EN BANC

[G.R. No. L-22545. November 28, 1969.]

BALDOMERO S. LUQUE AND OTHER PASSENGERS FROM THE PROVINCE OF CAVITE AND BATANGAS; AND PUBLIC
SERVICE OPERATORS FILOMENA ABALOS, AND OTHERS,Petitioners, v. HON. ANTONIO J. VILLEGAS, MAYOR OF
MANILA; MUNICIPAL BOARD OF MANILA; MANILA POLICE DEPARTMENT; HON. ENRIQUE MEDINA, PSC COMMISSIONER;
PUBLIC SERVICE COMMISSION; SAULOG TRANSIT, INC.; AND BATANGAS TRANSPORTATION Co., INC., Respondents.
Samuel Bautista, Arturo J. Clemente, Emigdio Arcilla, Delfin Villanueva and Baldomero S. Luque, for Petitioners.
Generoso O. Almario and Paulino S. Gueco for respondents Enrique Medina and The Public Service Commission.

5. CONSTITUTIONAL LAW; THEORY OF VESTED RIGHTS; NEGATED BY ENVIRONMENTAL CHANGES; POLICE POWER
EXERCISED. It is no argument to support the vested rights theory that petitioning passengers have enjoyed the privilege of
having been continuously transported even before the outbreak of the war directly without transfer from the provinces to places
inside Manila up to the respective bus terminals in said City. Times have changed. Vehicles have increased in number. Traffic
congestion has moved from bad to worse, from tolerable to critical. The number of people who use the thoroughfares has multiplied.
It is because of all these that it has become necessary for the police power to step in, not for the benefit of the few, but for the
benefit of the many.
6. ID. PUBLIC WELFARE; BASIS OF REGULATORY MEASURE. Public welfare lies at the bottom of any regulatory measure
designed "to relieve congestion of traffic, which is, to say the least, a menace to public safety." As a corollary, measures calculated
to promote the safety and convenience of the people using the thorough fares by the regulation of vehicular traffic, present a proper
subject for the exercise of police power.

Graciano C. Regala & Associates for respondents Saulog Transit, Inc. and Batangas Transportation Co., Inc.
Gregorio A. Ejercito and Felix C. Chavez for respondents Antonio J. Villegas, Et. Al.

SYLLABUS

1. CONSTITUTIONAL LAW; ORDINANCE NO. 4986 OF CITY OF MANILA AND PUBLIC SERVICE COMMISSIONER MEDINAS
ADMINISTRATIVE ORDER NO. 1, CONSTITUTIONAL. The constitutionality and legality of Ordinance No. 4986 and
Administrative Order No. 1, both issued by the Public Service Commissioner Medina, have separately passed judicial tests before
this Court in the cases of Lagman v. City of Manila and Lagman v. Medina.
2. PUBLIC SERVICE ACT; FRANCHISE; CERTIFICATE OF PUBLIC CONVENIENCE; NO VESTED RIGHT ACQUIRED BY
VIRTUE THEREOF. Petitioners argument pales on the face of the fact that the very nature of a certificate of public convenience
is at cross purposes with the concept of vested rights. To this day, the accepted view, at least insofar as the State is concerned, is
that "a certificate of public convenience constitutes neither a franchise nor a contract, confers no property right, and is a mere
license or privilege." The holder of such certificate does not acquire a property right in the route covered thereby. Nor does it confer
upon the holder any proprietary right or interest or franchise in the public highways. Revocation of this certificate deprives him of no
vested right. Little reflection is necessary to show that the certificate of public convenience is granted with so many strings attached.
New and additional burdens, alteration of the certificate, and even revocation or annulment thereof is reserved to the State.
3. ID.; PUBLIC SERVICE COMMISSION; POWERS. The Public Service Commission, a government agency vested by law with
"jurisdiction, supervision, and control over all public services and their franchises, equipment, and other properties is empowered,
upon proper notice and hearing, amongst others: (1)" (t)o amend, modify or revoke at any time a certificate issued under the
provisions of this Act (Commonwealth Act 146, as amended), whenever the facts and circumstances on the strength of which said
certificate was issued have been misrepresented or materially changed" ; and (2)" (t)o suspend or revoke any certificate issued
under the provisions of this Act whenever the holder thereof has violated or willfully and contumaciously refused to comply with any
order, rule or regulation of the Commission or any provision of the Act; Provided, That the Commission for good cause, may prior to
the hearing suspend for a period not to exceed thirty days any certificate or the exercise of any right or authority issued or granted
under this Act by order of the Commission, whenever such step shall in the judgment of the Commission be necessary to avoid
serious and irreparable damage or inconvenience to the public or to private interests. Jurisprudence echoes the rule that the
Commission is authorized to make reasonable rules and regulations for the operation of public services and to enforce them. In
reality, all certificates of public convenience issued are subject to the condition that all public services "shall observe and
comply(with) . . . all the rules and regulations of the Commission relative to" the service.
4. ID.; PUBLIC SERVICE; REQUIREMENT OF COMPLIANCE WITH PROVINCIAL RESOLUTIONS AND MUNICIPAL
ORDINANCES. Public services must also reckon with provincial resolutions and municipal ordinances relating to the operation of
public utilities within the province or municipality concerned. The Commission can require compliance with these provincial
resolutions or municipal ordinances.

7. ID.; ORDINANCE 4986 NOT A CLASS LEGISLATION. It is true that under ordinance 4986 inter-urban buses are allowed to
enter the City of Manila, while provincial buses are not given the same privilege, although they are allowed shuttle service into the
City of Manila. There is no point, however, in placing provincial buses on the same level as the inter-urban buses plying to and from
Manila and its suburban towns and cities. Inter-urban buses are used for transporting passengers only. Provincial buses are used for
passengers and freight. Provincial buses, because of the freight or baggage which the passengers usually bring along with them,
take longer time to load or unload than inter-urban buses. Provincial buses generally travel along national highways and provincial
roads, cover long distances, have fixed trip schedules. Provincial buses are greater in size and weight than inter-urban buses. The
routes of inter-urban buses are short, covering contiguous municipalities and cities only. Inter-urban buses mainly use city and
municipal streets. These distinctions generally hold true between provincial passenger jeepneys and inter-urban jeepneys.
8. ID.; EQUAL PROTECTION CLAUSE NOT TRANSGRESSED IN INSTANT CASE. The obvious inequality in treatment is but
the result flowing from the classification made by said Ordinance 4986 and does not trench upon the equal protection clause. The
least that can be said is that persons engaged in the same business, "are subjected to different restrictions or are held entitled to
different privileges under the same conditions."cralaw virtua1aw library
9. ID.; ID.; CLASSIFICATION PROPER. Neither is there merit to the charge that under said Ordinance 4986 private vehicles are
being unjustifiably favored over public vehicles. Private vehicles are not geared for profit, usually have but one destination. Public
vehicles are operated primarily for profit and for this reason are continually operated to make the most of time. Public and private
vehicles belong to different classes. Differences in class beget differences in privileges. And petitioners have no cause to complain.

DECISION

SANCHEZ, J.:

Challenged as unconstitutional, illegal and unjust in these original proceedings for certiorari and mandamus are two substantially
identical bus ban measures: (1) Ordinance No. 4986 of the City of Manila approved on July 13, 1964, entitled "An Ordinance
Rerouting Traffic on Roads and Streets in the City of Manila, and for Other Purposes," and (2) Administrative Order No. 1, series of
1964, dated February 7, 1964, and Administrative Order No. 3, series of 1964, dated April 21, 1964, both issued by Commissioner
Enrique Medina (hereinafter referred to as the Commissioner) of the Public Service Commission.
Original petitioners are passengers from the provinces of Cavite and Batangas who ride on buses plying along the routes between
the said provinces and Manila. Other petitioners are public service operators operating PUB and PUJ public service vehicles from
the provinces with terminals in Manila, while the rest are those allegedly operating PUB, PUJ or AC motor vehicles operating within
Manila and suburbs.

Ordinance 4986, amongst others, provides that:jgc:chanrobles.com.ph

which shall be identified by a sticker signed and furnished by the PSC and by the Mayors of the affected Cities and municipalities
and which shall be carried on a prominent place of the vehicle about the upper middle part of the windshield.

"RULE II. ENTRY POINTS AND ROUTES OF PROVINCIAL PASSENGER BUSES AND JEEPNEYS.
"1. Provincial passenger buses and jeepneys (PUB and PUJ) shall be allowed to enter Manila, but only through the following entry
points and routes, from 6:30 A.M. to 8:30 P.M. everyday except Sundays and holidays:chanrob1es virtual 1aw library
x

(m) Those coming from the south through F. B. Harrison shall proceed to Mabini; turn right to Harrison Boulevard; turn right to Taft
Avenue and proceed towards Pasay City;

"All such public utility vehicles authorized by this Order to enter the City of Manila and to carry their passengers thru the boundary
line, are not permitted to load or unload or to pick and/or drop passengers along the way, but must do so only in the following
places:chanrob1es virtual 1aw library
x

(n) Those coming from the south through Taft Avenue shall turn left at Vito Cruz; turn right to Dakota; turn right to Harrison
Boulevard; turn right to Taft Avenue; thence proceed towards Pasay City;

"c. Vehicles coming from the SOUTH may load or unload at the San Andres-Taft Rotonda; at Plaza Lawton or at the Corner of
Harrison and Mabini Streets near the Manila Zoo."cralaw virtua1aw library

Loading and unloading shall be allowed only at Harrison Boulevard, between A. Mabini and Taft Avenue;

On April 21, 1964, the Commissioner issued Administrative Order No. 3 which resolved motions for reconsideration (of the first
administrative order Administrative Order No. 1, series of 1964) filed by several affected operators. This order (No. 3), amongst
others, states that only 10% of the provincial buses and jeepneys shall be allowed to enter Manila; however, provincial buses and
jeepneys "operating within a radius of 50 kms. from Manila City Hall and whose business is more on the Manila end than on the
provincial end are given fifteen per cent to prevent a dislocation of their business; provided that operators having less than five units
are not permitted to cross the boundary and shall operate exclusively on the provincial end." This order also allocated the number of
units each provincial bus operator is allowed to operate within the City of Manila.

"RULE III. FLEXIBLE SHUTTLE BUS SERVICE

"1. In order that provincial commuters shall not be unduly inconvenienced as a result of the implementation of these essential traffic
control regulations, operators of provincial passenger buses shall be allowed to provide buses to shuttle their passengers from their
respective entry control points, under the following conditions:chanrob1es virtual 1aw library
(a) Each provincial bus company or firm shall be allowed such number of shuttle buses proportionate to the number of units
authorized it, the ratio to be determined by the Chief, Traffic Control Bureau, based on his observations as to the actual needs of
commuters and traffic volume; in no case shall the allocation be more than one shuttle bus for every 10 authorized units, or fraction
thereof.
(b) No shuttle bus shall enter Manila unless the same shall have been provided with identification stickers as required under Rule IV
hereof, which shall be furnished and allocated by the Chief, Traffic Control Bureau to each provincial bus company or firm.
(c) All such shuttle buses are not permitted to load or unload or to pick and/or drop passengers along the way but must do so only in
the following places:chanrob1es virtual 1aw library
x

(3) South.
(a) Harrison Boulevard, between Dakota and Taft Avenue."cralaw virtua1aw library
Administrative Order No. 1, series of 1964, issued by the Commissioner, in part, provides:jgc:chanrobles.com.ph
"2. All public utilities including jeepneys heretofore authorized to operate from the City of Manila to any point in Luzon, beyond the
perimeter of Greater Manila, shall carry the words For Provincial Operation in bold and clear types on both sides or on one side and
at the back of the vehicle and must not be less than 12 inches in dimension. All such vehicles marked For Provincial Operation are
authorized to operate outside the perimeter of Greater Manila in accordance with their respective certificates of public convenience,
and are not authorized to enter or to operate beyond the boundary line fixed in our order of March 12, 1963 and July 22, 1963, with
the exception of those vehicles authorized to carry their provincial passengers thru the boundary line up to their Manila terminal

1. On the main, nothing new there is in the present petition. For, the validity of Ordinance 4986 and the Commissioners
Administrative Order No. 1, series of 1964, here challenged, has separately passed judicial tests in two cases brought before this
Court.
In Lagman v. City of Manila (June 30, 1966), 17 SCRA 579, petitioner Lagman was an operator of PU auto trucks with fixed routes
and regular terminals for the transportation of passengers and freight on the Bocaue (Bulacan) Paraaque (Rizal) line via Rizal
Avenue, Plaza Goiti, Sta. Cruz Bridge, Plaza Lawton, P. Burgos, Taft Avenue. and Taft Avenue Extension, Manila. He sought to
prohibit the City of Manila, its officers and agents, from enforcing Ordinance 4986. His ground was that said ordinance was
unconstitutional, illegal, ultra vires and null and void. He alleged, amongst others, that (1) "the power conferred upon respondent
City of Manila, under said Section 18 (hh) of Republic Act No. 409, as amended, does not include the right to enact an ordinance
such as the one in question, which has the effect of amending or modifying a certificate of public convenience granted by the Public
Service Commission, because any amendment or modification of said certificate is solely vested by law in the latter governmental
agency, and only after notice and hearing (See. 16[m], Public Service Act); but since this procedure was not adopted or followed by
respondents in enacting the disputed ordinance, the same is likewise illegal and null and void" ; (2) "the enforcement of said
ordinance is arbitrary, oppressive and unreasonable because the city streets from which he had been prevented to operate his
buses are the cream of his business" ; and (3) "even assuming that Ordinance No. 4986 is valid, it is only the Public Service
Commission which can require compliance with its provisions (See. 17[j], Public Service Act), but since its implementation is without
the sanction or approval of the Commission, its enforcement is also unauthorized and illegal." This Court, in a decision impressive
because of its unanimity, upheld the ordinance. Speaking through Mr. Justice J.B.L. Reyes, we ruled:jgc:chanrobles.com.ph
"First, as correctly maintained by respondents, Republic Act No. 409, as amended, otherwise known as the Revised Charter of the
City of Manila, is a special law and of later enactment than Commonwealth Act No. 548 and the Public Service Law (Commonwealth
Act No. 146, as amended), so that even if conflict exists between the provisions of the former act and the latter acts, Republic Act
No. 409 should prevail over both Commonwealth Acts Nos. 548 and 146. In Cassion v. Banco Nacional Filipino, 89 Phil. 560, 561,
this Court said:chanrob1es virtual 1aw library
. . . for with or without an express enactment it is a familiar rule of statutory construction that to the extent of any necessary
repugnancy between a general and a special law or provision, the latter will control the former without regard to the respective dates
of passage.

"It is to be noted that Commonwealth Act No. 548 does not confer an exclusive power or authority upon the Director of Public Works,
subject to the approval of the Secretary of Public Works and Communications, to promulgate rules and regulations relating to the
use of and traffic on national roads or streets. This being the case, section 18 (hh) of the Manila Charter is deemed enacted as an
exception to the provisions of Commonwealth Act No. 548.
x

"Second, the same situation holds true with respect to the provision of the Public Service Act. Although the Public Service
Commission is empowered, under its Section 16(m), to amend, modify or revoke certificates of public convenience after notice and
hearing, yet there is no provision, specific or otherwise, which can be found in this statute (Commonwealth Act No. 146) vesting
power in the Public Service Commission to superintend, regulate, or control the streets of respondent City or suspend its power to
license or prohibit the occupancy thereof. On the other hand, this right or authority, as hereinabove concluded, is conferred upon
respondent City of Manila. The power vested in the Public Service Commission under Section 16(m) is, therefore, subordinate to the
authority granted to respondent City, under said section 18 (hh). . . .
x

"That the powers conferred by law upon the Public Service Commission were not designed to deny or supersede the regulatory
power of local governments over motor traffic, in the streets subject to their control, is made evident by section 17 (j) of the Public
Service Act (Commonwealth Act No. 146) that provides as follows:chanrob1es virtual 1aw library
SEC. 17. Proceedings of Commission without previous hearing. The Commission shall have power, without previous hearing,
subject to established limitations and exceptions, and saving provisions to the contrary:chanrob1es virtual 1aw library

ban is unfair, unreasonable and oppressive." We dismissed this petition and upheld the validity of the questioned order of the
Commissioner. On the aforequoted issues, Chief Justice Roberto Concepcion, speaking for an equally unanimous Court, said
"Petitioners claim is devoid of merit, inasmuch as:jgc:chanrobles.com.ph
"1. The terms and conditions of the bus ban established by the Commissioner are substantially identical to those contained in
Ordinance No. 4986 of the City of Manila rerouting traffic on roads and streets therein, approved on July 30, 1964. In G.R. No. L23305, entitled Lagman v. City of Manila, petitioner herein assailed the validity of said ordinance, upon the ground, among others,
that it tended to amend or modify certificates of public conveniences issued by the PSC that the power therein exercised by the City
of Manila belongs to the PSC; and that the ordinance is arbitrary, oppressive and unreasonable. In a decision promulgated on June
30, 1966, this Court rejected this pretense and dismissed Lagmans petition in said case.
"2. Petitioners certificate of public convenience, like all other similar certificates, was issued subject to the condition that operators
shall observe and comply [with] . . . all the rules and regulations of the Commission relative to PUB service, and the contested
orders issued pursuant to Sections 13(a), 16(g) and 17(a) of Commonwealth Act 146, as amended partake of the nature of
such rules and regulations.
x

"4. The purpose of the ban to minimize the traffic problem in the City of Manila and the traffic congestion, delays and even
accidents resulting from the free entry into the streets of said City and the operation around said streets, loading and unloading or
picking up passengers and cargoes of PU buses in great number and size and the letter and spirit of the contested orders are
inconsistent with the exclusion of Lagman or of those granted certificates of public convenience subsequently to the issuance of said
orders from the operation thereof.
x

"(j) To require any public service to comply with the laws of the Philippines, and with any provincial resolution in municipal ordinance
relating thereto, and to conform to the duties imposed upon it thereby, or by the provisions of its own charter, whether obtained
under any general or special law of the Philippines." (Italics supplied).

"9. The theory to the effect that, to be valid, the aforementioned orders must be issued by the PSC, not merely by its Commissioner,
and only after due notice and hearing, is predicated upon the premise that the bus ban operates as an amendment of petitioners
certificate of public convenience, which is false, and was not sustained by this Court in its decision in G.R. No. L-23305, which is
binding upon Lagman, he being the petitioner in said case." 2

"The petitioners contention that, under this section, the respective ordinances of the City can only be enforced by the Commission
alone is obviously unsound. Subsection (j) refers not only to ordinances but also to the laws of the Philippines, and it is plainly
absurd to assume that even laws relating to public services are to remain a dead letter without the place of the Commission; and the
section makes no distinction whatever between enforcement of laws and that of municipal ordinances.

The issues raised by Lagman in the two cases just mentioned were likewise relied upon by the petitioners in the case now before
us. But for the fact that the present petitioners raised other issues, we could have perhaps written finis to the present case. The
obvious reason is that we find no cause or reason why we should break away from our ruling in said cases. Petitioners herein,
however, draw our attention to points which are not specifically ruled upon in the Lagman cases heretofore mentioned.

"The very fact, furthermore, that the Commission is empowered, but not required, to demand compliance with apposite laws and
ordinances proves that the Commissions powers are merely supplementary to those of state organs, such as the police, upon which
the enforcement of laws primarily rests.

2. Petitioners other gripe against Ordinance 4986 is that it destroys vested rights of petitioning public services to operate inside
Manila and to proceed to their respective terminals located in the City. They would want likewise to nullify said ordinance upon the
averment that it impairs the vested rights of petitioning bus passengers to be transported directly to downtown Manila.

"Third, the implementation of the ordinance in question cannot be validly assailed as arbitrary, oppressive and seasonable. Aside
from the fact that there is no evidence to substantiate this charge it is not disputed that petitioner has not been totally banned or
prohibited from operating all his buses, he having been allowed to operate two (2) shuttle buses within the city limits." 1

It has been said that a vested right is one which is "fixed, unalterable, or irrevocable." 3 Another definition would give vested right the
connotation that it is "absolute, complete, and unconditional, to the exercise of which no obstacle exists . . ." 4 Petitioners citation
from 16 C.J.S., pp. 642-643, 5 correctly expresses the view that when the "right to enjoyment, present or prospective, has become
the property of some particular person or persons as a present interest," that right is a vested right. Along the same lines is our
jurisprudential concept. Thus, in Benguet Consolidated Mining Co. v. Pineda, 6 we put forth the thought that a vested right is "some
right or interest in the property which has become fixed and established, and is no longer open to doubt or controversy; it is an
"immediate fixed right of present and future enjoyment" ; it is to be contradistinguished from a right that is "expectant or contingent,"
The Benguet case also quoted from 16 C.J.S., Sec. 215, pp. 642-643, as follows: "Rights are vested when the right to enjoyment,
present or prospective, has become the property of some particular person or persons as a present interest. The right must be
absolute, complete, and unconditional, independent of a contingency, and a mere expectancy of future benefit, or a contingent

The second case for certiorari and prohibition, filed by same petitioner in the first case just mentioned, is entitled "Lagman v.
Medina" (December 24, 1968), 26 SCRA 442. Put at issue there is the validity of the Commissioners Administrative Order No. 1,
series of 1964, also disputed herein. It was there alleged, inter alia, that "the provisions of the bus ban had not been incorporated
into his certificate of public convenience" ; "to be applicable to a grantee of such certificate subsequently to the issuance of the order
establishing the ban, there should be a decision, not merely by the Commissioner, but, also, by the PSC, rendered after due notice
and hearing, based upon material changes in the facts and circumstances under which the certificate had been granted" ; and "the

interest in property founded on anticipated continuance of existing laws, does not constitute a vested right. So, inchoate rights which
have not been acted on are not vested." 7

and just regulations as may be prescribed for the protection of the public from the reckless or careless indifference of the carrier as
to the public welfare and for the prevention of unjust and unreasonable discrimination of any kind whatsoever in the performance of
the carriers duties as a servant of the public.

Of course, whether a right is vested or not, much depends upon the environmental facts. 8
Contending that they possess valid and subsisting certificates of public convenience, the petitioning public services aver that they
acquired a vested right to operate their public utility vehicles to and from Manila as appearing in their said respective certificates of
public convenience.
Petitioners argument pales on the face of the fact that the very nature of a certificate of public convenience is at cross purposes
with the concept of vested rights. To this day, the accepted view, at least insofar as the State is concerned, is that "a certificate of
public convenience constitutes neither a franchise nor a contract, confers no property right, and is a mere license or privilege." 9 The
holder of such certificate does not acquire a property right in the route covered thereby. Nor does it confer upon the holder any
proprietary right or interest or franchise in the public highways. 10 Revocation of this certificate deprives him of no vested right. 11
Little reflection is necessary to show that the certificate of public convenience is granted with so many strings attached. New and
additional burdens, alteration of the certificate, and even revocation or annulment thereof is reserved to the State.
We need but add that the Public Service Commission, a government agency vested by law with "jurisdiction, supervision, and
control over all public services and their franchises, equipment, and other properties" 12 is empowered, upon proper notice and
hearing, amongst others: (1)" [t]o amend, modify or revoke at any time a certificate issued under the provisions of this Act
[Commonwealth Act 146, as amended], whenever the facts and circumstances on the strength of which said certificate was issued
have been misrepresented or materially changed" ; 13 and (2)" [t]o suspend or revoke any certificate issued under the provisions of
this Act whenever the holder thereof has violated or willfully and contumaciously refused to comply with any order, rule or regulation
of the Commission or any provision of this Act: Provided, That the Commission, for good cause, may prior to the hearing suspend for
a period not to exceed thirty days any certificate or the exercise of any right or authority issued or granted under this Act by order of
the Commission, whenever such step shall in the judgment of the Commission be necessary to avoid serious and irreparable
damage or inconvenience to the public or to private interests." 14 Jurisprudence echoes the rule that the Commission is authorized
to make reasonable rules and regulations for the operation of public services and to enforce them. 15 In reality, all certificates of
public convenience issued are subject to the condition that all public services "shall observe and comply [with] . . . all the rules and
regulations of the Commission relative to" the service. 16 To further emphasize the control imposed on public services, before any
public service can "adopt, maintain, or apply practices or measures, rules, or regulations to which the public shall be subject in its
relation with the public service," the Commissions approval must first be had. 17
And more. Public services must also reckon with provincial resolutions and municipal ordinances relating to the operation of public
utilities within the province or municipality concerned. The Commission can require compliance with these provincial resolutions or
municipal ordinances. 18
Illustrative of the lack of "absolute, complete, and unconditional" right on the part of public services to operate because of the
delimitations and restrictions which circumscribe the privilege afforded a certificate of public convenience is the following from the
early (March 31, 1915) decision of this Court in Fisher v. Yangco Steamship Company, 31 Phil. 1, 18-19:jgc:chanrobles.com.ph
"Common carriers exercise a sort of public office, and have duties to perform in which the public is interested. Their business is,
therefore, affected with a public interest and is subject of public regulation. (New Jersey Steam Nav. Co. v. Merchants Banks, 6 How.
344, 882; Munn v. Illinois, 94 U.S. 113, 130.) Indeed, this right of regulation is so far beyond question that it is well settled that the
power of the state to exercise legislative control over railroad companies and other carriers in all respects necessary to protect the
public against danger, injustice and oppression may be exercised through boards of commissioners. (New York, etc. R. Co. v.
Bristol, 151 U.S. 556, 571; Connecticut, etc. R. Co. v. Woodruff, 153 U.S. 689.).

"Business of certain kinds, including the business of a common carrier, holds such a peculiar relation to the public interest that there
is superinduced upon is the right of public regulation. (Budd v. New York, 143 U.S. 517, 633.) When private property is affected with
a public interest it ceases to be juris privati only. Property becomes clothed with a public interest when used in a manner to make it
of public consequence and affect the community at large.When, therefore, one devotes his property to a use in which the public has
an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common
good, to the extent of the interest he has thus created. He may withdraw his grant by discontinuing the use, but so long as he
maintains the use he must submit to control. (Munn v. Illinois, 94 U.S. 113; Georgia R. & Bkg. Co. v. Smith, 128 U.S. 174; Budd v.
New York, 143 U.S. 517; Louisville, etc. Ry. Co. v. Kentucky, 161 U.S. 677, 695.)."cralaw virtua1aw library
The foregoing, without more, rejects the vested rights theory espoused by petitioning bus operators.
Very little need be added to show that neither do bus passengers have a vested right to be transported directly into the City of
Manila. It would suffice if a statement be here made that the alleged right of bus passengers, to a great extent, is dependent upon
the manner public services are allowed to operate within a given area. Because, regulations imposed upon public services directly
affect the bus passengers. It is quite obvious that if buses were allowed to load or unload solely at specific or designated places, a
passenger cannot legally demand or insist that the operator load or unload him at a place other than those specified or designated.
It is no argument to support the vested rights theory that petitioning passengers have enjoyed the privilege of having been
continuously transported even before the outbreak of the war directly without transfer from the provinces to places inside Manila up
to the respective bus terminals in said City. Times have changed. Vehicles have increased in number. Traffic congestion has moved
from bad to worse, from tolerable to critical. The number of people who use the thoroughfares has multiplied.
3. It is because of all of these that it has become necessary for the police power of the State to step in, not for the benefit of the few,
but for the benefit of the many. Reasonable restrictions have to be provided for the use of the thoroughfares. 19 The operation of
public services may be subjected to restraints and burdens, in order to secure the general comfort. 20 No franchise or right can be
availed of to defeat the proper exercise of police power 21 the authority "to enact rules and regulations for the promotion of the
general welfare." 22 So it is, that by the exercise of the police power, which is a continuing one, "a business lawful today may in the
future, because of the changed situation, the growth of population or other causes, become a menace to the public health and
welfare, and be required to yield to the public good." 23 Public welfare, we have said, lies at the bottom of any regulatory measure
designed "to relieve congestion of traffic, which is, to say the least, a menace to public safety." 24 As a corollary, measures
calculated to promote the safety and convenience of the people using the thoroughfares by the regulation of vehicular traffic, present
a proper subject for the exercise of police power.25cralaw:red
Both Ordinance 4986 and the Commissioners administrative orders fit into the concept of promotion of the general welfare.
Expressive of the purpose of Ordinance 4986 is Section 1 thereof, thus "As a positive measure to relieve the critical traffic
congestion in the City of Manila, which has grown to alarming and emergency proportions, and in the best interest of public welfare
and convenience, the following traffic rules and regulations are hereby promulgated." Along the same lines, the bus ban instituted by
the Commissioner has for its object "to minimize the traffic problem in the City of Manila and the traffic congestion, delays and even
accidents resulting from the free entry into the streets of said City and the operation around said streets, loading and unloading or
picking up passengers and cargoes of PU buses in great number and size." 26
Police power in both was properly exercised.
4. We find no difficulty in saying that, contrary to the assertion made by petitioners, Ordinance 4986 is not a class legislation.

". . . The right to enter the public employment as a common carrier and to offer ones services to the public for hire does not carry
with it the right to conduct that business as one pleases, without regard to the interests of the public and free from such reasonable

It is true that inter-urban buses are allowed to enter the City of Manila, while provincial buses are not given the same privilege,
although they are allowed shuttle service into the City of Manila. There is not point, however, in placing provincial buses on the same
level as the inter-urban buses plying to and from Manila and its suburban towns and cities (Makati, Pasay, Mandaluyong, Caloocan,
San Juan, Quezon City and Navotas). Inter-urban buses are used for transporting passengers only. Provincial buses are used for

passengers and freight. Provincial buses, because of the freight or baggage which the passengers usually bring along with them,
take longer time to load or unload than inter-urban buses. Provincial buses generally travel along national highways and provincial
roads, cover long distances, have fixed trip schedules. Provincial buses are greater in size and weight than inter-urban buses. The
routes of inter-urban buses are short, covering contiguous municipalities and cities only. Inter-urban buses mainly use city and
municipal streets.
These distinctions generally hold true between provincial passenger jeepneys and inter-urban passenger jeepneys.
No unjustified discrimination there is under the law.
The obvious inequality in treatment is but the result flowing from the classification made by the ordinance and does not trench upon
the equal protection clause. 27 The least that can be said is that persons engaged in the same business "are subjected to different
restrictions or are held entitled to different privileges under the same conditions." 28
Neither is there merit to the charge that private vehicles are being unjustifiably favored over public vehicles. Private vehicles are not
geared for profit, usually have but one destination. Public vehicles are operated primarily for profit and for this reason are continually
operated to make the most of time. Public and private vehicles belong to different classes. Differences in class beget differences in
privileges. And petitioners have no cause to complain.
The principles just enunciated have long been recognized. In Ichong v. Hernandez, 29 our ruling is that the equal protection of the
law clause "does not demand absolute equality amongst residents; it merely requires that all persons shall be treated alike, under
like circumstances and conditions both as to privileges conferred and liabilities enforced" ; and, that the equal protection clause "is
not infringed by legislation which applies only to those persons falling within a specified class, if it applies alike to all persons within
such class, and reasonable grounds exist for making a distinction between those who fall within such class and those who do not."
30
FOR THE REASONS GIVEN, the petition herein is denied.
Costs against petitioners. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee and Barredo, JJ., concur.

[G.R. No. 124293. September 24, 2003]

JG SUMMIT HOLDINGS, INC., petitioner, vs. COURT OF APPEALS, COMMITTEE ON PRIVATIZATION, its Chairman and
Members; ASSET PRIVATIZATION TRUST and PHILYARDS HOLDINGS, INC., respondents.
RESOLUTION
PUNO, J.:
The core issue posed by the Motions for Reconsideration is whether a shipyard is a public utility whose capitalization must be
sixty percent (60%) owned by Filipinos. Our resolution of this issue will determine the fate of the shipbuilding and ship repair
industry. It can either spell the industrys demise or breathe new life to the struggling but potentially healthy partner in the countrys
bid for economic growth. It can either kill an initiative yet in its infancy, or harness creativity in the productive disposition of
government assets.
The facts are undisputed and can be summarized briefly as follows:

On January 27, 1977, the National Investment and Development Corporation (NIDC), a government corporation, entered into
a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) for the construction, operation
and management of the Subic National Shipyard, Inc. (SNS) which subsequently became the Philippine Shipyard and Engineering
Corporation (PHILSECO). Under the JVA, the NIDC and KAWASAKI will contribute P330 million for the capitalization of PHILSECO
in the proportion of 60%-40% respectively.[1] One of its salient features is the grant to the parties of the right of first refusal should
either of them decide to sell, assign or transfer its interest in the joint venture, viz:
1.4 Neither party shall sell, transfer or assign all or any part of its interest in SNS [PHILSECO] to any third party without giving the
other under the same terms the right of first refusal. This provision shall not apply if the transferee is a corporation owned or
controlled by the GOVERNMENT or by a KAWASAKI affiliate.[2]
On November 25, 1986, NIDC transferred all its rights, title and interest in PHILSECO to the Philippine National Bank
(PNB). Such interests were subsequently transferred to the National Government pursuant to Administrative Order No. 14. On
December 8, 1986, President Corazon C. Aquino issued Proclamation No. 50 establishing the Committee on Privatization (COP)
and the Asset Privatization Trust (APT) to take title to, and possession of, conserve, manage and dispose of non-performing assets
of the National Government. Thereafter, on February 27, 1987, a trust agreement was entered into between the National
Government and the APT wherein the latter was named the trustee of the National Governments share in PHILSECO. In 1989, as a
result of a quasi-reorganization of PHILSECO to settle its huge obligations to PNB, the National Governments shareholdings in
PHILSECO increased to 97.41% thereby reducing KAWASAKIs shareholdings to 2.59%.[3]
In the interest of the national economy and the government, the COP and the APT deemed it best to sell the National
Governments share in PHILSECO to private entities. After a series of negotiations between the APT and KAWASAKI, they agreed
that the latters right of first refusal under the JVA be exchanged for the right to top by five percent (5%) the highest bid for the said
shares. They further agreed that KAWASAKI would be entitled to name a company in which it was a stockholder, which could
exercise the right to top. On September 7, 1990, KAWASAKI informed APT that Philyards Holdings, Inc. (PHI) would exercise its
right to top.[4]
At the pre-bidding conference held on September 18, 1993, interested bidders were given copies of the JVA between NIDC
and KAWASAKI, and of the Asset Specific Bidding Rules (ASBR) drafted for the National Governments 87.6% equity share in
PHILSECO.[5] The provisions of the ASBR were explained to the interested bidders who were notified that the bidding would be held
on December 2, 1993. A portion of the ASBR reads:
1.0 The subject of this Asset Privatization Trust (APT) sale through public bidding is the National Governments equity in PHILSECO
consisting of 896,869,942 shares of stock (representing 87.67% of PHILSECOs outstanding capital stock), which will be sold as a
whole block in accordance with the rules herein enumerated.
...
2.0 The highest bid, as well as the buyer, shall be subject to the final approval of both the APT Board of Trustees and the Committee
on Privatization (COP).
2.1 APT reserves the right in its sole discretion, to reject any or all bids.
3.0 This public bidding shall be on an Indicative Price Bidding basis. The Indicative price set for the National Governments 87.67%
equity in PHILSECO is PESOS: ONE BILLION THREE HUNDRED MILLION (P1,300,000,000.00).

...
6.0 The highest qualified bid will be submitted to the APT Board of Trustees at its regular meeting following the bidding, for the
purpose of determining whether or not it should be endorsed by the APT Board of Trustees to the COP, and the latter approves the
same. The APT shall advise Kawasaki Heavy Industries, Inc. and/or its nominee, Philyards Holdings, Inc., that the highest bid is
acceptable to the National Government. Kawasaki Heavy Industries, Inc. and/or Philyards Holdings, Inc. shall then have a period of
thirty (30) calendar days from the date of receipt of such advice from APT within which to exercise their Option to Top the Highest
Bid by offering a bid equivalent to the highest bid plus five (5%) percent thereof.
6.1 Should Kawasaki Heavy Industries, Inc. and/or Philyards Holdings, Inc. exercise their Option to Top the Highest Bid, they shall
so notify the APT about such exercise of their option and deposit with APT the amount equivalent to ten percent (10%) of the highest
bid plus five percent (5%) thereof within the thirty (30)-day period mentioned in paragraph 6.0 above. APT will then serve notice
upon Kawasaki Heavy Industries, Inc. and/or Philyards Holdings, Inc. declaring them as the preferred bidder and they shall have a
period of ninety (90) days from the receipt of the APTs notice within which to pay the balance of their bid price.
6.2 Should Kawasaki Heavy Industries, Inc. and/or Philyards Holdings, Inc. fail to exercise their Option to Top the Highest Bid within
the thirty (30)-day period, APT will declare the highest bidder as the winning bidder.
...
12.0 The bidder shall be solely responsible for examining with appropriate care these rules, the official bid forms, including any
addenda or amendments thereto issued during the bidding period. The bidder shall likewise be responsible for informing itself with
respect to any and all conditions concerning the PHILSECO Shares which may, in any manner, affect the bidders proposal. Failure
on the part of the bidder to so examine and inform itself shall be its sole risk and no relief for error or omission will be given by APT
or COP. . ..[6]
At the public bidding on the said date, petitioner J.G. Summit Holdings, Inc. submitted a bid of Two Billion and Thirty Million
Pesos (P2,030,000,000.00) with an acknowledgement of KAWASAKI/Philyards right to top, viz:

On February 2, 1994, petitioner was notified that PHI had fully paid the balance of the purchase price of the subject
bidding. On February 7, 1994, the APT notified petitioner that PHI had exercised its option to top the highest bid and that the COP
had approved the same on January 6, 1994. On February 24, 1994, the APT and PHI executed a Stock Purchase Agreement.
[10]
Consequently, petitioner filed with this Court a Petition for Mandamus under G.R. No. 114057. On May 11, 1994, said petition was
referred to the Court of Appeals. On July 18, 1995, the Court of Appeals denied the same for lack of merit. It ruled that the petition
for mandamus was not the proper remedy to question the constitutionality or legality of the right of first refusal and the right to top
that was exercised by KAWASAKI/PHI, and that the matter must be brought by the proper party in the proper forum at the proper
time and threshed out in a full blown trial. The Court of Appeals further ruled that the right of first refusal and the right to top
are prima facie legal and that the petitioner, by participating in the public bidding, with full knowledge of the right to top granted to
KASAWASAKI/Philyards is . . .estopped from questioning the validity of the award given to Philyards after the latter exercised the
right to top and had paid in full the purchase price of the subject shares, pursuant to the ASBR. Petitioner filed a Motion for
Reconsideration of said Decision which was denied on March 15, 1996. Petitioner thus filed a Petition for Certiorari with this
Court alleging grave abuse of discretion on the part of the appellate court.[11]
On November 20, 2000, this Court rendered the now assailed Decision ruling among others that the Court of Appeals erred
when it dismissed the petition on the sole ground of the impropriety of the special civil action of mandamus because the petition was
also one of certiorari.[12] It further ruled that a shipyard like PHILSECO is a public utility whose capitalization must be sixty percent
(60%) Filipino-owned.[13] Consequently, the right to top granted to KAWASAKI under the Asset Specific Bidding Rules (ASBR)
drafted for the sale of the 87.67% equity of the National Government in PHILSECO is illegal---not only because it violates the rules
on competitive bidding--- but more so, because it allows foreign corporations to own more than 40% equity in the shipyard. [14] It also
held that although the petitioner had the opportunity to examine the ASBR before it participated in the bidding, it cannot be estopped
from questioning the unconstitutional, illegal and inequitable provisions thereof.[15] Thus, this Court voided the transfer of the national
governments 87.67% share in PHILSECO to Philyard Holdings, Inc., and upheld the right of JG Summit, as the highest bidder, to
take title to the said shares, viz:
WHEREFORE, the instant petition for review on certiorari is GRANTED. The assailed Decision and Resolution of the Court of
Appeals are REVERSED and SET ASIDE. Petitioner is ordered to pay to APT its bid price of Two Billion Thirty Million Pesos
(P2,030,000,000.00 ), less its bid deposit plus interests upon the finality of this Decision. In turn, APT is ordered to:
(a) accept the said amount of P2,030,000,000.00 less bid deposit and interests from petitioner;

4. I/We understand that the Committee on Privatization (COP) has up to thirty (30) days to act on APTs recommendation based on
the result of this bidding. Should the COP approve the highest bid, APT shall advise Kawasaki Heavy Industries, Inc. and/or its
nominee, Philyards Holdings, Inc. that the highest bid is acceptable to the National Government. Kawasaki Heavy Industries, Inc.
and/or Philyards Holdings, Inc. shall then have a period of thirty (30) calendar days from the date of receipt of such advice from APT
within which to exercise their Option to Top the Highest Bid by offering a bid equivalent to the highest bid plus five (5%) percent
thereof.[7]

(b) execute a Stock Purchase Agreement with petitioner;

(c) cause the issuance in favor of petitioner of the certificates of stocks representing 87.6% of PHILSECOs total
capitalization;

As petitioner was declared the highest bidder, the COP approved the sale on December 3, 1993 subject to the right of
Kawasaki Heavy Industries, Inc./Philyards Holdings, Inc. to top JGSMIs bid by 5% as specified in the bidding rules. [8]

(d) return to private respondent PHGI the amount of Two Billion One Hundred Thirty-One Million Five Hundred
Thousand Pesos (P2,131,500,000.00); and

On December 29, 1993, petitioner informed APT that it was protesting the offer of PHI to top its bid on the grounds that: (a)
the KAWASAKI/PHI consortium composed of Kawasaki, Philyards, Mitsui, Keppel, SM Group, ICTSI and Insular Life violated the
ASBR because the last four (4) companies were the losing bidders thereby circumventing the law and prejudicing the weak winning
bidder; (b) only KAWASAKI could exercise the right to top; (c) giving the same option to top to PHI constituted unwarranted benefit
to a third party; (d) no right of first refusal can be exercised in a public bidding or auction sale; and (e) the JG Summit consortium
was not estopped from questioning the proceedings.[9]

(e) cause the cancellation of the stock certificates issued to PHI.

