
personally inspected it when it left Palawan. 41
The submission of the Philippine Coast Guards
Certificate of Inspection of Judy VII, dated July
31, 1991, did not conclusively prove that the
barge was seaworthy.42 The regularity of the
issuance of the Certificate is disputably
presumed.43 It could be contradicted by
competent evidence, which respondent offered.
Moreover, this evidence did not necessarily
take into account the actual condition of
the vessel at the time of the commencement of
the voyage.44

On this basis, the trial court correctly refused to

admit
Jesus
Cortezs
Affidavit,
which
respondent had offered as evidence. 52 Wellsettled is the rule that, unless the affiant is
presented as a witness, an affidavit is
considered hearsay.53
An exception to the foregoing rule is that on
"independently relevant statements." A report
made by a person is admissible if it is intended
to prove the tenor, not the truth, of the
statements.54 Independent of the truth or the
falsity of the statement given in the report, the
fact that it has been made is relevant. Here,
the hearsay rule does not apply.55

Second Issue:
Admissibility of the Survey Report
Petitioner
claims
that
the
Survey
Report45 prepared by Jesus Cortez, the cargo
surveyor, should not have been admitted in
evidence. The Court partly agrees. Because he
did not testify during the trial,46 then the Report
that he had prepared was hearsay and
therefore inadmissible for the purpose of
proving the truth of its contents.

In the instant case, the challenged Survey

Report prepared by Cortez was admitted only
as part of the testimonies of respondents
witnesses. The referral to Cortezs Report was
in relation to Manlapigs final Adjustment
Report. Evidently, it was the existence of the
Survey Report that was testified to. The
admissibility of that Report as part of the
testimonies of the witnesses was correctly
ruled upon by the trial court.

The Survey Report Not the Sole Evidence

The facts reveal that Cortezs Survey Report
was used in the testimonies of respondents
witnesses -- Charlie M. Soriano; and Federico S.
Manlapig, a cargo marine surveyor and the
vice-president
of
Toplis
and
Harding
Company.47 Soriano testified that the Survey
Report had been used in preparing the final
Adjustment
Report
conducted
by
their
company.48 The final Report showed that the
barge was not seaworthy because of the
existence of the holes. Manlapig testified that
he had prepared that Report after taking into
account the findings of the surveyor, as well as
the pictures and the sketches of the place

At any rate, even without the Survey Report,

petitioner has already failed to overcome the
presumption of fault that applies to common
carriers.
WHEREFORE, the Petition is DENIED and the
assailed
Decision
and
Resolution
are AFFIRMED. Costs against petitioner.
G.R. No. 165647
PHILIPPINES
FIRST
INC., Petitioner,

40

March 26, 2009

INSURANCE

CO.,

vs.
WALLEM
PHILS.
SHIPPING,
INC.,
UNKNOWN OWNER AND/OR UNKNOWN
CHARTERER
OF
THE
VESSEL
M/S
"OFFSHORE MASTER" AND "SHANGHAI
FAREAST
SHIP
BUSINESS
COMPANY," Respondents.

condition. Upon inspection, it was discovered

that 63,065.00 kilograms of the shipment had
sustained
unrecovered
spillages,
while
58,235.00 kilograms had been exposed and
contaminated, resulting in losses due to
depreciation and downgrading.11
On 29 April 1996, the consignee filed a formal
claim with Wallem for the value of the damaged
shipment, to no avail. Since the shipment was
insured with petitioner Philippines First
Insurance Co., Inc. against all risks in the
amount of P2,470,213.50,12 the consignee filed
a formal claim13 with petitioner for the damage
and losses sustained by the shipment. After
evaluating the invoices, the turn-over survey,
the
bad
order
certificate
and
other
documents,14 petitioner found the claim to be in
order and compensable under the marine
insurance policy. Consequently, petitioner paid
the consignee the sum of P397,879.69 and the
latter signed a subrogation receipt.

DECISION
TINGA, J.:
Before us is a Rule 45 petition1 which seeks the
reversal of the Decision2 and Resolution3 of the
Court of Appeals in CA-G.R. No. 61885. The
Court of Appeals reversed the Decision4 of the
Regional Trial Court (RTC) of Manila, Branch 55
in Civil Case No. 96-80298, dismissing the
complaint for sum of money.
The facts of the case follow.5
On or about 2 October 1995, Anhui Chemicals
Import & Export Corporation loaded on board
M/S Offshore Master a shipment consisting of
10,000 bags of sodium sulphate anhydrous 99
PCT Min. (shipment), complete and in good
order for transportation to and delivery at the
port of Manila for consignee, L.G. Atkimson
Import-Export, Inc. (consignee), covered by a
Clean Bill of Lading. The Bill of Lading reflects
the gross weight of the total cargo at 500,200
kilograms.6 The Owner and/or Charterer of M/V
Offshore Master is unknown while the shipper
of the shipment is Shanghai Fareast Ship
Business Company. Both are foreign firms doing
business in the Philippines, thru its local ship
agent, respondent Wallem Philippines Shipping,
Inc. (Wallem).7

