STATE REGULATION OF COMMON CARRIERS(3 cases)

Republic of the Philippines

SUPREME COURTManila

THIRD DIVISION

G.R. No. 70876 July 19, 1990

MA. LUISA BENEDICTO, petitioner, vs.HON. INTERMEDIATE APPELLATE COURT and GREENHILLS WOOD INDUSTRIES COMPANY, INC.respondents.

Britanico, Panganiban, Benitez, Africa, Linsangan and Barinaga for petitioner.

Abelardo V. Viray for private respondent.

 

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. 7She 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 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.

The prevailing doctrine on common carriers makes the registered owner liable for consequences flowing from the operations of the carrier, even though the specific vehicle involved may already have been transferred to another person. This doctrine rests upon the principle that in dealing with vehicles registered under the Public Service Law, the public has the right to assume that the registered owner is the actual or lawful owner thereof It would be very difficult and often impossible as a practical matter, for members of the general public to enforce the rights of action that they may have for injuries inflicted by the vehicles being negligently operated if they should be required to prove who the actual owner is. 11 The registered owner is not allowed to deny liability by proving the identity of the alleged transferee. Thus, contrary to petitioner's claim, private respondent is not required to go beyond the vehicle's certificate of registration 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 value not only because Benjamin Tee was not presented in court to testify on this matter but also because of the aforementioned doctrine. To permit the ostensible or registered owner to prove who the actual owner is, would be to set at naught the purpose or public policy which infuses that doctrine.

In fact, private respondent had no reason at all to doubt the authority of Licuden to enter into a contract of carriage on behalf of the registered owner. It appears that, earlier, in the first week of May 1980, private respondent Greenhills had contracted Licuden who was then driving the same cargo truck to transport and carry a load of sawn lumber from the Maddela sawmill to Dagupan City. 12 No one came forward to question that contract or the authority of Licuden to represent the owner of the carrier truck.

Moreover, assuming the truth of her story, petitioner Benedicto retained registered ownership of the freight truck for her own benefit and convenience,

that is, to secure the payment of the balance of the selling price of the truck. She may have been unaware of the legal security device of 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 of public policy and of equity require that she bear the consequences flowing from registered ownership of the subject vehicle.

Petitioner Benedicto, however, insists that the said principle should apply only to cases involving negligence and resulting injury to or death of passengers, and not to cases involving merely carriage of goods. We believe otherwise.

A common carrier, both from the nature of its business and for insistent reasons of public policy, is burdened by the law with the duty of exercising extraordinary diligence not only in ensuring the safety of passengers but also in caring for goods transported by it. 13 The loss or destruction or deterioration of goods turned over to the common carrier for 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 calamity or act of the public enemy in time of war, or from an act or omission of the shipper himself or from the character of the goods or their packaging or container. 14

This presumption may be overcome only by proof of extraordinary diligence on the part of the carrier. 15 Clearly, to permit a common carrier to escape its responsibility for the passengers or goods transported by it by proving a prior sale of the vehicle or means of transportation to an alleged vendee would be to attenuate drastically the carrier's duty of 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 capability to respond for the resulting damages. In other words, the thrust of the public policy here involved is as sharp and real in the case of carriage of goods as it is in the transporting of human beings. Thus, to sustain petitioner Benedicto's contention, that is, to require the shipper to go behind a certificate of registration of a public utility vehicle, would be utterly subversive of the purpose of the law and doctrine.

Petitioner further insists that there was no perfected contract of carriage for the reason that there was no proof that her consent or that of Tee had been obtained; no proof that the driver, Licuden was authorized to bind the registered owner; and no proof that the parties had agreed on the freightage to be paid.

Once more, we are not persuaded by petitioner's arguments which appear to be a transparent attempt to evade statutory responsibilities. Driver Licuden was entrusted with 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 with at least implied authority to contract to carry goods and to accept delivery of such goods for carriage to a specified 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.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 47065             June 26, 1940

PANGASINAN TRANSPORTATION CO., INC., petitioner, vs.THE PUBLIC SERVICE COMMISSION, respondent.

C. de G. Alvear for petitioner.Evaristo R. Sandoval for 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:

Y de acuerdo con que se provee por el articulo 15 de la ley No. 146 del Commonwealth, tal como ha sido enmendada por el articulo 1 de la Ley No. 454, por la presente se enmienda las condiciones de los certificados de convenciencia publica expedidos en los expedientes Nos. 24948, 30973, 36831, 32014 y la authorizacion el el expediente No. 53090, asi que se consideran incorporadas en los mismos las dos siguientes condiciones:

Que los certificados de conveniencia publica y authorizacion arriba mencionados seran validos y subsistentes solamente durante de veinticinco (25) anos, contados desde la fecha de la promulgacion de esta decision.

Que la empresa de la solicitante porda ser adquirida por el Commonwealth de Filipinas o por alguna dependencia del mismo en cualquier tiempo que lo deseare previo pago del precio d costo de su equipo util, menos una depreciacion razonable que se ha fijar por la Comision al tiempo de su adquisicion.

Not being agreeable to the two new conditions thus incorporated in its existing certificates, the petitioner filed on October 9, 1939 a motion for reconsideration which was denied by the Public Service Commission on November 14, 1939. Whereupon, on November 20, 1939, the present petition for a writ of certiorari was instituted in this court praying that an order be issued directing the secretary of the Public Service Commission to certify forthwith to this court the records of all proceedings in case No. 56641; that this court, after hearing, render a decision declaring section 1 of Commonwealth Act No. 454 unconstitutional and void; that, if this court should be of the opinion that section 1 of Commonwealth Act No. 454 is constitutional, a decision be rendered declaring that the provisions thereof are not applicable to valid and subsisting certificates issued prior to June 8, 1939. Stated in the language of the petitioner, it is contended:

1. That the legislative powers granted to the Public Service Commission by section 1 of Commonwealth Act No. 454, without limitation, guide or rule except the unfettered discretion and judgment of the Commission, constitute a complete and total abdication by the Legislature of its functions in the premises, and for that reason, the Act, in so far as those powers are concerned, is unconstitutional and void.

2. That even if it be assumed that section 1 of Commonwealth Act No. 454, is valid delegation of legislative powers, the Public Service Commission has exceeded its authority because: (a) The Act applies only to future certificates and not to valid and subsisting certificates issued prior to June 8, 1939, when said Act took effect, and (b) the Act, as applied by the Commission, violates constitutional guarantees.

Section 15 of Commonwealth Act No. 146, as amended by section 1 of Commonwealth Act No. 454, invoked by the respondent Public Service Commission in the decision complained of in the present proceedings, reads as follows:

With the exception to those enumerated in the preceding section, no public service shall operate in the Philippines without possessing a valid and subsisting certificate from the Public Service Commission, known as "certificate of public convenience," or "certificate of convenience and public necessity," as the case may be, to the effect that the operation of said service and the authorization to do business will promote the public interests in a proper and suitable manner.

The Commission may prescribed as a condition for the issuance of the certificate provided in the preceding paragraph that the service can be acquired by the Commonwealth of the Philippines or by any instrumentality thereof upon payment of the cost price of its useful equipment, less reasonable depreciation; and likewise, that the certificate shall valid only for a definite period of time; and that the violation of any of these conditions shall produce the immediate cancellation of the certificate without the necessity of any express action on the part of the Commission.

In estimating the depreciation, the effect of the use of the equipment, its actual condition, the age of the model, or other circumstances affecting its value in the market shall be taken into consideration.

The foregoing is likewise applicable to any extension or amendment of certificates actually 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.) We have already ruled that "public interest" furnishes a sufficient standard. (People vs.Fernandez and Trinidad, G. R. No. 45655, promulgated June 15, 1938; People vs. Rosenthal and Osmeña, G. R. Nos. 46076 and 46077, promulgated June 12, 1939, citing New York Central Securities Corporation vs. U.S.A., 287 U.S. 12, 24, 25, 77 Law. ed. 138, 145, 146; Schenchter Poultry Corporation vs. I.S., 295, 540, 79 Law. ed. 1570, 1585; Ferrazzini vs. Gsell, 34 Phil., 697, 711-712.)

Section 8 of Article XIII of the Constitution provides, among other things, that no franchise, certificate, or any other form of authorization for the operation of a public utility shall be "for a longer period than fifty years," and when it was ordained, in section 15 of Commonwealth Act No. 146, as amended by Commonwealth Act No. 454, that the Public Service Commission may prescribed as a condition for the issuance of a certificate that it "shall be valid only for a definite period of time" and, in section 16 (a) that "no such certificates shall be issued for a period of more than fifty years," the National Assembly meant to give effect to the aforesaid constitutional mandate. More than this, it has thereby also declared its will that the period to be fixed by the Public Service Commission shall not be longer than fifty years. All that has been delegated to the Commission, therefore, is the administrative function, involving the use discretion, to carry out the will of the National Assembly having in view, in addition, the promotion of "public interests 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 make the provision in question constitutionally objectionable.

The theory of the separation of powers is designed by its originators to secure action and at the same time to forestall overaction which necessarily results from undue concentration of powers, and thereby obtain efficiency and prevent deposition. Thereby, the "rule of law" was established which narrows the range of governmental action and makes it subject to control by certain devices. As a corollary, we find the rule prohibiting delegation of legislative authority, and from the earliest time American legal authorities have proceeded on the theory that legislative power must be exercised by the legislature alone. It is frankness, however, to confess that as one delves into the mass of judicial pronouncement, he finds a great deal of confusion. One thing, however, is apparent in the 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 to Bracton (De Legius et Consuetedinious Angliae, edited by G. E. Woodbine, Yale University Press, 1922, vol. 2, p. 167) but which is also recognized in principle in the Roman Law (D. 17.18.3), has been made to adapt itself to the complexities of modern governments, giving rise to the adoption, within certain limits, of the principle of "subordinate legislation," not only in the United States and England but in practically all modern governments. (People vs. Rosenthal and Osmeña, G. R. Nos. 46076 and 46077, promulgated June 12, 1939.) Accordingly, 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 toward the delegation of greater powers by the legislature, and toward the approval of the practice by the court. (Dillon Catfish Drainage Dist, v. Bank of Dillon, 141 S. E. 274, 275, 143 S. Ct. 178; State  vs. Knox County, 54 S. W. 2d. 973, 976, 165 Tenn. 319.) In harmony with such growing tendency, this Court, since the decision in the case of Compañia General de Tabacos de Filipinas vs. Board of Public Utility Commissioner (34 Phil., 136), relied upon by the petitioner, has, in instances, extended its seal of approval to the "delegation of greater powers by the legislature." (Inchausti Steamship Co. vs. Public Utility Commissioner, 44 Phil., Autobus Co. vs. De Jesus, 56 Phil., 446; People vs. Fernandez & Trinidad, G. R. No. 45655, promulgated June 15, 1938; People vs. Rosenthal & Osmeña, G. R. Nos. 46076, 46077, promulgated June 12, 1939; and Robb and Hilscher vs. People, G. R. No. 45866, promulgated June 12, 1939.).

Under the fourth paragraph of section 15 of Commonwealth 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 Commonwealth of the Philippines or by any instrumentality thereof upon payment of the cost price of its useful equipment, less reasonable," and "that the certificate shall be valid only for a definite period of time" is expressly made applicable "to any extension or amendment of certificates actually in force" and "to authorizations to renew and increase equipment and properties." We have examined the legislative proceedings on the subject and have found that these conditions were purposely made applicable to existing certificates of public convenience. The history of Commonwealth Act No. 454 reveals that there was an attempt to suppress, by way of amendment, the sentence "and likewise, that the certificate shall be valid only for a definite period of time," but the attempt failed:

x x x           x x x           x x x

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.

x x x           x x x           x x x

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 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 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 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.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

 

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 Board 2 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.

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,

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.

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. CoronaExecutive DirectorCivil Aeronautics BoardPPL Building, 1000 U.N. AvenueErmita, 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 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.

(SGD.) SEDFREY A. ORDONEZSecretary of Justice

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, andSilangan 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.

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.

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 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 being in the public interest, and in accordance with the public convenience and necessity:

(a) The development and utilization of the air potential of the Philippines;

(b) The encouragement and development of an air transportation system properly adapted to the present and future of foreign and domestic commerce of the Philippines, of the Postal Service and of the National Defense;

(c) The regulation of air transportation in such manner as to recognize and preserve the inherent advantages of, assure the highest degree of safety in, and foster sound economic condition in, such transportation, and to improve the relations between, and coordinate transportation by, air carriers;

(d) The promotion of adequate, economical and efficient service by air carriers at reasonable charges, without unjust discriminations, undue preferences or advantages, or unfair or destructive competitive practices;

(e) Competition between air carriers to the extent necessary to assure the sound development of an air transportation system properly adapted to the need of the foreign and domestic commerce of the Philippines, of the Postal Service, and of the National Defense;

(f) To promote safety of flight in air commerce in the Philippines; and,

(g) The encouragement and development of civil aeronautics.

More importantly, the said law has enumerated the requirements to determine the competency of a prospective operator to engage in the public service of air transportation.

