DE GUZMAN VS. CA, DEC. 22, 1988 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 1 finding private respondent to be a common 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: 1. that private respondent was not a common carrier; 2. that the hijacking of respondent's truck was force majeure; and 3. 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 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:
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DE GUZMAN VS. CA, DEC. 22, 1988
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 1 finding private respondent to be a common 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 casualoccupation — 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:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. 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 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 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:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;(2) Act of the public enemy in war, whether international or civil;(3) Act or omission of the shipper or owner of the goods;(4) The character-of the goods or defects in the packing or-in the containers; 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. 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:
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
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.
PLANTERS PRODUCTS INC VS. CA, SEPT 15, 1993
BELLOSILLO, J.:
Does a charter-party 1 between a shipowner and a charterer transform a common carrier into a private one as to negate the civil law presumption of negligence in case of loss or damage to its cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General Charter 2 was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3 Riders to the aforesaid charter-party starting from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably inspected by the charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the charter-party which reads:
16. . . . At loading port, notice of readiness to be accomplished by certificate from National Cargo Bureau inspector or substitute appointed by charterers for his account certifying the vessel's readiness to receive cargo spaces. The vessel's hold to be properly swept, cleaned and dried at the vessel's expense and the vessel to be presented clean for use in bulk to the satisfaction of the inspector before daytime commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage. 5
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its steelbodied dump trucks which were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and conditions of the charter-partly (which provided for an F.I.O.S. clause). 6 The hatches remained open throughout the duration of the discharge. 7
Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to the consignee's warehouse located some fifty (50) meters from the wharf. Midway to the warehouse, the trucks were made to pass through a weighing scale where they were individually weighed for the purpose of ascertaining the net weight of the cargo. The port area was windy, certain portions of the route to the warehouse were sandy and the weather was variable, raining occasionally while the discharge was in progress. 8 The petitioner's warehouse was made of corrugated galvanized iron (GI) sheets, with an opening at the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain spillages of the ferilizer. 9
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th and 18th). 10 A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and dirt. 12
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to have been contaminated with dirt. 13
Respondent SSA explained that they were not able to respond to the consignee's claim for payment because, according to them, what they received was just a request for shortlanded certificate and not a formal claim, and that this "request" was denied by them because they "had nothing to do with the discharge of the shipment." 14 Hence, on 18 July 1975, PPI filed an action for damages with the Court of First Instance of Manila. The defendant carrier argued that the strict public policy governing common carriers does not apply to them because they have become private carriers by reason of the provisions of the charter-party. The court a quo however sustained the claim of the plaintiff against the defendant carrier for the value of the goods lost or damaged when it ruled thus: 15
. . . Prescinding from the provision of the law that a common carrier is presumed negligent in case of loss or damage of the goods it contracts to transport, all that a shipper has to do in a suit to recover for loss or damage is to show receipt by the carrier of the goods and to delivery by it of less than what it received. After that, the burden of proving that the loss or damage was due to any of the causes which exempt him from liability is shipted to the carrier, common or private he may be. Even if the provisions of the charter-party aforequoted are deemed valid, and the defendants considered private carriers, it was still incumbent upon them to prove that the shortage or contamination sustained by the cargo is attributable to the fault or negligence on the part of the shipper or consignee in the loading, stowing, trimming and discharge of the cargo. This they failed to do. By this omission, coupled with their failure to destroy the presumption of negligence against them, the defendants are liable (emphasis supplied).
On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., 17 the appellate court ruled that the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and not a common carrier by reason of the time charterer-party. Accordingly, the Civil Code provisions on common carriers which set forth a presumption of negligence do not find application in the case at bar. Thus —
. . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee to adduce sufficient evidence to prove the negligence of the defendant carrier as alleged in its complaint. It is an old and well settled rule that if the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory manner the facts upon which he bases his claim, the
defendant is under no obligation to prove his exception or defense (Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202).
But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause of action, i.e. the alleged negligence of defendant carrier. It appears that the plaintiff was under the impression that it did not have to establish defendant's negligence. Be that as it may, contrary to the trial court's finding, the record of the instant case discloses ample evidence showing that defendant carrier was not negligent in performing its obligation . . . 18 (emphasis supplied).
Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present controversy because the issue raised therein is the validity of a stipulation in the charter-party delimiting the liability of the shipowner for loss or damage to goods cause by want of due deligence on its part or that of its manager to make the vessel seaworthy in all respects, and not whether the presumption of negligence provided under the Civil Code applies only to common carriers and not to private carriers. 19 Petitioner further argues that since the possession and control of the vessel remain with the shipowner, absent any stipulation to the contrary, such shipowner should made liable for the negligence of the captain and crew. In fine, PPI faults the appellate court in not applying the presumption of negligence against respondent carrier, and instead shifting the onus probandi on the shipper to show want of due deligence on the part of the carrier, when he was not even at hand to witness what transpired during the entire voyage.
As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by reason of a charter-party; in the negative, whether the shipowner in the instant case was able to prove that he had exercised that degree of diligence required of him under the law.
It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so, we find it fitting to first define important terms which are relevant to our discussion.
A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; 20 a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight; 21 Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. 22 In both cases, the charter-party provides for the hire of vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of the ship.
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. 23 The definition extends to carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a public employment and not as a casual occupation. The distinction between a "common or public carrier" and a "private or special carrier" lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry. 25 In the case of private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice. Moreover, in the case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. 26 On the contrary, no such presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Hardly then can we charge the charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer did not have any control of the means in doing so. This is evident in the present case considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner. 27
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. 28
Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-party exempting the shipowners from liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers. At any rate, the rule in the United States that a ship chartered by a single shipper to carry special cargo is not a common carrier, 29 does not find application in our jurisdiction, for we have observed that the growing concern for safety in the transportation of passengers and /or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules governing common carriers.
We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30 —
As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used to convey the goods of one and of several persons. Where the ship herself is let to a charterer, so that he takes over the charge and control of her, the case is different; the shipowner is not then a carrier. But where her services only are let, the same grounds for imposing a strict responsibility exist, whether he is employed by one or many. The master and the crew are in each case his servants, the freighter in each case is usually without any representative on board the ship; the same opportunities for fraud or collusion occur; and the same difficulty in discovering the truth as to what has taken place arises . . .
In an action for recovery of damages against a common carrier on the goods shipped, the shipper or consignee should first prove the fact of shipment and its consequent loss or damage while the same was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has exercised extraordinary diligence required by law or that the loss, damage or deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability. 31
To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with
three (3) layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a person to open without the use of the ship's boom. 32
It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. 33 When M/V "Sun Plum" docked at its berthing place, representatives of the consignee boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the whole operation on rotation basis. 34
Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. This was confirmed by respondent appellate court thus —
. . . Be that as it may, contrary to the trial court's finding, the record of the instant case discloses ample evidence showing that defendant carrier was not negligent in performing its obligations. Particularly, the following testimonies of plaintiff-appellee's own witnesses clearly show absence of negligence by the defendant carrier; that the hull of the vessel at the time of the discharge of the cargo was sealed and nobody could open the same except in the presence of the owner of the cargo and the representatives of the vessel (TSN, 20 July 1977, p. 14); that the cover of the hatches was made of steel and it was overlaid with tarpaulins, three layers of tarpaulins and therefore their contents were protected from the weather (TSN, 5 April 1978, p. 24); and, that to open these hatches, the seals would have to be broken, all the seals were found to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis supplied).
The period during which private respondent was to observe the degree of diligence required of it as a public carrier began from the time the cargo was unconditionally placed in its charge after the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its destination and its hull was reexamined by the consignee, but prior to unloading. This is clear from the limitation clause agreed upon by the parties in the Addendum to the standard "GENCON" time charter-party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free from all risk and expense to the carrier. 35 Moreover, a shipowner is liable for damage to the cargo resulting from improper stowage only when the stowing is done by stevedores employed by him, and therefore under his control and supervision, not when the same is done by the consignee or stevedores under the employ of the latter. 36
Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction or deterioration of the goods if caused by the charterer of the goods or defects in the packaging or in the containers. The Code of Commerce also provides that all losses and deterioration which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon the carrier. 37 The carrier, nonetheless, shall be liable for the loss and damage resulting from the preceding causes 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. 38
Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working with Atlas Fertilizer, described Urea as a chemical compound consisting mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the temperature inside the hull does not exceed eighty (80) degrees centigrade. Mr. Chupungco further added that in unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation amounting to one percent (1%) against the bill of lading is deemed "normal" or "tolerable." The primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow away some of the materials during the unloading process.
The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an extremely high temperature in its place of storage, or when it comes in contact with water. When Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged portion which is in liquid form still remains potent and usable although no longer saleable in its original market value.
The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical effects of the elements and the grimy condition of the various pieces of equipment used in transporting and hauling it.
The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into the vessel's holds during the voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred while the same was being transported from the ship to the dump trucks and finally to the consignee's warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bar order cargo" as contained in their report to PPI was just an approximation or estimate made by them after the fertilizer was discharged from the vessel and segregated from the rest of the cargo.
The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo. It rained from time to time at the harbor area while the cargo was being discharged according to the supply officer of PPI, who also testified that it was windy at the waterfront and along the shoreline where the dump trucks passed enroute to the consignee's warehouse.
Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage. More so, with a variable weather condition prevalent during its unloading, as was the case at bar. This is a risk the shipper or the owner of the goods has to face. Clearly, respondent carrier has sufficiently proved the inherent character of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its packaging which further contributed to the loss. On the other hand, no proof was adduced by the petitioner showing that the carrier was remise in the exercise of due diligence in order to minimize the loss or damage to the goods it carried.
WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the First Instance, now Regional Trial Court, of Manila should be, as it is hereby DISMISSED.
FISHER VS. YANGCO STEAMSHIP CO., VOV. 5, 1914U.S. QUINAJON AND QUITORIANO, JULY 30, 1915
JOHNSON, J.:
The defendants were charged with a violation of the provisions of Act No. 98. A complaint was presented in the court of the justice of the peace on the 11th day of November, 1912. A preliminary examination was had and the defendants were held for trial in the Court of First Instance of the province of Ilocos Norte.
On the 17th day of November, 1912, the prosecuting attorney of the Province of Ilocos Norte presented the following complaint:
The undersigned charges Pascual Quinajon and Eugenio Quitoriano, residents of the municipality of Paoay, Ilocos Norte, P.I., with violating Act No. 98 of the Civil Commission, within the jurisdiction of this court, as follows:
That the aforementioned accused are now and have been engaged for more than four years prior to this date in the transportation of passengers and merchandise in the port of Currimao — that is, in the loading and unloading of passengers and merchandise by means of virayes from the shore the steamers that anchor in the said port, and vice versa.
That the said accused have been regularly charging 6 centavos for the unloading and loading of each package of merchandise of cargo, large or small, heavy or light, off or on the steamers that anchor in the said port of Currimao, and that the unloading is understood to be from the steamer to the storage warehouses.
That, in the months of June, July, and September, 1912, the said accused, by means of their virayes and employees, did unload in the port of Currimao aforementioned 5,986 sacks of rice belonging to the provincial government of Ilocos Norte, P.I., that had come from Manila, P.I., which sacks were unloaded from the steamers in which they had been shipped and were carried to the storage warehouses in which they were deposited; that the said accused did willfully, unlawfully, and criminally demand and collect from the provincial treasurer for the unloading of each one of the said sacks of rice 10 centavos which, as set forth in the preceding paragraph, they have been regularly charging for such services in the unloading of the same kind of merchandise and under virtually the same circumstances and conditions; that the total sum of the payments so made by the provincial treasurer amounted to P598.60 for the aforesaid 5,986 sacks of rice, the provincial government of Ilocos Norte, P.I., being thereby damaged in the sum of 359.16, inasmuch as it should have paid only 239.44, in accordance with the said rate of 6 centavos for each package.
Acts committed in violation of the said Act No. 98 of the Civil Commission.
Upon that complaint the defendants were duly arraigned, tried, found guilty of the crime charged, and sentenced by the Honorable Dionisio Chanco, judge, to pay a fine of $100 (P200) and costs, and to return to the provincial government of the Province of Ilocos Norte the sum of P359.16.
From that sentence each of the defendants appealed to this court. In this court they allege that the lower court committed the following errors:
1. The court erred in holding that the accused had been regularly collecting 6 centavos for the loading or the unloading of each sack rice from steamers in the port of Currimao.
2. The court erred in holding that the defendants established preferential privileges and made discriminations in favor of certain shippers, against the provincial government of Ilocos Norte, in the loading or unloading of merchandise on to or from the steamers in the port of Currimao.
3. The court erred, further, in sentencing the accused to pay to the provincial government of Ilocos Norte the sum of P359.16.
The first assignment of error presents a question of fact only. The appellants allege that the lower court committed an error in its conclusions of fact. They allege that the lower court committed an error in deciding that they had regularly charged 6 centavos for each sack of rice loaded or unloaded at the port of Currimao. The decision of the lower court contains the following statement of facts:
It is proven that the defendants, acting as representatives of the Union Obrera, established at the port of Currimao, Ilocos Norte, and engaged by means of virayes as common carriers of passengers and in loading and unloading freight from steamers anchoring at said port, to the shore or to the warehouses, and vice versa, have regularly collected, during the last four years, 6 centavos for each sack of rice loaded or unloaded by said association.
It is likewise proven that the same defendants, representing the same association, collected from the provincial government of Ilocos Norte 10 centavos for each of the 5,986 sacks of rice which they unloaded from the steamers during the months of June, July, and September, as property belonging to the said government, a price which differed from the usual, charge of 6 centavos made to others shippers of said commodity.
The provincial fiscal presented as witnesses in support of the information the Chinese merchants Cu Chatco, Cu Joco, Sy Yacco, Lim Anco, and Francisco Castro, who testified that they paid to the defendants for loading and unloading supplies from the steamers at Currimao 6 centavos for each package of any kind of supplies, large or small, heavy or light. The two first named, Cu Chatco and Cu Joco, testified, furthermore, that formerly they paid transportation charges for the loading and discharge of their supplies from the steamers according to the weight and size of each package, for which purpose a classification was previously made by weighing and measuring said packages or merchandise. Cu Joco does not remember how much was paid at that time for each package, but Cu Chatco states that 10 centavos was paid for the transportation of each sack of rice weighing 60 kilos or more. The two above-named witnesses, Cu Chatco and Cu Joco, add that as the task of weighing and measuring was very annoying to the Chinese merchants at Laoag, Ilocos Norte, they suggested to the defendants and entered into an agreement with them, to pay by the lot the transportation charges covering loaded onto or unloaded from the steamers, at the rate of 6 centavos for each package, heavy or light, large or small.
We have made a careful examination of the evidence adduced during the trial of the cause, and conclude that said facts are substantially sustained thereby. The evidence clearly shows that the defendant collected 6 centavos for each package, of whatever kind of merchandise, large or small, heavy or light, from those merchants only with whom they had a special contract. From other merchants, with whom they had not made said special contract, as well as the Province of Ilocos Norte, they collected a different rate. The evidence shows that they collected from the Province of Ilocos Norte 10 centavos for each sack of rice which they unloaded from the steamers during the months of June, July, and September. There seems to be no reason for reversing or modifying the conclusions of the lower court based upon said finding of facts. The effect of collecting a different amount from different persons for exactly analogous or similar service performed by the defendants will be discussed when we come to a discussion of the law applicable to the foregoing facts.
The second assignment of error, to wit, that "the lower court committed an error in holding that the defendants established preferential privileges in favor of certain shippers," presents the question whether or not the defendants and appellants, in view of the foregoing facts, have violated the provisions of said Act No. 98.
The facts, as they are disclosed by the record and the findings of the lower court, may be stated concretely as follows: (1) The defendants, as common carriers, charged and collected from some shippers and merchants, a certain price for each package of merchandise, loaded or unloaded, according to a certain schedule. (See Exhibit A.) The prices fixed in the schedule depended upon the size and weight of the package. (2) The defendants entered into a special contract with certain merchants, under and by virtue of the terms of which they charged and collected, for loading merchandise in said port, the sum of 6 centavos for each package, without reference to its size or weight.
It is contended that it cost any more to load or unload the rice for the province than it did for the merchants with whom the special contract was made. There is no proof that the conditions were different. There is no proof that the services rendered by the defendants for the different parties were unlike or even not contemporaneous. The defendants justify their acts by the fact that they handled all the merchandise of some merchants, whether the packages were large or small, at the same price.
Under these facts, the question is squarely presented whether or not the defendants are guilty of a violation of the spirit or the letter of said Act No. 98. Said Act No. 98 was largely borrowed from the Act of Congress of February 4, 1887. The language of the two Acts, so far as they relate to the present case, is practically the same. Said Act of Congress has been construed by the Federal courts of the United States in several decisions. In view of the United States to said Act of Congress.
The similarity of Act No. 98 and the Act of Congress may be seen in the following quotations:
(Sec. 1, Act No. 98.) (Sec. 2, Act of Congress, Feb. 4, 1887.)
No person or corporation engaged as a common carrier of passengers or That if any common carrier subject property shall directly or indirectly by to the provisions of this Act shall,any special rate, rebate, drawback or directly or indirectly, by any specialother device, charge, demand, collect rate, rebate, drawback, or other device,or receive from any person or persons, charge, demand, collect, or receive froma greater or less compensation for any any person or persons a greater or service rendered, or to be rendered in less compensation for any servicethe transportation of passengers or rendered , or to be rendered, in theproperty on land or water between any transportation of passengers or points in the Philippine Islands than property, subject to the provisions ofsuch common carrier charges, demands, this Act, than it charges, demands, collects or receives from any other person collects, or receives from any otheror persons for doing for him a like or person or persons for doing contemporaneous service in the for him or them a like and transportation of a like kind of traffic contemporaneous service in theunder substantially similar circumstances transportation of a like kind ofand conditions, and any such unjust traffic under substantially similardiscrimination is hereby prohibited and circumstances and conditions, suchdeclared to be unlawful. common carrier shall be deemed guiltyof unjust discrimination, which is herebyprohibited and declared to be unlawful.
(Sec. 2, Act No. 98.) (Sec. 3, Act of Congress, Feb. 4, 1887.)
It shall be unlawful for anycommon carrier engaged in the That it shall be unlawful for any commontransportation of passengers or carrier subject to the provisions of this Actproperty as above set forth to make to make or give any undue or unreasonableor give any unnecessary or unreasonable preference or advantage to any particularpreference or advantage to any particular person, company, firm, corporation, orperson, company, firm, corporation or locality, or any particular description oflocality, or any particular kind of traffic traffic, in any respect whatsoever, or toin any respect whatsoever, or to subject subject any particular person, company,any particular person, company, firm, firm, corporation, or locality, or anycorporation or locality, or any particular particular description of traffic, to any kind of traffic, to any undue or undue or unreasonable prejudice orunreasonable prejudice or discrimination disadvantage in any respect whatsoever.whatsoever, and such unjust preferenceor discrimination is also hereby prohibitedand declared to be unlawful.
Said Act No. 98 is "An Act to regulate commerce in the Philippine Islands." Its purpose, so far as it is possible, is to compel common carriers to render to all persons exactly the same or analogous service for exactly the same price, to the end that there may be no unjust advantage or unreasonable discrimination. It applies to persons or corporation engaged as common carriers of passengers or property. A common carrier is a person or corporation whose regular business is to carry passengers or property for all persons who may choose to employ and renumerate him. A common carrier is a person or corporation who undertakes to carry goods or persons for hire. The appellants admit that they are common carriers. The only question presented is whether or not, under the facts, they have violated the Act regulating commerce in the Philippine Islands.
The law provides that no common carrier shall directly or indirectly, by any special rate, rebate, drawback, or other device, charge, demand collect, or receive from any person or persons, a greater or less compensation for any service rendered in the transportation of passengers or property, between points in the Philippine Islands, than he charges, demands, collects, or receives from any other person or persons, for doing a like or contemporaneous service, under substantially similar conditions or circumstances.
The law prohibits any common carrier from making or giving any unnecessary or unreasonable preference or advantage to any particular person, company, firm, corporation or locality, or any particular kind of traffic, or to subject any particular person, company, firm, corporation, or locality, or any particular kind of traffic, to any undue or unreasonable prejudice or discrimination whatsoever.
It will be noted that the law requires common carriers to carry for all persons, either passengers or property, for exactly the same charge for a like or contemporaneous service in the transportation of like kind of traffic under substantially similar circumstances or conditions. The law prohibits common carriers from subjecting any person, etc., or locality, or any particular kind of traffic, to any undue or unreasonable prejudice or discrimination whatsoever. The law does not require that the same charge shall be made for the carrying of passengers or property, unless all the conditions are alike and contemporaneous. It is not believed that the law prohibits the charging of a different rate for the carrying of passengers or property when the actual cost of handling and transporting the same is different. it is not believed that the law intended to require common carriers to carry the same kind of merchandise, even at the same price, under different and unlike conditions and where the actual cost is different. The actual cost of handling and transporting the same quantity of rice, for example, might be different, depending upon the form of package or other conditions. It would cost more to handle and transport rice packed in open boxes or baskets, for example, than it would to handle and transport the same quantity of rice neatly packed in sacks. It would cost more to handle and transport hemp, when it is unbaled and loose, than it would when it is baled. It might cost more to handle and transport household goods uncrated than when they are crated. It is not believed that the law prohibits the charging of a different price for handling and shipping merchandise when the shipper exercises greater care in preparing the same for shipment, thereby reducing the actual cost of handling and transporting. If the shipper puts his merchandise in a condition which costs less to handle and transport, he is certainly entitled to a better rate. The difference in the charge to different merchants or shippers must be based upon the actual cost of handling and transporting. The law does not require common carriers to perform different services for the same price, unless the actual cost is the same. It is when the price charged is for the purpose of favoring persons or localities or particular kinds of merchandise, that the law intervenes and prohibits. It is favoritism and discrimination which the law prohibits. The difference in charge must not be made to favor one merchant, or shipper, or locality, to the disadvantage of another merchant, or shipper, or locality. If the services are alike and contemporaneous, discrimination in the price charged is prohibited. For the purposes of the law, it is not sufficient always to say that merchandise is alike, simply because it is of a like kind or quantity. The quantity, kind, and quality may be exactly the same, and yet not be alike, so far as the cost of transportation is concerned. Examples have been given above. Many others might be given. A and B are each shippers of bananas between the same points. A delivers his bananas to the carrier in separate bundles or bunches, without a wrapper or any kind of protection, while B delivers exactly the same number of bunches of bananas, but they are neatly packed in a few boxes or baskets. It does not require
much argument to convince men conversant with the shipping of merchandise, in such a case, that the actual cost of handling and shipping would be different and would, therefore, not be "alike," although contemporaneous, perhaps. Neither is it believed that shipments may be rendered unlike by the fact that the total shipment is composed of different kinds or classes of merchandise. For example, A is a shipper of rice and hemp and B is a shipper of rice alone. Both A and B prepare their rice for shipment in exactly the same form of package. It is not believed that the carrier is permitted, under the law, to carry A's rice for a less price than he carries B's rice, simply because A is also a shipper of hemp. A difference in the charge for handling and transporting may only be made when the difference is based upon actual cost. The actual cost may depend upon quantity. A man who ships freight by the car-load, by reason of the actual cost of handling and shipping, may be entitled, under certain conditions, to a better rate than the man who ships a single article or package of the same class or kind of merchandise. A train-load of cattle might be shipped from Dagupan to Manila, for example, at less cost per head than it would cost to ship just a few head, less than a car-load. The actual cost of each shipment must necessarily depend upon and be settled by its own proof. This rule, however, does not prohibit the making of general schedules, providing they are made applicable to all. The difference in the charge made by the common carrier cannot be made for the purpose of favoring any person or locality, to the prejudice or disadvantage of another person or locality. A common carrier may discriminate between shippers when the amount of goods shipped by one actually costs less to handle and transport, but he cannot discriminate upon the ground simply that he carries all of the goods of one shipper, while he does not carry all of the goods of another. The difference in the charge must be the difference in the cost.
It is competent for a common carrier under the law, we believe, to enter into special agreements for handling and transporting merchandise, whereby advantage may accrue to individuals, when it is made clearly to appear that by such agreements the common carrier has only its interests and the legitimate increase of its profits in view, and when the consideration given to the individual is for the interest of the common carrier alone, and when the common carrier gives all shippers exactly the same rate, under the same conditions.
The appellants justify the different charge upon the ground that they carried pianos and matches, for the merchants with whom they had the special contracts, at the same price. It is not believed that a merchant who happens to be a shipper of both pianos and matches, should have any advantage over the merchant who ships pianos alone, unless there is some other actual additional cost in the one case, which does not exist in the other. A common carrier can not discriminate upon the ground that he carries all of the goods of one shipper, while he does not of another.
In the present case there is no pretense that it actually cost more to handle the rice for the province than it did for the merchants with whom the special contracts were made. From the evidence it would seem that there was a clear discrimination made against the province. Discrimination is the thing which is specifically prohibited and punished under the law.
It is not believed that the law prohibits common carriers from making special rates for the handling and transporting of merchandise, when the same are made for the purpose of increasing their business, and to manage their important interests upon the same principles which are regarded as sound, and adopted in other trades and pursuits. It is not believed that the law requires absolute equality in all cases. Circumstances and conditions may make it injurious to the carrier. Absolute equality, under certain circumstances and conditions, may give shippers an advantage over others. It is only unjust, undue, and unreasonable discrimination which the law forbids. The law of equality is in force only where the services performed in the different cases are substantially the same, and the circumstances and conditions are similar. Many considerations may properly enter into the agreement for the carriage or shipment rate, such as the quantity carried, its nature, its risks, the expense of carriage at different periods of time, and the like. Numerous circumstances may intervene, which bear upon the cost and expense of transportation, and it is but just to the carrier that he be permitted to take these circumstances into consideration, in determining the rate or amount of his compensation. A question of fact is raised in each case for the courts to decide.
The foregoing conclusions are based upon literally hundreds of decisions of the courts of different states, and the Supreme Court of the United States, as well as those of England, which have interpreted statutes analogous to the one under consideration.
In the third assignment of error the appellants allege that the lower court committed an error in condemning them to pay or return to the provincial government the sum of P359.16. It is not exactly clear from the decision of the lower court just how he arrived at that conclusion. Section 5 of Act No. 98 provides that any person or corporation, who may be damaged by reason of the doing by a common carrier of any matters and things prohibited, shall be entitled to sue for and recover all damages so incurred, etc. It would seem that the defendants and appellants had a right to charge the provincial government 6 centavos for each sack of rice unloaded. They unloaded for the province 5,986 sacks, for which they charged the sum of P598.60. They had a right to collect 6 centavos, or the sum of P359.16. The appellants therefore collected from the province more than they had a right to collect, the difference between P598.60 and 359.16, or P239.44. They should be required, therefore, to return to the province the excess which they collected, or the sum of P239.44. The judgment of the lower court, therefore, should be modified in this respect. The defendants are hereby ordered to return to the Province of Ilocos Norte the sum P239.44, for which sum a judgment is hereby ordered to be entered against them, for which execution may issue when this judgment becomes final, in case the same is not paid.
After a careful analysis of the facts, and the law applicable thereto, the judgment of the lower court, as herein modified, should be and is hereby affirmed with costs. So ordered.
LOADSTAR SHIPPING CO. VS CA, G.R. NO. 131621, SEPT 28, 1991
Loadstar Shipping vs. CA (GR 131621, 28 September 1999)First Division, Davide Jr. (CJ): 4 concur
Facts: On 19 November 1984, Loadstar Shipping Co. Inc. received on board its M/V “Cherokee” (a) 705 bales of lawanit hardwood; (b) 27 boxes and crates of tilewood assemblies and others; and (c) 49 bundles of mouldings R & W (3) Apitong Bolidenized for shipment. The goods, amounting to P6,067,178, were insured for the same amount with the Manila Insurance Co. (MIC) against various risks including “total loss by total loss of the vessel.” The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (PGAI) for P4 million. On 20 November 1984, on its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island. As a result of the total loss of its shipment, the consignee made a claim with Loadstar which, however, ignored the same. As the insurer, MIC paid P6,075,000 to the insured in full settlement of its claim, and the latter executed a subrogation receipt therefor.
On 4 February 1985, MIC filed a complaint against Loadstar and PGAI, alleging that the sinking of the vessel was due to the fault and negligence of Loadstar and its employees. It also prayed that PGAI be ordered to pay the insurance proceeds from the loss of the vessel directly to MIC, said amount to be deducted from MIC’s claim from Loadstar. In its answer, Loadstar denied any liability for the loss of the shipper’s goods and claimed that the sinking of its vessel was due to force majeure. PGAI, on the other hand, averred that MIC had no cause
of action against it, Loadstar being the party insured. In any event, PGAI was later dropped as a party defendant after it paid the insurance proceeds to Loadstar. On 4 October 1991, the trial court (RTC of Manila, Branch 16, Civil Case 85-29110) rendered judgment in favor of MIC, ordering Loadstar to pay MIC the amount of P6,067,178, with legal interest from the filing of the complaint until fully paid, P8,000 as attorney’s fees, and the costs of the suit.
Loadstar elevated the matter to the Court of Appeals, which, however on 30 January 1997, agreed with the trial court and affirmed its decision in toto. Loadstar’s motion for reconsideration was denied on 19 November 1997. Hence, the petition for review on certiorari.
The Supreme Court denied the petition and affirmed the challenged decision of the Court of Appeals; with costs against Loadstar.
1. Home Insurance vs. American Steamship, Valenzuela Hardwood vs. CA, and National Steel vs. CA not applicable; No charter party in present caseIn the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., the Court held that a common carrier transporting special cargo or chartering the vessel to a special person becomes a private carrier that is not subject to the provisions of the Civil Code. Any stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent is void only if the strict policy governing common carriers is upheld. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party. The cases of Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals and National Steel Corp. v. Court of Appeals, upheld the Home Insurance doctrine. These cases are not applicable in the present case as the factual settings are different. The records do not disclose that the M/V “Cherokee” undertook to carry a special cargo or was chartered to a special person only. There was no charter party. The bills of lading failed to show any special arrangement, but only a general provision to the effect that the M/V “Cherokee” was a “general cargo carrier.” Further, the bare fact that the vessel was carrying a particular type of cargo for one shipper, which appears to be purely coincidental, is not reason enough to convert the vessel from a common to a private carrier, especially where it was shown that the vessel was also carrying passengers.
2. Common Carriers defined; Article 1732 NCCArticle 1732 of the Civil Code defines “common carriers” as “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.”