Petitioner, in the exercise of its right of

subrogation, sent a demand letter to Wallem
for the recovery of the amount paid by
petitioner to the consignee. However, despite
receipt of the letter, Wallem did not settle nor
even send a response to petitioners claim. 15
Consequently, petitioner instituted an action
before
the
RTC
for
damages
against
respondents for the recovery ofP397,879.69
representing the actual damages suffered by
petitioner plus legal interest thereon computed
from the time of the filing of the complaint until
fully paid and attorneys fees equivalent to 25%
of the principal claim plus costs of suit.
In a decision16 dated 3 November 1998, the RTC
ordered
respondents
to
pay
petitioner P397,879.69 with 6% interest plus
attorneys fees and costs of the suit. It
attributed the damage and losses sustained by
the shipment to the arrastre operators
mishandling in the discharge of the shipment.
Citing Eastern Shipping Lines, Inc. v. Court of
Appeals,17 the RTC held the shipping company
and the arrastre operator solidarily liable since
both the arrastre operator and the carrier are
charged with and obligated to deliver the goods
in good order condition to the consignee. It also
ruled that the ship functioned as a common
carrier and was obliged to observe the degree
of care required of a common carrier in
handling cargoes. Further, it held that a notice
of loss or damage in writing is not required in
this case because said goods already
underwent a joint inspection or survey at the
time of receipt thereof by the consignee, which
dispensed with the notice requirement.

On or about 16 October 1995, the shipment

arrived at the port of Manila on board the
vessel M/S Offshore Master from which it was
subsequently discharged. It was disclosed
during the discharge of the shipment from the
carrier that 2,426 poly bags (bags) were in bad
order and condition, having sustained various
degrees of spillages and losses. This is
evidenced by the Turn Over Survey of Bad
Order Cargoes (turn-over survey) of the
arrastre operator, Asian Terminals, Inc. (arrastre
operator).8 The bad state of the bags is also
evinced by the arrastre operators Request for
Bad Order Survey.9
Asia Star Freight Services, Inc. undertook the
delivery of the subject shipment from the pier
to the consignees warehouse in Quezon
City,10 while the final inspection was conducted
jointly by the consignees representative and
the cargo surveyor. During the unloading, it
was found and noted that the bags had been
discharged in damaged and bad order

The Court of Appeals reversed and set aside

the RTCs decision.18 According to the appellate

41

court, there is no solidary liability between the

carrier and the arrastre operator because it was
clearly established by the court a quo that the
damage and losses of the shipment were
attributed to the mishandling by the arrastre
operator in the discharge of the shipment. The
appellate court ruled that the instant case falls
under an exception recognized inEastern

before it was turned over and delivered to the

arrastre operator.
The trial court, however, found through the
testimony of Mr. Maximino Velasquez Talens, a
cargo surveyor of Oceanica Cargo Marine
Surveyors Corporation, that the losses and
damage to the cargo were caused by the
mishandling
of
the
arrastre
operator.
Specifically, that the torn cargo bags resulted
from the use of steel hooks/spikes in piling the
cargo bags to the pallet board and in pushing
the bags by the stevedores of the arrastre
operator to the tug boats then to the
ports.25 The appellate court affirmed the finding
of mishandling in the discharge of cargo and it
served as its basis for exculpating respondents
from liability, rationalizing that with the fault of
the arrastre operator in the unloading of the
cargo established it should bear sole liability for
the cost of the damaged/lost cargo.

Shipping Lines.19 Hence, the arrastre operator

was held solely liable to the consignee.
Petitioner raises the following issues:
1. Whether or not the Court of Appeals
erred in not holding that as a common
carrier, the carriers duties extend to the
obligation to safely discharge the cargo
from the vessel;
2. Whether or not the carrier should be
held liable for the cost of the damaged
shipment;

While it is established that damage or losses

were incurred by the shipment during the
unloading, it is disputed who should be liable
for the damage incurred at that point of
transport. To address this issue, the pertinent
laws and jurisprudence are examined.

