1|Page|| Tr a n s p o r t a t i o n Law Assigned Readings

TRANSPORTATION LAW ASSIGNED READINGS: Convention, to be one undivided carriage, if it has

GOVERNING LAWS: been regarded by the parties as a single operation,
NEW CIVIL CODE: whether it had been agreed upon under the form of
a single contract or of a series of contracts, and it
WARSAW CONVENTION:
does not lose its international character merely
because one contract or a series of contracts is to be
Convention for the Unification of Certain Rules Relating
performed entirely within a territory subject to the
to International Carriage by Air, Signed at Warsaw on 12
sovereignty, suzerainty, mandate or authority of the
October 1929
same High Contracting Party.
(Warsaw Convention)

7
2

Article 2
Chapter I - Scope - Definitions

8
3

This Convention applies to carriage performed by

Article 1
the State or by legally constituted public bodies
provided it falls within the conditions laid down in
4
Article 1.

This Convention applies to all international carriage

9
of persons, luggage or goods performed by aircraft
for reward. It applies equally to gratuitous carriage
This Convention does not apply to carriage
by aircraft performed by an air transport
performed under the terms of any international
undertaking.
postal Convention.

5
10

For the purposes of this Convention the expression

Chapter II - Documents of Carriage
"international carriage" means any carriage in
which, according to the contract made by the
11
parties, the place of departure and the place of
destination, whether or not there be a break in the
Section I - Passenger Ticket
carriage or a transhipment, are situated either
within the territories of two High Contracting
12
Parties, or within the territory of a single High
Contracting Party, if there is an agreed stopping Article 3
place within a territory subject to the sovereignty,
suzerainty, mandate or authority of another Power, 13
even though that Power is not a party to this
Convention. A carriage without such an agreed For the carriage of passengers the carrier must
stopping place between territories subject to the deliver a passenger ticket which shall contain the
sovereignty, suzerainty, mandate or authority of the following particulars:-
same High Contracting Party is not deemed to be
international for the purposes of this Convention. 14

6 the place and date of issue;

A carriage to be performed by several successive air 15

carriers is deemed, for the purposes of this
2|Page|| Tr a n s p o r t a t i o n Law Assigned Readings
(b) the place of departure and of destination; 24

16 The luggage ticket shall contain the following

particulars:-
(c) the agreed stopping places, provided that the
carrier may reserve the right to alter the stopping 25
places in case of necessity, and that if he exercises
that right, the alteration shall not have the effect of the place and date of issue;
depriving the carriage of its international character;
26
17
(b) the place of departure and of destination;
(d) the name and address of the carrier or carriers;
27
18
(c) the name and address of the carrier or carriers;
(e) a statement that the carriage is subject to the
rules relating to liability established by this 28
Convention.
(d) the number of the passenger ticket;

19
29
The absence, irregularity or loss of the passenger
(e) a statement that delivery of the luggage will be
ticket does not affect the existence or the validity of
made to the bearer of the luggage ticket;
the contract of carriage, which shall none the less be
subject to the rules of this Convention. Nevertheless,
30
if the carrier accepts a passenger without a
passenger ticket having been delivered he shall not
(f) the number and weight of the packages;
be entitled to avail himself of those provisions of this
Convention which exclude or limit his liability.
31

20
(g) the amount of the value declared in accordance
with Article 22(2);
Section II - Luggage Ticket

32
21

(h) a statement that the carriage is subject to the

Article 4
rules relating to liability established by this
Convention.
22

33
For the carriage of luggage, other than small
personal objects of which the passenger takes charge
himself, the carrier must deliver a luggage ticket.

23

The luggage ticket shall be made out in duplicate,

one part for the passenger and the other part for the
carrier.
3|Page|| Tr a n s p o r t a t i o n Law Assigned
The absence, irregularity or loss of the luggage ticket
does not affect the existence or the validity of the
contract of carriage, which shall none the less be
subject to the rules of this Convention. Nevertheless,
if the carrier accepts luggage without a luggage
ticket having been delivered, or if the luggage ticket
does not contain the particulars set out at (d), (f) and
(h) above, the carrier shall not be entitled to avail
himself of those provisions of the Convention which
exclude or limit his liability.
34
Readings
accompany the goods. The third part shall be signed
by the carrier and handed by him to the consignor
after the goods have been accepted.
41
The carrier shall sign on acceptance of the goods.
42
The signature of the carrier may be stamped; that of
the consignor may be printed or stamped.

Section III - Air Consignment Note 43

If, at the request of the consignor, the carrier makes

35
out the air consignment note, he shall be deemed,
Article 5 subject to proof to the contrary, to have done so on
behalf of the consignor.
36
44
Every carrier of goods has the right to require the
consignor to make out and hand over to him a Article 7
document called an "air consignment note"; every
consignor has the right to require the carrier to 45
accept this document.
The carrier of goods has the right to require the
consignor to make out separate consignment notes
37
when there is more than one package.
The absence, irregularity or loss of this document
does not affect the existence or the validity of the 46
contract of carriage which shall, subject to the
Article 8
provisions of Article 9, be none the less governed by
the rules of this Convention.
47

38
The air consignment note shall contain the following
particulars:-
Article 6

48
39

the place and date of its execution;

The air consignment note shall be made out by the
consignor in three original parts and be handed over
49
with the goods.

(b) the place of departure and of destination;

40

50
The first part shall be marked "for the carrier," and
shall be signed by the consignor. The second part
(c) the agreed stopping places, provided that the
shall be marked "for the consignee"; it shall be
carrier may reserve the right to alter the stopping
signed by the consignor and by the carrier and shall
places in case of necessity, and that if he exercises
4|Page|| Tr a n s p o r t a t i o n Law Assigned Readings
that right the alteration shall not have the effect of 61
depriving the carriage of its international character;
(n) the number of parts of the air consignment note;
51
62
(d) the name and address of the consignor;
(o) the documents handed to the carrier to
52 accompany the air consignment note;

(e) the name and address of the first carrier; 63

53 (p) the time fixed for the completion of the carriage

and a brief note of the route to be followed, if these
(f) the name and address of the consignee, if the case matters have been agreed upon;
so requires;
64
54
(q) a statement that the carriage is subject to the
(g) the nature of the goods; rules relating to liability established by this
Convention.
55
65
(h) the number of the packages, the method of
packing and the particular marks or numbers upon Article 9
them;
66
56
If the carrier accepts goods without an air
the weight, the quantity and the volume or consignment note having been made out, or if the
dimensions of the goods; air consignment note does not contain all the
particulars set out in Article 8(a) to (i) inclusive and
57 (q), the carrier shall not be entitled to avail himself of
the provisions of this Convention which exclude or
(j) the apparent condition of the goods and of the limit his liability.
packing;
67
58
Article 10
(k) the freight, if it has been agreed upon, the date
and place of payment, and the person who is to pay 68
it;
The consignor is responsible for the correctness of
59 the particulars and statements relating to the goods
which he inserts in the air consignment note.
(l) if the goods are sent for payment on delivery, the
price of the goods, and, if the case so requires, the 69
amount of the expenses incurred;
The consignor will be liable for all damage suffered
60 by the carrier or any other person by reason of the
irregularity, incorrectness or incompleteness of the
(m) the amount of the value declared in accordance said particulars and statements.
with Article 22 (2);
5|Page|| Tr a n s p o r t a t i o n Law Assigned
70
Article 11
71
The air consignment note is prima facie evidence of
the conclusion of the contract, of the receipt of the
goods and of the conditions of carriage.
72
The statements in the air consignment note relating
to the weight, dimensions and packing of the goods,
as well as those relating to the number of packages,
are prima facie evidence of the facts stated; those
relating to the quantity, volume and condition of the
goods do not constitute evidence against the carrier
except so far as they both have been, and are stated
in the air consignment note to have been, checked by
him in the presence of the consignor, or relate to the
apparent condition of the goods.
73
Article 12
74
Subject to his liability to carry out all his obligations
under the contract of carriage, the consignor has the
right to dispose of the goods by withdrawing them
at the aerodrome of departure or destination, or by
stopping them in the course of the journey on any
landing, or by calling for them to be delivered at the
place of destination or in the course of the journey to
a person other than the consignee named in the air
consignment note, or by requiring them to be
returned to the aerodrome of departure. He must
not exercise this right of disposition in such a way as
to prejudice the carrier or other consignors and he
must repay any expenses occasioned by the exercise
of this right.
75
If it is impossible to carry out the orders of the
consignor the carrier must so inform him forthwith.
76
Readings
If the carrier obeys the orders of the consignor for
the disposition of the goods without requiring the
production of the part of the air consignment note
delivered to the latter, he will be liable, without
prejudice to his right of recovery from the consignor,
for any damage which may be caused thereby to any
person who is lawfully in possession of that part of
the air consignment note.
77
The right conferred on the consignor ceases at the
moment when that of the consignee begins in
accordance with Article 13. Nevertheless, if the
consignee declines to accept the consignment note or
the goods, or if he cannot be communicated with,
the consignor resumes his right of disposition.
78
Article 13
79
Except in the circumstances set out in the preceding
Article, the consignee is entitled, on arrival of the
goods at the place of destination, to require the
carrier to hand over to him the air consignment note
and to deliver the goods to him, on payment of the
charges due and on complying with the conditions
of carriage set out in the air consignment note.
80
Unless it is otherwise agreed, it is the duty of the
carrier to give notice to the consignee as soon as the
goods arrive.
81
If the carrier admits the loss of the goods, or if the
goods have not arrived at the expiration of seven
days after the date on which they ought to have
arrived, the consignee is entitled to put into force
against the carrier the rights which flow from the
contract of carriage.
82
Article 14
6|Page|| Tr a n s p o r t a t i o n Law Assigned
83
The consignor and the consignee can respectively
enforce all the rights given them by Articles 12 and
13, each in his own name, whether he is acting in his
own interest or in the interest of another, provided
that he carries out the obligations imposed by the
contract.
84
Article 15
85
Articles 12, 13 and 14 do not affect either the
relations of the consignor or the consignee with each
other or the mutual relations of third parties whose
rights are derived either from the consignor or from
the consignee.
86
The provisions of Articles 12, 13 and 14 can only be
varied by express provision in the air consignment
note.
87
Article 16
88
The consignor must furnish such information and
attach to the air consignment note such documents
as are necessary to meet the formalities of customs,
octroi or police before the goods can be delivered to
the consignee. The consignor is liable to the carrier
for any damage occasioned by the absence,
insufficiency or irregularity of any such information
or documents, unless the damage is due to the fault
of the carrier or his agents.
89
The carrier is under no obligation to enquire into the
correctness or sufficiency of such information or
documents.
90
Readings
Chapter III - Liability of the Carrier
91
Article 17
92
The carrier is liable for damage sustained in the
event of the death or wounding of a passenger or
any other bodily injury suffered by a passenger, if
the accident which caused the damage so sustained
took place on board the aircraft or in the course of
any of the operations of embarking or disembarking.
93
Article 18
94
The carrier is liable for damage sustained in the
event of the destruction or loss of, or of damage to,
any registered luggage or any goods, if the
occurrence which caused the damage so sustained
took place during the carriage by air.
95
The carriage by air within the meaning of the
preceding paragraph comprises the period during
which the luggage or goods are in charge of the
carrier, whether in an aerodrome or on board an
aircraft, or, in the case of a landing outside an
aerodrome, in any place whatsoever.
96
The period of the carriage by air does not extend to
any carriage by land, by sea or by river performed
outside an aerodrome. If, however, such a carriage
takes place in the performance of a contract for
carriage by air, for the purpose of loading, delivery
or transshipment, any damage is presumed, subject
to proof to the contrary, to have been the result of an
event which took place during the carriage by air.
97
Article 19
7|Page|| Tr a n s p o r t a t i o n Law Assigned
98
The carrier is liable for damage occasioned by delay
in the carriage by air of passengers, luggage or
goods.
99
Article 20
100
The carrier is not liable if he proves that he and his
agents have taken all necessary measures to avoid
the damage or that it was impossible for him or
them to take such measures.
101
In the carriage of goods and luggage the carrier is
not liable if he proves that the damage was
occasioned by negligent pilotage or negligence in the
handling of the aircraft or in navigation and that, in
all other respects, he and his agents have taken all
necessary measures to avoid the damage.
102
Article 21
103
If the carrier proves that the damage was caused by
or contributed to by the negligence of the injured
person the Court may, in accordance with the
provisions of its own law, exonerate the carrier
wholly or partly from his liability.
104
Article 22
105
In the carriage of passengers the liability of the
carrier for each passenger is limited to the sum of
125,000 francs. Where, in accordance with the law of
the Court seised of the case, damages may be
awarded in the form of periodical payments, the
equivalent capital value of the said payments shall
not exceed 125,000 francs. Nevertheless, by special
Readings
contract, the carrier and the passenger may agree to
a higher limit of liability.
106
In the carriage of registered luggage and of goods,
the liability of the carrier is limited to a sum of 250
francs per kilogram, unless the consignor has made,
at the time when the package was handed over to
the carrier, a special declaration of the value at
delivery and has paid a supplementary sum if the
case so requires. In that case the carrier will be liable
to pay a sum not exceeding the declared sum, unless
he proves that that sum is greater than the actual
value to the consignor at delivery.
107
As regards objects of which the passenger takes
charge himself the liability of the carrier is limited to
5,000 francs per passenger.
108
The sums mentioned above shall be deemed to refer
to the French franc consisting of 65 milligrams
gold of millesimal fineness 900. These sums may be
converted into any national currency in round
figures.
109
Article 23
110
Any provision tending to relieve the carrier of
liability or to fix a lower limit than that which is laid
down in this Convention shall be null and void, but
the nullity of any such provision does not involve
the nullity of the whole contract, which shall remain
subject to the provisions of this Convention.
111
Article 24
112
In the cases covered by Articles 18 and 19 any action
for damages, however founded, can only be brought
8|Page|| Tr a n s p o r t a t i o n Law Assigned
subject to the conditions and limits set out in this
Convention.
113
In the cases covered by Article 17 the provisions of
the preceding paragraph also apply, without
prejudice to the questions as to who are the persons
who have the right to bring suit and what are their
respective rights.
114
Article 25
115
The carrier shall not be entitled to avail himself of
the provisions of this Convention which exclude or
limit his liability, if the damage is caused by his
wilful misconduct or by such default on his part as,
in accordance with the law of the Court seised of the
case, is considered to be equivalent to wilful
misconduct.
116
Similarly the carrier shall not be entitled to avail
himself of the said provisions, if the damage is
caused as aforesaid by any agent of the carrier acting
within the scope of his employment.
117
Article 26
118
Receipt by the person entitled to delivery of luggage
or goods without complaint is prima facie evidence
that the same have been delivered in good condition
and in accordance with the document of carriage.
119
In the case of damage, the person entitled to
delivery must complain to the carrier forthwith after
the discovery of the damage, and, at the latest,
within three days from the date of receipt in the case
of luggage and seven days from the date of receipt in
the case of goods. In the case of delay the complaint
Readings
must be made at the latest within fourteen days
from the date on which the luggage or goods have
been placed at his disposal.
120
Every complaint must be made in writing upon the
document of carriage or by separate notice in
writing despatched within the times aforesaid.
121
Failing complaint within the times aforesaid, no
action shall lie against the carrier, save in the case of
fraud on his part.
122
Article 27
123
In the case of the death of the person liable, an
action for damages lies in accordance with the terms
of this Convention against those legally representing
his estate.
124
Article 28
125
An action for damages must be brought, at the
option of the plaintiff, in the territory of one of the
High Contracting Parties, either before the Court
having jurisdiction where the carrier is ordinarily
resident, or has his principal place of business, or
has an establishment by which the contract has been
made or before the Court having jurisdiction at the
place of destination.
126
Questions of procedure shall be governed by the law
of the Court seised of the case.
127
Article 29
9|Page|| Tr a n s p o r t a t i o n Law Assigned Readings
128 134

The right to damages shall be extinguished if an Chapter IV - Provisions Relating to Combined

action is not brought within two years, reckoned Carriage
from the date of arrival at the destination, or from
the date on which the aircraft ought to have arrived, 135
or from the date on which the carriage stopped.
Article 31
129
136
The method of calculating the period of limitation
shall be determined by the law of the Court seised of In the case of combined carriage performed partly
the case. by air and partly by any other mode of carriage, the
provisions of this Convention apply only to the
130 carriage by air, provided that the carriage by air falls
within the terms of Article 1.
Article 30
137
131
Nothing in this Convention shall prevent the parties
In the case of carriage to be performed by various in the case of combined carriage from inserting in
successive carriers and falling within the definition the document of air carriage conditions relating to
set out in the third paragraph of Article 1, each other modes of carriage, provided that the
carrier who accepts passengers, luggage or goods is provisions of this Convention are observed as
subjected to the rules set out in this Convention, and regards the carriage by air.
is deemed to be one of the contracting parties to the
contract of carriage in so far as the contract deals 138
with that part of the carriage which is performed
under his supervision. Chapter V - General and Final Provisions

132 139

In the case of carriage of this nature, the passenger Article 32

or his representative can take action only against the
carrier who performed the carriage during which 140
the accident or the delay occurred, save in the case
Any clause contained in the contract and all special
where, by express agreement, the first carrier has
agreements entered into before the damage occurred
assumed liability for the whole journey.
by which the parties purport to infringe the rules
laid down by this Convention, whether by deciding
133
the law to be applied, or by altering the rules as to
As regards luggage or goods, the passenger or jurisdiction, shall be null and void. Nevertheless for
consignor will have a right of action against the first the carriage of goods arbitration clauses are allowed,
carrier, and the passenger or consignee who is subject to this Convention, if the arbitration is to
entitled to delivery will have a right of action against take place within one of the jurisdictions referred to
the last carrier, and further, each may take action in the first paragraph of Article 28.
against the carrier who performed the carriage
during which the destruction, loss, damage or delay 141
took place. These carriers will be jointly and
Article 33
severally liable to the passenger or to the consignor
or consignee.
10 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
142
Nothing contained in this Convention shall prevent
the carrier either from refusing to enter into any
contract of carriage, or from making regulations
which do not conflict with the provisions of this
Convention.
143
Article 34
144
This Convention does not apply to international
carriage by air performed by way of experimental
trial by air navigation undertakings with the view to
the establishment of a regular line of air navigation,
nor does it apply to carriage performed in
extraordinary circumstances outside the normal
scope of an air carrier's business.
145
Article 35
146
The expression "days" when used in this Convention
means current days not working days.
147
Article 36
148
The Convention is drawn up in French in a single
copy which shall remain deposited in the archives of
the Ministry for Foreign Affairs of Poland and of
which one duly certified copy shall be sent by the
Polish Government to the Government of each of the
High Contracting Parties.
149
Article 37
150
This Convention shall be ratified. The instruments of
ratification shall be deposited in the archives of the
Readings
Ministry for Foreign Affairs of Poland, which will
notify the deposit to the Government of each of the
High Contracting Parties.
151
As soon as this Convention shall have been ratified
by five of the High Contracting Parties it shall come
into force as between them on the ninetieth day after
the deposit of the fifth ratification. Thereafter it shall
come into force between the High Contracting
Parties who shall have ratified and the High
Contracting Party who deposits his instrument of
ratification on the ninetieth day after the deposit.
152
It shall be the duty of the Government of the
Republic of Poland to notify to the Government of
each of the High Contracting Parties the date on
which this Convention comes into force as well as
the date of the deposit of each ratification.
153
Article 38
154
This Convention shall, after it has come into force,
remain open for accession by any State.
155
The accession shall be effected by a notification
addressed to the Government of the Republic of
Poland, which will inform the Government of each
of the High Contracting Parties thereof.
156
The accession shall take effect as from the ninetieth
day after the notification made to the Government of
the Republic of Poland.
157
Article 39
158
11 | P a g e | | Tr a n s p o r t a t i o n Law Assigned Readings
Any one of the High Contracting Parties may 165
denounce this Convention by a notification
addressed to the Government of the Republic of Any High Contracting Party shall be entitled not
Poland, which will at once inform the Government earlier than two years after the coming into force of
of each of the High Contracting Parties. this Convention to call for the assembling of a new
international Conference in order to consider any
159 improvements which may be made in this
Convention. To this end he will communicate with
Denunciation shall take effect six months after the the Government of the French Republic which will
notification of denunciation, and shall operate only take the necessary measures to make preparations
as regards the Party who shall have proceeded to for such Conference.
denunciation.
166
160
This Convention done at Warsaw on the 12th
Article 40 October, 1929, shall remain open for signature until
the 31st January, 1930.
161

Any High Contracting Party may, at the time of

signature or of deposit of ratification or of accession Additional Protocol
declare that the acceptance which he gives to this
Convention does not apply to all or any of his 167
colonies, protectorates, territories under mandate, or
any other territory subject to his sovereignty or his Additional Protocol (With reference to Article 2)
authority, or any territory under his suzerainty.
168
162
The High Contracting Parties reserve to themselves
Accordingly any High Contracting Party may the right to declare at the time of ratification or of
subsequently accede separately in the name of all or accession that the first paragraph of Article 2 of this
any of his colonies, protectorates, territories under Convention shall not apply to international carriage
mandate or any other territory subject to his by air performed directly by the State, its colonies,
sovereignty or to his authority or any territory under protectorates or mandated territories or by any other
his suzerainty which has been thus excluded by his territory under its sovereignty, suzerainty or
original declaration. authority."

163 CODE OF COMMERCE:

Any High Contracting Party may denounce this Code of Commerce Provisions on Overland
Convention, in accordance with its provisions, Transportation1
separately or for all or any of his colonies,
protectorates, territories under mandate or any other Scope
territory subject to his sovereignty or to his
authority, or any other territory under his As the heading suggests, this portion of the discussion on
suzerainty. Code of Commerce transportation contracts covers
overland transportation, the other portion covering
164 admiralty/maritime transport. The non-inclusion of air
transportation may be attributed to the fact they were
Article 41
1
12 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
inexistent at the time this antiquated piece of legislation
was enacted. Commercial overland transportation covers
the transport of merchandise or any objects of commerce
or the transportation of any object by entities habitually
engaged in public transportation.
Nature of Contract
ARTICLE 349. A contract of transportation by land or
water ways of any kind shall be considered commercial:
When it has for its object merchandise or any article of
commerce.
When, whatever its object may be, the carrier is a
merchant or is habitually engaged in transportation for the
public.
The first one is self-explanatory as transportation of
merchandise is always commercial. The second
subparagraph may be confusing however, as it may
include transportation of news and persons, and hence
may be thought of as being covered by the NCC Common
Carrier provisions. It must be noted that the article
principally requires that the carrier be a merchant or one
habitually engaged in transportation work for the public,
so that it may still be considered commercial even if the
business is for transporting passengers.
Effect of Civil Code
Article 1766 (NCC ). In all matters not regulated by this
2
Code, the rights and obligations of common carriers shall
be governed by the Code of Commerce and by special
laws.
Article 2270 (NCC). The following laws and regulations
are hereby repealed:
2 the vessels master. There are different classes of bills of
Readings
Those parts and provisions of the Civil Code of 1889
which are in force on the date when this new Civil Code
becomes effective;
The provisions of the Code of Commerce governing sales,
partnership, agency, loan, deposit and guaranty;
The provisions of the Code of Civil Procedure on
prescription as far as inconsistent with this Code; and
All laws, Acts, parts of Acts, rules of court, executive
orders, and administrative regulations which are
inconsistent with this Code.
The promulgation of the Civil Code, having included its
own section on common carriers, removed the distinction
between transport contracts of common carriers under the
Civil Code and that of the Code of Commerce. Since the
provisions pertaining to overland transportation have not
been repealed expressly, the Code of Commerce
provisions apply suppletorily.
Contract of Carriage
Bill of lading
Subject matter and description
ARTICLE 352. The bills of lading, or tickets in cases of
transportation of passengers, may be diverse, some for
persons and others for baggage; but all of them shall bear
the name of the carrier, the date of shipment, the points of
departure and arrival, the cost, and, with respect to the
baggage, the number and weight of the packages, with
such other manifestations which may be considered
necessary for their easy identification.
As defined in 9 Am Jur 662, a bill of lading (B/L) is
defined as a written acknowledgment of the receipt of
goods and an agreement to transport and to deliver them
at a specified place to a person named or on his order.
This includes almost all forms of transportation, and no
longer confined to its earlier notion of being issued only by
13 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
lading, and they are included in the Civil Code
enumeration of documents of title to goods as found in
Article 1636 thereof.
Form and contents
ARTICLE 350. The shipper as well as the carrier of
merchandise or goods may mutually demand that a bill of
lading be made, stating:
The name, surname and residence of the shipper.
The name, surname and residence of the carrier.
The name, surname and residence of the person to whom
or to whose order the goods are to be sent or whether they
are to be delivered to the bearer of said bill.
The description of the goods, with a statement of their
kind, of their weight, and of the external marks or signs of
the packages in which they are contained.
The cost of transportation.
The date on which shipment is made.
The place of delivery to the carrier.
The place and the time at which delivery to the consignee
shall be made.
The indemnity to be paid by the carrier in case of delay, if
there should be any agreement on this matter.
ARTICLE 351. In transportation made by railroads or
other enterprises subject to regulation rate and time
schedules, it shall be sufficient for the bills of lading or the
declaration of shipment furnished by the shipper to refer,
with respect to the cost, time and special conditions of the
carriage, to the schedules and regulations the application
of which he requests; and if the shipper does not
determine the schedule, the carrier must apply the rate of
those which appear to be the lowest, with the conditions
inherent thereto, always including a statement or reference
to in the bill of lading which he delivers to the shipper.
Readings
In general, there is no strict form for bills of lading. The
enumeration of the contents may be simplified, omitted,
referred to standard matrices, etc. to maximize the number
of transactions that can be accommodated within a certain
period. What is important in a B/L is that it contains the
carriers acknowledgment by the carrier that the goods are
received, the legal effect is the same.
Function
ARTICLE 353. The legal evidence of the contract
between the shipper and the carrier shall be the bills of
lading, by the contents of which the disputes which may
arise regarding their execution and performance shall be
decided, no exceptions being admissible other than those
of falsity and material error in the drafting.
After the contract has been complied with, the bill of
lading which the carrier has issued shall be returned to
him, and by virtue of the exchange of this title with the
thing transported, the respective obligations and actions
shall be considered cancelled, unless in the same act the
claim which the parties may wish to reserve be reduced to
writing, with the exception of that provided for in Article
366.
In case the consignee, upon receiving the goods, cannot
return the bill of lading subscribed by the carrier, because
of its loss or of any other cause, he must give the latter a
receipt for the goods delivered, this receipt producing the
same effects as the return of the bill of lading.
A bill of lading is the legal evidence of the contract of
transportation between the carrier and the shipper. In case
of dispute, the B/L may be referred to in order to
prove/disprove execution and performance in accordance
with its terms. Being a written contract, its contents may
not be disputed subject to exceptions to the parole
evidence rule.
Refusal to transport
14 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
ARTICLE 356. Carriers may refuse packages which
appear unfit for transportation; and if the carriage is to be
made by railway, and the shipment is insisted upon, the
company shall transport them, being exempt from all
responsibility if its objections, is made to appear in the bill
of lading.
This is an exception rather than a rule, since generally, the
common carrier cannot ordinarily refuse to carry a
particular class of goods without prejudicing its traffic.
Should the shipper insist despite the unfitness of the
items, the carrier is exonerated if the objection is stated in
the B/L.
Doubtful declaration of contents
ARTICLE 357. If by reason of well-founded suspicion of
falsity in the declaration as to the contents of a package the
carrier should decide to examine it, he shall proceed with
his investigation in the presence of witnesses, with the
shipper or consignee in attendance.
If the shipper or consignee who has to be cited does not
attend, the examination shall be made before a notary,
who shall prepare a memorandum of the result of the
investigation, for such purposes as may be proper.
If the declaration of the shipper should be true, the
expense occasioned by the examination and that of
carefully repacking the packages shall be for the account
of the carrier and in a contrary case for the account of the
shipper.
Carrier in case of doubt can examine contents of parcel,
but the procedure in the article should be followed.
No bill of lading
ARTICLE 354. In the absence of a bill of lading, disputes
shall be determined by the legal proofs which the parties
may present in support of their respective claims,
Readings
according to the general provisions established in this
Code for commercial contracts.
ARTICLE 351. In transportation made by railroads or
other enterprises subject to regulation rate and time
schedules, it shall be sufficient for the bills of lading or the
declaration of shipment furnished by the shipper to refer,
with respect to the cost, time and special conditions of the
carriage, to the schedules and regulations the application
of which he requests; and if the shipper does not
determine the schedule, the carrier must apply the rate of
those which appear to be the lowest, with the conditions
inherent thereto, always including a statement or reference
to in the bill of lading which he delivers to the shipper.
The issuance of a bill of lading may be demanded by
shipper and carrier, this is not obligatory, since as a
general rule, contracts may take any form. Its issuance may
only be obligatory in some instances pursuant to certain
regulations or as part of the agreement of the parties. The
want of B/L does not preclude the existence of a
transportation contract.
Carriers Responsibility
Commencement
ARTICLE 355. The responsibility of the carrier shall
commence from the moment he receives the merchandise,
personally or through a person charged for the purpose, at
the place indicated for receiving them.
This is similar to Article 1736 of the New Civil Code.
Route
ARTICLE 359. If there is an agreement between the
shipper and the carrier as to the road over which the
conveyance is to be made, the carrier may not change the
route, unless it be by reason of force majeure; and should
15 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
he do so without this cause, he shall be liable for all the
losses which the goods he transports may suffer from any
other cause, beside paying the sum which may have been
stipulated for such case.
If there is an agreed route, carriers violation may hold it
liable for losses and other indemnities; and with Article
1747 NCC, the carrier cannot limit its liability if the change
of route is unjustified. In case there is no agreed route, the
carrier must select the shortest, least expensive and
practically passable.
Care of Goods
ARTICLE 361. The merchandise shall be transported at
the risk and venture of the shipper, if the contrary has not
been expressly stipulated.
As a consequence, all the losses and deteriorations which
the goods may suffer during the transportation by reason
of fortuitous event, force majeure, or the inherent nature
and defect of the goods, shall be for the account and risk
of the shipper. Proof of these accidents is incumbent upon
the carrier.
ARTICLE 362. Nevertheless, the carrier shall be liable for
the losses and damages resulting from the causes
mentioned in the preceding article if it is proved, as
against him, that they arose through his negligence or by
reason of his having failed to take the precautions which
usage has established among careful persons, unless the
shipper has committed fraud in the bill of lading,
representing the goods to be of a kind or quality different
from what they really were.
If, notwithstanding the precautions referred to in this
article, the goods transported run the risk of being lost, on
account of their nature or by reason of unavoidable
accident, there being no time for their owners to dispose of
them, the carrier may proceed to sell them, placing them
for this purpose at the disposal of the judicial authority or
of the officials designated by special provisions.
Readings
Article 1734 (NCC). Common carriers are responsible for
the loss, destruction, or deterioration of the goods, unless
the same is due to any of the following causes only:
Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
Act of the public enemy in war, whether international or
civil;
Act or omission of the shipper or owner of the goods;
The character of the goods or defects in the packing or in
the containers;
Order or act of competent public authority.
Article 1735 (NCC). In all cases other than those
mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article,
if the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed
extraordinary diligence as required in article 1733.
The Civil Code and the Code of Commerce generally are
in consonance with each other. The first paragraph of
Article 361 has been construed as being the case only
when the loss is due to fortuitous event, force majeure, or
the inherent defect of the goods. Both laws do not seem to
be in disagreement with regard to the burden of the
carrier to prove its exercise of due diligence with regard to
its performance of its contractual duty. One difference seen
is the difference in the degree of care required for while
the Code of Commerce requires ordinary diligence, the
Civil Code modifies this and raises the degree to
extraordinary diligence.
Delivery
Condition of goods
ARTICLE 363. Outside of the cases mentioned in the
second paragraph of Article 361, the carrier shall be
obliged to deliver the goods shipped in the same condition
16 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
in which, according to the bill of lading, they were found
at the time they were received, without any damage or
impairment, and failing to do so, to pay the value which
those not delivered may have at the point and at the time
at which their delivery should have been made.
If those not delivered form part of the goods transported,
the consignee may refuse to receive the latter, when he
proves that he cannot make use of them independently of
the others.
ARTICLE 364. If the effect of the damage referred to in
Article 361 is merely a diminution in the value of the
goods, the obligation of the carrier shall be reduced to the
payment of the amount which, in the judgment of experts,
constitutes such difference in value.
ARTICLE 365. If, in consequence of the damage, the
goods are rendered useless for sale and consumption for
the purposes for which they are properly destined, the
consignee shall not be bound to receive them, and he may
have them in the hands of the carrier, demanding of the
latter their value at the current price on that day.
If among the damaged goods there should be some pieces
in good condition and without any defect, the foregoing
provision shall be applicable with respect to those
damaged and the consignee shall receive those which are
sound, this segregation to be made by distinct and
separate pieces and without dividing a single object,
unless the consignee proves the impossibility of
conveniently making use of them in this form.
The same rule shall be applied to merchandise in bales or
packages, separating those parcels which appear sound.
ARTICLE 366. Within the twenty-four hours following
the receipt of the merchandise, the claim against the
carrier for damage or average be found therein upon
opening the packages, may be made, provided that the
indications of the damage or average which gives rise to
the claim cannot be ascertained from the outside part of
such packages, in which case the claim shall be admitted
only at the time of receipt.
Readings
After the periods mentioned have elapsed, or the
transportation charges have been paid, no claim shall be
admitted against the carrier with regard to the condition
in which the goods transported were delivered.
ARTICLE 367. If doubts and disputes should arise
between the consignee and the carrier with respect to the
condition of the goods transported at the time their
delivery to the former is made, the goods shall be
examined by experts appointed by the parties, and, in case
of disagreement, by a third one appointed by the judicial
authority, the results to be reduced to writing; and if the
interested parties should not agree with the expert opinion
and they do not settle their differences, the merchandise
shall be deposited in a safe warehouse by order of the
judicial authority, and they shall exercise their rights in the
manner that may be proper.
Since this is a contract of transportation, the carrier has the
duty to deliver the goods to its destination in the same
condition as when it received the goods as a general rule.
Failure to do so renders the carrier liable for the
corresponding damage (depending on the case can either
be: a] the value of the damaged/lost goods; b] the
difference between the original value and the diminished
value; c] the value of the whole shipment in cases where
the goods have been rendered useless for the destined
purpose). The shipper may also refuse to accept the goods
in case of partial damage.
Since the condition of the goods would be the basis for
damages if there are any, in case where the actual
condition of the goods at the time of delivery are in
dispute, parties may appoint a third party expert examiner
or failure to agree on one, the court may appoint one for
them. The opinion of the expert, however, is not conclusive
on the parties.
To whom delivery made
ARTICLE 368. The carrier must deliver to the consignee,
without any delay or obstruction, the goods which he may
have received, by the mere fact of being named in the bill
17 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
of lading to receive them; and if he does not do so, he shall
be liable for the damages which may be caused thereby.
The article states that the delivery is to be made on the
consignee. Where the B/L is to the order of the shipper,
the carrier has the duty to take custody of the goods until
presentation of the bill of lading duly indorsed by the
shipper. Otherwise, said carrier would be guilty of
misdelivery as a contract of transportation not only
includes safe transportation of the goods but delivery to
the proper recipient.
Misdelivery must be distinguished from non-delivery. In
the former, goods are delivered to a person other than the
designated recipient, whereas in the latter, there is no
delivery made at all.
Judicial deposit
ARTICLE 369. If the consignee cannot be found at the
residence indicated in the bill of lading, or if he refuses to
pay the transportation charges and expenses, or if he
refuses to receive the goods, the municipal judge, where
there is none of the first instance, shall provide for their
deposit at the disposal of the shipper, this deposit
producing all the effects of delivery without prejudice to
third parties with a better right.
Article 1752 (NCC). Even when there is an agreement
limiting the liability of the common carrier in the vigilance
over the goods, the common carrier is disputably
presumed to have been negligent in case of their loss,
destruction or deterioration.
In order to deliver the goods to the proper recipient, the
carrier has the duty to sent notice of the arrival of the
goods for the said consignee to remove said goods within
a reasonable time.
If the recipient is unknown to the carrier, it must exercise
due diligence to look for the consignee of said goods. After
such search and while the consignee could not be found or
does not appear yet, the carrier may store the goods in a
proper place and the carrier will be deemed to have
Readings
performed its duty. Failure to exercise due diligence in
search of the consignee may hold the carrier liable for
damages due to delay in the receipt of the goods. This is in
accord with the rule that a common carriers responsibility
continues despite deposit in a warehouse until the
consignee is properly notified of its arrival and a
reasonable amount of time for said consignee to remove
the goods has passed (Article 1738).
A carrier may resort to judicial deposit if the consignee a)
is not found on the indicated address; b) refuses to pay the
transportation charges; c) refuses to receive the goods.
This act shall have the effect of delivery, without prejudice
to third persons who may claim a better right to the goods.
When to be made
ARTICLE 370. If a period has been fixed for the delivery
of the goods, it must be made within such time, and, for
failure to do so, the carrier shall pay the indemnity
stipulated in the bill of lading, neither the shipper nor the
consignee being entitled to anything else.
If no indemnity has been stipulated and the delay exceeds
the time fixed in the bill of lading, the carrier shall be
liable for the damages which the delay may have caused.
ARTICLE 358.If there is no period fixed for the delivery of
the goods the carrier shall be bound to forward them in
the first shipment of the same or similar goods which he
may make to the point where he must deliver them; and
should he not do so, the damages caused by the delay
should be for his account.
The first article contemplates a situation where a period
for delivery has been fixed, and there the carrier must
deliver within the time fixed, otherwise it shall be liable
for the indemnity agreed upon, and in the absence of such,
the carrier shall be liable for the damages caused by the
delay.
In Article 358, where no period was fixed, the carrier shall
forward the goods in the earliest shipment of same or
18 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
similar goods to the destination. Should it fail to do so, the
carrier would be liable for the damage caused by the delay.
Two or more carriers
ARTICLE 373. The carrier who makes the delivery of the
merchandise to the consignee by virtue of combined
agreements or services with other carriers shall assume
the obligations of those who preceded him in the
conveyance, reserving his right to proceed against the
latter if he was not the party directly responsible for the
fault which gave rise to the claim of the shipper or
consignee.
The carrier who makes the delivery shall likewise acquire
all the actions and rights of those who preceded him in the
conveyance.
The shipper and the consignee shall have an immediate
right of action against the carrier who executed the
transportation contract, or against the other carriers who
may have received the goods transported without
reservation.
However, the reservation made by the latter shall not
relieve them from the responsibilities which they may
have incurred by their own acts.
This contemplates a case where there are several
successive carriers performing the transportation contract.
The subsequent carriers shall acquire the rights and
obligations of the earlier carrier/s. Hence, the shipper and
consignee may claim against the subsequent carrier for
liabilities of the earlier carrier. The latter carrier however,
has a right to go against the earlier carriers who are
directly liable for the fault that gave rise to the
shippers/consignors claim.
Obligation to keep registry
ARTICLE 378. Agents for transportation shall be obliged
to keep a special registry, with the formalities required by
Article 36, in which all the goods the transportation of
which is undertaken shall be entered in consecutive order
Readings
of number and dates, with a statement of the
circumstances required in Article 350 and others following
for the respective bills of lading.
Compliance with administrative regulations
ARTICLE 377. The carrier shall be liable for all the
consequences which may arise from his failure to comply
with the formalities prescribed by the laws and
regulations of the public administration, during the whole
course of the trip and upon arrival at the point of
destination, except when his failure arises from having
been led into error by falsehood on the part of the shipper
in the declaration of the merchandise. If the carrier has
acted by virtue of a formal order of the shipper or
consignee of the merchandise, both shall become
responsible.
Common carriers being coupled with public interest,
failure to comply with the law holds the carrier liable
unless such violation was caused by the shippers
deception, in which case the carrier is exonerated. Where
there is no deception however, and the carrier acted under
the order of the shipper violating the law, both of them
shall be liable.
Rights and Obligations of Shipper and/or Consignee
Right to damages
Condition imposed on right
ARTICLE 366. Within the twenty-four hours following
the receipt of the merchandise, the claim against the
carrier for damage or average be found therein upon
opening the packages, may be made, provided that the
indications of the damage or average which gives rise to
the claim cannot be ascertained from the outside part of
such packages, in which case the claim shall be admitted
only at the time of receipt.
After the periods mentioned have elapsed, or the
transportation charges have been paid, no claim shall be
19 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
admitted against the carrier with regard to the condition
in which the goods transported were delivered.
ARTICLE 357. If by reason of well-founded suspicion of
falsity in the declaration as to the contents of a package the
carrier should decide to examine it, he shall proceed with
his investigation in the presence of witnesses, with the
shipper or consignee in attendance.
If the shipper or consignee who has to be cited does not
attend, the examination shall be made before a notary,
who shall prepare a memorandum of the result of the
investigation, for such purposes as may be proper.
If the declaration of the shipper should be true, the expense
occasioned by the examination and that of carefully repacking
the packages shall be for the account of the carrier and in a
contrary case for the account of the shipper.
ARTICLE 353. The legal evidence of the contract
between the shipper and the carrier shall be the bills of
lading, by the contents of which the disputes which may
arise regarding their execution and performance shall be
decided, no exceptions being admissible other than those
of falsity and material error in the drafting.
After the contract has been complied with, the bill of
lading which the carrier has issued shall be returned to
him, and by virtue of the exchange of this title with the
thing transported, the respective obligations and actions
shall be considered cancelled, unless in the same act the
claim which the parties may wish to reserve be reduced to
writing, with the exception of that provided for in Article
366.
In case the consignee, upon receiving the goods, cannot
return the bill of lading subscribed by the carrier, because
of its loss or of any other cause, he must give the latter a
receipt for the goods delivered, this receipt producing the
same effects as the return of the bill of lading.
The articles above are conditions or limitations on the
right to damages by the shipper. Article 366 provides for a
time limit to make a claim in case of damage. In Article
Readings
357, the damages may be in the form of the expenses for
the repacking of goods examined for being under
suspicion and the right only arises when the carriers
suspicion is wrong.
Amount of damages for loss
ARTICLE 372. The value of the goods which the carrier
must pay in cases if loss or misplacement shall be
determined in accordance with that declared in the bill of
lading, the shipper not being allowed to present proof that
among the goods declared therein there were articles of
greater value and money.
Horses, vehicles, vessels, equipment and all other
principal and accessory means of transportation shall be
especially bound in favor of the shipper, although with
respect to railroads said liability shall be subordinated to
the provisions of the laws of concession with respect to the
property, and to what this Code established as to the
manner and form of effecting seizures and attachments
against said companies.
Article 1744 (NCC). A stipulation between the common
carrier and the shipper or owner limiting the liability of
the former for the loss, destruction, or deterioration of the
goods to a degree less than extraordinary diligence shall
be valid, provided it be:
In writing, signed by the shipper or owner;
Supported by a valuable consideration other than the
service rendered by the common carrier; and
Reasonable, just and not contrary to public policy.
Since the B/L is the contract between the parties, the value
of the goods shipped as indicated therein shall be the
amount paid in case of loss and this shall be conclusive
between them. They may however agree to limit the value
unless the shipper declares a higher value and pays a
higher freight charge. However, if the loss is due to gross
negligence of the carrier which would amount to fraud,
20 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
the shipper may be allowed to prove the actual value of
the lost goods.
Amount of damages for delay
ARTICLE 371. In case of delay through the fault of the
carrier, referred to in the preceding articles, the consignee
may leave the goods transported in the hands of the
former, advising him thereof in writing before their arrival
at the point of destination.
When this abandonment takes place, the carrier shall pay
the full value of the goods as if they had been lost or
mislaid.
If the abandonment is not made, the indemnification for losses
and damages by reason of the delay cannot exceed the current
price which the goods transported would have had on the day
and at the place in which they should have been delivered; this
same rule is to be observed in all other cases in which this
indemnity may be due.
If no indemnity in case of delay has been agreed upon and
a delay took place without attendant fraud, damages shall
not exceed the value of the goods.
Right to abandon
ARTICLE 371. In case of delay through the fault of the
carrier, referred to in the preceding articles, the consignee
may leave the goods transported in the hands of the
former, advising him thereof in writing before their arrival
at the point of destination.
When this abandonment takes place, the carrier shall pay
the full value of the goods as if they had been lost or
mislaid.
If the abandonment is not made, the indemnification for
losses and damages by reason of the delay cannot exceed
the current price which the goods transported would have
had on the day and at the place in which they should have
been delivered; this same rule is to be observed in all other
cases in which this indemnity may be due.
Readings
ARTICLE 360. The shipper, without changing the place
where the delivery is to be made, may change the
consignment of the goods which he delivered to the
carrier, provided that at the time of ordering the change of
consignee the bill of lading signed by the carrier, if one has
been issued, be returned to him, in exchange for another
wherein the novation of the contract appears.
The expenses which this change of consignment occasions
shall be for the account of the shipper.
ARTICLE 365. If, in consequence of the damage, the
goods are rendered useless for sale and consumption for
the purposes for which they are properly destined, the
consignee shall not be bound to receive them, and he may
have them in the hands of the carrier, demanding of the
latter their value at the current price on that day.
ARTICLE 363. Outside of the cases mentioned in the
second paragraph of Article 361, the carrier shall be
obliged to deliver the goods shipped in the same condition
in which, according to the bill of lading, they were found
at the time they were received, without any damage or
impairment, and failing to do so, to pay the value which
those not delivered may have at the point and at the time
at which their delivery should have been made.
If those not delivered form part of the goods transported,
the consignee may refuse to receive the latter, when he
proves that he cannot make use of them independently of
the others.
If among the damaged goods there should be some pieces
in good condition and without any defect, the foregoing
provision shall be applicable with respect to those
damaged and the consignee shall receive those which are
sound, this segregation to be made by distinct and
separate pieces and without dividing a single object,
unless the consignee proves the impossibility of
conveniently making use of them in this form.
The same rule shall be applied to merchandise in bales or
packages, separating those parcels which appear sound.
21 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Agbayani describes this as an exceptional but limited right
in case of delay in delivery. This is to be done in the
interregnum of when carrier is in delay before arrival of
the goods at its destination. The intent to abandon must be
communicated to the carrier, otherwise refusal of the
goods upon arrival would be ineffective. The other
situations where abandonment may be made are those
indicated in Articles 363 and 365, namely, partial delivery
where the delivered goods would be unusable without the
remainder; and that the goods are rendered useless for the
purpose in which they were supposedly destined.
Right to change consignment
ARTICLE 360. The shipper, without changing the place
where the delivery is to be made, may change the
consignment of the goods which he delivered to the carrier,
provided that at the time of ordering the change of
consignee the bill of lading signed by the carrier, if one has
been issued, be returned to him, in exchange for another
wherein the novation of the contract appears.
The expenses which this change of consignment occasions
shall be for the account of the shipper.
Obligation to pay transportation charges
ARTICLE 374. The consignees to whom the shipment
was made may not defer the payment of the expenses and
transportation charges of the goods they receive after the
lapse of twenty-four hours following their delivery; and in
case of delay in this payment, the carrier may demand the
judicial sale of the goods transported in an amount
necessary to cover the cost of transportation and the
expenses incurred.
ARTICLE 375. The goods transported shall be especially
bound to answer for the cost of transportation and for the
expenses and fees incurred for them during their
conveyance and until the moment of their delivery.
This special right shall prescribe eight days after the
delivery has been made, and once prescribed, the carrier
Readings
shall have no other action than that corresponding to him
as an ordinary creditor.
ARTICLE 376. The preference of the carrier to the
payment of what is owed him for the transportation and
expenses of the goods delivered to the consignee shall not
be cut off by the bankruptcy of the latter, provided it is
claimed within the eight days mentioned in the preceding
article.
Article 2241 (NCC). With reference to specific movable
property of the debtor, the following claims or liens shall
be preferred:
xxx
(9) Credits for transportation, upon the goods carried, for
the price of the contract and incidental expenses, until
their delivery and for thirty days thereafter; xxx
A contract of transportation is a bilateral contract. The
services it renders is for a charge, so when carrier has done
its prestation, the shipper is obliged to pay for the services.
As per Article 374, transportation charges are due after the
24-hour protest period. In case of failure, the carrier can
either a) demand a judicial sale of the goods to the extent
of the charges; or b) create a lien on the goods. The 8 day
period granted by the Code of Commerce has been
increased by the Civil Code to 30 days. After this period,
the preference expires and the step to recover is via
ordinary action. Possession of the goods within the said
period, however, does not preclude the carrier from
instituting an ordinary action to collect the transportation
charges due it.
Article 376 also provides that the bankruptcy of the
consignee shall not cut off the carriers preference if the
claim has been made within the 30 day period.
Obligation to return bill of lading
22 | P a g e | | Tr a n s p o r t a t i o n Law Assigned Readings
ARTICLE 353. The legal evidence of the contract
between the shipper and the carrier shall be the bills of
lading, by the contents of which the disputes which may Reference used for this report include Commentaries and
arise regarding their execution and performance shall be Jurisprudence on the Commercial Laws of the Philippines
decided, no exceptions being admissible other than those Vol. 4 by Aguedo Agbayani, 1993 edition
of falsity and material error in the drafting.

