TRANSPORTATION LAW CASES 2007

G.R. No. 150403 January 25, 2007

CEBU SALVAGE CORPORATION, Petitioner,

vs.
PHILIPPINE HOME ASSURANCE CORPORATION, Respondent.

May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it
does not own?

This is the issue presented for the Court’s resolution in this petition for review on
certiorari1 assailing the March 16, 2001 decision2 and September 17, 2001 resolution3 of
the Court of Appeals (CA) in CA-G.R. CV No. 40473 which in turn affirmed the December
27, 1989 decision4 of the Regional Trial Court (RTC), Branch 145, Makati, Metro Manila.5

The pertinent facts follow.

On November 12, 1984, petitioner Cebu Salvage Corporation (as carrier) and Maria
Cristina Chemicals Industries, Inc. [MCCII] (as charterer) entered into a voyage charter6
wherein petitioner was to load 800 to 1,100 metric tons of silica quartz on board the M/T
Espiritu Santo7 at Ayungon, Negros Occidental for transport to and discharge at
Tagoloan, Misamis Oriental to consignee Ferrochrome Phils., Inc.8

Pursuant to the contract, on December 23, 1984, petitioner received and loaded 1,100
metric tons of silica quartz on board the M/T Espiritu Santo which left Ayungon for
Tagoloan the next day.9 The shipment never reached its destination, however, because
the M/T Espiritu Santo sank in the afternoon of December 24, 1984 off the beach of
Opol, Misamis Oriental, resulting in the total loss of the cargo.10

MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine
Home Assurance Corporation.11 Respondent paid the claim in the amount of P211,500
and was subrogated to the rights of MCCII.12Thereafter, it filed a case in the RTC13
against petitioner for reimbursement of the amount it paid MCCII.

After trial, the RTC rendered judgment in favor of respondent. It ordered petitioner to
pay respondent P211,500 plus legal interest, attorney’s fees equivalent to 25% of the
award and costs of suit.

On appeal, the CA affirmed the decision of the RTC. Hence, this petition.

Petitioner and MCCII entered into a "voyage charter," also known as a contract of
affreightment wherein the ship was leased for a single voyage for the conveyance of
goods, in consideration of the payment of freight.14 Under a voyage charter, the
shipowner retains the possession, command and navigation of the ship, the charterer or
freighter merely having use of the space in the vessel in return for his payment of
freight.15 An owner who retains possession of the ship remains liable as carrier and must
answer for loss or non-delivery of the goods received for transportation.16

Petitioner argues that the CA erred when it affirmed the RTC finding that the voyage
charter it entered into with MCCII was a contract of carriage.17 It insists that the
agreement was merely a contract of hire wherein MCCII hired the vessel from its owner,
ALS Timber Enterprises (ALS).18 Not being the owner of the M/T Espiritu Santo,
petitioner did not have control and supervision over the vessel, its master and crew.19
Thus, it could not be held liable for the loss of the shipment caused by the sinking of a
ship it did not own.

We disagree.

Based on the agreement signed by the parties and the testimony of petitioner’s
operations manager, it is clear that it was a contract of carriage petitioner signed with
MCCII. It actively negotiated and solicited MCCII’s account, offered its services to ship
the silica quartz and proposed to utilize the M/T Espiritu Santo in lieu of the M/T
Seebees or the M/T Shirley (as previously agreed upon in the voyage charter) since
these vessels had broken down.20

There is no dispute that petitioner was a common carrier. At the time of the loss of the
cargo, it was engaged in the business of carrying and transporting goods by water, for
compensation, and offered its services to the public.21

From the nature of their business and for reasons of public policy, common carriers are
bound to observe extraordinary diligence over the goods they transport according to
the circumstances of each case.22 In the event of loss of the goods, common carriers are
responsible, unless they can prove that this was brought about by the causes specified
in Article 1734 of the Civil Code.23 In all other cases, common carriers are presumed to be
at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence.24

Petitioner was the one which contracted with MCCII for the transport of the cargo. It
had control over what vessel it would use. All throughout its dealings with MCCII, it
represented itself as a common carrier. The fact that it did not own the vessel it decided
to use to consummate the contract of carriage did not negate its character and duties
as a common carrier. The MCCII (respondent’s subrogor) could not be reasonably
expected to inquire about the ownership of the vessels which petitioner carrier offered
to utilize. As a practical matter, it is very difficult and often impossible for the general
public to enforce its rights of action under a contract of carriage if it should be required
to know who the actual owner of the vessel is.25 In fact, in this case, the voyage charter
itself denominated petitioner as the "owner/operator" of the vessel.26

Petitioner next contends that if there was a contract of carriage, then it was between
MCCII and ALS as evidenced by the bill of lading ALS issued.27

Again, we disagree.

The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods
had been received for transportation. It was not signed by MCCII, as in fact it was simply
signed by the supercargo of ALS.28 This is consistent with the fact that MCCII did not
contract directly with ALS. While it is true that a bill of lading may serve as the contract
of carriage between the parties,29 it cannot prevail over the express provision of the
voyage charter that MCCII and petitioner executed:

[I]n cases where a Bill of Lading has been issued by a carrier covering goods shipped
aboard a vessel under a charter party, and the charterer is also the holder of the bill of
lading, "the bill of lading operates as the receipt for the goods, and as document of title
passing the property of the goods, but not as varying the contract between the
charterer and the shipowner." The Bill of Lading becomes, therefore, only a receipt and
not the contract of carriage in a charter of the entire vessel, for the contract is the
Charter Party, and is the law between the parties who are bound by its terms and
condition provided that these are not contrary to law, morals, good customs, public
order and public policy. 30

Finally, petitioner asserts that MCCII should be held liable for its own loss since the
voyage charter stipulated that cargo insurance was for the charterer’s account.31 This
deserves scant consideration. This simply meant that the charterer would take care of
having the goods insured. It could not exculpate the carrier from liability for the breach
of its contract of carriage. The law, in fact, prohibits it and condemns it as unjust and
contrary to public policy.32

To summarize, a contract of carriage of goods was shown to exist; the cargo was loaded
on board the vessel; loss or non-delivery of the cargo was proven; and petitioner failed
to prove that it exercised extraordinary diligence to prevent such loss or that it was due
to some casualty or force majeure. The voyage charter here being a contract of
affreightment, the carrier was answerable for the loss of the goods received for
transportation.33

The idea proposed by petitioner is not only preposterous, it is also dangerous. It says
that a carrier that enters into a contract of carriage is not liable to the charterer or
shipper if it does not own the vessel it chooses to use. MCCII never dealt with ALS and
yet petitioner insists that MCCII should sue ALS for reimbursement for its loss. Certainly,
to permit a common carrier to escape its responsibility for the goods it agreed to
transport (by the expedient of alleging non-ownership of the vessel it employed) would
radically derogate from the carrier's duty of extraordinary diligence. It would also open
the door to collusion between the carrier and the supposed owner and to the possible
shifting of liability from the carrier to one without any financial capability to answer for
the resulting damages.34

WHEREFORE, the petition is hereby DENIED.

Costs against petitioner. SO ORDERED.

 G.R. No. 164820 March 28, 2007

VICTORY LINER, INC., Petitioner,

vs.
PABLO M. RACE, Respondent.

In this Petition for Review on Certiorari under Rule 45 of the Rules of Court,1 petitioner
Victory Liner Inc. seeks to set aside the Decision of the Court of Appeals dated 26 April
2004 in CA-G.R. SP No. 74010,2 affirming the Decision and Resolution of the National
Labor Relations Commission (NLRC) dated 30 July 2002 and 30 August 2002,
respectively, in NLRC-CA-029327-01.3 In its Decision and Resolution, the NLRC vacated
the Decision4 of Labor Arbiter Salimathar V. Nambi (Labor Arbiter Nambi) dated 31 July
2001 in NLRC-NCR-00-09-08922-99 and ordered the petitioner to reinstate respondent
Pablo M. Race to his former position as a bus driver without loss of seniority rights and
other privileges and benefits with full backwages computed from the time of his illegal
dismissal in January 1998 up to his actual reinstatement.

Culled from the records are the following facts:

In June 1993, respondent was employed by the petitioner as a bus driver. As a requisite
for his hiring, the respondent deposited a cash bond in the amount of ₱10,000.00 to the
petitioner. Respondent was assigned to the Alaminos, Pangasinan - Cubao, Quezon City,
route on the evening schedule.5

On the night of 24 August 1994, respondent drove his assigned bus from Alaminos,
Pangasinan, destined to Cubao, Quezon City. While traversing Moncada, Tarlac, the bus
he was driving was bumped by a Dagupan-bound bus. As a consequence thereof,
respondent suffered a fractured left leg and was rushed to the Country Medical and
Trauma Center in Tarlac City where he was operated on and confined from 24 August
1994 up to 10 October 1994. One month after his release from the said hospital, the
respondent was confined again for further treatment of his fractured left leg at the
Specialist Group Hospital in Dagupan City. His confinement therein lasted a month.
Petitioner shouldered the doctor’s professional fee and the operation, medication and
hospital expenses of the respondent in the aforestated hospitals.6

In January 1998, the respondent, still limping heavily, went to the petitioner’s office to
report for work. He was, however, informed by the petitioner that he was considered
resigned from his job. Respondent refused to accede and insisted on having a dialogue
with the petitioner’s officer named Yolanda Montes (Montes). During their meeting,
Montes told him that he was deemed to have resigned from his work and to accept a
consideration of ₱50,000.00. Respondent rejected the explanation and offer. Thereafter,
before Christmas of 1998, he again conversed with Montes who reiterated to him that
he was regarded as resigned but raised the consideration therein to ₱100,000.00.
Respondent rebuffed the increased offer.7
On 30 June 1999, respondent, through his counsel, sent a letter to the petitioner
demanding employment-related money claims. There being no response from the
petitioner, the respondent filed before the Labor Arbiter on 1 September 1999 a
complaint for (1) unfair labor practice; (2) illegal dismissal; (3) underpayment of wages;
(4) nonpayment of overtime and holiday premium, service incentive leave pay, vacation
and sick leave benefits, 13th month pay; (5) excessive deduction of withholding tax and
SSS premium; and (6) moral and exemplary damages and attorney’s fees. This was
docketed as NLRC-NCR-00-09-08922-99.8

In its Position Paper dated 27 March 2000, petitioner claimed that respondent was paid
strictly on commission basis; that respondent was a mere field personnel who
performed his duties and functions outside the petitioner’s premises and whose time of
work cannot be determined with reasonable certainty; that petitioner, therefore, was
exempted from paying the respondent overtime compensation, night shift differential,
holiday pay and service incentive leave; that notwithstanding the specific exemptions
provided for in the Labor Code, the petitioner gave the respondent benefits better than
those received by the other bus drivers of the petitioner; that during his employment,
respondent was charged with and found guilty of numerous offenses which were
sufficient bases for his dismissal; that the prescriptive period for the filing of an action
or claim for reinstatement and payment of labor standard benefits is four years from
the time the cause of action accrued; and that the respondent’s cause of action against
petitioner had already prescribed because when the former instituted the aforesaid
complaint on 1 September 1999, more than five years had already lapsed from the
accrual of his cause of action on 24 August 1994.9

In his Reply dated 30 June 2000, respondent explained that when he stated in his
complaint that he was illegally dismissed on 24 August 1994, what he meant and
referred to was the date when he was no longer in a position to drive since he was
hospitalized from 24 August 1994 up to 10 October 1994. Respondent also admitted
that it was only in January 1998 that he informed the petitioner of his intent to report
back for work.10

On 31 July 2001, Labor Arbiter Nambi rendered his Decision dismissing the complaint of
respondent for lack of merit. He stated that the prescriptive period for filing an illegal
dismissal case is four years from the dismissal of the employee concerned. Since the
respondent stated in his complaint that he was dismissed from work on 24 August 1994
and he filed the complaint only on 1 September 1999, Labor Arbiter Nambi concluded
that respondent’s cause of action against petitioner had already prescribed. He also
noted that respondent committed several labor-related offenses against the petitioner
which may be considered as just causes for the termination of his employment under
Article 282 of the Labor Code.

Further, Labor Arbiter Nambi opined that respondent was not a regular employee but a
mere field personnel and, therefore, not entitled to service incentive leave, holiday pay,
overtime pay and 13th month pay. He also ruled that respondent failed to present
evidence showing that the latter was entitled to the abovestated money claims. The
fallo of the said decision reads:

WHEREFORE, considering that the causes of action in this case rooted from the
purported illegal dismissal of Pablo M. Race on August 24, 1994 when he figured in a
vehicular accident, or on October 10, 1994 when he was released from the hospital, and
he filed his complaint only on September 1, 1999 after a lapse of more than five (5)
years, the action has long prescribed, aside from the fact that there is absolutely no
evidence that respondent Victory Liner, Inc. is guilty of unfair labor practice and unjust
dismissal, in addition to its specific exemptions from the letters of Article 82 of the
Labor Code, as amended, the complaint and money claims are hereby DISMISSED by
reason of prescription and for utter lack of merit and total absence of legal and factual
basis in support thereof.11

Respondent appealed to the NLRC. On 30 July 2002, the NLRC promulgated its Decision
reversing the decision of Labor Arbiter Nambi. It ordered the reinstatement of the
respondent to his former position without loss of seniority rights and other privileges
and benefits with full back-wages computed from the time of his illegal dismissal in
January 1998 up to his actual reinstatement. It held that the respondent’s cause of
action accrued, not on 24 August 1994, but in January 1998, when the respondent
reported for work but was rejected by the petitioner. Thus, the respondent’s filing of
complaint on 1 September 1999 was well-within the four-year prescriptive period. It
also ruled that respondent was illegally dismissed by the petitioner as the latter failed to
accord him due process. It found that the petitioner did not give the respondent a
written notice apprising him of acts or omissions being complained of and a written
notice informing him of the termination of his employment. In conclusion, the NLRC
stated:

WHEREFORE, in view of all the foregoing, respondent-appellee’s company is hereby

ordered to reinstate complainant-appellant to his former position without loss of
seniority rights and other privileges and benefits with full backwages computed from
the time of his illegal dismissal on (sic) January 1988 up to his actual reinstatement.
Except for this modification, the appealed decision is hereby AFFIRMED.12

Petitioner filed a Motion for Reconsideration of the NLRC Decision alleging, among
other things, that the award of backwages to the respondent computed from January
1988 up to the promulgation of the NLRC Decision on 30 July 2002 was unlawful and
unjust considering that respondent was employed only in June 1993. The NLRC,
however, denied the same for lack of merit in its Resolution dated 30 August 2002.

Petitioner assailed the NLRC Decision and Resolution, dated 30 July 2002 and 30 August
2002, respectively, via a Petition for Certiorari to the Court of Appeals. On 26 April 2004,
the Court of Appeals dismissed the Petition, and found no grave abuse of discretion on
the part of the NLRC. It ruled that the NLRC committed a simple typographical error
when it stated in the fallo that the backwages of respondent shall be computed from
January 1988 instead of January 1998 because in the paragraph prior to the dispositive
portion, the NLRC categorically declared that the full backwages of the respondent was
to be computed from January1998. In addition, the NLRC has indicated in its Statement
of Facts that respondent was hired by the petitioner sometime in June 1993. It also held
that the respondent’s filing of complaint on 1 September 1999 was within the four-year
prescriptive period since the cause of action accrued when the respondent reported for
work in January 1998 and was informed that he was considered resigned. It ratiocinated
that respondent did not abandon his work and, instead, continued to be an employee of
petitioner after he was discharged from the hospital, viz:

Race did not abandon his work and continued to be an employee of Victory Liner, and
their contemporaneous conduct show this. He has his pay slip covering the period of
August 1-15, 1998 (p. 114, record), he was consulting the company physician who issued
him receipts dated October 28, 1996 and July 21 1997 (p. 115, record), and he wrote a
letter dated March 18, 1996 addressed to Gerarda Villa, Vice-President for Victory Liner,
signifying his intention to be a dispatcher or conductor due to his injured leg (p. 116,
Record). Further, annexed to Victory Liner’s Consolidated Supplemental Position Paper
and Formal Offer of Evidence with Erratum is Exhibit "6-A-Race" (p. 56, record)
submitted before the Labor Arbiter, where Race stated before the investigator that
after his release from the hospital he reported to Victory Liner twice a month. He also
said that he filed for a sick leave which was approved for the maximum of 120 days.
After his sick leave, he filed for disability leave, and this was also approved and ran until
sometime in May 1997.13

It also found that the petitioner failed to comply with the requirements of due process
in terminating the employment of respondent. The decretal portion of the said decision
reads:

WHEREFORE, the petition is DENIED DUE COURSE and DISMISSED.14

Petitioner filed the instant petition on the following grounds:

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED CONTRARY TO LAW AND

JURISPRUDENCE WHEN IT HELD IN THE ASSAILED DECISION THAT:

A. THE CAUSE OF ACTION OF RESPONDENT FOR ILLEGAL DISMISSAL HAS NOT YET
PRESCRIBED DESPITE HAVING BEEN FILED AFTER FOUR (4) YEARS AND NINE (9)
MONTHS FROM THE ACCRUAL OF THE ALLEGED ACTIONABLE WRONG;

B. RESPONDENT IS ENTITLED TO REINSTATEMENT WITH FULL BACKWAGES AND

OTHER BENEFITS CONSIDERING THAT THE TERMINATION OF HIS EMPLOYMENT BY
PETITIONER WAS LEGAL AND JUSTIFIED.15
Anent the first issue, petitioner insisted that respondent had already abandoned his
work and ceased to be its employee since November 1994; that the alleged "pay slip"
for the period August 1-15, 1998 was not actually a pay slip but a mere cash
advance/monetary aid extended to the respondent as the large amount of ₱65,000.00
stated therein was clearly inconsistent and disproportionate to the respondent’s low
salary of ₱192.00 a day; that the petitioner merely accommodated the respondent as
its former employee when the latter consulted the petitioner’s physician on 28 October
1996 and 21 July 1997; that the respondent’s letter dated 18 March 1996 to the
petitioner’s Vice-President Gerarda Villa was only an application for the position of
dispatcher or conductor and that such application was not granted; and that the
foregoing circumstances cannot be considered as an indication of employer-employee
relationship between the petitioner and respondent.16

Moreover, petitioner asserted that although the respondent reported for work twice a
month after he was discharged from the hospital, it does not imply that the respondent
was still considered as an employee at that time by the petitioner; that it allowed the
respondent to have a 120-day sick leave because the latter was a former employee; and
that it granted disability leave to the respondent since the latter was a former employee
and that respondent’s application for disability leave implied an admission on the part
of the respondent that he was no longer fit to work as a bus driver.17

Petitioner also asseverated that, based on the four-fold tests in determining the
employer-employee relationship which includes the payment of wages and power to
control the conduct of the employees, the respondent was no longer its employee upon
the latter’s discharge from the hospital in November 1994 because at such time, the
respondent was no longer fit to work as a bus driver and respondent did not render
services to the petitioner. Thus, petitioner reasoned that it had no more power to
control the conduct of, and it no longer paid any wages to, the respondent.18

Petitioner also argued that the cause of action of respondent had accrued on 10
November 1994; that from 10 November 1994 up to November 1998, the respondent
did not render any services to nor filed a case or action against the petitioner; that the
respondent’s filing of a complaint against petitioner on 1 September 1999 was clearly
beyond the four-year prescriptive period allowed by law; that if the reckoning period of
the accrual of a cause of action would be the time when the written demand was made
by the respondent on the petitioner, then the four-year prescriptive period would be
interminable as it could be extended to one or more years; that this is not the spirit or
intent of the law; that otherwise there is no more need to provide the four-year
prescriptive period as any complainant may simply allow the lapse of four years and file
the action thereafter and that it would be considered as a compliance by simply making
a purported demand for reinstatement after more than four years.19

These contentions are devoid of merit.

It should be emphasized at the outset that as a rule, this Court is not a trier of facts and
this applies with greater force in labor cases. Hence, factual findings of quasi-judicial
bodies like the NLRC, particularly when they coincide with those of the Labor Arbiter
and if supported by substantial evidence, are accorded respect and even finality by this
Court. But where the findings of the NLRC and the Labor Arbiter are contradictory, as in
the present case, this Court may delve into the records and examine for itself the
questioned findings.20

In illegal dismissal cases, the employee concerned is given a period of four years from
the time of his dismissal within which to institute a complaint. This is based on Article
1146 of the New Civil Code which states that actions based upon an injury to the rights
of the plaintiff must be brought within four years. We explained the rationale in the case
of Callanta v. Carnation Philippines, Inc.,21 thus:

[O]ne’s employment, profession, trade or calling is a "property right," and the wrongful
interference therewith is an actionable wrong. The right is considered to be property
within the protection of a constitutional guaranty of due process of law. Clearly then,
when one is arbitrarily and unjustly deprived of his job or means of livelihood, the action
instituted to contest the legality of one’s dismissal from employment constitutes, in
essence, an action predicated "upon an injury to the rights of the plaintiff," as
contemplated under Art. 1146 of the New Civil Code, which must be brought within four
years.

The four-year prescriptive period shall commence to run only upon the accrual of a
cause of action of the worker. It is settled that in illegal dismissal cases, the cause of
action accrues from the time the employment of the worker was unjustly terminated.22
Thus, the four-year prescriptive period shall be counted and computed from the date of
the employee’s dismissal up to the date of the filing of complaint for unlawful
termination of employment.23

Proceeding therefrom, we shall now discuss and determine when the respondent’s
cause of action accrued in order to ascertain whether the same had already prescribed.

It is error to conclude that the employment of the respondent was unjustly terminated
on 10 November 1994 because he was, at that time, still confined at the Specialist
Group Hospital, Dagupan City, for further treatment of his fractured left leg. He must be
considered as merely on sick leave at such time. Likewise, the respondent cannot also
be deemed as illegally dismissed from work upon his release from the said hospital in
December 1994 up to December 1997 since the records show that the respondent still
reported for work to the petitioner and was granted sick and disability leave by the
petitioner during the same period.24

The respondent must be considered as unjustly terminated from work in January 1998
since this was the first time he was informed by the petitioner that he was deemed
resigned from his work. During that same occasion, the petitioner, in fact, tried to
convince the respondent to accept an amount of ₱50,000.00 as a consolation for his
dismissal but the latter rejected it.25 Thus, it was only at this time that the respondent’s
cause of action accrued. Consequently, the respondent’s filing of complaint for illegal
dismissal on 1 September 1999 was well within the four-year prescriptive period.

It is also significant to note that from 10 November 1994 up to December 1997, the
petitioner never formally informed the respondent of the fact of his dismissal either
through a written notice or hearing. Indeed, it cannot be gainfully said that respondent
was unlawfully dismissed on 10 November 1994 and that the cause of action accrued on
that date.

As to the alleged abandonment of work by the respondent on 10 November 1994, it

should be emphasized that two factors must be present in order to constitute an
abandonment: (a) the failure to report for work or absence without valid or justifiable
reason; and (2) a clear intention to sever employer-employee relationship. The second
factor is the more determinative factor and is manifested by overt acts from which it
may be deduced that the employee has no more intention to work. The intent to
discontinue the employment must be shown by clear proof that it was deliberate and
unjustified. Mere absence from work does not imply abandonment.26

It is apparent that respondent did not abandon his work. His absence from work for a
long period of time was obviously due to the fact that he was still recuperating from
two operations on his fractured leg. Petitioner knew this very well. In fact, petitioner
shouldered the respondent’s medication and hospital expenses during the latter’s
confinement and operation in two hospitals.27 Moreover, when the respondent was able
to walk, although limping heavily, he still reported for work to the petitioner and was
granted sick and disability leave.28 Clearly then, respondent did not abandon his job on
10 November 1994.

In the same vein, the employer-employee relationship between the petitioner and
respondent cannot be deemed to have been extinguished on 10 November 1994. It
should be borne in mind that there are four tests in determining the existence of
employer-employee relationship: (1) the manner of selection and engagement; (2) the
payment of wages; (3) the presence or absence of the power of dismissal; and (4) the
presence or absence of the power of control. The so-called "control test" is commonly
regarded as the most crucial and determinative indicator of the presence or absence of
an employer-employee relationship. Under the control test, an employer-employee
relationship exists where the person for whom the services are performed reserves the
right to control not only the end achieved, but also the manner and means to be used in
reaching that end.29

Applying the aforecited tests, the employer-employee relationship between petitioner

and respondent continued even after the latter’s discharge from the hospital in
December 1994 up to 1997. Respondent had reported for work to the petitioner after
his release from the hospital in December 1994. Subsequently, respondent was also
granted a 120-day sick leave and disability leave by the petitioner.30 Respondent also
availed himself of the services of the petitioner’s physician on two occasions after his
release from the hospital in December 1994.31

On the other hand, the petitioner failed to establish the fact that the respondent ceased
to be its employee on 10 November 1994. Except for its flimsy reason that the sick leave,
disability leave and physician consultations were given to the respondent as mere
accommodations for a former employee, the petitioner did not present any evidence
showing that its employer-employee relationship with the respondent was
extinguished on 10 November 1994.

Evidently, these circumstances clearly manifest that petitioner exercised control over
the respondent and that the latter was still under the employment of the petitioner
even after December 1994.

Given the foregoing considerations, petitioner’s assertion that the respondent’s cause
of action accrued on 10 November 1994 must fail.

Apropos the second issue, petitioner contended that the order for the reinstatement of
the respondent as bus driver was unconstitutional for being tantamount to involuntary
servitude; that when the respondent filed his complaint for illegal dismissal, the latter
no longer desired to be reinstated to his former position as bus driver; that the
respondent’s unwillingness to be reinstated as bus driver was also evident from his
letter to the petitioner where the respondent manifested his intention to be hired as a
dispatcher or conductor; and that to reinstate the respondent as bus driver despite the
fact that it is against his will is involuntary servitude.32

Petitioner also argued that the order for the reinstatement was contrary to law; that as
a common carrier, it is obliged under the law to observe extra-ordinary diligence in the
conduct of its business; that it will violate such obligation if it will reinstate the
respondent as bus driver; that to allow the respondent to drive a bus, despite the fact
that the latter sustained a fractured left leg and was still limping, would imperil the lives
of the passengers and the property of the petitioner; and that the award of backwages
to the respondent was unjustified.33

The Labor Code mandates that before an employer may legally dismiss an employee
from the service, the requirement of substantial and procedural due process must be
complied with. Under the requirement of substantial due process, the grounds for
termination of employment must be based on just or authorized causes. The following
are just causes for the termination of employment under Article 282 of the Labor Code:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders
 of his employer or representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized
representative; and

(e) Other causes analogous to the foregoing.

Abandonment of work, or the deliberate and unjustified refusal of an employee to

resume his employment, may be a just cause for the termination of employment under
paragraph (b) of Article 282 of the Labor Code since it is a form of neglect of duty.

As earlier discussed, the petitioner insisted that respondent had already abandoned his
work on 10 November 1994 and, thus, the latter’s employment was deemed terminated
as of such date. We, however, found that there was no abandonment of work on the
part of the respondent. Petitioner also alleged that respondent was guilty of
insubordination as well as gross and habitual neglect in the performance of his duties
for reckless driving and for being involved in several vehicular accidents.34 The records,
nonetheless, failed to show that the said charges were proven and that respondent was
duly informed and heard with regard to the accusations. Since the petitioner, as an
employer, is burdened to prove just cause for terminating the employment of
respondent with clear and convincing evidence, and that petitioner failed to discharge
this burden, we hold that respondent was dismissed without just cause by the
petitioner.

It has been established that petitioners failed to comply with the requirement of
substantial due process in terminating the employment of respondent. We will now
determine whether the petitioner had complied with the procedural aspect of a lawful
dismissal.

In the termination of employment, the employer must (a) give the employee a written
notice specifying the ground or grounds of termination, giving to said employee
reasonable opportunity within which to explain his side; (b) conduct a hearing or
conference during which the employee concerned, with the assistance of counsel if the
employee so desires, is given the opportunity to respond to the charge, present his
evidence or rebut the evidence presented against him; and (c) give the employee a
written notice of termination indicating that upon due consideration of all
circumstances, grounds have been established to justify his termination.35
Petitioner miserably failed to comply with the foregoing requirements. There was
nothing in the records which evinces that petitioner had sent a written notice to the
respondent informing him of the ground or grounds of his termination or the reason
why he was deemed resigned. It does not also appear that the petitioner held a hearing
or conference where the respondent was given the opportunity to answer the charges
of abandonment, insubordination and habitual neglect of duty against him. Neither did
the petitioner send a written notice to the respondent informing the latter that his
service is terminated after considering all the circumstances.

In view of the fact that the petitioner neglected to observe the substantial and
procedural due process in terminating the employment of respondent, we rule that the
latter was illegally dismissed from work by the petitioner.

Consequently, the respondent is entitled to reinstatement without loss of seniority

rights, full backwages, inclusive of allowances, and other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement as provided for under Article 279 of the Labor Code.

It appears, however, that respondent was not seeking reinstatement. In his complaint
for illegal dismissal against petitioner, respondent stated:

RELIEF

Complainant/s pray/s for the following:

Reinstatement: No More.36

Respondent also sent to the petitioner a letter applying for the position of a dispatcher
or conductor.37 In the said letter, the respondent explained that since he cannot drive
anymore due to his leg injury, he was willing to be hired as a dispatcher or conductor.
The abovestated facts obviously show that respondent was unwilling to be reinstated
as a bus driver.

Even assuming that respondent is willing to be reinstated as petitioner’s bus driver, the
reinstatement is still unwarranted. There is a serious doubt as to whether the
respondent is physically capable of driving a bus based on the following undisputed
facts: (1) respondent was operated on and confined twice in two different hospitals for a
fractured left leg; (2) steel plates were attached to his fractured leg;38 (3) each
confinement lasted for a month; (4) after his discharge from the second confinement,
respondent was still limping heavily; (5) when respondent had reported for work to the
petitioner in January 1998, he was also limping;39 and (6) respondent does not have a
medical certificate which guarantees that his leg injury has already healed and that he is
now physically capable of driving a bus.
It should be stressed that petitioner is a common carrier and, as such, is obliged to
exercise extra-ordinary diligence in transporting its passengers safely.40 To allow the
respondent to drive the petitioner’s bus under such uncertain condition would,
undoubtedly, expose to danger the lives of the passengers and the property of the
petitioner. This would place the petitioner in jeopardy of violating its extra-ordinary
diligence obligation and, thus, may be subjected to numerous complaints and court
suits. It is clear therefore that the reinstatement of respondent not only would be
deleterious to the riding public but would also put unreasonable burden on the business
and interest of the petitioner. In this regard, it should be remembered that an employer
may not be compelled to continue to employ such persons whose continuance in the
service will patently be inimical to his interests.41

Based on the foregoing facts and circumstances, the reinstatement of the respondent is
no longer feasible. Thus, in lieu of reinstatement, payment to respondent of separation
pay equivalent to one month pay for every year of service is in order.42

WHEREFORE, the petition is PARTLY GRANTED insofar as it prays for the

non-reinstatement of respondent. The Decision of the Court of Appeals dated 26 April
2004 in CA-G.R. SP No. 74010, is hereby AFFIRMED with the following MODIFICATIONS:
Petitioner is ordered to pay the respondent, in lieu of reinstatement, separation pay of
ONE (1) MONTH PAY for every year of service, and full backwages inclusive of
allowances and other benefits or their monetary equivalent from 1 January 1998 up to
the finality of this Decision. No costs.

SO ORDERED.
 G.R. No. 167346 April 2, 2007

SOLIDBANK CORPORATION/ METROPOLITAN BANK AND TRUST COM,Petitioner,

vs.
SPOUSES PETER and SUSAN TAN, Respondents.

Assailed in this petition for review by certiorari under Rule 45 of the Rules of Court are
the decision1 and resolution2of the Court of Appeals (CA) dated November 26, 2004 and
March 1, 2005, respectively, in CA-G.R. CV No. 58618,3 affirming the decision of the
Regional Trial Court (RTC) of Manila, Branch 31.4

On December 2, 1991, respondents’ representative, Remigia Frias, deposited with

petitioner ten checks worth ₱455,962. Grace Neri, petitioner’s teller no. 8 in its Juan
Luna, Manila Branch, received two deposit slips for the checks, an original and a
duplicate. Neri verified the checks and their amounts in the deposit slips then returned
the duplicate copy to Frias and kept the original copy for petitioner.

In accordance with the usual practice between petitioner and respondents, the latter’s
passbook was left with petitioner for the recording of the deposits on the bank’s ledger.
Later, respondents retrieved the passbook and discovered that one of the checks,
Metropolitan Bank and Trust Company (Metrobank) check no. 403954, payable to cash
in the sum of ₱250,000 was not posted therein.

Immediately, respondents notified petitioner of the problem. Petitioner showed

respondent Peter Tan a duplicate

copy of a deposit slip indicating the list of checks deposited by Frias. But it did not
include the missing check. The deposit slip bore the stamp mark "teller no. 7" instead of
"teller no. 8" who previously received the checks.

Still later, respondent Peter Tan learned from Metrobank (where he maintained an
account) that Metrobank check no. 403954 had cleared after it was inexplicably
deposited by a certain Dolores Lagsac in Premier Bank in San Pedro, Laguna.
Respondents demanded that petitioner pay the amount of the check but it refused,
hence, they filed a case for collection of a sum of money in the RTC of Manila, Branch
31.

In its answer, petitioner averred that the deposit slips Frias used when she deposited
the checks were spurious. Petitioner accused respondents of engaging in a scheme to
illegally exact money from it. It added that, contrary to the claim of respondents, it was
"teller no. 7" who received the deposit slips and, although respondents insisted that
Frias deposited ten checks, only nine checks were actually received by said teller. By
way of counterclaim, it sought payment of ₱1,000,000 as actual and moral damages
and ₱500,000 as exemplary damages.
After trial, the RTC found petitioner liable to respondents:

Upon examination of the oral, as well as of the documentary evidence which the parties
presented at the trial in support of their respective contentions, and after taking into
consideration all the circumstances of the case, this Court believes that the loss of
Metrobank Check No. 403954 in the sum of ₱250,000.00 was due to the fault of
[petitioner]…[It] retained the original copy of the [deposit slip marked by "Teller No. 7"].
There is a presumption in law that evidence willfully suppressed would be adverse if
produced.

Art. 1173 of the Civil Code states that "the fault or negligence of the obligor consists in
the omission of that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the person of the time and of the place"; and
that "if the law or contract does not state the diligence which is to be observed in the
performance, the same as expected of a good father of a family shall be required."

…For failure to comply with its obligation, [petitioner] is presumed to have been at fault
or to have acted negligently unless they prove that they observe extraordinary diligence
as prescribed in Arts. 1733 and 1735 of the Civil Code (Art. 1756)…

WHEREFORE, premises considered, judgment is hereby rendered in favor of

[respondents], ordering [petitioner] to pay the sum of ₱250,000, with legal interest
from the time the complaint [for collection of a sum of money] was filed until satisfied;
₱25,000.00 moral damages; ₱25,000.00 exemplary damages plus 20% of the amount
due [respondents] as and for attorney’s fees. With costs.

SO ORDERED.5

Petitioner appealed to the CA which affirmed in toto the RTC’s assailed decision:

Serious doubt [was] engendered by the fact that [petitioner] did not present the
original of the deposit slip marked with "Teller No. 7" and on which the entry as to
Metrobank Check No. 403954 did not appear. Even the most cursory look at the
handwriting thereon reveal[ed] a very marked difference with that in the other deposit
slips filled up [by Frias] on December 2, 1991. Said circumstances spawn[ed] the belief
thus, the said deposit slip was prepared by [petitioner] itself to cover up for the lost
check.6

Petitioner filed a motion for reconsideration but the CA dismissed it. Hence, this
appeal.1a\^/phi1.net

Before us, petitioner faults the CA for upholding the RTC decision. Petitioner argues
that: (1) the findings of the RTC and the CA were not supported by the evidence and
records of the case; (2) the award of damages in favor of respondents was unwarranted
and (3) the application by the RTC, as affirmed by the CA, of the provisions of the Civil
Code on common carriers to the instant case was erroneous.7

The petition must fail.

On the first issue, petitioner contends that the lower courts erred in finding it negligent
for the loss of the subject check. According to petitioner, the fact that the check was
deposited in Premier Bank affirmed its claim that it did not receive the check.

At the outset, the Court stresses that it accords respect to the factual findings of the
trial court and, unless it overlooked substantial matters that would alter the outcome of
the case, this Court will not disturb such findings.8We meticulously reviewed the records
of the case and found no reason to deviate from the rule. Moreover, since the CA
affirmed these findings on appeal, they are final and conclusive on us.9 We therefore
sustain the RTC’s and CA’s findings that petitioner was indeed negligent and responsible
for respondents’ lost check.

On the issue of damages, petitioner argues that the moral and exemplary damages
awarded by the lower courts had no legal basis. For the award of moral damages to
stand, petitioner avers that respondents should have proven the existence of bad faith
by clear and convincing evidence. According to petitioner, simple negligence cannot be
a basis for its award. It insists that the award of exemplary damages is justified only
when the act complained of was done in a wanton, fraudulent and oppressive manner.10

We disagree.

While petitioner may argue that simple negligence does not warrant the award of moral
damages, it nonetheless cannot insist that that was all it was guilty of. It refused to
produce the original copy of the deposit slip which could have proven its claim that it
did not receive respondents’ missing check. Thus, in suppressing the best evidence that
could have bolstered its claim and confirmed its innocence, the presumption now arises
that it withheld the same for fraudulent purposes.11

Moreover, in presenting a false deposit slip in its attempt to feign innocence,

petitioner’s bad faith was apparent and unmistakable. Bad faith imports a dishonest
purpose or some moral obliquity or conscious doing of a wrong that partakes of the
nature of fraud.12

As to the award of exemplary damages, the law allows it by way of example for the
public good. The business of banking is impressed with public interest and great
reliance is made on the bank’s sworn profession of diligence and meticulousness in
giving irreproachable service.13 For petitioner’s failure to carry out its responsibility and
to account for respondents’ lost check, we hold that the lower courts did not err in
awarding exemplary damages to the latter.
On the last issue, we hold that the trial court did not commit any error.1awphi1.nét A
cursory reading of its decision reveals that it anchored its conclusion that petitioner was
negligent on Article 1173 of the Civil Code.14

In citing the different provisions of the Civil Code on common carriers,15 the trial court
merely made reference to the kind of diligence that petitioner should have performed
under the circumstances. In other words, like a common carrier whose business is also
imbued with public interest, petitioner should have exercised extraordinary diligence to
negate its liability to respondents.

Assuming arguendo that the trial court indeed used the provisions on common carriers
to pin down liability on petitioner, still we see no reason to strike down the RTC and CA
rulings on this ground alone.

In one case,16 the Court did not hesitate to apply the doctrine of last clear chance
(commonly used in transportation laws involving common carriers) to a banking
transaction where it adjudged the bank responsible for the encashment of a forged
check. There, we enunciated that the degree of diligence required of banks is more than
that of a good father of a family in keeping with their responsibility to exercise the
necessary care and prudence in handling their clients’ money.

We find no compelling reason to disallow the application of the provisions on common

carriers to this case if only to emphasize the fact that banking institutions (like
petitioner) have the duty to exercise the highest degree of diligence when transacting
with the public. By the nature of their business, they are required to observe the highest
standards of integrity and performance, and utmost assiduousness as well.17

WHEREFORE, the assailed decision and resolution of the Court of Appeals dated
November 26, 2004 and March 1, 2005, respectively, in CA-G.R. CV No. 58618 are
hereby AFFIRMED. Accordingly, the petition is DENIED.

Costs against petitioner. SO ORDERED.

 G.R. No. 170656 August 15, 2007

THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY and BAYANI

FERNANDO as Chairman of the Metropolitan Manila Development Authority,
petitioners,
vs.
VIRON TRANSPORTATION CO., INC., respondent.

G.R. No. 170657 August 15, 2007

HON. ALBERTO G. ROMULO, Executive Secretary, the METROPOLITAN MANILA

DEVELOPMENT AUTHORITY and BAYANI FERNANDO as Chairman of the
Metropolitan Manila Development Authority,petitioners,
vs.
MENCORP TRANSPORTATION SYSTEM, INC., respondent.

The following conditions in 1969, as observed by this Court: Vehicles have increased in
number. Traffic congestion has moved from bad to worse, from tolerable to critical. The
number of people who use the thoroughfares has multiplied x x x,1

have remained unchecked and have reverberated to this day. Traffic jams continue to
clog the streets of Metro Manila, bringing vehicles to a standstill at main road arteries
during rush hour traffic and sapping people’s energies and patience in the process.

The present petition for review on certiorari, rooted in the traffic congestion problem,
questions the authority of the Metropolitan Manila Development Authority (MMDA) to
order the closure of provincial bus terminals along Epifanio de los Santos Avenue (EDSA)
and major thoroughfares of Metro Manila.

Specifically challenged are two Orders issued by Judge Silvino T. Pampilo, Jr. of the
Regional Trial Court (RTC) of Manila, Branch 26 in Civil Case Nos. 03-105850 and
03-106224.

The first assailed Order of September 8, 2005,2 which resolved a motion for
reconsideration filed by herein respondents, declared Executive Order (E.O.) No. 179,
hereafter referred to as the E.O., "unconstitutional as it constitutes an unreasonable
exercise of police power." The second assailed Order of November 23, 20053 denied
petitioners’ motion for reconsideration.

The following facts are not disputed:

President Gloria Macapagal Arroyo issued the E.O. on February 10, 2003, "Providing for
the Establishment of Greater Manila Mass Transport System," the pertinent portions of
which read:
WHEREAS, Metro Manila continues to be the center of employment opportunities,
trade and commerce of the Greater Metro Manila area;

WHEREAS, the traffic situation in Metro Manila has affected the adjacent
provinces of Bulacan, Cavite, Laguna, and Rizal, owing to the continued movement
of residents and industries to more affordable and economically viable locations in
these provinces;

WHEREAS, the Metropolitan Manila Development Authority (MMDA) is tasked to

undertake measures to ease traffic congestion in Metro Manila and ensure the
convenient and efficient travel of commuters within its jurisdiction;

WHEREAS, a primary cause of traffic congestion in Metro Manila has been the
numerous buses plying the streets that impedes [sic] the flow of vehicles and
commuters due to the inefficient connectivity of the different transport modes;

WHEREAS, the MMDA has recommended a plan to decongest traffic by

eliminating the bus terminals now located along major Metro Manila thoroughfares
and providing more convenient access to the mass transport system to the
commuting public through the provision of mass transport terminal facilities that
would integrate the existing transport modes, namely the buses, the rail-based
systems of the LRT, MRT and PNR and to facilitate and ensure efficient travel
through the improved connectivity of the different transport modes;

WHEREAS, the national government must provide the necessary funding

requirements to immediately implement and render operational these projects;
and extent to MMDA such other assistance as may be warranted to ensure their
expeditious prosecution.

NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the

Philippines, by virtue of the powers vested in me by law, do hereby order:

Section 1. THE PROJECT. – The project shall be identified as GREATER MANILA

TRANSPORT SYSTEM Project.

Section 2. PROJECT OBJECTIVES. – In accordance with the plan proposed by

MMDA, the project aims to develop four (4) interim intermodal mass transport
terminals to integrate the different transport modes, as well as those that shall
hereafter be developed, to serve the commuting public in the northwest, north,
east, south, and southwest of Metro Manila. Initially, the project shall concentrate
on immediately establishing the mass transport terminals for the north and south
Metro Manila commuters as hereinafter described.

Section 3. PROJECT IMPLEMENTING AGENCY. – The Metropolitan Manila

 Development Authority (MMDA), is hereby designated as the implementing
Agency for the project. For this purpose, MMDA is directed to undertake such
infrastructure development work as may be necessary and, thereafter, manage the
project until it may be turned-over to more appropriate agencies, if found suitable
and convenient. Specifically, MMDA shall have the following functions and
responsibilities:

a) Cause the preparation of the Master Plan for the projects, including the
designs and costing;

b) Coordinate the use of the land and/or properties needed for the project
with the respective agencies and/or entities owning them;

c) Supervise and manage the construction of the necessary structures and

facilities;

d) Execute such contracts or agreements as may be necessary, with the

appropriate government agencies, entities, and/or private persons, in
accordance with existing laws and pertinent regulations, to facilitate the
implementation of the project;

e) Accept, manage and disburse such funds as may be necessary for the
construction and/or implementation of the projects, in accordance with
prevailing accounting and audit polices and practice in government.

f) Enlist the assistance of any national government agency, office or

department, including local government units, government-owned or
controlled corporations, as may be necessary;

g) Assign or hire the necessary personnel for the above purposes; and

h) Perform such other related functions as may be necessary to enable it to

accomplish the objectives and purposes of this Executive Order.4
(Emphasis in the original; underscoring supplied)

As the above-quoted portions of the E.O. noted, the primary cause of traffic congestion
in Metro Manila has been the numerous buses plying the streets and the inefficient
connectivity of the different transport modes;5 and the MMDA had "recommended a
plan to decongest traffic by eliminating the bus terminals now located along major
Metro Manila thoroughfares and providing more and convenient access to the mass
transport system to the commuting public through the provision of mass transport
terminal facilities"6 which plan is referred to under the E.O. as the Greater Manila Mass
Transport System Project (the Project).
The E.O. thus designated the MMDA as the implementing agency for the Project.

Pursuant to the E.O., the Metro Manila Council (MMC), the governing board and
policymaking body of the MMDA, issued Resolution No. 03-07 series of 20037 expressing
full support of the Project. Recognizing the imperative to integrate the different
transport modes via the establishment of common bus parking terminal areas, the
MMC cited the need to remove the bus terminals located along major thoroughfares of
Metro Manila.8

On February 24, 2003, Viron Transport Co., Inc. (Viron), a domestic corporation engaged
in the business of public transportation with a provincial bus operation,9 filed a petition
for declaratory relief10 before the RTC11 of Manila.

In its petition which was docketed as Civil Case No. 03-105850, Viron alleged that the
MMDA, through Chairman Fernando, was "poised to issue a Circular, Memorandum or
Order closing, or tantamount to closing, all provincial bus terminals along EDSA and in
the whole of the Metropolis under the pretext of traffic regulation."12 This impending
move, it stressed, would mean the closure of its bus terminal in Sampaloc, Manila and
two others in Quezon City.

Alleging that the MMDA’s authority does not include the power to direct provincial bus
operators to abandon their existing bus terminals to thus deprive them of the use of
their property, Viron asked the court to construe the scope, extent and limitation of the
power of the MMDA to regulate traffic under R.A. No. 7924, "An Act Creating the
Metropolitan Manila Development Authority, Defining its Powers and Functions,
Providing Funds Therefor and For Other Purposes."

Viron also asked for a ruling on whether the planned closure of provincial bus terminals
would contravene the Public Service Act and related laws which mandate public utilities
to provide and maintain their own terminals as a requisite for the privilege of operating
as common carriers.13

Mencorp Transportation System, Inc. (Mencorp), another provincial bus operator, later
filed a similar petition for declaratory relief14 against Executive Secretary Alberto G.
Romulo and MMDA Chairman Fernando.

Mencorp asked the court to declare the E.O. unconstitutional and illegal for
transgressing the possessory rights of owners and operators of public land
transportation units over their respective terminals.

Averring that MMDA Chairman Fernando had begun to implement a plan to close and
eliminate all provincial bus terminals along EDSA and in the whole of the metropolis
and to transfer their operations to common bus terminals,15 Mencorp prayed for the
issuance of a temporary restraining order (TRO) and/or writ of preliminary injunction to
restrain the impending closure of its bus terminals which it was leasing at the corner of
EDSA and New York Street in Cubao and at the intersection of Blumentritt, Laon Laan
and Halcon Streets in Quezon City. The petition was docketed as Civil Case No.
03-106224 and was raffled to Branch 47 of the RTC of Manila.

Mencorp’s petition was consolidated on June 19, 2003 with Viron’s petition which was
raffled to Branch 26 of the RTC, Manila.

Mencorp’s prayer for a TRO and/or writ of injunction was denied as was its application
for the issuance of a preliminary injunction.16

In the Pre-Trial Order17 issued by the trial court, the issues were narrowed down to
whether 1) the MMDA’s power to regulate traffic in Metro Manila included the power to
direct provincial bus operators to abandon and close their duly established and existing
bus terminals in order to conduct business in a common terminal; (2) the E.O. is
consistent with the Public Service Act and the Constitution; and (3) provincial bus
operators would be deprived of their real properties without due process of law should
they be required to use the common bus terminals.

Upon the agreement of the parties, they filed their respective position papers in lieu of
hearings.

By Decision18 of January 24, 2005, the trial court sustained the constitutionality and
legality of the E.O. pursuant to R.A. No. 7924, which empowered the MMDA to
administer Metro Manila’s basic services including those of transport and traffic
management.

The trial court held that the E.O. was a valid exercise of the police power of the State as
it satisfied the two tests of lawful subject matter and lawful means, hence, Viron’s and
Mencorp’s property rights must yield to police power.

On the separate motions for reconsideration of Viron and Mencorp, the trial court, by
Order of September 8, 2005, reversed its Decision, this time holding that the E.O. was
"an unreasonable exercise of police power"; that the authority of the MMDA under
Section (5)(e) of R.A. No. 7924 does not include the power to order the closure of Viron’s
and Mencorp’s existing bus terminals; and that the E.O. is inconsistent with the
provisions of the Public Service Act.

Petitioners’ motion for reconsideration was denied by Resolution of November 23,

2005.

Hence, this petition, which faults the trial court for failing to rule that: (1) the requisites
of declaratory relief are not present, there being no justiciable controversy in Civil Case
Nos. 03-105850 and 03-106224; and (2) the President has the authority to undertake or
cause the implementation of the Project.19

Petitioners contend that there is no justiciable controversy in the cases for declaratory
relief as nothing in the body of the E.O. mentions or orders the closure and elimination
of bus terminals along the major thoroughfares of Metro Manila. Viron and Mencorp,
they argue, failed to produce any letter or communication from the Executive
Department apprising them of an immediate plan to close down their bus terminals.

And petitioners maintain that the E.O. is only an administrative directive to government
agencies to coordinate with the MMDA and to make available for use government
property along EDSA and South Expressway corridors. They add that the only relation
created by the E.O. is that between the Chief Executive and the implementing officials,
but not between third persons.

The petition fails.

It is true, as respondents have pointed out, that the alleged deficiency of the
consolidated petitions to meet the requirement of justiciability was not among the
issues defined for resolution in the Pre-Trial Order of January 12, 2004. It is equally true,
however, that the question was repeatedly raised by petitioners in their Answer to
Viron’s petition,20 their Comment of April 29, 2003 opposing Mencorp’s prayer for the
issuance of a TRO,21 and their Position Paper of August 23, 2004.22

In bringing their petitions before the trial court, both respondents pleaded the
existence of the essential requisites for their respective petitions for declaratory relief,23
and refuted petitioners’ contention that a justiciable controversy was lacking.24 There
can be no denying, therefore, that the issue was raised and discussed by the parties
before the trial court.

The following are the essential requisites for a declaratory relief petition: (a) there must
be a justiciable controversy; (b) the controversy must be between persons whose
interests are adverse; (c) the party seeking declaratory relief must have a legal interest
in the controversy; and (d) the issue invoked must be ripe for judicial determination.25

The requirement of the presence of a justiciable controversy is satisfied when an actual

controversy or the ripening seeds thereof exist between the parties, all of whom are sui
juris and before the court, and the declaration sought will help in ending the
controversy.26 A question becomes justiciable when it is translated into a claim of right
which is actually contested.27

In the present cases, respondents’ resort to court was prompted by the issuance of the
E.O. The 4th Whereas clause of the E.O. sets out in clear strokes the MMDA’s plan to
"decongest traffic by eliminating the bus terminals now located along major Metro
Manila thoroughfares and providing more convenient access to the mass transport
system to the commuting public through the provision of mass transport terminal
facilities x x x."

Section 2 of the E.O. thereafter lays down the immediate establishment of common
bus terminals for north- and south-bound commuters. For this purpose, Section 8
directs the Department of Budget and Management to allocate funds of not more than
one hundred million pesos (P100,000,000) to cover the cost of the construction of the
north and south terminals. And the E.O. was made effective immediately.

The MMDA’s resolve to immediately implement the Project, its denials to the contrary
notwithstanding, is also evident from telltale circumstances, foremost of which was the
passage by the MMC of Resolution No. 03-07, Series of 2003 expressing its full support
of the immediate implementation of the Project.

Notable from the 5th Whereas clause of the MMC Resolution is the plan to "remove the
bus terminals located along major thoroughfares of Metro Manila and an urgent need
to integrate the different transport modes." The 7th Whereas clause proceeds to
mention the establishment of the North and South terminals.

As alleged in Viron’s petition, a diagram of the GMA-MTS North Bus/Rail Terminal had
been drawn up, and construction of the terminal is already in progress. The MMDA, in
its Answer28 and Position Paper,29 in fact affirmed that the government had begun to
implement the Project.

It thus appears that the issue has already transcended the boundaries of what is merely
conjectural or anticipatory.lawphil

Under the circumstances, for respondents to wait for the actual issuance by the MMDA
of an order for the closure of respondents’ bus terminals would be foolhardy for, by
then, the proper action to bring would no longer be for declaratory relief which, under
Section 1, Rule 6330 of the Rules of Court, must be brought before there is a breach or
violation of rights.

As for petitioners’ contention that the E.O. is a mere administrative issuance which
creates no relation with third persons, it does not persuade. Suffice it to stress that to
ensure the success of the Project for which the concerned government agencies are
directed to coordinate their activities and resources, the existing bus terminals owned,
operated or leased by third persons like respondents would have to be eliminated; and
respondents would be forced to operate from the common bus terminals.

It cannot be gainsaid that the E.O. would have an adverse effect on respondents. The
closure of their bus terminals would mean, among other things, the loss of income from
the operation and/or rentals of stalls thereat. Precisely, respondents claim a deprivation
of their constitutional right to property without due process of law.
Respondents have thus amply demonstrated a "personal and substantial interest in the
case such that [they have] sustained, or will sustain, direct injury as a result of [the
E.O.’s] enforcement."31 Consequently, the established rule that the constitutionality of a
law or administrative issuance can be challenged by one who will sustain a direct injury
as a result of its enforcement has been satisfied by respondents.

On to the merits of the case.

Respondents posit that the MMDA is devoid of authority to order the elimination of
their bus terminals under the E.O. which, they argue, is unconstitutional because it
violates both the Constitution and the Public Service Act; and that neither is the MMDA
clothed with such authority under R.A. No. 7924.

Petitioners submit, however, that the real issue concerns the President’s authority to
undertake or to cause the implementation of the Project. They assert that the authority
of the President is derived from E.O. No. 125, "Reorganizing the Ministry of
Transportation and Communications Defining its Powers and Functions and for Other
Purposes," her residual power and/or E.O. No. 292, otherwise known as the
Administrative Code of 1987. They add that the E.O. is also a valid exercise of the police
power.

E.O. No. 125,32 which former President Corazon Aquino issued in the exercise of
legislative powers, reorganized the then Ministry (now Department) of Transportation
and Communications. Sections 4, 5, 6 and 22 of E.O. 125, as amended by E.O. 125-A,33
read:

SECTION 4. Mandate. — The Ministry shall be the primary policy, planning,

programming, coordinating, implementing, regulating and administrative
entity of the Executive Branch of the government in the promotion,
development and regulation of dependable and coordinated networks of
transportationand communication systems as well as in the fast, safe, efficient and
reliable postal, transportation and communications services.

To accomplish such mandate, the Ministry shall have the following objectives:

(a) Promote the development of dependable and coordinated networks of

transportation and communications systems;

(b) Guide government and private investment in the development of

the country’s intermodal transportation and communications systems
in a most practical, expeditious, and orderly fashion for maximum safety,
service, and cost effectiveness; (Emphasis and underscoring supplied)

SECTION 5. Powers and Functions. — To accomplish its mandate, the Ministry shall
 have the following powers and functions:

(a) Formulate and recommend national policies and guidelines for the
preparation and implementation of integrated and comprehensive
transportation and communications systems at the national, regional and
local levels;

(b) Establish and administer comprehensive and integrated programs

for transportation and communications, and for this purpose, may call on
any agency, corporation, or organization, whether public or private, whose
development programs include transportation and communications as an
integral part thereof, to participate and assist in the preparation and
implementation of such program;

(c) Assess, review and provide direction to transportation and

communications research and development programs of the government
in coordination with other institutions concerned;

(d) Administer all laws, rules and regulations in the field of

transportation and communications; (Emphasis and underscoring
supplied)

xxxx

SECTION 6. Authority and Responsibility. — The authority and responsibility for

the exercise of the mandate of the Ministry and for the discharge of its powers
and functions shall be vested in the Minister of Transportation and
Communications, hereinafter referred to as the Minister, who shall have
supervision and control over the Ministry and shall be appointed by the President.
(Emphasis and underscoring supplied)

SECTION 22. Implementing Authority of Minister. — The Minister shall issue such
orders, rules, regulations and other issuances as may be necessary to ensure
the effective implementation of the provisions of this Executive Order.
(Emphasis and underscoring supplied)

It is readily apparent from the abovequoted provisions of E.O. No. 125, as amended,
that the President, then possessed of and exercising legislative powers, mandated the
DOTC to be the primary policy, planning, programming, coordinating, implementing,
regulating and administrative entity to promote, develop and regulate networks of
transportation and communications. The grant of authority to the DOTC includes the
power to establishand administer comprehensive and integrated programs for
transportation and communications.
As may be seen further, the Minister (now Secretary) of the DOTC is vested with the
authority and responsibility to exercise the mandate given to the department.
Accordingly, the DOTC Secretary is authorized to issue such orders, rules, regulations
and other issuances as may be necessary to ensure the effective implementation of the
law.

Since, under the law, the DOTC is authorized to establish and administer programs and
projects for transportation, it follows that the President may exercise the same power
and authority to order the implementation of the Project, which admittedly is one for
transportation.

Such authority springs from the President’s power of control over all executive
departments as well as the obligation for the faithful execution of the laws under Article
VII, Section 17 of the Constitution which provides:

SECTION 17. The President shall have control of all the executive departments,
bureaus and offices. He shall ensure that the laws be faithfully executed.

This constitutional provision is echoed in Section 1, Book III of the Administrative Code
of 1987. Notably, Section 38, Chapter 37, Book IV of the same Code defines the
President’s power of supervision and control over the executive departments, viz:

SECTION 38. Definition of Administrative Relationships. — Unless otherwise

expressly stated in the Code or in other laws defining the special relationships of
particular agencies, administrative relationships shall be categorized and defined as
follows:

(1) Supervision and Control. — Supervision and control shall include authority to
act directly whenever a specific function is entrusted by law or regulation to a
subordinate; direct the performance of duty; restrain the commission of acts;
review, approve, reverse or modify acts and decisions of subordinate officials or
units; determine priorities in the execution of plans and programs. Unless a
different meaning is explicitly provided in the specific law governing the
relationship of particular agencies the word "control" shall encompass supervision
and control as defined in this paragraph. x x x (Emphasis and underscoring
supplied)

Thus, whenever a specific function is entrusted by law or regulation to a subordinate,

the President may act directly or merely direct the performance of a duty.34

Respecting the President’s authority to order the implementation of the Project in the
exercise of the police power of the State, suffice it to stress that the powers vested in
the DOTC Secretary to establish and administer comprehensive and integrated
programs for transportation and communications and to issue orders, rules and
regulations to implement such mandate (which, as previously discussed, may also be
exercised by the President) have been so delegated for the good and welfare of the
people. Hence, these powers partake of the nature of police power.

Police power is the plenary power vested in the legislature to make, ordain, and
establish wholesome and reasonable laws, statutes and ordinances, not repugnant to
the Constitution, for the good and welfare of the people.35 This power to prescribe
regulations to promote the health, morals, education, good order or safety, and general
welfare of the people flows from the recognition that salus populi est suprema lex ─ the
welfare of the people is the supreme law.

While police power rests primarily with the legislature, such power may be delegated,
as it is in fact increasingly being delegated.36 By virtue of a valid delegation, the power
may be exercised by the President and administrative boards37 as well as by the
lawmaking bodies of municipal corporations or local governments under an express
delegation by the Local Government Code of 1991.38

The authority of the President to order the implementation of the Project

notwithstanding, the designation of the MMDA as the implementing agency for the
Project may not be sustained. It is ultra vires, there being no legal basis therefor.

It bears stressing that under the provisions of E.O. No. 125, as amended, it is the DOTC,
and not the MMDA, which is authorized to establish and implement a project such as
the one subject of the cases at bar. Thus, the President, although authorized to
establish or cause the implementation of the Project, must exercise the authority
through the instrumentality of the DOTC which, by law, is the primary implementing
and administrative entity in the promotion, development and regulation of networks of
transportation, and the one so authorized to establish and implement a project such as
the Project in question.

By designating the MMDA as the implementing agency of the Project, the President
clearly overstepped the limits of the authority conferred by law, rendering E.O. No. 179
ultra vires.

In another vein, the validity of the designation of MMDA flies in the absence of a
specific grant of authority to it under R.A. No. 7924.

To recall, R.A. No. 7924 declared the Metropolitan Manila area39 as a "special
development and administrative region" and placed the administration of "metro-wide"
basic services affecting the region under the MMDA.

Section 2 of R.A. No. 7924 specifically authorizes the MMDA to perform "planning,
monitoring and coordinative functions, and in the process exercise regulatory and
supervisory authority over the delivery of metro-wide services," including transport and
traffic management.40 Section 5 of the same law enumerates the powers and functions
of the MMDA as follows:

(a) Formulate, coordinate and regulate the implementation of medium and

long-term plans and programs for the delivery of metro-wide services, land use
and physical development within Metropolitan Manila, consistent with national
development objectives and priorities;

(b) Prepare, coordinate and regulate the implementation of medium-term

investment programs for metro-wide services which shall indicate sources and
uses of funds for priority programs and projects, and which shall include the
packaging of projects and presentation to funding institutions;

(c) Undertake and manage on its own metro-wide programs and projects for
the delivery of specific services under its jurisdiction, subject to the approval of
the Council. For this purpose, MMDA can create appropriate project
management offices;

(d) Coordinate and monitor the implementation of such plans, programs and
projects in Metro Manila; identify bottlenecks and adopt solutions to problems
of implementation;

(e) The MMDA shall set the policies concerning traffic in Metro Manila, and
shall coordinate and regulate the implementation of all programs and
projects concerning traffic management, specifically pertaining to
enforcement, engineering and education. Upon request, it shall be extended
assistance and cooperation, including but not limited to, assignment of
personnel, by all other government agencies and offices concerned;

(f) Install and administer a single ticketing system, fix, impose and collect
fines and penalties for all kinds of violations of traffic rules and regulations,
whether moving or non-moving in nature, and confiscate and suspend or
revoke drivers’ licenses in the enforcement of such traffic laws and regulations,
the provisions of RA 4136 and PD 1605 to the contrary notwithstanding. For
this purpose, the Authority shall impose all traffic laws and regulations in Metro
Manila, through its traffic operation center, and may deputize members of the
PNP, traffic enforcers of local government units, duly licensed security guards,
or members of non-governmental organizations to whom may be delegated
certain authority, subject to such conditions and requirements as the Authority
may impose; and

(g) Perform other related functions required to achieve the objectives of the
MMDA, including the undertaking of delivery of basic services to the local
government units, when deemed necessary subject to prior coordination with
 and consent of the local government unit concerned." (Emphasis and
underscoring supplied)

The scope of the function of MMDA as an administrative, coordinating and

policy-setting body has been settled in Metropolitan Manila Development Authority
(MMDA) v. Bel-Air Village Association, Inc.41 In that case, the Court stressed:

Clearly, the scope of the MMDA’s function is limited to the delivery of the seven (7)
basic services. One of these is transport and traffic management which includes
the formulation and monitoring of policies, standards and projects to rationalize
the existing transport operations, infrastructure requirements, the use of
thoroughfares and promotion of the safe movement of persons and goods. It also
covers the mass transport system and the institution of a system of road
regulation, the administration of all traffic enforcement operations, traffic
engineering services and traffic education programs, including the institution of a
single ticketing system in Metro Manila for traffic violations. Under this service, the
MMDA is expressly authorized to "to set the policies concerning traffic" and
"coordinate and regulate the implementation of all traffic management programs."
In addition, the MMDA may install and administer a single ticketing system," fix,
impose and collect fines and penalties for all traffic violations.

It will be noted that the powers of the MMDA are limited to the following acts:
formulation, coordination, regulation, implementation, preparation, management,
monitoring, setting of policies, installation of a system and administration. There is
no syllable in R.A. No. 7924 that grants the MMDA police power, let alone
legislative power. Even the Metro Manila Council has not been delegated any
legislative power. Unlike the legislative bodies of the local government units,
there is no provision in R.A. No. 7924 that empowers the MMDA or its Council to
‘enact ordinances, approve resolutions and appropriate funds for the general
welfare’ of the inhabitants of Metro Manila. The MMDA is, as termed in the
charter itself, a ‘development authority.’ It is an agency created for the purpose
of laying down policies and coordinating with the various national government
agencies, people’s organizations, non-governmental organizations and the
private sector for the efficient and expeditious delivery of basic services in the
vast metropolitan area. All its functions are administrative in nature and these
are actually summed up in the charter itself, viz:

‘SECTION 2. Creation of the Metropolitan Manila Development Authority. — . . .

The MMDA shall perform planning, monitoring and coordinative functions,

and in the process exercise regulatory and supervisory authority over the
delivery of metro-wide services within Metro Manila, without diminution of
the autonomy of the local government units concerning purely local matters.’42
(Emphasis and underscoring supplied)
In light of the administrative nature of its powers and functions, the MMDA is devoid of
authority to implement the Project as envisioned by the E.O; hence, it could not have
been validly designated by the President to undertake the Project. It follows that the
MMDA cannot validly order the elimination of respondents’ terminals.

Even the MMDA’s claimed authority under the police power must necessarily fail in
consonance with the above-quoted ruling in MMDA v. Bel-Air Village Association, Inc.
and this Court’s subsequent ruling in Metropolitan Manila Development Authority v.
Garin43 that the MMDA is not vested with police power.

Even assuming arguendo that police power was delegated to the MMDA, its exercise of
such power does not satisfy the two tests of a valid police power measure, viz: (1) the
interest of the public generally, as distinguished from that of a particular class, requires
its exercise; and (2) the means employed are reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon individuals.44 Stated
differently, the police power legislation must be firmly grounded on public interest and
welfare and a reasonable relation must exist between the purposes and the means.

As early as Calalang v. Williams,45 this Court recognized that traffic congestion is a

public, not merely a private, concern. The Court therein held that public welfare
underlies the contested statute authorizing the Director of Public Works to promulgate
rules and regulations to regulate and control traffic on national roads.

Likewise, in Luque v. Villegas,46 this Court emphasized that public welfare lies at the
bottom of any regulatory measure designed "to relieve congestion of traffic, which is,
to say the least, a menace to public safety."47 As such, measures calculated to promote
the safety and convenience of the people using the thoroughfares by the regulation of
vehicular traffic present a proper subject for the exercise of police power.

Notably, the parties herein concede that traffic congestion is a public concern that
needs to be addressed immediately. Indeed, the E.O. was issued due to the felt need to
address the worsening traffic congestion in Metro Manila which, the MMDA so
determined, is caused by the increasing volume of buses plying the major
thoroughfares and the inefficient connectivity of existing transport systems. It is thus
beyond cavil that the motivating force behind the issuance of the E.O. is the interest of
the public in general.

Are the means employed appropriate and reasonably necessary for the
accomplishment of the purpose. Are they not duly oppressive?

With the avowed objective of decongesting traffic in Metro Manila, the E.O. seeks to
"eliminate[e] the bus terminals now located along major Metro Manila thoroughfares
and provid[e] more convenient access to the mass transport system to the commuting
public through the provision of mass transport terminal facilities x x x."48 Common
carriers with terminals along the major thoroughfares of Metro Manila would thus be
compelled to close down their existing bus terminals and use the MMDA-designated
common parking areas.

In Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc.,49 two city ordinances were
passed by the Sangguniang Panlungsod of Lucena, directing public utility vehicles to
unload and load passengers at the Lucena Grand Central Terminal, which was given the
exclusive franchise to operate a single common terminal. Declaring that no other
terminals shall be situated, constructed, maintained or established inside or within the
city of Lucena, the sanggunian declared as inoperable all temporary terminals therein.

The ordinances were challenged before this Court for being unconstitutional on the
ground that, inter alia, the measures constituted an invalid exercise of police power, an
undue taking of private property, and a violation of the constitutional prohibition
against monopolies.

Citing De la Cruz v. Paras50 and Lupangco v. Court of Appeals,51 this Court held that the
assailed ordinances were characterized by overbreadth, as they went beyond what was
reasonably necessary to solve the traffic problem in the city. And it found that the
compulsory use of the Lucena Grand Terminal was unduly oppressive because it would
subject its users to fees, rentals and charges.

The true role of Constitutional Law is to effect an equilibrium between authority

and liberty so that rights are exercised within the framework of the law and the
laws are enacted with due deference to rights.

A due deference to the rights of the individual thus requires a more careful
formulation of solutions to societal problems.

From the memorandum filed before this Court by petitioner, it is gathered that the
Sangguniang Panlungsod had identified the cause of traffic congestion to be the
indiscriminate loading and unloading of passengers by buses on the streets of the
city proper, hence, the conclusion that the terminals contributed to the
proliferation of buses obstructing traffic on the city streets.

Bus terminals per se do not, however, impede or help impede the flow of traffic.
How the outright proscription against the existence of all terminals, apart from
that franchised to petitioner, can be considered as reasonably necessary to
solve the traffic problem, this Court has not been enlightened. If terminals lack
adequate space such that bus drivers are compelled to load and unload passengers
on the streets instead of inside the terminals, then reasonable specifications for the
size of terminals could be instituted, with permits to operate the same denied
those which are unable to meet the specifications.
 In the subject ordinances, however, the scope of the proscription against the
maintenance of terminals is so broad that even entities which might be able to
provide facilities better than the franchised terminal are barred from operating
at all. (Emphasis and underscoring supplied)

As in Lucena, this Court fails to see how the prohibition against the existence of
respondents’ terminals can be considered a reasonable necessity to ease traffic
congestion in the metropolis. On the contrary, the elimination of respondents’ bus
terminals brings forth the distinct possibility and the equally harrowing reality of traffic
congestion in the common parking areas, a case of transference from one site to
another.

Less intrusive measures such as curbing the proliferation of "colorum" buses, vans and
taxis entering Metro Manila and using the streets for parking and passenger pick-up
points, as respondents suggest, might even be more effective in easing the traffic
situation. So would the strict enforcement of traffic rules and the removal of
obstructions from major thoroughfares.

As to the alleged confiscatory character of the E.O., it need only to be stated that
respondents’ certificates of public convenience confer no property right, and are mere
licenses or privileges.52 As such, these must yield to legislation safeguarding the interest
of the people.

Even then, for reasons which bear reiteration, the MMDA cannot order the closure of
respondents’ terminals not only because no authority to implement the Project has
been granted nor legislative or police power been delegated to it, but also because the
elimination of the terminals does not satisfy the standards of a valid police power
measure.

Finally, an order for the closure of respondents’ terminals is not in line with the
provisions of the Public Service Act.

Paragraph (a), Section 13 of Chapter II of the Public Service Act (now Section 5 of
Executive Order No. 202, creating the Land Transportation Franchising and Regulatory
Board or LFTRB) vested the Public Service Commission (PSC, now the LTFRB) with "x x x
jurisdiction, supervision and control over all public services and their franchises,
equipment and other properties x x x."

Consonant with such grant of authority, the PSC was empowered to "impose such
conditions as to construction, equipment, maintenance, service, or operation as the
public interests and convenience may reasonably require"53 in approving any franchise
or privilege.

Further, Section 16 (g) and (h) of the Public Service Act54 provided that the Commission
shall have the 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:

(g) To compel any public service to furnish safe, adequate, and proper service as
regards the manner of furnishing the same as well as the maintenance of the
necessary material and equipment.

(h) To require any public service to establish, construct, maintain, and operate
any reasonable extension of its existing facilities, where in the judgment of said
Commission, such extension is reasonable and practicable and will furnish sufficient
business to justify the construction and maintenance of the same and when the
financial condition of the said public service reasonably warrants the original
expenditure required in making and operating such extension.(Emphasis and
underscoring supplied)

The establishment, as well as the maintenance of vehicle parking areas or passenger

terminals, is generally considered a necessary service to be provided by provincial bus
operators like respondents, hence, the investments they have poured into the
acquisition or lease of suitable terminal sites. Eliminating the terminals would thus run
counter to the provisions of the Public Service Act.

This Court commiserates with the MMDA for the roadblocks thrown in the way of its
efforts at solving the pestering problem of traffic congestion in Metro Manila. These
efforts are commendable, to say the least, in the face of the abominable traffic
situation of our roads day in and day out. This Court can only interpret, not change, the
law, however. It needs only to be reiterated that it is the DOTC ─ as the primary policy,
planning, programming, coordinating, implementing, regulating and administrative
entity to promote, develop and regulate networks of transportation and
communications ─ which has the power to establish and administer a
transportation project like the Project subject of the case at bar.

No matter how noble the intentions of the MMDA may be then, any plan, strategy or
project which it is not authorized to implement cannot pass muster.

WHEREFORE, the Petition is, in light of the foregoing disquisition, DENIED. E.O. No.
179 is declared NULL and VOID for being ultra vires. SO ORDERED.
 G..R. No. 156978 May 2, 2006

ABOITIZ SHIPPING CORPORATION, Petitioner,

vs.
NEW INDIA ASSURANCE COMPANY, LTD., Respondent.

For review on certiorari are the Decision1 dated August 29, 2002 of the Court of Appeals
in CA-G.R. CV No. 28770 and its Resolution2 dated January 23, 2003 denying
reconsideration. The Court of Appeals affirmed the Decision3dated November 20, 1989
of the Regional Trial Court of Manila in Civil Case No. 82-1475, in favor of respondent
New India Assurance Company, Ltd.

This petition stemmed from the action for damages against petitioner, Aboitiz Shipping
Corporation, arising from the sinking of its vessel, M/V P. Aboitiz, on October 31, 1980.

The pertinent facts are as follows:

Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals from
France on board a vessel owned by Franco-Belgian Services, Inc. The cargo was
consigned to General Textile, Inc., in Manila and insured by respondent New India
Assurance Company, Ltd. While in Hongkong, the cargo was transferred to M/V P.
Aboitiz for transshipment to Manila.4

Before departing, the vessel was advised by the Japanese Meteorological Center that it
was safe to travel to its destination.5 But while at sea, the vessel received a report of a
typhoon moving within its general path. To avoid the typhoon, the vessel changed its
course. However, it was still at the fringe of the typhoon when its hull leaked. On
October 31, 1980, the vessel sank, but the captain and his crew were saved.

On November 3, 1980, the captain of M/V P. Aboitiz filed his "Marine Protest", stating
that the wind force was at 10 to 15 knots at the time the ship foundered and described
the weather as "moderate breeze, small waves, becoming longer, fairly frequent white
horses."6

Thereafter, petitioner notified7 the consignee, General Textile, of the total loss of the
vessel and all of its cargoes. General Textile, lodged a claim with respondent for the
amount of its loss. Respondent paid General Textile and was subrogated to the rights of
the latter.8

Respondent hired a surveyor, Perfect, Lambert and Company, to investigate the cause
of the sinking. In its report,9the surveyor concluded that the cause was the flooding of
the holds brought about by the vessel’s questionable seaworthiness. Consequently,
respondent filed a complaint for damages against petitioner Aboitiz, Franco-Belgian
Services and the latter’s local agent, F.E. Zuellig, Inc. (Zuellig). Respondent alleged that
the proximate cause of the loss of the shipment was the fault or negligence of the
master and crew of the vessel, its unseaworthiness, and the failure of defendants
therein to exercise extraordinary diligence in the transport of the goods. Hence,
respondent added, defendants therein breached their contract of
10
carriage. 1avvphil.net

Franco-Belgian Services and Zuellig responded, claiming that they exercised

extraordinary diligence in handling the shipment while it was in their possession; its
vessel was seaworthy; and the proximate cause of the loss of cargo was a fortuitous
event. They also filed a cross-claim against petitioner alleging that the loss occurred
during the transshipment with petitioner and so liability should rest with petitioner.

For its part, petitioner also raised the same defense that the ship was seaworthy. It
alleged that the sinking of M/V P. Aboitiz was due to an unforeseen event and without
fault or negligence on its part. It also alleged that in accordance with the real and
hypothecary nature of maritime law, the sinking of M/V P. Aboitiz extinguished its
liability on the loss of the cargoes.11

Meanwhile, the Board of Marine Inquiry (BMI) conducted its own investigation to
determine whether the captain and crew were administratively liable. However,
petitioner neither informed respondent nor the trial court of the investigation. The BMI
exonerated the captain and crew of any administrative liability; and declared the vessel
seaworthy and concluded that the sinking was due to the vessel’s exposure to the
approaching typhoon.

On November 20, 1989, the trial court, citing the Court of Appeals decision in General
Accident Fire and Life Assurance Corporation v. Aboitiz Shipping Corporation12 involving
the same incident, ruled in favor of respondent. It held petitioner liable for the total
value of the lost cargo plus legal interest, thus:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of New

India and against Aboitiz ordering the latter to pay unto the former the amount of
P142,401.60, plus legal interest thereon until the same is fully paid, attorney’s fees
equivalent to fifteen [percent] (15%) of the total amount due and the costs of suit.

The complaint with respect to Franco and Zuellig is dismissed and their counterclaim
against New India is likewise dismissed

SO ORDERED.131avvphil.net

Petitioner elevated the case to the Court of Appeals and presented the findings of the
BMI. However, on August 29, 2002, the appellate court affirmed in toto the trial court’s
decision. It held that the proceedings before the BMI was only for the administrative
liability of the captain and crew, and was unilateral in nature, hence not binding on the
courts. Petitioner moved for reconsideration but the same was denied on January 23,
2003.

Hence, this petition for review, alleging that the Court of Appeals gravely erred in:

I. DISREGARDING THE RULINGS OF THE HONORABLE SUPREME COURT ON THE

APPLICATION OF THE RULE ON LIMITED LIABILITY UNDER ARTICLE 587, 590 AND
837 OF THE CODE OF COMMERCE TO CASES INVOLVING THE SINKING OF THE M/V "P.
ABOITIZ;

A. NOT APPLYING THE RULINGS IN THE CASES OF MONARCH INSURANCE CO., INC.
ET AL. V. COURT OF APPEALS ET AL. AND ABOITIZ SHIPPING CORPORATION V.
GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD.;

B. RULING THAT THE ISSUE ON THE APPLICATION OF THE RULE ON LIMITED

LIABILITY UNDER ARTICLES 587, 590 AND 837 OF THE CODE OF COMMERCE HAD
BEEN CONSIDERED AND PASSED UPON IN ITS DECISION;

II. NOT LIMITING THE AWARD OF DAMAGES TO RESPONDENT TO ITS PRO-RATA

SHARES IN THE INSURANCE PROCEEDS FROM THE SINKING OF THE M/V "P.
ABOITIZ".14

Stated simply, we are asked to resolve whether the limited liability doctrine, which
limits respondent’s award of damages to its pro-rata share in the insurance proceeds,
applies in this case.

Petitioner, citing Monarch Insurance Co. Inc. v. Court of Appeals, 15 contends that
respondent’s claim for damages should only be against the insurance proceeds and
limited to its pro-rata share in view of the doctrine of limited liability.

Respondent counters that the doctrine of real and hypothecary nature of maritime law
is not applicable in the present case because petitioner was found to have been
negligent. Hence, according to respondent, petitioner should be held liable for the total
value of the lost cargo.

It bears stressing that this Court has variedly applied the doctrine of limited liability to
the same incident – the sinking of M/V P. Aboitiz on October 31, 1980. Monarch, the
latest ruling, tried to settle the conflicting pronouncements of this Court relative to the
sinking of M/V P. Aboitiz. In Monarch, we said that the sinking of the vessel was not due
to force majeure, but to its unseaworthy condition.16 Therein, we found petitioner
concurrently negligent with the captain and crew.17 But the Court stressed that the
circumstances therein still made the doctrine of limited liability applicable.18

Our ruling in Monarch may appear inconsistent with the exception of the limited liability
doctrine, as explicitly stated in the earlier part of the Monarch decision. An exception to
the limited liability doctrine is when the damage is due to the fault of the shipowner or
to the concurrent negligence of the shipowner and the captain. In which case, the
shipowner shall be liable to the full-extent of the damage.19 We thus find it necessary to
clarify now the applicability here of the decision in Monarch.

From the nature of their business and for reasons of public policy, common carriers are
bound to observe extraordinary diligence over the goods they transport according to all
the circumstances of each case.20 In the event of loss, destruction or deterioration of the
insured goods, common carriers are responsible, unless they can prove that the loss,
destruction or deterioration was brought about by the causes specified in Article 1734 of
the Civil Code.21 In all other cases, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they observed extraordinary
diligence.22 Moreover, where the vessel is found unseaworthy, the shipowner is also
presumed to be negligent since it is tasked with the maintenance of its vessel. Though
this duty can be delegated, still, the shipowner must exercise close supervision over its
men.23

In the present case, petitioner has the burden of showing that it exercised extraordinary
diligence in the transport of the goods it had on board in order to invoke the limited
liability doctrine. Differently put, to limit its liability to the amount of the insurance
proceeds, petitioner has the burden of proving that the unseaworthiness of its vessel
was not due to its fault or negligence. Considering the evidence presented and the
circumstances obtaining in this case, we find that petitioner failed to discharge this
burden. It initially attributed the sinking to the typhoon and relied on the BMI findings
that it was not at fault. However, both the trial and the appellate courts, in this case,
found that the sinking was not due to the typhoon but to its unseaworthiness. Evidence
on record showed that the weather was moderate when the vessel sank. These factual
findings of the Court of Appeals, affirming those of the trial court are not to be
disturbed on appeal, but must be accorded great weight. These findings are conclusive
not only on the parties but on this Court as well.24

In contrast, the findings of the BMI are not deemed always binding on the courts.25
Besides, exoneration of the vessel’s officers and crew by the BMI merely concerns their
respective administrative liabilities.26 It does not in any way operate to absolve the
common carrier from its civil liabilities arising from its failure to exercise extraordinary
diligence, the determination of which properly belongs to the courts.27 Where the
shipowner fails to overcome the presumption of negligence, the doctrine of limited
liability cannot be applied.28 Therefore, we agree with the appellate court in sustaining
the trial court’s ruling that petitioner is liable for the total value of the lost cargo.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated August 29,
2002 and Resolution dated January 23, 2003 of the Court of Appeals in CA-G.R. CV No.
28770 are AFFIRMED. Costs against petitioner. SO ORDERED.
 G.R. No. 157658 October 15, 2007

PHILIPPINE NATIONAL RAILWAYS and VIRGILIO J. BORJA, Petitioners,

vs.
COURT OF APPEALS (Second Division), CORAZON C. AMORES, MA. EMILIE A.
MOJICA, CECILE C. SISON, DINO C. AMORES, LARISA C. AMORES, ARMAND JINO
C. AMORES and JOHN C. AMORES, Respondents.

Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, seeking to annul and set aside the Decision1 of the Court
of Appeals (CA) in CA-G.R. CV No. 54906 which reversed the Decision2 of the Regional
Trial Court (RTC) of Manila, Branch 28, in Civil Case No. 92-61987.

The factual antecedents are as follows:

In the early afternoon of April 27, 1992, Jose Amores (Amores) was traversing the
railroad tracks in Kahilum II Street, Pandacan, Manila. Before crossing the railroad track,
he stopped for a while then proceeded accordingly.3Unfortunately, just as Amores was
at the intersection, a Philippine National Railways’ (PNR) train with locomotive number
T-517 turned up and collided with the car.4

At the time of the mishap, there was neither a signal nor a crossing bar at the
intersection to warn motorists of an approaching train. Aside from the railroad track,
the only visible warning sign at that time was the defective standard signboard "STOP,
LOOK and LISTEN" wherein the sign "Listen" was lacking while that of "Look" was
bent.5 No whistle blow from the train was likewise heard before it finally bumped the
car of Amores.6 After impact, the car was dragged about ten (10) meters beyond the
center of the crossing.7 Amores died as a consequence thereof.

On July 22, 1992, the heirs of Amores, consisting of his surviving wife and six children,
herein respondents, filed a Complaint for Damages8 against petitioners PNR and Virgilio
J. Borja (Borja), PNR’s locomotive driver at the time of the incident, before the RTC of
Manila. The case was raffled to Branch 28 and was docketed as Civil Case No. 92-61987.
In their complaint, respondents averred that the train’s speedometer was defective, and
that the petitioners’ negligence was the proximate cause of the mishap for their failure
to take precautions to prevent injury to persons and property despite the dense
population in the vicinity. They then prayed for actual and moral damages, as well as
attorney’s fees.9

In their Answer,10 the petitioners denied the allegations, stating that the train was
railroad-worthy and without any defect. According to them, the proximate cause of the
death of Amores was his own carelessness and negligence, and Amores wantonly
disregarded traffic rules and regulations in crossing the railroad tracks and trying to
beat the approaching train. They admitted that there was no crossing bar at the site of
the accident because it was merely a barangay road.11 PNR stressed that it exercised
the diligence of a good father of a family in the selection and supervision of the
locomotive driver and train engineer, Borja, and that the latter likewise used
extraordinary diligence and caution to avoid the accident. Petitioners further asserted
that respondents had the last clear chance to avoid the accident but recklessly failed to
do so.

After trial on the merits, on August 22, 1996, the RTC rendered judgment in favor of the
petitioners, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered dismissing the complaint of the plaintiffs

and the defendants’ counterclaim.

The costs shall be halved and paid equally by the parties.

The counsel for the defendants is hereby ordered to inform this court who is the legal
representative of the deceased defendant, Virgilio Borja, within ten (10) days from
receipt of a copy of this decision.

SO ORDERED.12

The RTC rationalized that the proximate cause of the collision was Amores’ fatal
misjudgment and the reckless course of action he took in crossing the railroad track
even after seeing or hearing the oncoming train.

On appeal, the CA reversed the RTC decision, as follows:

WHEREFORE, the assailed Decision of the Regional Trial Court of Manila, Branch 28 is
hereby REVERSED. The defendants PNR and the estate of Virgilio J. Borja are jointly
and severally liable to pay plaintiffs the following:

1) The amount of ₱122,300.00 for the cost of damage to the car; and,

2) The amount of ₱50,000 as moral damages.

For lack of official receipts for funeral expenses and specimen of the last pay slip of the
deceased, the claim for reimbursement of funeral expenses and claim for payment of
support is hereby DENIED for lack of basis. Costs against Defendants.

SO ORDERED.13

In reversing the trial court’s decision, the appellate court found the petitioners negligent.
The court based the petitioners’ negligence on the failure of PNR to install a semaphore
or at the very least, to post a flagman, considering that the crossing is located in a
thickly populated area. Moreover, the signboard "Stop, Look and Listen" was found
insufficient because of its defective condition as described above. Lastly, no negligence
could be attributed to Amores as he exercised reasonable diligence in crossing the
railroad track.

Aggrieved by this reversal, the petitioners filed the present petition for review on
certiorari, raising the following grounds:

1. THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN

RENDERING ITS DECISION REVERSING THE DECISION OF THE REGIONAL TRIAL
COURT OF MANILA BRANCH 28, IN NOT TAKING INTO CONSIDERATION THE
PROVISION OF SECTION 42, R.A. 4136 OF THE LAND TRANSPORTATION AND
TRAFFIC CODE.
2. THE DECISION OF THE COURT OF APPEALS IS CONTRARY TO THE EVIDENCE ON
RECORD ADDUCED IN THE TRIAL ON THE MERIT IN CIVIL CASE NO. 92-61987.14

The petitioners insist that Amores must have heard the train’s whistle and heeded the
warning but, noting that the train was still a distance away and moving slowly, he must
have calculated that he could beat it to the other side of the track before the train
would arrive at the intersection. The petitioners likewise add that the train was
railroad-worthy and that its defective speedometer did not affect the train’s operation.
Lastly, they insist that evidence showed sufficient warning signs strategically installed
at the crossing to alert both motorists and pedestrians.

Respondents, on the other hand, argue that the cause of the accident was petitioners’
carelessness, imprudence and laxity in failing to provide a crossing bar and keeper at
the Kahilum II railway intersection. Considering that Kahilum II Street is in the middle of
a thickly populated squatters’ area, and many pedestrians cross the railroad track,
notwithstanding the fact that it is a public street and a main thoroughfare utilized in
going to Herran Street, the presence of adequate warning signals would have
prevented the untimely death of Amores. Another crucial point raised by the
respondents is the manner in which Borja applied the brakes of the train only when the
locomotive was already very near Amores’ car, as admitted by witness Querimit. Finally,
respondents claim that Borja’s failure to blow the locomotive’s horn, pursuant to the
usual practice of doing the same 100 meters before reaching the Kahilum II crossing
point is an earmark of recklessness on the part of the petitioners.

The petition must fail.

The only issue to be resolved in the present case is whether the appellate court was
correct in ascribing negligence on the part of the petitioners. It was ascertained beyond
quandary that the proximate cause of the collision is the negligence and imprudence of
the petitioner PNR and its locomotive driver, Borja, in operating the passenger train.
As the action is predicated on negligence, the relevant provision is Article 2176 of the
New Civil Code, which states that:

Whoever by act or omission causes damage to another, there being fault or negligence,
is obliged to pay for the damage done. Such fault or negligence, if there was no
pre-existing contractual relation between the parties, is called quasi-delict and is
governed by the provisions of this chapter.

We have thoroughly reviewed the records of the case and we find no cogent reason to
reverse the appellate court’s decision. Negligence has been defined as "the failure to
observe for the protection of the interests of another person that degree of care,
precaution, and vigilance which the circumstances justly demand, whereby such other
person suffers injury."15 Using the aforementioned philosophy, it may be reliably
concluded that there is no hard and fast rule whereby such degree of care and vigilance
is calibrated; it is dependent upon the circumstances in which a person finds himself. All
that the law requires is that it is perpetually compelling upon a person to use that care
and diligence expected of sensible men under comparable circumstances.16

We hold that the petitioners were negligent when the collision took place. The
transcript of stenographic notes reveals that the train was running at a fast speed
because notwithstanding the application of the ordinary and emergency brakes, the
train still dragged the car some distance away from the point of impact. Evidence
likewise unveils the inadequate precautions taken by petitioner PNR to forewarn the
public of the impending danger. Aside from not having any crossing bar, no flagman or
guard to man the intersection at all times was posted on the day of the incident. A
reliable signaling device in good condition, not just a dilapidated "Stop, Look and
Listen" signage because of many years of neglect, is needed to give notice to the public.
It is the responsibility of the railroad company to use reasonable care to keep the signal
devices in working order. Failure to do so would be an indication of negligence.

As held in the case of Philippine National Railway v. Brunty,17 it may broadly be stated
that railroad companies owe to the public a duty of exercising a reasonable degree of
care to avoid injury to persons and property at railroad crossings, which duties pertain
both to the operation of trains and to the maintenance of the crossings. Moreover,
every corporation constructing or operating a railway shall make and construct at all
points where such railway crosses any public road, good, sufficient, and safe crossings,
and erect at such points, at sufficient elevation from such road as to admit a free
passage of vehicles of every kind, a sign with large and distinct letters placed thereon,
to give notice of the proximity of the railway, and warn persons of the necessity of
looking out for trains.18 The failure of the PNR to put a cross bar, or signal light, flagman
or switchman, or semaphore is evidence of negligence and disregard of the safety of
the public, even if there is no law or ordinance requiring it, because public safety
demands that said device or equipment be installed.
The petitioners insist that a train has a right-of-way in a railroad crossing under the
existing laws. They derive their theory from Section 42 (d), Article III of R.A. 4136,
otherwise known as the Land Transportation and Traffic Code, which states that:

The driver of a vehicle upon a highway shall bring to a full stop such vehicle before
traversing any "through highway" or railroad crossing: Provided, That when it is
apparent that no hazard exists, the vehicle may be slowed down to five miles per hour
instead of bringing it to a full stop.

They claim that motorists are enjoined by law to stop, look and listen before crossing
railroad tracks and that a heavier responsibility rests upon the motorists in avoiding
accidents at level crossings.

It is true that one driving an automobile must use his faculties of seeing and hearing
when nearing a railroad crossing.1âwphi1 However, the obligation to bring to a full stop
vehicles moving in public highways before traversing any "through street" only accrues
from the time the said "through street" or crossing is so designated and sign-posted.
From the records of the case, it can be inferred that Amores exercised all the necessary
precautions required of him as to avoid injury to himself and to others.1âwphi1 The
witnesses’ testimonies showed that Amores slackened his speed, made a full stop, and
then proceeded to cross the tracks when he saw that there was no impending danger to
his life. Under these circumstances, we are convinced that Amores did everything, with
absolute care and caution, to avoid the collision.

It is settled that every person or motorist crossing a railroad track should use ordinary
prudence and alertness to determine the proximity of a train before attempting to cross.
We are persuaded that the circumstances were beyond the control of Amores for no
person would sacrifice his precious life if he had the slightest opportunity to evade the
catastrophe. Besides, the authority in this jurisdiction is that the failure of a railroad
company to install a semaphore or at the very least, to post a flagman or watchman to
warn the public of the passing train amounts to negligence.191âwphi1

In view of the foregoing, We will now discuss the liability of petitioner PNR. Article
218020 of the New Civil Code discusses the liability of the employer once negligence or
fault on the part of the employee has been established. The employer is actually liable
on the assumption of juris tantum that the employer failed to exercise diligentissimi
patris families in the selection and supervision of its employees. The liability is primary
and can only be negated by showing due diligence in the selection and supervision of
the employee, a factual matter that has not been demonstrated.21 Even the existence of
hiring procedures and supervisory employees cannot be incidentally invoked to
overturn the presumption of negligence on the part of the employer.22

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated
March 31, 2003 in CA-G.R. CV No. 54906 is hereby AFFIRMED.
 G.R. No. 155056-57 October 19, 2007

THE HEIRS OF THE LATE PANFILO V. PAJARILLO, Petitioners,

vs.
THE HON. COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION and
SAMAHAN NG MGA MANGGAGAWA NG PANFILO V. PAJARILLO, ALFREDO
HOYOHOY, HERMINIO CASTILLO, BERNARDO ROCO, RODOLFO TORRES, JULIAN
JORVINA, LOURDES ROCO, FLORITAYAPOC, MARLON ALDANA, PARALUMAN
ULANG, TOLENTINO SANHI, JOHNNY SORIANO, ANDRES CALAQUE, ROBERTO
LAVAREZ, FRANCISCO MORALES, SALVACION PERINA, ANTONIO ABALA,
ROMEO SALONGA, AUGUR M. MANIPOL, BIENVENIDA TEQUIL, MARIO ELEP,
ALADINO LATIGO, BERNARDINE BANSAL, PEDRO DE BAGUIO, RICARDO CALICA,
LAURA CO, VICENTE RECANA, ELENA TOLLEDO, ALFREDO PLAZA, SR.,
HERMINIO BALDONO, FELIPE YAPOC, ARISTON NIPA, and ALFONSO C.
BALDOMAR, Respondents.

In this Petition for Review on Certiorari under Rule 45 of the Rules of Court,1 petitioners,
heirs of Panfilo V. Pajarillo, seek to set aside the Decision,2 and Resolution,3 dated 12
March 2002 and 28 August 2002, respectively, of the Court of Appeals in CA-G.R. SP No.
54330 and CA-G.R. SP No. 54331, reversing the two Per Curiam Orders dated 28 October
1996 and 10 January 1997,4 of the National Labor Relations Commission (NLRC) in
NLRC NCR Cases No. 08-03013-87 and 01-00331-88.

Stripped of the non-essentials, the facts are as follows:

Panfilo V. Pajarillo (Panfilo) was the owner and operator of several buses plying certain
routes in Metro Manila. He used the name "PVP Liner" in his buses. Private respondents
were employed as drivers, conductors and conductresses by Panfilo.

During their employment with Panfilo, private respondents worked at least four times a
week or for an average of fifteen working days per month. They were required to
observe a work schedule starting from 4:00 in the morning up to 10:00 in the evening on
a straight time basis. Private respondent drivers were paid a daily commission of 10%,
while private respondent conductors and conductresses received a daily commission of
7%. In sum, each of the private respondents earned an average daily commission of
about ₱150.00 a day. They were not given emergency cost of living allowance (ECOLA),
13th month pay, legal holiday pay and service incentive leave pay.5

The following were deducted from the private respondents’ daily commissions: (a) costs
of washing the assigned buses; (b) terminal fees; (c) fees for sweeping the assigned
buses; (d) fees paid to the barangay tanod at bus terminals; and (e) rental fees for the
use of stereo in the assigned buses. Any employee who refused such deductions were
either barred from working or dismissed from work.6
Thereafter, private respondents and several co-employees formed a union called
"SAMAHAN NG MGA MANGGAGAWA NG PANFILO V. PAJARILLO" (respondent union).
The Department of Labor and Employment (DOLE) issued a Certificate of Registration
in favor of the respondent union.7

Upon learning of the formation of respondent union, Panfilo and his children ordered
some of the private respondents to sign a document affirming their trust and
confidence in Panfilo and denying any irregularities on his part. Other private
respondents were directed to sign a blank document which turned out to be a
resignation letter. Private respondents refused to sign the said documents, hence, they
were barred from working or were dismissed without hearing and notice. Panfilo and
his children and relatives also formed a company union where they acted as its directors
and officers.8

On 25 August 1987, respondent union and several employees filed a Complaint for
unfair labor practice and illegal deduction before the Labor Arbiter with "Panfilo V.
Pajarillo Liner" as party-respondent. This was docketed as NLRC/NCR Case No.
00-08-03013-87.9 On 28 September 1987, the respondent union filed an Amended
Complaint alleging this time not only unfair labor practice and illegal deduction but also
illegal dismissal.10

On 20 January 1988, respondent union and several employees filed another Complaint
for violation of labor standard laws claiming non-payment of (1) ECOLA, (2) 13th month
pay, (3) overtime pay, (4) legal holiday pay, (5) premium pay, and (6) service incentive
leave. The party-respondents in this complaint were "PVP LINER INC. and PANFILO V.
PAJARILLO, as its General Manager/Operator." This was docketed as NLRC Case No.
00-01-00331-88.11

Notifications and summons with respect to NLRC/NCR Case No. 00-08-03013-87 were
addressed and sent to "PANFILO V. PAJARILLO, President/Manager, Panfilo V. Pajarillo
Liner, Pasig Line St., Sta. Ana, Manila" on 31 August 1987. The Registry Return Receipt
dated 4 September 1987 was addressed to Panfilo V. Pajarillo, and a signature therein
appears on top of the signature of the name of the addressee.12 With regard to NLRC
Case No. 00-01-00331-88, notifications and summonses were addressed and sent to
"THE PRESIDENT/MANAGER, PVP Liner Inc. and Panfilo V. Pajarillo, 2175 Zamora
Street, Sta. Ana, Manila" on 25 January 1988. The Registry Return Receipt dated 4
February 1988 was addressed to "PVP Liner Inc." and was signed by a certain "Irene G.
Pajarillo" as the addressee’s agent.13

Panfilo denied the charges in the complaints. He maintained that private respondents
were not dismissed from work on account of their union activities; that private
respondents and several of their co-employees either resigned or were separated from
work, or simply abandoned their employment long before the respondent union was
organized and registered with the DOLE; that the private respondents are not entitled
to ECOLA and 13th month pay because they received wages above the minimum
provided by law; that the private respondents are not entitled to overtime and legal
holiday pay because these are already included in their daily commissions; that the
private respondents are not entitled to five days incentive leave pay because they work
only four days a week; that no deductions were made in the daily commissions of the
private respondents; that the private respondents voluntarily and directly paid certain
individuals for barangay protection and for the cleaning of the assigned buses; that he
had no participation in these activities/arrangements; that the private respondents
were not dismissed from work; and that the private respondents either abandoned their
jobs or voluntarily resigned from work.14

Upon motion of Panfilo, the complaints in NLRC/NCR Case No. 00-08-03013-87 and
NLRC Case No. 00-01-00331-88 were consolidated.15 On 29 January 1991, Panfilo died.16

After hearing and submission by both parties of their respective position papers and
memoranda, Labor Arbiter Manuel P. Asuncion (Arbiter Asuncion) rendered a Decision17
dated 28 December 1992, dismissing the consolidated complaints for lack of merit.
Thus:

IN THE LIGHT OF ALL THE FOREGOING CONSIDERATIONS, the complaint should be

as it is hereby dismissed for lack of merit.

Respondent union appealed to the NLRC. On 18 June 1996, the NLRC reversed the
decision of Arbiter Asuncion and ordered the reinstatement of, and payment of
backwages, ECOLA, 13th month pay, legal holiday pay and service incentive leave pay
to, private respondents.18 The dispositive portion of the NLRC decision reads:

Wherefore, the appealed decision is hereby set aside. Accordingly, judgment is hereby
rendered directing:

(1) The respondent, PVP Liner, Inc. to reinstate to their former positions, without
loss of seniority rights and other benefits, the following complainants: Alfredo
[Hoyohoy], Bernardo Roco, Rodolfo Torres, Julian Jorvina, Florita Yapoc, Marlon
Aldana, Paraluman Ulang, Tolentino Sanhi, Johnny Soriano, Andres Calaque,
Roberto Lavarez, Francisco Morales, Salvacion Perina, Antonio Abala, Alfonso
Baldomar, Jr., Romeo Salonga, Augur Manipol, Bienvenida Tequil, Mario Elep,
Aladino Latigo, Bernardine Bansal, Pedro de Baguio, Ricardo Calica, Laura Co,
Vicente Recana, Elena Tolledo, Alfredo Plaza, Sr., Herminio Baldono, Felioe Yapoc,
Ariston Nipa and Herminia Castillo and to pay them their backwages corresponding
to a period of three (3) years without qualifications and deductions;

(2) The same respondent PVP Liner, Inc. to pay amounts to be computed in a
hearing called for said purpose by the Arbitration Branch of Origin, the aforesaid
complainants their claims for emergency cost of living allowance (ECOLA), 13th
 month pay, legal holiday pay and service incentive leave benefits subject to the
three-year prescriptive period provided under Article 291 of the Labor Code, as
amended;

(3) The dismissal of the claims on alleged illegal deductions of the respondents for
lack of merits; and

(4) The dismissal of the case of Lourdes Roco due to prescription.

All other claims of the complainants and the respondents are likewise DISMISSED, for
being without merit.

The Arbitration Branch of Origin is hereby directed to enforce this decision.

Panfilo’s counsel filed a motion for reconsideration which was partially granted by the
NLRC in its Order dated 28 October 1996, to wit:

Dictated, however, by the imperatives of due process, we find it more judicious to just
remand this case for further hearing on key questions of:

1) whether or not PVP Liner Inc. was properly impleaded as party respondent in the
consolidated cases below;

2) whether or not summons was properly served on said corporation below; and

3) whether or not the subject cases can be considered as principally money claims
which have to be litigated in intestate/testate proceedings involving the estate of
the late Panfilo V. Pajarillo.

WHEREFORE, our decision dated June 18, 1996 is hereby set aside. Let this case be
remanded to the NCR Arbitration Branch for further hearing on the questions
above-mentioned.19

Respondent union filed a motion for reconsideration of the above-stated Order, but this
was denied by the NLRC in its Order dated 10 January 1997.20 Thus, respondent union
filed a Petition for Certiorari under Rule 65 before this Court. Pursuant, however, to our
ruling in St. Martin Funeral Home v. National Labor Relations Commission,21 we
remanded the petition to the Court of Appeals for proper disposition.

On 12 March 2002, the Court of Appeals rendered a Decision granting the respondent
union’s petition and nullifying the Orders dated 28 October 1996 and 10 January 1997 of
the NLRC. It also reinstated the Decision dated 18 June 1986 of the NLRC.22 The
appellate court decreed:
WHEREFORE, premises considered, the PETITION FOR CERTIORARI is hereby
GRANTED. Accordingly, the Order dated October 28 1996 and January 10, 1997 of the
NLRC are hereby NULLIFIED and its Decision dated 18 June 1986 be REINSTATED.

Panfilo’s counsel filed a motion for reconsideration of the said decision but this was
denied by the appellate court in its Resolution dated 28 August 2002.23

Herein petitioners, as heirs of Panfilo, filed the instant petition before this Court
assigning the following errors:

I. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ARRIVING AT THE

CONCLUSION THAT PVP LINER INC. WAS PROPERLY MISPLEADED, WHICH IS A
NON-EXISTING CORPORATION.
II. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN NOT
CONSIDERING THAT THERE WAS NO PROPER AND EFFECTIVE SERVICE OF
SUMMONS.
III. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN PIERCING THE VEIL
OF CORPORATE ENTITY OF PVP PAJARILLO LINER INC.
IV. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN REINSTATING THE
ORDER OF THE NLRC DATED JUNE 18, 1996, WHICH DECLARED THAT PRIVATE
RESPONDENTS WERE ILLEGALLY DISMISSED.24

Anent the first issue, petitioners alleged that the Decision dated 18 June 1996 of the
NLRC, ordered PVP Liner Inc. to reinstate private respondents and pay their backwages,
ECOLA, 13th month pay, legal holiday pay and service incentive leave pay; that there
was no such entity as PVP Liner Inc. organized and existing in the Philippines; that it
was not possible for Arbiter Asuncion and the NLRC to acquire jurisdiction over a
non-existing company; that there can never be a service of summons or notice to a
non-existent entity; that the true employer of private respondents was Panfilo as the
sole proprietor/operator of passenger buses doing business under the tradename, PVP
Liner, and not PVP Liner Inc. which was non-existent; that Panfilo never used PVP Liner
Inc. as his tradename; that the present operator of PVP Liner buses is P.V. PAJARILLO
LINER, a corporation duly registered with the Securities and Exchange Commission;
that at the time the instant case was filed before Arbiter Asuncion in 1987, the latter did
not have jurisdiction over P.V. PAJARILLO LINER because it was organized and duly
registered only on 22 January 1990; that P.V. PAJARILLO LINER has a separate and
distinct personality from Panfilo as the sole operator of PVP Liner buses; that, therefore,
P.V. PAJARILLO LINER cannot be made a party or impleaded in the present case; that
the amended complaint in NLRC/NCR Case No. 00-08-03013-87 impleaded as
party-respondent "PANFILO V. PAJARILLO LINER and PANFILO V. PAJARILLO, as
operator and responsible officer"; that PVP Liner Inc. was not impleaded in the instant
case; and that no summons was ever served on PVP Liner Inc. in NLRC/NCR Case No.
00-08-03013-87.25
The contentions are bereft of merit.

In the Complaint dated 20 January 1988, PVP Liner Inc. and Panfilo were impleaded as
party-respondents, thus:

That respondent PVP Liner, Inc., is a private business entity, engaged in transportation
of passengers, duly organized and existing pursuant to law and for this purpose
maintains its principal office at 2175, Zamora Street, Sta. Ana, Manila; while individual
respondent [Panfilo] is the General Manager/Operator and may be served with
summons, notices and other processes at the aforementioned principal office.26

Panfilo did not question in his position paper or in his motion for consolidation of the
complaints the foregoing allegations. Neither did he assail the inclusion of PVP Liner Inc.
as party-respondent in respondent union’s position paper dated 6 June 1988.

In Panfilo’s position paper as well as in the records of the proceedings before Arbiter
Asuncion, there is nothing that shows that Panfilo challenged the jurisdiction of Arbiter
Asuncion over PVP Liner Inc. When Arbiter Asuncion decided in favor of Panfilo, the
latter said nothing about the inclusion of PVP Liner Inc. as party respondent and the
lack of jurisdiction of Arbiter Asuncion over the same. It was only when the NLRC
rendered a Decision adverse to Panfilo that the latter alleged the non-existence of PVP
Liner Inc. and the fact that Arbiter Asuncion and the NLRC had no jurisdiction over it.

Petitioners are now precluded from questioning the inclusion of PVP Liner Inc. as
party-respondent as well as the jurisdiction of Arbiter Asuncion and the NLRC over
them under the principle of estoppel. It is settled that the active participation of a party
against whom the action was brought, coupled with his failure to object to the
jurisdiction of the court or quasi-judicial body where the action is pending, is
tantamount to an invocation of that jurisdiction and a willingness to abide by the
resolution of the case and will bar said party from later on impugning the court or
body’s jurisdiction.27 This Court has time and again frowned upon the undesirable
practice of a party submitting his case for decision and then accepting the judgment
only if favorable, and attacking it for lack of jurisdiction when adverse.28

It is apparent that Panfilo V. Pajarillo Liner and PVP Liner Inc. are one and the same
entity belonging to one and the same person, Panfilo. When PVP Liner Inc. and Panfilo
V. Pajarillo Liner were impleaded as party-respondents, it was Panfilo, through counsel,
who answered the complaints and filed the position papers, motions for
reconsideration and appeals. It was also Panfilo, through counsel, who participated in
the hearings and proceedings. In fact, Abel Pajarillo (Abel), son of Panfilo, testified
before Arbiter Asuncion that he was the operations manager of PVP Liner Inc.29 Further,
both Panfilo and PVP Liner Inc. were charged jointly and severally in the aforesaid
complaints.
Apropos the second issue, petitioners alleged that the notices and summons were
received by a certain Irene G. Pajarillo (Irene) for and in behalf of the PVP Liner Inc.; that
Irene was neither and could not have been the President/Manager of PVP Liner Inc., the
latter being non-existent; and that Irene was not an officer of P.V. Pajarillo Liner.30

Sections 4 and 5 of Rule IV of the Revised Rules of Procedure of the NLRC provides the
rule for the service of summonses and notices in NLRC cases, viz:

Sec. 4. Service of notices and resolutions. – a) Notices or summons and copies of orders,
resolutions or decisions shall be served personally by the bailiff or the duly authorized
public officer or by registered mail on the parties to the case within five (5) days from
receipt thereof by the serving officer.

Sec. 5. Proof and completeness of service. – The return is prima facie proof of the facts
indicated therein. Service by registered mail is complete upon receipt by the addressee
or his agent.31

Records show that Irene received the summons for NLRC Case No. 00-01-00331-88 on 4
February 1988 in behalf of PVP Liner Inc. These summonses were addressed and sent to
"THE PRESIDENT/MANAGER, PVP Liner Inc. and Panfilo V. Pajarillo, 2175 Zamora
Street, Sta. Ana, Manila" on 25 January 1988. The Registry Return Receipt dated 4
February 1988 was addressed to "PVP Liner Inc." and was signed by Irene as the
addressee’s agent.32Abel, one of the heirs of Panfilo and the Operations Manager of
PVP Liner Inc., testified during the hearing before Arbiter Asuncion that Irene was one
of the secretaries of PVP Liner Inc.33 Hence, there was a valid service of summons.

Regarding the third issue, petitioners posited that P.V. Pajarillo Liner Inc. is an
independent corporation and cannot be considered as an adjunct or extension of
Panfilo as the sole operator of PVP Liner buses; and that at the time P.V. Pajarillo Liner
Inc. was established, it had no liability or obligation which it tried to shield or
circumvent.34

It is a fundamental principle of corporation law that a corporation is an entity separate

and distinct from its stockholders and from other corporations to which it may be
connected. However, this separate and distinct personality of a corporation is merely a
fiction created by law for convenience and to promote justice. Hence, when the notion
of separate juridical personality is used to defeat public convenience, justify wrong,
protect fraud or defend crime, or is used as a device to defeat labor laws, this separate
personality of the corporation may be disregarded or the veil of the corporate fiction
pierced. This is true likewise when the corporation is merely an adjunct, a business
conduit or an alter ego of another corporation. The corporate mask may be lifted and
the corporate veil may be pierced when a corporation is but the alter ego of a person or
another corporation.35
It is apparent that Panfilo started his transportation business as the sole owner and
operator of passenger buses utilizing the name PVP Liner for his buses. After being
charged by respondent union of unfair labor practice, illegal deductions, illegal
dismissal and violation of labor standard laws, Panfilo transformed his transportation
business into a family corporation, namely, P.V. Pajarillo Liner Inc. He and petitioners
were the incorporators, stockholders and officers therein. P.V. Pajarillo Inc. and the sole
proprietorship of Panfilo have the same business address. P.V. Pajarillo Inc. also uses the
name "PVP Liner" in its buses. Further, the license to operate or franchise of the sole
proprietorship was merely transferred to P.V. Pajarillo Liner Inc. The testimony of Abel
during the hearing before Arbiter Asuncion is revealing, thus:

Q: Mr. Pajarillo, when did you start assuming the functions of operations manager of
PVP Liner?
A: Seven years from now, sometime in the year 1984 or 1985, sir.
Q: Do you have any written appointment as Operations Manager?
A: No, sir.
Q: I noticed that your surname is Pajarillo you are one way or another related to Mr.
Panfilo V. Pajarillo, is that correct?
Witness:
A: I am the son of Panfilo Pajarillo, sir.
Q: In so far as PVP Liner is concerned and being the operations manager, are you aware
if it is a single proprietor or a corporation?
A: At the start it was a single proprietorship, lately, it has become a family corporation.
Atty. Flores, Jr. (to witness)
Q: When you became the Operations Manager of PVP Liner, is it a single proprietor or a
family Corporation?
A: It was a single proprietorship.
Q: Mr. Witness, since PVP Liner is a transportation business it has a license to operate
these buses?
A:Yes, there is, sir.
Atty. Flores, Jr. (to witness)
Q: In whose name was it registered?
A: Before it was with my father Panfilo V. Pajarillo, sir.
Q: Do I understand that the licensing of this transportation company was transferred to
another person?
A: It was never transferred to another person, except now, that it has been transferred
to a corporation.36

It is clear from the foregoing that P.V. Pajarillo Liner Inc. was a mere continuation and
successor of the sole proprietorship of Panfilo. It is also quite obvious that Panfilo
transformed his sole proprietorship into a family corporation in a surreptitious attempt
to evade the charges of respondent union. Given these considerations, Panfilo and P.V.
Pajarillo Liner Inc. should be treated as one and the same person for purposes of
liability.37

Finally, petitioners averred that no unfair labor practice was committed, and that
private respondents were not illegally dismissed from work.

In its Decision dated 18 June 1996, the NLRC made an exhaustive discussion of the
allegations and evidence of both parties as regards unfair labor practice and illegal
dismissal. It concluded that private respondents, officers and members of respondent
union were dismissed by reason of their union activities and that there was no
compliance with substantial and procedural due process in terminating their services. It
also held that the private respondents who were not members of the respondent union
were also dismissed without just or valid cause, and that they were denied due process.
These factual findings and conclusions were supported by substantial evidence
comprised of affidavits, sworn statements, testimonies of witnesses during hearings
before Arbiter Asuncion, and other documentary evidence. These findings were
sustained by the Court of Appeals.

The rule is that findings of fact of quasi-judicial agencies like the NLRC are accorded by
this Court not only respect but even finality if they are supported by substantial
evidence, or that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.38 We find no compelling reason to deviate from such
findings of the NLRC as affirmed by the Court of Appeals.

Consequently, the private respondents are entitled to reinstatement, backwages and

other privileges and benefits under Article 279 of the Labor Code. Separation pay may
be given in lieu of reinstatement if the employee concerned occupies a position of trust
and confidence. In the case at bar, however, the private respondents, as former bus
drivers, conductors and conductresses of petitioners, do not hold the position of trust
and confidence.39

Nonetheless, it appears from the records that some of the private respondents, namely,
Augur Manipol, Rodolfo Torres, Ricardo Calica, Paraluman Ulang, Edith Chua, Alfredo
Hoyohoy, Johnny Soriano, Bernardo Roco, Tolentino Sanhi, Salvacion Perina, Pedro L.
de Baguio, Ariston Nipa, Felipe Yapoc, Laura Co, Bienvenida Tequil, Roberto Lavarez,
Francisco Morales and Herminio Castillo, had executed a Quitclaim/Release discharging
petitioners "from any and all claims by way of unpaid wages, separation pay, overtime
pay, differential pay, ECOLA, 13th month pay, holiday pay, service incentive leave pay
or otherwise."40

Generally, deeds of release, waivers, or quitclaims cannot bar employees from

demanding benefits to which they are legally entitled or from contesting the legality of
their dismissal, since quitclaims are looked upon with disfavor and are frowned upon as
contrary to public policy. Where, however, the person making the waiver has done so
voluntarily, with a full understanding thereof, and the consideration for the quitclaim is
credible and reasonable, the transaction must be recognized as being a valid and
binding undertaking.41

There is no showing that the executions of these quitclaims were tainted with deceit or
coercion. On the contrary, each of the private respondents’ Sinumpaang Salaysay,
which accompanied the quitclaims, evinces voluntariness and full understanding of the
execution and consequence of the quitclaim. In their said Sinumpaang Salaysay, the
private respondents stated that their lawyer had extensively explained to them the
computation and the actual amount of consideration they would receive; that they
were not forced or tricked by their lawyer in accepting the same; and that they already
received the amount of consideration.42

Further, the considerations received by the private respondents were credible and
reasonable because they were not grossly disproportionate to the computation by the
NLRC of the amount of backwages and other money claims.43

Given these circumstances, the quitclaims should be considered as binding on the

private respondents who executed them. It is settled that a legitimate waiver which
represents a voluntary and reasonable settlement of a worker’s claim should be
respected as the law between the parties.44 Accordingly, the private respondents who
made such quitclaims are already precluded from claiming reinstatement, backwages,
ECOLA, 13TH month pay, legal holiday pay, service incentive leave pay, and other
monetary claims.

With regard to the other private respondents who did not execute such quitclaims, they
are entitled to reinstatement, backwages, ECOLA, 13TH month pay, legal holiday pay
and service incentive leave pay in accordance with the computation of the NLRC.

WHEREFORE, the petition is hereby DENIED. The Decision and Resolution dated 12
March 2002 and 28 August 2002, respectively, of the Court of Appeals in CA-G.R. SP No.
54330 and CA-G.R. SP No. 54331, are hereby AFFIRMED with the following
MODIFICATIONS: (1) Private respondents Augur Manipol, Rodolfo M. Torres, Ricardo
Calica, Paraluman Ulang, Edith Chua, Alfredo Hoyohoy, Johnny Soriano, Bernardo Roco,
Tolentino Sanhi, Salvacion Perina, Pedro L. de Baguio, Ariston Nipa, Felipe Yapoc, Laura
Co, Bienvenida Tequil, Roberto Lavarez, Francisco Morales and Herminio Castillo are
hereby precluded from claiming reinstatement, backwages, ECOLA, 13TH month pay,
legal holiday pay and service incentive leave pay by reason of their respective
quitclaims; (2) Petitioners are hereby ordered to reinstate private respondents Julian
Jorvina, Florita Yapoc, Marlon Aldana, Andres Calaque, Antonio Abala, Alfonso
Baldomar, Romeo Salonga, Mario Elep, Aladino Latigo, Bernardine Bansal, Vicente
Recana, Elena Tolledo and Alfredo Plaza, Sr., and to pay these respondents backwages
from the time of their dismissal up to the finality of this Decision. Petitioners are also
ordered to pay the foregoing private respondents ECOLA, 13TH month pay, legal holiday
pay and service incentive leave pay in accordance with the computation of the NLRC.
Costs against petitioners. SO ORDERED.