SO ORDERED.[16]

In separate Motions for Reconsideration,[17] respondents submit three basic issues for our resolution: (1) Whether PHILSECO
is a public utility; (2) Whether under the 1977 JVA, KAWASAKI can exercise its right of first refusal only up to 40% of the total
capitalization of PHILSECO; and (3) Whether the right to top granted to KAWASAKI violates the principles of competitive bidding.
I.
Whether PHILSECO is a Public Utility.
After carefully reviewing the applicable laws and jurisprudence, we hold that PHILSECO is not a public utility for the following
reasons:
First. By nature, a shipyard is not a public utility.
A public utility is a business or service engaged in regularly supplying the public with some commodity or service of public
consequence such as electricity, gas, water, transportation, telephone or telegraph service. [18] To constitute a public utility, the facility
must be necessary for the maintenance of life and occupation of the residents. However, the fact that a business offers services or
goods that promote public good and serve the interest of the public does not automatically make it a public utility. Public use is not
synonymous with public interest. As its name indicates, the term public utility implies public use and service to the public. The
principal determinative characteristic of a public utility is that of service to, or readiness to serve, an indefinite public or portion of
the public as such which has a legal right to demand and receive its services or commodities. Stated otherwise, the owner or person
in control of a public utility must have devoted it to such use that the public generally or that part of the public which has been served
and has accepted the service, has the right to demand that use or service so long as it is continued, with reasonable efficiency and
under proper charges.[19] Unlike a private enterprise which independently determines whom it will serve, a public utility holds out
generally and may not refuse legitimate demand for service. [20] Thus, in Iloilo Ice and Cold Storage Co. vs. Public Utility Board,
[21]
this Court defined public use, viz:
Public use means the same as use by the public. The essential feature of the public use is that it is not confined to privileged
individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public character. In
determining whether a use is public, we must look not only to the character of the business to be done, but also to the proposed
mode of doing it. If the use is merely optional with the owners, or the public benefit is merely incidental, it is not a public use,
authorizing the exercise of jurisdiction of the public utility commission. There must be, in general, a right which the law compels the
owner to give to the general public. It is not enough that the general prosperity of the public is promoted. Public use is not
synonymous with public interest. The true criterion by which to judge the character of the use is whether the public may
enjoy it by right or only by permission.[22] (emphasis supplied)

There can be no disagreement that the shipbuilding and ship repair industry is imbued with public interest as it involves the
maintenance of the seaworthiness of vessels dedicated to the transportation of either persons or goods. Nevertheless, the fact that
a business is affected with public interest does not imply that it is under a duty to serve the public. While the business may be
regulated for public good, the regulation cannot justify the classification of a purely private enterprise as a public utility. The
legislature cannot, by its mere declaration, make something a public utility which is not in fact such; and a private business
operated under private contracts with selected customers and not devoted to public use cannot, by legislative fiat or by
order of a public service commission, be declared a public utility, since that would be taking private property for public use
without just compensation, which cannot be done consistently with the due process clause.[24]
It is worthy to note that automobile and aircraft manufacturers, which are of similar nature to shipyards, are not considered
public utilities despite the fact that their operations greatly impact on land and air transportation. The reason is simple. Unlike
commodities or services traditionally regarded as public utilities such as electricity, gas, water, transportation, telephone or telegraph
service, automobile and aircraft manufacturing---and for that matter ship building and ship repair--- serve the public only incidentally.
Second. There is no law declaring a shipyard as a public utility.
History provides us hindsight and hindsight ought to give us a better view of the intent of any law. The succession of laws
affecting the status of shipyards ought not to obliterate, but rather, give us full picture of the intent of the legislature. The totality of
the circumstances, including the contemporaneous interpretation accorded by the administrative bodies tasked with the enforcement
of the law all lead to a singular conclusion: that shipyards are not public utilities.
Since the enactment of Act No. 2307 which created the Public Utility Commission (PUC) until its repeal by Commonwealth Act
No. 146, establishing the Public Service Commission (PSC), a shipyard, by legislative declaration, has been considered a public
utility.[25] A Certificate of Public Convenience (CPC) from the PSC to the effect that the operation of the said service and the
authorization to do business will promote the public interests in a proper and suitable manner is required before any person or
corporation may operate a shipyard.[26] In addition, such persons or corporations should abide by the citizenship requirement
provided in Article XIII, section 8 of the 1935 Constitution,[27] viz:
Sec. 8. No franchise, certificate, or any other form or authorization for the operation of a public utility shall be granted except to
citizens of the Philippines or to corporations or other entities organized under the laws of the Philippines, sixty per centum of the
capital of which is owned by citizens of the Philippines, nor shall such franchise, certificate or authorization be exclusive in
character or for a longer period than fifty years. No franchise or right shall be granted to any individual, firm or 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. (emphasis supplied)

Applying the criterion laid down in Iloilo to the case at bar, it is crystal clear that a shipyard cannot be considered a public
utility.

To accelerate the development of shipbuilding and ship repair industry, former President Ferdinand E. Marcos issued P.D. No.
666 granting the following incentives:

A shipyard is a place or enclosure where ships are built or repaired.[23] Its nature dictates that it serves but a limited clientele
whom it may choose to serve at its discretion. While it offers its facilities to whoever may wish to avail of its services, a shipyard is
not legally obliged to render its services indiscriminately to the public. It has no legal obligation to render the services sought
by each and every client. The fact that it publicly offers its services does not give the public a legal right to demand that such
services be rendered.

SECTION 1. Shipbuilding and ship repair yards duly registered with the Maritime Industry Authority shall be entitled to the following
incentive benefits:
(a) Exemption from import duties and taxes.- The importation of machinery, equipment and materials for shipbuilding, ship repair
and/or alteration, including indirect import, as well as replacement and spare parts for the repair and overhaul of vessels such as
steel plates, electrical machinery and electronic parts, shall be exempt from the payment of customs duty and compensating tax:
Provided, however, That the Maritime Industry Authority certifies that the item or items imported are not produced locally in sufficient

quantity and acceptable quality at reasonable prices, and that the importation is directly and actually needed and will be used
exclusively for the construction, repair, alteration, or overhaul of merchant vessels, and other watercrafts; Provided, further, That if
the above machinery, equipment, materials and spare parts are sold to non-tax exempt persons or entities, the corresponding duties
and taxes shall be paid by the original importer; Provided, finally, That local dealers and/or agents who sell machinery, equipment,
materials and accessories to shipyards for shipbuilding and ship repair are entitled to tax credits, subject to approval by the total
tariff duties and compensating tax paid for said machinery, equipment, materials and accessories.
(b) Accelerated depreciation.- Industrial plant and equipment may, at the option of the shipbuilder and ship repairer, be depreciated
for any number of years between five years and expected economic life.
(c) Exemption from contractors percentage tax.- The gross receipts derived by shipbuilders and ship repairers from shipbuilding and
ship repairing activities shall be exempt from the Contractors Tax provided in Section 91 of the National Internal Revenue Code
during the first ten years from registration with the Maritime Industry Authority, provided that such registration is effected not later
than the year 1990; Provided, That any and all amounts which would otherwise have been paid as contractors tax shall be set aside
as a separate fund, to be known as Shipyard Development Fund, by the contractor for the purpose of expansion, modernization
and/or improvement of the contractors own shipbuilding or ship repairing facilities; Provided, That, for this purpose, the contractor
shall submit an annual statement of its receipts to the Maritime Industry Authority; and Provided, further, That any disbursement from
such fund for any of the purposes hereinabove stated shall be subject to approval by the Maritime Industry Authority.
In addition, P.D. No. 666 removed the shipbuilding and ship repair industry from the list of public utilities, thereby freeing the
industry from the 60% citizenship requirement under the Constitution and from the need to obtain Certificate of Public Convenience
pursuant to section 15 of C.A No. 146. Section 1 (d) of P.D. 666 reads:

It is the policy of the State to extend to projects which will significantly contribute to the attainment of these objectives, fiscal
incentives without which said projects may not be established in the locales, number and/or pace required for optimum national
economic development. Fiscal incentive systems shall be devised to compensate for market imperfections, reward
performance of making contributions to economic development, cost-efficient and be simple to administer.
The fiscal incentives shall be extended to stimulate establishment and assist initial operations of the enterprise, and shall terminate
after a period of not more than 10 years from registration or start-up of operation unless a special period is otherwise stated.
The foregoing declaration shall apply to all investment incentive schemes and in particular will supersede article 2 of
Presidential Decree No. 1789. (emphases supplied)
With the new investment incentive regime, Batas Pambansa Blg. 391 repealed the following laws, viz:
Sec. 20. The following provisions are hereby repealed:
1) Section 53, P.D. 463 (Mineral Resources Development Decree);
2.) Section 1, P.D. 666 (Shipbuilding and Ship Repair Industry);
3) Section 6, P.D. 1101 (Radioactive Minerals);
4) LOI 508 extending P.D. 791 and P.D. 924 (Sugar); and

(d) Registration required but not as a Public Utility.- The business of constructing and repairing vessels or parts thereof shall
not be considered a public utility and no Certificate of Public Convenience shall be required therefor. However, no shipyard,
graving dock, marine railway or marine repair shop and no person or enterprise shall engage in construction and/or repair of any
vessel, or any phase or part thereof, without a valid Certificate of Registration and license for this purpose from the Maritime Industry
Authority, except those owned or operated by the Armed Forces of the Philippines or by foreign governments pursuant to a treaty or
agreement. (emphasis supplied)
Any law, decree, executive order, or rules and regulations inconsistent with P.D. No. 666 were repealed or modified
accordingly.[28] Consequently, sections 13 (b) and 15 of C.A. No. 146 were repealed in so far as the former law included shipyards in
the list of public utilities and required the certificate of public convenience for their operation. Simply stated, the repeal was due to
irreconcilable inconsistency, and by definition, this kind of repeal falls under the category of an implied repeal.[29]
On April 28, 1983, Batas Pambansa Blg. 391, also known as the Investment Incentive Policy Act of 1983, was enacted. It laid
down the general policy of the government to encourage private domestic and foreign investments in the various sectors of the
economy, to wit:
Sec. 2. Declaration of Investment Policy.- It is the policy of the State to encourage private domestic and foreign investments in
industry, agriculture, mining and other sectors of the economy which shall: provide significant employment opportunities relative to
the amount of the capital being invested; increase productivity of the land, minerals, forestry, aquatic and other resources of the
country, and improve utilization of the products thereof; improve technical skills of the people employed in the enterprise; provide a
foundation for the future development of the economy; accelerate development of less developed regions of the country; and result
in increased volume and value of exports for the economy.

5) The following articles of Presidential Decree 1789: 2, 18, 19, 22, 28, 30, 39, 49 (d), 62, and 77. Articles 45, 46 and
48 are hereby amended only with respect to domestic and export producers.
All other laws, decrees, executive orders, administrative orders, rules and regulations or parts thereof which are inconsistent with the
provisions of this Act are hereby repealed, amended or modified accordingly.
All other incentive systems which are not in any way affected by the provisions of this Act may be restructured by the President so
as to render them cost-efficient and to make them conform with the other policy guidelines in the declaration of policy provided in
Section 2 of this Act. (emphasis supplied)
From the language of the afore-quoted provision, the whole of P.D. No. 666, section 1 was expressly and categorically
repealed. As a consequence, the provisions of C.A. No. 146, which were impliedly repealed by P.D. No. 666, section 1 were revived.
[30]
In other words, with the enactment of Batas Pambansa Blg. 391, a shipyard reverted back to its status as a public utility and as
such, requires a CPC for its operation.
The crux of the present controversy is the effect of the express repeal of Batas Pambansa Blg. 391 by Executive Order No.
226 issued by former President Corazon C. Aquino under her emergency powers.
We rule that the express repeal of Batas Pambansa Blg. 391 by E.O. No. 226 did not revive Section 1 of P.D. No. 666. But
more importantly, it also put a period to the existence of sections 13 (b) and 15 of C.A. No. 146. It bears emphasis that sections 13
(b) and 15 of C.A. No. 146, as originally written, owed their continued existence to Batas Pambansa Blg. 391. Had the latter not

repealed P.D. No. 666, the former should have been modified accordingly and shipyards effectively removed from the list of public
utilities. Ergo, with the express repeal of Batas Pambansa Blg. 391 by E.O. No. 226, the revival of sections 13 (b) and 15 of C.A. No.
146 had no more leg to stand on. A law that has been expressly repealed ceases to exist and becomes inoperative from the moment
the repealing law becomes effective.[31] Hence, there is simply no basis in the conclusion that shipyards remain to be a public utility.
A repealed statute cannot be the basis for classifying shipyards as public utilities.

1.4 Neither party shall sell, transfer or assign all or any part of its interest in SNS [renamed PHILSECO] to any third party without
giving the other under the same terms the right of first refusal. This provision shall not apply if the transferee is a corporation owned
and controlled by the GOVERMENT [of the Philippines] or by a Kawasaki affiliate.

In view of the foregoing, there can be no other conclusion than to hold that a shipyard is not a pubic utility. A shipyard has
been considered a public utility merely by legislative declaration. Absent this declaration, there is no more reason why it should
continuously be regarded as such. The fact that the legislature did not clearly and unambiguously express its intention to include
shipyards in the list of public utilities indicates that that it did not intend to do so. Thus, a shipyard reverts back to its status as nonpublic utility prior to the enactment of the Public Service Law.

Under section 1.3, the parties agreed to the amount of P330 million as the total capitalization of their joint venture. There was
no mention of the amount of their initial subscription. What is clear is that they are to infuse the needed capital from time to time until
the total subscribed and paid-up capital reaches P312 million. The phrase maintaining a proportion of 60%-40% refers to their
respective share of the burden each time the Board of Directors decides to increase the subscription to reach the target paid-up
capital of P312 million. It does not bind the parties to maintain the sharing scheme all throughout the existence of their partnership.

This interpretation is in accord with the uniform interpretation placed upon it by the Board of Investments (BOI), which was
entrusted by the legislature with the preparation of annual Investment Priorities Plan (IPPs). The BOI has consistently classified
shipyards as part of the manufacturing sector and not of the public utilities sector. The enactment of Batas Pambansa Blg. 391 did
not alter the treatment of the BOI on shipyards. It has been, as at present, classified as part of the manufacturing and not of the
public utilities sector.[32]

The parties likewise agreed to arm themselves with protective mechanisms to preserve their respective interests in the
partnership in the event that (a) one party decides to sell its shares to third parties; and (b) new Philseco shares are issued. Anent
the first situation, the non-selling party is given the right of first refusal under section 1.4 to have a preferential right to buy or to
refuse the selling partys shares. The right of first refusal is meant to protect the original or remaining joint venturer(s) or
shareholder(s) from the entry of third persons who are not acceptable to it as co-venturer(s) or co-shareholder(s). The joint venture
between the Philippine Government and KAWASAKI is in the nature of a partnership [36] which, unlike an ordinary corporation, is
based on delectus personae.[37] No one can become a member of the partnership association without the consent of all the other
associates. The right of first refusal thus ensures that the parties are given control over who may become a new partner in
substitution of or in addition to the original partners. Should the selling partner decide to dispose all its shares, the non-selling
partner may acquire all these shares and terminate the partnership. No person or corporation can be compelled to remain or to
continue the partnership. Of course, this presupposes that there are no other restrictions in the maximum allowable share that the
non-selling partner may acquire such as the constitutional restriction on foreign ownership in public utility. The theory that
KAWASAKI can acquire, as a maximum, only 40% of PHILSECOs shares is correct only if a shipyard is a public utility. In such
instance, the non-selling partner who is an alien can acquire only a maximum of 40% of the total capitalization of a public utility
despite the grant of first refusal. The partners cannot, by mere agreement, avoid the constitutional proscription. But as aforediscussed, PHILSECO is not a public utility and no other restriction is present that would limit the right of KAWASAKI to purchase
the Governments share to 40% of Philsecos total capitalization.

Furthermore, of the 441 Ship Building and Ship Repair (SBSR) entities registered with the MARINA, [33] none appears to have
an existing franchise. If we continue to hold that a shipyard is a pubic utility, it is a necessary consequence that all these entities
should have obtained a franchise as was the rule prior to the enactment of P.D. No. 666. But MARINA remains without authority,
pursuant to P.D. No. 474[34] to issue franchises for the operation of shipyards. Surely,
the legislature did not intend to create a vacuum by continuously treating a shipyard as a public utility without giving MARINA
the power to issue a Certificate of Public Convenience (CPC) or a Certificate of Public Convenience and Necessity (CPCN) as
required by section 15 of C.A. No. 146.
II.
Whether under the 1977 Joint Venture Agreement,
KAWASAKI can purchase only a maximum of 40%
of PHILSECOs total capitalization.
A careful reading of the 1977 Joint Venture Agreement reveals that there is nothing that prevents KAWASAKI from acquiring
more than 40% of PHILSECOs total capitalization. Section 1 of the 1977 JVA states:
1.3 The authorized capital stock of Philseco shall be P330 million. The parties shall thereafter increase their subscription in Philseco
as may be necessary and as called by the Board of Directors, maintaining a proportion of 60%-40% for NIDC and KAWASAKI
respectively, up to a total subscribed and paid-up capital stock of P312 million.

1.5 The By-Laws of SNS [PHILSECO] shall grant the parties preemptive rights to unissued shares of SNS [PHILSECO]. [35]

Furthermore, the phrase under the same terms in section 1.4 cannot be given an interpretation that would limit the right of
KAWASAKI to purchase PHILSECO shares only to the extent of its original proportionate contribution of 40% to the total
capitalization of the PHILSECO. Taken together with the whole of section 1.4, the phrase under the same terms means that a
partner to the joint venture that decides to sell its shares to a third party shall make a similar offer to the non-selling
partner. The selling partner cannot make a different or a more onerous offer to the non-selling partner.
The exercise of first refusal presupposes that the non-selling partner is aware of the terms of the conditions attendant to the
sale for it to have a guided choice. While the right of first refusal protects the non-selling partner from the entry of third persons, it
cannot also deprive the other partner the right to sell its shares to third persons if, under the same offer, it does not buy the shares.
Apart from the right of first refusal, the parties also have preemptive rights under section 1.5 in the unissued shares of
Philseco. Unlike the former, this situation does not contemplate transfer of a partners shares to third parties but the issuance of new
Philseco shares. The grant of preemptive rights preserves the proportionate shares of the original partners so as not to dilute their
respective interests with the issuance of the new shares. Unlike the right of first refusal, a preemptive right gives a partner a
preferential right over the newly issued shares only to the extent that it retains its original proportionate share in the joint venture.

The case at bar does not concern the issuance of new shares but the transfer of a partners share in the joint venture. Verily,
the operative protective mechanism is the right of first refusal which does not impose any limitation in the maximum shares that the
non-selling partner may acquire.
III.
Whether the right to top granted to KAWASAKI
in exchange for its right of first refusal violates
the principles of competitive bidding.
We also hold that the right to top granted to KAWASAKI and exercised by private respondent did not violate the rules of
competitive bidding.
The word bidding in its comprehensive sense means making an offer or an invitation to prospective contractors whereby the
government manifests its intention to make proposals for the purpose of supplies, materials and equipment for official business or
public use, or for public works or repair. [38] The three principles of public bidding are: (1) the offer to the public; (2) an opportunity for
competition; and (3) a basis for comparison of bids. [39] As long as these three principles are complied with, the public bidding can be
considered valid and legal. It is not necessary that the highest bid be automatically accepted. The bidding rules may specify other
conditions or the bidding process be subjected to certain reservation or qualification such as when the owner reserves to himself
openly at the time of the sale the right to bid upon the property, or openly announces a price below which the property will not be
sold. Hence, where the seller reserves the right to refuse to accept any bid made, a binding sale is not consummated between the
seller and the bidder until the seller accepts the bid. Furthermore, where a right is reserved in the seller to reject any and all bids
received, the owner may exercise the right even after the auctioneer has accepted a bid, and this applies to the auction of public as
well as private property. [40] Thus:
It is a settled rule that where the invitation to bid contains a reservation for the Government to reject any or all bids, the lowest or the
highest bidder, as the case may be, is not entitled to an award as a matter of right for it does not become a ministerial duty of the
Government to make such an award. Thus, it has been held that where the right to reject is so reserved, the lowest bid or any bid for
that matter may be rejected on a mere technicality, that all bids may be rejected, even if arbitrarily and unwisely, or under a mistake,
and that in the exercise of a sound discretion, the award may be made to another than the lowest bidder. And so, where the
Government as advertiser, availing itself of that right, makes its choice in rejecting any or all bids, the losing bidder has no cause to
complain nor right to dispute that choice, unless an unfairness or injustice is shown. Accordingly, he has no ground of action to
compel the Government to award the contract in his favor, nor compel it to accept his bid. [41]
In the instant case, the sale of the Government shares in PHILSECO was publicly known. All interested bidders were
welcomed. The basis for comparing the bids were laid down. All bids were accepted sealed and were opened and read in the
presence of the COAs official representative and before all interested bidders. The only question that remains is whether or not the
existence of KAWASAKIs right to top destroys the essence of competitive bidding so as to say that the bidders did not have an
opportunity for competition. We hold that it does not.
The essence of competition in public bidding is that the bidders are placed on equal footing. This means that all qualified
bidders have an equal chance of winning the auction through their bids. In the case at bar, all of the bidders were exposed to the
same risk and were subjected to the same condition, i.e., the existence of KAWASAKIs right to top. Under the ASBR, the

Government expressly reserved the right to reject any or all bids, and manifested its intention not to accept the highest bid should
KAWASAKI decide to exercise its right to top under the ABSR. This reservation or qualification was made known to the bidders in a
pre-bidding conference held on September 28, 1993. They all expressly accepted this condition in writing without any qualification.
Furthermore, when the Committee on Privatization notified petitioner of the approval of the sale of the National Government shares
of stock in PHILSECO, it specifically stated that such approval was subject to the right of KAWASAKI Heavy Industries,
Inc./Philyards Holdings, Inc. to top JGSMIs bid by 5% as specified in the bidding rules. Clearly, the approval of the sale was a
conditional one. Since Philyards eventually exercised its right to top petitioners bid by 5%, the sale was not
consummated. Parenthetically, it cannot be argued that the existence of the right to top set for naught the entire public bidding. Had
Philyards Holdings, Inc. failed or refused to exercise its right to top, the sale between the petitioner and the National Government
would have been consummated. In like manner, the existence of the right to top cannot be likened to a second bidding, which is
countenanced, except when there is failure to bid as when there is only one bidder or none at all. A prohibited second bidding
presupposes that based on the terms and conditions of the sale, there is already a highest bidder with the right to demand that the
seller accept its bid. In the instant case, the highest bidder was well aware that the acceptance of its bid was conditioned upon the
non-exercise of the right to top.
To be sure, respondents did not circumvent the requirements for bidding by granting KAWASAKI, a non-bidder, the right to top
the highest bidder. The fact that KAWASAKIs nominee to exercise the right to top has among its stockholders some losing bidders
cannot also be deemed unfair.
It must be emphasized that none of the parties questions the existence of KAWASAKIs right of first refusal, which is
concededly the basis for the grant of the right to top. Under KAWASAKIs right of first refusal, the National Government is under the
obligation to give preferential right to KAWASAKI in the event it decides to sell its shares in PHILSECO. It has to offer to KAWASAKI
the shares and give it the option to buy or refuse under the same terms for which it is willing to sell the said shares to third
parties. KAWASAKI is not a mere non-bidder. It is a partner in the joint venture; the incidents of which are governed by the law on
contracts and on partnership.
It is true that properties of the National Government, as a rule, may be sold only after a public bidding is held. Public bidding
is the accepted method in arriving at a fair and reasonable price and ensures that overpricing, favoritism and other anomalous
practices are eliminated or minimized. [42] But the requirement for public bidding does not negate the exercise of the right of first
refusal. In fact, public bidding is an essential first step in the exercise of the right of first refusal because it is only after the public
bidding that the terms upon which the Government may be said to be willing to sell its shares to third parties may be known. It is
only after the public bidding that the Government will have a basis with which to offer KAWASAKI the option to buy or forego the
shares.
Assuming that the parties did not swap KAWASAKIs right of first refusal with the right to top, KAWASAKI would have been
able to buy the National Governments shares in PHILSECOunder the same terms as offered by the highest bidder. Stated
otherwise, by exercising its right of first refusal, KAWASAKI could have bought the shares for only P2.03 billion and not the higher
amount of P2.1315 billion. There is, thus, no basis in the submission that the right to top unfairly favored KAWASAKI. In fact, with
the right to top, KAWASAKI stands to pay higher than it should had it settled with its right of first refusal. The obvious beneficiary of
the scheme is the National Government.
If at all, the obvious consideration for the exchange of the right of first refusal with the right to top is that KAWASAKI can name
a nominee, which it is a shareholder, to exercise the right to top. This is a valid contractual stipulation; the right to top is an
assignable right and both parties are aware of the full legal consequences of its exercise. As aforesaid, all bidders were aware of the

existence of the right to top, and its possible effects on the result of the public bidding was fully disclosed to them. The petitioner,
thus, cannot feign ignorance nor can it be allowed to repudiate its acts and question the proceedings it had fully adhered to. [43]

Jose F. Miravite for movants.

KAPUNAN, J.:

The fact that the losing bidder, Keppel Consortium (composed of Keppel, SM Group, Insular Life Assurance, Mitsui and
ICTSI), has joined Philyards in the latters effort to raise P2.131 billion necessary in exercising the right to top is not contrary to law,
public policy or public morals. There is nothing in the ASBR that bars the losing bidders from joining either the winning bidder
(should the right to top is not exercised) or KAWASAKI/PHI (should it exercise its right to top as it did), to raise the purchase
price. The petitioner did not allege, nor was it shown by competent evidence, that the participation of the losing bidders in the public
bidding was done with fraudulent intent. Absent any proof of fraud, the formation by Philyards of a consortium is legitimate in a free
enterprise system. The appellate court is thus correct in holding the petitioner estopped from questioning the validity of the transfer
of the National Governments shares in PHILSECO to respondent.
Finally, no factual basis exists to support the view that the drafting of the ASBR was illegal because no prior approval was
given by the COA for it, specifically the provision on the right to top the highest bidder and that the public auction on December 2,
1993 was not witnessed by a COA representative. No evidence was proffered to prove these allegations and the Court cannot make
legal conclusions out of mere allegations. Regularity in the performance of official duties is presumed [44] and in the absence of
competent evidence to rebut this presumption, this Court is duty bound to uphold this presumption.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration is hereby GRANTED. The impugned Decision and
Resolution of the Court of Appeals are AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, and Corona, JJ., concur.
Tinga, J., please see separate opinion.

G.R. No. 115381 December 23, 1994

KILUSANG MAYO UNO LABOR CENTER, petitioner,
vs.
HON. JESUS B. GARCIA, JR., the LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD, and the
PROVINCIAL BUS OPERATORS ASSOCIATION OF THE PHILIPPINES, respondents.
Potenciano A. Flores for petitioner.
Robert Anthony C. Sison, Cesar B. Brillantes and Jose Z. Galsim for private respondent.

Public utilities are privately owned and operated businesses whose service are essential to the general public. They are enterprises
which specially cater to the needs of the public and conduce to their comfort and convenience. As such, public utility services are
impressed with public interest and concern. The same is true with respect to the business of common carrier which holds such a
peculiar relation to the public interest that there is superinduced upon it the right of public regulation when private properties are
affected with public interest, hence, they cease 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 the control by the public for the
common good, to the extent of the interest he has thus created. 1
An abdication of the licensing and regulatory government agencies of their functions as the instant petition seeks to show, is indeed
lamentable. Not only is it an unsound administrative policy but it is inimical to public trust and public interest as well.
The instant petition for certiorari assails the constitutionality and validity of certain memoranda, circulars and/or orders of the
Department of Transportation and Communications (DOTC) and the Land Transportation Franchising and Regulatory Board
LTFRB) 2 which, among others, (a) authorize provincial bus and jeepney operators to increase or decrease the prescribed
transportation fares without application therefor with the LTFRB and without hearing and approval thereof by said agency in violation
of Sec. 16(c) of Commonwealth Act No. 146, as amended, otherwise known as the Public Service Act, and in derogation of LTFRB's
duty to fix and determine just and reasonable fares by delegating that function to bus operators, and (b) establish a presumption of
public need in favor of applicants for certificates of public convenience (CPC) and place on the oppositor the burden of proving that
there is no need for the proposed service, in patent violation not only of Sec. 16(c) of CA 146, as amended, but also of Sec. 20(a) of
the same Act mandating that fares should be "just and reasonable." It is, likewise, violative of the Rules of Court which places upon
each party the burden to prove his own affirmative allegations. 3 The offending provisions contained in the questioned issuances
pointed out by petitioner, have resulted in the introduction into our highways and thoroughfares thousands of old and smokebelching buses, many of which are right-hand driven, and have exposed our consumers to the burden of spiraling costs of public
transportation without hearing and due process.
The following memoranda, circulars and/or orders are sought to be nullified by the instant petition, viz: (a) DOTC Memorandum
Order 90-395, dated June 26, 1990 relative to the implementation of a fare range scheme for provincial bus services in the country;
(b) DOTC Department Order No.
92-587, dated March 30, 1992, defining the policy framework on the regulation of transport services; (c) DOTC Memorandum dated
October 8, 1992, laying down rules and procedures to implement Department Order No. 92-587; (d) LTFRB Memorandum Circular
No. 92-009, providing implementing guidelines on the DOTC Department Order No. 92-587; and (e) LTFRB Order dated March 24,
1994 in Case No. 94-3112.
The relevant antecedents are as follows:
On June 26, 1990; then Secretary of DOTC, Oscar M. Orbos, issued Memorandum Circular No. 90-395 to then LTFRB Chairman,
Remedios A.S. Fernando allowing provincial bus operators to charge passengers rates within a range of 15% above and 15% below
the LTFRB official rate for a period of one (1) year. The text of the memorandum order reads in full:
One of the policy reforms and measures that is in line with the thrusts and the priorities set out in the MediumTerm Philippine Development Plan (MTPDP) 1987 1992) is the liberalization of regulations in the transport

sector. Along this line, the Government intends to move away gradually from regulatory policies and make
progress towards greater reliance on free market forces.
Based on several surveys and observations, bus companies are already charging passenger rates above and
below the official fare declared by LTFRB on many provincial routes. It is in this context that some form of
liberalization on public transport fares is to be tested on a pilot basis.
In view thereof, the LTFRB is hereby directed to immediately publicize a fare range scheme for all provincial
bus routes in country (except those operating within Metro Manila). Transport Operators shall be allowed to
charge passengers within a range of fifteen percent (15%) above and fifteen percent (15%) below the LTFRB
official rate for a period of one year.
Guidelines and procedures for the said scheme shall be prepared by LTFRB in coordination with the DOTC
Planning Service.
The implementation of the said fare range scheme shall start on 6 August 1990.
For compliance. (Emphasis ours.)
Finding the implementation of the fare range scheme "not legally feasible," Remedios A.S. Fernando submitted the following
memorandum to Oscar M. Orbos on July 24, 1990, to wit:
With reference to DOTC Memorandum Order No. 90-395 dated 26 June 1990 which the LTFRB received on
19 July 1990, directing the Board "to immediately publicize a fare range scheme for all provincial bus routes in
the country (except those operating within Metro Manila)" that will allow operators "to charge passengers
within a range of fifteen percent (15%) above and fifteen percent (15%) below the LTFRB official rate for a
period of one year" the undersigned is respectfully adverting the Secretary's attention to the following for his
consideration:

3. More than inducing a reduction in bus fares by fifteen percent (15%) the
implementation of the proposal will instead trigger an upward adjustment in bus fares by
fifteen percent (15%) at a time when hundreds of thousands of people in Central and
Northern Luzon, particularly in Central Pangasinan, La Union, Baguio City, Nueva Ecija,
and the Cagayan Valley are suffering from the devastation and havoc caused by the
recent earthquake.
4. In lieu of the said proposal, the DOTC with its agencies involved in public
transportation can consider measures and reforms in the industry that will be socially
uplifting, especially for the people in the areas devastated by the recent earthquake.
In view of the foregoing considerations, the undersigned respectfully suggests that the implementation of the
proposed fare range scheme this year be further studied and evaluated.
On December 5, 1990, private respondent Provincial Bus Operators Association of the Philippines, Inc. (PBOAP) filed an application
for fare rate increase. An across-the-board increase of eight and a half centavos (P0.085) per kilometer for all types of provincial
buses with a minimum-maximum fare range of fifteen (15%) percent over and below the proposed basic per kilometer fare rate, with
the said minimum-maximum fare range applying only to ordinary, first class and premium class buses and a fifty-centavo (P0.50)
minimum per kilometer fare for aircon buses, was sought.
On December 6, 1990, private respondent PBOAP reduced its applied proposed fare to an across-the-board increase of six and a
half (P0.065) centavos per kilometer for ordinary buses. The decrease was due to the drop in the expected price of diesel.
The application was opposed by the Philippine Consumers Foundation, Inc. and Perla C. Bautista alleging that the proposed rates
were exorbitant and unreasonable and that the application contained no allegation on the rate of return of the proposed increase in
rates.
On December 14, 1990, public respondent LTFRB rendered a decision granting the fare rate increase in accordance with the
following schedule of fares on a straight computation method, viz:

1. Section 16(c) of the Public Service Act prescribes the following for the fixing and
determination of rates (a) the rates to be approved should be proposed by public
service operators; (b) there should be a publication and notice to concerned or affected
parties in the territory affected; (c) a public hearing should be held for the fixing of the
rates; hence, implementation of the proposed fare range scheme on August 6 without
complying with the requirements of the Public Service Act may not be legally feasible.
2. To allow bus operators in the country to charge fares fifteen (15%) above the present
LTFRB fares in the wake of the devastation, death and suffering caused by the July 16
earthquake will not be socially warranted and will be politically unsound; most likely
public criticism against the DOTC and the LTFRB will be triggered by the untimely motu
propioimplementation of the proposal by the mere expedient of publicizing the fare
range scheme without calling a public hearing, which scheme many as early as during
the Secretary's predecessor know through newspaper reports and columnists'
comments to be Asian Development Bank and World Bank inspired.

AUTHORIZED FARES
LUZON
MIN. OF 5 KMS. SUCCEEDING KM.
REGULAR P1.50 P0.37
STUDENT P1.15 P0.28
VISAYAS/MINDANAO
REGULAR P1.60 P0.375
STUDENT P1.20 P0.285
FIRST CLASS (PER KM.)
LUZON P0.385

VISAYAS/
MINDANAO P0.395
PREMIERE CLASS (PER KM.)
LUZON P0.395
VISAYAS/
MINDANAO P0.405

Where there are limitations in facilities, such as congested road space in urban areas, or at airports and ports,
the use of demand management measures in conformity with market principles may be considered.

AIRCON (PER KM.) P0.415. 4

2. Rate and Fare Setting. Freight rates shall be freed gradually from government controls. Passenger fares
shall also be deregulated, except for the lowest class of passenger service (normally third class passenger
transport) for which the government will fix indicative or reference fares. Operators of particular services may
fix their own fares within a range 15% above and below the indicative or reference rate.

On March 30, 1992, then Secretary of the Department of Transportation and Communications Pete Nicomedes Prado issued
Department Order No.
92-587 defining the policy framework on the regulation of transport services. The full text of the said order is reproduced below in
view of the importance of the provisions contained therein:
WHEREAS, Executive Order No. 125 as amended, designates the Department of Transportation and
Communications (DOTC) as the primary policy, planning, regulating and implementing agency on
transportation;
WHEREAS, to achieve the objective of a viable, efficient, and dependable transportation system, the
transportation regulatory agencies under or attached to the DOTC have to harmonize their decisions and
adopt a common philosophy and direction;
WHEREAS, the government proposes to build on the successful liberalization measures pursued over the last
five years and bring the transport sector nearer to a balanced longer term regulatory framework;
NOW, THEREFORE, pursuant to the powers granted by laws to the DOTC, the following policies and
principles in the economic regulation of land, air, and water transportation services are hereby adopted:
1. Entry into and exit out of the industry. Following the Constitutional dictum against monopoly, no franchise
holder shall be permitted to maintain a monopoly on any route. A minimum of two franchise holders shall be
permitted to operate on any route.
The requirements to grant a certificate to operate, or certificate of public convenience, shall be: proof of
Filipino citizenship, financial capability, public need, and sufficient insurance cover to protect the riding public.
In determining public need, the presumption of need for a service shall be deemed in favor of the applicant.
The burden of proving that there is no need for a proposed service shall be with the oppositor(s).
In the interest of providing efficient public transport services, the use of the "prior operator" and the "priority of
filing" rules shall be discontinued. The route measured capacity test or other similar tests of demand for
vehicle/vessel fleet on any route shall be used only as a guide in weighing the merits of each franchise
application and not as a limit to the services offered.

The right of an operator to leave the industry is recognized as a business decision, subject only to the filing of
appropriate notice and following a phase-out period, to inform the public and to minimize disruption of
services.