After the contract has been complied with, the bill of lading
which the carrier has issued shall be returned to him, and by CARRIAGE OF GOODS BY SEA ACT
virtue of the exchange of this title with the thing
COMMONWEALTH ACT No. 65
transported, the respective obligations and actions shall be
considered cancelled, unless in the same act the claim
IN ACT TO DECLARE THAT PUBLIC ACT
which the parties may wish to reserve be reduced to
NUMBERED FIVE HUNDRED AND TWENTY-ONE,
writing, with the exception of that provided for in Article
KNOWN AS "CARRIAGE OF GOODS BY SEA ACT,"
366.
ENACTED BY THE SEVENTY-FOURTH CONGRESS
OF THE UNITED STATES, BE ACCEPTED, AS IT IS
In case the consignee, upon receiving the goods, cannot
HEREBY ACCEPTED BY THE NATIONAL ASSEMBLY
return the bill of lading subscribed by the carrier, because of its
loss or of any other cause, he must give the latter a receipt for
WHEREAS, the Seventy-fourth Congress of the United
the goods delivered, this receipt producing the same effects as the
States enacted Public Act Numbered Five hundred and
return of the bill of lading.
twenty-one, entitled:

"Carriage of Goods by Sea Act";

The duty to return the B/L as stated in the second

WHEREAS, the primordial purpose of the said Acts is to
paragraph is an indication that the contractual obligation
bring about uniformity in ocean bills of lading and to give
has been performed and they are discharged from claims
effect to the Brussels Treaty, signed by the United States
against each other, subject to the exception provided for in
with other powers;
Article 366 pertaining to the 24-hour period to protest in
case the damage was found after opening the package. In
WHEREAS, the Government of the United States has left it
case the shipper could not return the B/L, such party
to the Philippine Government to decide whether or not the
should issue to the carrier a receipt for the goods
said Act shall apply to carriage of goods by sea in foreign
delivered.
trade to and from Philippine ports;

WHEREAS, the said Act of Congress contains advanced

legislation, which is in consonance with modern maritime
Applicability of Provisions
rules and the practices of the great shipping countries of
the world;
ARTICLE 379. The provisions contained in Articles 349
and following shall be understood as equally applicable to
WHEREAS, shipping companies, shippers, and marine
those who, although they do not personally effect the
insurance companies, and various chambers of commerce,
transportation of the merchandise, contract to do so
which are directly affected by such legislation, have
through others, either as contractors for a particular and
expressed their desire that said Congressional Act be
definite operation, or as agents for transportations and
made applicable and extended to the Philippines;
conveyances.
therefore,

In either case they shall be subrogated in the place of the

Be it enacted by the National Assembly of the Philippines:
carriers themselves, with respect to the obligations and
responsibility of the latter, as well as with regard to their
Section 1. That the provisions of Public Act Numbered
rights.
Five hundred and twenty-one of the Seventy-fourth
23 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Congress of the United States, approved on April
sixteenth, nineteen hundred and thirty-six, be accepted, as
it is hereby accepted to be made applicable to all contracts
for the carriage of goods by sea to and from Philippine
ports in foreign trade: Provided, That nothing in the Act
shall be construed as repealing any existing provision of
the Code of Commerce which is now in force, or as
limiting its application.
Section 2. This Act shall take effect upon its approval.
Approved: October 22,1936.
An Act Relating to the Carriage of Goods by Sea.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That every
bill of landing or similar document of title which is
evidence of a contract for the carriage of goods by sea to or
from ports of the United States, in foreign trade, shall have
effect subject to the provisions of the Act.
TITLE I
Section 1. When used in this Act
The term "carrier" includes the owner or the charterer who
enters into a contract of carriage with a shipper.
The term "contract of carriage" applies only to contracts of
carriage covered by a bill of lading or any similar
document of title, insofar as such document relates to the
carriage of goods by sea, including any bill of lading or
any similar document as aforesaid issued under or
pursuant to a charter party from the moment at which
such bill of lading or similar document of title regulates
the relations between a carrier and a holder of the same.
The term "goods" includes goods, wares, merchandise,
and articles of every kind whatsoever, except live animals
and cargo which by the contract of carriage is stated as
being carried on deck and is so carried.
The term "ship" means any vessel used for the carriage of
goods by sea.
The term "carriage of goods" covers the period from the
time when the goods are loaded on to the time when they
are discharged from the ship.
Readings
RISKS
Section 2. Subject to the provisions of section 6, under
every contract of carriage of goods by sea, the carrier in
relation to the loading handling, stowage, carriage,
custody, care, and discharge of such goods, shall be subject
to the responsibilities and liabilities and entitled to the
rights and immunities hereinafter set forth.
RESPONSIBILITIES AND LIABILITIES
Section 3. (1) The carrier shall be bound, before and at the
beginning of the voyage, to exercise due diligence to
Make the ship seaworthy;
Properly man, equip, and supply the ship;
Make the holds, refrigerating and cooling chambers, and
all other parts of the ship in which goods are carried, fit
and safe for their reception carriage and preservation.
(2) The carrier shall properly and carefully load, handle,
stow, carry, keep, care for, and discharge the goods carried.
(3) After receiving the goods into his charge the carrier, or
the master or agent of the carrier, shall, on demand of the
shipper, issue to the shipper a bill of lading showing
among other things
The leading marks necessary for identification of the
goods as the same are furnished in writing by the shipper
before the loading of such goods starts, provided such
marks are stamped or otherwise shown clearly upon the
goods if uncovered, or on the cases or coverings in which
such goods are contained, in such a manner as should
ordinarily remain legible until the end of the voyage.
Either the number of packages or pieces, or the quantity or
weight, as the case may be, as furnished in writing by the
shipper.
The apparent order and condition of the goods: Provided,
That no carrier, master, or agent of the carrier, shall be
bound to state or show in the bill of lading any marks,
number, quantity, or weight which he has reasonable
ground for suspecting not accurately to represent the
goods actually received, or which he has had no
reasonable means of checking.
24 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
(4) Such a bill of lading shall be prima facie evidence of the
receipt by the carrier of the goods as therein described in
accordance with paragraphs (3) (a), (b), and (c) of this
section: Provided, That nothing in this Act shall be
construed as repealing or limiting the application of any
part of the Act, as amended, entitled "An Act relating to
bills of lading in interstate and foreign commerce,"
approved August 29, 1916 (U. S. C. title 49, secs. 81-124),
commonly known as the "Pomerene Bills of Lading Act."
(5) The shipper shall be deemed to have guaranteed to the
carrier the accuracy at the time of shipment of the marks,
number, quantity, and weight, as furnished by him; and
the shipper shall indemnify the carrier against all loss
damages, and expenses arising or resulting from
inaccuracies in such particulars. The right of the carrier to
such indemnity shall in no way limit his responsibility and
liability under the contract of carriage or to any person
other than the shipper.
(6) Unless notice of loss or damage and the general nature
of such loss or damage be given in writing to the carrier or
his agent at the port of discharge before or at the time of
the removal of the goods into the custody of the person
entitled to delivery thereof under the contract of carriage,
such removal shall be prima facie evidence of the delivery
by the carrier of the goods as described in the bill of
lading. If the loss or damage is not apparent, the notice
must be given within three days of the delivery.
Said notice of loss or damage maybe endorsed upon the
receipt for the goods given by the person taking delivery
thereof.
The notice in writing need not be given if the state of the
goods has at the time of their receipt been the subject of
joint survey or inspection.
In any event the carrier and the ship shall be discharged
from all liability in respect of loss or damage unless suit is
brought within one year after delivery of the goods or the
date when the goods should have been delivered:
Provided, That if a notice of loss or damage, either
apparent or concealed, is not given as provided for in this
section, that fact shall not affect or prejudice the right of
the shipper to bring suit within one year after the delivery
of the goods or the date when the goods should have been
delivered
Readings
In the case of any actual or apprehended loss or damage
the carrier and the receiver shall give all reasonable
facilities to each other for inspecting and tallying the
goods.
(7) After the goods are loaded the bill of lading to be
issued by the carrier, master, or agent of the carrier to the
shipper shall, if the shipper so demands, be a "shipped"
bill of lading Provided, That if the shipper shall have
previously taken up any document of title to such goods,
he shall surrender the same as against the issue of the
"shipped" bill of lading, but at the option of the carrier
such document of title may be noted at the port of
shipment by the carrier, master, or agent with name or
name the names of the ship or ships upon which the
goods have been shipped and the date or dates of
shipment, and when so noted the same shall for the
purpose of this section be deemed to constitute a
"shipped" bill of lading.
(8) Any clause, covenant, or agreement in a contract of
carriage relieving the carrier or the ship from liability for
loss or damage to or in connection with the goods, arising
from negligence, fault, or failure in the duties and
obligations provided in this section, or lessening such
liability otherwise than as provided in this Act, shall be
null and void and of no effect. A benefit of insurance in
favor of the carrier, or similar clause, shall be deemed to be
a clause relieving the carrier from liability.
RIGHTS AND IMMUNITIES
Section 4. (1) Neither the carrier nor the ship shall be
liable for loss or damage arising or resulting from
unseaworthiness unless caused by want of due diligence
on the part of the carrier to make the ship seaworthy, and
to secure that the ship is properly manned, equipped, and
supplied, and to make to the holds, refrigerating and cool
chambers, and all other parts of the ship in which goods
are carried fit and safe for their reception, carriage, and
preservation in accordance with the provisions of
paragraph (1) of section 3. Whenever loss or damage has
resulted from unseaworthiness, the burden of proving the
exercise of due diligence shall be on the carrier or other
persons claiming exemption under the section.
(2) Neither the carrier nor the ship shall be responsible for
loss or damage arising or resulting from
25 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Act, neglect, or default of the master, mariner, pilot, or the
servants of the carrier in the navigation or in the
management of the ship;
Fire, unless caused by the actual fault or privity of the
carrier;
Perils, dangers, and accidents of the sea or other navigable
waters;
Act of God;
Act of war,
Act of public enemies;
Arrest or restraint of princes, rulers, or people, or seizure
under legal process;
Quarantine restrictions;
Act or omission of the shipper or owner of the goods, his
agent or representative;
Strikes or lockouts or stoppage or restraint of labor from
whatever cause, whether partial or general; Provided, That
nothing herein contained shall be construed to relieve a
carrier from responsibility for the carrier's own acts;
Riots and civil commotions
Saving or attempting to save life or property at sea;
Wastage in bulk or weight or any other loss or damage
arising from inherent defect, quality, or vice of the goods;
Insufficiency of packing;
Insufficiency of inadequacy of marks;
Latent defects not discoverable by due diligence; and
Any other cause arising without the actual fault and
privity of the carrier and without the fault or neglect of the
agents or servants of the carrier, but the burden of proof
shall be on the person claiming the benefit of this
exception to show that neither the actual fault or privity of
the carrier nor the fault or neglect of the agents or servants
of the carrier contributed to the loss or damage.
Readings
(3) The shipper shall not be responsible for loss or damage
sustained by the carrier or the ship arising from any cause
without the act, fault, or neglect of the shipper, his agents,
or servants.
(4) Any deviation in saving or attempting to save life or
property at sea, or any reasonable deviation shall not be
deemed to be an infringement or breach of this Act or of
the contract of carriage, and the carrier shall not be liable
for any loss or damage resulting therefrom: Provided,
however, That if the deviation is for the purpose of loading
cargo or unloading cargo or passengers it shall, prima
facie, be regarded as unreasonable.
(5) Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection
with the transportation of goods in an amount exceeding
$600 per package lawful money of the United States, or in
case of goods not shipped in packages, per customary
freight unit, or the equivalent of that sum in other
currency, unless the nature and value of such goods have
been declared by the shipper before shipment and inserted
in the bill of lading. This declaration, if embodied in the
bill of lading, shall be prima facie evidence, but shall not
be conclusive on the carrier.
By agreement between the carrier, master, or agent of the
carrier, and the shipper another maximum amount than
that mentioned in this paragraph may be fixed: Provided,
That such maximum shall not be less than the figure above
named. In no event shall the carrier be liable for more than
the amount of damage actually sustained.
Neither the carrier nor the ship shall be responsible in any
event for loss or damage to or in connection with the
transportation of the goods if the nature or value thereof
has been knowingly and fraudulently misstated by the
shipper in the bill of lading.
(6) Goods of an inflammable, explosive, or dangerous
nature to the shipment whereof the carrier, master or
agent of the carrier, has not consented with knowledge of
their nature and character, may at any time before
discharge be landed at any place or destroyed or rendered
innocuous by the carrier without compensation, and the
shipper of such goods shall be liable for all damages and
expenses directly or indirectly arising out of or resulting
from such shipment. If any such goods shipped with such
knowledge and consent shall become a danger to the ship
or cargo, they may in like manner be landed at any place,
26 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
or destroyed or rendered innocuous by the carrier without
liability on the part of the carrier except to general average,
if any.
SURRENDER OF RIGHTS AND IMMUNITIES AND
INCREASE OF RESPONSIBILITIES AND LIABILITIES
Section 5. A carrier shall be at liberty to surrender in
whole or in part all or any of his rights and immunities or
to increase any of his responsibilities and liabilities under
this Act, provided such surrender or increase shall be
embodied in the bill of lading issued to the shipper.
The provisions of this Act shall not be applicable to charter
parties; but if bills of lading are issued in the case of a ship
under charter party, they shall comply with the terms of
this Act. Nothing in this Act shall be held to prevent the
insertion in a bill of lading of any lawful provision
regarding general average.
SPECIAL CONDITIONS
Section 6. Notwithstanding the provisions of the
preceding sections, a carrier, master or agent of the carrier,
and a shipper shall, in regard to any particular goods be at
liberty to enter into any agreement in any terms as to the
responsibility and liability of the carrier for such goods,
and as to the rights and immunities of the carrier in
respect of such goods, or his obligation as to seaworthiness
(so far as the stipulation regarding seaworthiness is not
contrary to public policy), or the care or diligence of his
servants or agents in regard to the loading, handling
stowage, carriage, custody, care, and discharge of the
goods carried by sea: Provided, That in this case no bill of
lading has been or shall be issued and that the terms
agreed shall be embodied in a receipt which shall be a
non-negotiable document and shall be marked as such.
Any agreement so entered into shall have full legal
effect: Provided, That this section shall not apply to
ordinary commercial shipments made in the ordinary
course of trade but only to other shipments where the
character or condition of the property to be carried or the
circumstances, terms, and conditions under which the
carriage is to be performed are such as reasonably to
justify a special agreement.
Section 7. Nothing contained in this Act shall prevent a
carrier or a shipper from entering into any agreement,
stipulation, condition, reservation, or exemption as to the
Readings
responsibility and liability of the carrier or the ship for the
loss or damage to or in connection with the custody and
care and handling of goods prior to the loading on and
subsequent to the discharge from the ship on which the
goods are carried by sea.
Section 8. The provisions of this Act shall not affect the
rights and obligations of the carrier under the provisions
of the Shipping Act, 1916, or under the provisions of
section 4281 to 4289, inclusive, of the Revised Statutes of
the United States, or of any amendments thereto; or under
the provisions of any other enactment for the time being in
force relating to the limitation of the liability of the owners
of seagoing vessels.
TITLE II
Section 9. Nothing contained in this Act shall be construed
as permitting a common carrier by water to discriminate
between competing shippers similarly place in time and
circumstances, either (a) with respect to the right to
demand and receive bills of lading subject to the
provisions of this Act; or (b) when issuing such bills of
lading, either in the surrender of any of the carrier's rights
and immunities or in the increase of any of the carrier's
responsibilities and liabilities pursuant to section 6, title I,
of this Act or (c) in any other way prohibited by the
Shipping Act, 1916, s amended.
Section 10. Section 25 of the Interstate Commerce Act is
hereby amended by adding the following proviso at the
end of paragraph 4 thereof: "Provided, however, That
insofar as any bill of lading authorized hereunder relates
to the carriage of goods by sea, such bill of lading shall be
subject to the provisions of the Carriage of Goods by Sea
Act."
Section 11. Where under the customs of any trade the
weight of any bulk cargo inserted in the bill of lading is a
weight ascertained or accepted by a third party other than
the carrier or the shipper, and the fact that the weight is so
ascertained or accepted is stated in the bill of lading, then,
notwithstanding any thing in this Act, the bill of lading
shall not be deemed to be prima facie evidence against the
carrier of the receipt of goods of the weight so inserted in
the bill of lading, and the accuracy thereof at the time of
shipment shall not be deemed to have been guaranteed by
the shipper.
27 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Section 12. Nothing in this Act shall be construed as
superseding any part of the Act entitled "An act relating to
navigation of vessels, bills of lading, and to certain
obligations, duties, and rights in connection with the
carriage of property," approved February 13,1893, or of
any other law which would be applicable in the absence of
this Act, insofar as they relate to the duties,
responsibilities, and liabilities of the ship or carrier prior
to the time when the goods are loaded on or after the time
they are discharged from the ship.
Section 13. This Act shall apply to all contracts for carriage
of goods by sea to or from ports of the United States in
foreign trade. As used in this Act the term "United States"
includes its districts, territories, and possessions: Provided,
however, That the Philippine legislature may by law
exclude its application to transportation to or from ports of
the Philippine Islands. The term "foreign trade" means the
transportation of goods between the ports of the United
States and ports of foreign countries. Nothing in this Act
shall be held to apply to contracts for carriage of goods by
sea between any port of the United States or its
possessions, and any other port of the United States or its
possession: Provided, however, That any bill of lading or
similar document of title which is evidence of a contract
for the carriage of goods by sea between such ports,
containing an express statement that it shall be subject to
the provisions of this Act, shall be subjected hereto as fully
as if subject hereto as fully as if subject hereto by the
express provisions of this Act: Provided, further, That
every bill of lading or similar document of title which is
evidence of a contract for the carriage of goods by sea
from ports of the United States, in foreign trade, shall
contain a statement that it shall have effect subject to the
provisions of this Act.
Section 14. Upon the certification of the Secretary of
Commerce that the foreign commerce of the United States
in its competition with that of foreign nations is
prejudiced the provisions, or any of them, of Title I of this
Act, or by the laws of any foreign country or countries
relating to the carriage of goods by sea, the President of
the United States, may, from time to time, by proclamation,
suspend any or all provisions of Title I of this Act for such
periods of time or indefinitely as may be designated in the
proclamation. The President may at any time rescind such
suspension of Title I hereof, and any provisions thereof
which may have been suspended shall thereby be
reinstated and again apply to contracts thereafter made for
the carriage of goods by sea. Any proclamation of
Readings
suspension or rescission of any such suspension shall take
effect on a date named therein, which date shall be not less
than ten days from the issue of the proclamation.
Any contract for the carriage of goods by sea, subject to
the provisions of this Act, effective during any period
when title I hereof, or any part thereof, is suspended, shall
be subject to all provisions of law now or hereafter
applicable to that part of Title I which may have thus been
suspended.
Section 15. This Act shall take effect ninety days after the
date of its approval; but nothing in this Act shall apply
during a period not to exceed one year following its
approval to any contract for the carriage of goods by sea,
made before the date on which this Act is approved, nor to
any bill of lading or similar document of title issued,
whether before or after such date of approval in pursuance
of any such contract as aforesaid.
Section 16. This Act may be cited as the "Carriage of
Goods by Sea Act."
Approved, April 16, 1936.
THE SALVAGE LAW
SECTION 1. When in case of shipwreck, the vessel or its
cargo shall be beyond the control of the crew, or shall have
been abandoned by them, and picked up and conveyed to
a safe place by other persons, the latter shall be entitled to
a reward for the salvage. Those who, not being included in
the above paragraph, assist in saving a vessel or its cargo
from shipwreck, shall be entitled to a like reward.
SECTION 2. If the captain of the vessel, or the person
acting in his stead, is present, no one shall take from the
sea, or from the shores or coast merchandise or effects
proceeding from a shipwreck or proceed to the salvage of
the vessel, without the consent of such captain or person
acting in his stead.
SECTION 3. He who shall save or pick up a vessel or
merchandise at sea, in the absence of the captain of the
vessel, owner, or a representative of either of them, they
being unknown, shall convey and deliver such vessel or
merchandise, as soon as possible, to the Collector of
Customs, if the port has a collector, and otherwise to the
provincial treasurer or municipal mayor.
SECTION 4. After the salvage is accomplished, the owner
or his representative shall have a right to the delivery of
the vessel or things saved, provided that he pays, or gives
28 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
a bond to secure, the expenses and the proper reward. The
amount and sufficiency of the bond, in the absence of
agreement, shall be determined by the Collector of
Customs or by the Judge of the Court of First Instance of
the province in which the things saved may be found.
SECTION 5. The Collector of Customs, provincial
treasurer, or municipal mayor, to whom a salvage is
reported, shall order:
That the things saved be safeguard and inventoried.
b. The sale at public auction of the things saved which
may be in danger of immediate loss or of those whose
conservation is evidently prejudicial to the interests of the
owner, when no objection is made to such sale.
c. The advertisement within thirty days subsequent to the
salvage, in one of the local newspapers or in the nearest
newspaper published, of all the details of the disaster,
with a statement of the mark and number of the effects
requesting all interested persons to make their claims.
SECTION 6. If, while the vessel or things saved are at the
disposition of the authorities, the owner or his
representative shall claim them, such authorities shall
order their delivery to such owner or his representative,
provided that there is no controversy over their value, and
a bond is given by the owner or his representative to
secure the payment of the expenses and the proper
reward. Otherwise, the delivery shall not be made until
the matter is decided by the Court of First Instance of the
province.
SECTION 7. No claim being presented in the three months
subsequent to the publication of the advertisement
prescribed in sub-section (c) of Section five, the things save
shall be sold at public auction, and their proceeds, after
deducting the expenses and the proper reward shall be
deposited in the insular treasury. If three years shall pass
without anyone claiming it, one-half of the deposit shall be
adjudged to him who saved the things, and the other half
to the insular government.
SECTION 8. The following shall have no right to a reward
for salvage or assistance:
The crew of the vessel shipwrecked or which was in
danger of a shipwreck;
He who shall have commenced the salvage in spite of
opposition of the captain or his representative; and
He who shall have failed to comply with the provisions of
Section three.
Readings
SECTION 9. If, during the danger, an agreement is entered
into concerning the amount of the reward for salvage or
assistance, its validity may be impugned because it is
excessive, and it may be required to be reduced to an
amount proportionate to the circumstance.
SECTION 10. In a case coming under the last preceding
section, as well as in the absence of an agreement, the
reward for salvage or assistance shall be fixed by the Court
of First Instance of the province where the things salvaged
are found, taking into account principally the
expenditures made to recover or save the vessel or the
cargo or both, the zeal demonstrated, the time employed,
the services rendered, the excessive express occasioned the
number of persons who aided, the danger to which they
and their vessels were exposed as well as that which
menaced the things recovered or salvaged, and the value
of such things after deducting the expenses.
SECTION 11. From the proceeds of the sale of the things
saved shall be deducted, first, the expenses of their
custody, conservation, advertisement, and auction, as well
as whatever taxes or duties they should pay for their
entrance; then there shall be deducted the expenses of
salvage; and from the net amount remaining shall be taken
the reward for the salvage or assistance which shall not
exceed fifty per cent of such amount remaining.
SECTION 12. If in the salvage or in the rendering of
assistance different persons shall have intervened the
reward shall be divided between them in proportion to the
services which each one may have rendered, and, in case
of doubt, in equal parts. Those who, in order to save
persons, shall have been exposed to the same dangers
shall also have a right to participation in the reward.
SECTION 13. If a vessel or its cargo shall have been
assisted or saved, entirely or partially, by another vessel,
the reward for salvage or for assistance shall be divided
between the owner, the captain, and the remainder of the
crew of the latter vessel, so as to give the owner a half, the
captain a fourth, and all the remainder of the crew the
other fourth of the reward, in proportion to their
respective salaries, in the absence of an agreement to the
contrary. The express of salvage, as well as the reward for
salvage or assistance, shall be a charge on the things
salvaged on their value.
SECTION 14. This Act shall take effect on its passage.
ENACTED, FEBRUARY 4, 1916.
THE PUBLIC SERVICE LAW
CHAPTER I
ORGANIZATION
29 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Section 1. This Act shall be known as the "Public Service
Act."
Section 2. There is created under the Department of
Justice a commission which shall be designated and
known as the Public Service Commission, composed of
one Public Service Commissioner and five Associate
Commissioners, and which shall be vested with the
powers and duties hereafter specified. Whenever the word
"Commission" is used in this Act, it shall be held to mean
the Public Service Commission, and whenever the word
"Commissioner" is used in this Act it shall be held to mean
the Public Service Commissioner or anyone of the
Associate Commissioners. The Public Service
Commissioner and the Associate Public Service
Commissioners shall be natural born citizens and
residents of the Philippines, not under thirty years of age;
members of the Bar of the Philippines, with at least five
years of law practice or five years of employment in the
government service requiring a lawyer's diploma; and
shall be appointed by the President of the Philippines,
with the consent of the Commission on Appointments of
the Congress of the Philippines: Provided, however, That
the present Commissioner and the personnel of the
Commission shall continue in office without the necessity
of re-appointment. The Commissioners shall have the rank
and privilege of retirement of Judges of the Courts of First
Instance. (As amended by Republic Act Nos. 178 and 2677)
Section 3. The Commissioner and Associate
Commissioners shall hold office until they reach the age of
seventy years, or until removed in accordance with the
procedures prescribed in section one hundred and
seventy-three of Act Numbered Twenty-seven hundred
and eleven, known as the Revised Administrative Code:
Provided, however, That upon retirement any
Commissioner of Associate Commissioner shall be
entitled to all retirement benefits and privileges for Judges
of the Courts of First Instance or under the retirement law
to which he may be entitled on the date of his retirement.
In case of the absence, for any reason, of the Public Service
Commissioner, the Associate Commissioner with seniority
of appointment shall act as Commissioner. If on account of
absence, illness, or incapacity of any of three
Commissioners, or whenever by reason of temporary
disability of any Commissioner or of a vacancy occurring
therein, the requisite number of Commissioners necessary
to render a decision or issue an order in any case is not
present, or in the event of a tie vote among the
Commissioners, the Secretary of Justice may designate
Readings
such number of Judges of the Courts of First Instance, or
such number of attorneys of the legal division of the
Commission, as may be necessary to sit temporarily as
Commissioners in the Public Service Commission.
The Public Service Commission shall sit individually or as
a body en banc or in two divisions of three Commissioners
each. The Public Service Commissioner shall preside when
the Commission sits en banc and in one division. In the
other division, the Associate Commissioner with seniority
of appointment in that division shall preside. Five
Commissioners shall constitute a quorum for sessions en
banc and two Commissioners shall constitute a quorum
for the sessions of a division. In the absence of a quorum,
the session shall be adjourned until the requisite number
is present.
All the powers herein vested upon the Commission shall
be considered vested upon any of the Commissioners,
acting either individually or jointly as hereinafter
provided. The Commissioners shall equitably divide
among themselves all pending cases and those that may
hereafter be submitted to the Commissioner, in such
manner and form as they may determine, and shall
proceed to hear and determine the case assigned to each
or to their respective divisions, or to the Commission en
banc as follows: uncontested cases, except those pertaining
to the fixing of rates, shall be decided by one
Commissioner; contested cases and all cases involving the
fixing of rates shall be decided by the Commission in
division and the concurrence of at least two
Commissioners in the division shall be necessary for the
promulgation of a decision or non-interlocutory order in
these cases: Provided, however, That any motion for
reconsideration of a decision or non-interlocutory order of
any Commissioner or division shall be heard directly by
the Commission en banc and the concurrence of at least
four Commissioners shall be necessary for the
promulgation of a final decision or order resolving such
motion for reconsideration. (As amended by Republic Act
Nos. 723 and 2677)
Section 4. The Public Service Commissioner shall receive
an annual compensation of thirteen thousand pesos; and
each of the Associate Commissioners an annual
compensation of twelve thousand pesos. The
Commissioners shall be assisted by one chief attorney, one
finance and rate regulation officer, one chief utilities
regulation engineer, one chief accountant, one
transportation regulation chief, one secretary of the Public
30 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Service Commission, and three public utilities advisers
who shall receive an annual compensation of not less than
ten thousand eight hundred pesos each; five assistant
chiefs of division who shall receive an annual
compensation of not less than nine thousand six hundred
pesos each; twelve attorneys who shall receive an annual
compensation of not less than nine thousand pesos each;
and a technical and confidential staff to be composed of
two certified public accounts, two electrical engineers, two
mechanical or communication engineers, and two special
assistants who shall receive an annual compensation of not
less than seven thousand two hundred pesos each. (As
amended by Republic Act Nos. 723, 2677 and 3792)
Section 5. The Public Service Commissioner, the Associate
Public Service Commissioners, and all other officers and
employees of the Public Service Commission shall enjoy
the same privileges and rights as the officer and employees
of the classified civil service of the Government of the
Philippines. They shall also be entitled to receive from the
Government of the Philippines their necessary travelling
expenses while travelling on the business of the
Commission, which shall be paid on proper voucher
therefor, approved by the Secretary of Justice, out of funds
appropriated for the contingent expenses of the
Commission.
When the exigency of the service so requires and with the
approval of the Secretary of Justice, and subject to the
provisions of Commonwealth Act Numbered Two
hundred forty-six, as amended, funds may be set aside
from the appropriations provided for the Commission
and/or from the fees collected under Section forty of this
Act to defray the expenses to be incurred by the Public
Service Commissioner or any of the Associate
Commissioners, officers or employees of the Commission
to be designated by the Commissioner, with the approval
of the Secretary of Justice, in the study of modern trends
in supervision and regulation of public services. (As
amended by Republic Act No. 3792)
Section 6. The Secretary of Justice, upon recommendation
of the Public Service Commissioner, shall appoint all
subordinate officers and employees of the Commission as
may be provided in the Appropriation Act. The Public
Service Commissioner shall have general executive
control, direction, and supervision over the work of the
Commission and of its members, body and personnel, and
over all administrative business. (As amended by Republic
Act Nos. 178 and 3792)
Readings
Section 7. The Secretary of the Commission, under the
direction of the Commissioner, shall have charge of the
administrative business of the Commission and shall
perform such other duties as may be required of him. He
shall be the recorder and official reporter of the
proceedings of the Commission and shall have authority
to administer oaths in all matters coming under the
jurisdiction of the Commission. He shall be the custodian
of the records, maps, profiles, tariffs, itineraries, reports,
and any other documents and papers filed with the
Commission or entrusted to his care and shall be
responsible therefor to the Commission. He shall have
authority to designate from time to time any of his
delegates to perform the duties of Deputy Secretary with
any of the Commissioners.
Section 8. The Commission shall furnish the Secretary
such of its findings and decisions as in its judgment may
be of general public interest; the Secretary shall compile
the same for the purpose of publication in a series of
volumes to be designated "Reports of the Public Service
Commission of the Philippines," which shall be published
in such form and manner as may be best adapted for
public information and use, and such authorized
publications shall be competent evidence of the reports
and decisions of the Commission therein contained
without any further proof or authentication thereof.
Section 9. No member or employee of the Commission
shall have any official or professional relation with any
public service as herein defined, or hold any office of
profit or trust with the Government of the Philippines.
Section 10. The Commission shall have its office in the
City of Manila or at such other place as may be
designated, and may hold hearings on any proceedings at
such times and places, within the Philippines, as it may
provide by order in writing: Provided, That during the
months of April and May of each year, at least three
Commissioners shall be on vacation in such manner that
once every two years at least three of them shall be on
duty during April and May: Provided, however, That in
the interest of public service, the Secretary of Justice may
require any or all the Commissioners not on duty to
render services and perform their duties during the
vacation months. (As amended by Republic Act Nos. 176
and 3792)
Section 11. The Commission shall have the power to make
needful rules for its Government and other proceedings
31 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
not inconsistent with this Act and shall adopt a common
seal, and judicial notice shall be taken for such seal. True
copies of said rules and other amendments shall be
promptly furnished to the Bureau of Printing and shall be
forthwith published in the Official Gazette.
CHAPTER II
JURISDICTION, POWERS AND DUTIES OF THE
COMMISSION
Section 13. (a) The Commission shall have jurisdiction,
supervision, and control over all public services and their
franchises, equipment, and other properties, and in the
exercise of its authority, it shall have the necessary powers
and the aid of the public force: Provided, That public
services owned or operated by government entities or
government-owned or controlled corporations shall be
regulated by the Commission in the same way as
privately-owned public services, but certificates of public
convenience or certificates of public convenience and
necessity shall not be required of such entities or
corporations: And provided, further, That it shall have no
authority to require steamboats, motor ships and
steamship lines, whether privately-owned, or owned or
operated by any Government controlled corporation or
instrumentality to obtain certificate of public convenience
or to prescribe their definite routes or lines of service.
(b) The term "public service" includes every person that
now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or
limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway,
sub-way motor vehicle, either for freight or passenger, or
both with or without fixed route and whether may be its
classification, freight or carrier service of any class, express
service, steamboat or steamship line, pontines, ferries, and
water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine railways, marine repair
shop, [warehouse] wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system, gas, electric
light, heat and power water supply and power, petroleum,
sewerage system, wire or wireless communications
system, wire or wireless broadcasting stations and other
similar public services: Provided, however, That a person
engaged in agriculture, not otherwise a public service,
who owns a motor vehicle and uses it personally and/or
enters into a special contract whereby said motor vehicle is
offered for hire or compensation to a third party or third
Readings
parties engaged in agriculture, not itself or themselves a
public service, for operation by the latter for a limited time
and for a specific purpose directly connected with the
cultivation of his or their farm, the transportation,
processing, and marketing of agricultural products of such
third party or third parties shall not be considered as
operating a public service for the purposes of this Act.
(c) The word "person" includes every individual, co-
partnership, joint-stock company or corporation, whether
domestic or foreign, their lessees, trustees, or receivers, as
well as any municipality, province, city, government-
owned or controlled corporation, or agency of the
Government of the Philippines, and whatever other
persons or entities that may own or possess or operate
public services. (As amended by Com. Act 454 and RA No.
2677)
Section 14. The following are exempted from the
provisions of the preceding section:
Warehouses;
Vehicles drawn by animals and bancas moved by oar or
sail, and tugboats and lighters;
Airships within the Philippines except as regards the
fixing of their maximum rates on freight and passengers;
Radio companies except with respect to the fixing of rates;
Public services owned or operated by any instrumentality
of the National Government or by any government-owned
or controlled corporation, except with respect to the fixing
of rates. (As amended by Com. Act 454, RA No. 2031, and
RA No. 2677 )
Section 15. With the exception of those enumerated in the
preceding section, no public service shall operate in the
Philippines without possessing a valid and subsisting
certificate from the Public Service Commission known as
"certificate of public convenience," or "certificate of public
convenience and necessity," as the case may be, to the
effect that the operation of said service and the
authorization to do business will promote the public
interests in a proper and suitable manner.
The Commission may prescribe as a condition for the
issuance of the certificate provided in the preceding
paragraph that the service can be acquired by the Republic
32 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
of the Philippines or any instrumentality thereof upon
payment of the cost price of its useful equipment, less
reasonable depreciation; and likewise, that the certificate
shall be valid only for a definite period of time; and that
the violation of any of these conditions shall produce the
immediate cancellation of the certificate without the
necessity of any express action on the part of the
Commission.
In estimating the depreciation, the effect of the use of the
equipment, its actual condition, the age of the model, or
other circumstances affecting its value in the market shall
be taken into consideration.
The foregoing is likewise applicable to any extension or
amendment of certificates actually in force and to those
which may hereafter be issued, to permit to modify
itineraries and time schedules of public services, and to
authorizations to renew and increase equipment and
properties.
Section 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 :
To issue certificates which shall be known as certificates of
public convenience, authorizing the operation of public
service within the Philippines whenever the Commission
finds 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. Provided, That
thereafter, certificates of public convenience and
certificates of public convenience and necessity will be
granted only to citizens of the Philippines or of the United
States or to corporations, co-partnerships, associations or
joint-stock companies constituted and organized under the
laws of the Philippines; Provided, That sixty per centum of
the stock or paid-up capital of any such corporations, co-
partnership, association or joint-stock company must
belong entirely to citizens of the Philippines or of the
United States: Provided, further, That no such certificates
shall be issued for a period of more than fifty years.
To approve, subject to constitutional limitations any
franchise or privilege granted under the provisions of Act
No. Six Hundred and Sixty-seven, as amended by Act No.
One Thousand and twenty-two, by any political
Readings
subdivision of the Philippines when, in the judgment of
the Commission, such franchise or privilege will properly
conserve the public interests, and the Commission shall in
so approving impose such conditions as to construction,
equipment, maintenance, service, or operation as the
public interests and convenience may reasonably require,
and to issue certificates of public convenience and
necessity when such is required or provided by any law or
franchise.
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.
To fix just and reasonable standards, classifications,
regulations, practices, measurement, or service to be
furnished, imposed, observed, and followed thereafter by
any public service.
To ascertain and fix adequate and serviceable standards
for the measurement of quantity, quality, pressure, initial
voltage, or other condition pertaining to the supply of the
product or service rendered by any public service, and to
prescribe reasonable regulations for the examination and
test of such product or service and for the measurement
thereof.
To establish reasonable rules, regulations, instructions,
specifications, and standards, to secure the accuracy of all
meters and appliances for measurements.
To compel any public service to furnish safe, adequate,
and proper service as regards the manner of furnishing
the same as well as the maintenance of the necessary
material and equipment.
33 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
To require any public service to establish, construct,
maintain, and operate any reasonable extension of its
existing facilities, where in the judgment of said
Commission, such extension is reasonable and practicable
and will furnish sufficient business to justify the
construction and maintenance of the same and when the
financial condition of the said public service reasonably
warrants the original expenditure required in making and
operating such extension.
To direct any railroad, street railway or traction company
to establish and maintain at any junction or point of
connection or intersection with any other line of said road
or track, or with any other line of any other railroad, street
railway or traction to promote, such just and reasonable
connection as shall be necessary to promote the
convenience of shippers of property, or of passengers, and
in like manner direct any railroad, street railway, or
traction company engaged in carrying merchandise, to
construct, maintain and operate, upon reasonable terms, a
switch connection with any private sidetrack which may
be constructed by any shipper to connect with the railroad,
street railway or traction company line where, in the
judgment of the Commission, such connection is
reasonable and practicable and can be out in with safety
and will furnish sufficient business to justify the
construction and maintenance of the same.
To authorize, in its discretion, any railroad, street railway
or traction company to lay its tracks across the tracks of
any other railroad, street railway or traction company or
across any public highway.
To direct any railroad or street railway company to install
such safety devices or about such other reasonable
measures as may in the judgment of the Commission be
necessary for the protection of the public are passing
grade crossing of (1) public highways and railroads, (2)
public highways and streets railway, or (3) railways and
street railways.
To fix and determine proper and adequate rates of
depreciation of the property of any public service which
will be observed in a proper and adequate depreciation
account to be carried for the protection of stockholders,
bondholders or creditors in accordance with such rules,
regulations, and form of account as the Commission may
prescribe. Said rates shall be sufficient to provide the
amounts required over and above the expense of
maintenance to keep such property in a state of efficiency
Readings
corresponding to the progress of the industry. Each public
service shall conform its depreciation accounts to the rates
so determined and fixed, and shall set aside the moneys so
provided for out of its earnings and carry the same in a
depreciation fund. The income from investments of money
in such fund shall likewise be carried in such fund. This
fund shall not be expended otherwise than for
depreciation, improvements, new construction, extensions
or conditions to the properly of such public service.
To amend, modify or revoke at any time certificate issued
under the provisions of this Act, whenever the facts and
circumstances on the strength of which said certificate was
issued have been misrepresented or materially changed.
To 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.
To fix, determine, and regulate, as the convenience of the
state may require, a special type for auto-busses, trucks,
and motor trucks to be hereafter constructed, purchased,
and operated by operators after the approval of this Act; to
fix and determine a special registration fee for auto-buses,
trucks, and motor trucks so constructed, purchased and
operated: Provided, That said fees shall be smaller than
more those charged for auto-busses, trucks, and motor
trucks of types not made regulation under the subsection.
Section 17. Proceedings of Commission without previous
hearing. - The Commission shall have power without
previous hearing, subject to established limitations and
exception and saving provisions to the contrary:
To investigate, upon its own initiative, or upon complaint
in writing, any matter concerning any public service as
regards matters under its jurisdiction; to require any
public service to furnish safe, adequate, and proper
service as the public interest may require and warrant; to
enforce compliance with any standard, rule, regulation,
34 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
order or other requirement of this Act or of the
Commission, and to prohibit or prevent any public service
as herein defined from operating without having first
secured a certificate of public convenience or public
necessity and convenience, as the case may be and require
existing public services to pay the fees provided for in this
Act for the issuance of the proper certificate of public
convenience or certificate of public necessity and
convenience, as the case may be, under the penalty, in the
discretion by the Commission, of the revocation and
cancellation of any acquired rights.
To require any public service to pay the actual expenses
incurred by the Commission in any investigation if it shall
be found in the same that any rate, tool, charge, schedule,
regulation, practice, act or service thereof is in violation of
any provision of this Act or any certificate, order, rule,
regulation or requirement issued or established by the
Commission. The Commission may also assess against any
public service costs not to exceed twenty-five pesos with
reference to such investigation.
From time to time appraise and value the property of any
public service, whenever in the judgment of the
Commission it shall be necessary so to do, for the purpose
of carrying out any of the provisions of this Act, and in
making such valuation the Commission may have access
to and use any books, documents, or records in the
possession of any department, bureau, office, or board of
the government of the Philippines or any political
subdivision thereof.
To provide, on motion by or at the request of any
consumer or user of a public service, for the examination
and test of any appliance used for the measuring of any
product or service of a public service, and for that
purpose, by its agents, experts, or examiners to enter upon
any premises where said appliances may be, and other
premises of the public service, for the purpose of setting
up and using on said premises any apparatus necessary
therefor. and to fix the fees to be paid by any consumer or
user who may apply to the Commission for such
examination or test to be made, and if the appliance be
found defective or incorrect to the disadvantage of the
consumer or user to require the fees paid to be refunded to
the consumer or user by the public service concerned.
To permit any street railway or traction company to change
its existing gauge to standard steam railroad gauge, upon
Readings
such terms and conditions as the Commission shall
prescribe.
To grant to any public service special permits to make
extra or special trips within the territory covered by its
certificates of public convenience, and to make special
excursion trips outside of its own territory if the public
interest or special circumstances required it: Provided,
however, that in case a public service cannot render such
extra service on its own line or in its own territory, a
special permit for such extra service may be granted to any
other public service.
To require any public service to keep its books, records,
and accounts so as to afford an intelligent understanding
of the conduct of its business and to that end to require
every such public service of the same class to adopt a
uniform system of accounting. Such system conform to
any system approved and confirmed by the Auditor
General.
To require any public service to furnish annual reports of
finances and operations. Such reports shall set forth in
detail the capital stock issued, the amounts of said capital
stock paid up and the form of payment thereof; the
dividends paid, the surplus, if any and the number of
stockholders, the consolidated and pending obligations
and the interest paid thereon; the cost and value of the
property of the operator; concessions or franchises and
equipment; the number of employees and salaries paid to
each class; the accidents to passengers, employees, and
other person, and the causes thereof; the annual
expenditures on improvements; the manner of their
investment and nature of such improvements; the receipts
and profits in each of the branches of the business and of
whatever source; the operating and other expenses; the
balance of profits and losses; and a complete statement of
the annual financial operations of the operator, including
an annual balance sheet. Such reports shall also contain
any information which the Commission may require
concerning freight and passenger rates, or agreements,
compromises or contracts affecting the same. Said reports
shall cover a period of twelve months, ending on
December thirty-first of each year, and shall be sworn to by
the officer or functionary of the public service authorized
therefor. The Commission shall also have power to require
from time to time special reports containing such
information as above provided for or on other matters as
the Commission may deem necessary or advisable.
35 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
To require every public service to file with the
Commission a statement in writing, verified by the oaths
of the owner or the president and the secretary thereof, if
a corporation, setting forth the name, title of office or
portion, and post-office address, and the authority, power
and duties of every officer, member of the board of
directors, trustees executive committee, superintendent,
chief or head of construction and operation thereof, in
such form as to disclose the source and origin of each
administrative act, rule, decision, order or other action of
the operator of such public service; and, within ten days
after any change is made in the title of, or authority,
powers or duties appertaining to any such office or
position, or the person holding the same, filed with the
Commission a like statement, verified in like manner,
setting forth such change.
To require any public service to comply with the laws of
the Philippines and with any provincial resolution or
municipal ordinance relating thereto and to conform to
the duties imposed upon it thereby or by the provisions of
its own character, whether obtained under any general or
special law of the Philippines.
To investigate any or all accidents that may occur on the
property of any public service or directly or indirectly
arising from or connected with its maintenance or
operation in the Philippines; to require any public service
to give the Commission immediate and effective notice of
all any such accidents, and to make such order or
recommendation with respect thereto as the public
interest may warrant or require.
To require every public service s herein defined to file
within complete schedules of every classification
employed and of every individual or joint rate, toll fare or
charge made, charged or exacted by it for any product
supplied or service rendered within the Philippines and,
in the case of public carriers, to file with it a statement
showing the itineraries or routes served as specified in
such requirement.
CHAPTER III
OPERATORS OF PUBLIC SERVICES REGULATIONS
AND PROHIBITIONS
Section 18. It shall be unlawful for any individual, co-
partnership, association, corporation or joint-stock
company, their lessees, trustees or receivers appointed by
any court whatsoever, or any municipality, province, or
Readings
other department of the Government of the Philippines to
engage in any public service business without having first
secured from the Commission a certificate of public
convenience or certificate of public convenience and
necessity as provided for in this Act, except grantees of
legislative franchises expressly exempting such grantees
from the requirement of securing a certificate from this
Commission as well as concerns at present existing
expressly exempted from the jurisdiction of the
Commission, either totally or in part, by the provisions of
section thirteen of this Act.
Section 19. Unlawful Acts. - It shall be unlawful for any
public service:
To provide or maintain any service that is unsafe,
improper, or inadequate or withhold or refuse any service
which can reasonably be demanded and furnished, as
found and determined by the Commission in a final order
which shall be conclusive and shall take effect in
accordance with this Act, upon appeal of otherwise.
To make or give, directly or indirectly, by itself or through
its agents, attorneys or brokers, or any of them, discounts
or rebates on authorized rates, or grant credit for the
payment of freight charges, or any undue or unreasonable
preference or advantage to any person of corporation or to
any locality or to any particular description of traffic or
service, or subject any particular person or corporation or
locality or any particular description of traffic to any
prejudice or disadvantage in any respect whatsoever; to
adopt, maintain, or enforce any regulation, practice or
measurement which shall be found or determined by the
Commission to be unjust, unreasonable, unduly
preferential or unjustly discriminatory in a final order
which shall be conclusive and shall take effect in
accordance with the provisions of this Act, upon repeal or
otherwise.
To refuse or neglect, when requested by the Director of
Posts or his authorized representative, to carry public mail
on the regular trips of any public land transportation
service maintained or operated by any such public service;
upon such terms and conditions and for a consideration in
such amount as may be agreed upon between the Director
of Posts and the public service carrier of fixed by the
Commission in the absence of an agreement between the
Director of Posts and the carrier. In case the Director of
Posts and public service carrier are unable to agree on the
amount of the compensation to be paid for the carriage of
36 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
the mail, the Director of Posts shall forthwith request the
Commission to fix a just and reasonable compensation for
such carriage and the same shall be promptly fixed by the
Commission in accordance with Section sixteen of this
Act.
Section 20. Acts requiring the approval of the
Commission. - Subject to established limitations and
exceptions and saving provisions to the contrary, it shall be
unlawful for any public service or for the owner, lessee or
operator thereof, without the approval and authorization
of the Commission previously had -
To adopt, establish, fix, impose, maintain, collect or carry
into effect any individual or joint rates, commutation,
mileage or other special rate, toll, fare, charge,
classification or itinerary. The Commission shall approve
only those that are just and reasonable and not any that
are unjustly discriminatory or unduly preferential, only
upon reasonable notice to the public services and other
parties concerned, giving them a reasonable opportunity
to be heard and the burden of the proof to show that the
proposed rates or regulations are just and reasonable shall
be upon the public service proposing the same.
To establish, construct, maintain, or operate new units or
extend existing facilities or make any other addition to or
general extension of the service.
To abandon any railroad station or stop the sale of
passenger tickets, or cease to maintain an agent to receive
and discharge freight at any station now or hereafter
established at which passenger tickets are now or may
hereafter be regularly sold, or at which such agent is now
or may hereafter be maintained, or make any permanent
change in its time tables or itineraries on any railroad or in
its service.
To lay any railroad or street railway track across any
highway, so as to make a new crossing at grade, or cross
the tracks of any other railroad or street railway, provided,
that this subsection shall not apply to replacements of
lawfully existing tracks.
Hereafter to issue any stock or stock certificates
representing an increase of capital; or issue any share of
stock without par value; or issue any bonds or other
evidence of indebtedness payable in more than one year
from the issuance thereof, provided that it shall be the
duty of the Commission, after hearing, to approve any
Readings
such issue maturing in more than one year from the date
thereof, when satisfied that the same is to be made in
accordance with law, and the purpose of such issue be
approved by the Commission. (f) To capitalize any
franchise in excess of the amount, inclusive of any tax or
annual charge, actually paid to the Government of the
Philippines or any political subdivision thereof as the
consideration of said franchise; capitalize any contract for
consolidation, merger or lease, or issue any bonds or other
evidence of indebtedness against or as a lien upon any
contract for consolidation, merger, or lease: Provided,
however, that the provisions of this section shall not
prevent the issuance of stock, bonds, or other evidence of
indebtedness subject to the approval of the Commission
by any lawfully merged or consolidated public services
not in contravention of the provisions of this section.
To sell, alienate, mortgage, encumber or lease its property,
franchises, certificates, privileges, or rights or any part
thereof; or merge or consolidate its property, franchises
privileges or rights, or any part thereof, with those of any
other public service. The approval herein required shall be
given, after notice to the public and hearing the persons
interested at a public hearing, if it be shown that there are
just and reasonable grounds for making the mortgaged or
encumbrance, for liabilities of more than one year
maturity, or the sale, alienation, lease, merger, or
consolidation to be approved, and that the same are not
detrimental to the public interest, and in case of a sale, the
date on which the same is to be consummated shall be
fixed in the order of approval: Provided, however, that
nothing herein contained shall be construed to prevent the
transaction from being negotiated or completed before its
approval or to prevent the sale, alienation, or lease by any
public service of any of its property in the ordinary course
of its business.
To sell or register in its books the transfer or sale of shares
of its capital stock, if the result of that sale in itself or in
connection with another previous sale, shall be to vest in
the transferee more than forty per centum of the
subscribed capital of said public service. Any transfer
made in violation of this provision shall be void and of no
effect and shall not be registered in the books of the public
service corporation. Nothing herein contained shall be
construed to prevent the holding of shares lawfully
acquired. (As amended by Com. Act No. 454.)
To sell, alienate or in any manner transfer shares of its
capital stock to any alien if the result of that sale,
37 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
alienation, or transfer in itself or in connection with
another previous sale shall be the reduction to less than
sixty per centum of the capital stock belonging to
Philippine citizens. Such sale, alienation or transfer shall
be void and of no effect and shall be sufficient cause for
ordering the cancellation of the certificate.
To issue, give or tender, directly or indirectly, any free
ticket free pass or free or reduced rate of transportation for
passengers, except to the following persons: (1) officers,
agents, employees, attorneys, physicians and surgeons of
said public service, and members of their families; (2)
inmates of hospitals or charity institutions, and persons
engaged in charitable work; (3) indigent, destitute, and
homeless persons when transported by charitable societies
or hospitals, and the necessary agents employed in such
transportation; (4) the necessary caretakers, going and
returning, of livestock, poultry, fruit, and other freight
under uniform and non-discriminatory regulation; (5)
employees of sleeping car corporations, express
corporations and telegraph and telephone corporations,
railway and marine mail service employees, when
traveling in the course of their official duly; (6) post-office
inspectors, customs officers and inspectors, and
immigration inspectors when engaged in inspection; (7)
witnesses attending any legal investigation in which the
public service is an interested party; (8) persons injured in
accidents or wrecks, and physicians and nurses attending
such persons; (9) peace officers and men of regularly
constituted fire departments. (As amended by Com. Act
No. 454.)
Adopt, maintain, or apply practices or measures, rules or
regulations to which the public shall be subject in its
relations with the public service.
CHAPTER IV
PENALTIES FOR VIOLATIONS
Section 21. Every public service violating or failing to
comply with the terms and conditions of any certificate or
any orders, decisions or regulations of the Commission
shall be subject to a fine of not exceeding two hundred
pesos per day for every day during which such default or
violation continues; and the Commission is hereby
authorized and empowered to impose such fine, after due
notice and hearing.
The fines so imposed shall be paid to the Government of
the Philippines through the Commission, and failure to
Readings
pay the fine in any case within the same specified in the
order or decision of the Commission shall be deemed
good and sufficient reason for the suspension of the
certificate of said public service until payment shall be
made. Payment may also be enforced by appropriate
action brought in a court of competent jurisdiction. The
remedy provided in this section shall not be a bar to, or
affect any other remedy provided in this Act but shall be
cumulative and additional to such remedy or remedies.
Section 22. Observance of the orders, decisions, and
regulations of the Commission and of the terms and
conditions of any certificate may also be enforced by
mandamus or injunction in appropriate cases, or by action
to compel the specific performance of the orders,
decisions, and regulations so made, or of the duties
imposed by law upon such public service: Provided, that
the Commission may compromise any case that arise
under this Act in such manner and for such amount as it
may deem just and reasonable.
Section 23. Any public service corporation that shall
perform, commit, or do any act or thing forbidden or
prohibited or shall neglect, fail or omit to do or perform
any act or thing herein to be done or performed, shall be
punished by a fine not exceeding twenty-five thousand
pesos, or by imprisonment not exceeding five years, or
both, in the discretion of the court.
Section 24. Any person who shall knowingly and willfully
perform, commit, or do, or participate in performing,
committing, or doing, or who shall knowingly and
willfully cause, participate, or join with others in causing
any public service corporation or company to do, perform
or commit, or who shall advice, solicit, persuade, or
knowingly and willfully instruct, direct, or order any
officer, agent, or employee of any public service
corporation or company to perform, commit, or do any act
or thing forbidden or prohibited by this Act, shall be
punished by a fine not exceeding two thousand pesos, or
imprisonment not exceeding two years, or both, in the
discretion of the court: Provided, however, that for
operating a private passenger automobile as a public
service without having a certificate of public convenience
for the same the offender shall be subject to the penalties
provided for in section sixty-seven (j) of Act numbered
thirty-nine hundred an ninety-two.
Section 25. Any person who shall knowingly and willfully
neglect, fail, or omit to do or perform, or who shall
38 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
knowingly and willfully cause or join or participate with
others in causing any public service corporation or
company to neglect, fail or omit to do or perform, or who
shall advise, solicit, or persuade, or knowingly and
willfully instruct, direct, or order any officer, agent, or
employee of any public service corporation or company to
neglect, fail, or omit to do any act or thing required to be
done by this Act, shall be published by a fine not
exceeding two thousand pesos or by imprisonment not
exceeding two years, or both, in the discretion of the court.
Section 26. Any person who shall destroy, injure, or
interfere with any apparatus or appliance owned or
operated by to in charge of the Commission or its agents,
shall be deemed guilty of a misdemeanor and upon
conviction shall be published by a fine not exceeding one
thousand pesos or imprisonment not exceeding six
months, or both in the discretion of the court.
Any public service permitting the destruction, injury to, or
interference with, any such apparatus or appliances shall
forfeit a sum not exceeding four thousand pesos for each
offense.
Section 27. This Act shall not have the effect to release or
waive any right of action by the Commission or by any
person for any right, penalty, or forfeiture which may have
arisen or which may arise, under any of the laws of the
Philippines, and any penalty or forfeiture enforceable
under this Act shall not be a bar to or affect a recovery for
a right, or affect or bar any criminal proceedings against
any public service or person or persons operating such
public services, its officers, directors, agents, or employees.
Section 28. Violations of the orders, decisions, and
regulations of the Commission and of the terms and
conditions of any certificate issued by the Commission
shall prescribe after sixty days, and violations of the
provisions of this Act shall prescribe after one hundred
and eighty days.
CHAPTER V
PROCEDURE AND REVIEW
Section 29. All hearings and investigations before the
Commission shall be governed by rules adopted by the
Commission, and in the conduct thereof the Commission
shall not be bound by the technical rules of legal evidence:
Provided, That the Public Service Commissioner or
associate commissioners may summarily punish for
Readings
contempt by a fine not exceeding two hundred pesos or by
imprisonment not exceeding ten days, or both, any person
guilty of misconduct in the presence of the Commissioner
or associate commissioners or so near the same as to
interrupt the hearing or session or any proceeding before
them, including cases in which a person present at a
hearing, session, or investigation held by either of the
commissioners refuses to be sworn as a witness or to
answer as such when lawfully required to do so. To
enforce the provisions of this section, the Commission
may, if necessary, request the assistance of the municipal
police for the execution of any order made for said
purpose.
While the Commission is authorized to make rules for the
conduct of their business, it could not set at naught the
fundamental rule of all proceedings that only parties
having a real interest will be heard.
A party not affected or prejudiced cannot file an
opposition.
One public service corporation cannot assume the name
and be substituted in the place of another public service
corporation.
A legal representative of the estate of a deceased applicant
may be substituted for the latter. If the right consists in the
prosecution of unfinished proceedings upon an
application for a certificate of public convenience of the
deceased before the Public service Commission, it is but
logical that the legal representative be empowered and
entitled in behalf of the estate to make the right effective in
that proceeding.
One who has been granted a legislative franchise to
operate an ice plant, although not yet an operator of such
public utility, has sufficient interest or personality either to
oppose an established operator's application for an
increase in the capacity of his existing plant, or to ask for a
joint hearing of said application and the grantee's own
application for the issuance of a certificate of public
convenience in order to operate under such franchise.
The fact that a party is the lessee of a line does not bar him
from applying for a certificate of its own in the same line.
Even in cases where the owner of a certificate has sold it
subject to the condition that he would not apply for a
similar service on the same line sold by him, it has been
held that such an argument does not bar the seller from
39 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
applying and that the Public Service Commission, if it
finds that there is public need for the new service applied
for, may properly grant the certificate requested. In other
words the primary consideration is a finding by the
Commission that public interest and convenience require a
given service and that parties may not by agreement
deprive the Commission of its power.
A case involving the grant of a Certificate of Public
Convenience to the respondent becomes moot and
academic where the respondent ceases to be a bus
operator, and it should be dismissed.
Section 30. (a) The Commission may issue subpoenas and
subpoenas duces tecum, for witnesses in any matter or
inquiry pending before the Commission and require the
production of all books, papers, tariffs, contracts,
agreements, and all other documents, which the
Commission may deem necessary in any proceeding. such
process shall be issued under the seal of the Commission,
signed by one of the Commissioners or by the secretary,
and may be served by any person of full age, or by
registered mail. In case of disobedience to such subpoena,
the Commission may invoke the said of the Supreme
Court or of any Court of First Instance of the Philippines
in requiring the attendance and testimony of witness and
the production of books, papers, and documents under
the provisions of this chapter, and the Supreme Court, or
any Court of First Instance of the Philippines within the
jurisdiction of which such inquiry is carried on, may in
case of contumacy of refusal to obey a subpoena, issue to
any public service subject to the provisions of this Act, or
to any person, an order requiring such public service or
other person to appear before the Commission and
produce and papers if so ordered and give evidence
touching the matter; and any failure to obey such order of
the court may be punished by such court as a contempt
thereof.
(b) Any person who shall neglect or refuse to answer any
lawful inquiry or produce the Commission books, paper,
tariffs, contracts, agreements, and documents or other
things called for by said Commission, if in his power to do
so, in obedience to the subpoena or lawful inquiry of the
Commission, upon conviction thereof by a court of
competent jurisdiction, shall be punished by a fine not
exceeding five thousand pesos or by imprisonment not
exceeding one year, or both, in the discretion of the court.
Readings
(c) The Commissioner and associate commissioners, the
chiefs of divisions, the attorneys of the Commission, and
the deputy secretaries shall have the power to administer
oaths in all matters under the jurisdiction of the
Commission.
(d) Any person who shall testify falsely or make any false
affidavit or oath before the Commission or before any of
its members shall be guilty of perjury, and upon
conviction thereof in a court of competent jurisdiction,
shall be punished as provided by law.
(e) Witnesses appearing before the Commission in
obedience to subpoena or subpoena duces tecum, shall be
entitled to receive the same fees and mileage allowance as
witnesses attending Courts of First Instance in civil cases.
(f) Any person who shall obstruct the Commission or
either of the Commissioners while engaged in the
discharge of Official duties, or who shall conduct himself
in a rude, disrespectful or disorderly manner before the
Commission or either of the Commissioners, while
engaged in the discharge of official duties, or shall orally
or in writing be disrespectful to, offend or insult either of
the Commissioners on occasion or by reason of the
performance of official duties, upon conviction thereof by
a court of competent jurisdiction, shall be punished for
each offense by a fine not exceeding one thousand pesos,
or by imprisonment not exceeding six months, or both, in
the discretion of the court.
Section 31. No person shall be excused from testifying or
from producing any book, document, or paper in any
investigation or inquiry by or upon the hearing before the
Commission, when ordered so to do by said Commission,
except when the testimony or evidence required of him
may tend to incriminate him. Without the consent of the
interested party no member or employee of the
Commission shall be compelled or permitted to give
testimony in any civil suit to which the Commission is not
a party, with regard to secrets obtained by him in the
discharge of his official duty.
Section 32. The Commission may, in any investigation or
hearing, by its order in writing cause the deposition of
witnesses residing within or without the Philippines to be
taken in the manner prescribed by the Rules of Court.
Where witnesses reside in places distant from Manila and
it would be inconvenient and expensive for them to appear
personally before the Commission, the Commission may,
40 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
by proper order, commission any clerk of the Court of First
Instance, municipal judge or justice of the peace of the
Philippines to take the deposition of witnesses in any case
pending before the Commission. It shall be the duty of the
official so commissioned, to designated promptly a date or
dates for the taking of such deposition, giving timely
notice to the parties, and on said date to proceed to take
the deposition, reducing it to writing. After the
depositions have been taken, the official so commissioned
shall certify to the depositions taken and forward them as
soon as possible to the Commission. It shall be the duty of
the respective parties to furnish stenographers for taking
and transcribing the testimony taken. in case the are no
stenographers available, the testimony shall be taken in
long hand by such person as the clerk of court, the
municipal judge or justice of the peace may designate. The
Commission may also commission a notary public to take
the depositions in the same manner herein provided.
The Commission may also, by proper order, authorize any
of the attorneys of the legal division or division chiefs of
the Commission, if they be lawyers, to hear and investigate
any case filed, with the Commission and in connection
therewith to receive such evidence as may be material
thereto. At the conclusion of the hearing or investigation,
the attorney or division chief so authorized shall submit
the evidence received by him to the Commission to enable
the latter to render its decision. (As amended by Rep. Act
No. 723.)
Section 33. Every order made by the Commission shall be
served upon the person or public service affected thereby,
within ten days from the time said order is filed by
personal delivery or by ordinary mail, upon the attorney
of record, or in case there be no attorney of record, upon
the party interested; and in case such certified copy is sent
by registered mail, the registry mail receipt shall be prima
facie evidence of the receipt of such order by the public
service in due course of mail. All orders of the
Commission to continue an existing service or prescribing
rates to be charged shall be immediately operative; all
other orders shall become effective upon the dates
specified thereon: Provided, however, that orders,
resolutions or decisions in converted matters and not
referring to the continuance of an existing service or
prescribing rates to be charged shall not be effective unless
otherwise provided by the Commission, and shall take
effect thirty days after notice to the parties.
Readings
Section 34. Any interested party may request the
reconsideration of any order, ruling, or decision of the
Commission by means of a petition filed not later than
fifteen days after the date of the notice of the order, ruling,
or decision in question. The grounds on which the request
for reconsideration is based shall be clearly and
specifically stated in the petition. Copies of said petition
shall be served on all parties interested in the matter. It
shall be the duty of the Commission to call a hearing to
decide the same promptly, either denying the petition or
revoking or modifying the order, ruling or decision under
consideration.
Section 35. The Supreme Court is hereby given
jurisdiction to review any order, ruling, or decision of the
Commission and to modify or set aside such order, ruling,
or decision when it clearly appears that there was no
evidence before the Commission to support reasonably
such order, ruling, or decision, or that the same is contrary
to law, or that it was without the jurisdiction of the
Commission. The evidence presented to the Commission,
together with the record of the proceedings before the
Commission, shall be certified by the secretary of the
Commission to the Supreme Court. Any order, ruling, or
decision of the Commission may likewise be reviewed by
the Supreme Court upon a writ of certiorari in proper
cases. The procedure for review, except as herein
provided, shall be prescribed by rules of the Supreme
Court.
Section 36. Any other, ruling, or decision of the may be
reviewed on the application of any person or public
service affected thereby, by certiorari in appropriate cases,
or by petition, to be known as petition for review, which
shall be filed within thirty days from the notification of
such order, ruling or decision, or in case of a petition is
filed in accordance with the preceding section for the
reconsideration of such order, ruling or decision and the
same is denied it shall be filed within fifteen days after
notice of the order denying reconsideration. Said petition
shall be placed on file in the office of the Clerk of the
Supreme Court who shall furnish copies thereof to the
Secretary of the Commission and other parties interested.
Section 37. The institution of a writ of certiorari or other
special remedies in the Supreme Court shall in no case
supersede or stay any order, ruling or decision of the
Commission, unless the Supreme Court shall so direct,
and the appellant may be required by the Supreme Court
41 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
to give bond in such form and of such amount as may be
deemed proper.
Section 38. The chief of the legal division or any other
attorneys of the Commission shall represent the same in
all judicial proceedings. It shall be the duty of the Solicitor
General to represent the Commission in any judicial
proceedings if, for special reason, the Commissioner shall
request his intervention.
There is hereby created under the administrative
supervision of the Secretary of Justice an office to be
known as the Office of the People's Counsel in the Public
Service Commission. The people's Counsel shall have two
assistants and such number of employees as may be
necessary to perform the functions hereinafter specified.
The People's Counsel and his assistants shall be appointed
by the President of the Philippines with the consent of the
commission on appointments of the Congress of the
Philippines. The employees of the office of the People's
Counsel shall be appointed by the Secretary of Justice
upon recommendation of the People's Counsel.
The People's Counsel and his assistants shall posses the
qualifications of a provincial fiscal. The People's Counsel
shall receive compensation at the rate of seven thousand
two hundred pesos per annum, and the first and second
assistant's People's Counsel, at the rate of six thousand
pesos per annum each.
The People's Counsel, his assistants, and the employees of
the Office of the People's Counsel shall not, during their
continuance in office, intervene directly or indirectly in the
management or control of, or be financially interested
directly or indirectly in any public service as defined in
this Act.
It shall be the duty of the People's Counsel (1) to institute
proceedings before the Commission, in behalf of the
public, for the purpose of fixing just and reasonable rates
or charges to be followed and observed by public services
as herein defined, whenever he has reason to believe that
the existing rates or charges of such public services are
unjust and unreasonable or unjustly discriminatory; (2) to
represent and appear for the public before the
Commission or any court of the Philippines in every case
involving the interest of users of the products of, or service
furnished by any public service under the jurisdiction of
the Commission; (3) to represent and appear for
petitioners appearing before the Commission for the
Readings
purpose of complaining in matters of the rates and
services; (4) to investigate the service given by the rates
charged by, and the valuation of the properties of the
public services under the jurisdiction of the Commission,
and such other matters relating to said public services as
affect the interests of users of the products or service
thereof, and to take all the steps necessary for the
protection of the interests of the person or persons or of
the public affected thereby. In connection with such
investigation he is hereby empowered to issue subpoena or
subpoena duces tecum.
The People's Counsel is authorized to call upon and obtain
such assistance as he may deem necessary in the
performance of his duties from any officer or employee of
any department, bureau, office, agency, or instrumentality
of the government including corporations owned,
controlled or operated by the government. (As amended
by Rep. Act No. 178.)
Section 39. Any preceding in any court of the Philippines
directly affecting an order of the Commission or to which
the Commission is a party, shall have preference over all
other civil proceedings pending in such court, except
election cases.
CHAPTER VI
FEES
Section 40. The Commission is authorized and ordered to
charge and collect from any public service or applicant, as
the case may be, the following fees as reimbursement of its
expenses in the authorization, supervision and/or
regulation of public services:
The charge of fifty pesos for the registration of:
Applications under the provisions of Section sixteen (a),
(b), (c), and (d), and twenty (a), (b) (c), (e), (f), and (h):
Provided however, That in case of transportation services
an additional filing fee of five pesos shall be charged for
each additional unit or vehicle in excess of five units or
vehicles applied for: And provided, finally, That no filing
fee shall be collected for the reduction of rates if the same
does not alter or modify in any way the basic rates of the
schedule.
Applications for the approval or modification of
maximum rates under Section fourteen.
42 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Thirty pesos shall be collected from any operator of land
transportation for the registration of:
Applications under Section seventeen (f).
Applications for the extension of time covering a period of
thirty days for the registration of motor vehicles
previously authorized by the Commission.
The charge of thirty pesos for the filing of other
applications by any public service operator not specifically
provided for in the preceding paragraphs of this section
other than motions of a temporary or incidental character:
Provided, however, That fifteen pesos only shall be
collected for each certificate of public convenience or
certificate of public convenience and necessity in diploma
form issued to a public service operator.
For annual reimbursement of the expenses incurred by the
Commission for the supervision and regulation of the
operations of motor vehicle services:
For each automobile, ten pesos.
For each motor vehicle, truck, or trailer of less than two
tons gross transportation capacity, ten pesos.
For each motor vehicle, truck, or trailer of two tons or
more, but less than three tons gross transportation
capacity, twenty pesos.
For each motor vehicle, truck, or trailer of three tons or
more but less than four tons gross transportation capacity,
thirty pesos.
Motor vehicles, trucks, trailers or buses of four tons or
more gross capacity shall pay at the rate of ten pesos per
ton gross. The fees provided in paragraphs (d) and (e)
hereof shall be paid on or before September thirtieth of
each year with a penalty of fifty per centum in case of
delinquency: Provided, further, That if the fees or any
balance thereof are not paid within sixty days from the
said date, the penalty shall be increased by one per
centum for every month thereafter of delinquency:
Provided, however, That motor vehicles registered in the
Motor Vehicles Office after September thirtieth shall be
exempt from payment for said year.
For annual reimbursement of the expenses incurred by the
Commission in the supervision of other public services
Readings
and/or in the regulation or fixing of their rates, twenty
centavos for each one hundred pesos or fraction thereof, of
the capital stock subscribed or paid, or if no shares have
been issued, of the capital invested, or of the property and
equipment, whichever is higher.
For the issue or increase of capital stock, twenty centavos
for each one hundred pesos or fraction thereof, of the
increased capital.
For each permit authorizing the increase of equipment, the
installation of new units or authorizing the increase of
capacity. or the extension of means or general extension in
the services, twenty centavos for each one hundred pesos
or fraction of the additional capital necessary to carry out
the permit.
For the inspection or certification made in the meter
laboratory of the Commission or each apparatus or meter
used by any public service, four pesos, and for
examination made outside the meter laboratory of the
Commission, the additional expenses as may be incurred
in making the examination shall also be paid.
For certification of copies of official documents in the files
of the Commission, fifty centavos plus fifty centavos for
each page or folio so certified.
This section shall not be applicable to the Republic of the
Philippines, nor to its instrumentalities.
Aside from the appropriations for the Commission under
the annual General Appropriation Act, any unexpended
balance of the fees collected by the Commission under this
section shall be constituted receipts automatically
appropriated each year, and together with any surplus in
the standardizing meter laboratory revolving fund under
Commonwealth Act Numbered Three hundred forty-nine,
shall be disbursed by the Public Service Commissioner in
accordance with special budgets to be approved by the
Department of Justice, the Budget Commission and the
Office of the President of the Philippines for additional
needed personal services, maintenance and operating
expenses, acquisition of urgently needed vehicles,
furniture and equipment, maintenance of an adequate
reference library, acquisition of a lot and building for the
Commission, and other expenses necessary for efficient
administration and effective supervision and regulation of
public services. (As amended by Com. Act No. 454 and RA
No. 3792, approved June 22, 1963.)
43 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
CHAPTER VII
GENERAL AND TRANSITORY PROVISIONS
Section 41. A substantial compliance with the
requirements of this Act shall be sufficient to give effect to
all the rules, orders, acts and regulations of the
Commission and they shall not be declared inoperative,
illegal, or void for any omission of a technical nature in
respect thereto.
Section 42. Copies of all official documents and orders
filled or deposited in the office of the Commission,
certified by either of the commissioners, or by the
secretary to be true copy of the original, under the seal of
the Commission shall be evidence in like manner as the
originals in all courts of the Philippines.
Section 43. The Commission created under this Act shall
succeed the Commission created under Act numbered
thirty-one hundred and eight in the dispatch, hearing, and
determination of all pending matters before the latter; and
shall take charge of its archives, books, furniture,
equipment, and other properties of whatsoever nature.
Readings
Section 47. This Act shall take effect upon its approval.
Approved: November 7, 1936
CONSTITUTION: ARTICLE XII SECTION 11
Section 11. No franchise, certificate, or any other form of
authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to
corporations or associations organized under the laws of
the Philippines, at least sixty per centum of whose capital
is owned by such citizens; nor shall such franchise,
certificate, or authorization be exclusive in character or for
a longer period than fifty years. Neither shall any such
franchise or right be granted except under the condition
that it shall be subject to amendment, alteration, or repeal
by the Congress when the common good so requires. The
State shall encourage equity participation in public
utilities by the general public. The participation of foreign
investors in the governing body of any public utility
enterprise shall be limited to their proportionate share in
its capital, and all the executive and managing officers of
such corporation or association must be citizens of the
Philippines.

Section 44. In addition to the sum appropriated for the

former commission under Act numbered forty-one
hundred and thirty-two, the General Appropriation Act
for nineteen hundred and thirty-six, the sum of six
thousand seven hundred and sixty-eight pesos and thirty-
four centavos is hereby appropriated out of any funds in
the Philippines Treasury not otherwise; and in addition to
the sum appropriated under Act numbered thirty-eight,
the General Appropriation Act for nineteen hundred and
thirty-seven, the sum of twenty-three thousand six
hundred and ten pesos, or so much thereof as may be
necessary, is hereby appropriated, out of any funds in the
Philippines Treasury not otherwise appropriated, for
carrying out the purposes of this Act.

Section 45. If, any reason, any section, subsection,

sentence, clauses or terms of this Act is held to the
unconstitutional such decision shall not affect the validity
of the other provisions of this Act.

Section 46. Act numbered thirty-two hundred and forty-

seven and Act numbered thirty-five hundred and eighteen
shall continue in force and effect; but all provisions of Act
numbered thirty-one hundred and eight and amendments
thereof, and all other acts or parts or acts inconsistent with
the provisions of this Act are hereby repealed.
44 | P a g e | | Tr a n s p o r t a t i o n Law Assigned Readings
CASES Maritime Company of the Philippines the total amount
that the Maritime Company of the Philippines may
G.R. No. L-49407 August 19, 1988 voluntarily or by compliance to a writ of execution pay to
the plaintiff pursuant to the judgment rendered in this
NATIONAL DEVELOPMENT COMPANY, petitioner-
case.
appellant,
vs.
With costs against the defendant Maritime Company of
THE COURT OF APPEALS and DEVELOPMENT
the Philippines.
INSURANCE & SURETY
CORPORATION, respondents-appellees.
(pp. 34-35, Rollo, GR No. L-49469)

No. L-49469 August 19, 1988

The facts of these cases as found by the Court of Appeals,
are as follows:
MARITIME COMPANY OF THE
PHILIPPINES, petitioner-appellant,
The evidence before us shows that in accordance with a
vs.
memorandum agreement entered into between defendants
THE COURT OF APPEALS and DEVELOPMENT
NDC and MCP on September 13, 1962, defendant NDC as
INSURANCE & SURETY
the first preferred mortgagee of three ocean going vessels
CORPORATION, respondents- appellees.
including one with the name 'Dona Nati' appointed
defendant MCP as its agent to manage and operate said
Balgos & Perez Law Office for private respondent in both cases.
vessel for and in its behalf and account (Exh. A). Thus, on
February 28, 1964 the E. Philipp Corporation of New York
loaded on board the vessel "Dona Nati" at San Francisco,
California, a total of 1,200 bales of American raw cotton
PARAS, J.:
consigned to the order of Manila Banking Corporation,
Manila and the People's Bank and Trust Company acting
These are appeals by certiorari from the decision * of the
for and in behalf of the Pan Asiatic Commercial Company,
Court of Appeals in CA G.R. No: L- 46513-R entitled
Inc., who represents Riverside Mills Corporation (Exhs. K-
"Development Insurance and Surety Corporation plaintiff-
2 to K7-A & L-2 to L-7-A). Also loaded on the same vessel
appellee vs. Maritime Company of the Philippines and
at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa,
National Development Company defendant-appellants,"
Ltd., consigned to the order of Manila Banking
affirming in toto the decision ** in Civil Case No. 60641 of
Corporation consisting of 200 cartons of sodium lauryl
the then Court of First Instance of Manila, Sixth Judicial
sulfate and 10 cases of aluminum foil (Exhs. M & M-1). En
District, the dispositive portion of which reads:
route to Manila the vessel Dofia Nati figured in a collision
at 6:04 a.m. on April 15, 1964 at Ise Bay, Japan with a
WHEREFORE, judgment is hereby rendered ordering the
Japanese vessel 'SS Yasushima Maru' as a result of which
defendants National Development Company and
550 bales of aforesaid cargo of American raw cotton were
Maritime Company of the Philippines, to pay jointly and
lost and/or destroyed, of which 535 bales as damaged
severally, to the plaintiff Development Insurance and
were landed and sold on the authority of the General
Surety Corp., the sum of THREE HUNDRED SIXTY
Average Surveyor for Yen 6,045,-500 and 15 bales were not
FOUR THOUSAND AND NINE HUNDRED FIFTEEN
landed and deemed lost (Exh. G). The damaged and lost
PESOS AND EIGHTY SIX CENTAVOS (364,915.86) with
cargoes was worth P344,977.86 which amount, the plaintiff
the legal interest thereon from the filing of plaintiffs
as insurer, paid to the Riverside Mills Corporation as
complaint on April 22, 1965 until fully paid, plus TEN
holder of the negotiable bills of lading duly endorsed
THOUSAND PESOS (Pl0,000.00) by way of damages as
(Exhs. L-7-A, K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3
and for attorney's fee.
and R-3}. Also considered totally lost were the aforesaid
shipment of Kyokuto, Boekui Kaisa Ltd., consigned to the
On defendant Maritime Company of the Philippines'
order of Manila Banking Corporation, Manila, acting for
cross-claim against the defendant National Development
Guilcon, Manila, The total loss was P19,938.00 which the
Company, judgment is hereby rendered, ordering the
plaintiff as insurer paid to Guilcon as holder of the duly
National Development Company to pay the cross-claimant
45 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
endorsed bill of lading (Exhibits M-1 and S-3). Thus, the
plaintiff had paid as insurer the total amount of
P364,915.86 to the consignees or their successors-in-
interest, for the said lost or damaged cargoes. Hence,
plaintiff filed this complaint to recover said amount from
the defendants-NDC and MCP as owner and ship agent
respectively, of the said 'Dofia Nati' vessel. (Rollo, L-49469,
p.38)
On April 22, 1965, the Development Insurance and Surety
Corporation filed before the then Court of First Instance of
Manila an action for the recovery of the sum of
P364,915.86 plus attorney's fees of P10,000.00 against NDC
and MCP (Record on Appeal), pp. 1-6).
Interposing the defense that the complaint states no cause
of action and even if it does, the action has prescribed,
MCP filed on May 12, 1965 a motion to dismiss (Record on
Appeal, pp. 7-14). DISC filed an Opposition on May 21,
1965 to which MCP filed a reply on May 27, 1965 (Record
on Appeal, pp. 14-24). On June 29, 1965, the trial court
deferred the resolution of the motion to dismiss till after
the trial on the merits (Record on Appeal, p. 32). On June
8, 1965, MCP filed its answer with counterclaim and cross-
claim against NDC.
NDC, for its part, filed its answer to DISC's complaint on
May 27, 1965 (Record on Appeal, pp. 22-24). It also filed an
answer to MCP's cross-claim on July 16, 1965 (Record on
Appeal, pp. 39-40). However, on October 16, 1965, NDC's
answer to DISC's complaint was stricken off from the
record for its failure to answer DISC's written
interrogatories and to comply with the trial court's order
dated August 14, 1965 allowing the inspection or
photographing of the memorandum of agreement it
executed with MCP. Said order of October 16, 1965
likewise declared NDC in default (Record on Appeal, p.
44). On August 31, 1966, NDC filed a motion to set aside
the order of October 16, 1965, but the trial court denied it
in its order dated September 21, 1966.
On November 12, 1969, after DISC and MCP presented
their respective evidence, the trial court rendered a
decision ordering the defendants MCP and NDC to pay
jointly and solidarity to DISC the sum of P364,915.86 plus
the legal rate of interest to be computed from the filing of
the complaint on April 22, 1965, until fully paid and
attorney's fees of P10,000.00. Likewise, in said decision, the
trial court granted MCP's crossclaim against NDC.
Readings
MCP interposed its appeal on December 20, 1969, while
NDC filed its appeal on February 17, 1970 after its motion
to set aside the decision was denied by the trial court in its
order dated February 13,1970.
On November 17,1978, the Court of Appeals promulgated
its decision affirming in toto the decision of the trial court.
Hence these appeals by certiorari.
NDC's appeal was docketed as G.R. No. 49407, while that
of MCP was docketed as G.R. No. 49469. On July 25,1979,
this Court ordered the consolidation of the above cases
(Rollo, p. 103). On August 27,1979, these consolidated
cases were given due course (Rollo, p. 108) and submitted
for decision on February 29, 1980 (Rollo, p. 136).
In its brief, NDC cited the following assignments of error:
I
THE COURT OF APPEALS ERRED IN APPLYING
ARTICLE 827 OF THE CODE OF COMMERCE AND NOT
SECTION 4(2a) OF COMMONWEALTH ACT NO. 65,
OTHERWISE KNOWN AS THE CARRIAGE OF GOODS
BY SEA ACT IN DETERMINING THE LIABILITY FOR
LOSS OF CARGOES RESULTING FROM THE
COLLISION OF ITS VESSEL "DONA NATI" WITH THE
YASUSHIMA MARU"OCCURRED AT ISE BAY, JAPAN
OR OUTSIDE THE TERRITORIAL JURISDICTION OF
THE PHILIPPINES.
II
THE COURT OF APPEALS ERRED IN NOT DISMISSING
THE C0MPLAINT FOR REIMBURSEMENT FILED BY
THE INSURER, HEREIN PRIVATE RESPONDENT-
APPELLEE, AGAINST THE CARRIER, HEREIN
PETITIONER-APPELLANT. (pp. 1-2, Brief for Petitioner-
Appellant National Development Company; p. 96, Rollo).
On its part, MCP assigned the following alleged errors:
I
THE RESPONDENT COURT OF APPEALS ERRED IN
NOT HOLDING THAT RESPONDENT DEVELOPMENT
INSURANCE AND SURETY CORPORATION HAS NO
CAUSE OF ACTION AS AGAINST PETITIONER
46 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
MARITIME COMPANY OF THE PHILIPPINES AND IN
NOT DISMISSING THE COMPLAINT.
II
THE RESPONDENT COURT OF APPEALS ERRED IN
NOT HOLDING THAT THE CAUSE OF ACTION OF
RESPONDENT DEVELOPMENT INSURANCE AND
SURETY CORPORATION IF ANY EXISTS AS AGAINST
HEREIN PETITIONER MARITIME COMPANY OF THE
PHILIPPINES IS BARRED BY THE STATUTE OF
LIMITATION AND HAS ALREADY PRESCRIBED.
III
THE RESPONDENT COURT OF APPEALS ERRED IN
ADMITTING IN EVIDENCE PRIVATE RESPONDENTS
EXHIBIT "H" AND IN FINDING ON THE BASIS
THEREOF THAT THE COLLISION OF THE SS DONA
NATI AND THE YASUSHIMA MARU WAS DUE TO THE
FAULT OF BOTH VESSELS INSTEAD OF FINDING
THAT THE COLLISION WAS CAUSED BY THE FAULT,
NEGLIGENCE AND LACK OF SKILL OF THE
COMPLEMENTS OF THE YASUSHIMA MARU
WITHOUT THE FAULT OR NEGLIGENCE OF THE
COMPLEMENT OF THE SS DONA NATI
IV
THE RESPONDENT COURT OF APPEALS ERRED IN
HOLDING THAT UNDER THE CODE OF COMMERCE
PETITIONER APPELLANT MARITIME COMPANY OF
THE PHILIPPINES IS A SHIP AGENT OR NAVIERO OF
SS DONA NATI OWNED BY CO-PETITIONER
APPELLANT NATIONAL DEVELOPMENT COMPANY
AND THAT SAID PETITIONER-APPELLANT IS
SOLIDARILY LIABLE WITH SAID CO-PETITIONER FOR
LOSS OF OR DAMAGES TO CARGO RESULTING IN
THE COLLISION OF SAID VESSEL, WITH THE
JAPANESE YASUSHIMA MARU.
V insurance company for the amount the latter paid to the
THE RESPONDENT COURT OF APPEALS ERRED IN
FINDING THAT THE LOSS OF OR DAMAGES TO THE
CARGO OF 550 BALES OF AMERICAN RAW COTTON,
DAMAGES WERE CAUSED IN THE AMOUNT OF
P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00 PER
BALE AS ESTABLISHED IN THE BILLS OF LADING
AND ALSO IN HOLDING THAT PARAGRAPH 1O OF
Readings
THE BILLS OF LADING HAS NO APPLICATION IN
THE INSTANT CASE THERE BEING NO GENERAL
AVERAGE TO SPEAK OF.
VI
THE RESPONDENT COURT OF APPEALS ERRED IN
HOLDING THE PETITIONERS NATIONAL
DEVELOPMENT COMPANY AND COMPANY OF THE
PHILIPPINES TO PAY JOINTLY AND SEVERALLY TO
HEREIN RESPONDENT DEVELOPMENT INSURANCE
AND SURETY CORPORATION THE SUM OF P364,915.86
WITH LEGAL INTEREST FROM THE FILING OF THE
COMPLAINT UNTIL FULLY PAID PLUS P10,000.00 AS
AND FOR ATTORNEYS FEES INSTEAD OF
SENTENCING SAID PRIVATE RESPONDENT TO PAY
HEREIN PETITIONERS ITS COUNTERCLAIM IN THE
AMOUNT OF P10,000.00 BY WAY OF ATTORNEY'S FEES
AND THE COSTS. (pp. 1-4, Brief for the Maritime
Company of the Philippines; p. 121, Rollo)
The pivotal issue in these consolidated cases is the
determination of which laws govern loss or destruction of
goods due to collision of vessels outside Philippine waters,
and the extent of liability as well as the rules of
prescription provided thereunder.
The main thrust of NDC's argument is to the effect that the
Carriage of Goods by Sea Act should apply to the case at
bar and not the Civil Code or the Code of Commerce.
Under Section 4 (2) of said Act, the carrier is not
responsible for the loss or damage resulting from the "act,
neglect or default of the master, mariner, pilot or the
servants of the carrier in the navigation or in the
management of the ship." Thus, NDC insists that based on
the findings of the trial court which were adopted by the
Court of Appeals, both pilots of the colliding vessels were
at fault and negligent, NDC would have been relieved of
liability under the Carriage of Goods by Sea Act. Instead,
Article 287 of the Code of Commerce was applied and
both NDC and MCP were ordered to reimburse the
consignee as earlier stated.
This issue has already been laid to rest by this Court of
Eastern Shipping Lines Inc. v. IAC (1 50 SCRA 469-470
[1987]) where it was held under similar circumstance "that
the law of the country to which the goods are to be
transported governs the liability of the common carrier in
case of their loss, destruction or deterioration" (Article
47 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
1753, Civil Code). Thus, the rule was specifically laid
down that for cargoes transported from Japan to the
Philippines, the liability of the carrier is governed
primarily by the Civil Code and in all matters not
regulated by said Code, the rights and obligations of
common carrier shall be governed by the Code of
commerce and by laws (Article 1766, Civil Code). Hence,
the Carriage of Goods by Sea Act, a special law, is merely
suppletory to the provision of the Civil Code.
In the case at bar, it has been established that the goods in
question are transported from San Francisco, California
and Tokyo, Japan to the Philippines and that they were
lost or due to a collision which was found to have been
caused by the negligence or fault of both captains of the
colliding vessels. Under the above ruling, it is evident that
the laws of the Philippines will apply, and it is immaterial
that the collision actually occurred in foreign waters, such
as Ise Bay, Japan.
Under Article 1733 of the Civil Code, common carriers
from the nature of their business and for reasons of public
policy are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the
passengers transported by them according to all
circumstances of each case. Accordingly, under Article
1735 of the same Code, in all other than those mentioned
is Article 1734 thereof, the common carrier shall be
presumed to have been at fault or to have acted negigently,
unless it proves that it has observed the extraordinary
diligence required by law.
It appears, however, that collision falls among matters not
specifically regulated by the Civil Code, so that no
reversible error can be found in respondent courses
application to the case at bar of Articles 826 to 839, Book
Three of the Code of Commerce, which deal exclusively
with collision of vessels.
More specifically, Article 826 of the Code of Commerce
provides that where collision is imputable to the personnel
of a vessel, the owner of the vessel at fault, shall indemnify
the losses and damages incurred after an expert appraisal.
But more in point to the instant case is Article 827 of the
same Code, which provides that if the collision is
imputable to both vessels, each one shall suffer its own
damages and both shall be solidarily responsible for the
losses and damages suffered by their cargoes.
Readings
Significantly, under the provisions of the Code of
Commerce, particularly Articles 826 to 839, the shipowner
or carrier, is not exempt from liability for damages arising
from collision due to the fault or negligence of the captain.
Primary liability is imposed on the shipowner or carrier in
recognition of the universally accepted doctrine that the
shipmaster or captain is merely the representative of the
owner who has the actual or constructive control over the
conduct of the voyage (Y'eung Sheng Exchange and
Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that
the Code of Commerce should apply only to domestic
trade and not to foreign trade. Aside from the fact that the
Carriage of Goods by Sea Act (Com. Act No. 65) does not
specifically provide for the subject of collision, said Act in
no uncertain terms, restricts its application "to all contracts
for the carriage of goods by sea to and from Philippine
ports in foreign trade." Under Section I thereof, it is
explicitly provided that "nothing in this Act shall be
construed as repealing any existing provision of the Code
of Commerce which is now in force, or as limiting its
application." By such incorporation, it is obvious that said
law not only recognizes the existence of the Code of
Commerce, but more importantly does not repeal nor limit
its application.
On the other hand, Maritime Company of the Philippines
claims that Development Insurance and Surety
Corporation, has no cause of action against it because the
latter did not prove that its alleged subrogers have either
the ownership or special property right or beneficial
interest in the cargo in question; neither was it proved that
the bills of lading were transferred or assigned to the
alleged subrogers; thus, they could not possibly have
transferred any right of action to said plaintiff- appellee in
this case. (Brief for the Maritime Company of the
Philippines, p. 16).
The records show that the Riverside Mills Corporation
and Guilcon, Manila are the holders of the duly endorsed
bills of lading covering the shipments in question and an
examination of the invoices in particular, shows that the
actual consignees of the said goods are the
aforementioned companies. Moreover, no less than MCP
itself issued a certification attesting to this fact.
Accordingly, as it is undisputed that the insurer, plaintiff
appellee paid the total amount of P364,915.86 to said
consignees for the loss or damage of the insured cargo, it
is evident that said plaintiff-appellee has a cause of action
48 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
to recover (what it has paid) from defendant-appellant
MCP (Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p. 43).
MCP next contends that it can not be liable solidarity with
NDC because it is merely the manager and operator of the
vessel Dona Nati not a ship agent. As the general
managing agent, according to MCP, it can only be liable if
it acted in excess of its authority.
As found by the trial court and by the Court of Appeals,
the Memorandum Agreement of September 13, 1962
(Exhibit 6, Maritime) shows that NDC appointed MCP as
Agent, a term broad enough to include the concept of
Ship-agent in Maritime Law. In fact, MCP was even
conferred all the powers of the owner of the vessel,
including the power to contract in the name of the NDC
(Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40).
Consequently, under the circumstances, MCP cannot
escape liability.
It is well settled that both the owner and agent of the
offending vessel are liable for the damage done where
both are impleaded (Philippine Shipping Co. v. Garcia
Vergara, 96 Phil. 281 [1906]); that in case of collision, both
the owner and the agent are civilly responsible for the acts
of the captain (Yueng Sheng Exchange and Trading Co. v.
Urrutia & Co., supra citing Article 586 of the Code of
Commerce; Standard Oil Co. of New York v. Lopez
Castelo, 42 Phil. 256, 262 [1921]); that while it is true that
the liability of the naviero in the sense of charterer or agent,
is not expressly provided in Article 826 of the Code of
Commerce, it is clearly deducible from the general
doctrine of jurisprudence under the Civil Code but more
specially as regards contractual obligations in Article 586
of the Code of Commerce. Moreover, the Court held that
both the owner and agent (Naviero) should be declared
jointly and severally liable, since the obligation which is
the subject of the action had its origin in a tortious act and
did not arise from contract (Verzosa and Ruiz, Rementeria
y Cia v. Lim, 45 Phil. 423 [1923]). Consequently, the agent,
even though he may not be the owner of the vessel, is
liable to the shippers and owners of the cargo transported
by it, for losses and damages occasioned to such cargo,
without prejudice, however, to his rights against the owner
of the ship, to the extent of the value of the vessel, its
equipment, and the freight (Behn Meyer Y Co. v.
McMicking et al. 11 Phil. 276 [1908]).
As to the extent of their liability, MCP insists that their
liability should be limited to P200.00 per package or per
Readings
bale of raw cotton as stated in paragraph 17 of the bills of
lading. Also the MCP argues that the law on averages
should be applied in determining their liability.
MCP's contention is devoid of merit. The declared value of
the goods was stated in the bills of lading and
corroborated no less by invoices offered as evidence '
during the trial. Besides, common carriers, in the language
of the court in Juan Ysmael & Co., Inc. v. Barrette et al., (51
Phil. 90 [1927]) "cannot limit its liability for injury to a loss
of goods where such injury or loss was caused by its own
negligence." Negligence of the captains of the colliding
vessel being the cause of the collision, and the cargoes not
being jettisoned to save some of the cargoes and the vessel,
the trial court and the Court of Appeals acted correctly in
not applying the law on averages (Articles 806 to 818,
Code of Commerce).
MCP's claim that the fault or negligence can only be
attributed to the pilot of the vessel SS Yasushima Maru
and not to the Japanese Coast pilot navigating the vessel
Dona Nati need not be discussed lengthily as said claim is
not only at variance with NDC's posture, but also contrary
to the factual findings of the trial court affirmed no less by
the Court of Appeals, that both pilots were at fault for not
changing their excessive speed despite the thick fog
obstructing their visibility.
Finally on the issue of prescription, the trial court correctly
found that the bills of lading issued allow trans-shipment
of the cargo, which simply means that the date of arrival
of the ship Dona Nati on April 18,1964 was merely
tentative to give allowances for such contingencies that
said vessel might not arrive on schedule at Manila and
therefore, would necessitate the trans-shipment of cargo,
resulting in consequent delay of their arrival. In fact,
because of the collision, the cargo which was supposed to
arrive in Manila on April 18, 1964 arrived only on June 12,
13, 18, 20 and July 10, 13 and 15, 1964. Hence, had the
cargoes in question been saved, they could have arrived in
Manila on the above-mentioned dates. Accordingly, the
complaint in the instant case was filed on April 22, 1965,
that is, long before the lapse of one (1) year from the date
the lost or damaged cargo "should have been delivered" in
the light of Section 3, sub-paragraph (6) of the Carriage of
Goods by Sea Act.
PREMISES CONSIDERED, the subject petitions are
DENIED for lack of merit and the assailed decision of the
respondent Appellate Court is AFFIRMED.
49 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
SO ORDERED.
G.R. No. 114222 April 6, 1995
FRANCISCO S. TATAD, JOHN H. OSMENA and
RODOLFO G. BIAZON, petitioners,
vs.
HON. JESUS B. GARCIA, JR., in his capacity as the
Secretary of the Department of Transportation and
Communications, and EDSA LRT CORPORATION,
LTD., respondents.
QUIASON, J.:
This is a petition under Rule 65 of the Revised Rules of
Court to prohibit respondents from further implementing
and enforcing the "Revised and Restated Agreement to
Build, Lease and Transfer a Light Rail Transit System for
EDSA" dated April 22, 1992, and the "Supplemental
Agreement to the 22 April 1992 Revised and Restated
Agreement To Build, Lease and Transfer a Light Rail
Transit System for EDSA" dated May 6, 1993.
Petitioners Francisco S. Tatad, John H. Osmena and
Rodolfo G. Biazon are members of the Philippine Senate
and are suing in their capacities as Senators and as
taxpayers. Respondent Jesus B. Garcia, Jr. is the incumbent
Secretary of the Department of Transportation and
Communications (DOTC), while private respondent EDSA
LRT Corporation, Ltd. is a private corporation organized
under the laws of Hongkong.
I ten foreign and domestic corporations: namely, Kaiser
In 1989, DOTC planned to construct a light railway transit
line along EDSA, a major thoroughfare in Metropolitan
Manila, which shall traverse the cities of Pasay, Quezon,
Mandaluyong and Makati. The plan, referred to as EDSA
Light Rail Transit III (EDSA LRT III), was intended to
provide a mass transit system along EDSA and alleviate
the congestion and growing transportation problem in the
metropolis.
On March 3, 1990, a letter of intent was sent by the Eli
Levin Enterprises, Inc., represented by Elijahu Levin to
DOTC Secretary Oscar Orbos, proposing to construct the
EDSA LRT III on a Build-Operate-Transfer (BOT) basis.
On March 15, 1990, Secretary Orbos invited Levin to send
a technical team to discuss the project with DOTC.
Readings
On July 9, 1990, Republic Act No. 6957 entitled "An Act
Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private
Sector, and For Other Purposes," was signed by President
Corazon C. Aquino. Referred to as the Build-Operate-
Transfer (BOT) Law, it took effect on October 9, 1990.
Republic Act No. 6957 provides for two schemes for the
financing, construction and operation of government
projects through private initiative and investment: Build-
Operate-Transfer (BOT) or Build-Transfer (BT).
In accordance with the provisions of R.A. No. 6957 and to
set the EDSA LRT III project underway, DOTC, on January
22, 1991 and March 14, 1991, issued Department Orders
Nos. 91-494 and 91-496, respectively creating the
Prequalification Bids and Awards Committee (PBAC) and
the Technical Committee.
After its constitution, the PBAC issued guidelines for the
prequalification of contractors for the financing and
implementation of the project The notice, advertising the
prequalification of bidders, was published in three
newspapers of general circulation once a week for three
consecutive weeks starting February 21, 1991.
The deadline set for submission of prequalification
documents was March 21, 1991, later extended to April 1,
1991. Five groups responded to the invitation namely, ABB
Trazione of Italy, Hopewell Holdings Ltd. of Hongkong,
Mansteel International of Mandaue, Cebu, Mitsui & Co.,
Ltd. of Japan, and EDSA LRT Consortium, composed of
Engineers International, Inc., ACER Consultants (Far East)
Ltd. and Freeman Fox, Tradeinvest/CKD Tatra of the
Czech and Slovak Federal Republics, TCGI Engineering
All Asia Capital and Leasing Corporation, The Salim
Group of Jakarta, E. L. Enterprises, Inc., A.M. Oreta & Co.
Capitol Industrial Construction Group, Inc, and F. F. Cruz
& co., Inc.
On the last day for submission of prequalification
documents, the prequalification criteria proposed by the
Technical Committee were adopted by the PBAC. The
criteria totalling 100 percent, are as follows: (a) Legal
aspects 10 percent; (b) Management/Organizational
capability 30 percent; and (c) Financial capability 30
percent; and (d) Technical capability 30 percent (Rollo,
p. 122).
50 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
On April 3, 1991, the Committee, charged under the BOT
Law with the formulation of the Implementation Rules
and Regulations thereof, approved the same.
After evaluating the prequalification, bids, the PBAC
issued a Resolution on May 9, 1991 declaring that of the
five applicants, only the EDSA LRT Consortium "met the
requirements of garnering at least 21 points per criteria
[sic], except for Legal Aspects, and obtaining an over-all
passing mark of at least 82 points" (Rollo, p. 146). The
Legal Aspects referred to provided that the BOT/BT
contractor-applicant meet the requirements specified in
the Constitution and other pertinent laws (Rollo, p. 114).
Subsequently, Secretary Orbos was appointed Executive
Secretary to the President of the Philippines and was
replaced by Secretary Pete Nicomedes Prado. The latter
sent to President Aquino two letters dated May 31, 1991
and June 14, 1991, respectively recommending the award
of the EDSA LRT III project to the sole complying bidder,
the EDSA LRT Consortium, and requesting for authority
to negotiate with the said firm for the contract pursuant to
paragraph 14(b) of the Implementing Rules and
Regulations of the BOT Law (Rollo, pp. 298-302).
In July 1991, Executive Secretary Orbos, acting on
instructions of the President, issued a directive to the
DOTC to proceed with the negotiations. On July 16, 1991,
the EDSA LRT Consortium submitted its bid proposal to
DOTC.
Finding this proposal to be in compliance with the bid
requirements, DOTC and respondent EDSA LRT
Corporation, Ltd., in substitution of the EDSA LRT
Consortium, entered into an "Agreement to Build, Lease
and Transfer a Light Rail Transit System for EDSA" under
the terms of the BOT Law (Rollo, pp. 147-177).
Secretary Prado, thereafter, requested presidential
approval of the contract.
In a letter dated March 13, 1992, Executive Secretary
Franklin Drilon, who replaced Executive Secretary Orbos,
informed Secretary Prado that the President could not
grant the requested approval for the following reasons: (1)
that DOTC failed to conduct actual public bidding in
compliance with Section 5 of the BOT Law; (2) that the law
authorized public bidding as the only mode to award BOT
projects, and the prequalification proceedings was not the
public bidding contemplated under the law; (3) that Item
Readings
14 of the Implementing Rules and Regulations of the BOT
Law which authorized negotiated award of contract in
addition to public bidding was of doubtful legality; and (4)
that congressional approval of the list of priority projects
under the BOT or BT Scheme provided in the law had not
yet been granted at the time the contract was awarded
(Rollo, pp. 178-179).
In view of the comments of Executive Secretary Drilon, the
DOTC and private respondents re-negotiated the
agreement. On April 22, 1992, the parties entered into a
"Revised and Restated Agreement to Build, Lease and
Transfer a Light Rail Transit System for EDSA" (Rollo, pp.
47-78) inasmuch as "the parties [are] cognizant of the fact
the DOTC has full authority to sign the Agreement
without need of approval by the President pursuant to the
provisions of Executive Order No. 380 and that certain
events [had] supervened since November 7, 1991 which
necessitate[d] the revision of the Agreement" (Rollo, p. 51).
On May 6, 1992, DOTC, represented by Secretary Jesus
Garcia vice Secretary Prado, and private respondent
entered into a "Supplemental Agreement to the 22 April
1992 Revised and Restated Agreement to Build, Lease and
Transfer a Light Rail Transit System for EDSA" so as to
"clarify their respective rights and responsibilities" and to
submit [the] Supplemental Agreement to the President, of
the Philippines for his approval" (Rollo, pp. 79-80).
Secretary Garcia submitted the two Agreements to
President Fidel V. Ramos for his consideration and
approval. In a Memorandum to Secretary Garcia on May 6,
1993, approved the said Agreements, (Rollo, p. 194).
According to the agreements, the EDSA LRT III will use
light rail vehicles from the Czech and Slovak Federal
Republics and will have a maximum carrying capacity of
450,000 passengers a day, or 150 million a year to be
achieved-through 54 such vehicles operating
simultaneously. The EDSA LRT III will run at grade, or
street level, on the mid-section of EDSA for a distance of
17.8 kilometers from F.B. Harrison, Pasay City to North
Avenue, Quezon City. The system will have its own power
facility (Revised and Restated Agreement, Sec. 2.3
(ii); Rollo p. 55). It will also have thirteen (13) passenger
stations and one depot in 16-hectare government property
at North Avenue (Supplemental Agreement, Sec. 11; Rollo,
pp. 91-92).
Private respondents shall undertake and finance the entire
project required for a complete operational light rail
51 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
transit system (Revised and Restated Agreement, Sec.
4.1; Rollo, p. 58). Target completion date is 1,080 days or
approximately three years from the implementation date
of the contract inclusive of mobilization, site works, initial
and final testing of the system (Supplemental Agreement,
Sec. 5; Rollo, p. 83). Upon full or partial completion and
viability thereof, private respondent shall deliver the use
and possession of the completed portion to DOTC which
shall operate the same (Supplemental Agreement, Sec. 5;
Revised and Restated Agreement, Sec. 5.1; Rollo, pp. 61-62,
84). DOTC shall pay private respondent rentals on a
monthly basis through an Irrevocable Letter of Credit. The
rentals shall be determined by an independent and
internationally accredited inspection firm to be appointed
by the parties (Supplemental Agreement, Sec. 6; Rollo, pp.
85-86) As agreed upon, private respondent's capital shall
be recovered from the rentals to be paid by the DOTC
which, in turn, shall come from the earnings of the EDSA
LRT III (Revised and Restated Agreement, Sec. 1, p.
5; Rollo, p. 54). After 25 years and DOTC shall have
completed payment of the rentals, ownership of the
project shall be transferred to the latter for a consideration
of only U.S. $1.00 (Revised and Restated Agreement, Sec.
11.1; Rollo, p. 67).
On May 5, 1994, R.A. No. 7718, an "Act Amending Certain
Sections of Republic Act No. 6957, Entitled "An Act
Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private
Sector, and for Other Purposes" was signed into law by the
President. The law was published in two newspapers of
general circulation on May 12, 1994, and took effect 15
days thereafter or on May 28, 1994. The law expressly
recognizes BLT scheme and allows direct negotiation of
BLT contracts.
II
In their petition, petitioners argued that:
THE AGREEMENT OF APRIL 22, 1992, AS AMENDED
BY THE SUPPLEMENTAL AGREEMENT OF MAY 6,
1993, INSOFAR AS IT GRANTS EDSA LRT
CORPORATION, LTD., A FOREIGN CORPORATION,
THE OWNERSHIP OF EDSA LRT III, A PUBLIC UTILITY,
VIOLATES THE CONSTITUTION AND, HENCE, IS
UNCONSTITUTIONAL;
THE BUILD-LEASE-TRANSFER SCHEME PROVIDED IN
THE AGREEMENTS IS NOT DEFINED NOR
Readings
RECOGNIZED IN R.A. NO. 6957 OR ITS
IMPLEMENTING RULES AND REGULATIONS AND,
HENCE, IS ILLEGAL;
THE AWARD OF THE CONTRACT ON A NEGOTIATED
BASIS VIOLATES R; A. NO. 6957 AND, HENCE, IS
UNLAWFUL;
THE AWARD OF THE CONTRACT IN FAVOR OF
RESPONDENT EDSA LRT CORPORATION, LTD.
VIOLATES THE REQUIREMENTS PROVIDED IN THE
IMPLEMENTING RULES AND REGULATIONS OF THE
BOT LAW AND, HENCE, IS ILLEGAL;
THE AGREEMENTS VIOLATE EXECUTIVE ORDER NO
380 FOR THEIR FAILURE TO BEAR PRESIDENTIAL
APPROVAL AND, HENCE, ARE ILLEGAL AND
INEFFECTIVE; AND
THE AGREEMENTS ARE GROSSLY
DISADVANTAGEOUS TO THE GOVERNMENT (Rollo,
pp. 15-16).
Secretary Garcia and private respondent filed their
comments separately and claimed that:
Petitioners are not the real parties-in-interest and have no
legal standing to institute the present petition;
The writ of prohibition is not the proper remedy and the
petition requires ascertainment of facts;
The scheme adopted in the Agreements is actually a build-
transfer scheme allowed by the BOT Law;
The nationality requirement for public utilities mandated
by the Constitution does not apply to private respondent;
The Agreements executed by and between respondents
have been approved by President Ramos and are not
disadvantageous to the government;
The award of the contract to private respondent through
negotiation and not public bidding is allowed by the BOT
Law; and
Granting that the BOT Law requires public bidding, this
has been amended by R.A No. 7718 passed by the
Legislature On May 12, 1994, which provides for direct
negotiation as a mode of award of infrastructure projects.
52 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
III
Respondents claimed that petitioners had no legal
standing to initiate the instant action. Petitioners, however,
countered that the action was filed by them in their
capacity as Senators and as taxpayers.
The prevailing doctrines in taxpayer's suits are to allow
taxpayers to question contracts entered into by the
national government or government-owned or controlled
corporations allegedly in contravention of the law
(Kilosbayan, Inc. v. Guingona, 232 SCRA 110 [1994]) and to
disallow the same when only municipal contracts are
involved (Bugnay Construction and Development
Corporation v. Laron, 176 SCRA. 240 [1989]).
For as long as the ruling in Kilosbayan on locus standi is not
reversed, we have no choice but to follow it and uphold
the legal standing of petitioners as taxpayers to institute
the present action.
IV
In the main, petitioners asserted that the Revised and
Restated Agreement of April 22, 1992 and the
Supplemental Agreement of May 6, 1993 are
unconstitutional and invalid for the following reasons:
the EDSA LRT III is a public utility, and the ownership and
operation thereof is limited by the Constitution to Filipino
citizens and domestic corporations, not foreign
corporations like private respondent;
the Build-Lease-Transfer (BLT) scheme provided in the
agreements is not the BOT or BT Scheme under the law;
the contract to construct the EDSA LRT III was awarded to
private respondent not through public bidding which is
the only mode of awarding infrastructure projects under
the BOT law; and
the agreements are grossly disadvantageous to the
government.
Private respondent EDSA LRT Corporation, Ltd. to whom
the contract to construct the EDSA LRT III was awarded by
public respondent, is admittedly a foreign corporation
"duly incorporated and existing under the laws of
Hongkong" (Rollo, pp. 50, 79). There is also no dispute that
once the EDSA LRT III is constructed, private respondent,
Readings
as lessor, will turn it over to DOTC, as lessee, for the latter
to operate the system and pay rentals for said use.
The question posed by petitioners is:
Can respondent EDSA LRT Corporation, Ltd., a foreign
corporation own EDSA LRT III; a public utility? (Rollo, p.
17).
The phrasing of the question is erroneous; it is loaded.
What private respondent owns are the rail tracks, rolling
stocks like the coaches, rail stations, terminals and the
power plant, not a public utility. While a franchise is
needed to operate these facilities to serve the public, they
do not by themselves constitute a public utility. What
constitutes a public utility is not their ownership but their
use to serve the public (Iloilo Ice & Cold Storage Co. v.
Public Service Board, 44 Phil. 551, 557 558 [1923]).
The Constitution, in no uncertain terms, requires a
franchise for the operation of a public utility. However, it
does not require a franchise before one can own the
facilities needed to operate a public utility so long as it
does not operate them to serve the public.
Section 11 of Article XII of the Constitution provides:
No franchise, certificate or any other form of authorization
for the operation of a public utility shall be granted except to
citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines at
least sixty per centum of whose capital is owned by such
citizens, nor shall such franchise, certificate or
authorization be exclusive character or for a longer period
than fifty years . . . (Emphasis supplied).
In law, there is a clear distinction between the "operation"
of a public utility and the ownership of the facilities and
equipment used to serve the public.
Ownership is defined as a relation in law by virtue of
which a thing pertaining to one person is completely
subjected to his will in everything not prohibited by law or
the concurrence with the rights of another (Tolentino, II
Commentaries and Jurisprudence on the Civil Code of the
Philippines 45 [1992]).
The exercise of the rights encompassed in ownership is
limited by law so that a property cannot be operated and
used to serve the public as a public utility unless the
53 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
operator has a franchise. The operation of a rail system as
a public utility includes the transportation of passengers
from one point to another point, their loading and
unloading at designated places and the movement of the
trains at pre-scheduled times (cf. Arizona Eastern R.R. Co.
v. J.A.. Matthews, 20 Ariz 282, 180 P.159, 7 A.L.R. 1149
[1919] ;United States Fire Ins. Co. v. Northern P.R. Co., 30
Wash 2d. 722, 193 P. 2d 868, 2 A.L.R. 2d 1065 [1948]).
The right to operate a public utility may exist
independently and separately from the ownership of the
facilities thereof. One can own said facilities without
operating them as a public utility, or conversely, one may
operate a public utility without owning the facilities used
to serve the public. The devotion of property to serve the
public may be done by the owner or by the person in
control thereof who may not necessarily be the owner
thereof.
This dichotomy between the operation of a public utility
and the ownership of the facilities used to serve the public
can be very well appreciated when we consider the
transportation industry. Enfranchised airline and shipping
companies may lease their aircraft and vessels instead of
owning them themselves.
While private respondent is the owner of the facilities
necessary to operate the EDSA. LRT III, it admits that it is
not enfranchised to operate a public utility (Revised and
Restated Agreement, Sec. 3.2; Rollo, p. 57). In view of this
incapacity, private respondent and DOTC agreed that on
completion date, private respondent will immediately
deliver possession of the LRT system by way of lease for 25
years, during which period DOTC shall operate the same
as a common carrier and private respondent shall provide
technical maintenance and repair services to DOTC
(Revised and Restated Agreement, Secs. 3.2, 5.1 and
5.2; Rollo, pp. 57-58, 61-62). Technical maintenance consists
of providing (1) repair and maintenance facilities for the
depot and rail lines, services for routine clearing and
security; and (2) producing and distributing maintenance
manuals and drawings for the entire system (Revised and
Restated Agreement, Annex F).
Private respondent shall also train DOTC personnel for
familiarization with the operation, use, maintenance and
repair of the rolling stock, power plant, substations,
electrical, signaling, communications and all other
equipment as supplied in the agreement (Revised and
Restated Agreement, Sec. 10; Rollo, pp. 66-67). Training
Readings
consists of theoretical and live training of DOTC
operational personnel which includes actual driving of
light rail vehicles under simulated operating conditions,
control of operations, dealing with emergencies, collection,
counting and securing cash from the fare collection system
(Revised and Restated Agreement, Annex E, Secs. 2-3).
Personnel of DOTC will work under the direction and
control of private respondent only during training
(Revised and Restated Agreement, Annex E, Sec. 3.1). The
training objectives, however, shall be such that upon
completion of the EDSA LRT III and upon opening of
normal revenue operation, DOTC shall have in their
employ personnel capable of undertaking training of all
new and replacement personnel (Revised and Restated
Agreement, Annex E Sec. 5.1). In other words, by the end
of the three-year construction period and upon
commencement of normal revenue operation, DOTC shall
be able to operate the EDSA LRT III on its own and train
all new personnel by itself.
Fees for private respondent' s services shall be included in
the rent, which likewise includes the project cost, cost of
replacement of plant equipment and spare parts,
investment and financing cost, plus a reasonable rate of
return thereon (Revised and Restated Agreement, Sec.
1; Rollo, p. 54).
Since DOTC shall operate the EDSA LRT III, it shall
assume all the obligations and liabilities of a common
carrier. For this purpose, DOTC shall indemnify and hold
harmless private respondent from any losses, damages,
injuries or death which may be claimed in the operation or
implementation of the system, except losses, damages,
injury or death due to defects in the EDSA LRT III on
account of the defective condition of equipment or
facilities or the defective maintenance of such equipment
facilities (Revised and Restated Agreement, Secs. 12.1 and
12.2; Rollo, p. 68).
In sum, private respondent will not run the light rail
vehicles and collect fees from the riding public. It will have
no dealings with the public and the public will have no
right to demand any services from it.
It is well to point out that the role of private respondent as
lessor during the lease period must be distinguished from
the role of the Philippine Gaming Management
Corporation (PGMC) in the case of Kilosbayan Inc. v.
Guingona, 232 SCRA 110 (1994). Therein, the Contract of
Lease between PGMC and the Philippine Charity
54 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Sweepstakes Office (PCSO) was actually a collaboration or
joint venture agreement prescribed under the charter of
the PCSO. In the Contract of Lease; PGMC, the lessor
obligated itself to build, at its own expense, all the facilities
necessary to operate and maintain a nationwide on-line
lottery system from whom PCSO was to lease the facilities
and operate the same. Upon due examination of the
contract, the Court found that PGMC's participation was
not confined to the construction and setting up of the on-
line lottery system. It spilled over to the actual operation
thereof, becoming indispensable to the pursuit, conduct,
administration and control of the highly technical and
sophisticated lottery system. In effect, the PCSO leased out
its franchise to PGMC which actually operated and
managed the same.
Indeed, a mere owner and lessor of the facilities used by a
public utility is not a public utility (Providence and W.R.
Co. v. United States, 46 F. 2d 149, 152 [1930]; Chippewa
Power Co. v. Railroad Commission of Wisconsin, 205 N.W.
900, 903, 188 Wis. 246 [1925]; Ellis v. Interstate Commerce
Commission, Ill 35 S. Ct. 645, 646, 237 U.S. 434, 59 L. Ed.
1036 [1914]). Neither are owners of tank, refrigerator, wine,
poultry and beer cars who supply cars under contract to
railroad companies considered as public utilities (Crystal
Car Line v. State Tax Commission, 174 p. 2d 984, 987
[1946]).
Even the mere formation of a public utility corporation
does not ipso facto characterize the corporation as one
operating a public utility. The moment for determining the
requisite Filipino nationality is when the entity applies for
a franchise, certificate or any other form of authorization
for that purpose (People v. Quasha, 93 Phil. 333 [1953]).
Petitioners further assert that the BLT scheme under the
Agreements in question is not recognized in the BOT Law
and its Implementing Rules and Regulations.
Section 2 of the BOT Law defines the BOT and BT schemes
as follows:
Build-operate-and-transfer scheme A contractual
arrangement whereby the contractor undertakes the
construction including financing, of a given infrastructure
facility, and the operation and maintenance thereof. The
contractor operates the facility over a fixed term during
which it is allowed to charge facility users appropriate
tolls, fees, rentals and charges sufficient to enable the
contractor to recover its operating and maintenance
Readings
expenses and its investment in the project plus a
reasonable rate of return thereon. The contractor transfers
the facility to the government agency or local government
unit concerned at the end of the fixed term which shall not
exceed fifty (50) years. For the construction stage, the
contractor may obtain financing from foreign and/or
domestic sources and/or engage the services of a foreign
and/or Filipino constructor [sic]: Provided, That the
ownership structure of the contractor of an infrastructure
facility whose operation requires a public utility franchise must
be in accordance with the Constitution: Provided, however,
That in the case of corporate investors in the build-
operate-and-transfer corporation, the citizenship of each
stockholder in the corporate investors shall be the basis for
the computation of Filipino equity in the said corporation:
Provided, further, That, in the case of foreign constructors
[sic], Filipino labor shall be employed or hired in the
different phases of the construction where Filipino skills
are available: Provided, furthermore, that the financing of
a foreign or foreign-controlled contractor from Philippine
government financing institutions shall not exceed twenty
percent (20%) of the total cost of the infrastructure facility
or project: Provided, finally, That financing from foreign
sources shall not require a guarantee by the Government
or by government-owned or controlled corporations. The
build-operate-and-transfer scheme shall include a supply-
and-operate situation which is a contractual agreement
whereby the supplier of equipment and machinery for a
given infrastructure facility, if the interest of the
Government so requires, operates the facility providing in
the process technology transfer and training to Filipino
nationals.
Build-and-transfer scheme "A contractual arrangement
whereby the contractor undertakes the construction
including financing, of a given infrastructure facility, and
its turnover after completion to the government agency or
local government unit concerned which shall pay the
contractor its total investment expended on the project,
plus a reasonable rate of return thereon. This arrangement
may be employed in the construction of any infrastructure
project including critical facilities which for security or
strategic reasons, must be operated directly by the
government (Emphasis supplied).
The BOT scheme is expressly defined as one where the
contractor undertakes the construction and financing in
infrastructure facility, and operates and maintains the
same. The contractor operates the facility for a fixed period
during which it may recover its expenses and investment
55 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
in the project plus a reasonable rate of return thereon.
After the expiration of the agreed term, the contractor
transfers the ownership and operation of the project to the
government.
In the BT scheme, the contractor undertakes the
construction and financing of the facility, but after
completion, the ownership and operation thereof are
turned over to the government. The government, in turn,
shall pay the contractor its total investment on the project
in addition to a reasonable rate of return. If payment is to
be effected through amortization payments by the
government infrastructure agency or local government
unit concerned, this shall be made in accordance with a
scheme proposed in the bid and incorporated in the
contract (R.A. No. 6957, Sec. 6).
Emphasis must be made that under the BOT scheme, the
owner of the infrastructure facility must comply with the
citizenship requirement of the Constitution on the
operation of a public utility. No such a requirement is
imposed in the BT scheme.
There is no mention in the BOT Law that the BOT and BT
schemes bar any other arrangement for the payment by
the government of the project cost. The law must not be
read in such a way as to rule out or unduly restrict any
variation within the context of the two schemes. Indeed,
no statute can be enacted to anticipate and provide all the
fine points and details for the multifarious and complex
situations that may be encountered in enforcing the law
(Director of Forestry v. Munoz, 23 SCRA 1183 [1968];
People v. Exconde, 101 Phil. 1125 [1957]; United States v.
Tupasi Molina, 29 Phil. 119 [1914]).
The BLT scheme in the challenged agreements is but a
variation of the BT scheme under the law.
As a matter of fact, the burden on the government in
raising funds to pay for the project is made lighter by
allowing it to amortize payments out of the income from
the operation of the LRT System.
In form and substance, the challenged agreements provide
that rentals are to be paid on a monthly basis according to
a schedule of rates through and under the terms of a
confirmed Irrevocable Revolving Letter of Credit
(Supplemental Agreement, Sec. 6; Rollo, p. 85). At the end
of 25 years and when full payment shall have been made
to and received by private respondent, it shall transfer to
Readings
DOTC, free from any lien or encumbrances, all its title to,
rights and interest in, the project for only U.S. $1.00
(Revised and Restated Agreement, Sec. 11.1; Supplemental
Agreement, Sec; 7; Rollo, pp. 67, .87).
A lease is a contract where one of the parties binds himself
to give to another the enjoyment or use of a thing for a
certain price and for a period which may be definite or
indefinite but not longer than 99 years (Civil Code of the
Philippines, Art. 1643). There is no transfer of ownership
at the end of the lease period. But if the parties stipulate
that title to the leased premises shall be transferred to the
lessee at the end of the lease period upon the payment of
an agreed sum, the lease becomes a lease-purchase
agreement.
Furthermore, it is of no significance that the rents shall be
paid in United States currency, not Philippine pesos. The
EDSA LRT III Project is a high priority project certified by
Congress and the National Economic and Development
Authority as falling under the Investment Priorities Plan of
Government (Rollo, pp. 310-311). It is, therefore, outside
the application of the Uniform Currency Act (R.A. No.
529), which reads as follows:
Sec. 1. Every provision contained in, or made with
respect to, any domestic obligation to wit, any obligation
contracted in the Philippines which provisions purports to
give the obligee the right to require payment in gold or in
a particular kind of coin or currency other than Philippine
currency or in an amount of money of the Philippines
measured thereby, be as it is hereby declared against
public policy, and null, void, and of no effect, and no such
provision shall be contained in, or made with respect to,
any obligation hereafter incurred. The above prohibition
shall not apply to (a) . . .; (b) transactions affecting high-
priority economic projects for agricultural, industrial and
power development as may be determined by
the National Economic Council which are financed by or
through foreign funds; . . . .
The fact that the contract for the construction of the EDSA
LRT III was awarded through negotiation and before
congressional approval on January 22 and 23, 1992 of the
List of National Projects to be undertaken by the private
sector pursuant to the BOT Law (Rollo, pp. 309-312) does
not suffice to invalidate the award.
Subsequent congressional approval of the list including
"rail-based projects packaged with commercial
56 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
development opportunities" (Rollo, p. 310) under which
the EDSA LRT III projects falls, amounts to a ratification of
the prior award of the EDSA LRT III contract under the
BOT Law.
Petitioners insist that the prequalifications process which
led to the negotiated award of the contract appears to have
been rigged from the very beginning to do away with the
usual open international public bidding where qualified
internationally known applicants could fairly participate.
The records show that only one applicant passed the
prequalification process. Since only one was left, to
conduct a public bidding in accordance with Section 5 of
the BOT Law for that lone participant will be an absurb
and pointless exercise (cf. Deloso v. Sandiganbayan, 217
SCRA 49, 61 [1993]).
Contrary to the comments of the Executive Secretary
Drilon, Section 5 of the BOT Law in relation to Presidential
Decree No. 1594 allows the negotiated award of
government infrastructure projects.
Presidential Decree No. 1594, "Prescribing Policies,
Guidelines, Rules and Regulations for Government
Infrastructure Contracts," allows the negotiated award of
government projects in exceptional cases. Sections 4 of the
said law reads as follows:
Bidding. Construction projects shall generally be
undertaken by contract after competitive public
bidding. Projects may be undertaken by administration or force
account or by negotiated contract only in exceptional cases
where time is of the essence, or where there is lack of qualified
bidders or contractors, or where there is conclusive evidence that
greater economy and efficiency would be achieved through this
arrangement, and in accordance with provision of laws and
acts on the matter, subject to the approval of the Minister
of Public Works and Transportation and Communications,
the Minister of Public Highways, or the Minister of
Energy, as the case may be, if the project cost is less than
P1 Million, and the President of the Philippines, upon
recommendation of the Minister, if the project cost is P1
Million or more (Emphasis supplied).
xxx xxx xxx
Indeed, where there is a lack of qualified bidders or
contractors, the award of government infrastructure
contracts may he made by negotiation. Presidential Decree
Readings
No. 1594 is the general law on government infrastructure
contracts while the BOT Law governs particular
arrangements or schemes aimed at encouraging private
sector participation in government infrastructure projects.
The two laws are not inconsistent with each other but are
in pari materia and should be read together accordingly.
In the instant case, if the prequalification process was
actually tainted by foul play, one wonders why none of the
competing firms ever brought the matter before the PBAC,
or intervened in this case before us (cf. Malayan Integrated
Industries Corp. v. Court of Appeals, 213 SCRA 640 [1992];
Bureau Veritas v. Office of the President, 205 SCRA 705
[1992]).
The challenged agreements have been approved by
President Ramos himself. Although then Executive
Secretary Drilon may have disapproved the "Agreement to
Build, Lease and Transfer a Light Rail Transit System for
EDSA," there is nothing in our laws that prohibits parties
to a contract from renegotiating and modifying in good
faith the terms and conditions thereof so as to meet legal,
statutory and constitutional requirements. Under the
circumstances, to require the parties to go back to step one
of the prequalification process would just be an idle
ceremony. Useless bureaucratic "red tape" should be
