TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D.
State regulation of
common carriers)
Cases
G.R. No. L-25599 April 4, 1968
HOME INSURANCE COMPANY, plaintiff-appellee,
vs.
AMERICAN STEAMSHIP AGENCIES, INC. and LUZON
STEVEDORING CORPORATION, defendants,
AMERICAN STEAMSHIP AGENCIES, INC., defendant-
appellant.
William H. Quasha and Associates for plaintiff-appellee.
Ross, Selph, Salcedo and Associates for defendant-
appellant.
BENGZON, J.P., J.:
"Consorcio Pesquero del Peru of South America" shipped
freight pre-paid at Chimbate, Peru, 21,740 jute bags of
Peruvian fish meal through SS Crowborough, covered by
clean bills of lading Numbers 1 and 2, both dated January
17, 1963. The cargo, consigned to San Miguel Brewery, Inc.,
now San Miguel Corporation, and insured by Home
Insurance Company for $202,505, arrived in Manila on
March 7, 1963 and was discharged into the lighters of Luzon
Stevedoring Company. When the cargo was delivered to
consignee San Miguel Brewery Inc., there were shortages
amounting to P12,033.85, causing the latter to lay claims
against Luzon Stevedoring Corporation, Home Insurance
Company and the American Steamship Agencies, owner and
operator of SS Crowborough.
Because the others denied liability, Home Insurance
Company paid the consignee P14,870.71 — the insurance
value of the loss, as full settlement of the claim. Having been
refused reimbursement by both the Luzon Stevedoring
Corporation and American Steamship Agencies, Home
Insurance Company, as subrogee to the consignee, filed
against them on March 6, 1964 before the Court of First
Instance of Manila a complaint for recovery of P14,870.71
with legal interest, plus attorney's fees.
In answer, Luzon Stevedoring Corporation alleged that it
delivered with due diligence the goods in the same quantity
and quality that it had received the same from the carrier. It
also claimed that plaintiff's claim had prescribed under Article
366 of the Code of Commerce stating that the claim must be
made within 24 hours from receipt of the cargo.
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
American Steamship Agencies denied liability by alleging
that under the provisions of the Charter party referred to in
the bills of lading, the charterer, not the shipowner, was
responsible for any loss or damage of the cargo.
Furthermore, it claimed to have exercised due diligence in
stowing the goods and that as a mere forwarding agent, it
was not responsible for losses or damages to the cargo.
On November 17, 1965, the Court of First Instance, after
trial, absolved Luzon Stevedoring Corporation, having found
the latter to have merely delivered what it received from the
carrier in the same condition and quality, and ordered
American Steamship Agencies to pay plaintiff P14,870.71
with legal interest plus P1,000 attorney's fees. Said court
cited the following grounds:
(a) The non-liability claim of American Steamship
Agencies under the charter party contract is not
tenable because Article 587 of the Code of
Commerce makes the ship agent also civilly liable
for damages in favor of third persons due to the
conduct of the captain of the carrier;
(b) The stipulation in the charter party contract
exempting the owner from liability is against public
policy under Article 1744 of the Civil Code;
(c) In case of loss, destruction or deterioration of
goods, common carriers are presumed at fault or
negligent under Article 1735 of the Civil Code
unless they prove extraordinary diligence, and they
cannot by contract exempt themselves from
liability resulting from their negligence or that of
their servants; and
(d) When goods are delivered to the carrier in
good order and the same are in bad order at the
place of destination, the carrier is prima
facie liable.
Disagreeing with such judgment, American Steamship
Agencies appealed directly to Us. The appeal brings forth for
determination this legal issue: Is the stipulation in the charter
party of the owner's non-liability valid so as to absolve the
American Steamship Agencies from liability for loss?
The bills of lading,1 covering the shipment of Peruvian fish
meal provide at the back thereof that the bills of lading shall
be governed by and subject to the terms and conditions of
the charter party, if any, otherwise, the bills of lading prevail
over all the agreements.2 On the of the bills are stamped
"Freight prepaid as per charter party. Subject to all terms,
conditions and exceptions of charter party dated London,
Dec. 13, 1962."
A perusal of the charter party3 referred to shows that while
the possession and control of the ship were not entirely
transferred to the charterer,4 the vessel was chartered to its
full and complete capacity (Exh. 3). Furthermore, the, charter
had the option to go north or south or vice-versa,5 loading,
stowing and discharging at its risk and expense.6Accordingly,
the charter party contract is one of affreightment over the
whole vessel rather than a demise. As such, the liability of
the shipowner for acts or negligence of its captain and crew,
would remain in the absence of stipulation.
Section 2, paragraph 2 of the charter party, provides that the
owner is liable for loss or damage to the goods caused by
personal want of due diligence on its part or its manager to
make the vessel in all respects seaworthy and to secure that
she be properly manned, equipped and supplied or by the
personal act or default of the owner or its manager. Said
paragraph, however, exempts the owner of the vessel from
any loss or damage or delay arising from any other source,
even from the neglect or fault of the captain or crew or some
other person employed by the owner on board, for whose
acts the owner would ordinarily be liable except for said
paragraph..
Regarding the stipulation, the Court of First Instance
declared the contract as contrary to Article 587 of the Code
of Commerce making the ship agent civilly liable for
indemnities suffered by third persons arising from acts or
omissions of the captain in the care of the goods and Article
1744 of the Civil Code under which a stipulation between the
common carrier and the shipper or owner limiting the liability
of the former for loss or destruction of the goods to a degree
less than extraordinary diligence is valid provided it be
reasonable, just and not contrary to public policy. The
release from liability in this case was held unreasonable and
contrary to the public policy on common carriers.
The provisions of our Civil Code on common carriers were
taken from Anglo-American law.7 Under American
jurisprudence, a common carrier undertaking to carry a
special cargo or chartered to a special person only, becomes
a private carrier.8 As a private carrier, a stipulation exempting
1
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
the owner from liability for the negligence of its agent is not
against public policy,9 and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions
on common carriers should not be applied where the carrier
is not acting as such but as a private carrier. The stipulation
in the charter party absolving the owner from liability for loss
due to the negligence of its agent would be void only if the
strict public policy governing common carriers is applied.
Such policy has no force where the public at large is not
involved, as in the case of a ship totally chartered for the use
of a single party.
And furthermore, in a charter of the entire vessel, the bill of
lading issued by the master to the charterer, as shipper, is in
fact and legal contemplation merely a receipt and a
document of title not a contract, for the contract is the charter
party.10 The consignee may not claim ignorance of said
charter party because the bills of lading expressly referred to
the same. Accordingly, the consignees under the bills of
lading must likewise abide by the terms of the charter party.
And as stated, recovery cannot be had thereunder, for loss
or damage to the cargo, against the shipowners, unless the
same is due to personal acts or negligence of said owner or
its manager, as distinguished from its other agents or
employees. In this case, no such personal act or negligence
has been proved.
WHEREFORE, the judgment appealed from is hereby
reversed and appellant is absolved from liability to plaintiff.
No costs. So ordered.
G.R. No. 98243 July 1, 1992
ALEJANDRO ARADA, doing business under the name
and style "SOUTH NEGROS ENTERPRISES", petitioner,
vs.
HONORABLE COURT OF APPEALS, respondents.
PARAS, J.:
This is a petition for review on certiorari which seeks to annul
and set aside the decision * of the Court of Appeals dated
April 8, 1991 in CA-G.R. CV No. 20597 entitled "San Miguel
Corporation v. Alejandro Arada, doing business under the
name and style "South Negros Enterprises", reversing the
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
decision of the RTC, Seventh Judicial Region, Branch XII, On March 24, 1982, petitioner thru its crew master, Mr.
Cebu City, ordering petitioner to pay the private respondent Vivencio Babao, applied for a clearance with the Philippine
tho amount of P172,284.80 representing the value of the Coast Guard for M/L Maya to leave the port of San Carlos
cargo lost on board the ill-fated, M/L Maya with interest City, but due to a typhoon, it was denied clearance by SNI
thereon at the legal rate from the date of the filing of the Antonio Prestado PN who was then assigned at San Carlos
complaint on March 25, 1983 until fully paid, and the costs. City Coast Guard Detachment (Rollo, p. 122).
The undisputed facts of the case are as follows: Alejandro On March 25, 1982 M/L Maya was given clearance as there
Arada, herein petitioner, is the proprietor and operator of the was no storm and the sea was calm. Hence, said vessel left
firm South Negros Enterprises which has been organized for Mandaue City. While it was navigating towards Cebu, a
and established for more than ten (10) years. It is engaged in typhoon developed and said vessel was buffeted on all its
the business of small scale shipping as a common carrier, sides by big waves. Its rudder was destroyed and it drifted
servicing the hauling of cargoes of different corporations and for sixteen (16) hours although its engine was running.
companies with the five (5) vessels it was operating (Rollo, p.
121).
On March 27, 1982 at about 4:00 a.m., the vessel sank with
whatever was left of its cargoes. The crew was rescued by a
On March 24, 1982. petitioner entered into a contract with passing pump boat and was brought to Calanggaman Island.
private respondent to safely transport as a common carrier, Later in the afternoon, they were brought to Palompon,
cargoes of the latter from San Carlos City, Negros Leyte, where Vivencio Babao filed a marine protest (Rollo, p.
Occidental to Mandaue City using one of petitioner's vessels, 10).
M/L Maya. The cargoes of private respondent consisted of
9,824 cases of beer empties valued at P176,824.80, were
On the basis of such marine protest, the Board of Marine
itemized as follows:
Inquiry conducted a hearing of the sinking of M/L Maya
wherein private respondent was duly represented. Said
NO. CARGO VALUE Board made its findings and recommendation dated
OF November 7, 1983, the dispositive portion of which reads as:
CASE
S WHEREFORE, premises considered,
7,515 PPW P136.773.0 this Board recommends as it is hereby
CS STENIE 0 recommended that the owner/operator,
MTS officers and crew of M/L Maya be
1,542 PLW 23,438.40 exonerated or absolved from any
CS GRANDE administrative liability on account of this
MTS incident (Exh. 1).
58 CS G.E. 1,276.00
PLASTIC
MTS The Board's report containing its findings and
recommendation was then forwarded to the headquarters of
24 CS PLP MTS 456.00
the Philippine Coast Guard for appropriate action. On the
37 CS CS 673.40 basis of such report, the Commandant of the Philippine
WOODEN Coast Guard rendered a decision dated December 21, 1984
MTS in SBMI Adm. Case No. 88-82 exonerating the
8 CS LAGERLIT 128.00 owner/operator officers and crew of the ill-fated M/L Maya
E PLASTIC from any administrative liability on account of said incident
MTS (Exh. 2).
640 STENEI 14,080.00
CS PLASTIC
MTS On March 25, 1983, Private respondent filed a complaint in
9,824 P176,824.8 the Regional Trial Court its first cause of action being for the
CS 0 recovery of the value of the cargoes anchored on breach of
contract of carriage. After due hearing, said court rendered a
2
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
decision dated July 18, 1988, the dispositive portion of which
reads
WHEREFORE, judgment is hereby
rendered as follows:
(1) With respect to the first cause of
action, claim of plaintiff is hereby
dismissed;
(2) Under the second cause of action,
defendant must pay plaintiff the sum of
P2,000.00;
(3) In the third cause of action, the
defendant must pay plaintiff the sum of
P2,849.20;
(4) Since the plaintiff has withheld the
payment of P12,997.47 due the
defendynt, the plaintiff should deduct the
amount of P4,849.20 from the
P12,997.47 and the balance of
P8,148.27 must be paid to the
defendant; and
(5) Defendant's counterclaim not having
been substantiated by evidence is
likewise dismissed. NO COSTS. (Orig.
Record, pp. 193-195).
Thereafter, private respondent appealed said decision to the
Court of Appeals claiming that the trial court erred in —
(1) holding that nothing was shown that
the defendant, or any of his employees
who manned the M/L Maya was
negligent in any way nor did they fail to
observe extraordinary diligence over the
cargoes of the plaintiff; and
(2) holding that the sinking of said vessel
was caused by the storm, consequently,
dismissing the claim of plaintiff in its first
cause of action for breach of contract of
carriage of goods (Rollo, pp. 33-34;
Decision, pp. 3-4).
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
In its decision Promulgated on April 8, 1991, the Court of
Appeals reversed the decision of the court a quo, the
dispositive portion and the dispositive part of its decision
reads as:
WHEREFORE, that part of the
Judgment appeal6d from is REVERSED
and the appellee Aleiandro Arada, doing
business by the name and style, "South
Negros Enterprises", ordered (sic) to pay
unto the appellant San Miguel
Corporation the amount of P176,824.80
representing the value of the cargo lost
on board the ill-fated vessel, M/L Maya,
with interest thereon at the legal rate
from date of the filing of the complaint on
March 25, 1983, until fully paid, and the
costs. (Rollo, p. 37)
The Court of Appeals ruled that "in view of his failure to
observe extraordinary diligence over the cargo in question
and his negligence previous to the sinking of the carrying
vessel, as above shown, the appellee is liable to the
appellant for the value of the lost cargo.
Hence the present recourse.
On November 20, 1991, this Court gave due course to the
petition. The pivotal issue to be resolved is whether or not
petitioner is liable for the value of the lost cargoes.
Petitioner contends that it was not in the exercise of its
function as a common carrier when it entered into a contract
with private respondent,but was then acting as a private
carrier not bound by the requirement of extraordinary
diligence (Rollo, p. 15) and that the factual findings of the
Board of Marine Inquiry and the Special Board of Marine
Inquiry are binding and conclusive on the Court (Rollo, pp.
16-17).
Private respondent counters that M/L Maya was in the
exercise of its function as a common carrier and its failure to
observe the extraordinary diligence required of it in the
vigilance over their cargoes makes Petitioner liable for the
value of said cargoes.
The petition is devoid of merit.
Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water or
air, for compensation offering their services to the public (Art.
1732 of the New Civil Code).
In the case at bar, there is no doubt that petitioner was
exercising its function as a common carrier when it entered
into a contract with private respondent to carry and transport
the latter's cargoes. This fact is best supported by the
admission of petitioner's son, Mr. Eric Arada, who testified as
the officer-in-charge for operations of South Negros
Enterprises in Cebu City. In substance his testimony on
January 14, 1985 is as follows:
Q. How many vessels are you operating?
A. There were all in all around five (5).
Q. And you were entering to service hauling of cargoes to
different companies, is that correct?
A. Yes, sir.
Q. In one word, the South Negros Enterprises is engaged in
the business of common carriers, is that correct?
A. Yes, sir,
Q. And in fact, at the time of the hauling of the San Miguel
Beer, it was also in the same category as a common carrier?
A. Yes, sir,
(TSN. pp. 3-4, Jan. 29, 1985)
A common carrier, both from the nature of its business and
for insistent reasons of public policy is burdened by law with
the duty of exercising extraordinary diligence not only in
ensuring the safety of passengers, but in caring for the
goods transported by it. The loss or destruction or
deterioration of goods turned over to the common carrier for
the conveyance to a designated destination raises instantly a
presumption of fault or negligence on the part of the carrier,
save only where such loss, destruction or damage arises
from extreme circumstances such as a natural disaster or
3
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
calamity ... (Benedicto v. IAC, G.R. No. 70876, July 19, barometer and radio (Rorlo, p. 142). Neither did the captain blown
1990, 187 SCRA 547) (Emphasis supplied). of the vessel monitor and record the weather conditions in
everyday as required by Art, 612 of the Code of Commerce streaks
(Rollo, pp. 142-143). Had he done so while navigating for 31 along
In order that the common carrier may be exempted from
hours, he could have anticipated the strong winds and big the
responsibility, the natural disaster must have been
waves and taken shelter (Rollo, pp- 36; 145). His testimony directio
the proximate and only cause of the loss. However, the
on May 4, 1982 is as follows: n of
common carrier must exercise due diligence to prevent or
minimize the loss before, during and after the occurrence of the
flood, storm or other natural disaster in order that the Q. Did you not check on your own where the typhoon was? wind;
common carrier may be exempted from liability for the Spindrift
destruction or deterioration of the goods (Article 1739, New begins
A. No. sir. (TSN, May 4, 1982, pp. 58-59)
Civil Code). 2 AM 30 3.7 rough sea
heaps
Noteworthy is the fact that as Per official records of the up
In the instant case, the appellate court was correct in finding
Climatological Division of the Philippine Atmospheric, white
that petitioner failed to observe the extraordinary diligence
Geophysical and Astronomical Services Administration foam
over the cargo in question and he or the master in his
(PAG-ASA for brevity) issued by its Chief of Climatological from
employ was negligent previous to the sinking of the carrying
Division, Primitivo G. Ballan, Jr. as to the weather and sea breakin
vessel. In substance, the decision reads:
conditions that prevailed in the vicinity of Catmon, Cebu g waves
during the period March 25-27, 1982, the sea conditions on begin to
... VIVENCIO BABAO, the master of the March 25, 1982 were slight to rough and the weather be
carrying vessel, knew that there was a conditions then prevailing during those times were cloudy blown
typboon coming before his departure but skies with rainshowers and the small waves grew larger and
in
did not check where it was. larger, to wit:
streaks
along
xxx xxx xxx SPE WAVE SEA WEAT the
ED HT. HER directio
If only for the fact that he was first KNO (METE CONDITI n of the
denied clearance to depart on March 24, TS RS) ONS wind;
1982, obviously because of a typhoon Marc Spindrift
coming, Babao, as master of the vessel, h 25 begins
should have verified first where the 8 AM 15 1-2 slight cloudy
typhoon was before departing on March skies A common carrier is obliged to observe extraordinary
25, 1982. True, the sea was calm at w/ diligence and the failure of Babao to ascertain the direction
departure time. But that might be the rainsho of the storm and the weather condition of the path they would
calm before the storm. Prudence wers be traversing, constitute lack of foresight and minimum
dictates that he should have ascertained 2 PM 20-25 2.0-3.0 modera overcas vigilance over its cargoes taking into account the surrounding
first where the storm was before te t skies circumstances of the case.
departing as it might be on his path. to w/ some
(Rollo, pp. 35-36) rough rains
While the goods are in the possession of the carrier, it is but
8 PM 30 3.7 rough sea
fair that it exercises extraordinary diligence in protecting
Respondent court's conclusion as to the negligence of heaps
them from loss or damage, and if loss occurs, the law
petitioner is supported by evidence. It will be noted that up
presumes that it was due to the carrier's fault or negligence;
Vivencio Babao knew of the impending typhoon on March white that is necessary to protect the interest of the shipper which
24, 1982 when the Philippine Coast Guard denied M/L Maya foam is at the mercy of the carrier (Art. 1756, Civil Code, Aboitiz
the issuance of a clearance to sail. Less than 24 hours from Shipping Corporation v. Court of Appeals, G.R. No. 89757,
elapsed since the time of the denial of said clearance and breakin Aug. 6, 1990, 188 SCRA 387).
the time a clearance to sail was finally issued on March 25, g waves
1982. Records will show that Babao did not ascertain where begin to
the typhoon was headed by the use of his vessel's be
Averell B. Abrasaldo 4
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
Furthermore, the records show that the crew of M/L Maya did
not have the required qualifications provided for in P.D. No.
97 or the Philippine Merchant Marine Officers Law, all of
whom were unlicensed. While it is true that they were given
special permit to man the vessel, such permit was issued at
the risk and responsibility of the owner (Rollo, p. 36).
Finally, petitioner claims that the factual findings of the
Special Board of Marine Inquiry exonerating the
owner/operator, crew officers of the ill-fated vessel M/L Maya
from any administrative liability is binding on the court.
In rejecting petitioner's claim, respondent court was correct in
ruling that "such exoneration was but with respect to the
administrative liability of the owner/operator, officers and
crew of the ill-fated" vessel. It could not have meant
exoneration of appellee from liability as a common carrier for
his failure to observe extraordinary diligence in the vigilance
over the goods it was transporting and for the negligent acts
or omissions of his employees. Such is the function of the
Court, not the Special Board of Marine Inquiry." (Rollo, P. 37,
Annex A, p. 7)
The Philippine Merchant Marine Rules and Regulations
particularly Chapter XVI thereof entitled "Marine Investigation
and Suspension and Revocation Proceedings" prescribes
the Rules governing maritime casualties or accidents, the
rules and Procedures in administrative investigation of all
maritime cases within the jurisdiction or cognizance of the
Philippine Coast Guard and the grounds for suspension and
revocation of licenses/certificates of marine officers and
seamen (1601 — SCOPE); clearly, limiting the jurisdiction of
the Board of Marine Inquiry and Special Board of Marine
Inquiry to the administrative aspect of marine casualties in so
far as it involves the shipowners and officers.
PREMISES CONSIDERED, the appealed decision is
AFFIRMED.
SO ORDERED.
G.R. No. 101503 September 15, 1993
PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP
AGENCIES AND KYOSEI KISEN KABUSHIKI
KAISHA, respondents.
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
BELLOSILLO, J.:
Does a charter-party1 between a shipowner and a charterer
transform a common carrier into a private one as to negate
the civil law presumption of negligence in case of loss or
damage to its cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi
International Corporation (MITSUBISHI) of New York,
U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer
which the latter shipped in bulk on 16 June 1974 aboard the
cargo vessel M/V "Sun Plum" owned by private respondent
Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska,
U.S.A., to Poro Point, San Fernando, La Union, Philippines,
as evidenced by Bill of Lading No. KP-1 signed by the
master of the vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party
on the vessel M/V "Sun Plum" pursuant to the Uniform
General Charter2 was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in Tokyo,
Japan.3 Riders to the aforesaid charter-party starting from
par. 16 to 40 were attached to the pre-printed agreement.