Where there is lack of effective competition for services, or on specific routes, or for the transport of particular
commodities, maximum mandatory freight rates or passenger fares shall be set temporarily by the
government pending actions to increase the level of competition.
For unserved or single operator routes, the government shall contract such services in the most advantageous
terms to the public and the government, following public bids for the services. The advisability of bidding out
the services or using other kinds of incentives on such routes shall be studied by the government.
3. Special Incentives and Financing for Fleet Acquisition. As a matter of policy, the government shall not
engage in special financing and incentive programs, including direct subsidies for fleet acquisition and
expansion. Only when the market situation warrants government intervention shall programs of this type be
considered. Existing programs shall be phased out gradually.
The Land Transportation Franchising and Regulatory Board, the Civil Aeronautics Board, the Maritime
Industry Authority are hereby directed to submit to the Office of the Secretary, within forty-five (45) days of this
Order, the detailed rules and procedures for the Implementation of the policies herein set forth. In the
formulation of such rules, the concerned agencies shall be guided by the most recent studies on the subjects,
such as the Provincial Road Passenger Transport Study, the Civil Aviation Master Plan, the Presidential Task
Force on the Inter-island Shipping Industry, and the Inter-island Liner Shipping Rate Rationalization Study.
For the compliance of all concerned. (Emphasis ours)
On October 8, 1992, public respondent Secretary of the Department of Transportation and Communications Jesus B. Garcia, Jr.
issued a memorandum to the Acting Chairman of the LTFRB suggesting swift action on the adoption of rules and procedures to
implement above-quoted Department Order No. 92-587 that laid down deregulation and other liberalization policies for the transport
sector. Attached to the said memorandum was a revised draft of the required rules and procedures covering (i) Entry Into and Exit
Out of the Industry and (ii) Rate and Fare Setting, with comments and suggestions from the World Bank incorporated therein.
Likewise, resplendent from the said memorandum is the statement of the DOTC Secretary that the adoption of the rules and
procedures is a pre-requisite to the approval of the Economic Integration Loan from the World Bank. 5
On February 17, 1993, the LTFRB issued Memorandum Circular
No. 92-009 promulgating the guidelines for the implementation of DOTC Department Order No. 92-587. The Circular provides,
among others, the following challenged portions:

xxx xxx xxx

IV. Policy Guidelines on the Issuance of Certificate of Public Convenience.
The issuance of a Certificate of Public Convenience is determined by public need. The presumption of public
need for a service shall be deemed in favor of the applicant, while burden of proving that there is no need for
the proposed service shall be the oppositor'(s).
xxx xxx xxx
V. Rate and Fare Setting
The control in pricing shall be liberalized to introduce price competition complementary with the quality of
service, subject to prior notice and public hearing. Fares shall not be provisionally authorized without public
hearing.
A. On the General Structure of Rates
1. The existing authorized fare range system of plus or minus 15 per cent for provincial buses and jeepneys
shall be widened to 20% and -25% limit in 1994 with the authorized fare to be replaced by an indicative or
reference rate as the basis for the expanded fare range.
2. Fare systems for aircon buses are liberalized to cover first class and premier services.
xxx xxx xxx
(Emphasis ours).
Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation policy of the DOTC allowing provincial bus
operators to collect plus 20% and minus 25% of the prescribed fare without first having filed a petition for the purpose and without
the benefit of a public hearing, announced a fare increase of twenty (20%) percent of the existing fares. Said increased fares were to
be made effective on March 16, 1994.
On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of bus fares.
On March 24, 1994, the LTFRB issued one of the assailed orders dismissing the petition for lack of merit. The dispositive portion
reads:
PREMISES CONSIDERED, this Board after considering the arguments of the parties, hereby DISMISSES
FOR LACK OF MERIT the petition filed in the above-entitled case. This petition in this case was resolved with
dispatch at the request of petitioner to enable it to immediately avail of the legal remedies or options it is
entitled under existing laws.
SO ORDERED. 6

Hence, the instant petition for certiorari with an urgent prayer for issuance of a temporary restraining order.
The Court, on June 20, 1994, issued a temporary restraining order enjoining, prohibiting and preventing respondents from
implementing the bus fare rate increase as well as the questioned orders and memorandum circulars. This meant that provincial bus
fares were rolled back to the levels duly authorized by the LTFRB prior to March 16, 1994. A moratorium was likewise enforced on
the issuance of franchises for the operation of buses, jeepneys, and taxicabs.
Petitioner KMU anchors its claim on two (2) grounds. First, the authority given by respondent LTFRB to provincial bus operators to
set a fare range of plus or minus fifteen (15%) percent, later increased to plus twenty (20%) and minus twenty-five (-25%) percent,
over and above the existing authorized fare without having to file a petition for the purpose, is unconstitutional, invalid and illegal.
Second, the establishment of a presumption of public need in favor of an applicant for a proposed transport service without having to
prove public necessity, is illegal for being violative of the Public Service Act and the Rules of Court.
In its Comment, private respondent PBOAP, while not actually touching upon the issues raised by the petitioner, questions the
wisdom and the manner by which the instant petition was filed. It asserts that the petitioner has no legal standing to sue or has no
real interest in the case at bench and in obtaining the reliefs prayed for.
In their Comment filed by the Office of the Solicitor General, public respondents DOTC Secretary Jesus B. Garcia, Jr. and the
LTFRB asseverate that the petitioner does not have the standing to maintain the instant suit. They further claim that it is within
DOTC and LTFRB's authority to set a fare range scheme and establish a presumption of public need in applications for certificates
of public convenience.
We find the instant petition impressed with merit.
At the outset, the threshold issue of locus standi must be struck. Petitioner KMU has the standing to sue.
The requirement of locus standi inheres from the definition of judicial power. Section 1 of Article VIII of the Constitution provides:
xxx xxx xxx
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government.
In Lamb v. Phipps, 7 we ruled that judicial power is the power to hear and decide causes pending between parties who have the right
to sue in the courts of law and equity. Corollary to this provision is the principle of locus standi of a party litigant. One who is directly
affected by and whose interest is immediate and substantial in the controversy has the standing to sue. The rule therefore requires
that a party must show a personal stake in the outcome of the case or an injury to himself that can be redressed by a favorable
decision so as to warrant an invocation of the court's jurisdiction and to justify the exercise of the court's remedial powers in his
behalf. 8
In the case at bench, petitioner, whose members had suffered and continue to suffer grave and irreparable injury and damage from
the implementation of the questioned memoranda, circulars and/or orders, has shown that it has a clear legal right that was violated

and continues to be violated with the enforcement of the challenged memoranda, circulars and/or orders. KMU members, who avail
of the use of buses, trains and jeepneys everyday, are directly affected by the burdensome cost of arbitrary increase in passenger
fares. They are part of the millions of commuters who comprise the riding public. Certainly, their rights must be protected, not
neglected nor ignored.
Assuming arguendo that petitioner is not possessed of the standing to sue, this court is ready to brush aside this barren procedural
infirmity and recognize the legal standing of the petitioner in view of the transcendental importance of the issues raised. And this act
of liberality is not without judicial precedent. As early as theEmergency Powers Cases, this Court had exercised its discretion and
waived the requirement of proper party. In the recent case of Kilosbayan, Inc., et al. v. Teofisto Guingona, Jr., et al., 9 we ruled in the
same lines and enumerated some of the cases where the same policy was adopted, viz:
. . . A party's standing before this Court is a procedural technicality which it may, in the exercise of its
discretion, set aside in view of the importance of the issues raised. In the landmark Emergency Powers
Cases, [G.R. No. L-2044 (Araneta v. Dinglasan); G.R. No. L-2756 (Araneta
v. Angeles); G.R. No. L-3054 (Rodriguez v. Tesorero de Filipinas); G.R. No. L-3055 (Guerrero v. Commissioner
of Customs); and G.R. No. L-3056 (Barredo v. Commission on Elections), 84 Phil. 368 (1949)], this Court
brushed aside this technicality because "the transcendental importance to the public of these cases demands
that they be settled promptly and definitely, brushing aside, if we must, technicalities of procedure. (Avelino vs.
Cuenco, G.R. No. L-2621)." Insofar as taxpayers' suits are concerned, this Court had declared that it "is not
devoid of discretion as to whether or not it should be entertained," (Tan v. Macapagal, 43 SCRA 677, 680
[1972]) or that it "enjoys an open discretion to entertain the same or not." [Sanidad v. COMELEC, 73 SCRA
333 (1976)].
xxx xxx xxx
In line with the liberal policy of this Court on locus standi, ordinary taxpayers, members of Congress, and even
association of planters, and
non-profit civic organizations were allowed to initiate and prosecute actions before this court to question the
constitutionality or validity of laws, acts, decisions, rulings, or orders of various government agencies or
instrumentalities. Among such cases were those assailing the constitutionality of (a) R.A. No. 3836 insofar as
it allows retirement gratuity and commutation of vacation and sick leave to Senators and Representatives and
to elective officials of both Houses of Congress (Philippine Constitution Association, Inc. v. Gimenez, 15 SCRA
479 [1965]); (b) Executive Order No. 284, issued by President Corazon C. Aquino on 25 July 1987, which
allowed members of the cabinet, their undersecretaries, and assistant secretaries to hold other government
offices or positions (Civil Liberties Union v. Executive Secretary, 194 SCRA 317 [1991]); (c) the automatic
appropriation for debt service in the General Appropriations Act (Guingona v. Carague, 196 SCRA 221 [1991];
(d) R.A. No. 7056 on the holding of desynchronized elections (Osmea v. Commission on Elections, 199
SCRA 750 [1991]); (e) P.D. No. 1869 (the charter of the Philippine Amusement and Gaming Corporation) on
the ground that it is contrary to morals, public policy, and order (Basco v. Philippine Amusement and Gaming
Corp., 197 SCRA 52 [1991]); and (f) R.A. No. 6975, establishing the Philippine National Police. (Carpio v.
Executive Secretary, 206 SCRA 290 [1992]).
Other cases where we have followed a liberal policy regarding locus standi include those attacking the validity
or legality of (a) an order allowing the importation of rice in the light of the prohibition imposed by R.A. No.
3452 (Iloilo Palay and Corn Planters Association, Inc. v. Feliciano, 13 SCRA 377 [1965]; (b) P.D. Nos. 991 and

1033 insofar as they proposed amendments to the Constitution and P.D. No. 1031 insofar as it directed the
COMELEC to supervise, control, hold, and conduct the referendum-plebiscite on 16 October 1976 (Sanidad v.
Commission on Elections, supra); (c) the bidding for the sale of the 3,179 square meters of land at Roppongi,
Minato-ku, Tokyo, Japan (Laurel v. Garcia, 187 SCRA 797 [1990]); (d) the approval without hearing by the
Board of Investments of the amended application of the Bataan Petrochemical Corporation to transfer the site
of its plant from Bataan to Batangas and the validity of such transfer and the shift of feedstock from naphtha
only to naphtha and/or liquefied petroleum gas (Garcia v. Board of Investments, 177 SCRA 374 [1989]; Garcia
v. Board of Investments, 191 SCRA 288 [1990]); (e) the decisions, orders, rulings, and resolutions of the
Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue, Commissioner of Customs,
and the Fiscal Incentives Review Board exempting the National Power Corporation from indirect tax and
duties (Maceda v. Macaraig, 197 SCRA 771 [1991]); (f) the orders of the Energy Regulatory Board of 5 and 6
December 1990 on the ground that the hearings conducted on the second provisional increase in oil prices did
not allow the petitioner substantial cross-examination; (Maceda v. Energy Regulatory Board, 199 SCRA 454
[1991]); (g) Executive Order No. 478 which levied a special duty of P0.95 per liter of imported oil products
(Garcia v. Executive Secretary, 211 SCRA 219 [1992]); (h) resolutions of the Commission on Elections
concerning the apportionment, by district, of the number of elective members of Sanggunians (De Guia vs.
Commission on Elections, 208 SCRA 420 [1992]); and (i) memorandum orders issued by a Mayor affecting
the Chief of Police of Pasay City (Pasay Law and Conscience Union, Inc. v. Cuneta, 101 SCRA 662 [1980]).
In the 1975 case of Aquino v. Commission on Elections (62 SCRA 275 [1975]), this Court, despite its
unequivocal ruling that the petitioners therein had no personality to file the petition, resolved nevertheless to
pass upon the issues raised because of the far-reaching implications of the petition. We did no less in De
Guia v. COMELEC (Supra) where, although we declared that De Guia "does not appear to have locus standi,
a standing in law, a personal or substantial interest," we brushed aside the procedural infirmity "considering
the importance of the issue involved, concerning as it does the political exercise of qualified voters affected by
the apportionment, and petitioner alleging abuse of discretion and violation of the Constitution by respondent."
Now on the merits of the case.
On the fare range scheme.
Section 16(c) of the Public Service Act, as amended, reads:
Sec. 16. Proceedings of the Commission, upon notice and hearing. The Commission shall have
power, upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the
limitations and exceptions mentioned and saving provisions to the contrary:
xxx xxx xxx
(c) To fix and determine individual or joint rates, tolls, charges, classifications, or schedules thereof, as well as
commutation, mileage kilometrage, and other special rates which shall be imposed, observed, and followed
thereafter by any public service: Provided, That the Commission may, in its discretion, approve rates proposed
by public services provisionally and without necessity of any hearing; but it shall call a hearing thereon within
thirty days thereafter, upon publication and notice to the concerns operating in the territory affected: Provided,
further, That in case the public service equipment of an operator is used principally or secondarily for the

promotion of a private business, the net profits of said private business shall be considered in relation with the
public service of such operator for the purpose of fixing the rates. (Emphasis ours).
xxx xxx xxx
Under the foregoing provision, the Legislature delegated to the defunct Public Service Commission the power of fixing
the rates of public services. Respondent LTFRB, the existing regulatory body today, is likewise vested with the same
under Executive Order No. 202 dated June 19, 1987. Section 5(c) of the said executive order authorizes LTFRB "to
determine, prescribe, approve and periodically review and adjust, reasonable fares, rates and other related charges,
relative to the operation of public land transportation services provided by motorized vehicles."
Such delegation of legislative power to an administrative agency is permitted in order to adapt to the increasing complexity of
modern life. As subjects for governmental regulation multiply, so does the difficulty of administering the laws. Hence, specialization
even in legislation has become necessary. Given the task of determining sensitive and delicate matters as
route-fixing and rate-making for the transport sector, the responsible regulatory body is entrusted with the power of subordinate
legislation. With this authority, an administrative body and in this case, the LTFRB, may implement broad policies laid down in a
statute by "filling in" the details which the Legislature may neither have time or competence to provide. However, nowhere under the
aforesaid provisions of law are the regulatory bodies, the PSC and LTFRB alike, authorized to delegate that power to a common
carrier, a transport operator, or other public service.
In the case at bench, the authority given by the LTFRB to the provincial bus operators to set a fare range over and above the
authorized existing fare, is illegal and invalid as it is tantamount to an undue delegation of legislative authority. Potestas delegata
non delegari potest. What has been delegated cannot be delegated. This doctrine is based on the ethical principle that such a
delegated power constitutes not only a right but a duty to be performed by the delegate through the instrumentality of his own
judgment and not through the intervening mind of another.10 A further delegation of such power would indeed constitute a negation
of the duty in violation of the trust reposed in the delegate mandated to discharge it directly. 11 The policy of allowing the provincial
bus operators to change and increase their fares at will would result not only to a chaotic situation but to an anarchic state of affairs.
This would leave the riding public at the mercy of transport operators who may increase fares every hour, every day, every month or
every year, whenever it pleases them or whenever they deem it "necessary" to do so. In Panay Autobus Co. v. Philippine Railway
Co., 12 where respondent Philippine Railway Co. was granted by the Public Service Commission the authority to change its freight
rates at will, this Court categorically declared that:
In our opinion, the Public Service Commission was not authorized by law to delegate to the Philippine Railway
Co. the power of altering its freight rates whenever it should find it necessary to do so in order to meet the
competition of road trucks and autobuses, or to change its freight rates at will, or to regard its present rates as
maximum rates, and to fix lower rates whenever in the opinion of the Philippine Railway Co. it would be to its
advantage to do so.
The mere recital of the language of the application of the Philippine Railway Co. is enough to show that it is
untenable. The Legislature has delegated to the Public Service Commission the power of fixing the rates of
public services, but it has not authorized the Public Service Commission to delegate that power to a common
carrier or other public service. The rates of public services like the Philippine Railway Co. have been approved
or fixed by the Public Service Commission, and any change in such rates must be authorized or approved by
the Public Service Commission after they have been shown to be just and reasonable. The public service
may, of course, propose new rates, as the Philippine Railway Co. did in case No. 31827, but it cannot lawfully

make said new rates effective without the approval of the Public Service Commission, and the Public Service
Commission itself cannot authorize a public service to enforce new rates without the prior approval of said
rates by the commission. The commission must approve new rates when they are submitted to it, if the
evidence shows them to be just and reasonable, otherwise it must disapprove them. Clearly, the commission
cannot determine in advance whether or not the new rates of the Philippine Railway Co. will be just and
reasonable, because it does not know what those rates will be.
In the present case the Philippine Railway Co. in effect asked for permission to change its freight rates at will.
It may change them every day or every hour, whenever it deems it necessary to do so in order to meet
competition or whenever in its opinion it would be to its advantage. Such a procedure would create a most
unsatisfactory state of affairs and largely defeat the purposes of the public service law. 13 (Emphasis ours).
One veritable consequence of the deregulation of transport fares is a compounded fare. If transport operators will be authorized to
impose and collect an additional amount equivalent to 20% over and above the authorized fare over a period of time, this will unduly
prejudice a commuter who will be made to pay a fare that has been computed in a manner similar to those of compounded bank
interest rates.
Picture this situation. On December 14, 1990, the LTFRB authorized provincial bus operators to collect a thirty-seven (P0.37)
centavo per kilometer fare for ordinary buses. At the same time, they were allowed to impose and collect a fare range of plus or
minus 15% over the authorized rate. Thus P0.37 centavo per kilometer authorized fare plus P0.05 centavos (which is 15% of P0.37
centavos) is equivalent to P0.42 centavos, the allowed rate in 1990. Supposing the LTFRB grants another five (P0.05) centavo
increase per kilometer in 1994, then, the base or reference for computation would have to be P0.47 centavos (which is P0.42 +
P0.05 centavos). If bus operators will exercise their authority to impose an additional 20% over and above the authorized fare, then
the fare to be collected shall amount to P0.56 (that is, P0.47 authorized LTFRB rate plus 20% of P0.47 which is P0.29). In effect,
commuters will be continuously subjected, not only to a double fare adjustment but to a compounding fare as well. On their part,
transport operators shall enjoy a bigger chunk of the pie. Aside from fare increase applied for, they can still collect an additional
amount by virtue of the authorized fare range. Mathematically, the situation translates into the following:
Year** LTFRB authorized Fare Range Fare to be
rate*** collected per
kilometer
1990 P0.37 15% (P0.05) P0.42
1994 P0.42 + 0.05 = 0.47 20% (P0.09) P0.56
1998 P0.56 + 0.05 = 0.61 20% (P0.12) P0.73
2002 P0.73 + 0.05 = 0.78 20% (P0.16) P0.94
Moreover, rate making or rate fixing is not an easy task. It is a delicate and sensitive government function that requires dexterity of
judgment and sound discretion with the settled goal of arriving at a just and reasonable rate acceptable to both the public utility and
the public. Several factors, in fact, have to be taken into consideration before a balance could be achieved. A rate should not be
confiscatory as would place an operator in a situation where he will continue to operate at a loss. Hence, the rate should enable
public utilities to generate revenues sufficient to cover operational costs and provide reasonable return on the investments. On the
other hand, a rate which is too high becomes discriminatory. It is contrary to public interest. A rate, therefore, must be reasonable
and fair and must be affordable to the end user who will utilize the services.

Given the complexity of the nature of the function of rate-fixing and its far-reaching effects on millions of commuters, government
must not relinquish this important function in favor of those who would benefit and profit from the industry. Neither should the
requisite notice and hearing be done away with. The people, represented by reputable oppositors, deserve to be given full
opportunity to be heard in their opposition to any fare increase.

consideration for which a CPC is issued, and that fact alone must be consistently borne in mind. Also, existing operators in subject
routes must be given an opportunity to offer proof and oppose the application. Therefore, an applicant must, at all times, be required
to prove his capacity and capability to furnish the service which he has undertaken to
render. 18 And all this will be possible only if a public hearing were conducted for that purpose.

The present administrative procedure, 14 to our mind, already mirrors an orderly and satisfactory arrangement for all parties involved.
To do away with such a procedure and allow just one party, an interested party at that, to determine what the rate should be, will
undermine the right of the other parties to due process. The purpose of a hearing is precisely to determine what a just and
reasonable rate is. 15 Discarding such procedural and constitutional right is certainly inimical to our fundamental law and to public
interest.

Otherwise stated, the establishment of public need in favor of an applicant reverses well-settled and institutionalized judicial, quasijudicial and administrative procedures. It allows the party who initiates the proceedings to prove, by mere application, his affirmative
allegations. Moreover, the offending provisions of the LTFRB memorandum circular in question would in effect amend the Rules of
Court by adding another disputable presumption in the enumeration of 37 presumptions under Rule 131, Section 5 of the Rules of
Court. Such usurpation of this Court's authority cannot be countenanced as only this Court is mandated by law to promulgate rules
concerning pleading, practice and procedure. 19

On the presumption of public need.

A certificate of public convenience (CPC) is an authorization granted by the LTFRB for the operation of land transportation services
for public use as required by law. Pursuant to Section 16(a) of the Public Service Act, as amended, the following requirements must
be met before a CPC may be granted, to wit: (i) the applicant must be a citizen of the Philippines, or a corporation or co-partnership,
association or joint-stock company constituted and organized under the laws of the Philippines, at least 60 per centum of its stock or
paid-up capital must belong entirely to citizens of the Philippines; (ii) the applicant must be financially capable of undertaking the
proposed service and meeting the responsibilities incident to its operation; and (iii) the applicant must prove that the operation of the
public service proposed and the authorization to do business will promote the public interest in a proper and suitable manner. It is
understood that there must be proper notice and hearing before the PSC can exercise its power to issue a CPC.
While adopting in toto the foregoing requisites for the issuance of a CPC, LTFRB Memorandum Circular No. 92-009, Part IV,
provides for yet incongruous and contradictory policy guideline on the issuance of a CPC. The guidelines states:
The issuance of a Certificate of Public Convenience is determined by public need. The presumption of public
need for a service shall be deemed in favor of the applicant, while the burden of proving that there is no need
for the proposed service shall be the oppositor's. (Emphasis ours).
The above-quoted provision is entirely incompatible and inconsistent with Section 16(c)(iii) of the Public Service Act which requires
that before a CPC will be issued, the applicant must prove by proper notice and hearing that the operation of the public service
proposed will promote public interest in a proper and suitable manner. On the contrary, the policy guideline states that the
presumption of public need for a public service shall be deemed in favor of the applicant. In case of conflict between a statute and
an administrative order, the former must prevail.
16

By its terms, public convenience or necessity generally means something fitting or suited to the public need. As one of the basic
requirements for the grant of a CPC, public convenience and necessity exists when the proposed facility or service meets a
reasonable want of the public and supply a need which the existing facilities do not adequately supply. The existence or
non-existence of public convenience and necessity is therefore a question of fact that must be established by evidence, real and/or
testimonial; empirical data; statistics and such other means necessary, in a public hearing conducted for that purpose. The object
and purpose of such procedure, among other things, is to look out for, and protect, the interests of both the public and the existing
transport operators.
Verily, the power of a regulatory body to issue a CPC is founded on the condition that after full-dress hearing and investigation, it
shall find, as a fact, that the proposed operation is for the convenience of the public. 17 Basic convenience is the primary

Deregulation, while it may be ideal in certain situations, may not be ideal at all in our country given the present circumstances.
Advocacy of liberalized franchising and regulatory process is tantamount to an abdication by the government of its inherent right to
exercise police power, that is, the right of government to regulate public utilities for protection of the public and the utilities
themselves.
While we recognize the authority of the DOTC and the LTFRB to issue administrative orders to regulate the transport sector, we find
that they committed grave abuse of discretion in issuing DOTC Department Order
No. 92-587 defining the policy framework on the regulation of transport services and LTFRB Memorandum Circular No. 92-009
promulgating the implementing guidelines on DOTC Department Order No. 92-587, the said administrative issuances being
amendatory and violative of the Public Service Act and the Rules of Court. Consequently, we rule that the twenty (20%) per
centum fare increase imposed by respondent PBOAP on March 16, 1994 without the benefit of a petition and a public hearing is null
and void and of no force and effect. No grave abuse of discretion however was committed in the issuance of DOTC Memorandum
Order No. 90-395 and DOTC Memorandum dated October 8, 1992, the same being merely internal communications between
administrative officers.
WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED and the challenged administrative issuances and
orders, namely: DOTC Department Order No. 92-587, LTFRB Memorandum Circular
No. 92-009, and the order dated March 24, 1994 issued by respondent LTFRB are hereby DECLARED contrary to law and invalid
insofar as they affect provisions therein (a) delegating to provincial bus and jeepney operators the authority to increase or decrease
the duly prescribed transportation fares; and (b) creating a presumption of public need for a service in favor of the applicant for a
certificate of public convenience and placing the burden of proving that there is no need for the proposed service to the oppositor.
The Temporary Restraining Order issued on June 20, 1994 is hereby MADE PERMANENT insofar as it enjoined the bus fare rate
increase granted under the provisions of the aforementioned administrative circulars, memoranda and/or orders declared invalid.
No pronouncement as to costs.
SO ORDERED.
Padilla, Davide, Jr., Bellosillo and Quiason, JJ., concur.

[G.R. No. 117650. March 7, 1996]

SULPICIO LINES, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and JAIME CAGATAN, respondents.

We disagree.

DECISION

As early as 1911, this Court held that the question of venue essentially relates to the trial and touches more upon the
convenience of the parties, rather than upon the substance and merits of the case. [10] Our permissive rules underlying provisions on
venue are intended to assure convenience for the plaintiff and his witnesses and to promote the ends of justice. This axiom all the
more finds applicability in cases involving labor and management because of the principle, paramount in our jurisdiction, that the
State shall afford full protection to labor.[11]

Petitioner Sulpicio Lines, Inc., owner of MV Cotabato Princess, on January 15, 1992 dismissed private respondent
Jaime Cagatan, a messman of the said vessel, allegedly for being absent without leave for a prolonged period of six (6) months.

Even in cases where venue has been stipulated by the parties by contract, this Court has not hesitated to set aside
agreements on venue if the same would lead to a situation sogrossly inconvenient to one party as to virtually negate his claim.
In Sweet Lines vs. Teves,[12] involving a contract of adhesion, we held that:

KAPUNAN, J.:

As a result of his dismissal, the private respondent filed a complaint for illegal dismissal before the National Labor Relations
Commission (NLRC) through its National Capital Region Arbitration Branch in Manila, docketed as NLRC-NCR Case No. 00-063163-92.[1]
Responding to the said complaint, petitioner, on June 25, 1992, filed a Motion to Dismiss on the ground of improper venue,
stating, among other things, that the case for illegal dismissal should have been lodged with the NLRCs Regional Branch No. VII
(Cebu), as its main office was located in Cebu City.[2]
In an Order dated August 21, 1992 Labor Arbiter Arthur L. Amansec of the NLRC-NCR denied petitioners Motion to Dismiss,
holding that:
Considering that the complainant is a ship steward, traveled on board respondents ship along the Manila-Enstancia-IloiloZamboanga-Cotabato vice-versa route, Manila can be said to be part of the complainants territorial workplace.[3]
The aforequoted Order was seasonably appealed to the NLRC by petitioner. On February 28, 1994, respondent NLRC found
petitioners appeal unmeritorious and sustained the Labor Arbiters August 21, 1992 ruling, explaining that under the New NLRC
Rules, the Commission or the Labor Arbiter before whom the case is pending may order a change of venue. [4] Finding no grave
abuse of discretion in the Labor Arbiters assailed Order, respondent NLRC emphasized that:
[T]he complainant instituted the Action in Manila where he resides. Hence, we see no grave abuse of discretion on the part of the
labor arbiter in denying the respondents Motion to Dismiss as We find support in the basic principle that the State shall afford
protection to labor and that the NLRC is not bound by strict technical rules of procedure.[5]
Undaunted, petitioner sought a reconsideration of the above Order, which the public respondent denied in its Resolution
dated July 22, 1994.[6] Consequently, petitioner comes to this Court for relief, in the form of a Special Civil Action for Certiorari under
Rule 65 of the Rules of Court, contending that public respondent NLRC acted with grave abuse of discretion amounting to lack or
excess of jurisdiction when it issued its assailed rulings.[7]
It is petitioners principal contention that a ship or vessel as workplace is an extension of its homeport or principal place of
business, and that being part of the territory of the homeport, (such) vessel is governed to a large extent by the laws and is under
the jurisdiction of the homeport.[8] Based on this submission, petitioner avers that its vessel-as-workplace is under the territorial
jurisdiction of the Regional Arbitration branch where (its) . . . principal office is located, which is Branch VII, located in Cebu City.[9]

An agreement will not be held valid where it practically negates the action of the claimants, such as the private respondents
herein. The philosophy underlying the provisions on transfer of venue of actions is the convenience of the plaintiffs as well as his
witnesses and to promote the ends of justice. Considering the expense and trouble a passenger residing outside Cebu City would
incur to prosecute a claim in the City of Cebu, he would most probably decide not to file the action at all. The condition will thus
defeat, instead of enhance, the ends of justice. Upon the other hand, petitioner had branches or offices in the respective ports of call
of the vessels and can afford to litigate in any of these places. Hence, the filing of the suit in the CFI of Misamis Oriental, as was
done in the instant case will not cause inconvenience to, much less prejudice petitioner.[13]
In the case at bench, it is not denied that while petitioner maintains its principal office in Cebu City, it retains a major booking
and shipping office in Manila from which it earns considerable revenue, and from which it hires and trains a significant number of its
workforce. Its virulent insistence on holding the proceedings in the NLRCs regional arbitration branch inCebu City is obviously a ploy
to inconvenience the private respondent, a mere steward who resides in Metro Manila, who would obviously not be able to afford the
frequent trips to CebuCity in order to follow up his case.
Even the provisions cited by petitioner in support of its contention that venue of the illegal dismissal case lodged by private
respondent is improperly laid, would not absolutely support his claim that respondent NLRC acted with grave abuse of discretion in
allowing the private respondent to file his case with the NCR arbitration branch.
Section 1, Rule IV of the NLRC Rules of Procedure on Venue, provides that:
Section 1. Venue - (a) All cases in which Labor Arbiters have authority to hear and decide may be filed in the Regional Arbitration
Branch having jurisdiction over the workplace of the complainant/petitioner.
This provision is obviously permissive, for the said section uses the word may, allowing a different venue when the interests of
substantial justice demand a different one. In any case, as stated earlier, the Constitutional protection accorded to labor is a
paramount and compelling factor, provided the venue chosen is not altogether oppressive to the employer.
Moreover, Section 1, Rule IV of the 1990 NLRC Rules additionally provides that, for purposes of venue, workplace shall be
understood as the place or locality where the employee is regularly assigned when the cause of action arose. Since the private
respondents regular place of assignment is the vessel MV Cotabato Princess which plies the Manila-Estancia-Iloilo-ZamboangaCotabato route, we are of the opinion that Labor Arbiter Arthur L. Amansec was correct in concluding that Manila could be
considered part of the complainants territorial workplace. Respondent NLRC, therefore, committed no grave abuse of discretion in
sustaining the labor arbiters denial of herein petitioners Motion to Dismiss.

WHEREFORE, premises considered, the instant petition is hereby DISMISSED for lack of merit.
SO ORDERED.
Padilla, Bellosillo, Vitug, and Hermosisima, Jr., JJ., concur.
[G.R. No. 131166. September 30, 1999]
CALTEX (PHILIPPINES), INC. petitioner, vs. SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO, EUSEBIO S. GO,
CARLOS S. GO, VICTORIANO S. GO, DOMINADOR S. GO, RICARDO S. GO, EDWARD S. GO, ARTURO S. GO,
EDGAR S. GO, EDMUND S. GO, FRANCISCO SORIANO, VECTOR SHIPPING CORPORATION, TERESITA G.
CAEZAL AND SOTERA E. CAEZAL, respondents.
SYNOPSIS
On December 19, 1987, the MV Doa Paz, a passenger ship bound for Manila colided with motor tanker MT Vector. MT Vector
carried on board oil products owned by Caltex by virtue of a charter contract. Numerous people died in that accident including public
school teacher Sebastian Caezal and his 11 year old daughter. In 1989, Caezals wife and mother filed a complaint for Damages
arising from Breach of Contract of Carriage against Sulpicio Lines, Inc. Sulpicio Lines, in turn, filed a third party complaint against
Vector Shipping, Inc. and Caltex Phils. The trial court rendered decision against Sulpicio Lines and dismissed the third-party
complaint. On appeal, the Court of Appeals modified the trial courts ruling and held Vector Shipping Co. and Caltex Phils., Inc.,
equally liable. Hence, this petition.

3. ID.; ID.; ID.; CONTRACT OF AFFREIGHTMENT; CATEGORIES.- A contract of affreightment may be either time charter, wherein
the leased vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single
voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a
single or consecutive voyage, the Ship owner to supply the ships store, pay for the wages of the master of the crew, and
defray the expenses for the maintenance of the ship.
4. ID.; ID.; ID.; ID.; WHERE CHARTER IS ONE OF AFFREIGHTMENT, CHARTERER FREE FROM LIABILITY TO THIRD
PERSONS.- If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner
for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third
persons in respect of the ship.
5. ID.; ID.; COMMON CARRIER; REMAINS AS SUCH NOTWITHSTANDING CHARTER OF WHOLE OR PORTION OF VESSEL.In this case, the charter party agreement did not convert the common carrier into a private carrier. The parties entered into a
voyager charter, which retains the character of the vessel as a common carrier. In Planters Products, Inc. vs. Court of
Appeals, we said: It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole
or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter
or voyage charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common
carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the
property of the charterer. Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals. Although a charter party
may transform a common carrier into a private one, the same however is not true in a contract of affreightment xxx

SYLLABUS

6. ID.; ID.; ID.; SEAWORTHINESS, IMPLIEDLY WARRANTED.- A common carrier is a person or corporation whose regular
business is to carry passenger or property for all persons who may choose to employ and to remunerate him. MT Vector fits
the definition of a common carrier under Article 1732 of the Civil Code. Thus, the carriers are deemed to warrant impliedly the
seaworthiness of the ship. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a
sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition the
vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code. The
provisions owed their conception to the nature of the business of common carriers. This business is impressed with a special
public duty. The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and
safety of the passengers, especially because with the modern development of science and invention, transportation has
become more rapid, more complicated and somehow more hazardous. For these reasons, a passenger or a shipper of goods
is under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its
seaworthiness.

1. COMMERCIAL LAW; TRANSPORTATION; CONTRACT OF CARRIAGE; RESPECTIVE RIGHTS AND DUTIES OF PARTIES,
HOW DETERMINED.- The respective rights and duties of a shipper and the carrier depends not on whether the carrier is
public or private, but on whether the contract of carriage is a bill of lading or equivalent shipping documents on the one hand,
or a charter party or similar contract on the other.

7. ID.; ID.; ID.; NEGLIGENCE, CONSTRUED.- In Southeastern College, Inc. vs. Court of Appeals, we said that negligence, as
commonly understood, is conduct which naturally or reasonably creates undue risk or harm to others. It may be the failure to
observe that degree of care, precaution, and vigilance, which the circumstances justly demand, or the omission to do
something which ordinarily regulate the conduct of human affairs, would do.

2. ID.; ID.; ID.; CHARTER PARTY DIFFERENTIATED FROM CONTRACT OF AFFREIGHTMENT.- A charter party is a contract by
which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a
contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or
other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight.

8. ID.; ID.; ID.; ID.; CHARTERER WITH NO OBLIGATION TO ENSURE VESSEL COMPLIED WITH ALL LEGAL
REQUIREMENTS.- The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it
chartered complied with all legal requirements. The duty rests upon the common carrier simply for being engaged in public
service. The Civil Code demands diligence which is required by the nature of the obligation and that which corresponds with

Caltex Phils. and Vector entered into a contract of affreightment also known as a voyage charter. In a voyage charter, the
charter party provides for the hire of the vessel only, the ship owner to supply the ships store, pay for the wages of the master of the
crew, and defray the expenses for the maintenance of the ship. If the charter is a contract of affreightment, which leaves the general
owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The
Charterer is free from liability to third persons in respect of the ship.
The charterer of a vessel has no obligation before transporting all legal requirements. The duty rests upon the common
carrier simply for being engaged in public service.

the circumstances of the persons, the time and the place. Hence, considering the nature of the obligation between Caltex and
MT Vector, the liability as found by the Court of Appeals is without basis.
9. ID.; ID.; ID.; ID.; ID.; CASE AT BAR.- The relationship between the parties in this case is governed by special laws. Because of
the implied warranty of seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire
into the vessels seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from
shippers and hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of
the public in general is concerned. By the same token, we cannot expect passengers to inquire every time they board a
common carrier, whether the carrier possesses the necessary papers or that all the carriers employees are qualified. Such a
practice would be an absurdity in a business where time is always of the essence. Considering the nature of transportation
business, passengers and shippers alike customarily presume that common carriers possess all the legal requisites in its
operation. Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping his
cargoes.

At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea within the vicinity of Dumali Point
between Marinduque and Oriental Mindoro. All the crewmembers of MV Doa Paz died, while the two survivors from MT Vector
claimed that they were sleeping at the time of the incident.
The MV Doa Paz carried an estimated 4,000 passengers; many indeed, were not in the passenger manifest. Only 24 survived
the tragedy after having been rescued from the burning waters by vessels that responded to distress calls. [5] Among those who
perished were public school teacher Sebastian Caezal (47 years old) and his daughter Corazon Caezal (11 years old), both
unmanifested passengers but proved to be on board the vessel.
On March 22, 1988, the board of marine inquiry in BMI Case No. 653-87 after investigation found that the MT Vector, its
registered operator Francisco Soriano, and its owner and actual operator Vector Shipping Corporation, were at fault and responsible
for its collision with MV Doa Paz.[6]
On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife and mother respectively, filed with the
Regional Trial Court, Branch 8, Manila, a complaint for Damages Arising from Breach of Contract of Carriage against Sulpicio Lines,
Inc. (hereafter Sulpicio). Sulpicio, in turn, filed a third party complaint against Francisco Soriano, Vector Shipping Corporation and
Caltex (Philippines), Inc. Sulpicio alleged that Caltex chartered MT Vector with gross and evident bad faith knowing fully well that MT
Vector was improperly manned, ill-equipped, unseaworthy and a hazard to safe navigation; as a result, it rammed against MV Doa
Paz in the open sea setting MT Vectors highly flammable cargo ablaze.

DECISION
PARDO, J.:
Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel and a passenger
ship?
When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying petroleum products of Caltex (Philippines),
Inc. (hereinafter Caltex) no one could have guessed that it would collide with MV Doa Paz, killing almost all the passengers and
crew members of both ships, and thus resulting in one of the countrys worst maritime disasters.
[1]

The petition before us seeks to reverse the Court of Appeals decision holding petitioner jointly liable with the operator of MT
Vector for damages when the latter collided with Sulpicio Lines, Inc.s passenger ship MV Doa Paz.

On September 15, 1992, the trial court rendered decision dismissing the third party complaint against petitioner. The
dispositive portion reads:
WHEREFORE, judgement is hereby rendered in favor of plaintiffs and against defendant-3rd party plaintiff Sulpicio Lines, Inc., to
wit:
1. For the death of Sebastian E. Caezal and his 11-year old daughter Corazon G. Caezal, including loss of future earnings of said
Sebastian, moral and exemplary damages, attorneys fees, in the total amount of P 1,241,287.44 and finally;
2. The statutory costs of the proceedings.

The facts are as follows:

Likewise, the 3rd party complaint is hereby DISMISSED for want of substantiation and with costs against the 3rd party plaintiff.
On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute to Masbate, loaded with
8,800 barrels of petroleum products shipped by petitioner Caltex. [2] MT Vector is a tramping motor tanker owned and operated by
Vector Shipping Corporation, engaged in the business of transporting fuel products such as gasoline, kerosene, diesel and crude
oil. During that particular voyage, the MT Vector carried on board gasoline and other oil products owned by Caltex by virtue of a
charter contract between them.[3]
On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doa Paz left the port of Tacloban headed for Manila with
a complement of 59 crew members including the master and his officers, and passengers totaling 1,493 as indicated in the Coast
Guard Clearance.[4] The MV Doa Paz is a passenger and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the route
of Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila, making trips twice a week.

IT IS SO ORDERED.
DONE IN MANILA, this 15th day of September 1992.
ARSENIO M. GONONG
Judge[7]
On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April 15, 1997, the Court of Appeal modified the trial
courts ruling and included petitioner Caltex as one of the those liable for damages. Thus:

WHEREFORE, in view of all the foregoing, the judgment rendered by the Regional Trial Court is hereby MODIFIED as follows:
WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of Sebastian E. Caezal and Corazon Caezal:
1. Compensatory damages for the death of Sebastian E.Caezal and Corazon Caezal the total amount of ONE HUNDRED
THOUSAND PESOS (P100,000);
2. Compensatory damages representing the unearned income of Sebastian E. Caezal, in the total amount of THREE HUNDRED
SIX THOUSAND FOUR HUNDRED EIGHTY (P306,480.00) PESOS;
3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS (P 300,000.00);
4. Attorneys fees in the concept of actual damages in the amount of FIFTY THOUSAND PESOS (P 50,000.00);
5. Costs of the suit.
Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held equally liable under the third party complaint to
reimburse/indemnify defendant Sulpicio Lines, Inc. of the above-mentioned damages, attorneys fees and costs which the latter is
adjudged to pay plaintiffs, the same to be shared half by Vector Shipping Co. (being the vessel at fault for the collision) and the other
half by Caltex (Phils.), Inc. (being the charterer that negligently caused the shipping of combustible cargo aboard an unseaworthy
vessel).
SO ORDERED.
JORGE S. IMPERIAL
Associate Justice
WE CONCUR:
RAMON U. MABUTAS. JR. PORTIA ALIO HERMACHUELOS
Associate Justice Associate Justice[8]
Hence, this petition.
We find the petition meritorious.

Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter. [10]
A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a
specified time or use; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her to a
merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. [11]
A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period
of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of
the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ships
store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship. [12]
Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own people and becomes, in
effect, the owner for the voyage or service stipulated, subject to liability for damages caused by negligence.
If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage,
the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the
ship.[13]
Second : MT Vector is a common carrier
Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage charter. Does a charter
party agreement turn the common carrier into a private one? We need to answer this question in order to shed light on the
responsibilities of the parties.
In this case, the charter party agreement did not convert the common carrier into a private carrier. The parties entered into a
voyage charter, which retains the character of the vessel as a common carrier.
In Planters Products, Inc. vs. Court of Appeals,[14] we said:
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by
one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage charter. It is only
when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least
insofar as the particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the moment, be the property of the charterer.
Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals:[15]
Although a charter party may transform a common carrier into a private one, the same however is not true in a contract of
affreightment xxx

First: The charterer has no liability for damages under Philippine Maritime laws.
The respective rights and duties of a shipper and the carrier depends not on whether the carrier is public or private, but on
whether the contract of carriage is a bill of lading or equivalent shipping documents on the one hand, or a charter party or similar
contract on the other.[9]

A common carrier is a person or corporation whose regular business is to carry passengers or property for all persons who
may choose to employ and to remunerate him.[16] MT Vector fits the definition of a common carrier under Article 1732 of the Civil
Code. In Guzman vs. Court of Appeals,[17] we ruled:

The Civil Code defines common carriers in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting
passengers for passengers or goods or both, by land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity (in local idiom, as a sideline). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such
services on a anoccasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the general public, i.e., the general community or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1733 deliberately refrained from making such distinctions.
It appears to the Court that private respondent is properly characterized as a common carrier even though he merely back-hauled
goods for other merchants from Manila to Pangasinan, although such backhauling was done on a periodic, occasional rather than
regular or scheduled manner, and even though respondents principal occupation was not the carriage of goods for others. There is
no dispute that private respondent charged his customers a fee for hauling their goods; that the fee frequently fell below commercial
freight rates is not relevant here.
Under the Carriage of Goods by Sea Act :

Sulpicio argues that Caltex negligently shipped its highly combustible fuel cargo aboard an unseaworthy vessel such as the
MT Vector when Caltex:
1. Did not take steps to have M/T Vectors certificate of inspection and coastwise license renewed;
2. Proceeded to ship its cargo despite defects found by Mr. Carlos Tan of Bataan Refinery Corporation;
3. Witnessed M/T Vector submitting fake documents and certificates to the Philippine Coast Guard.
Sulpicio further argues that Caltex chose MT Vector to transport its cargo despite these deficiencies:
1. The master of M/T Vector did not posses the required Chief Mate license to command and navigate the vessel;
2. The second mate, Ronaldo Tarife, had the license of a Minor Patron, authorized to navigate only in bays and rivers
when the subject collision occurred in the open sea;
3. The Chief Engineer, Filoteo Aguas, had no license to operate the engine of the vessel;
4. The vessel did not have a Third Mate, a radio operator and a lookout; and

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to (a) Make the ship seaworthy;

5. The vessel had a defective main engine.[20]

As basis for the liability of Caltex, the Court of Appeals relied on Articles 20 and 2176 of the Civil Code, which provide:

(b) Properly man, equip, and supply the ship;

xxx xxx xxx
Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be seaworthy, it must be
adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a
common carrier to maintain in seaworthy condition the vessel involved in its contract of carriage is a clear breach of its duty
prescribed in Article 1755 of the Civil Code.[18]
The provisions owed their conception to the nature of the business of common carriers. This business is impressed with a
special public duty. The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and
safety of the passengers, especially because with the modern development of science and invention, transportation has become
more rapid, more complicated and somehow more hazardous.[19] For these reasons, a passenger or a shipper of goods is under no
obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness.