eschewed because it discourages private sector
participation, the "main engine" for national growth and
development (R.A. No. 6957, Sec. 1), and renders the BOT
Law nugatory.
Republic Act No. 7718 recognizes and defines a BLT
scheme in Section 2 thereof as:
(e) Build-lease-and-transfer A contractual arrangement
whereby a project proponent is authorized to finance and
construct an infrastructure or development facility and
upon its completion turns it over to the government
agency or local government unit concerned on a lease
arrangement for a fixed period after which ownership of
the facility is automatically transferred to the government
unit concerned.
Section 5-A of the law, which expressly allows direct
negotiation of contracts, provides:
Direct Negotiation of Contracts. Direct negotiation shall
be resorted to when there is only one complying bidder
left as defined hereunder.
57 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
If, after advertisement, only one contractor applies for
prequalification and it meets the prequalification
requirements, after which it is required to submit a bid
proposal which is subsequently found by the agency/local
government unit (LGU) to be complying.
If, after advertisement, more than one contractor applied
for prequalification but only one meets the
prequalification requirements, after which it submits
bid/proposal which is found by the agency/local
government unit (LGU) to be complying.
If, after prequalification of more than one contractor only
one submits a bid which is found by the agency/LGU to
be complying.
If, after prequalification, more than one contractor submit
bids but only one is found by the agency/LGU to be
complying. Provided, That, any of the disqualified
prospective bidder [sic] may appeal the decision of the
implementing agency, agency/LGUs prequalification bids
and awards committee within fifteen (15) working days to
the head of the agency, in case of national projects or to the
Department of the Interior and Local Government, in case
of local projects from the date the disqualification was
made known to the disqualified bidder: Provided,
furthermore, That the implementing agency/LGUs
concerned should act on the appeal within forty-five (45)
working days from receipt thereof.
Petitioners' claim that the BLT scheme and direct
negotiation of contracts are not contemplated by the BOT
Law has now been rendered moot and academic by R.A.
No. 7718. Section 3 of this law authorizes all government
infrastructure agencies, government-owned and controlled
corporations and local government units to enter into
contract with any duly prequalified proponent for the
financing, construction, operation and maintenance of any
financially viable infrastructure or development facility
through a BOT, BT, BLT, BOO (Build-own-and-operate),
CAO (Contract-add-operate), DOT (Develop-operate-and-
transfer), ROT (Rehabilitate-operate-and-transfer), and
ROO (Rehabilitate-own-operate) (R.A. No. 7718, Sec. 2 [b-
j]).
From the law itself, once and applicant has prequalified, it
can enter into any of the schemes enumerated in Section 2
thereof, including a BLT arrangement, enumerated and
defined therein (Sec. 3).
Readings
Republic Act No. 7718 is a curative statute. It is intended to
provide financial incentives and "a climate of minimum
government regulations and procedures and specific
government undertakings in support of the private sector"
(Sec. 1). A curative statute makes valid that which before
enactment of the statute was invalid. Thus, whatever
doubts and alleged procedural lapses private respondent
and DOTC may have engendered and committed in
entering into the questioned contracts, these have now
been cured by R.A. No. 7718 (cf. Development Bank of the
Philippines v. Court of Appeals, 96 SCRA 342 [1980];
Santos V. Duata, 14 SCRA 1041 [1965]; Adong V. Cheong
Seng Gee, 43 Phil. 43 [1922].
Lastly, petitioners claim that the agreements are grossly
disadvantageous to the government because the rental
rates are excessive and private respondent's development
rights over the 13 stations and the depot will rob DOTC of
the best terms during the most productive years of the
project.
It must be noted that as part of the EDSA LRT III project,
private respondent has been granted, for a period of 25
years, exclusive rights over the depot and the air space
above the stations for development into commercial
premises for lease, sublease, transfer, or advertising
(Supplemental Agreement, Sec. 11; Rollo, pp. 91-92). For
and in consideration of these development rights, private
respondent shall pay DOTC in Philippine currency
guaranteed revenues generated therefrom in the amounts
set forth in the Supplemental Agreement (Sec. 11; Rollo, p.
93). In the event that DOTC shall be unable to collect the
guaranteed revenues, DOTC shall be allowed to deduct
any shortfalls from the monthly rent due private
respondent for the construction of the EDSA LRT III
(Supplemental Agreement, Sec. 11; Rollo, pp. 93-94). All
rights, titles, interests and income over all contracts on the
commercial spaces shall revert to DOTC upon expiration
of the 25-year period. (Supplemental Agreement, Sec.
11; Rollo, pp. 91-92).
The terms of the agreements were arrived at after a
painstaking study by DOTC. The determination by the
proper administrative agencies and officials who have
acquired expertise, specialized skills and knowledge in the
performance of their functions should be accorded respect
absent any showing of grave abuse of discretion (Felipe
Ysmael, Jr. & Co. v. Deputy Executive Secretary, 190 SCRA
673 [1990]; Board of Medical Education v. Alfonso, 176 SCRA
304 [1989]).
58 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Government officials are presumed to perform their
functions with regularity and strong evidence is necessary
to rebut this presumption. Petitioners have not presented
evidence on the reasonable rentals to be paid by the
parties to each other. The matter of valuation is an esoteric
field which is better left to the experts and which this
Court is not eager to undertake.
That the grantee of a government contract will profit
therefrom and to that extent the government is deprived
of the profits if it engages in the business itself, is not
worthy of being raised as an issue. In all cases where a
party enters into a contract with the government, he does
so, not out of charity and not to lose money, but to gain
pecuniarily.
Definitely, the agreements in question have been entered
into by DOTC in the exercise of its governmental function.
DOTC is the primary policy, planning, programming,
regulating and administrative entity of the Executive
branch of government in the promotion, development and
regulation of dependable and coordinated networks of
transportation and communications systems as well as in
the fast, safe, efficient and reliable postal, transportation
and communications services (Administrative Code of
1987, Book IV, Title XV, Sec. 2). It is the Executive
department, DOTC in particular that has the power,
authority and technical expertise determine whether or
not a specific transportation or communication project is
necessary, viable and beneficial to the people. The
discretion to award a contract is vested in the government
agencies entrusted with that function (Bureau Veritas v.
Office of the President, 205 SCRA 705 [1992]).
WHEREFORE, the petition is DISMISSED.
SO ORDERED
G.R. No. L-68729 May 29, 1987
RADIO COMMUNICATIONS OF THE PHILIPPINES,
INC., petitioner,
vs.
NATIONAL TELECOMMUNICATIONS
COMMISSION and KAYUMANGGI RADIO
NETWORK INCORPORATED, respondents.
GUTIERREZ, JR, J.:
Readings
This petition seeks the reversal of the decision of the
National Telecommunications Commission (NTC) which
ordered petitioner Radio Communications of the
Philippines, Incorporated (RCPI) to desist from operating
its radio telephone services in Catarman, Northern Samar;
San Jose, Occidental Mindoro; and Sorsogon, Sorsogon.
Petitioner has been operating a radio communications
system since 1957 under its legislative franchise granted by
Republic Act No. 2036 which was enacted on June 23,
1957.
In 1968, the petitioner established a radio telegraph service
in Sorsogon, Sorsogon. In 1971, another radio telegraph
service was put up in San Jose, Mindoro followed by
another in Catarman, Samar in 1976. The installation of
radio telephone services started in 1971 in San Jose,
Mindoro; then in Sorsogon, Sorsogon and Catarman,
Samar in 1983.
In a decision dated June 24, 1980 in NTC Case No. 80-08,
private respondent Kayumanggi Radio Network
Incorporated was authorized by the public respondent to
operate radio communications systems in Catarman,
Samar and in San Jose, Mindoro.
On December 14, 1983, the private respondent filed a
complaint with the NTC alleging that the petitioner was
operating in Catarman, Samar and in San Jose, Mindoro
without a certificate of public covenience and necessity.
The petitioner, on the other hand, counter-alleged that its
telephone services in the places subject of the complaint
are covered by the legislative franchise recognized by both
the public respondent and its predecessor, the Public
Service Commission. In its supplemental reply, the
petitioner further stated that it has been in operation in the
questioned places long before private respondent
Kayumanggi filed its application to operate in the same
places.
After conducting a hearing, NTC, in its decision dated
August 22, 1984 ordered petitioner RCPI to immediately
cease or desist from the operation of its radio telephone
services in Catarman Northern Samar; San Jose,
Occidental Mindoro; and Sorsogon, Sorsogon stating that
under Executive Order No. 546, a certificate of public
convenience and necessity is mandatory for the operation
of communication utilities and services including radio
communications.
59 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
On September 4, 1984, the petitioner filed a motion for
reconsideration which was denied in an order dated
September 12, 1984.
On October 1, 1984, the present petition was filed raising
the issue of whether or not petitioner RCPI, a grantee of a
legislative franchise to operate a radio company, is
required to secure a certificate of public convenience and
necessity before it can validly operate its radio stations
including radio telephone services in Catarman, Northern
Samar; San Jose, Occidental Mindoro; and Sorsogon,
Sorsogon.
The petitioner's main argument states that the abolition of
the Public Service Commission under Presidential Decree
No. 1 and the creation of the National Telecommunications
Commission under Executive Order No. 546 to replace the
defunct Public Service Commission did not affect sections
14 and 15 of the Public Service Law (Commonwealth Act.
No. 146, as amended).
The provisions of the Public Service Law pertinent to the
petitioner's allegation are as follows:
Section 13. (a) the Commission shall have jurisdiction,
supervision, and control over all public services and their
franchises, equipment and other properties, and in the
exercise of its authority, it shall have the necessary powers
and the aid of public force: ...
Section 14. The following are exempted from the
provisions of the preceding section:
xxx xxx xxx
Radio companies except with respect to the fixing of rates;
xxx xxx xxx
Section 15. With the exception of those enumerated in the
preceding section, no public service shall operate in the
Philippines without possessing a valid and subsisting
certificate from the Public Service Commission, known as
"certificate of public convenience," or "certificate of
convenience and public necessity," as the case may be, to
the effect that the operation of said service and the
authorization to do business will promote the public
interests in a proper and suitable manner. ...
We find no merit in the petitioner's contention.
Readings
Pursuant to Presidential Decree No. 1 dated September
23,1972, reorganizing the executive branch of the National
Government, the Public Service Commission was
abolished and its functions were transferred to three
specialized regulatory boards, as follows: the Board of
Transportation, the Board of Communications and the
Board of Power and Waterworks. The functions so
transferred were still subject to the limitations provided in
sections 14 and 15 of the Public Service Law, as amended.
With the enactment of Executive Order No. 546 on July 23,
1979 implementing P.D. No.1, the Board of
Communications and the Telecommunications Control
Bureau were abolished and their functions were
transferred to the National Telecommunications
Commission (Sec. 19(d), Executive Order No. 546). Section
15 of said Executive Order spells out the functions of the
National Telecommunications Commission as follows:
Sec. 15. Functions of the Commission.-The Commission
shall exercise the following functions:
Issue Certificate of Public Convenience for the operation of
communications utilities and services, radio
communications petitions systems, wire or wireless
telephone or telegraph system, radio and television
broadcasting system and other similar public utilities;
Establish, prescribe and regulate areas of operation of
particular operators of public service communications;
and determine and prescribe charges or rates pertinent to
the operation of such public utility facilities and services
except in cases where charges or rates are established by
international bodies or associations of which the
Philippines is a participating member or by bodies
recognized by the Philippine Government as the proper
arbiter of such charges or rates;
Grant permits for the use of radio frequencies for wireless
telephone and telegraph systems and radio
communication systems including amateur radio stations
and radio and television broadcasting systems;
Sub-allocate series of frequencies of bands allocated by the
International Telecommunications Union to the specific
services;
Establish and prescribe rules, regulations, standards,
specifications in all cases related to the issued Certificate
of Public Convenience and administer and enforce the
same;
60 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Coordinate and cooperate with government agencies and
other entities concerned with any aspect involving
communications with a view to continuously improve the
communications service in the country;
Promulgate such rules and regulations, as public safety
and interest may require, to encourage a larger and more
effective use of communications, radio and television
broadcasting facilities, and to maintain effective
competition among private entities in these activities
whenever the Commission finds it reasonably feasible;
Supervise and inspect the operation of radio stations and
telecommunications facilities;
Undertake the examination and licensing of radio
operators;
Undertake, whenever necessary, the registration of radio
transmitters and transceivers; and
Perform such other functions as may be prescribed by law.
It is clear from the aforequoted provision that the
exemption enjoyed by radio companies from the
jurisdiction of the Public Service Commission and the
Board of Communications no longer exists because of the
changes effected by the Reorganization Law and
implementing executive orders. The petitioner's claim that
its franchise cannot be affected by Executive Order No. 546
on the ground that it has long been in operation since 1957
cannot be sustained.
A franchise started out as a "royal privilege or (a) branch
of the King's prerogative, subsisting in the hands of a
subject." This definition was given by Finch, adopted by
Blackstone, and accepted by every authority since (State v.
Twin Village Water Co., 98 Me 214, 56 A 763 (1903)). Today,
a franchise, being merely a privilege emanating from the
sovereign power of the state and owing its existence to a
grant, is subject to regulation by the state itself by virtue of
its police power through its administrative agencies. We
ruled in Pangasinan transportation Co., Inc. v. Public Service
Commission (70 Phil. 221) that:
... statutes enacted for the regulation of public utilities,
being a proper exercise by the State of its police power, are
applicable not only to those public utilities coming into
existence after its passage, but likewise to those already
established and in operation ...
Readings
Executive Order No. 546, being an implementing measure
of P.D. No. I insofar as it amends the Public Service Law
(CA No. 146, as amended) is applicable to the petitioner
who must be bound by its provisions. The petitioner
cannot install and operate radio telephone services on the
basis of its legislative franchise alone.
The position of the petitioner that by the mere grant of its
franchise under RA No. 2036 it can operate a radio
communications system anywhere within the Philippines
is erroneous. Section 1 of said statute reads:
Section 1. Subject to the provisions of the Constitution,
and to the provisions, not inconsistent herewith, of Act
Numbered Three thousand eight hundred and forty-six,
entitled.' An Act providing for the regulation of radio
stations and radio communications in the Philippine
Islands, and for other purposes;' Commonwealth Act
Numbered One hundred forty-six, known as the Public
Service Act, and their amendments, and other applicable
laws, there is hereby granted to the Radio Communications of
the Philippines, its successors or assigns, the right and privilege
of constructing, installing, establishing and operating in the
Philippines, at such places as the said corporation may select
and the Secretary of Public Works and Communications may
approve, radio stations for the reception and transmission
of wireless messages on radiotelegraphy and/or
radiotelephone, including both coastal and marine
telecommunications, each station to consist of two radio
apparatus comprising of a receiving and sending radio
apparatus. (Emphasis supplied).
Section 4(a) of the same Act further provides that:
Sec. 4(a). This franchise shall not take effect nor shall any
powers thereunder be exercised by the grantee until
the Secretary of Public works and Communications shall have
allotted to the grantee the frequencies and wave lengths to be
used, and issued to the grantee a license for such case.
(Emphasis supplied)
Thus, in the words of R.A. No. 2036 itself, approval of the
then Secretary of Public Works and Communications was
a precondition before the petitioner could put up radio
stations in areas where it desires to operate. It has been
repeated time and again that where the statutory norm
speaks unequivocally, there is nothing for the courts to do
except to apply it. The law, leaving no doubt as to the
scope of its operation, must be obeyed. (Gonzaga v. Court
of Appeals, 51 SCRA 381).
61 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
The records of the case do not show any grant of authority
from the then Secretary of Public Works and
Communications before the petitioner installed the
questioned radio telephone services in San Jose, Mindoro
in 1971. The same is true as regards the radio telephone
services opened in Sorsogon, Sorsogon and Catarman,
Samar in 1983. No certificate of public convenience and
necessity appears to have been secured by the petitioner
from the public respondent when such certificate,was
required by the applicable public utility regulations (See
executive Order No. 546, sec. 15, supra.; Philippine Long
Distance Telephone Co. v. City of Davao, 15 SCRA 75;
Olongapo Electric Light and Power Corp. v. National
Power Corporation, et al., G.R. No. L-24912, promulgated
April 9, 1987.)
It was well within the powers of the public respondent to
authorize the installation by the private respondent
network of radio communications systems in Catarman,
Samar and San Jose, Mindoro. Under the circumstances of
this case, the mere fact that the petitioner possesses a
franchise to put up and operate a radio communications
system in certain areas is not an insuperable obstacle to the
public respondent's issuing the proper certificate to an
applicant desiring to extend the same services to those
areas. The Constitution mandates that a franchise cannot
be exclusive in nature nor can a franchise be granted
except that it must be subject to amendment, alteration, or
even repeal by the legislature when the common good so
requires. (Art. XII, sec. 11 of the 1986 Constitution). There
is an express provision in the petitioner's franchise which
provides compliance with the above mandate R.A. 2036,
sec. 15).
In view of the foregoing, we find no reason to disturb the
public respondent's findings of fact, and conclusions of
law insofar as the private respondent was authorized to
operate in Catarman, Samar and San Jose, Mindoro. As a
rule, the Commission's findings of fact, if supported by
substantial evidence, are conclusive upon this Court. We
may modify or ignore them only when it clearly appears
that there is no evidence to support reasonably such a
conclusion. (Halili v. Daplas, 14 SCRA 14). The petitioner
has not shown why the private respondent should be
denied the authority to operate its services in Samar and
Mindoro. It has not overcome the presumption that when
the public respondent disturbed the petitioner's monopoly
in certain areas, it was doing so pursuant to public interest
and the common good.
Readings
WHEREFORE, the challenged order of the public
respondent dated August 22, 1984 is hereby AFFIRMED.
The petition is dismissed for lack of merit.
SO ORDERED.
G.R. No. 186312 June 29, 2010
SPOUSES DANTE CRUZ and LEONORA
CRUZ, Petitioners,
vs.
SUN HOLIDAYS, INC., Respondent.
DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a
Complaint on January 25, 20011 against Sun Holidays, Inc.
(respondent) with the Regional Trial Court (RTC) of Pasig
City for damages arising from the death of their son
Ruelito C. Cruz (Ruelito) who perished with his wife on
September 11, 2000 on board the boat M/B Coco Beach III
that capsized en route to Batangas from Puerto Galera,
Oriental Mindoro where the couple had stayed at Coco
Beach Island Resort (Resort) owned and operated by
respondent.
The stay of the newly wed Ruelito and his wife at the
Resort from September 9 to 11, 2000 was by virtue of a tour
package-contract with respondent that included
transportation to and from the Resort and the point of
departure in Batangas.
Miguel C. Matute (Matute),2 a scuba diving instructor and
one of the survivors, gave his account of the incident that
led to the filing of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000.
He was originally scheduled to leave the Resort in the
afternoon of September 10, 2000, but was advised to stay
for another night because of strong winds and heavy rains.
On September 11, 2000, as it was still windy, Matute and
25 other Resort guests including petitioners son and his
wife trekked to the other side of the Coco Beach mountain
that was sheltered from the wind where they boarded
M/B Coco Beach III, which was to ferry them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved
farther away from Puerto Galera and into the open seas,
the rain and wind got stronger, causing the boat to tilt
from side to side and the captain to step forward to the
front, leaving the wheel to one of the crew members.
62 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
The waves got more unwieldy. After getting hit by two big
waves which came one after the other, M/B Coco Beach III
capsized putting all passengers underwater.
The passengers, who had put on their life jackets,
struggled to get out of the boat. Upon seeing the captain,
Matute and the other passengers who reached the surface
asked him what they could do to save the people who
were still trapped under the boat. The captain replied
"Iligtas niyo na lang ang sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned
by Asia Divers in Sabang, Puerto Galera passed by the
capsized M/B Coco Beach III. Boarded on those two boats
were 22 persons, consisting of 18 passengers and four crew
members, who were brought to Pisa Island. Eight
passengers, including petitioners son and his wife, died
during the incident.
At the time of Ruelitos death, he was 28 years old and
employed as a contractual worker for Mitsui Engineering
& Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic
monthly salary of $900.3
Petitioners, by letter of October 26, 2000,4 demanded
indemnification from respondent for the death of their son
in the amount of at least P4,000,000.
Replying, respondent, by letter dated November 7,
2000,5 denied any responsibility for the incident which it
considered to be a fortuitous event. It nevertheless offered,
as an act of commiseration, the amount of P10,000 to
petitioners upon their signing of a waiver.
As petitioners declined respondents offer, they filed the
Complaint, as earlier reflected, alleging that respondent, as
a common carrier, was guilty of negligence in allowing
M/B Coco Beach III to sail notwithstanding storm
warning bulletins issued by the Philippine Atmospheric,
Geophysical and Astronomical Services Administration
(PAGASA) as early as 5:00 a.m. of September 11, 2000.6
In its Answer,7 respondent denied being a common carrier,
alleging that its boats are not available to the general
public as they only ferry Resort guests and crew members.
Nonetheless, it claimed that it exercised the utmost
diligence in ensuring the safety of its passengers; contrary
to petitioners allegation, there was no storm on September
11, 2000 as the Coast Guard in fact cleared the voyage; and
M/B Coco Beach III was not filled to capacity and had
sufficient life jackets for its passengers. By way of
Counterclaim, respondent alleged that it is entitled to an
award for attorneys fees and litigation expenses
amounting to not less than P300,000.
Readings
Carlos Bonquin, captain of M/B Coco Beach III, averred
that the Resort customarily requires four conditions to be
met before a boat is allowed to sail, to wit: (1) the sea is
calm, (2) there is clearance from the Coast Guard, (3) there
is clearance from the captain and (4) there is clearance
from the Resorts assistant manager.8 He added that M/B
Coco Beach III met all four conditions on September 11,
2000,9 but a subasco or squall, characterized by strong
winds and big waves, suddenly occurred, causing the boat
to capsize.10
By Decision of February 16, 2005,11 Branch 267 of the Pasig
RTC dismissed petitioners Complaint and respondents
Counterclaim.
Petitioners Motion for Reconsideration having been
denied by Order dated September 2, 2005,12 they appealed
to the Court of Appeals.
By Decision of August 19, 2008,13 the appellate court
denied petitioners appeal, holding, among other things,
that the trial court correctly ruled that respondent is a
private carrier which is only required to observe ordinary
diligence; that respondent in fact observed extraordinary
diligence in transporting its guests on board M/B Coco
Beach III; and that the proximate cause of the incident was
a squall, a fortuitous event.
Petitioners Motion for Reconsideration having been
denied by Resolution dated January 16, 2009,14 they filed
the present Petition for Review.15
Petitioners maintain the position they took before the trial
court, adding that respondent is a common carrier since
by its tour package, the transporting of its guests is an
integral part of its resort business. They inform that
another division of the appellate court in fact held
respondent liable for damages to the other survivors of the
incident.
Upon the other hand, respondent contends that petitioners
failed to present evidence to prove that it is a common
carrier; that the Resorts ferry services for guests cannot be
considered as ancillary to its business as no income is
derived therefrom; that it exercised extraordinary
diligence as shown by the conditions it had imposed
before allowing M/B Coco Beach III to sail; that the
incident was caused by a fortuitous event without any
contributory negligence on its part; and that the other case
wherein the appellate court held it liable for damages
involved different plaintiffs, issues and evidence.16
The petition is impressed with merit.
63 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Petitioners correctly rely on De Guzman v. Court of
Appeals17 in characterizing respondent as a common
carrier.
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 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 service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the
general community or population, and one who offers
services or solicits business only from a narrow segment of
the general population. We think that Article 1733
deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the notion
of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set
forth in the Civil Code. Under Section 13, paragraph (b) of
the Public Service Act, "public service" includes:
. . . every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged
in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system, gas, electric
light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other
similar public services . . .18 (emphasis and underscoring
supplied.)
Indeed, respondent is a common carrier. Its ferry services
are so intertwined with its main business as to be properly
Readings
considered ancillary thereto. The constancy of
respondents ferry services in its resort operations is
underscored by its having its own Coco Beach boats. And
the tour packages it offers, which include the ferry
services, may be availed of by anyone who can afford to
pay the same. These services are thus available to the
public.
That respondent does not charge a separate fee or fare for
its ferry services is of no moment. It would be imprudent
to suppose that it provides said services at a loss. The
Court is aware of the practice of beach resort operators
offering tour packages to factor the transportation fee in
arriving at the tour package price. That guests who opt not
to avail of respondents ferry services pay the same
amount is likewise inconsequential. These guests may only
be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code
defining "common carriers" has deliberately refrained
from making distinctions on whether the carrying of
persons or goods is the carriers principal business,
whether it is offered on a regular basis, or whether it is
offered to the general public. The intent of the law is thus
to not consider such distinctions. Otherwise, there is no
telling how many other distinctions may be concocted by
unscrupulous businessmen engaged in the carrying of
persons or goods in order to avoid the legal obligations
and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of
their business and for reasons of public policy, are bound
to observe extraordinary diligence for the safety of the
passengers transported by them, according to all the
circumstances of each case.19 They are bound to carry the
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances.20
When a passenger dies or is injured in the discharge of a
contract of carriage, it is presumed that the common
carrier is at fault or negligent. In fact, there is even no need
for the court to make an express finding of fault or
negligence on the part of the common carrier. This
statutory presumption may only be overcome by evidence
that the carrier exercised extraordinary diligence.21
Respondent nevertheless harps on its strict compliance
with the earlier mentioned conditions of voyage before it
allowed M/B Coco Beach III to sail on September 11, 2000.
Respondents position does not impress.
The evidence shows that PAGASA issued 24-hour public
weather forecasts and tropical cyclone warnings for
shipping on September 10 and 11, 2000 advising of
tropical depressions in Northern Luzon which would also
affect the province of Mindoro.22 By the testimony of Dr.
64 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Frisco Nilo, supervising weather specialist of PAGASA,
squalls are to be expected under such weather condition.23
A very cautious person exercising the utmost diligence
would thus not brave such stormy weather and put other
peoples lives at risk. The extraordinary diligence required
of common carriers demands that they take care of the
goods or lives entrusted to their hands as if they were their
own. This respondent failed to do.
Respondents insistence that the incident was caused by a
fortuitous event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of
the unforeseen and unexpected occurrence, or the failure
of the debtors to comply with their obligations, must have
been independent of human will; (b) the event that
constituted the caso fortuito must have been impossible to
foresee or, if foreseeable, impossible to avoid; (c) the
occurrence must have been such as to render it impossible
for the debtors to fulfill their obligation in a normal
manner; and (d) the obligor must have been free from any
participation in the aggravation of the resulting injury to
the creditor.24
To fully free a common carrier from any liability, the
fortuitous event must have been the proximate and only
cause of the loss. And it should have exercised due
diligence to prevent or minimize the loss before, during
and after the occurrence of the fortuitous event.25
Respondent cites the squall that occurred during the
voyage as the fortuitous event that overturned M/B Coco
Beach III. As reflected above, however, the occurrence of
squalls was expected under the weather condition of
September 11, 2000. Moreover, evidence shows that M/B
Coco Beach III suffered engine trouble before it capsized
and sank.26 The incident was, therefore, not completely
free from human intervention.
The Court need not belabor how respondents evidence
likewise fails to demonstrate that it exercised due diligence
to prevent or minimize the loss before, during and after
the occurrence of the squall.
Article 176427 vis--vis Article 220628 of the Civil Code
holds the common carrier in breach of its contract of
carriage that results in the death of a passenger liable to
pay the following: (1) indemnity for death, (2) indemnity
for loss of earning capacity and (3) moral damages.
Petitioners are entitled to indemnity for the death of
Ruelito which is fixed at P50,000.29
As for damages representing unearned income, the
formula for its computation is:
Readings
Net Earning Capacity = life expectancy x (gross annual
income - reasonable and necessary living expenses).
Life expectancy is determined in accordance with the
formula:
2 / 3 x [80 age of deceased at the time of death]30
The first factor, i.e., life expectancy, is computed by
applying the formula (2/3 x [80 age at death]) adopted
in the American Expectancy Table of Mortality or the
Actuarial of Combined Experience Table of Mortality.31
The second factor is computed by multiplying the life
expectancy by the net earnings of the deceased, i.e., the
total earnings less expenses necessary in the creation of
such earnings or income and less living and other
incidental expenses.32 The loss is not equivalent to the
entire earnings of the deceased, but only such portion as
he would have used to support his dependents or heirs.
Hence, to be deducted from his gross earnings are the
necessary expenses supposed to be used by the deceased
for his own needs.33
In computing the third factor necessary living expense,
Smith Bell Dodwell Shipping Agency Corp. v.
Borja34teaches that when, as in this case, there is no
showing that the living expenses constituted the smaller
percentage of the gross income, the living expenses are
fixed at half of the gross income.
Applying the above guidelines, the Court determines
Ruelito's life expectancy as follows:
Life expectancy 2/3 x [80 - age of deceased at the
= time of death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy
35
=
Documentary evidence shows that Ruelito was earning a
basic monthly salary of $90035 which, when converted to
Philippine peso applying the annual average exchange rate
of $1 = P44 in 2000,36 amounts to P39,600. Ruelitos net
earning capacity is thus computed as follows:
Net Earning = life expectancy x (gross annual
Capacity income - reasonable and necessary
living expenses).
= 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Net Earning
= P8,316,000
Capacity
65 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Respecting the award of moral damages, since respondent
common carriers breach of contract of carriage resulted in
the death of petitioners son, following Article 1764 vis--
vis Article 2206 of the Civil Code, petitioners are entitled
to moral damages.
Since respondent failed to prove that it exercised the
extraordinary diligence required of common carriers, it is
presumed to have acted recklessly, thus warranting the
award too of exemplary damages, which are granted in
contractual obligations if the defendant acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner.37
Under the circumstances, it is reasonable to award
petitioners the amount of P100,000 as moral damages
and P100,000 as exemplary damages.381avvphi1
Pursuant to Article 220839 of the Civil Code, attorney's fees
may also be awarded where exemplary damages are
awarded. The Court finds that 10% of the total amount
adjudged against respondent is reasonable for the
purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of
Appeals40 teaches that when an obligation, regardless of its
source, i.e., law, contracts, quasi-contracts, delicts or quasi-
delicts is breached, the contravenor can be held liable for
payment of interest in the concept of actual and
compensatory damages, subject to the following rules, to
wit
When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil
Code.
When an obligation, not constituting a loan or forbearance
of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages
except when or until the demand can be established with
reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time
the demand is made, the interest shall begin to run only
from the date the judgment of the court is made (at which
time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the
Readings
computation of legal interest shall, in any case, be on the
amount finally adjudged.
When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest,
whether the case falls under paragraph 1 or paragraph 2,
above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit. (emphasis
supplied).
Since the amounts payable by respondent have been
determined with certainty only in the present petition, the
interest due shall be computed upon the finality of this
decision at the rate of 12% per annum until satisfaction, in
accordance with paragraph number 3 of the immediately
cited guideline in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August
19, 2008 is REVERSED and SET ASIDE. Judgment is
rendered in favor of petitioners ordering respondent to
pay petitioners the following: (1) P50,000 as indemnity for
the death of Ruelito Cruz; (2) P8,316,000 as indemnity for
Ruelitos loss of earning capacity; (3) P100,000 as moral
damages; (4) P100,000 as exemplary damages; (5) 10% of
the total amount adjudged against respondent as attorneys
fees; and (6) the costs of suit.
The total amount adjudged against respondent shall earn
interest at the rate of 12% per annum computed from the
finality of this decision until full payment.
SO ORDERED.
G.R. No. 147079 December 21, 2004
A.F. SANCHEZ BROKERAGE INC., petitioners,
vs.
THE HON. COURT OF APPEALS and FGU
INSURANCE CORPORATION, respondents.
DECISION
CARPIO MORALES, J.:
Before this Court on a petition for Certiorari is the
appellate courts Decision1 of August 10, 2000 reversing
and setting aside the judgment of Branch 133, Regional
Trial Court of Makati City, in Civil Case No. 93-76B which
dismissed the complaint of respondent FGU Insurance
66 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Corporation (FGU Insurance) against petitioner A.F.
Sanchez Brokerage, Inc. (Sanchez Brokerage).
On July 8, 1992, Wyeth-Pharma GMBH shipped on board
an aircraft of KLM Royal Dutch Airlines at Dusseldorf,
Germany oral contraceptives consisting of 86,800 Blisters
Femenal tablets, 14,000 Blisters Nordiol tablets and 42,000
Blisters Trinordiol tablets for delivery to Manila in favor of
the consignee, Wyeth-Suaco Laboratories, Inc.2The
Femenal tablets were placed in 124 cartons and the
Nordiol tablets were placed in 20 cartons which were
packed together in one (1) LD3 aluminum container, while
the Trinordial tablets were packed in two pallets, each of
which contained 30 cartons.3
Wyeth-Suaco insured the shipment against all risks with
FGU Insurance which issued Marine Risk Note No. 4995
pursuant to Marine Open Policy No. 138.4
Upon arrival of the shipment on July 11, 1992 at the Ninoy
Aquino International Airport (NAIA),5 it was discharged
"without exception"6 and delivered to the warehouse of the
Philippine Skylanders, Inc. (PSI) located also at the NAIA
for safekeeping.7
In order to secure the release of the cargoes from the PSI
and the Bureau of Customs, Wyeth-Suaco engaged the
services of Sanchez Brokerage which had been its licensed
broker since 1984.8 As its customs broker, Sanchez
Brokerage calculates and pays the customs duties, taxes
and storage fees for the cargo and thereafter delivers it to
Wyeth-Suaco.9
On July 29, 1992, Mitzi Morales and Ernesto Mendoza,
representatives of Sanchez Brokerage, paid PSI storage fee
amounting to P8,572.35 a receipt for which, Official
Receipt No. 016992,10 was issued. On the receipt, another
representative of Sanchez Brokerage, M.
Sison,11 acknowledged that he received the cargoes
consisting of three pieces in good condition.12
Wyeth-Suaco being a regular importer, the customs
examiner did not inspect the cargoes13 which were
thereupon stripped from the aluminum containers14 and
loaded inside two transport vehicles hired by Sanchez
Brokerage.15
Among those who witnessed the release of the cargoes
from the PSI warehouse were Ruben Alonso and Tony
Akas,16 employees of Elite Adjusters and Surveyors Inc.
(Elite Surveyors), a marine and cargo surveyor and
insurance claim adjusters firm engaged by Wyeth-Suaco
on behalf of FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were
delivered to Hizon Laboratories Inc. in Antipolo City for
Readings
quality control check.17 The delivery receipt, bearing No.
07037 dated July 29, 1992, indicated that the delivery
consisted of one container with 144 cartons of Femenal
and Nordiol and 1 pallet containing Trinordiol.18
On July 31, 1992, Ronnie Likas, a representative of Wyeth-
Suaco, acknowledged the delivery of the cargoes by
affixing his signature on the delivery receipt.19 Upon
inspection, however, he, together with Ruben Alonzo of
Elite Surveyors, discovered that 44 cartons containing
Femenal and Nordiol tablets were in bad order.20 He thus
placed a note above his signature on the delivery receipt
stating that 44 cartons of oral contraceptives were in bad
order. The remaining 160 cartons of oral contraceptives
were accepted as complete and in good order.
Ruben Alonzo thus prepared and signed, along with
Ronnie Likas, a survey report21 dated July 31, 1992 stating
that 41 cartons of Femenal tablets and 3 cartons of Nordiol
tablets were "wetted" (sic).22
The Elite Surveyors later issued Certificate No. CS-0731-
1538/9223 attached to which was an "Annexed Schedule"
whereon it was indicated that prior to the loading of the
cargoes to the brokers trucks at the NAIA, they were
inspected and found to be in "apparent good
condition."24 Also noted was that at the time of delivery to
the warehouse of Hizon Laboratories Inc., slight to heavy
rains fell, which could account for the wetting of the 44
cartons of Femenal and Nordiol tablets.25
On August 4, 1992, the Hizon Laboratories Inc. issued a
Destruction Report26 confirming that 38 x 700 blister packs
of Femenal tablets, 3 x 700 blister packs of Femenal tablets
and 3 x 700 blister packs of Nordiol tablets were heavily
damaged with water and emitted foul smell.
On August 5, 1992, Wyeth-Suaco issued a Notice of
Materials Rejection27 of 38 cartons of Femenal and 3
cartons of Nordiol on the ground that they were
"delivered to Hizon Laboratories with heavy water
damaged (sic) causing the cartons to sagged (sic) emitting
a foul order and easily attracted flies."28
Wyeth-Suaco later demanded, by letter29 of August 25,
1992, from Sanchez Brokerage the payment of P191,384.25
representing the value of its loss arising from the damaged
tablets.
As the Sanchez Brokerage refused to heed the demand,
Wyeth-Suaco filed an insurance claim against FGU
Insurance which paid Wyeth-Suaco the amount
of P181,431.49 in settlement of its claim under Marine Risk
Note Number 4995.
67 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Wyeth-Suaco thus issued Subrogation Receipt in favor of
30
FGU Insurance.
On demand by FGU Insurance for payment of the amount
of P181,431.49 it paid Wyeth-Suaco, Sanchez Brokerage, by
letter31 of January 7, 1993, disclaimed liability for the
damaged goods, positing that the damage was due to
improper and insufficient export packaging; that when the
sealed containers were opened outside the PSI warehouse,
it was discovered that some of the loose cartons were
wet,32 prompting its (Sanchez Brokerages) representative
Morales to inform the Import-Export Assistant of Wyeth-
Suaco, Ramir Calicdan, about the condition of the cargoes
but that the latter advised to still deliver them to Hizon
Laboratories where an adjuster would assess the damage.33
Hence, the filing by FGU Insurance of a complaint for
damages before the Regional Trial Court of Makati City
against the Sanchez Brokerage.
The trial court, by Decision34 of July 29, 1996, dismissed
the complaint, holding that the Survey Report prepared by
the Elite Surveyors is bereft of any evidentiary support
and a mere product of pure guesswork.35
On appeal, the appellate court reversed the decision of the
trial court, it holding that the Sanchez Brokerage engaged
not only in the business of customs brokerage but also in
the transportation and delivery of the cargo of its clients,
hence, a common carrier within the context of Article 1732
of the New Civil Code.36
Noting that Wyeth-Suaco adduced evidence that the
cargoes were delivered to petitioner in good order and
condition but were in a damaged state when delivered to
Wyeth-Suaco, the appellate court held that Sanchez
Brokerage is presumed negligent and upon it rested the
burden of proving that it exercised extraordinary
negligence not only in instances when negligence is
directly proven but also in those cases when the cause of
the damage is not known or unknown.37
The appellate court thus disposed:
IN THE LIGHT OF ALL THE FOREGOING, the appeal of
the Appellant is GRANTED. The Decision of the Court a
quo is REVERSED. Another Decision is hereby rendered
in favor of the Appellant and against the Appellee as
follows:
The Appellee is hereby ordered to pay the Appellant the
principal amount of P181, 431.49, with interest thereupon
at the rate of 6% per annum, from the date of the Decision
of the Court, until the said amount is paid in full;
Readings
The Appellee is hereby ordered to pay to the Appellant the
amount of P20,000.00 as and by way of attorneys fees; and
The counterclaims of the Appellee are DISMISSED.38
Sanchez Brokerages Motion for Reconsideration having
been denied by the appellate courts Resolution of
December 8, 2000 which was received by petitioner on
January 5, 2001, it comes to this Court on petition for
certiorari filed on March 6, 2001.
In the main, petitioner asserts that the appellate court
committed grave and reversible error tantamount to abuse
of discretion when it found petitioner a "common carrier"
within the context of Article 1732 of the New Civil Code.
Respondent FGU Insurance avers in its Comment that the
proper course of action which petitioner should have
taken was to file a petition for review on certiorari since
the sole office of a writ of certiorari is the correction of
errors of jurisdiction including the commission of grave
abuse of discretion amounting to lack or excess of
jurisdiction and does not include correction of the
appellate courts evaluation of the evidence and factual
findings thereon.
On the merits, respondent FGU Insurance contends that
petitioner, as a common carrier, failed to overcome the
presumption of negligence, it being documented that
petitioner withdrew from the warehouse of PSI the subject
shipment entirely in good order and condition.39
The petition fails.
Rule 45 is clear that decisions, final orders or resolutions of
the Court of Appeals in any case, i.e., regardless of the
nature of the action or proceedings involved, may be
appealed to this Court by filing a petition for review,
which would be but a continuation of the appellate
process over the original case.40
The Resolution of the Court of Appeals dated December 8,
2000 denying the motion for reconsideration of its
Decision of August 10, 2000 was received by petitioner on
January 5, 2001. Since petitioner failed to appeal within 15
days or on or before January 20, 2001, the appellate courts
decision had become final and executory. The filing by
petitioner of a petition for certiorari on March 6, 2001
cannot serve as a substitute for the lost remedy of appeal.
In another vein, the rule is well settled that in a petition for
certiorari, the petitioner must prove not merely reversible
error but also grave abuse of discretion amounting to lack
or excess of jurisdiction.
68 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Petitioner alleges that the appellate court erred in
reversing and setting aside the decision of the trial court
based on its finding that petitioner is liable for the damage
to the cargo as a common carrier. What petitioner is
ascribing is an error of judgment, not of jurisdiction,
which is properly the subject of an ordinary appeal.
Where the issue or question involves or affects the wisdom
or legal soundness of the decision not the jurisdiction of
the court to render said decision the same is beyond the
province of a petition for certiorari.41 The supervisory
jurisdiction of this Court to issue a cert writ cannot be
exercised in order to review the judgment of lower courts
as to its intrinsic correctness, either upon the law or the
facts of the case.42
Procedural technicalities aside, the petition still fails.
The appellate court did not err in finding petitioner, a
customs broker, to be also a common carrier, as defined
under Article 1732 of the Civil Code, to wit:
Art. 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to
the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker
of Sanchez Brokerage, himself testified that the services
the firm offers include the delivery of goods to the
warehouse of the consignee or importer.
ATTY. FLORES:
Q: What are the functions of these license brokers, license
customs broker?
WITNESS:
As customs broker, we calculate the taxes that has to be
paid in cargos, and those upon approval of the importer,
we prepare the entry together for processing and claims
from customs and finally deliver the goods to the
warehouse of the importer.43
Article 1732 does not distinguish between one whose
principal business activity is the carrying of goods and
one who does such carrying only as an ancillary
activity.44 The contention, therefore, of petitioner that it is
not a common carrier but a customs broker whose
principal function is to prepare the correct customs
declaration and proper shipping documents as required
by law is bereft of merit. It suffices that petitioner
undertakes to deliver the goods for pecuniary
consideration.
Readings
In this light, petitioner as a common carrier is mandated to
observe, under Article 173345 of the Civil Code,
extraordinary diligence in the vigilance over the goods it
transports according to all the circumstances of each case.
In the event that the goods are lost, destroyed or
deteriorated, it is presumed to have been at fault or to have
acted negligently, unless it proves that it observed
extraordinary diligence.46
The concept of "extra-ordinary diligence" was explained
in Compania Maritima v. Court of Appeals:47
The extraordinary diligence in the vigilance over the
goods tendered for shipment requires the common carrier
to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted
to it for sale, carriage and delivery. It requires common
carriers to render service with the greatest skill and
foresight and "to use all reasonable means to ascertain the
nature and characteristics of goods tendered for shipment,
and to exercise due care in the handling and stowage,
including such methods as their nature requires."48
In the case at bar, it was established that petitioner
received the cargoes from the PSI warehouse in NAIA in
good order and condition;49 and that upon delivery by
petitioner to Hizon Laboratories Inc., some of the cargoes
were found to be in bad order, as noted in the Delivery
Receipt50 issued by petitioner, and as indicated in the
Survey Report of Elite Surveyors51 and the Destruction
Report of Hizon Laboratories, Inc.52
In an attempt to free itself from responsibility for the
damage to the goods, petitioner posits that they were
damaged due to the fault or negligence of the shipper for
failing to properly pack them and to the inherent
characteristics of the goods53; and that it should not be
faulted for following the instructions of Calicdan of
Wyeth-Suaco to proceed with the delivery despite
information conveyed to the latter that some of the
cartons, on examination outside the PSI warehouse, were
found to be wet.54
While paragraph No. 4 of Article 173455 of the Civil Code
exempts a common carrier from liability if the loss or
damage is due to the character of the goods or defects in
the packing or in the containers, the rule is that if the
improper packing is known to the carrier or his employees
or is apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of
liability for the resulting damage.56
If the claim of petitioner that some of the cartons were
already damaged upon delivery to it were true, then it
should naturally have received the cargo under protest or
69 | P a g e | | Tr a n s p o r t a t i o n Law Assigned Readings
with reservations duly noted on the receipt issued by PSI. A: Yes sir, there was an instance that one cartoon (sic) were
But it made no such protest or reservation.57 wetted (sic) but Wyeth-Suaco did not claim anything
against us.
Moreover, as observed by the appellate court, if indeed
petitioners employees only examined the cargoes outside ATTY. FLORES:
the PSI warehouse and found some to be wet, they would
certainly have gone back to PSI, showed to the Q: HOW IS IT?
warehouseman the damage, and demanded then and
there for Bad Order documents or a certification WITNESS:
confirming the damage.58 Or, petitioner would have
presented, as witness, the employees of the PSI from
A: We experienced, there was a time that we experienced
whom Morales and Domingo took delivery of the cargo to
that there was a cartoon (sic) wetted (sic) up to the bottom
prove that, indeed, part of the cargoes was already
are wet specially during rainy season.62
damaged when the container was allegedly opened
outside the warehouse.59
Since petitioner received all the cargoes in good order and
condition at the time they were turned over by the PSI
Petitioner goes on to posit that contrary to the report of
warehouseman, and upon their delivery to Hizon
Elite Surveyors, no rain fell that day. Instead, it asserts that
Laboratories, Inc. a portion thereof was found to be in bad
some of the cargoes were already wet on delivery by PSI
order, it was incumbent on petitioner to prove that it
outside the PSI warehouse but such notwithstanding
exercised extraordinary diligence in the carriage of the
Calicdan directed Morales to proceed with the delivery to
goods. It did not, however. Hence, its presumed
Hizon Laboratories, Inc.
negligence under Article 1735 of the Civil Code remains
unrebutted.
While Calicdan testified that he received the purported
telephone call of Morales on July 29, 1992, he failed to
WHEREFORE, the August 10, 2000 Decision of the Court
specifically declare what time he received the call. As to
of Appeals is hereby AFFIRMED.
whether the call was made at the PSI warehouse when the
shipment was stripped from the airport containers, or
Costs against petitioner.
when the cargoes were already in transit to Antipolo, it is
not determinable. Aside from that phone call, petitioner
SO ORDERED.
admitted that it had no documentary evidence to prove
that at the time it received the cargoes, a part of it was wet,
damaged or in bad condition.60 G.R. No. 138334 August 25, 2003

The 4-page weather data furnished by PAGASA61 on ESTELA L. CRISOSTOMO, Petitioner,

request of Sanchez Brokerage hardly impresses, no witness vs.
having identified it and interpreted the technical terms The Court of Appeals and CARAVAN TRAVEL &
thereof. TOURS INTERNATIONAL, INC., Respondents.

The possibility on the other hand that, as found by Hizon

Laboratories, Inc., the oral contraceptives were damaged
by rainwater while in transit to Antipolo City is more
likely then. Sanchez himself testified that in the past, there
was a similar instance when the shipment of Wyeth-Suaco
was also found to be wet by rain.
ATTY. FLORES:
Q: Was there any instance that a shipment of this nature,
oral contraceptives, that arrived at the NAIA were
damaged and claimed by the Wyeth-Suaco without any
question?
WITNESS:
DECISION
YNARES-SANTIAGO, J.:
In May 1991, petitioner Estela L. Crisostomo contracted
the services of respondent Caravan Travel and Tours
International, Inc. to arrange and facilitate her booking,
ticketing and accommodation in a tour dubbed "Jewels of
Europe". The package tour included the countries of
England, Holland, Germany, Austria, Liechstenstein,
Switzerland and France at a total cost of P74,322.70.
Petitioner was given a 5% discount on the amount, which
included airfare, and the booking fee was also waived
because petitioners niece, Meriam Menor, was respondent
companys ticketing manager.
70 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Pursuant to said contract, Menor went to her aunts
residence on June 12, 1991 a Wednesday to deliver
petitioners travel documents and plane tickets. Petitioner,
in turn, gave Menor the full payment for the package tour.
Menor then told her to be at the Ninoy Aquino
International Airport (NAIA) on Saturday, two hours
before her flight on board British Airways.
Without checking her travel documents, petitioner went to
NAIA on Saturday, June 15, 1991, to take the flight for the
first leg of her journey from Manila to Hongkong. To
petitioners dismay, she discovered that the flight she was
supposed to take had already departed the previous day.
She learned that her plane ticket was for the flight
scheduled on June 14, 1991. She thus called up Menor to
complain.
Subsequently, Menor prevailed upon petitioner to take
another tour the "British Pageant" which included
England, Scotland and Wales in its itinerary. For this tour
package, petitioner was asked anew to pay US$785.00 or
P20,881.00 (at the then prevailing exchange rate of P26.60).
She gave respondent US$300 or P7,980.00 as partial
payment and commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded
from respondent the reimbursement of P61,421.70,
representing the difference between the sum she paid for
"Jewels of Europe" and the amount she owed respondent
for the "British Pageant" tour. Despite several demands,
respondent company refused to reimburse the amount,
contending that the same was non-refundable.1 Petitioner
was thus constrained to file a complaint against
respondent for breach of contract of carriage and damages,
which was docketed as Civil Case No. 92-133 and raffled
to Branch 59 of the Regional Trial Court of Makati City.
In her complaint, petitioner alleged that her failure to join
2
"Jewels of Europe" was due to respondents fault since it
did not clearly indicate the departure date on the plane
ticket. Respondent was also negligent in informing her of
the wrong flight schedule through its employee Menor.
She insisted that the "British Pageant" was merely a
substitute for the "Jewels of Europe" tour, such that the
cost of the former should be properly set-off against the
sum paid for the latter.
For its part, respondent company, through its Operations
Manager, Concepcion Chipeco, denied responsibility for
petitioners failure to join the first tour. Chipeco insisted
Readings
that petitioner was informed of the correct departure date,
which was clearly and legibly printed on the plane ticket.
The travel documents were given to petitioner two days
ahead of the scheduled trip. Petitioner had only herself to
blame for missing the flight, as she did not bother to read
or confirm her flight schedule as printed on the ticket.
Respondent explained that it can no longer reimburse the
amount paid for "Jewels of Europe", considering that the
same had already been remitted to its principal in
Singapore, Lotus Travel Ltd., which had already billed the
same even if petitioner did not join the tour. Lotus
European tour organizer, Insight International Tours Ltd.,
determines the cost of a package tour based on a
minimum number of projected participants. For this
reason, it is accepted industry practice to disallow refund
for individuals who failed to take a booked tour.3
Lastly, respondent maintained that the "British Pageant"
was not a substitute for the package tour that petitioner
missed. This tour was independently procured by
petitioner after realizing that she made a mistake in
missing her flight for "Jewels of Europe". Petitioner was
allowed to make a partial payment of only US$300.00 for
the second tour because her niece was then an employee of
the travel agency. Consequently, respondent prayed that
petitioner be ordered to pay the balance of P12,901.00 for
the "British Pageant" package tour.
After due proceedings, the trial court rendered a
decision,4 the dispositive part of which reads:
WHEREFORE, premises considered, judgment is hereby
rendered as follows:
Ordering the defendant to return and/or refund to the
plaintiff the amount of Fifty Three Thousand Nine
Hundred Eighty Nine Pesos and Forty Three Centavos
(P53,989.43) with legal interest thereon at the rate of
twelve percent (12%) per annum starting January 16, 1992,
the date when the complaint was filed;
Ordering the defendant to pay the plaintiff the amount of
Five Thousand (P5,000.00) Pesos as and for reasonable
attorneys fees;
Dismissing the defendants counterclaim, for lack of merit;
and
With costs against the defendant.
71 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
SO ORDERED. 5
The trial court held that respondent was negligent in
erroneously advising petitioner of her departure date
through its employee, Menor, who was not presented as
witness to rebut petitioners testimony. However,
petitioner should have verified the exact date and time of
departure by looking at her ticket and should have simply
not relied on Menors verbal representation. The trial court
thus declared that petitioner was guilty of contributory
negligence and accordingly, deducted 10% from the
amount being claimed as refund.
Respondent appealed to the Court of Appeals, which
likewise found both parties to be at fault. However, the
appellate court held that petitioner is more negligent than
respondent because as a lawyer and well-traveled person,
she should have known better than to simply rely on what
was told to her. This being so, she is not entitled to any
form of damages. Petitioner also forfeited her right to the
"Jewels of Europe" tour and must therefore pay
respondent the balance of the price for the "British
Pageant" tour. The dispositive portion of the judgment
appealed from reads as follows:
WHEREFORE, premises considered, the decision of the
Regional Trial Court dated October 26, 1995 is hereby
REVERSED and SET ASIDE. A new judgment is hereby
ENTERED requiring the plaintiff-appellee to pay to the
defendant-appellant the amount of P12,901.00,
representing the balance of the price of the British Pageant
Package Tour, the same to earn legal interest at the rate of
SIX PERCENT (6%) per annum, to be computed from the
time the counterclaim was filed until the finality of this
decision. After this decision becomes final and executory,
the rate of TWELVE PERCENT (12%) interest per annum
shall be additionally imposed on the total obligation until
payment thereof is satisfied. The award of attorneys fees
is DELETED. Costs against the plaintiff-appellee.
SO ORDERED.6
Upon denial of her motion for reconsideration, petitioner
7
filed the instant petition under Rule 45 on the following
grounds:
I public carriers.10 A common carrier is defined under
It is respectfully submitted that the Honorable Court of
Appeals committed a reversible error in reversing and
Readings
setting aside the decision of the trial court by ruling that
the petitioner is not entitled to a refund of the cost of
unavailed "Jewels of Europe" tour she being equally, if not
more, negligent than the private respondent, for in the
contract of carriage the common carrier is obliged to
observe utmost care and extra-ordinary diligence which is
higher in degree than the ordinary diligence required of
the passenger. Thus, even if the petitioner and private
respondent were both negligent, the petitioner cannot be
considered to be equally, or worse, more guilty than the
private respondent. At best, petitioners negligence is only
contributory while the private respondent [is guilty] of
gross negligence making the principle of pari delicto
inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling
that the "Jewels of Europe" tour was not indivisible and
the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the
petitioner the consequential damages due her as a result of
breach of contract of carriage.8
Petitioner contends that respondent did not observe the
standard of care required of a common carrier when it
informed her wrongly of the flight schedule. She could not
be deemed more negligent than respondent since the latter
is required by law to exercise extraordinary diligence in
the fulfillment of its obligation. If she were negligent at all,
the same is merely contributory and not the proximate
cause of the damage she suffered. Her loss could only be
attributed to respondent as it was the direct consequence
of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is
one whereby a certain person or association of persons
obligate themselves to transport persons, things, or news
from one place to another for a fixed price.9 Such person or
association of persons are regarded as carriers and are
classified as private or special carriers and common or
Article 1732 of the Civil Code as persons, corporations,
firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land,
72 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
water or air, for compensation, offering their services to
the public.
It is obvious from the above definition that respondent is
not an entity engaged in the business of transporting
either passengers or goods and is therefore, neither a
private nor a common carrier. Respondent did not
undertake to transport petitioner from one place to
another since its covenant with its customers is simply to
make travel arrangements in their behalf. Respondents
services as a travel agency include procuring tickets and
facilitating travel permits or visas as well as booking
customers for tours.
While petitioner concededly bought her plane ticket
through the efforts of respondent company, this does not
mean that the latter ipso facto is a common carrier. At
most, respondent acted merely as an agent of the airline,
with whom petitioner ultimately contracted for her
carriage to Europe. Respondents obligation to petitioner
in this regard was simply to see to it that petitioner was
properly booked with the airline for the appointed date
and time. Her transport to the place of destination,
meanwhile, pertained directly to the airline.
The object of petitioners contractual relation with
respondent is the latters service of arranging and
facilitating petitioners booking, ticketing and
accommodation in the package tour. In contrast, the object
of a contract of carriage is the transportation of passengers
or goods. It is in this sense that the contract between the
parties in this case was an ordinary one for services and
not one of carriage. Petitioners submission is premised on
a wrong assumption.
The nature of the contractual relation between petitioner
and respondent is determinative of the degree of care
required in the performance of the latters obligation
under the contract. For reasons of public policy, a common
carrier in a contract of carriage is bound by law to carry
passengers as far as human care and foresight can provide
using the utmost diligence of very cautious persons and
with due regard for all the circumstances. As earlier
11
stated, however, respondent is not a common carrier but a
travel agency. It is thus not bound under the law to
observe extraordinary diligence in the performance of its
obligation, as petitioner claims.
Since the contract between the parties is an ordinary one
for services, the standard of care required of respondent is
Readings
that of a good father of a family under Article 1173 of the
Civil Code.12 This connotes reasonable care consistent with
that which an ordinarily prudent person would have
observed when confronted with a similar situation. The
test to determine whether negligence attended the
performance of an obligation is: did the defendant in
doing the alleged negligent act use that reasonable care
and caution which an ordinarily prudent person would
have used in the same situation? If not, then he is guilty of
negligence.13
In the case at bar, the lower court found Menor negligent
when she allegedly informed petitioner of the wrong day
of departure. Petitioners testimony was accepted as
indubitable evidence of Menors alleged negligent act
since respondent did not call Menor to the witness stand
to refute the allegation. The lower court applied the
presumption under Rule 131, Section 3 (e)14 of the Rules of
Court that evidence willfully suppressed would be
adverse if produced and thus considered petitioners
uncontradicted testimony to be sufficient proof of her
claim.
On the other hand, respondent has consistently denied
that Menor was negligent and maintains that petitioners
assertion is belied by the evidence on record. The date and
time of departure was legibly written on the plane ticket
and the travel papers were delivered two days in advance
precisely so that petitioner could prepare for the trip. It
performed all its obligations to enable petitioner to join the
tour and exercised due diligence in its dealings with the
latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut
petitioners testimony could not give rise to an inference
unfavorable to the former. Menor was already working in
France at the time of the filing of the complaint,15 thereby
making it physically impossible for respondent to present
her as a witness. Then too, even if it were possible for
respondent to secure Menors testimony, the presumption
under Rule 131, Section 3(e) would still not apply. The
opportunity and possibility for obtaining Menors
testimony belonged to both parties, considering that
Menor was not just respondents employee, but also
petitioners niece. It was thus error for the lower court to
invoke the presumption that respondent willfully
suppressed evidence under Rule 131, Section 3(e). Said
presumption would logically be inoperative if the evidence
73 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
is not intentionally omitted but is simply unavailable, or
when the same could have been obtained by both parties.16
In sum, we do not agree with the finding of the lower
court that Menors negligence concurred with the
negligence of petitioner and resultantly caused damage to
the latter. Menors negligence was not sufficiently proved,
considering that the only evidence presented on this score
was petitioners uncorroborated narration of the events. It
is well-settled that the party alleging a fact has the burden
of proving it and a mere allegation cannot take the place of
evidence.17 If the plaintiff, upon whom rests the burden of
proving his cause of action, fails to show in a satisfactory
manner facts upon which he bases his claim, the
defendant is under no obligation to prove his exception or
defense. 18
Contrary to petitioners claim, the evidence on record
shows that respondent exercised due diligence in
performing its obligations under the contract and followed
standard procedure in rendering its services to petitioner.
As correctly observed by the lower court, the plane
ticket19 issued to petitioner clearly reflected the departure
date and time, contrary to petitioners contention. The
travel documents, consisting of the tour itinerary, vouchers
and instructions, were likewise delivered to petitioner two
days prior to the trip. Respondent also properly booked
petitioner for the tour, prepared the necessary documents
and procured the plane tickets. It arranged petitioners
hotel accommodation as well as food, land transfers and
sightseeing excursions, in accordance with its avowed
undertaking.
Therefore, it is clear that respondent performed its
prestation under the contract as well as everything else
that was essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of her
affairs, there would have been no reason for her to miss
the flight. Needless to say, after the travel papers were
delivered to petitioner, it became incumbent upon her to
take ordinary care of her concerns. This undoubtedly
would require that she at least read the documents in
order to assure herself of the important details regarding
the trip.
The negligence of the obligor in the performance of the
obligation renders him liable for damages for the resulting
loss suffered by the obligee. Fault or negligence of the
obligor consists in his failure to exercise due care and
prudence in the performance of the obligation as the
Readings
nature of the obligation so demands.20 There is no fixed
standard of diligence applicable to each and every
contractual obligation and each case must be determined
upon its particular facts. The degree of diligence required
depends on the circumstances of the specific obligation
and whether one has been negligent is a question of fact
that is to be determined after taking into account the
particulars of each case.211wphi1
The lower court declared that respondents employee was
negligent. This factual finding, however, is not supported
by the evidence on record. While factual findings below
are generally conclusive upon this court, the rule is subject
to certain exceptions, as when the trial court overlooked,
misunderstood, or misapplied some facts or circumstances
of weight and substance which will affect the result of the
case.22
In the case at bar, the evidence on record shows that
respondent company performed its duty diligently and
did not commit any contractual breach. Hence, petitioner
cannot recover and must bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of
merit. The decision of the Court of Appeals in CA-G.R. CV
No. 51932 is AFFIRMED. Accordingly, petitioner is
ordered to pay respondent the amount of P12,901.00
representing the balance of the price of the British Pageant
Package Tour, with legal interest thereon at the rate of 6%
per annum, to be computed from the time the
counterclaim was filed until the finality of this Decision.
After this Decision becomes final and executory, the rate of
12% per annum shall be imposed until the obligation is
fully settled, this interim period being deemed to be by
then an equivalent to a forbearance of credit.23
SO ORDERED
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO
CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.
74 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged
in buying up used bottles and scrap metal in Pangasinan.
Upon gathering sufficient quantities of such scrap
material, respondent would bring such material to Manila
for resale. He utilized two (2) six-wheeler trucks which he
owned for hauling the material to Manila. On the return
trip to Pangasinan, respondent would load his vehicles
with cargo which various merchants wanted delivered to
differing establishments in Pangasinan. For that service,
respondent charged freight rates which were commonly
lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman
a merchant and authorized dealer of General Milk
Company (Philippines), Inc. in Urdaneta, Pangasinan,
contracted with respondent for the hauling of 750 cartons
of Liberty filled milk from a warehouse of General Milk in
Makati, Rizal, to petitioner's establishment in Urdaneta on
or before 4 December 1970. Accordingly, on 1 December
1970, respondent loaded in Makati the merchandise on to
his trucks: 150 cartons were loaded on a truck driven by
respondent himself, while 600 cartons were placed on
board the other truck which was driven by Manuel
Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to
petitioner. The other 600 boxes never reached petitioner,
since the truck which carried these boxes was hijacked
somewhere along the MacArthur Highway in Paniqui,
Tarlac, by armed men who took with them the truck, its
driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against
private respondent in the Court of First Instance of
Pangasinan, demanding payment of P 22,150.00, the
claimed value of the lost merchandise, plus damages and
attorney's fees. Petitioner argued that private respondent,
being a common carrier, and having failed to exercise the
extraordinary diligence required of him by the law, should
be held liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a
common carrier and argued that he could not be held
responsible for the value of the lost goods, such loss
having been due to force majeure.
On 10 December 1975, the trial court rendered a
Decision finding private respondent to be a common
1
Readings
carrier and holding him liable for the value of the
undelivered goods (P 22,150.00) as well as for P 4,000.00 as
damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged
that the trial court had erred in considering him a
common carrier; in finding that he had habitually offered
trucking services to the public; in not exempting him from
liability on the ground of force majeure; and in ordering
him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial
court and held that respondent had been engaged in
transporting return loads of freight "as a casual
occupation a sideline to his scrap iron business" and not
as a common carrier. Petitioner came to this Court by way
of a Petition for Review assigning as errors the following
conclusions of the Court of Appeals:
that private respondent was not a common carrier;
that the hijacking of respondent's truck was force majeure;
and
that respondent was not liable for the value of the
undelivered cargo. (Rollo, p. 111)
We consider first the issue of whether or not private
respondent Ernesto Cendana may, under the facts earlier
set forth, be properly characterized as a common carrier.
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 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 service on
an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community
75 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
or population, and one who offers services or solicits
business only from a narrow segment of the general
population. We think that Article 1733 deliberaom making
such distinctions.
So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the notion
of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set
forth in the Civil Code. Under Section 13, paragraph (b) of
the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged
in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas,
electric light, heat and power, water supply and power
petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting
stations and other similar public services. ... (Emphasis
supplied)
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 back-hauling was done on a
periodic or occasional rather than regular or scheduled
manner, and even though private
respondent's principal occupation was not the carriage of
goods for others. There is no dispute that private
respondent charged his customers a fee for hauling their
goods; that fee frequently fell below commercial freight
rates is not relevant here.
The Court of Appeals referred to the fact that private
respondent held no certificate of public convenience, and
concluded he was not a common carrier. This is palpable
error. A certificate of public convenience is not a requisite
for the incurring of liability under the Civil Code
provisions governing common carriers. That liability
Readings
arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has
also complied with the requirements of the applicable
regulatory statute and implementing regulations and has
been granted a certificate of public convenience or other
franchise. To exempt private respondent from the
liabilities of a common carrier because he has not secured
the necessary certificate of public convenience, would be
offensive to sound public policy; that would be to reward
private respondent precisely for failing to comply with
applicable statutory requirements. The business of a
common carrier impinges directly and intimately upon the
safety and well being and property of those members of
the general community who happen to deal with such
carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of those
who utilize their services and the law cannot allow a
common carrier to render such duties and liabilities
merely facultative by simply failing to obtain the necessary
permits and authorizations.
We turn then to the liability of private respondent as a
common carrier.
Common carriers, "by the nature of their business and for
reasons of public policy" 2 are held to a very high degree of
care and diligence ("extraordinary diligence") in the
carriage of goods as well as of passengers. The specific
import of extraordinary diligence in the care of goods
transported by a common carrier is, according to Article
1733, "further expressed in Articles 1734,1735 and 1745,
numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common
carriers are responsible for the loss, destruction or
deterioration of the goods which they carry, "unless the
same is due to any of the following causes only:
Flood, storm, earthquake, lightning or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether international
or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-
in the containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of
loss, destruction or deterioration which exempt the
common carrier for responsibility therefor, is a closed list.
76 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Causes falling outside the foregoing list, even if they
appear to constitute a species of force majeure fall within
the scope of Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and
5 of the preceding article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733.
(Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we
note firstly that the specific cause alleged in the instant
case the hijacking of the carrier's truck does not fall
within any of the five (5) categories of exempting causes
listed in Article 1734. It would follow, therefore, that the
hijacking of the carrier's vehicle must be dealt with under
the provisions of Article 1735, in other words, that the
private respondent as common carrier is presumed to have
been at fault or to have acted negligently. This
presumption, however, may be overthrown by proof of
extraordinary diligence on the part of private respondent.
Petitioner insists that private respondent had not observed
extraordinary diligence in the care of petitioner's goods.
Petitioner argues that in the circumstances of this case,
private respondent should have hired a security guard
presumably to ride with the truck carrying the 600 cartons
of Liberty filled milk. We do not believe, however, that in
the instant case, the standard of extraordinary diligence
required private respondent to retain a security guard to
ride with the truck and to engage brigands in a firelight at
the risk of his own life and the lives of the driver and his
helper.
The precise issue that we address here relates to the
specific requirements of the duty of extraordinary
diligence in the vigilance over the goods carried in the
specific context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the
vigilance over goods is, under Article 1733, given
additional specification not only by Articles 1734 and 1735
but also by Article 1745, numbers 4, 5 and 6, Article 1745
provides in relevant part:
Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public
policy:
Readings
xxx xxx xxx
(5) that the common carrier shall not be responsible for the
acts or omissions of his or its employees;
(6) that the common carrier's liability for acts committed
by thieves, or of robbers who do not act with grave or
irresistible threat, violence or force, is dispensed with or
diminished; and
(7) that the common carrier shall not responsible for the
loss, destruction or deterioration of goods on account of
the defective condition of the car vehicle, ship, airplane or
other equipment used in the contract of carriage.
(Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held
responsible and will not be allowed to divest or to
diminish such responsibility even for acts of strangers
like thieves or robbers, except where such thieves or
robbers in fact acted "with grave or irresistible threat,
violence or force." We believe and so hold that the limits of
the duty of extraordinary diligence in the vigilance over
the goods carried are reached where the goods are lost as
a result of a robbery which is attended by "grave or
irresistible threat, violence or force."
In the instant case, armed men held up the second truck
owned by private respondent which carried petitioner's
cargo. The record shows that an information for robbery in
band was filed in the Court of First Instance of Tarlac,
Branch 2, in Criminal Case No. 198 entitled "People of the
Philippines v. Felipe Boncorno, Napoleon Presno, Armando
Mesina, Oscar Oria and one John Doe." There, the accused
were charged with willfully and unlawfully taking and
carrying away with them the second truck, driven by
Manuel Estrada and loaded with the 600 cartons of Liberty
filled milk destined for delivery at petitioner's store in
Urdaneta, Pangasinan. The decision of the trial court
shows that the accused acted with grave, if not irresistible,
threat, violence or force. 3 Three (3) of the five (5) hold-
uppers were armed with firearms. The robbers not only
took away the truck and its cargo but also kidnapped the
driver and his helper, detaining them for several days and
later releasing them in another province (in Zambales).
The hijacked truck was subsequently found by the police
in Quezon City. The Court of First Instance convicted all
the accused of robbery, though not of robbery in band. 4
77 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
In these circumstances, we hold that the occurrence of the
loss must reasonably be regarded as quite beyond the
control of the common carrier and properly regarded as a
fortuitous event. It is necessary to recall that even common
carriers are not made absolute insurers against all risks of
travel and of transport of goods, and are not held liable for
acts or events which cannot be foreseen or are inevitable,
provided that they shall have complied with the rigorous
standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court
of Appeals that private respondent Cendana is not liable
for the value of the undelivered merchandise which was
lost because of an event entirely beyond private
respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is
hereby DENIED and the Decision of the Court of Appeals
dated 3 August 1977 is AFFIRMED. No pronouncement as
to costs.
SO ORDERED
G.R. No. 125948 December 29, 1998
FIRST PHILIPPINE INDUSTRIAL CORPORATION,
petitioner,
vs.
COURT OF APPEALS, HONORABLE PATERNO V.
TAC-AN, BATANGAS CITY and ADORACION C.
ARELLANO, in her official capacity as City Treasurer of
Batangas, respondents.
MARTINEZ, J.:
This petition for review on certiorari assails the
Decision of the Court of Appeals dated November 29,
1995, in CA-G.R. SP No. 36801, affirming the decision of
the Regional Trial Court of Batangas City, Branch 84, in
Civil Case No. 4293, which dismissed petitioners'
complaint for a business tax refund imposed by the City
of Batangas.
Petitioner is a grantee of a pipeline concession under
Republic Act No. 387, as amended, to contract, install
and operate oil pipelines. The original pipeline
concession was granted in 1967 and renewed by the
1 regulatory imposition. 4
Energy Regulatory Board in 1992. 2
Readings
Sometime in January 1995, petitioner applied for a
mayor's permit with the Office of the Mayor of Batangas
City. However, before the mayor's permit could be
issued, the respondent City Treasurer required
petitioner to pay a local tax based on its gross receipts
for the fiscal year 1993 pursuant to the Local Government
Code 3. The respondent City Treasurer assessed a
business tax on the petitioner amounting to P956,076.04
payable in four installments based on the gross receipts
for products pumped at GPS-1 for the fiscal year 1993
which amounted to P181,681,151.00. In order not to
hamper its operations, petitioner paid the tax under
protest in the amount of P239,019.01 for the first quarter
of 1993.
On January 20, 1994, petitioner filed a letter-protest
addressed to the respondent City Treasurer, the
pertinent portion of which reads:
Please note that our Company (FPIC) is a pipeline
operator with a government concession granted under
the Petroleum Act. It is engaged in the business of
transporting petroleum products from the Batangas
refineries, via pipeline, to Sucat and JTF Pandacan
Terminals. As such, our Company is exempt from paying
tax on gross receipts under Section 133 of the Local
Government Code of 1991 . . . .
Moreover, Transportation contractors are not included in
the enumeration of contractors under Section 131,
Paragraph (h) of the Local Government Code. Therefore,
the authority to impose tax "on contractors and other
independent contractors" under Section 143, Paragraph
(e) of the Local Government Code does not include the
power to levy on transportation contractors.
The imposition and assessment cannot be categorized as
a mere fee authorized under Section 147 of the Local
Government Code. The said section limits the
imposition of fees and charges on business to such
amounts as may be commensurate to the cost of
regulation, inspection, and licensing. Hence, assuming
arguendo that FPIC is liable for the license fee, the
imposition thereof based on gross receipts is violative of
the aforecited provision. The amount of P956,076.04
(P239,019.01 per quarter) is not commensurate to the cost
of regulation, inspection and licensing. The fee is
already a revenue raising measure, and not a mere
78 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
On March 8, 1994, the respondent City Treasurer denied
the protest contending that petitioner cannot be
considered engaged in transportation business, thus it
cannot claim exemption under Section 133 (j) of the
Local Government Code. 5
On June 15, 1994, petitioner filed with the Regional Trial
Court of Batangas City a complaint for tax refund with
6
prayer for writ of preliminary injunction against
respondents City of Batangas and Adoracion Arellano in
her capacity as City Treasurer. In its complaint,
petitioner alleged, inter alia, that: (1) the imposition and
collection of the business tax on its gross receipts
violates Section 133 of the Local Government Code; (2)
the authority of cities to impose and collect a tax on the
gross receipts of "contractors and independent
contractors" under Sec. 141 (e) and 151 does not include
the authority to collect such taxes on transportation
contractors for, as defined under Sec. 131 (h), the term
"contractors" excludes transportation contractors; and, (3)
the City Treasurer illegally and erroneously imposed
and collected the said tax, thus meriting the immediate
refund of the tax paid. 7
Traversing the complaint, the respondents argued that
petitioner cannot be exempt from taxes under Section
133 (j) of the Local Government Code as said exemption
applies only to "transportation contractors and persons
engaged in the transportation by hire and common
carriers by air, land and water." Respondents assert that
pipelines are not included in the term "common carrier"
which refers solely to ordinary carriers such as trucks,
trains, ships and the like. Respondents further posit that
the term "common carrier" under the said code pertains
to the mode or manner by which a product is delivered
to its destination. 8
On October 3, 1994, the trial court rendered a decision
dismissing the complaint, ruling in this wise:
. . . Plaintiff is either a contractor or other independent
contractor.
. . . the exemption to tax claimed by the plaintiff has
become unclear. It is a rule that tax exemptions are to be
strictly construed against the taxpayer, taxes being the
lifeblood of the government. Exemption may therefore
be granted only by clear and unequivocal provisions of
law.
Readings
Plaintiff claims that it is a grantee of a pipeline
concession under Republic Act 387. (Exhibit A) whose
concession was lately renewed by the Energy Regulatory
Board (Exhibit B). Yet neither said law nor the deed of
concession grant any tax exemption upon the plaintiff.
Even the Local Government Code imposes a tax on
franchise holders under Sec. 137 of the Local Tax Code.
Such being the situation obtained in this case
(exemption being unclear and equivocal) resort to
distinctions or other considerations may be of help:
That the exemption granted under Sec. 133 (j)
encompasses only common carriers so as not to
overburden the riding public or commuters with
taxes. Plaintif is not a common carrier, but a special
carrier extending its services and facilities to a single
specific or "special customer" under a "special contract."
The Local Tax Code of 1992 was basically enacted to give
more and effective local autonomy to local governments
than the previous enactments, to make them
economically and financially viable to serve the people
and discharge their functions with a concomitant
obligation to accept certain devolution of powers, . . . So,
consistent with this policy even franchise grantees are
taxed (Sec. 137) and contractors are also taxed under Sec.
143 (e) and 151 of the Code. 9Petitioner assailed the
aforesaid decision before this Court via a petition for
review. On February 27, 1995, we referred the case to the
respondent Court of Appeals for consideration and
adjudication. 10 On November 29, 1995, the respondent
court rendered a decision 11 affirming the trial court's
dismissal of petitioner's complaint. Petitioner's motion
for reconsideration was denied on July 18, 1996. 12
Hence, this petition. At first, the petition was denied due
course in a Resolution dated November 11,
1996. Petitioner moved for a reconsideration which was
granted by this Court in a Resolution 14 of January 22,
1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals
erred in holding that (1) the petitioner is not a common
carrier or a transportation contractor, and (2) the
exemption sought for by petitioner is not clear under the
law.
There is merit in the petition.
79 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
A "common carrier" may be defined, broadly, as one who
holds himself out to the public as engaged in the
business of transporting persons or property from place
to place, for compensation, offering his services to the
public generally.
Art. 1732 of the Civil Code defines a "common carrier" as
"any person, corporation, firm or association engaged in
the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation,
offering their services to the public."
The test for determining whether a party is a common
carrier of goods is:
He must be engaged in the business of carrying goods
for others as a public employment, and must hold
himself out as ready to engage in the transportation of
goods for person generally as a business and not as a
casual occupation;
He must undertake to carry goods of the kind to which
his business is confined;
He must undertake to carry by the method by which his
business is conducted and over his established roads;
and
The transportation must be for hire. 15
Based on the above definitions and requirements, there
is no doubt that petitioner is a common carrier. It is
engaged in the business of transporting or carrying
goods, i.e. petroleum products, for hire as a public
employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to
employ its services, and transports the goods by land
and for compensation. The fact that petitioner has a
limited clientele does not exclude it from the definition
of a common carrier. In De Guzman vs. Court of
Appeals 16
we ruled that:
The above article (Art. 1732, Civil Code) makes no
distinction between one whose principal business
activity is the carrying of persons or goods or both, and
one who does such carrying only as an ancillary activity
(in local idiom, as a "sideline"). Article 1732 . . . avoids
making any distinction between a person or enterprise
offering transportation service on a regular or scheduled
basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732
Readings
distinguish between a carrier offering its services to the
"general public," i.e., the general community or
population, and one who offers services or solicits
business only from a narrow segment of the general
population. We think that Article 1877 deliberately
refrained from making such distinctions.
So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the
notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers
set forth in the Civil Code. Under Section 13, paragraph
(b) of the Public Service Act, "public service" includes:
every person that now or hereafter may own, operate.
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without
fixed route and whatever may be its classification, freight
or carrier service of any class, express service, steamboat,
or steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or
dock, ice plant, ice-refrigeration plant, canal, irrigation
system gas, electric light heat and power, water supply
and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting
stations and other similar public services. (Emphasis
Supplied)
Also, respondent's argument that the term "common
carrier" as used in Section 133 (j) of the Local
Government Code refers only to common carriers
transporting goods and passengers through moving
vehicles or vessels either by land, sea or water, is
erroneous.
As correctly pointed out by petitioner, the definition of
"common carriers" in the Civil Code makes no
distinction as to the means of transporting, as long as it
is by land, water or air. It does not provide that the
transportation of the passengers or goods should be by
80 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
motor vehicle. In fact, in the United States, oil pipe line
operators are considered common carriers. 17
Under the Petroleum Act of the Philippines (Republic
Act 387), petitioner is considered a "common carrier."
Thus, Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. A
pipe line shall have the preferential right to utilize
installations for the transportation of petroleum owned
by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of
such other petroleum as may be offered by others for
transport, and to charge without discrimination such
rates as may have been approved by the Secretary of
Agriculture and Natural Resources.
Republic Act 387 also regards petroleum operation as a
public utility. Pertinent portion of Article 7 thereof
provides:
that everything relating to the exploration for and
exploitation of petroleum . . . and everything relating to
the manufacture, refining, storage, or transportation by
special methods of petroleum, is hereby declared to be
a public utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the
petitioner a "common carrier." In BIR Ruling No. 069-83,
it declared:
. . . since [petitioner] is a pipeline concessionaire that is
engaged only in transporting petroleum products, it is
considered a common carrier under Republic Act No. 387
. . . . Such being the case, it is not subject to withholding
tax prescribed by Revenue Regulations No. 13-78, as
amended.
From the foregoing disquisition, there is no doubt that
petitioner is a "common carrier" and, therefore, exempt
from the business tax as provided for in Section 133 (j),
of the Local Government Code, to wit:
Sec. 133. Common Limitations on the Taxing Powers of
Local Government Units. Unless otherwise provided
Readings
herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to
the levy of the following:
xxx xxx xxx
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line
It states: "SEC. 121 [now Sec. 131]. Common Limitations
on the Taxing Powers of Local Government Units." . . .
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the
business of transportation. This appears to be one of
those being deemed to be exempted from the taxing
powers of the local government units. May we know the
reason why the transportation business is being
excluded from the taxing powers of the local government
units?
MR. JAVIER (E.). Mr. Speaker, there is an exception
contained in Section 121 (now Sec. 131), line 16,
paragraph 5. It states that local government units may
not impose taxes on the business of transportation,
except as otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to
page 98 of Book II, one can see there that provinces have
the power to impose a tax on business enjoying a
franchise at the rate of not more than 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.
81 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
What we want to guard against here, Mr. Speaker, is the
imposition of taxes by local government units on the
carrier business. Local government units may impose
taxes on top of what is already being imposed by the
National Internal Revenue Code which is the so-called
"common carriers tax." We do not want a duplication of
this tax, so we just provided for an exception under
Section 125 [now Sec. 137] that a province may impose
this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr.
Speaker. . . . 18
It is clear that the legislative intent in excluding from the
taxing power of the local government unit the
imposition of business tax against common carriers is to
prevent a duplication of the so-called "common carrier's
tax."
Petitioner is already paying three (3%) percent common
carrier's tax on its gross sales/earnings under the
National Internal Revenue Code. 19 To tax petitioner
again on its gross receipts in its transportation of
petroleum business would defeat the purpose of the
Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The
decision of the respondent Court of Appeals dated
November 29, 1995 in CA-G.R. SP No. 36801 is
REVERSED and SET ASIDE.
SO ORDERED.
G.R. No. L-9605 September 30, 1957
GAUDIOSO EREZO, ET AL., plaintiff-appellee,
vs.
AGUEDO JEPTE, defendant-appellant.
Gesolgon, Matti and Custodio for appellees.
Aguedo Y. Jepte in his own behalf.
LABRADOR, J.:
Appeal from a judgment of the Court of First Instance of
Manila ordering defendant to pay plaintiff Gaudioso Erezo
P3,000 on the death of Ernesto Erezo, son of plaintiff
Gaudioso Erezo.
Readings
Defendant-appellant is the registered owner of a six by six
truck bearing plate No. TC-1253. On August, 9, 1949, while
the same was being driven by Rodolfo Espino y Garcia, it
collided with a taxicab at the intersection of San Andres
and Dakota Streets, Manila. As the truck went off the
street, it hit Ernesto Erezo and another, and the former
suffered injuries, as a result of which he died. The driver
was prosecuted for homicide through reckless negligence
in criminal case No. 10663 of the Court of First Instance of
Manila. The accused pleaded guilty and was sentenced to
suffer imprisonment and to pay the heirs of Ernesto Erezo
the sum of P3,000. As the amount of the judgment could
not be enforced against him, plaintiff brought this action
against the registered owner of the truck, the defendant-
appellant. The circumstances material to the case are
stated by the court in its decision.
The defendant does not deny at the time of the fatal
accident the cargo truck driven by Rodolfo Espino y
Garcia was registered in his name. He, however, claims
that the vehicle belonged to the Port Brokerage, of which
he was the broker at the time of the accident. He
explained, and his explanation was corroborated by
Policarpio Franco, the manager of the corporation, that the
trucks of the corporation were registered in his name as a
convenient arrangement so as to enable the corporation to
pay the registration fee with his backpay as a pre-war
government employee. Franco, however, admitted that the
arrangement was not known to the Motor Vehicle Office.
The trial court held that as the defendant-appellant
represented himself to be the owner of the truck and the
Motor Vehicle Office, relying on his representation,
registered the vehicles in his name, the Government and
all persons affected by the representation had the right to
rely on his declaration of ownership and registration. It,
therefore, held that the defendant-appellant is liable
because he cannot be permitted to repudiate his own
declaration. (Section 68 [a], Rule 123, and Art. 1431, New
Civil Code.).
Against the judgment, the defendant has prosecuted this
appeal claiming that at the time of the accident the
relation of employer and employee between the driver and
defendant-appellant was not established, it having been
proved at the trial that the owner of the truck was the Port
Brokerage, of which defendant-appellant was merely a
broker. We find no merit or justice in the above contention.
In previous decisions, We already have held that the
registered owner of a certificate of public convenience is
82 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
liable to the public for the injuries or damages suffered by
passengers or third persons caused by the operation of
said vehicle, even though the same had been transferred to
a third person. (Montoya vs. Ignacio, 94 Phil., 182, 50 Off.
Gaz., 108; Roque vs. Malibay Transit Inc.,1 G. R. No. L-
8561, November 18,1955; Vda. de Medina vs. Cresencia, 99
Phil., 506, 52 Off. Gaz., [10], 4606.)The principle upon
which this doctrine is based is that in dealing with
vehicles registered under the Public Service Law, the
public has the right to assume or presume that the
registered owner is the actual owner thereof, for it would
be difficult for the public to enforce the actions that they
may have for injuries caused to them by the vehicles being
negligently operated if the public should be required to
prove who the actual owner is. How would the public or
third persons know against whom to enforce their rights
in case of subsequent transfers of the vehicles? We do not
imply by this doctrine, however, that the registered owner
may not recover whatever amount he had paid by virtue of
his liability to third persons from the person to whom he
had actually sold, assigned or conveyed the vehicle.
Under the same principle the registered owner of any
vehicle, even if not used for a public service, should
primarily be responsible to the public or to third persons
for injuries caused the latter while the vehicle is being
driven on the highways or streets. The members of the
Court are in agreement that the defendant-appellant
should be held liable to plaintiff-appellee for the injuries
occasioned to the latter because of the negligence of the
driver even if the defendant-appellant was no longer the
owner of the vehicle at the time of the damage because he
had previously sold it to another. What is the legal basis
for his (defendant-appellant's) liability?.
There is a presumption that the owner of the guilty vehicle
is the defendant-appellant as he is the registered owner in
the Motor Vehicle Office. Should he not be allowed to
prove the truth, that he had sold it to another and thus
shift the responsibility for the injury to the real and actual
owner? The defendant holds the affirmative of this
proposition; the trial court held the negative.
The Revised Motor Vehicle Law (Act No. 3992, as
amended) provides that no vehicle may be used or
operated upon any public highway unless the same is
properly registered. It has been stated that the system of
licensing and the requirement that each machine must
carry a registration number, conspicuously displayed, is
one of the precautions taken to reduce the danger of injury
Readings
to pedestrians and other travelers from the careless
management of automobiles, and to furnish a means of
ascertaining the identity of persons violating the laws and
ordinances, regulating the speed and operation of
machines upon the highways (2 R. C. L. 1176). Not only
are vehicles to be registered and that no motor vehicles are
to be used or operated without being properly registered
for the current year, but that dealers in motor vehicles
shall furnish the Motor Vehicles Office a report showing
the name and address of each purchaser of motor vehicle
during the previous month and the manufacturer's serial
number and motor number. (Section 5 [c], Act. No. 3992, as
amended.).
Registration is required not to make said registration the
operative act by which ownership in vehicles is
transferred, as in land registration cases, because the
administrative proceeding of registration does not bear
any essential relation to the contract of sale between the
parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888),
but to permit the use and operation of the vehicle upon
any public highway (section 5 [a], Act No. 3992, as
amended).The main aim of motor vehicle registration is to
identify the owner so that if any accident happens, or that
any damage or injury is caused by the vehicles on the
public highways, responsibility therefore can be fixed on a
definite individual, the registered owner. Instances are
numerous where vehicles running on public highways
caused accidents or injuries to pedestrians or other
vehicles without positive identification of the owner or
drivers, or with very scant means of identification. It is to
forestall those circumstances, so inconvenient or
prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the
determination of persons responsible for damages or
injuries caused on public highways.
One of the principal purposes of motor vehicles legislation
is identification of the vehicle and of the operator, in case
of accident; and another is that the knowledge that means
of detection are always available may act as a deterrent
from lax observance of the law and of the rules of
conservative and safe operation. Whatever purpose there
may be in these statutes, it is subordinate at the last to the
primary purpose of rendering it certain that the violator of
the law or of the rules of safety shall not escape because of
lack of means to discover him." The purpose of the statute
is thwarted, and the displayed number becomes a "snare
and delusion," if courts will entertain such defenses as that
put forward by appellee in this case. No responsible
83 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
person or corporation could be held liable for the most
outrageous acts of negligence, if they should be allowed to
place a "middleman" between them and the public, and
escape liability by the manner in which they recompense
their servants. (King vs. Brenham Automobile Co., 145 S.
W. 278,279.)
With the above policy in mind, the question that
defendant-appellant poses is: should not be registered
owner be allowed at the trial to prove who the actual and
real owner is, and in accordance with such proof escape or
evade responsibility and lay the same on the person
actually owning the vehicle? We hold with the trial court
that the laws does not allow him to do so; the law, with its
aim and policy in mind, does not relieve him directly of
the responsibility that the law fixes and places upon him
as an incident or consequence of registration. Were a
registered owner allowed to evade responsibility by
proving who the supposed transferee or owner is, it would
be easy for him, by collusion with others or otherwise, to
escape said responsibility and transfer the same to an
indefinite person, or to one who possesses no property
with which to respond financially for the damage or injury
done. A victim of recklessness on the public highways is
usually without means to discover or identify the person
actually causing the injury or damage. He has no means
other than by a recourse to the registration in the Motor
Vehicles Office to determine who is the owner. The
protection that the law aims to extend to him would
become illusory were the registered owner given the
opportunity to escape liability by disproving his
ownership. If the policy of the law is to be enforced and
carried out, the registered owner should be allowed to
prove the contrary to the prejudice of the person injured
that is, to prove that a third person or another has become
the owner, so that he may thereby be relieved of the
responsibility to the injured person.1wphl.nt
The above policy and application of the law may appear
quite harsh and would seem to conflict with truth and
justice. We do not think it is so. A registered owner who
has already sold or transferred a vehicle has the recourse
to a third-party complaint, in the same action brought
against him to recover for the damage or injury done,
against the vendee or transferee of the vehicle. The
inconvenience of the suit is no justification for relieving
him of liability; said inconvenience is the price he pays for
failure to comply with the registration that the law
demands and requires.
Readings
In synthesis, we hold that the registered owner, the
defendant-appellant herein, is primarily responsible for
the damage caused to the vehicle of the plaintiff-appellee,
but he (defendant-appellant) has a right to be indemnified
by the real or actual owner of the amount that he may be
required to pay as damage for the injury caused to the
plaintiff-appellant.1wphl.nt
Bengzon, Paras, C.J., Bautista Angelo, Concepcion, Reyes, J. B.
L., and Felix, JJ., concur.
Montemayor, J., concurs in the result.
G.R. No. 125817 January 16, 2002
ABELARDO LIM and ESMADITO
GUNNABAN, petitioners,
vs.
COURT OF APPEALS and DONATO H.
GONZALES, respondents.
BELLOSILLO, J.:
When a passenger jeepney covered by a certificate of
public convenience is sold to another who continues to
operate it under the same certificate of public convenience
under the so-called kabit system, and in the course thereof
the vehicle meets an accident through the fault of another
vehicle, may the new owner sue for damages against the
erring vehicle? Otherwise stated, does the new owner have
any legal personality to bring the action, or is he the real
party in interest in the suit, despite the fact that he is not
the registered owner under the certificate of public
convenience?
Sometime in 1982 private respondent Donato Gonzales
purchased an Isuzu passenger jeepney from Gomercino
Vallarta, holder of a certificate of public convenience for
the operation of public utility vehicles plying the
Monumento-Bulacan route. While private respondent
Gonzales continued offering the jeepney for public
transport services he did not have the registration of the
vehicle transferred in his name nor did he secure for
himself a certificate of public convenience for its operation.
Thus Vallarta remained on record as its registered owner
and operator.1wphi1.nt
On 22 July 1990, while the jeepney was running
northbound along the North Diversion Road somewhere
in Meycauayan, Bulacan, it collided with a ten-wheeler-
truck owned by petitioner Abelardo Lim and driven by his
84 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
co-petitioner Esmadito Gunnaban. Gunnaban owned
responsibility for the accident, explaining that while he
was traveling towards Manila the truck suddenly lost its
brakes. To avoid colliding with another vehicle, he
swerved to the left until he reached the center island.
However, as the center island eventually came to an end,
he veered farther to the left until he smashed into a
Ferroza automobile, and later, into private respondent's
passenger jeepney driven by one Virgilio Gonzales. The
impact caused severe damage to both the Ferroza and the
passenger jeepney and left one (1) passenger dead and
many others wounded.
Petitioner Lim shouldered the costs for hospitalization of
the wounded, compensated the heirs of the deceased
passenger, and had the Ferroza restored to good condition.
He also negotiated with private respondent and offered to
have the passenger jeepney repaired at his shop. Private
respondent however did not accept the offer so Lim
offered him P20,000.00, the assessment of the damage as
estimated by his chief mechanic. Again, petitioner Lim's
proposition was rejected; instead, private respondent
demanded a brand-new jeep or the amount of P236,000.00.
Lim increased his bid to P40,000.00 but private respondent
was unyielding. Under the circumstances, negotiations
had to be abandoned; hence, the filing of the complaint for
damages by private respondent against petitioners.
In his answer Lim denied liability by contending that he
exercised due diligence in the selection and supervision of
his employees. He further asserted that as the jeepney was
registered in Vallartas name, it was Vallarta and not
private respondent who was the real party in interest.1 For
his part, petitioner Gunnaban averred that the accident
was a fortuitous event which was beyond his control.2
Meanwhile, the damaged passenger jeepney was left by
the roadside to corrode and decay. Private respondent
explained that although he wanted to take his jeepney
home he had no capability, financial or otherwise, to tow
the damaged vehicle. 3
The main point of contention between the parties related
to the amount of damages due private respondent. Private
respondent Gonzales averred that per estimate made by
an automobile repair shop he would have to
spend P236,000.00 to restore his jeepney to its original
condition.4 On the other hand, petitioners insisted that
they could have the vehicle repaired for P20,000.00.5
Readings
On 1 October 1993 the trial court upheld private
respondent's claim and awarded him P236,000.00 with
legal interest from 22 July 1990 as compensatory damages
and P30,000.00 as attorney's fees. In support of its
decision, the trial court ratiocinated that as vendee and
current owner of the passenger jeepney private
respondent stood for all intents and purposes as the real
party in interest. Even Vallarta himself supported private
respondent's assertion of interest over the jeepney for,
when he was called to testify, he dispossessed himself of
any claim or pretension on the property. Gunnaban was
found by the trial court to have caused the accident since
he panicked in the face of an emergency which was rather
palpable from his act of directing his vehicle to a perilous
streak down the fast lane of the superhighway then across
the island and ultimately to the opposite lane where it
collided with the jeepney.
On the other hand, petitioner Lim's liability for
Gunnaban's negligence was premised on his want of
diligence in supervising his employees. It was admitted
during trial that Gunnaban doubled as mechanic of the ill-
fated truck despite the fact that he was neither tutored nor
trained to handle such task.6
Forthwith, petitioners appealed to the Court of Appeals
which, on 17 July 1996, affirmed the decision of the trial
court. In upholding the decision of the court a quo the
appeals court concluded that while an operator under
the kabit system could not sue without joining the
registered owner of the vehicle as his principal, equity
demanded that the present case be made an
exception.7 Hence this petition.
It is petitioners' contention that the Court of Appeals erred
in sustaining the decision of the trial court despite their
opposition to the well-established doctrine that an
operator of a vehicle continues to be its operator as long as
he remains the operator of record. According to
petitioners, to recognize an operator under
the kabit system as the real party in interest and to
countenance his claim for damages is utterly subversive of
public policy. Petitioners further contend that inasmuch as
the passenger jeepney was purchased by private
respondent for only P30,000.00, an award of P236,000.00 is
inconceivably large and would amount to unjust
enrichment.8
Petitioners' attempt to illustrate that an affirmance of the
appealed decision could be supportive of the
85 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
pernicious kabit system does not persuade. Their labored
efforts to demonstrate how the questioned rulings of the
courts a quo are diametrically opposed to the policy of the
law requiring operators of public utility vehicles to secure
a certificate of public convenience for their operation is
quite unavailing.
The kabit system is an arrangement whereby a person who
has been granted a certificate of public convenience allows
other persons who own motor vehicles to operate them
under his license, sometimes for a fee or percentage of the
earnings.9 Although the parties to such an agreement are
not outrightly penalized by law, the kabit system is
invariably recognized as being contrary to public policy
and therefore void and inexistent under Art. 1409 of the
Civil Code.
In the early case of Dizon v. Octavio the Court explained
10
that one of the primary factors considered in the granting
of a certificate of public convenience for the business of
public transportation is the financial capacity of the holder
of the license, so that liabilities arising from accidents may
be duly compensated. The kabit system renders illusory
such purpose and, worse, may still be availed of by the
grantee to escape civil liability caused by a negligent use
of a vehicle owned by another and operated under his
license. If a registered owner is allowed to escape liability
by proving who the supposed owner of the vehicle is, it
would be easy for him to transfer the subject vehicle to
another who possesses no property with which to respond
financially for the damage done. Thus, for the safety of
passengers and the public who may have been wronged
and deceived through the baneful kabit system, the
registered owner of the vehicle is not allowed to prove that
another person has become the owner so that he may be
thereby relieved of responsibility. Subsequent cases affirm
such basic doctrine.11
It would seem then that the thrust of the law in enjoining
the kabit system is not so much as to penalize the parties
but to identify the person upon whom responsibility may
be fixed in case of an accident with the end view of
protecting the riding public. The policy therefore loses its
force if the public at large is not deceived, much less
involved.
In the present case it is at once apparent that the evil
sought to be prevented in enjoining the kabit system does
not exist. First, neither of the parties to the
pernicious kabit system is being held liable for
Readings
damages. Second, the case arose from the negligence of
another vehicle in using the public road to whom no
representation, or misrepresentation, as regards the
ownership and operation of the passenger jeepney was
made and to whom no such representation, or
misrepresentation, was necessary. Thus it cannot be said
that private respondent Gonzales and the registered
owner of the jeepney were in estoppel for leading the
public to believe that the jeepney belonged to the
registered owner. Third, the riding public was not bothered
nor inconvenienced at the very least by the illegal
arrangement. On the contrary, it was private respondent
himself who had been wronged and was seeking
compensation for the damage done to him. Certainly, it
would be the height of inequity to deny him his right.
In light of the foregoing, it is evident that private
respondent has the right to proceed against petitioners for
the damage caused on his passenger jeepney as well as on
his business. Any effort then to frustrate his claim of
damages by the ingenuity with which petitioners framed
the issue should be discouraged, if not repelled.
In awarding damages for tortuous injury, it becomes the
sole design of the courts to provide for adequate
compensation by putting the plaintiff in the same financial
position he was in prior to the tort. It is a fundamental
principle in the law on damages that a defendant cannot
be held liable in damages for more than the actual loss
which he has inflicted and that a plaintiff is entitled to no
more than the just and adequate compensation for the
injury suffered. His recovery is, in the absence of
circumstances giving rise to an allowance of punitive
damages, limited to a fair compensation for the harm
done. The law will not put him in a position better than
where he should be in had not the wrong happened.12
In the present case, petitioners insist that as the passenger
jeepney was purchased in 1982 for only P30,000.00 to
award damages considerably greater than this amount
would be improper and unjustified. Petitioners are at best
reminded that indemnification for damages comprehends
not only the value of the loss suffered but also that of the
profits which the obligee failed to obtain. In other words,
indemnification for damages is not limited to damnum
emergens or actual loss but extends to lucrum cessans or the
amount of profit lost.13
Had private respondent's jeepney not met an accident it
could reasonably be expected that it would have continued
86 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
earning from the business in which it was engaged.
Private respondent avers that he derives an average
income of P300.00 per day from his passenger jeepney and
this earning was included in the award of damages made
by the trial court and upheld by the appeals court. The
award therefore of P236,000.00 as compensatory damages
is not beyond reason nor speculative as it is based on a
reasonable estimate of the total damage suffered by
private respondent, i.e. damage wrought upon his jeepney
and the income lost from his transportation business.
Petitioners for their part did not offer any substantive
evidence to refute the estimate made by the courts a quo.
However, we are constrained to depart from the
conclusion of the lower courts that upon the award of
compensatory damages legal interest should be imposed
beginning 22 July 1990, i.e. the date of the accident. Upon
the provisions of Art. 2213 of the Civil Code, interest
"cannot be recovered upon unliquidated claims or
damages, except when the demand can be established
with reasonable certainty." It is axiomatic that if the suit
were for damages, unliquidated and not known until
definitely ascertained, assessed and determined by the
courts after proof, interest at the rate of six percent (6%)
per annum should be from the date the judgment of the
court is made (at which time the quantification of damages
may be deemed to be reasonably ascertained). 14
In this case, the matter was not a liquidated obligation as
the assessment of the damage on the vehicle was heavily
debated upon by the parties with private respondent's
demand for P236,000.00 being refuted by petitioners who
argue that they could have the vehicle repaired easily
for P20,000.00. In fine, the amount due private respondent
was not a liquidated account that was already demandable
and payable.
One last word. We have observed that private respondent
left his passenger jeepney by the roadside at the mercy of
the elements. Article 2203 of the Civil Code exhorts parties
suffering from loss or injury to exercise the diligence of a
good father of a family to minimize the damages resulting
from the act or omission in question. One who is injured
then by the wrongful or negligent act of another should
exercise reasonable care and diligence to minimize the
resulting damage. Anyway, he can recover from the
wrongdoer money lost in reasonable efforts to preserve
the property injured and for injuries incurred in
attempting to prevent damage to it. 15
Readings
However we sadly note that in the present case petitioners
failed to offer in evidence the estimated amount of the
damage caused by private respondent's unconcern
towards the damaged vehicle. It is the burden of
petitioners to show satisfactorily not only that the injured
party could have mitigated his damages but also the
amount thereof; failing in this regard, the amount of
damages awarded cannot be proportionately reduced.
WHEREFORE, the questioned Decision awarding private
respondent Donato Gonzales P236,000.00 with legal
interest from 22 July 1990 as compensatory damages
and P30,000.00 as attorney's fees is MODIFIED. Interest at
the rate of six percent (6%) per annum shall be computed
from the time the judgment of the lower court is made
until the finality of this Decision. If the adjudged principal
and interest remain unpaid thereafter, the interest shall be
twelve percent (12%) per annum computed from the time
judgment becomes final and executory until it is fully
satisfied.1wphi1.nt
Costs against petitioners.
SO ORDERED
G.R. No. L-64693 April 27, 1984
LITA ENTERPRISES, INC., petitioner,
vs.
SECOND CIVIL CASES DIVISION, INTERMEDIATE
APPELLATE COURT, NICASIO M. OCAMPO and
FRANCISCA P. GARCIA, respondents.
Manuel A. Concordia for petitioner.
Nicasio Ocampo for himself and on behalf of his correspondents.
ESCOLIN, J.:+.wph!1
"Ex pacto illicito non oritur actio" [No action arises out of an
illicit bargain] is the tune-honored maxim that must be
applied to the parties in the case at bar. Having entered
into an illegal contract, neither can seek relief from the
courts, and each must bear the consequences of his acts.
The factual background of this case is undisputed.
87 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Sometime in 1966, the spouses Nicasio M. Ocampo and
Francisca Garcia, herein private respondents, purchased in
installment from the Delta Motor Sales Corporation five
(5) Toyota Corona Standard cars to be used as taxicabs.
Since they had no franchise to operate taxicabs, they
contracted with petitioner Lita Enterprises, Inc., through
its representative, Manuel Concordia, for the use of the
latter's certificate of public convenience in consideration of
an initial payment of P1,000.00 and a monthly rental of
P200.00 per taxicab unit. To effectuate Id agreement, the
aforesaid cars were registered in the name of petitioner
Lita Enterprises, Inc, Possession, however, remained with
tile spouses Ocampo who operated and maintained the
same under the name Acme Taxi, petitioner's trade name.
About a year later, on March 18, 1967, one of said taxicabs
driven by their employee, Emeterio Martin, collided with a
motorcycle whose driver, one Florante Galvez, died from
the head injuries sustained therefrom. A criminal case was
eventually filed against the driver Emeterio Martin, while
a civil case for damages was instituted by Rosita Sebastian
Vda. de Galvez, heir of the victim, against Lita Enterprises,
Inc., as registered owner of the taxicab in the latter case,
Civil Case No. 72067 of the Court of First Instance of
Manila, petitioner Lita Enterprises, Inc. was adjudged
liable for damages in the amount of P25,000.00 and
P7,000.00 for attorney's fees.
This decision having become final, a writ of execution was
issued. One of the vehicles of respondent spouses with
Engine No. 2R-914472 was levied upon and sold at public
auction for 12,150.00 to one Sonnie Cortez, the highest
bidder. Another car with Engine No. 2R-915036 was
likewise levied upon and sold at public auction for
P8,000.00 to a certain Mr. Lopez.
Thereafter, in March 1973, respondent Nicasio Ocampo
decided to register his taxicabs in his name. He requested
the manager of petitioner Lita Enterprises, Inc. to turn
over the registration papers to him, but the latter allegedly
refused. Hence, he and his wife filed a complaint against
Lita Enterprises, Inc., Rosita Sebastian Vda. de Galvez,
Visayan Surety & Insurance Co. and the Sheriff of Manila
for reconveyance of motor vehicles with damages,
docketed as Civil Case No. 90988 of the Court of First
Instance of Manila. Trial on the merits ensued and on July
22, 1975, the said court rendered a decision, the dispositive
portion of which reads: t.hqw
Readings
WHEREFORE, the complaint is hereby dismissed as far as
defendants Rosita Sebastian Vda. de Galvez, Visayan
Surety & Insurance Company and the Sheriff of Manila are
concerned.
Defendant Lita Enterprises, Inc., is ordered to transfer the
registration certificate of the three Toyota cars not levied
upon with Engine Nos. 2R-230026, 2R-688740 and 2R-
585884 [Exhs. A, B, C and D] by executing a deed of
conveyance in favor of the plaintiff.
Plaintiff is, however, ordered to pay Lita Enterprises, Inc.,
the rentals in arrears for the certificate of convenience from
March 1973 up to May 1973 at the rate of P200 a month per
unit for the three cars. (Annex A, Record on Appeal, p.
102-103, Rollo)
Petitioner Lita Enterprises, Inc. moved for reconsideration
of the decision, but the same was denied by the court a
quo on October 27, 1975. (p. 121, Ibid.)
On appeal by petitioner, docketed as CA-G.R. No. 59157-R,
the Intermediate Appellate Court modified the decision by
including as part of its dispositive portion another
paragraph, to wit: t.hqw
In the event the condition of the three Toyota rears will no
longer serve the purpose of the deed of conveyance
because of their deterioration, or because they are no
longer serviceable, or because they are no longer available,
then Lita Enterprises, Inc. is ordered to pay the plaintiffs
their fair market value as of July 22, 1975. (Annex "D", p.
167, Rollo.)
Its first and second motions for reconsideration having
been denied, petitioner came to Us, praying that: t.
hqw
...
... after legal proceedings, decision be rendered or
resolution be issued, reversing, annulling or amending the
decision of public respondent so that:
the additional paragraph added by the public respondent
to the DECISION of the lower court (CFI) be deleted;
that private respondents be declared liable to petitioner
for whatever amount the latter has paid or was declared
liable (in Civil Case No. 72067) of the Court of First
88 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Instance of Manila to Rosita Sebastian Vda. de Galvez, as
heir of the victim Florante Galvez, who died as a result ot
the gross negligence of private respondents' driver while
driving one private respondents' taxicabs. (p. 39, Rollo.)
Unquestionably, the parties herein operated under an
arrangement, comonly known as the "kabit system",
whereby a person who has been granted a certificate of
convenience allows another person who owns motors
vehicles to operate under such franchise for a fee. A
certificate of public convenience is a special privilege
conferred by the government . Abuse of this privilege by
the grantees thereof cannot be countenanced. The "kabit
system" has been Identified as one of the root causes of the
prevalence of graft and corruption in the government
transportation offices. In the words of Chief Justice
Makalintal, 1 "this is a pernicious system that cannot be
too severely condemned. It constitutes an imposition upon
the goo faith of the government.
Although not outrightly penalized as a criminal offense,
the "kabit system" is invariably recognized as being
contrary to public policy and, therefore, void and
inexistent under Article 1409 of the Civil Code, It is a
fundamental principle that the court will not aid either
party to enforce an illegal contract, but will leave them
both where it finds them. Upon this premise, it was
flagrant error on the part of both the trial and appellate
courts to have accorded the parties relief from their
predicament. Article 1412 of the Civil Code denies them
such aid. It provides:t.hqw
ART. 1412. if the act in which the unlawful or forbidden
cause consists does not constitute a criminal offense, the
following rules shall be observed;
when the fault, is on the part of both contracting parties,
neither may recover what he has given by virtue of the
contract, or demand the performance of the other's
undertaking.
The defect of inexistence of a contract is permanent and
incurable, and cannot be cured by ratification or by
prescription. As this Court said in Eugenio v. Perdido, "the
2 applied to the parties in the case at bar. Having entered
mere lapse of time cannot give efficacy to contracts that are
null void."
The principle of in pari delicto is well known not only in
this jurisdiction but also in the United States where
common law prevails. Under American jurisdiction, the
Readings
doctrine is stated thus: "The proposition is universal that
no action arises, in equity or at law, from an illegal
contract; no suit can be maintained for its specific
performance, or to recover the property agreed to be sold
or delivered, or damages for its property agreed to be sold
or delivered, or damages for its violation. The rule has
sometimes been laid down as though it was equally
universal, that where the parties are in pari delicto, no
affirmative relief of any kind will be given to one against
the other." 3 Although certain exceptions to the rule are
provided by law, We see no cogent reason why the full
force of the rule should not be applied in the instant case.
WHEREFORE, all proceedings had in Civil Case No. 90988
entitled "Nicasio Ocampo and Francisca P. Garcia, Plaintiffs,
versus Lita Enterprises, Inc., et al., Defendants" of the Court
of First Instance of Manila and CA-G.R. No. 59157-R
entitled "Nicasio Ocampo and Francisca P. Garica, Plaintiffs-
Appellees, versus Lita Enterprises, Inc., Defendant-
Appellant," of the Intermediate Appellate Court, as well as
the decisions rendered therein are hereby annuleled and
set aside. No costs.
SO ORDERED.1wph1.t
G.R. No. L-65510 March 9, 1987
TEJA MARKETING AND/OR ANGEL
JAUCIAN, petitioner,
vs.
HONORABLE INTERMEDIATE APPELLATE
COURT * AND PEDRO N. NALE, respondents.
Cirilo A. Diaz, Jr. for petitioner.
Henry V. Briguera for private respondent.
PARAS, J.:
"'Ex pacto illicito' non oritur actio" (No action arises out of
illicit bargain) is the time-honored maxim that must be
into an illegal contract, neither can seek relief from the
courts, and each must bear the consequences of his acts."
(Lita Enterprises vs. IAC, 129 SCRA 81.)
89 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
The factual background of this case is undisputed. The
same is narrated by the respondent court in its now
assailed decision, as follows:
On May 9, 1975, the defendant bought from the plaintiff a
motorcycle with complete accessories and a sidecar in the
total consideration of P8,000.00 as shown by Invoice No.
144 (Exh. "A"). Out of the total purchase price the
defendant gave a downpayment of P1,700.00 with a
promise that he would pay plaintiff the balance within
sixty days. The defendant, however, failed to comply with
his promise and so upon his own request, the period of
paying the balance was extended to one year in monthly
installments until January 1976 when he stopped paying
anymore. The plaintiff made demands but just the same
the defendant failed to comply with the same thus forcing
the plaintiff to consult a lawyer and file this action for his
damage in the amount of P546.21 for attorney's fees and
P100.00 for expenses of litigation. The plaintiff also claims
that as of February 20, 1978, the total account of the
defendant was already P2,731.06 as shown in a statement
of account (Exhibit. "B"). This amount includes not only
the balance of P1,700.00 but an additional 12% interest per
annum on the said balance from January 26, 1976 to
February 27, 1978; a 2% service charge; and P 546.21
representing attorney's fees.
In this particular transaction a chattel mortgage (Exhibit 1)
was constituted as a security for the payment of the
balance of the purchase price. It has been the practice of
financing firms that whenever there is a balance of the
purchase price the registration papers of the motor vehicle
subject of the sale are not given to the buyer. The records
of the LTC show that the motorcycle sold to the defendant
was first mortgaged to the Teja Marketing by Angel
Jaucian though the Teja Marketing and Angel Jaucian are
one and the same, because it was made to appear that way
only as the defendant had no franchise of his own and he
attached the unit to the plaintiff's MCH Line. The
agreement also of the parties here was for the plaintiff to
undertake the yearly registration of the motorcycle with
the Land Transportation Commission. Pursuant to this
agreement the defendant on February 22, 1976 gave the
plaintiff P90.00, the P8.00 would be for the mortgage fee
and the P82.00 for the registration fee of the motorcycle.
The plaintiff, however failed to register the motorcycle on
that year on the ground that the defendant failed to
comply with some requirements such as the payment of
the insurance premiums and the bringing of the
motorcycle to the LTC for stenciling, the plaintiff saying
Readings
that the defendant was hiding the motorcycle from him.
Lastly, the plaintiff explained also that though the
ownership of the motorcycle was already transferred to
the defendant the vehicle was still mortgaged with the
consent of the defendant to the Rural Bank of Camaligan
for the reason that all motorcycle purchased from the
plaintiff on credit was rediscounted with the bank.
On his part the defendant did not dispute the sale and the
outstanding balance of P1,700. 00 still payable to the
plaintiff. The defendant was persuaded to buy from the
plaintiff the motorcycle with the side car because of the
condition that the plaintiff would be the one to register
every year the motorcycle with the Land Transportation
Commission. In 1976, however, the plaintfff failed to
register both the chattel mortgage and the motorcycle with
the LTC notwithstanding the fact that the defendant gave
him P90.00 for mortgage fee and registration fee and had
the motorcycle insured with La Perla Compana de Seguros
(Exhibit "6") as shown also by the Certificate of cover
(Exhibit "3"). Because of this failure of the plaintiff to
comply with his obligation to register the motorcycle the
defendant suffered damages when he failed to claim any
insurance indemnity which would amount to no less than
P15,000.00 for the more than two times that the motorcycle
figured in accidents aside from the loss of the daily
income of P15.00 as boundary fee beginning October 1976
when the motorcycle was impounded by the LTC for not
being registered.
The defendant disputed the claim of the plaintiff that he
was hiding from the plaintiff the motorcycle resulting in
its not being registered. The truth being that the
motorcycle was being used for transporting passengers
and it kept on travelling from one place to another. The
motor vehicle sold to him was mortgaged by the plaintiff
with the Rural Bank of Camaligan without his consent and
knowledge and the defendant was not even given a copy
of the mortgage deed. The defendant claims that it is not
true that the motorcycle was mortgaged because of re-
discounting for rediscounting is only true with Rural
Banks and the Central Bank. The defendant puts the
blame on the plaintiff for not registering the motorcycle
with the LTC and for not giving him the registration
papers inspite of demands made. Finally, the evidence of
the defendant shows that because of the filing of this case
he was forced to retain the services of a lawyer for a fee on
not less than P1,000.00.
xxx xxx xxx
90 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
... it also appears and the Court so finds that defendant
purchased the motorcycle in question, particularly for the
purpose of engaging and using the same in the
transportation business and for this purpose said trimobile
unit was attached to the plaintiffs transportation line who had
the franchise, so much so that in the registration certificate, the
plaintiff appears to be the owner of the unit. Furthermore, it
appears to have been agreed, further between the plaintiff
and the defendant, that plaintiff would undertake the
yearly registration of the unit in question with the LTC.
Thus, for the registration of the unit for the year 1976, per
agreement, the defendant gave to the plaintiff the amount
of P82.00 for its registration, as well as the insurance
coverage of the unit.
Eventually, petitioner Teja Marketing and/or Angel
Jaucian filed an action for "Sum of Money with Damages"
against private respondent Pedro N. Nale in the City Court
of Naga City. The City Court rendered judgment in favor
of petitioner, the dispositive portion of which reads:
WHEREFORE, decision is hereby rendered dismissing the
counterclaim and ordering the defendant to pay plaintiff
the sum of P1,700.00 representing the unpaid balance of
the purchase price with legal rate of interest from the date
of the filing of the complaint until the same is fully paid; to
pay plaintiff the sum of P546.21 as attorney's fees; to pay
plaintiff the sum of P200.00 as expenses of litigation; and
to pay the costs.
SO ORDERED.
On appeal to the Court of First Instance of Camarines Sur,
the decision was affirmed in toto. Private respondent filed
a petition for review with the Intermediate Appellate
Court and on July 18, 1983 the said Court promulgated its
decision, the pertinent portion of which reads
Readings
However, as the purchase of the motorcycle for operation
as a trimobile under the franchise of the private
respondent Jaucian, pursuant to what is commonly known
as the "kabit system", without the prior approval of the
Board of Transportation (formerly the Public Service
Commission) was an illegal transaction involving the
fictitious registration of the motor vehicle in the name of
the private respondent so that he may traffic with the
privileges of his franchise, or certificate of public
convenience, to operate a tricycle service, the parties
being in pari delicto, neither of them may bring an action
against the other to enforce their illegal contract [Art. 1412
(a), Civil Code].
xxx xxx xxx
WHEREFORE, the decision under review is hereby set
aside. The complaint of respondent Teja Marketing and/or
Angel Jaucian, as well as the counterclaim of petitioner
Pedro Nale in Civil Case No. 1153 of the Court of First
Instance of Camarines Sur (formerly Civil Case No. 5856 of
the City Court of Naga City) are dismissed. No
pronouncement as to costs.
SO ORDERED.
The decision is now before Us on a petition for review,
petitioner Teja Marketing and/or Angel Jaucian
presenting a lone assignment of error whether or not
respondent court erred in applying the doctrine of "pari
delicto."
We find the petition devoid of merit.
Unquestionably, the parties herein operated under an
arrangement, commonly known as the "kabit system"
whereby a person who has been granted a certificate of
public convenience allows another person who owns
motor vehicles to operate under such franchise for a fee. A
certificate of public convenience is a special privilege
conferred by the government. Abuse of this privilege by
the grantees thereof cannot be countenanced. The "kabit
system" has been Identified as one of the root causes of the
prevalence of graft and corruption in the government
transportation offices.
Although not outrightly penalized as a criminal offense,
the kabit system is invariably recognized as being contrary
to public policy and, therefore, void and in existent under
Article 1409 of the Civil Code. It is a fundamental
91 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
principle that the court will not aid either party to enforce
an illegal contract, but will leave both where it finds then.
Upon this premise it would be error to accord the parties
relief from their predicament. Article 1412 of the Civil
Code denies them such aid. It provides:
Art. 1412. If the act in which the unlawful or forbidden
cause consists does not constitute a criminal offense, the
following rules shall be observed:
When the fault is on the part of both contracting parties,
neither may recover that he has given by virtue of the
contract, or demand, the performance of the other's
undertaking.
The defect of in existence of a contract is permanent and
cannot be cured by ratification or by prescription. The
mere lapse of time cannot give efficacy to contracts that are
null and void.
WHEREFORE, the petition is hereby dismissed for lack of
merit. The assailed decision of the Intermediate Appellate
Court (now the Court of Appeals) is AFFIRMED. No costs.
SO ORDERED.
G.R. No. 144274 September 20, 2004
NOSTRADAMUS VILLANUEVA, petitioner,
vs.
PRISCILLA R. DOMINGO and LEANDRO LUIS R.
DOMINGO, respondents.
DECISION
CORONA, J.:
This is a petition to review the decision1 of the Court of
Appeals in CA-G.R. CV No. 52203 affirming in turn the
decision of the trial court finding petitioner liable to
respondent for damages. The dispositive portion read:
WHEREFORE, the appealed decision is hereby
AFFIRMED except the award of attorneys fees including
appearance fees which is DELETED.
SO ORDERED.2
The facts of the case, as summarized by the Court of
Appeals, are as follows:
Readings
[Respondent] Priscilla R. Domingo is the registered owner
of a silver Mitsubishi Lancer Car model 1980 bearing plate
No. NDW 781 91 with [co-respondent] Leandro Luis R.
Domingo as authorized driver. [Petitioner] Nostradamus
Villanueva was then the registered "owner" of a green
Mitsubishi Lancer bearing Plate No. PHK 201 91.
On 22 October 1991 at about 9:45 in the evening, following
a green traffic light, [respondent] Priscilla Domingos
silver Lancer car with Plate No. NDW 781 91 then driven
by [co-respondent] Leandro Luis R. Domingo was cruising
along the middle lane of South Superhighway at moderate
speed from north to south. Suddenly, a green Mitsubishi
Lancer with plate No. PHK 201 91 driven by Renato Dela
Cruz Ocfemia darted from Vito Cruz Street towards the
South Superhighway directly into the path of NDW 781
91 thereby hitting and bumping its left front portion. As a
result of the impact, NDW 781 91 hit two (2) parked
vehicles at the roadside, the second hitting another parked
car in front of it.
Per Traffic Accident Report prepared by Traffic Investigator
Pfc. Patrocinio N. Acido, Renato dela Cruz Ocfemia was
driving with expired license and positive for alcoholic
breath. Hence, Manila Assistant City Prosecutor Oscar A.
Pascua recommended the filing of information for reckless
imprudence resulting to (sic) damage to property and
physical injuries.
The original complaint was amended twice: first,
impleading Auto Palace Car Exchange as commercial
agent and/or buyer-seller and second, impleading Albert
Jaucian as principal defendant doing business under the
name and style of Auto Palace Car Exchange.
Except for Ocfemia, all the defendants filed separate
answers to the complaint. [Petitioner] Nostradamus
Villanueva claimed that he was no longer the owner of the
car at the time of the mishap because it was swapped with
a Pajero owned by Albert Jaucian/Auto Palace Car
Exchange. For her part, Linda Gonzales declared that her
presence at the scene of the accident was upon the request
of the actual owner of the Mitsubishi Lancer (PHK 201 91)
[Albert Jaucian] for whom she had been working as
agent/seller. On the other hand, Auto Palace Car
Exchange represented by Albert Jaucian claimed that he
was not the registered owner of the car. Moreover, it could
not be held subsidiary liable as employer of Ocfemia
because the latter was off-duty as utility employee at the
92 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
time of the incident. Neither was Ocfemia performing a
duty related to his employment. 3
After trial, the trial court found petitioner liable and
ordered him to pay respondent actual, moral and
exemplary damages plus appearance and attorneys fees:
WHEREFORE, judgment is hereby rendered for the
plaintiffs, ordering Nostradamus Villanueva to pay the
amount of P99,580 as actual damages, P25,000.00 as moral
damages, P25,000.00 as exemplary damages and attorneys
fees in the amount of P10,000.00 plus appearance fees
of P500.00 per hearing with legal interest counted from the
date of judgment. In conformity with the law on equity
and in accordance with the ruling in First Malayan
Lending and Finance Corporation vs. Court of Appeals
(supra), Albert Jaucian is hereby ordered to indemnify
Nostradamus Villanueva for whatever amount the latter is
hereby ordered to pay under the judgment.
SO ORDERED.4
The CA upheld the trial courts decision but deleted the
award for appearance and attorneys fees because the
justification for the grant was not stated in the body of the
decision. Thus, this petition for review which raises a
singular issue:
MAY THE REGISTERED OWNER OF A MOTOR
VEHICLE BE HELD LIABLE FOR DAMAGES ARISING
FROM A VEHICULAR ACCIDENT INVOLVING HIS
MOTOR VEHICLE WHILE BEING OPERATED BY THE
EMPLOYEE OF ITS BUYER WITHOUT THE LATTERS
CONSENT AND KNOWLEDGE? 5
Yes.
We have consistently ruled that the registered owner
of any vehicle is directly and primarily responsible to the
public and third persons while it is being operated. The
6
rationale behind such doctrine was explained way back in
1957 in Erezo vs. Jepte7:
The principle upon which this doctrine is based is that in
dealing with vehicles registered under the Public Service
Law, the public has the right to assume or presume that
the registered owner is the actual owner thereof, for it
would be difficult for the public to enforce the actions that
they may have for injuries caused to them by the vehicles
being negligently operated if the public should be
Readings
required to prove who the actual owner is. How would the
public or third persons know against whom to enforce
their rights in case of subsequent transfers of the vehicles?
We do not imply by his doctrine, however, that the
registered owner may not recover whatever amount he
had paid by virtue of his liability to third persons from the
person to whom he had actually sold, assigned or
conveyed the vehicle.
Under the same principle the registered owner of any vehicle,
even if not used for a public service, should primarily be
responsible to the public or to third persons for injuries caused
the latter while the vehicle is being driven on the highways or
streets. The members of the Court are in agreement that the
defendant-appellant should be held liable to plaintiff-appellee for
the injuries occasioned to the latter because of the negligence of
the driver, even if the defendant-appellant was no longer the
owner of the vehicle at the time of the damage because he had
previously sold it to another. What is the legal basis for his
(defendant-appellants) liability?
There is a presumption that the owner of the guilty vehicle
is the defendant-appellant as he is the registered owner in
the Motor Vehicles Office. Should he not be allowed to
prove the truth, that he had sold it to another and thus
shift the responsibility for the injury to the real and actual
owner? The defendant holds the affirmative of this
proposition; the trial court held the negative.
The Revised Motor Vehicle Law (Act No. 3992, as
amended) provides that no vehicle may be used or
operated upon any public highway unless the same is
property registered. It has been stated that the system of
licensing and the requirement that each machine must
carry a registration number, conspicuously displayed, is
one of the precautions taken to reduce the danger of injury
to pedestrians and other travelers from the careless
management of automobiles. And to furnish a means of
ascertaining the identity of persons violating the laws and
ordinances, regulating the speed and operation of
machines upon the highways (2 R.C.L. 1176). Not only are
vehicles to be registered and that no motor vehicles are to
be used or operated without being properly registered for
the current year, but that dealers in motor vehicles shall
furnish thee Motor Vehicles Office a report showing the
name and address of each purchaser of motor vehicle
during the previous month and the manufacturers serial
number and motor number. (Section 5(c), Act No. 3992, as
amended.)
93 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Registration is required not to make said registration the
operative act by which ownership in vehicles is
transferred, as in land registration cases, because the
administrative proceeding of registration does not bear
any essential relation to the contract of sale between the
parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888),
but to permit the use and operation of the vehicle upon
any public highway (section 5 [a], Act No. 3992, as
amended). The main aim of motor vehicle registration is to
identify the owner so that if any accident happens, or that
any damage or injury is caused by the vehicle on the
public highways, responsibility therefore can be fixed on a
definite individual, the registered owner. Instances are
numerous where vehicles running on public highways
caused accidents or injuries to pedestrians or other
vehicles without positive identification of the owner or
drivers, or with very scant means of identification. It is to
forestall these circumstances, so inconvenient or
prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the
determination of persons responsible for damages or
injuries caused on public highways:
One of the principal purposes of motor vehicles legislation
is identification of the vehicle and of the operator, in case
of accident; and another is that the knowledge that means
of detection are always available may act as a deterrent
from lax observance of the law and of the rules of
conservative and safe operation. Whatever purpose there
may be in these statutes, it is subordinate at the last to the
primary purpose of rendering it certain that the violator of
the law or of the rules of safety shall not escape because of
lack of means to discover him. The purpose of the statute
is thwarted, and the displayed number becomes a "share
and delusion," if courts would entertain such defenses as
that put forward by appellee in this case. No responsible
person or corporation could be held liable for the most
outrageous acts of negligence, if they should be allowed to
pace a "middleman" between them and the public, and
escape liability by the manner in which they recompense
servants. (King vs. Brenham Automobile Co., Inc. 145 S.W.
278, 279.)
With the above policy in mind, the question that
defendant-appellant poses is: should not the registered
owner be allowed at the trial to prove who the actual and
real owner is, and in accordance with such proof escape or
evade responsibility by and lay the same on the person
actually owning the vehicle? We hold with the trial court
that the law does not allow him to do so; the law, with its
Readings
aim and policy in mind, does not relieve him directly of
the responsibility that the law fixes and places upon him
as an incident or consequence of registration. Were a
registered owner allowed to evade responsibility by
proving who the supposed transferee or owner is, it would
be easy for him, by collusion with others or otherwise, to
escape said responsibility and transfer the same to an
indefinite person, or to one who possesses no property
with which to respond financially for the damage or injury
done. A victim of recklessness on the public highways is
usually without means to discover or identify the person
actually causing the injury or damage. He has no means
other than by a recourse to the registration in the Motor
Vehicles Office to determine who is the owner. The
protection that the law aims to extend to him would
become illusory were the registered owner given the
opportunity to escape liability by disproving his
ownership. If the policy of the law is to be enforced and
carried out, the registered owner should not be allowed to
prove the contrary to the prejudice of the person injured,
that is, to prove that a third person or another has become
the owner, so that he may thereby be relieved of the
responsibility to the injured person.
The above policy and application of the law may appear
quite harsh and would seem to conflict with truth and
justice. We do not think it is so. A registered owner who
has already sold or transferred a vehicle has the recourse
to a third-party complaint, in the same action brought
against him to recover for the damage or injury done,
against the vendee or transferee of the vehicle. The
inconvenience of the suit is no justification for relieving
him of liability; said inconvenience is the price he pays for
failure to comply with the registration that the law
demands and requires.
In synthesis, we hold that the registered owner, the
defendant-appellant herein, is primarily responsible for
the damage caused to the vehicle of the plaintiff-appellee,
but he (defendant-appellant) has a right to be indemnified
by the real or actual owner of the amount that he may be
required to pay as damage for the injury caused to the
plaintiff-appellant.8
Petitioner insists that he is not liable for damages since the
driver of the vehicle at the time of the accident was not an
authorized driver of the new (actual) owner of the vehicle.
He claims that the ruling in First Malayan Leasing and
Finance Corporation vs. CA9 implies that to hold the
94 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
registered owner liable for damages, the driver of the
vehicle must have been authorized, allowed and permitted
by its actual owner to operate and drive it. Thus, if the
vehicle is driven without the knowledge and consent of
the actual owner, then the registered owner cannot be held
liable for damages.
He further argues that this was the underlying theory
behind Duavit vs. CA wherein the court absolved the
10
registered owner from liability after finding that the
vehicle was virtually stolen from the owners garage by a
person who was neither authorized nor employed by the
owner. Petitioner concludes that the ruling in Duavit and
not the one in First Malayan should be applicable to him.
Petitioners argument lacks merit. Whether the driver is
authorized or not by the actual owner is irrelevant to
determining the liability of the registered owner who the
law holds primarily and directly responsible for any
accident, injury or death caused by the operation of the
vehicle in the streets and highways. To require the driver
of the vehicle to be authorized by the actual owner before
the registered owner can be held accountable is to defeat
the very purpose why motor vehicle legislations are
enacted in the first place.
Furthermore, there is nothing in First Malayan which even
remotely suggests that the driver must be authorized
before the registered owner can be held accountable.
In First Malayan, the registered owner, First Malayan
Corporation, was held liable for damages arising from the
accident even if the vehicle involved was already owned
by another party:
This Court has consistently ruled that regardless of who
the actual owner is of a motor vehicle might be, the
registered owner is the operator of the same with respect
to the public and third persons, and as such, directly and
primarily responsible for the consequences of its
operation. In contemplation of law, the owner/operator of
record is the employer of the driver, the actual operator and
employer being considered merely as his agent (MYC-
Agro-Industrial Corporation vs. Vda. de Caldo, 132 SCRA 10,
citing Vargas vs. Langcay, 6 SCRA 174; Tamayo vs. Aquino,
105 Phil. 949).
We believe that it is immaterial whether or not the driver
was actually employed by the operator of record. It is even
not necessary to prove who the actual owner of the vehicle
and the employer of the driver is. Granting that, in this
Readings
case, the father of the driver is the actual owner and that
he is the actual employer, following the well-settled
principle that the operator of record continues to be the
operator of the vehicle in contemplation of law, as regards
the public and third person, and as such is responsible for
the consequences incident to its operation, we must hold
and consider such owner-operator of record as the
employer, in contemplation of law, of the driver. And, to
give effect to this policy of law as enunciated in the above
cited decisions of this Court, we must now extend the
same and consider the actual operator and employer as the
agent of the operator of record.11
Contrary to petitioners position, the First Malayan ruling
is applicable to him since the case involves the same set of
facts the registered owner had previously sold the
vehicle to someone else and was being driven by an
employee of the new (actual) owner. Duavit is inapplicable
since the vehicle there was not transferred to another; the
registered and the actual owner was one and the same
person. Besides, in Duavit, the defense of the registered
owner, Gilberto Duavit, was that the vehicle was
practically stolen from his garage by Oscar Sabiano, as
affirmed by the latter:
Defendant Sabiano, in his testimony, categorically
admitted that he took the jeep from the garage of
defendant Duavit without the consent and authority of the
latter. He testified further that Duavit even filed charges
against him for the theft of the jeep but which Duavit did
not push through as his (Sabianos) parents apologized to
Duavit on his behalf.12
As correctly pointed out by the CA, the Duavit ruling is
not applicable to petitioners case since the circumstance of
unauthorized use was not present. He in fact voluntarily
delivered his car to Albert Jaucian as part of the
downpayment for a vehicle he purchased from Jaucian.
Thus, he could not claim that the vehicle was stolen from
him since he voluntarily ceded possession thereof to
Jaucian. It was the latter, as the new (actual) owner, who
could have raised the defense of theft to prove that he was
not liable for the acts of his employee Ocfemia. Thus, there
is no reason to apply the Duavit ruling to this case.
The ruling in First Malayan has been reiterated in BA
Finance Corporation vs. CA13 and more recently in Aguilar,
Sr. vs. Commercial Savings Bank.14 In BA Finance, we held the
registered owner liable even if, at the time of the accident,
the vehicle was leased by another party and was driven by
95 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
the lessees employee. In Aguilar, the registered owner-
bank answered for damages for the accident even if the
vehicle was being driven by the Vice-President of the Bank
in his private capacity and not as an officer of the Bank, as
claimed by the Bank. We find no reason to deviate from
these decisions.
The main purpose of vehicle registration is the easy
identification of the owner who can be held responsible
for any accident, damage or injury caused by the vehicle.
Easy identification prevents inconvenience and prejudice
to a third party injured by one who is unknown or
unidentified. To allow a registered owner to escape
liability by claiming that the driver was not authorized by
the new (actual) owner results in the public detriment the
law seeks to avoid.
Finally, the issue of whether or not the driver of the vehicle
during the accident was authorized is not at all relevant to
determining the liability of the registered owner. This
must be so if we are to comply with the rationale and
principle behind the registration requirement under the
motor vehicle law.
WHEREFORE, the petition is hereby DENIED. The
January 26, 2000 decision of the Court of Appeals
is AFFIRMED.
SO ORDERED.
G.R. No. 160286 July 30, 2004
SPOUSES FRANCISCO M. HERNANDEZ and
ANICETA ABEL-HERNANDEZ and JUAN
GONZALES,petitioners,
vs.
SPOUSES LORENZO DOLOR and MARGARITA
DOLOR, FRED PANOPIO, JOSEPH SANDOVAL, RENE
CASTILLO, SPOUSES FRANCISCO VALMOCINA and
VIRGINIA VALMOCINA, SPOUSES VICTOR
PANOPIO and MARTINA PANOPIO, and HON.
COURT OF APPEALS, respondents.
DECISION
YNARES-SANTIAGO, J.:
Readings
This is a petition for review under Rule 45 of the Rules of
Court seeking the reversal of the decision1 of the Court of
Appeals, dated April 29, 2003, in CA-G.R. CV No. 60357,
which affirmed with modification the amount of damages
awarded in the November 24, 1997 decision2 of the
Regional Trial Court of Batangas City, Branch IV.
The undisputed facts are as follows:
At about 3:00 p.m. of December 19, 1986, Lorenzo Menard
"Boyet" Dolor, Jr. was driving an owner-type jeepney with
plate no. DEB 804 owned by her mother, Margarita,
towards Anilao, Batangas. As he was traversing the road at
Barangay Anilao East, Mabini, Batangas, his vehicle
collided with a passenger jeepney bearing plate no. DEG
648, driven by petitioner Juan Gonzales and owned by his
co-petitioner Francisco Hernandez, which was travelling
towards Batangas City.
Boyet Dolor and his passenger, Oscar Valmocina, died as a
result of the collision. Fred Panopio, Rene Castillo and
Joseph Sandoval, who were also on board the owner-type
jeep, which was totally wrecked, suffered physical injuries.
The collision also damaged the passenger jeepney of
Francisco Hernandez and caused physical injuries to its
passengers, namely, Virgie Cadavida, Fiscal Artemio Reyes
and Francisca Corona.3
Consequently, respondents commenced an action4 for
damages against petitioners before the Regional Trial
Court of Batangas City, alleging that driver Juan Gonzales
was guilty of negligence and lack of care and that the
Hernandez spouses were guilty of negligence in the
selection and supervision of their employees.5
Petitioners countered that the proximate cause of the
death and injuries sustained by the passengers of both
vehicles was the recklessness of Boyet Dolor, the driver of
the owner-type jeepney, who was driving in a zigzagging
manner under the influence of alcohol. Petitioners also
alleged that Gonzales was not the driver-employee of the
Hernandez spouses as the former only leased the
passenger jeepney on a daily basis. The Hernandez
spouses further claimed that even if an employer-
employee relationship is found to exist between them, they
cannot be held liable because as employers they exercised
due care in the selection and supervision of their
employee.
During the trial of the case, it was established that the
drivers of the two vehicles were duly licensed to drive and
that the road where the collision occurred was asphalted
and in fairly good condition.6 The owner-type jeep was
travelling uphill while the passenger jeepney was going
downhill. It was further established that the owner-type
jeep was moderately moving and had just passed a road
bend when its passengers, private respondents Joseph
96 | P a g e | | Tr a n s p o r t a t i o n Law Assigned Readings
Sandoval and Rene Castillo, saw the passenger jeepney at P25,000.00 for hospitalization and medical expenses they
a distance of three meters away. The passenger jeepney incurred for the treatment of their son, Fred Panopio.
was traveling fast when it bumped the owner type
jeep.7 Moreover, the evidence presented by respondents To Fred Panopio:
before the trial court showed that petitioner Juan Gonzales
obtained his professional driver's license only on P25,000.00 for the loss of his right leg;
September 24, 1986, or three months before the accident.
Prior to this, he was holder of a student driver's permit
P10,000.00 as moral damages.
issued on April 10, 1986.8

To Joseph Sandoval:
On November 24, 1997, the trial court rendered a decision
in favor of respondents, the dispositive portion of which
P4,000.00 for medical treatment.
states:

The defendants are further directed to pay the costs of this

Premises duly considered and the plaintiffs having
proceedings.
satisfactorily convincingly and credibly presented
evidence clearly satisfying the requirements of
SO ORDERED.9
preponderance of evidence to sustain the complaint, this
Court hereby declares judgment in favor of the plaintiffs
and against the defendants. Defendants-spouses Francisco Petitioners appealed10 the decision to the Court of
Hernandez and Aniceta Abel Hernandez and Juan Appeals, which affirmed the same with modifications as
Gonzales are therefore directed to pay jointly and to the amount of damages, actual expenses and attorney's
severally, the following: fees awarded to the private respondents. The decretal
portion of the decision of the Court of Appeals reads:
To spouses Lorenzo Dolor and Margarita Dolor:
WHEREFORE, the foregoing premises considered, the
appealed decision is AFFIRMED. However, the award for
P50,000.00 for the death of their son, Lorenzo Menard
damages, actual expenses and attorney's fees shall be
"Boyet" Dolor, Jr.;
MODIFIED as follows:

P142,000.00 as actual and necessary funeral expenses;

To spouses Lorenzo Dolor and Margarita Dolor:

P50,000.00 reasonable value of the totally wrecked

P50,000.00 civil indemnity for their son Lorenzo Menard
owner-type jeep with plate no. DEB 804 Phil '85;
Dolor, Jr.;

P20,000.00 as moral damages;

P58,703.00 as actual and necessary funeral expenses;

P20,000.00 as reasonable litigation expenses and attorney's

P25,000,00 as temperate damages;
fees.

P100,000.00 as moral damages;

To spouses Francisco Valmocina and Virginia Valmocina:

P20,000.00 as reasonable litigation expenses and

P50,000.00 for the death of their son, Oscar Balmocina
attorney's fees.
(sic);

To Spouses Francisco Valmocina and Virginia Valmocina:

P20,000.00 as moral damages;

P50,000.00 civil indemnity for the death of their son,

P18,400.00 for funeral expenses;
Oscar Valmocina;

P10,000.00 for litigation expenses and attorney's fees.

P100,000.00 as moral damages;

To spouses Victor Panopio and Martina Panopio:

P10,000.00 as temperate damages;

P10,450.00 for the cost of the artificial leg and crutches

P10,000.00 as reasonable litigation expenses and
being used by their son Fred Panopio;
attorney's fees.
97 | P a g e | | Tr a n s p o r t a t i o n Law Assigned Readings
To Spouses Victor Panopio and Martina Panopio: If the owner was not in the motor vehicle, the provisions
of article 2180 are applicable.
P10,352.59 as actual hospitalization and medical
expenses; The Hernandez spouses argues that since they were not
inside the jeepney at the time of the collision, the
P5,000.00 as temperate damages. provisions of Article 2180 of the Civil Code, which does
not provide for solidary liability between employers and
To Fred Panopio: employees, should be applied.

P50,000.00 as moral damages. We are not persuaded.

To Joseph Sandoval: Article 2180 provides:

P3,000.00 as temperate damages. ARTICLE 2180. The obligation imposed by article 2176 is
demandable not only for one's own acts or omissions, but
also for those of persons for whom one is responsible.
SO ORDERED.11

The father and, in case of his death or incapacity, the

Hence the present petition raising the following issues:
mother, are responsible for the damages caused by the
minor children who live in their company.
Whether the Court of Appeals was correct when it
pronounced the Hernandez spouses as solidarily liable
Guardians are liable for damages caused by the minors or
with Juan Gonzales, although it is of record that they were
incapacitated persons who are under their authority and
not in the passenger jeepney driven by latter when the
live in their company.
accident occurred;

The owners and managers of an establishment or

Whether the Court of Appeals was correct in awarding
enterprise are likewise responsible for damages caused by
temperate damages to private respondents namely the
their employees in the service of the branches in which the
Spouses Dolor, Spouses Valmocina and Spouses Panopio
latter are employed or on the occasion of their functions.
and to Joseph Sandoval, although the grant of temperate
damages is not provided for in decision of the court a quo;
Employers shall be liable for the damages caused by
their employees and household helpers acting within
Whether the Court of Appeals was correct in increasing
the scope of their assigned tasks, even though the
the award of moral damages to respondents, Spouses
former are not engaged in any business or industry.
Dolor, Spouses Valmocina and Fred Panopio;

The State is responsible in like manner when it acts

Whether the Court of Appeals was correct in affirming the
through a special agent; but not when the damage has
grant of attorney's fees to Spouses Dolor and to Spouses
been caused by the official to whom the task done
Valmocina although the lower court did not specify the
properly pertains, in which case what is provided in article
fact and the law on which it is based.
2176 shall be applicable.

Petitioners contend that the absence of the Hernandez

Lastly, teachers or heads of establishments of arts and
spouses inside the passenger jeepney at the time of the
trades shall be liable for damages caused by their pupils
collision militates against holding them solidarily liable
and students or apprentices, so long as they remain in
with their co-petitioner, Juan Gonzales, invoking Article
their custody.
2184 of the Civil Code, which provides:

The responsibility treated of in this article shall cease

ARTICLE 2184. In motor vehicle mishaps, the owner is
when the persons herein mentioned prove that they
solidarily liable with his driver, if the former, who was in
observed all the diligence of a good father of a family to
the vehicle, could have, by the use of the due diligence,
prevent damage. (Underscoring supplied)
prevented the misfortune. It is disputably presumed that a
driver was negligent, if he had been found guilty of
reckless driving or violating traffic regulations at least On the other hand, Article 2176 provides
twice within the next preceding two months.
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-
98 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this
Chapter.
While the above provisions of law do not expressly
provide for solidary liability, the same can be inferred
from the wordings of the first paragraph of Article 2180
which states that the obligation imposed by article 2176 is
demandable not only for one's own acts or omissions, but also
for those of persons for whom one is responsible.
Moreover, Article 2180 should be read with Article 2194 of
the same Code, which categorically states that the
responsibility of two or more persons who are liable for quasi-
delict is solidary. In other words, the liability of joint
tortfeasors is solidary.12 Verily, under Article 2180 of the
Civil Code, an employer may be held solidarily liable for
the negligent act of his employee.13
The solidary liability of employers with their employees
for quasi-delicts having been established, the next
question is whether Julian Gonzales is an employee of the
Hernandez spouses. An affirmative answer will put to rest
any issue on the solidary liability of the Hernandez
spouses for the acts of Julian Gonzales. The Hernandez
spouses maintained that Julian Gonzales is not their
employee since their relationship relative to the use of the
jeepney is that of a lessor and a lessee. They argue that
Julian Gonzales pays them a daily rental of P150.00 for the
use of the jeepney.14 In essence, petitioners are practicing
the "boundary system" of jeepney operation albeit
disguised as a lease agreement between them for the use
of the jeepney.
We hold that an employer-employee relationship exists
between the Hernandez spouses and Julian Gonzales.
Indeed to exempt from liability the owner of a public
vehicle who operates it under the "boundary system" on
the ground that he is a mere lessor would be not only to
abet flagrant violations of the Public Service Law, but also
to place the riding public at the mercy of reckless and
irresponsible drivers reckless because the measure of
their earnings depends largely upon the number of trips
they make and, hence, the speed at which they drive; and
irresponsible because most if not all of them are in no
position to pay the damages they might cause.15
Anent the award of temperate damages to the private
respondents, we hold that the appellate court committed
no reversible error in awarding the same to the
respondents.
Temperate or moderate damages are damages which are
more than nominal but less than compensatory which may
be recovered when the court finds that some pecuniary
Readings
loss has been suffered but its amount cannot, from the
nature of the case, be proved with certainty. 16 Temperate
damages are awarded for those cases where, from the
nature of the case, definite proof of pecuniary loss cannot
be offered, although the court is convinced that there has
been such loss. A judge should be empowered to calculate
moderate damages in such cases, rather than the plaintiff
should suffer, without redress, from the defendant's
wrongful act.17 The assessment of temperate damages is
left to the sound discretion of the court provided that such
an award is reasonable under the circumstances.18
We have gone through the records of this case and we find
that, indeed, respondents suffered losses which cannot be
quantified in monetary terms. These losses came in the
form of the damage sustained by the owner type jeep of
the Dolor spouses; the internment and burial of Oscar
Valmocina; the hospitalization of Joseph Sandoval on
account of the injuries he sustained from the collision and
the artificial leg and crutches that respondent Fred
Panopio had to use because of the amputation of his right
leg. Further, we find that the amount of temperate
damages awarded to the respondents were reasonable
under the circumstances.
As to the amount of moral damages which was awarded to
respondents, a review of the records of this case shows
that there exists no cogent reason to overturn the action of
the appellate court on this aspect.
Under Article 2206, the "spouse, legitimate and
illegitimate descendants and ascendants of the deceased
may demand moral damages for mental anguish for the
death of the deceased." The reason for the grant of moral
damages has been explained, thus:
. . . the award of moral damages is aimed at a restoration,
within the limits possible, of the spiritual status quo ante;
and therefore, it must be proportionate to the suffering
inflicted. The intensity of the pain experienced by the
relatives of the victim is proportionate to the intensity of
affection for him and bears no relation whatsoever with
the wealth or means of the offender.19
Moral damages are emphatically not intended to enrich a
plaintiff at the expense of the defendant. They are awarded
to allow the former to obtain means, diversion or
amusements that will serve to alleviate the moral suffering
he has undergone due to the defendant's culpable action
and must, perforce, be proportional to the suffering
inflicted.20
Truly, the pain of the sudden loss of one's offspring,
especially of a son who was in the prime of his youth, and
who holds so much promise waiting to be fulfilled is
indeed a wellspring of intense pain which no parent
should be made to suffer. While it is true that there can be
99 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
no exact or uniform rule for measuring the value of a
human life and the measure of damages cannot be arrived
at by a precise mathematical calculation,21 we hold that the
Court of Appeals' award of moral damages of P100,000.00
each to the Spouses Dolor and Spouses Valmocina for the
death of their respective sons, Boyet Dolor and Oscar
Valmocina, is in full accord with prevailing
jurisprudence.22
With respect to the award of attorney's fees to
respondents, no sufficient basis was established for the
grant thereof.
It is well settled that attorney's fees should not be awarded
in the absence of stipulation except under the instances
enumerated in Article 2208 of the Civil Code. As we have
held in Rizal Surety and Insurance Company v. Court of
Appeals:23
Article 2208 of the Civil Code allows attorney's fees to be
awarded by a court when its claimant is compelled to
litigate with third persons or to incur expenses to protect
his interest by reason of an unjustified act or omission of
the party from whom it is sought. While judicial discretion
is here extant, an award thereof demands, nevertheless, a
factual, legal or equitable justification. The matter cannot
and should not be left to speculation and conjecture
(Mirasol vs. De la Cruz, 84 SCRA 337; Stronghold
Insurance Company, Inc. vs. Court of Appeals, 173 SCRA
619).
In the case at bench, the records do not show enough basis
for sustaining the award for attorney's fees and to adjudge
its payment by petitioner. x x x.
Likewise, this Court held in Stronghold Insurance
Company, Inc. vs. Court of Appeals that:
"In Abrogar v. Intermediate Appellate Court G.R. No.
67970, January 15, 1988, 157 SCRA 57], the Court had
occasion to state that '[t]he reason for the award of
attorney's fees must be stated in the text of the court's
decision, otherwise, if it is stated only in the dispositive
portion of the decision, the same must be disallowed on
appeal.' x x x."24
WHEREFORE, the petition is DENIED. The assailed
decision of the Court of Appeals is AFFIRMED with the
MODIFICATION that the grant of attorney's fees is
DELETED for lack of basis.
Costs against petitioners.
SO ORDERED.
G.R. No. 181398 June 29, 2011
Readings
FEB LEASING AND FINANCE CORPORATION (now
BPI LEASING CORPORATION), Petitioner,
vs.
SPOUSES SERGIO P. BAYLON and MARITESS
VILLENA-BAYLON, BG HAULER, INC., and MANUEL
Y. ESTILLOSO, Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari1 of the 9 October
2007 Decision2 and the 18 January 2008 Resolution3 of the
Court of Appeals in CA-G.R. CV No. 81446. The 9 October
2007 Decision affirmed the 30 October 2003 Decision4 of
the Regional Trial Court (Branch 35) of Gapan City in Civil
Case No. 2334 ordering petitioner to pay respondents
damages. The 18 January 2008 Resolution denied
petitioners motion for reconsideration.
The Facts
On 2 September 2000, an Isuzu oil tanker running along
Del Monte Avenue in Quezon City and bearing plate
number TDY 712 hit Loretta V. Baylon (Loretta), daughter
of respondent spouses Sergio P. Baylon and Maritess
Villena-Baylon (spouses Baylon). At the time of the
accident, the oil tanker was registered5 in the name of
petitioner FEB Leasing and Finance
Corporation6 (petitioner). The oil tanker was leased7 to BG
Hauler, Inc. (BG Hauler) and was being driven by the
latters driver, Manuel Y. Estilloso. The oil tanker was
insured8 by FGU Insurance Corp. (FGU Insurance).
The accident took place at around 2:00 p.m. as the oil
tanker was coming from Balintawak and heading towards
Manila. Upon reaching the intersection of Bonifacio Street
and Del Monte Avenue, the oil tanker turned left. While
the driver of the oil tanker was executing a left turn side
by side with another vehicle towards Del Monte Avenue,
the oil tanker hit Loretta who was then crossing Del
Monte Avenue coming from Mayon Street. Due to the
strong impact, Loretta was violently thrown away about
three to five meters from the point of impact. She fell to
the ground unconscious. She was brought for treatment to
the Chinese General Hospital where she remained in a
coma until her death two days after.9
100 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
The spouses Baylon filed with the RTC (Branch 35) of
Gapan City a Complaint for damages against petitioner,
10
BG Hauler, the driver, and FGU Insurance. Petitioner filed
its answer with compulsory counterclaim while FGU
Insurance filed its answer with counterclaim. On the other
hand, BG Hauler filed its answer with compulsory
counterclaim and cross-claim against FGU Insurance.
Petitioner claimed that the spouses Baylon had no cause of
action against it because under its lease contract with BG
Hauler, petitioner was not liable for any loss, damage, or
injury that the leased oil tanker might cause. Petitioner
claimed that no employer-employee relationship existed
between petitioner and the driver.
BG Hauler alleged that neither do the spouses Baylon have
a cause of action against it since the oil tanker was not
registered in its name. BG Hauler contended that the
victim was guilty of contributory negligence in crossing
the street. BG Hauler claimed that even if its driver was at
fault, BG Hauler exercised the diligence of a good father of
a family in the selection and supervision of its driver. BG
Hauler also contended that FGU Insurance is obliged to
assume all liabilities arising from the use of the insured oil
tanker.
For its part, FGU Insurance averred that the victim was
guilty of contributory negligence. FGU Insurance
concluded that the spouses Baylon could not expect to be
paid the full amount of their claims. FGU Insurance
pointed out that the insurance policy covering the oil
tanker limited any claim to a maximum of P400,000.00.
During trial, FGU Insurance moved that (1) it be allowed
to deposit in court the amount of P450,000.00 in the joint
names of the spouses Baylon, petitioner, and BG Hauler
and (2) it be released from further participating in the
proceedings. After the RTC granted the motion, FGU
Insurance deposited in the Branch Clerk of Court a check
in the names of the spouses Baylon, petitioner, and BG
Hauler. The RTC then released FGU Insurance from its
contractual obligations under the insurance policy.
The Ruling of the RTC
Readings
After weighing the evidence submitted by the parties, the
RTC found that the death of Loretta was due to the
negligent act of the driver. The RTC held that BG Hauler,
as the employer, was solidarily liable with the driver. The
RTC further held that petitioner, as the registered owner of
the oil tanker, was also solidarily liable.
The RTC found that since FGU Insurance already paid the
amount of P450,000.00 to the spouses Baylon, BG Hauler,
and petitioner, the insurers obligation has been
satisfactorily fulfilled. The RTC thus dismissed the cross-
claim of BG Hauler against FGU Insurance. The decretal
part of the RTCs decision reads:
Wherefore, premises considered, judgment is hereby
rendered in favor of the plaintiffs and against defendants
FEB Leasing (now BPI Leasing), BG Hauler, and Manuel
Estilloso, to wit:
Ordering the defendants, jointly and severally, to pay
plaintiffs the following:
the amount of P62,000.00 representing actual expenses
incurred by the plaintiffs;
the amount of P50,000.00 as moral damages;
the amount of P2,400,000.00 for loss of earning capacity of
the deceased victim, Loretta V. Baylon;
the sum of P50,000.00 for death indemnity;
the sum of P50,000.00 for and as attorneys fees; and
with costs against the defendants.
Ordering the dismissal of defendants counter-claim for
lack of merit and the cross claim of defendant BG Hauler
against defendant FGU Insurance.
SO ORDERED.11
Petitioner, BG Hauler, and the driver appealed the RTC
Decision to the Court of Appeals. Petitioner claimed that
as financial lessor, it is exempt from liability resulting from
any loss, damage, or injury the oil tanker may cause while
being operated by BG Hauler as financial lessee.
On the other hand, BG Hauler and the driver alleged that
no sufficient evidence existed proving the driver to be at
101 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
fault. They claimed that the RTC erred in finding BG
Hauler negligent despite the fact that it had exercised the
diligence of a good father of a family in the selection and
supervision of its driver and in the maintenance of its
vehicles. They contended that petitioner, as the registered
owner of the oil tanker, should be solely liable for Lorettas
death.
The Ruling of the Court of Appeals
The Court of Appeals held that petitioner, BG Hauler, and
the driver are solidarily liable for damages arising from
Lorettas death. Petitioners liability arose from the fact
that it was the registered owner of the oil tanker while BG
Haulers liability emanated from a provision in the lease
contract providing that the lessee shall be liable in case of
any loss, damage, or injury the leased oil tanker may
cause.
Thus, the Court of Appeals affirmed the RTC Decision but
with the modification that the award of attorneys fees be
deleted for being speculative. The dispositive part of the
appellate courts Decision reads:
WHEREFORE, in the light of the foregoing, the instant
appeal is DENIED. Consequently, the assailed Decision of
the lower court is AFFIRMED with the MODIFICATION
that the award of attorneys fees is DELETED.
IT IS SO ORDERED.12
Dissatisfied, petitioner and BG Hauler, joined by the
driver, filed two separate motions for reconsideration. In
its 18 January 2008 Resolution, the Court of Appeals
denied both motions for lack of merit.
Unconvinced, petitioner alone filed with this Court the
present petition for review on certiorari impleading the
spouses Baylon, BG Hauler, and the driver as
respondents.13
The Issue
The sole issue submitted for resolution is whether the
registered owner of a financially leased vehicle remains
liable for loss, damage, or injury caused by the vehicle
notwithstanding an exemption provision in the financial
lease contract.
The Courts Ruling
Readings
Petitioner contends that the lease contract between BG
Hauler and petitioner specifically provides that BG Hauler
shall be liable for any loss, damage, or injury the leased oil
tanker may cause even if petitioner is the registered owner
of the said oil tanker. Petitioner claims that the Court of
Appeals erred in holding petitioner solidarily liable with
BG Hauler despite having found the latter liable under the
lease contract.
For their part, the spouses Baylon counter that the lease
contract between petitioner and BG Hauler cannot bind
third parties like them. The spouses Baylon maintain that
the existence of the lease contract does not relieve
petitioner of direct responsibility as the registered owner
of the oil tanker that caused the death of their daughter.
On the other hand, BG Hauler and the driver argue that at
the time petitioner and BG Hauler entered into the lease
contract, Republic Act No. 598014 was still in effect. They
point out that the amendatory law, Republic Act No.
8556,15 which exempts from liability in case of any loss,
damage, or injury to third persons the registered owners
of vehicles financially leased to another, was not yet
enacted at that time.
In point is the 2008 case of PCI Leasing and Finance, Inc. v.
UCPB General Insurance Co., Inc.16 There, we held liable PCI
Leasing and Finance, Inc., the registered owner of an 18-
wheeler Fuso Tanker Truck leased to Superior Gas &
Equitable Co., Inc. (SUGECO) and being driven by the
latters driver, for damages arising from a collision. This
despite an express provision in the lease contract to the
effect that the lessee, SUGECO, shall indemnify and hold
the registered owner free from any liabilities, damages,
suits, claims, or judgments arising from SUGECOs use of
the leased motor vehicle.
In the instant case, Section 5.1 of the lease contract
between petitioner and BG Hauler provides:
Sec. 5.1. It is the principle of this Lease that while the title
or ownership of the EQUIPMENT, with all the rights
consequent thereof, are retained by the LESSOR, the risk
of loss or damage of the EQUIPMENT from whatever
source arising, as well as any liability resulting from the
ownership, operation and/or possession thereof, over
and above those actually compensated by insurance, are
hereby transferred to and assumed by the
LESSEE hereunder which shall continue in full force and
effect.17 (Emphasis supplied)
102 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
If it so wishes, petitioner may proceed against BG Hauler
to seek enforcement of the latters contractual obligation
under Section 5.1 of the lease contract. In the present case,
petitioner did not file a cross-claim against BG Hauler.
Hence, this Court cannot require BG Hauler to reimburse
petitioner for the latters liability to the spouses Baylon.
However, as the registered owner of the oil tanker,
petitioner may not escape its liability to third persons.
Under Section 5 of Republic Act No. 4136,18 as amended,
all motor vehicles used or operated on or upon any
highway of the Philippines must be registered with the
Bureau of Land Transportation (now Land Transportation
Office) for the current year.19 Furthermore, any
encumbrances of motor vehicles must be recorded with
the Land Transportation Office in order to be valid against
third parties. 20
In accordance with the law on compulsory motor vehicle
registration, this Court has consistently ruled that, with
respect to the public and third persons, the registered
owner of a motor vehicle is directly and primarily
responsible for the consequences of its operation
regardless of who the actual vehicle owner might
be. Well-settled is the rule that the registered owner of
21
the vehicle is liable for quasi-delicts resulting from its use.
Thus, even if the vehicle has already been sold, leased, or
transferred to another person at the time the vehicle
figured in an accident, the registered vehicle owner would
still be liable for damages caused by the accident. The sale,
transfer or lease of the vehicle, which is not registered with
the Land Transportation Office, will not bind third persons
aggrieved in an accident involving the vehicle. The
compulsory motor vehicle registration underscores the
importance of registering the vehicle in the name of the
actual owner.1avvphi1
The policy behind the rule is to enable the victim to find
redress by the expedient recourse of identifying the
registered vehicle owner in the records of the Land
Transportation Office. The registered owner can be
reimbursed by the actual owner, lessee or transferee who
is known to him. Unlike the registered owner, the innocent
victim is not privy to the lease, sale, transfer or
encumbrance of the vehicle. Hence, the victim should not
be prejudiced by the failure to register such transaction or
encumbrance. As the Court held in PCI Leasing:
The burden of registration of the lease contract is
minuscule compared to the chaos that may result if
Readings
registered owners or operators of vehicles are freed from
such responsibility. Petitioner pays the price for its failure
to obey the law on compulsory registration of motor
vehicles for registration is a pre-requisite for any person to
even enjoy the privilege of putting a vehicle on public
roads.22
In the landmark case of Erezo v. Jepte,23 the Court succinctly
laid down the public policy behind the rule, thus:
The main aim of motor vehicle registration is to identify
the owner so that if any accident happens, or that any
damage or injury is caused by the vehicle on the public
highways, responsibility therefor can be fixed on a definite
individual, the registered owner. Instances are numerous
where vehicles running on public highways caused
accidents or injuries to pedestrians or other vehicles
without positive identification of the owner or drivers, or
with very scant means of identification. It is to forestall
these circumstances, so inconvenient or prejudicial to the
public, that the motor vehicle registration is primarily
ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public
highways.
xxx
Were a registered owner allowed to evade responsibility
by proving who the supposed transferee or owner is, it
would be easy for him, by collusion with others or, or
otherwise, to escape said responsibility and transfer the
same to an indefinite person, or to one who possesses no
property with which to respond financially for the damage
or injury done. A victim of recklessness on the public
highways is usually without means to discover or identify
the person actually causing the injury or damage. He has
no means other than by a recourse to the registration in
the Motor Vehicles Office to determine who is the owner.
The protection that the law aims to extend to him would
become illusory were the registered owner given the
opportunity to escape liability by disproving his
ownership. If the policy of the law is to be enforced and
carried out, the registered owner should not be allowed to
prove the contrary to the prejudice of the person injured,
that is to prove that a third person or another has become
the owner, so that he may be thereby be relieved of the
responsibility to the injured person.24
In this case, petitioner admits that it is the registered
owner of the oil tanker that figured in an accident causing
103 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
the death of Loretta. As the registered owner, it cannot
escape liability for the loss arising out of negligence in the
operation of the oil tanker. Its liability remains even if at
the time of the accident, the oil tanker was leased to BG
Hauler and was being driven by the latters driver, and
despite a provision in the lease contract exonerating the
registered owner from liability.
As a final point, we agree with the Court of Appeals that
the award of attorneys fees by the RTC must be deleted
for lack of basis. The RTC failed to justify the award
of P50,000 attorneys fees to respondent spouses Baylon.
The award of attorneys fees must have some factual, legal
and equitable bases and cannot be left to speculations and
conjectures. Consistent with prevailing
25
jurisprudence, attorneys fees as part of damages are
26
awarded only in the instances enumerated in Article 2208
of the Civil Code. Thus, the award of attorneys fees is
27
the exception rather than the rule. Attorneys fees are not
awarded every time a party prevails in a suit because of
the policy that no premium should be placed on the right
to litigate. 28
WHEREFORE, we DENY the petition. We AFFIRM the 9
October 2007 Decision and the 18 January 2008 Resolution
of the Court of Appeals in CA-G.R. CV No. 81446
affirming with modification the 30 October 2003 Decision
of the Regional Trial Court (Branch 35) of Gapan City in
Civil Case No. 2334 ordering petitioner FEB Leasing and
Finance Corporation, BG Hauler, Inc., and driver Manuel
Y. Estilloso to solidarily pay respondent spouses Sergio P.
Baylon and Maritess Villena-Baylon the following
amounts:
P62,000.00 representing actual expenses incurred by the
plaintiffs;
P50,000.00 as moral damages;
P2,400,000.00 for loss of earning capacity of the deceased
victim, Loretta V. Baylon; and
P50,000.00 for death indemnity.
Costs against petitioner.
SO ORDERED.
G.R. No. 157917 August 29, 2012
Readings
SPOUSES TEODORO1 and NANETTE
PERENA, Petitioners,
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L.
ZARATE, NATIONAL RAILWAYS, and the COURT OF
APPEALS Respondents.
DECISION
BERSAMIN, J.:
The operator of a. school bus service is a common carrier
in the eyes of the law. He is bound to observe
extraordinary diligence in the conduct of his business. He
is presumed to be negligent when death occurs to a
passenger. His liability may include indemnity for loss of
earning capacity even if the deceased passenger may only
be an unemployed high school student at the time of the
accident.
The Case
By petition for review on certiorari, Spouses Teodoro and
Nanette Perefia (Perefias) appeal the adverse decision
promulgated on November 13, 2002, by which the Court of
Appeals (CA) affirmed with modification the decision
rendered on December 3, 1999 by the Regional Trial Court
(RTC), Branch 260, in Paraaque City that had decreed
them jointly and severally liable with Philippine National
Railways (PNR), their co-defendant, to Spouses Nicolas
and Teresita Zarate (Zarates) for the death of their 15-year
old son, Aaron John L. Zarate (Aaron), then a high school
student of Don Bosco Technical Institute (Don Bosco).
Antecedents
The Pereas were engaged in the business of transporting
students from their respective residences in Paraaque
City to Don Bosco in Pasong Tamo, Makati City, and back.
In their business, the Pereas used a KIA Ceres Van (van)
with Plate No. PYA 896, which had the capacity to
transport 14 students at a time, two of whom would be
seated in the front beside the driver, and the others in the
rear, with six students on either side. They employed
Clemente Alfaro (Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereas to
transport Aaron to and from Don Bosco. On August 22,
1996, as on previous school days, the van picked Aaron up
around 6:00 a.m. from the Zarates residence. Aaron took
104 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
his place on the left side of the van near the rear door. The
van, with its air-conditioning unit turned on and the
stereo playing loudly, ultimately carried all the 14 student
riders on their way to Don Bosco. Considering that the
students were due at Don Bosco by 7:15 a.m., and that they
were already running late because of the heavy vehicular
traffic on the South Superhighway, Alfaro took the van to
an alternate route at about 6:45 a.m. by traversing the
narrow path underneath the Magallanes Interchange that
was then commonly used by Makati-bound vehicles as a
short cut into Makati. At the time, the narrow path was
marked by piles of construction materials and parked
passenger jeepneys, and the railroad crossing in the
narrow path had no railroad warning signs, or watchmen,
or other responsible persons manning the crossing. In fact,
the bamboo barandilla was up, leaving the railroad
crossing open to traversing motorists.
At about the time the van was to traverse the railroad
crossing, PNR Commuter No. 302 (train), operated by
Jhonny Alano (Alano), was in the vicinity of the
Magallanes Interchange travelling northbound. As the
train neared the railroad crossing, Alfaro drove the van
eastward across the railroad tracks, closely tailing a large
passenger bus. His view of the oncoming train was
blocked because he overtook the passenger bus on its left
side. The train blew its horn to warn motorists of its
approach. When the train was about 50 meters away from
the passenger bus and the van, Alano applied the ordinary
brakes of the train. He applied the emergency brakes only
when he saw that a collision was imminent. The passenger
bus successfully crossed the railroad tracks, but the van
driven by Alfaro did not. The train hit the rear end of the
van, and the impact threw nine of the 12 students in the
rear, including Aaron, out of the van. Aaron landed in the
path of the train, which dragged his body and severed his
head, instantaneously killing him. Alano fled the scene on
board the train, and did not wait for the police investigator
to arrive.
Devastated by the early and unexpected death of Aaron,
the Zarates commenced this action for damages against
Alfaro, the Pereas, PNR and Alano. The Pereas and
PNR filed their respective answers, with cross-claims
against each other, but Alfaro could not be served with
summons.
At the pre-trial, the parties stipulated on the facts and
issues, viz:
Readings
FACTS:
(1) That spouses Zarate were the legitimate parents of
Aaron John L. Zarate;
(2) Spouses Zarate engaged the services of spouses Perea
for the adequate and safe transportation carriage of the
former spouses' son from their residence in Paraaque to
his school at the Don Bosco Technical Institute in Makati
City;
(3) During the effectivity of the contract of carriage and in
the implementation thereof, Aaron, the minor son of
spouses Zarate died in connection with a vehicular/train
collision which occurred while Aaron was riding the
contracted carrier Kia Ceres van of spouses Perea, then
driven and operated by the latter's employee/authorized
driver Clemente Alfaro, which van collided with the train
of PNR, at around 6:45 A.M. of August 22, 1996, within the
vicinity of the Magallanes Interchange in Makati City,
Metro Manila, Philippines;
(4) At the time of the vehicular/train collision, the subject
site of the vehicular/train collision was a railroad crossing
used by motorists for crossing the railroad tracks;
(5) During the said time of the vehicular/train collision,
there were no appropriate and safety warning signs and
railings at the site commonly used for railroad crossing;
(6) At the material time, countless number of Makati
bound public utility and private vehicles used on a daily
basis the site of the collision as an alternative route and
short-cut to Makati;
(7) The train driver or operator left the scene of the
incident on board the commuter train involved without
waiting for the police investigator;
(8) The site commonly used for railroad crossing by
motorists was not in fact intended by the railroad operator
for railroad crossing at the time of the vehicular collision;
(9) PNR received the demand letter of the spouses Zarate;
(10) PNR refused to acknowledge any liability for the
vehicular/train collision;
105 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
(11) The eventual closure of the railroad crossing alleged
by PNR was an internal arrangement between the former
and its project contractor; and
(12) The site of the vehicular/train collision was within
the vicinity or less than 100 meters from the Magallanes
station of PNR.
B. ISSUES
Whether or not defendant-driver of the van is, in the
performance of his functions, liable for negligence
constituting the proximate cause of the vehicular collision,
which resulted in the death of plaintiff spouses' son;
Whether or not the defendant spouses Perea being the
employer of defendant Alfaro are liable for any negligence
which may be attributed to defendant Alfaro;
Whether or not defendant Philippine National Railways
being the operator of the railroad system is liable for
negligence in failing to provide adequate safety warning
signs and railings in the area commonly used by motorists
for railroad crossings, constituting the proximate cause of
the vehicular collision which resulted in the death of the
plaintiff spouses' son;
Whether or not defendant spouses Perea are liable for
breach of the contract of carriage with plaintiff-spouses in
failing to provide adequate and safe transportation for the
latter's son;
Whether or not defendants spouses are liable for actual,
moral damages, exemplary damages, and attorney's fees;
Whether or not defendants spouses Teodorico and Nanette
Perea observed the diligence of employers and school bus
operators;
Whether or not defendant-spouses are civilly liable for the
accidental death of Aaron John Zarate;
Whether or not defendant PNR was grossly negligent in
operating the commuter train involved in the accident, in
allowing or tolerating the motoring public to cross, and its
failure to install safety devices or equipment at the site of
the accident for the protection of the public;
Whether or not defendant PNR should be made to
reimburse defendant spouses for any and whatever
Readings
amount the latter may be held answerable or which they
may be ordered to pay in favor of plaintiffs by reason of
the action;
Whether or not defendant PNR should pay plaintiffs
directly and fully on the amounts claimed by the latter in
their Complaint by reason of its gross negligence;
Whether or not defendant PNR is liable to defendants
spouses for actual, moral and exemplary damages and
attorney's fees.2
The Zarates claim against the Pereas was upon breach of
the contract of carriage for the safe transport of Aaron; but
that against PNR was based on quasi-delict under Article
2176, Civil Code.
In their defense, the Pereas adduced evidence to show
that they had exercised the diligence of a good father of
the family in the selection and supervision of Alfaro, by
making sure that Alfaro had been issued a drivers license
and had not been involved in any vehicular accident prior
to the collision; that their own son had taken the van daily;
and that Teodoro Perea had sometimes accompanied
Alfaro in the vans trips transporting the students to
school.
For its part, PNR tended to show that the proximate cause
of the collision had been the reckless crossing of the van
whose driver had not first stopped, looked and listened;
and that the narrow path traversed by the van had not
been intended to be a railroad crossing for motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its
decision,3 disposing:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of the plaintiff and against the
defendants ordering them to jointly and severally pay the
plaintiffs as follows:
(for) the death of Aaron- Php50,000.00;
Actual damages in the amount of Php100,000.00;
For the loss of earning capacity- Php2,109,071.00;
Moral damages in the amount of Php4,000,000.00;
106 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Exemplary damages in the amount of Php1,000,000.00;
Attorneys fees in the amount of Php200,000.00; and
Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereas motion for
reconsideration,4 reiterating that the cooperative gross
negligence of the Pereas and PNR had caused the
collision that led to the death of Aaron; and that the
damages awarded to the Zarates were not excessive, but
based on the established circumstances.
The CAs Ruling
Both the Pereas and PNR appealed (C.A.-G.R. CV No.
68916).
PNR assigned the following errors, to wit:5
The Court a quo erred in:
In finding the defendant-appellant Philippine National
Railways jointly and severally liable together with
defendant-appellants spouses Teodorico and Nanette
Perea and defendant-appellant Clemente Alfaro to pay
plaintiffs-appellees for the death of Aaron Zarate and
damages.
In giving full faith and merit to the oral testimonies of
plaintiffs-appellees witnesses despite overwhelming
documentary evidence on record, supporting the case of
defendants-appellants Philippine National Railways.
The Pereas ascribed the following errors to the RTC,
namely:
The trial court erred in finding defendants-appellants
jointly and severally liable for actual, moral and exemplary
damages and attorneys fees with the other defendants.
The trial court erred in dismissing the cross-claim of the
appellants Pereas against the Philippine National
Railways and in not holding the latter and its train driver
primarily responsible for the incident.
The trial court erred in awarding excessive damages and
attorneys fees.
Readings
The trial court erred in awarding damages in the form of
deceaseds loss of earning capacity in the absence of
sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision,
affirming the findings of the RTC, but limited the moral
damages to P 2,500,000.00; and deleted the attorneys fees
because the RTC did not state the factual and legal bases,
to wit:6
WHEREFORE, premises considered, the assailed Decision
of the Regional Trial Court, Branch 260 of Paraaque City
is AFFIRMED with the modification that the award of
Actual Damages is reduced to P 59,502.76; Moral Damages
is reduced to P 2,500,000.00; and the award for Attorneys
Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aarons earning
capacity, taking cognizance of the ruling in Cariaga v.
Laguna Tayabas Bus Company and Manila Railroad
Company,7 wherein the Court gave the heirs of Cariaga a
sum representing the loss of the deceaseds earning
capacity despite Cariaga being only a medical student at
the time of the fatal incident. Applying the formula
adopted in the American Expectancy Table of Mortality:
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3
years upon reckoning his life expectancy from age of 21
(the age when he would have graduated from college and
started working for his own livelihood) instead of 15 years
(his age when he died). Considering that the nature of his
work and his salary at the time of Aarons death were
unknown, it used the prevailing minimum wage
of P 280.00/day to compute Aarons gross annual salary to
be P 110,716.65, inclusive of the thirteenth month pay.
Multiplying this annual salary by Aarons life expectancy
of 39.3 years, his gross income would aggregate
to P 4,351,164.30, from which his estimated expenses in the
sum of P 2,189,664.30 was deducted to finally arrive at P
2,161,500.00 as net income. Due to Aarons computed net
income turning out to be higher than the amount claimed
by the Zarates, only P 2,109,071.00, the amount expressly
prayed for by them, was granted.
On April 4, 2003, the CA denied the Pereas motion for
reconsideration.8
107 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Issues
In this appeal, the Pereas list the following as the errors
committed by the CA, to wit:
The lower court erred when it upheld the trial courts
decision holding the petitioners jointly and severally liable
to pay damages with Philippine National Railways and
dismissing their cross-claim against the latter.
The lower court erred in affirming the trial courts decision
awarding damages for loss of earning capacity of a minor
who was only a high school student at the time of his
death in the absence of sufficient basis for such an award.
The lower court erred in not reducing further the amount
of damages awarded, assuming petitioners are liable at all.
Ruling
The petition has no merit.
1.
Were the Pereas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages
against both the Pereas and the PNR, basing their claim
against the Pereas on breach of contract of carriage and
against the PNR on quasi-delict.
The RTC found the Pereas and the PNR negligent. The
CA affirmed the findings.
We concur with the CA.
To start with, the Pereas defense was that they exercised
the diligence of a good father of the family in the selection
and supervision of Alfaro, the van driver, by seeing to it
that Alfaro had a drivers license and that he had not been
involved in any vehicular accident prior to the fatal
collision with the train; that they even had their own son
travel to and from school on a daily basis; and that
Teodoro Perea himself sometimes accompanied Alfaro in
transporting the passengers to and from school. The RTC
gave scant consideration to such defense by regarding
such defense as inappropriate in an action for breach of
contract of carriage.
Readings
We find no adequate cause to differ from the conclusions
of the lower courts that the Pereas operated as a common
carrier; and that their standard of care was extraordinary
diligence, not the ordinary diligence of a good father of a
family.
Although in this jurisdiction the operator of a school bus
service has been usually regarded as a private
carrier,9primarily because he only caters to some specific
or privileged individuals, and his operation is neither
open to the indefinite public nor for public use, the exact
nature of the operation of a school bus service has not
been finally settled. This is the occasion to lay the matter to
rest.
A carrier is a person or corporation who undertakes to
transport or convey goods or persons from one place to
another, gratuitously or for hire. The carrier is classified
either as a private/special carrier or as a common/public
carrier.10 A private carrier is one who, without making the
activity a vocation, or without holding himself or itself out
to the public as ready to act for all who may desire his or
its services, undertakes, by special agreement in a
particular instance only, to transport goods or persons
from one place to another either gratuitously or for
hire.11 The provisions on ordinary contracts of the Civil
Code govern the contract of private carriage.The diligence
required of a private carrier is only ordinary, that is, the
diligence of a good father of the family. In contrast, a
common carrier is a person, corporation, firm or
association engaged in the business of carrying or
transporting passengers or goods or both, by land, water,
or air, for compensation, offering such services to the
public.12 Contracts of common carriage are governed by
the provisions on common carriers of the Civil Code, the
Public Service Act,13 and other special laws relating to
transportation. A common carrier is required to observe
extraordinary diligence, and is presumed to be at fault or
to have acted negligently in case of the loss of the effects of
passengers, or the death or injuries to passengers.14
In relation to common carriers, the Court defined public
use in the following terms in United States v. Tan
Piaco,15viz:
"Public use" is the same as "use by the public". The
essential feature of the public use 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,
108 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
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 the 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.
In De Guzman v. Court of Appeals,16 the Court noted that
Article 1732 of the Civil Code avoided any distinction
between a person or an enterprise offering transportation
on a regular or an isolated basis; and has not distinguished
a carrier offering his services to the general public, that is,
the general community or population, from one offering
his services only to a narrow segment of the general
population.
Nonetheless, the concept of a common carrier embodied in
Article 1732 of the Civil Code coincides neatly with the
notion of public service under the Public Service Act,
which supplements the law on common carriers found in
the Civil Code. Public service, according to Section 13,
paragraph (b) of the Public Service Act, includes:
x x x every person that now or hereafter may own,
operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientle, whether
permanent or occasional, and done for the general
business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged
in the transportation of passengers or freight or both,
shipyard, marine repair shop, ice-refrigeration plant,
canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. x x
x. 17
Given the breadth of the aforequoted characterization of a
common carrier, the Court has considered as common
carriers pipeline operators,18 custom brokers and
Readings
warehousemen,19 and barge operators20 even if they had
limited clientle.
As all the foregoing indicate, the true test for a common
carrier is not the quantity or extent of the business actually
transacted, or the number and character of the
conveyances used in the activity, but whether the
undertaking is a part of the activity engaged in by the
carrier that he has held out to the general public as his
business or occupation. If the undertaking is a single
transaction, not a part of the general business or
occupation engaged in, as advertised and held out to the
general public, the individual or the entity rendering such
service is a private, not a common, carrier. The question
must be determined by the character of the business
actually carried on by the carrier, not by any secret
intention or mental reservation it may entertain or assert
when charged with the duties and obligations that the law
imposes.21
Applying these considerations to the case before us, there
is no question that the Pereas as the operators of a school
bus service were: (a) engaged in transporting passengers
generally as a business, not just as a casual occupation; (b)
undertaking to carry passengers over established roads by
the method by which the business was conducted; and (c)
transporting students for a fee. Despite catering to a
limited clientle, the Pereas operated as a common
carrier because they held themselves out as a ready
transportation indiscriminately to the students of a
particular school living within or near where they
operated the service and for a fee.
The common carriers standard of care and vigilance as to
the safety of the passengers is defined by law. Given the
nature of the business and for reasons of public policy, the
common carrier is bound "to observe extraordinary
diligence in the vigilance over the goods and for the safety
of the passengers transported by them, according to all the
circumstances of each case."22 Article 1755 of the Civil
Code specifies that the common carrier should "carry the
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances." To
successfully fend off liability in an action upon the death
or injury to a passenger, the common carrier must prove
his or its observance of that extraordinary diligence;
otherwise, the legal presumption that he or it was at fault
or acted negligently would stand.23 No device, whether by
stipulation, posting of notices, statements on tickets, or
109 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
otherwise, may dispense with or lessen the responsibility
of the common carrier as defined under Article 1755 of the
Civil Code. 24
And, secondly, the Pereas have not presented any
compelling defense or reason by which the Court might
now reverse the CAs findings on their liability. On the
contrary, an examination of the records shows that the
evidence fully supported the findings of the CA.
As earlier stated, the Pereas, acting as a common carrier,
were already presumed to be negligent at the time of the
accident because death had occurred to their
passenger.25 The presumption of negligence, being a
presumption of law, laid the burden of evidence on their
shoulders to establish that they had not been negligent.26It
was the law no less that required them to prove their
observance of extraordinary diligence in seeing to the safe
and secure carriage of the passengers to their destination.
Until they did so in a credible manner, they stood to be
held legally responsible for the death of Aaron and thus to
be held liable for all the natural consequences of such
death.
There is no question that the Pereas did not overturn the
presumption of their negligence by credible evidence.
Their defense of having observed the diligence of a good
father of a family in the selection and supervision of their
driver was not legally sufficient. According to Article 1759
of the Civil Code, their liability as a common carrier did
not cease upon proof that they exercised all the diligence
of a good father of a family in the selection and
supervision of their employee. This was the reason why
the RTC treated this defense of the Pereas as
inappropriate in this action for breach of contract of
carriage.
The Pereas were liable for the death of Aaron despite the
fact that their driver might have acted beyond the scope of
his authority or even in violation of the orders of the
common carrier. In this connection, the records showed
27
their drivers actual negligence. There was a showing, to
begin with, that their driver traversed the railroad tracks
at a point at which the PNR did not permit motorists
going into the Makati area to cross the railroad tracks.
Although that point had been used by motorists as a
shortcut into the Makati area, that fact alone did not
excuse their driver into taking that route. On the other
hand, with his familiarity with that shortcut, their driver
was fully aware of the risks to his passengers but he still
Readings
disregarded the risks. Compounding his lack of care was
that loud music was playing inside the air-conditioned
van at the time of the accident. The loudness most
probably reduced his ability to hear the warning horns of
the oncoming train to allow him to correctly appreciate the
lurking dangers on the railroad tracks. Also, he sought to
overtake a passenger bus on the left side as both vehicles
traversed the railroad tracks. In so doing, he lost his view
of the train that was then coming from the opposite side of
the passenger bus, leading him to miscalculate his chances
of beating the bus in their race, and of getting clear of the
train. As a result, the bus avoided a collision with the train
but the van got slammed at its rear, causing the fatality.
Lastly, he did not slow down or go to a full stop before
traversing the railroad tracks despite knowing that his
slackening of speed and going to a full stop were in
observance of the right of way at railroad tracks as defined
by the traffic laws and regulations.28 He thereby violated a
specific traffic regulation on right of way, by virtue of
which he was immediately presumed to be negligent.29
The omissions of care on the part of the van driver
constituted negligence,30 which, according to Layugan v.
Intermediate Appellate Court,31 is "the omission to do
something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of
human affairs, would do, or the doing of something which
a prudent and reasonable man would not do,32 or as Judge
Cooley defines it, (t)he failure to observe for the
protection of the interests of another person, that degree of
care, precaution, and vigilance which the circumstances
justly demand, whereby such other person suffers
injury."33
The test by which to determine the existence of negligence
in a particular case has been aptly stated in the leading
case of Picart v. Smith,34 thuswise:
The test by which to determine the existence of negligence
in a particular case may be stated as follows: Did the
defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent
person would have used in the same situation? If not, then
he is guilty of negligence. The law here in effect adopts the
standard supposed to be supplied by the imaginary
conduct of the discreet paterfamilias of the Roman law.
The existence of negligence in a given case is not
determined by reference to the personal judgment of the
actor in the situation before him. The law considers what
would be reckless, blameworthy, or negligent in the man
110 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
of ordinary intelligence and prudence and determines
liability by that.
The question as to what would constitute the conduct of a
prudent man in a given situation must of course be always
determined in the light of human experience and in view
of the facts involved in the particular case. Abstract
speculation cannot here be of much value but this much
can be profitably said: Reasonable men govern their
conduct by the circumstances which are before them or
known to them. They are not, and are not supposed to be,
omniscient of the future. Hence they can be expected to
take care only when there is something before them to
suggest or warn of danger. Could a prudent man, in the
case under consideration, foresee harm as a result of the
course actually pursued? If so, it was the duty of the actor
to take precautions to guard against that harm. Reasonable
foresight of harm, followed by the ignoring of the
suggestion born of this prevision, is always necessary
before negligence can be held to exist. Stated in these
terms, the proper criterion for determining the existence of
negligence in a given case is this: Conduct is said to be
negligent when a prudent man in the position of the
tortfeasor would have foreseen that an effect harmful to
another was sufficiently probable to warrant his foregoing
the conduct or guarding against its consequences.
(Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the
Pereas driver was entirely negligent when he traversed
the railroad tracks at a point not allowed for a motorists
crossing despite being fully aware of the grave harm to be
thereby caused to his passengers; and when he
disregarded the foresight of harm to his passengers by
overtaking the bus on the left side as to leave himself blind
to the approach of the oncoming train that he knew was
on the opposite side of the bus.
Unrelenting, the Pereas cite Phil. National Railways v.
Intermediate Appellate Court,35 where the Court held the
PNR solely liable for the damages caused to a passenger
bus and its passengers when its train hit the rear end of
the bus that was then traversing the railroad crossing. But
the circumstances of that case and this one share no
similarities. In Philippine National Railways v.
Intermediate Appellate Court, no evidence of contributory
negligence was adduced against the owner of the bus.
Instead, it was the owner of the bus who proved the
exercise of extraordinary diligence by preponderant
evidence. Also, the records are replete with the showing of
Readings
negligence on the part of both the Pereas and the PNR.
Another distinction is that the passenger bus in Philippine
National Railways v. Intermediate Appellate Court was
traversing the dedicated railroad crossing when it was hit
by the train, but the Pereas school van traversed the
railroad tracks at a point not intended for that purpose.
At any rate, the lower courts correctly held both the
Pereas and the PNR "jointly and severally" liable for
damages arising from the death of Aaron. They had been
impleaded in the same complaint as defendants against
whom the Zarates had the right to relief, whether jointly,
severally, or in the alternative, in respect to or arising out
of the accident, and questions of fact and of law were
common as to the Zarates.36 Although the basis of the right
to relief of the Zarates (i.e., breach of contract of carriage)
against the Pereas was distinct from the basis of the
Zarates right to relief against the PNR (i.e., quasi-delict
under Article 2176, Civil Code), they nonetheless could be
held jointly and severally liable by virtue of their
respective negligence combining to cause the death of
Aaron. As to the PNR, the RTC rightly found the PNR also
guilty of negligence despite the school van of the Pereas
traversing the railroad tracks at a point not dedicated by
the PNR as a railroad crossing for pedestrians and
motorists, because the PNR did not ensure the safety of
others through the placing of crossbars, signal lights,
warning signs, and other permanent safety barriers to
prevent vehicles or pedestrians from crossing there. The
RTC observed that the fact that a crossing guard had been
assigned to man that point from 7 a.m. to 5 p.m. was a
good indicium that the PNR was aware of the risks to
others as well as the need to control the vehicular and
other traffic there. Verily, the Pereas and the PNR were
joint tortfeasors.
2.
Was the indemnity for loss of
Aarons earning capacity proper?
The RTC awarded indemnity for loss of Aarons earning
capacity. Although agreeing with the RTC on the liability,
the CA modified the amount. Both lower courts took into
consideration that Aaron, while only a high school
student, had been enrolled in one of the reputable schools
in the Philippines and that he had been a normal and able-
bodied child prior to his death. The basis for the
computation of Aarons earning capacity was not what he
would have become or what he would have wanted to be if
not for his untimely death, but the minimum wage in
111 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
effect at the time of his death. Moreover, the RTCs
computation of Aarons life expectancy rate was not
reckoned from his age of 15 years at the time of his death,
but on 21 years, his age when he would have graduated
from college.
We find the considerations taken into account by the lower
courts to be reasonable and fully warranted.
Yet, the Pereas submit that the indemnity for loss of
earning capacity was speculative and
unfounded.1wphi1 They cited People v. Teehankee,
Jr., where the Court deleted the indemnity for victim
37
Jussi Leinos loss of earning capacity as a pilot for being
speculative due to his having graduated from high school
at the International School in Manila only two years before
the shooting, and was at the time of the shooting only
enrolled in the first semester at the Manila Aero Club to
pursue his ambition to become a professional pilot. That
meant, according to the Court, that he was for all intents
and purposes only a high school graduate.
We reject the Pereas submission.
First of all, a careful perusal of the Teehankee, Jr. case
shows that the situation there of Jussi Leino was not akin
to that of Aaron here. The CA and the RTC were not
speculating that Aaron would be some highly-paid
professional, like a pilot (or, for that matter, an engineer, a
physician, or a lawyer). Instead, the computation of
Aarons earning capacity was premised on him being a
lowly minimum wage earner despite his being then
enrolled at a prestigious high school like Don Bosco in
Makati, a fact that would have likely ensured his success
in his later years in life and at work.
And, secondly, the fact that Aaron was then without a
history of earnings should not be taken against his parents
and in favor of the defendants whose negligence not only
cost Aaron his life and his right to work and earn money,
but also deprived his parents of their right to his presence
and his services as well. Our law itself states that the loss
of the earning capacity of the deceased shall be the
liability of the guilty party in favor of the heirs of the
deceased, and 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." Accordingly,
38
we emphatically hold in favor of the indemnification for
Aarons loss of earning capacity despite him having been
Readings
unemployed, because compensation of this nature is
awarded not for loss of time or earnings but for loss of the
deceaseds power or ability to earn money.39
This favorable treatment of the Zarates claim is not
unprecedented. In Cariaga v. Laguna Tayabas Bus
Company and Manila Railroad Company,40 fourth-year
medical student Edgardo Carriagas earning capacity,
although he survived the accident but his injuries
rendered him permanently incapacitated, was computed
to be that of the physician that he dreamed to become. The
Court considered his scholastic record sufficient to justify
the assumption that he could have finished the medical
course and would have passed the medical board
examinations in due time, and that he could have possibly
earned a modest income as a medical practitioner. Also, in
People v. Sanchez,41 the Court opined that murder and
rape victim Eileen Sarmienta and murder victim Allan
Gomez could have easily landed good-paying jobs had
they graduated in due time, and that their jobs would
probably pay them high monthly salaries from P 10,000.00
to P 15,000.00 upon their graduation. Their earning
capacities were computed at rates higher than the
minimum wage at the time of their deaths due to their
being already senior agriculture students of the University
of the Philippines in Los Baos, the countrys leading
educational institution in agriculture.
3.
Were the amounts of damages excessive?
The Pereas plead for the reduction of the moral and
exemplary damages awarded to the Zarates in the
respective amounts of P 2,500,000.00 and P 1,000,000.00 on
the ground that such amounts were excessive.
The plea is unwarranted.
The moral damages of P 2,500,000.00 were really just and
reasonable under the established circumstances of this
case because they were intended by the law to assuage the
Zarates deep mental anguish over their sons unexpected
and violent death, and their moral shock over the
senseless accident. That amount would not be too much,
considering that it would help the Zarates obtain the
means, diversions or amusements that would alleviate
their suffering for the loss of their child. At any rate,
reducing the amount as excessive might prove to be an
injustice, given the passage of a long time from when their
mental anguish was inflicted on them on August 22, 1996.
112 | P a g e | | Tr a n s p o r t a t i o n Law Assigned
Anent the P 1,000,000.00 allowed as exemplary damages,
we should not reduce the amount if only to render
effective the desired example for the public good. As a
common carrier, the Pereas needed to be vigorously
reminded to observe their duty to exercise extraordinary
diligence to prevent a similarly senseless accident from
happening again. Only by an award of exemplary
damages in that amount would suffice to instill in them
and others similarly situated like them the ever-present
Readings
need for greater and constant vigilance in the conduct of a
business imbued with public interest.
WHEREFORE, we DENY the petition for review
on certiorari; AFFIRM the decision promulgated on
November 13, 2002; and ORDER the petitioners to pay the
costs of suit.
SO ORDERED