3. Article 1732 NCC construed; De Guzman vs. CAArticle 1732 makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (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. Article 1733 deliberately refrained from making such distinctions.
4. Issuance of CPC not a prerequisite for a common carrier; De Guzman vs. CAA certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability 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 the carrier 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.
5. Vessel not seaworthy as it was not sufficiently manned when it embarked on its voyageThe M/V “Cherokee” was not seaworthy when it embarked on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the time. “For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common
carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.”
6. Doctrine of limited liability does not apply when there was negligence on part of vessel owner or agentThe doctrine of limited liability does not apply where there was negligence on the part of the vessel owner or agent. Herein, Loadstar was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its vessel to sail despite knowledge of an approaching typhoon. In any event, it did not sink because of any storm that may be deemed as force majeure, inasmuch as the wind condition in the area where it sank was determined to be moderate. Since it was remiss in the performance of its duties, Loadstar cannot hide behind the “limited liability” doctrine to escape responsibility for the loss of the vessel and its cargo.
7. Stipulations in St. Paul Fire and National Union Fire Insurance cases different from present one; Present stipulations void as contrary to public policyIn the cases of St. Paul Fire & Marine Ins. Co. v. Macondray & Co., Inc., and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc., it was ruled that after paying the claim of the insured for damages under the insurance policy, the insurer is subrogated merely to the rights of the assured, i.e. it can recover only the amount that may, in turn, be recovered by the latter. Since the right of the assured in case of loss or damage to the goods is limited or restricted by the provisions in the bills of lading, a suit by the insurer as subrogee is necessarily subject to the same limitations and restrictions. These cases involved a limitation on the carrier’s liability to an amount fixed in the bill of lading which the parties may enter into, provided that the same was freely and fairly agreed upon (Articles 1749-1750). On the other hand, the stipulation in the present case effectively reduces the common carrier’s liability for the loss or destruction of the goods to a degree less than extraordinary (Articles 1744 and 1745), i.e. the carrier is not liable for any loss or damage to shipments made at “owner’s risk.” Such stipulation is obviously null and void for being contrary to public policy.
8. Three kinds of stipulations to limit liability, which are void and which are validThree kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a higher rate of freight. According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as being contrary to public policy, but the third is valid and enforceable.
9. MIC subrogated to right of shipperSince the stipulation in question is null and void, it follows that when MIC paid the shipper, it was subrogated to all the rights which the latter has against the common carrier, Loadstar.
10. Action has not yet prescribed; Stipulation reducing 1 year period voidHerein, MIC’s cause of action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA) — which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit — may be applied suppletorily to the present case. This one-year prescriptive period also applies to the insurer of the goods. Herein, the period for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year period is null and void; it must, accordingly, be struck down.
FIRST PHILIPPINE INDUSTRIAL CO. VS. CA, DEC. 29, 1998
First Philippine Industrial Corp. vs. CA (GR 125948, 29 December 1998)Second Division , Martinez (J): 3 concur
Facts: First Philippine Industrial Corporation (FPIC) is a grantee of a pipeline concession under RA 387, as amended, to contract, install and operate oil pipelines. The original pipeline concession was granted in 1967 and renewed by the Energy Regulatory Board in 1992. Sometime in January 1995, FPIC 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 City Treasurer required FPIC to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government Code. The 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, FPIC paid the tax
under protest in the amount of P239,019.01 for the first quarter of 1993. On 8 March 1994, the 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.
On 15 June 1994, FPIC filed with the RTC Batangas City a complaint for tax refund with prayer for writ of preliminary injunction against the City of Batangas and Adoracion Arellano in her capacity as City Treasurer (Civil Case 4293). On 3 October 1994, the trial court rendered a decision dismissing the complaint.
PFIC assailed the aforesaid decision before the Supreme Court via a petition for review. On 27 February 1995, the Supreme Court referred the case to the Court of Appeals for consideration and adjudication (CA-GR SP 36801). On 29 November 1995, the CA rendered a decision affirming the trial court’s dismissal of petitioner’s complaint. FPIC’s motion for reconsideration was denied on 18 July 1996. Hence, the petition for review on certiorari.
At first, the petition was denied due course in a Resolution dated 11 November 1996. FPIC moved for a reconsideration which was granted by the Supreme Court in a Resolution of 22 January 1997. Thus, the petition was reinstated. Finally, the Supreme Court granted the petition, and thus reversed and set aside the decision of the Court of Appeals.
1. Common Carrier defined (broad definition)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.
2. Common Carrier defined (Article 1732)Article 1732 of the Civil Code defines a “common carrier” as “any person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.”
3. Test for determining whether a party is a common carrier of goodsa. 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;b. He must undertake to carry goods of the kind to which his business is confined;c. He must undertake to carry by the method by which his business is conducted and over his established roads; andd. The transportation must be for hire.
4. FPIC is a common carrierBased on the definitions and requirements, FPIC 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.
5. The fact that FPIC has a limited clientele does not exclude it from the definition of a common carrierArticle 1732 of the Civil Code makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (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 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. (De Guzman vs. CA)
6. Common Carrier under Article 1732 coincides neatly with notion of Public ServiceThe 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 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.”
7. Oil pipeline operators are common carriers; Motor vehicle not requiredThe definition of “common carriers” in the Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe line operators are considered common carriers.
8. Pipeline concessionaire as common carrier (RA 387)Under the Petroleum Act of the Philippines (Republic Act 387), FPIC is considered a “common carrier.” Thus, Article 86 thereof provides that “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 obliged 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 change without discrimination such rates as may have been approved by the Secretary of Agriculture and Natural Resources.”
9. Petroleum operation regarded as public utility (RA 387)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.”
10. Pipeline concessionaire a common carrier (BIR Ruling 069-83)The Bureau of Internal Revenue likewise considers FPIC a “common carrier.” In BIR Ruling 069-83, it declared that “. . . 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.”
11. FPIC is a common carrier and is thus exempt from the business tax provided in Section 133 (j) LGCFPIC is a “common carrier” and, therefore, exempt from the business tax as provided for in Section 133 (j), of the Local Government Code. Section 133 (j) provides that “(Common Limitations on the Taxing Powers of Local Government Units) Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx (j.) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided in this Code.”
12. Non-imposition of business tax against common carriers to prevent duplication of “common carrier’s tax”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.” The legislature thus provided an exception under Section 125 (now Section 137) that a province may impose this tax at a specific rate. In the case at bar, FPIC is already paying 3% common carrier’s tax on its gross sales/earnings under the National Internal Revenue Code. To tax FPIC again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local Government Code.
HOME INSURANCE CO. VS. AMERICAN STEAMSHIP AGENCIES, INC., APRIL 4, 1968
Facts: “Consorcio Pesquero del Peru of South America” shipped freight pre-paid at Chimbate, Peru, 21,740 jute bags of Peruvian fish meal through SS Crowborough, covered by clean bills of lading Numbers 1 and 2, both dated 17 January 1963. The cargo, consigned to San Miguel Brewery, Inc., now San Miguel Corporation, and insured by Home Insurance Company for $202,505, arrived in Manila on 7 March 1963 and was discharged into the lighters of Luzon Stevedoring Company. When the cargo was delivered to consignee San Miguel Brewery, Inc., there were shortages amounting to P12,033.85, causing the latter to lay claims against Luzon Stevedoring Corporation, Home Insurance Company and the American Steamship Agencies, owner and operator of SS Crowborough. Because the others denied liability, Home Insurance Company paid the consignee P14,870.71 — the insurance value of the loss, as full settlement of the claim.
Having been refused reimbursement by both the Luzon Stevedoring Corporation and American Steamship Agencies, Home Insurance Company, as subrogee to the consignee, filed against them on 6 March 1964 before the CFI Manila a complaint for recovery of P14,870.71 with legal interest, plus attorney’s fees. On 17 November 1965, the CFI, after trial, absolved Luzon Stevedoring Corporation, having found the latter to have merely delivered what it received from the carrier in the same condition and quality, and ordered American Steamship Agencies to pay Home Insurance Co. P14,870.71 with legal interest plus P1,000 attorneys fees.
Disagreeing with such judgment, American Steamship Agencies appealed directly to the Supreme Court. The Supreme Court reversed the judgment appealed from, and absolved the American Steamship Agencies from liability to Home Insurance Co.; without costs.
1. Contents of the bill lading in the present caseThe bills of lading, covering the shipment of Peruvian fish meal provide at the back thereof that the bills of lading shall be governed by and subject to the terms and conditions of the charter party, if any, otherwise, the bills of lading prevail over all the agreements. On the face of the bills are stamped “Freight prepaid as per charter party. Subject to all terms, conditions and exceptions of charter party dated London, Dec. 13, 1962.”
2. Charter party in instant case is a Contract of AffreightmentA perusal of the charter party referred to shows that while the possession and control of the ship were not entirely transferred to the charterer, the vessel was chartered to its full and complete capacity. Furthermore, the charterer had the option to go north or south or vice-versa, loading, stowing and discharging at its risk and expense. Accordingly, the charter party contract is one of affreightment over the whole vessel rather than a demise. As such, the liability of the shipowner for acts or negligence of its captain and crew, would remain in the absence of stipulation.
3. Source of provisions of Civil Code on common carriersThe provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy, and is deemed valid. Thus, the Civil Code provisions on common carriers (especially Article 1744) should not be applied where the carrier is not acting as such but as a private carrier. In the case at bar, Section 2, paragraph 2 of the charter party – which provides that the owner is liable for loss or damage to the goods caused by personal want of due diligence on its part or its manager to make the vessel in all respects seaworthy and to secure that she be properly manned, equipped and supplied or by the personal act or default of the owner or its manager. Said paragraph, however, exempts the owner of the vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of the captain or crew or some other person employed by the owner on board, for whose acts the owner would ordinarily be liable except for said paragraph – is valid. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party.
4. Consignee cannot claim ignorance of charter party, as bills of lading expressly referred to the same; Instance for recovery not present in caseIn a charter of the entire vessel, the bill of lading issued by the master to the charterer, as shipper, is in fact and legal contemplation merely a receipt and a document of title, not a contract, for the contract is the charter party. The consignee may not claim ignorance of said charter party because the bills of lading expressly referred to the same. Accordingly, the consignees under the bills of lading must likewise abide by the terms of the charter party. And as stated recovery cannot be had thereunder, for loss or damage to the cargo, against the shipowners, unless the same is due to personal acts or negligence of said owner or its manager, as distinguished from its other agents or employees. In this case, no such personal act or negligence has been proved.
SAN PABLO VS. PANTRANCO SOUTH EXPRESS, INC. AUG. 21, 1987
GANCAYCO, J.:
The question that is posed in these petitions for review is whether the sea can be considered as a continuation of the highway. The corollary issue is whether a land transportation company can be authorized to operate a ferry service or coastwise or interisland shipping service along its authorized route as an incident to its franchise without the need of filing a separate application for the same.
The Pantranco South Express, Inc., hereinafter referred to as PANTRANCO is a domestic corporation engaged in the land transportation business with PUB service for passengers and freight and various certificates for public conveniences CPC to operate passenger buses from Metro Manila to Bicol Region and Eastern Samar. On March 27,1980 PANTRANCO through its counsel wrote to Maritime Industry Authority (MARINA) requesting authority to lease/purchase a vessel named M/V "Black Double" "to be used for its project to operate a ferryboat service from Matnog, Sorsogon and Allen, Samar
that will provide service to company buses and freight trucks that have to cross San Bernardo Strait. 1 In a reply of April 29,1981 PANTRANCO was informed by MARINA that it cannot give due course to the request on the basis of the following observations:
1. The Matnog-Allen run is adequately serviced by Cardinal Shipping Corp. and Epitacio San Pablo; MARINA policies on interisland shipping restrict the entry of new operators to Liner trade routes where these are adequately serviced by existing/authorized operators.
2. Market conditions in the proposed route cannot support the entry of additional tonnage; vessel acquisitions intended for operations therein are necessarily limited to those intended for replacement purposes only. 2
PANTRANCO nevertheless acquired the vessel MV "Black Double" on May 27, 1981 for P3 Million pesos. It wrote the Chairman of the Board of Transportation (BOT) through its counsel, that it proposes to operate a ferry service to carry its passenger buses and freight trucks between Allen and Matnog in connection with its trips to Tacloban City invoking the case of Javellana vs. Public Service Commission. 3 PANTRANCO claims that it can operate a ferry service in connection with its franchise for bus operation in the highway from Pasay City to Tacloban City "for the purpose of continuing the highway, which is interrupted by a small body of water, the said proposed ferry operation is merely a necessary and incidental service to its main service and obligation of transporting its passengers from Pasay City to Tacloban City. Such being the case ... there is no need ... to obtain a separate certificate for public convenience to operate a ferry service between Allen and Matnog to cater exclusively to its passenger buses and freight trucks. 4
Without awaiting action on its request PANTRANCO started to operate said ferry service. Acting Chairman Jose C. Campos, Jr. of BOT ordered PANTRANCO not to operate its vessel until the application for hearing on Oct. 1, 1981 at 10:00 A.M. 5 In another order BOT enjoined PANTRANCO from operating the MV "Black Double" otherwise it will be cited to show cause why its CPC should not be suspended or the pending application denied. 6
Epitacio San Pablo (now represented by his heirs) and Cardinal Shipping Corporation who are franchise holders of the ferry service in this area interposed their opposition. They claim they adequately service the PANTRANCO by ferrying its buses, trucks and passengers. BOT then asked the legal opinion from the Minister of Justice whether or not a bus company with an existing CPC between Pasay City and Tacloban City may still be required to secure another certificate in order to operate a ferry service between two terminals of a small body of water. On October 20, 1981 then Minister of Justice Ricardo Puno rendered an opinion to the effect that there is no need for bus operators to secure a separate CPC to operate a ferryboat service holding as follows:
Further, a common carrier which has been granted a certificate of public convenience is expected to provide efficient, convenient and adequate service to the riding public. (Hocking Valley Railroad Co. vs. Public Utilities Commission, 1 10 NE 521; Louiseville and NR Co. vs. Railroad Commissioners, 58 SO 543) It is the right of the public which has accepted the service of a public utility operator to demand that the service should be conducted with reasonable efficiency. (Almario, supra, citing 73 C.J.S. 990-991) Thus, when the bus company in the case at bar proposes to add a ferry service to its Pasay Tacloban route, it merely does so in the discharge of its duty under its current certificate of public convenience to provide adequate and convenient service to its riders. Requiring said bus company to obtain another certificate to operate such ferry service when it merely forms a part — and constitutes an improvement — of its existing transportation service would simply be duplicitous and superfluous. 7
Thus on October 23, 1981 the BOT rendered its decision holding that the ferry boat service is part of its CPC to operate from Pasay to Samar/Leyte by amending PANTRANCO's CPC so as to reflect the same in this wise:
Let the original Certificate of public convenience granted to Pantranco South Express Co., Inc. be amended to embody the grant of authority to operate a private ferry boat service as one of the conditions for the grant of the certificate subject to the condition that the ferryboat shall be for the exclusive use of Pantranco buses, its passengers and freight trucks, and should it offer itself to the public for hire other than its own passengers, it must apply for a separate certificate of public convenience as a public ferry boat service, separate and distinct from its land transport systems. 8
Cardinal Shipping Corporation and the heirs of San Pablo filed separate motions for reconsideration of said decision and San Pablo filed a supplemental motion for reconsideration that were denied by the BOT on July 21, 1981. 9
Hence, San Pablo filed the herein petition for review on certiorari with prayer for preliminary injunction 10 seeking the revocation of said decision, and pending consideration of the petition, the issuance of a restraining order or preliminary injunction against the operation by PANTRANCO of said ferry service. San Pablo raised the following issues:
A. DID THE RESPONDENT BOARD VIOLATE PETITIONERS' RIGHT TO DUE PROCESS, THE RULES OF PROCEDURE AND SECTION 16 (m) OF THE PUBLIC SERVICE ACT, WHEN IT ISSUED IN A COMPLAINT CASE THE DECISION DATED OCTOBER 23, 1981 WHICH MOTU PROPIO AMENDED RESPONDENT PANTRANCO'S PUB CERTIFICATE TO INCLUDE AND AUTHORIZE OPERATION OF A SHIPPING SERVICE ON THE ROUTE MATNOG, SORSOGON — ALLEN, SAMAR — EVEN AS THERE MUST BE A FORMAL APPLICATION FOR AMENDMENT AND SEPARATE PROCEEDINGS HELD THEREFORE, ASSUMING AMENDMENT IS PROPER?
B. DID THE RESPONDENT BOARD ERR IN FINDING IN ITS DECISION OF OCTOBER 23, 1981, THAT THE SEA FROM THE PORT OF MATNOG, SORSOGON, LUZON ISLAND TO THE PORT OF ALLEN, SAMAR ISLAND, OR FROM LUZON ISLAND TO SAMAR ISLAND IS A MERE FERRY OR CONTINUATION OF THE HIGHWAY — IT BEING 23 KILOMETERS OF ROUGH AND OPEN SEA AND ABOUT 2 HOURS TRAVEL TIME REQUIRING BIG INTER-ISLAND VESSELS, NOT MERE BARGES, RAFTS OR SMALL BOATS UTILIZED IN FERRY SERVICE?
C. DID THE RESPONDENT BOARD ERR WHEN IT RULED THAT RESPONDENT PANTRANCO'S VESSEL M/V BLACK DOUBLE IS MERELY A PRIVATE CARRIER, NOT A PUBLIC FERRY OPERATING FOR PUBLIC SERVICE (ASSUMING THAT THE MATNOG-ALLEN SEA ROUTE IS A MERE FERRY OR CONTINUATION OF HIGHWAY) EVEN IF SAID VESSEL IS FOR HIRE AND COLLECTS SEPARATE FARES AND CATERS TO THE PUBLIC EVEN FOR A LIMITED CLIENTELE?
D. DID THE RESPONDENT BOARD ERR WHEN IT GRANTED RESPONDENT PANTRANCO AUTHORITY TO OPERATE A SHIPPING SERVICE IN THE FACE OF THE LATTER'S CONTENTION AS AN AFTER THOUGH THAT IT NEED NOT APPLY THEREFOR, AND IN SPITE OF ITS FAILURE TO SECURE THE PRE-REQUISITE MARITIME INDUSTRY AUTHORITY (MARINA) APPROVAL TO ACQUIRE A VESSEL UNDER ITS MEMORANDUM CIRCULAR NO. 8-A AS WELL AS ITS PRIOR FAVORABLE ENDORSEMENT BEFORE ANY SHIPPING AUTHORIZATION MAY BE GRANTED UNDER BOT — MARINA AGREEMENT OF AUGUST 10, 1976 AND FEBRUARY 26, 1982?
E. DID RESPONDENT BOARD ERR WHEN IT GRANTED RESPONDENT PANTRANCO AUTHORITY TO OPERATE A SHIPPING SERVICE ON A ROUTE ADEQUATELY SERVICED IF NOT ALREADY "SATURATED" WITH THE SERVICES OF TWO 12) EXISTING OPERATORS PETITIONERS AND CARDINAL SHIPPING CORP.) IN VIOLATION OF THE PRINCIPLE OF PRIOR OPERATOR RULE'? 11
By the same token Cardinal Shipping Corporation filed a separate petition raising similar issues, namely:
a. the decision did not conform to the procedures laid down by law for an amendment of the original certificate of public convenience, and the authority to operate a private ferry boat service to PANTRANCO was issued without ascertaining the established essential requisites for such grant, hence, violative of due process requirements;
b. the grant to PANTRANCO of authority to operate a ferryboat service as a private carrier on said route contravenes existing government policies relative to the rationalization of operations of all water transport utilities;
c. it contravenes the memorandum of agreement between MARINA and the Board of Transportation; d. the grant of authority to operate a ferry service as a private carrier is not feasible; it lessens PANTRANCO's liability to passengers and cargo to a degree less than extraordinary diligence?
e. PANTRANCO is not a private carrier when it operates its ferry service;
f. it runs counter to the "old operator" doctrine; and
g. the operation by PANTRANCO of the ferry service cnstitutes undue competition. �
The foregoing considerations constitutes the substantial errors committed by the respondent Board which would more than amply justify review of the questioned decision by this Honorable Court.12
Both cases were consolidated and are now admitted for decision.
The resolution of all said issues raised revolves on the validity of the questioned BOT decision.
The BOT resolved the issue of whether a ferry service is an extension of the highway and thus is a part of the authority originally granted PANTRANCO in the following manner:
A ferry service, in law, is treated as a continuation of the highway from one side of the water over which passes to the other side for transportation of passengers or of travellers with their teams vehicles and such other property as, they may carry or have with them. (U.S. vs. Pudget Sound Nev. Co. DC Washington, 24 F. Supp. 431). It maybe said to be a necessary service of a specially constructed boat to carry passengers and property across rivers or bodies of water from a place in one shore to a point conveniently opposite on the other shore and continuation of the highway making a connection with the thoroughfare at each terminal (U.S. vs. Canadian Pac. N.Y. Co. 4 P. Supp, 85). It comprises not merely the privilege of transportation but also the use for that purpose of the respective landings with outlets therefrom. (Nole vs. Record, 74 OKL. 77; 176 Pac. 756). A ferry service maybe a public ferry or a private ferry. A public ferry service is one which all the public have the right to resort to and for which a regular fare is established and the ferryman is a common carrier be inbound to take an who apply and bound to keep his ferry in operation and good repair. (Hudspeth v. Hall, 11 Oa. 510; 36 SB 770). A ferry (private) service is mainly for the use of the owner and though he may take pay for ferriage, he does not follow it as a business. His ferry is not open to the public at its demand and he may or may not keep it in operation (Hudspeth vs. Hall, supra, St. Paul Fire and Marine Ins. 696), Harrison, 140 Ark 158; 215 S.W. 698).
The ferry boat service of Pantranco is a continuation of the highway traversed by its buses from Pasay City to Samar, Leyte passing through Matnog (Sorsogon) through San Bernardino Strait to Alien (Samar). It is a private carrier because it will be used exclusively to transport its own buses, passengers and freight trucks traversing the said route. It will cater exclusively to the needs of its own clientele (passengers on board- Pantranco buses) and will not offer itself indiscriminately for hire or for compensation to the general public. Legally therefore, Pantranco has the right to operate the ferry boat M/V BLACK DOUBLE, along the route from Matnog (Sorsogon) to Allen (Samar) and vice versa for the exclusive use of its own buses, passengers and freight trucks without the need of applying for a separate certificate of public convenience or provisional authority. Since its operation is an integral part of its land transport system, its original certificate of public convenience should be amended to include the operation of such ferryboat for its own exclusive use
In Javellana 14 this Court recited the following definition of ferry :
The term "ferry" implied the continuation by means of boats, barges, or rafts, of a highway or the connection of highways located on the opposite banks of a stream or other body of water. The term necessarily implies transportation for a short distance, almost invariably between two points, which is unrelated to other transportation .(Emphasis supplied)
The term "ferry" is often employed to denote the right or franchise granted by the state or its authorized mandatories to continue by means of boats, an interrupted land highway over the interrupting waters and to charge toll for the use thereof by the public. In this sense it has also been defined as a privilege, a liberty, to take tolls for transporting passengers and goods across a lake or stream or some other body of water, with no essential difference from a bridge franchise except as to the mode of transportation, 22 Am. Jur. 553.
A "ferry" has been defined by many courts as "a public highway or thoroughfare across a stream of water or river by boat instead of a bridge." (St. Clare Country v. Interstate Car and Sand Transfer Co., 192 U.S. 454, 48 L. ed. 518; etc.)
The term ferry is often employed to denote the right or franchise granted by the state or its authorized mandatories to continue by means of boats, an interrupted land highway over the interrupting waters and to charge toll for the use thereof by the public. (Vallejo Ferry Co. vs. Solano Aquatic Club, 165 Cal. 255, 131 P. 864, Ann. Cas. 1914C 1179; etc.) (Emphasis supplied)
"Ferry" is service necessity for common good to reach point across a stream lagoon, lake, or bay. (U.S. vs. Canadian Pac. Ry. Co. DC Was., 4 Supp. 851,853)'
"Ferry" properly means a place of transit across a river or arm of the sea, but in law it is treated as a franchise, and defined as the exclusive right to carry passengers across a river, or arm of the sea, from one vill to another, or to connect a continuous line of road leading from township or vill to another. (Canadian Pac. Ry. Co. vs. C.C. A. Wash. 73 F. 2d. 831, 832)'
Includes various waters: (1) But an arm of the sea may include various subordinate descriptions of waters, where the tide ebbs and flows. It may be a river, harbor, creek, basin, or bay; and it is sometimes used to designate very extensive reaches of waters within the projecting capes or points or a country. (See Rex vs. Bruce, Deach C.C. 1093). (2) In an early case the court said: "The distinction between rivers navigable and not navigable, that is, where the sea does, or does not, ebb and flow, is very ancient. Rex
vs. Smith, 2 Dougl. 441, 99 Reprint 283. The former are called arms of the sea, while the latter pass under the denomination of private or inland rivers" Adams vs. Pease 2 Conn. 481, 484. (Emphasis supplied)
In the cases of Cababa vs. Public Service Commission, 16 Cababa vs. Remigio & Carillo and Municipality of Gattaran vs. Elizaga 17 this Court considered as ferry service such water service that crosses rivers.
However, in Javellana We made clear distinction between a ferry service and coastwise or interisland service by holding that:
We are not unmindful of the reasons adduced by the Commission in considering the motorboat service between Calapan and Batangas as ferry; but from our consideration of the law as it stands, particularly Commonwealth Act No. 146, known as the Public Service Act and the provisions of the Revised Administrative Code regarding municipal ferries and those regarding the jurisdiction of the Bureau of Customs over documentation, registration, licensing, inspection, etc. of steamboats, motorboats or motor vessels, and the definition of ferry as above quoted we have the impression and we are inclined to believe that the Legislature intended ferry to mean the service either by barges or rafts, even by motor or steam vessels, between the banks of a river or stream to continue the highway which is interrupted by the body of water, or in some cases to connect two points on opposite shores of an arm of the sea such as bay or lake which does not involve too great a distance or too long a time to navigate But where the line or service involves crossing the open sea like the body of water between the province of Batangas and the island of Mindoro which the oppositors describe thus "the intervening waters between Calapan and Batangas are wide and dangerous with big waves where small boat barge, or raft are not adapted to the service," then it is more reasonable to regard said line or service as more properly belonging to interisland or coastwise trade. According to the finding of the Commission itself the distance between Calapan is about 24 nautical miles or about 44.5 kilometers. We do not believe that this is the short distance contemplated by the Legislature in referring to ferries whether within the jurisdiction of a single municipality or ferries between two municipalities or provinces. If we are to grant that water transportation between Calapan and Batangas is ferry service, then there would be no reason for not considering the same service between the different islands of the Philippines, such as Boac Marinduque and Batangas; Roxas City of Capiz and Romblon; Cebu City, Cebu and Ormoc, Leyte; Guian, Samar and Surigao, Surigao; and Dumaguete, Negros Oriental and Oroquieta or Cagayan de Oro.
The Commission makes the distinction between ferry service and motorship in the coastwise trade, thus:
A ferry service is distinguished from a motorship or motorboat service engaged in the coastwise trade in that the latter is intended for the transportation of passengers and/or freight for hire or compensation between ports or places in the Philippines without definite routes or lines of service.
We cannot agree. The definiteness of the route of a boat is not the deciding factor. A boat of say the William Lines, Inc. goes from Manila to Davao City via Cebu, Tagbilaran, Dumaguete, Zamboanga, every week. It has a definite route, and yet it may not for that reason be regarded as engaged in ferry service. Again, a vessel of the Compania Maritima makes the trip from Manila to Tacloban and back, twice a week. Certainly, it has a definite route. But that service is not ferry service, but rather interisland or coastwise trade.
We believe that it will be more in consonance with the spirit of the law to consider steamboat or motorboat service between the different islands, involving more or less great distance and over more or less turbulent and dangerous waters of the open sea, to be coastwise or inter-island service. Anyway, whether said service between the different islands is regarded as ferry service or coastwise trade service, as long as the water craft used are steamboats, motorboats or motor vessels, the result will be the same as far as the Commission is concerned. " 18 (Emphasis supplied)
This Court takes judicial notice of the fact, and as shown by an examination of the map of the Philippines, that Matnog which is on the southern tip of the island of Luzon and within the province of Sorsogon and Allen which is on the northeastern tip of the island of Samar, is traversed by the San Bernardino Strait which leads towards the Pacific Ocean. The parties admit that the distance between Matnog and Allen is about 23 kilometers which maybe negotiated by motorboat or vessel in about 1-1/2 hours as claimed by respondent PANTRANCO to 2 hours according to petitioners. As the San Bernardino Strait which separates Matnog and Allen leads to the ocean it must at times be choppy and rough so that it will not be safe to navigate the same by small boats or barges but only by such steamboats or vessels as the MV "Black Double. 19
Considering the environmental circumstances of the case, the conveyance of passengers, trucks and cargo from Matnog to Allen is certainly not a ferry boat service but a coastwise or interisland shipping service. Under no circumstance can the sea between Matnog and Allen be considered a continuation of the highway. While a ferry boat service has been considered as a continuation of the highway when crossing rivers or even lakes, which are small body of waters - separating the land, however, when as in this case the two terminals, Matnog and Allen are separated by an open sea it can not be considered as a continuation of the highway. Respondent PANTRANCO should secure a separate CPC for the operation of an interisland or coastwise shipping service in accordance with the provisions of law. Its CPC as a bus transportation cannot be merely amended to include this water service under the guise that it is a mere private ferry service.
The contention of private respondent PANTRANCO that its ferry service operation is as a private carrier, not as a common carrier for its exclusive use in the ferrying of its passenger buses and cargo trucks is absurd. PANTRANCO does not deny that it charges its passengers separately from the charges for the bus trips and issues separate tickets whenever they board the MV "Black Double" that crosses Matnog to Allen, 20 PANTRANCO cannot pretend that in issuing tickets to its passengers it did so as a private carrier and not as a common carrier. The Court does not see any reason why inspite of its amended franchise to operate a private ferry boat service it cannot accept walk-in passengers just for the purpose of crossing the sea between Matnog and Allen. Indeed evidence to this effect has been submitted. 21 What is even more difficult to comprehend is that while in one breath respondent PANTRANCO claims that it is a private carrier insofar as the ferryboat service is concerned, in another breath it states that it does not thereby abdicate from its obligation as a common carrier to observe extraordinary diligence and vigilance in the transportation of its passengers and goods. Nevertheless, considering that the authority granted to PANTRANCO is to operate a private ferry, it can still assert that it cannot be held to account as a common carrier towards its passengers and cargo. Such an anomalous situation that will jeopardize the safety and interests of its passengers and the cargo owners cannot be allowed.