Article 20. - Every person who contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the
same.
Article 2176. - Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict
and is governed by the provisions of this Chapter.
And what is negligence?
The Civil Code provides:
Article 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith,
the provisions of Article 1171 and 2201 paragraph 2, shall apply.

This aside, we now rule on whether Caltex is liable for damages under the Civil Code.
Third: Is Caltex liable for damages under the Civil Code?
We rule that it is not.

If the law does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family
shall be required.

In Southeastern College, Inc. vs. Court of Appeals, [21] we said that negligence, as commonly understood, is conduct which
naturally or reasonably creates undue risk or harm to others. It may be the failure to observe that degree of care, precaution, and
vigilance, which the circumstances justly demand, or the omission to do something which ordinarily regulate the conduct of human
affairs, would do.

A: We did not insist on getting a copy of the C.I. from Mr. Abalos on the first place, because of our long business relation, we
trust Mr. Abalos and the fact that the vessel was able to sail indicates that the documents are in order. xxx[25]

The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied with
all legal requirements. The duty rests upon the common carrier simply for being engaged in public service. [22] The Civil Code
demands diligence which is required by the nature of the obligation and that which corresponds with the circumstances of the
persons, the time and the place.Hence, considering the nature of the obligation between Caltex and MT Vector, the liability as found
by the Court of Appeals is without basis.

Atty. Sarenas: This being the case, and this being an admission by you, this Certificate of Inspection has expired on December
7. Did it occur to you not to let the vessel sail on that day because of the very approaching date of expiration?

The relationship between the parties in this case is governed by special laws. Because of the implied warranty of
seaworthiness,[23] shippers of goods, when transacting with common carriers, are not expected to inquire into the vessels
seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and hold them
liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the public in general is
concerned. By the same token, we cannot expect passengers to inquire every time they board a common carrier, whether the carrier
possesses the necessary papers or that all the carriers employees are qualified. Such a practice would be an absurdity in a
business where time is always of the essence. Considering the nature of transportation business, passengers and shippers alike
customarily presume that common carriers possess all the legal requisites in its operation.

On cross examination -

Apolinar Ng: No sir, because as I said before, the operation Manager assured us that they were able to secure a renewal of the
Certificate of Inspection and that they will in time submit us a copy.[26]
Finally, on Mr. Ngs redirect examination:
Atty. Poblador: Mr. Witness, were you aware of the pending expiry of the Certificate of Inspection in the coastwise license on
December 7, 1987. What was your assurance for the record that this document was renewed by the MT Vector?
Atty. Sarenas: xxx
Atty. Poblador: The certificate of Inspection?

Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping his cargoes.
A cursory reading of the records convinces us that Caltex had reasons to believe that MT Vector could legally transport cargo
that time of the year.
Atty. Poblador: Mr. Witness, I direct your attention to this portion here containing the entries here under VESSELS
DOCUMENTS

A: As I said, firstly, we trusted Mr. Abalos as he is a long time business partner; secondly, those three years, they were allowed
to sail by the Coast Guard. That are some that make me believe that they in fact were able to secure the necessary
renewal.
Q: If the Coast Guard clears a vessel to sail, what would that mean?
Atty. Sarenas: Objection.

1. Certificate of Inspection No. 1290-85, issued December 21, 1986, and Expires December 7, 1987, Mr. Witness, what
steps did you take regarding the impending expiry of the C.I. or the Certificate of Inspection No. 1290-85 during
the hiring of MT Vector?
Apolinar Ng: At the time when I extended the Contract, I did nothing because the tanker has a valid C.I. which will expire on
December 7, 1987 but on the last week of November, I called the attention of Mr. Abalos to ensure that the C.I. be
renewed and Mr. Abalos, in turn, assured me they will renew the same.

Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years before the tragic incident
occurred in 1987. Past services rendered showed no reason for Caltex to observe a higher degree of diligence.

Q: What happened after that?

A: On the first week of December, I again made a follow-up from Mr. Abalos, and said they were going to send me a copy as
soon as possible, sir.[24]
xxx xxx xxx
Q: What did you do with the C.I.?

Court: He already answered that in the cross examination to the effect that if it was allowed, referring to MV Vector, to sail,
where it is loaded and that it was scheduled for a destination by the Coast Guard, it means that it has Certificate of
Inspection extended as assured to this witness by Restituto Abalos. That in no case MV Vector will be allowed to sail if
the Certificate of Inspection is, indeed, not to be extended. That was his repeated explanation to the crossexamination. So, there is no need to clarify the same in the re-direct examination.[27]

Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even the Philippine
Coast Guard itself was convinced of its seaworthiness. All things considered, we find no legal basis to hold petitioner liable for
damages.
As Vector Shipping Corporation did not appeal from the Court of Appeals decision, we limit our ruling to the liability of Caltex
alone. However, we maintain the Court of Appeals ruling insofar as Vector is concerned .

WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDE the decision of the Court of Appeals in CA-G. R. CV
No. 39626, promulgated on April 15, 1997, insofar as it held Caltex liable under the third party complaint to reimburse/indemnify
defendant Sulpicio Lines, Inc. the damages the latter is adjudged to pay plaintiffs-appellees. The Court AFFIRMS the decision of the
Court of Appeals insofar as it orders Sulpicio Lines, Inc. to pay the heirs of Sebastian E. Caezal and Corazon Caezal damages as
set forth therein. Third-party defendant-appellee Vector Shipping Corporation and Francisco Soriano are held liable to
reimburse/indemnify defendant Sulpicio Lines, Inc. whatever damages, attorneys fees and costs the latter is adjudged to pay
plaintiffs-appellees in the case.
No costs in this instance.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, and Ynares-Santiago, JJ., concur.
Puno, J., took no part due to close relation with a party.
[G.R. No. 93291. March 29, 1999]

1. REMEDIAL LAW; CIVIL PROCEDURE; FINDINGS OF FACTS OF THE TRIAL COURT, BINDING ON APPEAL. Well-settled to
the point of being elementary is the doctrine that the findings by the trial court are binding on the appellate court and will not
be disturbed on appeal, unless the trial court has overlooked or ignored some fact or circumstance of sufficient weight or
significance which, if considered, would alter the situation. After a thorough review and examination of the evidence on hand,
we discern no ground or basis for disregarding the findings and conclusion arrived at below.
2. MERCANTILE LAW; TRANSPORTATION; REGULATIONS FOR PREVENTING COLLISIONS AT SEA; DUTY TO KEEP OUT
OF WAY REMAINS WITH OVERTAKING VESSEL. Whether or not the collision sued upon occurred in a crossing situation is
immaterial as the Court of Appeals, relying on Rule 24-C, Regulations for Preventing Collisions at the Sea, ruled that the duty
to keep out of the way remained even if the overtaking vessel cannot determine with certainty whether she is forward of or
abaft more than 2 points from the vessel. It is beyond cavil that M/V Don Sulpicio must assume responsibility as it was in a
better position to avoid the collision. It should have blown its horn or given signs to warn the other vessel that it was to
overtake it. Assuming argumenti ex gratia that F/B Aquarius G had no lookout during the collision, the omission does not
suffice to exculpate Sulpicio Lines from liability. M/V Don Sulpicio cannot claim that it was a privileged vessel being in the
portside which can maintain its course and speed during the collision. When it overtook F/B Aquarius G, it was duty bound to
slacken its speed and keep away from other vessels, which it failed to do. The stance of petitioners that F/B Aquarius G is a
burdened vessel which should have kept out of the way of M/V Don Sulpicio is not supported by facts.

SYNOPSIS

3. CIVIL LAW; DAMAGES; AWARD OF ACTUAL DAMAGES PROPER IN CASE AT BAR. Anent the award of actual damage in
the amount of P564,448.80, petitioners mere allegation that the award of actual damages is exaggerated and speculative,
without controverting the receipts and invoices when the boat was constructed and which were the bases of accounting
entries in the books of accounts presented by the private respondent, are unavailing to defeat the award. To be sure, the
private respondent amply established the compensatory damages it suffered by reason of the collision.

On November 18, 1978, while the weather was good and the visibility was clear, passenger liner M/V Don Sulpicio sighted
two fishing boats ahead at the distance of about four (4) miles. The two boats, later known to be F/B Aquarius C and F/B Aquarius
G; were running at a speed of 7.5 to 8 knots per hour while M/V Don Sulpicio was running at 15.5 knots per hour toward the
direction of the two boats. When it caught up with them, it collided with F/B Aquarius G that resulted in the sinking of the latter.
Before the RTC of Bacolod City, the owner of the ill-fated fishing boats, Aquarius Fishing Co., Inc., filed a complaint for damages
against Sulpicio Lines, Inc., owner of the passenger liner. On May 30, 1986, the RTC came out with a decision in favor of the
plaintiff. The CA affirmed the RTC decision. In its appeal before the Supreme Court, petitioner contended that under the Rules of
the Road and Regulations on the Prevention of Collission, M/V Don Sulpicio was the priviledged vessel and the F/B Aquarius was
the burdened vessel in the crossing situation. However, the latter violated the rules, did not keep out of the way, did not slacken
speed but instead went full ahead and cross the bow of M/V Don Sulpicio.

4. ID.; ID.; AMOUNT OF UNREALIZED PROFIT; TOO UNCERTAIN AND ONEROUS IN CASE AT BAR. The P10,000.00 a month
awarded by the trial court and the respondent court, for earnings that would have been derived from FIB Aquarius G, without
indicating the material period is too uncertain and onerous to deserve serious consideration. As regards the reckoning period,
there is tenability in petitioners submission that a fishing boat deteriorates quite quickly due to exposure to the elements. To
hold Sulpicio Lines to pay the profits that would have been realized by the private respondent for an unlimited period of time is
to burden it indefinitely, which cannot be countenanced. Failure of Aquarius Fishing Co., Inc. to come forward with
controverting evidence to the allegation of Sulpicio Lines that the ordinary lifespan of a fishing vessel is more than ten (10)
years, amounted to an admission of such allegation. The vessel was constructed in 1972 while the collision occurred in
1978. The remaining life span of F/B Aquarius G was therefore four (4) years. Conformably, computed at P 10,000.00 per
month for a period of four (4) years, the unrealized profits/earnings involved, amounted to at most P480,000.00.

The Supreme Court ruled that whether or not the collision occurred in a crossing situation or not is immaterial. The duty to
keep out of the way remained even if the overtaking vessel cannot determine with certainty whether she is forward of or abaft more
than two points from the vessel. M/V Don Sulpicio must assume responsibility as it was in a better position to avoid the collision. It
cannot claim that it was a privileged vessel being in the portside which can maintain its course and speed during the collision. Its
stance that F/B Aquarius G was a burdened vessel which should have kept out of M/V Don Sulpicios way was not supported by

5. ID.; ID.; ATTORNEYS FEES; AWARD THEREOF IN CASE AT BAR, PROPER. As regards the attorneys fees equivalent to 15%
of all the awards granted by the Regional Trial Court, the propriety thereof cannot be questioned. Gross and evident bad faith
on the part of petitioner in refusing to pay the claim sued upon constrained the private respondent to enlist the services of a
lawyer to litigate. Petitioner must have placed reliance on the general rule that attorneys fees cannot be recovered as part of
damages because of the policy that no premium should be placed on the right to litigate. (Philtranco Service Enterprises, Inc.
v. Court of Appeals, 273 SCRA 562; Morales v. Court of Appeals, 274 SCRA 282). But the aforecited rule is inapplicable here
in the face of the stubborn refusal of petitioner to respect the valid claim of the private respondent.

SULPICIO LINES, INC. and CRESENCIO G. CASTANEDA, petitioners, vs. COURT OF APPEALS and AQUARIUS FISHING
CO., INC., respondents.

facts.
SYLLABUS

6. ID.; OBLIGATIONS AND CONTRACTS; PAYMENT OF LEGAL INTEREST PROPER, IN CASE AT BAR. The payment of legal
interest is also in order. But it should be computed from November 18, 1978, not from March 30, 1986, when the Regional

Trial Court a quo came out with its Decision. It was from the time of the collision complained of that the private respondent
began to be deprived of subject vessel.
D E C I S I ON
PURISIMA, J.:
At bar is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court seeking the reversal of the Decision,
dated November 29, 1989, of the Court of Appeals [1] in CA GR No. 15081, and the Resolution, dated April 24, 1990, denying
petitioners Motion for Reconsideration.
The facts that matter are as follows:
The case stemmed from a complaint for damages of Aquarius Fishing Co., Inc. against Sulpicio Lines, Inc. and Cresencio G.
Castaneda, docketed as Civil Case No. 14510 before Branch 44 of Regional Trial Court in Bacolod City. In due time, said
defendants submitted their Answer with counterclaim.
On May 31, 1986, the trial court came out with its Decision in favor of plaintiff Aquarius Fishing Co., Inc. ratiocinating and
disposing thus:
The question to be determined is whether the collision between M/V Don Sulpicio and F/B Aquarius 'G' was due to the negligence of
the defendants or of the plaintiff. It is admitted in the evidence that at a distance of about 4 miles M/V Don Sulpicio has sighted 2
fishing boats, namely: F/B Aquarius 'C' and F/B Aquarius G although defendants maintained it was F/B Aquarius 'B'. From the
evidence it appears that the 2 fishing boats had a speed of about 7.5 to 8 knots per hour while M/V Don Sulpicio was running about
15.5 knots per hour. It would appear that the speed of M/V Don Sulpicio was more than twice as fast as the speed of the two fishing
boats. The weather at that time the accident happened was clear and visibility was good. In other words, from the distance of about
four miles at sea, the men of Don Sulpicio could clearly see the 2 fishing boats which were ahead about 4 miles and likewise, the
men of the 2 fishing boats could clearly see M/V Don Sulpicio following. The plaintiff claims that they continued on their speed in
their course and while maintaining their speed they were rammed by M/V Don Sulpicio.
Defendants claim that plaintiff was negligent and that the collision was due to the negligence of the men manning F/B Aquarius 'B'
and submit that considering that F/B Aquarius 'B' had no lookout and that the fishing boat was ahead, F/B Aquarius 'B' should have
given way to M/V Don Sulpicio who was following in order to avoid collision. And considering that F/B Aquarius 'B' was at fault, it
should suffer its own damage.
xxx xxx xxx
It appears in the theory of defendants that simply because a vessel had no lookout and that the vessel was ahead, if it is rammed by
another vessel that is following, the fault would be on the vessel that is ahead because the vessel that is ahead should always give
way to the vessel that is following.
xxx xxx xxx

From this argument, it would appear that whether actual negligence was committed by the vessel ahead or not, but as long as the
vessel had no lookout and has not given way to the vessel following, the vessel following, if it ram the vessel ahead, has no fault.
It should be noted that F/B Aquarius G is a fishing vessel with a speed of only 7.5 or 8 knots per hour and according to the master of
the vessel, they are not required by law to have a lookout because the vessel is small. M/V Don Sulpicio is a passenger boat with a
speed of about 15.5 knots an hour and being a passenger boat, it is bigger boat and a faster boat. It is incumbent upon its master to
see to it that the direction to which they are proceeding is clear. Having seen for the first time the 2 vessels, F/B Aquarius C and F/B
Aquarius G about 4 miles ahead and that they were almost parallel to each other or in the same line with each other, as M/V Don
Sulpicio was following, M/V Don Sulpicio should have used sufficient diligence to avoid collision. It appears from the evidence that
during the incident, the weather was clear and visibility was very good. The M/V Don Sulpicio had a clear opportunity to avoid
collision, but it failed to do so. M/V Don Sulpicio believed, that considering that it was a following vessel, it can just go thru and
proceed irrespective of danger. The Court believes that the evidence is abundant to show negligence on the part of the master of the
defendants and as such, defendants should be held responsible for all the damages suffered by F/B Aquarius G.
Defendants claim that the vessel involved was F/B Aquarius B. However, the evidence show that the fishing vessel that sunk was
F/B Aquarius G and not F/B Aquarius B. And as shown by the evidence, the total loss of F/B Aquarius G together with its articles and
provisions was P564,448.80.[2]
WHEREFORE, the Court finds the complaint duly supported by evidence and judgment is hereby rendered in favor of the plaintiff
and against the defendants, who are hereby ordered to pay, jointly and severally, the plaintiff the sum of P564,448.80 for the actual
loss of F/B Aquarius G including its articles and provisions; the sum of P10,000.00 per month from the date of the accident
representing deprivation of the use and services of F/B Aquarius G and another sum of P10,000.00 for actual expenses and costs of
litigation, another sum of P10,000.00 by way of exemplary damages, another sum equivalent to 15% of the total claim of plaintiff as
attorneys fees plus P300.00 per court appearance, and to pay legal rate of interest of all the amounts so adjudged from November
18, 1978 until the entire amount is fully paid, and to pay the costs. Counterclaim is dismissed.[3]
The defendants appealed to the Court of Appeals, assigning seven (7) errors which the appellate court summed up and
treated as two pivotal issues, to wit:
1. THE COURT A QUO ERRED IN DISREGARDING THE REGULATION FOR PREVENTING COLLISION AT SEA, MORE
POPULARLY KNOWN AS THE RULE OF THE ROAD IN DETERMINING WHICH OF THE TWO VESSELS WAS NEGLIGENT AND
LIABLE, CONSIDERING THAT M/V DON SULPICIO COMPLIED WITH THEIR PROVISIONS, WHILE F/B AQUARIUS G DID NOT;
AND
2. THE COURT A QUO ERRED IN AWARDING DAMAGES, ATTORNEYS FEES, ACTUAL EXPENSES AND COSTS OF
LITIGATION, LEGAL RATE OF INTEREST OF ALL THE AWARDS FROM NOVEMBER 18, 1978 UNTIL ALL THE AMOUNTS ARE
FULLY PAID.[4]
On November 29, 1989, the Court of Appeals affirmed the Decision of the trial court of origin. The Motion for Reconsideration
interposed on December 23, 1989 by appellants met the same fate. It was denied on April 24, 1990.
Undaunted, petitioners found their way to this Court via the present Petition for Review on Certiorari, contending that:
I

THE LOWER COURT ERRED IN EXONERATING THE VESSEL F/B AQUARIUS B AND HER MASTER FROM NEGLIGENCE
DESPITE THE ADMISSION BY AGAPITO GERBOLINGA, PATRON OF SAID VESSEL THAT THEY HAD NO LOOKOUT DURING
THE COLLISION.

It was clearly established by the positive testimony of second mate, Aurelio Villacampa, Jr. on July 14, 1981 and the sketch prepared
by said witness (Exhibit 2) that the two vessels were in a crossing situation. The vessel M/V Don Sulpicio was approaching on the
starboard or right side of the crossing vessel F/B Aquarius B. The applicable rules in such a crossing situation are Rules 19, 21, 22
and 23. We quote the above Rules as follows:

II
THE LOWER COURT ERRED IN DISREGARDING THE REGULATION FOR PREVENTING COLLISION AT SEA, MORE
POPULARLY KNOWN AS THE RULES OF THE ROAD IN DETERMINING WHICH OF THE TWO VESSELS WAS NEGLIGENT
AND LIABLE.
III
THE LOWER COURT ERRED IN IMPUTING NEGLIGENCE ON THE VESSEL M/V DON SULPICIO, THE PRIVILEGED VESSEL
WHICH COMPLIED WITH RULES 19 AND 21, RULES OF THE ROAD.

Rule 19. When two power driven vessels are crossing, so as to involve risk of collision, the vessel which has the other on her
starboard side shall keep out of the way of the other.
Rule 21. Where, by any of the Rules, one of two vessels is to keep out of the way, the other shall keep her course and speed.
Rule 22. Every vessel which is directed by these Rules to keep out of the way of another vessel, so far as possible, take positive
early action to comply with this obligation, and shall, if the circumstance of the case admit, avoid crossing ahead of the other.
Rule 23. Every power-driven vessel which is directed by these Rules to keep out of the way of another vessel shall, on approaching
her, if necessary, slacken her speed or stop or reverse.

IV
THE LOWER COURT ERRED IN AWARDING TO PLAINTIFF-APPELLEE THE AMOUNT OF P564,448.80 AS ACTUAL LOSS
PLUS P10,000.00 PER MONTH FROM THE PERIOD OF NOVEMBER 18, 1978 REPRESENTING DEPRIVATION OF USE AND
SERVICES OF F/B AQUARIUS B AND ANOTHER SUM OF P10,000.00 FOR ACTUAL EXPENSES AND COST OF LITIGATION.

The M/V DON SULPICIO was the privileged vessel and the F/B Aquarius B was the burdened vessel in the crossing situation
(Exhibits 2, 3, 4, 9, 10). However, the F/B Aquarius B violated the rules, did not keep out of the way, did not slacken speed but
instead went full ahead and crossed the bow of M/V DON SULPICIO. xxx
xxx xxx xxx

V
THE LOWER COURT ERRED IN AWARDING PLAINTIFF AND AGAINST DEFENDANTS THE SUM OF P10,000.00 AS
EXEMPLARY DAMAGES.
VI
THE LOWER COURT ERRED IN AWARDING PLAINTIFF AND AGAINST THE DEFENDANT-APPELLEE THE SUM EQUIVALENT
TO 15% OF THE TOTAL CLAIM AS ATTORNEYS FEES PLUS P300.00 PER COURT APPEARANCE.
VII
THE LOWER COURT ERRED IN AWARDING LEGAL RATE OF INTEREST OF ALL THE AWARDS TO PLAINTIFF-APPELLEE
FROM NOVEMBER 18, 1978 UNTIL ALL THE AMOUNTS ARE FULLY PAID.[5]
Placing reliance on the Rules of the Road and Regulations on the Prevention of Collision, petitioners maintain:
xxx that respondent Court of Appeals completely disregarded the rule of admission in matters adverse to ones interest. It is very
clear that the F/B Aquarius B, her patron and crew were negligent in this case.The Rules of the Road which is Annex A' of the
Philippine Merchant Rules and Regulations requires that all vessels must have a lookout (Rule 29, Rules of the Road). All vessels
irrespective of size and make must keep a lookout. There is no exception to this rule.
xxx xxx xxx

In the case at bar F/B Aquarius B by failure to keep out of the way and slacken her speed has allowed herself to come to close
proximity to the vessel M/V DON SULPICIO bringing about the collision.
The award to private respondent of the sum of P564,448.80 as actual loss is based on surmises and conjectures. No appraisal of
the value of the vessel F/B Aquarius B was presented to support said claim of total loss. The claim of P564,448.80 was derived after
summarizing up invoices and receipts of alleged purchases of materials, provisions dating back since 1972 and even after
November 18, 1978 the date of the collision (Exhibits CC to KK). This award is exaggerated (sic) and speculative.[6]
On October 24, 1990, respondent Aquarius Fishing Co., Inc. sent in its Comment, stating:
Granting for the sake of argument that any or all of the petitioners witnesses can be classified as lookouts for M/V Don Sulpicio, their
negligence is made much clearer because they could not determine risk of collision, speed was not slackened, no warning sign was
made and the course of M/V Don Sulpicio was not changed to avoid the collision.
At any rate, the office of the Coast Guard Judge Advocate which we believed is the proper authority and has the technical
competence to determine who is at fault in maritime cases has this to say on the look out defense put up by the petitioners:
It is clear that the M/V Don Sulpicio was the overtaking vessel and, under the Rules on the Road, was the burdened vessel which
had the duty to take all the necessary actions to keep clear of the overtaken vessel. It was also shown that M/V Don Sulpicio did not
alter her course to reduce her speed and being at close range with F/B Aquarius G, did not even give a warning signal. It was
likewise shown that the Aquarius Fishing Co., Inc. did not own a vessel named F/B Aquarius B ( as identified by Chief Mate Oro), but
it did own a vessel named Aquarius G at the time of the incident. The fact that F/B 'Aquarius G' had no lookout at the time of the

collision does not excuse M/V Don Sulpicio from observing her duty to keep clear of the overtaken vessel especially so when there
was sufficient room for her to do so.[7]

overtook F/B Aquarius G, it was duty bound to slacken its speed and keep away from other vessel, which it failed to do. The stance
of petitioners that F/B Aquarius G is a burdened vessel which should have kept out of the way of M/V Don Sulpicio is not supported
by facts.

The Petition is not impressed with merit.

Well-settled to the point of being elementary is the doctrine that the findings by the trial court are binding on the appellate
court and will not be disturbed on appeal, unless the trial court has overlooked or ignored some fact or circumstance of sufficient
weight or significance which, if considered, would alter the situation.[8]
"Factual findings of the appellate court deemed conclusive. (Estonina v. Court of Appeals, 266 SCRA 627)"
It is a fundamental rule in criminal as well as in civil cases that in the matter of credibility of witnesses, the findings of the trial court
are given great weight and highest degree of respect by the appellate court. (Lee Eng Hong v. Court of Appeals, 241 SCRA 392
citing Pagsuyuin v. Intermediate Appellate Court, 193 SCRA 547)
xxx It is not the function of this Court to assess and evaluate all over again the evidence, testimonial and evidentiary, adduced by the
parties particularly where, such as here, the findings of both the trial court and the appellate court on the matter coincide. (South
Sea Surety and Insurance Company, Inc. v. Court of Appeals, 244 SCRA 744)
It is a settled principle of civil procedure that the conclusions of the trial court regarding the credibility of witnesses are entitled to
great respect from the appellate court xxx" (Limketkai Sons Milling, Inc. vs. Court of Appeals, 250 SCRA 253, citing Serrano vs.
Court of Appeals, 196 SCRA 107)
After a thorough review and examination of the evidence on hand, we discern no ground or basis for disregarding the findings
and conclusion arrived at below.
Petitioners asserted that private respondent, through its patron, admitted that the vessel had no lookout during the collision
despite the absolute rule provided in Rule 9 of the Rules of Road. To bolster its stance, it contended that it was a privileged vessel
pursuant to Rules 19, 21, 22, 23 of the Regulations for the Prevention of Collisions at Sea.
Both the trial court and the respondent court found that M/V Don Sulpicio was crossing at 15.5 knots per hour while F/B
Aquarius G was obeying a speed limit of 7.5 knots per hour. The weather was clear and visibility was good. M/V Don Sulpicio was
four (4) miles away when it first sighted F/B Aquarius G. All the time up to the collision, M/V Don Sulpicio maintained its speed of 16
knots. It was only two (2) minutes before the collision when M/V Don Sulpicio changed its course.
Whether or not the collision sued upon occurred in a crossing situation is immaterial as the Court of Appeals, relying on Rule
24-C, Regulations for Preventing Collisions at the Sea, rules that the duty to keep out of the way remained even if the overtaking
vessel cannot determine with certainty whether she is forward of or abaft more than 2 points from the vessel. It is beyond cavil
that M/V Don Sulpicio must assume responsibility as it was in a better position to avoid the collision. It should have blown its horn or
give signs to warn the other vessel that it was to overtake it.
Assuming argumenti ex gratia that F/B Aquarius G had no lookout during the collision, the omission does not suffice to
exculpate Sulpicio Lines from Liability. M/V Don Sulpicio cannot claim that it was a privileged vessel being in the portside which can
maintain its course and speed during the collision. When it overtook F/B Aquarius G, it was duty bound during the collision. When it

Anent the award of actual damage in the amount of P564,448.80, petitioners mere allegation that the award of actual
damages is exaggerated and speculative, without controverting the receipts and invoices when the boat was constructed and which
were bases of accounting entries in the books of accounts presented by the private respondent, are unavailing to defeat the
award. To be sure, the private respondent amply established the compensatory damages it suffered by reason of the collision.
The award of fifteen (15%) percent of the total claim sued upon as attorneys fees and the legal rate of interest adjudged are
proper. However, the P10,000.00 a month awarded by the trial court and the respondent court for earnings that would have derived
from F/B Aquarius G, without indicating the material period is too uncertain and onerous to deserve serious consideration.
In awarding P10,000.00 per month, representing the supposed profits F/B Aquarius G could have netted, the trial court relied
on the sole testimony of Mr. Johnny L. Chua, who is in the employ of private respondent.
The arguments of petitioners that the earnings of F/B Aquarius G must be shown is not applicable in this case. F/B Aquarius G is just
a carrier to its mother boat Aquarius G. Its role was to carry the catch from the fishing ground to the port and it was serving not only
its mother boat, but other boats owned by respondent Aquarius. The income of F/B Aquarius G is therefore impossible to really
determine. The only reasonable basis is only its rental value compared with similar boats.[9]
As regards the reckoning period, there is tenability in petitioners submission that a fishing boat deteriorates quite quickly due
to exposure to the elements. To hold Sulpicio Lines to pay the profits that would have been realized by the private respondents for
an unlimited period of time is to burden it indefinitely, which cannot be countenanced.
xxx The decision awarding P10,000.00 per month reckoned from November 1978 up to the present implies unlimited existence of
the fishing vessel F/B Aquarius G which is not the case as any common man will experience. The Honorable Court can take judicial
notice of the deterioration of the wood in a fishing boat that is always exposed to the elements. Surely, said existence will not last for
more than ten years. Considering that the fishing vessel is already six years old, then it has a lifespan of not more than four more
years.[10]
Failure of Aquarius Fishing Co., Inc. to come forward with controverting evidence to the allegation of Sulpicio Lines that the
ordinary lifespan of a fishing vessel is more than ten (10) years, amounted to an admission of such allegation. The vessel was
constructed in 1972 while the collision occurred in 1978. The remaining life span of F/B Aquarius G was therefore four (4)
years. Conformably, computed atP10,000.00 per month for a period of four (4) years, the unrealized profits/earnings involved,
amounted to at most P480,000.00.
As regards the attorneys fees equivalent to 15% of all the awards granted by the Regional Trial Court, the propriety thereof
cannot be questioned. Gross and evident bad faith on the part of petitioner in refusing to pay the claim sued upon constrained the
private respondent to enlist the services of a lawyer to litigate.
Petitioner must have placed reliance on the general rule that attorneys fees cannot be recovered as part of damages because
of the policy that no premium should be placed on the right to litigate.(Philtranco Service Enterprises, Inc. v. Court of Appeals, 273
SCRA 562; Morales v. Court of Appeals, 274 SCRA 282). But the aforecited rule is inapplicable here in the face of the stubborn
refusal of petitioner to respect the valid claim of the private respondent.

The payment of legal interest is also in order. But it should be computed from November 18, 1978, not from March 30, 1986,
when the Regional Trial Court a quo came out with its Decision. It was from the time of the collision complained of that the private
respondent began to be deprived of subject vessel.
WHEREFORE, the Petition is DENIED and the Decision of the Court of Appeals in CA GR CV No. 15081 AFFIRMED, with the
MODIFICATION that the award for exemplary damages is deleted for want of legal basis, and the amount of unrealized profits
awarded is fixed at P480,000.00. No pronouncement as to cost.
SO ORDERED.
Romero, (Chairman), Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.

In his affidavit, Manatad related that while they were on their way to Butuan, Domeng and Etat slashed open the cargo where the
basketballs were loaded. The two (2) were able to cart away four (4) basketballs when they are alighted from the truck at the time
petitioner Gulde stopped at the house of one Benedicto Cagampang, a checker of SLI at Calao Street, near the Agusan Institute of
Technology (AIT), to give to him his medicines. Manapat added that he did not do anything to stop Domeng and Etat for fear for his
life because they have weapons.
Manapat further stated that petitioner Gulde was not aware that the two (2) persons boarded their truck. Petitioner Gulde only knew
of the same when Manapat told him that Domeng and Etat stole four (4) basketballs. Manapat likewise added that they no longer
reported the incident to SLI because one Boy Oco, who has a cargo in their truck and was following them, saw the incident that
when Gulde stopped at Calao Street, Oco proceeded to the SLIs warehouse and reported the incident to the warehouseman.
Thereafter, SLI reported the incident to the police and petitioner Gulde and Manapat were investigated. On October 1, 1996, they
were further investigated by the SLIs officers and on October 9, 1996, they were dismissed for having been found guilty of
connivance with the two pilferers. xxx[1]
Based on the foregoing facts, the Labor Arbiter ruled in favor of petitioner finding that respondents dismissal from employment
was valid. On appeal, the NLRC initially reversed the decision of the Labor Arbiter. In its decision of April 30, 1998, the NLRC
declared that respondent was illegally dismissed and ordered petitioner to reinstate him. The dispositive portion of the NLRC
decision reads:

[G.R. No. 149930. February 22, 2002]

SULPICIO LINES, INC., petitioner, vs. QUINCIANO GULDE, respondent.
RESOLUTION
KAPUNAN, J.:
This is a petition for review on certiorari filed by Sulpicio Lines, Inc. assailing the Decision, dated February 28, 2001, of the
Court of Appeals in CA-G.R. SP No. 51510 which declared the dismissal of respondent Quinciano Gulde illegal. Likewise assailed is
the Resolution, dated, August 21, 2001, of the appellate court denying petitioners motion for reconsideration.

WHEREFORE, the decision of the Labor Arbiter is hereby VACATED and SET ASIDE. A new decision is rendered declaring the
dismissal of complainant Quinciano Gulde, illegal. As a consequence, respondent Sulpicio Lines, Inc. is directed to reinstate
complainant to his former position without loss of seniority rights and other privileges. Respondent firm is further directed to pay
complainant his full backwages, inclusive of allowance, and other benefits, from the time his compensation was withheld from him
up to the time of his actual reinstatement.[2]
However, when petitioner filed a motion for reconsideration, the NLRC reversed itself as it held that respondent's dismissal
was valid for loss of trust and confidence.
Respondent then elevated the case to the Supreme Court but following the pronouncement in St. Martin Funeral Homes vs.
NLRC (295 SCRA 494 [1998]), the petition was referred to the CA. After consideration of the evidence on record, the CA rendered
the assailed decision finding the dismissal of respondent illegal. In effect, the CA reinstated the decision of the NLRC dated April 30,
1998.[3] Petitioner moved for reconsideration but it was denied for lack of merit.[4]

As found by the CA, the factual background of the case is as follows:

Petitioner Quinciano Gulde (respondent herein) and one Martin Manatad were employed as truck driver and truck helper of private
respondent Sulpicio Lines, Inc. (SLI) (petitioner herein), respectively.Petitioner Gulde has been in the employ of SLI for thirteen (13)
years until his termination from the company on October 9, 1996.
The incident which gave rise to the case at bar happened on September 15, 1996. It started after Gulde and Manapat picked up
private respondent SLIs cargoes from Nasipit Port delivery to its warehouse inButuan City. It appears that two (2) persons by the
name of Doming and Etat boarded their truck while they were in Nasipit. Manapat knew of the same since he was riding at the back
of the truck.

Petitioner now comes to this Court alleging in the main that the CA erred in ruling that respondents dismissal was
illegal. Petitioner insists that there was just cause, i.e., loss of trust and confidence, for the termination of respondents
employment. The CA allegedly overlooked certain material facts that would prove that respondent conspired with the thieves in
looting four (4) pieces of basketball from petitioners truck. These facts are allegedly as follows:
Firstly, respondent admitted that two looters have been constant riders on board the truck and in fact known to petitioner (should be
respondent) and his truck helper;
Secondly, respondent allowed the two thieves to board his truck from Nasipit Port to Butuan on the date of the pilferage;

Thirdly, respondent deliberately stopped the truck and allowed the two looters to disembark carrying the pilfered cargo with them.
xxx;

Davide, Jr., C.J., (Chairman), Puno and Ynares-Santiago, JJ., concur.

Fourth, petitioner (should be respondent) did not report the pilferage to management despite his knowledge of the incident. xx x
G.R. No. 140992
Lastly, when the theft was discovered, it was petitioner (should be respondent) and his helper who knew where the stolen items
were stashed and in fact went to the place where they were hidden and retrieved them.[5]
The petition is bereft of merit.
The basic requisite for dismissal on the ground of loss of trust and confidence is that the employee concerned must be one
holding a position of trust and confidence. However, loss of confidence must not be indiscriminately used as a shield by the
employer against a claim that the dismissal of an employee was arbitrary.[6] Loss of confidence as a just cause for termination of
employment is premised on the fact that the employee concerned holds a position of responsibility or trust and confidence. He must
be invested with confidence on delicate matters, such as custody handling or care and protection of the property and assets of the
employer. And, in order to constitute a just cause for dismissal, the act complained of must be work-related and shows that the
employee concerned is unfit to continue to work for the employer.[7]
Further, well-settled is the rule that for loss of trust and confidence to be a valid ground for dismissal of an employee, it must
be substantial and founded on clearly established facts sufficient to warrant the employees separation from employment.[8]
In this case, contrary to the allegations of petitioner, there is no sufficient evidence to show that respondent conspired with the
thieves in stealing four (4) pieces of basketball from petitioners truck. As found by the CA:
[I]t ca be gleaned that the evidence presented in the case did not clearly prove that petitioner wilfully breach his duty. It was not
proven the indeed he connived with the thieves. The same was even commented upon by the NLRC when it said that the
allegations that petitioner (respondent herein) knew the thieves were not even found in the police report. (p. 29. Rollo) Additionally,
the reason given by the truck helper as to his inaction in preventing the thieves from taking the basketballs is not incredible. His
reaction given the situation is not beyond human reaction to similar circumstances. It is a natural reaction to think about ones safety
first before the safety of anothers property.
Likewise, contrary to petitioners claim, respondent did not stop the truck to allow the looters to disembark. Rather, respondent
made a brief stop at the house of a co-employee in Calao Street near the Agusan Institute of Technology to deliver his medicines.
[9]
In fact, as testified by Manapat, respondents companion, respondent was not aware that the two pilferers boarded the truck and
he learned about the theft only when Manapat told him about it.[10]
In fine, petitioner failed to present sufficient evidence to show that respondent committed acts that would warrant his dismissal
for loss of trust and confidence. It is significant to note that respondent had been in petitioners employ for thirteen (13) years and it
has not been shown that during this period he had been guilty of any infraction against petitioner. It is difficult to believe that he
would deliberately jeopardize his job for something as worthless as basketballs.

March 25, 2004

SAMAHANG MANGGAGAWA SA SULPICIO LINES, INC.NAFLU, RODOLFO ALINDATO, ROQUE TAN, JESSIE LIM, SUSAN
TOPACIO, LYDDA PASCUAL, BERNARDO ALCANTARA, GELACIO DESQUITADO, RODRIGO AVELINO, LEONARDO
ANDRADE, DANILO CHUA, AMANDO EUGENIO, CALVIN LOPEZ, ANDRES BASCO, JR., and CIRILO ALON, petitioners,
vs.
SULPICIO LINES, INC., respondent.

DECISION
SANDOVAL-GUTIERREZ, J.:
A strike is a powerful weapon of the working class. But like a sensitive explosive, it must be handled carefully, lest it blows up in the
workers own hands.1 Thus, the right to strike has to be pursued within the bounds of law.
For our resolution is the instant petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended,
assailing the Decision2 dated May 28, 1999 and the Resolution3 dated November 25, 1999 rendered by the Court of Appeals in CAG.R. SP No. 51322, entitled "Samahang Manggagawa sa Sulpicio Lines, Inc. NAFLU vs. National Labor Relations Commission
and Sulpicio Lines, Inc."
The factual antecedents as gleaned from the records are:
On February 5, 1991, Sulpicio Lines, Inc. (herein respondent) and the Samahang Manggagawa sa Sulpicio Lines Inc. NAFLU
(herein petitioner) executed a collective bargaining agreement (CBA) with a term of five (5) years (from October 17, 1990 to October
16, 1995).
After three (3) years or on December 15, 1993, petitioner union and respondent company started their negotiation on the CBAs
economic provisions.4 But this negotiation remained at stalemate.
On March 1, 1994, petitioner filed with the National Conciliation and Mediation Board (NCMB), National Capital Region, a notice of
strike due to collective bargaining deadlock, docketed as NCMB-NCR-NS-03-118-94.
For its part, respondent, on March 21, 1994, filed with the Office of the Secretary, Department of Labor and Employment a petition
praying that the Labor Secretary assume jurisdiction over the controversy.
On March 23, 1994, former Labor Secretary Nieves R. Confesor issued an Order assuming jurisdiction over the labor dispute
pursuant to Article 263 (g) of the Labor Code, as amended, thus:

WHEREFORE, premises considered, the instant petition is hereby DENIED for lack of merit.