3. Whether or not Wallems failure to

answer the extra judicial demand by
petitioner
for
the
cost
of
the
lost/damaged shipment is an implied
admission of the formers liability for
said goods;

Common carriers, from the nature of their

business and for reasons of public policy, are
bound to observe extraordinary diligence in the
vigilance over the goods transported by
them.26 Subject
to
certain
exceptions
enumerated under Article 173427 of the Civil
Code, common carriers are responsible for the
loss, destruction, or deterioration of the goods.
The extraordinary responsibility of the common
carrier lasts from the time the goods are
unconditionally placed in the possession of, and
received by the carrier for transportation until
the
same
are
delivered,
actually
or
constructively, by the carrier to the consignee,
or to the person who has a right to receive
them.28

4. Whether or not the courts below erred

in giving credence to the testimony of
Mr. Talens.
It is beyond question that respondents vessel
is a common carrier.20 Thus, the standards for
determining the existence or absence of the
respondents liability will be gauged on the
degree of diligence required of a common
carrier. Moreover, as the shipment was an
exercise of international trade, the provisions of
the Carriage of Goods
by Sea Act21 (COGSA), together with the Civil
Code and the Code of Commerce, shall apply. 22

For marine vessels, Article 619 of the Code of

Commerce provides that the ship captain is
liable for the cargo from the time it is turned
over to him at the dock or afloat alongside the
vessel at the port of loading, until he delivers it
on the shore or on the discharging wharf at the
port of unloading, unless agreed otherwise.
In Standard Oil Co. of New York v. Lopez
Castelo,29 the Court interpreted the ship
captains liability as ultimately that of the
shipowner by regarding the captain as the
representative of the ship owner.

The first and second issues raised in the

petition will be resolved concurrently since they
are interrelated.
It is undisputed that the shipment was
damaged prior to its receipt by the insured
consignee. The damage to the shipment was
documented by the turn-over survey23 and
Request for Bad Order Survey. 24 The turn-over
survey, in particular, expressly stipulates that
2,426 bags of the shipment were received by
the arrastre operator in damaged condition.
With these documents, petitioner insists that
the shipment incurred damage or losses while
still in the care and responsibility of Wallem and

Lastly, Section 2 of the COGSA provides that

under every contract of carriage of goods by
sea, the carrier in relation to the loading,
handling, stowage, carriage, custody, care, and
discharge of such goods, shall be subject to the

42

responsibilities and liabilities and entitled to the

rights and immunities set forth in the
Act.30 Section 3 (2) thereof then states that
among the carriers responsibilities are to
properly and carefully load, handle, stow, carry,
keep, care for, and discharge the goods carried.

and necessarily solidarily liable as the facts of a

case may vary the rule.
Thus, in this case the appellate court is correct
insofar as it ruled that an arrastre operator and
a carrier may not be held solidarily liable at all
times. But the precise question is which entity
had custody of the shipment during its
unloading from the vessel?

The above doctrines are in fact expressly

incorporated in the bill of lading between the
shipper Shanghai Fareast Business Co., and the
consignee, to wit:

The aforementioned Section 3(2) of the COGSA

states that among the carriers responsibilities
are to properly and carefully load, care for and
discharge the goods carried. The bill of lading
covering the subject shipment likewise
stipulates that the carriers liability for loss or
damage to the goods ceases after its discharge
from the vessel. Article 619 of the Code of
Commerce holds a ship captain liable for the
cargo from the time it is turned over to him
until its delivery at the port of unloading.

4.
PERIOD
OF
RESPONSIBILITY.
The
responsibility of the carrier shall commence
from the time when the goods are loaded on
board the vessel and shall cease when they are
discharged from the vessel.
The Carrier shall not be liable of loss of or
damage to the goods before loading and after
discharging from the vessel, howsoever such
loss or damage arises.31

In a case decided by a U.S. Circuit

Court, Nichimen Company v. M./V. Farland, 37 it
was ruled that like the duty of seaworthiness,
the duty of care of the cargo is nondelegable,38 and the carrier is accordingly
responsible for the acts of the master, the
crew, the stevedore, and his other agents. It
has also been held that it is ordinarily the duty
of the master of a vessel to unload the cargo
and place it in readiness for delivery to the
consignee, and there is an implied obligation
that this shall be accomplished with sound
machinery, competent hands, and in such
manner that no unnecessary injury shall be
done thereto.39 And the fact that a consignee is
required to furnish persons to assist in
unloading a shipment may not relieve the
carrier of its duty as to such unloading.40

On the other hand, the functions of an arrastre

operator involve the handling of cargo
deposited on the wharf or between the
establishment of the consignee or shipper and
the ship's tackle.32 Being the custodian of the
goods discharged from a vessel, an arrastre
operator's duty is to take good care of the
goods and to turn them over to the party
entitled to their possession.33
Handling cargo is mainly the arrastre operator's
principal work so its drivers/operators or
employees should observe the standards and
measures necessary to prevent losses and
damage to shipments under its custody.34
In Firemans Fund Insurance Co. v. Metro Port
Service,
Inc.35 the
Court
explained
the
relationship and responsibility of an arrastre
operator to a consignee of a cargo, to quote:

The exercise of the carriers custody and

responsibility over the subject shipment during
the unloading actually transpired in the instant
case during the unloading of the shipment as
testified by Mr. Talens, the cargo surveyor, to
quote:

The legal relationship between the consignee

and the arrastre operator is akin to that of a
depositor and warehouseman. The relationship
between the consignee and the common carrier
is similar to that of the consignee and the
arrastre operator. Since it is the duty of the
ARRASTRE to take good care of the goods that
are in its custody and to deliver them in good
condition to the consignee, such responsibility
also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore
charged with and obligated to deliver the goods
in good condition to the consignee.(Emphasis
supplied) (Citations omitted)

Atty. Repol:
- Do you agree with me that Wallem
Philippines is a shipping [company]?
A Yes, sir.
Q And, who hired the services of the
stevedores?
A The checker of the vessel of Wallem,
sir.41

The liability of the arrastre operator was

reiterated in Eastern Shipping Lines, Inc. v.
Court of Appeals36 with the clarification that the
arrastre operator and the carrier are not always

xxx

43

Q Mr. Witness, during the discharging

operation of this cargo, where was the
master of the vessel?

courts finding of actual damages in the

amount of P397,879.69 has to be sustained.
On the credibility of Mr. Talens which is the
fourth issue, the general rule in assessing
credibility of witnesses is well-settled:

A On board the vessel, supervising, sir.

Q And, observed
operation?

the

discharging
x x x the trial court's evaluation as to the
credibility of witnesses is viewed as correct and
entitled to the highest respect because it is
more competent to so conclude, having had the
opportunity
to
observe
the
witnesses'
demeanor and deportment on the stand, and
the manner in which they gave their
testimonies. The trial judge therefore can
better determine if such witnesses were telling
the truth, being in the ideal position to weigh
conflicting testimonies. Therefore, unless the
trial judge plainly overlooked certain facts of
substance and value which, if considered,
might affect the result of the case, his
assessment on credibility must be respected. 46

A Yes, sir.
Q And, what did the master of the vessel
do when the cargo was being unloaded
from the vessel?
A He would report to the head checker,
sir.
Q He did not send the stevedores to
what manner in the discharging of the
cargo from the vessel?
A And head checker po and siyang
nagpapatakbo ng trabaho sa loob ng
barko, sir.42

Contrary to petitioners stance on the third

issue, Wallems failure to respond to its
demand letter does not constitute an implied
admission of liability. To borrow the words of Mr.
Justice Oliver Wendell Holmes, thus:

xxx

A man cannot make evidence for himself by

writing a letter containing the statements that
he wishes to prove. He does not make the
letter evidence by sending it to the party
against whom he wishes to prove the facts
[stated therein]. He no more can impose a duty
to answer a charge than he can impose a duty
to pay by sending goods. Therefore a failure to
answer such adverse assertions in the absence
of further circumstances making an answer
requisite or natural has no effect as an
admission.47

Q Is he [the head checker] an employee

of the company?
A He is a contractor/checker of Wallem
Philippines, sir.43
Moreover, the liability of Wallem is highlighted
by Mr. Talens notes in the Bad Order
Inspection, to wit:
"The bad order torn bags, was due to
stevedores[] utilizing steel hooks/spikes in
piling the cargo to [the] pallet board at the
vessels cargo holds and at the pier designated
area before and after discharged that cause the
bags to torn [sic]."44 (Emphasis supplied)

With respect to the attorneys fees, it is evident

that petitioner was compelled to litigate this
matter to protect its interest. The RTCs award
of P20,000.00 as attorneys fees is reasonable.

The records are replete with evidence which

show that the damage to the bags happened
before and after their discharge45 and it was
caused by the stevedores of the arrastre
operator who were then under the supervision
of Wallem.1awphi1.net

WHEREFORE, the petition is GRANTED. The

Decision of the Court of Appeals dated 22 June
2004 and its Resolution dated 11 October 2004
are REVERSED and SET ASIDE. Wallem is
ordered
to
pay
petitioner
the
sum
of P397,879.69, with interest thereon at 6% per
annum from the filing of the complaint on 7
October 1996 until the judgment becomes final
and executory. Thereafter, an interest rate of
12%
per
annum
shall
be
imposed.48Respondents are also ordered to pay
petitioner the amount of P20,000.00 for and as
attorneys fees, together with the costs of the
suit.

It is settled in maritime law jurisprudence that

cargoes while being unloaded generally remain
under the custody of the carrier. In the instant
case, the damage or losses were incurred
during the discharge of the shipment while
under
the
supervision
of
the
carrier.
Consequently, the carrier is liable for the
damage or losses caused to the shipment. As
the cost of the actual damage to the subject
shipment has long been settled, the trial

44