Addenda Nos. 1, 2, 3 and 4 to the charter-party were also
subsequently entered into on the 18th, 20th, 21st and 27th of
May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her
holds4 were all presumably inspected by the charterer's
representative and found fit to take a load of urea in bulk
pursuant to par. 16 of the charter-party which reads:
16. . . . At loading port, notice of
readiness to be accomplished by
certificate from National Cargo Bureau
inspector or substitute appointed by
charterers for his account certifying the
vessel's readiness to receive cargo
spaces. The vessel's hold to be properly
swept, cleaned and dried at the vessel's
expense and the vessel to be presented
clean for use in bulk to the satisfaction of
the inspector before daytime
commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores
hired by and under the supervision of the shipper, the steel
hatches were closed with heavy iron lids, covered with three
(3) layers of tarpaulin, then tied with steel bonds. The
hatches remained closed and tightly sealed throughout the
entire voyage.5
Upon arrival of the vessel at her port of call on 3 July 1974,
the steel pontoon hatches were opened with the use of the
vessel's boom. Petitioner unloaded the cargo from the holds
into its steelbodied dump trucks which were parked
alongside the berth, using metal scoops attached to the ship,
pursuant to the terms and conditions of the charter-partly
(which provided for an F.I.O.S. clause).6 The hatches
remained open throughout the duration of the discharge.7
Each time a dump truck was filled up, its load of Urea was
covered with tarpaulin before it was transported to the
consignee's warehouse located some fifty (50) meters from
the wharf. Midway to the warehouse, the trucks were made
to pass through a weighing scale where they were
individually weighed for the purpose of ascertaining the net
weight of the cargo. The port area was windy, certain
portions of the route to the warehouse were sandy and the
weather was variable, raining occasionally while the
discharge was in progress.8 The petitioner's warehouse was
made of corrugated galvanized iron (GI) sheets, with an
opening at the front where the dump trucks entered and
unloaded the fertilizer on the warehouse floor. Tarpaulins
and GI sheets were placed in-between and alongside the
trucks to contain spillages of the ferilizer.9
It took eleven (11) days for PPI to unload the cargo, from 5
July to 18 July 1974 (except July 12th, 14th and 18th).10A
private marine and cargo surveyor, Cargo Superintendents
Company Inc. (CSCI), was hired by PPI to determine the
"outturn" of the cargo shipped, by taking draft readings of the
vessel prior to and after discharge. 11 The survey report
submitted by CSCI to the consignee (PPI) dated 19 July
1974 revealed a shortage in the cargo of 106.726 M/T and
that a portion of the Urea fertilizer approximating 18 M/T was
contaminated with dirt. The same results were contained in a
Certificate of Shortage/Damaged Cargo dated 18 July 1974
prepared by PPI which showed that the cargo delivered was
indeed short of 94.839 M/T and about 23 M/T were rendered
unfit for commerce, having been polluted with sand, rust and
dirt. 12
Consequently, PPI sent a claim letter dated 18 December
1974 to Soriamont Steamship Agencies (SSA), the resident
agent of the carrier, KKKK, for P245,969.31 representing the
cost of the alleged shortage in the goods shipped and the
diminution in value of that portion said to have been
contaminated with dirt. 13
5
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
Respondent SSA explained that they were not able to
respond to the consignee's claim for payment because,
according to them, what they received was just a request for
shortlanded certificate and not a formal claim, and that this
"request" was denied by them because they "had nothing to
do with the discharge of the shipment." 14 Hence, on 18 July
1975, PPI filed an action for damages with the Court of First
Instance of Manila. The defendant carrier argued that the
strict public policy governing common carriers does not apply
to them because they have become private carriers by
reason of the provisions of the charter-party. The court a
quo however sustained the claim of the plaintiff against the
defendant carrier for the value of the goods lost or damaged
when it ruled thus: 15
. . . Prescinding from the provision of the
law that a common carrier is presumed
negligent in case of loss or damage of
the goods it contracts to transport, all
that a shipper has to do in a suit to
recover for loss or damage is to show
receipt by the carrier of the goods and to
delivery by it of less than what it
received. After that, the burden of
proving that the loss or damage was due
to any of the causes which exempt him
from liability is shipted to the carrier,
common or private he may be. Even if
the provisions of the charter-party
aforequoted are deemed valid, and the
defendants considered private carriers, it
was still incumbent upon them to prove
that the shortage or contamination
sustained by the cargo is attributable to
the fault or negligence on the part of the
shipper or consignee in the loading,
stowing, trimming and discharge of the
cargo. This they failed to do. By this
omission, coupled with their failure to
destroy the presumption of negligence
against them, the defendants are liable
(emphasis supplied).
On appeal, respondent Court of Appeals reversed the lower
court and absolved the carrier from liability for the value of
the cargo that was lost or damaged. 16 Relying on the 1968
case of Home Insurance Co. v. American Steamship
Agencies, Inc.,17 the appellate court ruled that the cargo
vessel M/V "Sun Plum" owned by private respondent KKKK
was a private carrier and not a common carrier by reason of
the time charterer-party. Accordingly, the Civil Code
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
provisions on common carriers which set forth a presumption to show want of due deligence on the part of the carrier,
of negligence do not find application in the case at bar. Thus when he was not even at hand to witness what transpired
— during the entire voyage.
. . . In the absence of such As earlier stated, the primordial issue here is whether a
presumption, it was incumbent upon the common carrier becomes a private carrier by reason of a
plaintiff-appellee to adduce sufficient charter-party; in the negative, whether the shipowner in the
evidence to prove the negligence of the instant case was able to prove that he had exercised that
defendant carrier as alleged in its degree of diligence required of him under the law.
complaint. It is an old and well settled
rule that if the plaintiff, upon whom rests
It is said that etymology is the basis of reliable judicial
the burden of proving his cause of
decisions in commercial cases. This being so, we find it
action, fails to show in a satisfactory
fitting to first define important terms which are relevant to our
manner the facts upon which he bases
discussion.
his claim, the defendant is under no
obligation to prove his exception or
defense (Moran, Commentaries on the A "charter-party" is defined as a contract by which an entire
Rules of Court, Volume 6, p. 2, citing ship, or some principal part thereof, is let by the owner to
Belen v. Belen, 13 Phil. 202). another person for a specified time or use; 20 a contract of
affreightment by which the owner of a ship or other vessel
lets the whole or a part of her to a merchant or other person
But, the record shows that the plaintiff-
for the conveyance of goods, on a particular voyage, in
appellee dismally failed to prove the
consideration of the payment of freight; 21 Charter parties are
basis of its cause of action, i.e. the
of two types: (a) contract of affreightment which involves the
alleged negligence of defendant carrier.
use of shipping space on vessels leased by the owner in part
It appears that the plaintiff was under the
or as a whole, to carry goods for others; and, (b) charter by
impression that it did not have to
demise or bareboat charter, by the terms of which the whole
establish defendant's negligence. Be
vessel is let to the charterer with a transfer to him of its entire
that as it may, contrary to the trial court's
command and possession and consequent control over its
finding, the record of the instant case
navigation, including the master and the crew, who are his
discloses ample evidence showing that
servants. Contract of affreightment may either be time
defendant carrier was not negligent in
charter, wherein the vessel is leased to the charterer for a
performing its obligation . .
fixed period of time, or voyage charter, wherein the ship is
. 18 (emphasis supplied).
leased for a single voyage. 22 In both cases, the charter-party
provides for the hire of vessel only, either for a determinate
Petitioner PPI appeals to us by way of a petition for review period of time or for a single or consecutive voyage, the
assailing the decision of the Court of Appeals. Petitioner shipowner to supply the ship's stores, pay for the wages of
theorizes that the Home Insurance case has no bearing on the master and the crew, and defray the expenses for the
the present controversy because the issue raised therein is maintenance of the ship.
the validity of a stipulation in the charter-party delimiting the
liability of the shipowner for loss or damage to goods cause
Upon the other hand, the term "common or public carrier" is
by want of due deligence on its part or that of its manager to
defined in Art. 1732 of the Civil Code. 23 The definition
make the vessel seaworthy in all respects, and not whether
extends to carriers either by land, air or water which hold
the presumption of negligence provided under the Civil Code
themselves out as ready to engage in carrying goods or
applies only to common carriers and not to private
transporting passengers or both for compensation as a
carriers. 19 Petitioner further argues that since the
public employment and not as a casual occupation. The
possession and control of the vessel remain with the
distinction between a "common or public carrier" and a
shipowner, absent any stipulation to the contrary, such
"private or special carrier" lies in the character of the
shipowner should made liable for the negligence of the
business, such that if the undertaking is a single transaction,
captain and crew. In fine, PPI faults the appellate court in not
not a part of the general business or occupation, although
applying the presumption of negligence against respondent
carrier, and instead shifting the onus probandi on the shipper
6
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
involving the carriage of goods for a fee, the person or
corporation offering such service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common
carriers, by reason of the nature of their business, should
observe extraordinary diligence in the vigilance over the
goods they carry.25 In the case of private carriers, however,
the exercise of ordinary diligence in the carriage of goods will
suffice. Moreover, in the case of loss, destruction or
deterioration of the goods, common carriers are presumed to
have been at fault or to have acted negligently, and the
burden of proving otherwise rests on them.26 On the
contrary, no such presumption applies to private carriers, for
whosoever alleges damage to or deterioration of the goods
carried has the onus of proving that the cause was the
negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary
course of business, operates as a common carrier,
transporting goods indiscriminately for all persons. When
petitioner chartered the vessel M/V "Sun Plum", the ship
captain, its officers and compliment were under the employ
of the shipowner and therefore continued to be under its
direct supervision and control. Hardly then can we charge
the charterer, a stranger to the crew and to the ship, with the
duty of caring for his cargo when the charterer did not have
any control of the means in doing so. This is evident in the
present case considering that the steering of the ship, the
manning of the decks, the determination of the course of the
voyage and other technical incidents of maritime navigation
were all consigned to the officers and crew who were
screened, chosen and hired by the shipowner. 27
It is therefore imperative that a public carrier shall remain as
such, notwithstanding the charter of the whole or portion of a
vessel by one or more persons, provided the charter is
limited to the ship only, as in the case of a time-charter or
voyage-charter. It is only when the charter includes both the
vessel and its crew, as in a bareboat or demise that a
common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned.
Indubitably, a shipowner in a time or voyage charter retains
possession and control of the ship, although her holds may,
for the moment, be the property of the charterer. 28
Respondent carrier's heavy reliance on the case of Home
Insurance Co. v. American Steamship Agencies, supra, is
misplaced for the reason that the meat of the controversy
therein was the validity of a stipulation in the charter-party
exempting the shipowners from liability for loss due to the
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
negligence of its agent, and not the effects of a special
charter on common carriers. At any rate, the rule in the
United States that a ship chartered by a single shipper to
carry special cargo is not a common carrier, 29 does not find
application in our jurisdiction, for we have observed that the
growing concern for safety in the transportation of
passengers and /or carriage of goods by sea requires a more
exacting interpretation of admiralty laws, more particularly,
the rules governing common carriers.
We quote with approval the observations of Raoul Colinvaux,
the learned barrister-at-law 30 —
As a matter of principle, it is difficult to
find a valid distinction between cases in
which a ship is used to convey the
goods of one and of several persons.
Where the ship herself is let to a
charterer, so that he takes over the
charge and control of her, the case is
different; the shipowner is not then a
carrier. But where her services only are
let, the same grounds for imposing a
strict responsibility exist, whether he is
employed by one or many. The master
and the crew are in each case his
servants, the freighter in each case is
usually without any representative on
board the ship; the same opportunities
for fraud or collusion occur; and the
same difficulty in discovering the truth as
to what has taken place arises . . .
In an action for recovery of damages against a common
carrier on the goods shipped, the shipper or consignee
should first prove the fact of shipment and its consequent
loss or damage while the same was in the possession, actual
or constructive, of the carrier. Thereafter, the burden of proof
shifts to respondent to prove that he has exercised
extraordinary diligence required by law or that the loss,
damage or deterioration of the cargo was due to fortuitous
event, or some other circumstances inconsistent with its
liability. 31
To our mind, respondent carrier has sufficiently overcome,
by clear and convincing proof, the prima faciepresumption of
negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in
his deposition taken on 19 April 1977 before the Philippine
Consul and Legal Attache in the Philippine Embassy in
Tokyo, Japan, testified that before the fertilizer was loaded,
the four (4) hatches of the vessel were cleaned, dried and
fumigated. After completing the loading of the cargo in bulk
in the ship's holds, the steel pontoon hatches were closed
and sealed with iron lids, then covered with three (3) layers
of serviceable tarpaulins which were tied with steel bonds.
The hatches remained close and tightly sealed while the ship
was in transit as the weight of the steel covers made it
impossible for a person to open without the use of the ship's
boom. 32
It was also shown during the trial that the hull of the vessel
was in good condition, foreclosing the possibility of spillage
of the cargo into the sea or seepage of water inside the hull
of the vessel. 33 When M/V "Sun Plum" docked at its berthing
place, representatives of the consignee boarded, and in the
presence of a representative of the shipowner, the foreman,
the stevedores, and a cargo surveyor representing CSCI,
opened the hatches and inspected the condition of the hull of
the vessel. The stevedores unloaded the cargo under the
watchful eyes of the shipmates who were overseeing the
whole operation on rotation basis. 34
Verily, the presumption of negligence on the part of the
respondent carrier has been efficaciously overcome by the
showing of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo. This was confirmed by
respondent appellate court thus —
. . . Be that as it may, contrary to the trial
court's finding, the record of the instant
case discloses ample evidence showing
that defendant carrier was not negligent
in performing its obligations. Particularly,
the following testimonies of plaintiff-
appellee's own witnesses clearly show
absence of negligence by the defendant
carrier; that the hull of the vessel at the
time of the discharge of the cargo was
sealed and nobody could open the same
except in the presence of the owner of
the cargo and the representatives of the
vessel (TSN, 20 July 1977, p. 14); that
the cover of the hatches was made of
steel and it was overlaid with tarpaulins,
three layers of tarpaulins and therefore
their contents were protected from the
weather (TSN, 5 April 1978, p. 24); and,
that to open these hatches, the seals
would have to be broken, all the seals
7
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
were found to be intact (TSN, 20 July
1977, pp. 15-16) (emphasis supplied).
The period during which private respondent was to observe
the degree of diligence required of it as a public carrier
began from the time the cargo was unconditionally placed in
its charge after the vessel's holds were duly inspected and
passed scrutiny by the shipper, up to and until the vessel
reached its destination and its hull was reexamined by the
consignee, but prior to unloading. This is clear from the
limitation clause agreed upon by the parties in the
Addendum to the standard "GENCON" time charter-party
which provided for an F.I.O.S., meaning, that the loading,
stowing, trimming and discharge of the cargo was to be done
by the charterer, free from all risk and expense to the
carrier. 35 Moreover, a shipowner is liable for damage to the
cargo resulting from improper stowage only when the
stowing is done by stevedores employed by him, and
therefore under his control and supervision, not when the
same is done by the consignee or stevedores under the
employ of the latter. 36
Article 1734 of the New Civil Code provides that common
carriers are not responsible for the loss, destruction or
deterioration of the goods if caused by the charterer of the
goods or defects in the packaging or in the containers. The
Code of Commerce also provides that all losses and
deterioration which the goods may suffer during the
transportation by reason of fortuitous event, force majeure,
or the inherent defect of the goods, shall be for the account
and risk of the shipper, and that proof of these accidents is
incumbent upon the carrier. 37 The carrier, nonetheless, shall
be liable for the loss and damage resulting from the
preceding causes if it is proved, as against him, that they
arose through his negligence or by reason of his having
failed to take the precautions which usage has established
among careful persons. 38
Respondent carrier presented a witness who testified on the
characteristics of the fertilizer shipped and the expected risks
of bulk shipping. Mr. Estanislao Chupungco, a chemical
engineer working with Atlas Fertilizer, described Urea as a
chemical compound consisting mostly of ammonia and
carbon monoxide compounds which are used as fertilizer.
Urea also contains 46% nitrogen and is highly soluble in
water. However, during storage, nitrogen and ammonia do
not normally evaporate even on a long voyage, provided that
the temperature inside the hull does not exceed eighty (80)
degrees centigrade. Mr. Chupungco further added that in
unloading fertilizer in bulk with the use of a clamped shell,
losses due to spillage during such operation amounting to
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
one percent (1%) against the bill of lading is deemed
"normal" or "tolerable." The primary cause of these spillages
is the clamped shell which does not seal very tightly. Also,
the wind tends to blow away some of the materials during the
unloading process.
The dissipation of quantities of fertilizer, or its daterioration in
value, is caused either by an extremely high temperature in
its place of storage, or when it comes in contact with water.
When Urea is drenched in water, either fresh or saline, some
of its particles dissolve. But the salvaged portion which is in
liquid form still remains potent and usable although no longer
saleable in its original market value.
The probability of the cargo being damaged or getting mixed
or contaminated with foreign particles was made greater by
the fact that the fertilizer was transported in "bulk," thereby
exposing it to the inimical effects of the elements and the
grimy condition of the various pieces of equipment used in
transporting and hauling it.
The evidence of respondent carrier also showed that it was
highly improbable for sea water to seep into the vessel's
holds during the voyage since the hull of the vessel was in
good condition and her hatches were tightly closed and firmly
sealed, making the M/V "Sun Plum" in all respects seaworthy
to carry the cargo she was chartered for. If there was loss or
contamination of the cargo, it was more likely to have
occurred while the same was being transported from the ship
to the dump trucks and finally to the consignee's warehouse.
This may be gleaned from the testimony of the marine and
cargo surveyor of CSCI who supervised the unloading. He
explained that the 18 M/T of alleged "bar order cargo" as
contained in their report to PPI was just an approximation or
estimate made by them after the fertilizer was discharged
from the vessel and segregated from the rest of the cargo.
The Court notes that it was in the month of July when the
vessel arrived port and unloaded her cargo. It rained from
time to time at the harbor area while the cargo was being
discharged according to the supply officer of PPI, who also
testified that it was windy at the waterfront and along the
shoreline where the dump trucks passed enroute to the
consignee's warehouse.
Indeed, we agree with respondent carrier that bulk shipment
of highly soluble goods like fertilizer carries with it the risk of
loss or damage. More so, with a variable weather condition
prevalent during its unloading, as was the case at bar. This is
a risk the shipper or the owner of the goods has to face.
Clearly, respondent carrier has sufficiently proved the
inherent character of the goods which makes it highly
vulnerable to deterioration; as well as the inadequacy of its
packaging which further contributed to the loss. On the other
hand, no proof was adduced by the petitioner showing that
the carrier was remise in the exercise of due diligence in
order to minimize the loss or damage to the goods it carried.
WHEREFORE, the petition is DISMISSED. The assailed
decision of the Court of Appeals, which reversed the trial
court, is AFFIRMED. Consequently, Civil Case No. 98623 of
the then Court of the First Instance, now Regional Trial
Court, of Manila should be, as it is hereby DISMISSED.
Costs against petitioner.
SO ORDERED.
G.R. No. 131621 September 28, 1999
LOADSTAR SHIPPING CO., INC., petitioner,
vs.
COURT OF APPEALS and THE MANILA INSURANCE
CO., INC., respondents.
DAVIDE, JR., C.J.:
Petitioner Loadstar Shipping Co., Inc. (hereafter
LOADSTAR), in this petition for review on certiorari under
Rule 45 of the 1997 Rules of Civil Procedure, seeks to
reverse and set aside the following: (a) the 30 January 1997
decision 1 of the Court of Appeals in CA-G.R. CV No. 36401,
which affirmed the decision of 4 October 1991 2 of the
Regional Trial Court of Manila, Branch 16, in Civil Case No.
85-29110, ordering LOADSTAR to pay private respondent
Manila Insurance Co. (hereafter MIC) the amount of
P6,067,178, with legal interest from the filing of the compliant
until fully paid, P8,000 as attorney's fees, and the costs of
the suit; and (b) its resolution of 19 November
1997, 3 denying LOADSTAR's motion for reconsideration of
said decision.
The facts are undisputed.1âwphi1.nêt
On 19 November 1984, LOADSTAR received on board its
M/V "Cherokee" (hereafter, the vessel) the following goods
for shipment:
8
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood
assemblies and the others ;and
c) 49 bundles of mouldings R & W (3)
Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured for the
same amount with MIC against various risks including
"TOTAL LOSS BY TOTAL OF THE LOSS THE VESSEL."
The vessel, in turn, was insured by Prudential Guarantee &
Assurance, Inc. (hereafter PGAI) for P4 million. On 20
November 1984, on its way to Manila from the port of
Nasipit, Agusan del Norte, the vessel, along with its cargo,
sank off Limasawa Island. As a result of the total loss of its
shipment, the consignee made a claim with LOADSTAR
which, however, ignored the same. As the insurer, MIC paid
P6,075,000 to the insured in full settlement of its claim, and
the latter executed a subrogation receipt therefor.
On 4 February 1985, MIC filed a complaint against
LOADSTAR and PGAI, alleging that the sinking of the vessel
was due to the fault and negligence of LOADSTAR and its
employees. It also prayed that PGAI be ordered to pay the
insurance proceeds from the loss the vessel directly to MIC,
said amount to be deducted from MIC's claim from
LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of
the shipper's goods and claimed that sinking of its vessel
was due to force majeure. PGAI, on the other hand, averred
that MIC had no cause of action against it, LOADSTAR being
the party insured. In any event, PGAI was later dropped as a
party defendant after it paid the insurance proceeds to
LOADSTAR.
As stated at the outset, the court a quo rendered judgment in
favor of MIC, prompting LOADSTAR to elevate the matter to
the court of Appeals, which, however, agreed with the trial
court and affirmed its decision in toto.
In dismissing LOADSTAR's appeal, the appellate court made
the following observations:
1) LOADSTAR cannot be considered a private carrier on the
sole ground that there was a single shipper on that fateful
voyage. The court noted that the charter of the vessel was
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
limited to the ship, but LOADSTAR retained control over its
crew. 4
2) As a common carrier, it is the Code of Commerce, not the
Civil Code, which should be applied in determining the rights
and liabilities of the parties.
3) The vessel was not seaworthy because it was
undermanned on the day of the voyage. If it had been
seaworthy, it could have withstood the "natural and inevitable
action of the sea" on 20 November 1984, when the condition
of the sea was moderate. The vessel sank, not because
of force majeure, but because it was not seaworthy.
LOADSTAR'S allegation that the sinking was probably due to
the "convergence of the winds," as stated by a PAGASA
expert, was not duly proven at the trial. The "limited liability"
rule, therefore, is not applicable considering that, in this
case, there was an actual finding of negligence on the part of
the carrier.5
4) Between MIC and LOADSTAR, the provisions of the Bill of
Lading do not apply because said provisions bind only the
shipper/consignee and the carrier. When MIC paid the
shipper for the goods insured, it was subrogated to the
latter's rights as against the carrier, LOADSTAR. 6
5) There was a clear breach of the contract of carriage when
the shipper's goods never reached their destination.
LOADSTAR's defense of "diligence of a good father of a
family" in the training and selection of its crew is unavailing
because this is not a proper or complete defense in culpa
contractual.
6) "Art. 361 (of the Code of Commerce) has been judicially
construed to mean that when goods are delivered on board a
ship in good order and condition, and the shipowner delivers
them to the shipper in bad order and condition, it then
devolves upon the shipowner to both allege and prove that
the goods were damaged by reason of some fact which
legally exempts him from liability." Transportation of the
merchandise at the risk and venture of the shipper means
that the latter bears the risk of loss or deterioration of his
goods arising from fortuitous events, force majeure, or the
inherent nature and defects of the goods, but not those
caused by the presumed negligence or fault of the carrier,
unless otherwise proved. 7
The errors assigned by LOADSTAR boil down to a
determination of the following issues:
(1) Is the M/V "Cherokee" a private or a common carrier?
(2) Did LOADSTAR observe due and/or ordinary diligence in
these premises.
Regarding the first issue, LOADSTAR submits that the
vessel was a private carrier because it was not issued
certificate of public convenience, it did not have a regular trip
or schedule nor a fixed route, and there was only "one
shipper, one consignee for a special cargo."
In refutation, MIC argues that the issue as to the
classification of the M/V "Cherokee" was not timely raised
below; hence, it is barred by estoppel. While it is true that the
vessel had on board only the cargo of wood products for
delivery to one consignee, it was also carrying passengers
as part of its regular business. Moreover, the bills of lading in
this case made no mention of any charter party but only a
statement that the vessel was a "general cargo carrier."
Neither was there any "special arrangement" between
LOADSTAR and the shipper regarding the shipment of the
cargo. The singular fact that the vessel was carrying a
particular type of cargo for one shipper is not sufficient to
convert the vessel into a private carrier.
As regards the second error, LOADSTAR argues that as a
private carrier, it cannot be presumed to have been
negligent, and the burden of proving otherwise devolved
upon MIC. 8
LOADSTAR also maintains that the vessel was seaworthy.
Before the fateful voyage on 19 November 1984, the vessel
was allegedly dry docked at Keppel Philippines Shipyard and
was duly inspected by the maritime safety engineers of the
Philippine Coast Guard, who certified that the ship was fit to
undertake a voyage. Its crew at the time was experienced,
licensed and unquestionably competent. With all these
precautions, there could be no other conclusion except that
LOADSTAR exercised the diligence of a good father of a
family in ensuring the vessel's seaworthiness.
LOADSTAR further claims that it was not responsible for the
loss of the cargo, such loss being due to force majeure. It
points out that when the vessel left Nasipit, Agusan del
Norte, on 19 November 1984, the weather was fine until the
next day when the vessel sank due to strong waves. MCI's
witness, Gracelia Tapel, fully established the existence of
two typhoons, "WELFRING" and "YOLING," inside the
Philippine area of responsibility. In fact, on 20 November
9
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
1984, signal no. 1 was declared over Eastern Visayas, which
includes Limasawa Island. Tapel also testified that the
convergence of winds brought about by these two typhoons
strengthened wind velocity in the area, naturally producing
strong waves and winds, in turn, causing the vessel to list
and eventually sink.
LOADSTAR goes on to argue that, being a private carrier,
any agreement limiting its liability, such as what transpired in
this case, is valid. Since the cargo was being shipped at
"owner's risk," LOADSTAR was not liable for any loss or
damage to the same. Therefore, the Court of Appeals erred
in holding that the provisions of the bills of lading apply only
to the shipper and the carrier, and not to the insurer of the
goods, which conclusion runs counter to the Supreme
Court's ruling in the case of St. Paul Fire & Marine Co. v.
Macondray & Co., Inc., 9 and National Union Fire Insurance
Company of Pittsburgh v. Stolt-Nielsen Phils., Inc. 10
Finally, LOADSTAR avers that MIC's claim had already
prescribed, the case having been instituted beyond the
period stated in the bills of lading for instituting the same —
suits based upon claims arising from shortage, damage, or
non-delivery of shipment shall be instituted within sixty days
from the accrual of the right of action. The vessel sank on 20
November 1984; yet, the case for recovery was filed only on
4 February 1985.
MIC, on the other hand, claims that LOADSTAR was liable,
notwithstanding that the loss of the cargo was due toforce
majeure, because the same concurred with LOADSTAR's
fault or negligence.
is not altered by the fact that the carriage of the goods in business of carrying
question was periodic, occasional, episodic or unscheduled. or transporting
passengers or
goods or both, by
In support of its position, LOADSTAR relied on the 1968
land, water, or air
case of Home Insurance Co. v. American Steamship
for compensation,
Agencies, Inc., 11 where this Court held that a common
offering their
carrier transporting special cargo or chartering the vessel to
services to the
a special person becomes a private carrier that is not subject
public.
to the provisions of the Civil Code. Any stipulation in the
charter party absolving the owner from liability for loss due to
the negligence of its agent is void only if the strict policy The above article makes no distinction
governing common carriers is upheld. Such policy has no between one whose principal business
force where the public at is not involved, as in the case of a activity is the carrying of persons or
ship totally chartered for the use of a single party. goods or both, and one who does such
LOADSTAR also cited Valenzuela Hardwood and Industrial carrying only as ancillary activity (in local
Supply, Inc. v. Court of Appeals 12 and National Steel Corp. idiom, as "a sideline". Article 1732 also
v. Court of Appeals, 13 both of which upheld the Home carefully avoids making any distinction
Insurance doctrine. between a person or enterprise offering
transportation service on a regular or
scheduled basis and one offering such
These cases invoked by LOADSTAR are not applicable in
service on an occasional, episodic or
the case at bar for the simple reason that the factual settings
unscheduled basis. Neither does Article
are different. The records do not disclose that the M/V
1732 distinguish between a carrier
"Cherokee," on the date in question, undertook to carry a
offering its services to the "general
special cargo or was chartered to a special person only.
public," i.e., the general community or
There was no charter party. The bills of lading failed to show
population, and one who offers services
any special arrangement, but only a general provision to the
or solicits business only from a
effect that the M/V"Cherokee" was a "general cargo
narrow segment of the general
carrier." 14 Further, the bare fact that the vessel was carrying
population. We think that Article 1733
a particular type of cargo for one shipper, which appears to
deliberately refrained from making such
be purely coincidental, is not reason enough to convert the
distinctions.
vessel from a common to a private carrier, especially where,
as in this case, it was shown that the vessel was also
carrying passengers. xxx xxx xxx

Secondly, LOADSTAR did not raise the issue of prescription

Under the facts and circumstances obtaining in this case,
in the court below; hence, the same must be deemed
LOADSTAR fits the definition of a common carrier under
waived.
Article 1732 of the Civil Code. In the case of De Guzman v.
Court of Appeals,15 the Court juxtaposed the statutory
Thirdly, the " limited liability " theory is not applicable in the definition of "common carriers" with the peculiar
case at bar because LOADSTAR was at fault or negligent, circumstances of that case, viz.:
and because it failed to maintain a seaworthy vessel.
Authorizing the voyage notwithstanding its knowledge of a
The Civil Code defines "common carriers" in the following
typhoon is tantamount to negligence.
terms:
We find no merit in this petition.
Art. 1732. Common
carriers
Anent the first assigned error, we hold that LOADSTAR is a persons,
common carrier. It is not necessary that the carrier be issued corporations, firms
a certificate of public convenience, and this public character or associations
engaged in
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
It appears to the Court that private
respondent is properly characterized as
a common carrier even though he
merely "back-hauled" goods for other
merchants from Manila to Pangasinan,
although such backhauling was done on
a periodic or occasional rather than
regular or scheduled manner, and
eventhough private
respondent's principal occupation was
not the carriage of goods for others.
There is no dispute that private
are respondent charged his customers a fee
for hauling their goods; that fee
frequently fell below commercial freight
rates is not relevant here.
the
10
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
The Court of Appeals referred to the fact
that private respondent held no
certificate of public convenience, and
concluded he was not a common carrier.
This is palpable error. A certificate of
public convenience is not a requisite for
the incurring of liability under the Civil
Code provisions governing common
carriers. That liability arises the moment
a person or firm acts as a common
carrier, without regard to whether or not
such carrier has also complied with the
requirements of the applicable
regulatory statute and implementing
regulations and has been granted a
certificate of public convenience or other
franchise. To exempt private respondent
from the liabilities of a common carrier
because he has not secured the
necessary certificate of public
convenience, would be offensive to
sound public policy; that would be to
reward private respondent precisely for
failing to comply with applicable
statutory requirements The business of
a common carrier impinges directly and
intimately upon the safety and well being
and property of those members of the
general community who happen to deal
with such carrier. The law imposes
duties and liabilities upon common
carriers for the safety and protection of
those who utilize their services and the
law cannot allow a common carrier to
render such duties and liabilities merely
facultative by simply failing to obtain the
necessary permits and authorizations.
Moving on to the second assigned error, we find that the M/V
"Cherokee" was not seaworthy when it embarked on its
voyage on 19 November 1984. The vessel was not even
sufficiently manned at the time. "For a vessel to be
seaworthy, it must be adequately equipped for the voyage
and manned with a sufficient number of competent officers
and crew. The failure of a common carrier to maintain in
seaworthy condition its vessel involved in a contract of
carriage is a clear breach of its duty prescribed in Article
1755 of the Civil Code." 16
Neither do we agree with LOADSTAR's argument that the
"limited liability" theory should be applied in this case. The
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
doctrine of limited liability does not apply where there was invalid as being contrary to public policy,
negligence on the part of the vessel owner or but the third is valid and enforceable. 21
agent. 17 LOADSTAR was at fault or negligent in not
maintaining a seaworthy vessel and in having allowed its
Since the stipulation in question is null and void, it
vessel to sail despite knowledge of an approaching typhoon.
follows that when MIC paid the shipper, it was
In any event, it did not sink because of any storm that may
subrogated to all the rights which the latter has
be deemed as force majeure, inasmuch as the wind
against the common carrier, LOADSTAR.
condition in the performance of its duties, LOADSTAR
cannot hide behind the "limited liability" doctrine to escape
responsibility for the loss of the vessel and its cargo. Neither is there merit to the contention that the claim in this
case was barred by prescription. MIC's cause of action had
not yet prescribed at the time it was concerned. Inasmuch as
LOADSTAR also claims that the Court of Appeals erred in
neither the Civil Code nor the Code of Commerce states a
holding it liable for the loss of the goods, in utter disregard of
specific prescriptive period on the matter, the Carriage of
this Court's pronouncements in St. Paul Fire & Marine Ins.
Goods by Sea Act (COGSA) — which provides for a one-
Co. v. Macondray & Co., Inc., 18 and National Union Fire
year period of limitation on claims for loss of, or damage to,
Insurance v. Stolt-Nielsen Phils., Inc. 19 It was ruled in these
cargoes sustained during transit — may be applied
two cases that after paying the claim of the insured for
suppletorily to the case at bar. This one-year prescriptive
damages under the insurance policy, the insurer is
period also applies to the insurer of the goods. 22In this case,
subrogated merely to the rights of the assured, that is, it can
the period for filing the action for recovery has not yet
recover only the amount that may, in turn, be recovered by
elapsed. Moreover, a stipulation reducing the one-year
the latter. Since the right of the assured in case of loss or
period is null and void; 23 it must, accordingly, be struck
damage to the goods is limited or restricted by the provisions
down.
in the bills of lading, a suit by the insurer as subrogee is
necessarily subject to the same limitations and restrictions.
We do not agree. In the first place, the cases relied on by WHEREFORE, the instant petition is DENIED and the
LOADSTAR involved a limitation on the carrier's liability to an challenged decision of 30 January 1997 of the Court of
amount fixed in the bill of lading which the parties may enter Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs
into, provided that the same was freely and fairly agreed against petitioner.1âwphi1.nêt
upon (Articles 1749-1750). On the other hand, the stipulation
in the case at bar effectively reduces the common carrier's
SO ORDERED.
liability for the loss or destruction of the goods to a degree
less than extraordinary (Articles 1744 and 1745), that is, the
carrier is not liable for any loss or damage to shipments G.R. No. L-9605 September 30, 1957
made at "owner's risk." Such stipulation is obviously null and
void for being contrary to public policy." 20 It has been said:
GAUDIOSO EREZO, ET AL., plaintiff-appellee,
vs.
Three kinds of stipulations have often AGUEDO JEPTE, defendant-appellant.
been made in a bill of lading.
The first one exempting the carrier from
LABRADOR, J.:
any and all liability for loss or damage
occasioned by its own negligence. The
second is one providing for an Appeal from a judgment of the Court of First Instance of
unqualified limitation of such liability to Manila ordering defendant to pay plaintiff Gaudioso Erezo
an agreed valuation. And the third is one P3,000 on the death of Ernesto Erezo, son of plaintiff
limiting the liability of the carrier to an Gaudioso Erezo.
agreed valuation unless the shipper
declares a higher value and pays a
Defendant-appellant is the registered owner of a six by six
higher rate of. freight. According to an
almost uniform weight of authority, the truck bearing plate No. TC-1253. On August, 9, 1949, while
first and second kinds of stipulations are the same was being driven by Rodolfo Espino y Garcia, it
collided with a taxicab at the intersection of San Andres and
11
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
Dakota Streets, Manila. As the truck went off the street, it hit
Ernesto Erezo and another, and the former suffered injuries,
as a result of which he died. The driver was prosecuted for
homicide through reckless negligence in criminal case No.
10663 of the Court of First Instance of Manila. The accused
pleaded guilty and was sentenced to suffer imprisonment
and to pay the heirs of Ernesto Erezo the sum of P3,000. As
the amount of the judgment could not be enforced against
him, plaintiff brought this action against the registered owner
of the truck, the defendant-appellant. The circumstances
material to the case are stated by the court in its decision.
The defendant does not deny at the time of the
fatal accident the cargo truck driven by Rodolfo
Espino y Garcia was registered in his name. He,
however, claims that the vehicle belonged to the
Port Brokerage, of which he was the broker at the
time of the accident. He explained, and his
explanation was corroborated by Policarpio
Franco, the manager of the corporation, that the
trucks of the corporation were registered in his
name as a convenient arrangement so as to
enable the corporation to pay the registration fee
with his backpay as a pre-war government
employee. Franco, however, admitted that the
arrangement was not known to the Motor Vehicle
Office.
The trial court held that as the defendant-appellant
represented himself to be the owner of the truck and the
Motor Vehicle Office, relying on his representation,
registered the vehicles in his name, the Government and all
persons affected by the representation had the right to rely
on his declaration of ownership and registration. It, therefore,
held that the defendant-appellant is liable because he cannot
be permitted to repudiate his own declaration. (Section 68
[a], Rule 123, and Art. 1431, New Civil Code.).
Against the judgment, the defendant has prosecuted this
appeal claiming that at the time of the accident the relation of
employer and employee between the driver and defendant-
appellant was not established, it having been proved at the
trial that the owner of the truck was the Port Brokerage, of
which defendant-appellant was merely a broker. We find no
merit or justice in the above contention. In previous
decisions, We already have held that the registered owner of
a certificate of public convenience is liable to the public for
the injuries or damages suffered by passengers or third
persons caused by the operation of said vehicle, even
though the same had been transferred to a third person.
(Montoya vs. Ignacio, 94 Phil., 182, 50 Off. Gaz., 108; Roque
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
vs. Malibay Transit Inc.,1 G. R. No. L- 8561, November
18,1955; Vda. de Medina vs. Cresencia, 99 Phil., 506, 52
Off. Gaz., [10], 4606.)The principle upon which this doctrine
is based is that in dealing with vehicles registered under the
Public Service Law, the public has the right to assume or
presume that the registered owner is the actual owner
thereof, for it would be difficult for the public to enforce the
actions that they may have for injuries caused to them by the
vehicles being negligently operated if the public should be
required to prove who the actual owner is. How would the
public or third persons know against whom to enforce their
rights in case of subsequent transfers of the vehicles? We do
not imply by this doctrine, however, that the registered owner
may not recover whatever amount he had paid by virtue of
his liability to third persons from the person to whom he had
actually sold, assigned or conveyed the vehicle.
Under the same principle the registered owner of any
vehicle, even if not used for a public service, should primarily
be responsible to the public or to third persons for injuries
caused the latter while the vehicle is being driven on the
highways or streets. The members of the Court are in
agreement that the defendant-appellant should be held liable
to plaintiff-appellee for the injuries occasioned to the latter
because of the negligence of the driver even if the
defendant-appellant was no longer the owner of the vehicle
at the time of the damage because he had previously sold it
to another. What is the legal basis for his (defendant-
appellant's) liability?.
There is a presumption that the owner of the guilty vehicle is
the defendant-appellant as he is the registered owner in the
Motor Vehicle Office. Should he not be allowed to prove the
truth, that he had sold it to another and thus shift the
responsibility for the injury to the real and actual owner? The
defendant holds the affirmative of this proposition; the trial
court held the negative.
The Revised Motor Vehicle Law (Act No. 3992, as amended)
provides that no vehicle may be used or operated upon any
public highway unless the same is properly registered. It has
been stated that the system of licensing and the requirement
that each machine must carry a registration number,
conspicuously displayed, is one of the precautions taken to
reduce the danger of injury to pedestrians and other travelers
from the careless management of automobiles, and to
furnish a means of ascertaining the identity of persons
violating the laws and ordinances, regulating the speed and
operation of machines upon the highways (2 R. C. L. 1176).
Not only are vehicles to be registered and that no motor
vehicles are to be used or operated without being properly
registered for the current year, but that dealers in motor
vehicles shall furnish the Motor Vehicles Office a report
showing the name and address of each purchaser of motor
vehicle during the previous month and the manufacturer's
serial number and motor number. (Section 5 [c], Act. No.
3992, as amended.).
Registration is required not to make said registration the
operative act by which ownership in vehicles is transferred,
as in land registration cases, because the administrative
proceeding of registration does not bear any essential
relation to the contract of sale between the parties (Chinchilla
vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the
use and operation of the vehicle upon any public highway
(section 5 [a], Act No. 3992, as amended).The main aim of
motor vehicle registration is to identify the owner so that if
any accident happens, or that any damage or injury is
caused by the vehicles on the public highways, responsibility
therefore can be fixed on a definite individual, the registered
owner. Instances are numerous where vehicles running on
public highways caused accidents or injuries to pedestrians
or other vehicles without positive identification of the owner
or drivers, or with very scant means of identification. It is to
forestall those circumstances, so inconvenient or prejudicial
to the public, that the motor vehicle registration is primarily
ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public
highways.
One of the principal purposes of motor vehicles
legislation is identification of the vehicle and of the
operator, in case of accident; and another is that
the knowledge that means of detection are always
available may act as a deterrent from lax
observance of the law and of the rules of
conservative and safe operation. Whatever
purpose there may be in these statutes, it is
subordinate at the last to the primary purpose of
rendering it certain that the violator of the law or of
the rules of safety shall not escape because of
lack of means to discover him." The purpose of the
statute is thwarted, and the displayed number
becomes a "snare and delusion," if courts will
entertain such defenses as that put forward by
appellee in this case. No responsible person or
corporation could be held liable for the most
outrageous acts of negligence, if they should be
allowed to place a "middleman" between them and
the public, and escape liability by the manner in
which they recompense their servants. (King vs.
Brenham Automobile Co., 145 S. W. 278,279.)
12
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
With the above policy in mind, the question that defendant-
appellant poses is: should not be registered owner be
allowed at the trial to prove who the actual and real owner is,
and in accordance with such proof escape or evade
responsibility and lay the same on the person actually
owning the vehicle? We hold with the trial court that the laws
does not allow him to do so; the law, with its aim and policy
in mind, does not relieve him directly of the responsibility that
the law fixes and places upon him as an incident or
consequence of registration. Were a registered owner
allowed to evade responsibility by proving who the supposed
transferee or owner is, it would be easy for him, by collusion
with others or otherwise, to escape said responsibility and
transfer the same to an indefinite person, or to one who
possesses no property with which to respond financially for
the damage or injury done. A victim of recklessness on the
public highways is usually without means to discover or
identify the person actually causing the injury or damage. He
has no means other than by a recourse to the registration in
the Motor Vehicles Office to determine who is the owner. The
protection that the law aims to extend to him would become
illusory were the registered owner given the opportunity to
escape liability by disproving his ownership. If the policy of
the law is to be enforced and carried out, the registered
owner should be allowed to prove the contrary to the
prejudice of the person injured that is, to prove that a third
person or another has become the owner, so that he may
thereby be relieved of the responsibility to the injured
person.1âwphïl.nêt
The above policy and application of the law may appear
quite harsh and would seem to conflict with truth and justice.
We do not think it is so. A registered owner who has already
sold or transferred a vehicle has the recourse to a third-party
complaint, in the same action brought against him to recover
for the damage or injury done, against the vendee or
transferee of the vehicle. The inconvenience of the suit is no
justification for relieving him of liability; said inconvenience is
the price he pays for failure to comply with the registration
that the law demands and requires.
In synthesis, we hold that the registered owner, the
defendant-appellant herein, is primarily responsible for the
damage caused to the vehicle of the plaintiff-appellee, but he
(defendant-appellant) has a right to be indemnified by the
real or actual owner of the amount that he may be required
to pay as damage for the injury caused to the plaintiff-
appellant.1âwphïl.nêt
SO ORDERED.
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
G.R. No. 70876 July 19, 1990
MA. LUISA BENEDICTO, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT and
GREENHILLS WOOD INDUSTRIES COMPANY,
INC. respondents.
FELICIANO, J.:
This Petition for Review asks us to set aside the Decision of
the then Intermediate Appellate Court dated 30 January
1985 in A.C.-G.R. CV No. 01454, which affirmed in toto the
decision of the Regional Trial Court ("RTC") of Dagupan City
in Civil Case No. 5206. There, the RTC held petitioner Ma.
Luisa Benedicto liable to pay private respondent Greenhills
Wood Industries Company, Inc. ("Greenhills") the amounts of
P16,016.00 and P2,000.00 representing the cost of
Greenhills' lost sawn lumber and attorney's fees,
respectively.
Private respondent Greenhills, a lumber manufacturing firm
with business address at Dagupan City, operates sawmill in
Maddela, Quirino.
Sometime in May 1980, private respondent bound itself to
sell and deliver to Blue Star Mahogany, Inc., ("Blue Star") a
company with business operations in Valenzuela, Bulacan
100,000 board feet of sawn lumber with the understanding
that an initial delivery would be made on 15 May 1980. 1 To
effect its first delivery, private respondent's resident manager
in Maddela, Dominador Cruz, contracted Virgilio Licuden, the
driver of a cargo truck bearing Plate No. 225 GA TH to
transport its sawn lumber to the consignee Blue Star in
Valenzuela, Bulacan. This cargo truck was registered in the
name of petitioner Ma. Luisa Benedicto, the proprietor of
Macoven Trucking, a business enterprise engaged in hauling
freight, with main office in B.F. Homes, Parañaque.
On 15 May 1980, Cruz in the presence and with the consent
of driver Licuden, supervised the loading of 7,690 board feet
of sawn lumber with invoice value of P16,918.00 aboard the
cargo truck. Before the cargo truck left Maddela for
Valenzuela, Bulacan, Cruz issued to Licuden Charge
Invoices Nos. 3259 and 3260 both of which were initialed by
the latter at the bottom left corner.2 The first invoice was for
the amount of P11,822.80 representing the value of 5,374
board feet of sawn lumber, while the other set out the
amount of P5,095.20 as the value of 2,316 board feet. Cruz
instructed Licuden to give the original copies of the two (2)
invoices to the consignee upon arrival in Valenzuela,
Bulacan 3 and to retain the duplicate copies in order that he
could afterwards claim the freightage from private
respondent's Manila office. 4
On 16 May 1980, the Manager of Blue Star called up by long
distance telephone Greenhills' president, Henry Lee Chuy,
informing him that the sawn lumber on board the subject
cargo truck had not yet arrived in Valenzuela, Bulacan. The
latter in turn informed Greenhills' resident manager in its
Maddela saw-mill of what had happened. In a letter 5 dated
18 May 1980, Blue Star's administrative and personnel
manager, Manuel R. Bautista, formally informed Greenhills'
president and general manager that Blue Star still had not
received the sawn lumber which was supposed to arrive on
15 May 1980 and because of this delay, "they were
constrained to look for other suppliers."
On 25 June 1980, after confirming the above with Blue Star
and after trying vainly to persuade it to continue with their
contract, private respondent Greenhill's filed Criminal Case
No. 668 against driver Licuden for estafa. Greenhills also
filed against petitioner Benedicto Civil Case No. D-5206 for
recovery of the value of the lost sawn lumber plus damages
before the RTC of Dagupan City.
In her answer, 6 petitioner Benedicto denied liability alleging
that she was a complete stranger to the contract of carriage,
the subject truck having been earlier sold by her to Benjamin
Tee, on 28 February 1980 as evidenced by a deed of
sale. 7 She claimed that the truck had remained registered in
her name notwithstanding its earlier sale to Tee because the
latter had paid her only P50,000.00 out of the total agreed
price of P68,000.00 However, she averred that Tee had
been operating the said truck in Central Luzon from that date
(28 February 1980) onwards, and that, therefore, Licuden
was Tee's employee and not hers.
On 20 June 1983, based on the finding that petitioner
Benedicto was still the registered owner of the subject truck,
and holding that Licuden was her employee, the trial court
adjudged as follows:
WHEREFORE, in the light of the
foregoing considerations, this Court
hereby renders judgment against
defendant Maria Luisa Benedicto,
ordering her to pay the Greenhills Wood
Industries Co. Inc., thru its President and
13
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
General Manager, the amount of
P16,016 cost of the sawn lumber loaded
on the cargo truck, with legal rate of
interest from the filing of the complaint to
pay attorney's fees in the amount of
P2,000.00; and to pay the costs of this
suit.
SO ORDERED. 8
On 30 January 1985, upon appeal by petitioner, the
Intermediate Appellate Court affirmed 9 the decision of the
trial court in toto. Like the trial court, the appellate court held
that since petitioner was the registered owner of the subject
vehicle, Licuden the driver of the truck, was her employee,
and that accordingly petitioner should be responsible for the
negligence of said driver and bear the loss of the sawn
lumber plus damages. Petitioner moved for reconsideration,
without success. 10
In the present Petition for Review, the sole issue raised is
whether or not under the facts and applicable law, the
appellate court was correct in finding that petitioner, being
the registered owner of the carrier, should be held liable for
the value of the undelivered or lost sawn lumber.
Petitioner urges that she could not be held answerable for
the loss of the cargo, because the doctrine which makes the
registered owner of a common carrier vehicle answerable to
the public for the negligence of the driver despite the sale of
the vehicle to another person, applies only to cases involving
death of or injury to passengers. What applies in the present
case, according to petitioner, is the rule that a contract of
carriage requires proper delivery of the goods to and
acceptance by the carrier. Thus, petitioner contends that the
delivery to a person falsely representing himself to be an
agent of the carrier prevents liability from attaching to the
registered owner.
The Court considers that petitioner has failed to show that
appellate court committed reversible error in affirming the
trial court's holding that petitioner was liable for the cost of
the sawn lumber plus damages.
There is no dispute that petitioner Benedicto has been
holding herself out to the public as engaged in the business
of hauling or transporting goods for hire or compensation.
Petitioner Benedicto is, in brief, a common carrier.
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
The prevailing doctrine on common carriers makes the injury to or death of passengers, and not to cases involving
registered owner liable for consequences flowing from the merely carriage of goods. We believe otherwise.
operations of the carrier, even though the specific vehicle
involved may already have been transferred to another
A common carrier, both from the nature of its business and
person. This doctrine rests upon the principle that in dealing
for insistent reasons of public policy, is burdened by the law
with vehicles registered under the Public Service Law, the
with the duty of exercising extraordinary diligence not only in
public has the right to assume that the registered owner is
ensuring the safety of passengers but also in caring for
the actual or lawful owner thereof It would be very difficult
goods transported by it. 13 The loss or destruction or
and often impossible as a practical matter, for members of
deterioration of goods turned over to the common carrier for
the general public to enforce the rights of action that they
conveyance to a designated destination, raises instantly a
may have for injuries inflicted by the vehicles being
presumption of fault or negligence on the part of the carrier,
negligently operated if they should be required to prove who
save only where such loss, destruction or damage arises
the actual owner is. 11 The registered owner is not allowed to
from extreme circumstances such as a natural disaster or
deny liability by proving the identity of the alleged transferee.
calamity or act of the public enemy in time of war, or from an
Thus, contrary to petitioner's claim, private respondent is not
act or omission of the shipper himself or from the character
required to go beyond the vehicle's certificate of registration
of the goods or their packaging or container. 14
to ascertain the owner of the carrier. In this regard, the letter
presented by petitioner allegedly written by Benjamin Tee
admitting that Licuden was his driver, had no evidentiary This presumption may be overcome only by proof of
value not only because Benjamin Tee was not presented in extraordinary diligence on the part of the carrier. 15 Clearly, to
court to testify on this matter but also because of the permit a common carrier to escape its responsibility for the
aforementioned doctrine. To permit the ostensible or passengers or goods transported by it by proving a prior sale
registered owner to prove who the actual owner is, would be of the vehicle or means of transportation to an alleged
to set at naught the purpose or public policy which infuses vendee would be to attenuate drastically the carrier's duty of
that doctrine. extraordinary diligence. It would also open wide the door to
collusion between the carrier and the supposed vendee and
to shifting liability from the carrier to one without financial
In fact, private respondent had no reason at all to doubt the
capability to respond for the resulting damages. In other
authority of Licuden to enter into a contract of carriage on
words, the thrust of the public policy here involved is as
behalf of the registered owner. It appears that, earlier, in the
sharp and real in the case of carriage of goods as it is in the
first week of May 1980, private respondent Greenhills had
transporting of human beings. Thus, to sustain petitioner
contracted Licuden who was then driving the same cargo
Benedicto's contention, that is, to require the shipper to go
truck to transport and carry a load of sawn lumber from the
behind a certificate of registration of a public utility vehicle,
Maddela sawmill to Dagupan City. 12 No one came forward to
would be utterly subversive of the purpose of the law and
question that contract or the authority of Licuden to represent
doctrine.
the owner of the carrier truck.
Petitioner further insists that there was no perfected contract
Moreover, assuming the truth of her story, petitioner
of carriage for the reason that there was no proof that her
Benedicto retained registered ownership of the freight truck
consent or that of Tee had been obtained; no proof that the
for her own benefit and convenience, that is, to secure the
driver, Licuden was authorized to bind the registered owner;
payment of the balance of the selling price of the truck. She
and no proof that the parties had agreed on the freightage to
may have been unaware of the legal security device of
be paid.
chattel mortgage; or she, or her buyer, may have been
unwilling to absorb the expenses of registering a chattel
mortgage over the truck. In either case, considerations both Once more, we are not persuaded by petitioner's arguments
of public policy and of equity require that she bear the which appear to be a transparent attempt to evade statutory
consequences flowing from registered ownership of the responsibilities. Driver Licuden was entrusted with
subject vehicle. possession and control of the freight truck by the registered
owner (and by the alleged secret owner, for that matter).i•t•c-
aüsl Driver Licuden, under the circumstances, was clothed
Petitioner Benedicto, however, insists that the said principle
with at least implied authority to contract to carry goods and
should apply only to cases involving negligence and resulting
to accept delivery of such goods for carriage to a specified
14
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
destination. That the freight to be paid may-not have been
fixed before loading and carriage, did not prevent the
contract of carriage from arising, since the freight was at
least determinable if not fixed by the tariff schedules in
petitioner's main business office. Put in somewhat different
terms, driver Licuden is in law regarded as the employee and
agent of the petitioner, for whose acts petitioner must
respond. A contract of carriage of goods was shown; the
sawn lumber was loaded on board the freight truck; loss or
non-delivery of the lumber at Blue Star's premises in
Valenzuela, Bulacan was also proven; and petitioner has not
proven either that she had exercised extraordinary diligence
to prevent such loss or non-delivery or that the loss or non-
delivery was due to some casualty or force
majeure inconsistent with her liability. 16 Petitioner's liability to
private respondent Greenhills was thus fixed and complete,
without prejudice to petitioner's right to proceed against her
putative transferee Benjamin Tee and driver Licuden for
reimbursement or contribution. 17
WHEREFORE, the Petition for Review is DENIED for lack of
merit and the Decision of the former Intermediate Appellate
Court dated 30 January 1985 is hereby AFFIRMED. Costs
against petitioner.
SO ORDERED.
G.R. No. 98275 November 13, 1992
BA FINANCE CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS, REGIONAL TRIAL COURT
OF ANGELES CITY, BRANCH LVI, CARLOS OCAMPO,
INOCENCIO TURLA, SPOUSES MOISES AGAPITO and
SOCORRO M. AGAPITO and NICOLAS
CRUZ, respondents.
MELO, J.:
The question of petitioner's responsibility for damages when
on March 6, 1983, an accident occurred involving petitioner's
Isuzu ten-wheeler truck then driven by an employee of Lino
Castro is the thrust of the petition for review on certiorari now
before Us considering that neither the driver nor Lino Castro
appears to be connected with petitioner.
On October 13, 1988, the disputed decision in the suit below
was rendered by the court of origin in this manner:
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
1. Ordering Rock B.A. and Rogelio Villar y Amare
jointly and severally to pay the plaintiffs as follows:
a) To the plaintiff Carlos Ocampo — P121,650.00;
b) To the plaintiff Moises Ocampo — P298,500.00
c) To the plaintiff Nicolas Cruz — P154,740.00
d) To the plaintiff Inocencio Turla, Sr. — 48,000.00
2. Dismissing the case against Lino Castro
3. Dismissing the third-party complaint against
STRONGHOLD
4. Dismissing all the counterclaim of the
defendants and third-party defendants.
5. Ordering ROCK to reimburse B.A. the total
amount of P622,890.00 which the latter is
adjudged to pay to the plaintiffs. (p. 46, Rollo)
Respondent Court of Appeals affirmed the appealed
disposition in toto through Justice Rasul, with Justices De
Pano, Jr. and Imperial concurring, on practically the same
grounds arrived at by the court a quo (p. 28, Rollo). Efforts
exerted towards re-evaluation of the adverse were futile (p.
37, Rollo). Hence, the instant petition.
The lower court ascertained after due trial that Rogelio Villar
y Amare, the driver of the Isuzu truck, was at fault when the
mishap occurred in as much as he was found guilty beyond
reasonable doubt of reckless imprudence resulting in triple
homicide with multiple physical injuries with damage to
property in a decision rendered on February 16, 1984 by the
Presiding Judge of Branch 6 of the Regional Trial Court
stationed at Malolos, Bulacan. Petitioner was adjudged liable
for damages in as much as the truck was registered in its
name during the incident in question, following the doctrine
laid down by this Court in Perez vs. Gutierrez (53 SCRA 149
[1973]) and Erezo, et al. vs. Jepte (102 Phil. 103 [1957]). In
the same breadth, Rock Component Philippines, Inc. was
ordered to reimburse petitioner for any amount that the latter
may be adjudged liable to pay herein private respondents as
expressly stipulated in the contract of lease between
petitioner and Rock Component Philippines, Inc. Moreover,
the trial court applied Article 2194 of the new Civil Code on
solidary accountability of join tortfeasors insofar as the
liability of the driver, herein petitioner and Rock Component
Philippines was concerned (pp. 6-7, Decision; pp. 44-
45, Rollo).
To the question of whether petitioner can be held responsible
to the victim albeit the truck was leased to Rock Component
Philippines when the incident occurred, the appellate court
answered in the affirmative on the basis of the jurisprudential
dogmas which, as aforesaid, were relied upon by the trial
court although respondent court was quick to add
the caveat embodied in the lease covenant between
petitioner and Rock Component Philippines relative to the
latter's duty to reimburse any amount which may be
adjudged against petitioner (pp. 32-33, Rollo).
Petitioner asseverates that it should not have been haled to
court and ordered to respond for the damage in the manner
arrived at by both the trial and appellate courts since
paragraph 5 of the complaint lodged by the plaintiffs below
would indicate that petitioner was not the employer of the
negligent driver who was under the control an supervision of
Lino Castro at the time of the accident, apart from the fact
that the Isuzu truck was in the physical possession of Rock
Component Philippines by virtue of the lease agreement.
Aside from casting clouds of doubt on the propriety of
invoking the Perez and Erezo doctrines, petitioner continue
to persist with the idea that the pronouncements of this Court
in Duavit vs. Court of Appeals (173 SCRA 490 [1989])
and Duquillo vs. Bayot (67 Phil 131 [1939]) dovetail with the
factual and legal scenario of the case at hand. Furthermore,
petitioner assumes, given the so-called hiatus on the basis
for the award of damages as decreed by the lower and
appellate courts, that Article 2180 of the new Civil Code on
vicarious liability will divest petitioner of any responsibility
absent as there is any employer-employee relationship
between petitioner and the driver.
Contrary to petitioner's expectations, the recourse instituted
from the rebuffs it encountered may not constitute a sufficient
foundation for reversal of the impugned judgment of
respondent court. Petitioner is of the impression that
the Perez and Erezo cases are inapplicable due to the
variance of the generative facts in said cases as against
those obtaining in the controversy at bar. A contrario, the
lesson imparted by Justice Labrador in Erezo is still good
law, thus:
15
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
. . . In previous decisions, We already
have held that the registered owner of a
certificate of public convenience is liable
to the public for the injuries or damages
suffered by passengers or third persons
caused by the operation of said vehicle,
even though the same had been
transferred to a third person. (Montoya
vs. Ignacio, 94 Phil., 182 50 Off. Gaz.,
108; Roque vs. Malibay Transit, Inc.,
G.R. No. L-8561, November 18, 1955;
Vda. de Medina vs. Cresencia, 99 Phil.,
506, 52 Off. Gaz., [10], 4606.) The
principle upon which this doctrine is
based is that in dealing with vehicles
registered under the Public Service Law,
the public has the right to assume or
presumed that the registered owner is
the actual owner thereof, for it would be
difficult with the public to enforce the
actions that they may have for injuries
caused to them by the vehicles being
negligently operated if the public should
be required to prove who actual the
owner is. How would the public or third
persons know against whom to enforce
their rights in case of subsequent
transfer of the vehicles? We do not imply
by this doctrine, however, that the
registered owner may not recover
whatever amount he had paid by virtue
of his liability to third persons from the
person to whom he had actually sold,
assigned or conveyed the vehicle.
Under the same principle the registered
owner of any vehicle, even if not used
for a public service, should primarily
responsible to the public or to the third
persons for injuries caused the latter
while the vehicle is being driven on the
highways or streets. The members of
the Court are in agreement that the
defendant-appellant should be held
liable to plaintiff-appellee for the injuries
occasioned to the latter because of the
negligence of the driver, even if the
defendant-appellant was no longer an
owner of the vehicle at the time of the
damage because he had previously sold
it to another. What is the legal basis for
his (defendants-appellant's) liability?
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
There is a presumption that the owner of
the guilty vehicle is the defendant-
appellant as he is the registered owner
in the Motor Vehicle Office. Should he
not be allowed to prove the truth, that he
had sold it to another and thus shift the
responsibility for the injury to the real
and the actual owner? The defendants
hold the affirmative of this proposition;
the trial court hold the negative.
The Revised Motor Vehicle Law (Act No.
3992, as amended) provides that the
vehicle may be used or operated upon
any public highway unless the same is
properly registered. It has been stated
that the system of licensing and the
requirement that each machine must
carry a registration number,
conspicuously displayed, is one of the
precautions taken to reduce the danger
of injury of pedestrians and other
travelers from the careless management
of automobiles, and to furnish a means
of ascertaining the identity of persons
violating the laws and ordinances,
regulating the speed and operation of
machines upon the highways (2 R. C. L.
1176). Not only are vehicles to be
registered and that no motor vehicles
are to be used or operated without being
properly registered from the current
year, furnish the Motor Vehicle Office a
report showing the name and address of
each purchaser of motor vehicle during
the previous month and the
manufacturer's serial number and motor
number. (Section 5[c], Act No. 3992, as
amended.)
Registration is required not to make said
registration the operative act by which
ownership in vehicles is transferred, as
in land registration cases, because the
administrative proceeding of registration
does not bear any essential relation to
the contract of sale between the parties
(Chinchilla vs. Rafael and Verdaguer, 39
Phil. 888), but to permit the use and
operation of the vehicle upon any public
highway (section 5[a], Act No. 3992, as
amended). the main aim of motor
vehicle registration is to identify the
owner so that if any accident happens,
or that any damage or injury is caused
by the vehicle on the public highways,
responsibility therefor can be fixed on a
definite individual, the registered owner.
Instances are numerous where vehicles
running on public highways caused
accidents or injuries to pedestrians or
other vehicles without positive
identification of the owner or drivers, or
with very scant means of identification. It
is to forestall these circumstances, so
inconvenient or prejudicial to the public,
that the motor vehicle registration is
primarily obtained, in the interest of the
determinations of persons responsible
for damages or injuries caused on public
highways.
One of the principle purposes of motor vehicles legislation is
identification of the vehicle and of the operator, in case of
accident; and another is that the knowledge that means of
detection are always available my act as a deterrent from lax
observance of the law and of the rules of conservative and
safe operation. Whatever purpose there may be in these
statutes, it is subordinate at the last to the primary purpose of
rendering it certain that the violator of the law or of the rules
of safety shall not escape because of lack of means to
discover him. The purpose of the statute is thwarted, and the
displayed number becomes a "share and delusion," if courts
would entertain such defenses as that put forward by
appellee in this case. No responsible person or corporation
could be held liable for the most outrageous acts of
negligence, if they should be allowed to pace a "middleman"
between them and the public, and escape liability by the
manner in which they recompense their servants. (King vs.
Breham Automobile Co., Inc. 145 S. W. 278, 279.)
With the above policy in mind, the question that defendant-
appellant poses is: should not the registered owner be
allowed at the trial to prove who the actual and real owner is,
and in accordance with such proof escape or evade
responsibility and lay the same on the person actually
owning the vehicle? We hold with the trial court that the law
does not allow him to do so; the law, with its aim and policy
in mind, does not relieve him directly of the responsibility that
the law fixes and places upon him as an incident or
consequence of registration. Were a registered owner
allowed to evade responsibility by proving who the supposed
16
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
transferee or owner is, it would be easy for him, by collusion
with others or otherwise, to escape said responsibility and
transfer the same to an indefinite person, or to one who
possesses no property with which to respond financially for
the damage or injury done. A victim of recklessness on the
public highways is usually without means to discover or
Identify the person actually causing the injury or damage. He
has no means other then by a recourse to the registration in
the Motor Vehicles Office to determine who is the owner. The
protection that the law aims to extend to him would become
illusory were the registered owner given the opportunity to
escape liability by disproving his ownership. If the policy of
the law is to be enforced and carried out, the registered
owner should not be allowed to prove the contrary to the
prejudice of the person injured, that is, to prove that a third
person or another has become the owner, so that he may
thereby be relieved of the responsibility to the injured person.
The above policy and application of the
law may appear quite harsh and would
seem to conflict with truth and justice.
We do not think it is so. A registered
owner who has already sold or
transferred a vehicle has the recourse to
a third-party complaint, in the same
action brought against him to recover for
the damage or injury done, against the
vendee or transferee of the vehicle. The
inconvenience of the suit is no
justification for relieving him of liability;
said inconvenience is the price he pays
for failure to comply with the registration
that the law demands and requires.
In synthesis, we hold that the registered
owner, the defendant-appellant herein,
is primarily responsible for the damage
caused to the vehicle of the plaintiff-
appellee, but he (defendant-appellant)
has a right to be indemnified by the real
or actual owner of the amount that he
may be required to pay as damage for
the injury caused to the plaintiff-
appellant.
If the foregoing words of wisdom were applied in solving the
circumstance whereof the vehicle had been alienated or sold
to another, there certainly can be no serious exception
against utilizing the same rationale to the antecedents of this
case where the subject vehicle was merely leased by
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
petitioner to Rock Component Philippines, Inc., with
petitioner retaining ownership over the vehicle.
Petitioner's reliance on the ruling of this Court in Duavit vs.
Court of Appeals and in Duquillo vs. Bayot (supra) is legally
unpalatable for the purpose of the present discourse. The
vehicles adverted to in the two cases shared a common
thread, so to speak, in that the jeep and the truck were
driven in reckless fashion without the consent or knowledge
of the respective owners. Cognizant of the inculpatory
testimony spewed by defendant Sabiniano when he admitted
that he took the jeep from the garage of defendant Dauvit
without the consent or authority of the latter, Justice
Gutierrez, Jr. in Duavit remarked;
. . . Herein petitioner does not deny
ownership of the vehicle involved in the
mishap but completely denies having
employed the driver Sabiniano or even
having authorized the latter to drive his
jeep. The jeep was virtually stolen from
the petitioner's garage. To hold,
therefore, the petitioner liable for the
accident caused by the negligence of
Sabiniano who was neither his driver nor
employee would be absurd as it would
be like holding liable the owner of a
stolen vehicle for an accident caused by
the person who stole such vehicle. In
this regard, we cannot ignore the many
cases of vehicles forcibly taken from
their owners at gunpoint or stolen from
garages and parking areas and the
instances of service station attendants
or mechanics of auto repair shops using,
without the owner's consent, vehicles
entrusted to them for servicing or
repair.(at p. 496.)
In the Duquillo case, the defendant therein cannot, according
to Justice Diaz, be held liable for anything because of
circumstances which indicated that the truck was driven
without the consent or knowledge of the owner thereof.
Consequently, there is no need for Us to discuss the matter
of imputed negligence because petitioner merely presumed,
erroneously, however, that judgment was rendered against it
on the basis of such doctrine embodied under Article 2180 of
the new Civil Code.
WHEREFORE, the petition is hereby DISMISSED and
decision under review AFFIRMED without special
pronouncement as to costs.
SO ORDERED.
G.R. No. 125817 January 16, 2002
ABELARDO LIM and ESMADITO
GUNNABAN, petitioners,
vs.
COURT OF APPEALS and DONATO H.
GONZALES, respondents.
BELLOSILLO, J.:
When a passenger jeepney covered by a certificate of public
convenience is sold to another who continues to operate it
under the same certificate of public convenience under the
so-called kabit system, and in the course thereof the vehicle
meets an accident through the fault of another vehicle, may
the new owner sue for damages against the erring vehicle?
Otherwise stated, does the new owner have any legal
personality to bring the action, or is he the real party in
interest in the suit, despite the fact that he is not the
registered owner under the certificate of public convenience?
Sometime in 1982 private respondent Donato Gonzales
purchased an Isuzu passenger jeepney from Gomercino
Vallarta, holder of a certificate of public convenience for the
operation of public utility vehicles plying the Monumento-
Bulacan route. While private respondent Gonzales continued
offering the jeepney for public transport services he did not
have the registration of the vehicle transferred in his name
nor did he secure for himself a certificate of public
convenience for its operation. Thus Vallarta remained on
record as its registered owner and operator.1âwphi1.nêt
On 22 July 1990, while the jeepney was running northbound
along the North Diversion Road somewhere in Meycauayan,
Bulacan, it collided with a ten-wheeler-truck owned by
petitioner Abelardo Lim and driven by his co-petitioner
Esmadito Gunnaban. Gunnaban owned responsibility for the
accident, explaining that while he was traveling towards
Manila the truck suddenly lost its brakes. To avoid colliding
with another vehicle, he swerved to the left until he reached
the center island. However, as the center island eventually
came to an end, he veered farther to the left until he
17
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
smashed into a Ferroza automobile, and later, into private
respondent's passenger jeepney driven by one Virgilio
Gonzales. The impact caused severe damage to both the
Ferroza and the passenger jeepney and left one (1)
passenger dead and many others wounded.
Petitioner Lim shouldered the costs for hospitalization of the
wounded, compensated the heirs of the deceased
passenger, and had the Ferroza restored to good condition.
He also negotiated with private respondent and offered to
have the passenger jeepney repaired at his shop. Private
respondent however did not accept the offer so Lim offered
him ₱20,000.00, the assessment of the damage as
estimated by his chief mechanic. Again, petitioner Lim's
proposition was rejected; instead, private respondent
demanded a brand-new jeep or the amount of ₱236,000.00.
Lim increased his bid to ₱40,000.00 but private respondent
was unyielding. Under the circumstances, negotiations had
to be abandoned; hence, the filing of the complaint for
damages by private respondent against petitioners.
In his answer Lim denied liability by contending that he
exercised due diligence in the selection and supervision of
his employees. He further asserted that as the jeepney was
registered in Vallarta’s name, it was Vallarta and not private
respondent who was the real party in interest.1 For his part,
petitioner Gunnaban averred that the accident was a
fortuitous event which was beyond his control.2
Meanwhile, the damaged passenger jeepney was left by the
roadside to corrode and decay. Private respondent explained
that although he wanted to take his jeepney home he had no
capability, financial or otherwise, to tow the damaged
vehicle.3
The main point of contention between the parties related to
the amount of damages due private respondent. Private
respondent Gonzales averred that per estimate made by an
automobile repair shop he would have to spend ₱236,000.00
to restore his jeepney to its original condition.4 On the other
hand, petitioners insisted that they could have the vehicle
repaired for ₱20,000.00.5
On 1 October 1993 the trial court upheld private
respondent's claim and awarded him ₱236,000.00 with legal
interest from 22 July 1990 as compensatory damages and
₱30,000.00 as attorney's fees. In support of its decision, the
trial court ratiocinated that as vendee and current owner of
the passenger jeepney private respondent stood for all
intents and purposes as the real party in interest. Even
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
Vallarta himself supported private respondent's assertion of
interest over the jeepney for, when he was called to testify,
he dispossessed himself of any claim or pretension on the
property. Gunnaban was found by the trial court to have
caused the accident since he panicked in the face of an
emergency which was rather palpable from his act of
directing his vehicle to a perilous streak down the fast lane of
the superhighway then across the island and ultimately to the
opposite lane where it collided with the jeepney.
On the other hand, petitioner Lim's liability for Gunnaban's
negligence was premised on his want of diligence in
supervising his employees. It was admitted during trial that
Gunnaban doubled as mechanic of the ill-fated truck despite
the fact that he was neither tutored nor trained to handle
such task.6
Forthwith, petitioners appealed to the Court of Appeals
which, on 17 July 1996, affirmed the decision of the trial
court. In upholding the decision of the court a quo the
appeals court concluded that while an operator under
the kabit system could not sue without joining the registered
owner of the vehicle as his principal, equity demanded that
the present case be made an exception.7 Hence this petition.
It is petitioners' contention that the Court of Appeals erred in
sustaining the decision of the trial court despite their
opposition to the well-established doctrine that an operator of
a vehicle continues to be its operator as long as he remains
the operator of record. According to petitioners, to recognize
an operator under the kabit system as the real party in
interest and to countenance his claim for damages is utterly
subversive of public policy. Petitioners further contend that
inasmuch as the passenger jeepney was purchased by
private respondent for only ₱30,000.00, an award of
₱236,000.00 is inconceivably large and would amount to
unjust enrichment.8
Petitioners' attempt to illustrate that an affirmance of the
appealed decision could be supportive of the
pernicious kabit system does not persuade. Their labored
efforts to demonstrate how the questioned rulings of the
courts a quoare diametrically opposed to the policy of the law
requiring operators of public utility vehicles to secure a
certificate of public convenience for their operation is quite
unavailing.
The kabit system is an arrangement whereby a person who
has been granted a certificate of public convenience allows
other persons who own motor vehicles to operate them
under his license, sometimes for a fee or percentage of the
earnings.9 Although the parties to such an agreement are not
outrightly penalized by law, the kabit system is invariably
recognized as being contrary to public policy and therefore
void and inexistent under Art. 1409 of the Civil Code.
In the early case of Dizon v. Octavio10 the Court explained
that one of the primary factors considered in the granting of a
certificate of public convenience for the business of public
transportation is the financial capacity of the holder of the
license, so that liabilities arising from accidents may be duly
compensated. The kabit system renders illusory such
purpose and, worse, may still be availed of by the grantee to
escape civil liability caused by a negligent use of a vehicle
owned by another and operated under his license. If a
registered owner is allowed to escape liability by proving who
the supposed owner of the vehicle is, it would be easy for
him to transfer the subject vehicle to another who possesses
no property with which to respond financially for the damage
done. Thus, for the safety of passengers and the public who
may have been wronged and deceived through the
baneful kabit system, the registered owner of the vehicle is
not allowed to prove that another person has become the
owner so that he may be thereby relieved of responsibility.
Subsequent cases affirm such basic doctrine.11
It would seem then that the thrust of the law in enjoining
the kabit system is not so much as to penalize the parties but
to identify the person upon whom responsibility may be fixed
in case of an accident with the end view of protecting the
riding public. The policy therefore loses its force if the public
at large is not deceived, much less involved.
In the present case it is at once apparent that the evil sought
to be prevented in enjoining the kabit system does not
exist. First, neither of the parties to the
pernicious kabit system is being held liable for
damages. Second, the case arose from the negligence of
another vehicle in using the public road to whom no
representation, or misrepresentation, as regards the
ownership and operation of the passenger jeepney was
made and to whom no such representation, or
misrepresentation, was necessary. Thus it cannot be said
that private respondent Gonzales and the registered owner
of the jeepney were in estoppel for leading the public to
believe that the jeepney belonged to the registered
owner. Third, the riding public was not bothered nor
inconvenienced at the very least by the illegal arrangement.
On the contrary, it was private respondent himself who had
been wronged and was seeking compensation for the
18
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
damage done to him. Certainly, it would be the height of
inequity to deny him his right.
In light of the foregoing, it is evident that private respondent
has the right to proceed against petitioners for the damage
caused on his passenger jeepney as well as on his business.
Any effort then to frustrate his claim of damages by the
ingenuity with which petitioners framed the issue should be
discouraged, if not repelled.
In awarding damages for tortuous injury, it becomes the sole
design of the courts to provide for adequate compensation
by putting the plaintiff in the same financial position he was in
prior to the tort. It is a fundamental principle in the law on
damages that a defendant cannot be held liable in damages
for more than the actual loss which he has inflicted and that
a plaintiff is entitled to no more than the just and adequate
compensation for the injury suffered. His recovery is, in the
absence of circumstances giving rise to an allowance of
punitive damages, limited to a fair compensation for the harm
done. The law will not put him in a position better than where
he should be in had not the wrong happened.12
In the present case, petitioners insist that as the passenger
jeepney was purchased in 1982 for only ₱30,000.00 to
award damages considerably greater than this amount would
be improper and unjustified. Petitioners are at best reminded
that indemnification for damages comprehends not only the
value of the loss suffered but also that of the profits which
the obligee failed to obtain. In other words, indemnification
for damages is not limited to damnum emergens or actual
loss but extends to lucrum cessans or the amount of profit
lost.13
Had private respondent's jeepney not met an accident it
could reasonably be expected that it would have continued
earning from the business in which it was engaged. Private
respondent avers that he derives an average income of
₱300.00 per day from his passenger jeepney and this
earning was included in the award of damages made by the
trial court and upheld by the appeals court. The award
therefore of ₱236,000.00 as compensatory damages is not
beyond reason nor speculative as it is based on a
reasonable estimate of the total damage suffered by private
respondent, i.e. damage wrought upon his jeepney and the
income lost from his transportation business. Petitioners for
their part did not offer any substantive evidence to refute the
estimate made by the courts a quo.
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
However, we are constrained to depart from the conclusion
of the lower courts that upon the award of compensatory
damages legal interest should be imposed beginning 22 July
1990, i.e. the date of the accident. Upon the provisions of
Art. 2213 of the Civil Code, interest "cannot be recovered
upon unliquidated claims or damages, except when the
demand can be established with reasonable certainty." It is
axiomatic that if the suit were for damages, unliquidated and
not known until definitely ascertained, assessed and
determined by the courts after proof, interest at the rate of six
percent (6%) per annum should be from the date the
judgment of the court is made (at which time the
quantification of damages may be deemed to be reasonably
ascertained).14
In this case, the matter was not a liquidated obligation as the
assessment of the damage on the vehicle was heavily
debated upon by the parties with private respondent's
demand for ₱236,000.00 being refuted by petitioners who
argue that they could have the vehicle repaired easily for
₱20,000.00. In fine, the amount due private respondent was
not a liquidated account that was already demandable and
payable.
One last word. We have observed that private respondent
left his passenger jeepney by the roadside at the mercy of
the elements. Article 2203 of the Civil Code exhorts parties
suffering from loss or injury to exercise the diligence of a
good father of a family to minimize the damages resulting
from the act or omission in question. One who is injured then
by the wrongful or negligent act of another should exercise
reasonable care and diligence to minimize the resulting
damage. Anyway, he can recover from the wrongdoer money
lost in reasonable efforts to preserve the property injured and
for injuries incurred in attempting to prevent damage to it.15
However we sadly note that in the present case petitioners
failed to offer in evidence the estimated amount of the
damage caused by private respondent's unconcern towards
the damaged vehicle. It is the burden of petitioners to show
satisfactorily not only that the injured party could have
mitigated his damages but also the amount thereof; failing in
this regard, the amount of damages awarded cannot be
proportionately reduced.
WHEREFORE, the questioned Decision awarding private
respondent Donato Gonzales ₱236,000.00 with legal interest
from 22 July 1990 as compensatory damages and
₱30,000.00 as attorney's fees is MODIFIED. Interest at the
rate of six percent (6%) per annum shall be computed from
the time the judgment of the lower court is made until the
finality of this Decision. If the adjudged principal and interest
remain unpaid thereafter, the interest shall be twelve percent
(12%) per annum computed from the time judgment
becomes final and executory until it is fully
satisfied.1âwphi1.nêt
Costs against petitioners.
SO ORDERED.
G.R. No. L-8095 March 31, 1915
F.C. FISHER, plaintiff,
vs.
YANGCO STEAMSHIP COMPANY, J.S. STANLEY, as
Acting Collector of Customs of the Philippine Islands,
IGNACIO VILLAMOR, as Attorney-General of the
Philippine Islands, and W.H. BISHOP, as prosecuting
attorney of the city of Manila, respondents.
CARSON, J.:
The real question involved in these proceedings is whether
the refusal of the owners and officers of a steam vessel, duly
licensed to engage in the coastwise trade of the Philippine
Islands and engaged in that trade as a common carrier, to
accept for carriage "dynamite, powder or other explosives"
from any and all shippers who may offer such explosives for
carriage can be held to be a lawful act without regard to any
question as to the conditions under which such explosives
are offered to carriage, or as to the suitableness of the
vessel for the transportation of such explosives, or as to the
possibility that the refusal to accept such articles of
commerce in a particular case may have the effect of
subjecting any person or locality or the traffic in such
explosives to an undue, unreasonable or unnecessary
prejudice or discrimination.
Summarized briefly, the complaint alleges that plaintiff is a
stockholder in the Yangco Steamship Company, the owner
of a large number of steam vessels, duly licensed to engage
in the coastwise trade of the Philippine Islands; that on or
about June 10, 1912, the directors of the company adopted a
resolution which was thereafter ratified and affirmed by the
shareholders of the company, "expressly declaring and
providing that the classes of merchandise to be carried by
the company in its business as a common carrier do not
19
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
include dynamite, powder or other explosives, and expressly
prohibiting the officers, agents and servants of the company
from offering to carry, accepting for carriage said dynamite,
powder or other explosives;" that thereafter the respondent
Acting Collector of Customs demanded and required of the
company the acceptance and carriage of such explosives;
that he has refused and suspended the issuance of the
necessary clearance documents of the vessels of the
company unless and until the company consents to accept
such explosives for carriage; that plaintiff is advised and
believes that should the company decline to accept such
explosives for carriage, the respondent Attorney-General of
the Philippine Islands and the respondent prosecuting
attorney of the city of Manila intend to institute proceedings
under the penal provisions of sections 4, 5, and 6 of Act No.
98 of the Philippine Commission against the company, its
managers, agents and servants, to enforce the requirements
of the Acting Collector of Customs as to the acceptance of
such explosives for carriage; that notwithstanding the
demands of the plaintiff stockholder, the manager, agents
and servants of the company decline and refuse to cease the
carriage of such explosives, on the ground that by reason of
the severity of the penalties with which they are threatened
upon failure to carry such explosives, they cannot subject
themselves to "the ruinous consequences which would
inevitably result" from failure on their part to obey the
demands and requirements of the Acting Collector of
Customs as to the acceptance for carriage of explosives; that
plaintiff believes that the Acting Collector of Customs
erroneously construes the provisions of Act No. 98 in holding
that they require the company to accept such explosives for
carriage notwithstanding the above mentioned resolution of
the directors and stockholders of the company, and that if the
Act does in fact require the company to carry such
explosives it is to that extent unconstitutional and void; that
notwithstanding this belief of complainant as to the true
meaning of the Act, the questions involved cannot be raised
by the refusal of the company or its agents to comply with
the demands of the Acting Collector of Customs, without the
risk of irreparable loss and damage resulting from his refusal
to facilitate the documentation of the company's vessels, and
without assuming the company to test the questions involved
by refusing to accept such explosives for carriage.
The prayer of the complaint is as follows:
Wherefore your petitioner prays to this honorable
court as follows:
First. That to the due hearing of the above entitled
action be issued a writ of prohibition perpetually
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
restraining the respondent Yangco Steamship
Company, its appraisers, agents, servants or other
representatives from accepting to carry and from
carrying, in steamers of said company dynamite,
powder or other explosive substance, in
accordance with the resolution of the board of
directors and of the shareholders of said company.
Second. That a writ of prohibition be issued
perpetually enjoining the respondent J.S. Stanley
as Acting Collector of Customs of the Philippine
Islands, his successors, deputies, servants or
other representatives, from obligating the said
Yangco Steamship Company, by any means
whatever, to carry dynamite, powder or other
explosive substance.
Third. That a writ of prohibition be issued
perpetually enjoining the respondent Ignacio
Villamor as Attorney-General of the Philippine
Islands, and W.H. Bishop as prosecuting attorney
of the city of Manila, their deputies representatives
or employees, from accusing the said Yangco
Steamship Company, its officers, agents or
servants, of the violation of Act No. 98 by reason
of the failure or omission of the said company to
accept for carriage out to carry dynamite powder
or other explosive.
Fourth. That the petitioner be granted such other
remedy as may be meet and proper.
To this complaint the respondents demurred, and we are of
opinion that the demurrer must be sustained, on the ground
that the complaint does not set forth facts sufficient to
constitute a cause of action.
It will readily be seen that plaintiff seeks in these proceedings
to enjoin the steamship company from accepting for carriage
on any of its vessels, dynamite, powder or other explosives,
under any conditions whatsoever; to prohibit the Collector of
Customs and the prosecuting officers of the government
from all attempts to compel the company to accept such
explosives for carriage on any of its vessels under any
conditions whatsoever; and to prohibit these officials from
any attempt to invoke the penal provisions of Act No. 98, in
any case of a refusal by the company or its officers so to do;
and this without regard to the conditions as to safety and so
forth under which such explosives are offered for carriage,
and without regard also to any question as to the
suitableness for the transportation of such explosives of the
particular vessel upon which the shipper offers them for
carriage; and further without regard to any question as to
whether such conduct on the part of the steamship company
and its officers involves in any instance an undue,
unnecessary or unreasonable discrimination to the prejudice
of any person, locality or particular kind of traffic.
There are no allegations in the complaint that for some
special and sufficient reasons all or indeed any of the
company's vessels are unsuitable for the business of
transporting explosives; or that shippers have declined or will
in future decline to comply with such reasonable regulations
and to take such reasonable precautions as may be
necessary and proper to secure the safety of the vessels of
the company in transporting such explosives. Indeed the
contention of petitioner is that a common carrier in the
Philippine Islands may decline to accept for carriage any
shipment of merchandise of a class which it expressly or
impliedly declines to accept from all shippers alike, because
as he contends "the duty of a common carrier to carry for all
who offer arises from the public profession he has made, and
limited by it."
In support of this contention counsel cites for a number of
English and American authorities, discussing and applying
the doctrine of the common law with reference to common
carriers. But it is unnecessary now to decide whether, in the
absence of statute, the principles on which the American and
English cases were decided would be applicable in this
jurisdiction. The duties and liabilities of common carriers in
this jurisdiction are defined and fully set forth in Act No. 98 of
the Philippine Commission, and until and unless that statute
be declared invalid or unconstitutional, we are bound by its
provisions.
Sections 2, 3 and 4 of the Act are as follows:
SEC. 2. It shall be unlawful for any common carrier
engaged in the transportation of passengers or
property as above set forth to make or give any
unnecessary or unreasonable preference or
advantage to any particular person, company, firm,
corporation or locality, or any particular kind of
traffic in any respect whatsoever, or to subject any
particular person, company, firm, corporation or
locality, or any particular kind of traffic, to undue or
unreasonable prejudice or discrimination
whatsoever, and such unjust preference or
20
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
discrimination is also hereby prohibited and
declared to be unlawful.
SEC. 3. No common carrier engaged in the
carriage of passengers or property as aforesaid
shall, under any pretense whatsoever, fail or
refuse to receive for carriage, and as promptly as it
is able to do so without discrimination, to carry any
person or property offering for carriage, and in the
order in which such persons or property are
offered for carriage, nor shall any such common
carrier enter into any arrangement, contract or
agreement with any other person or corporation
whereby the latter is given an exclusive or
preferential or monopolize the carriage any class
or kind of property to the exclusion or partial
exclusion of any other person or persons, and the
entering into any such arrangement, contract or
agreement, under any form or pretense
whatsoever, is hereby prohibited and declared to
be unlawful.
SEC. 4. Any willful violation of the provisions of
this Act by any common carrier engaged in the
transportation of passengers or property as
hereinbefore set forth is hereby declared to be
punishable by a fine not exceeding five thousand
dollars money of the United States, or by
imprisonment not exceeding two years, or both,
within the discretion of the court.
The validity of this Act has been questioned on various
grounds, and it is vigorously contended that in so far as it
imposes any obligation on a common carrier to accept for
carriage merchandise of a class which he makes no public
profession to carry, or which he has expressly or impliedly
announced his intention to decline to accept for carriage from
all shippers alike, it is ultra vires, unconstitutional and void.
We may dismiss without extended discussion any argument
or contention as to the invalidity of the statute based on
alleged absurdities inherent in its provisions or on alleged
unreasonable or impossible requirements which may be read
into it by a strained construction of its terms.
We agree with counsel for petitioner that the provision of the
Act which prescribes that, "No common carrier ... shall, under
any pretense whatsoever, fail or refuse to receive for
carriage ... to carry any person or property offering for
carriage," is not to be construed in its literal sense and
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
without regard to the context, so as to impose an imperative
duty on all common carriers to accept for carriage, and to
carry all and any kind of freight which may be offered for
carriage without regard to the facilities which they may have
at their disposal. The legislator could not have intended and
did not intend to prescribe that a common carrier running
passenger automobiles for hire must transport coal in his
machines; nor that the owner of a tank steamer, expressly
constructed in small watertight compartments for the carriage
of crude oil must accept common carrier must accept and
carry contraband articles, such as opium, morphine, cocaine,
or the like, the mere possession of which is declared to be a
criminal offense; nor that common carriers must accept eggs
offered for transportation in paper parcels or any
merchandise whatever do defectively packed as to entail
upon the company unreasonable and unnecessary care or
risks.
Read in connection with its context this, as well as all the
other mandatory and prohibitory provisions of the statute,
was clearly intended merely to forbid failures or refusals to
receive persons or property for carriage involving any
"unnecessary or unreasonable preference or advantage to
any particular person, company, firm, corporation, or locality,
or any particular kind of traffic in any respect whatsoever," or
which would "subject any particular person, company, firm,
corporation or locality, or any particular kind of traffic to any
undue or unreasonable prejudice or discrimination
whatsoever."
The question, then, of construing and applying the statute, in
cases of alleged violations of its provisions, always involves
a consideration as to whether the acts complained of had the
effect of making or giving an "unreasonable or unnecessary
preference or advantage" to any person, locality or particular
kind of traffic, or of subjecting any person, locality, or
particular kind of traffic to any undue or unreasonable
prejudice or discrimination. It is very clear therefore that the
language of the statute itself refutes any contention as to its
invalidity based on the alleged unreasonableness of its
mandatory or prohibitory provisions.
So also we may dismiss without much discussion the
contentions as to the invalidity of the statute, which are
based on the alleged excessive severity of the penalties
prescribed for violation of its provisions. Upon general
principles it is peculiarly and exclusively within the province
of the legislator to prescribe the pains and penalties which
may be imposed upon persons convicted of violations of the
laws in force within his territorial jurisdiction. With the
exercise of his discretion in this regard where it is alleged
that excessive fines or cruel and unusual punishments have
been prescribed, and even in such cases the courts will not
presume to interfere in the absence of the clearest and most
convincing argument and proof in support of such
contentions. (Weems vs. United States, 217 U.S., 349;
U.S. vs.Pico, 18 Phil. Rep., 386.) We need hardly add that
there is no ground upon which to rest a contention that the
penalties prescribed in the statute under consideration are
either excessive or cruel and unusual, in the sense in which
these terms are used in the organic legislation in force in the
Philippine Islands.
But it is contended that on account of the penalties
prescribed the statute should be held invalid upon the
principles announced in Ex parte Young (209 U.S., 123, 147,
148); Cotting vs. Goddard (183 U.S., 79, 102); Mercantile
Trust Co. vs. Texas Co. (51 Fed., 529); Louisville
Ry. vs. McCord (103 Fed., 216); Cons. Gas Co. vs. Mayer
(416 Fed., 150). We are satisfied however that the reasoning
of those cases is not applicable to the statute under
consideration. The principles announced in those decisions
are fairly indicated in the following citations found in
petitioner's brief:
But when the legislature, in an effort to prevent any inquiry of
the validity of a particular statute, so burdens any challenge
thereof in the courts that the party affected is necessarily
constrained to submit rather than take the chances of the
penalties imposed, then it becomes a serious question
whether the party is not deprived of the equal protection of
the laws. (Cotting vs. Goddard, 183 U. S., 79, 102.)
It may therefore be said that when the penalties for
disobedience are by fines so enormous and
imprisonment so severe as to intimidate the
company and its officers from resorting to the
courts to test the validity of the legislation, the
result is the same as if the law in terms prohibited
the company from seeking judicial construction of
laws which deeply affect its rights.
It is urged that there is no principle upon which to
base the claim that a person is entitled to disobey
a statute at least once, for the purpose of testing
its validity, without subjecting himself to the
penalties for disobedience provided by the statute
in case it is valid. This is not an accurate statement
of the case. Ordinarily a law creating offenses in
the nature of misdemeanors or felonies relates to a
subject over which the jurisdiction of the legislature
21
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
is complete in any event. In the case, however, of
the establishment of certain rates without any
hearing, the validity of such rates necessarily
depends upon whether they are high enough to
permit at least some return upon the investment
(how much it is not now necessary to state), and
an inquiry as to that fact is a proper subject of
judicial investigation. If it turns out that the rates
are too low for that purpose, then they are illegal.
Now, to impose upon a party interested the burden
of obtaining a judicial decision of such a question
(no prior hearing having been given) only upon the
condition that, if unsuccessful, he must suffer
imprisonment and pay fines, as provided in these
acts, is, in effect, to close up all approaches to the
courts, and thus prevent any hearing upon the
question whether the rates as provided by the acts
are not too low, and therefore invalid. The
distinction is obvious between a case where the
validity of the act depends upon the existence of a
fact which can be determined only after
investigation of a very complicated and technical
character, and the ordinary case of a statute upon
a subject requiring no such investigation, and over
which the jurisdiction of the legislature is complete
in any event.
We hold, therefore, that the provisions of the acts
relating to the enforcement of the rates, either for
freight or passengers, by imposing such enormous
fines and possible imprisonment as a result of an
unsuccessful effort to test the validity of the laws
themselves, are unconstitutional on their face,
without regard to the question of the insufficiency
of those rates. (Ex parte Young, 209 U.S., 123
147, 148.)
An examination of the general provisions of our statute, of
the circumstances under which it was enacted, the mischief
which it sought to remedy and of the nature of the penalties
prescribed for violations of its terms convinces us that, unlike
the statutes under consideration in the above cited cases, its
enactment involved no attempt to prevent common carriers
"from resorting to the courts to test the validity of the
legislation;" no "effort to prevent any inquiry" as to its validity.
It imposes no arbitrary obligation upon the company to do or
to refrain from doing anything. It makes no attempt to compel
such carriers to do business at a fixed or arbitrarily
designated rate, at the risk of separate criminal prosecutions
for every demand of a higher or a different rate. Its penalties
can be imposed only upon proof of "unreasonable,"
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
"unnecessary" and "unjust" discriminations, and range from a
maximum which is certainly not excessive for willful,
deliberate and contumacious violations of its provisions by a
great and powerful corporation, to a minimum which may be
a merely nominal fine. With so wide a range of discretion for
a contention on the part of any common carrier that it or its
officers are "intimidated from resorting to the courts to test
the validity" of the provisions of the statute prohibiting such
"unreasonable," "unnecessary" and "unjust" discriminations,
or to test in any particular case whether a given course of
conduct does in fact involve such discrimination. We will
presume, for the purpose of declaring the statute invalid, that
there is so real a danger that the Courts of First Instance and
this court on appeal will abuse the discretion thus conferred
upon us, as to intimidate any common carrier, acting in good
faith, from resorting to the courts to test the validity of the
statute. Legislative enactments, penalizing unreasonable
discriminations, unreasonable restraints of trade, and
unreasonable conduct in various forms of human activity are
so familiar and have been so frequently sustained in the
courts, as to render extended discussion unnecessary to
refute any contention as to the invalidity of the statute under
consideration, merely it imposes upon the carrier the
obligation of adopting one of various courses of conduct
open to it, at the risk of incurring a prescribed penalty in the
event that the course of conduct actually adopted by it
should be held to have involved an unreasonable,
unnecessary or unjust discrimination. Applying the test
announced in Ex parte Young, supra, it will be seen that the
validity of the Act does not depend upon "the existence of a
fact which can be determined only after investigation of a
very complicated and technical character," and that "the
jurisdiction of the legislature" over the subject with which the
statute deals "is complete in any event." There can be no
real question as to the plenary power of the legislature to
prohibit and to penalize the making of undue, unreasonable
and unjust discriminations by common carriers to the
prejudice of any person, locality or particular kind of traffic.
(See Munn vs.Illinois, 94 U.S., 113, and other cases
hereinafter cited in support of this proposition.)
Counsel for petitioner contends also that the statute, if
construed so as to deny the right of the steamship company
to elect at will whether or not it will engage in a particular
business, such as that of carrying explosives, is
unconstitutional "because it is a confiscation of property, a
taking of the carrier's property without due process of law,"
and because it deprives him of his liberty by compelling him
to engage in business against his will. The argument
continues as follows:
To require of a carrier, as a condition to his
continuing in said business, that he must carry
anything and every thing is to render useless the
facilities he may have for the carriage of certain
lines of freight. It would be almost as complete a
confiscation of such facilities as if the same were
destroyed. Their value as a means of livelihood
would be utterly taken away. The law is a
prohibition to him to continue in business; the
alternative is to get out or to go into some other
business — the same alternative as was offered in
the case of the Chicago & N.W. Ry. vs. Dey (35
Fed. Rep., 866, 880), and which was there
commented on as follows:
"Whatever of force there may be in such
arguments, as applied to mere personal
property capable of removal and use
elsewhere, or in other business, it is
wholly without force as against railroad
corporations, so large a proportion of
whose investment is in the soil and
fixtures appertaining thereto, which
cannot be removed. For a government,
whether that government be a single
sovereign or one of the majority, to say
to an individual who has invested his
means in so laudable an enterprise as
the construction of a railroad, one which
tends so much to the wealth and
prosperity of the community, that, if he
finds that the rates imposed will cause
him to do business at a loss, he may quit
business, and abandon that road, is the
very irony of despotism. Apples of
Sodom were fruit of joy in comparison.
Reading, as I do, in the preamble of the
Federal Constitution, that it was
ordained to "establish justice," I can
never believe that it is within the
property of an individual invested in and
used for a purpose in which even the
Argus eyes of the police power can see
nothing injurious to public morals, public
health, or the general welfare. I read
also in the first section of the bill of rights
of this state that "all men are by nature
free and equal, and have certain
inalienable rights, among which are
those of enjoying and defending life and
liberty, acquiring, possessing, and
protecting property, and pursuing and
22
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
obtaining safety and happiness;" and I
know that, while that remains as the
supreme law of the state, no legislature
can directly or indirectly lay its withering
or destroying hand on a single dollar
invested in the legitimate business of
transportation." (Chicago & N.W.
Ry. vs. Dey, 35 Fed. Rep., 866, 880.)
It is manifest, however, that this contention is directed
against a construction of the statute, which, as we have said,
is not warranted by its terms. As we have already indicated,
the statute does not "require of a carrier, as a condition to his
continuing in said business, that he must carry anything and
everything," and thereby "render useless the facilities he may
have for the carriage of certain lines of freight." It merely
forbids failures or refusals to receive persons or property for
carriage which have the effect of giving an "unreasonable or
unnecessary preference or advantage" to any person,
locality or particular kind of traffic, or of subjecting any
person, locality or particular kind of traffic to any undue or
unreasonable prejudice or discrimination.
Counsel expressly admits that the statute, "as a prohibition
against discrimination is a fair, reasonable and valid exercise
of government," and that "it is necessary and proper that
such discrimination be prohibited and prevented," but he
contends that "on the other hand there is no reasonable
warrant nor valid excuse for depriving a person of his liberty
by requiring him to engage in business against his will. If he
has a rolling boat, unsuitable and unprofitable for passenger
trade, he may devote it to lumber carrying. To prohibit him
from using it unless it is fitted out with doctors and stewards
and staterooms to carry passengers would be an invalid
confiscation of this property. A carrier may limit his business
to the branches thereof that suit his convenience. If his
wagon be old, or the route dangerous, he may avoid liability
for loss of passengers' lives and limbs by carrying freight
only. If his vehicles require expensive pneumatic tires,
unsuitable for freight transportation, ha may nevertheless
carry passengers. The only limitation upon his action that it is
competent for the governing authority to impose is to require
him to treat all alike. His limitations must apply to all, and
they must be established limitations. He cannot refuse to
carry a case of red jusi on the ground that he has carried for
others only jusi that he was green, or blue, or black. But he
can refuse to carry redjusi, if he has publicly professed such
a limitation upon his business and held himself out as
unwilling to carry the same for anyone."
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
To this it is sufficient answer to say that there is nothing in
the statute which would deprive any person of his liberty "by
requiring him to engage in business against his will." The
prohibitions of the statute against undue, unnecessary or
unreasonable regulations which the legislator has seen fit to
prescribe for the conduct of the business in which the carrier
is engaged of his own free will and accord. In so far as the
self-imposed limitations by the carrier upon the business
conducted by him, in the various examples given by counsel,
do not involve an unreasonable or unnecessary
discrimination the statute would not control his action in any
wise whatever. It operates only in cases involving such
unreasonable or unnecessary preferences or discriminations.
Thus in the hypothetical case suggested by the petitioner, a
carrier engaged in the carriage of green, blue or black jusi,
and duly equipped therefor would manifestly be guilty of
"giving an unnecessary and unreasonable preference to a
particular kind of traffic" and of subjecting to "an undue and
reasonable prejudice a particular kind of traffic," should he
decline to carry red jusi, to the prejudice of a particular
shipper or of those engaged in the manufacture of that kind
of jusi, basing his refusal on the ground of "mere whim or
caprice" or of mere personal convenience. So a public carrier
of passengers would not be permitted under this statute to
absolve himself from liability for a refusal to carry a
Chinaman, a Spaniard, an American, a Filipino, or
a mestizo by proof that from "mere whim or caprice or
personal scruple," or to suit his own convenience, or in the
hope of increasing his business and thus making larger
profits, he had publicly announced his intention not to carry
one or other of these classes of passengers.
The nature of the business of a common carrier as a public
employment is such that it is clearly within the power of the
state to impose such just and reasonable regulations thereon
in the interest of the public as the legislator may deem
proper. Of course such regulations must not have the effect
of depriving an owner of his property without due process of
law, nor of confiscating or appropriating private property
without just compensation, nor of limiting or prescribing
irrevocably vested rights or privileges lawfully acquired under
a charter or franchise. But aside from such constitutional
limitations, the determination of the nature and extent of the
regulations which should be prescribed rests in the hands of
the legislator.
Common carriers exercise a sort of public office, and have
duties to perform in which the public is interested. Their
business is, therefore, affected with a public interest, and is
subject of public regulation. (New Jersey Steam Nav.
Co. vs. Merchants Bank, 6 How., 344, 382; Munn vs. Illinois,
94 U.S., 113, 130.) Indeed, this right of regulation is so far
beyond question that it is well settled that the power of the
state to exercise legislative control over railroad companies
and other carriers "in all respects necessary to protect the
public against danger, injustice and oppression" may be
exercised through boards of commissioners. (New York etc.
R. Co. vs. Bristol, 151 U.S., 556, 571; Connecticut etc. R.
Co. vs. Woodruff, 153 U.S., 689.)
Regulations limiting of passengers the number of
passengers that may be carried in a particular vehicle or
steam vessel, or forbidding the loading of a vessel beyond a
certain point, or prescribing the number and qualifications of
the personnel in the employ of a common carrier, or
forbidding unjust discrimination as to rates, all tend to limit
and restrict his liberty and to control to some degree the free
exercise of his discretion in the conduct of his business. But
since the Granger cases were decided by the Supreme
Court of the United States no one questions the power of the
legislator to prescribe such reasonable regulations upon
property clothed with a public interest as he may deem
expedient or necessary to protect the public against danger,
injustice or oppression. (Munn vs. Illinois, 94 U.S., 113, 130;
Chicago etc. R. Co. vs. Cutts, 94 U.S., 155; Budd vs. New
York, 143 U.S., 517; Cotting vs. Goddard, 183 U.S., 79.) The
right to enter the public employment as a common carrier
and to offer one's services to the public for hire does not
carry with it the right to conduct that business as one
pleases, without regard to the interest of the public and free
from such reasonable and just regulations as may be
prescribed for the protection of the public from the reckless
or careless indifference of the carrier as to the public welfare
and for the prevention of unjust and unreasonable
discrimination of any kind whatsoever in the performance of
the carrier's duties as a servant of the public.
Business of certain kinds, including the business of a
common carrier, holds such a peculiar relation to the public
interest that there is superinduced upon it the right of public
regulation. (Budd vs. New York, 143 U.S., 517, 533.) When
private property is "affected with a public interest it ceases to
be juris privati only." Property becomes clothed with a public
interest when used in a manner to make it of public
consequence and affect the community at large. "When,
therefore, one devotes his property to a use in which the
public has an interest, he, in effect, grants to the public an
interest in that use, and must submit to be controlled by the
public for the common good, to the extent of the interest he
has thus created. He may withdraw his grant by
discontinuing the use, but so long as he maintains the use he
must submit to control." (Munn vs. Illinois, 94 U.S., 113;
23
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
Georgia R. & Bkg. Co. vs. Smith, 128 U.S., 174;
Budd vs. New York, 143 U.S., 517; Louisville etc. Ry.
Co. vs. Kentucky, 161 U.S., 677, 695.)
Of course this power to regulate is not a power to destroy,
and limitation is not the equivalent of confiscation. Under
pretense of regulating fares and freight the state can not
require a railroad corporation to carry persons or property
without reward. Nor can it do that which in law amounts to a
taking of private property for public use without just
compensation, or without due process of law. (Chicago etc.
R. Co. vs. Minnesota, 134 U.S., 418; Minneapolis Eastern R.
Co. vs. Minnesota, 134 U.S., 467.) But the judiciary ought
not to interfere with regulations established and palpably
unreasonable as to make their enforcement equivalent to the
taking of property for public use without such compensation
as under all the circumstances is just both to the owner and
to the public, that is, judicial interference should never occur
unless the case presents, clearly and beyond all doubt, such
a flagrant attack upon the rights of property under the guise
of regulations as to compel the court to say that the
regulation in question will have the effect to deny just
compensation for private property taken for the public use.
(Chicago etc. R. Co. vs. Wellman, 143 U.S., 339;
Smyth vs. Ames, 169 U.S., 466, 524; Henderson Bridge
Co. vs. Henderson City, 173 U.S., 592, 614.)
Under the common law of England it was early recognized
that common carriers owe to the public the duty of carrying
indifferently for all who may employ them, and in the order in
which application is made, and without discrimination as to
terms. True, they were allowed to restrict their business so
as to exclude particular classes of goods, but as to the kinds
of property which the carrier was in the habit of carrying in
the prosecution of his business he was bound to serve all
customers alike (State vs. Cincinnati etc. R. Co., 47 Ohio St.,
130, 134, 138; Louisville etc. Ry. Co. vs. Quezon City Coal
Co., 13 Ky. L. Rep., 832); and it is to be observed in passing
that these common law rules are themselves regulations
controlling, limiting and prescribing the conditions under
which common carriers were permitted to conduct their
business. (Munn vs. Illinois, 94 U. S., 113, 133.)
It was found, in the course of time, that the correction of
abuses which had grown up with the enormously increasing
business of common carriers necessitated the adoption of
statutory regulations controlling the business of common
carriers, and imposing severe and drastic penalties for
violations of their terms. In England, the Railway Clauses
Consolidation Act was enacted in 1845, the Railway and
Canal Traffic Act in 1854, and since the passage of those
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
Acts much additional legislation has been adopted tending to
limit and control the conduct of their business by common
carriers. In the United States, the business of common
carriers has been subjected to a great variety of statutory
regulations. Among others Congress enacted "The Interstate
Commerce Act" (1887) and its amendments, and the Elkins
Act as amended (1906); and most if not all of the States of
the Union have adopted similar legislation regulating the
business of common carriers within their respective
jurisdictions. Unending litigation has arisen under these
statutes and their amendments, but nowhere has the right of
the state to prescribe just and reasonable regulations
controlling and limiting the conduct of the business of
common carriers in the public interest and for the general
welfare been successfully challenged, though of course there
has been wide divergence of opinion as to the
reasonableness, the validity and legality of many of the
regulations actually adopted.
The power of the Philippine legislator to prohibit and to
penalize all and any unnecessary or unreasonable
discriminations by common carriers may be maintained upon
the same reasoning which justified the enactment by the
Parliament of England and the Congress of the United States
of the above mentioned statutes prohibiting and penalizing
the granting of certain preferences and discriminations in
those countries. As we have said before, we find nothing
confiscatory or unreasonable in the conditions imposed in
the Philippine statute upon the business of common carriers.
Correctly construed they do not force him to engage in any
business his will or to make use of his facilities in a manner
or for a purpose for which they are not reasonably adapted. It
is only when he offers his facilities as a common carrier to
the public for hire, that the statute steps in and prescribes
that he must treat all alike, that he may not pick and choose
which customer he will serve, and, specifically, that he shall
not make any undue or unreasonable preferences or
discriminations whatsoever to the prejudice not only of any
person or locality but also of any particular kind of traffic.
The legislator having enacted a regulation prohibiting
common carriers from giving unnecessary or unreasonable
preferences or advantages to any particular kind of traffic or
subjecting any particular kind of traffic to any undue or
unreasonable prejudice or discrimination whatsoever, it is
clear that whatever may have been the rule at the common
law, common carriers in this jurisdiction cannot lawfully
decline to accept a particular class of goods for carriage, to
the prejudice of the traffic in those goods, unless it appears
that for some sufficient reason the discrimination against the
traffic in such goods is reasonable and necessary. Mere
whim or prejudice will not suffice. The grounds for the
discrimination must be substantial ones, such as will justify
the courts in holding the discrimination to have been
reasonable and necessary under all circumstances of the
case.
The prayer of the petition in the case at bar cannot be
granted unless we hold that the refusal of the defendant
steamship company to accept for carriage on any of its
vessels "dynamite, gunpowder or other explosives" would in
no instance involve a violation of the provisions of this
statute. There can be little doubt, however, that cases may
and will arise wherein the refusal of a vessel "engaged in the
coastwise trade of the Philippine Islands as a common
carrier" to accept such explosives for carriage would subject
some person, company, firm or corporation, or locality, or
particular kind of traffic to a certain prejudice or
discrimination. Indeed it cannot be doubted that the refusal of
a "steamship company, the owner of a large number of
vessels" engaged in that trade to receive for carriage any
such explosives on any of its vessels would subject the traffic
in such explosives to a manifest prejudice and discrimination.
The only question to be determined therefore is whether
such prejudice or discrimination might in any case prove to
be undue, unnecessary or unreasonable.
This of course is, in each case, a question of fact, and we
are of the opinion that the facts alleged in the complaint are
not sufficient to sustain a finding in favor of the contentions of
the petitioner. It is not alleged in the complaint that
"dynamite, gunpowder and other explosives" can in no event
be transported with reasonable safety on board steam
vessels engaged in the business of common carriers. It is not
alleged that all, or indeed any of the defendant steamship
company's vessels are unsuited for the carriage of such
explosives. It is not alleged that the nature of the business in
which the steamship company is engaged is such as to
preclude a finding that a refusal to accept such explosives on
any of its vessels would subject the traffic in such explosives
to an undue and unreasonable prejudice and discrimination.
Plaintiff's contention in this regard is as follows:
In the present case, the respondent company has
expressly and publicly renounced the carriage of
explosives, and expressly excluded the same
terms from the business it conducts. This in itself
were sufficient, even though such exclusion of
explosives were based on no other ground than
the mere whim, caprice or personal scruple of the
24
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
carrier. It is unnecessary, however, to indulge in
academic discussion of a moot question, for the
decision not a carry explosives rests on substantial
grounds which are self-evident.
We think however that the answer to the question whether
such a refusal to carry explosives involves an unnecessary
or unreasonable preference or advantage to any person,
locality or particular kind of traffic or subjects any person,
locality or particular to traffic to an undue or unreasonable
prejudice and discrimination is by no means "self-evident,"
and that it is a question of fact to be determined by the
particular circumstances of each case.
The words "dynamite, powder or other explosives" are broad
enough to include matches, and other articles of like nature,
and may fairly be held to include also kerosene oil, gasoline
and similar products of a highly inflammable and explosive
character. Many of these articles of merchandise are in the
nature of necessities in any country open to modern
progress and advancement. We are not fully advised as to
the methods of transportation by which they are made
commercially available throughout the world, but certain it is
that dynamite, gunpowder, matches, kerosene oil and
gasoline are transported on many vessels sailing the high
seas. Indeed it is a matter of common knowledge that
common carriers throughout the world transport enormous
quantities of these explosives, on both land and sea, and
there can be little doubt that a general refusal of the common
carriers in any country to accept such explosives for carriage
would involve many persons, firms and enterprises in utter
ruin, and would disastrously affect the interests of the public
and the general welfare of the community.
It would be going to far to say that a refusal by a steam
vessel engaged in the business of transporting general
merchandise as a common carrier to accept for carriage a
shipment of matches, solely on the ground of the dangers
incident to the explosive quality of this class of merchandise,
would not subject the traffic in matches to an unnecessary,
undue or unreasonable prejudice and discrimination without
proof that for some special reason the particular vessel is not
fitted to carry articles of that nature. There may be and
doubtless are some vessels engaged in business as
common carriers of merchandise, which for lack of suitable
deck space or storage rooms might be justified in declining to
carry kerosene oil, gasoline, and similar products, even when
offered for carriage securely packed in cases; and few
vessels are equipped to transport those products in bulk. But
in any case of a refusal to carry such products which would
subject any person, locality or the traffic in such products
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
would be necessary to hear evidence before making an
affirmative finding that such prejudice or discrimination was
or was not unnecessary, undue or unreasonable. The
making of such a finding would involve a consideration of the
suitability of the vessel for the transportation of such
products ; the reasonable possibility of danger or disaster
resulting from their transportation in the form and under the
conditions in which they are offered for carriage; the general
nature of the business done by the carrier and, in a word, all
the attendant circumstances which might affect the question
of the reasonable necessity for the refusal by the carrier to
undertake the transportation of this class of merchandise.
But it is contended that whatever the rule may be as to other
explosives, the exceptional power and violence of dynamite
and gunpowder in explosion will always furnish the owner of
a vessel with a reasonable excuse for his failure or refusal to
accept them for carriage or to carry them on board his boat.
We think however that even as to dynamite and gunpowder
we would not be justified in making such a holding unaided
by evidence sustaining the proposition that these articles can
never be carried with reasonable safety on any vessel
engaged in the business of a common carrier. It is said that
dynamite is so erratic an uncontrollable in its action that it is
impossible to assert that it can be handled with safety in any
given case. On the other hand it is contended that while this
may be true of some kinds of dynamite, it is a fact that
dynamite can be and is manufactured so as to eliminate any
real danger from explosion during transportation. These are
of course questions of fact upon which we are not qualified to
pass judgment without the assistance of expert witnesses
who have made special studies as to the chemical
composition and reactions of the different kinds of dynamite,
or attained a thorough knowledge of its properties as a result
of wide experience in its manufacture and transportation.
As we construe the Philippine statute, the mere fact that
violent and destructive explosions can be obtained by the
use of dynamite under certain conditions would not be
sufficient in itself to justify the refusal of a vessel, duly
licensed as a common carrier of merchandise, to accept it for
carriage, if it can be proven that in the condition in which it is
offered for carriage there is no real danger to the carrier, nor
reasonable ground to fear that his vessel or those on board
his vessel will be exposed to unnecessary and unreasonable
risk in transporting it, having in mind the nature of his
business as a common carrier engaged in the coastwise
trade in the Philippine Islands, and his duty as a servant of
the public engaged in a public employment. So also, if by the
exercise of due diligence and the taking of unreasonable
precautions the danger of explosions can be practically
eliminated, the carrier would not be justified in subjecting the
traffic in this commodity to prejudice or discrimination by
proof that there would be a possibility of danger from
explosion when no such precautions are taken.
The traffic in dynamite, gunpowder and other explosives is
vitally essential to the material and general welfare of the
people of these Islands. If dynamite, gunpowder and other
explosives are to continue in general use throughout the
Philippines, they must be transported by water from port to
port in the various islands which make up the Archipelago.
We are satisfied therefore that the refusal by a particular
vessel, engaged as a common carrier of merchandise in the
coastwise trade of the Philippine Islands, to accept any or all
of these explosives for carriage would constitute a violation
of the prohibitions against discriminations penalized under
the statute, unless it can be shown by affirmative evidence
that there is so real and substantial a danger of disaster
necessarily involved in the carriage of any or all of these
articles of merchandise as to render such refusal a due or a
necessary or a reasonable exercise of prudence and
discretion on the part of the shipowner.
The complaint in the case at bar lacking the necessary
allegations under this ruling, the demurrer must be sustained
on the ground that the facts alleged do not constitute a cause
of action.
A number of interesting questions of procedure are raised
and discussed in the briefs of counsel. As to all of these
questions we expressly reserve our opinion, believing as we
do that in sustaining the demurrer on the grounds indicated
in this opinion we are able to dispose of the real issue
involved in the proceedings without entering upon the
discussion of the nice questions which it might have been
necessary to pass upon had it appeared that the facts
alleged in the complaint constitute a cause of action.
We think, however, that we should not finally dispose of the
case without indicating that since the institution of these
proceedings the enactment of Acts No. 2307 and No. 2362
(creating a Board of Public Utility Commissioners and for
other purposes) may have materially modified the right to
institute and maintain such proceedings in this jurisdiction.
But the demurrer having been formallly submitted for
judgment before the enactment of these statutes, counsel
have not been heard in this connection. We therefore refrain
from any comment upon any questions which might be
raised as to whether or not there may be another adequate
and appropriate remedy for the alleged wrong set forth in the
25
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
complaint. Our disposition of the question raised by the
demurrer renders that unnecessary at this time, though it
may not be improper to observe that a careful examination of
those acts confirms us in the holding upon which we base
our ruling on this demurrer, that is to say "That whatever may
have been the rule at the common law, common carriers in
this jurisdiction cannot lawfully decline to accept a particular
class of goods for carriage, to the prejudice of the traffic in
those goods, unless it appears that for some sufficient
reason the discrimination against the traffic in such goods is
reasonable and necessary. Mere prejudice or whim will not
suffice. The grounds of the discrimination must be
substantial ones, such as will justify the courts in holding the
discrimination to have been reasonable and necessary under
all the circumstances of the case."
Unless an amended complaint be filed in the meantime, let
judgment be entered ten days hereafter sustaining the
demurrer and dismissing the complaint with costs against the
complainant, and twenty days thereafter let the record be
filed in the archives of original actions in this court. So
ordered.
G.R. No. 47065 June 26, 1940
PANGASINAN TRANSPORTATION CO., INC., petitioner,
vs.
THE PUBLIC SERVICE COMMISSION, respondent.
LAUREL, J.:
The petitioner has been engaged for the past twenty years in
the business of transporting passengers in the Province of
Pangasinan and Tarlac and, to a certain extent, in the
Province of Nueva Ecija and Zambales, by means of motor
vehicles commonly known as TPU buses, in accordance with
the terms and conditions of the certificates of public
convenience issued in its favor by the former Public Utility
Commission in cases Nos. 24948, 30973, 36830, 32014 and
53090. On August 26, 1939, the petitioner filed with the
Public Service Commission an application for authorization
to operate ten additional new Brockway trucks (case No.
56641), on the ground that they were needed to comply with
the terms and conditions of its existing certificates and as a
result of the application of the Eight Hour Labor Law. In the
decision of September 26, 1939, granting the petitioner's
application for increase of equipment, the Public Service
Commission ordered:
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
Y de acuerdo con que se provee por el articulo 15 the Act, in so far as those powers are concerned,
de la ley No. 146 del Commonwealth, tal como ha is unconstitutional and void.
sido enmendada por el articulo 1 de la Ley No.
454, por la presente se enmienda las condiciones
2. That even if it be assumed that section 1 of
de los certificados de convenciencia publica
Commonwealth Act No. 454, is valid delegation of
expedidos en los expedientes Nos. 24948, 30973,
legislative powers, the Public Service Commission
36831, 32014 y la authorizacion el el expediente
has exceeded its authority because: (a) The Act
No. 53090, asi que se consideran incorporadas en
applies only to future certificates and not to valid
los mismos las dos siguientes condiciones:
and subsisting certificates issued prior to June 8,
1939, when said Act took effect, and (b) the Act,
Que los certificados de conveniencia publica y as applied by the Commission, violates
authorizacion arriba mencionados seran validos y constitutional guarantees.
subsistentes solamente durante de veinticinco (25)
anos, contados desde la fecha de la promulgacion
Section 15 of Commonwealth Act No. 146, as amended by
de esta decision.
section 1 of Commonwealth Act No. 454, invoked by the
respondent Public Service Commission in the decision
Que la empresa de la solicitante porda ser complained of in the present proceedings, reads as follows:
adquirida por el Commonwealth de Filipinas o por
alguna dependencia del mismo en cualquier
With the exception to those enumerated in the
tiempo que lo deseare previo pago del precio d
preceding section, no public service shall operate
costo de su equipo util, menos una depreciacion
in the Philippines without possessing a valid and
razonable que se ha fijar por la Comision al tiempo
subsisting certificate from the Public Service
de su adquisicion.
Commission, known as "certificate of public
convenience," or "certificate of convenience and
Not being agreeable to the two new conditions thus public necessity," as the case may be, to the effect
incorporated in its existing certificates, the petitioner filed on that the operation of said service and the
October 9, 1939 a motion for reconsideration which was authorization to do business will promote the
denied by the Public Service Commission on November 14, public interests in a proper and suitable manner.
1939. Whereupon, on November 20, 1939, the present
petition for a writ of certiorari was instituted in this court
The Commission may prescribed as a condition for
praying that an order be issued directing the secretary of the
the issuance of the certificate provided in the
Public Service Commission to certify forthwith to this court
preceding paragraph that the service can be
the records of all proceedings in case No. 56641; that this
acquired by the Commonwealth of the Philippines
court, after hearing, render a decision declaring section 1 of
or by any instrumentality thereof upon payment of
Commonwealth Act No. 454 unconstitutional and void; that, if
the cost price of its useful equipment, less
this court should be of the opinion that section 1 of
reasonable depreciation; and likewise, that the
Commonwealth Act No. 454 is constitutional, a decision be
certificate shall valid only for a definite period of
rendered declaring that the provisions thereof are not
time; and that the violation of any of these
applicable to valid and subsisting certificates issued prior to
conditions shall produce the immediate
June 8, 1939. Stated in the language of the petitioner, it is
cancellation of the certificate without the necessity
contended:
of any express action on the part of the
Commission.
1. That the legislative powers granted to the Public
Service Commission by section 1 of
In estimating the depreciation, the effect of the use
Commonwealth Act No. 454, without limitation,
of the equipment, its actual condition, the age of
guide or rule except the unfettered discretion and
the model, or other circumstances affecting its
judgment of the Commission, constitute a
value in the market shall be taken into
complete and total abdication by the Legislature of
consideration.
its functions in the premises, and for that reason,
26
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
The foregoing is likewise applicable to any
extension or amendment of certificates actually
force and to those which may hereafter be issued,
to permits to modify itineraries and time schedules
of public services and to authorization to renew
and increase equipment and properties.
Under the first paragraph of the aforequoted section 15 of
Act No. 146, as amended, no public service can operate
without a certificate of public convenience or certificate of
convenience and public necessity to the effect that the
operation of said service and the authorization to do
business will "public interests in a proper and suitable
manner." Under the second paragraph, one of the conditions
which the Public Service Commission may prescribed the
issuance of the certificate provided for in the first paragraph
is that "the service can be acquired by the Commonwealth of
the Philippines or by any instrumental thereof upon payment
of the cost price of its useful equipment, less reasonable
depreciation," a condition which is virtually a restatement of
the principle already embodied in the Constitution, section 6
of Article XII, which provides that "the State may, in the
interest of national welfare and defense, establish and
operate industries and means of transportation and
communication, and, upon payment of just compensation,
transfer to public ownership utilities and other private
enterprises to be operated by the Government. "Another
condition which the Commission may prescribed, and which
is assailed by the petitioner, is that the certificate "shall be
valid only for a definite period of time." As there is a relation
between the first and second paragraphs of said section 15,
the two provisions must be read and interpreted together.
That is to say, in issuing a certificate, the Commission must
necessarily be satisfied that the operation of the service
under said certificate during a definite period fixed
therein "will promote the public interests in a proper and
suitable manner." Under section 16 (a) of Commonwealth
Act. No. 146 which is a complement of section 15, the
Commission is empowered to issue certificates of public
convenience whenever it "finds that the operation of the
public service proposed and the authorization to do business
will promote the public interests in a proper and suitable
manner." Inasmuch as the period to be fixed by the
Commission under section 15 is inseparable from the
certificate itself, said period cannot be disregarded by the
Commission in determining the question whether the
issuance of the certificate will promote the public interests in
a proper and suitable manner. Conversely, in determining "a
definite period of time," the Commission will be guided by
"public interests," the only limitation to its power being that
said period shall not exceed fifty years (sec. 16 (a),
Commonwealth Act No. 146; Constitution, Art. XIII, sec. 8.)
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
We have already ruled that "public interest" furnishes a G. E. Woodbine, Yale University Press, 1922, vol. 2, p. 167)
sufficient standard. (People vs. Fernandez and Trinidad, G. but which is also recognized in principle in the Roman Law
R. No. 45655, promulgated June 15, 1938; (D. 17.18.3), has been made to adapt itself to the
People vs. Rosenthal and Osmeña, G. R. Nos. 46076 and complexities of modern governments, giving rise to the
46077, promulgated June 12, 1939, citing New York Central adoption, within certain limits, of the principle of "subordinate
Securities Corporation vs. U.S.A., 287 U.S. 12, 24, 25, 77 legislation," not only in the United States and England but in
Law. ed. 138, 145, 146; Schenchter Poultry practically all modern governments. (People vs. Rosenthal
Corporation vs. I.S., 295, 540, 79 Law. ed. 1570, 1585; and Osmeña, G. R. Nos. 46076 and 46077, promulgated
Ferrazzini vs. Gsell, 34 Phil., 697, 711-712.) June 12, 1939.) Accordingly, with the growing complexity of
modern life, the multiplication of the subjects of
governmental regulation, and the increased difficulty of
Section 8 of Article XIII of the Constitution provides, among
administering the laws, there is a constantly growing
other things, that no franchise, certificate, or any other form
tendency toward the delegation of greater powers by the
of authorization for the operation of a public utility shall be
legislature, and toward the approval of the practice by the
"for a longer period than fifty years," and when it was
court. (Dillon Catfish Drainage Dist, v. Bank of Dillon, 141 S.
ordained, in section 15 of Commonwealth Act No. 146, as
E. 274, 275, 143 S. Ct. 178; State vs. Knox County, 54 S. W.
amended by Commonwealth Act No. 454, that the Public
2d. 973, 976, 165 Tenn. 319.) In harmony with such growing
Service Commission may prescribed as a condition for the
tendency, this Court, since the decision in the case
issuance of a certificate that it "shall be valid only for a
of Compañia General de Tabacos de Filipinas vs. Board of
definite period of time" and, in section 16 (a) that "no such
Public Utility Commissioner (34 Phil., 136), relied upon by
certificates shall be issued for a period of more than fifty
the petitioner, has, in instances, extended its seal of approval
years," the National Assembly meant to give effect to the
to the "delegation of greater powers by the legislature."
aforesaid constitutional mandate. More than this, it has
(Inchausti Steamship Co. vs. Public Utility Commissioner, 44
thereby also declared its will that the period to be fixed by the
Phil., Autobus Co. vs. De Jesus, 56 Phil., 446;
Public Service Commission shall not be longer than fifty
People vs. Fernandez & Trinidad, G. R. No. 45655,
years. All that has been delegated to the Commission,
promulgated June 15, 1938; People vs. Rosenthal &
therefore, is the administrative function, involving the use
Osmeña, G. R. Nos. 46076, 46077, promulgated June 12,
discretion, to carry out the will of the National Assembly
1939; and Robb and Hilscher vs. People, G. R. No. 45866,
having in view, in addition, the promotion of "public interests
promulgated June 12, 1939.).
in a proper and suitable manner." The fact that the National
Assembly may itself exercise the function and authority thus
conferred upon the Public Service Commission does not Under the fourth paragraph of section 15 of Commonwealth
make the provision in question constitutionally objectionable. Act No. 146, as amended by Commonwealth Act No. 454,
the power of the Public Service Commission to prescribed
the conditions "that the service can be acquired by the
The theory of the separation of powers is designed by its
Commonwealth of the Philippines or by any instrumentality
originators to secure action and at the same time to forestall
thereof upon payment of the cost price of its useful
overaction which necessarily results from undue
equipment, less reasonable," and "that the certificate shall be
concentration of powers, and thereby obtain efficiency and
valid only for a definite period of time" is expressly made
prevent deposition. Thereby, the "rule of law" was
applicable "to any extension or amendment of certificates
established which narrows the range of governmental action
actually in force" and "to authorizations to renew and
and makes it subject to control by certain devices. As a
increase equipment and properties." We have examined the
corollary, we find the rule prohibiting delegation of legislative
legislative proceedings on the subject and have found that
authority, and from the earliest time American legal
these conditions were purposely made applicable to existing
authorities have proceeded on the theory that legislative
certificates of public convenience. The history of
power must be exercised by the legislature alone. It is
Commonwealth Act No. 454 reveals that there was an
frankness, however, to confess that as one delves into the
attempt to suppress, by way of amendment, the sentence
mass of judicial pronouncement, he finds a great deal of
"and likewise, that the certificate shall be valid only for a
confusion. One thing, however, is apparent in the
definite period of time," but the attempt failed:
development of the principle of separation of powers and that
is that the maxim of delegatus non potest
delegari or delegata potestas non potest delegari, attributed xxx xxx xxx
to Bracton (De Legius et Consuetedinious Angliae, edited by
27
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
Sr. CUENCO. Señor Presidente, para otra
enmienda. En la misma pagina, lineas 23 y 24,
pido que se supriman las palabras 'and likewise,
that the certificate shall be valid only for a definite
period time.' Esta disposicion del proyecto autoriza
a la Comision de Servicios Publicos a fijar un
plazo de vigencia certificado de conveniencia
publica. Todo el mundo sabe que bo se puede
determinar cuando los intereses del servicio
publico requiren la explotacion de un servicio
publico y ha de saber la Comision de Servisios, si
en un tiempo determinado, la explotacion de
algunos buses en cierta ruta ya no tiene de ser,
sobre todo, si tiene en cuenta; que la explotacion
de los servicios publicos depende de condiciones
flutuantes, asi como del volumen como trafico y de
otras condiciones. Ademas, el servicio publico se
concede por la Comision de Servicios Publicos el
interes publico asi lo exige. El interes publico no
tiene duracion fija, no es permanente; es un
proceso mas o menos indefinido en cuanto al
tiempo. Se ha acordado eso en el caucus de
anoche.
EL PRESIDENTE PRO TEMPORE. ¿Que dice el
Comite?
Sr. ALANO. El Comite siente tener que rechazar
esa enmienda, en vista de que esto certificados de
conveniencia publica es igual que la franquicia:
sepuede extender. Si los servicios presentados
por la compañia durante el tiempo de su
certificado lo require, puede pedir la extension y se
le extendera; pero no creo conveniente el que
nosotros demos un certificado de conveniencia
publica de una manera que podria pasar de
cincuenta anos, porque seria anticonstitucional.
xxx xxx xxx
By a majority vote the proposed amendment was defeated.
(Sesion de 17 de mayo de 1939, Asamblea Nacional.)
The petitioner is mistaken in the suggestion that, simply
because its existing certificates had been granted before
June 8, 1939, the date when Commonwealth Act No. 454,
amendatory of section 15 of Commonwealth Act No. 146,
was approved, it must be deemed to have the right of holding
them in perpetuity. Section 74 of the Philippine Bill provided
that "no franchise, privilege, or concession shall be granted
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
to any corporation except under the conditions that it shall be
subject to amendment, alteration, or repeal by the Congress
of the United States." The Jones Law, incorporating a similar
mandate, provided, in section 28, that "no franchise or right
shall be granted to any individual, firm, or corporation except
under the conditions that it shall be subject to amendment,
alteration, or repeal by the Congress of the United States."
Lastly, the Constitution of the Philippines provided, in section
8 of Article XIII, that "no franchise or right shall be granted to
any individual, firm, or corporation, except under the
condition that it shall be subject to amendment, alteration, or
repeal by the National Assembly when the public interest so
requires." The National Assembly, by virtue of the
Constitution, logically succeeded to the Congress of the
United States in the power to amend, alter or repeal any
franchise or right granted prior to or after the approval of the
Constitution; and when Commonwealth Acts Nos. 146 and
454 were enacted, the National Assembly, to the extent
therein provided, has declared its will and purpose to amend
or alter existing certificates of public convenience.
Upon the other hand, statutes enacted for the regulation of
public utilities, being a proper exercise by the state of its
police power, are applicable not only to those public utilities
coming into existence after its passage, but likewise to those
already established and in operation.
Nor is there any merit in petitioner's contention,
that, because of the establishment of petitioner's
operations prior to May 1, 1917, they are not
subject to the regulations of the Commission.
Statutes for the regulation of public utilities are a
proper exercise by the state of its police power. As
soon as the power is exercised, all phases of
operation of established utilities, become at once
subject to the police power thus called into
operation. Procedures' Transportation Co. v.
Railroad Commission, 251 U. S. 228, 40 Sup. Ct.
131, 64 Law. ed. 239, Law v. Railroad
Commission, 184 Cal. 737, 195 Pac. 423, 14 A. L.
R. 249. The statute is applicable not only to those
public utilities coming into existence after its
passage, but likewise to those already established
and in operation. The 'Auto Stage and Truck
Transportation Act' (Stats. 1917, c. 213) is a
statute passed in pursuance of the police power.
The only distinction recognized in the statute
between those established before and those
established after the passage of the act is in the
method of the creation of their operative rights. A
certificate of public convenience and necessity it
required for any new operation, but no such
certificate is required of any transportation
company for the operation which was actually
carried on in good faith on May 1, 1917, This
distinction in the creation of their operative rights in
no way affects the power of the Commission to
supervise and regulate them. Obviously the power
of the Commission to hear and dispose of
complaints is as effective against companies
securing their operative rights prior to May 1, 1917,
as against those subsequently securing such right
under a certificate of public convenience and
necessity. (Motor Transit Co. et al. v. Railroad
Commission of California et al., 209 Pac. 586.)
Moreover, Commonwealth Acts Nos. 146 and 454 are not
only the organic acts of the Public Service Commission but
are "a part of the charter of every utility company operating
or seeking to operate a franchise" in the Philippines.
(Streator Aqueduct Co. v. et al., 295 Fed. 385.) The business
of a common carrier holds such a peculiar relation to the
public interest that there is superinduced upon it the right of
public regulation. When private property is "affected with a
public interest it ceased to be juris privati only." When,
therefore, one devotes his property to a use in which the
public has an interest, he, in effect, grants to the public an
interest in that use, and must submit to be controlled by the
public for the common good, to the extent of the interest he
has thus created. He may withdraw his grant by discounting
the use, but so long as he maintains the use he must submit
to control. Indeed, this right of regulation is so far beyond
question that it is well settled that the power of the state to
exercise legislative control over public utilities may be
exercised through boards of commissioners.
(Fisher vs. Yangco Steamship Company, 31 Phil., 1, citing
Munn vs. Illinois, 94 U.S. 113; Georgia R. & Bkg.
Co. vs. Smith, 128 U.S. 174; Budd vs. New York, 143 U.S.
517; New York etc. R. Co. vs. Bristol 151 U.S. 556, 571;
Connecticut etc. R. Co. vs. Woodruff, 153 U.S. 689;
Louisville etc. Ry Co. vs. Kentucky, 161 U.S. 677, 695.) This
right of the state to regulate public utilities is founded upon
the police power, and statutes for the control and regulation
of utilities are a legitimate exercise thereof, for the protection
of the public as well as of the utilities themselves. Such
statutes are, therefore, not unconstitutional, either impairing
the obligation of contracts, taking property without due
process, or denying the equal protection of the laws,
especially inasmuch as the question whether or not private
property shall be devoted to a public and the consequent
burdens assumed is ordinarily for the owner to decide; and if
he voluntarily places his property in public service he cannot
complain that it becomes subject to the regulatory powers of
28
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
the state. (51 C. J., sec. 21, pp. 9-10.) in the light of
authorities which hold that a certificate of public convenience
constitutes neither a franchise nor contract, confers no
property right, and is mere license or privilege.
(Burgess vs. Mayor & Alderman of Brockton, 235 Mass. 95,
100, 126 N. E. 456; Roberto vs. Commisioners of
Department of Public Utilities, 262 Mass. 583, 160 N. E. 321;
Scheible vs. Hogan, 113 Ohio St. 83, 148 N. E. 581;
Martz vs. Curtis [J. L.] Cartage Co. [1937], 132 Ohio St. 271,
7 N. E. [d] 220; Manila Yellow Taxicab Co. vs. Sabellano, 59
Phil., 773.)
Whilst the challenged provisions of Commonwealth Act No.
454 are valid and constitutional, we are, however, of the
opinion that the decision of the Public Service Commission
should be reversed and the case remanded thereto for
further proceedings for the reason now to be stated. The
Public Service Commission has power, upon proper notice
and hearing, "to amend, modify or revoke at any time any
certificate issued under the provisions of this Act, whenever
the facts and circumstances on the strength of which said
certificate was issued have been misrepresented or
materially changed." (Section 16, par. [m], Commonwealth
Act No. 146.) The petitioner's application here was for an
increase of its equipment to enable it to comply with the
conditions of its certificates of public convenience. On the
matter of limitation to twenty five (25) years of the life of its
certificates of public convenience, there had been neither
notice nor opportunity given the petitioner to be heard or
present evidence. The Commission appears to have taken
advantage of the petitioner to augment petitioner's
equipment in imposing the limitation of twenty-five (25) years
which might as well be twenty or fifteen or any number of
years. This is, to say the least, irregular and should not be
sanctioned. There are cardinal primary rights which must be
respected even in proceedings of this character. The first of
these rights is the right to a hearing, which includes the right
of the party interested or affected to present his own case
and submit evidence in support thereof. In the language of
Chief Justice Hughes, in Morgan v. U.S., (304 U.S. 1, 58 S.
Ct. 773, 999, 82 Law. ed. 1129), "the liberty and property of
the citizen shall be protected by the rudimentary
requirements of fair play." Not only must the party be given
an opportunity to present his case and to adduce evidence
tending to establish the rights which he asserts but the
tribunal must consider the evidence presented. (Chief Justice
Hughes in Morgan vs. U.S., 298 U.S. 468, 56 S. Ct. 906, 80
:Law. ed. 1288.) In the language of this Court in Edwards vs.
McCoy (22 Phil., 598), "the right to adduce evidence, without
the corresponding duty on the part of the board to consider it,
is vain. Such right is conspicuously futile if the person or
persons to whom the evidence is presented can thrust it
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
aside without or consideration." While the duty to deliberate
does not impose the obligation to decide right, it does imply a
necessity which cannot be disregarded, namely, that of
having something to support its decision. A decision with
absolutely nothing to support it is a nullity, at least when
directly attacked. (Edwards vs. McCoy, supra.) This principle
emanates from the more fundamental principle that the
genius of constitutional government is contrary to the vesting
of unlimited power anywhere. Law is both a grant and a
limitation upon power.
The decision appealed from is hereby reversed and the case
remanded to the Public Service Commission for further
proceedings in accordance with law and this decision,
without any pronouncement regarding costs. So ordered.
G.R. No. 119528 March 26, 1997
PHILIPPINE AIRLINES, INC., petitioner,
vs.
CIVIL AERONAUTICS BOARD and GRAND
INTERNATIONAL AIRWAYS, INC., respondents.
TORRES, JR., J.:
This Special Civil Action for Certiorari and Prohibition under
Rule 65 of the Rules of Court seeks to prohibit respondent
Civil Aeronautics Board from exercising jurisdiction over
private respondent's Application for the issuance of a
Certificate of Public Convenience and Necessity, and to
annul and set aside a temporary operating permit issued by
the Civil Aeronautics Board in favor of Grand International
Airways (GrandAir, for brevity) allowing the same to engage
in scheduled domestic air transportation services, particularly
the Manila-Cebu, Manila-Davao, and converse routes.
The main reason submitted by petitioner Philippine Airlines,
Inc. (PAL) to support its petition is the fact that GrandAir
does not possess a legislative franchise authorizing it to
engage in air transportation service within the Philippines or
elsewhere. Such franchise is, allegedly, a requisite for the
issuance of a Certificate of Public Convenience or Necessity
by the respondent Board, as mandated under Section 11,
Article XII of the Constitution.
Respondent GrandAir, on the other hand, posits that a
legislative franchise is no longer a requirement for the
issuance of a Certificate of Public Convenience and
Necessity or a Temporary Operating Permit, following the
Court's pronouncements in the case of Albano
vs. Reyes,1 as restated by the Court of Appeals in Avia
Filipinas International vs. Civil Aeronautics
Board2 and Silangan Airways, Inc. vs. Grand International
Airways, Inc., and the Hon. Civil Aeronautics Board.3
On November 24, 1994, private respondent GrandAir applied
for a Certificate of Public Convenience and Necessity with
the Board, which application was docketed as CAB Case No.
EP-12711.4 Accordingly, the Chief Hearing Officer of the
CAB issued a Notice of Hearing setting the application for
initial hearing on December 16, 1994, and directing GrandAir
to serve a copy of the application and corresponding notice
to all scheduled Philippine Domestic operators. On
December 14, 1994, GrandAir filed its Compliance, and
requested for the issuance of a Temporary Operating Permit.
Petitioner, itself the holder of a legislative franchise to
operate air transport services, filed an Opposition to the
application for a Certificate of Public Convenience and
Necessity on December 16, 1995 on the following grounds:
A. The CAB has no jurisdiction to hear
the petitioner's application until the latter
has first obtained a franchise to operate
from Congress.
B. The petitioner's application is deficient
in form and substance in that:
1. The application does not indicate a
route structure including a computation
of trunkline, secondary and rural
available seat kilometers (ASK) which
shall always be maintained at a monthly
level at least 5% and 20% of the ASK
offered into and out of the proposed
base of operations for rural and
secondary, respectively.
2. It does not contain a project/feasibility
study, projected profit and loss
statements, projected balance sheet,
insurance coverage, list of personnel, list
of spare parts inventory, tariff structure,
documents supportive of financial
capacity, route flight schedule, contracts
on facilities (hangars, maintenance, lot)
etc.
29
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
C. Approval of petitioner's application
would violate the equal protection clause
of the constitution.
D. There is no urgent need and demand
for the services applied for.
E. To grant petitioner's application would
only result in ruinous competition
contrary to Section 4(d) of R.A. 776. 5
At the initial hearing for the application, petitioner raised the
issue of lack of jurisdiction of the Board to hear the
application because GrandAir did not possess a legislative
franchise.
On December 20, 1994, the Chief Hearing Officer of CAB
issued an Order denying petitioner's Opposition. Pertinent
portions of the Order read:
PAL alleges that the CAB has no
jurisdiction to hear the petitioner's
application until the latter has first
obtained a franchise to operate from
Congress.
The Civil Aeronautics Board has
jurisdiction to hear and resolve the
application. In Avia Filipina vs. CAB, CA
G.R. No. 23365, it has been ruled that
under Section 10 (c) (I) of R.A. 776, the
Board possesses this specific power and
duty.
In view thereof, the opposition of PAL on
this ground is hereby denied.
SO ORDERED.
Meantime, on December 22, 1994, petitioner this time,
opposed private respondent's application for a temporary
permit maintaining that:
1. The applicant does not possess the
required fitness and capability of
operating the services applied for under
RA 776; and,
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
2. Applicant has failed to prove that
there is clear and urgent public need for
the services applied for.6
On December 23, 1994, the Board promulgated Resolution
No. 119(92) approving the issuance of a Temporary
Operating Permit in favor of Grand Air 7 for a period of three
months, i.e., from December 22, 1994 to March 22, 1994.
Petitioner moved for the reconsideration of the issuance of
the Temporary Operating Permit on January 11, 1995, but
the same was denied in CAB Resolution No. 02 (95) on
February 2, 1995. 8 In the said Resolution, the Board justified
its assumption of jurisdiction over GrandAir's application.
WHEREAS , the CAB is specifically
authorized under Section 10-C (1) of
Republic Act No. 776 as follows:
(c) The Board shall have the following
specific powers and duties:
(1) In accordance with the provision of
Chapter IV of this Act, to issue, deny,
amend revise, alter, modify, cancel,
suspend or revoke, in whole or in part,
upon petitioner-complaint, or upon its
own initiative, any temporary operating
permit or Certificate of Public
Convenience and Necessity; Provided,
however; that in the case of foreign air
carriers, the permit shall be issued with
the approval of the President of the
Republic of the Philippines.
WHEREAS, such authority was affirmed
in PAL vs. CAB, (23 SCRA 992),
wherein the Supreme Court held that the
CAB can even on its own initiative, grant
a TOP even before the presentation of
evidence;
WHEREAS, more recently, Avia
Filipinas vs. CAB, (CA-GR No. 23365),
promulgated on October 30, 1991, held
that in accordance with its mandate, the
CAB can issue not only a TOP but also
a Certificate of Public Convenience and
Necessity (CPCN) to a qualified
applicant therefor in the absence of a
legislative franchise, citing therein as
basis the decision of Albano
vs. Reyes (175 SCRA 264) which
provides (inter alia) that:
a) Franchises by Congress are not
required before each and every public
utility may operate when the law has
granted certain administrative agencies
the power to grant licenses for or to
authorize the operation of certain public
utilities;
b) The Constitutional provision in Article
XII, Section 11 that the issuance of a
franchise, certificate or other form of
authorization for the operation of a
public utility does not necessarily imply
that only Congress has the power to
grant such authorization since our
statute books are replete with laws
granting specified agencies in the
Executive Branch the power to issue
such authorization for certain classes of
public utilities.
WHEREAS, Executive Order No. 219
which took effect on 22 January 1995,
provides in Section 2.1 that a minimum
of two (2) operators in each route/link
shall be encouraged and that
routes/links presently serviced by only
one (1) operator shall be open for entry
to additional operators.
RESOLVED, (T)HEREFORE, that the
Motion for Reconsideration filed by
Philippine Airlines on January 05, 1995
on the Grant by this Board of a
Temporary Operating Permit (TOP) to
Grand International Airways, Inc.
alleging among others that the CAB has
no such jurisdiction, is hereby DENIED,
as it hereby denied, in view of the
foregoing and considering that the
grounds relied upon by the movant are
not indubitable.
30
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
On March 21, 1995, upon motion by private respondent, the
temporary permit was extended for a period of six (6) months
or up to September 22, 1995.
Hence this petition, filed on April 3, 1995.
Petitioners argue that the respondent Board acted beyond its
powers and jurisdiction in taking cognizance of GrandAir's
application for the issuance of a Certificate of Public
Convenience and Necessity, and in issuing a temporary
operating permit in the meantime, since GrandAir has not
been granted and does not possess a legislative franchise to
engage in scheduled domestic air transportation. A
legislative franchise is necessary before anyone may engage
in air transport services, and a franchise may only be granted
by Congress. This is the meaning given by the petitioner
upon a reading of Section 11, Article XII,9 and Section 1,
Article VI, 10 of the Constitution.
To support its theory, PAL submits Opinion No. 163, S. 1989
of the Department of Justice, which reads:
Dr. Arturo C. Corona
 Executive
Director
 Civil Aeronautics Board
 PPL
Building, 1000 U.N. Avenue
 Ermita,
Manila
Sir:
This has reference to your request for
opinion on the necessity of a legislative
franchise before the Civil Aeronautics
Board ("CAB") may issue a Certificate of
Public Convenience and Necessity
and/or permit to engage in air commerce
or air transportation to an individual or
entity.
You state that during the hearing on the
application of Cebu Air for a
congressional franchise, the House
Committee on Corporations and
Franchises contended that under the
present Constitution, the CAB may not
issue the abovestated certificate or
permit, unless the individual or entity
concerned possesses a legislative
franchise. You believe otherwise,
however, for the reason that under R.A.
No. 776, as amended, the CAB is
explicitly empowered to issue operating
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
permits or certificates of public
convenience and necessity and that this
statutory provision is not inconsistent
with the current charter.
We concur with the view expressed by
the House Committee on Corporations
and Franchises. In an opinion rendered
in favor of your predecessor-in-office,
this Department observed that, —
. . . it is useful to note the distinction
between the franchise to operate and a
permit to commence operation. The
former is sovereign and legislative in
nature; it can be conferred only by the
lawmaking authority (17 W and P, pp.
691-697). The latter is administrative
and regulatory in character (In re
Application of Fort Crook-Bellevue
Boulevard Line, 283 NW 223); it is
granted by an administrative agency,
such as the Public Service Commission
[now Board of Transportation], in the
case of land transportation, and the Civil
Aeronautics Board, in case of air
services. While a legislative franchise is
a pre-requisite to a grant of a certificate
of public convenience and necessity to
an airline company, such franchise
alone cannot constitute the authority to
commence operations, inasmuch as
there are still matters relevant to such
operations which are not determined in
the franchise, like rates, schedules and
routes, and which matters are resolved
in the process of issuance of permit by
the administrative. (Secretary of Justice
opn No. 45, s. 1981)
Indeed, authorities are agreed that a
certificate of public convenience and
necessity is an authorization issued by
the appropriate governmental agency for
the operation of public services for which
a franchise is required by law (Almario,
Transportation and Public Service Law,
1977 Ed., p. 293; Agbayani, Commercial
Law of the Phil., Vol. 4, 1979 Ed., pp.
380-381).
Based on the foregoing, it is clear that a
franchise is the legislative authorization
to engage in a business activity or
enterprise of a public nature, whereas a
certificate of public convenience and
necessity is a regulatory measure which
constitutes the franchise's authority to
commence operations. It is thus logical
that the grant of the former should
precede the latter.
Please be guided accordingly.
Respondent GrandAir, on the other hand, relies on its
interpretation of the provisions of Republic Act 776, which
follows the pronouncements of the Court of Appeals in the
cases of Avia Filipinas vs. Civil Aeronautics Board,
and Silangan Airways, Inc. vs. Grand International
Airways (supra).
In both cases, the issue resolved was whether or not the
Civil Aeronautics Board can issue the Certificate of Public
Convenience and Necessity or Temporary Operating Permit
to a prospective domestic air transport operator who does
not possess a legislative franchise to operate as such.
Relying on the Court's pronouncement in Albano
vs. Reyes (supra), the Court of Appeals upheld the authority
of the Board to issue such authority, even in the absence of
a legislative franchise, which authority is derived from
Section 10 of Republic Act 776, as amended by P.D. 1462. 11
The Civil Aeronautics Board has jurisdiction over GrandAir's
Application for a Temporary Operating Permit. This rule has
been established in the case of Philippine Air Lines
Inc., vs. Civil Aeronautics Board, promulgated on June 13,
1968. 12 The Board is expressly authorized by Republic Act
776 to issue a temporary operating permit or Certificate of
Public Convenience and Necessity, and nothing contained in
the said law negates the power to issue said permit before
the completion of the applicant's evidence and that of the
oppositor thereto on the main petition. Indeed, the CAB's
authority to grant a temporary permit "upon its own initiative"
strongly suggests the power to exercise said authority, even
before the presentation of said evidence has begun.
Assuming arguendo that a legislative franchise is
prerequisite to the issuance of a permit, the absence of the
same does not affect the jurisdiction of the Board to hear the
application, but tolls only upon the ultimate issuance of the
requested permit.
The power to authorize and control the operation of a public
utility is admittedly a prerogative of the legislature, since
Congress is that branch of government vested with plenary
powers of legislation.
31
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
The franchise is a legislative grant,
whether made directly by the legislature
itself, or by any one of its properly
constituted instrumentalities. The grant,
when made, binds the public, and is,
directly or indirectly, the act of the
state. 13
The issue in this petition is whether or not Congress, in
enacting Republic Act 776, has delegated the authority to
authorize the operation of domestic air transport services to
the respondent Board, such that Congressional mandate for
the approval of such authority is no longer necessary.
Congress has granted certain administrative agencies the
power to grant licenses for, or to authorize the operation of
certain public utilities. With the growing complexity of modern
life, the multiplication of the subjects of governmental
regulation, and the increased difficulty of administering the
laws, there is a constantly growing tendency towards the
delegation of greater powers by the legislature, and towards
the approval of the practice by the courts. 14 It is generally
recognized that a franchise may be derived indirectly from
the state through a duly designated agency, and to this
extent, the power to grant franchises has frequently been
delegated, even to agencies other than those of a legislative
nature. 15 In pursuance of this, it has been held that
privileges conferred by grant by local authorities as agents
for the state constitute as much a legislative franchise as
though the grant had been made by an act of the
Legislature. 16
The trend of modern legislation is to vest the Public Service
Commissioner with the power to regulate and control the
operation of public services under reasonable rules and
regulations, and as a general rule, courts will not interfere
with the exercise of that discretion when it is just and
reasonable and founded upon a legal right. 17
It is this policy which was pursued by the Court in Albano
vs. Reyes. Thus, a reading of the pertinent issuances
governing the Philippine Ports Authority, 18 proves that the
PPA is empowered to undertake by itself the operation and
management of the Manila International Container Terminal,
or to authorize its operation and management by another by
contract or other means, at its option. The latter power
having been delegated to the to PPA, a franchise from
Congress to authorize an entity other than the PPA to
operate and manage the MICP becomes unnecessary.
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
Given the foregoing postulates, we find that the Civil
Aeronautics Board has the authority to issue a Certificate of
Public Convenience and Necessity, or Temporary Operating
Permit to a domestic air transport operator, who, though not
possessing a legislative franchise, meets all the other
requirements prescribed by the law. Such requirements were
enumerated in Section 21 of R.A. 776.
There is nothing in the law nor in the Constitution, which
indicates that a legislative franchise is an indispensable
requirement for an entity to operate as a domestic air
transport operator. Although Section 11 of Article XII
recognizes Congress' control over any franchise, certificate
or authority to operate a public utility, it does not mean
Congress has exclusive authority to issue the same.
Franchises issued by Congress are not required before each
and every public utility may operate. 19 In many instances,
Congress has seen it fit to delegate this function to
government agencies, specialized particularly in their
respective areas of public service.
A reading of Section 10 of the same reveals the clear intent
of Congress to delegate the authority to regulate the
issuance of a license to operate domestic air transport
services:
Sec. 10. Powers and Duties of the
Board. (A) Except as otherwise provided
herein, the Board shall have the power
to regulate the economic aspect of air
transportation, and shall have general
supervision and regulation of, the
jurisdiction and control over air carriers,
general sales agents, cargo sales
agents, and air freight forwarders as well
as their property rights, equipment,
facilities and franchise, insofar as may
be necessary for the purpose of carrying
out the provision of this Act.
In support of the Board's authority as stated above, it is given
the following specific powers and duties:
(C) The Board shall have the following
specific powers and duties:
(1) In accordance with the provisions of
Chapter IV of this Act, to issue, deny,
amend, revise, alter, modify, cancel,
suspend or revoke in whole or in part
upon petition or complaint or upon its
own initiative any Temporary Operating
Permit or Certificate of Public
Convenience and Necessity: Provided
however, That in the case of foreign air
carriers, the permit shall be issued with
the approval of the President of the
Republic of the Philippines.
Petitioner argues that since R.A. 776 gives the Board the
authority to issue "Certificates of Public Convenience and
Necessity", this, according to petitioner, means that a
legislative franchise is an absolute requirement. It cites a
number of authorities supporting the view that a Certificate of
Public Convenience and Necessity is issued to a public
service for which a franchise is required by law, as
distinguished from a "Certificate of Public Convenience"
which is an authorization issued for the operation of public
services for which no franchise, either municipal or
legislative, is required by law. 20
This submission relies on the premise that the authority to
issue a certificate of public convenience and necessity is a
regulatory measure separate and distinct from the authority
to grant a franchise for the operation of the public utility
subject of this particular case, which is exclusively lodged by
petitioner in Congress.
We do not agree with the petitioner.
Many and varied are the definitions of certificates of public
convenience which courts and legal writers have drafted.
Some statutes use the terms "convenience and necessity"
while others use only the words "public convenience." The
terms "convenience and necessity", if used together in a
statute, are usually held not to be separable, but are
construed together. Both words modify each other and must
be construed together. The word 'necessity' is so connected,
not as an additional requirement but to modify and qualify
what might otherwise be taken as the strict significance of
the word necessity. Public convenience and necessity exists
when the proposed facility will meet a reasonable want of the
public and supply a need which the existing facilities do not
adequately afford. It does not mean or require an actual
physical necessity or an indispensable thing. 21
The terms "convenience" and
"necessity" are to be construed together,
although they are not synonymous, and
32
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases
effect must be given both. The
convenience of the public must not be
circumscribed by according to the word
"necessity" its strict meaning or an
essential requisites. 22
The use of the word "necessity", in conjunction with "public
convenience" in a certificate of authorization to a public
service entity to operate, does not in any way modify the
nature of such certification, or the requirements for the
issuance of the same. It is the law which determines the
requisites for the issuance of such certification, and not the
title indicating the certificate.
Congress, by giving the respondent Board the power to issue
permits for the operation of domestic transport services, has
delegated to the said body the authority to determine the
capability and competence of a prospective domestic air
transport operator to engage in such venture. This is not an
instance of transforming the respondent Board into a mini-
legislative body, with unbridled authority to choose who
should be given authority to operate domestic air transport
services.
To be valid, the delegation itself must be
circumscribed by legislative restrictions,
not a "roving commission" that will give
the delegate unlimited legislative
authority. It must not be a delegation
"running riot" and "not canalized with
banks that keep it from overflowing."
Otherwise, the delegation is in legal
effect an abdication of legislative
authority, a total surrender by the
legislature of its prerogatives in favor of
the delegate. 23
Congress, in this instance, has set specific limitations on how
such authority should be exercised.
Firstly, Section 4 of R.A. No. 776, as amended, sets out the
following guidelines or policies:
Sec. 4. Declaration of policies. In the
exercise and performance of its powers
and duties under this Act, the Civil
Aeronautics Board and the Civil
Aeronautics Administrator shall consider
the following, among other things, as
Averell B. Abrasaldo
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman
being in the public interest, and in More importantly, the said law has enumerated the
accordance with the public convenience requirements to determine the competency of a prospective
and necessity: operator to engage in the public service of air transportation.
(a) The development and utilization of Sec. 12. Citizenship requirement. Except
the air potential of the Philippines; as otherwise provided in the Constitution
and existing treaty or treaties, a permit
authorizing a person to engage in
(b) The encouragement and
domestic air commerce and/or air
development of an air transportation
transportation shall be issued only to
system properly adapted to the present
citizens of the Philippines 24
and future of foreign and domestic
commerce of the Philippines, of the
Postal Service and of the National Sec. 21. Issuance of permit. The Board
Defense; shall issue a permit authorizing the
whole or any part of the service covered
by the application, if it finds: (1) that the
(c) The regulation of air transportation in
applicant is fit, willing and able to
such manner as to recognize and
perform such service properly in
preserve the inherent advantages of,
conformity with the provisions of this Act
assure the highest degree of safety in,
and the rules, regulations, and
and foster sound economic condition in,
requirements issued thereunder; and (2)
such transportation, and to improve the
that such service is required by the
relations between, and coordinate
public convenience and necessity;
transportation by, air carriers;
otherwise the application shall be
denied.
(d) The promotion of adequate,
economical and efficient service by air
Furthermore, the procedure for the processing of the
carriers at reasonable charges, without
application of a Certificate of Public Convenience and
unjust discriminations, undue
Necessity had been established to ensure the weeding out of
preferences or advantages, or unfair or
those entities that are not deserving of public service. 25
destructive competitive practices;
In sum, respondent Board should now be allowed to continue
(e) Competition between air carriers to
hearing the application of GrandAir for the issuance of a
the extent necessary to assure the
Certificate of Public Convenience and Necessity, there being
sound development of an air
no legal obstacle to the exercise of its jurisdiction.
transportation system properly adapted
to the need of the foreign and domestic
commerce of the Philippines, of the ACCORDINGLY, in view of the foregoing considerations, the
Postal Service, and of the National Court RESOLVED to DISMISS the instant petition for lack of
Defense; merit. The respondent Civil Aeronautics Board is hereby
DIRECTED to CONTINUE hearing the application of
respondent Grand International Airways, Inc. for the
(f) To promote safety of flight in air
issuance of a Certificate of Public Convenience and
commerce in the Philippines; and,
Necessity.
(g) The encouragement and
SO ORDERED.
development of civil aeronautics.
33
TRANSPORTATION LAW – II. COMMON CARRIERS IN GENERAL (B. Can a common carrier become a private carrier? – D. State regulation of
common carriers)
Cases

J
u
s
t
i
e

Averell B. Abrasaldo 34
Compiled by: Jasielle Leigh Ulangkaya – II-Sanchez Roman