"WHEREFORE PREMISES CONSIDERED, this Office assumes jurisdiction over the labor dispute at Sulpicio Lines, Inc.
pursuant to Article 263 (g) of the Labor Code, as amended.

SO ORDERED.

"Accordingly, any strike or lockout whether actual or intended is hereby enjoined.

"Further, the parties are directed to cease and desist from committing any and all acts that might exacerbate the situation.
"SO ORDERED."
Meanwhile, on May 20, 1994, petitioner filed with the NCMB a second notice of strike alleging that respondent company committed
acts5 constituting unfair labor practice amounting to union busting, docketed as NCMB NCR-05-261-94.

5) Susan Topacio

13) Calvin Lopez

6) Lydda Pascual

14) Andres Rasco, Jr.

7) Bernardo Alcantara

15) Cirilo Alon

Provoked by respondents alleged unfair labor practice/s, petitioner union immediately conducted a strike vote. Thus, on May 20,
1994, about 9:30 oclock in the morning, 167 rank-and-file employees, officers and members of petitioner, did not report for work and
instead gathered in front of Pier 12, North Harbor at Manila.
As a remedial measure, former Labor Secretary Confesor issued an Order dated May 20, 1994 directing the striking employees to
return to work; and certifying the labor dispute to the National Labor Relations Commission (NLRC) for compulsory arbitration. This
certified labor dispute was docketed as NLRC Case No. CC-0083-94.
Meanwhile, respondent company filed with the NLRC a complaint for "illegal strike/clearance for termination," docketed as NLRC
NCR Case No. 00-05-04705-94.
On September 29, 1995, the NLRC issued a Resolution6 declaring the strike of petitioners officers and members illegal, with notice
to respondent of the option to terminate their (petitioners officers) employment. In the same Resolution, the NLRC dismissed
petitioners complaint against respondent, thus:
"WHEREFORE, premises considered, after a careful and judicious consideration of the facts, arguments and evidence
thus adduced, it is the considered opinion of thie Commission that the union (Samahang Manggagawa sa Sulpicio Lines,
Inc.) had clearly engaged in an illegal strike on May 20, 1994, when its officers and members actively participated in a
well concerted refusal, stoppage and cessation to render work at Sulpicio Lines, Inc.. In clear violation not only of the
procedural requirements of a valid strike, but worse, in clear and blatant contravention of the assumption order of the
Secretary of Labor and Employment. Consequently, the following union officers named in the complaint, to wit:

1) Allan F. Aguhar

9) Rodrigo Avelino

2) Rodolfo Alindato

10) Leonardo Andrade

3) Roque Tan

11) Danilo Chua

4) Jessie Lim

12) Amando Eugenio

8) Gelacio Dequitado

are declared to have lost their employment status with the company, and the latter may now, if it so desires,
terminate their employment with it. The unions complaint against the company is hereby DISMISSED for lack of merit.
"SO ORDERED."
Petitioner filed a motion for reconsideration but was denied by the NLRC in a Resolution7 dated January 15, 1996.
On March 19, 1996, petitioner filed with this Court a petition for certiorari assailing the NLRC Resolutions. Pursuant to our ruling
in St. Martins Funeral Home vs. NLRC,8 we referred the petition to the Court of Appeals for its appropriate action and disposition.
On May 28, 1999, the Court of Appeals rendered a Decision affirming the NLRC Resolutions. The Appellate Court held (1) that the
NLRC has jurisdiction to resolve the issue of legality of the strike; (2) that the May 20, 1994 temporary work stoppage by the officers
and members of petitioner amounted to an illegal strike; (3) that even assuming that respondent committed unfair labor practice/s,
still, the strike is illegal because it failed to comply with the mandatory procedural requirements of a valid strike under Article 263 (c)
and (f) of the Labor Code, as amended; and (4) that the dismissal of petitioners officers who knowingly participated in an illegal
strike is in accordance with Article 264 (a) of the Labor Code, as amended.
On October 20, 1995, petitioner filed a motion for reconsideration but was denied by the Court of Appeals in a Resolution dated
November 25, 1999.
Hence, this petition for review on certiorari. Petitioner alleged that the Court of Appeals seriously erred (1) in holding that the oneday work stoppage of petitioners officers and members is an illegal strike; (2) in sustaining the dismissal from the service of its
officers; and (3) in ruling that the NLRC has jurisdiction over a petition to declare the strike illegal.
The basic issue for our determination is whether the strike staged by petitioners officers and members is illegal. Articles
263 and 264 of the Labor Code, as amended, provide:
"ART. 263. STRIKES, PICKETING AND LOCKOUTS.
xxx

(c) In cases of bargaining deadlocks, the duly certified or recognized bargaining agent may file a notice of strike x x x with
the Ministry (now Department) at least 30 days before the intended date thereof. In cases of unfair labor practice, the
period of notice shall be 15 days and in the absence of a duly certified or recognized bargaining agent, the notice of
strike may be filed by any legitimate labor organization in behalf of its members. However, in case of dismissal from
employment of union officers duly elected in accordance with the union constitution and by-laws, which may
constitute union busting where the existence of the union is threatened, the 15-day cooling-off period shall not
apply and the union may take action immediately.
xxx
(f) A decision to declare a strike must be approved by a majority of the total union membership in the bargaining
unit concerned, obtained by secret ballot in meetings or referenda called for that purpose. x x x. The decision shall
be valid for the duration of the dispute based on substantially the same grounds considered when the strike or lockout
vote was taken. The Ministry (now Department) may at its own initiative or upon the request of any affected party,
supervise the conduct of the secret balloting. In every case, the union x x x shall furnish the Ministry (now
Department) the results of the voting at least seven days before the intended strike or lockout, subject to the
cooling-off period herein provided.
x x x.
ART. 264. PROHIBITED ACTIVITIES.
(a) No labor organization or employer shall declare a strike or lockout without first having bargained collectively in
accordance with Title VII of this Book or without first having filed the notice required in the preceding article or without
the necessary strike or lockout vote first having been obtained and reported to the Ministry (now Department).
x x x."
Following are the Implementing Guidelines of the above provisions issued by the Department of Labor and Employment:
1. A strike shall be filed with the Department of Labor and Employment at least 15 days if the issues raised are unfair
labor practice or at least 30 days if the issue involved bargaining deadlock. However, in case of dismissal from
employment of union officers duly elected in accordance with the union constitution and by-laws, which may constitute
union busting where the existence of the union is threatened, the 15-day cooling-off period shall not apply and the union
may take action immediately;
2. The strike shall be supported by a majority vote of the members of the union obtained by secret ballot in a meeting
called for the purpose; and
3. A strike vote shall be reported to the Department of Labor and Employment at least seven (7) days before the intended
strike.
There is no showing that the petitioner union observed the 7-day strike ban; and that the results of the strike vote were submitted by
petitioners to the Department of Labor and Employment at least seven (7) days before the strike.
We thus hold that for failing to comply with the mandatory requirements of Article 263 (c) and (f) of the Labor Code, the strike
mounted by petitioner union on May 20, 1994 is illegal.

In Gold City Integrated Port Service, Inc. vs. NLRC,9 we stressed that "the language of the law leaves no room for doubt that the
cooling-off period and the seven-day strike ban after the strike-vote report were intended to be mandatory."
But petitioner insists that the strike can still be declared legal for it was done in good faith, being in response to what its officers and
members honestly perceived as unfair labor practice or union busting committed by respondent.
Petitioners accusation of union busting is bereft of any proof. We scanned the records very carefully and failed to discern any
evidence to sustain such charge.
In Tiu vs. NLRC,10 we held:
"x x x. It is the union, therefore, who had the burden of proof to present substantial evidence to support its
allegations (of unfair labor practices committed by management).
"x x x.
"x x x, but in the case at bar the facts and the evidence did not establish even at least a rational basis why the union
would wield a strike based on alleged unfair labor practices it did not even bother to substantiate during the conciliation
proceedings. It is not enough that the union believed that the employer committed acts of unfair labor practice
when the circumstances clearly negate even a prima facie showing to warrant such a belief."
We explained in National Federation of Labor vs. NLRC11 that "with the enactment of Republic Act No. 6715 which took effect on
March 21, 1989, the rule now is that such requirements as the filing of a notice of strike, strike vote, and notice given to the
Department of Labor are mandatory in nature. Thus, even if the union acted in good faith in the belief that the company was
committing an unfair labor practice, if no notice of strike and a strike vote were conducted, the said strike is illegal."
In a desperate attempt to justify its position, petitioner insists that what transpired on May 20, 1994 was not a strike but merely a
"one-day work absence"12 or a "simple act of absenteeism".13
We are not convinced. A strike, as defined in Article 212 (o) of the Labor Code, as amended, means "any temporary stoppage of
work by the concerted action of employees as a result of an industrial or labor dispute." The term "strike" shall comprise not only
concerted work stoppages, but also slowdowns, mass leaves, sitdowns, attempts to damage, destroy or sabotage plant equipment
and facilities, and similar activities.14
The basic elements of a strike are present in the case at bar. First, petitioners officers and members numbering 167, in a concerted
manner, did not report for work on May 20, 1994; second, they gathered in front of respondents office at Pier 12, North Harbor at
Manila to participate in a strike voting conducted by petitioner; and third, such union activity was an aftermath of petitioners second
notice of strike by reason of respondents unfair labor practice/s. Clearly, what transpired then was a strike because the cessation of
work by petitioners concerted action resulted from a labor dispute.
Invoking compassion, petitioner pleads that its officers who participated in the one-day strike should not be dismissed from the
service, considering that respondents business activities were not interrupted, much less paralyzed. While we sympathize with their
plight, however, we must take care that in the contest between labor and capital, the results achieved are fair and in conformity with
the law.15
Pertinent is Article 264 (a) of the same Code, thus:
"ART. 264. PROHIBITED ACTIVITIES.

"x x x. Any union officer who knowingly participates in an illegal strike and any worker or union officer who
knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment
status: Provided, That mere participation of a worker in a lawful strike shall not constitute sufficient ground for termination
of his employment, even if a replacement had been hired by the employer during such lawful strike.
x x x."
It is worth reiterating that the strike is illegal for failure of petitioner to submit the strike vote to the Department of Labor and
Employment at least seven (7) days prior thereto. Also, petitioner failed to prove that respondent company committed any unfair
labor practice. Amid this background, the participation of the union officers in an illegal strike forfeits their employment
status.
In Telefunken Semiconductors Employees Union-FFW vs. Secretary of Labor and Employment,16 we explained
"The effects of such illegal strikes, outlined in Article 265 (now Article 264) of the Labor Code, make a distinction between
workers and union officers who participate therein.
"A union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly participates
in the commission of illegal acts during a strike may be declared to have lost their employment status. An ordinary
striking worker cannot be terminated for mere participation in an illegal strike. There must be proof that he
committed illegal acts during a strike. A union officer, on the other hand, may be terminated from work when he
knowingly participates in an illegal strike, and like other workers, when he commits an illegal act during a strike."
Moreover, petitioner maintains that the Labor Arbiter, not the NLRC, should have taken cognizance of the case at bar. We do not
agree.
In International Pharmaceuticals, Inc. v. Secretary of Labor and Employment,17 we held:
x x x [T]he Secretary was explicitly granted by Article 263 (g) of the Labor Code the authority to assume jurisdiction over
a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, and
decide the same accordingly. Necessarily, this authority to assume jurisdiction over the said labor dispute must
include and extend to all questions and controversies arising therefrom, including cases over which the Labor
Arbiter has exclusive jurisdiction (underscoring supplied).
"In the same manner, when the Secretary of Labor and Employment certifies the labor dispute to the NLRC for
compulsory arbitration the latter is concomitantly empowered to resolve all questions and controversies arising
therefrom including cases otherwise belonging originally and exclusively to the Labor Arbiter."
WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals dated May 28, 1999 and November 25,
1999 are hereby AFFIRMED.
SO ORDERED.
[G.R. No. 140349. June 29, 2005]
SULPICIO LINES, INC., petitioner, vs. FIRST LEPANTO-TAISHO INSURANCE CORPORATION, respondent.
DECISION

CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari assailing the Decision[1] of the Court of Appeals reversing the Decision [2] of the
Regional Trial Court (RTC) of Manila, Branch XIV, dismissing the complaint for damages for failure of the plaintiff to prove its case
with a preponderance of evidence. Assailed as well is the Resolution [3] of the Court of Appeals denying petitioners Motion for
Reconsideration.
THE FACTS
On 25 February 1992, Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a contract,
evidenced by Bill of Lading No. CEB/SIN-008/92 issued by the latter in favor of the owner of the goods, for Delbros, Inc. to transport
a shipment of goods consisting of three (3) wooden crates containing one hundred thirty-six (136) cartons of inductors and LC
compound on board the V Singapore V20 from Cebu City to Singapore in favor of the consignee, Taiyo Yuden Singapore Pte, Ltd.
For the carriage of said shipment from Cebu City to Manila, Delbros, Inc. engaged the services of the vessel M/V Philippine
Princess, owned and operated by petitioner Sulpicio Lines, Inc. (carrier). The vessel arrived at the North Harbor, Manila, on 24
February 1992.
During the unloading of the shipment, one crate containing forty-two (42) cartons dropped from the cargo hatch to the pier
apron. The owner of the goods examined the dropped cargo, and upon an alleged finding that the contents of the crate were no
longer usable for their intended purpose, they were rejected as a total loss and returned to Cebu City.
The owner of the goods filed a claim with herein petitioner-carrier for the recovery of the value of the rejected cargo which
was refused by the latter. Thereafter, the owner of the goods sought payment from respondent First Lepanto-Taisho Insurance
Corporation (insurer) under a marine insurance policy issued to the former. Respondent-insurer paid the claim less thirty-five percent
(35%) salvage value or P194, 220.31.
The payment of the insurance claim of the owner of the goods by the respondent-insurer subrogated the latter to whatever
right or legal action the owner of the goods may have against Delbros, Inc. and petitioner-carrier, Sulpicio Lines, Inc. Thus,
respondent-insurer then filed claims for reimbursement from Delbros, Inc. and petitioner-carrier Sulpicio Lines, Inc. which were
subsequently denied.
On 04 November 1992, respondent-insurer filed a suit for damages docketed as Civil Case No. 92-63337 with the trial court
against Delbros, Inc. and herein petitioner-carrier. On 05 February 1993, petitioner-carrier filed its Answer with Counterclaim.
Delbros, Inc. filed on 15 April 1993 its Answer with Counterclaim and Cross-claim, alleging that assuming the contents of the crate in
question were truly in bad order, fault is with herein petitioner-carrier which was responsible for the unloading of the crates.
Petitioner-carrier filed its Answer to Delbros, Inc.s cross-claim asserting that it observed extraordinary diligence in the
handling, storage and general care of the shipment and that subsequent inspection of the shipment by the Manila Adjusters and
Surveyors Company showed that the contents of the third crate that had fallen were found to be in apparent sound condition, except
that 2 cello bags each of 50 pieces ferri inductors No. LC FL 112270K-60 (c) were unaccounted for and missing as per packaging
list.

After hearing, the trial court dismissed the complaint for damages as well as the counterclaim filed by therein defendant
Sulpicio Lines, Inc. and the cross-claim filed by Delbros, Inc. According to the RTC:
The plaintiff has failed to prove its case. The first witness for the plaintiff merely testified about the payment of the claim based on
the documents accompanying the claim which were the Packing List, Commercial Invoices, Bill of Lading, Claims Statement, Marine
Policies, Survey Report, Marine Risk Note, and the letter to Third Party carriers and shipping lines (Exhibit A-J).

common carriers possession for delivery to a specified consignee, they are in good order and condition and are supposed to be
transported and delivered to the consignee in the same state. In the case herein, the goods were received by defendant-appellee
Delbros in Cebu properly packed in cardboard cartons and then placed in wooden crates, for delivery to the consignee in Singapore.
However, before the shipment reached Singapore (while it was in Manila) one crate and 2 cartons contained therein were not
anymore in their original state. They were no longer fit to be sent to Singapore.
.

The check was paid and delivered to the assured as evidenced by the check voucher and the subrogation receipt.
On cross-examination by counsel for the Sulpicio Lines, he said that their company paid the claim less 35% salvage value based on
the adjuster report. This testimony is hearsay.
The second witness for the plaintiff, Arturo Valdez, testified, among others, that he, together with a co-surveyor and a representative
of Sulpicio Lines had conducted a survey of the shipment at the compound of Sulpicio Lines. He prepared a survey report (Exhibits
G and G-1) and took a picture of shipment (Exhibit G-2).
On cross-examination, he said that two cartons were torn at the sides with top portion flaps opened and the 41 cartons were
properly sealed and in good order conditions. Two cartons were already opened and slightly damaged. He merely looked at them
but did not conduct an inspection of the contents. What he was referring to as slightly damaged were the cartons only and not the
contents.
From the foregoing evidence, it is apparent that the plaintiff had failed to prove its case with a preponderance of evidence.
.
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered dismissing the Complaint, defendant Sulpicio
Lines counterclaim and defendant Delbros Inc.s cross-claim.[4]
A Motion for Reconsideration was then filed by herein respondent-insurer and subsequently denied by the trial court in an
Order dated 07 February 1995 on the ground that it did not raise any new issue. Thus, respondent-insurer instituted an appeal with
the Court of Appeals, which reversed the dismissal of the complaint by the lower court, the decretal portion of which reads:
WHEREFORE, the appeal is granted. The decision appealed from is REVERSED. Defendants-appellees Delbros and Sulpicio Lines
are hereby ordered to pay, jointly and severally, plaintiff-appellant the sum of P194,220.31 representing actual damages, plus legal
interest counted from the filing of the complaint until fully paid.[5]
The appellate court disposed of the issues in the case in this wise:
Furthermore, the evidence shows that one of the three crates fell during the unloading at the pier in Manila. The wooden crate which
fell was damaged such that this particular crate was not anymore sent to Singapore and was instead shipped back to Cebu from
Manila. Upon examination, it was found that two (2) cartons of the forty-two (42) cartons contained in this crate were externally
damaged. They were torn at the sides and their top portions or flaps were open. These facts were admitted by all the parties.
Defendant-appellees, however, insist that it was only the external packaging that was damaged, and that there was no actual
damage to the goods such that would make them liable to the shipper. This theory is erroneous. When the goods are placed at a

As We have already found, there is damage suffered by the goods of the shipper. This consists in the destruction of one wooden
crate and the tearing of two of the cardboard boxes therein rendering then unfit to be sent to Singapore. Defendant-appellee Sulpicio
Lines admits that this crate fell while it was being unloaded at the Manila pier. Falling of the crate was negligence on the part of
defendant-appellee Sulpicio Lines under the doctrine of res ipsa loquitur. Defendant-appellee Sulpicio Lines cannot exculpate itself
from liability because it failed to prove that it exercised due diligence in the selection and supervision of its employees to prevent the
damage.[6]
On 21 June 1999, herein petitioner-carrier filed its Motion for Reconsideration of the decision of the Court of Appeals which
was subsequently denied in a Resolution dated 13 October 1999. Hence, the instant petition.
During the pendency of the appeal before this Court, Delbros, Inc. filed a manifestation stating that its appeal [7] filed before
this Court had been dismissed for being filed out of time and thus the case as against it was declared closed and terminated. As a
consequence, it paid in full the amount of the damages awarded by the appellate court to the respondent-insurer. Before this Court,
Delbros, Inc. prays for reimbursement, contribution, or indemnity from its co-defendant, herein petitioner-carrier Sulpicio Lines, Inc.
for whatever it had paid to respondent-insurer in consonance with the decision of the appellate court declaring both Delbros, Inc.
and petitioner-carrier Sulpicio Lines, Inc. jointly and severally liable.
ISSUES
Petitioner-carrier raises the following issues in its petition:
1. The Court of Appeals erred in not holding that the trial court justly and correctly dismissed the complaint against
Sulpicio Lines, which dismissal is already final.
2. The Court of Appeals erred in not dismissing the appeal for failure of appellant to comply with the technical
requirement of the Rules of Court.
RULING OF THE COURT
We shall first address the procedural issue raised by petitioner-carrier, Sulpicio Lines, Inc. that the Court of Appeals should
have dismissed the appeal for failure of respondent-insurer to attach a copy of the decision of the trial court to its appellants brief in
violation of Rule 44, Section 13(h) of the Rules of Civil Procedure.[8]
A perusal of the records will show, however, that in a Resolution [9] dated 13 August 1996, the Court of Appeals required herein
respondent-insurer to submit seven (7) copies of the questioned decision within five (5) days from notice. Said Resolution was
properly complied with.

As a rule, the right to appeal is a statutory right and one who seeks to avail of that right must comply with the manner required
by the pertinent rules for the perfection of an appeal. Nevertheless, this Court has allowed the filing of an appeal upon subsequent
compliance with the requirements imposed by law, where a strict application of the technical rules will impair the proper
administration of justice. As enunciated by the Court in the case of Jaro v. Court of Appeals:[10]
There is ample jurisprudence holding that the subsequent and substantial compliance of an appellant may call for the relaxation of
the rules of procedure. In Cusi-Hernandez vs. Diaz [336 SCRA 113] andPiglas-Kamao vs. National Labor Relations
Commission [357SCRA 640], we ruled that the subsequent submission of the missing documents with the motion for reconsideration
amounts to substantial compliance. The reasons behind the failure of the petitioners in these two cases to comply with the required
attachments were no longer scrutinized.[11]
We see no error, therefore, on the part of the Court of Appeals when it gave due course to the appeal after respondent-insurer
had submitted copies of the RTC decision, albeit belatedly.
We now come to the substantial issues alleged by petitioner-carrier. The pivotal question to be considered in the resolution of
this issue is whether or not, based on the evidence presented during the trial, the owner of the goods, respondent-insurers
predecessor-in-interest, did incur damages, and if so, whether or not petitioner-carrier is liable for the same.
It cannot be denied that the shipment sustained damage while in the custody of petitioner-carrier. It is not disputed that one of
the three (3) crates did fall from the cargo hatch to the pier apron while petitioner-carrier was unloading the cargo from its vessel.
Neither is it impugned that upon inspection, it was found that two (2) cartons were torn on the side and the top flaps were open and
that two (2) cello bags, each of 50 pieces ferri inductors, were missing from the cargo.
Petitioner-carrier contends that its liability, if any, is only to the extent of the cargo damage or loss and should not include the
lack of fitness of the shipment for transport to Singapore due to the damaged packing. This is erroneous. Petitioner-carrier seems to
belabor under the misapprehension that a distinction must be made between the cargo packaging and the contents of the cargo.
According to it, damage to the packaging is not tantamount to damage to the cargo. It must be stressed that in the case at bar, the
damage sustained by the packaging of the cargo while in petitioner-carriers custody resulted in its unfitness to be transported to its
consignee in Singapore. Such failure to ship the cargo to its final destination because of the ruined packaging, indeed, resulted in
damages on the part of the owner of the goods.
The falling of the crate during the unloading is evidence of petitioner-carriers negligence in handling the cargo. As a common
carrier, it is expected to observe extraordinary diligence in the handling of goods placed in its possession for transport. [12] The
standard of extraordinary diligence imposed upon common carriers is considerably more demanding than the standard of ordinary
diligence, i.e., the diligence of a good paterfamilias established in respect of the ordinary relations between members of society. [13] A
common carrier is bound to transport its cargo and its passengers safely "as far as human care and foresight can provide, using
the utmost diligence of a very cautious person, with due regard to all circumstances.[14] 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 the
damage to, or destruction of, the goods entrusted to it for safe carriage and delivery. [15] 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.[16]
Thus, when the shipment suffered damages as it was being unloaded, petitioner-carrier is presumed to have been negligent
in the handling of the damaged cargo. Under Articles 1735 [17] and 1752[18] of the Civil Code, 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 loss, destruction or deterioration of goods under Article 1735, the common carrier must
prove that they observed extraordinary diligence as required in Article 1733[19] of the Civil Code.[20]
Petitioner-carrier miserably failed to adduce any shred of evidence of the required extraordinary diligence to overcome the
presumption that it was negligent in transporting the cargo.
Coming now to the issue of the extent of petitioner-carriers liability, it is undisputed that respondent-insurer paid the owner of
the goods under the insurance policy the amount of P194,220.31 for the alleged damages the latter has incurred. Neither is there
dispute as to the fact that Delbros, Inc. paid P194,220.31 to respondent-insurer in satisfaction of the whole amount of the judgment
rendered by the Court of Appeals. The question then is: To what extent is Sulpicio Lines, Inc., as common carrier, liable for the
damages suffered by the owner of the goods?
Upon respondent-insurers payment of the alleged amount of loss suffered by the insured (the owner of the goods), the insurer
is entitled to be subrogated pro tanto to any right of action which the insured may have against the common carrier whose
negligence or wrongful act caused the loss. [21] Subrogation is the substitution of one person in the place of another with reference to
a lawful claim or right, so that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including its
remedies or securities.[22] The rights to which the subrogee succeeds are the same as, but not greater than, those of the person for
whom he is substituted, that is, he cannot acquire any claim, security or remedy the subrogor did not have. [23] In other words, a
subrogee cannot succeed to a right not possessed by the subrogor. [24] A subrogee in effect steps into the shoes of the insured and
can recover only if the insured likewise could have recovered.[25]
As found by the Court of Appeals, there was damage suffered by the goods which consisted in the destruction of one wooden
crate and the tearing of two (2) cardboard boxes therein which rendered them unfit to be sent to Singapore. [26] The falling of the crate
was negligence on the part of Sulpicio Lines, Inc. for which it cannot exculpate itself from liability because it failed to prove that it
exercised extraordinary diligence.[27]
Hence, we uphold the ruling of the appellate court that herein petitioner-carrier is liable to pay the amount paid by respondentinsurer for the damages sustained by the owner of the goods.
As stated in the manifestation filed by Delbros, Inc., however, respondent-insurer had already been paid the full amount
granted by the Court of Appeals, hence, it will be tantamount to unjust enrichment for respondent-insurer to again recover damages
from herein petitioner-carrier.
With respect to Delbros, Inc.s prayer contained in its manifestation that, in case the decision in the instant case be adverse to
petitioner-carrier, a pronouncement as to the matter of reimbursement, indemnification or contribution in favor of Delbros, Inc. be
included in the decision, this Court will not pass upon said issue since Delbros, Inc. has no personality before this Court, it not being
a party to the instant case. Notwithstanding, this shall not bar any action Delbros, Inc. may institute against petitioner-carrier Sulpicio
Lines, Inc. with respect to the damages the latter is liable to pay.
WHEREFORE, premises considered, the assailed Decision of the Court of Appeals dated 26 May 1999 and its Resolution
dated 13 October 1999 are hereby AFFIRMED. No costs.
SO ORDERED.

[G.R. No. 148410. January 17, 2005]

VICENTE C. ETCUBAN, JR., petitioner, vs. SULPICIO LINES, INC., respondent.
DECISION
CALLEJO, SR., J.:
The stakes are high in a position imbued with trust, and for petitioner Vicente C. Etcuban, Jr., the loss of trust in him by his
employer cost him his job after 16 years of service. He cries that the penalty was too harsh for an unproved and petty infraction.
Upon the other hand, his employer avers that it acted well within its rights in terminating the petitioners services after the
investigation revealed that the latter failed to live up to the trust and confidence expected of him as Chief Purser. The Labor Arbiter
and the National Labor Relations Commission (NLRC) agreed with the petitioner, while the Court of Appeals ruled for the employer.
The Antecedents
Respondent Sulpicio Lines, Inc. is a domestic corporation engaged in the business domestic shipping. Among its fleet of interisland vessels was the M/V Surigao Princess, plying the CebuCagayan de OroJagnaBohol route.[1]
The petitioner was employed by the respondent on January 30, 1978 until his dismissal on June 10, 1994 for loss of trust and
confidence.[2] At the time of his dismissal, the petitioner was the Chief Purser of the M/V Surigao Princess receiving a monthly salary
of P5,000.00.[3] As the Chief Purser, the petitioner handled the funds of the vessel and was the custodian of all the passage tickets
and bills of lading.[4] It was his responsibility, among other things, to issue passage tickets and to receive payments from the
customers of the respondent, as well as to issue the corresponding official receipts therefor. [5] He was also tasked to disburse the
salaries of the crewmen of the vessel.[6]
Sometime in the last week of May 1994, the newly designated jefe de viaje[7] of the M/V Surigao Princess, in a surprise
examination, discovered that several yellow passengers duplicate original[8] of yet to be sold or unissued passage tickets already
contained the amount of P88.00 the fare for adult passengers for the Cagayan de Oro to Jagna, Bohol route. He noticed that three
other original copies which made up the full set did not bear the same impression, although they were supposed to have been
prepared at the same time. Acting on what appeared to be a strong evidence of short-changing the company, the jefe de viaje dug
deeper on what he uncovered. As expected, he found inordinate amount of ticket issuances for children at half the fare of P44.00 in
Voyage 434 of the vessel. [9] When word of the anomaly reached the respondent, it waited for the petitioner to return to Cebu City in
the hope of shedding more light on the matter.
On May 30, 1994, shortly after disembarking from the M/V Surigao Princess at the port of Cebu, the petitioner received a
memorandum of even date from Personnel Officer Artemio F. Aiga relative to the irregularity in the alleged involvement in anomaly of
ticket issuance, instructing him to forthwith report to the main office and to explain in writing why no disciplinary action should be
meted on him or to submit himself to an investigation. The memorandum warned the petitioner that his failure to comply with the
aforementioned instructions would be construed as a waiver of his right to be heard. It also informed the petitioner of his immediate
preventive suspension until further notice.[10] The petitioner, however, refused to acknowledge receipt of the memorandum which was
personally served on him,[11] prompting the respondent to mail the same, and which the petitioner received days later.[12]

Meanwhile, upon his arrival at the office, the petitioner was questioned by Mr. Carlo S. Go, Senior Executive Vice-President
and General Manager of respondent. Thereafter, petitioner was preliminarily investigated by Mr. Aiga wherein his statements were
taken down.[13] After the initial investigation, the petitioner was told to sign its minutes but he adamantly refused, claiming the same
to be self-incriminatory.[14] The next day, the petitioner was replaced by Mr. Felix Almonicar as the Chief Purser of the M/V Surigao
Princess.[15] As a result of his replacement, the petitioner thought he was fired from his job.
Barely a week after the petitioners preventive suspension and pending his administrative investigation, he filed a complaint
against the respondent for illegal dismissal, non-payment of overtime pay, 13 th month pay and other monetary benefits with the
NLRC, Regional Arbitration Branch No. VII, Cebu City. The case was docketed as NLRC No. RAB-VII-06-0607-84. The petitioner
alleged that the ground for his dismissal, i.e., loss of trust and confidence, was ill-motivated and without factual basis. He did not
deny that the anomalous tickets were in his possession, but denied that he was guilty of any wrongdoing. He dismissed the
handwriting on the tickets as his, and claimed that he was singled out for the dismissal. He averred that the trumped-up charge was
a clever scheme resorted to by his employer so it could avoid paying him monetary benefits, considering that he was with the
company for more than sixteen (16) years. He argued that assuming that it was he who wrote those entries in the tickets, the fact
remains that they were still unissued; hence, no money went to his pocket and no material prejudice was caused to the respondent.
According to the petitioner, he would not jeopardize his livelihood for something as miniscule as P88.00. He prayed not for
reinstatement but for separation pay, monetary benefits plus damages.[16]
On June 9, 1994, the respondent received its summons. [17] Short of pre-empting its administrative investigation, coupled with
the petitioners obstinate refusal to submit to further investigation, the respondent decided to terminate the petitioners employment
for loss of trust and confidence in connection with passage tickets nos. 636742-636748. [18] A copy of the notice of
termination[19] dated June 10, 1994 was sent by mail to the petitioner.
After hearing on the merits, Labor Arbiter Ernesto F. Carreon rendered his Decision dated March 13, 1995, finding the
petitioners dismissal illegal. He ruled that the respondent failed to substantiate and prove that the petitioner committed any
wrongdoing. He found the evidence of impression on the tickets inadequate, considering that the petitioner was not the only person
in the vessel handling or issuing the passage tickets. According to the Labor Arbiter, the anomalous entries on the unissued tickets
could not be attributed entirely to the petitioner; thus, there was no reason for the respondent to lose its trust and confidence on the
petitioner.[20] The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondent Sulpicio Lines, Inc., to pay the complainant
Vicente C. Etcuban, Jr. the following :
1.

Separation pay -------------------------------- P80,480.00

2.

Backwages ------------------------------------ 40,703.23

3.

Proportionate 13th Month Pay ------------- 2,235.50

P123,418.73
vvvvvvvvvvvv

The other claims are dismissed for lack of merit.

SO ORDERED.[21]
Both parties appealed to the NLRC, 4 th Division, Cebu City. In its appeal, the respondent insisted that the dismissal was
justified.[22] The petitioner, on the other hand, questioned the computation of his backwages, besides reiterating his claim for moral
damages.[23]
[24]

On February 21, 1996, a Decision was rendered by the NLRC affirming the challenged decision with the modification that
the backwages to be paid to the petitioner shall be reckoned from the time of his actual dismissal on June 10, 1994, up to the
issuance of the writ of execution on the finality of the decision, but not to exceed five (5) years. In fixing the additional backwages,
the NLRC concluded that the respondent has the open recourse to the Supreme Court which could prolong his (petitioners) agony.
The decretal part of the decision reads:
WHEREFORE, premises considered, the assailed decision is MODIFIED with respect to the monetary awards. The award of
backwages shall be computed from the date of the actual dismissal or 10 June 1994 up to the issuance of the Writ of Execution on
the finality of the decision in this case but not to exceed five (5) years. The backwages shall include the corresponding 13th month
pay and leave (sick and vacation) benefits for the whole period covered.
SO ORDERED.[25]
In affirming the decision of the Labor Arbiter, the NLRC ruled as follows
We do not find the allegedly highly irregular condition of the tickets valid reason to even suspend, much less terminate the
complainant-appellant for loss of trust and confidence. It has not been established by clear and competent evidence that the
alleged irregular condition of the tickets was attributable to the complainant or to other members of the team of inspectors
who have equal access to the tickets. This is vital in view of the complainants denial to have committed the same. Moreover,
there is no showing at all on record that the respondent suffered damage as a consequence of the existence of these
tickets with entry of the rate or cost of transportation from Cagayan de Oro City to Jagna, Bohol, or that the complainant has
benefited from the same. To establish loss of confidence, the employer must have reasonable ground to believe that the employee is
responsible for the misconduct and his participation therein renders him unworthy of the trust and confidence demanded of his
position, and makes him absolutely unfit to continue with his employment.
With more reason, we do not find valid loss of confidence to warrant dismissal the alleged stabbing the back by the complainantappellant of the respondent-appellant by the mere filing of the case. This act of the complainant-appellant is not a misconduct. It is a
valid recourse to the instrumentality of the government that can give him ample protection and labor justice especially when he felt
that his 16 years of service is being threatened.[26]
[27]

[28]

The respondent filed a motion for reconsideration which was denied by the NLRC in a Resolution promulgated on April
15, 1996. It stressed its finding that the petitioners alleged breach of trust was not sufficiently established by the evidence on record.
It further ruled that the petitioners indefinite suspension from work amounted to his constructive dismissal. [29]
On June 14, 1996, the respondent filed a petition for certiorari[30] with this Court, ascribing to the NLRC, among others, grave
abuse of discretion when it ruled that the preventive suspension of the petitioner was tantamount to constructive dismissal.
Following the pronouncement in St. Martin Funeral Home v. NLRC,[31] the petition was referred to the Court of Appeals for its
appropriate action and disposition.[32]

On December 28, 2000, the Court of Appeals reversed and set aside the NLRC decision. [33] It ruled that there was valid and
just cause for the petitioners dismissal, as there was sufficient basis for loss of trust and confidence on him. The appellate court
amplified that in cases of dismissal for loss of trust and confidence, it is not required that there is proof beyond reasonable doubt. It
ratiocinated, thus:
The office of a purser involves a high degree of trust and confidence. Private respondent had access to company funds as it was his
sensitive duty to issue tickets and accept payments from the passengers of the vessel. When the passenger copies of unissued
tickets in his custody were written with the amount of P88.00 while the other copies were clean, this already constituted culpable
tampering of the tickets. This Court is fully aware of the standard operating procedure that tickets should be accomplished only at
the time of their issuance and that the duplicate or triplicate copies should contain exact carbon impressions of the entries in the
original copies. It was then highly anomalous that the original copies of the tickets were already written with the amount of P88.00
when they were still unissued. More so, because the amount of P88.00 were not duplicated in the other copies of the tickets. There
was a clear case of tampering of the unissued tickets in private respondents possession. This clearly was intended to facilitate the
anomaly of entering in the duplicate copies an amount different if not lower than what is stated in the original copy and remitting to
the petitioner the lower amount.
Complainant was the custodian of the tickets with the authority to issue the same. The tampered tickets were in his possession. As
such, it was therefore reasonable and logical for petitioner to conclude if not certain a well-grounded moral conviction that private
respondent Etcuban committed the tampering. Even if it is allowed that another person committed the tampering, private respondent
was still culpable as the tampered tickets were found in his possession and the same could not have been done without his
conformity or negligence. His possession of the tickets with unexplained written entries in the passenger copies of the unissued
tickets was by itself sufficient basis enough to prove respondents culpability. He was the custodian of the tickets and he should be
culpable for any violation of the integrity of the tickets. On this score, this Court agrees with petitioner that the anomalous entries in
the tickets in his custody was sufficient basis for petitioner to lose trust and confidence on private respondent.
In cases of dismissal for loss of trust and confidence, it is not required that there is proof beyond reasonable doubt. It is sufficient
that there is sufficient basis for loss of trust and confidence.[34]
In the instant case, this Court holds that there was sufficient basis for petitioner to lose trust and confidence in private respondent so
as to justify his termination. It may be pertinent to note that private respondents overall conduct is inconsistent with innocence.
Private respondent did not wait for the result of petitioners investigation and filed a complaint for illegal dismissal despite private
respondents admission that he was merely placed under preventive suspension. Preventive suspension is allowed under Section 3,
Rule XIV of the Implementing Rules of the Labor Code. While it is true that no penalty should be attached to an employees recourse
to the NLRC, his immediate filing of the case in the light of the discovery of the anomalous tickets only betrays his culpability.
It bears emphasis that private respondents position as purser was highly sensitive. As such, he must demonstrate utmost honesty
and fidelity to the trust reposed in him. On its part, petitioner was well within its prerogative to require from its purser a high degree
of uprightness and probity. Their integrity was impaired by the tampered tickets in his possession. There was sufficient basis for
petitioner to lose trust and confidence in private respondent. Having lost its trust and confidence, petitioner cannot be expected to
allow private respondent to handle the funds of the corporation. It would be highly unfair to require petitioner to continue employing
private respondent in such sensitive post in the absence of full trust and confidence.
The requirement of due process has been fully satisfied in the instant case. Private respondent was served notice for investigation
as he himself admitted that he submitted himself to an investigation on May 30, 1994 though he did not signed (sic) the statement as
it was self-incriminatory. It is true that when he filed the case, private respondent has not been served notice of termination precisely

because he took it upon himself to consider that he was terminated without waiting for the result of the investigation. At any rate,
after petitioner received the summons of the instant case, it subsequently served upon private respondent a notice of termination. [35]
The petitioners motion for reconsideration[36] was denied by the Court of Appeals for lack of merit in its Resolution [37] dated
May 31, 2001.
Aggrieved at the unfortunate turn of events, the petitioner took the present recourse, and now asks the Court to reinstate and
uphold the NLRC decision. The petitioner anchors his petition for review on the following grounds:
I
PUBLIC RESPONDENT ACTED IN VIOLATION OF EXISTING LAWS WHEN IT ORDERED THE DISMISSAL OF THE
PETITIONER DESPITE HIS LONG YEARS IN THE COMPANY AND THE MINIMAL AMOUNT INVOLVED IN THE CASE.
II
PUBLIC RESPONDENT ACTED IN VIOLATION OF EXISTING LAWS AND JURISPRUDENCE IN ORDERING THE DISMISSAL OF
PETITIONER DESPITE THE FACT THAT NO LOSS OR PREJUDICE WAS SUFFERED BY THE COMPANY FROM HIS
SUPPOSED INFRACTION.
III
PUBLIC RESPONDENT COMMITTED A SERIOUS LEGAL ERROR IN ORDERING THE DISMISSAL OF THE PETITIONER
DESPITE THE FACT THAT OTHER EMPLOYEES COULD HAVE FILLED-UP THE TICKETS IN QUESTION.