What appears clear from the record is that at the beginning PANTRANCO planned to operate such ferry boat service between Matnog and Alien as a common carrier so it requested authority from MARINA to purchase the vessel M/V "Black Double 22 in accordance with the procedure provided for by law for such application for a certificate of public convenience. 23 However when its request was denied as the said routes "are adequately serviced by existing/authorized operators, 24 it nevertheless purchased the vessel and started operating the same. Obviously to go about this obstacle to its operation, it then contrived a novel theory that what it proposes to operate is a private ferryboat service across a small body of water for the exclusive use of its buses, trucks and passengers as an incident to its franchise to convey passengers and cargo on land from Pasay City to Tacloban so that it believes it need not secure a separate certificate of public convenience. 25 Based on this representation, no less than the Secretary of Justice was led to render an affirmative opinion on October 20, 1981, 26 followed a few days later by the questioned decision of public respondent of October 23, 1981. 27 Certainly the Court cannot give its imprimatur to such a situation.
Thus the Court holds that the water transport service between Matnog and Allen is not a ferry boat service but a coastwise or interisland shipping service. Before private respondent may be issued a franchise or CPC for the operation of the said service as a common carrier, it must comply with the usual requirements of filing an application, payment of the fees, publication, adducing evidence at a hearing and affording the oppositors the opportunity to be heard, among others, as provided by law. 28
WHEREFORE, the petitions are hereby GRANTED and the Decision of the respondent Board of Transportation (BOT) of October 23, 1981 in BOT Case No. 81-348-C and its Order of July 21, 1982 in the same case denying the motions for reconsideration filed by petitioners are hereby Reversed and set aside and declared null and void. Respondent PANTRANCO is hereby permanently enjoined from operating the ferryboat service and/or coastwise/interisland services between Matnog and Allen until it shall have secured the appropriate Certificate of Public Convenience (CPC) in accordance with the requirements of the law, with costs against respondent PANTRANCO.
SO ORDERED.
NATIONAL STEEL CORP. VS. CA, DEC 15, 1997
Facts: The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or shipment for the general public. Its services are available only to specific persons who enter into a special contract of charter party with its owner. The ship is a private carrier, and it is in this capacity that its owner, Vlasons Shipping, Inc. (VSA), entered into a contract of affreightment or contract of voyage charter hire with National Steel Corporation (NSC) on 17 July 1974, whereby NSC hired VSI’s vessel, the MV ‘VLASONS I’ to make 1 voyage to load steel products at Iligan City and discharge them at North Harbor, Manila, under the following terms and conditions, viz: “xxx (2) Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master’s option. xxx (4) Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Bill of Lading within fifteen (15) days. (5) Laydays/Cancelling: July 26, 1974/Aug. 5, 1974. (6) Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive hours, Sundays and Holidays Included). (7) Demurrage/Dispatch: P8,000.00/P4,000.00 per day. xxx (9) Cargo Insurance: Charterer’s and/or Shipper’s must insure the cargoes. Shipowners not responsible for losses/damages except on proven willful negligence of the officers of the vessel. (10) Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized Charter Party Agreement shall form part of this Contract. xxx” On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV ‘VLASONS I’ loaded at NSC’s pier at Iligan City, the NSC’s shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages with a total weight of about 2,481.19 metric tons for carriage to Manila. The shipment was placed in the 3 hatches of the ship. Chief Mate Gonzalo Sabando, acting as agent of the vessel, acknowledged receipt of the cargo on board and signed the corresponding bill of lading, BLPP 0233 on 8 August 1974. The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on 12 August 1974. The following day, when the vessel’s 3 hatches containing the shipment were opened by NSC’s agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was completed only on 24 August 1974 after incurring a delay of 11 days due to the heavy rain which interrupted the unloading operations. To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated 17 March 1975, MASCO made a report of its ocular inspection conducted on the cargo, both while it was still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was taken and stored. MASCO reported that it found wetting and rusting of the packages of hot rolled sheets and metal covers of the tinplates; that tarpaulin hatch covers were noted torn at various extents; that container/metal casings of the skids were rusting all over. MASCO’s surveyors drew at random samples of bad order packing materials of the tinplates and delivered the same to the MIT Testing Laboratories for analysis. On 31 August 1974, the MIT Testing Laboratories issued Report 1770 which in part, states, “The analysis of bad order samples of packing materials . . . shows that wetting was caused by contact with sea water.” On 6 September 1974, on the basis of Report 1770, NSC filed with VSI its claim for damages suffered due to the downgrading of the damaged tinplates in the amount of P941,145.18. Then on 3 October 1974, NSC formally demanded payment of said claim but VSI refused and failed to pay.
NSC filed its complaint against VSI on 21 April 1976 (Civil Case 23317) before the CFI of Rizal. The trial court rendered judgment in favor of VSI and against NSC dismissing the complaint with costs against NSC, and ordering NSC to pay VSI on the counterclaim for the sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal rate on both amounts from April 7, 1976 until the same shall have been fully paid; attorney’s fees and expenses of litigation in the sum of P100,000.00; and cost of suit.
On appeal, and on 12 August 1993, the Court of Appeals modified the decision of the trial court by reducing the demurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of litigation. NSC and VSI filed separate motions for reconsideration. In a Resolution dated 20 October 1993, the appellate court denied both motions. Undaunted, NSC and VSI filed their respective petitions for review before the Supreme Court. On motion of VSI, the Court ordered on 14 February 1994 the consolidation of the petitions.
The Supreme Court denied the consolidated petitions; and affirmed the questioned Decision of the Court of Appeals with the modification that the demurrage awarded to VSI is deleted. No pronouncement as to costs.
1. The term “FIOST”; Paragraph 5 of the NANYOZAI Charter PartyThe terms ‘F.I.O.S.T.’ which is used in the shipping business is a standard provision in the NANYOZAI Charter Party which stands for ‘Freight In and Out including Stevedoring and Trading’, which means that the handling, loading and unloading of the cargoes are the responsibility of the Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it states, “Charterers to load, stow and discharge the cargo free of risk and expenses to owners. . . .”
2. Paragraph 10 of the NANYOZAI Charter PartyUnder paragraph 10 of the NANYOZAI Charter Party, it is provided that “owners shall, before and at the beginning of the voyage, exercise due diligence to make the vessel seaworthy and properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and preservation. Owners shall not be liable for loss of or damage of the cargo arising or resulting from: unseaworthiness unless caused by want of due diligence on the part of the owners to make the vessel seaworthy, and to secure that the vessel is properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and preservation; . . ; perils, dangers and accidents of the sea or other navigable waters; . . ; wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the cargo; insufficiency of packing; . . .; latent defects not discoverable by due diligence; any other cause arising without the actual fault or privity of Owners or without the fault of the agents or servants of owners.”
3. Paragraph 12 of the NANYOZAI Charter PartyParagraph 12 of said NANYOZAI Charter Party also provides that “owners shall not be responsible for split, chafing and/or any damage unless caused by the negligence or default of the master and crew.”
4. Common carriers defined (Article 1732); Test of common carrierArticle 1732 of the Civil Code defines a common carrier as “persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.” It has been held that the true test of a common carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its transportation service for a fee.
5. Private Carrier; Charter partyA carrier which does not qualify under the test of a common carrier is deemed a private carrier. “Generally, private carriage is undertaken by special agreement and the carrier does not hold himself out to carry goods for the general public. The most typical, although not the only form of private carriage, is the charter party, a maritime contract by which the charterer, a party other than the shipowner, obtains the use and service of all or some part of a ship for a period of time or a voyage or voyages.”
6. VSI a private carrier; Rights and obligations of VSI and NSC are determined by stipulations in charter partyHerein, VSI did not offer its services to the general public. It carried passengers or goods only for those it chose under a “special contract of charter party.” The MV Vlasons I “was not a common but a private carrier.” Consequently, the rights and obligations of VSI and NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter party.
7. Contract of private carriage; Valenzuela Hardwood vs. CAIn Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation, the Court ruled that “in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in contracts involving common carriers.”
8. Extent of VSI’s Responsibility and Liability Over NSC’s CargoFrom the parties’ Contract of Voyage Charter Hire, dated 17 July 1974, VSI “shall not be responsible for losses except on proven willful negligence of the officers of the vessel.” The NANYOZAI Charter Party, which was incorporated in the parties’ contract of transportation further provided that the shipowner shall not be liable for loss of or damage to the cargo arising or resulting from unseaworthiness, unless the same was caused by its lack of due diligence to make the vessel seaworthy or to ensure that the same was “properly manned, equipped and supplied,” and to “make the holds and all other parts of the vessel in which cargo was carried, fit and safe for its reception, carriage and preservation.” The NANYOZAI Charter Party also provided that “owners shall not be
responsible for split, chafing and/or any damage unless caused by the negligence or default of the master or crew.”
9. Burden of Proof (parties’ agreement)Herein, NSC must prove that the damage to its shipment was caused by VSI’s willful negligence or failure to exercise due diligence in making MV Vlasons I seaworthy and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden of proof was placed on NSC by the parties’ agreement.
10. Article 361 of the Code of CommerceArticle 361 of the Code of Commerce provides that “Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been expressly stipulated. Therefore, the damage and impairment suffered by the goods during the transportation, due to fortuitous event, force majeure, or the nature and inherent defect of the things, shall be for the account and risk of the shipper. The burden of proof of these accidents is on the carrier.”
11. Article 362 of the Code of CommerceArticle 362 of the Code of Commerce provides that “The carrier, however, shall be liable for damages arising from the cause mentioned in the preceding article if proofs against him show that they occurred on account of his negligence or his omission to take the precautions usually adopted by careful persons, unless the shipper committed fraud in the bill of lading, making him to believe that the goods were of a class or quality different from what they really were.”
12. Private carrier; Shipowner’s obligation governed by Code of Commerce, not Civil CodeAs the MV Vlasons I was a private carrier, the shipowner’s obligations are governed by the foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general rule, places the prima facie presumption of negligence on a common carrier.
13. Burden of proof in action against private carrier for loss of cargo; Plaintiff entitled to benefit of presumptions and inferencesIn an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove that the carrier was negligent or unseaworthy, and the fact that the goods were lost or damaged while in the carrier’s custody does not put the burden of proof on the carrier. Since a private carrier is not an insurer but undertakes only to exercise due care in the protection of the goods committed to its care, the burden of proving negligence or a breach of that duty rests on plaintiff and proof of loss of, or damage to, cargo while in the carrier’s possession does not cast on it the burden of proving proper care and diligence on its part or that the loss occurred from an excepted cause in the contract or bill of lading. However, in discharging the burden of proof, plaintiff is entitled to the benefit of the presumptions and inferences by which the law aids the bailor in an action against a bailee, and since the carrier is in a better position to know the cause of the loss and that it was not one involving its liability, the law requires that it come forward with the information available to it, and its failure to do so warrants an inference or presumption of its liability. However, such inferences and presumptions, while they may affect the burden of coming forward with evidence, do not alter the burden of proof which remains on plaintiff, and, where the carrier comes forward with evidence explaining the loss or damage, the burden of going forward with the evidence is again on plaintiff.
14. Burden of proof in action based on shipowner’s warranty of seaworthiness; Where contract of carriage exempts carrier from liability for unseaworthiness not discoverable by due diligenceWhere the action is based on the shipowner’s warranty of seaworthiness, the burden of proving a breach thereof and that such breach was the proximate cause of the damage rests on plaintiff, and proof that the goods were lost or damaged while in the carrier’s possession does not cast on it the burden of proving seaworthiness. . . . Where the contract of carriage exempts the carrier from liability for unseaworthiness not discoverable by due diligence, the carrier has the preliminary burden of proving the exercise of due diligence to make the vessel seaworthy.
15. Findings of the trial court, subsequently affirmed by the Court of Appeals, binding upon the Supreme CourtWhere the factual findings of both the trial court and the Court of Appeals coincide, the same are binding on the Supreme Court. The Court stresses that, subject to some exceptional instances, only questions of law — not questions of fact — may be raised before the Supreme Court in a petition for review under Rule 45 of the Rules of Court. Herein, after a thorough review of the case, the Court finds no reason to disturb the lower courts’ factual findings.
16. MV Vlasons I was seaworthyVSI exercised due diligence to make the ship seaworthy and fit for the carriage of NSC’s cargo of steel and tinplates. This is shown by the fact that it was drydocked and harbored by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to Manila under the contract of voyage charter hire. The vessel’s voyage from Iligan to Manila was the vessel’s first voyage after drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it met all requirements for trading as cargo vessel.
17. Due diligence exercised by officers and crew of MV Vlasons I; Use of old tarpaulin an addition to new one used to make hatch waterproofDue diligence was exercised by the officers and the crew of the MV Vlasons I. This was further demonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin did not give way and the ship’s hatches and cargo holds remained waterproof. Herein, the ship used the old tarpaulin, only in addition to the new one used primarily to make the ship’s hatches watertight. The foregoing are clear from the marine protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the ship’s boatswain, Jose Pascua, where it was stated that every time the strong winds and big waves caused the first layer of the canvass covering to give way, the new canvass covering still hold on. NSC failed to discharge its burden to show negligence on the part of the officers and the crew of MV Vlasons I,
18. Stevedores of NSC negligent in unloading cargo form ship; Reason for delay in pointing out stevedores’ negligence to NSCIt was the stevedores of NSC who were negligent in unloading the cargo from the ship. The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned by a passing typhoon disrupted the loading of the cargo. This tent-like covering, however, was clearly inadequate for keeping rain and seawater away from the hatches of the ship. NSC attempts to discredit the testimony of Vicente Angliongto, an officer of VSI, by questioning his failure to complain immediately about the stevedores’ negligence on the first day of unloading, pointing out that he wrote his letter to NSC only 7 days later. 7 days lapsed because he first called the attention of the stevedores, then the NSC’s representative, about the negligent and defective procedure adopted in unloading the cargo. This series of actions constitutes a reasonable response in accord with common sense and ordinary human experience. Angliongto could not be blamed for calling the stevedores’ attention first and then the NSC’s representative on location before formally informing NSC of the negligence he had observed, because he was not responsible for the stevedores or the unloading operations. In fact, he was merely expressing concern for NSC which was ultimately responsible for the stevedores it had hired and the performance of their task to unload the cargo.
19. NSC has cause of action against stevedoring company, and not against VSIThe fact that NSC actually accepted and proceeded to remove the cargo from the ship during unfavorable weather will not make VSI liable for any damage caused thereby. In passing, it may be noted that the NSC may seek indemnification, subject to the laws on prescription, from the stevedoring company at fault in the discharge operations.
20. Duty of a stevedore companyA stevedore company engaged in discharging cargo has the duty to load the cargo in a prudent manner, and it is liable for injury to, or loss of, cargo caused by its negligence and where the officers and members and crew of the vessel do nothing and have no responsibility in the discharge of cargo by stevedores, the vessel is not liable for loss of, or damage to, the cargo caused by the negligence of the stevedores.
21. Effect of NSC’s Failure to Insure the CargoThe obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally separate and distinct from the contractual or statutory responsibility that may be incurred by VSI for damage to the cargo caused by the willful negligence of the officers and the crew of MV Vlasons I . Clearly, therefore, NSC’s failure to insure the cargo will not affect its right, as owner and real party in interest, to file an action against VSI for damages caused by the latter’s willful negligence. Nothing in the charter party would make the liability of VSI for damage to the cargo contingent on or affected in any manner by NSC’s obtaining an insurance over the cargo.
22. Admissibility of certificates proving seaworthiness; Exhibits 3-9 and 12 inadmissibleThe certificates of seaworthiness offered in evidence by VSI include the (1) Certificate of Inspection of the Philippine Coast Guard at Cebu, (2) Certificate of Inspection from the Philippine Coast Guard, (3) International Load Line Certificate from the Philippine Coast Guard, (4) Coastwise License from the Board of Transportation, and (5) Certificate of Approval for Conversion issued by the Bureau of Customs. Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are inadmissible, for they have not been properly offered as evidence. Exhibits 3 and 4 are certificates issued by private parties, but they have not been proven by one who saw the writing executed, or by
evidence of the genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits 5, 6, 7, 8, 9, and 12 are photocopies, but their admission under the best evidence rule have not been demonstrated.
23. Exhibit 11 admissible as exception to hearsay ruleHerein, Exhibit 11 is admissible under a well-settled exception to the hearsay rule per Section 44 of Rule 130 of the Rules of Court, which provides that “(e)ntries in official records made in the performance of a duty by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined by law, are prima facie evidence of the facts therein stated.” Exhibit 11 is an original certificate of the Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade Noli C. Flores to the effect that “the vessel ‘VLASONS I’, was drydocked and PCG Inspectors were sent on board for inspection. After completion of drydocking and duly inspected by PCG Inspectors, the vessel ‘VLASONS I’, a cargo vessel, is in seaworthy condition, meets all requirements, fitted and equipped for trading as a cargo vessel was cleared by the Philippine Coast Guard and sailed for Cebu Port on July 10, 1974.” (sic) NSC’s Claim, therefore, is obviously misleading and erroneous.
24. Assailing genuineness of certificate of seaworthiness not sufficient proof of unseaworthinessNSC has the burden of proving that MV Vlasons I was not seaworthy. The vessel was a private carrier and, as such, it did not have the obligation of a common carrier to show that it was seaworthy. Indeed, NSC glaringly failed to discharge its duty of proving the willful negligence of VSI in making the ship seaworthy resulting in damage to its cargo. Assailing the genuineness of the certificate of seaworthiness is not sufficient proof that the vessel was not seaworthy.
25. Demurrage definedThe Court defined demurrage in its strict sense as the compensation provided for in the contract of affreightment for the detention of the vessel beyond the laytime or that period of time agreed on for loading and unloading of cargo. 40 It is given to compensate the shipowner for the nonuse of the vessel.
26. How laytime runsLaytime runs according to the particular clause of the charter party. If laytime is expressed in “running days,” this means days when the ship would be run continuously, and holidays are not excepted. A qualification of “weather permitting” excepts only those days when bad weather reasonably prevents the work contemplated.
27. Laytime for four days, and qualified as WWDSHINC, in present caseHerein, the contract of voyage charter hire provided for a four-day laytime; it also qualified laytime as WWDSHINC or weather working days Sundays and holidays included. The running of laytime was thus made subject to the weather, and would cease to run in the event unfavorable weather interfered with the unloading of cargo. Consequently, NSC may not be held liable for demurrage as the four-day laytime allowed it did not lapse, having been tolled by unfavorable weather condition in view of the WWDSHINC qualification agreed upon by the parties. Clearly, it was error for the trial court and the Court of Appeals to have found and affirmed respectively that NSC incurred 11 days of delay in unloading the cargo.
28. Attorney’s fees not justifiedWhile VSI was compelled to litigate to protect its rights, such fact by itself will not justify an award of attorney’s fees under Article 2208 of the Civil Code when “no sufficient showing of bad faith would be reflected in a party’s persistence in a case other than an erroneous conviction of the righteousness of his cause.” Moreover, attorney’s fees may not be awarded to a party for the reason alone that the judgment rendered was favorable to the latter, as this is tantamount to imposing a premium on one’s right to litigate or seek judicial redress of legitimate grievances.
KILUSANG MAYO UNO LABOR CENTER VS. GARCIA, JR., DEC 23, 1994
KAPUNAN, J.:
Public utilities are privately owned and operated businesses whose service are essential to the general public. They are enterprises which specially cater to the needs of the public and conduce to their comfort and convenience. As such, public utility services are impressed with public interest and concern. The same is true with respect to the business of common carrier which holds such a peculiar relation to the public interest that there is superinduced upon it the right of public regulation when private properties are affected with public interest, hence, they cease to be juris privati only. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect grants to the public an interest in that use, and must submit to the control by the public for the common good, to the extent of the interest he has thus created. 1
An abdication of the licensing and regulatory government agencies of their functions as the instant petition seeks to show, is indeed lamentable. Not only is it an unsound administrative policy but it is inimical to public trust and public interest as well.
The instant petition for certiorari assails the constitutionality and validity of certain memoranda, circulars and/or orders of the Department of Transportation and Communications (DOTC) and the Land Transportation Franchising and Regulatory Board LTFRB) 2 which, among others, (a)
authorize provincial bus and jeepney operators to increase or decrease the prescribed transportation fares without application therefor with the LTFRB and without hearing and approval thereof by said agency in violation of Sec. 16(c) of Commonwealth Act No. 146, as amended, otherwise known as the Public Service Act, and in derogation of LTFRB's duty to fix and determine just and reasonable fares by delegating that function to bus operators, and (b) establish a presumption of public need in favor of applicants for certificates of public convenience (CPC) and place on the oppositor the burden of proving that there is no need for the proposed service, in patent violation not only of Sec. 16(c) of CA 146, as amended, but also of Sec. 20(a) of the same Act mandating that fares should be "just and reasonable." It is, likewise, violative of the Rules of Court which places upon each party the burden to prove his own affirmative allegations. 3 The offending provisions contained in the questioned issuances pointed out by petitioner, have resulted in the introduction into our highways and thoroughfares thousands of old and smoke-belching buses, many of which are right-hand driven, and have exposed our consumers to the burden of spiraling costs of public transportation without hearing and due process.
The following memoranda, circulars and/or orders are sought to be nullified by the instant petition, viz: (a) DOTC Memorandum Order 90-395, dated June 26, 1990 relative to the implementation of a fare range scheme for provincial bus services in the country; (b) DOTC Department Order No.92-587, dated March 30, 1992, defining the policy framework on the regulation of transport services; (c) DOTC Memorandum dated October 8, 1992, laying down rules and procedures to implement Department Order No. 92-587; (d) LTFRB Memorandum Circular No. 92-009, providing implementing guidelines on the DOTC Department Order No. 92-587; and (e) LTFRB Order dated March 24, 1994 in Case No. 94-3112.
The relevant antecedents are as follows:
On June 26, 1990; then Secretary of DOTC, Oscar M. Orbos, issued Memorandum Circular No. 90-395 to then LTFRB Chairman, Remedios A.S. Fernando allowing provincial bus operators to charge passengers rates within a range of 15% above and 15% below the LTFRB official rate for a period of one (1) year. The text of the memorandum order reads in full:
One of the policy reforms and measures that is in line with the thrusts and the priorities set out in the Medium-Term Philippine Development Plan (MTPDP) 1987 — 1992) is the liberalization of regulations in the transport sector. Along this line, the Government intends to move away gradually from regulatory policies and make progress towards greater reliance on free market forces.
Based on several surveys and observations, bus companies are already charging passenger rates above and below the official fare declared by LTFRB on many provincial routes. It is in this context that some form of liberalization on public transport fares is to be tested on a pilot basis.
In view thereof, the LTFRB is hereby directed to immediately publicize a fare range scheme for all provincial bus routes in country (except those operating within Metro Manila). Transport Operators shall be allowed to charge passengers within a range of fifteen percent (15%) above and fifteen percent (15%) below the LTFRB official rate for a period of one year.
Guidelines and procedures for the said scheme shall be prepared by LTFRB in coordination with the DOTC Planning Service.
The implementation of the said fare range scheme shall start on 6 August 1990.
For compliance. (Emphasis ours.)
Finding the implementation of the fare range scheme "not legally feasible," Remedios A.S. Fernando submitted the following memorandum to Oscar M. Orbos on July 24, 1990, to wit:
With reference to DOTC Memorandum Order No. 90-395 dated 26 June 1990 which the LTFRB received on 19 July 1990, directing the Board "to immediately publicize a fare range scheme for all provincial bus routes in the country (except those operating within Metro Manila)" that will allow operators "to charge passengers within a range of fifteen percent (15%) above and fifteen percent (15%) below the LTFRB official rate for a period of one year" the undersigned is respectfully adverting the Secretary's attention to the following for his consideration:
1. Section 16(c) of the Public Service Act prescribes the following for the fixing and determination of rates — (a) the rates to be approved should be proposed by public service operators; (b) there should be a publication and notice to concerned or affected parties in the territory affected; (c) a public hearing should be held for the fixing of the rates; hence, implementation of the proposed fare range scheme on August 6 without complying with the requirements of the Public Service Act may not be legally feasible.
2. To allow bus operators in the country to charge fares fifteen (15%) above the present LTFRB fares in the wake of the devastation, death and suffering caused by the July 16 earthquake will not be socially warranted and will be politically unsound; most likely public criticism against the DOTC and the LTFRB will be triggered by the untimely motu propio implementation of the proposal by the mere expedient of publicizing the fare range scheme without calling a public hearing, which scheme many as early as during the Secretary's predecessor know through newspaper reports and columnists' comments to be Asian Development Bank and World Bank inspired.
3. More than inducing a reduction in bus fares by fifteen percent (15%) the implementation of the proposal will instead trigger an upward adjustment in bus fares by fifteen percent (15%) at a time when hundreds of thousands of people in Central and Northern Luzon, particularly in Central Pangasinan, La Union, Baguio City, Nueva Ecija, and the Cagayan Valley are suffering from the devastation and havoc caused by the recent earthquake.
4. In lieu of the said proposal, the DOTC with its agencies involved in public transportation can consider measures and reforms in the industry that will be socially uplifting, especially for the people in the areas devastated by the recent earthquake.
In view of the foregoing considerations, the undersigned respectfully suggests that the implementation of the proposed fare range scheme this year be further studied and evaluated.
On December 5, 1990, private respondent Provincial Bus Operators Association of the Philippines, Inc. (PBOAP) filed an application for fare rate increase. An across-the-board increase of eight and a half centavos (P0.085) per kilometer for all types of provincial buses with a minimum-maximum fare range of fifteen (15%) percent over and below the proposed basic per kilometer fare rate, with the said minimum-maximum fare range applying only to ordinary, first class and premium class buses and a fifty-centavo (P0.50) minimum per kilometer fare for aircon buses, was sought.
On December 6, 1990, private respondent PBOAP reduced its applied proposed fare to an across-the-board increase of six and a half (P0.065) centavos per kilometer for ordinary buses. The decrease was due to the drop in the expected price of diesel.
The application was opposed by the Philippine Consumers Foundation, Inc. and Perla C. Bautista alleging that the proposed rates were exorbitant and unreasonable and that the application contained no allegation on the rate of return of the proposed increase in rates.
On December 14, 1990, public respondent LTFRB rendered a decision granting the fare rate increase in accordance with the following schedule of fares on a straight computation method, viz:
AUTHORIZED FARES
LUZONMIN. OF 5 KMS. SUCCEEDING KM.
REGULAR P1.50 P0.37STUDENT P1.15 P0.28
VISAYAS/MINDANAO
REGULAR P1.60 P0.375STUDENT P1.20 P0.285FIRST CLASS (PER KM.)LUZON P0.385VISAYAS/MINDANAO P0.395PREMIERE CLASS (PER KM.)LUZON P0.395VISAYAS/MINDANAO P0.405
AIRCON (PER KM.) P0.415. 4
On March 30, 1992, then Secretary of the Department of Transportation and Communications Pete Nicomedes Prado issued Department Order No.92-587 defining the policy framework on the regulation of transport services. The full text of the said order is reproduced below in view of the importance of the provisions contained therein:
WHEREAS, Executive Order No. 125 as amended, designates the Department of Transportation and Communications (DOTC) as the primary policy, planning, regulating and implementing agency on transportation;
WHEREAS, to achieve the objective of a viable, efficient, and dependable transportation system, the transportation regulatory agencies under or attached to the DOTC have to harmonize their decisions and adopt a common philosophy and direction;
WHEREAS, the government proposes to build on the successful liberalization measures pursued over the last five years and bring the transport sector nearer to a balanced longer term regulatory framework;
NOW, THEREFORE, pursuant to the powers granted by laws to the DOTC, the following policies and principles in the economic regulation of land, air, and water transportation services are hereby adopted:
1. Entry into and exit out of the industry. Following the Constitutional dictum against monopoly, no franchise holder shall be permitted to maintain a monopoly on any route. A minimum of two franchise holders shall be permitted to operate on any route.
The requirements to grant a certificate to operate, or certificate of public convenience, shall be: proof of Filipino citizenship, financial capability, public need, and sufficient insurance cover to protect the riding public.
In determining public need, the presumption of need for a service shall be deemed in favor of the applicant. The burden of proving that there is no need for a proposed service shall be with the oppositor(s).
In the interest of providing efficient public transport services, the use of the "prior operator" and the "priority of filing" rules shall be discontinued. The route measured capacity test or other similar tests of demand for vehicle/vessel fleet on any route shall be used only as a guide in weighing the merits of each franchise application and not as a limit to the services offered.
Where there are limitations in facilities, such as congested road space in urban areas, or at airports and ports, the use of demand management measures in conformity with market principles may be considered.
The right of an operator to leave the industry is recognized as a business decision, subject only to the filing of appropriate notice and following a phase-out period, to inform the public and to minimize disruption of services.
2. Rate and Fare Setting. Freight rates shall be freed gradually from government controls. Passenger fares shall also be deregulated, except for the lowest class of passenger service (normally third class passenger transport) for which the government will fix indicative or reference fares. Operators of particular services may fix their own fares within a range 15% above and below the indicative or reference rate.
Where there is lack of effective competition for services, or on specific routes, or for the transport of particular commodities, maximum mandatory freight rates or passenger fares shall be set temporarily by the government pending actions to increase the level of competition.
For unserved or single operator routes, the government shall contract such services in the most advantageous terms to the public and the government, following public bids for the services. The advisability of bidding out the services or using other kinds of incentives on such routes shall be studied by the government.
3. Special Incentives and Financing for Fleet Acquisition. As a matter of policy, the government shall not engage in special financing and incentive programs, including direct subsidies for fleet acquisition and expansion. Only when the market situation warrants government intervention shall programs of this type be considered. Existing programs shall be phased out gradually.
The Land Transportation Franchising and Regulatory Board, the Civil Aeronautics Board, the Maritime Industry Authority are hereby directed to submit to the Office of the Secretary, within forty-five (45) days of this Order, the detailed rules and procedures for the Implementation of the policies herein set forth. In the formulation of such rules, the concerned agencies shall be guided by the most recent studies on the subjects, such as the Provincial Road Passenger Transport Study, the Civil Aviation Master Plan, the Presidential Task Force on the Inter-island Shipping Industry, and the Inter-island Liner Shipping Rate Rationalization Study.
For the compliance of all concerned. (Emphasis ours)
On October 8, 1992, public respondent Secretary of the Department of Transportation and Communications Jesus B. Garcia, Jr. issued a memorandum to the Acting Chairman of the LTFRB suggesting swift action on the adoption of rules and procedures to implement above-quoted Department Order No. 92-587 that laid down deregulation and other liberalization policies for the transport sector. Attached to the said memorandum was a revised draft of the required rules and procedures covering (i) Entry Into and Exit Out of the Industry and (ii) Rate and Fare Setting, with comments and suggestions from the World Bank incorporated therein. Likewise, resplendent from the said memorandum is the statement of the DOTC Secretary that the adoption of the rules and procedures is a pre-requisite to the approval of the Economic Integration Loan from the World Bank. 5
On February 17, 1993, the LTFRB issued Memorandum CircularNo. 92-009 promulgating the guidelines for the implementation of DOTC Department Order No. 92-587. The Circular provides, among others, the following challenged portions:
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IV. Policy Guidelines on the Issuance of Certificate of Public Convenience.
The issuance of a Certificate of Public Convenience is determined by public need. The presumption of public need for a service shall be deemed in favor of the applicant, while burden of proving that there is no need for the proposed service shall be the oppositor'(s).
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V. Rate and Fare Setting
The control in pricing shall be liberalized to introduce price competition complementary with the quality of service, subject to prior notice and public hearing. Fares shall not be provisionally authorized without public hearing.
A. On the General Structure of Rates
1. The existing authorized fare range system of plus or minus 15 per cent for provincial buses and jeepneys shall be widened to 20% and -25% limit in 1994 with the authorized fare to be replaced by an indicative or reference rate as the basis for the expanded fare range.
2. Fare systems for aircon buses are liberalized to cover first class and premier services.
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(Emphasis ours).
Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation policy of the DOTC allowing provincial bus operators to collect plus 20% and minus 25% of the prescribed fare without first having filed a petition for the purpose and without the benefit of a public hearing, announced a fare increase of twenty (20%) percent of the existing fares. Said increased fares were to be made effective on March 16, 1994.
On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of bus fares.
On March 24, 1994, the LTFRB issued one of the assailed orders dismissing the petition for lack of merit. The dispositive portion reads:
PREMISES CONSIDERED, this Board after considering the arguments of the parties, hereby DISMISSES FOR LACK OF MERIT the petition filed in the above-entitled case. This petition in this case was resolved with dispatch at the request of petitioner to enable it to immediately avail of the legal remedies or options it is entitled under existing laws.
SO ORDERED. 6
Hence, the instant petition for certiorari with an urgent prayer for issuance of a temporary restraining order.
The Court, on June 20, 1994, issued a temporary restraining order enjoining, prohibiting and preventing respondents from implementing the bus fare rate increase as well as the questioned orders and memorandum circulars. This meant that provincial bus fares were rolled back to the levels duly authorized by the LTFRB prior to March 16, 1994. A moratorium was likewise enforced on the issuance of franchises for the operation of buses, jeepneys, and taxicabs.
Petitioner KMU anchors its claim on two (2) grounds. First, the authority given by respondent LTFRB to provincial bus operators to set a fare range of plus or minus fifteen (15%) percent, later increased to plus twenty (20%) and minus twenty-five (-25%) percent, over and above the existing authorized fare without having to file a petition for the purpose, is unconstitutional, invalid and illegal. Second, the establishment of a presumption of public need in favor of an applicant for a proposed transport service without having to prove public necessity, is illegal for being violative of the Public Service Act and the Rules of Court.
In its Comment, private respondent PBOAP, while not actually touching upon the issues raised by the petitioner, questions the wisdom and the manner by which the instant petition was filed. It asserts that the petitioner has no legal standing to sue or has no real interest in the case at bench and in obtaining the reliefs prayed for.
In their Comment filed by the Office of the Solicitor General, public respondents DOTC Secretary Jesus B. Garcia, Jr. and the LTFRB asseverate that the petitioner does not have the standing to maintain the instant suit. They further claim that it is within DOTC and LTFRB's authority to set a fare range scheme and establish a presumption of public need in applications for certificates of public convenience.
We find the instant petition impressed with merit.
At the outset, the threshold issue of locus standi must be struck. Petitioner KMU has the standing to sue.
The requirement of locus standi inheres from the definition of judicial power. Section 1 of Article VIII of the Constitution provides:
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Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.
In Lamb v. Phipps, 7 we ruled that judicial power is the power to hear and decide causes pending between parties who have the right to sue in the courts of law and equity. Corollary to this provision is the principle of locus standi of a party litigant. One who is directly affected by and whose interest is immediate and substantial in the controversy has the standing to sue. The rule therefore requires that a party must show a personal stake in the outcome of the case or an injury to himself that can be redressed by a favorable decision so as to warrant an invocation of the court's jurisdiction and to justify the exercise of the court's remedial powers in his behalf. 8
In the case at bench, petitioner, whose members had suffered and continue to suffer grave and irreparable injury and damage from the implementation of the questioned memoranda, circulars and/or orders, has shown that it has a clear legal right that was violated and continues to be violated with the enforcement of the challenged memoranda, circulars and/or orders. KMU members, who avail of the use of buses, trains and jeepneys everyday, are directly affected by the burdensome cost of arbitrary increase in passenger fares. They are part of the millions of commuters who comprise the riding public. Certainly, their rights must be protected, not neglected nor ignored.
Assuming arguendo that petitioner is not possessed of the standing to sue, this court is ready to brush aside this barren procedural infirmity and recognize the legal standing of the petitioner in view of the transcendental importance of the issues raised. And this act of liberality is not without judicial precedent. As early as the Emergency Powers Cases, this Court had exercised its discretion and waived the requirement of proper party. In the recent case of Kilosbayan, Inc., et al. v. Teofisto Guingona, Jr., et al., 9 we ruled in the same lines and enumerated some of the cases where the same policy was adopted, viz:
. . . A party's standing before this Court is a procedural technicality which it may, in the exercise of its discretion, set aside in view of the importance of the issues raised. In the landmark Emergency Powers Cases, [G.R. No. L-2044 (Araneta v. Dinglasan); G.R. No. L-2756 (Aranetav. Angeles); G.R. No. L-3054 (Rodriguez v. Tesorero de Filipinas); G.R. No. L-3055 (Guerrero v. Commissioner of Customs); and G.R. No. L-3056 (Barredo v. Commission on Elections), 84 Phil. 368 (1949)], this Court brushed aside this technicality because "the transcendental importance to the public of these cases demands that they be settled promptly and definitely, brushing aside, if we must, technicalities of procedure. (Avelino vs. Cuenco, G.R. No. L-2621)." Insofar as taxpayers' suits are concerned, this Court had declared that it "is not devoid of discretion as to whether or not it should be entertained," (Tan v. Macapagal, 43 SCRA 677, 680 [1972]) or that it "enjoys an open discretion to entertain the same or not." [Sanidad v. COMELEC, 73 SCRA 333 (1976)].
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In line with the liberal policy of this Court on locus standi, ordinary taxpayers, members of Congress, and even association of planters, andnon-profit civic organizations were allowed to initiate and prosecute actions before this court to question the constitutionality or validity of laws, acts, decisions, rulings, or orders of various government agencies or instrumentalities. Among such cases were those assailing the constitutionality of (a) R.A. No. 3836 insofar as it allows retirement gratuity and commutation of vacation and sick leave to Senators and Representatives and to elective officials of both Houses of Congress (Philippine Constitution Association, Inc. v. Gimenez, 15 SCRA 479 [1965]); (b) Executive Order No. 284, issued by President Corazon C. Aquino on 25 July 1987, which allowed members of the cabinet, their undersecretaries, and assistant secretaries to hold other government offices or positions (Civil Liberties Union v. Executive Secretary, 194 SCRA 317 [1991]); (c) the automatic appropriation for debt service in the General Appropriations Act (Guingona v. Carague, 196 SCRA 221 [1991]; (d) R.A. No. 7056 on the holding of desynchronized elections (Osmeña v. Commission on Elections, 199 SCRA 750 [1991]); (e) P.D. No. 1869 (the charter of the Philippine Amusement and Gaming Corporation) on the ground that it is contrary to morals, public policy, and order (Basco v. Philippine Amusement and Gaming Corp., 197 SCRA 52 [1991]); and (f) R.A. No. 6975, establishing the Philippine National Police. (Carpio v. Executive Secretary, 206 SCRA 290 [1992]).
Other cases where we have followed a liberal policy regarding locus standi include those attacking the validity or legality of (a) an order allowing the importation of rice in the light of the prohibition imposed by R.A. No. 3452 (Iloilo Palay and Corn Planters Association, Inc. v. Feliciano, 13 SCRA 377 [1965]; (b) P.D. Nos. 991 and 1033 insofar as they proposed amendments to the Constitution and P.D. No. 1031 insofar as it directed the COMELEC to supervise, control, hold, and conduct the referendum-plebiscite on 16 October 1976 (Sanidad v. Commission on Elections, supra); (c) the bidding for the sale of the 3,179 square meters of land at Roppongi, Minato-ku, Tokyo, Japan (Laurel v. Garcia, 187 SCRA 797 [1990]); (d) the approval without hearing by the Board of Investments of the amended application of the Bataan Petrochemical Corporation to transfer the site of its plant from Bataan to Batangas and the validity of such transfer and the shift of feedstock from naphtha only to naphtha and/or liquefied petroleum gas (Garcia v. Board of Investments, 177 SCRA 374 [1989]; Garcia v. Board of Investments, 191 SCRA 288 [1990]); (e) the decisions, orders, rulings, and resolutions of the Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue, Commissioner of Customs, and the Fiscal Incentives Review Board exempting the National Power Corporation from indirect tax and duties (Maceda v. Macaraig, 197 SCRA 771 [1991]); (f) the orders of the Energy Regulatory Board of 5 and 6 December 1990 on the ground that the hearings conducted on the second provisional increase in oil prices did not allow the petitioner substantial cross-examination; (Maceda v. Energy Regulatory Board, 199 SCRA 454 [1991]); (g) Executive Order No. 478 which levied a special duty of P0.95 per liter of imported oil products (Garcia v. Executive Secretary, 211 SCRA 219 [1992]); (h) resolutions of the Commission on Elections concerning the apportionment, by district, of the number of elective members of Sanggunians (De Guia vs. Commission on Elections, 208 SCRA 420 [1992]); and (i) memorandum orders issued by a Mayor affecting the Chief of Police of Pasay City (Pasay Law and Conscience Union, Inc. v. Cuneta, 101 SCRA 662 [1980]).
In the 1975 case of Aquino v. Commission on Elections (62 SCRA 275 [1975]), this Court, despite its unequivocal ruling that the petitioners therein had no personality to file the petition, resolved nevertheless to pass upon the issues raised because of the far-reaching implications of the petition. We did no less in De Guia v. COMELEC (Supra) where, although we declared that De Guia "does not appear to have locus standi, a standing in law, a personal or substantial interest," we brushed aside the procedural infirmity "considering the importance of the issue involved, concerning as it does the political exercise of qualified voters affected by the apportionment, and petitioner alleging abuse of discretion and violation of the Constitution by respondent."
Now on the merits of the case.
On the fare range scheme.
Section 16(c) of the Public Service Act, as amended, reads:
Sec. 16. Proceedings of the Commission, upon notice and hearing. — The Commission shall have power, upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations and exceptions mentioned and saving provisions to the contrary:
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(c) To fix and determine individual or joint rates, tolls, charges, classifications, or schedules thereof, as well as commutation, mileage kilometrage, and other special rates which shall be imposed, observed, and followed thereafter by any public service: Provided, That the Commission may, in its discretion, approve rates proposed by public services provisionally and without necessity of any hearing; but it shall call a hearing thereon within thirty days thereafter, upon publication and notice to the concerns operating in the territory affected: Provided, further, That in case the public service equipment of an operator is used principally or secondarily for the promotion of a private business, the net profits of said private business shall be considered in relation with the public service of such operator for the purpose of fixing the rates. (Emphasis ours).
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Under the foregoing provision, the Legislature delegated to the defunct Public Service Commission the power of fixing the rates of public services. Respondent LTFRB, the existing regulatory body today, is likewise vested with the same under Executive Order No. 202 dated June 19, 1987. Section 5(c) of the said executive order authorizes LTFRB "to determine, prescribe, approve and periodically review and adjust, reasonable fares, rates and other related charges, relative to the operation of public land transportation services provided by motorized vehicles."
Such delegation of legislative power to an administrative agency is permitted in order to adapt to the increasing complexity of modern life. As subjects for governmental regulation multiply, so does the difficulty of administering the laws. Hence, specialization even in legislation has become necessary. Given the task of determining sensitive and delicate matters asroute-fixing and rate-making for the transport sector, the responsible regulatory body is entrusted with the power of subordinate legislation. With this authority, an administrative body and in this case, the LTFRB, may implement broad policies laid down in a statute by "filling in" the details which the Legislature may neither have time or competence to provide. However, nowhere under the aforesaid provisions of law are the regulatory bodies, the PSC and LTFRB alike, authorized to delegate that power to a common carrier, a transport operator, or other public service.
In the case at bench, the authority given by the LTFRB to the provincial bus operators to set a fare range over and above the authorized existing fare, is illegal and invalid as it is tantamount to an undue delegation of legislative authority. Potestas delegata non delegari potest. What has been delegated cannot be delegated. This doctrine is based on the ethical principle that such a delegated power constitutes not only a right but a duty to be performed by the delegate through the instrumentality of his own judgment and not through the intervening mind of another. 10 A further delegation of such power would indeed constitute a negation of the duty in violation of the trust reposed in the delegate mandated to discharge it directly. 11 The policy of allowing the provincial bus operators to change and increase their fares at will would result not only to a chaotic situation but to an anarchic state of affairs. This would leave the riding public at the mercy of transport operators who may increase fares every hour, every day, every month or every year, whenever it pleases them or whenever they deem it "necessary" to do so. In Panay Autobus Co. v. Philippine Railway Co., 12 where respondent Philippine Railway Co. was granted by the Public Service Commission the authority to change its freight rates at will, this Court categorically declared that:
In our opinion, the Public Service Commission was not authorized by law to delegate to the Philippine Railway Co. the power of altering its freight rates whenever it should find it necessary to do so in order to meet the competition of road trucks and autobuses, or to change its freight rates at will, or to regard its present rates as maximum rates, and to fix lower rates whenever in the opinion of the Philippine Railway Co. it would be to its advantage to do so.
The mere recital of the language of the application of the Philippine Railway Co. is enough to show that it is untenable. The Legislature has delegated to the Public Service Commission the power of fixing the rates of public services, but it has not authorized the Public Service Commission to delegate that power to a common carrier or other public service. The rates of public services like the Philippine Railway Co. have been approved or fixed by the Public Service Commission, and any change in such rates must be authorized or approved by the Public Service Commission after they have been shown to be just and reasonable. The public service may, of course, propose new rates, as the Philippine Railway Co. did in case No. 31827, but it cannot lawfully make said new rates effective without the approval of the Public Service Commission, and the Public Service Commission itself cannot authorize a public service to enforce new rates without the prior approval of said rates by the commission. The commission must approve new rates when they are submitted to it, if the evidence shows them to be just and reasonable, otherwise it must disapprove them. Clearly, the commission cannot determine in advance whether or not the new rates of the Philippine Railway Co. will be just and reasonable, because it does not know what those rates will be.
In the present case the Philippine Railway Co. in effect asked for permission to change its freight rates at will. It may change them every day or every hour, whenever it deems it necessary to do so in order to meet competition or whenever in its opinion it would be to its advantage. Such a procedure would create a most unsatisfactory state of affairs and largely defeat the purposes of the public service law. 13 (Emphasis ours).
One veritable consequence of the deregulation of transport fares is a compounded fare. If transport operators will be authorized to impose and collect an additional amount equivalent to 20% over and above the authorized fare over a period of time, this will unduly prejudice a commuter who will be made to pay a fare that has been computed in a manner similar to those of compounded bank interest rates.
Picture this situation. On December 14, 1990, the LTFRB authorized provincial bus operators to collect a thirty-seven (P0.37) centavo per kilometer fare for ordinary buses. At the same time, they were allowed to impose and collect a fare range of plus or minus 15% over the authorized rate. Thus P0.37 centavo per kilometer authorized fare plus P0.05 centavos (which is 15% of P0.37 centavos) is equivalent to P0.42 centavos, the allowed rate in 1990. Supposing the LTFRB grants another five (P0.05) centavo increase per kilometer in 1994, then, the base or reference for computation would have to be P0.47 centavos (which is P0.42 + P0.05 centavos). If bus operators will exercise their authority to impose an additional 20% over and above the authorized fare, then the fare to be collected shall amount to P0.56 (that is, P0.47 authorized LTFRB rate plus 20% of P0.47 which is P0.29). In effect, commuters will be continuously subjected, not only to a double fare adjustment but to a compounding fare as well. On their part, transport operators shall enjoy a bigger chunk of the pie. Aside from fare increase applied for, they can still collect an additional amount by virtue of the authorized fare range. Mathematically, the situation translates into the following:
Year** LTFRB authorized Fare Range Fare to berate*** collected perkilometer
1990 P0.37 15% (P0.05) P0.421994 P0.42 + 0.05 = 0.47 20% (P0.09) P0.561998 P0.56 + 0.05 = 0.61 20% (P0.12) P0.732002 P0.73 + 0.05 = 0.78 20% (P0.16) P0.94
Moreover, rate making or rate fixing is not an easy task. It is a delicate and sensitive government function that requires dexterity of judgment and sound discretion with the settled goal of arriving at a just and reasonable rate acceptable to both the public utility and the public. Several factors, in fact, have to be taken into consideration before a balance could be achieved. A rate should not be confiscatory as would place an operator in a situation where he will continue to operate at a loss. Hence, the rate should enable public utilities to generate revenues sufficient to cover operational costs and provide reasonable return on the investments. On the other hand, a rate which is too high becomes discriminatory. It is contrary to public interest. A rate, therefore, must be reasonable and fair and must be affordable to the end user who will utilize the services.
Given the complexity of the nature of the function of rate-fixing and its far-reaching effects on millions of commuters, government must not relinquish this important function in favor of those who would benefit and profit from the industry. Neither should the requisite notice and hearing be done away with. The people, represented by reputable oppositors, deserve to be given full opportunity to be heard in their opposition to any fare increase.
The present administrative procedure, 14 to our mind, already mirrors an orderly and satisfactory arrangement for all parties involved. To do away with such a procedure and allow just one party, an interested party at that, to determine what the rate should be, will undermine the right of the other parties to due process. The purpose of a hearing is precisely to determine what a just and reasonable rate is. 15 Discarding such procedural and constitutional right is certainly inimical to our fundamental law and to public interest.
On the presumption of public need.
A certificate of public convenience (CPC) is an authorization granted by the LTFRB for the operation of land transportation services for public use as required by law. Pursuant to Section 16(a) of the Public Service Act, as amended, the following requirements must be met before a CPC may be granted, to wit: (i) the applicant must be a citizen of the Philippines, or a corporation or co-partnership, association or joint-stock company constituted and organized under the laws of the Philippines, at least 60 per centum of its stock or paid-up capital must belong entirely to citizens of the Philippines; (ii) the applicant must be financially capable of undertaking the proposed service and meeting the responsibilities incident to its operation; and (iii) the applicant must prove that the operation of the public service proposed and the authorization to do business will promote the public interest in a proper and suitable manner. It is understood that there must be proper notice and hearing before the PSC can exercise its power to issue a CPC.
While adopting in toto the foregoing requisites for the issuance of a CPC, LTFRB Memorandum Circular No. 92-009, Part IV, provides for yet incongruous and contradictory policy guideline on the issuance of a CPC. The guidelines states:
The issuance of a Certificate of Public Convenience is determined by public need. The presumption of public need for a service shall be deemed in favor of the applicant, while the burden of proving that there is no need for the proposed service shall be the oppositor's. (Emphasis ours).
The above-quoted provision is entirely incompatible and inconsistent with Section 16(c)(iii) of the Public Service Act which requires that before a CPC will be issued, the applicant must prove by proper notice and hearing that the operation of the public service proposed will promote public interest in a proper and suitable manner. On the contrary, the policy guideline states that the presumption of public need for a public service shall be deemed in favor of the applicant. In case of conflict between a statute and an administrative order, the former must prevail.
By its terms, public convenience or necessity generally means something fitting or suited to the public need. 16 As one of the basic requirements for the grant of a CPC, public convenience and necessity exists when the proposed facility or service meets a reasonable want of the public and supply a need which the existing facilities do not adequately supply. The existence ornon-existence of public convenience and necessity is therefore a question of fact that must be established by evidence, real and/or testimonial; empirical data; statistics and such other means necessary, in a public hearing conducted for that purpose. The object and purpose of such procedure, among other things, is to look out for, and protect, the interests of both the public and the existing transport operators.
Verily, the power of a regulatory body to issue a CPC is founded on the condition that after full-dress hearing and investigation, it shall find, as a fact, that the proposed operation is for the convenience of the public. 17 Basic convenience is the primary consideration for which a CPC is issued, and that fact alone must be consistently borne in mind. Also, existing operators in subject routes must be given an opportunity to offer proof and oppose the application. Therefore, an applicant must, at all times, be required to prove his capacity and capability to furnish the service which he has undertaken torender. 18 And all this will be possible only if a public hearing were conducted for that purpose.
Otherwise stated, the establishment of public need in favor of an applicant reverses well-settled and institutionalized judicial, quasi-judicial and administrative procedures. It allows the party who initiates the proceedings to prove, by mere application, his affirmative allegations. Moreover, the offending provisions of the LTFRB memorandum circular in question would in effect amend the Rules of Court by adding another disputable presumption in the enumeration of 37 presumptions under Rule 131, Section 5 of the Rules of Court. Such usurpation of this Court's authority cannot be countenanced as only this Court is mandated by law to promulgate rules concerning pleading, practice and procedure. 19
Deregulation, while it may be ideal in certain situations, may not be ideal at all in our country given the present circumstances. Advocacy of liberalized franchising and regulatory process is tantamount to an abdication by the government of its inherent right to exercise police power, that is, the right of government to regulate public utilities for protection of the public and the utilities themselves.
While we recognize the authority of the DOTC and the LTFRB to issue administrative orders to regulate the transport sector, we find that they committed grave abuse of discretion in issuing DOTC Department OrderNo. 92-587 defining the policy framework on the regulation of transport services and LTFRB Memorandum Circular No. 92-009 promulgating the implementing guidelines on DOTC Department Order No. 92-587, the said administrative issuances being amendatory and violative of the Public Service Act and the Rules of Court. Consequently, we rule that the twenty (20%) per centum fare increase imposed by respondent PBOAP on March 16, 1994 without the benefit of a petition and a public hearing is null and void and of no force and effect. No grave abuse of discretion however was committed in the issuance of DOTC Memorandum Order No. 90-395 and DOTC Memorandum dated October 8, 1992, the same being merely internal communications between administrative officers.
WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED and the challenged administrative issuances and orders, namely: DOTC Department Order No. 92-587, LTFRB Memorandum CircularNo. 92-009, and the order dated March 24, 1994 issued by respondent LTFRB are hereby DECLARED contrary to law and invalid insofar as they affect provisions therein (a) delegating to provincial bus and jeepney operators the authority to increase or decrease the duly prescribed transportation fares; and (b) creating a presumption of public need for a service in favor of the applicant for a certificate of public convenience and placing the burden of proving that there is no need for the proposed service to the oppositor.
The Temporary Restraining Order issued on June 20, 1994 is hereby MADE PERMANENT insofar as it enjoined the bus fare rate increase granted under the provisions of the aforementioned administrative circulars, memoranda and/or orders declared invalid.
No pronouncement as to costs.
SO ORDERED.
TATAD VS. GARCIA, JR, APRIL 6, 1995
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
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.
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 ten foreign and domestic corporations: namely, Kaiser 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).
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 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 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:
(1) 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;
(2) THE BUILD-LEASE-TRANSFER SCHEME PROVIDED IN THE AGREEMENTS IS NOT DEFINED NOR RECOGNIZED IN R.A. NO. 6957 OR ITS IMPLEMENTING RULES AND REGULATIONS AND, HENCE, IS ILLEGAL;
(3) THE AWARD OF THE CONTRACT ON A NEGOTIATED BASIS VIOLATES R; A. NO. 6957 AND, HENCE, IS UNLAWFUL;
(4) 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;
(5) THE AGREEMENTS VIOLATE EXECUTIVE ORDER NO 380 FOR THEIR FAILURE TO BEAR PRESIDENTIAL APPROVAL AND, HENCE, ARE ILLEGAL AND INEFFECTIVE; AND
(6) THE AGREEMENTS ARE GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT (Rollo, pp. 15-16).
Secretary Garcia and private respondent filed their comments separately and claimed that:
(1) Petitioners are not the real parties-in-interest and have no legal standing to institute the present petition;
(2) The writ of prohibition is not the proper remedy and the petition requires ascertainment of facts;
(3) The scheme adopted in the Agreements is actually a build-transfer scheme allowed by the BOT Law;
(4) The nationality requirement for public utilities mandated by the Constitution does not apply to private respondent;
(5) The Agreements executed by and between respondents have been approved by President Ramos and are not disadvantageous to the government;
(6) The award of the contract to private respondent through negotiation and not public bidding is allowed by the BOT Law; and
(7) 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.
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:
(1) 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;
(2) the Build-Lease-Transfer (BLT) scheme provided in the agreements is not the BOT or BT Scheme under the law;
(3) 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
(4) the agreements are grossly disadvantageous to the government.
1. 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, 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 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 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 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]).
2. 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:
(a) 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 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.
(b) 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 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 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 bythe National Economic Council which are financed by or through foreign funds; . . . .
3. 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 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 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.
(a) 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.
(b) 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.
(c) If, after prequalification of more than one contractor only one submits a bid which is found by the agency/LGU to be complying.
(d) 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).
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].
4. 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]).
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.
5. 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
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Sat 2 Oct 2004
Transportation Law: Yu Con vs. Ipil (GR 10195, 29 December 1916)
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Yu Con vs. Ipil (GR 10195, 29 December 1916)En Banc, Araullo (J): 4 concur
Facts: Yu Con, a merchant and a resident of the town of San Nicolas, of the city of Cebu, engaged in the sale of cloth and domestic articles and having a share in a shop, or small store, situated in the town of Catmon, of said province, had several times chartered from Narciso Lauron, a banca named Maria belonging to the latter, of which Glicerio Ipil was master and Justo Solamo, supercargo, for the transportation of certain merchandise and some money to and from the said town and the port of Cebu. On 17 October, 1911 Yu Con chartered the said banca from Lauron for the transportation of various merchandise from the port of Cebu to Catmon, at the price of P45 for the round trip, which merchandise was loaded on board the said craft which was then at anchor in front of one of the graded fills of the wharf of said port. In the afternoon of the following day, he delivered to the other two defendants, Ipil, and Solamo, master and supercargo, respectively, of the banca, the sum of P450, which was in a trunk belonging to Yu Con and was taken charge of by Ipil and Solamo, who received this money from Yu Con, for the purpose of its delivery to the latter’s shop in Catmon for the purchase of corn in this town. While the money was still in said trunk aboard the vessel, on the night of 18 October, the time scheduled for the departure of the Maria from the port of Cebu, said master and said supercargo transferred the P450 from Yu Con’s trunk, where it was, to theirs, which was in a stateroom of the banca, from which stateroom both the trunk and the money disappeared during that same night, and that the investigations, made to ascertain their whereabouts, produced no result.
Yu Con brought action to enable him to recover from Ipil, Lauron, and Solamo in solidum the sum of P450 lost. Yu Conbased his action on the charge that the disappearance of said sum was due to the abandonment, negligence, or voluntary breach, on the part of the defendants, of the duty they had in respect to the safe-keeping of said sum.
At the termination of the trial, the court, held that the sole cause of the disappearance of the money from the said banca was the negligence of the master and the supercargo, Ipil and Solamo, respectively, and that Lauron was responsible for that negligence, as owner of the banca, pursuant to articles 586, 587, and 618 of the Code of Commerce, Yu Con therefore being entitled to recover the amount lost. Judgment was rendered on 20 April 1914, in favor of Yu Con and against Ipil, et. al. jointly and severally for the sum of P450, with interest thereon at the rate of 6% per annum from the date of filing of the complaint, 24 October 1911, with costs. Yu Con was absolved from the counterclaim. From this judgment Ipil, et. al. excepted and at the same time moved for a new trial. Their motion was denied, to which ruling they also excepted, and, through the proper bill of exceptions, entered an appeal to the Supreme Court.
The Supreme Court affirmed the judgment appealed from, with the costs of this instance against Ipil, et. al.
1. Master and supercargo gave no satisfactory explanation in regard disappearance of trunk and moneyThe master and the supercargo, gave no satisfactory explanation in regard to the disappearance of the trunk and the money therein contained, from the stateroom in which the trunk was, nor as to who stole or might have stolen it. The master and the supercargo of the banca merely testified that they did not know who the robbers were, for, when the robbery was committed, they were sound asleep, as they were tired, and that he believed that the guard Simeon also fell asleep because he, too, was tired. Both of them testified that the small window of the stateroom had been broken, and the first of them, i. e., the master, stated that all the window-blinds had been removed from the windows, as well as part of the partition in which they were and that the trunk in which the money was contained could have been passed through said small window, because the Chinaman’s trunk, which differed but a little from the one stolen, could be passed through the same opening. However, no evidence whatever was offered to prove that it might have been possible to remove the trunk from the stateroom through the opening made by the breaking of the small window, neither was the size of the trunk proven, so that it might be verified whether the statement made by the latter was true, viz., that it might have been possible to remove from the stateroom through said opening the trunk in which the P450 were contained, which sum, the same as the trunk, its container, had not been found, in spite of the investigation made for the purpose. Furthermore, it was not proven, nor is there any circumstantial evidence to show, that the robbery in question was committed by persons not belonging to the craft.
2. Loss occurred through manifest fault and negligence of Ipil, et. al.; No force majeureThe loss or disappearance of the property of Yu Con, which, were in the possession of Ipil and Solamo, the master and the supercargo of the banca Maria, occurred through the manifest fault and negligence of the latter, for, not only did they fail to take the necessary precautions in order that the stateroom containing the trunk in which they kept the money should be properly guarded by members of the crew and put in such condition that it would be impossible to steal the trunk from it or that persons not belonging to the vessel might force an entrance into the stateroom from the outside, but also they did not expressly station some person inside the stateroom for the guarding and safe-keeping of the trunk, for it was not proven that the cabin-boy Gabriel slept there, nor that the other cabin-boy, Simeon Solamo, was on guard that night. On the contrary, it was proven that all the people on the vessel slept soundly that night; which fact cannot, in any manner, serve them as an excuse, nor can it be accepted as an explanation of the statement that they were not aware of what was then occurring on board. If the trunk was actually stolen by outsiders and removed through the small window of the stateroom, a detail which also was not proven, but, on the contrary, increases their liability, because it is very strange that none of them who were six and were around or near the stateroom, should have heard the noise which the robbers must have made in breaking its window. All of these circumstances, together with that of its having been impossible to know who took the trunk and the money and the failure to recover the one or the other, make the conduct of master and supercargo and of the other members of the crew of the banca, eminently suspicious and prevent the Court holding that the disappearance or loss of the money was due to a fortuitous event, to force majeure, or that it was an occurrence which could not have been foreseen, or which, if foreseen, was inevitable.
3. Manresa; Liability of CarriersManresa, in his Commentaries on the Civil Code (Vol. 10 p. 773), in treating of the provisions of the said code concerning transportation by sea and by land of both persons and things, says ‘’Liability of carriers. — In order that a thing may be transported, it must be delivered to the carrier, as the Code says. From the time it is delivered to the carrier or shipper until it is received by the consignee, the carrier has it in his possession, as a necessary condition for its transportation, and is obliged to preserve and guard it; wherefore it is but natural and logical that he should be responsible for it. The Code discovers in the relation of all these elements the factors which go to make up the conception of a trust. and, taking into account that the delivery of the thing on the part of the shipper is unavoidable, if the transportation is to take place, esteems that, at least in certain respects, such trusts are necessary.”
4. Ipil and Solamo depositories, are liable under Article 1770, and Articles 1601 and 1602 in relation to Articles 1783 and 1784Ipil and Solamo, being the depositaries of the sum in question, and they having failed to exercise for its safe-keeping the diligence required by the nature of the obligation assumed by them and by the circumstances of the time and the place, in pursuance of the provisions of articles 1601 and 1602, in their relation to articles 1783 and 1784, and as prescribed in article 1770, of the Civil Code, they are liable for its loss or misplacement and must restore it to Yu Con, together with the corresponding interest thereon as an indemnity for the losses and damages caused him through the loss of the said sum.
5. Lauron has responsibility as to selection and supervision of Ipil and Solamo; Lauron party to contract with Yu ConNarciso Lauron was the owner of the vessel in which the loss or misplacement of the P450 occurred, of which vessel, Glicerio Ipil was master and Justo Solamo, supercargo, both of whom were appointed to, or chosen for, the positions they held, by Lauron himself. The sum was delivered to the said master, Ipil, and the merchandise to be transported by means of said vessel from the port of Cebu to the town of Catmon was laden by virtue of a contract executed by and between Yucon and the owner of the vessel, Narciso Lauron. Said vessel was engaged in the transportation of merchandise by sea and made voyages to and from the port of Cebu to Catmon, and had been equipped and victualed for this purpose by its owner, with whom, Yu Con contracted for the transportation of the merchandise which was to be carried from the port of Cebu to the town of Catmon.
6. Vessel construed; ReusThe word vessel serves to designate every kind of craft by whatever particular or technical name it may now be known or which nautical advancements may give it in the future. (Commentaries on the Code of Commerce, in the General Review of Legislation and Jurisprudence, founded by D. Jose Reus y Garcia, Vol. 2, p. 136.)
7. Vessel construed; EscricheAccording to the Dictionary of Legislation and Jurisprudence by Escriche, a vessel is any kind of craft, considering solely the hull.
8. Ship and Vessel construed; BlancoBlanco, the commentator on mercantile law, in referring to the grammatical meaning of the words “ship” and
“vessels,” says, in his work, that these terms designate every kind of craft, large or small, whether belonging to the merchant marine or to the navy. And referring to their juridical meaning, he adds: “This does not differ essentially from the grammatical meaning; the words ’ship’ and ‘vessel’ also designate every craft, large or small, so long as it be not an accessory of another, such as the small boat of a vessel, of greater or less tonnage. This definition comprises both the craft intended for ocean or for coastwise navigation, as well as the floating docks, mud lighters, dredges, dumpscows or any other floating apparatus used in the service of an industry or in that of maritime commerce. . . .” (Vol. 1, p. 389.)
9. Banca in present case a vesselAccording to the definitions, the banca called Maria, chartered by Yu Con from Narciso Lauron, was a “vessel”, pursuant to the meaning this word has in mercantile law, that is, in accordance with the provisions of the Code of Commerce in force.
10. Ipil is also considered as captain; Article 609Glicerio Ipil, the master of the said banca, Maria, must also be considered as its captain, in the legal acceptation of this word. The same Code of Commerce in force in these Islands compares, in its article 609, masters with captains. It is to be noted that in the Code of Commerce of Spain the denomination of arraeces is not included in said article as equivalent to that of masters, as it is in the Code of these Islands.
11. Article 609; General Review of Legislation and JurisprudenceCommenting on Article 609, the General Review of Legislation and Jurisprudence says: “The name of captain or master is given, according to the kind of vessel, to the person in charge of it. The first denomination is applied to those who govern vessels that navigate the high seas or ships of large dimensions and importance, although they be engaged in the coastwise trade. Masters are those who command smaller ships engaged exclusively in the coastwise trade. For the purposes of maritime commerce, the words ‘captain’ and ‘master’ have the same meaning; both being the chiefs or commanders of ships.” (Vol. 2, p. 168.)
12. Article 587 of the Code of CommerceArticle 587 of the Code of Commerce in force provides that “The agent shall be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself herefrom by abandoning the vessel with all her equipments and the freight he may have earned during the trip.”
13. Article 618 of the Code of CommerceArticle 618 of the same Code also prescribes that “The captain shall be civilly liable to the agent and the latter to the third persons who may have made contracts with the former — (1) For all the damages suffered by the vessel and its cargo by reason of want of skill or negligence on his part, If a misdemeanor or crime has been committed he shall be liable in accordance with the Penal Code. (2) For all the thefts committed by the crew, reserving his right of action against the guilty parties.”
14. Article 624 of the 1829 Code of CommerceThe Code of Commerce previous to the one now in force, to wit, that of 1829, in its article 624, provided that the agent or shipowner should not be liable for any excesses which, during the navigation, might be committed by the captain and crew, and that, for the reason of such excesses it was only proper to bring action against the persons and property of those found guilty.
15. Reasons for fundamental difference between provisions of old and new Code of Commerce; EstasenEstasen, in his work on the Institutes of Mercantile Law (Vol. 4, p. 280), makes the remarks, in referring to the exposition of reasons presented by the Code Commission which prepared and presented for approval the Code of Commerce now in force, in which exposition of reasons were set forth the fundamental differences between the provisions contained in both codes. He says: “Another very important innovation introduced by the Code is that relative to the liability for misdemeanors and crimes committed by the captain or by members of the crew This is a matter of the greatest importance on which a variety of opinions has been expressed by different juris-consults. The old code declares the captain civilly liable for all damage sustained by the vessel or its cargo through lack of skill or care on his part, through violations of the law, or through unlawful acts committed by the crew. As regards the agent or shipowner, it declares in unmistakable terms that he shall in no wise be liable for any excesses which, during the navigation, may be committed by the captain and the crew. Upon an examination, in the light of the principles of modern law, of the standing legal doctrine on the nonliability of the shipowner for the unlawful acts, that is, the crimes or quasi crimes, committed by the captain and the crew, it is observed that it cannot by maintained in the absolute and categorical terms in which it is formulated. It is well and good that the shipowner be not held criminally liable for such crimes or quasi crimes; but he cannot be excused from liability for the damage and harm which, in consequence of those acts, may be suffered by the
third parties who contracted with the captain, in his double capacity of agent and subordinate of the shipowner himself. In maritime commerce, the shippers and passengers in making contracts with the captain do so through the confidence they have in the shipowner who appointed him; they presume that the owner made a most careful investigation before appointing him, and, above all, they themselves are unable to make such an investigation, and even though they should do so, they could not obtain complete security, inasmuch as the shipowner can, whenever he sees fit, appoint another captain instead. The shipowner is in the same case with respect to the members of the crew, for, though he does not appoint directly, yet, expressly or tacitly, he contributes to their appointment. On the other hand, if the shipowner derives profits from the results of the choice of the captain and the crew, when the choice turns out successful, it is also just that he should suffer the consequences of an unsuccessful appointment, by application of the rule of natural law contained in the Partidas, viz., that he who enjoys the benefits derived from a thing must likewise suffer the losses that ensue therefrom. Moreover, the Penal Code contains a general principle that resolves the question under consideration, for it declares that such persons as undertake and carry on any industry shall be civilly liable, in default of those who may be criminally liable, for the misdemeanors and crimes committed by their subordinates in the discharge of their duties. The Code of Commerce in force omits the declaration of non-liability contained in the old code, and clearly makes the shipowner liable civilly for the loss suffered by those who contracted with the captain, in consequence of the misdemeanors and crimes committed by the latter or by the members of the crew.”
16. Lauron civilly liable to Yu ConIn accordance with the provisions of the Code of Commerce in force, Narciso Lauron, as the proprietor and owner of the craft of which Glicerio Ipil was the master and in which, through the fault and negligence of the latter and of the supercargo Justo Solamo, there occurred the loss, theft, or robbery of the P450 that belonged to Yu Con and were delivered to said master and supercargo, a theft which, on the other hand, does not appear to have been committed by a person not belonging to the craft, should, for said loss or theft, be held civilly liable to Yu Con, who executed with Lauron the contract for the transportation of the merchandise and money between the port of Cebu and the town of Catmon, by means of the said craft.
Sat 2 Oct 2004
Transportation Law: Fisher vs. Yangco Steamship (GR 8085, 5 November 1914)
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Fisher vs. Yangco Steamship (GR 8085, 5 November 1914)En Banc, Carson (J): 2 concur, 2 concur in result
Facts: FC Fisher was a stockholder in the Yangco Steamship Company, the owner of a large number of steam vessels, duly licensed to engage in the coastwise trade of the Philippine Islands. On 10 June 1912, the directors of the company adopted a’ resolution which was thereafter ratified and affirmed by the shareholders of the company, “expressly declaring and providing that the classes of merchandise to be carried by the company in its business as a common carrier do not include dynamite, powder or other explosives, and expressly prohibiting the officers, agents and servants of the company from offering to carry, accepting for carriage or carrying said dynamite, powder or other explosives.” Thereafter the Acting Collector of Customs (JS Stanley) demanded and required of the company the acceptance and carriage of such explosives. He has refused and suspended the issuance of the necessary clearance documents of the vessels of the company unless and until the company consents to accept such explosives for carriage. Fisher was advised and believed that should the company decline to accept such explosives for carriage, the Attorney-General of the Philippine Islands (Ignacio Villamor) and the the prosecuting attorney of the city of Manila (WH Bishop) intend to institute proceedings under the penal provisions of sections 4, 5, and 6 of Act 98 of the Philippine Commission against the company, its managers, agents and servants, to enforce the requirements of the Acting-Collector of Customs as to the acceptance of such explosives for carriage. Notwithstanding the demands of Fisher, the manager, agents and servants of the company decline and refuse to cease the carriage of such explosives, on the ground that by reason of the severity of the penalties with which they are threatened upon failure to carry such explosives, they cannot subject themselves to “the ruinous consequences which would inevitably result” from failure on their part to obey the demands and requirements of the Acting Collector of Customs as to the acceptance for carriage of explosives. Fisher believes that the Acting Collector of Customs erroneously construes the provisions of Act
98 in holding that they require the company to accept such explosives for carriage notwithstanding the resolution of the directors and stockholders of the company, and that if the Act does in fact require the company to carry such explosives it is to that extent unconstitutional and void.
Fisher filed a complaint, the respondents demurred.
The Supreme Court sustained the demurrer , on the ground that the complaint does not set forth facts sufficient to constitute a cause of action. It ordered thus that “unless an amended complaint be filed in the meantime let judgment be entered ten days hereafter sustaining the demurrer and dismissing the complaint with costs against the complainant, and twenty days thereafter let the record be filed in the archives of original actions in this court.”
1. Duties and liabilities of common carriers defined and set forth in Act 98; Court bound by its provisionsThe duties and liabilities of common carriers in this jurisdiction are defined and fully set forth in Act 98 of the Philippine Commission, and, until and unless that statute be declared invalid or unconstitutional, the Court is bound by its provisions.
2. Section 2 of Act 98Section 2 of Act 98 provides that “It shall be unlawful for any common carrier engaged in the transportation of passengers or property as above set forth to make or give any unnecessary or unreasonable preference or advantage to any particular person, company, firm, corporation or locality, or any particular kind of traffic in any respect whatsoever, or to subject any particular person, company, firm, corporation or locality, or any particular kind of traffic, to any undue or unreasonable prejudice or discrimination whatsoever, and such unjust preference or discrimination is also hereby prohibited and declared to be unlawful.”
3. Section 3 of Act 98Section 3 of Act 98 provides that “No common carrier engaged in the carriage of passengers or property as aforesaid shall, under any pretense whatsoever, fail or refuse to receive for carriage, and as promptly as it is able to do so without discrimination, to carry any person or property offering for carriage, and in the order in which such persons or property are offered for carriage, nor shall any such common carrier enter into any arrangement, contract or agreement with any other person or corporation whereby the latter is given an exclusive or preferential privilege over any other person or persons to control or monopolize the carriage of any class or kind of property to the exclusion or partial exclusion of any other person or persons, and the entering into any such arrangement, contract or agreement, under any form or pretense whatsoever, is hereby prohibited and declared to be unlawful.”
4. Section 4 of Act 98Section 4 of Act 98 provides that “Any willful violation of the provisions of this Act by any common carrier engaged in the transportation of passengers or property as hereinbefore set forth is hereby declared to be punishable by a fine not exceeding five thousand dollars money of the United States, or by imprisonment not exceeding two years, or both, within the discretion of the court.”
5. Statute validThe validity of the Act has been questioned on various grounds, and it is vigorously contended that in so far as it imposes any obligation on a common carrier to accept for carriage merchandise of a class which he makes no public profession to carry, or which he has expressly or impliedly announced his intention to decline to accept for carriage from all shippers alike, it is ultra vires, unconstitutional and void. The Court may dismiss without extended discussion any argument or contention as to the invalidity of the statute based on alleged absurdities inherent in its provisions or on alleged unreasonable or impossible requirements which may be read into it by a strained construction of its terms.
6. Provision of Act prescribing “No common carrier shall, under any pretense whatsoever, fail or refuse to receive for carriage, and to carry any person or property offering for carriage,” not to be construed literallyThe provision of the Act which prescribes that, “No common carrier . . . shall, under any pretense whatsoever, fail or refuse to receive for carriage, and . . . to carry any person or property offering for carriage,” is not to be construed in its literal sense and without regard to the context, so as to impose an imperative duty on all common carriers to accept for carriage, and to carry all and any kind of freight which may be offered for carriage without regard to the facilities which they may have at their disposal. The legislator could not have intended and did not intend to prescribe that a common carrier running passenger automobiles for hire must transport coal in his machines; nor that the owner of a tank steamer, expressly constructed in small watertight
compartments for the carriage of crude oil must accept a load of cattle or of logs in the rough; nor that any common carrier must accept and carry contraband articles, such as opium, morphine, cocaine, or the like, the mere possession of which is declared to be a criminal offense; nor that common carriers must accept eggs offered for transportation in paper parcels or any merchandise whatever so defectively packed as to entail upon the company unreasonable and unnecessary care or risks.
7. Intent of the lawRead in connection with its context, this, as well as all the other mandatory and prohibitory provisions of the statute, was clearly intended merely to forbid failures or refusals to receive persons or property for carriage involving any “unnecessary or unreasonable preference or advantage to any particular person, company, firm, corporation or locality, or any particular kind of traffic in any respect whatsoever,” or which would “subject any particular person, company, firm, corporation or locality, or any particular kind of traffic to any undue or unreasonable prejudice or discrimination whatsoever.”
8. Language of statute refutes contention as to invalidity based on alleged unreasonableness of its mandatory provisionsThe question of construing and applying the statute, in cases of alleged violations of its provisions, always involves a consideration as to whether the acts complained of had the effect of making or giving an “unreasonable or unnecessary preference or advantage” to any person, locality or particular kind of traffic, or of subjecting any person, locality, or particular kind of traffic to any undue or unreasonable prejudice or discrimination. It is very clear therefore that the language of the statute itself refutes any contention as to its invalidity based on the alleged unreasonableness of its mandatory or prohibitory provisions.
9. Pains and penalties prescribed within province of legislator; Courts will not interfere in absence of proof as to its excessiveness and crueltyThe Court may dismiss without much discussion the contentions as to the invalidity of the statute, which are based on the alleged excessive severity of the penalties prescribed for violation of its provisions. Upon general principles it is peculiarly and exclusively within the province of the legislator to prescribe the pains and penalties which may be imposed upon persons convicted of violations of the laws in force within his territorial jurisdiction. With the exercise of his discretion in this regard the courts have nothing to do, save only in cases where it is alleged that excessive fines or cruel and unusual punishments have been prescribed, and even in such cases the courts will not presume to interfere in the absence of the clearest and most convincing argument and proof in support of such contentions. There is no ground upon which to rest a contention that the penalties prescribed in the statute under consideration are either excessive or cruel and unusual, in the sense in which these terms are used in the organic legislation in force in the Philippine Islands.
10. Ex parte Young (209 U. S., 123, 147, 148); Cotting vs. Godard (183 U. S., 79, 102); Mercantile Trust Co. vs. Texas Co. (51 Fed., 529); Louisville Ry. vs. McCord (103 Fed., 216); Cons. Gas Co. vs. Mayer (416 Fed., 150) not applicable; Different circumstances in the law’s creation and applicationAn examination of the general provisions of the statute, of the circumstances under which it was enacted, the mischief which it sought to remedy and of the nature of the penalties prescribed for violations of its terms convinces us that, unlike the statutes under consideration in the cases of Ex parte Young; Cotting vs. Godard; Mercantile Trust Co. vs. Texas Co.; Louisville Ry. vs. McCord; Cons. Gas Co. vs. Mayer, its enactment involved no attempt to prevent common carriers “from resorting to the courts to test the validity of the legislation;” no “effort to prevent any inquiry” as to its validity. It imposes no arbitrary obligation upon the company to do or to refrain from doing anything. It makes no attempt to compel such carriers to do business at a fixed or arbitrarily designated rate, at the risk of separate criminal prosecutions for every demand of a higher or a different rate. Its penalties can be imposed only upon proof of “unreasonable,” “unnecessary” and “unjust” discriminations, and range from a maximum which is certainly not excessive for willful, deliberate and contumacious violations of its provisions by a great and powerful corporation, to a minimum which may be a merely nominal fine. With so wide a range of discretion conferred upon the courts, there is no substantial basis for a contention on the part of any common carrier that it or its officers are “intimidated from resorting to the courts to test the validity” of the provisions of the statute prohibiting such “unreasonable,” “unnecessary” and “unjust” discriminations, or to test in any particular case whether a given course of conduct does in fact involve such discrimination.
11. Court will not presume that the lower courts will abuse discretion to intimidate a common carrier from resorting to courts to test the validityThe Court will not presume, for the purpose of declaring the statute invalid, that there is so real a danger that the Courts of First Instance and this court on appeal will abuse the discretion thus conferred upon the Court, as to intimidate any common carrier, acting in good faith, from resorting to the courts to test the validity of the statute. Legislative enactments, penalizing unreasonable discriminations, unreasonable restraints of trade, and
unreasonable conduct in various forms of human activity are so familiar and have been so frequently sustained in the courts, as to render extended discussion unnecessary to refute any contention as to the invalidity of the statute under consideration, merely because it imposes upon the carrier the obligation of adopting one of various courses of conduct open to it, at the risk of incurring a prescribed penalty in the event that the course of conduct actually adopted by it should be held to have involved an unreasonable, unnecessary or unjust discrimination.
12. Application of the test announced in Ex parte Young; Plenary power of legislatureApplying the test announced in Ex parte Young, it will be seen that the validity of the Act does not depend upon the existence of a fact which can be determined only after investigation of a very complicated and technical character,” and that “the jurisdiction of the legislature’” over the subject with which the statute deals “is complete in any event.” There can be no real question as to the plenary power of the legislature to prohibit and to penalize the making of undue, unreasonable and unjust discriminations by common carriers to the prejudice of any person, locality or particular kind of traffic.
13. Statute does not require carrier, as condition to continue business, that he must carry anything and everything The statute does not “require of a carrier, as a condition to his continuing in said business, that he must carry anything and everything,” and thereby “render useless the facilities he may have for the carriage of certain lines of freight.” It merely forbids failures or refusals to receive persons or property for carriage which have the effect of giving an “unreasonable or unnecessary preference or advantage” to any person, locality or particular kind of traffic, or of subjecting any person, locality or particular kind of traffic to any undue or unreasonable prejudice or discrimination.
14. Nothing in statute that would deprive person of his libertyThere is nothing in the statute which would deprive any person of his liberty “by requiring him to engage in business against his will.” The prohibitions of the statute against undue, unnecessary or unreasonable preferences and discriminations are merely the reasonable regulations which the legislator has seen fit to prescribe for the conduct of the business in which the carrier is engaged of his own free will and accord. In so far as the self-imposed limitations by the carrier upon the business conducted by him, in the various examples given by counsel, do not involve an unreasonable or unnecessary discrimination the statute would not control his action in any wise whatever. It operates only in cases involving such unreasonable or unnecessary preferences or discriminations.
15. Nature of business of common carrier as public employment; State has power to impose just and reasonable regulationsThe nature of the business of a common carrier as a public employment is such that it is clearly within the power of the state to impose such just and reasonable regulations thereon in the interest of the public as the legislator’ may deem proper. Of course such regulations must not have the effect of depriving an owner of his property without due process of law, nor of confiscating or appropriating private property without just compensation, nor of limiting or prescribing irrevocably vested rights or privileges lawfully acquired under a charter or franchise. But aside from such constitutional limitations, the determination of the nature and extent of the regulations which should be prescribed rests in the hands of the legislator. Common carriers exercise a sort of public office, and have duties to perform in which the public is interested. Their business is, therefore, affected with a public interest, and is subject of public regulation. Indeed, this right of regulation is so far beyond question that it is well settled that the power of the state to exercise legislative control over railroad companies and other carriers “in all respects necessary to protect the public against danger, injustice and oppression” may be exercised through boards of commissioners.
16. Examples of regulations controlling free exercise of carrier’s discretion in conduct of businessRegulations limiting the number of passengers that may be carried in a particular vehicle or steam vessel, or forbidding the loading of a vessel beyond a certain point, or prescribing the number and qualifications of the personnel in the employ of a common carrier, or forbidding unjust discrimination as to rates, all tend to limit and restrict his liberty and to control to some degree the free exercise of his discretion in the conduct of his business.
17. No one questions power of legislator to prescribe reasonable regulations upon property with public interestSince the Granger cases were decided by the Supreme Court of the United States no one questions the power of the legislator to prescribe such reasonable regulations upon property clothed with a public interest as he may deem expedient or necessary to protect the public against danger, injustice or oppression.
18. Right to enter public employment does not carry right to conduct business as one pleasesThe right to enter the public employment as a common carrier and to offer one’s services to the public for hire does not carry with it the right to conduct that business as one pleases, without regard to the interests of the public and free from such reasonable and just regulations as may be prescribed for the protection of the public from the reckless or careless indifference of the carrier as to the public welfare and for the prevention of unjust and unreasonable discrimination of any kind whatsoever in the performance of the carrier’s duties as a servant of the public.
19. When private property becomes clothed with public interestBusiness of certain kinds, including the business of a common carrier, holds such a peculiar relation to the public interest that there is super induced upon it the right of public regulation. When private property is “affected with a public interest it ceases to be juris privati only.” Property becomes clothed with a public interest when used in a manner to make it of public consequence and affect the community at large. “When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created. He may withdraw his grant by discontinuing the use, but so long as he maintains the use he must submit to control.”
20. Power to regulate not power to destroy, limitation is not confiscationThe power to regulate is not a power to destroy, and limitation is not the equivalent of confiscation. Under pretense of regulating fares and freight the state can not require a railroad corporation to carry persons or property without reward. Nor can it do that which in law amounts to a taking of private property for public use without just compensation, or without due process of law.
21. Judiciary would not interfere with regulations unless there is flagrant attack upon rights of propertyThe judiciary ought not to interfere with regulations established under legislative sanction unless they are so plainly and palpably unreasonable as to make their enforcement equivalent to the taking of property for public use without such compensation as under all the circumstances is just both to the owner and to the public, that is, judicial interference should never occur unless the case presents, clearly and beyond all doubt, such a flagrant attack upon the rights of property under the guise of regulations as to compel the court to say that the regulation in question will have the effect to deny just compensation for private property taken for the public use.
22. Common law rules themselves are regulationsUnder the common law of England it was early recognized that common carriers owe to the public the duty of carrying indifferently for all who may employ them, and in the order in which application is made, and without discrimination as to terms. True, they were allowed to restrict their business so as to exclude particular classes of goods, but as to the kinds of property which the carrier was in the habit of carrying in the prosecution of his business he was bound to serve all customers alike; and it is to be observed in passing that these common law rules are themselves regulations controlling, limiting and prescribing the conditions under which common carriers were permitted to conduct their business.
23. Correction of abuses precipitated adoption of statutory regulations; ExamplesThe correction of abuses which had grown up with the enormously increasing business of common carriers necessitated the adoption of statutory regulations controlling the business of common carriers, and imposing severe and drastic penalties for violations of their terms. In England, the Railway Clauses Consolidation Act was enacted in 1845, the Railway and Canal Traffic Act in 1854, and since the passage of those Acts much additional legislation has been adopted tending to limit and control the conduct of their business by common carriers. In the United States, the business of common carriers has been subjected to a great variety of statutory regulations. Among others Congress enacted “The Interstate Commerce Act” (1887 ) and its amendments, and the Elkins Act as amended (1906); and most if not all of the States of the Union have adopted similar legislation regulating the business of common carriers within their respective jurisdictions Unending litigation has arisen under these statutes and their amendments, but nowhere has the right of the state to prescribe just and reasonable regulations controlling and limiting the conduct of the business of common carriers in the public interest and for the general welfare been successfully challenged, though of course there has been wide divergence of opinion as to the reasonableness, the validity and legality of many of the regulations actually adopted.
24. Power of Philippine legislator to prohibit and penalize unnecessary or unreasonable discrimination by common carrier; Discrimination must be substantialThe power of the Philippine legislator to prohibit and to penalize all and any unnecessary or unreasonable discriminations by common carriers may be maintained upon the same reasoning which justified the enactment
by the Parliament of England and the Congress of the United States of the statutes prohibiting and penalizing the granting of certain preferences and discriminations in those countries. The legislator having enacted a regulation prohibiting common carriers from giving unnecessary or unreasonable preferences or advantages to any particular kind of traffic or subjecting any particular kind of traffic to any undue or unreasonable prejudice or discrimination whatsoever, it is clear that whatever may have been the rule at the common law, common carriers in this jurisdiction cannot lawfully decline to accept a particular class of goods for carriage, to the prejudice of the traffic in those goods, unless it appears that for some sufficient reason the discrimination against the traffic in such goods is reasonable and necessary. Mere whim or prejudice will not suffice. The grounds for the discrimination must be substantial ones, such as will justify the courts in holding the discrimination to have been reasonable and necessary under all the circumstances of the case.
25. Whether refusal to carry explosives involves an unnecessary or unreasonable preference or advantage to any person borne by particular circumstances of each case; Nothing in pleadings support contention that traffic of explosive unnecessary or unreasonableThe answer to the question whether such a refusal to carry explosives involves an unnecessary or unreasonable preference or advantage to any person, locality or particular kind of traffic or subjects any person, locality or particular kind of traffic to an undue or unreasonable prejudice or discrimination is by no means “self-evident,” and that it is a question of fact to be determined by the particular circumstances of each case. Herein, it is not alleged in the complaint that “dynamite, gunpowder and other explosives” can in no event be transported with reasonable safety on board steam vessels engaged in the business of common carriers. It is not alleged that all, or indeed any of the Yangco Steamship’s vessels are unsuited for the carriage of such explosives. It is not alleged that the nature of the business in which the steamship company is engaged is such as to preclude a finding that a refusal to accept such explosives on any of its vessels would subject the traffic in such explosives to an undue and unreasonable prejudice and discrimination.
26. Inclusions to the words “dynamite, powder or other explosivesThe words “dynamite, powder or other explosives” are broad enough to include matches, and other articles of like nature, and may fairly be held to include also kerosene oil, gasoline and similar products of a highly inflammable and explosive character. Many of these articles of merchandise are in the nature of necessities in any country open to modern progress and advancement.
27. Methods of transportation possible for the transport of dynamite, etc.The Court is not fully advised as to the methods of transportation by which they are made commercially available throughout the world, but certain it is that dynamite, gunpowder, matches, kerosene oil and gasoline are transported on many vessels sailing the high seas. Indeed it is matter of common knowledge that common carriers throughout the world transport enormous quantities of these explosives, on both land and sea, and there can be little doubt that a general refusal of the common carriers in any country to accept such explosives for carriage would involve many persons, firms and enterprises in utter ruin, and would disastrously affect the interests of the public and the general welfare of the community.
28. Attendant circumstances determines whether refusal to carry products prejudiced or discriminatoryIn any case of a refusal to carry products which would subject any person, locality or the traffic in such products to any prejudice or discrimination whatsoever, it would be necessary to hear evidence before making an affirmative finding that such prejudice or discrimination was or was not unnecessary, undue or unreasonable. The making of such a finding would involve a consideration of the suitability of the vessel for the transportation of such products; the reasonable possibility of danger or disaster resulting from their transportation in the form and under the conditions in which they are offered for carriage; the general nature of the business done by the carrier and, in a word, all the attendant circumstances which might affect the question of the reasonable necessity for the refusal by the carrier to undertake the transportation of this class of merchandise.
29. Behavior of dynamite; Determining its hazards and transportabilityThe Court would not be justified in making such a holding unaided by evidence sustaining the proposition that dynamite and gunpowder can never be carried with reasonable safety on any vessel engaged in the business of a common carrier. It is said that dynamite is so erratic and uncontrollable in its action that it is impossible to assert that it can be handled with safety in any given case. On the other hand it is contended that while this may be true of some kinds of dynamite, it is a fact that dynamite can be and is manufactured so as to eliminate any real danger from explosion during transportation. These are of course questions of fact upon which we are not qualified to pass judgment without the assistance of expert witnesses who have made special studies as to the chemical composition and reactions of the different kinds of dynamite, or attained a thorough knowledge of its properties as a result of wide experience in its manufacture and transportation.
30. Violent and destructive explosions attributable to dynamite, in itself, would not justify refusal of common carrierThe mere fact that violent and destructive explosions can be obtained by the use of dynamite under certain conditions would not be sufficient in itself to justify the refusal of a vessel, duly licensed as a common carrier of merchandise, to accept it for carriage, if it can be proven that in the condition in which it is offered for carriage there is no real danger to the carrier, nor reasonable ground to fear that his vessel or those on board his vessel will be exposed to unnecessary and unreasonable risk in transporting it, having in mind the nature of his business as a common carrier engaged in the coastwise trade in the Philippine Islands, and his duty as a servant of the public engaged in a public employment. So also, if by the exercise of due diligence and the taking of reasonable precautions the danger of explosions can be practically eliminated, the carrier would not be justified in subjecting the traffic in this commodity to prejudice or discrimination by proof that there would be a possibility of danger from explosion when no such precautions are taken.
31. Traffic in dynamite, gunpowder and other explosives essential to the material and general welfare of countryThe traffic in dynamite, gunpowder and other explosives is vitally essential to the material and general welfare of the people of these Islands. If dynamite, gunpowder and other explosives are to continue in general use throughout the Philippines, they must be transported by water from port to port in the various islands which make up the Archipelago.
32. Refusal of particular vessel to accept explosives for carriage constitutes violation of statute, unless evidence of substantial danger of disaster is shownThe refusal by a particular vessel, engaged as a common carrier of merchandise in the coastwise trade of the Philippine Islands, to accept any or all of these explosives for carriage would constitute a violation of the prohibitions against discriminations penalized under the statute, unless it can be shown by affirmative evidence that there is so real and substantial a danger of disaster necessarily involved in the carriage of any or all of these articles of merchandise as to render such refusal a due or a necessary or a reasonable exercise of prudence and discretion on the part of the shipowner.
33. Demurrer must be sustained The complaint in the present case lacks the necessary allegations under the ruling, the demurrer must be sustained on the ground that the facts alleged do not constitute a cause of action.
34. Interesting questions of procedure not passed upon as it may appear that discussion would make it appear that facts alleged in complaint constitute a cause of actionA number of interesting questions of procedure are raised and discussed in the briefs of counsel. As to all of these questions we expressly reserve our opinion, believing as we do that in sustaining the demurrer on the grounds indicated in this opinion we are able to dispose of the real issue involved in the proceedings without entering upon the discussion of the nice questions which it might have been necessary to pass upon had it appeared that the facts alleged in the complaint constitute a cause of action.
35. Passage of Acts 2307 and 2362 notedSince the institution of these proceedings the enactment of Acts 2307 and No. 2362 (creating a Board of Public Utility Commissioners and for other purposes) may have materially modified the right to institute and maintain such proceedings in this jurisdiction.
36. Basis of the Court’s decisionThe Court based its ruling on the demurrer, that is to say “That whatever may have been the rule at the common law, common carriers in this jurisdiction cannot lawfully decline to accept a particular class of goods for carriage, to the prejudice of the traffic in those goods, unless it appears that for some sufficient reason the discrimination against the traffic in such goods is reasonable and necessary. Mere prejudice or whim will not suffice. The grounds of the discrimination must be substantial ones, such as will justify the courts in holding the discrimination to have been reasonable and necessary under all the circumstances of the case.”
Sat 2 Oct 2004
Transportation Law: USA vs. Steamship Rubi (GR 9235, 17 November 1915)
Posted by Berne Guerrero under (a) oas , haystacksNo Comments
USA vs. Steamship Rubi (GR 9235, 17 November 1915)En Banc, Carson (J): 2 concur, 1 concur in result, 2 dissent
Facts: On 9 February 1913, Steamer “Rubi” arrived in the city of Manila from a coastwise port but while on a continuous voyage from the foreign port of Hongkong. At the time of her arrival in the port of Manila she had on board concealed in an unknown place 13.380 kilos of opium and 2.620 kilos of morphine. At the same time the steamer had other cargo which was duly manifested as required by law, and that the said opium and morphine were not manifested. While the steamer was lying in the harbor two members of the steamer’s crew, one known as a ‘coal passer’ and the other as a ‘donkey man,’ attempted to discharge the opium and morphine from the vessel but in doing so delivered it to secret service agents of the Bureau of Customs. Thereupon the steamer was seized and the Collector of Customs imposed a penalty of P500 on account of the violation of section 77 of Act 355, the usual proceedings having been followed in imposing the penalty.
The United States and the Insular Collector of Customs applied with the Court of First Instance of Manila for a petition for a judgment confirming the action of the Insular Collector of Customs in imposing an administrative fine on the steamship Rubi for bringing unmanifested cargo into the port of Manila. The Steamship Rubi was represented by Warner, Barnes & Co. (Ltd.), general agents in the Philippine Islands for her owners. The trial judge dismissed the petition on the ground that “there was no knowledge on the part of the master of the vessel of the opium and morphine, and so far as he was concerned it was not cargo. He being the master of the vessel, who should make manifests of all cargo, could not manifest that which he did not know of, and the vessel could not know more or have knowledge of more than he had, for his knowledge was that of the vessel. Hence, the appeal.
The Supreme Court reversed the judgment entered in the court below, with the costs of this instance de oficio, and ordered that the record should be remanded to the court below with instructions to enter the appropriate orders in accord with the prayer of the petition.
1. US vs. Steamship Islas Filipinas in pointIn the recently decided case of the United States of America and the Insular Collector of Customs vs. The Steamship Islas Filipinas, represented by her owners Fernandez Hermanos (28 Phil. Rep., 291), wherein the facts were very similar to those stipulated in the court below, the Court ruled adversely to most of the contentions of the appellee in said case, at the same time sustaining contentions which are substantially identical with those upon which the present appellants rest their appeal.
2. Distinction between US vs. Steamship Islas Filipinas and present caseIn the former case, however, no real question arose as to the fact that the unmanifested cargo came from a foreign port; and it clearly appeared that the captain of the vessel willfully, and with intent to smuggle and to import prohibited drugs into the Philippine Islands, omitted the goods from the manifest. The present case is to be distinguished from that case in that it is expressly stipulated that the time when and the place where the unmanifested goods were placed on board the Rubi were unknown to the defendants, these goods having been discovered on 9 February 1913, after the vessel, which had arrived in Manila from Hongkong on 30 January 1913, had touched, in the course of her voyage, at the ports of Mangarin, Iloilo, Cebu, and returned to Manila a second time; and further because it does not appear that the captain, or any of the officers of the Rubi had any knowledge of the presence of the unmanifested goods on the ship, these goods having been brought on board surreptitiously by two members of the crew, who attempted to land them in Manila without the knowledge and against the wishes of the owners, the captain and the other officers of the ship, and despite their diligent efforts to prevent the smuggling of such goods into the Philippine Islands.
3. Section 77 of Act 355, as amended by Section 2 of Act 1235The penalties were imposed by the Collector of Customs on charges of violations of the provisions of section 77 of Act No. 355, as amended by section 2 of Act No. 1235, which is as follows: “Every vessel from a foreign port or place must, under a penalty of not exceeding five hundred dollars for failure, have on board complete written or typewritten manifests of all her cargo, signed by the master. All of the cargo intended to be landed at a port in the Philippine Archipelago must be described in separate manifests for each port of call therein. Each manifest shall include the port of departure and the port of delivery, with the marks, numbers, quantity, and description of the packages and the names of the consignees thereof. Every vessel from a foreign port or place must have on board complete manifests of passengers, immigrants and their baggage, in the prescribed form, setting forth their destination and all particulars required by the immigration laws; and every such vessel shall have prepared for presentation to the proper customs official, upon arrival in ports of the Philippines, a
complete list of all ship’s stores then on board, which must be certified thereto by the master thereof. Every vessel entering Philippine ports from a foreign port must carry manifests as hereinbefore provided, whether she carries cargo, passengers, or immigrants and their baggage, or not. If any such vessel does not carry cargo, passengers, or immigrants, the manifests must show that no cargo is carried from the port of departure to the port of destination in the Philippine Archipelago. Manifests in substantial compliance with these requirements shall be accepted, whether in English or in the language of the nation to which the vessel belongs. If in a language other than English, the master must furnish the number of translated copies required by the Collector.”
4. Nothing in statute justifies inference that penalties prescribed for having on board unmanifested goods are applicable only where it affirmatively appears that such goods have been imported from abroadWhile the penalty prescribed in section 77 of Act 355 can be incurred only by vessels “from a foreign port or place,” there is nothing in the statute which justifies the inference that the penalties prescribed for having on board unmanifested goods are applicable only in cases where it affirmatively appears that such goods have been imported from abroad. Under the express terms of the statute the penalty may be imposed if any unmanifested cargo is found on board such vessels, and there is no provision, express or implied, which forbids its imposition in the absence of proof as to the place where or the time when such unmanifested cargo is placed aboard the vessel.
5. If the penalty is imposed only upon production of proof that goods surreptitiously placed on board at some foreign port would defeat purpose of the lawOne of the purposes sought to be attained by penalizing the failure to manifest all cargo on board such vessels is to prevent the smuggling into the Islands of foreign goods; but it would tend largely to defeat this, as well as the other purposes and objects sought to be attained by the statute, if the penalty prescribed for having on board unmanifested goods could only be imposed upon the production of affirmative proof that such goods had been surreptitiously placed on board at some foreign port rather than upon the high seas or at any one of various ports at which vessels from foreign ports are permitted to touch in the Philippine Islands. In the very nature of things such proof would not be available in many if not most cases of violations of the statute. The surreptitious or unlawful importation or smuggling of goods into the Philippine Islands is severely penalized elsewhere in the statute, and the penalties prescribed in the section under consideration are not imposed for that offense but for the failure of the ship and its officers to comply with the regulations contained therein in regard to the manifesting of the cargo on board.
6. Sections 136 and 137 not in conflict with regulations in Section 77While sections 136 and 137 are applicable to all vessels licensed for carrying on coasting trade within the Philippine Islands, the existence of those regulations is in no wise in conflict with the regulations contained in section 77 of the Act which require that “every vessel from a foreign port or place must, under a penalty of not exceeding one thousand pesos for failure, have on board complete written or typewritten manifests of all her cargo, signed by the master.” So that if a vessel from a foreign port or place engaged in a continuous voyage is “licensed for carrying on coasting trade,” and touches at various ports within the Islands, she is not thereby relieved from the duty of having her cargo duly manifested when she enters any such port. In this connection it may be proper to observe that while it affirmatively appears that at the time of the seizure the Rubi was a vessel from a foreign port or place, it does not appear whether she was or was not licensed to engage in the coasting trade in the Philippines.
7. Cargo construed; US vs. Steamship Islas Filipinas citing Phile vs. The AnnaIn the former case, United States vs. Steamship Islas Filipinas, (28 Phil. Rep., 291), the Court held that the term “cargo” as used in section 77 of Act No. 355, as amended by section 2 of Act 1235, includes “all goods, wares and merchandise aboard ship which do not form part of the ship’s stores,” and in support of the ruling the Court relied in part upon the rulings in the case of Phile vs. The Anna (1 Dallas [U. S.] 202.)
8. Scope of “cargo”The language used in US vs. Steamship Islas Filipinas, while sufficiently inclusive for the purpose of the case then under consideration, is if anything too narrow rather than too broad if intended as a definition of the word “cargo” as used in the first paragraph of that section. Certainly this is true if the words “goods, wares and merchandise” are taken in the strictly technical and limited sense sometimes attributed to them in-commercial law. Having in mind the context, and the purposes and objects sought to be obtained by the enactment of this statute, the Court is satisfied that the word “cargo” as used in the first paragraph of section 77 refers to the “entire lading of the ship which carries it” and includes all goods, wares, merchandise, effects, and indeed everything, of every kind or description, found on board, except such things as are used or intended for use in connection with the management or direction of the vessel and are not intended for delivery at any port of call, and except also, perhaps, “passengers or immigrants and their baggage.” Manifests are required for “passengers
or immigrants and their baggage,” and the word “cargo” has sometimes been used with reference to passengers and immigrants, but in view of the apparent classification of the kinds of manifests prescribed in the section under consideration into manifests of “cargo,” and manifests of “passengers or immigrants and their baggage,” the Court expressly reserve its Opinion as to whether the word “cargo” in the first paragraph of this section was intended by the legislator to include the latter.
9. Intent and object of requirements for submission of manifestThe evident intent and object of these requirements for the submission of manifests by all vessels from foreign ports is to impose upon the owners and officers of such vessels an imperative obligation to submit lists of the entire lading of the ship in the prescribed form, in order to facilitate the labors of the customs and immigration officers, and to defeat any attempt to make use of such vessels to secure the unlawfully entry of persons or things into the Islands. No exception is made in the statute, and the recognition of any attempt to read an exception into the statute could hardly fail to defeat the purpose of its enactment.
10. Ruling in Phile vs. Anna construed; Intent of legislatorIt is true that in the case of Phile vs. The Anna, Governor Cushman (Fed. Case 5646) and in some other cases the courts have held or intimated that it could not have been the intention of the legislator to impose the penalty prescribed for breaches of the revenue laws under such circumstances. The Court thinks that, on examination, it will be found that in these cases the rulings in this regard are based on the enormous disproportion between the penalty of forfeiture of the vessel which was sought to be enforced in these cases and the alleged mischief sought to be remedied. The reasoning on which those decisions rest is not that the legislator could not have prescribed a penalty for any and every failure to manifest the entire cargo, but that the legislator could not have intended to prescribe the forfeiture of the vessel as a penalty for the unintentional omission of some trifle from the ship’s manifests, without the knowledge or consent of the owners and despite the exercise of reasonable diligence by the ship’s officers.
11. Penalty in statute not sufficient to sustain implied exception to general provisions of the Philippine statuteIn Philippine jurisdiction, the penalty prescribed by the section under consideration is a fine of not more than $500, so that, in the exercise of a sound discretion, the amount of the penalty imposed in each case may be and should be proportioned to the gravity of the particular violation of the statute on account of which it is imposed. Manifestly a penalty of this nature is not sufficient to sustain an implied exception to the general provisions of the Philippine statute such as the courts in some cases appear to have read into certain American statutes prescribing the forfeiture of the vessel for violations of their provisions.
12. Section 77 of Act 355 unequivocal in prescribing imposition of penalty; Section 303There is nothing in section 77 of the Act which indicates any intention on the part of the legislator to limit the imposition of the prescribed penalty to cases where the captain or the ship’s officers knowingly or willfully omitted any part of the cargo from the manifests. This section in unequivocal terms prescribes the imposition of the penalty in all cases of such omissions, and read together with section 303, which imposes penalties or forfeitures on the master of the vessels in such cases, it cannot be doubted that the intention of the legislator was to provide for the imposition of the prescribed penalties, whether such omissions occurred with or without the knowledge of the owner or the officers of the vessels.
13. Section 303 of Act 355Section 303, both by its terms and the nature of the penalties prescribed it makes very clear the intention of the legislator to penalize omissions from the ship’s manifest, whether made with or without the knowledge of the owners, or of the ship’s officers charged with the preparation of the required manifests. Section 303 provides that “Except as provided by the last preceding section, if any merchandise be found on board any vessel from a foreign port which is not included in her manifests, produced as required by this Act, the master shall forfeit an amount equal to double the duties fixed therefor: Provided always, That if it appears to the collector that such omissions occurred with intent to defraud the revenue, the master shall in addition forfeit an amount equal to the value of the merchandise not manifested. and all such merchandise belonging or consigned to the officers or crew of the vessel shall be seized and forfeited; but if such merchandise belongs to any other person acting in good faith the same shall be released upon payment of the regular duties and charges thereon. If any package or article named on the manifest be missing on the arrival of the vessel, or if the merchandise on board does not otherwise agree with the manifest delivered by the master, except as above prescribed, the master shall be liable to a penalty of not less than two hundred and fifty dollars and not more than two thousand five hundred dollars and in addition an amount equal to the value of the said missing merchandise as ascertained by the collector of customs, unless the collector shall be satisfied that such deficiency or disagreement occurred without fraudulent intent, in which case said penalty shall not be inflicted: Provided, nevertheless, That if such disagreement or deficiency is found by the collector to be due to the carelessness, negligence, or incompetence of the master of
the vessel, her owners, or agents, a penalty of not more than the value thereof may be imposed upon the master for each package missing or materially disagreeing in marks, character, or otherwise with the description thereof in the manifest. All penalties inflicted under the provisions of this section shall be forthwith reported to the Insular Collector with full particulars of the offense committed and of the previous conduct of the master in like matters.”
14. US vs. Stadacona, and U. S. vs. Missouri not applicableIn the cases of US vs. Stadacona, and U. S. vs. Missouri, it was held, under the statutes relied upon in those cases, that where “no personal delinquency is imputable to the master,” “a sense of justice to the master” forbids the imposition of the prescribed penalty as to him. However, in view of the express provisions of the Philippine statute, and of the nature of the prescribed penalties, and in view also of the manifest intention of the legislator to provide for the imposition of penalties for omissions from ship’s manifests, whether made with or without the knowledge of the owner or ship’s officers, the Court would not be justified in adopting and following the reasoning of the decisions in the cases of US vs. Stadacona (Fed. Case 16371) and US vs. Missouri (Fed Case 15785).
15. Power of the legislator to prescribe penalties; US vs. Brig Malek AdhelThe power of the legislator to prescribe such penalties is clearly sustained in the opinion of the Supreme Court of the United States in the case of United States vs. Brig Malek Adhel (43 U. S., 210). Therein, it was said: “The next question is, whether the innocence of the owners can withdraw the ship from the penalty of confiscation under the Act of Congress. Here, again, it may be remarked that the Act makes no exception whatsoever, whether the aggression be with or without the cooperation of the owners. The vessel which commits the aggression is treated as the offender, as the guilty instrument or thing to which the forfeiture attaches, without any reference whatsoever to the character or conduct of the owner. The vessel or boat (says the Act of Congress) from which such piratical aggression, etc., shall have been first attempted or made shall be condemned. Nor is there anything new in a provision of this sort. It is not an uncommon course in the admiralty, acting under the law of nations, to treat the vessel in which or by which, or by the master or crew thereof, a wrong or offense has been done as the offender, without any regard whatsoever to the personal misconduct or responsibility of the owner thereof. And this is done from the necessity of the case, as the only adequate means of suppressing the offense or wrong, or insuring an indemnity to the injured party. The doctrine also is familiarly applied to cases of smuggling and other misconduct under our revenue laws; and has been applied to other kindred cases, such as cases arising on embargo and non-intercourse acts. In short, the acts of the master and crew, in cases of this sort, bind the interest of the owner of the ship, whether he be innocent or guilt; and he impliedly submits to whatever the law denounces as a forfeiture attached to the ship by reason of their unlawful or wanton wrongs. In the case of The United States vs. The Schooner Little Charles (1 Brock. Rep., 347, 354), a case arising under the embargo laws, the same argument which has been addressed to us, was upon that occasion addressed to Mr. Chief Justice Marshall. The learned judge, in reply, said: ‘This is not a proceeding against the owner; it is a proceeding against the vessel for an offense committed by the vessel; which is not the less an offense, and does not the less subject her to forfeiture because it was committed without the authority and against the will of the owner. It is true that inanimate matter can commit no offense. But this body is animated and put in action by the crew, who are guided by the master. The vessel acts and speaks by the master. She reports herself by the master. It is therefore not unreasonable that the vessel should be affected by this report.’ The same doctrine was held by this court in the case of The Palmyra (12 Wheat. R 1, 14) where, referring to seizures in revenue causes, it was said: ‘The thing is here primarily considered as the offender, or rather the offense is primarily attached to the thing and this whether the offense be malum prohibitum or malum in re. The same thing applies to proceeding in rem or seizures in the Admiralty.’ ”
16. Owner of vessel made to suffer for acts or omission of officers and crewThe doctrine is well established in pursuance of which the owner of a vessel may be made to suffer for the acts or omissions of the officers and crew, “without any regard whatsoever to the character or responsibility of the owner,” from “the necessity of the case, as the only adequate means of suppressing the offense, or wrong.” In many if not in most instances of violations of the provisions of section 77 of the statute it would be practically impossible to establish the connivance or willful participation of the master in the surreptitious lading of his ship with unmanifested goods, unless they were of such bulk as to render the inference of guilty knowledge irresistible. There would be but small prospects of success in the attempt to suppress the practice of carrying unmanifested goods on vessels from foreign ports by the imposition of penalties on the ship or the master, if the imposition of such penalties were made dependent on the production of affirmative proof that such omissions had been made knowingly by the master or that the unmanifested goods had been brought aboard with his connivance. Under such circumstances the legislator has seen fit to prescribe penalties in all cases where unmanifested cargo is found on the vessel, whether it appears that such cargo was placed on board with or without the consent or knowledge of the owners or ship’s officers and despite the possibility of individual hardships in some instances.
17. Disciplinary control of officers on crew renders concealments of unmanifested cargo rareIt is always within the power of the ship’s officers to render it extremely difficult if not practically impossible for members of the crew or other persons to conceal unmanifested goods on board ship. Their disciplinary control of the ship, the crew, and indeed of every person on board, if duly exercised, should render such concealments of unmanifested cargo rare indeed.
18. Penalty not harsh or oppressive; Discretion of Collector of CustomsThe danger of real hardship or injustice arising from the imposition of harsh or oppressive penalties under the provisions of sections 77 of the Act is substantially provided against by the discretion conferred upon the Collector of Customs under the supervision of the courts whereby he may impose any penalty, from an amount merely nominal up to a maximum of $500.
Sat 2 Oct 2004
Transportation Law: Murillo vs. Mendoza (GR 46020, 8 December 1938)
Posted by Berne Guerrero under (a) oas , haystacksNo Comments
Murillo vs. Mendoza (GR 46020, 8 December 1938)En Banc, Imperial (J): 5 concur
Facts: Concepcion Murilllo, Antonio, Carmen, Flavio and Jose Luis Madrid are the dependents of Octavio Madrid, now deceased, and Alfredo Mendoza is the owner and operator of the S. S. Marie, and conducts his business under the name and style of Manila Steamship Navigation Company. On 8 July 1936, Octavio Madrid was employed by Mendoza as first officer of the S. S. Marie, with a salary of P110 a month plus board during the last 12 weeks immediately preceding his death or an average weekly wage of P28.29. While the said vessel was plying off the coast of the Province of Isabela, at Palanan Point, and while Madrid was performing his duties as first officers, the vessel was struck by a heavy typhoon, as a result of which it sank with all the officers and members of the crew perishing in the disaster. Notice of injury and claim for compensation was filed on time by Murillo despite which Mendoza refused and still refused to pay the compensation due.
As widow and children of the deceased Octavio Madrid brought an action to recover from Mendoza the compensation allegedly granted them by the Workmen’s Compensation Act by reason of the death of said deceased. The court rendered judgment on 16 November 1937, ordering Mendoza to pay to Murillo the sum of P3,000 with legal interest thereon from 23 November 1936, and the costs. The court, believing that the stipulation likewise submitted for decision the other 19 cases, also ordered Mendoza, in the decision rendered by it in this case, to pay to the other plaintiffs the sums of money claimed as compensation in the other complaints filed by them.
Mendoza appealed from the decision so rendered, but in this appeal and in the decision rendered by the Supreme Court, only the appeal taken in GR 46020 will be considered and decided. The reason is because in this appeal the plaintiffs in the other cases have neither appeared nor been heard.
The Supreme Court affirmed the decision rendered by the lower court, which is the only one appealed from, with the costs of this instance to Mendoza.
1. Rolan vs. Perez; When gross income of employer more than P20,000 In the case of Rolan vs. Perez (34 Off. Gaz., 1598), the court held that under the law, as amended, the fact that the gross income of the employer during the year next preceding the one in which the accident occurred was P20,000 or more, as required by law, need not be alleged or proven by the plaintiff, but that, if being a defense of the defendant, the burden is on the latter to allege and establish it. In the above-cited case.
2. Subsection (d) of Section 39, Act 3428 (original), cited in Rolan vs. PerezSubsection (d) of section 39 of Act No. 3428 originally read: “’(d) “Industrial employment” in case of private employers includes all employment or work at a trade, occupation or profession exercised by an employer for the purpose of gain, the gross income of which in the year immediately preceding the one during which the
accident occurred was not less than forty thousand pesos, except agriculture, charitable institutions, and domestic service.’
3. Subsection (d) of Section 39, Act 3428 (as amended by Section 13, Arc 3812), cited in Rolan vs. PerezAs amended by section 13 of Act No. 3812, said subsection (d) is couched in this wise: “(d) “Industrial employment” in case of private employers includes all employment or work at a trade, occupation or profession exercised by an employer for the purpose of gain, except agriculture, charitable institutions, and domestic service, but as to agriculture, employees for the operation of mechanical implements shall be entitled to the benefits of this Act.”
4. Effect of omission of phrase in amended provisionWhen the said subsection was amended, the legislature omitted the phrase ‘the gross income of which in the year immediately preceding the one during which the accident occurred was not less than forty thousand pesos.’ This omission simply means that from the taking effect of the amendment, 8 December 1930, the necessity to allege and prove the amount of the gross income ceased.
5. Purpose of Section 42, Act 3428, as amended by Section 14 of Act 3812It is true that section 42, as amended by section 14 of Act 3812, provides that when the gross income of any trade or occupation exercised by the employer during the year next preceding the one in which the accident occurred, is less than P20,000, the claim for compensation shall be governed by the provisions of Act 1874; but the only purpose of this provision is to introduce a defense in favor of the employer so that, in the event his gross income does not reach said amount, he may invoke his right to be used under the provisions of Act No. 1874; and being a defense favorable to the defendant, upon him, and not upon the plaintiff, rests the burden of alleging and proving it.”
6. Workmen’s Compensation Act covers maritime accidents occurring in the Philippine watersUnlike legislations existing in the United States of America wherein, aside from the workmen’s compensation laws adopted by the different States, the federal admiralty laws and the Longshoremen’s and Harbor Workers’ Compensation Act are in force, the Philippine Legislature has deemed it advisable to include in the Workmen’s Compensation Act all accidents that may occur to workmen or employees in factories, shops and other industrial and agricultural workplaces as well as in the interisland seas of the archipelago. The applicability of the Workmen’s Compensation Act to accidents occurring in the Philippine seas has been discussed for the first time in the case of Enciso vs. Dy-Liacco (57 Phil., 446 et seq.), where the question was decided affirmatively.
7. Section 38 of Act 3428, as amended by Section 12 of Act 3812; Interisland tradeSection 38 of Act No. 3428, as amended by section 12 of Act No. 3812, provides that “this Act shall cover the liability of the employers towards employees engaged in the coastwise and interisland trade, and also in the foreign trade when such is permissible under the laws of the United States and the Philippine Islands.”
8. Enciso vs. Dy-Liacco; Workmen’s compensations acts enacted to abrogate common law and Civil code relative to obligation arising from negligenceIn the case of Enciso vs. Dy-Liacco, supra, this court stated that the consensus of opinion and of the decisions of the courts of various States of the Union is that workmen’s compensation acts have been enacted to abrogate the common law and the Civil Code relative to obligations arising from nonpunishable fault or negligence. It has been repeatedly stated that the Workmen’s Compensation Law was enacted to abrogate the common law and our Civil Code upon culpable acts and omissions, and that the employer need not be guilty of neglect or fault, in order that responsibility may attach to him.
9. Enciso vs. Dy-Liacco; Diverse means of attaining purpose of compensation actsThe compensation acts, especially the pioneer enactments differ considerably, one from another, in many essential aspects. While the purpose sought to be accomplished is the same, the legislatures of the various states chose diverse means for its attainment. One thing is characteristic of all of the acts; the common law doctrines of negligence are abrogated, and in place of the common law procedure is substituted a scheme for achieving cheap, speedy justice. (28 R. C. L., p. 714.)
10. Statutes prescribing liability without fault valid; Similar lawsThe compensation acts do create liability without fault, the courts have uniformly held this to be no objection to their validity. Philippine jurisprudence affords numerous examples of liability without fault and the deprivation of property without fault being attributable to its owner. Statutes making railroad corporations absolutely liable, without regard to negligence, for injuries to property caused by fire escaping from their locomotive engines, are clearly statutes creating liability without fault, yet these statues have been upheld by all the courts of the states in which they have been upheld by all the courts of the state in which they have been enacted, as well as by the
Supreme Court of the United States. As a matter of fact, the workmen’s compensation act does exactly the same thing as the safety appliance acts; it imposes new duties of care on the employer - the difference being that in one case the duty is announced in definite terms, whereas in the other it rests in implication. As expressed by the United States Supreme Court, ‘the common law bases the employer’s liability for injuries to the employee upon the ground of negligence; but negligence is merely the disregard of some duty imposed by law; and the nature and extent of the duty may be modified by legislation, with corresponding change in the test of negligence.’ . . .” (28 R. C. L., pp. 752, 753.)
11. Workmen’s compensation act distinct from damages, payments made as compensationThe workmen’s compensation acts are based on a new theory of compensation distinct from the theories of damages, payments under the acts being made as compensation, not as indemnity (74 C. J., 232; Mobile & O. R. Co. vs. Industrial Commission of Illinois, 28 F. [2d] 228; Martin vs. Kennecott Copper Corporation, 252 F. 207; Devine’s Case, 129 N. E., 414; Duart vs. Simmons, 121 N. E., 100; 251 U. S., 547; Kenney vs. Boston, 111 N. E., 47; Erie R. Co. vs. Linnekogel, 248 F., 389; De Biasi vs. Normandy Water Co., 228 F., 234; Schlickenmayer vs. City of Highland Park, 235 N. W., 156; Andrejwski vs. Wolverine Coal Co., 148 N. W., 684; Flanigan vs. Hines, 193 P., 1077).
12. Intention of legislature in enacting Workmen’s Compensation ActThe intention of the Legislature in enacting the Workmen’s Compensation Act was to secure workmen and their dependents against becoming objects of charity, by making a reasonable compensation for such accidental calamities as are incidental to the employment.
13. Compensation for injuries as item in cost of production or transportationUnder such Act injuries to workmen and employees are to be considered no longer as results of fault or negligence, but as the products of the industry in which the employee is concerned. Compensation for such injuries is, under the theory of such statute, like any other item in the cost of production or transportation, and ultimately charged to the consumer. The law substitutes for liability for negligence an entirely new conception; that is, that if the injury arises out of and in the course of the employment, under the doctrine of man’s humanity to man, the cost of compensation must be one of the elements to be liquidated and balanced in the course of consumption. In other words, the theory of the law is that, if the industry produces an injury, that cost of that injury shall be included in the cost of the product of the industry. Hence the provision that the injury must arise out of and in the course of the employment (Mobile & O. R. Co. vs. Industrial Commission of Illinois, 28 F. [2d], 228, 229).
14. Accidents compensated independently of employer’s negligence; ExceptionsUnder Act 3428, as amended by Act 3812, accidents are compensated independently of whether or not the employer has incurred fault or negligence, and the only exceptions thereto are the accidents arising from the voluntary act of the injured person, those resulting from the drunkenness of the employee who had the accident, and those caused by the notorious negligence thereof (section 4, Act 3428).
15. Section 2 of Act 3428, as amended by Section 1 of Act 3812Section 2 of the Act no. 3428, as amended by section 1 of Act 3812, provides that in order that an accident may be compensated, it is necessary that it has arisen out of and in the course of the employment.
16. “Arising out of employment” construedA definition of the phrase arising out of the employment that has received wide favor is the one stating that this element required by law exists when there is apparent to the rational mind, upon consideration of all of the circumstances, a causal connection between the conditions under which the work is required to be performed and the resulting injury (71 C. J., 648; Michigan Transit Corporation vs. Brown, 56 F. [2d], 200, 202; In re Employers’ Liability Assur. Corporation, 102 N. E., 697; Industrial Commission of Colorado vs. Enyeart, 256 P., 314, 315; Mann vs. Glastonbury Knitting Co., 96 A., 368; 90 Conn., 116; Vincennes Bridge Co. vs. Industrial Commission, 184 N. E., 603, 605; Triangle Auto Painting & Trimming Co. vs. Industrial Commission, 178 N. E., 886, 889; Landon vs. Industrial Commission, 173 N. E. 49, 50; Franklin Coal & Coke Co. vs. Industrial Commission, 152 N. E., 498, 500; Edelweiss Gardens vs. Industrial Commission, 125 N. E., 260; Texas Indemnity Ins. Co. vs. McLaury, 54 S. E. [2d], 862, 863). It is said that an accident has arisen in the course of the employment when it has occurred within the period of the employment, at a place where the employee may reasonably be, and while he is reasonably fulfilling the duties of his employment (71 C. J., 659; Stakonis vs. United Advertising Co., 148 A., 334; Taylor vs. St. Paul’s Universalist Church, 145 A., 887; Flanagan vs. Webster & Webster, 142 A., 201; Larke vs. John Hancock Mut. L. Ins. Co., 97 A., 320).
17. Determination whether death arose out of employmentIn investigating whether or not the death of said official arose out of his employment, all of the circumstances
present in the case should be taken into consideration in order to be able to determine whether or not a causal connection exists between his said death and the conditions under which he necessarily had to fulfill his duties. The deceased was contracted and employed to direct and render services in the vessel. When he accepted the employment, he knew that he was in duty bound to render services in good weather as well as when the vessel encountered a storm or typhoon, and it may be stated that he must have been aware that in case of a typhoon his services has to be rendered in a higher degree, because in such event it was part of his duties to save the vessel.
18. Death of Madrid compensableTaking into consideration all of these circumstances, it is clear that his death is compensable under the law on the ground that a causal relation existed between such death and the conditions under which he had to perform his employment. It is obvious that the typhoon was the immediate cause of the sinking of the vessel and that there existed no causal relation between it and the employment of the deceased. It is evident, however, that between the conditions and circumstances under which the deceased discharged his employment and his death, there existed the causal connection which makes the accident compensable.
19. Employer not responsible from force majeure when employee not exposed to a greater danger than usualThe doctrine is generally accepted that the employer is not responsible for accidents arising from force majeure or an act of God, as it is usually called, when the employee has not been exposed to a greater danger than usual. However, in the case of the deceased and in that of a sailor, it cannot be denied that upon contracting their services to navigate in the waters of the archipelago, having to render extraordinary services in cases of typhoon, they are exposed to greater risk than usual, in comparison with other employees working on land.
20. Injuries resulting from exposure to special or peculiar dangers of elements compensable under WCAInjuries resulting from exposure to the elements are generally classed as risks to which the general public is exposed. The rule is generally recognized that if an employee, by reason of his duties, is exposed to a special or peculiar danger from the elements, i.e., one greater than that to which other persons in the community are exposed, and an unexpected injury is sustained by reason of the elements, the injury constitutes an accident arising out of and in the course of the employment within the meaning of the workmen’s compensation acts. And this rule has been recognized and applied in later cases. (83 A. L. R. Annotation, page 234).
21. Determining when risk incidental to and arisen out of employmentThe nature of the employment, the conditions under which it was to be and was pursued, the exposure to probable injury from reasonably to be expected storms of similar character were all matters incident to such a risk as was here underwritten, and therefore an injury maturing such a risk could well be said to have been incidental to and to have arisen out of that employment.’” (Workmen’s Compensation Law, Schneider, vol. I, pp. 1076, 1077.)
22. Similarity of accident caused by lightning and one caused by typhoonThere is similarity between an accident caused by lightning and one caused by a typhoon because both are fortuitous events and of the so-called acts of God by reason of such similarity some cases decided by the courts in connection with accidents caused by lightning may be cited to better illustrate the doctrine laid down by the Court.
23. Aetna Life Insurance vs. Industrial Commission of ColoradoIn the case of Aetna Life Ins. Co. vs. Industrial Commission of Colorado (254 P., 995), the Supreme Court of said State held that the death of a farm hand, who was struck by lightning while driving a team of horses across a hill near a wire fence, was compensable as an accident which arose out of his employment.
24. Moody vs. TillmanIn the case of Moody vs. Tillman (163 S. E., 521), the Supreme Court of Georgia held that burns received by a workman employed to sound a turpentine still, where burns resulted from the still’s catching fire by lightning, had arisen out of the employment and were compensable.
25. Mathis vs. Ash Grove LimeIn the case of Mathis vs. Ash Grove Lime & Portland Cement Co. (272 P., 183), the Supreme Court of Kansas held that the death of the employee of some quarries, by lightning, while he was walking along the railroad track on his way from one quarry to another, was compensable and that such death arose out of the employment.
26. Lebourgeois vs. Lyon LumberIn the cases of Lebourgeois vs. Lyon Lumber Co. (6 La. App., 216); Fontenot vs. Lyon Lumber Co. (6 La. App., 162), and Gasca vs. Texas Pipe Line co. (2 La. App., 483), the Supreme Court of Louisiana held that an employee killed by lightning while eating his launch near a tree at the noon hour, was killed by an accident arising out of his employment and was compensable.
27. Article 643 of the Code of CommerceArticle 643 of the Code of Commerce provides that “If the vessel and her freight should be totally lost, by reason of capture or wreck, all rights of the crew to demand any wages whatsoever shall be extinguished, as well as that of the agent for the recovery of the advances made.”
28. Article 837 of the Code of CommerceArticle 837 of the Code of Commerce provides that “The civil liability contracted by the shipowners in the cases prescribed in this section, shall be understood as limited to the value of the vessel with all her appurtenances and all the freight earned during the voyage.”
29. Compensation in favor of workmen and employees under WCA to be paid even if it is not recognized or in conflict with provisions of the Civil Cod and Code of CommerceThe rights and responsibilities defined in the Workmen’s Compensation Act must be governed by its own peculiar provisions in complete disregard of other similar provisions in complete disregard of other similar provisions of the civil as well as the mercantile law. If an accident is compensable under the Workmen’s Compensation Act, it must be compensated even when the workman’s right is not recognized by or is in conflict with other provisions of the Civil Code or of the Code of Commerce. The reason behind this principle is that the Workmen’s Compensation Act was enacted by the Legislature in abrogation of the other existing laws. Workmen’s compensation acts follow the natural and logical evolution of society and the theory upon which they are based is that each time an employee is killed or injured, there is an economic loss which must be made up or compensated in some way. The burden of this economic loss should be borne by the industry rather than by society as a whole. A fund should be provided by the industry from which a fixed sum should be set apart as every accident occurs to compensate the person injured, or his dependents, for his or their loss (State vs. Industrial Commission, 111 N. E., 299; L. R. A. 1916D, 944).
30. Humanity and civilization demand protection for workman in every line of laborThe court is aware of the fact that the practical application of the doctrine laid down will perhaps occasion great losses to the shipowners doing business in this country, but humanity and civilization demand protection for the workman in every line of labor, and to fulfill this social objective and at the same time avoid ruin, employers and shipowners should employ means to insure the stability of their business.
Sat 2 Oct 2004
Transportation Law: McMicking vs. El Banco Espanol-Filipino (GR 5029, 1 April 1909)
Posted by Berne Guerrero under (a) oas , haystacksNo Comments
McMicking vs. El Banco Espanol-Filipino (GR 5029, 1 April 1909)En Banc, Johnson (J): 4 concur
Facts: On 21 February 1907, one Sanchez and one Cue Suan as a sociedad en comandita were the owners of certain steamship, known as the Hock-Tay. Said sociedad borrowed from El Banco Espanol-Filipino the sum of P30,000 at 8% per annum from 21 September 1907, until paid, and gave as security for the payment of said sum a chattel mortgage executed and delivered in accordance with Act 1508 of the Philippine Commission. Said mortgage was duly recorded in the office of the collector of customs of the port of Manila on 27 February 1907, in the record of conveyances of titles, mortgages and hypothecations of vessels documented at said port. Said mortgage was duly recorded in the office of the register of property of the city of Manila on 13 September 1907, in accordance with the provisions of section 4 of said Act (No. 1508). The last voyage of the steamer Hock-Tay began on 12 September 1907, and ended on 29 September of the same year. Captain Manuel Ayala was the one who collected from the agents “Sanchez y Cue Sang,” the wages of the crew hired by him and who distributed the same among them, the said crew having nothing to do with the ship’s agents whom they did not know and
with whom they made no contract except through Captain Ayala. The officers and crew of the steamer Hock-Tay, the same as all those belonging to the coastwise trade of these Islands, were hired upon a monthly salary with food and drink. Inchausti & Co., as charterers of the steamer Hock-Tay, paid to Manuel Ayala, during the month of September, 1907, all the expenses for subsistence, with the exception of those corresponding to the maintenance of the officers and crew, and that the balances only refer to the food and drink of the officers and crew. On 10 October 1907, El Banco Espanol-Filipino caused to be delivered to the sheriff of the city of Manila the said chattel mortgage on the said steamer, Hock-Tay, together with notice that the terms of said mortgage had been broken by the mortgagors, and requested that the sheriff sell said mortgaged property in accordance with the provisions of section 14 of said Act. The sheriff gave notice to said mortgagors of said request on the part of the said mortgagee (El Banco Espanol-Filipino) and that said ship would be sold in accordance with the law. Due notice was given of the sale of said mortgaged property (the Hock-Tay) in accordance with the provisions of said Act. The date fixed for the sale of said property was 27 October 1907. On 27 October 1907, Manuel Ayala served upon the said sheriff a notice, in his capacity as captain of the steamer Hock-Tay, demanding that the Sheriff should not deliver to Banco Espanol-Filipino the sum of P4,441,92, which is the amount of the wages of the crew and expenses of supplies now owing, and which, in accordance with the Code of Commerce, constitute preferred claims. On 27 October 1907, the steamer was sold to the highest bidder for cash for the sum of P30,000.
On 30 October 1907, the sheriff of the city of Manila filed a complaint in the Court of First Instance of the city of Manila to request Banco Eapanol Filipino and Ayala to interplead their respective rights to the funds acquired resulting from the auction sale. The trial court rendered a judgment on 29 September 1908, holding that there is due Ayala from the proceeds of the sale of the vessel and in preference to the claim of the mortgagee the said sum of P756.66; and adjudging that the judgment of 20 January 1908, be vacated and that the sheriff of Manila, out of the proceeds of the sale of said vessel as reported by him, pay to Ayala the said sum of P756.66, and that the balance of said proceeds less the costs of the proceeding be paid to the mortgagee, the Banco Espanol-Flipino.
From the decision of the lower court, Ayala duly appealed.
The Supreme Court affirmed the judgment of the lower court, without any special finding as to costs.
1. Article 580 of the Code of CommerceArticle 580 provides that “In all judicial sales of vessels for the payment of creditors, the following shall have preference in the order stated: (1) The credits in favor of the public treasury which are accounted for by means of a judicial certificate of the competent authority. (2) The judicial costs of the proceedings, according to an appraisement approved by the judge or court. (3) The pilotage charges, tonnage dues, and the other sea or port charges, proven by means of proper certificates of the officers intrusted with the collection. (4) The salaries of the caretakers and watchmen of the vessel and any other expense connected with the preservation of said vessel, from the time of arrival until her sale, which appear to have been paid or are due by virtue of a true account approved by the judge or court. (5) The rent of the warehouse where the rigging and stores of the vessel have been taken care of, according to contract. (6) The salaries due the captain and crew during their last voyage, which shall be vouched for by virtue of the liquidation made from the shipping articles and account books of the vessel, approved by the chief of the bureau of merchant marine where there is one, and in his absence by the counsel, or judge, or court. (7) The reimbursement for the goods of the freight the captain may have sold in order to repair the vessel, provided the sale has been ordered by a judicial instrument executed with the formalities required in such cases, and recorded in the certificate of the registry of the vessel. (8) The part of the price which has not been paid the last vendor, the credits pending for the payment of material and work in the construction of the vessel, when it has not navigated, and those arising from the repair and equipment of the vessel and its provisioning with victuals and fuel during its last voyage. In order that said credits may enjoy the preference contained in this number, they must appear by contracts recorded in the commercial registry, or if they were contracted for the vessel while on a voyage and said vessel has not returned to the port where she is registered, they must be proven with the authority required for such cases and entered in the certificate of the record of said vessel. (9) The amounts borrowed on bottomry bonds before the departure of the vessel, proven by means of the contracts executed according to law and recorded in the commercial registry, the amounts borrowed during the voyage with the authority mentioned in the foregoing number, filling the same requisites, and the insurance premium, proven by the policy of the contract or certificate taken from the books of the broker. (10) The indemnity due the shippers for the value of the goods shipped, which were not delivered to the consignees, or for averages suffered for which the vessel is liable, provided either appear in a judicial or arbitration decision.”
2. Article 580, paragraph 6By reference to paragraph 6 of said article 580, it is seen that in all judicial sales of vessels the salaries due the
captain and the crew during the last voyage shall be paid in accordance with the preferences mentioned in said article out of the proceeds of said ship.
3. Article 646 of the Code of CommerceArticle 646 of said Code of Commerce provides that “The vessel with her engines, rigging, equipment, and freights shall be liable for the pay earned by the crew engaged per month or for the trip, the liquidation and payment to take place between one voyage and the other. After a new voyage has been undertaken, credits such as the former shall lose their right of preference.”
4. Article 646 in relation to Article 580Article 646 creates a lien upon a ship in favor of the crew engaged in the operation of the same and this lien in favor of the crew takes certain preference in accordance with the provisions of said article 580. The wages due the crew and expenses incurred in maintaining the ship during the last voyage constitute a lien under the law and take preference over a lien created by giving the ship as security for money borrowed. The crew, therefore, under article 580 of the Commercial Code, for their wages, etc., for the last voyage, have a prior lien upon a ship, to the lien created in the present case by the chattel mortgage.
5. Liens in favor of crew in present circumstances known as legal liensLiens in favor of the crew under these circumstances are known as legal liens and whoever buys a ship or loans money and takes a chattel mortgage as security, takes the ship subject to such prior liens. Herein, the said mortgage was executed and delivered in accordance with the provisions of Act 1508 of the Philippine Commission. The ship was sold by the sheriff of the city of Manila in accordance with the provisions of section 14 of that Act.
6. Section 14, Act 1508; MethodSection 14 provides the method of disposing of the funds received under such a sale. The method is as follows: “The proceeds of such sale shall be applied to the payment, (1) of the cost and expenses of keeping and sale; (2) to the payment of the demand or obligation secured by such mortgages; (3) the residue shall be paid to persons holding subsequent mortgages in their order and (4) the balance shall be paid to the mortgagor or person holding under him or demand.”
7. Reason for the absence of provision for using funds received in mortgaged sale of amounts due on prior liens; IllustrationThere is no provision in the law for using the funds received in the sale of mortgaged property for the payment of amounts due on prior liens. The reason is plain why no such provision was made. It is that in no case can such a sale or a sale based upon the second mortgage or lien upon property affect in any way prior liens. To illustrate: Suppose that “A held a mortgage against the ship in question, executed, delivered a recorded prior to the date of the mortgage executed, delivered, and recorded to and by El Banco Espanol-Filipino. Certainly the sale of the ship under the mortgage in favor of the second mortgage could in no way affect the rights which “A” held against the ship and the purchaser under the sale of the mortgage in favor of Banco Espanol-Filipino would take the ship subject to the claim which “A” held against the same. The lien which Manuel Ayala and the other members of his crew held against the said ship were exactly analogous to the claims of “A” in the above illustration. Therefore the sale of the ship under the mortgage in question in no way divested the line which the law created in favor of the said Manuel Ayala and his crew against the ship in question.
8. Remedy of Ayala and other members of his crewAyala’s remedy is not against the money which was received under said sale, but against the ship by foreclosing his lien against the same. It is true that under a sale of personal property in accordance with section 14 of said Act, the sheriff has a right to pay the costs and expenses of keeping and sale, but the Court is not of the opinion that this relates to the cost of keeping and maintaining the ship prior to the time when the sheriff takes possession of it for the purpose of selling the same.
9. Two methods of sale in Code of Commerce; Article 580, and Articles 579 and 584The Code of Commerce refers to two methods of sale: one a judicial and the other a voluntary sale. Article 580 provides how the funds received from a judicial sale shall be distributed and for the cancellation of liens held against the ship. But it can not be contended, even under the provisions of article 583, that the mere fact that a ship has been sold under a judicial sale, the rights of prior lien holders, who were not parties to the procedure under which such sale took place, were foreclosed. The rights of persons not parties to a proceeding can not be affected thereby. Article 582 gives a certain time within which the creditors shall present and enforce their liens when the sale is a voluntary one. Article 579 and 584 provide a method of collecting or enforcing not only the liens created under section 580 but also for the collection of any other kind of lien whatsoever.
10. Section 114 of Code of Procedure in Civil Actions; Action prosecuted in name of real party in interest; PurposeSection 114 of the Code of Procedure in Civil Actions expressly provides that every action must be prosecuted in the name of the real party in interest. This section of the code recognizes the assignments of rights of action and also recognizes that when one has a right of action assigned to him he is then the real party in interest and may maintain an action upon such claim or right. The purpose of section 114 is to require the plaintiff to be the real party in interest, or, in other words, he must be the person to whom the proceeds of the action shall belong, and to prevent actions by persons who have no interest in the result of the same. Of course the said section can not be construed to prohibit the maintenance of an action by one who is legally authorized to represent the real parties in interest. Herein, Ayala was allowed to collect the amount that was due him, as well as the amount which was due other members of the crew and which had been assigned to him.
Fri 1 Oct 2004
Transportation Law: Heirs of de los Santos vs. CA (GR 51165, 21 June 1990)
Posted by Berne Guerrero under (a) oas , haystacksNo Comments
Heirs of de los Santos vs. CA (GR 51165, 21 June 1990)First Division, Medialdea (J): 4 concur
Facts: On 2 November 1967, Mauricio de los Santos accompanied his common-law wife, Amparo delos Santos, and children, namely: Romeo, Josie, Hernani (10 years old), Abella (7 years old), Maria Lemia (5 years old) and Melany (5 months old), to pier 8, North Harbor, Manila, to board the M/V ‘Mindoro’, owned by Compania Maritima, bound for Aklan. Amparo delos Santos and the aforesaid children brought all their belongings, including household utensils valued at P1,000.00, with the intention of living in Aklan permanently. On the other hand, as to spouses Diego Salim and Teresa Pamatian, Diego brought with him P200 in cash and some belongings, while Teresa brought some cash and personal belongings worth P250. Diego boarded the vessel even if he did not have yet a ticket. As to Ruben Reyes, he brought with him personal belongings and cash in the amount of P2,900. M/V ‘Mindoro’ sailed from pier 8 North Harbor, Manila, at about 6:00 p.m. (should have sailed at 2:00 p.m.) of said day bound for New Washington, Aklan, with many passengers aboard (about 200). Amparo was not included in the manifest as she boarded the boat without ticket, but appeared to have purchased one in the vessel. It appears that said vessel met typhoon ‘Welming’ on the Sibuyan Sea, Aklan, at about 5:00 a.m. of 4 November 1967 causing the death of many of its passengers, including Amparo delos Santos and her children. Other drowned victims include spouses Teresa Pamatian and Diego Salim, and also Felix Reyes Jakusalam. 136 survived the accident, including Ruben Reyes and Eliadora Crisostomo de Justo. Eliandora was able to board a balsa, while Ruben was able to swim to an island and with others, rescued later on and brought to the hospital.
A complaint was originally filed on 21 October 1968 and amended on 24 October 1968 by the heirs of Delos Santos and others as pauper litigants against the Compania Maritima, for damages due to the death of several passengers as a result of the sinking of the M/V ‘Mindoro’. The trial court, on 27 March 1974, adjudged the case in favor of Compania Maritima, dismissing the case due to lack of sufficient evidence.
Forthwith, Reyes, and the heirs of the Delos Santos(es), Diego Salim, and Teresa Pamatian brought an appeal to the Court of Appeals. The appellate court affirmed the decision on appeal.
The Supreme Court reversed the appealed decision, and rendered judgment sentencing Compania Maritima to pay the following: (1) P30,000.00 as indemnity for death to the heirs of each of the victims; (2) P10,000.00 as moral damages to the heirs of each of the victims; (3) P6,805.00 as actual damages divided among the petitioners as follows: heirs of Amparo Delos Santos and her deceased children, P2,000.00; heirs of Teresa Pamatian, P450.00; heirs of Diego Salem, P400.00; and Ruben Reyes, P2,955.00; (4) P10,000.00 as attorney’s fees; and (5) the costs.
1. Article 587 of the Code of CommerceArticle 587 of the Code of Commerce provides that “The ship agent shall also be civilly liable for indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he
loaded on the vessel, but he may exempt himself therefrom by abandoning the vessel with all her equipment’s and the freight it may have earned during the voyage.”
2. Liability of shipowner or agent confined to which he is entitled as to right to abandonUnder Article 587 of the Code of Commerce, a shipowner or agent has the right of abandonment; and by necessary implication, his liability is confined to that which he is entitled as of right to abandon — “the vessel with all her equipment’s and the freight it may have earned during the voyage” (Yangco v. Laserna, et al., 73 Phil. 330, 332).
3. Article 587 of the Code of Commerce still a good law; ReasonNotwithstanding the passage of the New Civil Code, Article 587 of the Code of Commerce is still good law. The reason lies in the peculiar nature of maritime law is which is “exclusively real and hypothecary that operates to limit such liability to the value of the vessel, or to the insurance thereon, if any (Yangco v. Laserna, ibid). This rule is found necessary to offset against the innumerable hazards and perils of a sea voyage and to encourage shipbuilding and marine commerce.
4. Application of the limited liability doctrineThe limited liability doctrine applies not only to the goods but also in all cases like death or injury to passengers wherein the shipowner or agent may properly be held liable for the negligent or illicit acts of the captain (Yangco v. Laserna, ibid). Article 587 speaks only of situations where the fault or negligence is committed solely by the captain. In cases where the shipowner is likewise to be blamed, Article 587 does not apply (see Manila Steamship Co., Inc. v. Abdulhanan, et al., 100 Phil. 32, 38). Such a situation will be covered by the provisions of the New Civil Code on Common Carriers.
5. Extraordinary diligence in vigilance over goods and safety of passengers required of common carriers; Utmost diligence of very cautious persons in carrying passengers; Presumption of faultOwing to the nature of their business and for reasons of public policy, common carriers are tasked to observe extraordinary diligence in the vigilance over the goods and for the safety of its passengers (Article 1733, New Civil Code). Further, 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 a due regard for all the circumstances (Article 1755, New Civil Code). Whenever death or injury to a passenger occurs, common carriers are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as prescribed by Articles 1733 and 1755 (Article 1756, New Civil Code).
6. Modern technology belie contention that Maritima did not have information as to typhoon WelmingModern technology belie Maritima’s contention that it did not have any information about typhoon ‘Welming’ until after the boat was already at sea. The Weather Bureau is now equipped with modern apparatus which enables it to detect any incoming atmospheric disturbances. During the periods of November 1-5, 1967, the Bureau issued a total of 17 warnings or advisories of typhoon ‘Welming’ to shipping companies. Considering the the late departure of the ship at 6:00 p.m. (instead of the scheduled 2:00 p.m. departure) on 2 November 1967, it is highly improbable that the Weather Bureau had not yet issued any typhoon bulletin at any time during the day to the shipping companies. Maritima submitted no convincing evidence to show this omission.
7. Ship’s captain aware of typhoon, Maritima duly informed; Maritima displayed lack of foresight and minimum concern for safety of passengersHerein, It cannot be true that he was apprised of the typhoon only at about 11:00 a.m. on 3 November 1967 when the Weather report was transmitted to him from the Weather Bureau at which time he plotted its position. For in his radiogram sent to Maritima’s office in Manila as early as 8:07 a.m. of 3 November 1967, he stated in the concluding portion “still observing weather condition.” thereby implicitly suggesting that he had known even before departure of the unusual weather condition. ” If the captain knew of the typhoon beforehand, it is inconceivable for Maritima to be totally in the dark of ‘Welming.’ In allowing the ship to depart late from Manila despite the typhoon advisories, Maritima displayed lack of foresight and minimum concern for the safety of its passengers taking into account the surrounding circumstances of the case.
8. Maritima shares equally in ship captain’s negligenceWhile the captain was negligent for overloading the ship, Maritima shares equally in his negligence. While M/V Mindoro was already cleared by the Bureau of Customs and the Coast Guard for departure at 2:00 p.m. the ship’s departure was, however, delayed for 4 hours. Maritima could not account for the delay because it neither checked from the captain the reasons behind the delay nor sent its representative to inquire into the cause of such delay. It was due to this interim that iindeed there is a great probability that unmanifested cargo (such as dump truck, 3 Toyota cars, steel bars, and 6,000 beer cases) and passengers (about 241 more than the authorized 193 passengers) were loaded during the 4 hour interval.” Perchance, a closer supervision could have prevented
the overloading of the ship. Maritima could have directed the ship’s captain to immediately depart in view of the fact that as of 11:07 a.m. of 2 November 1967, the typhoon had already attained surface winds of about 240 kilometers per hour. Verily, if it were not for this delay, the vessel could have reached its destination and thereby have avoided the effects of the storm. This conclusion was buttressed by evidence that another ship, M/V Mangaren, an inter island vessel, sailed for New Washington, Aklan on 2 November 1967, ahead of M/V Mindoro and took the same route as the latter but it arrived safely.
9. Seaworthiness; Necessity of installation of a radarMaritima presents evidence of the seaworthy condition of the ship prior to its departure to prove that it exercised extraordinary diligence in this case. M/V Mindoro was dry-docked for about a month. Necessary repairs were made on the ship. Life saving equipment and navigational instruments were installed. Maritima, however, could not present evidence that it specifically installed a radar which could have allowed the vessel to navigate safely for shelter during a storm. Consequently, the vessel was left at the mercy of ‘Welming’ in the open sea because although it was already in the vicinity of the Aklan river, it was unable to enter the mouth of Aklan River to get into New Washington, Aklan due to darkness and the Floripon Lighthouse at the entrance of the Aklan River was not functioning or could not be seen at all. With the impending threat of ‘Welming,’ an important device such as the radar could have enabled the ship to pass through the river and to safety.
10. Storms and typhoons not strange occurrencesStorms and typhoons are not strange occurrences. In 1967 alone before ‘Welming,’ there were about 17 typhoons that hit the country, the latest of which was typhoon Uring which occurred on October 20-25, which cost so much damage to lives and properties.
11. Maritima’s negligence proximate cause of sinking of M/V MindoroMaritima’s lack of extraordinary diligence coupled with the negligence of the captain were the proximate causes of the sinking of M/V Mindoro. Hence, Maritima is liable for the deaths and injury of the victims.
12. Trial court generally fix amount of damages; ExceptionsOrdinarily, the Supreme Court would remand the case to the trial court for the reception of evidence. Considering however, that the case has been pending for almost 23 years and that since all the evidence had already been presented by both parties and received by the trial court, the Supreme Court resolved to decide the corresponding damages due to petitioners (see Samal v. Court of Appeals, 99 Phil. 230; Del Castillo v. Jaymalin, L-28256, March 17, 1982, 112 SCRA 629).
13. Amount of damages for the death of passenger caused by breach of contract of carriageUnder Article 1764 in relation to Article 2206 of the New Civil Code, the amount of damages for the death of a passenger caused by the breach of contract by a common carrier is at least P3,000.00. The prevailing jurisprudence has increased the amount of P3,000.00 to P30,000.00 (De Lima v. Laguna Tayabas Co., L-35697-99, April 15, 1988, 160 SCRA 70). Consequently, Maritima should pay the civil indemnity of P30,000.00 to the heirs of each of the victims. For mental anguish suffered due to the deaths of their relatives, Maritima should also pay to the heirs the sum of P10,000.00 each as moral damages.
14. Actual damagesIn addition, at the time of death, (1) Amparo delos Santos had with her cash in the sum of P1,000.00 and personal belongings valued at P500.00; (2) Teresa Pamatian, cash in the sum of P250.00 and personal belongings worth P200.00; and (3) Diego Salem, cash in the sum of P200.00 and personal belongings valued at P100.00. Likewise, the heirs of Amparo delos Santos and her deceased children incurred transportation and incidental expenses in connection with the trial in the amount of P500.00 while Dominador Salem, son of victim Diego Salem and nephew of victim Teresa Pamatian spent about P100.00 for expenses at the trial. With respect to Reyes, the evidence shows that at the time of the disaster, he had in his possession cash in the sum of P2,900.00 and personal belongings worth P100.00. Further, due to the disaster, Reyes was unable to work for 3 months due to shock and he was earning P9.50 a day or in a total sum of P855.00. He also spent about P100.00 for court expenses. For such losses and incidental expenses at the trial of the case, Maritima should pay the amounts to the petitioners as actual damages.
15. Moral damages not due; Exception to rule that moral damages not recoverable in action based on breach of contractReyes’ claim for moral damages cannot be granted inasmuch as the same is not recoverable in damage action based on the breach of contract of transportation under Articles 2219 and 2220 of the New Civil Code except (1) where the mishap resulted in the death of a passenger and (2) where it is proved that the carrier was guilty of fraud or bad faith, even if death does not result (Rex Taxicab Co., Inc. v. Bautista, 109 Phil. 712). The exceptions do not apply in the present case since Reyes survived the incident and no evidence was presented to
show that Maritima was guilty of bad faith. Mere carelessness of the carrier does not per se constitute or justify an inference of malice or bad faith on its part (Rex Taxicab Co., Inc. v. Bautista, supra).
16. Exemplary damages not dueAnent the claim for exemplary damages, the Court is not inclined to grant the same in the absence of gross or reckless negligence in this case.
17. Attorney’s feesAs regards the claim for attorney’s fees, the records reveal that the petitioners engaged the services of a lawyer and agreed to pay the sum of P3,000.00 each on a contingent basis. In view thereof, The Court finds the sum of P10,000.00 as a reasonable compensation for the legal services rendered.
Fri 1 Oct 2004
Transportation Law: Mecenas vs. CA (GR 88052, 14 December 1989)
Posted by Berne Guerrero under (a) oas , haystacksNo Comments
Mecenas vs. CA (GR 88052, 14 December 1989)Third Division, Feliciano (J): 4 concur
Facts: At 6:20 a.m. of 22 April 1980, the M/T “Tacloban City,” a barge-type oil tanker of Philippine registry, with a gross tonnage of 1,241.68 tons, owned by the Philippine National Oil Company (PNOC) and operated by the PNOC Shipping and Transport Corporation (PNOC Shipping), having unloaded its cargo of petroleum products, left Amlan, Negros Occidental, and headed towards Bataan. At about 1:00 p.m. of that same day, the M/V “Don Juan,” an inter-island vessel, also of Philippine registry, of 2,391.31 tons gross weight, owned and operated by the Negros Navigation Co., Inc. (Negros Navigation) left Manila bound for Bacolod with 750 passengers listed in its manifest, and a complete set of officers and crew members. At about 10:30 p.m., the “Tacloban City” and the “Don Juan” collided at the Talbas Strait near Maestra de Ocampo Island in the vicinity of the island of Mindoro. When the collision occurred, the sea was calm, the weather fair and visibility good. As a result of this collision, the M/V “Don Juan” sank and hundreds of its passengers perished. Among the ill-fated passengers were the spouses Perfecto Mecenas and Sofia Mecenas, whose bodies were never found despite intensive search by their children, Jose, Romeo, Lilia, Orlando, Violeta (Acervo), Luzviminda, and Ofelia (Javier).
On 29 December 1980, the Mecenas filed a complaint in the then Court of First Instance of Quezon City (Civil Case Q-31525), against Negros Navigation and Capt. Roger Santisteban, the captain of the “Don Juan” without, however, impleading either PNOC or PNOC Shipping. The children prayed for actual damages of not less than P100,000.00 as well as moral and exemplary damages in such amount as the Court may deem reasonable to award to them. Another complaint (Civil Case Q-33932), was filed in the same court by Lilia Ciocon claiming damages against Negros Navigation, PNOC and PNOC Shipping for the death of her husband Manuel Ciocon, another of the luckless passengers of the “Don Juan.” Manuel Ciocon’s body, too, was never found. The 2 cases were consolidated and heard jointly by the Regional Trial Court of Quezon City, Branch 82. On 17 July 1986, after trial, the trial court rendered a decision, ordering (a) Negros Navigation and Capt. Santisteban jointly and severally liable to pay the Mecenas, the sum of P400,000.00 for the death of their parents, Perfecto A. Mecenas and Sofia P. Mecenas; to pay the Mecenas the sum of P15,000.00 as and for attorney’s fees; plus costs of the suit; (b) each of Negros Navigation PNOC/PNOC Shipping to pay Ciocon the sum of P100,000.00 for the death of Manuel Ciocon, to pay Ciocon jointly and severally, the sum of P15,000.00 as and for attorney’s fees, plus costs of the suit.
Negros Navigation, Capt. Santisteban, PNOC and PNOC Shipping appealed the trial court’s decision to the Court of Appeals. Later, PNOC and PNOC Shipping withdrew their appeal citing a compromise agreement reached by them with Negros Navigation; the Court of Appeals granted the motion by a resolution dated 5 September 1988, subject to the reservation made by Lilia Ciocon that she could not be bound by the compromise agreement and would enforce the award granted her by the trial court. In time, the Court of Appeals rendered a decision dated 26 January 1989, affirming the decision of the lower court with modification with respect to Civil Case 31525, wherein Negros Navigation and Capt. Santisteban are held jointly and severally liable to pay the Mecenas the amount of P100,000.00 as actual and compensatory damages and
P15,000.00 as attorney’s fees and the cost of the suit. The Mecenas filed a petition for review in light of the reduction of the amount of damages awarded.
The Supreme Court granted the Petition for Review on Certiorari, reversed and set aside the Decision of the Court of Appeals insofar as it reduced the amount of damages awarded to the Mecenas to P100,000.00; restored the award granted by the trial court and augmented as follows: (a) P126,000.00 for actual damages; (b) P60,000.00 as compensatory damages for wrongful death; (c) P307,000.00 as moral damages; (d) P307,000.00 as exemplary damages making a total of P800,000.00; and (e) P15,000.00 as attorney’s fees. The Court also ordered the Mecenas to pay the additional filing fees properly due and payable in view of the award made, which fees shall be computed by the Clerk of Court of the trial court, and shall constitute a lien upon the judgment awarded; with costs against Negros Navigation and Capt. Santisteban.
1. Mecenas suit based on breach of contract of carriage, not quasi-delictBoth the trial court and the Court of Appeals considered the action (Civil Case Q-31525) brought by the sons and daughters of the deceased Mecenas spouses against Negros Navigation as based on quasi-delict. The action, however, is more appropriately regarded as grounded on contract, the contract of carriage between the Mecenas spouses as regular passengers who paid for their boat tickets and Negros Navigation; the surviving children while not themselves passengers are in effect suing the carrier in representation of their deceased parents.
2. Ciocon suit based on both contract (Negros Navigation) and quasi-delict (PNOC and PNOC Shipping)The suit (Civil Case Q-33932) filed by the widow Lilia Ciocon was correctly treated by the trial and appellate courts as based on contract (vis-a-vis Negros Navigation) and as well on quasi-delict (vis-a-vis PNOC and PNOC Shipping).
3. Liability of common carrier in action based upon breach of contract of carriageIn an action based upon a breach of the contract of carriage, the carrier under our civil law is liable for the death of passengers arising from the negligence or wilful act of the carrier’s employees although such employees may have acted beyond the scope of their authority or even in violation of the instructions of the carrier, which liability may include liability for moral damages.
4. Article 2232 NCCArticle 2332 of the Civil Code provides that “In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.”
5. Both vessels at faultThe then Commandant of the Philippine Coast Guard, Commodore B.C. Ochoco, in a decision dated 2 March 1981, held that the “Tacloban City” was “primarily and solely [sic] at fault and responsible for the collision.” Initially, the Minister of National Defense upheld the decision of Commodore Ochoco. On Motion for Reconsideration, however, the Minister of National Defense reversed himself and held that both vessels had been at fault. The trial court, after a review of the evidence submitted during the trial, arrived at the same conclusion that the Minister of National Defense had reached that both the “Tacloban City” and the “Don Juan” were at fault in the collision. The trial court found that “M/V Don Juan and Tacloban City became aware of each other’s presence in the area by visual contact at a distance of something like 6 miles from each other. They were fully aware that if they continued on their course, they will meet head on. Don Juan steered to the right; Tacloban City continued its course to the left. There can be no excuse for them not to realize that, with such maneuvers, they will collide. They executed maneuvers inadequate, and too late, to avoid collision.” They are thus equally negligent and are liable for damages. The Court of Appeals, for its part, reached the same conclusion. There is, therefore, no question that the “Don Juan” was at least as negligent as the M/T “Tacloban City” in the events leading up to the collision and the sinking of the “Don Juan.”
6. Fact pointing to negligence reaching level of recklessness or gross negligence; Captain and crew playing mahjongThe report of the Philippine Coast Guard Commandant set out that there had been fault or negligence on the part of Capt. Santisteban and his officers and crew before the collision and immediately after contact of the 2vessels. The decision of Commodore Ochoco said “MS Don Juan’s Master, Capt. Rogelio Santisteban, was playing mahjong before and up to the time of collision. Moreover, after the collision, he failed to institute appropriate measures to delay the sinking of MS Don Juan and to supervise properly the execution of his order of abandonship. As regards the officer on watch, Senior 3rd Mate Rogelio Devera, he admitted that he failed or did not call or inform Capt. Santisteban of the imminent danger of collision and of the actual collision itself . Also, he failed to assist his master to prevent the fast sinking of the ship. The record also indicates that Auxiliary Chief Mate Antonio Labordo displayed laxity in maintaining order among the passengers after the
collision.” The behaviour of the captain of the “Don Juan” in this instance — playing mahjong “before and up to the time of collision” — constitutes behaviour that is simply unacceptable on the part of the master of a vessel to whose hands the lives and welfare of at least 750 passengers had been entrusted.
7. No such thing as “off-duty” hours for master of a vesselWhether or not Capt. Santisteban was “off-duty” or “on-duty” at or around the time of actual collision is quite immaterial; there is, both realistically speaking and in contemplation of law, no such thing as “off-duty” hours for the master of a vessel at sea that is a common carrier upon whom the law imposes the duty of extraordinary diligence, i.e. “the duty to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.” The record does not show that was the first or only time that Capt. Santisteban had entertained himself during a voyage by playing mahjong with his officers and passengers; Negros Navigation in permitting, or in failing to discover and correct such behaviour, must be deemed grossly negligent.
8. Captain failed to maintain seaworthiness of “Don Juan”Capt. Santisteban was also faulted in the Philippine Coast Guard decision for failing after the collision, “to institute appropriate measures to delay the sinking of M/V Don Juan.” This appears to us to be a euphemism for failure to maintain the seaworthiness or the water-tight integrity of the “Don Juan.” The record shows that the “Don Juan” sank within 10 to 15 minutes after initial contact with the “Tacloban City.” While the failure of Capt. Santisteban to supervise his officers and crew in the process of abandoning the ship and his failure to avail of measures to prevent the too rapid sinking of his vessel after collision, did not cause the collision by themselves, such failures doubtless contributed materially to the consequent loss of life and, moreover, were indicative of the kind and level of diligence exercised by Capt. Santisteban in respect of his vessel and his officers and men prior to actual contact between the 2 vessels. The officer-on-watch in the “Don Juan” admitted that he had failed to inform Capt. Santisteban not only of the “imminent danger of collision” but even of “the actual collision itself.”
9. “Don Juan” carrying more passengers than what it is certified to carryThe “Don Juan” was carrying more passengers than she had been certified as allowed to carry. The Certificate of Inspection, dated 27 August 1979, issued by the Philippine Coast Guard Commander at Iloilo City, the Don Juan’s home port, states “Passengers allowed: 810, Total Persons Allowed: 864.” The report of the Philippine Coast Guard stated that the “Don Juan” had been “officially cleared with 878 passengers on-board when she sailed from the port of Manila on 22 April 1980 at about 1:00 p.m.” This head-count of the passengers “did not include the 126 crew members, children below 3 years old and 2 half-paying passengers” which had been counted as one adult passenger. Thus, the total number of persons on board the “Don Juan” on that ill-starred night of 22 April 1980 was 1,004, or 140 persons more than the maximum number that could be safely carried by the “Don Juan,” per its own Certificate of Inspection. In addition, that only 750 passengers had been listed in its manifest for its final voyage; in other words, at least 128 passengers on board had not even been entered into the “Don Juan’s” manifest. The “Don Juan’s” Certificate of Inspection showed that she carried life boat and life raft accommodations for only 864 persons, the maximum number of persons she was permitted to carry; in other words, she did not carry enough boats and life rafts for all the persons actually on board that tragic night of 22 April 1980.
10. “Don Juan” grossly negligentThe grossness of the negligence of the “Don Juan” is underscored by the facts: (1) The “Don Juan” was more than twice as fast as the “Tacloban City.” The “Don Juan’s” top speed was 17 knots; while that of the “Tacloban City” was 6.3. knots. (2) The “Don Juan” carried the full complement of officers and crew members specified for a passenger vessel of her class. (3) The “Don Juan” was equipped with radar which was functioning that night. (4) The “Don Juan’s” officer on-watch had sighted the “Tacloban City” on his radar screen while the latter was still 4 nautical miles away. Visual confirmation of radar contact was established by the “Don Juan” while the “Tacloban City” was still 2.7 miles away. In the total set of circumstances which existed, the “Don Juan,” had it taken seriously its duty of extraordinary diligence, could have easily avoided the collision with the “Tacloban City.” Indeed, the “Don Juan” might well have avoided the collision even if it had exercised ordinary diligence merely.
11. Rule 18 of the International Rules of the Road are not to be obeyed and construed without regard to all circumstances attendantIt is true that the “Tacloban City” failed to follow Rule 18 of the International Rules of the Road which requires 2 power-driven vessels meeting end on or nearly end on each to alter her course to starboard (right) so that each vessel may pass on the port side (left) of the other. The “Tacloban City,” when the 2 vessels were only 0.3 of a mile apart, turned (for the second time) 15x to port side while the “Don Juan” veered hard to starboard. This circumstance, while it may have made the collision immediately inevitable, cannot, however, be viewed in
isolation from the rest of the factual circumstances obtaining before and up to the collision. In any case, Rule 18 like all other International Rules of the Road, are not to be obeyed and construed without regard to all the circumstances surrounding a particular encounter between 2 vessels.
12. Route observance of International Rules of Road does not per se relieve vessel from responsibilityIn ordinary circumstances, a vessel discharges her duty to another by a faithful and literal observance of the Rules of Navigation, and she cannot be held at fault for so doing even though a different course would have prevented the collision. This rule, however, is not to be applied where it is apparent that her captain was guilty of negligence or of a want of seamanship in not perceiving the necessity for, or in so acting as to create such necessity for, a departure from the rule and acting accordingly. In other words, “route observance” of the International Rules of the Road will not relieve a vessel from responsibility if the collision could have been avoided by proper care and skill on her part or even by a departure from the rules.
13. Intention of “Tacloban City” signaled to “Don Juan”Herein, the “Don Juan” having sighted the “Tacloban City” when it was still a long way off was negligent in failing to take early preventive action and in allowing the 2 vessels to come to such close quarters as to render the collision inevitable when there was no necessity for passing so near to the “Tacloban City” as to create that hazard or inevitability, for the “Don Juan” could choose its own distance. The “Tacloban City,” upon turning hard to port shortly before the moment of collision, signaled its intention to do so by giving 2 short blasts with its horn. The “Don Juan” gave no answering horn blast to signal its own intention and proceeded to turn hard to starboard.
14. Manchester Development Corp. vs. CA cannot be given retroactive effectThe Manchester doctrine, which has been modified and clarified in subsequent decision by the Court in Sun Insurance Office, Ltd. (SIOL), et al. v. Asuncion, et al. cannot be applied in the present case so as to work a striking out of that portion of the trial court’s award which could be deemed notionally to constitute an award of moral and exemplary damages. Manchester was promulgated by the Court on 7 May 1987. Circular 7 of the Supreme Court, which embodied the doctrine in Manchester, is dated 24 March 1988. Upon the other hand, the complaint in the present case was filed on 29 December 1980, that is, long before either Manchester or Circular 7 of 24 March 1988 emerged. The decision of the trial court was itself promulgated on 17 July 1986, again, before Manchester and Circular 7 were promulgated. Manchester should not be applied retroactively to the present case where a decision on the merits had already been rendered by the trial court, even though such decision was then under appeal and had not yet reached finality. There is no indication at all that the Mecenas here sought simply to evade payment of the court’s filing fees or to mislead the court in the assessment of the filing fees. In any event, herein, the Court applies Manchester as clarified and amplified by Sun Insurance Office Ltd. (SIOL), by holding that the Mecenas shall pay the additional filing fee that is properly payable given the award specified below, and that such additional filing fee shall constitute a lien upon the judgment.
15. Disaggregation of original award of damagesThe amount of damages — compensatory, moral and exemplary — were properly imposable upon Negros Navigation and Capt. Santisteban. The original award of the trial court of P400,000.00 could well have been disaggregated by the trial court and the Court of Appeals in the following manner: (1) actual or compensatory damages proved in the course of trial consisting of actual expenses incurred by petitioners in their search for their parents’ bodies — 126,000.00; (2) actual or compensatory damages in case of wrongful death (P30,000.00 x 2) — P 60,000.00; (3) moral damages — P107,000.00; (4) exemplary damages — P107,000.00; or a total of P400,000.00.
16. Additional moral damages of P200,000 reasonableConsidering that the legitimate children of the deceased spouses Mecenas, are 7 in number and that they lost both father and mother in one fell blow of fate, and considering the pain and anxiety they doubtless experienced while searching for their parents among the survivors and the corpses recovered from the sea or washed ashore, the Court believes that an additional amount of P200,000.00 for moral damages, making a total of P307,000.00 as moral damages, would be quite reasonable.
17. Judicial notice of dreadful regularity of maritime disastersThe Court will take judicial notice of the dreadful regularity with which grievous maritime disasters occur in our waters with massive loss of life. The bulk of our population is too poor to afford domestic air transportation. So it is that notwithstanding the frequent sinking of passenger vessels in our waters, crowds of people continue to travel by sea.
18. Purpose of exemplary damages; As to common carriersExemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially
deleterious in its consequence by creating negative incentives or deterrents against such behaviour. In requiring compliance with the standard of extraordinary diligence, a standard which is in fact that of the highest possible degree of diligence, from common carriers and in creating a presumption of negligence against them, the law seeks to compel them to control their employees, to tame their reckless instincts and to force them to take adequate care of human beings and their property. The Court is prepared to use the instruments given to it by the law for securing the ends of law and public policy. One of those instruments is the institution of exemplary damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable carriage of people and goods by sea. Herein, considering the foregoing, an additional award in the amount of P200,000.00 as exemplary damages, making a total award of P307,000.00 as exemplary damages, is quite modest.
19. Court may consider and resolve all issues to render substantial justiceThe Mecenas herein merely asked for the restoration of the P400,000.00 award of the trial court. The Court underscore once more, however, the firmly settled doctrine that the Court may consider and resolve all issues which must be decided in order to render substantial justice to the parties, including issues not explicitly raised by the party affected. In the present case, as in Kapalaran Bus Line v. Coronado, et al., both the demands of substantial justice and the imperious requirements of public policy compel the Court to the conclusion that the trial court’s implicit award of moral and exemplary damages was erroneously deleted and must be restored and augmented and brought more nearly to the level required by public policy and substantial justice.
Fri 1 Oct 2004
Transportation Law: Aboitiz Shipping vs. CA (GR 89757, 6 August 1990)
Posted by Berne Guerrero under (a) oas , haystacksNo Comments
Aboitiz Shipping vs. CA (GR 89757, 6 August 1990)First Division, Gancayco (J): 4 concur
Facts: On October 28, 1980, the vessel M/V “P. Aboitiz” took on board in Hongkong for shipment to Manila some cargo consisting of 1 20-footer container holding 271 rolls of goods foe apparel covered by Bill of Lading 515-M and 1 40-footer container holding 447 rolls, 10 bulk and 95 cartons of goods for apparel covered by Bill of Landing 505-M. The total value, including invoice value, freightage, customs duties, taxes and similar imports amount to US$39,885 for the first shipment while that of the second shipment amounts to US$94,190.55. Both shipments were consigned to the Philippine Apparel, Inc. and insured with the General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC). The vessel is owned and operated by Aboitiz Shipping Corporation. On 31 October 1980 on its way to Manila the vessel sunk and it was declared lost with all its cargoes. GAFLAC paid the consignee the amounts US$39,885.85 or P319,086.80 and US$94,190.55 or P753,524.40 for the lost cargo.
As GAFLAC was subrogated to all the rights, interests and actions of the consignee against Aboitiz, it filed an action for damages against Aboitiz in the Regional Trial Court of Manila alleging that the loss was due to the fault and negligence of Aboitiz and the master and crew of its vessel in that they did not observe the extraordinary diligence required by law as regards common carriers. After the issues were joined and the trial on the merits a decision was rendered by the trial court on 29 June 1985, ordering Aboitiz to pay GAFLAC actual damages in the sum of P1,072,611.20 plus legal interest from the date of the filing of the complaint on 28 October 1981, until full payment thereof, attorney’s fees in the amount of 20% of the total claim and to pay the costs.
Not satisfied therewith, Aboitiz appealed to the Court of Appeals wherein in due course a decision was rendered on 9 March 1989 affirming in toto the appealed decision, with costs against Aboitiz. A motion for reconsideration of said decision filed by Aboitiz was denied in a resolution dated 15 August 1989.. Hence, the petition for review.
The Supreme Court dismissed the petition, with costs against Aboitiz.
1. Finding of administrative bodies not always binding upon the courtThe sinking of the vessel M/V “P. Aboitiz” was the subject of an administrative investigation conducted by the Board of Marine Inquiry (BMI) whereby in a decision dated 26 December 1984, it was found that the sinking of the vessel may be attributed to force majeure on account of a typhoon. The trial court did not err in not giving weight to the finding of the BMI that the vessel sank due to a fortuitous event as findings of administrative bodies are not always binding on courts. This is especially so in the present case where GAFLAC was not a party in the BMI proceedings and which proceeding was not adversary in character.
2. General rule as to administrative findings of factsAs a general rule, administrative findings of facts are not disturbed by the courts when supported by substantial evidence unless it is tainted with unfairness or arbitrariness that would amount to abuse of discretion or lack of jurisdiction. Even in Vasquez vs. Court of Appeals, the Court ruled that it nevertheless disagree with the conclusion of the BMI exonerating the captain from any negligence “since it obviously had not taken into account the legal responsibility of a common carrier towards the security of the passengers involved.”
3. Trial court not informed of parallel administrative investigation being conducted by BMI; GAFLAC cannot be bound by findings and conclusions of BMIThe present case was brought to court on 28 October 1981. The trial court was never informed of a parallel administrative investigation that was being conducted by the BMI in any of the pleadings of Aboitiz. It was only on 22 March 1985 when Aboitiz revealed to the trial court the decision of the BMI dated 26 December 1984. The said decision appears to have been rendered over 3 years after the case was brought to court. Said administrative investigation was conducted unilaterally. GAFLAC was not notified or given an opportunity to participate therein. It cannot thereby be bound by said findings and conclusions of the BMI.
4. Weather condition prevailing under wind force of 10 to 15 knots usual and foreseeableThe wind force when the ill-fated ship foundered was 10 to 15 knots. According to the Beau fort Scale (Exhibit “I”), which is admittedly an accurate reference for measuring wind velocity, the wind force of 10 to 15 knots is classified as scale No. 4 and described as ‘moderate breeze,’ small waves, becoming longer, fairly frequent white horses.’ The weather condition prevailing under said wind force is usual and foreseeable. The vessel M/V “Aboitiz” and its cargo were not lost due to fortuitous event or force majeure.
5. Common carrier bound to observe extraordinary diligence (Article 1732 NCC); Presumption of negligence, burden of proofIn accordance with Article 1732 of the Civil Code, the common carrier, from the nature of its business and for reasons of public policy, is bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by it according to all the circumstances of each case. While the goods are in the possession of the carrier, it is but fair that it exercise extraordinary diligence in protecting them from loss or damage, and if loss occurs, the law presumes that it was due to the carrier’s fault or negligence; that is necessary to protect the interest of the shipper which is at the mercy of the carrier (Article 17O6, Civil Code; Anuran vs. Puno, 17 SCRA 224; Nocum vs. Laguna Tayabas Bus Co., 30 SCRA 69; Landigan vs. Pangasinan Transportation Company, 88 SCRA 284).” Herein, Aboitiz failed to prove that the loss of the subject cargo was not due to its fault or negligence.
6. Limited liability clause; ExceptionWhile it is true that in the bill of lading there is such stipulation that the liability of the carrier is US$500.00 per package/container/customary freight, there is an exception, that is, when the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. Herein, the description of the nature and the value of the goods shipped are declared and reflected in the bills of lading. Thus, it is the basis of the liability of the carrier as the actual value of the loss.
7. Section 4 (5) COGSASection 4(5) of the Carriage of Goods by Sea Act provides that “(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 $500 per package of 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 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 mis-stated by the shipper in the bill of lading.”
8. “Container” construed; Noscitur a sociisIt is absurd to interpret “container,” as provided in the bill of lading to be valued at US$500.00 each, to refer to the container which is the modern substitute for the hold of the vessel. The package/container contemplated by the law to limit the liability of the carrier should be sensibly related to the unit in which the shipper packed the goods and described them, not a large metal object, functionally a part of the ship, in which the carrier caused them to be contained. Such “container” must be given the same meaning and classification as a “package” and “customary freight unit.” By the rule of noscitur a sociis, the word ‘container’ must be given the same meaning as ‘package’ and ‘customary freight unit’ and therefore cannot possibly refer to modern containers which are used for shipment of goods in bulk.
9. Allied Guarantee Insurance Co. Inc. vs. Aboitiz Shipping Corporation, (CA GR CV 04121, 23 March1987); Limited liability clause must be reasonable and freely agreed uponGenerally speaking, a stipulation, limiting the common carrier’s liability to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is valid. (Civil Code, Art. 1749). Such stipulation, however, must be reasonable and just under the circumstances and must have been fairly and freely agreed upon. (St. Paul Fire & Marine Insurance Co. vs. Macondray Co., 70 SCRA 122, 126-127 (1976) Herein, the goods shipped on the M/V “P. Aboitiz” were insured for P278,530.50, which may be taken as their value. To limit the liability of the carrier to $500.00 would obviously put it in its power to have taken the whole cargo.
10. Ysmael vs .Gabino Barreto; Limitation of liability inapplicable when loss caused by own negligenceIn Juan Ysmael & Co. vs. Gabino Barreto & Co., 51 Phil. 90 (1927), it was held that a stipulation limiting the carrier’s liability to $500.00 per package of silk when the value of such package was P2,500.00 unless the true value had been declared and the corresponding freight paid was ‘void as against public policy.’ That ruling applies to the present case. By the weight of modern authority, a carrier cannot limit its liability for injury or loss of goods shipped where such injury or loss was caused by its own negligence. (Juan Ysmael & Co. v. Gabino Barreto & Co., supra) Here to limit the liability of Aboitiz Shipping to $500.00 would nullify the policy of the law imposing on common carriers the duty to observe extraordinary diligence in the carriage of goods.
11. Issuance of execution pending appeal; Filing of supersedeas bond to stay executionThe purpose of Section 2, Rule 39, of the Rules of Court would not be achieved or execution pending appeal would not be achieved if insolvency would still be awaited. The remedy is available to petitioner under Section 3 Rule 39 of the Rules of Court but to place insolvency as a condition to issuance of a writ of execution pending appeal would render it illusory and ineffectual. Herein, Aboitiz is facing many law suits arising from said sinking of its vessel involving cargo loss of no less than P50 million, in some cases of which judgment had been rendered against Aboitiz, and considering that its insurer is now bankrupt, leaving Aboitiz alone to face and answer the suits, which may render any judgment for GAFLAC ineffectual, that the appeal is interposed manifestly for delay and the willingness of GAFLAC to put up a bond certainly are cogent bases for the issuance of an order of execution pending appeal. The statutory undertaking of posting a supersedeas bond will achieve a three-pronged direction of justice, (1) it will cast no doubt on the solvency of the defendant; (2) it will not defeat or render phyrric a just resolution of the case whichever party prevails in the end or in the main case on appeal, since both of their claims are secured by their corresponding bonds; and (3) it will put to equitable operation Sec. 3 Rule 39 of the Revised Rules of Court.
12. Aboitiz vs. CA (GR 88159; 13 November1989); Doctrine of primary administrative jurisdiction not applicableIn a similar case for damages arising from the same incident entitled Aboitiz Shipping Corporation vs. Honorable Court of Appeals and Allied Guaranteed Insurance Company, Inc., G.R. No. 88159, the Court in a resolution dated 13 November 1989 dismissed the petition for lack of merit. Therein this Court held in part that the cause of sinking of the vessel was due to its unseaworthiness and the failure of its crew and the master to exercise extraordinary diligence. Therein, the decision and resolution of the appellate court shows that the same took into consideration not only the findings of the lower court but also the findings of the BMI. Thus, the appellate court stated that the decision of the Board was based simply on its finding that the Philippine Coast Guard had certified the vessel to be seaworthy and that it sank because it was exposed later to an oncoming typhoon plotted within the radius where the vessel was positioned. This generalization certainly cannot prevail over the detailed explanation of the trial court in the case as basis for its contrary conclusion. The Court found therein no cogent reason to deviate from the factual findings of the appellate court and rule that the doctrine of primary administrative jurisdiction is not applicable in said case.
13. Aboitiz vs. CA (GR 88159; 13 November1989); Limitation of liability would render inefficacious the extraordinary diligence required by law of common carriersGenerally speaking any stipulation, limiting the common carrier’s liability to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value is valid. (Civil Code, Art. 1749) Such
stipulation, however, must be reasonable and just under the circumstances and must have been fairly and freely agreed upon. (St. Paul Fire & Marine Insurance Co. v. Macondray & Co., 70 SCRA 122, 126-127 [1976]. Therein, the goods shipped on the M/V ‘P. Aboitiz’ were insured for P278,536.50, which may be taken as their value. To limit the liability of the carrier to $500.00 would obviously put in its power to have taken the whole cargo. In Juan Ysmael & Co. v. Gabino Barretto & Co., 51 Phil. 90 [1927], it was held that a stipulation limiting the carrier’s liability to P300.00 per package of silk, when the value of such package was P2,500.00, unless the true value had been declared and the corresponding freight paid; was void as against public policy. That ruling applies to said case.
14. Aboitiz vs. CA (GR 88159; 13 November1989) final and executoryThe motion for reconsideration for the Court’s Resolution in GR 88159 filed by Aboitiz was denied with finality in a resolution dated January 8, 1990. Said resolution of the case had become final and executory, entry of judgment having been made and the records remanded for execution on 22 March 1990. Said case is the law of the case applicable to the present petition.
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