G.R. No. 101089. April 7, 1993.

ESTRELLITA M. BASCOS, petitioners, vs.COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.

Modesto S. Bascos for petitioner.

Pelaez, Adriano & Gregorio for private respondent.

SYLLABUS

1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER. — Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public." The test to determine a common carrier is "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted." . . . The holding of the Court in De Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of the Civil Code, it held thus: "The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguished between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions."

2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE ABSOLUTE. — Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article 1734. In those cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption . . . The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.

3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER ABSOLVED FROM LIABILITY. — In De Guzman vs. Court of Appeals, the Court held that hijacking, not being included in the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with Article 1745 of the Civil Code which provides: "Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy . . . (6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violences or force, is dispensed with or diminished"; In the same case, the Supreme Court also held that: "Under Article 1745 (6) above, a

common carrier is held responsible — and will not be allowed to divest or to diminish such responsibility — even for acts of strangers like thieves or robbers, except where such thieves or robbers in fact acted "with grave of irresistible threat, violence of force," We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."

4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. — In this case, petitioner herself has made the admission that she was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the same.

5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. — Petitioner presented no other proof of the existence of the contract of lease. He who alleges a fact has the burden of proving it.

6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS WITNESSES. — While the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a witness as could be gleaned from the contents of the petition. Affidavits are not considered the best evidence if the affiants are available as witnesses.

7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO BE. — Granting that the said evidence were not self-serving, the same were not sufficient to prove that the contract was one of lease. It must be understood that a contract is what the law defines it to be and not what it is called by the contracting parties.

D E C I S I O N

CAMPOS, JR., J p:

This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO A. CIPRIANO, doing business under the name CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing business under the name of BASCOS TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion of which is quoted hereunder:

"PREMISES considered, We find no reversible error in the decision appealed from, which is hereby affirmed in toto. Costs against appellant." 1

The facts, as gathered by this Court, are as follows:

Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling contract 2 with Jibfair Shipping Agency Corporation whereby the former bound itself to haul the latter's 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos (petitioner) to transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from the Manila Port Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner failed to deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount of the lost goods in accordance with the contract which stated that:

"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and non-delivery or damages to the cargo during transport at market value, . . ." 3

Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a complaint for a sum of money and damages with writ of preliminary attachment 4 for breach of a contract of carriage. The prayer for a Writ of Preliminary Attachment was supported by an affidavit 5 which contained the following allegations:

"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court, whereby a writ of preliminary attachment may lawfully issue, namely:

"(e) in an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors;"

5. That there is no sufficient security for the claim sought to be enforced by the present action;

6. That the amount due to the plaintiff in the above-entitled case is above all legal counterclaims;"

The trial court granted the writ of preliminary attachment on February 17, 1987.

In her answer, petitioner interposed the following defenses: that there was no contract of carriage since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to Laguna; that CIPTRADE was liable to petitioner in the amount of P11,000.00 for loading the cargo; that the truck carrying the cargo was hijacked along Canonigo St., Paco, Manila on the night of October 21, 1988; that the hijacking was immediately reported to CIPTRADE and that petitioner and the police exerted all efforts to locate the hijacked properties; that after preliminary investigation, an information for robbery and carnapping were filed against Jose Opriano, et al.; and that hijacking, being a force majeure, exculpated petitioner from any liability to CIPTRADE.

After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering the latter to pay the former:

1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS (P156,404.00) as an (sic) for actual damages with legal interest of 12% per cent per annum to be counted from December 4, 1986 until fully paid;

2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and

3. The costs of the suit.

The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by defendant is DENIED for being moot and academic.

SO ORDERED." 6

Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's judgment.

Consequently, petitioner filed this petition where she makes the following assignment of errors; to wit:

"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE OF CARGO TRUCK.

II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE TO FORCE MAJEURE, NAMELY, HIJACKING.

III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT THAT PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE MERITS OF THE CASE." 7

The petition presents the following issues for resolution: (1) was petitioner a common carrier?; and (2) was the hijacking referred to a force majeure?

The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted in her answer that she did business under the name A.M. Bascos Trucking and that said admission dispensed with the presentation by private respondent, Rodolfo Cipriano, of proofs that petitioner was a common carrier. The respondent Court also adopted in toto the trial court's decision that petitioner was a common carrier, Moreover, both courts appreciated the following pieces of evidence as indicators that petitioner was a common carrier: the fact that the truck driver of petitioner, Maximo Sanglay, received the cargo consisting of 400 bags of soya bean meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the truck helper, Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo was placed in petitioner's care.

In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she alleged in this petition that the contract between her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of the truck. She cited as evidence certain affidavits which referred to the contract as "lease". These affidavits were made by Jesus Bascos 8 and by petitioner herself. 9 She further averred that Jesus Bascos confirmed in his testimony his statement that the contract was a lease contract. 10 She also stated that: she was not catering to the general public. Thus, in her answer to the amended complaint, she said that she does business under the same style of A.M. Bascos Trucking, offering her trucks for lease to those who have cargo to move, not to the general public but to a few customers only in view of the fact that it is only a small business. 11

We agree with the respondent Court in its finding that petitioner is a common carrier.

Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public." The test to determine a common carrier is "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted." 12 In this case, petitioner herself has made the admission that she was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the same. 13

But petitioner argues that there was only a contract of lease because they offer their services only to a select group of people and because the private respondents, plaintiffs in the lower court, did not object to the presentation of affidavits by petitioner where the transaction was referred to as a lease contract.

Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is instructive. In referring to Article 1732 of the Civil Code, it held thus:

"The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions."

Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts have dismissed them as self-serving and petitioner contests the conclusion. We are bound by the appellate court's factual conclusions. Yet, granting that the said evidence were not self-serving, the same were not sufficient to prove that the contract was one of lease. It must be understood that a contract is what the law defines it to be and not what it is called by the contracting parties. 15 Furthermore, petitioner presented no other proof of the existence of the contract of lease. He who alleges a fact has the burden of proving it. 16

Likewise, We affirm the holding of the respondent court that the loss of the goods was not due to force majeure.

Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. 17 Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. 18 There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article 1734. 19 In those cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption.

In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from liability for the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held that hijacking, not being included in the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with Article 1745 of the Civil Code which provides:

"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy;

xxx xxx xxx

(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violences or force, is dispensed with or diminished;"

In the same case, 21 the Supreme Court also held that:

"Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to diminish such responsibility — even for acts of strangers like thieves or robbers except where such thieves or robbers in fact acted with grave or irresistible threat, violence or force. We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."

To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial court and the Court of Appeals have concluded that these affidavits were not enough to overcome the presumption. Petitioner's affidavit about the hijacking was based on what had been told her by Juanito Morden. It was not a first-hand account. While it had been admitted in court for lack of objection on the part of private respondent, the respondent Court had discretion in assigning weight to such evidence. We are bound by the conclusion of the appellate court. In a petition for review on certiorari, We are not to determine the probative value of evidence but to resolve questions of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking took place. Thirdly, while the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a witness as could be gleaned from the contents of the petition. Affidavits are not considered the best evidence if the affiants are available as witnesses. 25 The subsequent filing of the information for carnapping and robbery against the accused named in said affidavits did not necessarily mean that the contents of the affidavits were true because they were yet to be determined in the trial of the criminal cases.

The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.

Having affirmed the findings of the respondent Court on the substantial issues involved, We find no reason to disturb the conclusion that the motion to lift/dissolve the writ of preliminary attachment has been rendered moot and academic by the decision on the merits.

In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be sustained. The petition is DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.

G.R. No. L-25599             April 4, 1968

HOME INSURANCE COMPANY, plaintiff-appellee, vs.AMERICAN STEAMSHIP AGENCIES, INC. and LUZON STEVEDORING CORPORATION, defendants, AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellant.

William H. Quasha and Associates for plaintiff-appellee.Ross, Selph, Salcedo and Associates for defendant-appellant.

BENGZON, J.P., J.:

"Consorcio Pesquero del Peru of South America" shipped freight pre-paid at Chimbate, Peru, 21,740 jute bags of Peruvian fish meal through SS Crowborough, covered by clean bills of lading Numbers 1 and 2, both dated January 17, 1963. The cargo, consigned to San Miguel Brewery, Inc., now San Miguel Corporation, and insured by Home Insurance Company for $202,505, arrived in Manila on March 7, 1963 and was discharged into the lighters of Luzon Stevedoring Company. When the cargo was delivered to consignee San Miguel Brewery Inc., there were shortages amounting to P12,033.85, causing the latter to lay claims against Luzon Stevedoring Corporation, Home Insurance Company and the American Steamship Agencies, owner and operator of SS Crowborough.

Because the others denied liability, Home Insurance Company paid the consignee P14,870.71 — the insurance value of the loss, as full settlement of the claim. Having been refused reimbursement by both the Luzon Stevedoring Corporation and American Steamship Agencies, Home Insurance Company, as subrogee to the consignee, filed against them on March 6, 1964 before the Court of First Instance of Manila a complaint for recovery of P14,870.71 with legal interest, plus attorney's fees.

In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the goods in the same quantity and quality that it had received the same from the carrier. It also claimed that plaintiff's claim had prescribed under Article 366 of the Code of Commerce stating that the claim must be made within 24 hours from receipt of the cargo.

American Steamship Agencies denied liability by alleging that under the provisions of the Charter party referred to in the bills of lading, the charterer, not the shipowner, was responsible for any loss or damage of the cargo. Furthermore, it claimed to have exercised due diligence in stowing the goods and that as a mere forwarding agent, it was not responsible for losses or damages to the cargo.

On November 17, 1965, the Court of First Instance, after trial, absolved Luzon Stevedoring Corporation, having found the latter to have merely delivered what it received from the carrier in the same condition and quality, and ordered American Steamship Agencies to pay plaintiff P14,870.71 with legal interest plus P1,000 attorney's fees. Said court cited the following grounds:

(a) The non-liability claim of American Steamship Agencies under the charter party contract is not tenable because Article 587 of the Code of Commerce makes the ship agent also civilly liable for damages in favor of third persons due to the conduct of the captain of the carrier;

(b) The stipulation in the charter party contract exempting the owner from liability is against public policy under Article 1744 of the Civil Code;

(c) In case of loss, destruction or deterioration of goods, common carriers are presumed at fault or negligent under Article 1735 of the Civil Code unless they prove extraordinary diligence, and they cannot by contract exempt themselves from liability resulting from their negligence or that of their servants; and

(d) When goods are delivered to the carrier in good order and the same are in bad order at the place of destination, the carrier is prima facie liable.

Disagreeing with such judgment, American Steamship Agencies appealed directly to Us. The appeal brings forth for determination this legal issue: Is the stipulation in the charter party of the owner's non-liability valid so as to absolve the American Steamship Agencies from liability for loss?

The bills of lading,1 covering the shipment of Peruvian fish meal provide at the back thereof that the bills of lading shall be governed by and subject to the terms and conditions of the charter party, if any, otherwise, the bills of lading prevail over all the agreements.2 On the of the bills are stamped "Freight prepaid as per charter party. Subject to all terms, conditions and exceptions of charter party dated London, Dec. 13, 1962."

A perusal of the charter party3 referred to shows that while the possession and control of the ship were not entirely transferred to the charterer,4 the vessel was chartered to its full and complete capacity (Exh. 3). Furthermore, the, charter had the option to go north or south or vice-versa,5 loading, stowing and discharging at its risk and expense.6 Accordingly, the charter party contract is one of affreightment over the whole vessel rather than a demise. As such, the liability of the shipowner for acts or negligence of its captain and crew, would remain in the absence of stipulation.

Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or damage to the goods caused by personal want of due diligence on its part or its manager to make the vessel in all respects seaworthy and to secure that she be properly manned, equipped and supplied or by the personal act or default of the owner or its manager. Said paragraph, however, exempts the owner of the vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of the captain or crew or some other person employed by the owner on board, for whose acts the owner would ordinarily be liable except for said paragraph..

Regarding the stipulation, the Court of First Instance declared the contract as contrary to Article 587 of the Code of Commerce making the ship agent civilly liable for indemnities suffered by third persons arising from acts or omissions of the captain in the care of the goods and Article 1744 of the Civil Code under which a stipulation between the common carrier and the shipper or owner limiting the liability of the former for loss or destruction of the goods to a degree less than extraordinary diligence is valid provided it be reasonable, just and not contrary to public policy. The release from liability in this case was held unreasonable and contrary to the public policy on common carriers.

The provisions of our Civil Code on common carriers were taken from Anglo-American law. 7 Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier.8 As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy,9 and is deemed valid.

Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void only if the

strict public policy governing common carriers is applied. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party.

And furthermore, in a charter of the entire vessel, the bill of lading issued by the master to the charterer, as shipper, is in fact and legal contemplation merely a receipt and a document of title not a contract, for the contract is the charter party.10 The consignee may not claim ignorance of said charter party because the bills of lading expressly referred to the same. Accordingly, the consignees under the bills of lading must likewise abide by the terms of the charter party. And as stated, recovery cannot be had thereunder, for loss or damage to the cargo, against the shipowners, unless the same is due to personal acts or negligence of said owner or its manager, as distinguished from its other agents or employees. In this case, no such personal act or negligence has been proved.

WHEREFORE, the judgment appealed from is hereby reversed and appellant is absolved from liability to plaintiff. No costs. So ordered.

G.R. No. 98243 July 1, 1992

ALEJANDRO ARADA, doing business under the name and style "SOUTH NEGROS ENTERPRISES", petitioner, vs.HONORABLE COURT OF APPEALS, respondents.

 

PARAS, J.:

This is a petition for review on certiorari which seeks to annul and set aside the decision * of the Court of Appeals dated April 8, 1991 in CA-G.R. CV No. 20597 entitled "San Miguel Corporation v. Alejandro Arada, doing business under the name and style "South Negros Enterprises", reversing the decision of the RTC, Seventh Judicial Region, Branch XII, Cebu City, ordering petitioner to pay the private respondent tho amount of P172,284.80 representing the value of the cargo lost on board the ill-fated, M/L Maya with interest thereon at the legal rate from the date of the filing of the complaint on March 25, 1983 until fully paid, and the costs.

The undisputed facts of the case are as follows: Alejandro Arada, herein petitioner, is the proprietor and operator of the firm South Negros Enterprises which has been organized and established for more than ten (10) years. It is engaged in the business of small scale shipping as a common carrier, servicing the hauling of cargoes of different corporations and companies with the five (5) vessels it was operating (Rollo, p. 121).

On March 24, 1982. petitioner entered into a contract with private respondent to safely transport as a common carrier, cargoes of the latter from San Carlos City, Negros Occidental to Mandaue City using one of petitioner's vessels, M/L Maya. The cargoes of private respondent consisted of 9,824 cases of beer empties valued at P176,824.80, were itemized as follows:

NO. OF CASES

CARGO VALUE

7,515 CS PPW STENIE MTS

P136.773.00

1,542 CS PLW GRANDE MTS

23,438.40

58 CS G.E. PLASTIC MTS

1,276.00

24

CS

PLP MTS 456.00

37 CS CS 673.40

WOODEN MTS

8 CS LAGERLITE PLASTIC MTS

128.00

640 CS STENEI PLASTIC MTS

14,080.00

9,824 CS   P176,824.80

On March 24, 1982, petitioner thru its crew master, Mr. Vivencio Babao, applied for a clearance with the Philippine Coast Guard for M/L Maya to leave the port of San Carlos City, but due to a typhoon, it was denied clearance by SNI Antonio Prestado PN who was then assigned at San Carlos City Coast Guard Detachment (Rollo, p. 122).

On March 25, 1982 M/L Maya was given clearance as there was no storm and the sea was calm. Hence, said vessel left for Mandaue City. While it was navigating towards Cebu, a typhoon developed and said vessel was buffeted on all its sides by big waves. Its rudder was destroyed and it drifted for sixteen (16) hours although its engine was running.

On March 27, 1982 at about 4:00 a.m., the vessel sank with whatever was left of its cargoes. The crew was rescued by a passing pump boat and was brought to Calanggaman Island. Later in the afternoon, they were brought to Palompon, Leyte, where Vivencio Babao filed a marine protest (Rollo, p. 10).

On the basis of such marine protest, the Board of Marine Inquiry conducted a hearing of the sinking of M/L Maya wherein private respondent was duly represented. Said Board made its findings and recommendation dated November 7, 1983, the dispositive portion of which reads as:

WHEREFORE, premises considered, this Board recommends as it is hereby recommended that the owner/operator, officers and crew of M/L Maya be exonerated or absolved from any administrative liability on account of this incident (Exh. 1).

The Board's report containing its findings and recommendation was then forwarded to the headquarters of the Philippine Coast Guard for appropriate action. On the basis of such report, the Commandant of the Philippine Coast Guard rendered a decision dated December 21, 1984 in SBMI Adm. Case No. 88-82 exonerating the owner/operator officers and crew of the ill-fated M/L Maya from any administrative liability on account of said incident (Exh. 2).

On March 25, 1983, Private respondent filed a complaint in the Regional Trial Court its first cause of action being for the recovery of the value of the cargoes anchored on breach of contract of carriage. After due hearing, said court rendered a decision dated July 18, 1988, the dispositive portion of which reads

WHEREFORE, judgment is hereby rendered as follows:

(1) With respect to the first cause of action, claim of plaintiff is hereby dismissed;

(2) Under the second cause of action, defendant must pay plaintiff the sum of P2,000.00;

(3) In the third cause of action, the defendant must pay plaintiff the sum of P2,849.20;

(4) Since the plaintiff has withheld the payment of P12,997.47 due the defendynt, the plaintiff should deduct the amount of P4,849.20 from the P12,997.47 and the balance of P8,148.27 must be paid to the defendant; and

(5) Defendant's counterclaim not having been substantiated by evidence is likewise dismissed. NO COSTS. (Orig. Record, pp. 193-195).

Thereafter, private respondent appealed said decision to the Court of Appeals claiming that the trial court erred in —

(1) holding that nothing was shown that the defendant, or any of his employees who manned the M/L Maya was negligent in any way nor did they fail to observe extraordinary diligence over the cargoes of the plaintiff; and

(2) holding that the sinking of said vessel was caused by the storm, consequently, dismissing the claim of plaintiff in its first cause of action for breach of contract of carriage of goods (Rollo, pp. 33-34; Decision, pp. 3-4).

In its decision Promulgated on April 8, 1991, the Court of Appeals reversed the decision of the court a quo, the dispositive portion and the dispositive part of its decision reads as:

WHEREFORE, that part of the Judgment appeal6d from is REVERSED and the appellee Aleiandro Arada, doing business by the name and style, "South Negros Enterprises", ordered (sic) to pay unto the appellant San Miguel Corporation the amount of P176,824.80 representing the value of the cargo lost on board the ill-fated vessel, M/L Maya, with interest thereon at the legal rate from date of the filing of the complaint on March 25, 1983, until fully paid, and the costs. (Rollo, p. 37)

The Court of Appeals ruled that "in view of his failure to observe extraordinary diligence over the cargo in question and his negligence previous to the sinking of the carrying vessel, as above shown, the appellee is liable to the appellant for the value of the lost cargo.

Hence the present recourse.

On November 20, 1991, this Court gave due course to the petition. The pivotal issue to be resolved is whether or not petitioner is liable for the value of the lost cargoes.

Petitioner contends that it was not in the exercise of its function as a common carrier when it entered into a contract with private respondent,but was then acting as a private carrier not bound by the requirement of extraordinary diligence (Rollo, p. 15) and that the factual findings of the Board of Marine Inquiry and the Special Board of Marine Inquiry are binding and conclusive on the Court (Rollo, pp. 16-17).

Private respondent counters that M/L Maya was in the exercise of its function as a common carrier and its failure to observe the extraordinary diligence required of it in the vigilance over their cargoes makes Petitioner liable for the value of said cargoes.

The petition is devoid of merit.

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

In the case at bar, there is no doubt that petitioner was exercising its function as a common carrier when it entered into a contract with private respondent to carry and transport the latter's cargoes. This fact is best supported by the admission of petitioner's son, Mr. Eric Arada, who testified as the officer-in-charge for operations of South Negros Enterprises in Cebu City. In substance his testimony on January 14, 1985 is as follows:

Q. How many vessels are you operating?

A. There were all in all around five (5).

Q. And you were entering to service hauling of cargoes to different companies, is that correct?

A. Yes, sir.

Q. In one word, the South Negros Enterprises is engaged in the business of common carriers, is that correct?

A. Yes, sir,

Q. And in fact, at the time of the hauling of the San Miguel Beer, it was also in the same category as a common carrier?

A. Yes, sir,

(TSN. pp. 3-4, Jan. 29, 1985)

A common carrier, both from the nature of its business and for insistent reasons of public policy is burdened by law with the duty of exercising extraordinary diligence not only in ensuring the safety of passengers, but in caring for the goods transported by it. The loss or destruction or deterioration of goods turned over to the common carrier for the conveyance to a designated destination raises instantly a presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or damage arises from extreme circumstances such as a natural disaster or calamity ... (Benedicto v. IAC, G.R. No. 70876, July 19, 1990, 187 SCRA 547) (Emphasis supplied).

In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate andonly cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize the loss before, during and after the occurrence of flood, storm or other natural disaster in order that the common carrier may be exempted from liability for the destruction or deterioration of the goods (Article 1739, New Civil Code).

In the instant case, the appellate court was correct in finding that petitioner failed to observe the extraordinary diligence over the cargo in question and he or the master in his employ was negligent previous to the sinking of the carrying vessel. In substance, the decision reads:

... VIVENCIO BABAO, the master of the carrying vessel, knew that there was a typboon coming before his departure but did not check where it was.

xxx xxx xxx

If only for the fact that he was first denied clearance to depart on March 24, 1982, obviously because of a typhoon coming, Babao, as master of the vessel, should have verified first where the typhoon was before departing on March 25, 1982. True, the sea was calm at departure time. But that might be the calm before the storm. Prudence dictates that he should have ascertained first where the storm was before departing as it might be on his path. (Rollo, pp. 35-36)

Respondent court's conclusion as to the negligence of petitioner is supported by evidence. It will be noted that Vivencio Babao knew of the impending typhoon on March 24, 1982 when the Philippine Coast Guard denied M/L Maya the issuance of a clearance to sail. Less than 24 hours elapsed since the time of the denial of said clearance and the time a clearance to sail was finally issued on March 25, 1982. Records will show that Babao did not ascertain where the typhoon was headed by the use of his vessel's barometer and radio (Rorlo, p. 142). Neither did the captain of the vessel monitor and record the weather conditions everyday as required by Art, 612 of the Code of Commerce (Rollo, pp. 142-143). Had he done so while navigating for 31 hours, he could have anticipated the strong winds and big waves and taken shelter (Rollo, pp- 36; 145). His testimony on May 4, 1982 is as follows:

Q. Did you not check on your own where the typhoon was?

A. No. sir. (TSN, May 4, 1982, pp. 58-59)

Noteworthy is the fact that as Per official records of the Climatological Division of the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAG-ASA for brevity) issued by its Chief of Climatological Division, Primitivo G. Ballan, Jr. as to the weather and sea conditions that prevailed in the vicinity of Catmon, Cebu during the period March 25-27, 1982, the sea conditions on March 25, 1982 were slight to rough and the weather conditions then prevailing during those times were cloudy skies with rainshowers and the small waves grew larger and larger, to wit:

(Exh. 3)

A common carrier is obliged to observe extraordinary diligence and the failure of Babao to ascertain the direction of the storm and the weather condition of the path they would be traversing, constitute lack of foresight and minimum vigilance over its cargoes taking into account the surrounding circumstances of the case.

While the goods are in the possession of the carrier, it is but fair that it exercises extraordinary diligence in protecting them from loss or damage, and if loss occurs, the law presumes that it was due to the carrier's fault or negligence; that is necessary to protect the interest of the shipper which is at the mercy of the carrier (Art. 1756, Civil Code, Aboitiz Shipping Corporation v. Court of Appeals, G.R. No. 89757, Aug. 6, 1990, 188 SCRA 387).

Furthermore, the records show that the crew of M/L Maya did not have the required qualifications provided for in P.D. No. 97 or the Philippine Merchant Marine Officers Law, all of whom were unlicensed. While it is true that they were given special permit to man the vessel, such permit was issued at the risk and responsibility of the owner (Rollo, p. 36).

Finally, petitioner claims that the factual findings of the Special Board of Marine Inquiry exonerating the owner/operator, crew officers of the ill-fated vessel M/L Maya from any administrative liability is binding on the court.

In rejecting petitioner's claim, respondent court was correct in ruling that "such exoneration was but with respect to the administrative liability of the owner/operator, officers and crew of the ill-fated" vessel. It could not have meant exoneration of appellee from liability as a common carrier for his failure to observe extraordinary diligence in the vigilance over the goods it was transporting and for the negligent acts or omissions of his employees. Such is the function of the Court, not the Special Board of Marine Inquiry." (Rollo, P. 37, Annex A, p. 7)

The Philippine Merchant Marine Rules and Regulations particularly Chapter XVI thereof entitled "Marine Investigation and Suspension and Revocation Proceedings" prescribes the Rules governing maritime casualties or accidents, the rules and Procedures in administrative investigation of all maritime cases within the jurisdiction or cognizance of the Philippine Coast Guard and the grounds for suspension and revocation of licenses/certificates of marine officers and seamen (1601 — SCOPE); clearly, limiting the jurisdiction of the Board of Marine Inquiry and Special Board of Marine Inquiry to the administrative aspect of marine casualties in so far as it involves the shipowners and officers.

PREMISES CONSIDERED, the appealed decision is AFFIRMED.

SO ORDERED.

G.R. No. 101503 September 15, 1993

PLANTERS PRODUCTS, INC., petitioner, vs.COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA,respondents.

Gonzales, Sinense, Jimenez & Associates for petitioner.

Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.

 

BELLOSILLO, J.:

Does a charter-party 1 between a shipowner and a charterer transform a common carrier into a private one as to negate the civil law presumption of negligence in case of loss or damage to its cargo?

Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued on the date of departure.

On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General Charter 2 was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3Riders to the aforesaid charter-party starting from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively.

Before loading the fertilizer aboard the vessel, four (4) of her holds  4 were all presumably inspected by the charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the charter-party which reads:

16. . . . At loading port, notice of readiness to be accomplished by certificate from National Cargo Bureau inspector or substitute appointed by charterers for his account certifying the vessel's readiness to receive cargo spaces. The vessel's hold to be properly swept, cleaned and dried at the vessel's expense and the vessel to be presented clean for use in bulk to the satisfaction of the inspector before daytime commences. (emphasis supplied)

After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage.  5

Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its steelbodied dump trucks which were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and

conditions of the charter-partly (which provided for an F.I.O.S. clause).  6 The hatches remained open throughout the duration of the discharge. 7

Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to the consignee's warehouse located some fifty (50) meters from the wharf. Midway to the warehouse, the trucks were made to pass through a weighing scale where they were individually weighed for the purpose of ascertaining the net weight of the cargo. The port area was windy, certain portions of the route to the warehouse were sandy and the weather was variable, raining occasionally while the discharge was in progress. 8 The petitioner's warehouse was made of corrugated galvanized iron (GI) sheets, with an opening at the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain spillages of the ferilizer. 9

It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th and 18th).10 A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and dirt. 12

Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to have been contaminated with dirt. 13

Respondent SSA explained that they were not able to respond to the consignee's claim for payment because, according to them, what they received was just a request for shortlanded certificate and not a formal claim, and that this "request" was denied by them because they "had nothing to do with the discharge of the shipment." 14Hence, on 18 July 1975, PPI filed an action for damages with the Court of First Instance of Manila. The defendant carrier argued that the strict public policy governing common carriers does not apply to them because they have become private carriers by reason of the provisions of the charter-party. The court a quo however sustained the claim of the plaintiff against the defendant carrier for the value of the goods lost or damaged when it ruled thus: 15

. . . Prescinding from the provision of the law that a common carrier is presumed negligent in case of loss or damage of the goods it contracts to transport, all that a shipper has to do in a suit to recover for loss or damage is to show receipt by the carrier of the goods and to delivery by it of less than what it received . After that, the burden of proving that the loss or damage was due to any of the causes which exempt him from liability is shipted to the carrier, common or private he may be. Even if the provisions of the charter-party aforequoted are deemed valid, and the defendants considered private carriers, it was still incumbent upon them to prove that the shortage or contamination sustained by the cargo is attributable to the fault or negligence on the part of the shipper or consignee in the loading, stowing, trimming and discharge of the cargo . This they failed to do. By this omission, coupled with their failure to destroy the presumption of negligence against them, the defendants are liable (emphasis supplied).

On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., 17 the appellate court ruled that the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and not a common carrier by reason of the time charterer-party. Accordingly, the Civil Code provisions on common carriers which set forth a presumption of negligence do not find application in the case at bar. Thus —

. . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee to adduce sufficient evidence to prove the negligence of the defendant carrier as alleged in its complaint. It is an old and well settled rule that if the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory manner the facts upon which he bases his claim, the defendant is under no obligation to prove his exception or defense (Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202).

But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause of action, i.e. the alleged negligence of defendant carrier. It appears that the plaintiff was under the impression that it did not have to establish defendant's negligence. Be that as it may, contrary to the trial court's finding, the record of the instant case discloses ample evidence showing that defendant carrier was not negligent in performing its obligation . . . 18 (emphasis supplied).

Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present controversy because the issue raised therein is the validity of a stipulation in the charter-party delimiting the liability of the shipowner for loss or damage to goods cause by want of due deligence on its part or that of its manager to make the vessel seaworthy in all respects, and not whether the presumption of negligence provided under the Civil Code applies only to common carriers and not to private carriers. 19 Petitioner further argues that since the possession and control of the vessel remain with the shipowner, absent any stipulation to the contrary, such shipowner should made liable for the negligence of the captain and crew. In fine, PPI faults the appellate court in not applying the presumption of negligence against respondent carrier, and instead shifting the onus probandi on the shipper to show want of due deligence on the part of the carrier, when he was not even at hand to witness what transpired during the entire voyage.

As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by reason of a charter-party; in the negative, whether the shipowner in the instant case was able to prove that he had exercised that degree of diligence required of him under the law.

It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so, we find it fitting to first define important terms which are relevant to our discussion.

A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; 20 a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight; 21 Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the

charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. 22 In both cases, the charter-party provides for the hire of vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of the ship.

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. 23 The definition extends to carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a public employment and not as a casual occupation. The distinction between a "common or public carrier" and a "private or special carrier" lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier. 24

Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry.  25 In the case of private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice. Moreover, in the case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them.  26 On the contrary, no such presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier.

It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Hardly then can we charge the charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer did not have any control of the means in doing so. This is evident in the present case considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner. 27

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. 28

Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-party exempting the shipowners from liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers. At any rate, the rule in the United States that a ship chartered by a single shipper to carry special cargo is not a common carrier, 29 does not find application in our jurisdiction, for we have observed that the growing concern for safety in the transportation of passengers and /or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules governing common carriers.

We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30 —

As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used to convey the goods of one and of several persons. Where the ship herself is let to a charterer, so that he takes over the charge and control of her, the case is different; the shipowner is not then a carrier. But where her services only are let, the same grounds for imposing a strict responsibility exist, whether he is employed by one or many. The master and the crew are in each case his servants, the freighter in each case is usually without any representative on board the ship; the same opportunities for fraud or collusion occur; and the same difficulty in discovering the truth as to what has taken place arises . . .

In an action for recovery of damages against a common carrier on the goods shipped, the shipper or consignee should first prove the fact of shipment and its consequent loss or damage while the same was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has exercised extraordinary diligence required by law or that the loss, damage or deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability. 31

To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the  prima faciepresumption of negligence.

The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a person to open without the use of the ship's boom. 32

It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel.  33 When M/V "Sun Plum" docked at its berthing place, representatives of the consignee boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the whole operation on rotation basis. 34

Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. This was confirmed by respondent appellate court thus —

. . . Be that as it may, contrary to the trial court's finding, the record of the instant case discloses ample evidence showing that defendant carrier was not negligent in performing its obligations. Particularly, the following testimonies of plaintiff-appellee's own witnesses clearly show absence of negligence by the defendant carrier; that the hull of the vessel at the time of the discharge of the cargo was sealed and nobody could open the same except in the presence of the owner of the cargo and the representatives of the vessel (TSN, 20 July 1977, p. 14); that the cover of the hatches was made of steel and it was overlaid with tarpaulins, three layers of tarpaulins and therefore their contents were protected from the weather (TSN, 5 April 1978, p. 24); and, that to open these hatches,

the seals would have to be broken, all the seals were found to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis supplied).

The period during which private respondent was to observe the degree of diligence required of it as a public carrier began from the time the cargo was unconditionally placed in its charge after the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its destination and its hull was reexamined by the consignee, but prior to unloading. This is clear from the limitation clause agreed upon by the parties in the Addendum to the standard "GENCON" time charter-party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free from all risk and expense to the carrier.  35 Moreover, a shipowner is liable for damage to the cargo resulting from improper stowage only when the stowing is done by stevedores employed by him, and therefore under his control and supervision, not when the same is done by the consignee or stevedores under the employ of the latter. 36

Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction or deterioration of the goods if caused by the charterer of the goods or defects in the packaging or in the containers. The Code of Commerce also provides that all losses and deterioration which the goods may suffer during the transportation by reason of fortuitous event,  force majeure, or the inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon the carrier. 37 The carrier, nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage has established among careful persons. 38

Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working with Atlas Fertilizer, described Urea as a chemical compound consisting mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the temperature inside the hull does not exceed eighty (80) degrees centigrade. Mr. Chupungco further added that in unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation amounting to one percent (1%) against the bill of lading is deemed "normal" or "tolerable." The primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow away some of the materials during the unloading process.

The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an extremely high temperature in its place of storage, or when it comes in contact with water. When Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged portion which is in liquid form still remains potent and usable although no longer saleable in its original market value.

The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical effects of the elements and the grimy condition of the various pieces of equipment used in transporting and hauling it.

The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into the vessel's holds during the voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred while the same was being transported from the ship to the dump trucks and finally to the

consignee's warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bar order cargo" as contained in their report to PPI was just an approximation or estimate made by them after the fertilizer was discharged from the vessel and segregated from the rest of the cargo.

The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo. It rained from time to time at the harbor area while the cargo was being discharged according to the supply officer of PPI, who also testified that it was windy at the waterfront and along the shoreline where the dump trucks passed enroute to the consignee's warehouse.

Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage. More so, with a variable weather condition prevalent during its unloading, as was the case at bar. This is a risk the shipper or the owner of the goods has to face. Clearly, respondent carrier has sufficiently proved the inherent character of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its packaging which further contributed to the loss. On the other hand, no proof was adduced by the petitioner showing that the carrier was remise in the exercise of due diligence in order to minimize the loss or damage to the goods it carried.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the First Instance, now Regional Trial Court, of Manila should be, as it is hereby DISMISSED.

Costs against petitioner.

SO ORDERED.

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 3and 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.

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 — P298,500.00

c) To the plaintiff Nicolas Cruz — P154,740.00

d) To the plaintiff Inocencio Turla, Sr. — 48,000.00

2. Dismissing the case against Lino Castro

3. Dismissing the third-party complaint against STRONGHOLD

4. Dismissing all the counterclaim of the defendants and third-party defendants.

5. Ordering ROCK to reimburse B.A. the total amount of P622,890.00 which the latter is adjudged to pay to the plaintiffs. (p. 46, Rollo)

Respondent Court of Appeals affirmed the appealed disposition in toto through Justice Rasul, with Justices De Pano, Jr. and Imperial concurring, on practically the same grounds arrived at by the court  a quo (p. 28, Rollo). Efforts exerted towards re-evaluation of the adverse were futile (p. 37, Rollo). Hence, the instant petition.

The lower court ascertained after due trial that Rogelio Villar y Amare, the driver of the Isuzu truck, was at fault when the mishap occurred in as much as he was found guilty beyond reasonable doubt of reckless imprudence resulting in triple homicide with multiple physical injuries with damage to property in a decision rendered on February 16, 1984 by the Presiding Judge of Branch 6 of the Regional Trial Court

stationed at Malolos, Bulacan. Petitioner was adjudged liable for damages in as much as the truck was registered in its name during the incident in question, following the doctrine laid down by this Court in Perez vs. Gutierrez (53 SCRA 149 [1973]) and Erezo, et al. vs. Jepte (102 Phil. 103 [1957]). In the same breadth, Rock Component Philippines, Inc. was ordered to reimburse petitioner for any amount that the latter may be adjudged liable to pay herein private respondents as expressly stipulated in the contract of lease between petitioner and Rock Component Philippines, Inc. Moreover, the trial court applied Article 2194 of the new Civil Code on solidary accountability of join tortfeasors insofar as the liability of the driver, herein petitioner and Rock Component Philippines was concerned (pp. 6-7, Decision; pp. 44-45, Rollo).

To the question of whether petitioner can be held responsible to the victim albeit the truck was leased to Rock Component Philippines when the incident occurred, the appellate court answered in the affirmative on the basis of the jurisprudential dogmas which, as aforesaid, were relied upon by the trial court although respondent court was quick to add the caveat embodied in the lease covenant between petitioner and Rock Component Philippines relative to the latter's duty to reimburse any amount which may be adjudged against petitioner (pp. 32-33, Rollo).

Petitioner asseverates that it should not have been haled to court and ordered to respond for the damage in the manner arrived at by both the trial and appellate courts since paragraph 5 of the complaint lodged by the plaintiffs below would indicate that petitioner was not the employer of the negligent driver who was under the control an supervision of Lino Castro at the time of the accident, apart from the fact that the Isuzu truck was in the physical possession of Rock Component Philippines by virtue of the lease agreement.

Aside from casting clouds of doubt on the propriety of invoking the Perez and Erezo doctrines, petitioner continue to persist with the idea that the pronouncements of this Court in Duavit vs. Court of Appeals (173 SCRA 490 [1989]) and Duquillo vs. Bayot (67 Phil 131 [1939]) dovetail with the factual and legal scenario of the case at hand. Furthermore, petitioner assumes, given the so-called  hiatus on the basis for the award of damages as decreed by the lower and appellate courts, that Article 2180 of the new Civil Code on vicarious liability will divest petitioner of any responsibility absent as there is any employer-employee relationship between petitioner and the driver.

Contrary to petitioner's expectations, the recourse instituted from the rebuffs it encountered may not constitute a sufficient foundation for reversal of the impugned judgment of respondent court. Petitioner is of the impression that the Perez and Erezo cases are inapplicable due to the variance of the generative facts in said cases as against those obtaining in the controversy at bar. A contrario, the lesson imparted by Justice Labrador in Erezo is still good law, thus:

. . . 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.

G.R. No. L-8095             March 31, 1915

F.C. FISHER, plaintiff, vs.YANGCO STEAMSHIP COMPANY, J.S. STANLEY, as Acting Collector of Customs of the Philippine Islands, IGNACIO VILLAMOR, as Attorney-General of the Philippine Islands, and W.H. BISHOP, as prosecuting attorney of the city of Manila, respondents.

Haussermann, Cohn and Fisher for plaintiff.Office of the Solicitor-General Harvey for respondents.

CARSON, J.:

The real question involved in these proceedings is whether the refusal of the owners and officers of a steam vessel, duly licensed to engage in the coastwise trade of the Philippine Islands and engaged in that trade as a common carrier, to accept for carriage "dynamite, powder or other explosives" from any and all shippers who may offer such explosives for carriage can be held to be a lawful act without regard to any question as to the conditions under which such explosives are offered to carriage, or as to the suitableness of the vessel for the transportation of such explosives, or as to the possibility that the refusal to accept such articles of commerce in a particular case may have the effect of subjecting any person or locality or the traffic in such explosives to an undue, unreasonable or unnecessary prejudice or discrimination.

Summarized briefly, the complaint alleges that plaintiff is a stockholder in the Yangco Steamship Company, the owner of a large number of steam vessels, duly licensed to engage in the coastwise trade of the Philippine Islands; that on or about June 10, 1912, the directors of the company adopted a resolution which was thereafter ratified and affirmed by the shareholders of the company, "expressly declaring and providing that the classes of merchandise to be carried by the company in its business as a common carrier do not include dynamite, powder or other explosives, and expressly prohibiting the officers, agents and servants of the company from offering to carry, accepting for carriage said dynamite, powder or other explosives;" that thereafter the respondent Acting Collector of Customs demanded and required of the company the acceptance and carriage of such explosives; that he has refused and suspended the issuance of the necessary clearance documents of the vessels of the company unless and until the company consents to accept such explosives for carriage; that plaintiff is advised and believes that should the company decline to accept such explosives for carriage, the respondent Attorney-General of the Philippine Islands and the respondent prosecuting attorney of the city of Manila intend to institute proceedings under the penal provisions of sections 4, 5, and 6 of Act No. 98 of the Philippine Commission against the company, its managers, agents and servants, to enforce the requirements of the Acting Collector of Customs as to the acceptance of such explosives for carriage; that notwithstanding the demands of the plaintiff stockholder, the manager, agents and servants of the company decline and refuse to cease the carriage of such explosives, on the ground that by reason of the severity of the penalties with which they are threatened upon failure to carry such explosives, they cannot subject themselves to "the ruinous consequences which would inevitably result" from failure on their part to obey the demands and requirements of the Acting Collector of Customs as to the acceptance for carriage of explosives; that plaintiff believes that the Acting Collector of Customs erroneously construes the provisions of Act No. 98 in holding that they require the company to accept such explosives for carriage notwithstanding the above mentioned resolution of the directors and stockholders of the company, and that if the Act does in fact require the company to carry such explosives it is to that extent unconstitutional and void; that notwithstanding this belief of complainant as to the true meaning of the Act, the questions involved cannot be raised by the refusal of the company or its agents to comply with the demands of the Acting Collector of Customs, without the risk of irreparable loss and damage resulting from his refusal to

facilitate the documentation of the company's vessels, and without assuming the company to test the questions involved by refusing to accept such explosives for carriage.

The prayer of the complaint is as follows:

Wherefore your petitioner prays to this honorable court as follows:

First. That to the due hearing of the above entitled action be issued a writ of prohibition perpetually restraining the respondent Yangco Steamship Company, its appraisers, agents, servants or other representatives from accepting to carry and from carrying, in steamers of said company dynamite, powder or other explosive substance, in accordance with the resolution of the board of directors and of the shareholders of said company.

Second. That a writ of prohibition be issued perpetually enjoining the respondent J.S. Stanley as Acting Collector of Customs of the Philippine Islands, his successors, deputies, servants or other representatives, from obligating the said Yangco Steamship Company, by any means whatever, to carry dynamite, powder or other explosive substance.

Third. That a writ of prohibition be issued perpetually enjoining the respondent Ignacio Villamor as Attorney-General of the Philippine Islands, and W.H. Bishop as prosecuting attorney of the city of Manila, their deputies representatives or employees, from accusing the said Yangco Steamship Company, its officers, agents or servants, of the violation of Act No. 98 by reason of the failure or omission of the said company to accept for carriage out to carry dynamite powder or other explosive.

Fourth. That the petitioner be granted such other remedy as may be meet and proper.

To this complaint the respondents demurred, and we are of opinion that the demurrer must be sustained, on the ground that the complaint does not set forth facts sufficient to constitute a cause of action.

It will readily be seen that plaintiff seeks in these proceedings to enjoin the steamship company from accepting for carriage on any of its vessels, dynamite, powder or other explosives, under any conditions whatsoever; to prohibit the Collector of Customs and the prosecuting officers of the government from all attempts to compel the company to accept such explosives for carriage on any of its vessels under any conditions whatsoever; and to prohibit these officials from any attempt to invoke the penal provisions of Act No. 98, in any case of a refusal by the company or its officers so to do; and this without regard to the conditions as to safety and so forth under which such explosives are offered for carriage, and without regard also to any question as to the suitableness for the transportation of such explosives of the particular vessel upon which the shipper offers them for carriage; and further without regard to any question as to whether such conduct on the part of the steamship company and its officers involves in any instance an undue, unnecessary or unreasonable discrimination to the prejudice of any person, locality or particular kind of traffic.

There are no allegations in the complaint that for some special and sufficient reasons all or indeed any of the company's vessels are unsuitable for the business of transporting explosives; or that shippers have declined or will in future decline to comply with such reasonable regulations and to take such reasonable precautions as may be necessary and proper to secure the safety of the vessels of the company in transporting such explosives. Indeed the contention of petitioner is that a common carrier in the Philippine Islands may decline to accept for carriage any shipment of merchandise of a class which it expressly or impliedly declines to accept from all shippers alike, because as he contends "the duty of a

common carrier to carry for all who offer arises from the public profession he has made, and limited by it."

In support of this contention counsel cites for a number of English and American authorities, discussing and applying the doctrine of the common law with reference to common carriers. But it is unnecessary now to decide whether, in the absence of statute, the principles on which the American and English cases were decided would be applicable in this jurisdiction. The duties and liabilities of common carriers in this jurisdiction are defined and fully set forth in Act No. 98 of the Philippine Commission, and until and unless that statute be declared invalid or unconstitutional, we are bound by its provisions.

Sections 2, 3 and 4 of the Act are as follows:

SEC. 2. It shall be unlawful for any common carrier engaged in the transportation of passengers or property as above set forth to make or give any unnecessary or unreasonable preference or advantage to any particular person, company, firm, corporation or locality, or any particular kind of traffic in any respect whatsoever, or to subject any particular person, company, firm, corporation or locality, or any particular kind of traffic, to undue or unreasonable prejudice or discrimination whatsoever, and such unjust preference or discrimination is also hereby prohibited and declared to be unlawful.

SEC. 3. No common carrier engaged in the carriage of passengers or property as aforesaid shall, under any pretense whatsoever, fail or refuse to receive for carriage, and as promptly as it is able to do so without discrimination, to carry any person or property offering for carriage, and in the order in which such persons or property are offered for carriage, nor shall any such common carrier enter into any arrangement, contract or agreement with any other person or corporation whereby the latter is given an exclusive or preferential or monopolize the carriage any class or kind of property to the exclusion or partial exclusion of any other person or persons, and the entering into any such arrangement, contract or agreement, under any form or pretense whatsoever, is hereby prohibited and declared to be unlawful.

SEC. 4. Any willful violation of the provisions of this Act by any common carrier engaged in the transportation of passengers or property as hereinbefore set forth is hereby declared to be punishable by a fine not exceeding five thousand dollars money of the United States, or by imprisonment not exceeding two years, or both, within the discretion of the court.

The validity of this Act has been questioned on various grounds, and it is vigorously contended that in so far as it imposes any obligation on a common carrier to accept for carriage merchandise of a class which he makes no public profession to carry, or which he has expressly or impliedly announced his intention to decline to accept for carriage from all shippers alike, it is ultra vires, unconstitutional and void.

We may dismiss without extended discussion any argument or contention as to the invalidity of the statute based on alleged absurdities inherent in its provisions or on alleged unreasonable or impossible requirements which may be read into it by a strained construction of its terms.

We agree with counsel for petitioner that the provision of the Act which prescribes that, "No common carrier ... shall, under any pretense whatsoever, fail or refuse to receive for carriage ... to carry any person or property offering for carriage," is not to be construed in its literal sense and without regard to the context, so as to impose an imperative duty on all common carriers to accept for carriage, and to carry all and any kind of freight which may be offered for carriage without regard to the facilities which they may have at their disposal. The legislator could not have intended and did not intend to prescribe that a

common carrier running passenger automobiles for hire must transport coal in his machines; nor that the owner of a tank steamer, expressly constructed in small watertight compartments for the carriage of crude oil must accept common carrier must accept and carry contraband articles, such as opium, morphine, cocaine, or the like, the mere possession of which is declared to be a criminal offense; nor that common carriers must accept eggs offered for transportation in paper parcels or any merchandise whatever do defectively packed as to entail upon the company unreasonable and unnecessary care or risks.

Read in connection with its context this, as well as all the other mandatory and prohibitory provisions of the statute, was clearly intended merely to forbid failures or refusals to receive persons or property for carriage involving any "unnecessary or unreasonable preference or advantage to any particular person, company, firm, corporation, or locality, or any particular kind of traffic in any respect whatsoever," or which would "subject any particular person, company, firm, corporation or locality, or any particular kind of traffic to any undue or unreasonable prejudice or discrimination whatsoever."

The question, then, of construing and applying the statute, in cases of alleged violations of its provisions, always involves a consideration as to whether the acts complained of had the effect of making or giving an "unreasonable or unnecessary preference or advantage" to any person, locality or particular kind of traffic, or of subjecting any person, locality, or particular kind of traffic to any undue or unreasonable prejudice or discrimination. It is very clear therefore that the language of the statute itself refutes any contention as to its invalidity based on the alleged unreasonableness of its mandatory or prohibitory provisions.

So also we may dismiss without much discussion the contentions as to the invalidity of the statute, which are based on the alleged excessive severity of the penalties prescribed for violation of its provisions. Upon general principles it is peculiarly and exclusively within the province of the legislator to prescribe the pains and penalties which may be imposed upon persons convicted of violations of the laws in force within his territorial jurisdiction. With the exercise of his discretion in this regard where it is alleged that excessive fines or cruel and unusual punishments have been prescribed, and even in such cases the courts will not presume to interfere in the absence of the clearest and most convincing argument and proof in support of such contentions. (Weems vs. United States, 217 U.S., 349; U.S. vs. Pico, 18 Phil. Rep., 386.) We need hardly add that there is no ground upon which to rest a contention that the penalties prescribed in the statute under consideration are either excessive or cruel and unusual, in the sense in which these terms are used in the organic legislation in force in the Philippine Islands.

But it is contended that on account of the penalties prescribed the statute should be held invalid upon the principles announced in Ex parte Young (209 U.S., 123, 147, 148); Cotting vs. Goddard (183 U.S., 79, 102); Mercantile Trust Co. vs. Texas Co. (51 Fed., 529); Louisville Ry. vs. McCord (103 Fed., 216); Cons. Gas Co. vs.Mayer (416 Fed., 150). We are satisfied however that the reasoning of those cases is not applicable to the statute under consideration. The principles announced in those decisions are fairly indicated in the following citations found in petitioner's brief:

But when the legislature, in an effort to prevent any inquiry of the validity of a particular statute, so burdens any challenge thereof in the courts that the party affected is necessarily constrained to submit rather than take the chances of the penalties imposed, then it becomes a serious question whether the party is not deprived of the equal protection of the laws. (Cotting vs. Goddard, 183 U. S., 79, 102.)

It may therefore be said that when the penalties for disobedience are by fines so enormous and imprisonment so severe as to intimidate the company and its officers from resorting to the courts to test the validity of the legislation, the result is the same as if the law in terms prohibited the company from seeking judicial construction of laws which deeply affect its rights.

It is urged that there is no principle upon which to base the claim that a person is entitled to disobey a statute at least once, for the purpose of testing its validity, without subjecting himself to the penalties for disobedience provided by the statute in case it is valid. This is not an accurate statement of the case. Ordinarily a law creating offenses in the nature of misdemeanors or felonies relates to a subject over which the jurisdiction of the legislature is complete in any event. In the case, however, of the establishment of certain rates without any hearing, the validity of such rates necessarily depends upon whether they are high enough to permit at least some return upon the investment (how much it is not now necessary to state), and an inquiry as to that fact is a proper subject of judicial investigation. If it turns out that the rates are too low for that purpose, then they are illegal. Now, to impose upon a party interested the burden of obtaining a judicial decision of such a question (no prior hearing having been given) only upon the condition that, if unsuccessful, he must suffer imprisonment and pay fines, as provided in these acts, is, in effect, to close up all approaches to the courts, and thus prevent any hearing upon the question whether the rates as provided by the acts are not too low, and therefore invalid. The distinction is obvious between a case where the validity of the act depends upon the existence of a fact which can be determined only after investigation of a very complicated and technical character, and the ordinary case of a statute upon a subject requiring no such investigation, and over which the jurisdiction of the legislature is complete in any event.

We hold, therefore, that the provisions of the acts relating to the enforcement of the rates, either for freight or passengers, by imposing such enormous fines and possible imprisonment as a result of an unsuccessful effort to test the validity of the laws themselves, are unconstitutional on their face, without regard to the question of the insufficiency of those rates. (Ex parte Young, 209 U.S., 123 147, 148.)

An examination of the general provisions of our statute, of the circumstances under which it was enacted, the mischief which it sought to remedy and of the nature of the penalties prescribed for violations of its terms convinces us that, unlike the statutes under consideration in the above cited cases, its enactment involved no attempt to prevent common carriers "from resorting to the courts to test the validity of the legislation;" no "effort to prevent any inquiry" as to its validity. It imposes no arbitrary obligation upon the company to do or to refrain from doing anything. It makes no attempt to compel such carriers to do business at a fixed or arbitrarily designated rate, at the risk of separate criminal prosecutions for every demand of a higher or a different rate. Its penalties can be imposed only upon proof of "unreasonable," "unnecessary" and "unjust" discriminations, and range from a maximum which is certainly not excessive for willful, deliberate and contumacious violations of its provisions by a great and powerful corporation, to a minimum which may be a merely nominal fine. With so wide a range of discretion for a contention on the part of any common carrier that it or its officers are "intimidated from resorting to the courts to test the validity" of the provisions of the statute prohibiting such "unreasonable," "unnecessary" and "unjust" discriminations, or to test in any particular case whether a given course of conduct does in fact involve such discrimination. We will presume, for the purpose of declaring the statute invalid, that there is so real a danger that the Courts of First Instance and this court on appeal will abuse the discretion thus conferred upon us, as to intimidate any common carrier, acting in good faith, from resorting to the courts to test the validity of the statute. Legislative enactments, penalizing unreasonable discriminations, unreasonable restraints of trade, and unreasonable conduct in various forms of human activity are so familiar and have been so frequently sustained in the courts, as to render extended discussion unnecessary to refute any contention as to the invalidity of the statute under consideration, merely it imposes upon the carrier the obligation of adopting one of various courses of conduct open to it, at the risk of incurring a prescribed penalty in the event that the course of conduct actually adopted by it should be held to have involved an unreasonable, unnecessary or unjust discrimination. Applying the test announced in Ex parte Young, supra, it will be seen that the validity of the Act does not depend upon "the existence of a fact which can be determined only after investigation of a very complicated and technical character," and

that "the jurisdiction of the legislature" over the subject with which the statute deals "is complete in any event." There can be no real question as to the plenary power of the legislature to prohibit and to penalize the making of undue, unreasonable and unjust discriminations by common carriers to the prejudice of any person, locality or particular kind of traffic. (See Munn vs. Illinois, 94 U.S., 113, and other cases hereinafter cited in support of this proposition.)

Counsel for petitioner contends also that the statute, if construed so as to deny the right of the steamship company to elect at will whether or not it will engage in a particular business, such as that of carrying explosives, is unconstitutional "because it is a confiscation of property, a taking of the carrier's property without due process of law," and because it deprives him of his liberty by compelling him to engage in business against his will. The argument continues as follows:

To require of a carrier, as a condition to his continuing in said business, that he must carry anything and every thing is to render useless the facilities he may have for the carriage of certain lines of freight. It would be almost as complete a confiscation of such facilities as if the same were destroyed. Their value as a means of livelihood would be utterly taken away. The law is a prohibition to him to continue in business; the alternative is to get out or to go into some other business — the same alternative as was offered in the case of the Chicago & N.W. Ry. vs. Dey (35 Fed. Rep., 866, 880), and which was there commented on as follows:

"Whatever of force there may be in such arguments, as applied to mere personal property capable of removal and use elsewhere, or in other business, it is wholly without force as against railroad corporations, so large a proportion of whose investment is in the soil and fixtures appertaining thereto, which cannot be removed. For a government, whether that government be a single sovereign or one of the majority, to say to an individual who has invested his means in so laudable an enterprise as the construction of a railroad, one which tends so much to the wealth and prosperity of the community, that, if he finds that the rates imposed will cause him to do business at a loss, he may quit business, and abandon that road, is the very irony of despotism. Apples of Sodom were fruit of joy in comparison. Reading, as I do, in the preamble of the Federal Constitution, that it was ordained to "establish justice," I can never believe that it is within the property of an individual invested in and used for a purpose in which even the Argus eyes of the police power can see nothing injurious to public morals, public health, or the general welfare. I read also in the first section of the bill of rights of this state that "all men are by nature free and equal, and have certain inalienable rights, among which are those of enjoying and defending life and liberty, acquiring, possessing, and protecting property, and pursuing and obtaining safety and happiness;" and I know that, while that remains as the supreme law of the state, no legislature can directly or indirectly lay its withering or destroying hand on a single dollar invested in the legitimate business of transportation." (Chicago & N.W. Ry. vs. Dey, 35 Fed. Rep., 866, 880.)

It is manifest, however, that this contention is directed against a construction of the statute, which, as we have said, is not warranted by its terms. As we have already indicated, the statute does not "require of a carrier, as a condition to his continuing in said business, that he must carry anything and everything," and thereby "render useless the facilities he may have for the carriage of certain lines of freight." It merely forbids failures or refusals to receive persons or property for carriage which have the effect of giving an "unreasonable or unnecessary preference or advantage" to any person, locality or particular kind of traffic, or of subjecting any person, locality or particular kind of traffic to any undue or unreasonable prejudice or discrimination.

Counsel expressly admits that the statute, "as a prohibition against discrimination is a fair, reasonable and valid exercise of government," and that "it is necessary and proper that such discrimination be prohibited and prevented," but he contends that "on the other hand there is no reasonable warrant nor valid excuse for depriving a person of his liberty by requiring him to engage in business against his will. If he has a rolling boat, unsuitable and unprofitable for passenger trade, he may devote it to lumber carrying. To prohibit him from using it unless it is fitted out with doctors and stewards and staterooms to carry passengers would be an invalid confiscation of this property. A carrier may limit his business to the branches thereof that suit his convenience. If his wagon be old, or the route dangerous, he may avoid liability for loss of passengers' lives and limbs by carrying freight only. If his vehicles require expensive pneumatic tires, unsuitable for freight transportation, ha may nevertheless carry passengers. The only limitation upon his action that it is competent for the governing authority to impose is to require him to treat all alike. His limitations must apply to all, and they must be established limitations. He cannot refuse to carry a case of red jusi on the ground that he has carried for others only jusi that he was green, or blue, or black. But he can refuse to carry red jusi, if he has publicly professed such a limitation upon his business and held himself out as unwilling to carry the same for anyone."

To this it is sufficient answer to say that there is nothing in the statute which would deprive any person of his liberty "by requiring him to engage in business against his will." The prohibitions of the statute against undue, unnecessary or unreasonable regulations which the legislator has seen fit to prescribe for the conduct of the business in which the carrier is engaged of his own free will and accord. In so far as the self-imposed limitations by the carrier upon the business conducted by him, in the various examples given by counsel, do not involve an unreasonable or unnecessary discrimination the statute would not control his action in any wise whatever. It operates only in cases involving such unreasonable or unnecessary preferences or discriminations. Thus in the hypothetical case suggested by the petitioner, a carrier engaged in the carriage of green, blue or black jusi, and duly equipped therefor would manifestly be guilty of "giving an unnecessary and unreasonable preference to a particular kind of traffic" and of subjecting to "an undue and reasonable prejudice a particular kind of traffic," should he decline to carry red jusi, to the prejudice of a particular shipper or of those engaged in the manufacture of that kind of  jusi, basing his refusal on the ground of "mere whim or caprice" or of mere personal convenience. So a public carrier of passengers would not be permitted under this statute to absolve himself from liability for a refusal to carry a Chinaman, a Spaniard, an American, a Filipino, or a  mestizo by proof that from "mere whim or caprice or personal scruple," or to suit his own convenience, or in the hope of increasing his business and thus making larger profits, he had publicly announced his intention not to carry one or other of these classes of passengers.

The nature of the business of a common carrier as a public employment is such that it is clearly within the power of the state to impose such just and reasonable regulations thereon in the interest of the public as the legislator may deem proper. Of course such regulations must not have the effect of depriving an owner of his property without due process of law, nor of confiscating or appropriating private property without just compensation, nor of limiting or prescribing irrevocably vested rights or privileges lawfully acquired under a charter or franchise. But aside from such constitutional limitations, the determination of the nature and extent of the regulations which should be prescribed rests in the hands of the legislator.

Common carriers exercise a sort of public office, and have duties to perform in which the public is interested. Their business is, therefore, affected with a public interest, and is subject of public regulation. (New Jersey Steam Nav. Co. vs. Merchants Bank, 6 How., 344, 382; Munn vs. Illinois, 94 U.S., 113, 130.) Indeed, this right of regulation is so far beyond question that it is well settled that the power of the state to exercise legislative control over railroad companies and other carriers "in all respects necessary to protect the public against danger, injustice and oppression" may be exercised through boards of

commissioners. (New York etc. R. Co. vs. Bristol, 151 U.S., 556, 571; Connecticut etc. R. Co. vs. Woodruff, 153 U.S., 689.)

Regulations limiting of passengers the number of passengers that may be carried in a particular vehicle or steam vessel, or forbidding the loading of a vessel beyond a certain point, or prescribing the number and qualifications of the personnel in the employ of a common carrier, or forbidding unjust discrimination as to rates, all tend to limit and restrict his liberty and to control to some degree the free exercise of his discretion in the conduct of his business. But since the Granger cases were decided by the Supreme Court of the United States no one questions the power of the legislator to prescribe such reasonable regulations upon property clothed with a public interest as he may deem expedient or necessary to protect the public against danger, injustice or oppression. (Munn vs.Illinois, 94 U.S., 113, 130; Chicago etc. R. Co. vs. Cutts, 94 U.S., 155; Budd vs. New York, 143 U.S., 517; Cottingvs. Goddard, 183 U.S., 79.) The right to enter the public employment as a common carrier and to offer one's services to the public for hire does not carry with it the right to conduct that business as one pleases, without regard to the interest of the public and free from such reasonable and just regulations as may be prescribed for the protection of the public from the reckless or careless indifference of the carrier as to the public welfare and for the prevention of unjust and unreasonable discrimination of any kind whatsoever in the performance of the carrier's duties as a servant of the public.

Business of certain kinds, including the business of a common carrier, holds such a peculiar relation to the public interest that there is superinduced upon it the right of public regulation. (Budd vs. New York, 143 U.S., 517, 533.) When private property is "affected with a public interest it ceases to be  juris privati only." Property becomes clothed with a public interest when used in a manner to make it of public consequence and affect the community at large. "When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created. He may withdraw his grant by discontinuing the use, but so long as he maintains the use he must submit to control." (Munn vs. Illinois, 94 U.S., 113; Georgia R. & Bkg. Co. vs. Smith, 128 U.S., 174; Budd vs. New York, 143 U.S., 517; Louisville etc. Ry. Co. vs. Kentucky, 161 U.S., 677, 695.)

Of course this power to regulate is not a power to destroy, and limitation is not the equivalent of confiscation. Under pretense of regulating fares and freight the state can not require a railroad corporation to carry persons or property without reward. Nor can it do that which in law amounts to a taking of private property for public use without just compensation, or without due process of law. (Chicago etc. R. Co. vs. Minnesota, 134 U.S., 418; Minneapolis Eastern R. Co. vs. Minnesota, 134 U.S., 467.) But the judiciary ought not to interfere with regulations established and palpably unreasonable as to make their enforcement equivalent to the taking of property for public use without such compensation as under all the circumstances is just both to the owner and to the public, that is, judicial interference should never occur unless the case presents, clearly and beyond all doubt, such a flagrant attack upon the rights of property under the guise of regulations as to compel the court to say that the regulation in question will have the effect to deny just compensation for private property taken for the public use. (Chicago etc. R. Co. vs. Wellman, 143 U.S., 339; Smyth vs. Ames, 169 U.S., 466, 524; Henderson Bridge Co. vs.Henderson City, 173 U.S., 592, 614.)

Under the common law of England it was early recognized that common carriers owe to the public the duty of carrying indifferently for all who may employ them, and in the order in which application is made, and without discrimination as to terms. True, they were allowed to restrict their business so as to exclude particular classes of goods, but as to the kinds of property which the carrier was in the habit of carrying in the prosecution of his business he was bound to serve all customers alike (State vs. Cincinnati etc. R. Co., 47 Ohio St., 130, 134, 138; Louisville etc. Ry. Co. vs. Quezon City Coal Co., 13 Ky. L. Rep.,

832); and it is to be observed in passing that these common law rules are themselves regulations controlling, limiting and prescribing the conditions under which common carriers were permitted to conduct their business. (Munn vs. Illinois, 94 U. S., 113, 133.)

It was found, in the course of time, that the correction of abuses which had grown up with the enormously increasing business of common carriers necessitated the adoption of statutory regulations controlling the business of common carriers, and imposing severe and drastic penalties for violations of their terms. In England, the Railway Clauses Consolidation Act was enacted in 1845, the Railway and Canal Traffic Act in 1854, and since the passage of those Acts much additional legislation has been adopted tending to limit and control the conduct of their business by common carriers. In the United States, the business of common carriers has been subjected to a great variety of statutory regulations. Among others Congress enacted "The Interstate Commerce Act" (1887) and its amendments, and the Elkins Act as amended (1906); and most if not all of the States of the Union have adopted similar legislation regulating the business of common carriers within their respective jurisdictions. Unending litigation has arisen under these statutes and their amendments, but nowhere has the right of the state to prescribe just and reasonable regulations controlling and limiting the conduct of the business of common carriers in the public interest and for the general welfare been successfully challenged, though of course there has been wide divergence of opinion as to the reasonableness, the validity and legality of many of the regulations actually adopted.

The power of the Philippine legislator to prohibit and to penalize all and any unnecessary or unreasonable discriminations by common carriers may be maintained upon the same reasoning which justified the enactment by the Parliament of England and the Congress of the United States of the above mentioned statutes prohibiting and penalizing the granting of certain preferences and discriminations in those countries. As we have said before, we find nothing confiscatory or unreasonable in the conditions imposed in the Philippine statute upon the business of common carriers. Correctly construed they do not force him to engage in any business his will or to make use of his facilities in a manner or for a purpose for which they are not reasonably adapted. It is only when he offers his facilities as a common carrier to the public for hire, that the statute steps in and prescribes that he must treat all alike, that he may not pick and choose which customer he will serve, and, specifically, that he shall not make any undue or unreasonable preferences or discriminations whatsoever to the prejudice not only of any person or locality but also of any particular kind of traffic.

The legislator having enacted a regulation prohibiting common carriers from giving unnecessary or unreasonable preferences or advantages to any particular kind of traffic or subjecting any particular kind of traffic to any undue or unreasonable prejudice or discrimination whatsoever, it is clear that whatever may have been the rule at the common law, common carriers in this jurisdiction cannot lawfully decline to accept a particular class of goods for carriage, to the prejudice of the traffic in those goods, unless it appears that for some sufficient reason the discrimination against the traffic in such goods is reasonable and necessary. Mere whim or prejudice will not suffice. The grounds for the discrimination must be substantial ones, such as will justify the courts in holding the discrimination to have been reasonable and necessary under all circumstances of the case.

The prayer of the petition in the case at bar cannot be granted unless we hold that the refusal of the defendant steamship company to accept for carriage on any of its vessels "dynamite, gunpowder or other explosives" would in no instance involve a violation of the provisions of this statute. There can be little doubt, however, that cases may and will arise wherein the refusal of a vessel "engaged in the coastwise trade of the Philippine Islands as a common carrier" to accept such explosives for carriage would subject some person, company, firm or corporation, or locality, or particular kind of traffic to a certain prejudice or discrimination. Indeed it cannot be doubted that the refusal of a "steamship company, the owner of a

large number of vessels" engaged in that trade to receive for carriage any such explosives on any of its vessels would subject the traffic in such explosives to a manifest prejudice and discrimination. The only question to be determined therefore is whether such prejudice or discrimination might in any case prove to be undue, unnecessary or unreasonable.

This of course is, in each case, a question of fact, and we are of the opinion that the facts alleged in the complaint are not sufficient to sustain a finding in favor of the contentions of the petitioner. It is not alleged in the complaint that "dynamite, gunpowder and other explosives" can in no event be transported with reasonable safety on board steam vessels engaged in the business of common carriers. It is not alleged that all, or indeed any of the defendant steamship company's vessels are unsuited for the carriage of such explosives. It is not alleged that the nature of the business in which the steamship company is engaged is such as to preclude a finding that a refusal to accept such explosives on any of its vessels would subject the traffic in such explosives to an undue and unreasonable prejudice and discrimination.

Plaintiff's contention in this regard is as follows:

In the present case, the respondent company has expressly and publicly renounced the carriage of explosives, and expressly excluded the same terms from the business it conducts. This in itself were sufficient, even though such exclusion of explosives were based on no other ground than the mere whim, caprice or personal scruple of the carrier. It is unnecessary, however, to indulge in academic discussion of a moot question, for the decision not a carry explosives rests on substantial grounds which are self-evident.

We think however that the answer to the question whether such a refusal to carry explosives involves an unnecessary or unreasonable preference or advantage to any person, locality or particular kind of traffic or subjects any person, locality or particular to traffic to an undue or unreasonable prejudice and discrimination is by no means "self-evident," and that it is a question of fact to be determined by the particular circumstances of each case.

The words "dynamite, powder or other explosives" are broad enough to include matches, and other articles of like nature, and may fairly be held to include also kerosene oil, gasoline and similar products of a highly inflammable and explosive character. Many of these articles of merchandise are in the nature of necessities in any country open to modern progress and advancement. We are not fully advised as to the methods of transportation by which they are made commercially available throughout the world, but certain it is that dynamite, gunpowder, matches, kerosene oil and gasoline are transported on many vessels sailing the high seas. Indeed it is a matter of common knowledge that common carriers throughout the world transport enormous quantities of these explosives, on both land and sea, and there can be little doubt that a general refusal of the common carriers in any country to accept such explosives for carriage would involve many persons, firms and enterprises in utter ruin, and would disastrously affect the interests of the public and the general welfare of the community.

It would be going to far to say that a refusal by a steam vessel engaged in the business of transporting general merchandise as a common carrier to accept for carriage a shipment of matches, solely on the ground of the dangers incident to the explosive quality of this class of merchandise, would not subject the traffic in matches to an unnecessary, undue or unreasonable prejudice and discrimination without proof that for some special reason the particular vessel is not fitted to carry articles of that nature. There may be and doubtless are some vessels engaged in business as common carriers of merchandise, which for lack of suitable deck space or storage rooms might be justified in declining to carry kerosene oil, gasoline, and similar products, even when offered for carriage securely packed in cases; and few vessels are equipped to transport those products in bulk. But in any case of a refusal to carry such products which would

subject any person, locality or the traffic in such products would be necessary to hear evidence before making an affirmative finding that such prejudice or discrimination was or was not unnecessary, undue or unreasonable. The making of such a finding would involve a consideration of the suitability of the vessel for the transportation of such products ; the reasonable possibility of danger or disaster resulting from their transportation in the form and under the conditions in which they are offered for carriage; the general nature of the business done by the carrier and, in a word, all the attendant circumstances which might affect the question of the reasonable necessity for the refusal by the carrier to undertake the transportation of this class of merchandise.

But it is contended that whatever the rule may be as to other explosives, the exceptional power and violence of dynamite and gunpowder in explosion will always furnish the owner of a vessel with a reasonable excuse for his failure or refusal to accept them for carriage or to carry them on board his boat. We think however that even as to dynamite and gunpowder we would not be justified in making such a holding unaided by evidence sustaining the proposition that these articles can never be carried with reasonable safety on any vessel engaged in the business of a common carrier. It is said that dynamite is so erratic an uncontrollable in its action that it is impossible to assert that it can be handled with safety in any given case. On the other hand it is contended that while this may be true of some kinds of dynamite, it is a fact that dynamite can be and is manufactured so as to eliminate any real danger from explosion during transportation. These are of course questions of fact upon which we are not qualified to pass judgment without the assistance of expert witnesses who have made special studies as to the chemical composition and reactions of the different kinds of dynamite, or attained a thorough knowledge of its properties as a result of wide experience in its manufacture and transportation.

As we construe the Philippine statute, the mere fact that violent and destructive explosions can be obtained by the use of dynamite under certain conditions would not be sufficient in itself to justify the refusal of a vessel, duly licensed as a common carrier of merchandise, to accept it for carriage, if it can be proven that in the condition in which it is offered for carriage there is no real danger to the carrier, nor reasonable ground to fear that his vessel or those on board his vessel will be exposed to unnecessary and unreasonable risk in transporting it, having in mind the nature of his business as a common carrier engaged in the coastwise trade in the Philippine Islands, and his duty as a servant of the public engaged in a public employment. So also, if by the exercise of due diligence and the taking of unreasonable precautions the danger of explosions can be practically eliminated, the carrier would not be justified in subjecting the traffic in this commodity to prejudice or discrimination by proof that there would be a possibility of danger from explosion when no such precautions are taken.

The traffic in dynamite, gunpowder and other explosives is vitally essential to the material and general welfare of the people of these Islands. If dynamite, gunpowder and other explosives are to continue in general use throughout the Philippines, they must be transported by water from port to port in the various islands which make up the Archipelago. We are satisfied therefore that the refusal by a particular vessel, engaged as a common carrier of merchandise in the coastwise trade of the Philippine Islands, to accept any or all of these explosives for carriage would constitute a violation of the prohibitions against discriminations penalized under the statute, unless it can be shown by affirmative evidence that there is so real and substantial a danger of disaster necessarily involved in the carriage of any or all of these articles of merchandise as to render such refusal a due or a necessary or a reasonable exercise of prudence and discretion on the part of the shipowner.

The complaint in the case at bar lacking the necessary allegations under this ruling, the demurrer must be sustained on the ground that the facts alleged do not constitute a cause of action.

A number of interesting questions of procedure are raised and discussed in the briefs of counsel. As to all of these questions we expressly reserve our opinion, believing as we do that in sustaining the demurrer on the grounds indicated in this opinion we are able to dispose of the real issue involved in the proceedings without entering upon the discussion of the nice questions which it might have been necessary to pass upon had it appeared that the facts alleged in the complaint constitute a cause of action.

We think, however, that we should not finally dispose of the case without indicating that since the institution of these proceedings the enactment of Acts No. 2307 and No. 2362 (creating a Board of Public Utility Commissioners and for other purposes) may have materially modified the right to institute and maintain such proceedings in this jurisdiction. But the demurrer having been formallly submitted for judgment before the enactment of these statutes, counsel have not been heard in this connection. We therefore refrain from any comment upon any questions which might be raised as to whether or not there may be another adequate and appropriate remedy for the alleged wrong set forth in the complaint. Our disposition of the question raised by the demurrer renders that unnecessary at this time, though it may not be improper to observe that a careful examination of those acts confirms us in the holding upon which we base our ruling on this demurrer, that is to say "That whatever may have been the rule at the common law, common carriers in this jurisdiction cannot lawfully decline to accept a particular class of goods for carriage, to the prejudice of the traffic in those goods, unless it appears that for some sufficient reason the discrimination against the traffic in such goods is reasonable and necessary. Mere prejudice or whim will not suffice. The grounds of the discrimination must be substantial ones, such as will justify the courts in holding the discrimination to have been reasonable and necessary under all the circumstances of the case."

Unless an amended complaint be filed in the meantime, let judgment be entered ten days hereafter sustaining the demurrer and dismissing the complaint with costs against the complainant, and twenty days thereafter let the record be filed in the archives of original actions in this court. So ordered.

G.R. No. L-12191             October 14, 1918

JOSE CANGCO, plaintiff-appellant, vs.MANILA RAILROAD CO., defendant-appellee.

Ramon Sotelo for appellant.Kincaid & Hartigan for appellee.

 

FISHER, J.:

At the time of the occurrence which gave rise to this litigation the plaintiff, Jose Cangco, was in the employment of Manila Railroad Company in the capacity of clerk, with a monthly wage of P25. He lived in the pueblo of San Mateo, in the province of Rizal, which is located upon the line of the defendant railroad company; and in coming daily by train to the company's office in the city of Manila where he worked, he used a pass, supplied by the company, which entitled him to ride upon the company's trains free of charge. Upon the occasion in question, January 20, 1915, the plaintiff arose from his seat in the second class-car where he was riding and, making, his exit through the door, took his position upon the steps of the coach, seizing the upright guardrail with his right hand for support.

On the side of the train where passengers alight at the San Mateo station there is a cement platform which begins to rise with a moderate gradient some distance away from the company's office and extends along in front of said office for a distance sufficient to cover the length of several coaches. As the train slowed down another passenger, named Emilio Zuñiga, also an employee of the railroad company, got off the same car, alighting safely at the point where the platform begins to rise from the level of the ground. When the train had proceeded a little farther the plaintiff Jose Cangco stepped off also, but one or both of his feet came in contact with a sack of watermelons with the result that his feet slipped from under him and he fell violently on the platform. His body at once rolled from the platform and was drawn under the moving car, where his right arm was badly crushed and lacerated. It appears that after the plaintiff alighted from the train the car moved forward possibly six meters before it came to a full stop.

The accident occurred between 7 and 8 o'clock on a dark night, and as the railroad station was lighted dimly by a single light located some distance away, objects on the platform where the accident occurred were difficult to discern especially to a person emerging from a lighted car.

The explanation of the presence of a sack of melons on the platform where the plaintiff alighted is found in the fact that it was the customary season for harvesting these melons and a large lot had been brought to the station for the shipment to the market. They were contained in numerous sacks which has been piled on the platform in a row one upon another. The testimony shows that this row of sacks was so placed of melons and the edge of platform; and it is clear that the fall of the plaintiff was due to the fact that his foot alighted upon one of these melons at the moment he stepped upon the platform. His statement that he failed to see these objects in the darkness is readily to be credited.

The plaintiff was drawn from under the car in an unconscious condition, and it appeared that the injuries which he had received were very serious. He was therefore brought at once to a certain hospital in the city of Manila where an examination was made and his arm was amputated. The result of this operation was unsatisfactory, and the plaintiff was then carried to another hospital where a second operation was performed and the member was again amputated higher up near the shoulder. It appears in evidence that

the plaintiff expended the sum of P790.25 in the form of medical and surgical fees and for other expenses in connection with the process of his curation.

Upon August 31, 1915, he instituted this proceeding in the Court of First Instance of the city of Manila to recover damages of the defendant company, founding his action upon the negligence of the servants and employees of the defendant in placing the sacks of melons upon the platform and leaving them so placed as to be a menace to the security of passenger alighting from the company's trains. At the hearing in the Court of First Instance, his Honor, the trial judge, found the facts substantially as above stated, and drew therefrom his conclusion to the effect that, although negligence was attributable to the defendant by reason of the fact that the sacks of melons were so placed as to obstruct passengers passing to and from the cars, nevertheless, the plaintiff himself had failed to use due caution in alighting from the coach and was therefore precluded form recovering. Judgment was accordingly entered in favor of the defendant company, and the plaintiff appealed.

It can not be doubted that the employees of the railroad company were guilty of negligence in piling these sacks on the platform in the manner above stated; that their presence caused the plaintiff to fall as he alighted from the train; and that they therefore constituted an effective legal cause of the injuries sustained by the plaintiff. It necessarily follows that the defendant company is liable for the damage thereby occasioned unless recovery is barred by the plaintiff's own contributory negligence. In resolving this problem it is necessary that each of these conceptions of liability, to-wit, the primary responsibility of the defendant company and the contributory negligence of the plaintiff should be separately examined.

It is important to note that the foundation of the legal liability of the defendant is the contract of carriage, and that the obligation to respond for the damage which plaintiff has suffered arises, if at all, from the breach of that contract by reason of the failure of defendant to exercise due care in its performance. That is to say, its liability is direct and immediate, differing essentially, in legal viewpoint from that presumptive responsibility for the negligence of its servants, imposed by article 1903 of the Civil Code, which can be rebutted by proof of the exercise of due care in their selection and supervision. Article 1903 of the Civil Code is not applicable to obligations arising ex contractu, but only to extra-contractual obligations — or to use the technical form of expression, that article relates only to  culpa aquiliana and not to culpa contractual.

Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of the Civil Code, clearly points out this distinction, which was also recognized by this Court in its decision in the case of Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil. rep., 359). In commenting upon article 1093 Manresa clearly points out the difference between "culpa, substantive and independent, which of itself constitutes the source of an obligation between persons not formerly connected by any legal tie" and culpa considered as an accident in the performance of an obligation already existing . . . ."

In the Rakes case (supra) the decision of this court was made to rest squarely upon the proposition that article 1903 of the Civil Code is not applicable to acts of negligence which constitute the breach of a contract.

Upon this point the Court said:

The acts to which these articles [1902 and 1903 of the Civil Code] are applicable are understood to be those not growing out of pre-existing duties of the parties to one another. But where relations already formed give rise to duties, whether springing from contract or quasi-contract, then breaches of those duties are subject to article 1101, 1103, and 1104 of the same code. (Rakes vs. Atlantic, Gulf and Pacific Co., 7 Phil. Rep., 359 at 365.)

This distinction is of the utmost importance. The liability, which, under the Spanish law, is, in certain cases imposed upon employers with respect to damages occasioned by the negligence of their employees to persons to whom they are not bound by contract, is not based, as in the English Common Law, upon the principle of respondeat superior — if it were, the master would be liable in every case and unconditionally — but upon the principle announced in article 1902 of the Civil Code, which imposes upon all persons who by their fault or negligence, do injury to another, the obligation of making good the damage caused. One who places a powerful automobile in the hands of a servant whom he knows to be ignorant of the method of managing such a vehicle, is himself guilty of an act of negligence which makes him liable for all the consequences of his imprudence. The obligation to make good the damage arises at the very instant that the unskillful servant, while acting within the scope of his employment causes the injury. The liability of the master is personal and direct. But, if the master has not been guilty of any negligence whatever in the selection and direction of the servant, he is not liable for the acts of the latter, whatever done within the scope of his employment or not, if the damage done by the servant does not amount to a breach of the contract between the master and the person injured.

It is not accurate to say that proof of diligence and care in the selection and control of the servant relieves the master from liability for the latter's acts — on the contrary, that proof shows that the responsibility has never existed. As Manresa says (vol. 8, p. 68) the liability arising from extra-contractual culpa is always based upon a voluntary act or omission which, without willful intent, but by mere negligence or inattention, has caused damage to another. A master who exercises all possible care in the selection of his servant, taking into consideration the qualifications they should possess for the discharge of the duties which it is his purpose to confide to them, and directs them with equal diligence, thereby performs his duty to third persons to whom he is bound by no contractual ties, and he incurs no liability whatever if, by reason of the negligence of his servants, even within the scope of their employment, such third person suffer damage. True it is that under article 1903 of the Civil Code the law creates a  presumption that he has been negligent in the selection or direction of his servant, but the presumption is rebuttable and yield to proof of due care and diligence in this respect.

The supreme court of Porto Rico, in interpreting identical provisions, as found in the Porto Rico Code, has held that these articles are applicable to cases of extra-contractual culpa exclusively. (Carmona vs. Cuesta, 20 Porto Rico Reports, 215.)

This distinction was again made patent by this Court in its decision in the case of Bahia vs. Litonjua and Leynes, (30 Phil. rep., 624), which was an action brought upon the theory of the extra-contractual liability of the defendant to respond for the damage caused by the carelessness of his employee while acting within the scope of his employment. The Court, after citing the last paragraph of article 1903 of the Civil Code, said:

From this article two things are apparent: (1) That when an injury is caused by the negligence of a servant or employee there instantly arises a presumption of law that there was negligence on the part of the master or employer either in selection of the servant or employee, or in supervision over him after the selection, or both; and (2) that that presumption is  juris tantum and not juris et de jure, and consequently, may be rebutted. It follows necessarily that if the employer shows to the satisfaction of the court that in selection and supervision he has exercised the care and diligence of a good father of a family, the presumption is overcome and he is relieved from liability.

This theory bases the responsibility of the master ultimately on his own negligence and not on that of his servant. This is the notable peculiarity of the Spanish law of negligence. It is, of

course, in striking contrast to the American doctrine that, in relations with strangers, the negligence of the servant in conclusively the negligence of the master.

The opinion there expressed by this Court, to the effect that in case of extra-contractual  culpa based upon negligence, it is necessary that there shall have been some fault attributable to the defendant personally, and that the last paragraph of article 1903 merely establishes a rebuttable presumption, is in complete accord with the authoritative opinion of Manresa, who says (vol. 12, p. 611) that the liability created by article 1903 is imposed by reason of the breach of the duties inherent in the special relations of authority or superiority existing between the person called upon to repair the damage and the one who, by his act or omission, was the cause of it.

On the other hand, the liability of masters and employers for the negligent acts or omissions of their servants or agents, when such acts or omissions cause damages which amount to the breach of a contact, is not based upon a mere presumption of the master's negligence in their selection or control, and proof of exercise of the utmost diligence and care in this regard does not relieve the master of his liability for the breach of his contract.

Every legal obligation must of necessity be extra-contractual or contractual. Extra-contractual obligation has its source in the breach or omission of those mutual duties which civilized society imposes upon it members, or which arise from these relations, other than contractual, of certain members of society to others, generally embraced in the concept of status. The legal rights of each member of society constitute the measure of the corresponding legal duties, mainly negative in character, which the existence of those rights imposes upon all other members of society. The breach of these general duties whether due to willful intent or to mere inattention, if productive of injury, give rise to an obligation to indemnify the injured party. The fundamental distinction between obligations of this character and those which arise from contract, rests upon the fact that in cases of non-contractual obligation it is the wrongful or negligent act or omission itself which creates the vinculum juris, whereas in contractual relations the vinculum exists independently of the breach of the voluntary duty assumed by the parties when entering into the contractual relation.

With respect to extra-contractual obligation arising from negligence, whether of act or omission, it is competent for the legislature to elect — and our Legislature has so elected — whom such an obligation is imposed is morally culpable, or, on the contrary, for reasons of public policy, to extend that liability, without regard to the lack of moral culpability, so as to include responsibility for the negligence of those person who acts or mission are imputable, by a legal fiction, to others who are in a position to exercise an absolute or limited control over them. The legislature which adopted our Civil Code has elected to limit extra-contractual liability — with certain well-defined exceptions — to cases in which moral culpability can be directly imputed to the persons to be charged. This moral responsibility may consist in having failed to exercise due care in the selection and control of one's agents or servants, or in the control of persons who, by reason of their status, occupy a position of dependency with respect to the person made liable for their conduct.

The position of a natural or juridical person who has undertaken by contract to render service to another, is wholly different from that to which article 1903 relates. When the sources of the obligation upon which plaintiff's cause of action depends is a negligent act or omission, the burden of proof rests upon plaintiff to prove the negligence — if he does not his action fails. But when the facts averred show a contractual undertaking by defendant for the benefit of plaintiff, and it is alleged that plaintiff has failed or refused to perform the contract, it is not necessary for plaintiff to specify in his pleadings whether the breach of the contract is due to willful fault or to negligence on the part of the defendant, or of his servants or agents. Proof of the contract and of its nonperformance is sufficientprima facie to warrant a recovery.

As a general rule . . . it is logical that in case of extra-contractual culpa, a suing creditor should assume the burden of proof of its existence, as the only fact upon which his action is based; while on the contrary, in a case of negligence which presupposes the existence of a contractual obligation, if the creditor shows that it exists and that it has been broken, it is not necessary for him to prove negligence. (Manresa, vol. 8, p. 71 [1907 ed., p. 76]).

As it is not necessary for the plaintiff in an action for the breach of a contract to show that the breach was due to the negligent conduct of defendant or of his servants, even though such be in fact the actual cause of the breach, it is obvious that proof on the part of defendant that the negligence or omission of his servants or agents caused the breach of the contract would not constitute a defense to the action. If the negligence of servants or agents could be invoked as a means of discharging the liability arising from contract, the anomalous result would be that person acting through the medium of agents or servants in the performance of their contracts, would be in a better position than those acting in person. If one delivers a valuable watch to watchmaker who contract to repair it, and the bailee, by a personal negligent act causes its destruction, he is unquestionably liable. Would it be logical to free him from his liability for the breach of his contract, which involves the duty to exercise due care in the preservation of the watch, if he shows that it was his servant whose negligence caused the injury? If such a theory could be accepted, juridical persons would enjoy practically complete immunity from damages arising from the breach of their contracts if caused by negligent acts as such juridical persons can of necessity only act through agents or servants, and it would no doubt be true in most instances that reasonable care had been taken in selection and direction of such servants. If one delivers securities to a banking corporation as collateral, and they are lost by reason of the negligence of some clerk employed by the bank, would it be just and reasonable to permit the bank to relieve itself of liability for the breach of its contract to return the collateral upon the payment of the debt by proving that due care had been exercised in the selection and direction of the clerk?

This distinction between culpa aquiliana, as the source of an obligation, and culpa contractual as a mere incident to the performance of a contract has frequently been recognized by the supreme court of Spain. (Sentencias of June 27, 1894; November 20, 1896; and December 13, 1896.) In the decisions of November 20, 1896, it appeared that plaintiff's action arose ex contractu, but that defendant sought to avail himself of the provisions of article 1902 of the Civil Code as a defense. The Spanish Supreme Court rejected defendant's contention, saying:

These are not cases of injury caused, without any pre-existing obligation, by fault or negligence, such as those to which article 1902 of the Civil Code relates, but of damages caused by the defendant's failure to carry out the undertakings imposed by the contracts . . . .

A brief review of the earlier decision of this court involving the liability of employers for damage done by the negligent acts of their servants will show that in no case has the court ever decided that the negligence of the defendant's servants has been held to constitute a defense to an action for damages for breach of contract.

In the case of Johnson vs. David (5 Phil. Rep., 663), the court held that the owner of a carriage was not liable for the damages caused by the negligence of his driver. In that case the court commented on the fact that no evidence had been adduced in the trial court that the defendant had been negligent in the employment of the driver, or that he had any knowledge of his lack of skill or carefulness.

In the case of Baer Senior & Co's Successors vs. Compania Maritima (6 Phil. Rep., 215), the plaintiff sued the defendant for damages caused by the loss of a barge belonging to plaintiff which was allowed to get adrift by the negligence of defendant's servants in the course of the performance of a contract of

towage. The court held, citing Manresa (vol. 8, pp. 29, 69) that if the "obligation of the defendant grew out of a contract made between it and the plaintiff . . . we do not think that the provisions of articles 1902 and 1903 are applicable to the case."

In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff sued the defendant to recover damages for the personal injuries caused by the negligence of defendant's chauffeur while driving defendant's automobile in which defendant was riding at the time. The court found that the damages were caused by the negligence of the driver of the automobile, but held that the master was not liable, although he was present at the time, saying:

. . . unless the negligent acts of the driver are continued for a length of time as to give the owner a reasonable opportunity to observe them and to direct the driver to desist therefrom. . . . The act complained of must be continued in the presence of the owner for such length of time that the owner by his acquiescence, makes the driver's acts his own.

In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage & Taxicab Co. (33 Phil. Rep., 8), it is true that the court rested its conclusion as to the liability of the defendant upon article 1903, although the facts disclosed that the injury complaint of by plaintiff constituted a breach of the duty to him arising out of the contract of transportation. The express ground of the decision in this case was that article 1903, in dealing with the liability of a master for the negligent acts of his servants "makes the distinction between private individuals and public enterprise;" that as to the latter the law creates a rebuttable presumption of negligence in the selection or direction of servants; and that in the particular case the presumption of negligence had not been overcome.

It is evident, therefore that in its decision Yamada case, the court treated plaintiff's action as though founded in tort rather than as based upon the breach of the contract of carriage, and an examination of the pleadings and of the briefs shows that the questions of law were in fact discussed upon this theory. Viewed from the standpoint of the defendant the practical result must have been the same in any event. The proof disclosed beyond doubt that the defendant's servant was grossly negligent and that his negligence was the proximate cause of plaintiff's injury. It also affirmatively appeared that defendant had been guilty of negligence in its failure to exercise proper discretion in the direction of the servant. Defendant was, therefore, liable for the injury suffered by plaintiff, whether the breach of the duty were to be regarded as constituting culpa aquiliana or culpa contractual. As Manresa points out (vol. 8, pp. 29 and 69) whether negligence occurs an incident in the course of the performance of a contractual undertaking or its itself the source of an extra-contractual undertaking obligation, its essential characteristics are identical. There is always an act or omission productive of damage due to carelessness or inattention on the part of the defendant. Consequently, when the court holds that a defendant is liable in damages for having failed to exercise due care, either directly, or in failing to exercise proper care in the selection and direction of his servants, the practical result is identical in either case. Therefore, it follows that it is not to be inferred, because the court held in the Yamada case that defendant was liable for the damages negligently caused by its servants to a person to whom it was bound by contract, and made reference to the fact that the defendant was negligent in the selection and control of its servants, that in such a case the court would have held that it would have been a good defense to the action, if presented squarely upon the theory of the breach of the contract, for defendant to have proved that it did in fact exercise care in the selection and control of the servant.

The true explanation of such cases is to be found by directing the attention to the relative spheres of contractual and extra-contractual obligations. The field of non- contractual obligation is much more broader than that of contractual obligations, comprising, as it does, the whole extent of juridical human relations. These two fields, figuratively speaking, concentric; that is to say, the mere fact that a person is

bound to another by contract does not relieve him from extra-contractual liability to such person. When such a contractual relation exists the obligor may break the contract under such conditions that the same act which constitutes the source of an extra-contractual obligation had no contract existed between the parties.

The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry him in safety and to provide safe means of entering and leaving its trains (civil code, article 1258). That duty, being contractual, was direct and immediate, and its non-performance could not be excused by proof that the fault was morally imputable to defendant's servants.

The railroad company's defense involves the assumption that even granting that the negligent conduct of its servants in placing an obstruction upon the platform was a breach of its contractual obligation to maintain safe means of approaching and leaving its trains, the direct and proximate cause of the injury suffered by plaintiff was his own contributory negligence in failing to wait until the train had come to a complete stop before alighting. Under the doctrine of comparative negligence announced in the Rakes case (supra), if the accident was caused by plaintiff's own negligence, no liability is imposed upon defendant's negligence and plaintiff's negligence merely contributed to his injury, the damages should be apportioned. It is, therefore, important to ascertain if defendant was in fact guilty of negligence.

It may be admitted that had plaintiff waited until the train had come to a full stop before alighting, the particular injury suffered by him could not have occurred. Defendant contends, and cites many authorities in support of the contention, that it is negligence per se for a passenger to alight from a moving train. We are not disposed to subscribe to this doctrine in its absolute form. We are of the opinion that this proposition is too badly stated and is at variance with the experience of every-day life. In this particular instance, that the train was barely moving when plaintiff alighted is shown conclusively by the fact that it came to stop within six meters from the place where he stepped from it. Thousands of person alight from trains under these conditions every day of the year, and sustain no injury where the company has kept its platform free from dangerous obstructions. There is no reason to believe that plaintiff would have suffered any injury whatever in alighting as he did had it not been for defendant's negligent failure to perform its duty to provide a safe alighting place.

We are of the opinion that the correct doctrine relating to this subject is that expressed in Thompson's work on Negligence (vol. 3, sec. 3010) as follows:

The test by which to determine whether the passenger has been guilty of negligence in attempting to alight from a moving railway train, is that of ordinary or reasonable care. It is to be considered whether an ordinarily prudent person, of the age, sex and condition of the passenger, would have acted as the passenger acted under the circumstances disclosed by the evidence. This care has been defined to be, not the care which may or should be used by the prudent man generally, but the care which a man of ordinary prudence would use under similar circumstances, to avoid injury." (Thompson, Commentaries on Negligence, vol. 3, sec. 3010.)

Or, it we prefer to adopt the mode of exposition used by this court in Picart vs. Smith (37 Phil. rep., 809), we may say that the test is this; Was there anything in the circumstances surrounding the plaintiff at the time he alighted from the train which would have admonished a person of average prudence that to get off the train under the conditions then existing was dangerous? If so, the plaintiff should have desisted from alighting; and his failure so to desist was contributory negligence.1awph!l.net

As the case now before us presents itself, the only fact from which a conclusion can be drawn to the effect that plaintiff was guilty of contributory negligence is that he stepped off the car without being able to

discern clearly the condition of the platform and while the train was yet slowly moving. In considering the situation thus presented, it should not be overlooked that the plaintiff was, as we find, ignorant of the fact that the obstruction which was caused by the sacks of melons piled on the platform existed; and as the defendant was bound by reason of its duty as a public carrier to afford to its passengers facilities for safe egress from its trains, the plaintiff had a right to assume, in the absence of some circumstance to warn him to the contrary, that the platform was clear. The place, as we have already stated, was dark, or dimly lighted, and this also is proof of a failure upon the part of the defendant in the performance of a duty owing by it to the plaintiff; for if it were by any possibility concede that it had right to pile these sacks in the path of alighting passengers, the placing of them adequately so that their presence would be revealed.

As pertinent to the question of contributory negligence on the part of the plaintiff in this case the following circumstances are to be noted: The company's platform was constructed upon a level higher than that of the roadbed and the surrounding ground. The distance from the steps of the car to the spot where the alighting passenger would place his feet on the platform was thus reduced, thereby decreasing the risk incident to stepping off. The nature of the platform, constructed as it was of cement material, also assured to the passenger a stable and even surface on which to alight. Furthermore, the plaintiff was possessed of the vigor and agility of young manhood, and it was by no means so risky for him to get off while the train was yet moving as the same act would have been in an aged or feeble person. In determining the question of contributory negligence in performing such act — that is to say, whether the passenger acted prudently or recklessly — the age, sex, and physical condition of the passenger are circumstances necessarily affecting the safety of the passenger, and should be considered. Women, it has been observed, as a general rule are less capable than men of alighting with safety under such conditions, as the nature of their wearing apparel obstructs the free movement of the limbs. Again, it may be noted that the place was perfectly familiar to the plaintiff as it was his daily custom to get on and of the train at this station. There could, therefore, be no uncertainty in his mind with regard either to the length of the step which he was required to take or the character of the platform where he was alighting. Our conclusion is that the conduct of the plaintiff in undertaking to alight while the train was yet slightly under way was not characterized by imprudence and that therefore he was not guilty of contributory negligence.

The evidence shows that the plaintiff, at the time of the accident, was earning P25 a month as a copyist clerk, and that the injuries he has suffered have permanently disabled him from continuing that employment. Defendant has not shown that any other gainful occupation is open to plaintiff. His expectancy of life, according to the standard mortality tables, is approximately thirty-three years. We are of the opinion that a fair compensation for the damage suffered by him for his permanent disability is the sum of P2,500, and that he is also entitled to recover of defendant the additional sum of P790.25 for medical attention, hospital services, and other incidental expenditures connected with the treatment of his injuries.

The decision of lower court is reversed, and judgment is hereby rendered plaintiff for the sum of P3,290.25, and for the costs of both instances. So ordered.

On January 20, 1915, Cangco was riding the train of Manila Railroad Co (MRC). He was an employee of the latter and he was given a pass so that he could ride the train for free. When he was nearing his destination at about 7pm, he arose from his seat even though the train was not at full stop. When he was about to alight from the train (which was still slightly moving) he accidentally stepped on a sack of watermelons which he failed to notice due to the fact that it was dim. This caused him to lose his balance at the door and he fell and his arm was crushed by the train and he suffered other serious injuries. He was dragged a few meters more as the train slowed down.It was established that the employees of MRC were negligent in piling the sacks of watermelons. MRC raised as a defense the fact that Cangco was also negligent as he failed to exercise diligence in alighting from the train as he did not wait for it to stop.ISSUE: Whether or not Manila Railroad Co is liable for damages.HELD: Yes. Alighting from a  moving train while it is slowing down is a common practice and a lot of people are doing so every day without suffering injury. Cangco has the vigor and agility of young manhood, and it was by no means so risky for him to get off while the train was yet moving as the same act would have been in an aged or feeble person. He was also ignorant of the fact that sacks of watermelons were there as there were no appropriate warnings and the place was dimly lit.The Court also elucidated on the distinction between the liability of employers under Article 2180 and their liability for breach of contract [of carriage]:

NOTES: But, if the master has not been guilty of any negligence whatever in the selection and direction of the servant, he is not liable for the acts of the latter, whatever done within the scope of his employment or not, if the damage done by the servant does not amount to a breach of the contract between the master and the person injured.The liability arising from extra-contractual culpa is always based upon a voluntary act or omission which, without willful intent, but by mere negligence or inattention, has caused damage to another.These two fields, figuratively speaking, concentric; that is to say, the mere fact that a person is bound to another by contract does not relieve him from extra-contractual liability to such person. When such a contractual relation exists the obligor may break the contract under such conditions that the same act which constitutes the source of an extra-contractual obligation had no contract existed between the parties.Manresa: Whether negligence occurs an incident in the course of the performance of a contractual undertaking or in itself the source of an extra-contractual undertaking obligation, its essential characteristics are identical.Vinculum Juris: (def) It means “an obligation of law”, or the right of the obligee to enforce a civil matter in a court of law.

PAL vs CA (106 SCRA 391)Facts:Samson is a licensed aviator employed by the Philippine Airlines. He was partnered with another pilot

Bustamante. Samson had complained on previous occasions to PAL that Bustamante was slow in reacting

and was having lapses of poor judgment during flights. PAL however still allowed Bustamante to

continue flying.

On a certain flight, Bustamante overshot the airfield while landing the plane at the Daet airport. Samson

tried to control the plane, but did not succeed. The plane crash-landed beyond the runway into a

mangrove. Samson hit his head on the windshield due to the impact of the crash. He suffered head

injuries such as brain concussions and wounds on his forehead. To make matters worse, plaintiff was

discharged from employment. Samson then filed an action for damages against PAL.

Issue:Whether or not PAL is liable for damages.

Held:The Court held that PAL is liable for damages. There was gross negligence on the part of PAL because

despite the knowledge of Bustamante’s condition the still allowed him to continue flying. Bustamante had

a tumor in his nasopharynx which affected his vision. As provided in Articles 1732, 1733, and 1756 of the

NCC, PAL being a common carrier should have exercised extraordinary diligence in the supervision of

their employees and utmost diligence in bringing passengers to their destination.

The court affirmed the decision of the trial court in awaring damages. Private respondent is entitled to

P198,000.00 as unearned income or compulsory damages, P80,000.00 for moral damages, P20,000 as

attorney’s fees and P5,000 as expenses for litigation. This claim of the plaintiff for loss and impairment of

earning capacity is based on the provision of Art. 2205, NCC. Even from the standpoint of the petitioner

that there is employer-employee relationship between it and private respondent arising from the contract

of employment, private respondent is still entitled to moral damages in view of the finding of bad faith or

malice, applying the provisions of Art. 2220 of the NCC.

[G.R. No. 119641. May 17, 1996]

PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS, DR. JOSEFINO MIRANDA and LUISA MIRANDA, respondents.

SYLLABUS

1.    CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT OF AIR CARRIAGE; A RELATION ATTENDED WITH PUBLIC DUTY; DISCOURTEOUS CONDUCT TOWARDS A PASSENGER GIVES RISE FOR AN ACTION FOR DAMAGES. - The Court has time and again ruled, and it cannot be over-emphasized, that a contract of air carriage generates a relation attended with a public duty and any discourteous conduct on the part of a carrier’s employee toward a passenger gives the latter an action for damages and, more so, where there is bad faith. While it may be true that there was no direct evidence on record of blatant rudeness on the part of PAL employees towards the Mirandas, the fact that private respondents were practically compelled to haggle for accommodations, a situation unbefitting persons of their stature, is rather demeaning and it partakes of discourtesy magnified by PAL’s condescending attitude. Moreover, it cannot be denied that the PAL employees herein concerned were definitely less than candid, to put it mildly, when they withheld information from private respondents that they could actually be accommodated in a hotel of their choice.

2.    REMEDIAL LAW; EVIDENCE; FINDINGS OF THE TRIAL AND APPELLATE COURT ON THE EXISTENCE OF BAD FAITH ON THE PART OF THE CARRIER, GENERALLY NOT DISTURBED ON APPEAL. - It is settled that bad faith must be duly proved and not merely presumed. The existence of bad faith, being a factual question, and the Supreme Court not being a trier of facts, the findings thereon of the trial court as well as of the Court of Appeals shall not be disturbed on appeal and are entitled to great weight and respect. Said findings are final and conclusive upon the Supreme Court except, inter alia, where the findings of the Court of Appeals and the trial court are contrary to each other.

3.    ID.; ID.; ID.; CASE AT BAR. - It is evident that the issues raised in this petition are the correctness of the factual findings of the Court of Appeals of bad faith on the part of petitioner and the award of damages against it. This Court has consistently held that the findings of the Court of Appeals and the other lower courts are as a rule binding upon it, subject to certain exceptions created by case law. As nothing in the record indicates any of such exceptions, the factual conclusions of the appellate court must be affirmed.

4.    CIVIL LAW; DAMAGES; MORAL DAMAGES; RECOVERABLE IN A BREACH OF CONTRACT ATTENDED WITH FRAUD OR BAD FAITH; INATTENTION TO AND LACK OF CARE FOR INTERESTS OF PASSENGERS AMOUNTS TO BAD FAITH. - It is now firmly settled that moral damages are recoverable in suits predicated on breach of a contract of carriage where it is proved that the carrier was guilty of fraud or bad faith. Inattention to and lack of care for the interests of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to an award of moral damages. What the law considers as bad faith which may furnish the ground for an award of moral damages would be bad faith in securing the contract and in the execution thereof, as well as in the enforcement of its terms, or any other kind of deceit. Such unprofessional and prescribed conduct is attributable to petitioner airline in the case at bar and the adverse doctrinal rule is accordingly applicable to it.

5.    ID.; ID.; ID.; AWARDED TO COMPENSATE PLAINTIFF’S INJURIES. - It must, of course, be borne in mind that moral damages are not awarded to penalize the defendant but to compensate the plaintiff for the injuries he may have suffered.

6.    ID.; ID.; EXEMPLARY DAMAGES; AWARDED WHERE DEFENDANT ACTED IN WANTON, FRAUDULENT AND OPPRESSIVE MANNER. - In a contractual or quasi-contractual relationship, exemplary damages, on the other hand, may be awarded only if the defendant had acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.

7. ID.; ID.; ATTORNEY’S FEES; AWARDED WHERE THERE IS A FINDING OF BAD FAITH; CASE AT BAR. - Attorney’s fees in the concept of damages may be awarded where there is a finding of bad faith. The evidence on record amply sustains, and we correspondingly find, that the awards assessed against petitioner on the aforestated items of damages are justified and reasonable.

8. ID.; OBLIGATIONS AND CONTRACTS; CONTRACT OF AIR CARRIAGE; LIABILITY OF CARRIER NOT LIMITED BY THE PROVISIONS OF WARSAW CONVENTION. - Although the Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine government, said convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that liability. The Warsaw Convention declares the carrier liable in the enumerated cases and under certain limitations. However, it must not be construed to preclude the operation of the Civil Code and pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially if willful misconduct on the part of the carrier’s employees is found or established. (Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al., G.R. No. 60501, March 5, 1993)

APPEARANCES OF COUNSEL

Siguion Reyna Montecillo & Ongsiako for petitioner.Noel P. Catre for private respondents.

D E C I S I O N

REGALADO, J.:

In this appeal by certiorari, petitioner Philippine Airlines, Inc. (PAL) assails the decision of respondent Court of Appeals in CA-G.R. CV No. 291471 which affirmed the judgment of the trial court finding herein petitioner liable as follows:

“Wherefore, premises considered, judgment is hereby rendered ordering the defendant, Philippine Airlines or PAL, to pay to the plaintiffs, Dr. Josefino Miranda and Luisa Miranda, the sum of P100,000.00 as moral damages; P30,000.00 as exemplary or corrective damages; P 10,000.00 as attorney’s fees; and the costs.”2

The factual antecedents of the present petition reveal that sometime in May, 1988, Dr. Josefino Miranda and his wife, Luisa, who were residents of Surigao City, went to the United States of America on a regular flight of Philippine Airlines, Inc. (PAL). On June 19, 1988, after a stay of over a month there, they obtained confirmed bookings from PAL’s San Francisco Office for PAL Flight PR 101 from San Francisco to Manila via Honolulu on June 21, 1988; PAL Flight PR 851 from Manila to Cebu on June 24, 1988; and PAL Flight PR 905 from Cebu to Surigao also on June 24, 1988.

Accordingly, on June 21, 1988, private respondents boarded PAL Flight PR 101 in San Francisco with five (5) pieces of baggage. After a stopover atHonolulu, and upon arrival in Manila on June 23, 1988, they were told by the PAL personnel that their baggage consisting of two balikbayan boxes, two pieces of luggage and one fishing rod case were off-loaded at Honolulu, Hawaii due to weight limitations. Consequently, private respondents missed their connecting flight fromManila to Cebu City, as originally scheduled, since they had to wait for their baggage which arrived the following day, June 24, 1988, after their pre-scheduled connecting flight had left. They consequently also missed their other scheduled connecting flight from Cebu City to Surigao City.

On June 25, 1988, they departed for Cebu City and therefrom private respondents had to transfer to PAL Flight 471 for Surigao City. On the way to SurigaoCity, the pilot announced that they had to return to Mactan Airport due to some mechanical problem. While at Mactan Airport, the passengers were provided by PAL with lunch and were booked for the afternoon flight to Surigao City. However, said flight was also canceled.

Since there were no more flights for Surigao City that day, private respondents asked to be billeted at the Cebu Plaza Hotel where they usually stay whenever they happen to be in  Cebu City. They were, however, told by the PAL employees that they could not be accommodated at said hotel supposedly because it was fully booked. Contrarily, when Dr. Miranda called the hotel, he was informed that he and his wife could be accommodated there. Although reluctant at first, PAL eventually agreed to private respondents’ overnight stay at said hotel. Oscar Jereza, PAL duty manager, approved the corresponding hotel authority with standard meals. It was only after private respondents’ insistence that their meals be ordered a la carte that they were allowed to do so by PAL provided that they sign for their orders.

Inasmuch as the shuttle bus had already left by the time private respondents were ready to go to the hotel, PAL offered them P 150.00 to include the fare for the return trip to the airport. Dr. Miranda asked for P 150.00 more as he and his wife, along with all of their baggages, could not be accommodated in just one taxi, aside from the need for tipping money for hotel boys. Upon refusal of this simple request, Dr. Miranda then declared that he would forego the amenities offered by PAL. Thus, the voucher for P 150.00 and the authority for the hotel accommodations prepared by PAL were voided due to private respondents’ decision not to avail themselves thereof.

To aggravate the muddled situation, when private respondents tried to retrieve their baggage, they were told this time that the same were loaded on another earlier PAL flight to Surigao City. Thus, private respondents proceeded to the hotel sans their baggage and of which they were deprived for the remainder of their trip. Private respondents were finally able to leave on board the first PAL flight to Surigao City only on June 26, 1988. Thereafter, they instituted an action for damages which, after trial as well as on appeal, was decided in their favor.

Petitioner PAL has come to us via the instant petition for review on certiorari, wherein it challenges the affirmatory decision of respondent Court of Appeals3 (1) for applying Articles 2220, 2232 and 2208 of the Civil Code when it sustained the award of the court a quo for moral and exemplary damages and attorney’s fees despite absence of bad faith on its part; and (2) for not applying the express provisions of the contract of carriage and pertinent provisions of the Warsaw Convention limiting its liability to US$20.00 per kilo of baggage.

1. Anent the first issue, petitioner argues that there was no bad faith on its part for while there was admittedly a delay in fulfilling its obligation under the contract of carriage with respect to the transport of passengers and the delivery of their baggage, such delay was justified by the paramount consideration of ensuring the safety of its passengers. It likewise maintains that its employees treated private respondents fairly and with courtesy to the extent of acceding to most of their demands in order to mitigate the inconvenience occasioned by the measures undertaken by the airline to ensure passenger safety.4

It reiterated its position that the off-loading of private respondents’ baggage was due to “weight limitations,” as lengthily explained by petitioner from an aeronautically technical viewpoint,5 taking into consideration such variable factors as flight distance, weather, air resistance, runway condition and fuel requirement. Given the variable weather conditions, it claimed that the weight limitation for each flight can only be ascertained shortly before take-off. While admittedly there would be a resulting inconvenience in the accommodations of the passengers and the handling of their cargo, the same is outweighed by the paramount concern for the safety of the flight.

Petitioner moreover impugns the Court of Appeal’s allegedly improper reliance on the inaccurate interpretation of the testimony of PAL’s baggage service representative, Edgar Mondejar, * that private respondents’ baggage were off-loaded to give preference to baggage and/or cargo originating from Honolulu. PAL argues that Mondejar’s knowledge of what transpired in Honolulu was merely based on the telex report forwarded to PAL’s Manila station stating that the off-loading was due to weight limitations.6

Petitioner enumerates the following incidents as indicative of its good faith in dealing with private respondents: (1) The cancellation of the flight to Surigao City due to mechanical/engine trouble was to ensure the safety of passengers and cargo; (2) PAL offered to shoulder private respondents’ preferred accommodations, meals and transportation while in Cebu City with more than the usual amenities given in cases of flight disruption, and gave them priority in the following day’s flight to Surigao City; (3) PAL employees did not act rudely towards private respondents and its managerial personnel even gave them special attention; (4) It was reasonable for PAL to limit the transportation expense to P150.00, considering that the fare between the airport and the hotel was only P75.00, and they would be picked up by the shuttle bus from the hotel to the airport, while the request for money for tips could not be justified; and (5) The inadvertent loading of private respondents’ baggage on the replacement flight to Surigao City was at most simple and excusable negligence due to the numerous flight disruptions and large number of baggages on that day.

Petitioner strenuously, and understandably, insists that its employees did not lie to private respondents regarding the want of accommodations at the latter’s hotel of preference. The only reason why Cebu Plaza Hotel was not initially offered to them by PAL was because of the earlier advice of the hotel personnel that not all the stranded PAL passengers could be accommodated therein. It claimed that it was in accordance with the airline’s policy of housing all affected passengers in one location for easy communication and transportation, which accommodations in this instance could be provided by Magellan Hotel. However, upon insistence of the Mirandas on their preference for Cebu Plaza Hotel, Jeremias Tumulak, PAL’s passenger relations officer, told them that they could use the office phone and that if they could arrange for such accommodation PAL would shoulder the expenses. This concession, so petitioner avers, negates any malicious intent on its part.

Crucial to the determination of the propriety of the award of damages in this case is the lower court’s findings on the matter of bad faith, which deserves to be quoted at length:

“These claims were reasonable and appeared to be supported by the evidence. Thus it cannot be denied that plaintiffs had to undergo some personal inconveniences in Manila for lack of their baggage. It is also highly probable that plaintiffs’ scheduled return to Surigao City was upset because of their having to wait for one day for their missing things. Consequently, it was quite evident that the off-loading of plaintiffs’ baggage in Honolulu was the proximate cause of plaintiffs’ subsequent inconveniences for which they claimed to have suffered social humiliation, wounded feelings, frustration and mental anguish.

       xxx                                    xxx                                    xxx

“In the present case there was a breach of contract committed in bad faith by the defendant airlines. As previously noted, plaintiffs had a confirmed booking on PAL Flight PR 101 from San Francisco to Manila. Therefore plaintiffs were entitled to an assured passage not only for themselves but for their baggage as well. They had a legal right to rely on this.

“The evidence showed that plaintiffs’ baggage were properly loaded and stowed in the plane when it left San Francisco for Honolulu. The off-loading or bumping off by defendant airlines of plaintiffs’ baggage to give way to other passengers or cargo was an arbitrary and oppressive act which clearly amounted to a breach of contract committed in bad faith and with malice. In the aforecited case, the Supreme Court defined bad faith as a breach of a known duty through some motive of interest or ill will. Self-enrichment or fraternal interest, and not personal ill will, may have been the motive, but it is malice nevertheless (infra).

“As correctly pointed out in the Memorandum for Plaintiffs dated June 18, 1990 (pp. 4-5), the following excerpt from the testimony of Edgar Mondejar clearly demonstrated the act of discrimination perpetrated by defendant on the herein plaintiffs (TSN, Edgar Mondejar, Feb. 28, 1990, pp. 26-28), thus:

Q:   Before a plane departs, your office will see to it the plane loads the exact weight limitation insofar as the cargoes (sic) and passengers are concerned, is that correct?

A:    Yes.

Q:   And so with the PR 101 flight starting mainland USA, it complied with the weight limitation, passengers and baggages (sic) limitation, is that correct?

A:    Yes.

Q:   In other words the trip from the mainland USA started in Hawaii to off-load cargoes (sic), you complied with the weight limitation and so on?

A:    Yes.

Q:   But you are saying upon arriving in Honolulu certain containers were off-loaded?

A:    Yes.

Q:   That would be therefore some containers were off-loaded to give way to some other containers starting from Honolulu towards Manila?

A:    Yes.

Q:   In other words Mr. Mondejar, preference was given to cargoes (sic) newly loaded at Honolulu instead of the cargoes (sic) already from mainland USA, is that correct?

A:    Yes.

“The aforesaid testimony constituted a clear admission in defendant’s evidence of facts amounting to a breach of contract in bad faith. This being so, defendant must be held liable in damages for the consequences of its action.”7 (Corrections indicated in original text.)

The trial court further found that the situation was aggravated by the following incidents: the poor treatment of the Mirandas by the PAL employees during the stopover at Mactan Airport in Cebu; the cavalier and dubious response of petitioner’s personnel to the Miranda spouses’ request to be billeted at the Cebu Plaza Hotel by denying the same allegedly because it was fully booked, which claim was belied by the fact that Dr. Miranda was easily able to arrange for accommodations thereat; and, the PAL

employees’ negligent, almost malicious, act of sending off the baggage of private respondents to Surigao City, while they were still in Cebu, without any explanation for this gross oversight.8

The Court of Appeals affirmed these findings of the trial court by stating that –

”While we recognize an airline’s prerogative to off-load baggag(e) to conform with weight limitations for the purpose of ensuring the safety of passengers, We, however, cannot sanction the motion (sic) and manner it was carried out in this case.

“It is uncontroverted that appellees’ baggag(e) were properly weighed and loaded in the plane when it left San Francisco for Honolulu. When they reached Honolulu, they were not informed that their baggag(e) would be off-loaded. Ironically, if the purpose of the off-loading was to conform with the weight limitations, why were other containers loaded in Honolulu? The real reason was revealed by Edgar Mondejar, baggage service representative of the appellant. x x x9

       xxx                                    xxx                                    xxx

“As earlier noted, the off-loading of appellees’ baggag(e) was done in bad faith because it was not really for the purpose of complying with weight limitations but to give undue preference to newly-loaded baggag(e) in Honolulu. This was followed by another mishandling of said baggag(e) in the twice-cancelled connecting flight from Cebu to Surigao. Appellees’ sad experience was further aggravated by the misconduct of appellant’s personnel in Cebu, who lied to appellees in denying their request to be billeted at Cebu Plaza Hotel.”10

The Court has time and again ruled, and it cannot be over-emphasized, that a contract of air carriage generates a relation attended with a public duty and any discourteous conduct on the part of a carrier’s employee toward a passenger gives the latter an action for damages and, more so, where there is bad faith.11

It is settled that bad faith must be duly proved and not merely presumed. The existence of bad faith, being a factual question, and the Supreme Court not being a trier of facts, the findings thereon of the trial court as well as of the Court of Appeals shall not be disturbed on appeal and are entitled to great weight and respect.12Said findings are final and conclusive upon the Supreme Court except, inter alia, where the findings of the Court of Appeals and the trial court are contrary to each other.13

It is evident that the issues raised in this petition are the correctness of the factual findings of the Court of Appeals of bad faith on the part of petitioner and the award of damages against it. This Court has consistently held that the findings of the Court of Appeals and the other lower courts are as a rule binding upon it, subject to certain exceptions created by case law. As nothing in the record indicates any of such exceptions, the factual conclusions of the appellate court must be affirmed.14

It is now firmly settled that moral damages are recoverable in suits predicated on breach of a contract of carriage where it is proved that the carrier was guilty of fraud or bad faith.15 Inattention to and lack of care for the interests of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to an award of moral damages. What the law considers as bad faith which may furnish the ground for an award of moral damages would be bad faith in securing the contract and in the execution thereof, as well as in the enforcement of its terms, or any other kind of deceit.16 Such unprofessional and proscribed conduct is attributable to petitioner airline in the case at bar and the adverse doctrinal rule is accordingly applicable to it.

In Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al.,17 a case which is virtually on all fours with the present controversy, we stated:

“In the case at bar, both the trial court and the appellate court found that CATHAY was grossly negligent and reckless when it failed to deliver the luggage of petitioner at the appointed place and time. We agree. x x x. While the mere failure of CATHAY to deliver respondent’s luggage at the agreed place and time did notipso facto amount to willful misconduct since the luggage was eventually delivered to private respondent, albeit belatedly, We are persuaded that the employees of CATHAY acted in bad faith. x x x

“x x x if the defendant airline is shown to have acted fraudulently or in bad faith, the award of moral and exemplary damages is proper.”

It must, of course, be borne in mind that moral damages are not awarded to penalize the defendant but to compensate the plaintiff for the injuries he may have suffered.18 In a contractual or quasi-contractual relationship, exemplary damages, on the other hand, may be awarded only if the defendant had acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.19 Attorney’s fees in the concept of damages may be awarded where there is a finding of bad faith.20 The evidence on record amply sustains, and we correspondingly find, that the awards assessed against petitioner on the aforestated items of damages are justified and reasonable.

At this juncture, it may also be pointed out that it is PAL’s duty to provide assistance to private respondents and, for that matter, any other passenger similarly inconvenienced due to delay in the completion of the transport and the receipt of their baggage. Therefore, its unilateral and voluntary act of providing cash assistance is deemed part of its obligation as an air carrier, and is hardly anything to rave about. Likewise, arrangements for and verification of requested hotel accommodations for private respondents could and should have been done by PAL employees themselves, and not by Dr. Miranda. It was rather patronizing of PAL to make much of the fact that they allowed Dr. Miranda to use its office telephone in order to get a hotel room.

While it may be true that there was no direct evidence on record of blatant rudeness on the part of PAL employees towards the Mirandas, the fact that private respondents were practically compelled to haggle for accommodations, a situation unbefitting persons of their stature, is rather demeaning and it partakes of discourtesy magnified by PAL’s condescending attitude. Moreover, it cannot be denied that the PAL employees herein concerned were definitely less than candid, to put it mildly, when they withheld information from private respondents that they could actually be accommodated in a hotel of their choice.

Indeed, the flambuoyant testimony of Oscar Jereza,* as PAL’s duty manager, merely pays lip-service to, without putting into reality, the avowed company policy of invariably making available and always granting the requests for the kind and standard of accommodations demanded by and appropriate for its passengers.21Certainly, a more efficient service, and not a lackadaisical and disorganized system, is expected of the nations’ flag carrier, especially on an international flight.

For, on the picayune matter of transportation expenses, PAL was obviously and unduly scrimping even on the small amount to be given to the Mirandas. PAL failed to consider that they were making arrangements for two paying round-trip passengers, not penny-ante freeloaders, who had been inconvenienced by the numerous delays in flight services and careless handling of their belongings by PAL. The niggardly attitude of its personnel in this unfortunate incident, as well as their hair-splitting attempts at justification, is a disservice to the image which our national airline seeks to project in its costly advertisements.

We agree with the findings of the lower court that the request of private respondents for monetary assistance of P300.00 for taxi fare was indeed justified, considering that there were two of them and they had several pieces of luggage which had to be ferried between the airport and the hotel. Also, the request for a small additional sum for tips is equally reasonable since tipping, especially in a first-rate hotel, is an accepted practice, of which the Court can take judicial notice. This is aside from the fact that private

respondents, having just arrived from an extended trip abroad, had already run out of Philippine currency, which predicament was exacerbated by their additional stay in Manila due to the off-loading of their baggage. All these inconveniences should have warranted a commonsensical and more understanding treatment from PAL, considering that private respondents found themselves in this unpleasant situation through no fault of theirs.

2. On its second issue, petitioner avers that the express provisions on private respondents’ tickets stipulating that liability for delay in delivery of baggage shall be limited to US$20.00 per kilo of baggage delayed, unless the passenger declares a higher valuation, constitutes the contract of carriage between PAL and private respondents.

It further contends that these express provisions are in compliance with the provisions of the Warsaw Convention for the Unification of Rules Relating to International Carrier by Air, to which the Philippines is a signatory. Thereunder, it is asserted that PAL flight PR 101 from San Francisco, U.S.A. to Manila,Philippines is an “international transportation” well within the coverage of the Warsaw Convention.

Petitioner obstinately insists on the applicability of the provisions of the Warsaw Convention regarding the carrier’s limited liability since the off-loading was supposedly justified and not attended by bad faith. Neither was there any claim for loss of baggage as in fact private respondents’ baggage were, albeit delayed, received by them in good condition.22

The court a quo debunked petitioner’s arguments by this holding:

“The defense raised by defendant airlines that it can be held liable only under the terms of the Warsaw Convention (Answer, Special and Affirmative Defenses, datedOctober 26, 1988) is of no moment. For it has also been held that Articles 17, 18 and 19 of the Warsaw Convention of 1929 merely declare the air carriers liable for damages in the cases enumerated therein, if the conditions specified are present. Neither the provisions of said articles nor others regulate or exclude liability for other breaches of contract by air carriers (Northwest Airlines, Inc. vs. Nicolas Cuenca, et al., 14 SCRA 1063).”23

This ruling of the trial court was affirmed by respondent Court of Appeals, thus:

“We are not persuaded. Appellees do not seek payment for loss of any baggage. They are claiming damages arising from the discriminatory off-loading of their baggag(e). That cannot be limited by the printed conditions in the tickets and baggage checks. Neither can the Warsaw Convention exclude nor regulate the liability for other breaches of contract by air carriers. A recognition of the Warsaw Convention does not preclude the operation of our Civil Code and related laws in determining the extent of liability of common carriers in breach of contract of carriage, particularly for willful misconduct of their employees.”24

The congruent finding of both the trial court and respondent court that there was discriminatory off-loading being a factual question is, as stated earlier, binding upon and can no longer be passed upon by this Court, especially in view of and in deference to the affirmance of the same by respondent appellate court.

There was no error on the part of the Court of Appeals when it refused to apply the provisions of the Warsaw Convention, for in the words of this Court in the aforequoted Cathay Pacific case:

“x x x although the Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine government, said convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an

absolute limit of the extent of that liability. The Warsaw Convention declares the carrier liable in the enumerated cases and under certain limitations. However, it must not be construed to preclude the operation of the Civil Code and pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially if willful misconduct on the part of the carrier’s

 employees is found or established, which is the case before Us. x x x”

ACCORDINGLY, finding no reversible error, the challenged judgment of respondent Court of Appeals is hereby AFFIRMED in toto.

SO ORDERED.

G.R. No. 94149 May 5, 1992

AMERICAN HOME ASSURANCE, COMPANY, petitioner, vs.THE COURT OF APPEALS and NATIONAL MARINE CORPORATION and/or NATIONAL MARINE CORPORATION (Manila), respondents.

 

PARAS, J.:

This is a petition for review on certiorari which seeks to annul and set aside the (a) decision 1 dated May 30, 1990 of the Court of Appeals in C.A. G.R. SP. No. 20043 entitled "American Home Assurance Company v. Hon. Domingo D. Panis, Judge of the Regional Trial Court of Manila, Branch 41 and National Marine Corporation and/or National Marine Corporation (Manila)", dismissing petitioner's petition for certiorari, and (b) resolution 2 dated June 29, 1990 of the Court of Appeals denying petitioner's motion for reconsideration.

The undisputed facts of the case are follows:

Both petitioner American Home Assurance Co. and the respondent National Marine Corporation are foreign corporations licensed to do business in the Philippines, the former through its branch. The American Home Assurance Company (Philippines), Inc. and the latter through its branch. The National Marine Corporation (Manila) (Rollo, p. 20, Annex L, p.1).

That on or about June 19, 1988, Cheng Hwa Pulp Corporation shipped 5,000 bales (1,000 ADMT) of bleached kraft pulp from Haulien, Taiwan on board "SS Kaunlaran", which is owned and operated by herein respondent National Marine Corporation with Registration No. PID-224. The said shipment was consigned to Mayleen Paper, Inc. of Manila, which insured the shipment with herein petitioner American Home Assurance Co. as evidenced by Bill of Lading No. HLMN-01.

On June 22, 1988, the shipment arrived in Manila and was discharged into the custody of the Marina Port Services, Inc., for eventual delivery to the consignee-assured. However, upon delivery of the shipment to Mayleen Paper, Inc., it was found that 122 bales had either been damaged or lost. The loss was calculated to be 4,360 kilograms with an estimated value of P61,263.41.

Mayleen Paper, Inc. then duly demanded indemnification from respondent National Marine Corporation for the aforesaid damages/losses in the shipment but, for apparently no justifiable reason, said demand was not heeded (Petition, p. 4).

As the shipment was insured with petitioner in the amount of US$837,500.00, Mayleen Paper, Inc. sought recovery from the former. Upon demand and submission of proper documentation, American Home Assurance paid Mayleen Paper, Inc. the adjusted amount of P31,506.75 for the damages/losses suffered by the shipment, hence, the former was subrogated to the rights and interests on Mayleen Paper, Inc.

On June 6, 1989, the petitioner, as subrogee, then brought suit against respondent for the recovery of the amount of P31.506.75 and 25% of the total amount due as attorney's fees, by filing a complaint for recovery of sum of money (Petition, p. 4).

Respondent, National Marine Corporation, filed a motion to dismiss dated August 7, 1989 stating that American Home Assurance Company had no cause of action based on Article 848 of the Code of Commerce which provides "that claims for averages shall not be admitted if they do not exceed 5% of the interest which the claimant may have in the vessel or in the cargo if it be gross average and 1% of the goods damaged if particular average, deducting in both cases the expenses of appraisal, unless there is an agreement to the contrary." It contended that based on the allegations of the complaint, the loss sustained in the case was P35,506.75 which is only .18% of P17,420,000.00, the total value of the cargo.

On the other hand, petitioner countered that Article 848 does not apply as it refers to averages and that a particular average presupposes that the loss or damages is due to an inherent defect of the goods, an accident of the sea, or a force majeure or the negligence of the crew of the carrier, while claims for damages due to the negligence of the common carrier are governed by the Civil Code provisions on Common Carriers.

In its order dated November 23, 1989, the Regional Trial Court sustained private respondent's contention. In part it stated:

Before the Court for resolution is a motion for reconsideration filed by defendant through counsel dated October 6, 1989.

The record shows that last August 8, 1989, defendant through counsel filed a motion to dismiss plaintiff's complaint.

Resolving the said motion last September 18, 1989, the court ruled to defer resolution thereof until after trial on the merits. In the motion now under consideration, defendant prays for the reconsideration of the order of September 18, 1989 and in lieu thereof, another order be entered dismissing plaintiff's complaint.

There appears to be good reasons for the court to take a second look at the issues raised by the defendant.

xxx xxx xxx

It is not disputed defendants that the loss suffered by the shipment is only .18% or less that 1% of the interest of the consignee on the cargo Invoking the provision of the Article 848 of the Code of Commerce which reads:

Claims for average shall not be admitted if they do not exceed five percent of the interest which the claimant may have in the vessels or cargo if it is gross average, and one percent of the goods damaged if particular average, deducting in both cases the expenses of appraisal, unless there is an agreement to the contrary. (Emphasis supplied)

defendant claims that plaintiff is barred from suing for recovery.

Decisive in this case in whether the loss suffered by the cargo in question is a "particular average."

Particular average, is a loss happening to the ship, freight, or cargo which is not be (sic) shared by contributing among all those interested, but must be borne by the owner of the subject to which it occurs. (Black's Law Dictionary, Revised Fourth Edition, p. 172, citing Bargett v. Insurance Co. 3 Bosw. [N.Y.] 395).

as distinguished from general average which

is a contribution by the several interests engaged in the maritime venture to make good the loss of one of them for the voluntary sacrifice of a part of the ship or cargo to save the residue of the property and the lives of those on board, or for extraordinary expenses necessarily incurred for the common benefit and safety of all (Ibid., citing California Canneries Co. v. Canton Ins. Office 25 Cal. App. 303, 143 p. 549-553).

From the foregoing definition, it is clear that the damage on the cargo in question, is in the nature of the "particular average." Since the loss is less than 1% to the value of the cargo and there appears to be no allegations as to any agreement defendants and the consignee of the goods to the contrary, by express provision of the law, plaintiff is barred from suing for recovery.

WHEREOF, plaintiff's complaint is hereby dismissed for lack of cause of action. (Rollo, p. 27; Annex A, pp. 3-4).

The petitioner then filed a motion for reconsideration of the order of dismissal but same was denied by the court in its order dated January 26, 1990 (supra).

Instead of filing an appeal from the order of the court a quo dismissing the complaint for recovery of a sum of money, American Home Assurance Company filed a petition for certiorari with the Court of Appeals to set aside the two orders or respondent judge in said court (Rollo, p. 25).

But the Court of Appeals in its decision dated May 30, 1990, dismissed the petition as constituting plain errors of law and not grave abuse of discretion correctible by certiorari (a Special Civil Action). If at all, respondent court ruled that there are errors of judgment subject to correction by certiorari as a mode of appeal but the appeal is to the Supreme Court under Section 17 of the Judiciary Act of 1948 as amended by Republic Act No. 5440. Otherwise stated, respondent Court opined that the proper remedy is a petition for review on certiorari with the Supreme Court on pure questions of law (Rollo, p. 30).

Hence, this petition.

In a resolution dated December 10, 1990, this Court gave due course to the petition and required both parties to file their respective memoranda (Rollo, p. 58).

The procedural issue in this case is whether or not certiorari was the proper remedy in the case before the Court of Appeals.

The Court of Appeals ruled that appeal is the proper remedy, for aside from the fact that the two orders dismissing the complaint for lack of cause of action are final orders within the meaning of Rule 41, Section 2 of the Rules of Court, subject petition raised questions which if at all, constituting grave abuse of discretion correctible bycertiorari.

Evidently, the Court of Appeals did not err in dismissing the petition for  certiorari for as ruled by this Court, an order of dismissal whether right or wrong is a final order, hence, a proper subject of appeal, not certiorari(Marahay v. Melicor, 181 SCRA 811 (1990]). However, where the fact remains that respondent Court of Appeals obviously in the broader interests of justice, nevertheless proceeded to decide the petition for certiorari and ruled on specific points raised therein in a manner akin to what would have been done on assignments of error in a regular appeal, the petition therein was therefore disposed of on the merits and not on a dismissal due to erroneous choice of remedies or technicalities (Cruz v. I.A.C., 169 SCRA 14 (1989]). Hence, a review of the decision of the Court of Appeals on the merits against the petitioner in this case is in order.

On the main controversy, the pivotal issue to be resolved is the application of the law on averages (Articles 806, 809 and 848 of the Code of Commerce).

Petitioner avers that respondent court failed to consider that respondent National Marine Corporation being a common carrier, in conducting its business is regulated by the Civil Code primarily and suppletorily by the Code of Commerce; and that respondent court refused to consider the Bill of Lading as the law governing the parties.

Private respondent countered that in all matters not covered by the Civil Code, the rights and obligations of the parties shall be governed by the Code of Commerce and by special laws as  provided for in Article 1766 of the Civil Code; that Article 806, 809 and 848 of the Code of Commerce should be applied suppletorily as they provide for the extent of the common carriers' liability.

This issue has been resolved by this Court in National Development Co. v. C.A. (164 SCRA 593 [1988]; citingEastern Shipping Lines, Inc. v. I.A.C., 150 SCRA 469, 470 [1987] where it was held that "the law of the country to which the goods are to be transported persons the liability of the common carrier in case of their loss, destruction or deterioration." (Article 1753, Civil Code). Thus, for cargoes transported to the Philippines as in the case at bar, the liability of the carrier is governed primarily by the Civil Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws (Article 1766, Civil Code).

Corollary thereto, the Court held further that under Article 1733 of the Civil Code, common carriers from the nature of their business and for reasons of public policy are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them according to all circumstances of each case. Thus, under Article 1735 of the same Code, in all cases other than those mentioned in Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law ( Ibid., p. 595).

But more importantly, the Court ruled that common carriers cannot limit their liability for injury or loss of goods where such injury or loss was caused by its own negligence. Otherwise stated, the law on averages under the Code of Commerce cannot be applied in determining liability where there is negligence ( Ibid., p. 606).

Under the foregoing principle and in line with the Civil Code's mandatory requirement of extraordinary diligence on common carriers in the car care of goods placed in their stead, it is but reasonable to conclude that the issue of negligence must first be addressed before the proper provisions of the Code of Commerce on the extent of liability may be applied.

The records show that upon delivery of the shipment in question of Mayleen's warehouse in Manila, 122 bales were found to be damaged/lost with straps cut or loose, calculated by the so-called "percentage method" at 4,360 kilograms and amounting to P61,263.41 (Rollo, p. 68). Instead of presenting proof of the exercise of extraordinary diligence as required by law, National Marine Corporation (NMC) filed its Motion to Dismiss dated August 7, 1989, hypothetically admitting the truth of the facts alleged in the complaint to the effect that the loss or damage to the 122 bales was due to the negligence or fault of NMC (Rollo, p. 179). As ruled by this Court, the filing of a motion to dismiss on the ground of lack of cause of action carries with it the admission of the material facts pleaded in the complaint (Sunbeam Convenience Foods, Inc. v. C.A., 181 SCRA 443 [1990]). Such being the case, it is evident that the Code of Commerce provisions on averages cannot apply.

On the other hand, Article 1734 of the Civil Code provides that common carriers are responsible for loss, destruction or deterioration of the goods, unless due to any of the causes enumerated therein. It is obvious that the case at bar does not fall under any of the exceptions. Thus, American Home Assurance Company is entitled to reimbursement of what it paid to Mayleen Paper, Inc. as insurer.

Accordingly, it is evident that the findings of respondent Court of Appeals, affirming the findings and conclusions of the court a quo are not supported by law and jurisprudence.

PREMISES CONSIDERED, (1) the decisions of both the Court of Appeals and the Regional Trial Court of Manila, Branch 41, appealed from are REVERSED; and (2) private respondent National Marine Corporation is hereby ordered to reimburse the subrogee, petitioner American Home Assurance Company, the amount of P31,506.75.

SO ORDERED.

G.R. No. L-15652 December 14, 1920

THE YNCHAUSTI STEAMSHIP COMPANY, petitioner, vs.I. B. DEXTER, as Auditor of the Philippine Islands, and C. E. UNSON, as Acting Purchasing Agent of the Philippine Islands, respondents.

Cohn & Fisher for petitioner.Attorney-General Paredes and Assistant Attorney-General A. Santos for respondents.

STREET, J.:

This a petition for a writ of mandamus filed in this court of the Ynchausti Steamship Company to compel the Purchasing Agent of the Philippine Islands and the Insular Auditor to sign, countersign, and deliver to the petitioner a warrant upon the Treasurer of the Philippine Islands for the sum of P82.79 in satisfaction of a claim for that amount, which is alleged to be due the petitioner as a common carrier for freight earned in transporting for the Government two distinct consignments of mineral oil from Manila to two other ports in the Philippine Islands. After the defendants had duly answered, denying all the allegations of the petition except such as relate to the character and places of residence of the parties to the petition (which are admitted) the controversy was submitted for determination by this court upon an agreed statement of facts as follows:

On July 23, 1918, the Government of the Philippine Islands, acting by and through the respondent Insular Purchasing Agent, employed the services of the petitioner, Ynchausti Steamship Co., a common carrier, for the transportation, on board the steamship Venus, from the port of Manila to the port of Aparri, Cagayan, of a consignment of merchandise, consisting of thirty (30) cases of "White Rose" mineral oil of two five-gallon cans to the case; and on September 18, 1918, the said Government likewise employed the services of petitioner for the transportation on board the steamship Venus, from Manila to Aparri, Cagayan, of ninety-six cases of "Cock" Brand mineral oil, ten gallons to the case. The goods were delivered by the shipper to the carrier, which accordingly received them, and to evidence the contract of transportation, the parties duly executed and delivered what is popularly called the Government bill of lading (General Form 9-A), hereto attached, marked Exhibit A and made a part hereof, wherein and whereby it was stipulated that the carrier, the petitioner Ynchausti & Co., received the above-mentioned supplies in apparent good condition, obligating itself to carry said supplies to the place agreed upon, in accordance with the authorized and prescribed rates and classifications, and subject to the law of common carriers in force on the date of the shipment, and to the conditions prescribed by the Insular Collector of Customs in Philippine Marine Regulations at page 16 under the heading of "Bill of Lading Conditions," hereto attached, marked Exhibit B and made a part hereof.

Upon the delivery of the said shipment of "Cock" brand oil and consignee claimed that  one case was delivered empty, and noted such claim upon the bill of lading; and upon the delivery of the said shipment of "White Rose," brand oil the consignee claimed that one case was delivered empty, and noted said claim upon the bill of lading.

Thereafter, notwithstanding the protestations of the petitioner, Ynchausti Steamship Co., that said shortages were due to causes entirely unknown to it, and were not due to any fault or negligence on its part, or on the part of its agents or servants, the Acting Insular Purchasing Agent of the Philippine Islands notified the petitioners herein that after due investigation the Insular Auditor found and decided that the leakages of the two whole cases were due to its negligence and that the

deduction of the sum of P22.53, the invoice value of the goods lost, and held by the Auditor to be the true value thereof had been authorized by the said Insular Auditor.

Petitioner thereupon protested against the threatened deduction, and demanded that it be paid the full amount due for the transportation of the two said shipments of merchandise, to wit, the sum of P82.79, as shown by its transportation voucher presented in this cause, hereto attached. marked Exhibit C and made a part hereof.

Thereafter, notwithstanding the protest and demand of the petitioner as aforesaid, the Insular Auditor, in conformity with his ruling, declined and still declines to issue to the petitioner a warrant for the full sum of P82.79, and has tendered to it a warrant for the sum of P60.26, which the petitioner has refused to accept.lawphi1.net

The sum of P22.53 authorized to be deducted by the Insular Auditor, as appears herein, has not at any time been liquidated by consent, agreement, or by the judgment of any court of competent jurisdiction.

Upon a perusal of the foregoing agreed statement it will be seen that the present litigation had its origin in a situation practically identical with that considered by this court in Compañia General de Tabacos vs. French and Unson (39 Phil., 34). It will be noted, however, that the case mentioned was decided upon demurrer, while the one now before us is to be heard and determined upon the petition, answer, and the admitted facts.

We note that in this case, as in the case of Compañia General de Tabacos vs. French and Unson (supra), the petition alleges that the leakage of the lost gasoline was due to causes unknown to the petitioner and was not due to any fault or negligence of petitioner, its agents, or servants. The respondents, by demurring to the petition in the earlier case, admitted that allegation. In the case now before us that allegation is put in issue, and we find nothing in the admitted statement of facts to support it. It results that if that allegation is material to the relief here sought, the petition must fail.

We are of the opinion that the allegation in question is material and that the belief sought in this case cannot be granted.

In section 646 of the Administrative Code it is provided that when Government property is transmitted from one place to another by carrier, it shall be upon proper bill of lading, or receipt, from such carrier, and it shall be the duty of the consignee, or his representative, to make full notation of any evidence of loss, shortage, or damage, upon the bill of lading, or receipt, before accomplishing it. It is admitted by the petitioner in the agreed statement of facts that the consignee, at the time the oil was delivered, noted the loss in the present case upon the two respective bills of lading. The notation of these losses by the consignee, in obedience to the precept of section 646 of the Administrative Code, is competent evidence to show that the shortage in fact existed. As the petitioner admits that the oil was received by it for carriage and inasmuch as the fact of loss is proved in the manner just stated, it results that there is a presumption that the petitioner was to blame for the loss; and it was incumbent upon the petitioner in order to entitle it to relief in the case to rebut that presumption by proving, as is alleged in the petition, that the loss was not due to any fault or negligence of the petitioner.

The mere proof of delivery of goods in good order to a carrier, and of their arrival at the place of destination in bad order, makes out a prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the carrier must be held responsible. (4 R. C. L., p. 917.) It is incumbent upon the carrier to prove that the loss was due to accident or some other circumstance inconsistent with

its liability. (Articles 361-363, Code of Commerce.) Indeed, if the Government of the Philippine Islands had instituted an action in a court of law against the petitioner to recover the value of the oil lost while these consignments were in the court of transportation, it would, upon the facts appearing before us, have been entitled to judgment.

From this it is apparent that the mandamus prayed for cannot be granted. It is a rule of universal application that a petition for extraordinary relief of the character here sought must show merit. That is, the petitioner's right to relief must be clear. Such cannot be said to be the case where, as here, a presumption of responsibility on the part of the petitioner stands unrefuted upon the record.

We are of the opinion that, in the absence of proof showing that the carrier was not at fault in respect to the matter under discussion, the Insular Auditor was entitled to withhold, from the amount admittedly due to the petitioner for the freight charges, a sum sufficient to cover the value of the oil lost in transit.

The petition will be dismissed, with costs against the petitioner. So ordered.

Mapa, C.J., Araullo, Avanceña, and Villamor, JJ., concur.Malcolm, J., concurs in the result.

G.R. No. L-29721 March 27, 1929

AMANDO MIRASOL, Plaintiff-Appellant, vs. THE ROBERT DOLLAR CO., Defendant-Appellant.

Vicente Hilado for plaintiff-appellant.J.A. Wolfson for defendant-appellant.

STATEMENTchanrobles virtual law library

After the promulgation of the decision rendered by the Second Division of February 13, 1929, 1 the defendant filed a motion to have the case heard and decided in banc, and inasmuch as the legal questions involved are important to the shipping interests, the court thought it best to do so.chanroblesvirtualawlibrary chanrobles virtual law library

After the formal pleas, plaintiff alleges that he is the owner and consignee of two cases of books, shipped in good order and condition at New York, U.S.A., on board the defendant's steamship President Garfield, for transport and delivery to the plaintiff in the City of Manila, all freight charges paid. That the two cases arrived in Manila on September 1, 1927, in bad order and damaged condition, resulting in the total loss of one case and a partial loss of the other. That the loss in one case is P1,630, and the other P700, for which he filed his claims, and defendant has refused and neglected to pay, giving as its reason that the damage in question "was caused by sea water." That plaintiff never entered into any contract with the defendant limiting defendant's liability as a common carrier, and when he wrote the letter of September 3, 1927, he had not then ascertained the contents of the damaged case, and could not determine their value. That he never intended to ratify or confirm any agreement to limit the liability of the defendant. That on September 9, 1927, when the other case was found, plaintiff filed a claim for the real damage of the books therein named in the sum of $375.chanroblesvirtualawlibrary chanrobles virtual law library

Plaintiff prays for corresponding judgment, with legal interest from the filing of the complaint and costs.chanroblesvirtualawlibrary chanrobles virtual law library

For answer the defendant made a general and specific denial, and as a separate and special defense alleges that the steamship President Garfield at all the times alleged was in all respects seaworthy and properly manned, equipped and supplied, and fit for the voyage. That the damage to plaintiff's merchandise, if any, was not caused through the negligence of the vessel, its master, agent, officers, crew, tackle or appurtenances, nor by reason of the vessel being unseaworthy or improperly manned, "but that such damage, if any, resulted from faults or errors in navigation or in the management of said vessel." As a second separate and special defense, defendant alleges that in the bill of lading issued by the defendant to plaintiff, it was agreed in writing that defendant should not be "held liable for any loss of, or damage to, any of said merchandise resulting from any of the following causes, to wit: Acts of God, perils of the sea or other waters," and that plaintiff's damage, if any, was caused by "Acts of God" or "perils of the sea." As a third special defense, defendant quoted clause 13 of the bill of lading, in which it is stated that in no case shall it be held liable "for or in respect to said merchandise or property beyond the sum of two hundred and fifty dollars for any piece, package or any article not enclosed in a package, unless a higher value is stated herein and ad valorem freight paid or assessed thereon," and that there was no other agreement. That no September 3, 1927 the plaintiff wrote the defendant a letter as follows:

Therefore, I wish to file claim of damage to the meager maximum value that your bills of lading will indemnify me, that is $250 as per condition 13.

As a fourth special defense, defendant alleges that the damage, if any, was caused by "sea water," and that the bill of lading exempts defendant from liability for that cause. That damage by "sea water" is a shipper's risk, and that defendant is not liable.chanroblesvirtualawlibrary chanrobles virtual law library

As a result of the trial upon such issues, the lower court rendered judgment for the plaintiff for P2,080, with legal interest thereon from the date of the final judgment, with costs, from which both parties appealed, and the plaintiff assigns the following errors:

I. The lower court erred in holding that plaintiff's damage on account of the loss of the damaged books in the partially damaged case can be compensated with an indemnity of P450 instead of P750 as claimed by plaintiff.chanroblesvirtualawlibrary chanrobles virtual law library

II. The lower court, consequently, also erred in giving judgment for plaintiff for only P2,080 instead of P2,380.chanroblesvirtualawlibrary chanrobles virtual law library

III. The lower court erred in not sentencing defendant to pay legal interest on the amount of the judgment, at least, from the date of the rendition of said judgment, namely, January 30, 1928.

The defendant assigns the following errors:

I. The lower court erred in failing to recognize the validity of the limited liability clause of the bill of lading, Exhibit 2.chanroblesvirtualawlibrary chanrobles virtual law library

II. The lower court erred in holding defendant liable in any amount and in failing to hold, after its finding as a fact that the damage was caused by sea water, that the defendant is not liable for such damage by sea water.chanroblesvirtualawlibrary chanrobles virtual law library

III. The lower court erred in awarding damages in favor of plaintiff and against defendant for P2,080 or in any other amount, and in admitting, over objection, Exhibits G, H, I and J.

JOHNS, J.:

Plaintiff's contention that he is entitled to P700 for his Encyclopedia Britannica is not tenable. The evidence shows that the P400 that the court allowed, he could buy a new set which could contain all of the material and the subject matter of the one which he lost. Plaintiff's third assignment of error is well taken, as under all of the authorities, he is entitled to legal interest from the date of his judgement rendered in the lower court and not the date when it becomes final. The lower court found that plaintiff's damage was P2,080, and that finding is sustained by that evidence. There was a total loss of one case and a partial loss of the other, and in the very nature of the things, plaintiff could not prove his loss in any other way or manner that he did prove it, and the trial court who heard him testify must have been convinced of the truth of his testimony.chanroblesvirtualawlibrarychanrobles virtual law library

There is no claim or pretense that the plaintiff signed the bill of lading or that he knew of his contents at the time that it was issued. In that situation he was not legally bound by the clause which purports to limit defendant's liability. That question was squarely met and decided by this court in banc in Juan Ysmael and Co., vs. Gabino Baretto and Co., (51 Phil., 90; see numerous authorities there cited).chanroblesvirtualawlibrary chanrobles virtual law library

Among such authorities in the case of The Kengsington decided by the Supreme Court of the U.S. January 6, 1902 (46 Law. Ed., 190), in which the opinion was written by the late Chief Justice White, the syllabus of which is as follows:

1. Restrictions of the liability of a steamship company for its own negligence or failure of duty toward the passenger, being against the public policy enforced by the courts of the United States, will not to be upheld, though the ticket was issued and accepted in a foreign country and contained a condition making it subject to the law thereof, which sustained such stipulation.chanroblesvirtualawlibrary chanrobles virtual law library

2. The stipulation in a steamship passenger's ticket, which compels him to value his baggage, at a certain sum, far less than it is worth, or, in order to have a higher value put upon it, to subject it to the provisions of the Harter Act, by which the carrier would be exempted from all the liability therefore from errors in navigation or management of the vessel of other negligence is unreasonable and in conflict with public policy.chanroblesvirtualawlibrary chanrobles virtual law library

3. An arbitrary limitation of 250 francs for the baggage of any steamship passenger unaccompanied by any right to increase the amount of adequate and reasonable proportional payment, is void as against public policy.

Both the facts upon which it is based and the legal principles involved are square in point in this case.chanroblesvirtualawlibrary chanrobles virtual law library

The defendant having received the two boxes in good condition, its legal duty was to deliver them to the plaintiff in the same condition in which it received them. From the time of their delivery to the defendant in New York until they are delivered to the plaintiff in Manila, the boxes were under the control and supervision of the defendant and beyond the control of the plaintiff. The defendant having admitted that the boxes were damaged while in transit and in its possession, the burden of proof then shifted, and it devolved upon the defendant to both allege and prove that the damage was caused by reason of some fact which exempted it from liability. As to how the boxes were damaged, when or where, was a matter peculiarly and exclusively within the knowledge of the defendant and in the very nature of things could not be in the knowledge of the plaintiff. To require the plaintiff to prove as to when and how the damage was caused would force him to call and rely upon the employees of the defendant's ship, which in legal effect would be to say that he could not recover any damage for any reason. That is not the law.chanroblesvirtualawlibrary chanrobles virtual law library

Shippers who are forced to ship goods on an ocean liner or any other ship have some legal rights, and when goods are delivered on board ship in good order and condition, and the shipowner delivers them to the shipper in bad order and condition, it then devolves upon the shipowner to both allege and prove that the goods were damaged by the reason of some fact which legally exempts him from liability; otherwise, the shipper would be left without any redress, no matter what may have caused the damage.chanroblesvirtualawlibrary chanrobles virtual law library

The lower court in its opinion says:

The defendant has not even attempted to prove that the two cases were wet with sea water by fictitious event, force majeure or nature and defect of the things themselves. Consequently, it must be presumed that it was by causes entirely distinct and in no manner imputable to the plaintiff, and of which the steamer President Garfield or any of its crew could not have been entirely unaware.

And the evidence for the defendant shows that the damage was largely caused by "sea water," from which it contends that it is exempt under the provisions of its bill of lading and the provisions of the article 361 of the Code of Commerce, which is as follows:

Merchandise shall be transported at the risk and venture of the shipper, if the contrary was not expressly stipulated.chanroblesvirtualawlibrary chanrobles virtual law library

Therefore, all damages and impairment suffered by the goods during the transportation, by reason of accident, force majeure, or by virtue of the nature or defect of the articles, shall be for the account and risk of the shipper.chanroblesvirtualawlibrary chanrobles virtual law library

The proof of these accidents is incumbent on the carrier.

In the final analysis, the cases were received by the defendant in New York in good order and condition, and when they arrived in Manila, they were in bad condition, and one was a total loss. The fact that the cases were damaged by "sea water," standing alone and within itself, is not evidence that they were damaged by force majeure or for a cause beyond the defendant's control. The words "perils of the sea," as stated in defendant's brief apply to "all kinds of marine casualties, such as shipwreck, foundering, stranding," and among other things, it is said: "Tempest, rocks, shoals, icebergs and other obstacles are within the expression," and "where the peril is the proximate cause of the loss, the shipowner is excused." "Something fortuitous and out of the ordinary course is involved in both words 'peril' or 'accident'."chanrobles virtual law library

Defendant also cites and relies on the case of Government of the Philippine Islands vs. Ynchausti & Company (40 Phil., 219), but it appears from a reading of that case that the facts are very different and, hence, it is not in point. In the instant case, there is no claim or pretense that the two cases were not in good order when received on board the ship, and it is admitted that they were in bad order on their arrival at Manila. Hence, they must have been damaged in transit. In the very nature of things, if they were damaged by reason of a tempest, rocks, icebergs, foundering, stranding or the perils of the sea, that would be a matter exclusively within the knowledge of the officers of defendant's ship, and in the very nature of things would not be within plaintiff's knowledge, and upon all of such questions, there is a failure of proof.chanroblesvirtualawlibrary chanrobles virtual law library

The judgment of the lower court will be modified, so as to give the plaintiff legal interest on the amount of his judgment from the date of its rendition in the lower court, and in all respects affirmed, with costs. So ordered.

G.R. No. 83613 February 21, 1990

FIREMAN'S FUND INSURANCE CO., petitioner, vs.METRO PORT SERVICE, INC., (Formerly E. Razon, Inc.), respondent.

Dollete, Blanco, Ejercito & Associates for petitioner.

Cruz, Durian, Agabin, Atienza, Alday & Tuason for respondent.

 

GUTIERREZ, JR., J.:

This is a petition for review of the decision and resolution denying reconsideration of the Court of Appeals in CA-G.R. CV No. 00673 entitled "Fireman's Fund Insurance Co. v. Maersk Line, Compañia General de Tabacos de Filipinas and E. Razon, Inc."

The facts are as follows:

Vulcan Industrial and Mining Corporation imported from the United States several machineries and equipment which were loaded on board the SIS Albert Maersk at the port of Philadelphia, U.S.A., and transhipped for Manila through the vessel S/S Maersk Tempo.

The cargo which was covered by a clean bill of lading issued by Maersk Line and Compania General de Tabacos de Filipinas (referred to as the CARRIER) consisted of the following:

xxx xxx xxx

1 piece truck mounted core drill

1 piece trailer mounted core drill

1 (40') container of 321 pieces steel tubings

1 (40') container of 170 pieces steel tubings

1 (40') container of 13 cases, 3 crates, 2 pallets and 26 mining machinery parts. (Rollo, p. 4)

The shipment arrived at the port of Manila on June 3, 1979 and was turned over complete and in good order condition to the arrastre operator E. Razon Inc. (now Metro Port Service Inc. and referred to as the ARRASTRE).

At about 10:20 in the morning of June 8, 1979, a tractor operator, named Danilo Librando and employed by the ARRASTRE, was ordered to transfer the shipment to the Equipment Yard at Pier 3. While Librando was maneuvering the tractor (owned and provided by Maersk Line) to the left, the cargo fell from the chassis and hit one of the container vans of American President Lines. It was discovered that there were no twist lock at the rear end of the chassis where the cargo was loaded.

There was heavy damage to the cargo as the parts of the machineries were broken, denied, cracked and no longer useful for their purposes.

The value of the damage was estimated at P187,500.00 which amount was paid by the petitioner insurance company to the consignee, Vulcan Industrial and Mining Corporation.

The petitioner, under its subrogation rights, then filed a suit against Maersk Line, Compania General de Tabacos (as agent) and E. Razon, Inc., for the recovery of the amount it paid the assured under the covering insurance policy. On October 26, 1980, the trial court rendered judgment, the decretal portion of which reads as follows:

xxx xxx xxx

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants by ordering the latter to pay, jointly and severally, the plaintiff the sum of P187,500.00, with legal interest thereon from August 29, 1980 until full payment thereof.

Defendants are also ordered to pay, in solidum, the sum of P10,000.00 as attorney's fees to the plaintiff, and to pay the costs of this suit.

There shall be no award for exemplary damages in favor of the plaintiff, for the reason that defendants are probably acting in good faith in resisting the complaint. (Rollo, pp. 45-46)

All the defendants appealed to the Court of Appeals. Eventually, Maersk Line and Compania General de Tabacos negotiated with the petitioner for the settlement of the latter's claim and no longer pursued their appeal.

On the appeal of the ARRASTRE, the Court of Appeals rendered a decision with the following dispositive portion:

WHEREFORE, foregoing premises considered, the decision of the court a quo insofar as herein defendant-appellant is concerned is REVERSED It is hereby ordered that the complaint against herein defendant-appellant be dismissed. No costs. (Rollo, p. 50)

Reconsideration of the decision was denied in a resolution dated May 23, 1988.

Hence, the present recourse.

The petitioner raises this lone assignment of error:

THE HONORABLE COURT OF APPEALS ERRED IN LIMITING LIABILITY SOLELY ON CO-DEFENDANT MAERSK LINES, CONTRARY TO THE FINDINGS OF FACTS OF THE TRIAL COURT A QUO AND OTHER FACTORS SHOWING CLEAR JOINT LIABILITY OF DEFENDANTS IN SOLIDUM.

There is merit in this petition.

This Court has held in a number of cases that findings of fact of the Court of Appeals are, in general, conclusive on the Supreme Court when supported by the evidence on record. The rule is not absolute, however, and allows exceptions, which we find present in the case at bar. The respondent court's findings of facts are contrary to those of the trial court and appear to be contradicted by the evidence on record thus calling for our review. (Metro Port Service, Inc. v. Court of Appeals, 131 SCRA 365 [1984]).

In absolving the ARRASTRE, the respondent Court ruled that although Librando was an employee of the ARRASTRE, since he was included in its payroll, he was technically and strictly an employee of Maersk Line in this particular instance when he drove the tractor admittedly owned by the foreign shipping line. The Court ruled that he received instructions not from Metro Port but from Maersk Line relative to this job. He was performing a duty that properly pertained to Maersk Line which, for lack of a tractor operator, had to get or hire from the ARRASTRE as per their management contract. Nevertheless, Librando was not remiss in his duty as tractor-driver considering that the proximate and direct cause of the damage was the absence of twist locks in the rear end of the chassis which Maersk Line failed to provide. The respondent court thereby placed the entire burden of liability on the owner of the Chassis which in this case was the foreign shipping company, Maersk Line.

The foregoing conclusion disregarded the pertinent findings of facts made by the lower court which are supported by the evidence on record, to wit:

1. The accident occurred while the cargoes were in the custody of the arrastre operator.

2. The tractor operator was an employee of the arrastre operator.

xxx xxx xxx

4. By the management contract inasmuch as the foreign shipping company has no tractor operator in its employ, the arrastre provided the operator.

xxx xxx xxx

8. It was likewise the responsibility of the tractor operator, an employee of the arrastre operator to inspect the chassis and tractor before driving the same, but which obligation the operator failed to do.

9. It was also the responsibility of the supervisor in the employ of the arrastre operator to see that their men complied with their respective tasks, which included the examination if the chassis has twist lock. (Rollo, pp. 44-45)

The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]). The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]). 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.

In general, the nature of the work of an arrastre operator covers the handling of cargoes at piers and wharves (Visayan Cebu Terminal Co., Inc. v. Commissioner of Internal Revenue, 13 SCRA 357 [1965]).

This is embodied in the Management Contract drawn between the Bureau of Customs and E. Razon Inc., as the Arrastre Operator. The latter agreed to bind itself, to wit:

CLAIMS AND LIABILITY FOR LOSSES AND DAMAGES

1. Responsibility and Liability for Losses and Damages;

Claims. — The CONTRACTOR shall, at its own expense handle all merchandise in the piers and other designated places and at its own expense perform all work undertaken by it hereunder diligently and in skillful workmanlike and efficient manner; That the CONTRACTOR shall be solely responsible as an independent CONTRACTOR, and hereby agrees to accept liability and to promptly pay to the s hip company, consignee, consignor or other interested party or parties for the loss, damage, or non-delivery of cargoes to the extent of the actual invoice value of each package which in no case shall be more than Three Thousand Five Hundred Pesos (P3,500.00) for each package unless the value of the importation is otherwise specified or manifested or communicated in writing together with the invoice value and supported by a certified packing list to the CONTRACTOR by the interested party or parties before the discharge of the goods, as well as all damage that may be suffered on account of loss, damage, or destruction of any merchandise while in custody or under the control of the CONTRACTOR in any pier, shed, warehouse, facility; or other designated place under the supervision of the BUREAU, but said CONTRACTOR shall not be responsible for the condition of the contents of any package received nor for the weight, nor for any loss, injury or damage to the said cargo before or while the goods are being received or remained on the piers, sheds, warehouse or facility if the loss, injury or damage is caused by force majeure, or other cause beyond the CONTRACTORS control or capacity to prevent or remedy; ...

xxx xxx xxx

The CONTRACTOR shall be solely responsible for any and all injury or damage that may arise on account of the negligence or carelessness of the CONTRACTOR, its agent or employees in the performance of the undertaking by it to be performed under the terms of the contract, and the CONTRACTOR hereby agree to and hold the BUREAU at all times harmless therefrom and whole or any part thereof. (Original Records, pp. 110-112; Emphasis supplied)

To carry out its duties, the ARRASTRE is required to provide cargo handling equipment which includes among others trailers, chassis for containers. In some cases, however, the shipping line has its own cargo handling equipment.

In this particular instance, the records reveal that Maersk Line provided the chassis and the tractor which carried the carried the subject shipment. It merely requested the ARRASTRE to dispatch a tractor operator to drive the tractor inasmuch as the foreign shipping line did not have any truck operator in its employ. Such arrangement is allowed between the ARRASTRE and the CARRIER pursuant to the Management Contract. It was clearly one of the services offered by the ARRASTRE. We agree with the petitioner that it is the ARRASTRE which had the sole discretion and prerogative to hire and assign Librando to operate the tractor. It was also the ARRASTRE's sole decision to detail and deploy Librando for the particular task from among its pool of tractor operators or drivers. It is, therefore, inacurrate to state that Librando should be considered an employee of Maersk Line on that specific occasion.

Handling cargo is mainly the s principal work so its driver/operators, "cargadors", or employees should observe the stand" and indispensable measures necessary to prevent losses and damage to shipments under its custody. Since the ARRASTRE offered its drivers for the operation of tractors in the handling of cargo and equipment, then the ARRASTRE should see to it that the drivers under its employ must exercise due diligence in the performance of their work. From the testimonies of witnesses presented, we gather that driver/operator Librando was remiss in his duty. Benildez Cepeda, an arrastre-investigator of Metro Port admitted that Librando as tractor-operator should first have inspected the chassis and made sure that the cargo was securely loaded on the chassis. He testified:

Q My question is in your investigation report including enclosures, the principal reason was that the chassis has no rear twist lock?

A Yes, sir.

Q Did you investigate whether the driver Librando inspected the the truck before he operated the same whether there was rear twist lock or not?

A I have asked him about that question whether he had inspected the has any rear twist lock and the answer he did not inspect, sir.

Q As a operator, do you agree with me that it is the duty also of Librando to see to it that the truck is in good condition and fit to travel, is that correct?

A Yes, sir.

Q And as a tractor operator it is his duty to see to it that the van mounted on top of the tractor was properly is that correct?

A Yes, sir. (At pp. 18-20, T.S.N., February 17, 1982)

Again Danilo Librando also admitted that it was usually his practice to inspect not only the tractor but the chassis as well but failed to do so in this particular instance.

Q You mentioned of the absence of a twist lock. Will you tell us where is this twist lock supposed to be located?

A At the rear end of the chassis.

Q Before you operated the tractor which carried the mounted cord drill truck and trailer did you examine if the chasiss had any twist locks?

A No, sir, because I presumed that it had twist locks and I was confident that it had twist locks.

Q As a matter of procedure and according to you, you examined the tractor, do you not make it a practice to examine whether the chassis had any twist locks?

A I used to do that but in that particular instance I thought it had already its twist locks. (p. 8, T.S.N., October 5, 1981)

It is true that Maersk Line is also at fault for not providing twist locks on the chassis. However, we find the testimony of Manuel Heraldez who is the Motor Pool General Superintendent of Metro Port rather significant. On cross-examination, he stated that:

Q In your experience, Mr. witness, do you know which is ahead of the placing of the container van or the placing of the twist lock on the chassis?

A The twist lock is already permanently attached on the chassis, sir.

Q Earlier, you mentioned that you cannot see the twist lock if the chassis is loaded, correct?

A Yes, sir.

Q Do you what to impress upon the Honorable Court that, by mere looking at a loaded chassis, the twist lock cannot be seen by the naked eye? Because the van contained a hole in which the twist lock thus entered inside the hold and locked itself. It is already loaded. So. you cannot no longer see it.

Q But if you closely examine this chassis which has a load of container van. You can see whether a twist lock is present or not?

A Yes, sir. A twist lock is present.

Q In other words, if the driver of this tractor closely examined this van, he could have detected whether or not a twist lock is present?

A Yes, sir. (pp. 33-35, T.S.N., March 23, 1982; Emphasis supplied)

Whether or not the twist lock can be seen by the naked eye when the cargo has been loaded on the chassis, an efficient and diligent tractor operator must nevertheless check if the cargo is securely loaded on the chassis.

We, therefore, find Metro Port Service Inc., solidarily liable in the instant case for the negligence of its employee. With respect to the limited liability of the ARRASTRE, the records disclose that the value of the importation was relayed to the arrastre operator and in fact processed by its chief claims examiner based on the documents submitted.

WHEREFORE, the appealed judgment of respondent Court of Appeals is hereby REVERSED and SET ASIDE and that of the Court of First Instance of Manila, 6th Judicial District, Branch II is REINSTATED. No costs.

SO ORDERED.

YNCHAUSTI STEAMSHIP CO. V. DEXTERFacts:•The Government employed Ynchausti, a common carrier, for the transportation of 30 cases of WhiteRose mineral oil and 96 cases of “Cock” Brand mineral oil on board the steamshipVenus, whichwould journey from Manila to Aparri.•T h e c a r r i e r r e c e i v e d t h e g o o d s , a n d to e v id e n c e th e c o n t r a c t o f t r a n s p o r t a t i o n , t h e p a r t i e s d u l y executed and delivered a bill of lading.•T h e   b i l l   o f   l a d i n g   s t i p u l a t e d   t h a t t h e   c a r r i e r   r e c e i v e d   t h e   s u p p l i e s   i n   a p p a r e n t g o o d   c o n d i t i o n , obligating itself to carry said supplies to the place agreed upon, in accordance with the authorizedand prescribed rates and classifications, and  subject to the law of common carriers in force on thed a t e o f t h e s h i p m e n t , a n d t o t h e c o n d i t i o n s p r e s c r i b e d b y t h e I n s u l a r Co l l e c t o r o f C u s t o ms i n Philippine Marine Regulations.•Upon delivery, the consignee claimed that one case of White Rose and one case of “Cock” weredelivered empty. The consignee noted these claims on the bill of lading.•The Insular Purchasing Agent notified Ynchausti that:oThe Insular Auditor had investigated the matter and decided that the leakages of the 2 caseswere due to the carrier’s negligence, andoHe had authorized the deduction of P22.53 from the amount due to the carrier—an amountequivalent to the estimated value of the goods lost.•Y n c h a u s t i p r o t e s t e d a n d   d e m a n d e d   p a y m e n t   o f t h e   f u l l   a m o u n t d u e   t h e m .   T h e I n s u l a r A u d i t o r   refused the same and tendered a warrant only for the reduced sum of P60.26.•Ynchausti filed this case (a petition for a writ of mandamus) to compel the Government to pay thefull amount of P82.79.•Ynchausti alleges that the shortages were due to causes unknown to it, and that there was no faultor negligence on their part or on the part of any of their agents or servants.Issue: Who bears the loss?Ruling: Ynchausti bears the loss.Competent evidence was provided to show that the shortage existed.•Under Sec. 646 of the Administrative Code, it is the duty of the consignee to make a full notation of  any loss, evidence or damage on the bill of lading. The consignee did exactly what was required bythe law.Presumption that Ynchausti is to blame for the loss.•Ynchausti admits that it received the oil, and the fact of loss was proved in the proper manner.Doctrine: the presumption of negligence / liability•General rule: mere proof of  delivery of goods in good order to a carrier, and proof of their arrival atthe place of destination in bad order, makes a prima faciecase against the carrier.oE x c e p t i o n : i f t h e r e i s a n   e x p l a n a t io n g i v e n .   T h e c a r r i e r m u s t p r o v e t h e   l o s s i s   d u e t o accident or some other circumstance inconsistent with its liability.Dispositive: The Insular Auditor is entitled to withhold the amount equivalent to the value of the lost oil.

Mirasol v. Dollar Johns, J (1929)Nature: Appeal from the judgement of the lower courtParties: Amando Mirasol,

plaintiff-appellant The Robert Dollar Co., defendant-appellantFacts:Plaintiff shipped a good order and

condition two cases of books at New York, U.S.A.,on board the defendant's steamship

President Garfield 

 

, for transport and delivery tothe plaintiff in the City of Manila. The two cases arrived in Manila in bad order

and damaged condition, resulting in thetotal loss of one case and a partial loss of the other.Plaintiff filed claims

but defendant has refused and neglected to pay, giving as itsreason that the damage in question "was

caused by sea water." Defendant allegesthat in the bill of lading it was agreed that defendant should not

be "held liable forany loss of, or damage to, any of said merchandise resulting from Acts of God, perilsof the sea or

other waters. Defendant also quoted clause 13 of the bill of lading, inwhich it is stated that in no case shall it be

held liable beyond the sum of two hundredand fifty dollars unless a higher value is stated herein and ad valorem freight paid

orassessed thereon.Plaintiff contends that he never entered into any contract with the defendant limitingdefendant's liability

as a common carrier and never intended to ratify or confirm anyagreement to limit the liability of the defendant.Lower court

decided for the plaintiff. Defendant appealed.Issue/s:WON the common carrier can escape liability for the

damage of the merchandise inthe case at bar.Ruling/s: NOWhere it appears in the bill of lading issued to a shipper a

clause limiting the carrier’sliability, printed in fine letters, but the same was, however, not signed by the shipperas he was not

advised of the contents of the same, the shipper is not bound thereof. The stipulation is void as it is against public

policy, and the plaintiff was not legallybound by the clause limiting the carrier’s liability.Shippers are forced to

ship goods in an ocean line and have legal rights, and whengoods are delivered in board. The ship in good

condition and the carrier delivers themto the shipper in bad order or condition, in an action for damages the burden of

proof is shifted upon the carrier to both allege and prove that the goods were damaged byreason of same act which legally

exempt it from liability. Because as to when and howgoods were delivered in transit is a matter peculiarly within

the knowledge of thecarrier and its employees. To require the plaintiff to prove as to when and how the

damage was done would force him to rely upon the employment of defendant carrierwhich in legal effect would be to say

that he cannot recover for any reason.Street, J. DissentingI think that its liability is limited, under clause 13,

printed on the back of the bill of lading, to the amount of 250 dollars for each of the two boxes of books

comprisingthis consignment. While the law does not permit a carrier gratuitously to exempt itself from liability for

the negligence of its servants, it cannot effectually do so for avaluable consideration; and

where freight rates are adjusted upon the basis of a reasonable limited value per package, where a

higher value is not declared by theshipper, the limitation as to the value is binding.