Law[42] and jurisprudence have long recognized the right of employers to dismiss employees by reason of loss of trust and
confidence.[43] More so, in the case of supervisors or personnel occupying positions of responsibility, loss of trust justifies
termination.[44] Loss of confidence as a just cause for termination of employment is premised from the fact that an employee
concerned holds a position of trust and confidence. This situation holds where a person is entrusted with confidence on delicate
matters, such as the custody, handling, or care and protection of the employers property. But, in order to constitute a just cause for
dismissal, the act complained of must be work-related such as would show the employee concerned to be unfit to continue working
for the employer.[45]
The degree of proof required in labor cases is not as stringent as in other types of cases. [46] It must be noted, however, that
recent decisions of this Court have distinguished the treatment of managerial employees from that of rank-and-file personnel, insofar
as the application of the doctrine of loss of trust and confidence is concerned. Thus, with respect to rank-and-file personnel, loss of
trust and confidence as ground for valid dismissal requires proof of involvement in the alleged events in question, and that mere
uncorroborated assertions and accusations by the employer will not be sufficient. But as regards a managerial employee, the mere
existence of a basis for believing that such employee has breached the trust of his employer would suffice for his dismissal. Hence,
in the case of managerial employees, proof beyond reasonable doubt is not required, it being sufficient that there is some basis for
such loss of confidence, such as when the employer has reasonable ground to believe that the employee concerned is responsible
for the purported misconduct, and the nature of his participation therein renders him unworthy of the trust and confidence demanded
by his position.[47]
In the present case, the petitioner is not an ordinary rank-and-file employee. The petitioners work is of such nature as to
require a substantial amount of trust and confidence on the part of the employer. Being the Chief Purser, he occupied a highly
sensitive and critical position and may thus be dismissed on the ground of loss of trust and confidence. One of the many duties of
the petitioner included the preparation and filling up passage tickets, and indicating the amounts therein before being given to the
passengers. More importantly, he handled the personnel funds of the MV Surigao Princess. Clearly, the petitioners position involves
a high degree of responsibility requiring trust and confidence. The position carried with it the duty to observe proper company
procedures in the fulfillment of his job, as it relates closely to the financial interests of the company.

IV
PUBLIC RESPONDENT LEGALLY ERRED IN DELETING THE AWARD OF 13TH MONTH PAY PREVIOUSLY GRANTED TO
PETITIONER.[38]
The petition is bereft of merit.
The petitioner insists that his dismissal was without factual and legal basis. Echoing the findings of the Labor Arbiter and the
NLRC, he maintains that the handwriting on the irregular tickets was not proven to be his. He argues that the reluctance of the
respondent to take on his challenge to subject the same tickets to a handwriting expert proved his inculpability. [39]Moreover, he points
out that the very testimony of the respondents Personnel Officer, Mr. Aiga, to the effect that the latter had no idea whose handwriting
it was on the questioned tickets, helped clear his innocence.[40]
Upon the other hand, the respondent counters that there was sufficient basis for its loss of trust and confidence on petitioner;
the tampered tickets were found in his possession, and as Chief Purser, he was the custodian of the unissued tickets. The
respondent avers that proof beyond reasonable doubt is not necessary to justify loss of trust and confidence, it being sufficient that
there is some basis to justify it.[41]
We agree with the respondent.

The requirement that there be some basis or reasonable ground to believe that the employee is responsible for the
misconduct was sufficiently met in the case at bar. As Chief Purser, the petitioner cannot feign ignorance on the irregularity as he
had custody of the tickets when the anomaly was discovered. It would not be amiss to suppose that the petitioner, who would benefit
directly or indirectly from the fruits of such fraudulent scheme, was a party to such irregularity. That there were other pursers who
could have done the irregularity is of no moment. It bears stressing that the petitioner was the Chief Purser who was tasked to
directly supervise each and every purser under him. While, indeed, it was not proved that he was the one who made the irregular
entries on the tickets, the fact that he did not lift a finger at all to determine who it was is a sad reflection of his job. In fact, even if the
petitioner had no actual and direct participation in the alleged anomalies, his failure to detect any anomaly in the passage tickets
amounts to gross negligence and incompetence, which are, likewise, justifiable grounds for his dismissal. Be that as it may, to our
mind, it is no longer necessary to prove the petitioners direct participation in the irregularity, for what is material is that his actuations
were more than sufficient to sow in his employer the seed of mistrust and loss of confidence.
Neither are we impressed with the petitioners claim that he was singled out, or that his dismissal was a ploy to obviate
payment of his retirement benefits. There is nothing in the records to show that beyond making these allegations, the petitioner did
nary of anything to substantiate the same.
Finally, the petitioner theorizes that even assuming that there was evidence to support the charges against him, his dismissal
from the service is unwarranted, harsh and is not commensurate to his misdeeds, considering the following: first, his 16 long years

of service with the company; second, no loss or damages was suffered by the company since the tickets were unissued; third, he
had no previous derogatory record; and, lastly, the amount involved is miniscule.[48] Citing jurisprudence,[49] he appeals for
compassion and requests that he be merely suspended, or at the very least, given separation pay for his length of service. [50]

WHEREFORE, the petition is DENIED and the assailed Decision and Resolution of the Court of Appeals are hereby
AFFIRMED in toto. No costs.
SO ORDERED.

We find no merit in the petitioners contention.

We are not unmindful of the foregoing doctrine, but after a careful scrutiny of the cited cases, the Court is convinced that the
petitioners reliance thereon is misplaced. It must be stressed that in all of the cases cited, the employees involved were all rank-andfile or ordinary workers. As pointed out earlier, the rules on termination of employment, penalties for infractions, insofar as fiduciary
employees are concerned, are not necessarily the same as those applicable to the termination of employment of ordinary
employees. Employers, generally, are allowed a wider latitude of discretion in terminating the employment of managerial personnel
or those of similar rank performing functions which by their nature require the employers trust and confidence, than in the case of
ordinary rank-and-file employees.[51]
The fact that the petitioner has worked with the respondent for more than 16 years, if it is to be considered at all, should be
taken against him. The infraction that he committed, vis-a-vishis long years of service with the company, reflects a regrettable lack of
loyalty. Loyalty that he should have strengthened instead of betrayed. If an employees length of service is to be regarded as a
justification for moderating the penalty of dismissal, it will actually become a prize for disloyalty, perverting the meaning of social
justice and undermining the efforts of labor to cleanse its ranks of all undesirables.[52]
The argument that the petitioner was not guilty of anything because the tickets were never issued or that he had received
nothing from the passengers that he could short-change the company would not mitigate his liability, nor efface the respondents loss
of trust and confidence in him. Whether or not the respondent was financially prejudiced is immaterial. Also, what matters is not the
amount involved, be it paltry or gargantuan; rather the fraudulent scheme in which the petitioner was involved, which constitutes a
clear betrayal of trust and confidence. In fact, there are indications that this fraudulent act had been done before, and probably
would have continued had it not been discovered.
Moreover, the records show that the petitioner is not as blameless as he claimed to be. In 1979 and 1980, he was suspended
by the respondent for several company infractions, [53]which the petitioner did not deny. It must also be stressed that when an
employee accepts a promotion to a managerial position or to an office requiring full trust and confidence, he gives up some of the
rigid guaranties available to an ordinary worker. Infractions which, if committed by others, would be overlooked or condoned or
penalties mitigated may be visited with more serious disciplinary action.[54]
It cannot be over emphasized that there is no substitute for honesty for sensitive positions which call for utmost trust. Fairness
dictates that the respondent should not be allowed to continue with the employment of the petitioner who has breached the
confidence reposed on him.[55] Unlike other just causes for dismissal, trust in an employee, once lost, is difficult, if not impossible, to
regain.[56] There can be no doubt that the petitioners continuance in the extremely sensitive fiduciary position of Chief Purser would
be patently inimical to the respondents interests. It would be oppressive and unjust to order the respondent to take him back, for the
law, in protecting the rights of the employee, authorizes neither oppression nor self-destruction of the employer. [57]
Anent the petitioners request for separation pay, the Court is constrained to deny the same. Well-settled is the rule that
separation pay shall be allowed only in those instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. [58] Inasmuch as reason for which the petitioner was validly separated involves
his integrity, which is especially required for the position of purser, he is not worthy of compassion as to deserve at least separation
pay for his length of service.[59]

SECOND DIVISION
JEFFREY NACAGUE,
Petitioner,

G.R. No. 172589

Present:

- versus -

CARPIO, J., Chairperson,

NACHURA,
PERALTA,
ABAD, and
MENDOZA,JJ.

SULPICIO LINES, INC.,

Respondent.
Promulgated:
August 8, 2010
x--------------------------------------------------x
DECISION

CARPIO, J.:
The Case

This is a petition for review of the 23 January 2006 Decision and 19 April 2006 Resolution of the Court of Appeals in CA-G.R. CEB
SP No. 01065. In its 23 January 2006 Decision, the Court of Appeals dismissed the petition for certiorari filed by petitioner
Jeffrey Nacague (Nacague) and affirmed the 21 March 2005 Decision and 31 May 2005 Resolution of the National Labor Relations
Commission (NLRC) in NLRC Case No. V-000481-04. In its 19 April 2006 Resolution, the Court of Appeals denied Nacaguesmotion
for reconsideration.

The Facts

On 15 June 1995, respondent Sulpicio Lines, Inc. (Sulpicio Lines) hired Nacague as hepe de viaje or the representative
of Sulpicio Lines on board its vessel M/V Princess of the World (the ship).

Separation pay P75,600.00

Backwages P77,415.00
Total P153,015.00

On 25 January 2003, Sulpicio Lines received an anonymous letter reporting the use of illegal drugs on board the ship. On 14
February 2003, Ceasar T. Chico, a housekeeper on the ship, submitted a report regarding the drug paraphernalia found inside
the Mopalla Suite Room and the threat on his life made by Nacague and Chief Mate Reynaldo Doroonafter he found the drug

The other claims are dismissed for lack of merit.

paraphernalia.

SO ORDERED.

On 15 February 2003, Sulpicio Lines sent a notice of investigation to Nacague informing him of the charges against him for use of
illegal drugs and threatening a co-employee.

According to the Labor Arbiter, the termination of employment of employees found positive for using illegal drugs should not be
exercised indiscriminately and thoughtlessly.The Labor Arbiter agreed with Nacague that the drug test result from S.M. Lazo Clinic

When the ship docked in the port of Manila on 18 February 2003, some crew members of the ship, together with Nacague, were

was questionable because the clinic is not accredited by the Dangerous Drug Board and not under its supervision. The Labor Arbiter

subjected to a random drug test. They were taken to S.M. Lazo Medical Clinic (S.M. Lazo Clinic) and were required to submit urine

gave more weight to the drug test performed by Chong Hua Hospital because it was accredited by the Dangerous Drug Board. The

samples. The result of the random drug test revealed that Nacague was positive for methamphetamine hydrochloride or shabu.

Labor Arbiter said that doubts must be resolved in favor of the employee. The Labor Arbiter also ruled that reinstatement is no longer
viable due to the strained relations betweenNacague and Sulpicio Lines and, thus, awarded separation pay to Nacague.

On 20 February 2003, Sulpicio Lines subjected Nacague to a formal investigation. Nacague denied using illegal drugs.

Dissatisfied with the Labor Arbiters Decision, Sulpicio Lines appealed to the NLRC. In its 21 March 2005 Decision, the NLRC
reversed the Labor Arbiters decision and dismissed Nacagues complaint for lack of merit.

On 23 February 2003, Nacague went to Chong Hua Hospital in Cebu City to undergo a voluntary drug test. The drug test with
Chong Hua Hospital yielded a negative result.Nacague submitted this test result to Sulpicio Lines.

According to the NLRC, since Nacague, who was performing a task involving trust and confidence, was found positive for using
illegal drugs, he was guilty of serious misconduct and loss of trust and confidence. The NLRC added that Sulpicio Lines Code of

However, on 7 March 2003, Sulpicio Lines sent a memorandum to Nacague terminating him from the service. The memorandum

Conduct specified that the penalty for the use and illegal possession of prohibited drugs is dismissal. The NLRC also said that there

reads:

is a presumption that S.M. Lazo Clinic is an accredited drug testing center and that it was incumbent upon Nacague to show
After a careful consideration of your case with the evidence available, including your explanation, and with the
positive drug test result, management finds you culpable of grave misconduct and loss of trust and
confidence.

otherwise.

Nacague filed a motion for reconsideration. In its 31 May 2005 Resolution, the NLRC denied Nacagues motion.

In view thereof, the company is constrained to terminate your employment effective today, March 7, 2003.
Nacague filed a petition for certiorari with the Court of Appeals. Nacague alleged that the NLRC gravely abused its discretion when it
declared that Sulpicio Lines validly terminated his employment.
Feeling aggrieved, Nacague filed a complaint for illegal suspension, illegal dismissal and for reinstatement with backwages.

On 12 November 2003, Labor Arbiter Ernesto F. Carreon rendered a decision in favor of Nacague and declared that Sulpicio Lines

The Ruling of the Court of Appeals

illegally dismissed Nacague. The dispositive portion of the Labor Arbiters 12 November 2003 Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Sulpicio Lines,
Inc. to pay complainant Jeffrey Nacague the following:

According to the Court of Appeals, Sulpicio Lines complied with both the procedural and substantive requirements of the law when it
terminated the employment of Nacague.The Court of Appeals said that the positive result of the S.M. Lazo Clinic drug test was the

main basis of Sulpicio Lines in terminating Nacagues employment. The Court of Appeals declared that the evidence presented

Under Article 279 of the Labor Code, an employer may terminate the services of an employee for just causes or for authorized

by Sulpicio Lines was sufficient to justify the conclusion that Nacague committed serious misconduct and a breach of trust and

causes. Furthermore, under Article 277(b) of the Labor Code, the employer must send the employee who is about to be terminated,

confidence warranting his dismissal from employment. The Court of Appeals agreed with the NLRC that Nacague failed to prove his

a written notice stating the causes for termination and must give the employee the opportunity to be heard and to defend himself.

allegation that S.M. Lazo Clinic lacks accreditation. On the procedural requirements, the Court of Appeals found that Sulpicio Lines

Thus, to constitute valid dismissal from employment, two requisites must concur: (1) the dismissal must be for a just or authorized

complied with the twin-notice requirements and conducted a formal hearing.

cause; and (2) the employee must be afforded an opportunity to be heard and to defend himself.

Nacague filed a motion for reconsideration. In its 19 April 2006 Resolution, the Court of Appeals denied the motion.

Contrary to Sulpicio Lines allegation, Nacague was already questioning the credibility of S.M. Lazo Clinic as early as the
proceedings before the Labor Arbiter. In fact, the Labor Arbiter declared that the S.M. Lazo Clinic drug test result was doubtful since

Hence, this petition.

it is not under the supervision of the Dangerous Drug Board.

The Issue

The NLRC and the Court of Appeals ruled that Sulpicio Lines validly terminated Nacagues employment because he was found guilty
of using illegal drugs which constitutes serious misconduct and loss of trust and confidence. However, we find that Sulpicio Lines

Nacague raises the sole issue of whether the Court of Appeals erred in ruling that his termination from employment was valid.

failed to clearly show that Nacague was guilty of using illegal drugs. We agree with the Labor Arbiter that the lack of accreditation of
S.M. Lazo Clinic made its drug test results doubtful.

The Ruling of the Court

Section 36 of R.A. No. 9165 provides that drug tests shall be performed only by authorized drug testing centers. Moreover, Section
The petition is meritorious.

36 also prescribes that drug testing shall consist of both the screening test and the confirmatory test. Section 36 of R.A. No. 9165
reads:

Nacague maintains that the S.M. Lazo Clinic drug test was not credible because Sulpicio Lines failed to show that S.M. Lazo Clinic
is an authorized drug testing center. Nacaguealso alleges that the urine samples were gathered carelessly without proper labels to
identify their owners and that S.M. Lazo Clinic did not ask Nacague if he was taking any medication that might alter the results of the
drug test. Nacague adds that Republic Act No. 9165 (R.A. No. 9165) and the Department of Labor and Employment Order No. 5303 (Department Order No. 53-03) require two drug tests a screening test and a confirmatory test. Nacague maintains that, since only
a screening test was conducted, he was illegally dismissed based on an incomplete drug test. Nacague argues that Sulpicio Lines

SEC. 36. Authorized Drug Testing. Authorized drug testing shall be done by any government forensic
laboratories or by any of the drug testing laboratories accredited and monitored by the DOH to
safeguard the quality of test results. The DOH shall take steps in setting the price of the drug test with DOH
accredited drug testing centers to further reduce the cost of such drug test. The drug testing shall employ,
among others, two (2) testing methods, the screening test which will determine the positive result as well as
the type of drug used and the confirmatory test which will confirm a positive screening test. x x x (Emphasis
supplied)

failed to discharge its burden of proving that the termination of his employment was legal.
Department Order No. 53-03 further provides:
On

the

other

hand, Sulpicio Lines

questions

the

belated

attempt

of Nacague to

question

the

credibility

of

S.M. Lazo Clinic. Sulpicio Lines also argues that since Nacague knew that the residue of the drug would no longer be detectable in
his body after five days, Nacague underwent another drug test with the Chong Hua Hospital. Sulpicio Lines insists that the most
accurate drug test is the random drug test conducted by S.M. Lazo Clinic and that the test with Chong Hua Hospital was a planned
test.

Drug Testing Program for Officers and Employees

Drug testing shall conform with the procedures as prescribed by the Department of
Health (DOH) (www.doh.gov.ph). Only drug testing centers accredited by the DOH
shall be utilized. A list of accredited centers may be accessed through the OSHC
website (www.oshc.dole.gov.ph).
Drug testing shall consist of both the screening test and the confirmatory test;
the latter to be carried out should the screening test turn positive. The employee
concerned must be informed of the test results whether positive or negative. (Emphasis
supplied)

LEONARDO-DE CASTRO,
BERSAMIN, and
VILLARAMA, JR., JJ.

In Social Justice Society v. Dangerous Drugs Board, we explained:

As to the mechanics of the test, the law specifies that the procedure shall employ two testing methods, i.e., the
screening test and the confirmatory test, doubtless to ensure as much as possible the trustworthiness of the
results. But the more important consideration lies in the fact that the tests shall be conducted by trained
professionals in access-controlled laboratories monitored by the Department of Health (DOH) to safeguard
against results tampering and to ensure an accurate chain of custody.

DOMINGO E. CURSO,
LUCIA E. CURSO,
MELECIO E. CURSO, SEGUNDO E. CURSO,
VIRGILIO E. CURSO, DIOSDADA E. CURSO, and CECILIA E.
Promulgated:
CURSO,
Respondents.
March 17, 2010
x-----------------------------------------------------------------------------------------x
DECISION
BERSAMIN, J.:

The law is clear that drug tests shall be performed only by authorized drug testing centers. In this case, Sulpicio Lines failed to
prove that S.M. Lazo Clinic is an accredited drug testing center. Sulpicio Lines did not even deny Nacagues allegation that

Are the surviving brothers and sisters of a passenger of a vessel that sinks during a voyage entitled to recover moral damages

S.M. Lazo Clinic was not accredited. Also, only a screening test was conducted to determine if Nacaguewas guilty of using illegal

from the vessel owner as common carrier?

drugs. Sulpicio Lines did not confirm the positive result of the screening test with a confirmatory test. Sulpicio Lines failed to
indubitably prove thatNacague was guilty of using illegal drugs amounting to serious misconduct and loss of trust and

This is the question presented in the appeal taken by the common carrier from the reversal by the Court of Appeals (CA) of the

confidence. Sulpicio Lines failed to clearly show that it had a valid and legal cause for terminating Nacagues employment. When the

decision of the Regional Trial Court (RTC) dismissing the complaint for various damages filed by the surviving brothers and sisters

alleged valid cause for the termination of employment is not clearly proven, as in this case, the law considers the matter a case of

of the late Dr. Cenon E. Curso upon a finding that force majeure had caused the sinking. The CA awarded moral and other

illegal dismissal.

damages to the surviving brothers and sisters.

We agree with the Labor Arbiter that Nacagues reinstatement is no longer feasible due to strained relations

Antecedents

between Nacague and Sulpicio Lines and that Nacague should instead be granted separation pay.
WHEREFORE, we GRANT the petition. We SET ASIDE the 23 January 2006 Decision and the 19 April 2006 Resolution of the

On October 23, 1988, Dr. Curso boarded at the port of Manila the MV Doa Marilyn, an inter-island vessel owned and operated by

Court of Appeals in CA-G.R. CEB SP No. 01065. We REINSTATE the 12 November 2003 Decision of the Labor Arbiter.

petitioner Sulpicio Lines, Inc., bound forTacloban City. Unfortunately, the MV Doa Marilyn sank in the afternoon of October 24,
1988 while at sea due to the inclement sea and weather conditions brought about by Typhoon Unsang. The body of Dr. Curso was

SO ORDERED.

not recovered, along with hundreds of other passengers of the ill-fated vessel. At the time of his death, Dr. Curso was 48 years old,
and employed as a resident physician at the Naval District Hospital in Naval, Biliran. He had a basic monthly salary of P3,940.00,
and would have retired from government service by December 20, 2004 at the age of 65.

SULPICIO LINES, INC.,

G.R. No. 157009

Petitioner,
Present:

-versus -

PUNO, C.J., Chairperson,

CARPIO MORALES,

On January 21, 1993, the respondents, allegedly the surviving brothers and sisters of Dr. Curso, sued the petitioner in the RTC in
Naval, Biliran to claim damages based on breach of contract of carriage by sea, averring that the petitioner had acted negligently in
transporting Dr. Curso and the other passengers. They stated, among others, that their parents had predeceased Dr. Curso, who
died single and without issue; and that, as such, they were Dr. Cursos surviving heirs and successors in interest entitled to recover
moral and other damages.[1] They prayed for judgment, as follows: (a) compensatory damages of P1,924,809.00; (b) moral damages

of P100,000.00; (c) exemplary or corrective damages in the amount deemed proper and just; (d) expenses of litigation of at

Furthermore, there was no account of the acts and decision of the crew of the ill-fated ship from 8:00
PM on October 23, 1988 when the Chief Mate left his post until 4:00 AM the next day when he resumed duty.
It does not appear what occurred during that time, or what weather reports were received and acted upon by
the ship captain. What happened during such time is important in determining what information about the
typhoon was gathered and how the ship officers reached their decision to just change course, and not take
shelter while a strong typhoon was approaching.

least P50,000.00; (e) attorneys fees of P50,000.00; and (f) costs of suit.

The petitioner denied liability, insisting that the sinking of the vessel was due to force majeure (i.e., Typhoon Unsang), which
exempted a common carrier from liability. It averred that the MV Doa Marilyn was seaworthy in all respects, and was in fact cleared

Furthermore, the Court doubts the fitness of the ship for the voyage, since at the first sign of bad weather, the
ships hydraulic system failed and had to be repaired mid-voyage, making the vessel a virtual derelict amidst a
raging storm at sea. It is part of the appellees extraordinary diligence as a common carrier to make sure that
its ships can withstand the forces that bear upon them during a voyage, whether they be the ordinary stress of
the sea during a calm voyage or the rage of a storm. The fact that the stud bolts in the ships hydraulic system
gave way while the ship was at sea discredits the theory that the appellee exercised due diligence in
maintaining the seaworthy condition of the M.V. Doa Marilyn. xxx.[4]

by the Philippine Coast Guard for the voyage; and that after the accident it conducted intensive search and rescue operations and
extended assistance and aid to the victims and their families.

Ruling of the RTC

xxx
Aside from these, the defendant must compensate the plaintiffs for moral damages that they suffered as a
result of the negligence attending the loss of the M.V. Doa Marilyn. Plaintiffs, have established that they took
great pains to recover, in vain, the body of their brother, at their own cost, while suffering great grief due to the
loss of a loved one. Furthermore, Plaintiffs were unable to recover the body of their brother. Moral damages
worth P100,000.00 is proper.

On July 28, 1995, the RTC dismissed the complaint upon its finding that the sinking of the vessel was due to force majeure. The
RTC concluded that the officers of the MV DoaMarilyn had acted with the diligence required of a common carrier; that the sinking of
the vessel and the death of its passengers, including Dr. Curso, could not have been avoided; that there was no basis to consider

WHEREFORE, premises considered, the appealed decision of the RTC of Naval, Biliran, Branch 16,
rendered in Civil Case No. B-0851, is hereby SET ASIDE. In lieu thereof, judgment is hereby rendered,
finding the defendant-appellee Sulpicio Lines, Inc, to have been negligent in transporting the
deceased Cenon E. Curso who was on board the ill-fated M.V. Doa Marilyn, resulting in his untimely
death. Defendant-appellee is hereby ordered to pay the plaintiffs heirs of Cenon E. Curso the following:

the MV Doa Marilyn not seaworthy at the time of the voyage; that the findings of the Special Board of Marine Inquiry (SBMI)
constituted to investigate the disaster absolved the petitioner, its officers, and crew of any negligence and administrative liability; and
that the respondents failed to prove their claim for damages.

(1) Death indemnity in the amount of P50,000.00;

Ruling of the CA

(2) Loss of Earning Capacity in the amount of P504,241.20;

(3) Moral Damages in the amount of P100,000.00.

The respondents appealed to the CA, contending that the RTC erred: (a) in considering itself barred from entertaining the case by

(4) Costs of the suit.[5]

the findings of fact of the SBMI in SBMI-ADM Case No. 08-88; (b) in not holding that the petitioner was negligent and did not
exercise the required diligence and care in conducting Dr. Curso to his destination; (c) in not finding that the MV Doa Marilyn was
unseaworthy at the time of its sinking; and (d) in not awarding damages to them.[2]

Hence, this appeal, in which the petitioner insists that the CA committed grievous errors in holding that the respondents were entitled
to moral damages as the brothers and sisters of the late Dr. Curso; that the CA thereby disregarded Article 1764 and Article 2206 of

[3]

In its decision dated September 16, 2002, the CA held and disposed:
Based on the events described by the appellees witness, the Court found inadequate proof to show
that Sulpicio Lines, Inc., or its officers and crew, had exercised the required degree of diligence to acquit
the appellee of liability.
In the first place, the court finds inadequate explanation why the officers of the M.V. Doa Marilyn had not
apprised themselves of the weather reports on the approach of typhoon Unsang which had the power of a
signal no. 3 cyclone, bearing upon the general direction of the path of the M.V. Doa Marilyn. If the officers and
crew of the Doa Marilyn had indeed been adequately monitoring the strength and direction of the typhoon, and
had acted promptly and competently to avoid the same, then such a mishap would not have occurred.

the Civil Code, and the ruling in Receiver for North Negros Sugar Co., Inc. v. Ybaez,[6]whereby the Supreme Court disallowed the
award of moral damages in favor of the brothers and sisters of a deceased passenger in an action upon breach of a contract of
carriage.[7]
Issues
The petitioner raises the following issues:

ARE THE BROTHERS AND SISTERS OF A DECEASED PASSENGER IN A CASE OF BREACH OF

CONTRACT OF CARRIAGE ENTITLED TO AN AWARD OF MORAL DAMAGES AGAINST THE CARRIER?
ASSUMING (THAT) THEY ARE ENTITLED TO CLAIM MORAL DAMAGES, SHOULD THE AWARD BE
GRANTED OR GIVEN TO THE BROTHER OR SISTER NOTWITHSTANDING (THE) LACK OF EVIDENCE
AS REGARDS HIS OR HER PERSONAL SUFFERING?
Ruling

Essentially, the purpose of moral damages is indemnity or reparation, that is, to enable the injured party to obtain the means,
diversions, or amusements that will serve to alleviate the moral suffering he has undergone by reason of the tragic event. According
to Villanueva v. Salvador,[13] the conditions for awarding moral damages are: (a) there must be an injury, whether physical, mental, or
psychological, clearly substantiated by the claimant; (b) there must be a culpable act or omission factually established; (c) the
wrongful act or omission of the defendant must be the proximate cause of the injury sustained by the claimant; and (d) the award of

The petition is meritorious.

As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract, unless there is
fraud or bad faith.[8] As an exception, moral damages may be awarded in case of breach of contract of carriage that results in the
death of a passenger,[9] in accordance with Article 1764, in relation to Article 2206 (3), of the Civil Code, which provide:
Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of
this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the
breach of contract by a common carrier.
Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least
three thousand pesos, even though there may have been mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the
indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded
by the court, unless the deceased on account of permanent physical disability not caused by the defendant,
had no earning capacity at the time of his death;

damages is predicated on any of the cases stated in Article 2219 of the Civil Code.

To be entitled to moral damages, the respondents must have a right based upon law. It is true that under Article 1003 [14] of
the Civil Code they succeeded to the entire estate of the late Dr. Curso in the absence of the latters descendants, ascendants,
illegitimate children, and surviving spouse. However, they were not included among the persons entitled to recover moral damages,
as enumerated in Article 2219 of the Civil Code, viz:
Article 2219. Moral damages may be recovered in the following and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;

(2) If the deceased was obliged to give support according to the provisions of article 291, the recipient
who is not an heir called to the decedent's inheritance by the law of testate or intestate succession, may
demand support from the person causing the death, for a period not exceeding five years, the exact duration
to be fixed by the court;

(3) Seduction, abduction, rape or other lascivious acts;

(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may
demand moral damages for mental anguish by reason of the death of the deceased.

(6) Illegal search;

(4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest;

(7) Libel, slander or any other form of defamation;

The foregoing legal provisions set forth the persons entitled to moral damages. The omission from Article 2206 (3) of the brothers

(8) Malicious prosecution;

and sisters of the deceased passenger reveals the legislative intent to exclude them from the recovery of moral damages for mental

(9) Acts mentioned in article 309;

anguish by reason of the death of the deceased. Inclusio unius est exclusio alterius.[10] The solemn power and duty of the courts to
interpret and apply the law do not include the power to correct the law by reading into it what is not written therein.

[11]

Thus, the CA

erred in awarding moral damages to the respondents.

The petitioner has correctly relied on the holding in Receiver for North Negros Sugar Company, Inc. v. Ybaez,[12] to the effect that in

(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34 and 35.
The parents of the female seduced, abducted, raped or abused referred to in No. 3 of this article, may
also recover moral damages.
The spouse, descendants, ascendants and brothers and sisters may bring the action mentioned in
No. 9 of this article, in the order named.

case of death caused by quasi-delict, the brother of the deceased was not entitled to the award of moral damages based on Article
2206 of the Civil Code.

Article 2219 circumscribes the instances in which moral damages may be awarded. The provision does not include
succession in the collateral line as a source of the right to recover moral damages. The usage of the phrase analogous cases in the

provision means simply that the situation must be held similar to those expressly enumerated in the law in question [15] following

[G.R. NOS. 121720-28]

PNOC SHIPPING AND TRANSPORT CORPORATION, Petitioner, v. HON. JUAN T. NABONG, JR., PRESIDING JUDGE,
REGIONAL TRIAL COURT OF MANILA, BRANCH 32; THE CITY OF MANILA; MAYOR ALFREDO LIM; VICE MAYOR LITO
ATIENZA; SANGGUNIANG PANLUNGSOD, AND CITY TREASURER ANTHONY ACEVEDO, Respondents.

the ejusdem generis rule. Hence, Article 1003 of the Civil Code is not concerned with recovery of moral damages.

In fine, moral damages may be recovered in an action upon breach of contract of carriage only when: ( a) where death of a

[G.R. NOS. 121847-55]

passenger results, or (b) it is proved that the carrier was guilty of fraud and bad faith, even if death does not result. [16] Article 2206 of

MAERSK-FILIPINAS, INC., AMERICAN PRESIDENT LINES, SEA-LAND SERVICES, INC., OVERSEAS FREIGHTERS
SHIPPING, INC., DONGNAMA SHIPPING CO., LTD., FLAGSHIP TANKERS, CORE INDO MARITIME CORP., CORE MARITIME
CORP., AND EASTERN SHIPPING LINES, INC., Petitioners, v. CITY OF MANILA, HON. MAYOR ALFREDO S. LIM, HON. VICE
MAYOR LITO ATIENZA, JR., SANGGUNIANG PANLUNGSOD NG MAYNILA, AND CITY TREASURER ANTHONY Y. ACEBEDO
AND THEIR AGENTS OR REPRESENTATIVES, AND HON. JUDGE JUAN C. NABONG, JR., BRANCH 32, REGIONAL TRIAL
COURT OF MANILA, RESPONDENTS, WILLIAM LINES, INC., NEGROS NAVIGATION CO., INC., LORENZO SHIPPING
CORPORATION, CARLOS A. GOTHONG LINES, INC., ABOITIZ SHIPPING CORPORATION, ABOITIZ AIR TRANSPORT
CORPORATION, ABOITIZ HAULERS, INC., SOLID SHIPPING LINES CORPORATION AND PNOC SHIPPING & TRANSPORT
CORPORATION, Intervenors.

the Civil Code entitles the descendants, ascendants, illegitimate children, and surviving spouse of the deceased passenger to
demand moral damages for mental anguish by reason of the death of the deceased.[17]

WHEREFORE,

the

petition

for

review

on certiorari is granted,

and

the award

made

to

the

respondents

in

the decision dated September 16, 2002 of the Court of Appeals of moral damages amounting to P100,000.00 is deleted and set

[G.R. NO. 122333]

aside.

SO ORDERED.

EN BANC
G.R. No. 120051, December 10, 2014
CITY OF MANILA, HON. ALFREDO S. LIM, AS MAYOR OF THE CITY OF MANILA, AND ANTHONY Y. ACEVEDO, CITY
TREASURER, Petitioners, v. HON. ANGEL VALERA COLET, AS PRESIDING JUDGE, REGIONAL TRIAL COURT OF MANILA
(BR. 43), AND MALAYSIAN AIRLINE SYSTEM,Respondents.
[G.R. NO. 121613]
MAERSK-FILIPINAS, INC., AMERICAN PRESIDENT LINES, LTD., FLAGSHIP TANKERS CORP., CORE INDO MARITIME
CORP., AND CORE MARITIME CORP., Petitioners, v. CITY OF MANILA, MAYOR ALFREDO LIM, VICE MAYOR LITO
ATIENZA,1 SANGGUNIANG PANLUNGSOD AND CITY TREASURER ANTHONY ACEVEDO, Respondents.
[G.R. NO. 121675]
EASTERN SHIPPING LINES, INC., Petitioner, v. CITY COUNCIL OF MANILA, THE MAYOR OF MANILA AND THE CITY OF
MANILA, Respondents.
[G.R. NO. 121704]
WILLIAM LINES, INC., NEGROS NAVIGATION CO., INC., LORENZO SHIPPING CORPORATION, CARLOS A. GOTHONG
LINES, INC., ABOITIZ SHIPPING CORPORATION, ABOITIZ AIR TRANSPORT CORPORATION, ABOITIZ HAULERS, INC., AND
SOLID SHIPPING LINES CORPORATION, Petitioners, v. REGIONAL TRIAL COURT OF MANILA, BRANCH 32, CITY OF
MANILA, MAYOR ALFREDO LIM, VICE MAYOR LITO ATIENZA, SANGGUNIANG PANLUNGSOD, AND CITY TREASURER
ANTHONY ACEVEDO, Respondents.

COSCO CONTAINER LINES AND HEUNG-A SHIPPING CO., LTD., BOTH REPRESENTED BY THEIR RESIDENT AGENT,
WALLEM PHILIPPINES SHIPPING, INC.; DSR SENATOR LINES, COMPANIA SUD AMERICANA DE VAPORES S.A., AND
ARIMURA SANGYO COMPANY, LTD., ALL REPRESENTED BY THEIR RESIDENT AGENT, C.F. SHARP SHIPPING AGENCIES,
INCORPORATED; PACIFIC INTERNATIONAL LINES (PTE) LTD. AND PACIFIC EAGLE LINES (PTE) LTD., BOTH
REPRESENTED BY THEIR RESIDENT AGENT, TMS SHIP AGENCIES, INC.; COMPAGNIE MARITIME D AFFRETEMENT
(CMA), REPRESENTED BY ITS RESIDENT AGENT, INCHCAPE SHIPPING SERVICES; EVERETT ORIENT LINES, INC.,
REPRESENTED BY ITS RESIDENT AGENT, EVERETT STEAMSHIP CORPORATION; YANGMING MARINE TRANSPORT
CORP., REPRESENTED BY ITS RESIDENT AGENT, SKY INTERNATIONAL, INC.; NIPON YUSEN KAISHA, REPRESENTED BY
ITS RESIDENT AGENT, FIL-JAPAN SHIPPING CORPORATION; HYUNDAI MERCHANT MARINE CO. LTD., REPRESENTED BY
ITS RESIDENT AGENT, CITADEL LINES; MALAYSIAN INTERNATIONAL SHIPPING CORPORATION BERHAD,
REPRESENTED BY ITS RESIDENT AGENT, ROYAL CARGO AGENCIES, INC.; BOLT ORIENT LINE, REPRESENTED BY ITS
RESIDENT AGENT, FILSOV SHIPPING COMPANY, INC.; MITSUI-O.S.K. LINES, LTD., REPRESENTED BY ITS RESIDENT
AGENT, MAGSAYSAY AGENCIES, INC.; PHILS., MICRONESIA & ORIENT NAVIGATION CO. (PMSO LINE), REPRESENTED
BY ITS RESIDENT AGENT, VAN TRANSPORT COMPANY, INC.; LLOYD TRIESTINO DI NAVIGAZIONE S.P.A.N. AND
COMPAGNIE GENERALE MARITIME, BOTH REPRESENTED BY THEIR RESIDENT AGENT, F.E. ZUELLIG (M), INC.; AND
MADRIGAL-WAN HAI LINES, Petitioners, v. CITY OF MANILA, MAYOR ALFREDO LIM, VICE MAYOR LITO ATIENZA,
SANGGUNIANG PANLUNGSOD AND CITY TREASURER ANTHONY Y. ACEBEDO, Respondents.
[G.R. NO. 122335]
SULPICIO LINES, INC., Petitioner, v. REGIONAL TRIAL COURT OF MANILA, BRANCH 32, CITY OF MANILA MAYOR
ALFREDO LIM, VICE MAYOR LITO ATIENZA, SANGGUNIANG PANLUNGSOD AND CITY TREASURER ANTHONY
ACEVEDO, Respondents.
[G.R. NO. 122349]
ASSOCIATION OF INTERNATIONAL SHIPPING LINES, INC., IN ITS OWN BEHALF AND IN REPRESENTATION OF ITS
MEMBERS, Petitioner, v. CITY OF MANILA, MAYOR ALFREDO LIM, VICE MAYOR LITO ATIENZA, SANGGUNIANG
PANLUNGSOD AND CITY TREASURER ANTHONY ACEVEDO, Respondents.
[G.R. NO. 124855]
DONGNAMA SHIPPING CO., LTD. AND KYOWA SHIPPING LTD. HEREIN REPRESENTED BY SKY INTERNATIONAL,

INC., Petitioners, v. COURT OF APPEALS, CITY OF MANILA MAYOR ALFREDO LIM, VICE MAYOR LITO ATIENZA, CITY
COUNCIL OF MANILA, AND CITY TREASURER ANTHONY ACEVEDO, Respondents.

of Manila.
As MAS was renewing its business permit for 1994, it was assessed by the City Treasurer of Manila on January 17, 1994 for the
following taxes and fees:chanroblesvirtuallawlibrary

DECISION
LEONARDO-DE CASTRO, J.:
Before the Court are 10 consolidated Petitions, the issue at the crux of which is the constitutionality and/or validity of Section 21(B)
of Ordinance No. 7794 of the City of Manila, otherwise known as the Revenue Code of the City of Manila (Manila Revenue Code),
as amended by Ordinance No. 7807.2chanRoblesvirtualLawlibrary
I
ANTECEDENT FACTS
The Manila Revenue Code was enacted on June 22, 1993 by the City Council of Manila and approved on June 29, 1993 by then
Manila Mayor Alfredo S. Lim (Lim). Section 21(B) of said Code originally provided:chanroblesvirtuallawlibrary
Section 21. Tax on Businesses Subject to the Excise, Value-Added or Percentage Taxes Under the NIRC. On any of the following
businesses and articles of commerce subject to the excise, value-added or percentage taxes under the National Internal Revenue
Code, hereinafter referred to as NIRC, as amended, a tax of three percent (3%) per annum on the gross sales or receipts of the
preceding calendar year is hereby imposed:
xxxx
B) On the gross receipts of keepers of garages, cars for rent or hire driven by the lessee, transportation contractors, persons who
transport passenger or freight for hire, and common carriers by land, air or water, except owners of bancas and owners of animaldrawn two-wheel vehicle.
Shortly thereafter, Ordinance No. 7807 was enacted by the City Council of Manila on September 27, 1993 and approved by Mayor
Lim on September 29, 1993, already amending several provisions of the Manila Revenue Code. Section 21 of the Manila Revenue
Code, as amended, imposed a lower tax rate on the businesses that fell under it, and paragraph (B) thereof read as
follows:chanroblesvirtuallawlibrary
Section 21. Tax on Business Subject to the Excise, Value-Added or Percentage Taxes Under the NIRC On any of the following
businesses and articles of commerce subject to the excise, value-added or percentage taxes under the National Internal Revenue
Code hereinafter referred to as NIRC, as amended, a tax of FIFTY PERCENT (50%) OF ONE PERCENT (1%) per annum on the
gross sales or receipts of the preceding calendar year is hereby imposed:
xxxx
B) On the gross receipts of keepers of garages, cars for rent or hire driven by the lessee, transportation contractors, persons who
transport passenger or freight for hire, and common carriers by land, air or water, except owners of bancas and owners of animaldrawn two-wheel vehicle.