Sec. 12. Citizenship requirement. Except as otherwise provided in the Constitution and existing treaty or treaties, a permit authorizing a person to engage in domestic air commerce and/or air transportation shall be issued only to citizens of the Philippines 24

Sec. 21. Issuance of permit. The Board shall issue a permit authorizing the whole or any part of the service covered by the application, if it finds: (1) that the applicant is fit, willing and able to perform such service properly in conformity with the provisions of this Act and the rules, regulations, and requirements issued thereunder; and (2) that such service is required by the public convenience and necessity; otherwise the application shall be denied.

Furthermore, the procedure for the processing of the application of a Certificate of Public Convenience and Necessity had been established to ensure the weeding out of those entities that are not deserving of public service. 25

In sum, respondent Board should now be allowed to continue hearing the application of GrandAir for the issuance of a Certificate of Public Convenience and Necessity, there being no legal obstacle to the exercise of its jurisdiction.

ACCORDINGLY, in view of the foregoing considerations, the Court RESOLVED to DISMISS the instant petition for lack of merit. The respondent Civil Aeronautics Board is hereby DIRECTED to CONTINUE hearing the application of respondent Grand International Airways, Inc. for the issuance of a Certificate of Public Convenience and Necessity.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. L-31379 August 29, 1988

COMPAÑIA MARITIMA, petitioner, vs.COURT OF APPEALS and VICENTE CONCEPCION, respondents.

Rafael Dinglasan for petitioner.

Benjamin J. Molina for private respondent.

 

FERNAN, C.J.:

Petitioner Compañia Maritima seeks to set aside through this petition for review on certiorari the decision 1 of the Court of Appeals dated December 5, 1965, adjudging petitioner liable to private respondent Vicente E. Concepcion for damages in the amount of P24,652.97 with legal interest from the date said decision shall have become final, for petitioner's failure to deliver safely private respondent's payloader, and for costs of suit. The payloader was declared abandoned in favor of petitioner.

The facts of the case are as follows:

Private respondent Vicente E. Concepcion, a civil engineer doing business under the name and style of Consolidated Construction with office address at Room 412, Don Santiago Bldg., Taft Avenue, Manila, had a contract with the Civil Aeronautics Administration (CAA) sometime in 1964 for the construction of the airport in Cagayan de Oro City Misamis Oriental.

Being a Manila — based contractor, Vicente E. Concepcion had to ship his construction equipment to Cagayan de Oro City. Having shipped some of his equipment through petitioner and having settled the balance of P2,628.77 with respect to said shipment, Concepcion negotiated anew with petitioner, thru its collector, Pacifico Fernandez, on August 28, 1964 for the shipment to Cagayan de Oro City of one (1) unit payloader, four (4) units 6x6 Reo trucks and two (2) pieces of water tanks. He was issued Bill of Lading 113 on the same date upon delivery of the equipment at the Manila North Harbor. 2

These equipment were loaded aboard the MV Cebu in its Voyage No. 316, which left Manila on August 30, 1964 and arrived at Cagayan de Oro City in the afternoon of September 1, 1964. The Reo trucks and water tanks were safely unloaded within a few hours after arrival, but while the payloader was about two (2) meters above the pier in the course of unloading, the swivel pin of the heel block of the port block of Hatch No. 2 gave way, causing the payloader to fall. 3 The payloader was damaged and was thereafter taken to petitioner's compound in Cagayan de Oro City.

On September 7, 1964, Consolidated Construction, thru Vicente E. Concepcion, wrote Compañia Maritima to demand a replacement of the payloader which it was considering as a complete loss because of the extent of damage. 4 Consolidated Construction likewise notified petitioner of its claim for damages. Unable to elicit response, the demand was repeated in a letter dated October 2, 1964. 5

Meanwhile, petitioner shipped the payloader to Manila where it was weighed at the San Miguel Corporation. Finding that the payloader weighed 7.5 tons and not 2.5 tons as declared in the B-111 of Lading, petitioner denied the claim for damages of Consolidated Construction in its letter dated October 7, 1964, contending that had Vicente E. Concepcion declared the actual weight of the payloader, damage to their ship as well as to his payloader could have been prevented. 6

To replace the damaged payloader, Consolidated Construction in the meantime bought a new one at P45,000.00 from Bormaheco Inc. on December 3, 1964, and on July 6, 1965., Vicente E. Concepcion filed an action for damages against petitioner with the then Court of First Instance of Manila, Branch VII, docketed as Civil Case No. 61551, seeking to recover damages in the amount of P41,225.00 allegedly suffered for the period of 97 days that he was not able to employ a payloader in the construction job at the rate of P450.00 a day; P34,000.00 representing the cost of the damaged payloader; Pl 1, 000. 00 representing the difference between the cost of the damaged payloader and that of the new payloader; P20,000.00 representing the losses suffered by him due to the diversion of funds to enable him to buy a new payloader; P10,000.00 as attorney's fees; P5,000.00 as exemplary damages; and cost of the suit. 7

After trial, the then Court of First Instance of Manila, Branch VII, dismissed on April 24, 1968 the complaint with costs against therein plaintiff, herein private respondent Vicente E. Concepcion, stating that the proximate cause of the

fall of the payloader was Vicente E. Concepcion's act or omission in having misrepresented the weight of the payloader as 2.5 tons instead of its true weight of 7.5 tons, which underdeclaration was intended to defraud Compañia Maritima of the payment of the freight charges and which likewise led the Chief Officer of the vessel to use the heel block of hatch No. 2 in unloading the payloader. 8

From the adverse decision against him, Vicente E. Concepcion appealed to the Court of Appeals which, on December 5, 1965 rendered a decision, the dispositive portion of which reads:

IN VIEW WHEREOF, judgment must have to be as it is hereby reversed; defendant is condemned to pay unto plaintiff the sum in damages of P24,652.07 with legal interest from the date the present decision shall have become final; the payloader is declared abandoned to defendant; costs against the latter. 9

Hence, the instant petition.

The principal issue in the instant case is whether or not the act of private respondent Vicente E. Concepcion in furnishing petitioner Compañia Maritima with an inaccurate weight of 2.5 tons instead of the payloader's actual weight of 7.5 tons was the proximate and only cause of the damage on the Oliver Payloader OC-12 when it fell while being unloaded by petitioner's crew, as would absolutely exempt petitioner from liability for damages under paragraph 3 of Article 1734 of the Civil Code, which provides:

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:

xxx xxx xxx

(3) Act or omission of the shipper or owner of the goods.

Petitioner claims absolute exemption under this provision upon the reasoning that private respondent's act of furnishing it with an inaccurate weight of the payloader constitutes misrepresentation within the meaning of "act or omission of the shipper or owner of the goods" under the above- quoted article. It likewise faults the respondent Court of Appeals for reversing the decision of the trial court notwithstanding that said appellate court also found that by representing the weight of the payloader to be only 2.5 tons, private respondent had led petitioner's officer to believe that the same was within the 5 tons capacity of the heel block of Hatch No. 2. Petitioner would thus insist that the proximate and only cause of the damage to the payloader was private respondent's alleged misrepresentation of the weight of the machinery in question; hence, any resultant damage to it must be borne by private respondent Vicente E. Concepcion.

The general rule under Articles 1735 and 1752 of the Civil Code is that common carriers are presumed to have been at fault or to have acted negligently in case the goods transported by them are lost, destroyed or had deteriorated. To overcome the presumption of liability for the loss, destruction or deterioration of the goods under Article 1735, the common carriers must prove that they observed extraordinary diligence as required in Article 1733 of the Civil Code. The responsibility of observing extraordinary diligence in the vigilance over the goods is further expressed in Article 1734 of the same Code, the article invoked by petitioner to avoid liability for damages.

Corollary is the rule that mere proof of delivery of the goods in good order to a common carrier, and of their arrival at the place of destination in bad order, makes out prima facie case against the common carrier, so that if no explanation is given as to how the loss, deterioration or destruction of the goods occurred, the common carrier must be held responsible. 10 Otherwise stated, it is incumbent upon the common carrier to prove that the loss, deterioration or destruction was due to accident or some other circumstances inconsistent with its liability.

In the instant case, We are not persuaded by the proferred explanation of petitioner alleged to be the proximate cause of the fall of the payloader while it was being unloaded at the Cagayan de Oro City pier. Petitioner seems to have overlooked the extraordinary diligence required of common carriers in the vigilance over the goods transported by them by virtue of the nature of their business, which is impressed with a special public duty.

Thus, Article 1733 of the Civil Code provides:

Art. 1733. Common carriers, from the nature of their business and for reason of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them according to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735 and 1745, Nos. 5, 6 and 7, ...

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for safe carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage including such methods as their nature requires." 11 Under Article 1736 of the Civil Code, the responsibility to observe extraordinary diligence commences and lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has the right to receive them without prejudice to the provisions of Article 1738.

Where, as in the instant case, petitioner, upon the testimonies of its own crew, failed to take the necessary and adequate precautions for avoiding damage to, or destruction of, the payloader entrusted to it for safe carriage and delivery to Cagayan de Oro City, it cannot be reasonably concluded that the damage caused to the payloader was due to the alleged misrepresentation of private respondent Concepcion as to the correct and accurate weight of the payloader. As found by the respondent Court of Appeals, the fact is that petitioner used a 5-ton capacity lifting apparatus to lift and unload a visibly heavy cargo like a payloader. Private respondent has, likewise, sufficiently established the laxity and carelessness of petitioner's crew in their methods of ascertaining the weight of heavy cargoes offered for shipment before loading and unloading them, as is customary among careful persons.

It must be noted that the weight submitted by private respondent Concepcion appearing at the left-hand portion of Exhibit 8 12 as an addendum to the original enumeration of equipment to be shipped was entered into the bill of lading by petitioner, thru Pacifico Fernandez, a company collector, without seeing the equipment to be shipped. 13 Mr. Mariano Gupana, assistant traffic manager of petitioner, confirmed in his testimony that the company never checked the information entered in the bill of lading. 14 Worse, the weight of the payloader as entered in the bill of lading was assumed to be correct by Mr. Felix Pisang, Chief Officer of MV Cebu. 15

The weights stated in a bill of lading are prima facie evidence of the amount received and the fact that the weighing was done by another will not relieve the common carrier where it accepted such weight and entered it on the bill of lading. 16 Besides, common carriers can protect themselves against mistakes in the bill of lading as to weight by exercising diligence before issuing the same. 17

While petitioner has proven that private respondent Concepcion did furnish it with an inaccurate weight of the payloader, petitioner is nonetheless liable, for the damage caused to the machinery could have been avoided by the exercise of reasonable skill and attention on its part in overseeing the unloading of such a heavy equipment. And circumstances clearly show that the fall of the payloader could have been avoided by petitioner's crew. Evidence on record sufficiently show that the crew of petitioner had been negligent in the performance of its obligation by reason of their having failed to take the necessary precaution under the circumstances which usage has established among careful persons, more particularly its Chief Officer, Mr. Felix Pisang, who is tasked with the over-all supervision of loading and unloading heavy cargoes and upon whom rests the burden of deciding as to what particular winch the unloading of the payloader should be undertaken. 18 While it was his duty to determine the weight of heavy cargoes before accepting them. Mr. Felix Pisang took the bill of lading on its face value and presumed the same to be correct by merely "seeing" it. 19 Acknowledging that there was a "jumbo" in the MV Cebu which has the capacity of lifting 20 to 25 ton cargoes, Mr. Felix Pisang chose not to use it, because according to him, since the ordinary boom has a capacity of 5 tons while the payloader was only 2.5 tons, he did not bother to use the "jumbo" anymore. 20

In that sense, therefore, private respondent's act of furnishing petitioner with an inaccurate weight of the payloader upon being asked by petitioner's collector, cannot be used by said petitioner as an excuse to avoid liability for the damage caused, as the same could have been avoided had petitioner utilized the "jumbo" lifting apparatus which has a capacity of lifting 20 to 25 tons of heavy cargoes. It is a fact known to the Chief Officer of MV Cebu that the payloader was loaded aboard the MV Cebu at the Manila North Harbor on August 28, 1964 by means of a terminal crane. 21 Even if petitioner chose not to take the necessary precaution to avoid damage by checking the correct weight of the payloader, extraordinary care and diligence compel the use of the "jumbo" lifting apparatus as the most prudent course for petitioner.

While the act of private respondent in furnishing petitioner with an inaccurate weight of the payloader cannot successfully be used as an excuse by petitioner to avoid liability to the damage thus caused, said act constitutes a

contributory circumstance to the damage caused on the payloader, which mitigates the liability for damages of petitioner in accordance with Article 1741 of the Civil Code, to wit:

Art. 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of the goods, the proximate cause thereof being the negligence of the common carrier, the latter shall be liable in damages, which however, shall be equitably reduced.

We find equitable the conclusion of the Court of Appeals reducing the recoverable amount of damages by 20% or 1/5 of the value of the payloader, which at the time the instant case arose, was valued at P34,000. 00, thereby reducing the recoverable amount at 80% or 4/5 of P34,000.00 or the sum of P27,200.00. Considering that the freight charges for the entire cargoes shipped by private respondent amounting to P2,318.40 remained unpaid.. the same would be deducted from the P27,000.00 plus an additional deduction of P228.63 representing the freight charges for the undeclared weight of 5 tons (difference between 7.5 and 2.5 tons) leaving, therefore, a final recoverable amount of damages of P24,652.97 due to private respondent Concepcion.

Notwithstanding the favorable judgment in his favor, private respondent assailed the Court of Appeals' decision insofar as it limited the damages due him to only P24,652.97 and the cost of the suit. Invoking the provisions on damages under the Civil Code, more particularly Articles 2200 and 2208, private respondent further seeks additional damages allegedly because the construction project was delayed and that in spite of his demands, petitioner failed to take any steps to settle his valid, just and demandable claim for damages.

We find private respondent's submission erroneous. It is well- settled that an appellee, who is not an appellant, may assign errors in his brief where his purpose is to maintain the judgment on other grounds, but he may not do so if his purpose is to have the judgment modified or reversed, for, in such case, he must appeal. 22 Since private respondent did not appeal from the judgment insofar as it limited the award of damages due him, the reduction of 20% or 1/5 of the value of the payloader stands.

WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals is hereby AFFIRMED in all respects with costs against petitioner. In view of the length of time this case has been pending, this decision is immediately executory.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 147079             December 21, 2004

A.F. SANCHEZ BROKERAGE INC., petitioners, vs.THE HON. COURT OF APPEALS and FGU INSURANCE CORPORATION, respondents.

CARPIO MORALES, J.:

Before this Court on a petition for Certiorari is the appellate court’s Decision1 of August 10, 2000 reversing and setting aside the judgment of Branch 133, Regional Trial Court of Makati City, in Civil Case No. 93-76B which dismissed the complaint of respondent FGU Insurance Corporation (FGU Insurance) against petitioner A.F. Sanchez Brokerage, Inc. (Sanchez Brokerage).

On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal Dutch Airlines at Dusseldorf, Germany oral contraceptives consisting of 86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol tablets and 42,000 Blisters Trinordiol tablets for delivery to Manila in favor of the consignee, Wyeth-Suaco Laboratories, Inc.2The Femenal tablets were placed in 124 cartons and the Nordiol tablets were placed in 20 cartons which were packed together in one (1) LD3 aluminum container, while the Trinordial tablets were packed in two pallets, each of which contained 30 cartons.3

Wyeth-Suaco insured the shipment against all risks with FGU Insurance which issued Marine Risk Note No. 4995 pursuant to Marine Open Policy No. 138.4

Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International Airport (NAIA),5 it was discharged "without exception"6 and

delivered to the warehouse of the Philippine Skylanders, Inc. (PSI) located also at the NAIA for safekeeping.7

In order to secure the release of the cargoes from the PSI and the Bureau of Customs, Wyeth-Suaco engaged the services of Sanchez Brokerage which had been its licensed broker since 1984.8 As its customs broker, Sanchez Brokerage calculates and pays the customs duties, taxes and storage fees for the cargo and thereafter delivers it to Wyeth-Suaco.9

On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of Sanchez Brokerage, paid PSI storage fee amounting to P8,572.35 a receipt for which, Official Receipt No. 016992,10 was issued. On the receipt, another representative of Sanchez Brokerage, M. Sison,11 acknowledged that he received the cargoes consisting of three pieces in good condition.12

Wyeth-Suaco being a regular importer, the customs examiner did not inspect the cargoes13 which were thereupon stripped from the aluminum containers14 and loaded inside two transport vehicles hired by Sanchez Brokerage.15

Among those who witnessed the release of the cargoes from the PSI warehouse were Ruben Alonso and Tony Akas,16 employees of Elite Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo surveyor and insurance claim adjusters firm engaged by Wyeth-Suaco on behalf of FGU Insurance.

Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. in Antipolo City for quality control check.17 The delivery receipt, bearing No. 07037 dated July 29, 1992, indicated that the delivery consisted of one container with 144 cartons of Femenal and Nordiol and 1 pallet containing Trinordiol.18

On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the delivery of the cargoes by affixing his signature on the delivery receipt.19 Upon inspection, however, he, together with Ruben Alonzo of Elite Surveyors, discovered that 44 cartons containing Femenal and Nordiol tablets were in bad order.20 He thus placed a note above his signature on the delivery receipt stating that 44 cartons of oral contraceptives were in bad order. The remaining 160 cartons of oral contraceptives were accepted as complete and in good order.

Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey report21 dated July 31, 1992 stating that 41 cartons of Femenal tablets and 3 cartons of Nordiol tablets were "wetted" (sic).22

The Elite Surveyors later issued Certificate No. CS-0731-1538/9223 attached to which was an "Annexed Schedule" whereon it was indicated that prior to the loading of the cargoes to the broker’s trucks at the NAIA, they were inspected and found to be in "apparent good condition."24 Also noted was that at the time of delivery to the warehouse of Hizon Laboratories Inc., slight to heavy rains fell, which could account for the wetting of the 44 cartons of Femenal and Nordiol tablets.25

On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction Report26 confirming that 38 x 700 blister packs of Femenal tablets, 3 x 700 blister packs of Femenal tablets and 3 x 700 blister packs of Nordiol tablets were heavily damaged with water and emitted foul smell.

On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection27 of 38 cartons of Femenal and 3 cartons of Nordiol on the ground that they were "delivered to Hizon Laboratories with heavy water damaged (sic) causing the cartons to sagged (sic) emitting a foul order and easily attracted flies."28

Wyeth-Suaco later demanded, by letter29 of August 25, 1992, from Sanchez Brokerage the payment ofP191,384.25 representing the value of its loss arising from the damaged tablets.

As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an insurance claim against FGU Insurance which paid Wyeth-Suaco the amount of P181,431.49 in settlement of its claim under Marine Risk Note Number 4995.

Wyeth-Suaco thus issued Subrogation Receipt30 in favor of FGU Insurance.

On demand by FGU Insurance for payment of the amount of P181,431.49 it paid Wyeth-Suaco, Sanchez Brokerage, by letter31 of January 7, 1993, disclaimed liability for the damaged goods, positing that the damage was due to improper and insufficient export packaging; that when the sealed containers were opened outside the PSI warehouse, it was discovered that some of the loose cartons were wet,32 prompting its (Sanchez Brokerage’s) representative Morales to inform the Import-Export Assistant of Wyeth-Suaco, Ramir Calicdan, about the condition of the cargoes but that the latter

advised to still deliver them to Hizon Laboratories where an adjuster would assess the damage.33

Hence, the filing by FGU Insurance of a complaint for damages before the Regional Trial Court of Makati City against the Sanchez Brokerage.

The trial court, by Decision34 of July 29, 1996, dismissed the complaint, holding that the Survey Report prepared by the Elite Surveyors is bereft of any evidentiary support and a mere product of pure guesswork.35

On appeal, the appellate court reversed the decision of the trial court, it holding that the Sanchez Brokerage engaged not only in the business of customs brokerage but also in the transportation and delivery of the cargo of its clients, hence, a common carrier within the context of Article 1732 of the New Civil Code.36

Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to petitioner in good order and condition but were in a damaged state when delivered to Wyeth-Suaco, the appellate court held that Sanchez Brokerage is presumed negligent   and upon it rested the burden of proving that it exercised extraordinary negligence not only in instances when negligence is directly proven but also in those cases when the cause of the damage is not known or unknown.37

The appellate court thus disposed:

IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is GRANTED. The Decision of the Court a quo is REVERSED. Another Decision is hereby rendered in favor of the Appellant and against the Appellee as follows:

1. The Appellee is hereby ordered to pay the Appellant the principal amount of P181, 431.49, with interest thereupon at the rate of 6% per annum, from the date of the Decision of the Court, until the said amount is paid in full;

2. The Appellee is hereby ordered to pay to the Appellant the amount of P20,000.00 as and by way of attorney’s fees; and

3. The counterclaims of the Appellee are DISMISSED.38

Sanchez Brokerage’s Motion for Reconsideration having been denied by the appellate court’s Resolution of December 8, 2000 which was received by petitioner on January 5, 2001, it comes to this Court on petition for certiorari filed on March 6, 2001.

In the main, petitioner asserts that the appellate court committed grave and reversible error tantamount to abuse of discretion when it found petitioner a "common carrier" within the context of Article 1732 of the New Civil Code.

Respondent FGU Insurance avers in its Comment that the proper course of action which petitioner should have taken was to file a petition for review on certiorari since the sole office of a writ of certiorari is the correction of errors of jurisdiction including the commission of grave abuse of discretion amounting to lack or excess of jurisdiction and does not include correction of the appellate court’s evaluation of the evidence and factual findings thereon.

On the merits, respondent FGU Insurance contends that petitioner, as a common carrier, failed to overcome the presumption of negligence, it being documented that petitioner withdrew from the warehouse of PSI the subject shipment entirely in good order and condition.39

The petition fails.

Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless of the nature of the action or proceedings involved, may be appealed to this Court by filing a petition for review, which would be but a continuation of the appellate process over the original case.40

The Resolution of the Court of Appeals dated December 8, 2000 denying the motion for reconsideration of its Decision of August 10, 2000 was received by petitioner on January 5, 2001. Since petitioner failed to appeal within 15 days or on or before January 20, 2001, the appellate court’s decision had become final and executory. The filing by petitioner of a petition for certiorari on March 6, 2001 cannot serve as a substitute for the lost remedy of appeal.

In another vein, the rule is well settled that in a petition for certiorari, the petitioner must prove not merely reversible error but also grave abuse of discretion amounting to lack or excess of jurisdiction.

Petitioner alleges that the appellate court erred in reversing and setting aside the decision of the trial court based on its finding that petitioner is liable for the damage to the cargo as a common carrier.   What petitioner is ascribing is an error of judgment, not of jurisdiction, which is properly the subject of an ordinary appeal.

Where the issue or question involves or affects the wisdom or legal soundness of the decision – not the jurisdiction of the court to render said decision – the same is beyond the province of a petition for certiorari.41 The supervisory jurisdiction of this Court to issue a cert writ cannot be exercised in order to review the judgment of lower courts as to its intrinsic correctness, either upon the law or the facts of the case.42

Procedural technicalities aside, the petition still fails.

The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined under Article 1732 of the Civil Code, to wit:

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.

Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage, himself testified that the services the firm offers include the delivery of goods to the warehouse of the consignee or importer.

ATTY. FLORES:

Q: What are the functions of these license brokers, license customs broker?

WITNESS:

As customs broker, we calculate the taxes that has to be paid in cargos, and those upon approval of the importer, we prepare the entry together for processing and claims from customs and finally deliver the goods to the warehouse of the importer.43

Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who does such carrying only as an ancillary activity.44 The contention, therefore, of petitioner that it is not a common carrier but a customs broker whose principal function is to prepare the correct customs declaration and proper shipping documents as required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary consideration.

In this light, petitioner as a common carrier is mandated to observe, under Article 173345 of the Civil Code, extraordinary diligence in the vigilance over the goods it transports according to all the circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to have acted negligently, unless it proves that it observed extraordinary diligence.46

The concept of "extra-ordinary diligence" was explained in Compania Maritima v. Court of Appeals:47

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristics of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires."48

In the case at bar, it was established that petitioner received the cargoes from the PSI warehouse in NAIA in good order and condition;49 and that upon delivery by petitioner to Hizon Laboratories Inc., some of the cargoes were found to be in bad order, as noted in the Delivery Receipt50 issued by petitioner, and as indicated in the Survey Report of Elite Surveyors51 and the Destruction Report of Hizon Laboratories, Inc.52

In an attempt to free itself from responsibility for the damage to the goods, petitioner posits that they were damaged due to the fault or negligence of the shipper for failing to properly pack them and to the inherent characteristics of the goods53; and that it should not be faulted for following the instructions of

Calicdan of Wyeth-Suaco to proceed with the delivery despite information conveyed to the latter that some of the cartons, on examination outside the PSI warehouse, were found to be wet.54

While paragraph No. 4 of Article 173455 of the Civil Code exempts a common carrier from liability if the loss or damage is due to the character of the goods or defects in the packing or in the containers, the rule is that if the improper packing is known to the carrier or his employees or is apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability for the resulting damage.56

If the claim of petitioner that some of the cartons were already damaged upon delivery to it were true, then it should naturally have received the cargo under protest or with reservations duly noted on the receipt issued by PSI. But it made no such protest or reservation.57

Moreover, as observed by the appellate court, if indeed petitioner’s employees only examined the cargoes outside the PSI warehouse and found some to be wet, they would certainly have gone back to PSI, showed to the warehouseman the damage, and demanded then and there for Bad Order documents or a certification confirming the damage.58 Or, petitioner would have presented, as witness, the employees of the PSI from whom Morales and Domingo took delivery of the cargo to prove that, indeed, part of the cargoes was already damaged when the container was allegedly opened outside the warehouse.59

Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain fell that day. Instead, it asserts that some of the cargoes were already wet on delivery by PSI outside the PSI warehouse but such notwithstanding Calicdan directed Morales to proceed with the delivery to Hizon Laboratories, Inc.

While Calicdan testified that he received the purported telephone call of Morales on July 29, 1992, he failed to specifically declare what time he received the call. As to whether the call was made at the PSI warehouse when the shipment was stripped from the airport containers, or when the cargoes were already in transit to Antipolo, it is not determinable. Aside from that phone call, petitioner admitted that it had no documentary evidence to prove that at the time it received the cargoes, a part of it was wet, damaged or in bad condition.60

The 4-page weather data furnished by PAGASA61 on request of Sanchez Brokerage hardly impresses, no witness having identified it and interpreted the technical terms thereof.

The possibility on the other hand that, as found by Hizon Laboratories, Inc., the oral contraceptives were damaged by rainwater while in transit to Antipolo City is more likely then. Sanchez himself testified that in the past, there was a similar instance when the shipment of Wyeth-Suaco was also found to be wet by rain.

ATTY. FLORES:

Q: Was there any instance that a shipment of this nature, oral contraceptives, that arrived at the NAIA were damaged and claimed by the Wyeth-Suaco without any question?

WITNESS:

A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but Wyeth-Suaco did not claim anything against us.

ATTY. FLORES:

Q: HOW IS IT?

WITNESS:

A: We experienced, there was a time that we experienced that there was a cartoon ( sic )   wetted ( sic ) up to the bottom are wet specially during rainy season.62

Since petitioner received all the cargoes in good order and condition at the time they were turned over by the PSI warehouseman, and upon their delivery to Hizon Laboratories, Inc. a portion thereof was found to be in bad order, it was incumbent on petitioner to prove that it exercised extraordinary diligence in the carriage of the goods. It did not, however. Hence, its presumed negligence under Article 1735 of the Civil Code remains unrebutted.

WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby AFFIRMED.

Costs against petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-9671             August 23, 1957

CESAR L. ISAAC, plaintiff-appellant, vs.A. L. AMMEN TRANSPORTATION CO., INC., defendant-appellee.

Angel S. Gamboa for appellant.Manuel O. Chan for appellee.

BAUTISTA ANGELO, J.:

A. L. Ammen Transportation Co., Inc., hereinafter referred to as defendant, is a corporation engaged in the business of transporting passengers by land for compensation in the Bicol provinces and one of the lines it operates is the one connecting Legaspi City, Albay with Naga City, Camarines Sur. One of the buses which defendant was operating is Bus No. 31. On May 31, 1951, plaintiff boarded said bus as a passenger paying the required fare from Ligao, Albay bound for Pili, Camarines Sur, but before reaching his destination, the bus collided with a motor vehicle of the pick-up type coming from the opposite direction, as a result of which plaintiff's left arm was completely severed and the severed portion fell inside the bus. Plaintiff was rushed to a hospital in Iriga, Camarines Sur where he was given blood transfusion to save his life. After four days, he was transferred to another hospital in Tabaco, Albay, where he under went treatment for three months. He was moved later to the Orthopedic Hospital where he was operated on and stayed there for another two months. For these services, he incurred expenses amounting to P623.40, excluding medical fees which were paid by defendant.

As an aftermath, plaintiff brought this action against defendants for damages alleging that the collision which resulted in the loss of his left arm was mainly due to the gross incompetence and recklessness of the driver of the bus operated by defendant and that defendant incurred in culpa contractual arising from its non-compliance with its obligation to transport plaintiff safely to his, destination. Plaintiff prays for judgment against defendant as follows: (1) P5,000 as expenses for his medical treatment, and P3,000 as the cost of an artificial arm, or a total of P8,000; (2) P6,000 representing loss of earning; (3) P75,000 for diminution of his earning capacity; (4) P50,000 as moral damages; and (5) P10,000 as attorneys' fees and costs of suit.

Defendant set up as special defense that the injury suffered by plaintiff was due entirely to the fault or negligence of the driver of the pick-up car which collided with the bus driven by its driver and to the contributory negligence of plaintiff himself. Defendant further claims that the accident which resulted in the injury of plaintiff is one which defendant could not foresee or, though foreseen, was inevitable.

The after trial found that the collision occurred due to the negligence of the driver of the pick-up car and not to that of the driver of the bus it appearing that the latter did everything he could to avoid the same but that notwithstanding his efforts, he was not able to avoid it. As a consequence, the court dismissed complaint, with costs against plaintiff. This is an appeal from said decision.

It appears that plaintiff boarded a bus of defendant as paying passenger from Ligao, Albay, bound for Pili, Camarines Sur, but before reaching his destination, the bus collided with a pick-up car which was coming from the opposite direction and, as a, result, his left arm was completely severed and fell inside the back part of the bus. Having this background in view, and considering that plaintiff chose to hold defendant liable on its contractual obligation to carry him safely to his place of destination, it becomes important to determine the nature and extent of the liability of a common carrier to a passenger in the light of the law applicable in this jurisdiction.

In this connection, appellant invokes the rule that, "when an action is based on a contract of carriage, as in this case, all that is necessary to sustain

recovery is proof of the existence of the contract of the breach thereof by act or omission", and in support thereof, he cites several Philippine cases.1 With the ruling in mind, appellant seems to imply that once the contract of carriage is established and there is proof that the same was broken by failure of the carrier to transport the passenger safely to his destination, the liability of the former attaches. On the other hand, appellee claims that is a wrong presentation of the rule. It claims that the decisions of this Court in the cases cited do not warrant the construction sought to be placed upon, them by appellant for a mere perusal thereof would show that the liability of the carrier was predicated not upon mere breach of its contract of carriage but upon the finding that its negligence was found to be the direct or proximate cause of the injury complained of. Thus, appellee contends that "if there is no negligence on the part of the common carrier but that the accident resulting in injuries is due to causes which are inevitable and which could not have been avoided or anticipated notwithstanding the exercise of that high degree of care and skill which the carrier is bound to exercise for the safety of his passengers", neither the common carrier nor the driver is liable therefor.

We believe that the law concerning the liability of a common carrier has now suffered a substantial modification in view of the innovations introduced by the new Civil Code. These innovations are the ones embodied in Articles 1733, 1755 and 1756 in so far as the relation between a common carrier and its passengers is concerned, which, for ready reference, we quote hereunder:

ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extra ordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them according to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.

ART. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.

ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755.

The Code Commission, in justifying this extraordinary diligence required of a common carrier, says the following:

A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost deligence of very cautions persons, with due regard for all circumstances. This extraordinary diligence required of common carriers is calculated to protect the passengers from the tragic mishaps that frequently occur in connection with rapid modern transportation. This high standard of care is imperatively demanded by the precariousness of human life and by the consideration that every person must in every way be safeguarded against all injury. (Report of the Code Commission, pp. 35-36)" (Padilla, Civil Code of the Philippines, Vol. IV, 1956 ed., p. 197).

From the above legal provisions, we can make the following restatement of the principles governing the liability of a common carrier: (1) the liability of a carrier is contractual and arises upon breach of its obligation. There is breach if it fails to exert extraordinary diligence according to all circumstances of each case; (2) a carrier is obliged to carry its passenger with the utmost diligence of a very cautious person, having due regard for all the circumstances; (3) a carrier is presumed to be at fault or to have acted negligently in case of death of, or injury to, passengers, it being its duty to prove that it exercised extraordinary diligence; and (4) the carrier is not an insurer against all risks of travel.

The question that now arises is: Has defendant observed extraordinary diligence or the utmost diligence of every cautious person, having due regard for all circumstances, in avoiding the collision which resulted in the injury caused to the plaintiff?

After examining the evidence in connection with how the collision occurred, the lower court made the following finding:

Hemos examinado muy detenidamente las pruebas presentadas en la vista, principalmente, las declaraciones que hemos acotado arriba, y hernos Ilegado a la conclusion de que el demandado ha hecho, todo cuanto estuviere de su parte para evitar el accidente, pero sin embargo, no ha podido evitarlo.

EI hecho de que el demandado, antes del choque, tuvo que hacer pasar su truck encima de los montones de grava que estaban depositados en la orilla del camino, sin que haya ido mas alla, por el grave riesgo que corrian las vidas de sus pasajeros, es prueba concluyente de lo que tenemos dicho, a saber: — que el cuanto esuba de su parte, para evitar el accidente, sin que haya podidoevitardo, por estar fuera de su control.

The evidence would appear to support the above finding. Thus, it appears that Bus No. 31, immediately prior to the collision, was running at a moderate speed because it had just stopped at the school zone of Matacong, Polangui, Albay. The pick-up car was at full speed and was running outside of its proper lane. The driver of the bus, upon seeing the manner in which the pick-up was then running, swerved the bus to the very extreme right of the road until its front and rear wheels have gone over the pile of stones or gravel situated on the rampart of the road. Said driver could not move the bus farther right and run over a greater portion of the pile, the peak of which was about 3 feet high, without endangering the safety of his passengers. And notwithstanding all these efforts, the rear left side of the bus was hit by the pick-up car.

Of course, this finding is disputed by appellant who cannot see eye to eye with the evidence for the appellee and insists that the collision took place because the driver of the bus was going at a fast speed. He contends that, having seen that a car was coming from the opposite direction at a distance which allows the use of moderate care and prudence to avoid an accident, and knowing that on the side of the road along which he was going there was a pile of gravel, the driver of the bus should have stopped and waited for the vehicle from the opposite direction to pass, and should have proceeded only after the other vehicle had passed. In other words, according to appellant, the act of the driver of the bus in squeezing his way through of the bus in squeezing his way through between the oncoming pick-up and the pile of gravel under the circumstances was considered negligent.

But this matter is one of credibility and evaluation of the evidence. This is evidence. This is the function of the trial court. The trial court has already spoken on this matter as we have pointed out above. This is also a matter of appreciation of the situation on the part of the driver. While the position taken by appellant appeals more to the sense of caution that one should observe in a given situation to avoid an accident or mishap, such however can not always be expected from one who is placed suddenly in a predicament where he is not given enough time to take the course of action as he should under ordinary circumstances. One who is placed in such a predicament cannot exercise such coolness or accuracy of judgment as is required of him under ordinary circumstances and he cannot therefore be expected to observe the same judgment, care and precaution as in the latter. For this reason, authorities abound where failure to observe the same degree of care that as ordinary prudent man would exercise under ordinary circumstances when confronted with a sadden emergency was held to be warranted and a justification to exempt the carrier from liability. Thus, it was held that "where a carrier's employee is confronted with a sudden emergency, the fact that he is obliged to act quickly and without a chance for deliberation must be taken into account, and he is held to the some degree of care that he would otherwise be required to exercise in the absence of such emergency but must exercise only such care as any ordinary prudent person would exercise under like circumstances and conditions, and the failure on his part to exercise the best judgement the case renders possible does not establish lack of care and skill on his part which renders the company, liable. . . . (13 C. J. S., 1412; 10 C. J.,970). Considering all the circumstances, we are persuaded to conclude that the driver of the bus has done what a prudent man could have done to avoid the collision and in our opinion this relieves appellee from legibility under our law.

A circumstances which miliates against the stand of appellant is the fact borne out by the evidence that when he boarded the bus in question, he seated himself on the left side thereof resting his left arm on the window sill but with his left elbow outside the window, this being his position in the bus when the collision took place. It is for this reason that the collision resulted in the severance of said left arm from the body of appellant thus doing him a great damage. It is therefore apparent that appellant is guilty of contributory negligence. Had he not placed his left arm on the window sill with a portion thereof protruding outside, perhaps the injury would have been avoided as is the case with the other passenger. It is to be noted that appellant was the only victim of the collision.

It is true that such contributory negligence cannot relieve appellee of its liability but will only entitle it to a reduction of the amount of damage caused (Article 1762, new Civil Code), but this is a circumstance which further militates against the position taken by appellant in this case.

It is the prevailing rule that it is negligence per se for a passenger on a railroad voluntarily or inadvertently to protrude his arm, hand, elbow, or any other part of his body through the window of a moving car beyond the outer edge of the window or outer surface of the car, so as to come in contact with objects or obstacles near the track, and that no recovery can be had for an injury which but

for such negligence would not have been sustained. (10 C. J. 1139)

Plaintiff, (passenger) while riding on an interurban car, to flick the ashes, from his cigar, thrust his hand over the guard rail a sufficient distance beyond the side line of the car to bring it in contact with the trunk of a tree standing beside the track; the force of the blow breaking his wrist. Held, that he was guilty of contributory negligence as a matter of law. (Malakia vs. Rhode Island Co., 89 A., 337.)

Wherefore, the decision appealed from is affirmed, with cost against appellant.

Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Labrador, Concepcion, Endencia and Felix, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 153563             February 07, 2005

NATIONAL TRUCKING AND FORWARDING CORPORATION, petitioner, vs.LORENZO SHIPPING CORPORATION, Respondent.

D E C I S I O N

QUISUMBING, J.:

For review on certiorari are the Decision1 dated January 16, 2002, of the Court of Appeals, in CA-G.R. CV No. 48349, and its Resolution,2 of May 13, 2002, denying the motion for reconsideration of herein petitioner National Trucking and Forwarding Corporation (NTFC). The impugned decision affirmed in toto the judgment3 dated November 14, 1994 of the Regional Trial Court (RTC) of Manila, Branch 53, in Civil Case No. 90-52102.

The undisputed facts, as summarized by the appellate court, are as follows:

On June 5, 1987, the Republic of the Philippines, through the Department of Health (DOH), and the Cooperative for American Relief Everywhere, Inc. (CARE) signed an agreement wherein CARE would acquire from the United States government donations of non-fat dried milk and other food products from January 1, 1987 to December 31, 1989. In turn, the Philippines would transport and distribute the donated commodities to the intended beneficiaries in the country.

The government entered into a contract of carriage of goods with herein petitioner National Trucking and Forwarding Corporation (NTFC). Thus, the latter shipped 4,868 bags of non-fat dried milk through herein respondent Lorenzo Shipping Corporation (LSC) from September to December 1988. The consignee named in the bills of lading issued by the respondent was Abdurahman Jama, petitioner’s branch supervisor in Zamboanga City.

On reaching the port of Zamboanga City, respondent’s agent, Efren Ruste4 Shipping Agency, unloaded the 4,868 bags of non-fat dried milk and delivered the goods to petitioner’s warehouse. Before each delivery, Rogelio Rizada and Ismael Zamora, both delivery checkers of Efren Ruste Shipping Agency, requested Abdurahman to surrender the original bills of lading, but the latter merely presented certified true copies thereof. Upon completion of each delivery, Rogelio and Ismael asked Abdurahman to sign the delivery receipts. However, at times when Abdurahman had to attend to other business before a delivery was completed, he instructed his subordinates to sign the delivery receipts for him.

Notwithstanding the precautions taken, the petitioner allegedly did not receive the subject goods. Thus, in a letter dated March 11, 1989, petitioner NTFC filed a formal claim for non-delivery of the goods shipped through respondent.

In its letter of April 26, 1989, the respondent explained that the cargo had already been delivered to Abdurahman Jama. The petitioner then decided to investigate the loss of the goods. But before the investigation was over, Abdurahman Jama resigned as branch supervisor of petitioner.

Noting but disbelieving respondent’s insistence that the goods were delivered, the government through the DOH, CARE, and NTFC as plaintiffs filed an action for breach of contract of carriage, against respondent as defendant, with the RTC of Manila.

After trial, the RTC resolved the case as follows:

WHEREFORE, judgment is hereby rendered in favor of the defendant and against the plaintiffs, dismissing the latter’s complaint, and ordering the plaintiffs, pursuant to the defendant’s counterclaim, to pay, jointly and solidarily, to the defendant, actual damages in the amount of P50,000.00, and attorney’s fees in the amount ofP70,000.00, plus the costs of suit.

SO ORDERED.5

Dissatisfied with the foregoing ruling, herein petitioner appealed to the Court of Appeals. It faulted the lower court for not holding that respondent failed to deliver the cargo, and that respondent failed to exercise the extraordinary diligence required of common carriers. Petitioner also assailed the lower court for denying its claims for actual, moral, and exemplary damages, and for awarding actual damages and attorney’s fees to the respondent.6

The Court of Appeals found that the trial court did not commit any reversible error. It dismissed the appeal, and affirmed the assailed decision in toto.

Undaunted, petitioner now comes to us, assigning the following errors:

I

THE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO APPRECIATE AND APPLY THE LEGAL STANDARD OF EXTRAORDINARY DILIGENCE IN THE SHIPMENT AND DELIVERY OF GOODS TO THE RESPONDENT AS A COMMON CARRIER, AS WELL AS THE ACCOMPANYING LEGAL PRESUMPTION OF FAULT OR NEGLIGENCE ON THE PART OF THE COMMON CARRIER, IF THE GOODS ARE LOST, DESTROYED OR DETERIORATED, AS REQUIRED UNDER THE CIVIL CODE.

II

THE COURT OF APPEALS GRAVELY ERRED WHEN IT SUSTAINED THE BASELESS AND ARBITRARY AWARD OF ACTUAL DAMAGES AND ATTORNEY’S FEES INASMUCH AS THE ORIGINAL COMPLAINT WAS FILED IN GOOD FAITH, WITHOUT MALICE AND WITH THE BEST INTENTION OF PROTECTING THE INTEREST AND INTEGRITY OF THE GOVERNMENT AND ITS CREDIBILITY AND RELATIONSHIP WITH INTERNATIONAL RELIEF AGENCIES AND DONOR STATES AND ORGANIZATION.7

The issues for our resolution are: (1) Is respondent presumed at fault or negligent as common carrier for the loss or deterioration of the goods? and (2) Are damages and attorney’s fees due respondent?

Anent the first issue, petitioner contends that the respondent is presumed negligent and liable for failure to abide by the terms and conditions of the bills of lading; that Abdurahman Jama’s failure to testify should not be held against petitioner; and that the testimonies of Rogelio Rizada and Ismael Zamora, as employees of respondent’s agent, Efren Ruste Shipping Agency, were biased and could not overturn the legal presumption of respondent’s fault or negligence.

For its part, the respondent avers that it observed extraordinary diligence in the delivery of the goods. Prior to releasing the goods to Abdurahman, Rogelio and Ismael required the surrender of the original bills of lading, and in their absence, the certified true copies showing that Abdurahman was indeed the consignee of the goods. In addition, they required Abdurahman or his designated subordinates to sign the delivery receipts upon completion of each delivery.

We rule for respondent.

Article 17338 of the Civil Code demands that a common carrier observe extraordinary diligence over the goods transported by it. Extraordinary diligence is that extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property or rights.9 This exacting standard imposed on common carriers in a contract of carriage of goods is intended to tilt the scales in favor of the shipper who is at the mercy of the common carrier once the goods have been lodged for shipment. Hence, in case of loss of goods in transit, the common carrier is presumed under the law to have been at fault or negligent.10 However, the presumption of fault or negligence, may be

overturned by competent evidence showing that the common carrier has observed extraordinary diligence over the goods.

In the instant case, we agree with the court a quo that the respondent adequately proved that it exercised extraordinary diligence. Although the original bills of lading remained with petitioner, respondent’s agents demanded from Abdurahman the certified true copies of the bills of lading. They also asked the latter and in his absence, his designated subordinates, to sign the cargo delivery receipts.

This practice, which respondent’s agents testified to be their standard operating procedure, finds support in Article 353 of the Code of Commerce:

ART. 353. . . .

After the contract has been complied with, the bill of lading which the carrier has issued shall be returned to him, and by virtue of the exchange of this title with the thing transported, the respective obligations and actions shall be considered cancelled, ….

In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the carrier, because of its loss or of any other cause, he must give the latter a receipt for the goods delivered, this receipt producing the same effects as the return of the bill of lading. (Emphasis supplied)

Conformably with the aforecited provision, the surrender of the original bill of lading is not a condition precedent for a common carrier to be discharged of its contractual obligation. If surrender of the original bill of lading is not possible, acknowledgment of the delivery by signing the delivery receipt suffices. This is what respondent did.

We also note that some delivery receipts were signed by Abdurahman’s subordinates and not by Abdurahman himself as consignee. Further, delivery checkers Rogelio and Ismael testified that Abdurahman was always present at the initial phase of each delivery, although on the few occasions when Abdurahman could not stay to witness the complete delivery of the shipment, he authorized his subordinates to sign the delivery receipts for him. This, to our mind, is sufficient and substantial compliance with the requirements.

We further note that, strangely, petitioner made no effort to disapprove Abdurahman’s resignation until after the investigation and after he was cleared of any responsibility for the loss of the goods. With Abdurahman outside of its reach, petitioner cannot now pass to respondent what could be Abdurahman’s negligence, if indeed he were responsible.

On the second issue, petitioner submits there is no basis for the award of actual damages and attorney’s fees. It maintains that its original complaint for sum of money with damages for breach of contract of carriage was not fraudulent, in bad faith, nor malicious. Neither was the institution of the action rash nor precipitate. Petitioner avers the filing of the action was intended to protect the integrity and interest of the government and its relationship and credibility with international relief agencies and donor states.

On the other hand, respondent maintains that petitioner’s suit was baseless and malicious because instead of going after its absconding employee, petitioner wanted to recoup its losses from respondent. The trial court and the Court of Appeals were justified in granting actual damages and reasonable attorney’s fees to respondent.

On this point, we agree with petitioner.

The right to litigate should bear no premium. An adverse decision does not ipso facto justify an award of attorney’s fees to the winning party.11 When, as in the instant case, petitioner was compelled to sue to protect the credibility of the government with international organizations, we are not inclined to grant attorney’s fees. We find no ill motive on petitioner’s part, only an erroneous belief in the righteousness of its claim.

Moreover, an award of attorney’s fees, in the concept of damages under Article 2208 of the Civil Code,12 requires factual and legal justifications. While the law allows some degree of discretion on the part of the courts in awarding attorney’s fees and expenses of litigation, the discretion must be exercised with great care approximating as closely as possible, the instances exemplified by the law.13 We have searched but found nothing in petitioner’s suit that justifies the award of attorney’s fees.

Respondent failed to show proof of actual pecuniary loss, hence, no actual damages are due in favor of respondent.14

WHEREFORE, the petition is PARTIALLY GRANTED. The assailed decision and resolution of the Court of Appeals in CA-G.R. CV No. 48349 dated

January 16, 2002 and May 13, 2002 respectively, denying petitioner’s claim for actual, moral and exemplary damages are AFFIRMED. The award of actual damages and attorney’s fees to respondent pursuant to the latter’s counterclaim in the trial court is DELETED.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 166640               July 31, 2009

HERMINIO MARIANO, JR., Petitioner, vs.ILDEFONSO C. CALLEJAS and EDGAR DE BORJA, Respondents.

D E C I S I O N

PUNO, C.J.:

On appeal are the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. CV No. 66891, dated May 21, 2004 and January 7, 2005 respectively, which reversed the Decision3 of the Regional Trial Court (RTC) of Quezon City, dated September 13, 1999, which found respondents jointly and severally liable to pay petitioner damages for the death of his wife.

First, the facts:

Petitioner Herminio Mariano, Jr. is the surviving spouse of Dr. Frelinda Mariano who was a passenger of a Celyrosa Express bus bound for Tagaytay when she met her death. Respondent Ildefonso C. Callejas is the registered owner of Celyrosa Express, while respondent Edgar de Borja was the driver of the bus on which the deceased was a passenger.

At around 6:30 p.m. on November 12, 1991, along Aguinaldo Highway, San Agustin, Dasmariñas, Cavite, the Celyrosa Express bus, carrying Dr. Mariano as its passenger, collided with an Isuzu truck with trailer bearing plate numbers PJH 906 and TRH 531. The passenger bus was bound for Tagaytay while the trailer truck came from the opposite direction, bound for Manila. The trailer truck bumped the passenger bus on its left middle portion. Due to the impact, the passenger bus fell on its right side on the right shoulder of the highway and caused the death of Dr. Mariano and physical injuries to four other passengers. Dr. Mariano was 36 years old at the time of her death. She left behind three minor children, aged four, three and two years.

Petitioner filed a complaint for breach of contract of carriage and damages against respondents for their failure to transport his wife and mother of his three minor children safely to her destination. Respondents denied liability for the death of Dr. Mariano. They claimed that the proximate cause of the accident was the recklessness of the driver of the trailer truck which bumped their bus while allegedly at a halt on the shoulder of the road in its rightful lane. Thus, respondent Callejas filed a third-party complaint against Liong Chio Chang, doing business under the name and style of La Perla Sugar Supply, the owner of the trailer truck, for indemnity in the event that he would be held liable for damages to petitioner.lavvph!l

Other cases were filed. Callejas filed a complaint,4 docketed as Civil Case No. NC-397 before the RTC of Naic, Cavite, against La Perla Sugar Supply and Arcadio Arcilla, the truck driver, for damages he incurred due to the vehicular accident. On September 24, 1992, the said court dismissed the complaint against La Perla Sugar Supply for lack of evidence. It, however, found Arcilla liable to pay Callejas the cost of the repairs of his passenger bus, his lost earnings, exemplary damages and attorney’s fees.5

A criminal case, Criminal Case No. 2223-92, was also filed against truck driver Arcilla in the RTC of Imus, Cavite. On May 3, 1994, the said court convicted truck driver Arcadio Arcilla of the crime of reckless imprudence resulting to homicide, multiple slight physical injuries and damage to property.6

In the case at bar, the trial court, in its Decision dated September 13, 1999, found respondents Ildefonso Callejas and Edgar de Borja, together with Liong Chio Chang, jointly and severally liable to pay petitioner damages and costs of suit. The dispositive portion of the Decision reads:

ACCORDINGLY, the defendants are ordered to pay as follows:

1. The sum of P50,000.00 as civil indemnity for the loss of life;2. The sum of P40,000.00 as actual and compensatory damages;3. The sum of P1,829,200.00 as foregone income;4. The sum of P30,000.00 as moral damages;5. The sum of P20,000.00 as exemplary damages;6. The costs of suit.

SO ORDERED.7

Respondents Callejas and De Borja appealed to the Court of Appeals, contending that the trial court erred in holding them guilty of breach of contract of carriage.

On May 21, 2004, the Court of Appeals reversed the decision of the trial court. It reasoned:

. . . the presumption of fault or negligence against the carrier is only a disputable presumption. It gives in where contrary facts are established proving either that the carrier had exercised the degree of diligence required by law or the injury suffered by the passenger was due to a fortuitous event. Where, as in the instant case, the injury sustained by the petitioner was in no way due to any defect in the means of transport or in the method of transporting or to the negligent or wilful acts of private respondent's employees, and therefore involving no issue of negligence in its duty to provide safe and suitable cars as well as competent employees, with the injury arising wholly from causes created by strangers over which the carrier had no control or even knowledge or could not have prevented, the presumption is rebutted and the carrier is not and ought not to be held liable. To rule otherwise would make the common carrier the insurer of the absolute safety of its passengers which is not the intention of the lawmakers.8

The dispositive portion of the Decision reads:

WHEREFORE, the decision appealed from, insofar as it found defendants-appellants Ildefonso Callejas and Edgar de Borja liable for damages to plaintiff-appellee Herminio E. Mariano, Jr., is REVERSED and SET ASIDE and another one entered absolving them from any liability for the death of Dr. Frelinda Cargo Mariano.9

The appellate court also denied the motion for reconsideration filed by petitioner.

Hence, this appeal, relying on the following ground:

THE DECISION OF THE HONORABLE COURT OF APPEALS, SPECIAL FOURTEENTH DIVISION IS NOT IN ACCORD WITH THE FACTUAL BASIS OF THE CASE.10

The following are the provisions of the Civil Code pertinent to the case at bar:

ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.

ART. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.

ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755.

In accord with the above provisions, Celyrosa Express, a common carrier, through its driver, respondent De Borja, and its registered owner, respondent Callejas, has the express obligation "to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances,"11 and to observe extraordinary diligence in the discharge of its duty. The death of the wife of the petitioner in the course of transporting her to her destination gave rise to the presumption of negligence of the carrier. To overcome the presumption, respondents have to show that they observed extraordinary diligence in the discharge of their duty, or that the accident was caused by a fortuitous event.

This Court interpreted the above quoted provisions in Pilapil v. Court of Appeals.12 We elucidated:

While the law requires the highest degree of diligence from common carriers in the safe transport of their passengers and creates a presumption of

negligence against them, it does not, however, make the carrier an insurer of the absolute safety of its passengers.

Article 1755 of the Civil Code qualifies the duty of extraordinary care, vigilance and precaution in the carriage of passengers by common carriers to only such as human care and foresight can provide. What constitutes compliance with said duty is adjudged with due regard to all the circumstances.

Article 1756 of the Civil Code, in creating a presumption of fault or negligence on the part of the common carrier when its passenger is injured, merely relieves the latter, for the time being, from introducing evidence to fasten the negligence on the former, because the presumption stands in the place of evidence. Being a mere presumption, however, the same is rebuttable by proof that the common carrier had exercised extraordinary diligence as required by law in the performance of its contractual obligation, or that the injury suffered by the passenger was solely due to a fortuitous event.

In fine, we can only infer from the law the intention of the Code Commission and Congress to curb the recklessness of drivers and operators of common carriers in the conduct of their business.

Thus, it is clear that neither the law nor the nature of the business of a transportation company makes it an insurer of the passenger's safety, but that its liability for personal injuries sustained by its passenger rests upon its negligence, its failure to exercise the degree of diligence that the law requires.

In the case at bar, petitioner cannot succeed in his contention that respondents failed to overcome the presumption of negligence against them. The totality of evidence shows that the death of petitioner’s spouse was caused by the reckless negligence of the driver of the Isuzu trailer truck which lost its brakes and bumped the Celyrosa Express bus, owned and operated by respondents.

First, we advert to the sketch prepared by PO3 Magno S. de Villa, who investigated the accident. The sketch13shows the passenger bus facing the direction of Tagaytay City and lying on its right side on the shoulder of the road, about five meters away from the point of impact. On the other hand, the trailer truck was on the opposite direction, about 500 meters away from the point of impact. PO3 De Villa stated that he interviewed De Borja, respondent driver of the passenger bus, who said that he was about to unload some passengers when his bus was bumped by the driver of the trailer truck that lost its brakes. PO3 De Villa checked out the trailer truck and found that its brakes really failed. He testified before the trial court, as follows:

ATTY. ESTELYDIZ:q You pointed to the Isuzu truck beyond the point of impact. Did you investigate why did (sic) the Isuzu truck is beyond the point of impact?a Because the truck has no brakes.COURT:q What is the distance between that circle which is marked as Exh. 1-c to the place where you found the same?a More or less 500 meters.q Why did you say that the truck has no brakes?a I tested it.q And you found no brakes?a Yes, sir.x x xq When you went to the scene of accident, what was the position of Celyrosa bus?a It was lying on its side.COURT:q Right side or left side?a Right side.ATTY. ESTELYDIZ:q On what part of the road was it lying?a On the shoulder of the road.COURT:q How many meters from the point of impact?a Near, about 5 meters.14

His police report bolsters his testimony and states:

Said vehicle 1 [passenger bus] was running from Manila toward south direction when, in the course of its travel, it was hit and bumped by vehicle 2 [truck with trailer] then running fast from opposite direction, causing said vehicle 1 to fall on its side on the road shoulder, causing the death of one and injuries of some passengers thereof, and its damage, after collission (sic), vehicle 2 continiously (sic) ran and stopped at approximately 500 meters away from the piont (sic) of impact.15

In fine, the evidence shows that before the collision, the passenger bus was cruising on its rightful lane along the Aguinaldo Highway when the trailer

truck coming from the opposite direction, on full speed, suddenly swerved and encroached on its lane, and bumped the passenger bus on its left middle portion. Respondent driver De Borja had every right to expect that the trailer truck coming from the opposite direction would stay on its proper lane. He was not expected to know that the trailer truck had lost its brakes. The swerving of the trailer truck was abrupt and it was running on a fast speed as it was found 500 meters away from the point of collision. Secondly, any doubt as to the culpability of the driver of the trailer truck ought to vanish when he pleaded guilty to the charge of reckless imprudence resulting to multiple slight physical injuries and damage to property in Criminal Case No. 2223-92, involving the same incident.1avvph!1

IN VIEW WHEREOF, the petition is DENIED. The Decision dated May 21, 2004 and the Resolution dated January 7, 2005 of the Court of Appeals in CA-G.R. CV No. 66891 are AFFIRMED.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

 

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:

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 — P298,500.00c) To the plaintiff Nicolas Cruz — P154,740.00d) To the plaintiff Inocencio Turla, Sr. — 48,000.002. Dismissing the case against Lino Castro3. Dismissing the third-party complaint against STRONGHOLD4. 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:

. . . 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?

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 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 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.

EN BANC

[G.R. No. L-8194.  July 11, 1956.]

EMERENCIANA M. VDA. DE MEDINA, ET AL., Plaintiffs-Appellees, vs. GUILLERMO CRESENCIA, ET AL., Defendants. GUILLERMO

CRESENCIA, Appellant.

 

D E C I S I O N

REYES, J.B.L., J.:

Appeal by Defendant Guillermo Cresencia from the judgment of the Court of First Instance of Manila in its civil case No. 19890, sentencing Appellant, jointly and severally with his co-Defendant Brigido Avorque, to pay Plaintiffs Emerencia M. Vda. de Medina and her minor children damages in the total amount of P56,000, P5,000 attorneys’ fees, and costs.

It appears that on May 31, 1953, passenger jeepney bearing plate No. TPU-2232 (Manila), driven by Brigido Avorque, smashed into a Meralco post on Azcarraga Street, resulting in the death of Vicente Medina, one of its passengers. A criminal case for homicide through reckless imprudence was filed against Avorque (criminal case No. 22775 of the Court of First Instance

of Manila), to which he pleaded guilty on September 9, 1953. The heirs of the deceased, however, reserved their right to file a separate action for damages, and on June 16, 1953, brought suit against the driver Brigido Avorque and Appellant Guillermo Cresencia, the registered owner and operator of the jeepney in question. Defendant Brigido Avorque did not file any answer; chan roblesvirtualawlibrarywhile DefendantCresencia answered, disclaiming liability on the ground that he had sold the jeepney in question on October 14, 1950 to one Maria A. Cudiamat; chan roblesvirtualawlibrarythat the jeepney had been repeatedly sold by one buyer after another, until the vehicle was purchased on January 29, 1953 by Rosario Avorque, the absolute owner thereof at the time of the accident. In view of Cresencia’s answer,Plaintiffs filed leave, and was allowed, to amend their complaint making Rosario Avorque a co-Defendant; chan roblesvirtualawlibraryand the latter, by way of answer, admitted having purchased the aforesaid jeepney on May 31, 1953, but alleged in defense that she was never the public utility operator thereof. The case then proceeded to trial, during which, after the Plaintiffs had presented their evidence,Defendants Guillermo Cresencia and Rosario Avorque made manifestations admitting that the former was still the registered operator of the jeepney in question in the records of the Motor Vehicles Office and the Public Service Commission, while the latter was the owner thereof at the time of the accident; chan roblesvirtualawlibraryand submitted the case for the decision on the question of who, as between the two, should be held liable to Plaintiffs for damages. The lower court, by Judge Jose Zulueta, held that as far as the public is concerned, Defendant Cresencia, in the eyes of the law, continued to be the legal owner of the jeepney in question; chan roblesvirtualawlibraryand rendered judgment against him, jointly and severally with the driver Brigido Avorque, for P6,000 compensatory damages, P30,000 moral damages, P10,000 exemplary damages, P10,000 nominal damages, P5,000 attorneys fees, and costs, while Defendant Rosario Avorque was absolved from liability. From this judgment, Defendant Cresencia appealed.

We have already held in the case of Montoya vs. Ignacio, 94 Phil., 182 (December 29, 1953), which the court below cited, that the law (section 20 [g], C. A. No. 146 as amended) requires the approval of the Public Service Commission in order that a franchise, or any privilege pertaining thereto, may be sold or leased without infringing the certificate issued to the grantee; chan roblesvirtualawlibraryand that if property covered by the franchise is transferred or leased without this requisite approval, the transfer is not binding against the public or the Service Commission; chan roblesvirtualawlibraryand in contemplation of law, the grantee of record continues to be responsible under the franchise in relation to the Commission and to the public. There we gave the reason for this rule to be as follows:chanroblesvirtuallawlibrary

“ cralaw Since a franchise is personal in nature any transfer or lease thereof should be notified to the Public Service Commission so that the latter may take proper safeguards to protect the interest of the public. In fact, the law requires that, before the approval is granted, there should be a public hearing, with notice to all interested parties, in order that the Commission may determine if there are good and reasonable grounds justifying the transfer or lease of the property covered by the franchise, or if the sale or lease is detrimental to public interest cralaw .”

The above ruling was later reiterated in the cases of Timbol vs. Osias, L-7547, April 30, 1955 and Roque vs. Malibay Transit Inc., L- 8561, November 18, 1955.

As the sale of the jeepney here in question was admittedly without the approval of the Public Service Commission, Appellant herein, Guillermo Cresencia, who is the registered owner and operator thereof, continued to be liable to the Commission and the public for the consequences incident to its operation. Wherefore, the lower court did not err in holding him, and not the buyer Rosario Avorque, responsible for the damages sustained by Plaintiff by reason of the death of Vicente Medina resulting from the reckless negligence of the jeepney’s driver, Brigido Avorque.

Appellant also argues that the basis of Plaintiffs’ action being the employer’s subsidiary liability under the Revised Penal Code for damages arising from his employee’s criminal acts, it isDefendant Rosario Avorque who should answer subsidiarily for the damages sustained byPlaintiffs, since she admits that she, and not Appellant, is the employer of the negligent driver Brigido Avorque. The argument is untenable, because Plaintiffs’ action for damages is independent of the criminal case filed against Brigido Avorque, and based, not on the employer’s subsidiary liability under the Revised Penal Code, but on a breach of the carrier’s contractual obligation to carry his passengers safely to their destination (culpa contractual). And it is also for this reason that there is no need of first proving the insolvency of the driver Brigido Avorque before damages can be recovered from the carrier, for in culpa contractual, the liability of the carrier is not merely subsidiary or secondary, but direct and immediate (Articles 1755, 1756, and 1759, New Civil Code).

The propriety of the damages awarded has not been questioned, Nevertheless, it is patent upon the record that the award of P10,000 by way of nominal damages is untenable as a matter of law, since nominal damages cannot co-exist with compensatory damages. The purpose of nominal damages is to vindicate or recognize a right that has been violated, in order to preclude further contest thereon; chan roblesvirtualawlibrary“and not for the purpose of indemnifying the Plaintiff for any loss suffered by him” (Articles 2221, 2223, new Civil Code.) Since the court below has already awarded compensatory and exemplary damages that are in themselves a judicial recognition thatPlaintiff’s right was violated, the award of nominal damages is

unnecessary and improper. Anyway, ten thousand pesos cannot, in common sense, be deemed “nominal”.

With the modification that the award of P10,000 nominal damages” be eliminated, the decision appealed from is affirmed. Costs against Appellant. SO ORDERED.

Republic of the PhilippinesSUPREME COURTTHIRD DIVISION

G.R. No. 161745 September 30, 2005LEA MER INDUSTRIES, INC., Petitioners, vs.MALAYAN INSURANCE CO., INC.,* Respondent.

D E C I S I O N

PANGANIBAN, J.:

ommon carriers are bound to observe extraordinary diligence in their vigilance over the goods entrusted to them, as required by the nature of their business and for reasons of public policy. Consequently, the law presumes that common carriers are at fault or negligent for any loss or damage to the goods that they transport. In the present case, the evidence submitted by petitioner to overcome this presumption was sorely insufficient.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the October 9, 2002 Decision2and the December 29, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 66028. The challenged Decision disposed as follows:

"WHEREFORE, the appeal is GRANTED. The December 7, 1999 decision of the Regional Trial Court of Manila, Branch 42 in Civil Case No. 92-63159 is hereby REVERSED and SET ASIDE. [Petitioner] is ordered to pay the [herein respondent] the value of the lost cargo in the amount of P565,000.00. Costs against the [herein petitioner]."4

The assailed Resolution denied reconsideration.

The Facts

Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the shipment of 900 metric tons of silica sand valued at P565,000.5 Consigned to Vulcan Industrial and Mining Corporation, the cargo was to be transported from Palawan to Manila. On October 25, 1991, the silica sand was placed on board Judy VII, a barge leased by Lea Mer.6 During the voyage, the vessel sank, resulting in the loss of the cargo.7

Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo.8 To recover the amount paid and in the exercise of its right of subrogation, Malayan demanded reimbursement from Lea Mer, which refused to comply. Consequently, Malayan instituted a Complaint with the Regional Trial Court (RTC) of Manila on September 4, 1992, for the collection of P565,000 representing the amount that respondent had paid Vulcan.9

On October 7, 1999, the trial court dismissed the Complaint, upon finding that the cause of the loss was a fortuitous event.10 The RTC noted that the vessel had sunk because of the bad weather condition brought about by Typhoon Trining. The court ruled that petitioner had no advance knowledge of the incoming typhoon, and that the vessel had been cleared by the Philippine Coast Guard to travel from Palawan to Manila.11

Ruling of the Court of Appeals

Reversing the trial court, the CA held that the vessel was not seaworthy when it sailed for Manila. Thus, the loss of the cargo was occasioned by petitioner’s fault, not by a fortuitous event.12

Hence, this recourse.13

The Issues

Petitioner states the issues in this wise:

"A. Whether or not the survey report of the cargo surveyor, Jesus Cortez, who had not been presented as a witness of the said report during the trial of

this case before the lower court can be admitted in evidence to prove the alleged facts cited in the said report.

"B. Whether or not the respondent, Court of Appeals, had validly or legally reversed the finding of fact of the Regional Trial Court which clearly and unequivocally held that the loss of the cargo subject of this case was caused by fortuitous event for which herein petitioner could not be held liable.

"C. Whether or not the respondent, Court of Appeals, had committed serious error and grave abuse of discretion in disregarding the testimony of the witness from the MARINA, Engr. Jacinto Lazo y Villegal, to the effect that the vessel ‘Judy VII’ was seaworthy at the time of incident and further in disregarding the testimony of the PAG-ASA weather specialist, Ms. Rosa Barba y Saliente, to the effect that typhoon ‘Trining’ did not hit Metro Manila or Palawan."14

In the main, the issues are as follows: (1) whether petitioner is liable for the loss of the cargo, and (2) whether the survey report of Jesus Cortez is admissible in evidence.

The Court’s Ruling

The Petition has no merit.

First Issue:

Liability for Loss of Cargo

Question of Fact

The resolution of the present case hinges on whether the loss of the cargo was due to a fortuitous event. This issue involves primarily a question of fact, notwithstanding petitioner’s claim that it pertains only to a question of law. As a general rule, questions of fact may not be raised in a petition for review.15 The present case serves as an exception to this rule, because the factual findings of the appellate and the trial courts vary.16 This Court meticulously reviewed the records, but found no reason to reverse the CA.

Rule on Common Carriers

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 -- when this service is offered to the public for compensation.17 Petitioner is clearly a common carrier, because it offers to the public its business of transporting goods through its vessels.18

Thus, the Court corrects the trial court’s finding that petitioner became a private carrier when Vulcan chartered it.19 Charter parties are classified as contracts of demise (or bareboat) and affreightment, which are distinguished as follows:

"Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes, in effect, the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer; anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all."20

The distinction is significant, because a demise or bareboat charter indicates a business undertaking that isprivate in character. 21 Consequently, the rights and obligations of the parties to a contract of private carriage are governed principally by their stipulations, not by the law on common carriers.22

The Contract in the present case was one of affreightment, as shown by the fact that it was petitioner’s crew that manned the tugboat M/V Ayalit and controlled the barge Judy VII.23 Necessarily, petitioner was a common carrier, and the pertinent law governs the present factual circumstances.

Extraordinary Diligence Required

Common carriers are bound to observe extraordinary diligence in their vigilance over the goods and the safety of the passengers they transport, as required by the nature of their business and for reasons of public policy.24Extraordinary diligence requires rendering service with the greatest skill and foresight to avoid damage and destruction to the goods entrusted for carriage and delivery.25

Common carriers are presumed to have been at fault or to have acted negligently for loss or damage to the goods that they have transported.26 This

presumption can be rebutted only by proof that they observed extraordinary diligence, or that the loss or damage was occasioned by any of the following causes:27

"(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

"(2) Act of the public enemy in war, whether international or civil;

"(3) Act or omission of the shipper or owner of the goods;

"(4) The character of the goods or defects in the packing or in the containers;

"(5) Order or act of competent public authority."28

Rule on Fortuitous Events

Article 1174 of the Civil Code provides that "no person shall be responsible for a fortuitous event which could not be foreseen, or which, though foreseen, was inevitable." Thus, if the loss or damage was due to such an event, a common carrier is exempted from liability.

Jurisprudence defines the elements of a "fortuitous event" as follows: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to comply with their obligations, must have been independent of human will; (b) the event that constituted the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been free from any participation in the aggravation of the resulting injury to the creditor.29

To excuse the common carrier fully of any liability, the fortuitous event must have been the proximate and only cause of the loss.30 Moreover, it should have exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the fortuitous event.31

Loss in the Instant Case

There is no controversy regarding the loss of the cargo in the present case. As the common carrier, petitioner bore the burden of proving that it had exercised extraordinary diligence to avoid the loss, or that the loss had been occasioned by a fortuitous event -- an exempting circumstance.

It was precisely this circumstance that petitioner cited to escape liability. Lea Mer claimed that the loss of the cargo was due to the bad weather condition brought about by Typhoon Trining.32 Evidence was presented to show that petitioner had not been informed of the incoming typhoon, and that the Philippine Coast Guard had given it clearance to begin the voyage.33 On October 25, 1991, the date on which the voyage commenced and the barge sank, Typhoon Trining was allegedly far from Palawan, where the storm warning was only "Signal No. 1."34

The evidence presented by petitioner in support of its defense of fortuitous event was sorely insufficient. As required by the pertinent law, it was not enough for the common carrier to show that there was an unforeseen or unexpected occurrence. It had to show that it was free from any fault -- a fact it miserably failed to prove.

First, petitioner presented no evidence that it had attempted to minimize or prevent the loss before, during or after the alleged fortuitous event.35 Its witness, Joey A. Draper, testified that he could no longer remember whether anything had been done to minimize loss when water started entering the barge.36 This fact was confirmed during his cross-examination, as shown by the following brief exchange:

"Atty. Baldovino, Jr.:

Other than be[a]ching the barge Judy VII, were there other precautionary measure[s] exercised by you and the crew of Judy VII so as to prevent the los[s] or sinking of barge Judy VII?

x x x x x x x x x

Atty. Baldovino, Jr.:

Your Honor, what I am asking [relates to the] action taken by the officers and crew of tugboat Ayalit and barge Judy VII x x x to prevent the sinking of barge Judy VII?

x x x x x x x x x

Court:

Mr. witness, did the captain of that tugboat give any instruction on how to save the barge Judy VII?

Joey Draper:

I can no longer remember sir, because that happened [a] long time ago."37

Second,  the alleged fortuitous event was not the sole and proximate cause of the loss. There is a preponderance of evidence that the barge was not seaworthy when it sailed for Manila.38 Respondent was able to prove that, in the hull of the barge, there were holes that might have caused or aggravated the sinking.39 Because the presumption of negligence or fault applied to petitioner, it was incumbent upon it to show that there were no holes; or, if there were, that they did not aggravate the sinking.

Petitioner offered no evidence to rebut the existence of the holes. Its witness, Domingo A. Luna, testified that the barge was in "tip-top" or excellent condition,40 but that he had not personally inspected it when it left Palawan.41

The submission of the Philippine Coast Guard’s Certificate of Inspection of Judy VII, dated July 31, 1991, did not conclusively prove that the barge was seaworthy.42 The regularity of the issuance of the Certificate is disputably presumed.43 It could be contradicted by competent evidence, which respondent offered. Moreover, this evidence did not necessarily take into account the actual condition of the vessel at the time of the commencement of the voyage.44

Second Issue:

Admissibility of the Survey Report

Petitioner claims that the Survey Report45 prepared by Jesus Cortez, the cargo surveyor, should not have been admitted in evidence. The Court partly agrees. Because he did not testify during the trial,46 then the Report that he had prepared was hearsay and therefore inadmissible for the purpose of proving the truth of its contents.

The Survey Report Not the Sole Evidence

The facts reveal that Cortez’s Survey Report was used in the testimonies of respondent’s witnesses -- Charlie M. Soriano; and Federico S. Manlapig, a cargo marine surveyor and the vice-president of Toplis and Harding Company.47 Soriano testified that the Survey Report had been used in preparing the final Adjustment Report conducted by their company.48 The final Report showed that the barge was not seaworthy because of the existence of the holes. Manlapig testified that he had prepared that Report after taking into account the findings of the surveyor, as well as the pictures and the sketches of the place where the sinking occurred.49 Evidently, the existence of the holes was proved by the testimonies of the witnesses, not merely by Cortez’ Survey Report.

Rule on Independently

Relevant Statement

That witnesses must be examined and presented during the trial,50 and that their testimonies must be confined to personal knowledge is required by the rules on evidence, from which we quote:

"Section 36. Testimony generally confined to personal knowledge; hearsay excluded. –A witness can testify only to those facts which he knows of his personal knowledge; that is, which are derived from his own perception, except as otherwise provided in these rules."51

On this basis, the trial court correctly refused to admit Jesus Cortez’s Affidavit, which respondent had offered as evidence.52 Well-settled is the rule that, unless the affiant is presented as a witness, an affidavit is considered hearsay.53

An exception to the foregoing rule is that on "independently relevant statements." A report made by a person is admissible if it is intended to prove the tenor, not the truth, of the statements.54 Independent of the truth or the falsity of the statement given in the report, the fact that it has been made is relevant. Here, the hearsay rule does not apply.55

In the instant case, the challenged Survey Report prepared by Cortez was admitted only as part of the testimonies of respondent’s witnesses. The referral to Cortez’s Report was in relation to Manlapig’s final Adjustment Report. Evidently, it was the existence of the Survey Report that was testified

to. The admissibility of that Report as part of the testimonies of the witnesses was correctly ruled upon by the trial court.

At any rate, even without the Survey Report, petitioner has already failed to overcome the presumption of fault that applies to common carriers.

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution are AFFIRMED. Costs against petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 165647               March 26, 2009

PHILIPPINES FIRST INSURANCE CO., INC., Petitioner, vs.WALLEM PHILS. SHIPPING, INC., UNKNOWN OWNER AND/OR UNKNOWN CHARTERER OF THE VESSEL M/S "OFFSHORE MASTER" AND "SHANGHAI FAREAST SHIP BUSINESS COMPANY," Respondents.

D E C I S I O N

TINGA, J.:

Before us is a Rule 45 petition1 which seeks the reversal of the Decision2 and Resolution3 of the Court of Appeals in CA-G.R. No. 61885. The Court of Appeals reversed the Decision4 of the Regional Trial Court (RTC) of Manila, Branch 55 in Civil Case No. 96-80298, dismissing the complaint for sum of money.

The facts of the case follow.5

On or about 2 October 1995, Anhui Chemicals Import & Export Corporation loaded on board M/S Offshore Master a shipment consisting of 10,000 bags of sodium sulphate anhydrous 99 PCT Min. (shipment), complete and in good order for transportation to and delivery at the port of Manila for consignee, L.G. Atkimson Import-Export, Inc. (consignee), covered by a Clean Bill of Lading. The Bill of Lading reflects the gross weight of the total cargo at 500,200 kilograms.6 The Owner and/or Charterer of M/V Offshore Master is unknown while the shipper of the shipment is Shanghai Fareast Ship Business Company. Both are foreign firms doing business in the Philippines, thru its local ship agent, respondent Wallem Philippines Shipping, Inc. (Wallem).7

On or about 16 October 1995, the shipment arrived at the port of Manila on board the vessel M/S Offshore Master from which it was subsequently discharged. It was disclosed during the discharge of the shipment from the carrier that 2,426 poly bags (bags) were in bad order and condition, having sustained various degrees of spillages and losses. This is evidenced by the Turn Over Survey of Bad Order Cargoes (turn-over survey) of the arrastre operator, Asian Terminals, Inc. (arrastre operator).8 The bad state of the bags is also evinced by the arrastre operator’s Request for Bad Order Survey.9

Asia Star Freight Services, Inc. undertook the delivery of the subject shipment from the pier to the consignee’s warehouse in Quezon City,10 while the final inspection was conducted jointly by the consignee’s representative and the cargo surveyor. During the unloading, it was found and noted that the bags had been discharged in damaged and bad order condition. Upon inspection, it was discovered that 63,065.00 kilograms of the shipment had sustained unrecovered spillages, while 58,235.00 kilograms had been exposed and contaminated, resulting in losses due to depreciation and downgrading.11

On 29 April 1996, the consignee filed a formal claim with Wallem for the value of the damaged shipment, to no avail. Since the shipment was insured with petitioner Philippines First Insurance Co., Inc. against all risks in the amount of P2,470,213.50,12 the consignee filed a formal claim13 with petitioner for the damage and losses sustained by the shipment. After evaluating the invoices, the turn-over survey, the bad order certificate and other documents,14 petitioner found the claim to be in order and compensable under the marine insurance policy. Consequently, petitioner paid the

consignee the sum of P397,879.69 and the latter signed a subrogation receipt.

Petitioner, in the exercise of its right of subrogation, sent a demand letter to Wallem for the recovery of the amount paid by petitioner to the consignee. However, despite receipt of the letter, Wallem did not settle nor even send a response to petitioner’s claim.15

Consequently, petitioner instituted an action before the RTC for damages against respondents for the recovery ofP397,879.69 representing the actual damages suffered by petitioner plus legal interest thereon computed from the time of the filing of the complaint until fully paid and attorney’s fees equivalent to 25% of the principal claim plus costs of suit.

In a decision16 dated 3 November 1998, the RTC ordered respondents to pay petitioner P397,879.69 with 6% interest plus attorney’s fees and costs of the suit. It attributed the damage and losses sustained by the shipment to the arrastre operator’s mishandling in the discharge of the shipment. Citing Eastern Shipping Lines, Inc. v. Court of Appeals,17 the RTC held the shipping company and the arrastre operator solidarily liable since both the arrastre operator and the carrier are charged with and obligated to deliver the goods in good order condition to the consignee. It also ruled that the ship functioned as a common carrier and was obliged to observe the degree of care required of a common carrier in handling cargoes. Further, it held that a notice of loss or damage in writing is not required in this case because said goods already underwent a joint inspection or survey at the time of receipt thereof by the consignee, which dispensed with the notice requirement.

The Court of Appeals reversed and set aside the RTC’s decision.18 According to the appellate court, there is no solidary liability between the carrier and the arrastre operator because it was clearly established by the court a quo  that the damage and losses of the shipment were attributed to the mishandling by the arrastre operator in the discharge of the shipment. The appellate court ruled that the instant case falls under an exception recognized inEastern

Shipping Lines.19 Hence, the arrastre operator was held solely liable to the consignee.

Petitioner raises the following issues:

1. Whether or not the Court of Appeals erred in not holding that as a common carrier, the carrier’s duties extend to the obligation to safely discharge the cargo from the vessel;

2. Whether or not the carrier should be held liable for the cost of the damaged shipment;

3. Whether or not Wallem’s failure to answer the extra judicial demand by petitioner for the cost of the lost/damaged shipment is an implied admission of the former’s liability for said goods;

4. Whether or not the courts below erred in giving credence to the testimony of Mr. Talens.

It is beyond question that respondent’s vessel is a common carrier.20 Thus, the standards for determining the existence or absence of the respondent’s liability will be gauged on the degree of diligence required of a common carrier. Moreover, as the shipment was an exercise of international trade, the provisions of the Carriage of Goods

by Sea Act21 (COGSA), together with the Civil Code and the Code of Commerce, shall apply.22

The first and second issues raised in the petition will be resolved concurrently since they are interrelated.

It is undisputed that the shipment was damaged prior to its receipt by the insured consignee. The damage to the shipment was documented by the turn-over survey23 and Request for Bad Order Survey.24 The turn-over survey, in particular, expressly stipulates that 2,426 bags of the shipment were received by the arrastre operator in damaged condition. With these documents, petitioner insists that the shipment incurred damage or losses while still in the care and responsibility of Wallem and before it was turned over and delivered to the arrastre operator.

The trial court, however, found through the testimony of Mr. Maximino Velasquez Talens, a cargo surveyor of Oceanica Cargo Marine Surveyors Corporation, that the losses and damage to the cargo were caused by the mishandling of the arrastre operator. Specifically, that the torn cargo bags resulted from the use of steel hooks/spikes in piling the cargo bags to the pallet board and in pushing the bags by the stevedores of the arrastre operator to the tug boats then to the ports.25 The appellate court affirmed the

finding of mishandling in the discharge of cargo and it served as its basis for exculpating respondents from liability, rationalizing that with the fault of the arrastre operator in the unloading of the cargo established it should bear sole liability for the cost of the damaged/lost cargo.

While it is established that damage or losses were incurred by the shipment during the unloading, it is disputed who should be liable for the damage incurred at that point of transport. To address this issue, the pertinent laws and jurisprudence are examined.

Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods transported by them.26 Subject to certain exceptions enumerated under Article 173427 of the Civil Code, common carriers are responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them.28

For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for the cargo from the time it is turned over to him at the dock or afloat alongside the vessel at the port of loading, until he delivers it on the shore or on the discharging wharf at the port of unloading, unless agreed otherwise. In Standard Oil Co. of New York v. Lopez Castelo,29 the Court interpreted the ship captain’s liability as ultimately that of the shipowner by regarding the captain as the representative of the ship owner.

Lastly, Section 2 of the COGSA provides that under every contract of carriage of goods by sea, the carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities set forth in the Act.30 Section 3 (2) thereof then states that among the carriers’ responsibilities are to properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.

The above doctrines are in fact expressly incorporated in the bill of lading between the shipper Shanghai Fareast Business Co., and the consignee, to wit:

4. PERIOD OF RESPONSIBILITY. The responsibility of the carrier shall commence from the time when the goods are loaded on board the vessel and shall cease when they are discharged from the vessel.

The Carrier shall not be liable of loss of or damage to the goods before loading and after discharging from the vessel, howsoever such loss or damage arises.31

On the other hand, the functions of an arrastre operator involve the handling of cargo deposited on the wharf or between the establishment of the consignee or shipper and the ship's tackle.32 Being the custodian of the goods discharged from a vessel, an arrastre operator's duty is to take good care of the goods and to turn them over to the party entitled to their possession.33

Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or employees should observe the standards and measures necessary to prevent losses and damage to shipments under its custody.34

In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc.35 the Court explained the relationship and responsibility of an arrastre operator to a consignee of a cargo, to quote:

The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator. Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with and obligated to deliver the goods in good condition to the consignee.(Emphasis supplied) (Citations omitted)

The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v. Court of Appeals36 with the clarification that the arrastre operator and the carrier are not always and necessarily solidarily liable as the facts of a case may vary the rule.

Thus, in this case the appellate court is correct insofar as it ruled that an arrastre operator and a carrier may not be held solidarily liable at all times. But the precise question is which entity had custody of the shipment during its unloading from the vessel?

The aforementioned Section 3(2) of the COGSA states that among the carriers’ responsibilities are to properly and carefully load, care for and discharge the goods carried. The bill of lading covering the subject shipment likewise stipulates that the carrier’s liability for loss or damage to the goods ceases after its discharge from the vessel. Article 619 of the Code of Commerce holds a ship captain liable for the cargo from the time it is turned over to him until its delivery at the port of unloading.

In a case decided by a U.S. Circuit Court, Nichimen Company v. M./V. Farland,37 it was ruled that like the duty of seaworthiness, the duty of care of the cargo is non-delegable,38 and the carrier is accordingly responsible for the acts of the master, the crew, the stevedore, and his other agents. It has also been held that it is ordinarily the duty of the master of a vessel to unload the cargo and place it in readiness for delivery to the consignee, and there is an implied obligation that this shall be accomplished with sound machinery, competent hands, and in such manner that no unnecessary injury shall be done thereto.39 And the fact that a consignee is required to furnish persons to assist in unloading a shipment may not relieve the carrier of its duty as to such unloading.40

The exercise of the carrier’s custody and responsibility over the subject shipment during the unloading actually transpired in the instant case during the unloading of the shipment as testified by Mr. Talens, the cargo surveyor, to quote:

Atty. Repol:

- Do you agree with me that Wallem Philippines is a shipping [company]?

A Yes, sir.

Q And, who hired the services of the stevedores?

A The checker of the vessel of Wallem, sir.41

x x x

Q Mr. Witness, during the discharging operation of this cargo, where was the master of the vessel?

A On board the vessel, supervising, sir.

Q And, observed the discharging operation?

A Yes, sir.

Q And, what did the master of the vessel do when the cargo was being unloaded from the vessel?

A He would report to the head checker, sir.

Q He did not send the stevedores to what manner in the discharging of the cargo from the vessel?

A And head checker po and siyang nagpapatakbo ng trabaho sa loob ng barko, sir.42

x x x

Q Is he [the head checker] an employee of the company?

A He is a contractor/checker of Wallem Philippines, sir.43

Moreover, the liability of Wallem is highlighted by Mr. Talen’s notes in the Bad Order Inspection, to wit:

"The bad order torn bags, was due to stevedores[‘] utilizing steel hooks/spikes in piling the cargo to [the] pallet board at the vessel’s cargo holds and at the pier designated area before and after discharged that cause the bags to torn [sic]."44 (Emphasis supplied)

The records are replete with evidence which show that the damage to the bags happened before and after their discharge45 and it was caused by the stevedores of the arrastre operator who were then under the supervision of Wallem.1awphi1.net

It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier. In the instant case, the damage or losses were incurred during the discharge of the shipment while under the supervision of the carrier. Consequently, the carrier is liable for the damage or losses caused to the shipment. As the cost of the actual damage to the subject shipment has long been settled, the trial court’s finding of actual damages in the amount of P397,879.69 has to be sustained.

On the credibility of Mr. Talens which is the fourth issue, the general rule in assessing credibility of witnesses is well-settled:

x x x the trial court's evaluation as to the credibility of witnesses is viewed as correct and entitled to the highest respect because it is more competent to so conclude, having had the opportunity to observe the witnesses' demeanor and deportment on the stand, and the manner in which they gave their testimonies. The trial judge therefore can better determine if such witnesses were telling the truth, being in the ideal position to weigh conflicting testimonies. Therefore, unless the trial judge plainly overlooked certain facts of substance and value which, if considered, might affect the result of the case, his assessment on credibility must be respected.46

Contrary to petitioner’s stance on the third issue, Wallem’s failure to respond to its demand letter does not constitute an implied admission of liability. To borrow the words of Mr. Justice Oliver Wendell Holmes, thus:

A man cannot make evidence for himself by writing a letter containing the statements that he wishes to prove. He does not make the letter evidence by sending it to the party against whom he wishes to prove the facts [stated therein]. He no more can impose a duty to answer a charge than he can impose a duty to pay by sending goods. Therefore a failure to answer such adverse assertions in the absence of further circumstances making an answer requisite or natural has no effect as an admission.47

With respect to the attorney’s fees, it is evident that petitioner was compelled to litigate this matter to protect its interest. The RTC’s award of P20,000.00 as attorney’s fees is reasonable.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated 22 June 2004 and its Resolution dated 11 October 2004 are REVERSED and SET ASIDE. Wallem is ordered to pay petitioner the sum of P397,879.69, with interest thereon at 6% per annum from the filing of the complaint on 7 October 1996 until the judgment becomes final and executory. Thereafter, an interest rate of 12% per annum shall be imposed.48Respondents are also ordered to pay petitioner the amount of P20,000.00 for and as attorney’s fees, together with the costs of the suit.

SO ORDERED.