Mayors permit and regulatory fees

Municipal license tax or business tax
Total

10,307.50
1,100,000.00
P 1,110,307.503

MAS, believing that it was exempt from the municipal license tax or business tax, tendered, via Far East Bank and Trust Company
(FEBTC) Check No. 06564 dated January 19, 1994, only the amount of P10,307.50 for the mayors permit and regulatory fees. The
City Treasurer of Manila refused to accept FEBTC Check No. 06564.
Consequently, on January 20, 1994, MAS instituted Civil Case No. 94-69052, to consign with the trial court the amount of
P10,307.50 for mayors permit and regulatory fees; to challenge the assessment against it by the City Treasurer of Manila in the
amount of P1,100,000.00 for municipal license tax or business tax; and to have Section 21(B) of the Manila Revenue Code, as
amended, on which said assessment for municipal license tax or business tax was based, be declared invalid or null and void. Civil
Case No. 94-69052 was assigned to the Regional Trial Court (RTC) of Manila, Branch 43.
On April 3, 1995, RTC-Branch 43 rendered a Decision4 in favor of MAS. The dispositive portion of said Decision
reads:chanroblesvirtuallawlibrary
WHEREFORE, the foregoing disquisitions considered, judgment is hereby rendered in favor of the plaintiff against the
defendants:ChanRoblesVirtualawlibrary
1.

Declaring the consignation valid and made in accordance with law;

2.

Ordering defendants to issue to plaintiff the mayors permit or permit to operate for 1994, the necessary certificates and
official receipts evidencing payment of [plaintiffs] liabilities for mayors permit fee and other regulatory fees for 1994; and,

3.

Declaring Section 21(B) of Ordinance No. 7794, as amended by Ordinance No. 7807, of the City of Manila as invalid or
null and void insofar as it imposes a business tax on transportation contractors, persons engaged in the transportation of
passengers or freight by hire and common carriers by air, land or water, or that plaintiff is exempt from the tax imposed by
said section 21(B).

4.

Declaring plaintiffs obligation to the defendant City of Manila for mayors permit fee and other regulatory fees for 1994 as
having been paid and extinguished without any liability for surcharges, interests or any additional amount whatsoever.

Not having been proven, the prayer for the payment of attorneys fees is denied.
No pronouncement as to costs.5

The City of Manila, through its City Treasurer, began imposing and collecting the business tax under Section 21(B) of the Manila
Revenue Code, as amended, beginning January 1994.

The City of Manila, Mayor Lim, and City Treasurer Anthony Y. Acevedo (Acevedo) filed with the Court a Petition for Review
on Certiorari,6 assailing the Decision dated April 3, 1995 of RTC-Branch 43 in Civil Case No. 94-69052 based on pure questions of
law. They assigned the following errors on the part of RTC-Branch 43:chanroblesvirtuallawlibrary

G.R. No. 120051

4.1. That the trial court erred in declaring Section 21(B) of [the Manila Revenue Code, as amended,] as invalid or null and void.

Malaysian Airline System (MAS) is a foreign corporation organized and existing under the laws of Malaysia. It is licensed to engage
in business in the Philippines by the Securities and Exchange Commission (SEC), particularly in the airline business which involves
the transportation of passengers and cargo for hire. Its principal office and place of business in the Philippines is located in the City

4.2. That the trial court erred in declaring the consignation valid and made in accordance with law. 7

The City of Manila, Mayor Lim, and City Treasurer Acevedo prayed in their Petition that the Court (1) reverse and set aside the
assailed RTC Decision; and (2) affirm the constitutionality and validity of Section 21(B) of the Manila Revenue Code, as amended.
The Petition was docketed as G.R. No. 120051.
MAS filed its Comment,8 to which the City of Manila, Mayor Lim, and City Treasurer Acevedo filed their
Reply.9chanRoblesvirtualLawlibrary

In its Decision13 dated August 28, 1995 in Civil Case Nos. 94-68861, 94-68862, 94-68863, 94-68919, 94-68936, 94-68939, 9468940, 94-68941, and 94-69028, RTC-Branch 32 upheld the power of the respondent City of Manila, as a local government unit
(LGU), to levy the business tax under Section 21(B) of the Manila Revenue Code, as amended, consistent with the basic policy of
local autonomy. Ultimately, RTC-Branch 32 decreed:chanroblesvirtuallawlibrary

G.R. No. 121613

Because they were assessed and/or compelled to pay business taxes pursuant to Section 21(B) of the Manila Revenue Code, as
amended, before they were issued their business permits for 1994, several corporations, with principal offices in Manila and
operating as transportation contractors, persons who transport passenger or freight for hire, and common carriers by land, air or
water, filed their respective petitions before the Manila RTC against the City of Manila, Mayor Lim, Vice Mayor Lito Atienza
(Atienza), the City Council of Manila/Sangguniang Panlungsod ng Maynila, and City Treasurer Acevedo. Said petitions were
separately docketed and raffled to different RTC Branches, to wit:chanroblesvirtuallawlibrary
Civil Case No.

Petitioner

each of said petitioner corporations should post an injunction bond in the amount of P50,000.00. The Writ of Preliminary Injunction
enjoined respondent City of Manila and local officials from: (1) imposing, enforcing, assessing, and collecting the taxes under
Section 21(B) of the Manila Revenue Code, as amended; and (2) denying to petitioners Maersk, APL, Flagship Tankers, CIMC,
CMC, and OFSI their business permits and licenses for 1994. In another Order dated April 22, 1994, RTC-Branch 32 granted the
prayer of intervenor corporations for the issuance of a similar Writ of Preliminary Injunction.

RTC-Branch No.

94-68861

Maersk Filipinas, Inc. (Maersk)

32

94-68862

American President Lines, Ltd. (APL)

33

94-68863

Sea-Land Services, Inc. (Sea-Land)

34

94-68919

Overseas Freighters Shipping, Inc. (OFSI)

55

94-68936

Dongnama Shipping Co., Ltd. (Dongnama) and Kyowa Shipping, Ltd.

(Kyowa)

47

94-68939

Flagship Tankers Corp. (Flagship Tankers)

21

94-68940

Core Indo Maritime Corp. (CIMC)

21

94-68941

Core Maritime Corp. (CMC)

21

94-6902810

Eastern Shipping Lines, Inc. (Eastern Shipping)

All of the aforementioned cases were later consolidated before RTC-Branch 32.
Several more corporations with principal offices in Manila and engaged in the same line of business as the above-named petitioner
corporations filed petitions/complaints-in-intervention in the pending cases, namely: William Lines, Inc. (William Lines); Negros
Navigation Co., Inc. (Negros Navigation); Lorenzo Shipping Corp. (Lorenzo Shipping); Carlos A. Gothong Lines, Inc. (Gothong
Lines); Aboitiz Shipping Corp., Aboitiz Air Transport Corp., and Aboitiz Haulers, Inc. (collectively referred to as the Aboitiz Group);
Solid Shipping Lines Corp. (Solid Shipping); and PNOC Shipping & Transport Corp. (PSTC).
Petitioner and intervenor corporations essentially sought the (1) declaration of Section 21(B) of the Manila Revenue Code, as
amended, as void/invalid for being contrary to the Constitution and the Local Government Code (LGC) of 1991; (2) refund of the
business taxes that the petitioner and intervenor corporations paid under protest; and (3) the issuance of a temporary restraining
order (TRO), writ of preliminary injunction, writ of prohibition, and/or writ of permanent injunction to enjoin the implementation of
Section 21(B) of the Manila Revenue Code, as amended.
RTC-Branch 32 issued a TRO11 on January 14, 1994 in favor of petitioners Maersk, APL, Flagship Tankers, CIMC, and CMC. The
TRO was effective for 20 days and ordered respondent City of Manila and local officials to cease and desist from implementing
Section 21(B) of the Manila Revenue Code, as amended, while the prayer for a writ of preliminary injunction was scheduled for
presentation of evidence. On February 3, 1992, after hearing, RTC-Branch 32 issued an Order granting the prayer of petitioners
Maersk, APL, Flagship Tankers, CIMC, CMC, and OFSI for the issuance of a Writ of Preliminary Injunction, 12 with the condition that

WHEREFORE, the petitions, the supplemental petitions, and the petitions or complaints in intervention in all these cases are
DISMISSED.
All temporary restraining orders are cancelled, all writs of preliminary injunction are recalled and dissolved, and the injunction bonds
cancelled.14
Maersk, APL, Flagship Tankers, CIMC, and CMC (collectively referred to herein as Maersk, et al.,), filed a direct appeal before the
Court. Initially, Maersk, et al.,, filed a motion for extension of time to file their petition for review on certiorari. Upon filing of said
motion, they were assessed docket and legal fees in the amount of P420.00, which they fully paid. The motion for extension of time
was granted by the Court in a Resolution15 dated October 4, 1995. Within the extended period, Maersk,et al.,, filed their Petition for
Review on Certiorari with prayer for issuance of a writ of preliminary injunction and TRO,16 docketed as G.R. No. 121613, naming
RTC-Branch 32, the City of Manila, Mayor Lim, Vice Mayor Atienza, the Sangguniang Panlungsod ng Maynila, and City Treasurer
Acevedo, as respondents. Maersk, et al.,, submitted for resolution by the Court a lone question of
law, viz.:chanroblesvirtuallawlibrary
Whether or not Section 21(B) of Ordinance No. 7794, otherwise known as the Revenue Code of the City of Manila, as amended by
Section 1(G) of Ordinance No. 7807, is valid and constitutional.17
Meanwhile, Maersk, et al.,, also filed with RTC-Branch 32 a Motion to Stay or Restore Writ of Preliminary Injunction, presenting a
Memorandum issued by City Treasurer Acevedo already ordering the collection of the business tax under Section 21(B) of the
Manila Revenue Code, as amended. In an Order18 dated October 16, 1995, RTC-Branch 32 granted the Motion of Maersk, et al.,,
after finding the same to be meritorious and in conformity with Rule 39, Section 4 of the Rules of Court, on the condition that
Maersk, et al.,, would increase their injunction bond from P50,000.00 each to P800,000.00 each, or for a total of P4,000,000.00.
With this latest development, Maersk, et al.,, filed with the Court a Supplemental Petition and Motion praying for the confirmation of
the RTC Order dated October 16, 1995 restoring the Writ of Preliminary Injunction and deletion of the name of RTC-Branch 32 from
the caption of the Petition in G.R. No. 121613 as the trial court is not a necessary party.
On October 23, 1995 though, the Court issued a Resolution19 in G.R. No. 121613 in which it resolved as
follows:chanroblesvirtuallawlibrary
On the basis of the foregoing, the Court RESOLVED to DISMISS the petition for review on certiorari for non-compliance with the
above-mentioned requirement no. 1, [Maersk,et al.,,] having failed to remit the amount of P202.00 as payment for the balance of the
prescribed legal fees.
Accordingly, the supplemental petition and motion of [Maersk, et al.,.,] dated October 17, 1995 praying that the lower courts order
restoring the Writ of Preliminary Injunction be confirmed and that the Regional Trial Court of Manila, Branch 32, be deleted from the
caption of the petition for not being a necessary party is NOTED WITHOUT ACTION.
Maersk, et al.,, filed a Motion for Reconsideration20 of the foregoing Resolution dated October 23, 1995 of the Court. Maersk, et al.,,
argued that the dismissal of their Petition by minute resolution would deprive them of their property rights on mere technical
grounds. Maersk, et al.,, had no intention of not paying the amount of P202.00, which consisted of sheriffs fee of P200.00 and
clerks commission of P2.00, charged in connection with their prayer for the issuance of a preliminary injunction and TRO. While

Maersk, et al.,, did include such a prayer in their Petition, the same had already become moot and academic after RTC-Branch 32
issued the Order dated October 16, 1995 restoring and reinstating the Writ of Preliminary Injunction in favor of Maersk, et al., In
their Supplemental Petition and Motion in G.R. No. 121613, Maersk, et al.,, was then only seeking the confirmation by the Court of
the Order dated October 16, 1995 of RTC-Branch 32 and, in effect, withdrawing their prayer for the issuance of a writ of preliminary
injunction and TRO by the Court. Besides, Maersk, et al.,, submitted that the sheriffs fee of P200.00 and clerks commission of
P2.00 were not part of the legal fees required for perfecting an appeal from the decision of the Court of Appeals or the RTC. The
sheriffs fee and clerks commission would merely be deposited with the Court, which implied that said amounts would be
refunded to Maersk, et al.,, in case the Court decided not to issue the TRO prayed for. In fact, when Maersk, et al.,, filed their
motion for extension of time to file their petition for review on certiorari, they fully paid the docket and legal fees as computed by the
cashier of the Court; and when they actually filed their Petition for Review on Certiorari with prayer for issuance of a writ of
preliminary injunction and TRO, they were not assessed and required to pay additional legal fees. In any event, Maersk, et al.,, had
already deposited with the Cashiers Office of the Court the amount of P202.00. Maersk, et al.,, asserted that their case is
meritorious and that dismissal is discretionary for the appellate court and discretion must be exercised wisely and prudently, never
capriciously, with a view to substantial justice. Consequently, Maersk, et al.,, prayed that the Court reconsider its Resolution dated
October 23, 1995 and give due course to and squarely resolve their Petition and Supplemental Petition and Motion in G.R. No.
121613.

based on Section 21(B) of the Manila Revenue Code, as amended. They were intervenors in Civil Case Nos. 94-68861, 94-68862,
94-68863, 94-68919, 94-68936, 94-68939, 94-68940, 94-68941, and 94-69028, before RTC-Branch 32.

Counsel for Maersk, et al.,, subsequently submitted a joint Memorandum21 for the petitioners in G.R. Nos. 121613, 122333, and
122349.

C. The RTC erred in holding that there are only four basic requirements for a valid exercise of the power of the City of Manila to levy
tax. 27

G.R. No. 121675

In their Memorandum,28 William Lines, et al.,, focused their discussion on the following issues:chanroblesvirtuallawlibrary

William Lines, et al.,, challenged the Decision dated August 28, 1995 rendered by RTC-Branch 32 in said civil cases through a
Petition for Review on Certiorari with Prayer for Issuance of a Preliminary Injunction and for a Temporary Restraining
Order,26 docketed as G.R. No. 121704. They identified as respondents the City of Manila, Mayor Lim, Vice Mayor Atienza, City
Treasurer Acevedo, the Sangguniang Panlungsod ng Maynila, and RTC-Branch 32 Presiding Judge Juan C. Nabong, Jr. (Nabong).
William Lines, et al.,, assigned three major errors purportedly committed by RTC-Branch 32:chanroblesvirtuallawlibrary
A. The RTC erred in failing to declare the aforecited Section 21(B) of [the Manila Revenue Code, as amended, as] ultra vires and
therefore null and void because such sections violate the Provisions of the LGC x x x.
xxxx
B. The RTC erred in holding that Sec. 143(h) which is an omnibus grant of power couched in general terms is the exception
referred or adverted to in Section 133(j) of the LGC.

Eastern Shipping was the petitioner in Civil Case No. 94-69028, which was consolidated with Civil Case Nos. 94-68861, 94-68862,
94-68863, 94-68919, 94-68936, 94-68939, 94-68940, and 94-68941, before RTC-Branch 32.

I.

Since the Decision dated August 28, 1995 of RTC-Branch 32 in the consolidated cases was contrary to its interest, Eastern Shipping
appealed the same before the Court through a Petition for Review onCertiorari with Prayer for Preliminary Injunction and/or
Temporary Restraining Order,22 with the City Council of Manila, the Mayor of Manila, and the City of Manila, as respondents. In its
Petition, docketed as G.R. No. 121675, Eastern Shipping raised pure questions of law and argued two fundamental
issues:chanroblesvirtuallawlibrary

IS COMPLIANCE WITH THE GUIDELINES AND LIMITATIONS SET FORTH IN BOOK II TITLE I OF THE LOCAL
GOVERNMENT [CODE] (LGC) NECESSARY FOR THE VALIDITY OF SEC. 21(B) OF [THE MANILA REVENUE CODE,
AS AMENDED]?

II.

DID SEC. 21(B) OF [THE MANILA REVENUE CODE, AS AMENDED] VIOLATE SUCH GUIDELINES AND LIMITATIONS
OF THE LGC?

III.

IS SEC. 21(B) OF [THE MANILA REVENUE CODE, AS AMENDED,] INVALID, ULTRA VIRES AND UNLAWFUL? 29

I.

WHETHER OR NOT SECTION 21 OF [THE MANILA REVENUE CODE, AS AMENDED,] IS VALID AND
CONSTITUTIONAL.

II.

IN THE REMOTE POSSIBILITY THAT THE QUESTIONED ORDINANCE IS DECLARED VALID AND
CONSTITUTIONAL, WHETHER OR NOT [EASTERN SHIPPING] IS LIABLE TO PAY THE BUSINESS TAX BASED ON
GROSS RECEIPTS DERIVED FROM INCOMING FREIGHTS ONLY OR OUTGOING FREIGHTS ONLY OR BOTH. 23

G.R. Nos. 121720-28

The Office of the City Legal Officer, on behalf of the City of Manila, Mayor Lim, Vice Mayor Atienza, the City Council of
Manila/Sangguniang Panlungsod ng Maynila, and City Treasurer Acevedo, filed a joint Comment24 on the Petitions in G.R. Nos.
121675, 121720-28, and 121847-55. Eastern Shipping later on filed its Memorandum.25chanRoblesvirtualLawlibrary
G.R. No. 121704
William Lines, Negros Navigation, Lorenzo Shipping, Gothong Lines, the Aboitiz Group, and Solid Shipping (collectively referred to
herein as William Lines, et al.,) are duly organized domestic corporations principally engaged in the business of operating domestic
shipping vessels for the transportation of cargoes and passengers, except Aboitiz Air Transport Corp., which is engaged in the
transportation of cargoes by air, and Aboitiz Haulers, Inc. which is engaged in the business of domestic freight and hauling by land.
William Lines, et al.,, all have principal addresses in Manila.
William Lines, et al.,, paid under protest to the City of Manila the business taxes assessed against them for the first quarter of 1994,

PSTC is a government owned and controlled corporation engaged in the business of shipping, tinkering, lighterage, barging, towing,
transport, and shipment of goods, chattels, petroleum and other products, marine, and maritime commerce in general.
Pursuant to Section 21(B) of the Manila Revenue Code, as amended, PSTC was assessed by the City of Manila for business tax in
the amount of P2,233,994.35, representing 50% of 1% of the gross receipts earned by PSTC in the year 1993 which amounted to
P446,798,871.87. The total amount of business tax due was payable in four equal parts every quarter of 1994. PSTC paid under
protest on January 19, 1994 the business tax for the first quarter of 1994 in the amount of P558,498.59, and on April 20, 1994 the
business tax for the second quarter of 1994 in the amount of P558,498.59, evidenced by Municipal License Receipt Nos. 003483
and 0057675, respectively. PSTC claimed it had no other recourse but to pay to the City of Manila the assessed local business tax,
considering the latter had threatened to cancel its license to operate if said taxes were not paid. PSTC, by way of letters dated
February 21, 1994 and April 27, 1994, filed protests or claims for refund with the City Treasurer of Manila, but the letters were not
acted upon.
PSTC intervened in Civil Case Nos. 94-68861, 94-68862, 94-68863, 94-68919, 94-68936, 94-68939, 94-68940, 94-68941, and 9469028 before RTC-Branch 32.
Unsatisfied with the Decision dated August 28, 1995 rendered by RTC-Branch 32 in the said civil cases, PSTC filed with the Court a

Petition for Review on Certiorari with Prayer for Temporary Restraining Order and/or Preliminary Injunction,30 against Presiding
Judge Nabong of RTC-Branch 32, the City of Manila, Mayor Lim, Vice Mayor Atienza, City Treasurer Acevedo, and the Sangguniang
Panlungsod ng Maynila. In its Petition, docketed as G.R. No. 121720-28, PSTC maintained that RTC-Branch 32 erred
thus:chanroblesvirtuallawlibrary
I

1. WHETHER OR NOT SECTION 21(B) OF [THE MANILA REVENUE CODE, AS AMENDED,] IS VALID AND CONSTITUTIONAL.
2. IN THE NEGATIVE[,] WHETHER OR NOT RESPONDENTS CAN BE COMPELLED TO REFUND THE TAXES WRONGFULLY
AND ERRONEOUSLY COLLECTED UNDER THE ASSAILED ORDINANCE.cralawred

IN FAILING TO REALIZE AND CONSIDER THAT THE RESPONDENT CITY OF MANILA, A MERE MUNICIPAL CORPORATION,
HAS NO INHERENT POWER OF TAXATION.cralawred
II
EVEN ASSUMING ARGUENDO THAT SUCH POWER IS CATEGORICALLY GRANTED BY STATUTE, THE SAME IS SUBJECT
TO SUCH GUIDELINES AND LIMITATIONS PROVIDED BY CONGRESS UNDER SECTION 133 OF THE LOCAL GOVERNMENT
CODE OF 1991 AND, AS TO WHICH, NONE WAS GIVEN TO RESPONDENT CITY OF MANILA.cralawred
III
IN FAILING TO REALIZE AND CONSIDER THAT AN ORDINANCE WHICH AMENDS, ENLARGES OR LIMITS THE PROVISIONS
OF A STATUTE CONSTITUTES AN UNCONSTITUTIONAL AND ILLEGAL DEROGATION OF LEGISLATIVE POWER, HENCE,
THE ORDINANCE IS INVALID AND VOID AB-INITIO.
IV
IN FAILING TO REALIZE AND CONSIDER THAT THE RESPONDENT CITY OF MANILAS [REVENUE CODE, AS AMENDED,
PARTICULARLY SECTION 21(B) THEREOF] WHICH IMPOSES 50% OF 1% OF THE GROSS SALES OR RECEIPT OF THE
NEXT PRECEDING YEAR, ON TOP OF THE NATIONAL INTERNAL REVENUE TAXES ALREADY IMPOSED UNDER THE
NATIONAL INTERNAL REVENUE CODE, IS UNREASONABLE, UNJUST, UNFAIR OR OPPRESSIVE, CONFISCATORY, AND
CONTRAVENES THE CONSTITUTION OR STATUTE, HENCE, THE ORDINANCE IS INVALID AND NULL AND VOID ABINITIO.cralawred
V
IN FAILING TO REALIZE AND CONSIDER THAT THE TAX IMPOSED UNDER SECTION 21(B) OF [THE MANILA REVENUE
CODE, AS AMENDED,] PARTAKES THE NATURE OF A SALES TAX OR A PERCENTAGE TAX BEYOND THE TAXING POWER
OF THE RESPONDENT CITY OF MANILA TO IMPOSE, HENCE, UNENFORCEABLE BY RESPONDENT CITY
OFFICIALS.cralawred
VI
IN FAILING TO REALIZE AND CONSIDER THAT [PSTC] IS SPECIFICALLY EXEMPTED FROM LOCAL GOVERNMENT TAXES
IMPOSED UNDER THE LOCAL GOVERNMENT CODE OF 1991, PURSUANT TO SECTION 115 OF THE NATIONAL INTERNAL
REVENUE CODE, AS AMENDED BY REPUBLIC ACT 7761.31
As mentioned previously, the Office of the City Legal Officer, on behalf of the City of Manila, Mayor Lim, Vice Mayor Atienza, the City
Council of Manila/Sangguniang Panlungsod ng Maynila, and City Treasurer Acevedo, filed a joint Comment on the Petitions in G.R.
Nos. 121675, 121720-28, and 121847-55.
PSTC filed its Memorandum,32 summing up its issues and arguments, to wit:chanroblesvirtuallawlibrary
ISSUES SUBMITTED FOR RESOLUTION

ARGUMENTS IN SUPPORT OF THE MEMORANDUM

I. THE ASSAILED ORDINANCE IS A CLEAR USURPATION OF LEGISLATIVE POWER, HENCE, UNCONSTITUTIONAL AND
VOID AB-INITIO.
II. THE ASSAILED ORDINANCE IN ITSELF IS UNJUST, UNFAIR, OR EXCESSIVE, CONFISCATORY AND IN RESTRAINT OF
TRADE AND IN EFFECT CONSTITUTES AN UNLAWFUL TAKING OF PROPERTY WITHOUT DUE PROCESS OF LAW. 33
G.R. Nos. 121847-55
OFSI is a domestic corporation engaged in business as a transportation contractor. It also represents, as a general agent in the
Philippines, ZIM Israel Navigation Co., Ltd. and Gold Star Line, Hong Kong, which are engaged in the transport by common carrier
of export/import goods to and from the Philippines. Its offices are located in Intramuros, Manila.
OFSI questioned the legality of Section 21(B) of the Manila Revenue Code, as amended, in a Petition for Declaratory Relief with
Prayer for Preliminary Injunction and/or Temporary Restraining Order, which was docketed as Civil Case No. 94-68919 and
originally raffled to RTC-Branch 55. Civil Case No. 94-68919 was eventually consolidated with Civil Case Nos. 94-68861, 94-68862,
94-68863, 94-68936, 94-68939, 94-68940, 94-68941, and 94-69028 before RTC-Branch 32. During the pendency of said civil
cases, OFSI paid under protest on January 20, 1994 the business tax for the first quarter of 1994 amounting to P181,928.97.
Pursuant to Section 196 of the Local Government Code (LGC), OFSI wrote the City Treasurer of Manila a letter dated March 1, 1994
claiming refund of the business tax it had paid. The letter was received by the City Treasurers Office of Manila on March 3, 1994.
The City Treasurers Office of Manila had seven days from receipt of the letter to refund the amount paid, but more than two months
had passed and OFSI received no response from the City Treasurer. To avoid multiplicity of suits, OFSI filed a Supplemental
Petition in Civil Case No. 94-68919 to incorporate its claim for refund of the business tax it had paid for the first quarter of 1994.
Aggrieved by the Decision dated August 28, 1995 of RTC-Branch 32 in Civil Case Nos. 94-68861, 94-68862, 94-68863, 94-68919,
94-68936, 94-68939, 94-68940, 94-68941, and 94-69028, OFSI sought recourse from the Court by filing a Petition for Review
by Certiorari with Prayer for the Issuance of a Preliminary Injunction and/or Temporary Restraining Order,34 naming as respondents
the City of Manila, Mayor Lim, Vice Mayor Atienza, the City Council of Manila, City Treasurer Acevedo, and Presiding Judge Nabong
of RTC-Branch 32. The Petition of OFSI, docketed as G.R. Nos. 121847-55, presented for consideration and resolution of the Court
the following:chanroblesvirtuallawlibrary
Assignment of Errors
THE RESPONDENT HONORABLE JUDGE ERRED IN HIS FINDING THAT SECTION 21(B) OF [THE MANILA REVENUE CODE,
AS AMENDED,] IS VALID AND CONSTITUTIONAL.cralawred
Legal Issues Involved In This Petition
WHETHER OR NOT SECTION 21(B) OF [THE MANILA REVENUE CODE, AS AMENDED,] IS VALID AND CONSTITUTIONAL.
WHETHER OR NOT A WRIT OF PRELIMINARY INJUNCTION AND/OR TEMPORARY RESTRAINING ORDER MAY BE ISSUED
BY THE HONORABLE COURT.35
In a subsequent Manifestation,36 OFSI informed the Court that RTC-Branch 32 issued an Order dated October 26, 1995 granting its
Motion to Restore Injunction Pending Appeal; reinstating and restoring the Writ of Preliminary Injunction lifted on August 28, 1995;

and requiring OFSI to post a bond in the increased amount of P300,000.00.

A joint Comment on the Petitions in G.R. Nos. 121675, 121720-28, and 121847-55 was filed by the Office of the City Legal Officer,
on behalf of the City of Manila, Mayor Lim, Vice Mayor Atienza, the City Council of Manila/Sangguniang Panlungsod ng Maynila, and
City Treasurer Acevedo.
The Reply37 of OFSI was the last pleading filed in G.R. Nos. 121847-55.

said shipping companies thereunder. However, after being informed that Maersk already filed a similar case, i.e., Civil Case No. 9468861 before RTC-Branch 32, Gothong Lines decided to withdraw as complainant in Civil Case No. 94-69141 and simply intervene
in Civil Case No. 94-68861. As a result, Sulpicio Lines became the sole complainant in Civil Case No. 94-69141. Sulpicio Lines
then filed a Motion to Consolidate Civil Case No. 94-69141 with Civil Case No. 94-68861 which was granted.
On August 28, 1995, RTC-Branch 32 rendered a Decision in Civil Case Nos. 94-68861, 94-68862, 94-68863, 94-68919, 94-68936,
94-68939, 94-68940, 94-68941, and 94-69028. Civil Case No. 94-69141 was not included in the caption of the Decision, although
the complaint of Sulpicio Lines was mentioned in the body of the same Decision.

G.R. No. 122333

After RTC-Branch 32 rendered its Decision in Civil Case Nos. 94-68861, 94-68862, 94-68863, 94-68919, 94-68936, 94-68939, 9468940, 94-68941, and 94-69028 on August 28, 1995, upholding the constitutionality and validity of Section 21(B) of the Manila
Revenue Code, as amended, and lifting the Writs of Preliminary Injunction issued in said cases, the City of Manila and its officials
resumed the enforcement of the local business tax in question. City Treasurer Acevedo issued a Memorandum dated September 7,
1995, instructing Oscar S. Dizon, Acting Chief, License Division, City Treasurers Office of Manila, to prepare the complete staff work
for the collection of the unpaid taxes, plus interests imposed by Section 21(B) of the Manila Revenue Code, as amended, against
shipping companies and other common carriers.
A Petition for Prohibition with Temporary Restraining Order and/or Preliminary Injunction 38 was jointly filed before the Court by
several foreign and domestic corporations doing business in Manila as shipping companies and/or common carriers, namely: Cosco
Container Lines (Cosco) and Heung-A Shipping Co., LTD., both represented by their resident agent, Wallem Philippines Shipping,
Inc.; DSR Senator Lines, Compania Sud Americana de Vapores S.A., and Arimura Sangyo Company, Ltd., all represented by their
resident agent, C.F. Sharp Shipping Agencies, Inc.; Pacific International Lines (PTE) Ltd. and Pacific Eagle Lines (PTE) Ltd., both
represented by their resident agent, TMS Ship Agencies, Inc.; Compagnie Maritime D Affretement (CMA), represented by its
resident Agent, Inchcape Shipping Services; Everett Orient Lines, Inc., represented by it resident agent, Everett Steamship
Corporation; Yangming Marine Transport Corp., represented by its resident agent, Sky International, Inc.; Nipon Yusen Kaisha,
represented by its resident agent, Fil-Japan Shipping Corporation; Hyundai Merchant Marine Co., Ltd., represented by its resident
agent, Citadel Lines; Malaysian International Shipping Corporation Berhad, represented by its resident agent, Royal Cargo
Agencies, Inc.; Bolt Orient Line, represented by its resident agent, FILSOV Shipping Company, Inc.; Mitsui-O.S.K. Lines, Ltd.,
represented by its resident agent, Magsaysay Agencies, Inc.; Phils., Micronesia & Orient Navigation Co. (PMSO Line), represented
by its resident agent, Van Transport Company, Inc.; Lloyd Triestino di Navigazione S.P.A.N. and Compagnie Generale Maritime, both
represented by their resident agent, F.E. Zuellig (M), Inc.; and Madrigal-Wan Hai Lines (collectively referred to herein as Cosco, et
al.,).
The Petition of Cosco, et al.,, was docketed as G.R. No. 122333. In their Petition, Cosco, et al.,, presented for resolution of the
Court the principal issue of whether or not Section 21(B) of the Manila Revenue Code, as amended, is constitutional. Cosco, et al.,,
posited that Section 21(B) of the Manila Revenue Code, as amended, is unconstitutional and void ab initio because it was enacted
by the Sangguniang Panlungsod ng Maynila, which was presided over by Vice Mayor Atienza, approved by Mayor Lim, and
implemented and enforced by City Treasurer Acevedo, ultra vires and in violation of constitutional and statutory limitations on the
taxing power of LGUs. Hence, Cosco, et al.,, prayed for the issuance of a writ of prohibition to restrain, enjoin, and prohibit
respondents City of Manila, Mayor Lim, Vice Mayor Atienza, Sangguniang Panlungsod, and City Treasurer Acevedo, from enforcing
Section 21(B) of the Manila Revenue Code, as amended.
A joint Memorandum was filed on behalf of the petitioners in G.R. Nos. 121613, 122333, and 122349.
G.R. No. 122335

Sulpicio Lines did not formally receive a copy of the aforementioned Decision dated August 28, 1995 of RTC-Branch 32 and was
merely informed of the same by the petitioners/intervenors in the other civil cases. This prompted Sulpicio Lines to file with RTCBranch 32 a Motion for Clarificatory Order seeking to verify if said Decision included and was binding on Sulpicio Lines. Acting on
the Motion of Sulpicio Lines, RTC-Branch 32 issued an Order39 on October 16, 1995, which reads:chanroblesvirtuallawlibrary
Although Civil Case No. 94-64191 is not included in the caption of the above Decision, the Decision against all the petitioners,
intervenors, most specifically against intervenor Carlos A. Gothong Lines, Inc. is binding and enforceable against Sulpicio Lines, Inc.
because Civil Case No. 94-64191 had been consolidated with Civil Case No. 94-68861.
WHEREFORE, the Decision and the dispositive portion of the Decision rendered on August 28, 1995, shall apply to and binds
Sulpicio Lines, Inc. x x x.
After Sulpicio Lines confirmed that the Decision dated August 28, 1995 of RTC-Branch 32 in Civil Case Nos. 94-68861, 94-68862,
94-68863, 94-68919, 94-68936, 94-68939, 94-68940, 94-68941, and 94-69028, was also applicable to and binding upon it, it filed
with the Court a Petition for Review onCertiorari with Prayer for Issuance of a Preliminary Injunction and for a Temporary Restraining
Order,40 against the City of Manila, Mayor Lim, Vice Mayor Atienza, City Treasurer Acevedo, the Sangguniang Panlungsod ng
Maynila, and Presiding Judge Nabong of RTC-Branch 32. The appeal of Sulpicio Lines was docketed as G.R. No. 122335.
The assignment of errors in the Petition of Sulpicio Lines was the same as that in the Petition of William Lines, et al.,, in G.R. No.
121704, viz.:chanroblesvirtuallawlibrary
A. The RTC erred in failing to declare that the aforecited Section 21(B) of [the Manila Revenue Code, as amended, as] ultra vires
and therefore null and void because such sections of the Ordinances of the City of Manila violate the Provisions of the LGC x x x
xxxx
B. The RTC erred in holding that Sec. 143(h) which is an omnibus grant of power couched in general terms is the exception
referred or adverted to in Section 133(j) of the LGC.
C. The RTC erred in holding that there are only four basic requirements for a valid exercise of the power of the City of Manila to levy
tax.41
On January 31, 1996, the Court issued a Resolution42 referring the Petition of Sulpicio Lines in G.R. No. 122335 to the Court of
Appeals for proper determination and disposition pursuant to Section 9, paragraph 3 of Batas Pambansa Blg. 129, which granted
the Court of Appeals exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional
Trial Courts and quasi-judicial agencies, instrumentalities, boards or commission.

Sulpicio Lines, Inc. (Sulpicio Lines) is a domestic corporation, holding office in North Harbor, Manila, whose principal business is the
operation of domestic shipping vessels for the transportation of cargoes and passengers.

At the Court of Appeals, the Petition of Sulpicio Lines was docketed as CA-G.R. SP No. 39973. In a Resolution43 dated April 12,
1996, the appellate court directed the respondents City of Manila, Mayor Lim, Vice Mayor Atienza, City Treasurer Acevedo, the
Sangguniang Panlungsod ng Maynila, and Presiding Judge Nabong of RTC-Branch 32, to file their Comments.

Sulpicio Lines and Gothong Lines jointly filed a complaint for declaratory relief with prayer for the issuance of a writ of preliminary
injunction, which was docketed as Civil Case No. 94-69141 and raffled to RTC-Branch 44. Sulpicio Lines and Gothong Lines asked
the trial court to determine the validity of Section 21(B) of the Manila Revenue Code, as amended, as well as the rights and duties of

In the meantime, Sulpicio Lines filed with the Court in G.R. No. 122335 a Motion for Reconsideration of the Resolution dated
January 31, 1996 and for Consolidation.44 Sulpicio Lines prayed that the Resolution dated January 31, 1996 of the Court in G.R.
No. 122335 be withdrawn; that the rollo of G.R. No. 122335 be transmitted back to the Court; and that G.R. No. 122335 be

consolidated with the other cases pending before the Court en banc questioning the Decision dated August 28, 1995 of RTC-Branch
32 which upheld the constitutionality and validity of Section 21(B) of the Manila Revenue Code, as amended.
After several copies of its Resolutions were returned unserved on the respondents in G.R. Nos. 122335, 122349, and 124855, the
Court issued a Resolution45 on December 2, 1997 dispensing with the filing of a Comment by the respondents in the three cases.
G.R. No. 122349
The Association of International Shipping Lines, Inc. (AISL) is a non-stock domestic corporation the members of which are mostly
foreign corporations duly licensed to do business in the Philippines, specifically: American Transport Lines, Inc., represented by its
resident agent, Anchor International Shipping Agency, Inc.; Australian National Line, Fleet Trans International, and United Arab
Shipping Co., all represented by their resident agent, Jardine Davies Transport; Dongnama Shipping Co., Ltd., represented by its
resident agent, Uni-Ship Incorporated; Hanjin Shipping Company, Ltd., represented by its resident agent, MOF Company, Inc.;
Hapag-Lloyd A/G, represented by its resident agent, Hapag-Lloyd Phils., Inc.; Kawasaki Kisen Kaisha, represented by its resident
agent, Transmar Agencies, Inc.; Knutsen Line, represented by its resident agent, AWB Trade International; Kyowa Line, represented
by its resident agent, Sky International, Inc.; Neptune Orient Line, represented by its resident agent, Overseas Agency Services,
Inc.; Orient Overseas Container Line, represented by its resident agent, OOCL (Philippines), Inc.; P&O Containers, Ltd., P&O Swire
Containers and WILH Wilhelmsen Line A/S, all represented by their resident agent, Soriamont Steamship Agencies; Regional
Container Lines (Pte) Ltd., represented by its resident agent, South China Lines Phils., Inc.; Senator Line Bremen Germany,
represented by its resident agent, C.F. Sharp & Company; Tokyo Senpaku Kaisha, Ltd., represented by its resident agent, Fil-Japan
Shipping Corporation; Uniglory Line, represented by its resident agent, Don Tim Shipping Corporation; Wan Hai Lines, Ltd.,
represented by its resident agent, Eastern Shipping Agencies, Inc.; Westwind Line, represented by its resident agent, Westwind
Shipping Corporation; Zim Israel Navigation Co., Ltd., represented by its resident agent, Overseas Freighters Shipping, Inc.; Eastern
Shipping Lines, Inc.; Nedlloyd Lines, Inc.; Philippine President Lines, Ltd.; and Sea-Land Service, Inc.
After RTC-Branch 32 rendered its Decision dated August 28, 1995 in Civil Case Nos. 94-68861, 94-68862, 94-68863, 94-68919, 9468936, 94-68939, 94-68940, 94-68941, and 94-69028, upholding the constitutionality and validity of Section 21(B) of the Manila
Revenue Code, as amended; and City Treasurer Acevedo issued the Memorandum dated September 7, 1995 ordering the collection
of the business tax under the questioned provision of the local tax ordinance, AISL, for itself and on behalf and for the benefit of its
above-named members, filed before the Court a Petition for Prohibition with Temporary Restraining Order and/or Preliminary
Injunction46 against the City of Manila, Mayor Lim, Vice Mayor Atienza, City Treasurer Acevedo, and the Sangguniang Panlungsod
ng Maynila. The Petition of AISL, docketed as G.R. No. 122349, was substantially similar to the Petition of Cosco, et al.,, in G.R.
No. 122333.

annulment or modification of the foregoing Decision of RTC-Branch 32. The Petition was docketed as G.R. No. 122120. Instead of
consolidating G.R. No. 122120 with the other pending cases that challenge the constitutionality and validity of Section 21(B) of the
Manila Revenue Code, as amended, the Court issued a Resolution dated October 23, 1995 referring the Petition in G.R. No. 122120
to the Court of Appeals for the following reason:chanroblesvirtuallawlibrary
Considering that under Section 19 (sic), paragraph (1) of Batas Pambansa Blg. 129, the Court of Appeals now exercises original
jurisdiction to issue writs of mandamus, prohibitions, certiorari, habeas corpus, and quo warranto, and auxiliary writs or processes,
whether or not in aid of its appellate jurisdiction, the Court resolved to REFER this case to the Court of Appeals, for disposition. 47
The Petition for Certiorari of Dongnama and Kyowa was docketed as CA-G.R. SP No. 39188 before the Court of Appeals. The
Court of Appeals rendered its Decision48 in CA-G.R. SP No. 39188 on March 29, 1996, finding no merit in the Petition of Dongnama
and Kyowa as RTC-Branch 32 did not act with grave abuse of discretion when it ruled in its Decision dated August 28, 1995 that
Section 21(B) of the Manila Revenue Code, as amended, is valid and in clear conformity with the law and the Constitution. In the
end, the appellate court adjudged:chanroblesvirtuallawlibrary
WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is hereby DENIED for lack of merit. 49
Dongnama and Kyowa went back before the Court by way of Petition for Review on Certiorari under Rule 65 of the Rules of Court,
docketed as G.R. No. 124355, based on a lone assignment of error:chanroblesvirtuallawlibrary
RESPONDENT COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN ASSUMING JURISDICTION OVER SUPREME
COURT G.R. NO. 122120 ENTITLED DONGNAMA SHIPPING CO. LTD., AND KYOWA SHIPPING LTD. HEREIN REPRESENTED
BY SKY INTERNATIONAL INC. VS. HON. JUDGE JUAN C. NABONG JR., CITY OF MANILA, MAYOR ALFREDO LIM, VICE
MAYOR LITO ATIENZA, CITY COUNCIL OF MANILA, AND CITY TREASURER ANTHONY ACEVEDO WHEN IN FACT AS PER
SUPREME COURTS RESOLUTION DATED 23 OCTOBER 1995 IN RELATION [TO] SECTION 9, PARAGRAPH (1) BATAS
PAMBANSA BLG. 129, THE ORIGINAL JURISDICTION PERTAINING TO THE COURT OF APPEALS REFERS TO THE
ISSUANCE OF WRIT OF CERTIORARI, AMONG OTHERS AND NOT TO PETITION FOR CERTIORARI ON THE GROUND OF
GRAVE ABUSE OF DISCRETION WHICH THE HON. SUPREME COURT HAS EXCLUSIVE JURISDICTION. 50
Dongnama and Kyowa specifically prayed:chanroblesvirtuallawlibrary
1. That this petition be given due course;

In its Resolution dated December 2, 1997, the Court dispensed with the filing of a Comment by the respondents in G.R. Nos.
122335, 122349, and 124855.

2. That the Decision dated 29 March 1996 be annulled and set aside pending the resolution of the same to be decided together with
other related cases by this Court;

The only other pleading in G.R. No. 122349 is a joint Memorandum filed on behalf of the petitioners in G.R. Nos. 121613, 122333,
and 122349.

3. That respondents Court of Appeals jurisdiction over the instant case be limited to the issue on the propriety of the prayer for
preliminary injunction and restraining order in relation to the assailed Decision dated 28 August 1995 by RTC-Manila, Branch 32.51

G.R. No. 124855

The Court, in a Resolution dated December 2, 1997, dispensed with the filing of a Comment by the respondents in G.R. Nos.
122335, 122349, and 124855.

Dongnama and Kyowa are foreign corporations, organized and existing under the laws of the Republic of Korea and Japan,
respectively. Both shipping companies are doing business in the Philippines through their resident agent, Sky International, Inc.
(Sky International), with office in Binondo, Manila.

Dongnama and Kyowa eventually filed a Memorandum.52chanRoblesvirtualLawlibrary

Dongnama and Kyowa, through Sky International, lodged a petition to declare unconstitutional Section 21(B) of the Manila Revenue
Code, as amended, with prayer for a writ of preliminary injunction and TRO, docketed as Civil Case No. 94-68936 and initially raffled
to RTC-Branch 47, but later consolidated with Civil Case Nos. 94-68861, 94-68862, 94-68863, 94-68919, 94-68939, 94-68940, 9468941, and 94-69028 before RTC-Branch 32. On August 28, 1995, RTC-Branch 32 rendered its Decision in the consolidated civil
cases upholding the constitutionality and validity of Section 21(B) of the Manila Revenue Code, as amended.
Dongnama and Kyowa then filed with the Court a Petition for Certiorari with Urgent Prayer for Restraining Order, seeking the

Consolidation of the 10 Petitions

The foregoing 10 cases were consolidated at different times and stages.53chanRoblesvirtualLawlibrary
On December 2, 1997, the Court issued a Resolution54 giving due course to the Petitions and requiring the parties to simultaneously
file their Memoranda within 20 days from notice.
Among the parties to the 10 Petitions, Maersk, et al.,; Eastern Shipping; William Lines, et al.,; PSTC; Cosco, et al.,; AISL; and

Dongnama and Kyowa (petitioners in G.R. Nos. 121613, 121675, 121704, 121720-28, 122333, 122349, and 124855, respectively)
complied with the Resolution dated December 2, 1997 and submitted their Memoranda.
In a Resolution55 dated April 23, 2002, the Court resolved to consider the cases submitted for deliberation.
The Court issued a Resolution56 on July 5, 2011 requiring the parties to the 10 cases to move in the premises.
A copy of the Resolution dated July 5, 2011 was served upon and received by Atty. Renato G. Dela Cruz (Dela Cruz), City Legal
Officer of Manila, on behalf of the City of Manila, Mayor Lim, Vice Mayor Atienza, the City Council of Manila/Sangguniang
Panlungsod ng Maynila, and City Treasurer Acevedo, the petitioners in G.R. No. 120051 and respondents in the other nine cases.
Atty. Dela Cruz filed a Manifestation57 informing the Court that despite exerting effort, he could no longer locate the records for the
10 cases. The former lawyers who handled the cases had long ceased to be connected with the City of Manila and both were
already deceased. Thus, Atty. Dela Cruz prayed that he be furnished copies of the petitions and pleadings in the cases and be
given a fresh period of 10 days from receipt thereof to submit his compliance with the Resolution dated July 5, 2011. The Court
granted Atty. Cruzs prayer in a Resolution58 dated April 24, 2012. Atty. Dela Cruz once more moved for an extension of time to
comply with the Resolution dated July 5, 2011, which the Court granted in a Resolution59 dated November 20, 2012.
In a Resolution60 dated July 16, 2013, the Court took notice that Atty. Dela Cruz failed to comply with the Resolution dated July 5,
2011 within the extended period which expired on November 8, 2012. Resultantly, the Court resolved to require Atty. Dela Cruz to
(a) show cause why he should not be disciplinarily dealt with or held in contempt for such failure; and (b) comply with the Resolution
dated July 5, 2011, both within 10 days from notice.
Atty. Sitro G. Tajonera (Tajonera) of the Office of the City Legal Officer of Manila filed a Manifestation and Motion for Leave to
Withdraw Petition in G.R. No. 12005161 dated August 12, 2013. Atty. Tajonera moved for the withdrawal of the Petition in G.R. No.
120051 on the ground that the issues therein had been rendered moot and academic by the Decisions of the Court in Coca-Cola
Bottlers Philippines, Inc. v. City of Manila62 and City of Manila v. Coca-Cola Bottlers Philippines, Inc.63 (Coca-Cola cases), which
declared with finality the unconstitutionality of Section 21 of the Manila Revenue Code, as amended.
Atty. Dela Cruz likewise filed a Compliance with the Courts Show Cause Resolution dated July 16, 2013. According to Atty. Dela
Cruz, he already resigned as City Legal Officer of Manila effective May 31, 2013. Still, Atty. Dela Cruz
explained:chanroblesvirtuallawlibrary
c. Due to the multifarious duties that undersigned attended to and the many legal problems that confronted the Mayor whom he had
to assist in resolving them, he inadvertently overlooked the deadline set for submission of his compliance of the Courts directive
which in fact lapsed without him having been reminded by Atty. Karen Peralta of the unfulfilled obligation to this Honorable Court.
d. For this, he acknowledges that he was remiss in his duty to the Court and in delegating it to another.
[e.] Undersigned begs the Courts clemency on his inability to submit the pleading required of him and his fault in relying on his
subordinate-lawyer to assist him in complying with the Courts directive.

Section 21(B) of the Manila Revenue

Code, as amended, was constitutional
and valid.
The City of Manila, Mayor Lim, Vice Mayor Atienza, the Sangguniang Panlungsod ng Maynila, and City Treasurer Acevedo argued
that Section 21(B) was constitutional and valid. RTC-Branch 32, in its Decision dated August 28, 1995 in Civil Case Nos. 94-68861,
94-68862, 94-68863, 94-68919, 94-68936, 94-68939, 94-68940, 94-68941, and 94-69028, and the Court of Appeals, in its Decision
dated March 29, 1996 in CA-G.R. SP No. 39188, adopted the same position.
The 1987 Constitution granted LGUs the power to create their own sources of revenue and to levy taxes, fees, and charges subject
to the guidelines and limitations provided by Congress, consistent with the policy of local autonomy. This grant was reiterated in
Section 129 of the LGC and the scope of tax powers of a city such as Manila is described in Section 151 also of the LGC. Hence,
the Constitution and Congress, through the LGC, expressly granted LGUs the general power to tax.
The enactment of Section 21(B) of the Manila Revenue Code, as amended, is statutorily ingrained. It is based on the exempting
clause at the beginning of Section 133, in conjunction with Section 143(h), of the LGC. The relevant provisions of the Code are
reproduced below:chanroblesvirtuallawlibrary
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:
xxxx
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by
hire and common carriers by air, land or water, except as provided in this Code;
SEC. 143. Tax on Business. The municipality may impose taxes on the following businesses:
xxxx
(h) On any business, not otherwise specified in the preceding paragraphs, which the sanggunian concerned may deem proper
to tax: Provided, That on any business subject to the excise, value-added or percentage tax under the National Internal
Revenue Code, as amended, the rate of tax shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar
year.
The sanggunian concerned may prescribe a schedule of graduated tax rates but in no case to exceed the rates prescribed herein.
(Emphases supplied.)

There is only one vital issue in all the 10 cases: Whether or not Section 21(B) of the Manila Revenue Code, as amended, was in
conformity with the Constitution and the laws and, therefore, valid.

Inasmuch as transportation contractors, persons who transport passenger or freight for hire, and common carriers by land, air or
water, are engaged in business subject to excise, value added, or percentage tax under the National Internal Revenue Code
(NIRC), as amended, then the City of Manila could lawfully levy local business tax under Section 21(B) of the Manila Revenue Code,
as amended. It is irrelevant which of Sections 133(j) and 143(h) of the LGC is the special or general provision since there is an
exempting clause in Section 133, that is, Unless otherwise provided herein, which means that even if the businesses enumerated
therein are exempted from the levy of local tax, if there is a provision to the contrary, such as Section 143(h), the Sanggunian
concerned could still impose the local tax. As an alternative argument, Section 133(j) of the LGC is the general provision on the
limitations on the taxing power of the LGUs, while Section 143(h) of the LGC is the specific provision on the businesses which the
LGUs could tax; and per the rules of statutory construction, the latter prevails over the former. To rule otherwise and adopt the
construction put forward by the opposing parties would render Section 143(h) of the LGC a hollow decorative provision with no
subject to tax.

There are two fundamental and opposing positions on the issue. Presented below are summaries of the arguments in support of
each.

Moreover, the business tax imposed by Section 21(B) of the Manila Revenue Code, as amended, complied with the limitations and
conditions in the LGC for a valid local tax: (1) The rate of tax did not exceed 2% of gross sales or receipts of the preceding calendar

[f.] Undersigned assures the Court that henceforth, he shall not commit the same mistake or any neglect of duty or lack of respect to
the Court.64
II
ARGUMENTS OF THE PARTIES

year; (2) The tax is consistent with the basic policy of local autonomy; (3) The tax is not unjust, excessive, oppressive, confiscatory,
or contrary to declared national policy; and (4) That a prior public hearing was conducted for the purpose of enacting the Manila
Revenue Code, as amended.
Section 21(B) of the Manila Revenue Code, as amended, also enjoyed the presumption of constitutionality and validity. This
presumption can only be overridden by overwhelming evidence to the contrary. In Drilon v. Lim,65 the Court already declared the
Manila Revenue Code as valid given that the procedural requirements for the enactment of the same had been observed.
Lastly, taxes are the lifeblood of the nation. Tax exemptions are construed strictly against the taxpayer, and the burden is upon the
person claiming exemption from the tax to show a clear grant of exemption by organic law or statute.
Section 21(B) of the Manila Revenue
Code, as amended, was null and void
for being contrary to the Constitution
and the LGC.
On the other end of the spectrum, MAS; Maersk, et al.,; Eastern Shipping; William Lines, et al.,; PSTC; OFSI; Cosco, et al.,; Sulpicio
Lines; AISL; and Dongnama and Kyowa, asserted that Section 21(B) of the Manila Revenue Code, as amended, was null and void
because it violated the Constitution and the LGC. It was the position affirmed by RTC-Branch 43 in its Decision dated April 3, 1995
in Civil Case No. 94-69052.
Under the Philippine system of government, the power of taxation, while inherent in the State in view of its sovereign prerogatives, is
not inherent in municipal corporations or LGUs. LGUs may exercise the power only if and to the extent that it is delegated to them.
One of the common limitations on the power to tax of LGUs is Section 133(j) of the LGC, carried over from the Local Tax Code of
1973.
Section 133(j) expressly states that the taxing powers of the LGUs shall not extend to the transportation business. Section 133(j) of
the LGC is a special provision, which prevails over Section 143(h) of the same Code, a general provision. This interpretation would
give effect to both Sections 133(j) and 143(h) of the LGC, and contrary to the assertion of the City of Manila and its public officials,
would not render Section 143(h) useless, meaningless, and nugatory. There are other businesses which the LGUs may tax under
Section 143(h). Besides, in case of any doubt, any tax ordinance or revenue measure shall be construed strictly against the LGU
enacting it and liberally in favor of the taxpayer, for taxes, being burdens, are not to be presumed beyond what the applicable statute
expressly and clearly declares.
In addition, although Section 21(B) of the Manila Revenue Code, as amended, imposed what was denominated as a business tax,
in reality it was a percentage or sales tax. Business tax is imposed on the privilege of doing business, though it may be computed
as a percentage of gross sales. For business tax, there is no set ratio between volume of sales and the amount of tax. Cities and
municipalities are given the power to impose business tax under Section 143(h) of the LGC. In contrast, percentage or sales tax is
based on gross sales or receipts. The percentage bears a direct relationship to the sales or receipts generated by a business,
without regard for the extent of operation or size of the business. Cities and municipalities may validly impose a tax on business, but
consonant with the limitations on local taxation, they may not impose percentage or sales tax on top of what is already imposed in
the NIRC. Section 21(B) of the Manila Revenue Code, as amended, imposing on transportation contractors, persons who transport
passenger or freight for hire, and common carriers by land, air or water, a tax of 50% of 1% of the gross sales or receipts from the
preceding year on top of the national taxes already imposed by the NIRC was unjust, unfair, excessive, confiscatory, and in restraint
of economic trade.
And finally, Section 21(B) of the Manila Revenue Code, as amended, violated the rule on uniformity in taxation. Uniformity in
taxation should not be construed in a pure geographical sense, i.e., that the questioned tax was imposed with the same force and
effect on all businesses located in Manila. Shipping companies should be differentiated from other businesses. Aside from the risks
and responsibilities the shipping companies shoulder, their services are not confined within the territorial limits of Manila alone but
extend to other parts of the world. It is not uniformity for the shipping companies to be classed and taxed under the same category
with other common carriers domiciled and plying Manila territory 24 hours a day.

III
RULING OF THE COURT
Resolution of pending incidents in
several cases.
Before delving into the merits of the 10 cases, there are pending incidents in three cases that first need to be addressed:
(1) G.R. No. 120051: The City Legal Officer of Manila, as counsel for the City of Manila, Mayor Lim, and City Treasurer Acevedo,
petitioners in G.R. No. 120051, filed a Manifestation and Motion for Leave to Withdraw Petition in G.R. No. 120051, on the ground
that the issues therein had been rendered moot and academic by the Decisions of the Court in the Coca-Cola cases, which declared
with finality the unconstitutionality of Section 21 of the Manila Revenue Code, as amended.
The Court resolves to deny the motion to withdraw.
There already had been an exchange of pleadings between the parties in G.R. No. 120051, i.e.,Petition, Comment, and Reply. In a
Resolution dated December 2, 1997, the Court also already considered G.R. No. 120051 and all the other nine consolidated cases
submitted for deliberation. At this stage, the decision to grant or not to grant the motion to withdraw is fully within the discretion of
the Court.66chanRoblesvirtualLawlibrary
The Court denies the motion to withdraw because the assertion by the City Legal Officer of Manila that the Coca-Cola cases already
rendered the issues in G.R. No. 120051 moot and academic is erroneous. The Court did not declare in the Coca-Cola cases that
Section 21 of the Manila Revenue Code, as amended, was unconstitutional. What the Court held in the two Coca-Cola cases was
that Ordinance Nos. 7988 and 8011 (approved by then Mayor Atienza on February 25, 2000 and February 22, 2001, respectively),
amending Section 21 of the Manila Revenue Code, were null and void for (a) failure to comply with the publication requirement for
tax ordinances under Section 188 of the LGC; and (b) deletion of an exempting proviso found in Section 143(h) of the LGC and the
prior Section 21 of the Manila Revenue Code, which opened the door to the double taxation of Coca-Cola. Section 21 of the Manila
Revenue Code, as it was amended by Ordinance No. 7807, and more specifically, paragraph (B) thereof, was not the subject of a
constitutional review by the Court in the Coca-Cola cases.
As for Atty. Dela Cruzs Compliance with the Courts Show Cause Resolution, the Court finds the same satisfactory, although he is
reminded to be more conscientious of his duties as legal counsel in the future, despite the heavy volume of his work load.
(2) G.R. No. 121613: In a Resolution dated October 23, 1995, the Court dismissed the Petition of Maersk, et al.,, for the latters
failure to deposit sheriffs fee and clerks commission in the total amount of P202.00; and in light of said dismissal, noted without
action the Supplemental Petition and Motion of Maersk, et al.,, praying for the confirmation of the Writ of Preliminary Injunction
restored by RTC-Branch 32 and deletion of RTC-Branch 32 from the caption of G.R. No. 121613 for not being a necessary party. In
their pending Motion for Reconsideration of the Resolution dated October 23, 1995, Maersk, et al.,, prayed that the Court give due
course to and squarely resolve their Petition and Supplemental Petition and Motion.
The Court resolves to grant the Motion for Reconsideration of Maersk, et al., It sets aside the Resolution dated October 23, 1995;
reinstates the Petition of Maersk, et al.,, in G.R. No. 121613; and gives due course to the Petition and Supplemental Petition and
Motion of Maersk, et al.,, in the said case.
Of particular relevance to the plight of Maersk, et al.,, herein is the following discussion of the Court in Ayala Land, Inc. v.
Carpo67:chanroblesvirtuallawlibrary
To be sure, the remedy of appeal is a purely statutory right and one who seeks to avail thereof must comply with the statute or rule.
For this reason, payment of the full amount of the appellate court docket and other lawful fees within the reglementary period is
mandatory and jurisdictional. However, as we have ruled in Aranas v. Endona, the strict application of the jurisdictional nature of the
above rule on payment of appellate docket fees may be mitigated under exceptional circumstances to better serve the interest of
justice. As early as 1946, in the case of Segovia v. Barrios, we ruled that where an appellant in good faith paid less than the correct

amount for the docket fee because that was the amount he was required to pay by the clerk of court, and he promptly paid the
balance, it is error to dismiss his appeal because
every citizen has the right to assume and trust that a public officer charged by law with certain duties knows his duties and performs
them in accordance with law. To penalize such citizen for relying upon said officer in all good faith is repugnant to justice.
The ruling in Segovia was applied by this Court in subsequent cases where an appellants right to appeal was threatened by the
mistake of public officers in computing the correct amount of docket fee. Respondents draw attention to Rule 41, 4 of the 1997
Rules of Civil Procedure which provides that the appellate court docket and other lawful fees must be paid in full to the clerk of the
court which rendered the judgment or final order appealed from within the period for taking the appeal. They argue that this Rule
has overruled the decision in Segovia.
This contention is untenable. Rule 41, 4 must be read in relation to Rule 50, 1(c) which provides that:ChanRoblesVirtualawlibrary
An appeal may be dismissed by the Court of Appeals, on its own motion or on that of the appellee, on the following grounds:
xxxx
(c) Failure of the appellant to pay the docket and other lawful fees as provided in Section 4 of Rule 41.
xxxx
With the exception of 1(b), which refers to the failure to file notice of appeal or the record on appeal within the period prescribed by
these Rules, the grounds enumerated in Rule 50, 1 are merely directory and not mandatory. This is plain from the use of the
permissive may in the text of the statute. Despite the jurisdictional nature of the rule on payment of docket fee, therefore, the
appellate court still has the discretion to relax the rule in meritorious cases. The ruling in Segovia is still good law which the appellate
court, in the exercise of its discretion, must apply in circumstances such as that in the present case where an appellant was, from
the start, ready and willing to pay the correct amount of docket fee, but was unable to do so due to the error of an officer of the court
in computing the correct amount. To hold otherwise would be unjust and unwarranted. (Citations omitted.)
The Court notes that Revised Circular No. 1-88, effective July 1, 1991, which was cited in the Resolution dated October 23, 1995 as
basis for the dismissal of the Petition of Maersk, et al.,, also used the word may in the first paragraph
thereof:chanroblesvirtuallawlibrary
(1) Payment of docketing and other fees. Section 1 of Rule 45 requires that petitions for review be filed and the required fees paid
within the prescribed period. Unless exempted by law or rule, such fees must be fully paid in accordance with this Circular;
otherwise, the Court may deny the petition outright. The same rule shall govern petitions under Rule 65. (Emphasis supplied.)
Hence, denial of the petition for review outright for failure to pay docketing and other fees within the prescribed period was also
directory and not mandatory upon the Court under Revised Circular No. 1-88.
In the exercise of its discretion, the Court determines that there was meritorious reason why Maersk,et al.,, paid docket and other
legal fees within the prescribed period, but short of the P202.00 for sheriffs fee and clerks commission. Maersk, et al.,, were
already assessed and required to pay the docket and legal fees when they filed their Motion for Extension of Time to File Petition for
Review onCertiorari. The Motion did not yet indicate that the intended Petition would include a prayer for a TRO, so the receiving
clerk did not assess Maersk, et al.,, for sheriffs fee and clerks commission. When Maersk, et al.,, actually filed their Petition with
prayer for the issuance of a writ of preliminary injunction and TRO, they were no longer assessed additional fees by the receiving
clerk. Maersk, et al.,, found out about the deficiency in their legal fees upon their receipt of the Resolution dated October 23, 1995
already dismissing their Petition and noting without action their Supplemental Petition and Motion. Maersk, et al.,, immediately filed
a Motion for Reconsideration of said Resolution, and also deposited their balance of P202.00 with the Court.
Given the circumstances, Maersk, et al.,, cannot be faulted for their failure to pay the required legal fees for such failure was clearly
not a dilatory tactic nor intended to circumvent the Rules of Court. On the contrary, the subsequent payment by Maersk, et al.,, of
the P202.00 deficiency even before the Court had passed upon their Motion for Reconsideration was indicative of their good faith
and willingness to comply with the Rules.68chanRoblesvirtualLawlibrary
Acting on the Supplemental Petition and Motion of Maersk, et al.,, the Court further resolves to NOTE WITHOUT ACTION the prayer

to confirm the Writ of Preliminary Injunction restored by RTC-Branch 32 in light of the present judgment, and to GRANT the prayer to
delete RTC-Branch 32 from the caption of the case as it was not a necessary party.
(3) G.R. No. 122335: In a Resolution dated January 31, 1996, the Court referred the Petition of Sulpicio Lines to the Court of
Appeals. There is a pending Motion for Reconsideration of the Resolution dated January 31, 1996 filed by Sulpicio Lines seeking
the withdrawal of the Resolution dated January 31, 1996 and transmittal of the rollo of G.R. No. 122335 from the Court of Appeals
back to the Court.
The Court resolves to grant the Motion for Reconsideration of Sulpicio Lines. It sets aside the Resolution dated January 31, 1996
and gives due course to the Petition of Sulpicio Lines in G.R. No. 122335.
The Petition for Review on Certiorari of Sulpicio Lines, filed under Rule 42 of the old Rules of Court, should not have been referred
to the Court of Appeals. It is true that under Section 9, paragraph (3) of Batas Pambansa Blg. 129, the Court of Appeals has
(e)xclusive appellate jurisdiction over all final judgments, resolutions, orders or awards of Regional Trial Courts x x x. However,
Rule 42 of the old Rules of Court, then in effect, allowed an appeal straight from the RTC (formerly called Court of First
Instance) to the Supreme Court when the appeal raised pure questions of law:chanroblesvirtuallawlibrary
RULE 42
APPEAL FROM COURTS OF FIRST INSTANCE
TO SUPREME COURT
Section 1. Procedure. The procedure of appeal to the Supreme Court from Courts of First Instance shall be governed by the same
rules governing appeals to the Court of Appeals, except as hereinafter provided.
Section 2. Appeals on pure question of law. Where the appellant states in his notice of appeal or record on appeal that he will raise
only questions of law, no other question shall be allowed, and the evidence need not be elevated.
A cursory reading of the Petition for Review on Certiorari of Sulpicio Lines would readily reveal that it appealed the Decision dated
August 28, 1995 of RTC-Branch 32 in Civil Case Nos. 94-68861, 94-68862, 94-68863, 94-68919, 94-68936, 94-68939, 94-68940,
94-68941, and 94-69028 based only on questions of law. The Petition did not raise any question of fact and did not require the
presentation or elevation of evidence.
In G.R. No. 124855, Dongnama and Kyowa questioned the Resolution dated October 23, 1995, which similarly referred their original
Petition for Certiorari, docketed as G.R. No. 122120, to the Court of Appeals, where it was docketed as CA-G.R. SP No. 39188. The
Resolution dated October 23, 1995 cited as basis for the referral Section 9, paragraph (1) of Batas Pambansa Blg. 129 which gave
the Court of Appeals [o]riginal jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo warranto, and
auxiliary writs or processes, whether or not in aid of its appellate jurisdiction. The Court, however, will no longer address the
propriety of the referral of the original Petition of Dongnama and Kyowa to the Court of Appeals since said issue has become moot
and academic after the appellate court rendered its Decision in CA-G.R. SP No. 39188 on March 29, 1996. The Court will simply
treat the Petition in G.R. No. 124855 as an appeal of the Decision dated March 29, 1996 of the Court of Appeals in CA-G.R. SP No.
39188.
Ruling on the merits of the 10 Petitions.
The Court rules in favor of MAS; Maersk, et al.,; Eastern Shipping; William Lines, et al.,; PSTC; OFSI; Cosco, et al.,; Sulpicio Lines;
AISL; and Dongnama and Kyowa. Section 21(B) of the Manila Revenue Code, as amended, was null and void for being beyond the
power of the City of Manila and its public officials to enact, approve, and implement under the LGC.
It is already well-settled that although the power to tax is inherent in the State, the same is not true for the LGUs to whom the power
must be delegated by Congress and must be exercised within the guidelines and limitations that Congress may provide. The Court
expounded in Pelizloy Realty Corporation v. The Province of Benguet69 that:chanroblesvirtuallawlibrary

The power to tax is an attribute of sovereignty, and as such, inheres in the State. Such, however, is not true for provinces, cities,
municipalities and barangays as they are not the sovereign; rather, they are mere territorial and political subdivisions of the
Republic of the Philippines.
The rule governing the taxing power of provinces, cities, municipalities and barangaysis summarized in Icard v. City Council of
Baguio:ChanRoblesVirtualawlibrary
It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent power of taxation. The charter or statute
must plainly show an intent to confer that power or the municipality, cannot assume it. And the power when granted is to be
construed in strictissimi juris. Any doubt or ambiguity arising out of the term used in granting that power must be resolved against
the municipality. Inferences, implications, deductions all these have no place in the interpretation of the taxing power of a
municipal corporation.
Therefore, the power of a province to tax is limited to the extent that such power is delegated to it either by the Constitution or by
statute. Section 5, Article X of the 1987 Constitution is clear on this point:ChanRoblesVirtualawlibrary
Section 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees and
charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy.
Such taxes, fees, and charges shall accrue exclusively to the local governments.
Per Section 5, Article X of the 1987 Constitution, the power to tax is no longer vested exclusively on Congress; local legislative
bodies are now given direct authority to levy taxes, fees and other charges. Nevertheless, such authority is subject to such
guidelines and limitations as the Congress may provide.
In conformity with Section 3, Article X of the 1987 Constitution, Congress enacted Republic Act No. 7160, otherwise known as the
Local Government Code of 1991. Book II of the LGC governs local taxation and fiscal matters.
Relevant provisions of Book II of the LGC establish the parameters of the taxing powers of LGUs found below.
First, Section 130 provides for the following fundamental principles governing the taxing powers of LGUs:
1.

Taxation shall be uniform in each LGU.

2.

Taxes, fees, charges and other impositions shall:

a.

be equitable and based as far as practicable on the taxpayers ability to pay;

b.

be levied and collected only for public purposes;

c.

not be unjust, excessive, oppressive, or confiscatory;

d.

not be contrary to law, public policy, national economic policy, or in the restraint of trade.

3.

The collection of local taxes, fees, charges and other impositions shall in no case be let to any private person.

4.

The revenue collected pursuant to the provisions of the LGC shall inure solely to the benefit of, and be subject to the
disposition by, the LGU levying the tax, fee, charge or other imposition unless otherwise specifically provided by the LGC.

5.

Each LGU shall, as far as practicable, evolve a progressive system of taxation.

Second, Section 133 provides for the common limitations on the taxing powers of LGUs. x x x. (Underscoring and citations omitted.)
Among the common limitations on the taxing power of LGUs is Section 133(j) of the LGC, which states that [u]nless otherwise
provided herein, the taxing power of LGUs shall not extend to [t]axes on the gross receipts of transportation contractors and
persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided
in this Code[.]
Section 133(j) of the LGC clearly and unambiguously proscribes LGUs from imposing any tax on the gross receipts of transportation
contractors, persons engaged in the transportation of passengers or freight by hire, and common carriers by air, land, or water. Yet,
confusion arose from the phrase unless otherwise provided herein, found at the beginning of the said provision. The City of Manila
and its public officials insisted that said clause recognized the power of the municipality or city, under Section 143(h) of the LGC, to
impose tax on any business subject to the excise, value-added or percentage tax under the National Internal Revenue Code, as
amended. And it was pursuant to Section 143(h) of the LGC that the City of Manila and its public officials enacted, approved, and
implemented Section 21(B) of the Manila Revenue Code, as amended.
The Court is not convinced. Section 133(j) of the LGC prevails over Section 143(h) of the same Code, and Section 21(B) of the
Manila Revenue Code, as amended, was manifestly in contravention of the former.
First, Section 133(j) of the LGC is a specific provision that explicitly withholds from any LGU, i.e.,whether the province, city,
municipality, or barangay, the power to tax the gross receipts of transportation contractors, persons engaged in the transportation of
passengers or freight by hire, and common carriers by air, land, or water.
In contrast, Section 143 of the LGC defines the general power of the municipality (as well as the city, if read in relation to Section
15170 of the same Code) to tax businesses within its jurisdiction. While paragraphs (a) to (g) thereof identify the particular
businesses and fix the imposable tax rates for each, paragraph (h) is apparently the catch-all provision allowing the municipality to
impose tax on any business, not otherwise specified in the preceding paragraphs, which the sanggunian concerned may deem
proper to tax[.]
The succeeding proviso of Section 143(h) of the LGC, viz., Provided, That on any business subject to the excise, value-added or
percentage tax under the National Internal Revenue Code, as amended, the rate of tax shall not exceed two percent (2%) of gross
sales or receipts of the preceding calendar year[,] is not a specific grant of power to the municipality or city to impose business tax
on the gross sales or receipts of such a business. Rather, the proviso only fixes a maximum rate of imposable business tax in case
the business taxed under Section 143(h) of the LGC happens to be subject to excise, value added, or percentage tax under the
NIRC.
The omnibus grant of power to municipalities and cities under Section 143(h) of the LGC cannot overcome the specific
exception/exemption in Section 133(j) of the same Code. This is in accord with the rule on statutory construction that specific
provisions must prevail over general ones.71 A special and specific provision prevails over a general provision irrespective of their
relative positions in the statute. Generalia specialibus non derogant. Where there is in the same statute a particular enactment and
also a general one which in its most comprehensive sense would include what is embraced in the former, the particular enactment
must be operative, and the general enactment must be taken to affect only such cases within its general language as are not within
the provisions of the particular enactment.72chanRoblesvirtualLawlibrary
In the case at bar, the sanggunian of the municipality or city cannot enact an ordinance imposing business tax on the gross receipts
of transportation contractors, persons engaged in the transportation of passengers or freight by hire, and common carriers by air,
land, or water, when said sanggunian was already specifically prohibited from doing so. Any exception to the express prohibition
under Section 133(j) of the LGC should be just as specific and unambiguous.
Second, the construction adopted by the Court gives effect to both Sections 133(j) and 143(h) of the LGC. In construing a law, care
should be taken that every part thereof be given effect and a construction that could render a provision inoperative should be
avoided, and inconsistent provisions should be reconciled whenever possible as parts of a harmonious
whole.73chanRoblesvirtualLawlibrary

As pointed out by William Lines, et al.,, in their Petition, despite the prohibition against LGUs imposing tax on the gross receipts of
transportation contractors, persons engaged in the transportation of passengers or freight by hire, and common carriers by air, land,
or water, under Section 133(j) of the LGC, there are still other multiple businesses subject to excise, value added, or percentage tax
under the NIRC, which the municipalities and cities can still tax pursuant to Section 143(h) of the LGC, such
as:ChanRoblesVirtualawlibrary
1)
Hotels and motels under Sec. 113 of the NIRC;
2)
Caterers, taxed under Sec. 114 of the NIRC;
3)
Dealers in securities, taxed under Sec. 116 of the NIRC;
4)
Franchise holders, taxed under Sec. 117 of the NIRC;
5)
Senders of overseas dispatch, message or communication originating in the Philippines, taxed under Sec. 118 of the NIRC;
6)
Banks and non-bank financial intermediaries, taxed under Sec. 119 of the NIRC;
7)
Finance companies, taxed under Sec. 120 of the NIRC;
8)
Agents of foreign insurance companies, taxed under Sec. 122 of the NIRC;
9)
Amusement places, taxed under Sec. 123 of the NIRC;
10) Winners in horse races, taxed under Sec. 124 of the NIRC; and
11) Those who sell, barter, or exchange shares of stocks, taxed under Sec. 124-A of the NIRC. 74

(e) Taxes on the business of transportation contractors and persons engaged in the transportation of passengers or freight by hire
and common carries by air, land or water except as otherwise provided in this Code, and taxes or fees for the registration of motor
vehicles and for the issuance of all kinds of licenses or permits for the driving thereof;
The Court, in First Philippine Industrial Corp. v. Court of Appeals,75 expounded on the lawmakers reason for exempting the gross
receipts of common carriers from the taxing powers of the LGUs:chanroblesvirtuallawlibrary
From the foregoing disquisition, there is no doubt that petitioner is a common carrier and, therefore, exempt from the business tax
as provided for in Section 133 (j), of the Local Government Code x x x
xxxx
The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are
illuminating:ChanRoblesVirtualawlibrary
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line 1. It states: SEC. 121 (now Sec. 131). Common Limitations on the Taxing
Powers of Local Government Units. . . .

Thus, Section 143(h) of the LGC would not be a hollow decorative provision with no subject to tax. On the contrary, it would be
Section 133(j) of the LGC which would become inoperative should the Court accept the construction proffered by the City of Manila
and its public officials, because then, there would be no instance at all when the gross receipts of the transportation contractors,
persons engaged in the transportation of passengers or freight by hire, and common carriers by air, land, or water, would not be
subject to tax by the LGUs.

MR. AQUINO (A.). Thank you Mr. Speaker.

Third, Section 5(b) of the LGC itself, on Rules of Interpretation, provides:chanroblesvirtuallawlibrary

MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16, paragraph 5. It states that
local government units may not impose taxes on the business of transportation, except as otherwise provided in this code.

SEC. 5. Rules of Interpretation. In the interpretation of the provisions of this Code, the following rules shall apply:

Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that provinces have the power to
impose a tax on business enjoying a franchise at the rate of not more than one-half of 1 percent of the gross annual receipts. So,
transportation contractors who are enjoying a franchise would be subject to tax by the province. That is the exception, Mr. Speaker.

xxxx
(b) In case of doubt, any tax ordinance or revenue measure shall be construed strictly against the local government unit enacting it,
and liberally in favor of the taxpayer. Any tax exemption, incentive or relief granted by any local government unit pursuant to the
provisions of this Code shall be construed strictly against the person claiming it[.]
The Court strictly construes Section 21(B) of the Manila Revenue Code, as amended, against the City of Manila and its public
officials and liberally in favor of the transportation contractors, persons engaged in the transportation of passengers or freight by
hire, and common carriers by air, land, or water. Strictly assessed against the guidelines and limitations set forth in the LGC,
Section 21(B) of the Manila Revenue Code, as amended, was enacted ultra vires.

Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one of those being deemed to be
exempted from the taxing powers of the local government units. May we know the reason why the transportation business is being
excluded from the taxing powers of the local government units?

What we want to guard against here, Mr. Speaker is the imposition of taxes by local government units on the carrier business. Local
government units may impose taxes on top of what is already being imposed by the National Internal Revenue Code which is the
so-called common carriers tax. We do not want a duplication of this tax, so we just provided for an exception under Section 125
(now Section 137) that a province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . .
It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax
against common carriers is to prevent a duplication of the so-called common carriers tax.

And fourth, the construction adopted by the Court is in accordance with the consistent intention of the laws to withhold from the
LGUs the power to tax transportation contractors, persons engaged in the transportation of passengers or freight by hire, and
common carriers by air, land, or water.

Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the National Internal
Revenue Code. To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of
the Local Government Code. (Citations omitted.)

Even prior to Section 133(j) of the LGC, Section 5(e) of Presidential Decree No. 231, otherwise known as The Local Tax Code, as
amended, already limited the taxing powers of LGUs as follows:chanroblesvirtuallawlibrary

Consistent with the foregoing legislative intent, Republic Act No. 7716, more popularly known as the Expanded Value-Added Tax (EVAT) Law, which took effect after the LGC on May 28, 1994, expressly amended the NIRC of 1977 and added to Section 115 of the
latter on Percentage tax on carriers and keepers of garages, the following proscription: The gross receipts of common carriers
derived from their incoming and outgoing freight shall not be subjected to the local taxes imposed under Republic Act No. 7160,
otherwise known as the Local Government Code of 1991.

SEC. 5. Common limitations on the taxing powers of local government. The exercise of the taxing powers of provinces, cities,
municipalities and barrios shall not extend to the imposition of the following:
xxxx

IV
DISPOSITIVE PORTION

WHEREFORE, in view of the foregoing, the Court hereby RESOLVES:

1. In G.R. No. 120051: (a) to DENY the Motion to Withdraw the Petition filed by the Office of the City Legal Officer on behalf of the
City of Manila, Mayor Atienza, and City Treasurer Acevedo; and (b) toDECLARE as SATISFACTORY the Compliance submitted by
Atty. Dela Cruz;
2. In G.R. No. 121613: (a) to GRANT the Motion for Reconsideration of Maersk, et al.,; (b) to SET ASIDE the Resolution dated
October 23, 1995; (c) to REINSTATE the Petition of Maersk, et al.,; (d) to GIVE DUE COURSE to the Petition and the Supplemental
Petition and Motion of Maersk, et al.,; (e) as regards the Supplemental Petition and Motion of Maersk, et al.,, to NOTE WITHOUT
ACTION the prayer to confirm the Writ of Preliminary Injunction restored by RTC-Branch 32 in light of the present judgment, and
to GRANT the prayer to delete RTC-Branch 32 from the caption of the case for not being a necessary party; and
3. In G.R. No. 122335: (a) to GRANT the Motion for Reconsideration of Sulpicio Lines; (b) to SET ASIDE the Resolution dated
January 31, 1996; and (c) to GIVE DUE COURSE to the Petition of Sulpicio Lines.

1. To DECLARE Section 21(B) of the Manila Revenue Code, as amended, null and void for being in violation of the guidelines and
limitations on the taxing powers of the LGUs under the LGC;
2. In G.R. No. 120051: (a) to DENY the Petition of the City of Manila, Mayor Lim, and City Treasurer Acevedo; and (b)
to AFFIRM the Decision dated April 3, 1995 of RTC-Branch 43 in Civil Case No. 94-69052; and
3. In G.R. Nos. 121613, 121675, 121704, 121720-28, 121847-55, 122333, 122335, 122349, and 124855: (a) to GRANT the
Petitions of Maersk, et al.,; Eastern Shipping; William Lines, et al.,; PSTC; OFSI; Cosco, et al.,; Sulpicio Lines; AISL; and Dongnama
and Kyowa, respectively; (b) to REVERSE and SET ASIDE the Decision dated August 28, 1995 of RTC-Branch 32 in Civil Case
Nos. 94-68861, 94-68862, 94-68863, 94-68919, 94-68936, 94-68939, 94-68940, 94-68941, and 94-69028, and the Decision dated
March 29, 1996 of the Court of Appeals in CA-G.R. SP No. 39188; (c) to ORDER the City of Manila to refund to Maersk, et al.,;
Eastern Shipping; William Lines, et al.,; PSTC; OFSI; Cosco, et al.,; Sulpicio Lines; AISL; and Dongnama and Kyowa the business
taxes assessed and collected against said corporations under Section 21(B) of the Manila Revenue Code, as amended; and (d)
to MAKE PERMANENT the Writs of Preliminary Injunction restored by RTC-Branch 32 during the pendency of the Petitions at bar.
SO ORDERED.cralawlawlibrary

Furthermore, the Court hereby DECIDES: