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Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. L-8686 July 30, 1915

THE UNITED STTES, plaintiff-appellee,vs.

PSCUL !UINJON "#$ EUGENIO !UITORINO, defendants-appellants.

Irineo Javier for appellants.

Attorney-General Villamor for appellee.

JOHNSON, J.%

The defendants were chared with a violation of the provisions of Act No. !". A co#plaint was presented in the court of

the $ustice of the peace on the %%th da& of Nove#ber, %!%'. A preli#inar& e(a#ination was had and the defendants were

held for trial in the Court of )irst *nstance of the province of *locos Norte.

+n the %th da& of Nove#ber, %!%', the prosecutin attorne& of the Province of *locos Norte presented the followin

co#plaint

The undersined chares Pascual uina$on and Euenio uitoriano, residents of the #unicipalit& of Paoa&,

*locos Norte, P.*., with violatin Act No. !" of the Civil Co##ission, within the $urisdiction of this court, as follows

That the afore#entioned accused are now and have been enaed for #ore than four &ears prior to this date in

the transportation of passeners and #erchandise in the port of Curri#ao / that is, in the loadin and unloadin

of passeners and #erchandise b& #eans of virayes fro# the shore the stea#ers that anchor in the said port,

and vice versa.

That the said accused have been reularl& charin 0 centavos for the unloadin and loadin of each pac1ae of

#erchandise of caro, lare or s#all, heav& or liht, off or on the stea#ers that anchor in the said port of

Curri#ao, and that the unloadin is understood to be fro# the stea#er to the storae warehouses.

That, in the #onths of 2une, 2ul&, and 3epte#ber, %!%', the said accused, b& #eans of their virayes and e#plo&ees, did

unload in the port of Curri#ao afore#entioned 4,!"0 sac1s of rice belonin to the provincial overn#ent of *locos Norte,

P.*., that had co#e fro# Manila, P.*., which sac1s were unloaded fro# the stea#ers in which the& had been shipped and

were carried to the storae warehouses in which the& were deposited5 that the said accused did willfull&, unlawfull&, and

cri#inall& de#and and collect fro# the provincial treasurer for the unloadin of each one of the said sac1s of rice %6

centavos which, as set forth in the precedin pararaph, the& have been reularl& charin for such services in the

unloadin of the sa#e 1ind of #erchandise and under virtuall& the sa#e circu#stances and conditions5 that the total su#

of the pa&#ents so #ade b& the provincial treasurer a#ounted to P4!".06 for the aforesaid 4,!"0 sac1s of rice, the

provincial overn#ent of *locos Norte, P.*., bein thereb& da#aed in the su# of 74!.%0, inas#uch as it should have paid

onl& '7!.88, in accordance with the said rate of 0 centavos for each pac1ae.

Acts co##itted in violation of the said Act No. !" of the Civil Co##ission.

1



9pon that co#plaint the defendants were dul& arrained, tried, found uilt& of the cri#e chared, and sentenced b& the

:onorable ;ionisio Chanco, $ude, to pa& a fine of <%66 =P'66> and costs, and to return to the provincial overn#ent of

the Province of *locos Norte the su# of P74!.%0.

)ro# that sentence each of the defendants appealed to this court. *n this court the& allee that the lower court co##itted

the followin errors

%. The court erred in holdin that the accused had been reularl& collectin 0 centavos for the loadin or the

unloadin of each sac1 rice fro# stea#ers in the port of Curri#ao.

'. The court erred in holdin that the defendants established preferential privilees and #ade discri#inations in

favor of certain shippers, aainst the provincial overn#ent of *locos Norte, in the loadin or unloadin of

#erchandise on to or fro# the stea#ers in the port of Curri#ao.

7. The court erred, further, in sentencin the accused to pa& to the provincial overn#ent of *locos Norte the su#

of P74!.%0.

The first assin#ent of error presents a ?uestion of fact onl&. The appellants allee that the lower court co##itted an

error in its conclusions of fact. The& allee that the lower court co##itted an error in decidin that the& had reularl&

chared 0 centavos for each sac1 of rice loaded or unloaded at the port of Curri#ao. The decision of the lower court

contains the followin state#ent of facts

*t is proven that the defendants, actin as representatives of the Union Obrera, established at the port of

Curri#ao, *locos Norte, and enaed b& #eans of virayes as co##on carriers of passeners and in loadin and

unloadin freiht fro# stea#ers anchorin at said port, to the shore or to the warehouses, and vice versa, have

reularl& collected, durin the last four &ears, 0 centavos for each sac1 of rice loaded or unloaded b& said

association.

*t is li1ewise proven that the sa#e defendants, representin the sa#e association, collected fro# the provincial

overn#ent of *locos Norte %6 centavos for each of the 4,!"0 sac1s of rice which the& unloaded fro# the

stea#ers durin the #onths of 2une, 2ul&, and 3epte#ber, as propert& belonin to the said overn#ent, a price

which differed fro# the usual, chare of 0 centavos #ade to others shippers of said co##odit&.

The provincial fiscal presented as witnesses in support of the infor#ation the Chinese #erchants Cu Chatco, Cu

2oco, 3& @acco, i# Anco, and )rancisco Castro, who testified that the& paid to the defendants for loadin and

unloadin supplies fro# the stea#ers at Curri#ao 0 centavos for each pac1ae of an& 1ind of supplies, lare or

s#all, heav& or liht. The two first na#ed, Cu Chatco and Cu 2oco, testified, further#ore, that for#erl& the& paid

transportation chares for the loadin and dischare of their supplies fro# the stea#ers accordin to the weiht

and sie of each pac1ae, for which purpose a classification was previousl& #ade b& weihin and #easurin

said pac1aes or #erchandise. Cu 2oco does not re#e#ber how #uch was paid at that ti#e for each pac1ae,

but Cu Chatco states that %6 centavos was paid for the transportation of each sac1 of rice weihin 06 1ilos or

#ore. The two above-na#ed witnesses, Cu Chatco and Cu 2oco, add that as the tas1 of weihin and #easurin

was ver& anno&in to the Chinese #erchants at aoa, *locos Norte, the& suested to the defendants and

entered into an aree#ent with the#, to pa& b& the lot the transportation chares coverin loaded onto or

unloaded fro# the stea#ers, at the rate of 0 centavos for each pac1ae, heav& or liht, lare or s#all.

e have #ade a careful e(a#ination of the evidence adduced durin the trial of the cause, and conclude that said facts

are substantiall& sustained thereb&. The evidence clearl& shows that the defendant collected 0 centavos for each

pac1ae, of whatever 1ind of #erchandise, lare or s#all, heav& or liht, fro# those #erchants onl& with who# the& had

a special contract. )ro# other #erchants, with who# the& had not #ade said special contract, as well as the Province of

*locos Norte, the& collected a different rate. The evidence shows that the& collected fro# the Province of *locos Norte %6

centavos for each sac1 of rice which the& unloaded fro# the stea#ers durin the #onths of 2une, 2ul&, and 3epte#ber.

2



There see#s to be no reason for reversin or #odif&in the conclusions of the lower court based upon said findin of

facts. The effect of collectin a different a#ount fro# different persons for e(actl& analoous or si#ilar service perfor#ed

b& the defendants will be discussed when we co#e to a discussion of the law applicable to the foreoin facts.

The second assin#ent of error, to wit, that Dthe lower court co##itted an error in holdin that the defendants established

preferential privilees in favor of certain shippers,D presents the ?uestion whether or not the defendants and appellants, in

view of the foreoin facts, have violated the provisions of said Act No. !".

The facts, as the& are disclosed b& the record and the findins of the lower court, #a& be stated concretel& as follows =%>The defendants, as co##on carriers, chared and collected fro# so#e shippers and #erchants, a certain price for each

pac1ae of #erchandise, loaded or unloaded, accordin to a certain schedule. =3ee E(hibit A.> The prices fi(ed in the

schedule depended upon the sie and weiht of the pac1ae. ='> The defendants entered into a special contract

with certain #erchants, under and b& virtue of the ter#s of which the& chared and collected, for loadin #erchandise in

said port, the su# of 0 centavos for each pac1ae, without reference to its sie or weiht.

*t is contended that it cost an& #ore to load or unload the rice for the province than it did for the #erchants with who# the

special contract was #ade. There is no proof that the conditions were different. There is no proof that the services

rendered b& the defendants for the different parties were unli1e or even not conte#poraneous. The defendants $ustif& their

acts b& the fact that the& handled all the #erchandise of so#e #erchants, whether the pac1aes were lare or s#all, at

the sa#e price.

9nder these facts, the ?uestion is s?uarel& presented whether or not the defendants are uilt& of a violation of the spirit or

the letter of said Act No. !". 3aid Act No. !" was larel& borrowed fro# the Act of Conress of )ebruar& 8, %"". The

lanuae of the two Acts, so far as the& relate to the present case, is practicall& the sa#e. 3aid Act of Conress has been

construed b& the )ederal courts of the 9nited 3tates in several decisions. *n view of the 9nited 3tates to said Act of

Conress.

The si#ilarit& of Act No. !" and the Act of Conress #a& be seen in the followin ?uotations

=3ec. %, Act No. !".> =3ec. ', Act of Conress, )eb. 8, %"".>

No person or corporation enaedas a co##on carrier of passeners or That if an& co##on carrier sub$ect

propert& shall directl& or indirectl& b& to the provisions of this Act shall,

an& special rate, rebate, drawbac1 or directl& or indirectl&, b& an& special

other device, chare, de#and, collect rate, rebate, drawbac1, or other device,

or receive fro# an& person or persons, chare, de#and, collect, or receive fro#

a reater or less co#pensation for an& an& person or persons a reater or

service rendered, or to be rendered in less co#pensation for an& service

the transportation of passeners or rendered , or to be rendered, in the

propert& on land or water between an& transportation of passeners or

points in the Philippine *slands than propert&, sub$ect to the provisions of

such co##on carrier chares, de#ands, this Act, than it chares, de#ands,

collects or receives fro# an& other person collects, or receives fro# an& other

or persons for doin for hi# a li1e or person or persons for doin

conte#poraneous service in the for hi# or the# a li1e and

transportation of a li1e 1ind of traffic conte#poraneous service in the

under substantiall& si#ilar circu#stances transportation of a li1e 1ind of

and conditions, and an& such un$ust traffic under substantiall& si#ilar

discri#ination is hereb& prohibited and circu#stances and conditions, such

declared to be unlawful. co##on carrier shall be dee#ed uilt&

3



of un$ust discri#ination, which is hereb&

prohibited and declared to be unlawful.

=3ec. ', Act No. !".> =3ec. 7, Act of Conress, )eb. 8, %"".>

*t shall be unlawful for an&

co##on carrier enaed in the That it shall be unlawful for an& co##on

transportation of passeners or carrier sub$ect to the provisions of this Act

propert& as above set forth to #a1e to #a1e or ive an& undue or unreasonableor ive an& unnecessar& or unreasonable preference or advantae to an& particular

preference or advantae to an& particular person, co#pan&, fir#, corporation, or

person, co#pan&, fir#, corporation or localit&, or an& particular description of

localit&, or an& particular 1ind of traffic traffic, in an& respect whatsoever, or to

in an& respect whatsoever, or to sub$ect sub$ect an& particular person, co#pan&,

an& particular person, co#pan&, fir#, fir#, corporation, or localit&, or an&

corporation or localit&, or an& particular particular description of traffic, to an&

1ind of traffic, to an& undue or undue or unreasonable pre$udice or

unreasonable pre$udice or discri#ination disadvantae in an& respect whatsoever.

whatsoever, and such un$ust preference

or discri#ination is also hereb& prohibited

and declared to be unlawful.

3aid Act No. !" is DAn Act to reulate co##erce in the Philippine *slands.D *ts purpose, so far as it is possible, is to co#pe

co##on carriers to render to all persons e(actl& the sa#e or analoous service for e(actl& the sa#e price, to the end that

there #a& be no un$ust advantae or unreasonable discri#ination. *t applies to persons or corporation enaed

as common carriers of passeners or propert&. A co##on carrier is a person or corporation whose reular business is to

carr& passeners or propert& for all persons who #a& choose to e#plo& and renu#erate hi#. A co##on carrier is a

person or corporation who underta1es to carr& oods or persons for hire. The appellants ad#it that the& are co##on

carriers. The onl& ?uestion presented is whether or not, under the facts, the& have violated the Act reulatin co##erce in

the Philippine *slands.

The law provides that no co##on carrier shall directl& or indirectl&, b& an& special rate, rebate, drawbac1, or other device,chare, de#and collect, or receive fro# an& person or persons, a reater or less co#pensation for an& service rendered

in the transportation of passeners or propert&, between points in the Philippine *slands, than he chares, de#ands,

collects, or receives fro# an& other person or persons, for doin a li1e or conte#poraneous service, under substantiall&

si#ilar conditions or circu#stances.

The law prohibits an& co##on carrier fro# #a1in or ivin an& unnecessar& or unreasonable preference or advantae

to an& particular person, co#pan&, fir#, corporation or localit&, or an& particular 1ind of traffic, or to sub$ect an& particular

person, co#pan&, fir#, corporation, or localit&, or an& particular 1ind of traffic, to an& undue or unreasonable pre$udice or

discri#ination whatsoever.

*t will be noted that the law re?uires co##on carriers to carr& for all persons, either passeners or propert&, for e(actl& the

sa#e chare for a li1e or conte#poraneous service in the transportation of li1e 1ind of traffic under substantiall& si#ilarcircu#stances or conditions. The law prohibits co##on carriers fro# sub$ectin an& person, etc., or localit&, or an&

particular 1ind of traffic, to an& undue or unreasonable pre$udice or discri#ination whatsoever. The law does not re?uire

that the sa#e chare shall be #ade for the carr&in of passeners or propert&, unless all the conditions are ali1e and

conte#poraneous. *t is not believed that the law prohibits the charin of a different rate for the carr&in of passeners or

propert& when the actual cost of handlin and transportin the sa#e is different. it is not believed that the law intended to

re?uire co##on carriers to carr& thesame kind of #erchandise, even at the sa#e price, under different and unli1e

conditions and where the actual cost is different. The actual cost of handlin and transportin the sa#e ?uantit& of rice, for

e(a#ple, #iht be different, dependin upon the for# of pac1ae or other conditions. *t would cost #ore to handle and

4



transport rice pac1ed in open bo(es or bas1ets, for e(a#ple, than it would to handle and transport the sa#e ?uantit& of

rice neatl& pac1ed in sac1s. *t would cost #ore to handle and transport he#p, when it is unbaled and loose, than it would

when it is baled. *t #iht cost #ore to handle and transport household oods uncrated than when the& are crated. *t is not

believed that the law prohibits the charin of a different price for handlin and shippin #erchandise when the shipper

e(ercises reater care in preparin the sa#e for ship#ent, thereb& reducin the actual cost of handlin and transportin.

*f the shipper puts his #erchandise in a condition which costs less to handle and transport, he is certainl& entitled to a

better rate. The difference in the chare to different #erchants or shippers #ust be based upon the actual cost of handlin

and transportin. The law does not re?uire co##on carriers to perfor# different services for the sa#e price, unless the

actual cost is the sa#e. *t is when the price chared is for the purpose of favorin persons or localities or particular 1indsof #erchandise, that the law intervenes and prohibits. *t is favoritis# and discri#ination which the law prohibits. The

difference in chare #ust not be #ade to favor one #erchant, or shipper, or localit&, to the disadvantae of another

#erchant, or shipper, or localit&. *f the services are ali1e and conte#poraneous, discri#ination in the price chared is

prohibited. )or the purposes of the law, it is not sufficient alwa&s to sa& that #erchandise is ali1e, si#pl& because it is of a

li1e 1ind or ?uantit&. The ?uantit&, 1ind, and ?ualit& #a& be e(actl& the sa#e, and &et not be ali1e, so far as the cost of

transportation is concerned. E(a#ples have been iven above. Man& others #iht be iven. A and B are each shippers of

bananas between the sa#e points. A delivers his bananas to the carrier in separate bundles or bunches, without a

wrapper or an& 1ind of protection, while B delivers e(actl& the sa#e nu#ber of bunches of bananas, but the& are neatl&

pac1ed in a few bo(es or bas1ets. *t does not re?uire #uch aru#ent to convince #en conversant with the shippin of

#erchandise, in such a case, that the actual cost of handlin and shippin would be different and would, therefore, not be

Dali1e,D althouh conte#poraneous, perhaps. Neither is it believed that ship#ents #a& be rendered unli1e b& the fact that

the total ship#ent is co#posed of different 1inds or classes of #erchandise. )or e(a#ple, A is a shipper of rice and he#pand B is a shipper of rice alone. Both A and B prepare their rice for ship#ent in e(actl& the sa#e for# of pac1ae. *t is not

believed that the carrier is per#itted, under the law, to carr& As rice for a less price than he carries Bs rice, si#pl&

because A is also a shipper of he#p. A difference in the chare for handlin and transportin #a& onl& be #ade when the

difference is based upon actual cost. The actual cost #a& depend upon ?uantit&. A #an who ships freiht b& the car-load,

b& reason of the actual cost of handlin and shippin, #a& be entitled, under certain conditions, to a better rate than the

#an who ships a sinle article or pac1ae of the sa#e class or 1ind of #erchandise. A train-load of cattle #iht be

shipped fro# ;aupan to Manila, for e(a#ple, at less cost per head than it would cost to ship $ust a few head, less than a

car-load. The actual cost of each ship#ent #ust necessaril& depend upon and be settled b& its own proof. This rule,

however, does not prohibit the #a1in of eneral schedules, providin the& are #ade applicable to all. The difference in

the chare #ade b& the co##on carrier cannot be #ade for the purpose of favorin an& person or localit&, to the

pre$udice or disadvantae of another person or localit&. A co##on carrier #a& discri#inate between shippers when the

a#ount of oods shipped b& one actuall& costs less to handle and transport, but he cannot discri#inate upon the round

si#pl& that he carries all of the oods of one shipper, while he does not carr& all of the oods of another. The difference in

the chare #ust be the difference in the cost.

*t is co#petent for a co##on carrier under the law, we believe, to enter into special aree#ents for handlin and

transportin #erchandise, whereb& advantae #a& accrue to individuals, when it is #ade clearl& to appear that b& such

aree#ents the co##on carrier has onl& its interests and the leiti#ate increase of its profits in view, and when the

consideration iven to the individual is for the interest of the co##on carrier alone, and when the co##on carrier ives all

shippers e(actl& the sa#e rate, under the sa#e conditions.

The appellants $ustif& the different chare upon the round that the& carried pianos and #atches, for the #erchants with

who# the& had the special contracts, at the sa#e price. *t is not believed that a #erchant who happens to be a shipper ofboth pianos and #atches, should have an& advantae over the #erchant who ships pianos alone, unless there is so#e

other actual additional cost in the one case, which does not e(ist in the other. A co##on carrier can not discri#inate upon

the round that he carries all of the oods of one shipper, while he does not of another.

*n the present case there is no pretense that it actuall& cost #ore to handle the rice for the province than it did for the

#erchants with who# the special contracts were #ade. )ro# the evidence it would see# that there was a clear

discri#ination #ade aainst the province. ;iscri#ination is the thin which is specificall& prohibited and punished under

the law.

5



*t is not believed that the law prohibits co##on carriers fro# #a1in special rates for the handlin and transportin of

#erchandise, when the sa#e are #ade for the purpose of increasin their business, and to #anae their i#portant

interests upon the sa#e principles which are rearded as sound, and adopted in other trades and pursuits. *t is not

believed that the law re?uires absolute e?ualit& in all cases. Circu#stances and conditions #a& #a1e it in$urious to the

carrier. Absolute e?ualit&, under certain circu#stances and conditions, #a& ive shippers an advantae over others. *t is

onl& un$ust, undue, and unreasonable discri#ination which the law forbids. The law of e?ualit& is in force onl& where the

services perfor#ed in the different cases are substantiall& the sa#e, and the circu#stances and conditions are si#ilar.

Man& considerations #a& properl& enter into the aree#ent for the carriae or ship#ent rate, such as the ?uantit& carried

its nature, its ris1s, the e(pense of carriae at different periods of ti#e, and the li1e. Nu#erous circu#stances #a&intervene, which bear upon the cost and e(pense of transportation, and it is but $ust to the carrier that he be per#itted to

ta1e these circu#stances into consideration, in deter#inin the rate or a#ount of his co#pensation. A ?uestion of fact is

raised in each case for the courts to decide.

The foreoin conclusions are based upon literall& hundreds of decisions of the courts of different states, and the

3upre#e Court of the 9nited 3tates, as well as those of Enland, which have interpreted statutes analoous to the one

under consideration.

*n the third assin#ent of error the appellants allee that the lower court co##itted an error in conde#nin the# to pa& or

return to the provincial overn#ent the su# of P74!.%0. *t is not e(actl& clear fro# the decision of the lower court $ust how

he arrived at that conclusion. 3ection 4 of Act No. !" provides that an& person or corporation, who #a& be da#aed b&

reason of the doin b& a co##on carrier of an& #atters and thins prohibited, shall be entitled to sue for and recover allda#aes so incurred, etc. *t would see# that the defendants and appellants had a riht to chare the provincial

overn#ent 0 centavos for each sac1 of rice unloaded. The& unloaded for the province 4,!"0 sac1s, for which the&

chared the su# of P4!".06. The& had a riht to collect 0 centavos, or the su# of P74!.%0. The appellants therefore

collected fro# the province #ore than the& had a riht to collect, the difference between P4!".06 and 74!.%0, or P'7!.88.

The& should be re?uired, therefore, to return to the province the e(cess which the& collected, or the su# of P'7!.88. The

$ud#ent of the lower court, therefore, should be #odified in this respect. The defendants are hereb& ordered to return to

the Province of *locos Norte the su# P'7!.88, for which su# a $ud#ent is hereb& ordered to be entered aainst the#,

for which e(ecution #a& issue when this $ud#ent beco#es final, in case the sa#e is not paid.

After a careful anal&sis of the facts, and the law applicable thereto, the $ud#ent of the lower court, as herein #odified,

should be and is hereb& affir#ed with costs. 3o ordered.

Arellano, .J., !orres, arson, and Araullo, JJ., concur.

!rent, J., dissents.


SUPREME COURT

Manila

EN BANC

G.R. No. L-&5599 '()l *, 1968

HOME INSURNCE COMPN+, plaintiff-appellee,

vs.

6



MERICN STEMSHIP GENCIES, INC. "#$ LUON STEEDORING CORPORTION, defendants,

MERICN STEMSHIP GENCIES, INC., defendant-appellant.

"illiam #. $uasha and Associates for plaintiff-appellee.

%oss, &elph, &alcedo and Associates for defendant-appellant.

ENGON, J.P., J.:

DConsorcio Pes?uero del Peru of 3outh A#ericaD shipped freiht pre-paid at Chi#bate, Peru, '%,86 $ute bas ofPeruvian fish #eal throuh 33 Crowborouh, covered b& clean bills of ladin Nu#bers % and ', both dated 2anuar& %,

%!07. The caro, consined to 3an Miuel Brewer&, *nc., now 3an Miuel Corporation, and insured b& :o#e *nsurance

Co#pan& for <'6',464, arrived in Manila on March , %!07 and was dischared into the lihters of uon 3tevedorin

Co#pan&. hen the caro was delivered to consinee 3an Miuel Brewer& *nc., there were shortaes a#ountin to

P%',677."4, causin the latter to la& clai#s aainst uon 3tevedorin Corporation, :o#e *nsurance Co#pan& and the

A#erican 3tea#ship Aencies, owner and operator of 33 Crowborouh.

Because the others denied liabilit&, :o#e *nsurance Co#pan& paid the consinee P%8,"6.% / the insurance value of

the loss, as full settle#ent of the clai#. :avin been refused rei#burse#ent b& both the uon 3tevedorin Corporation

and A#erican 3tea#ship Aencies, :o#e *nsurance Co#pan&, as subroee to the consinee, filed aainst the# on

March 0, %!08 before the Court of )irst *nstance of Manila a co#plaint for recover& of P%8,"6.% with leal interest, plus

attorne&s fees.

*n answer, uon 3tevedorin Corporation alleed that it delivered with due dilience the oods in the sa#e ?uantit& and

?ualit& that it had received the sa#e fro# the carrier. *t also clai#ed that plaintiffs clai# had prescribed under Article 700

of the Code of Co##erce statin that the clai# #ust be #ade within '8 hours fro# receipt of the caro.

A#erican 3tea#ship Aencies denied liabilit& b& allein that under the provisions of the Charter part& referred to in the

bills of ladin, the charterer, not the shipowner, was responsible for an& loss or da#ae of the caro. )urther#ore, it

clai#ed to have e(ercised due dilience in stowin the oods and that as a #ere forwardin aent, it was not responsible

for losses or da#aes to the caro.

+n Nove#ber %, %!04, the Court of )irst *nstance, after trial, absolved uon 3tevedorin Corporation, havin found thelatter to have #erel& delivered what it received fro# the carrier in the sa#e condition and ?ualit&, and ordered A#erican

3tea#ship Aencies to pa& plaintiff P%8,"6.% with leal interest plus P%,666 attorne&s fees. 3aid court cited the

followin rounds

=a> The non-liabilit& clai# of A#erican 3tea#ship Aencies under the charter part& contract is not tenable

because Article 4" of the Code of Co##erce #a1es the ship aent also civill& liable for da#aes in favor of third

persons due to the conduct of the captain of the carrier5

=b> The stipulation in the charter part& contract e(e#ptin the owner fro# liabilit& is aainst public polic& under

Article %88 of the Civil Code5

=c> *n case of loss, destruction or deterioration of oods, co##on carriers are presu#ed at fault or nelient

under Article %74 of the Civil Code unless the& prove e(traordinar& dilience, and the& cannot b& contract

e(e#pt the#selves fro# liabilit& resultin fro# their nelience or that of their servants5 and

=d> hen oods are delivered to the carrier in ood order and the sa#e are in bad order at the place of

destination, the carrier is prima facie liable.

7



;isareein with such $ud#ent, A#erican 3tea#ship Aencies appealed directl& to 9s. The appeal brins forth for

deter#ination this leal issue *s the stipulation in the charter part& of the owners non-liabilit& valid so as to absolve the

A#erican 3tea#ship Aencies fro# liabilit& for lossF

The bills of ladin,% coverin the ship#ent of Peruvian fish #eal provide at the bac1 thereof that the bills of ladin shall be

overned b& and sub$ect to the ter#s and conditions of the charter part&, if an&, otherwise, the bills of ladin prevail over

all the aree#ents.' +n the of the bills are sta#ped D)reiht prepaid as per charter part&. 3ub$ect to all ter#s, conditions

and e(ceptions of charter part& dated ondon, ;ec. %7, %!0'.D

A perusal of the charter part&7 referred to shows that while the possession and control of the ship were not entirel&

transferred to the charterer,8 the vessel was chartered to its full and co#plete capacit& =E(h. 7>. )urther#ore, the, charter

had the option to o north or south or vice-versa,4 loadin, stowin and discharin at its ris1 and e(pense.0 Accordinl&,

the charter part& contract is one of affreiht#ent over the whole vessel rather than a de#ise. As such, the liabilit& of the

shipowner for acts or nelience of its captain and crew, would re#ain in the absence of stipulation.

3ection ', pararaph ' of the charter part&, provides that the owner is liable for loss or da#ae to the oods caused b&

personal want of due dilience on its part or its #anaer to #a1e the vessel in all respects seaworth& and to secure that

she be properl& #anned, e?uipped and supplied or b& the personal act or default of the owner or its #anaer. 3aid

pararaph, however, e(e#pts the owner of the vessel fro# an& loss or da#ae or dela& arisin fro# an& other source,

even fro# the nelect or fault of the captain or crew or so#e other person e#plo&ed b& the owner on board, for whose

acts the owner would ordinaril& be liable e(cept for said pararaph..

Reardin the stipulation, the Court of )irst *nstance declared the contract as contrar& to Article 4" of the Code of

Co##erce #a1in the ship aent civill& liable for inde#nities suffered b& third persons arisin fro# acts or o#issions of

the captain in the care of the oods and Article %88 of the Civil Code under which a stipulation between the co##on

carrier and the shipper or owner li#itin the liabilit& of the for#er for loss or destruction of the oods to a deree less than

e(traordinar& dilience is valid provided it be reasonable, $ust and not contrar& to public polic&. The release fro# liabilit& in

this case was held unreasonable and contrar& to the public polic& on co##on carriers.

The provisions of our Civil Code on co##on carriers were ta1en fro# Anlo-A#erican law. 9nder A#erican

$urisprudence, a co##on carrier underta1in to carr& a special caro or chartered to a special person onl&, beco#es a

private carrier."

As a private carrier, a stipulation e(e#ptin the owner fro# liabilit& for the nelience of its aent is notaainst public polic&,! and is dee#ed valid.

3uch doctrine e find reasonable. The Civil Code provisions on co##on carriers should not be applied where the carrier

is not actin as such but as a private carrier. The stipulation in the charter part& absolvin the owner fro# liabilit& for loss

due to the nelience of its aent would be void onl& if the strict public polic& overnin co##on carriers is applied. 3uch

polic& has no force where the public at lare is not involved, as in the case of a ship totall& chartered for the use of a

sinle part&.

And further#ore, in a charter of the entire vessel, the bill of ladin issued b& the #aster to the charterer, as shipper, is in

fact and leal conte#plation #erel& a receipt and a docu#ent of title not a contract, for the contract is the charter

part&.%6 The consinee #a& not clai# inorance of said charter part& because the bills of ladin e(pressl& referred to the

sa#e. Accordinl&, the consinees under the bills of ladin #ust li1ewise abide b& the ter#s of the charter part&. And as

stated, recover& cannot be had thereunder, for loss or da#ae to the caro, aainst the shipowners, unless the sa#e is

due to personal acts or nelience of said owner or its #anaer, as distinuished fro# its other aents or e#plo&ees. *n

this case, no such personal act or nelience has been proved.

:ERE)+RE, the $ud#ent appealed fro# is hereb& reversed and appellant is absolved fro# liabilit& to plaintiff. No

costs. 3o ordered.

8



%eyes, J.'.(., )akalintal, *aldivar, &anche+, astro, Aneles and ernando, JJ., concur.

i+on J., took no part.

oncepcion, .J., is on leave.


SUPREME COURT

Manila

)*R3T ;*G*3*+N

G.R. No. 101503 S/'/2/( 15, 1993

PLNTERS PRODUCTS, INC., petitioner,

vs.

COURT O PPELS, SORIMONT STEMSHIP GENCIES ND 4+OSEI 4ISEN 4USHI4I

4ISH,respondents.

Gon+ales, &inense, Jimene+ / Associates for petitioner.

&iuion %eyna, )ontecillo / Onsiako (a0 Office for private respondents.

ELLOSILLO, J.:

;oes a charter-part& 1 between a shipowner and a charterer transfor# a co##on carrier into a private one as to neate

the civil law presu#ption of nelience in case of loss or da#ae to its caroF

Planters Products, *nc. =PP*>, purchased fro# Mitsubishi *nternational Corporation =M*T39B*3:*> of New @or1, 9.3.A.,

!,7'!.60! #etric tons =MHT> of 9rea 80I fertilier which the latter shipped in bul1 on %0 2une %!8 aboard the carovessel MHG D3un Plu#D owned b& private respondent J&osei Jisen Jabushi1i Jaisha =JJJJ> fro# Jenai, Alas1a, 9.3.A.,

to Poro Point, 3an )ernando, a 9nion, Philippines, as evidenced b& Bill of adin No. JP-% sined b& the #aster of the

vessel and issued on the date of departure.

+n % Ma& %!8, or prior to its vo&ae, a ti#e charter-part& on the vessel MHG D3un Plu#D pursuant to the 9nifor#

Keneral Charter & was entered into between Mitsubishi as shipperHcharterer and JJJJ as shipowner, in To1&o,

2apan. 3 Riders to the aforesaid charter-part& startin fro# par. %0 to 86 were attached to the pre-printed aree#ent.

Addenda Nos. %, ', 7 and 8 to the charter-part& were also subse?uentl& entered into on the %"th, '6th, '%st and 'th of

Ma& %!8, respectivel&.

Before loadin the fertilier aboard the vessel, four =8> of her holds

*

were all presu#abl& inspected b& the charterersrepresentative and found fit to ta1e a load of urea in bul1 pursuant to par. %0 of the charter-part& which reads

%0. . . . At loadin port, notice of readiness to be acco#plished b& certificate fro# National Caro Bureau

inspector or substitute appointed b& charterers for his account certif&in the vessels readiness to receive

caro spaces. !he vessel1s hold to be properly s0ept, cleaned and dried at the vessel1s e2pense and the

vessel to be presented clean for use in bulk to the satisfaction of the inspector before daytime

commences. =e#phasis supplied>

9



After the 9rea fertilier was loaded in bul1 b& stevedores hired b& and under the supervision of the shipper, the steel

hatches were closed with heav& iron lids, covered with three =7> la&ers of tarpaulin, then tied with steel bonds. The

hatches re#ained closed and tihtl& sealed throuhout the entire vo&ae. 5

9pon arrival of the vessel at her port of call on 7 2ul& %!8, the steel pontoon hatches were opened with the use of the

vessels boo#. Petitioner unloaded the caro fro# the holds into its steelbodied du#p truc1s which were par1ed alonside

the berth, usin #etal scoops attached to the ship, pursuant to the ter#s and conditions of the charter-partl& =which

provided for an ).*.+.3. clause>. 6 The hatches re#ained open throuhout the duration of the dischare.

Each ti#e a du#p truc1 was filled up, its load of 9rea was covered with tarpaulin before it was transported to the

consinees warehouse located so#e fift& =46> #eters fro# the wharf. Midwa& to the warehouse, the truc1s were #ade to

pass throuh a weihin scale where the& were individuall& weihed for the purpose of ascertainin the net weiht of the

caro. The port area was wind&, certain portions of the route to the warehouse were sand& and the weather was variable,

rainin occasionall& while the dischare was in proress. 8 The petitioners warehouse was #ade of corruated alvanied

iron =K*> sheets, with an openin at the front where the du#p truc1s entered and unloaded the fertilier on the warehouse

floor. Tarpaulins and K* sheets were placed in-between and alonside the truc1s to contain spillaes of the ferilier. 9

*t too1 eleven =%%> da&s for PP* to unload the caro, fro# 4 2ul& to %" 2ul& %!8 =e(cept 2ul& %'th, %8th and %"th>.10 A

private #arine and caro surve&or, Caro 3uperintendents Co#pan& *nc. =C3C*>, was hired b& PP* to deter#ine the

DoutturnD of the caro shipped, b& ta1in draft readins of the vessel prior to and after dischare. 11 The surve& report

sub#itted b& C3C* to the consinee =PP*> dated %! 2ul& %!8 revealed a shortae in the caro of %60.'0 MHT and that aportion of the 9rea fertilier appro(i#atin %" MHT was conta#inated with dirt. The sa#e results were contained in a

Certificate of 3hortaeH;a#aed Caro dated %" 2ul& %!8 prepared b& PP* which showed that the caro delivered was

indeed short of !8."7! MHT and about '7 MHT were rendered unfit for co##erce, havin been polluted with sand, rust

and

dirt. 1&

Conse?uentl&, PP* sent a clai# letter dated %" ;ece#ber %!8 to 3oria#ont 3tea#ship Aencies =33A>, the resident

aent of the carrier, JJJJ, for P'84,!0!.7% representin the cost of the alleed shortae in the oods shipped and the

di#inution in value of that portion said to have been conta#inated with dirt. 13

Respondent 33A e(plained that the& were not able to respond to the consinees clai# for pa&#ent because, accordinto the#, what the& received was $ust a re?uest for shortlanded certificate and not a for#al clai#, and that this Dre?uestD

was denied b& the# because the& Dhad nothin to do with the dischare of the ship#ent.D 1*:ence, on %" 2ul& %!4, PP*

filed an action for da#aes with the Court of )irst *nstance of Manila. The defendant carrier arued that the strict public

polic& overnin co##on carriers does not appl& to the# because the& have beco#e private carriers b& reason of the

provisions of the charter-part&. The court a 3uo however sustained the clai# of the plaintiff aainst the defendant carrier

for the value of the oods lost or da#aed when it ruled thus 15

. . . Prescindin fro# the provision of the law that a co##on carrier is presu#ed nelient in case of loss

or da#ae of the oods it contracts to transport, all that a shipper has to do in a suit to recover for loss or

damae is to sho0 receipt by the carrier of the oods and to delivery by it of less than 0hat it

received . After that, the burden of provin that the loss or damae 0as due to any of the causes 0hich

e2empt him from liability is shipted to the carrier, common or private he may be . Even if the provisions ofthe charter-part& afore?uoted are dee#ed valid, and the defendants considered private carriers, it 0as

still incumbent upon them to prove that the shortae or contamination sustained by the caro is

attributable to the fault or nelience on the part of the shipper or consinee in the loadin, sto0in,

trimmin and dischare of the caro. This the& failed to do. B& this o#ission, coupled with their failure to

destro& the presu#ption of nelience aainst the#, the defendants are liable =e#phasis supplied>.

+n appeal, respondent Court of Appeals reversed the lower court and absolved the carrier fro# liabilit& for the value of the

caro that was lost or da#aed. 16 Rel&in on the %!0" case of #ome Insurance o. v . American &teamship Aencies,

10



Inc ., 1 the appellate court ruled that the caro vessel MHG D3un Plu#D owned b& private respondent JJJJ was a private

carrier and not a co##on carrier b& reason of the ti#e charterer-part&. Accordinl&, the Civil Code provisions on co##on

carriers which set forth a presu#ption of nelience do not find application in the case at bar. Thus /

. . . *n the absence of such presu#ption, it 0as incumbent upon the plaintiff-appellee to adduce sufficient

evidence to prove the nelience of the defendant carrier as alleed in its co#plaint. *t is an old and well

settled rule that if the plaintiff, upon who# rests the burden of provin his cause of action, fails to show in

a satisfactor& #anner the facts upon which he bases his clai#, the defendant is under no obliation to

prove his e(ception or defense =)oran, ommentaries on the %ules of ourt , Golu#e 0, p. ', citin Belenv. Belen, %7 Phil. '6'>.

But, the record sho0s that the plaintiff-appellee dismally failed to prove the basis of its cause of action,

i .e. the alleed nelience of defendant carrier . *t appears that the plaintiff was under the i#pression that

it did not have to establish defendants nelience. Be that as it #a&, contrar& to the trial courts findin,

the record of the instant case discloses a#ple evidence showin that defendant carrier was not nelient

in perfor#in its obliation . . . 18 =e#phasis supplied>.

Petitioner PP* appeals to us b& wa& of a petition for review assailin the decision of the Court of Appeals. Petitioner

theories that the #ome Insurance case has no bearin on the present controvers& because the issue raised therein is

the validit& of a stipulation in the charter-part& deli#itin the liabilit& of the shipowner for loss or da#ae to oods cause

b& want of due delience on its part or that of its #anaer to #a1e the vessel seaworth& in all respects, and not whetherthe presu#ption of nelience provided under the Civil Code applies onl& to co##on carriers and not to private

carriers. 19 Petitioner further arues that since the possession and control of the vessel re#ain with the shipowner, absent

an& stipulation to the contrar&, such shipowner should #ade liable for the nelience of the captain and crew. *n fine, PP*

faults the appellate court in not appl&in the presu#ption of nelience aainst respondent carrier, and instead shiftin

the onus probandi on the shipper to show want of due delience on the part of the carrier, when he was not even at hand

to witness what transpired durin the entire vo&ae.

As earlier stated, the pri#ordial issue here is whether a co##on carrier beco#es a private carrier b& reason of a charter-

part&5 in the neative, whether the shipowner in the instant case was able to prove that he had e(ercised that deree of

dilience re?uired of hi# under the law.

*t is said that et&#olo& is the basis of reliable $udicial decisions in co##ercial cases. This bein so, we find it fittin to

first define i#portant ter#s which are relevant to our discussion.

A Dcharter-part&D is defined as a contract b& which an entire ship, or so#e principal part thereof, is let b& the owner to

another person for a specified ti#e or use5 &0 a contract of affreiht#ent b& which the owner of a ship or other vessel lets

the whole or a part of her to a #erchant or other person for the conve&ance of oods, on a particular vo&ae, in

consideration of the pa&#ent of freiht5 &1 Charter parties are of two t&pes =a> contract of affreiht#ent which involves the

use of shippin space on vessels leased b& the owner in part or as a whole, to carr& oods for others5 and, =b> charter b&

de#ise or bareboat charter, b& the ter#s of which the whole vessel is let to the charterer with a transfer to hi# of its entire

co##and and possession and conse?uent control over its naviation, includin the #aster and the crew, who are his

servants. Contract of affreiht#ent #a& either be ti#e charter, wherein the vessel is leased to the charterer for a fi(ed

period of ti#e, or vo&ae charter, wherein the ship is leased for a sinle vo&ae. && *n both cases, the charter-part&provides for the hire of vessel onl&, either for a deter#inate period of ti#e or for a sinle or consecutive vo&ae, the

shipowner to suppl& the ships stores, pa& for the waes of the #aster and the crew, and defra& the e(penses for the

#aintenance of the ship.

9pon the other hand, the ter# Dco##on or public carrierD is defined in Art. %7' of the Civil Code. &3 The definition

e(tends to carriers either b& land, air or water which hold the#selves out as read& to enae in carr&in oods or

transportin passeners or both for co#pensation as a public e#plo&#ent and not as a casual occupation. The distinction

between a Dco##on or public carrierD and a Dprivate or special carrierD lies in the character of the business, such that if

11



the underta1in is a sinle transaction, not a part of the eneral business or occupation, althouh involvin the carriae of

oods for a fee, the person or corporation offerin such service is a private carrier. &*

Article %77 of the New Civil Code #andates that co##on carriers, b& reason of the nature of their business, should

observe e(traordinar& dilience in the viilance over the oods the& carr&. &5 *n the case of private carriers, however, the

e(ercise of ordinar& dilience in the carriae of oods will suffice. Moreover, in the case of loss, destruction or

deterioration of the oods, co##on carriers are presu#ed to have been at fault or to have acted nelientl&, and the

burden of provin otherwise rests on the#. &6 +n the contrar&, no such presu#ption applies to private carriers, for

whosoever allees da#ae to or deterioration of the oods carried has the onus of provin that the cause was thenelience of the carrier.

*t is not disputed that respondent carrier, in the ordinar& course of business, operates as a co##on carrier, transportin

oods indiscri#inatel& for all persons. hen petitioner chartered the vessel MHG D3un Plu#D, the ship captain, its officers

and co#pli#ent were under the e#plo& of the shipowner and therefore continued to be under its direct supervision and

control. :ardl& then can we chare the charterer, a straner to the crew and to the ship, with the dut& of carin for his

caro when the charterer did not have an& control of the #eans in doin so. This is evident in the present case

considerin that the steerin of the ship, the #annin of the dec1s, the deter#ination of the course of the vo&ae and

other technical incidents of #ariti#e naviation were all consined to the officers and crew who were screened, chosen

and hired b& the shipowner. &

*t is therefore i#perative that a public carrier shall re#ain as such, notwithstandin the charter of the whole or portion of avessel b& one or #ore persons, provided the charter is li#ited to the ship onl&, as in the case of a ti#e-charter or vo&ae-

charter. *t is onl& when the charter includes both the vessel and its crew, as in a bareboat or de#ise that a co##on carrier

beco#es private, at least insofar as the particular vo&ae coverin the charter-part& is concerned. *ndubitabl&, a

shipowner in a ti#e or vo&ae charter retains possession and control of the ship, althouh her holds #a&, for the #o#ent,

be the propert& of the charterer. &8

Respondent carriers heav& reliance on the case of #ome Insurance o. v . American &teamship Aencies, supra, is

#isplaced for the reason that the #eat of the controvers& therein was the validit& of a stipulation in the charter-part&

e(e#ptin the shipowners fro# liabilit& for loss due to the nelience of its aent, and not the effects of a special charter

on co##on carriers. At an& rate, the rule in the 9nited 3tates that a ship chartered b& a sinle shipper to carr& special

caro is not a co##on carrier,&9

does not find application in our $urisdiction, for we have observed that the rowinconcern for safet& in the transportation of passeners and Hor carriae of oods b& sea re?uires a #ore e(actin

interpretation of ad#iralt& laws, #ore particularl&, the rules overnin co##on carriers.

e ?uote with approval the observations of Raoul Colinvau(, the learned barrister-at-law 30 /

As a #atter of principle, it is difficult to find a valid distinction between cases in which a ship is used to

conve& the oods of one and of several persons. here the ship herself is let to a charterer, so that he

ta1es over the chare and control of her, the case is different5 the shipowner is not then a carrier. But

where her services onl& are let, the sa#e rounds for i#posin a strict responsibilit& e(ist, whether he is

e#plo&ed b& one or #an&. The #aster and the crew are in each case his servants, the freihter in each

case is usuall& without an& representative on board the ship5 the sa#e opportunities for fraud or collusion

occur5 and the sa#e difficult& in discoverin the truth as to what has ta1en place arises . . .

*n an action for recover& of da#aes aainst a co##on carrier on the oods shipped, the shipper or consinee should

first prove the fact of ship#ent and its conse?uent loss or da#ae while the sa#e was in the possession, actual or

constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has e(ercised

e(traordinar& dilience re?uired b& law or that the loss, da#ae or deterioration of the caro was due to fortuitous event,

or so#e other circu#stances inconsistent with its liabilit&. 31

12



To our #ind, respondent carrier has sufficientl& overco#e, b& clear and convincin proof, the prima faciepresu#ption of

nelience.

The #aster of the carr&in vessel, Captain ee Tae Bo, in his deposition ta1en on %! April %! before the Philippine

Consul and eal Attache in the Philippine E#bass& in To1&o, 2apan, testified that before the fertilier was loaded, the

four =8> hatches of the vessel were cleaned, dried and fu#iated. After co#pletin the loadin of the caro in bul1 in the

ships holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with three =7> la&ers of

serviceable tarpaulins which were tied with steel bonds. The hatches re#ained close and tihtl& sealed while the ship was

in transit as the weiht of the steel covers #ade it i#possible for a person to open without the use of the ships boo#.

3&

*t was also shown durin the trial that the hull of the vessel was in ood condition, foreclosin the possibilit& of spillae of

the caro into the sea or seepae of water inside the hull of the vessel. 33 hen MHG D3un Plu#D doc1ed at its berthin

place, representatives of the consinee boarded, and in the presence of a representative of the shipowner, the fore#an,

the stevedores, and a caro surve&or representin C3C*, opened the hatches and inspected the condition of the hull of

the vessel. The stevedores unloaded the caro under the watchful e&es of the ship#ates who were overseein the whole

operation on rotation basis. 3*

Geril&, the presu#ption of nelience on the part of the respondent carrier has been efficaciousl& overco#e b& the

showin of e(traordinar& eal and assiduit& e(ercised b& the carrier in the care of the caro. This was confir#ed b&

respondent appellate court thus /

. . . Be that as it #a&, contrar& to the trial courts findin, the record of the instant case discloses ample

evidence sho0in that defendant carrier 0as not nelient in performin its obliations. Particularl&, the

followin testi#onies of plaintiff-appellees own witnesses clearl& show absence of nelience b& the

defendant carrier5 that the hull of the vessel at the ti#e of the dischare of the caro was sealed and

nobod& could open the sa#e e(cept in the presence of the owner of the caro and the representatives of

the vessel =T3N, '6 2ul& %!, p. %8>5 that the cover of the hatches was #ade of steel and it was overlaid

with tarpaulins, three la&ers of tarpaulins and therefore their contents were protected fro# the weather

=T3N, 4 April %!", p. '8>5 and, that to open these hatches, the seals would have to be bro1en, all the

seals were found to be intact =T3N, '6 2ul& %!, pp. %4-%0> =e#phasis supplied>.

The period durin which private respondent was to observe the deree of dilience re?uired of it as a public carrier beanfro# the ti#e the caro was unconditionall& placed in its chare after the vessels holds were dul& inspected and passed

scrutin& b& the shipper, up to and until the vessel reached its destination and its hull was ree(a#ined b& the consinee,

but prior to unloadin. This is clear fro# the li#itation clause areed upon b& the parties in the Addendu# to the standard

DKENC+ND ti#e charter-part& which provided for an ).*.+.3., #eanin, that the loadin, stowin, tri##in and dischare

of the caro was to be done b& the charterer, free fro# all ris1 and e(pense to the carrier. 35 Moreover, a shipowner is

liable for da#ae to the caro resultin fro# i#proper stowae onl& when the stowin is done b& stevedores e#plo&ed b&

hi#, and therefore under his control and supervision, not when the sa#e is done b& the consinee or stevedores under

the e#plo& of the latter. 36

Article %78 of the New Civil Code provides that co##on carriers are not responsible for the loss, destruction or

deterioration of the oods if caused b& the charterer of the oods or defects in the pac1ain or in the containers. The

Code of Co##erce also provides that all losses and deterioration which the oods #a& suffer durin the transportation b&reason of fortuitous event, force ma4eure, or the inherent defect of the oods, shall be for the account and ris1 of the

shipper, and that proof of these accidents is incu#bent upon the carrier. 3 The carrier, nonetheless, shall be liable for the

loss and da#ae resultin fro# the precedin causes if it is proved, as aainst hi#, that the& arose throuh his

nelience or b& reason of his havin failed to ta1e the precautions which usae has established a#on careful

persons. 38

Respondent carrier presented a witness who testified on the characteristics of the fertilier shipped and the e(pected ris1s

of bul1 shippin. Mr. Estanislao Chupunco, a che#ical enineer wor1in with Atlas )ertilier, described 9rea as a

13




SUPREME COURT

Manila

EN BANC

G.R. No. 11*&&& '()l 6, 1995

RNCISCO S. TTD, JOHN H. OSMEN "#$ RODOLO G. ION, petitioners,

vs.

HON. JESUS . GRCI, JR., )# )7 "'")y "7 / S/(/"(y o / D/'"(/# o T("#7'o(")o# "#$

Cou#)")o#7, "#$ EDS LRT CORPORTION, LTD., respondents.

!UISON, J.:

This is a petition under Rule 04 of the Revised Rules of Court to prohibit respondents fro# further i#ple#entin and

enforcin the DRevised and Restated Aree#ent to Build, ease and Transfer a iht Rail Transit 3&ste# for E;3AD dated

April '', %!!', and the D3upple#ental Aree#ent to the '' April %!!' Revised and Restated Aree#ent To Build, ease

and Transfer a iht Rail Transit 3&ste# for E;3AD dated Ma& 0, %!!7.

Petitioners )rancisco 3. Tatad, 2ohn :. +s#ena and Rodolfo K. Biaon are #e#bers of the Philippine 3enate and are

suin in their capacities as 3enators and as ta(pa&ers. Respondent 2esus B. Karcia, 2r. is the incu#bent 3ecretar& of the

;epart#ent of Transportation and Co##unications =;+TC>, while private respondent E;3A RT Corporation, td. is a

private corporation oranied under the laws of :on1on.

*

*n %!"!, ;+TC planned to construct a liht railwa& transit line alon E;3A, a #a$or thorouhfare in Metropolitan Manila,which shall traverse the cities of Pasa&, ueon, Mandalu&on and Ma1ati. The plan, referred to as E;3A iht Rail

Transit *** =E;3A RT ***>, was intended to provide a #ass transit s&ste# alon E;3A and alleviate the conestion and

rowin transportation proble# in the #etropolis.

+n March 7, %!!6, a letter of intent was sent b& the Eli evin Enterprises, *nc., represented b& Eli$ahu evin to ;+TC

3ecretar& +scar +rbos, proposin to construct the E;3A RT *** on a Build-+perate-Transfer =B+T> basis.

+n March %4, %!!6, 3ecretar& +rbos invited evin to send a technical tea# to discuss the pro$ect with ;+TC.

+n 2ul& !, %!!6, Republic Act No. 0!4 entitled DAn Act Authoriin the )inancin, Construction, +peration and

Maintenance of *nfrastructure Pro$ects b& the Private 3ector, and )or +ther Purposes,D was sined b& President CoraonC. A?uino. Referred to as the Build-+perate-Transfer =B+T> aw, it too1 effect on +ctober !, %!!6.

Republic Act No. 0!4 provides for two sche#es for the financin, construction and operation of overn#ent pro$ects

throuh private initiative and invest#ent Build-+perate-Transfer =B+T> or Build-Transfer =BT>.

*n accordance with the provisions of R.A. No. 0!4 and to set the E;3A RT *** pro$ect underwa&, ;+TC, on 2anuar& '',

%!!% and March %8, %!!%, issued ;epart#ent +rders Nos. !%-8!8 and !%-8!0, respectivel& creatin the Pre?ualification

Bids and Awards Co##ittee =PBAC> and the Technical Co##ittee.

15



After its constitution, the PBAC issued uidelines for the pre?ualification of contractors for the financin and

i#ple#entation of the pro$ect The notice, advertisin the pre?ualification of bidders, was published in three newspapers of

eneral circulation once a wee1 for three consecutive wee1s startin )ebruar& '%, %!!%.

The deadline set for sub#ission of pre?ualification docu#ents was March '%, %!!%, later e(tended to April %, %!!%. )ive

roups responded to the invitation na#el&, ABB Traione of *tal&, :opewell :oldins td. of :on1on, Mansteel

*nternational of Mandaue, Cebu, Mitsui L Co., td. of 2apan, and E;3A RT Consortiu#, co#posed of ten forein and

do#estic corporations na#el&, Jaiser Enineers *nternational, *nc., ACER Consultants =)ar East> td. and )ree#an )o(,

TradeinvestHCJ; Tatra of the Cech and 3lova1 )ederal Republics, TCK* Enineerin All Asia Capital and easinCorporation, The 3ali# Kroup of 2a1arta, E. . Enterprises, *nc., A.M. +reta L Co. Capitol *ndustrial Construction Kroup,

*nc, and ). ). Cru L co., *nc.

+n the last da& for sub#ission of pre?ualification docu#ents, the pre?ualification criteria proposed b& the Technical

Co##ittee were adopted b& the PBAC. The criteria totallin %66 percent, are as follows =a> eal aspects / %6 percent5

=b> Manae#entH+raniational capabilit& / 76 percent5 and =c> )inancial capabilit& / 76 percent5 and =d> Technical

capabilit& / 76 percent =%ollo, p. %''>.

+n April 7, %!!%, the Co##ittee, chared under the B+T aw with the for#ulation of the *#ple#entation Rules and

Reulations thereof, approved the sa#e.

After evaluatin the pre?ualification, bids, the PBAC issued a Resolution on Ma& !, %!!% declarin that of the fiveapplicants, onl& the E;3A RT Consortiu# D#et the re?uire#ents of arnerin at least '% points per criteria sic , e(cept

for eal Aspects, and obtainin an over-all passin #ar1 of at least "' pointsD =%ollo, p. %80>. The eal Aspects referred

to provided that the B+THBT contractor-applicant #eet the re?uire#ents specified in the Constitution and other pertinent

laws =%ollo, p. %%8>.

3ubse?uentl&, 3ecretar& +rbos was appointed E(ecutive 3ecretar& to the President of the Philippines and was replaced

b& 3ecretar& Pete Nico#edes Prado. The latter sent to President A?uino two letters dated Ma& 7%, %!!% and 2une %8,

%!!%, respectivel& reco##endin the award of the E;3A RT *** pro$ect to the sole co#pl&in bidder, the E;3A RT

Consortiu#, and re?uestin for authorit& to neotiate with the said fir# for the contract pursuant to pararaph %8=b> of the

*#ple#entin Rules and Reulations of the B+T aw =%ollo, pp. '!"-76'>.

*n 2ul& %!!%, E(ecutive 3ecretar& +rbos, actin on instructions of the President, issued a directive to the ;+TC to

proceed with the neotiations. +n 2ul& %0, %!!%, the E;3A RT Consortiu# sub#itted its bid proposal to ;+TC.

)indin this proposal to be in co#pliance with the bid re?uire#ents, ;+TC and respondent E;3A RT Corporation, td.,

in substitution of the E;3A RT Consortiu#, entered into an DAree#ent to Build, ease and Transfer a iht Rail Transit

3&ste# for E;3AD under the ter#s of the B+T aw =%ollo, pp. %8-%>.

3ecretar& Prado, thereafter, re?uested presidential approval of the contract.

*n a letter dated March %7, %!!', E(ecutive 3ecretar& )ran1lin ;rilon, who replaced E(ecutive 3ecretar& +rbos, infor#ed

3ecretar& Prado that the President could not rant the re?uested approval for the followin reasons =%> that ;+TC failed

to conduct actual public biddin in co#pliance with 3ection 4 of the B+T aw5 ='> that the law authoried public biddin as

the onl& #ode to award B+T pro$ects, and the pre?ualification proceedins was not the public biddin conte#plated under

the law5 =7> that *te# %8 of the *#ple#entin Rules and Reulations of the B+T aw which authoried neotiated award of

contract in addition to public biddin was of doubtful lealit&5 and =8> that conressional approval of the list of priorit&

pro$ects under the B+T or BT 3che#e provided in the law had not &et been ranted at the ti#e the contract was awarded

=%ollo, pp. %"-%!>.

*n view of the co##ents of E(ecutive 3ecretar& ;rilon, the ;+TC and private respondents re-neotiated the aree#ent.

+n April '', %!!', the parties entered into a DRevised and Restated Aree#ent to Build, ease and Transfer a iht Rail

16



Transit 3&ste# for E;3AD =%ollo, pp. 8-"> inas#uch as Dthe parties are coniant of the fact the ;+TC has full

authorit& to sin the Aree#ent without need of approval b& the President pursuant to the provisions of E(ecutive +rder

No. 7"6 and that certain events had supervened since Nove#ber , %!!% which necessitated the revision of the

Aree#entD =%ollo, p. 4%>. +n Ma& 0, %!!', ;+TC, represented b& 3ecretar& 2esus Karcia vice 3ecretar& Prado, and

private respondent entered into a D3upple#ental Aree#ent to the '' April %!!' Revised and Restated Aree#ent to

Build, ease and Transfer a iht Rail Transit 3&ste# for E;3AD so as to Dclarif& their respective rihts and

responsibilitiesD and to sub#it the 3upple#ental Aree#ent to the President, of the Philippines for his approvalD =%ollo,

pp. !-"6>.

3ecretar& Karcia sub#itted the two Aree#ents to President )idel G. Ra#os for his consideration and approval. *n a

Me#orandu# to 3ecretar& Karcia on Ma& 0, %!!7, approved the said Aree#ents, =%ollo, p. %!8>.

Accordin to the aree#ents, the E;3A RT *** will use liht rail vehicles fro# the Cech and 3lova1 )ederal Republics

and will have a #a(i#u# carr&in capacit& of 846,666 passeners a da&, or %46 #illion a &ear to be achieved-throuh 48

such vehicles operatin si#ultaneousl&. The E;3A RT *** will run at rade, or street level, on the #id-section of E;3A for

a distance of %." 1ilo#eters fro# ).B. :arrison, Pasa& Cit& to North Avenue, ueon Cit&. The s&ste# will have its own

power facilit& =Revised and Restated Aree#ent, 3ec. '.7 =ii>5 %ollo p. 44>. *t will also have thirteen =%7> passener

stations and one depot in %0-hectare overn#ent propert& at North Avenue =3upple#ental Aree#ent, 3ec. %%5 %ollo, pp.

!%-!'>.

Private respondents shall underta1e and finance the entire pro$ect re?uired for a co#plete operational liht rail transits&ste# =Revised and Restated Aree#ent, 3ec. 8.%5 %ollo, p. 4">. Taret co#pletion date is %,6"6 da&s or appro(i#atel&

three &ears fro# the i#ple#entation date of the contract inclusive of #obiliation, site wor1s, initial and final testin of the

s&ste# =3upple#ental Aree#ent, 3ec. 45 %ollo, p. "7>. 9pon full or partial co#pletion and viabilit& thereof, private

respondent shall deliver the use and possession of the co#pleted portion to ;+TC which shall operate the sa#e

=3upple#ental Aree#ent, 3ec. 45 Revised and Restated Aree#ent, 3ec. 4.%5 %ollo, pp. 0%-0', "8>. ;+TC shall pa&

private respondent rentals on a #onthl& basis throuh an *rrevocable etter of Credit. The rentals shall be deter#ined b&

an independent and internationall& accredited inspection fir# to be appointed b& the parties =3upple#ental Aree#ent,

3ec. 05 %ollo, pp. "4-"0> As areed upon, private respondents capital shall be recovered fro# the rentals to be paid b&

the ;+TC which, in turn, shall co#e fro# the earnins of the E;3A RT *** =Revised and Restated Aree#ent, 3ec. %, p.

45 %ollo, p. 48>. After '4 &ears and ;+TC shall have co#pleted pa&#ent of the rentals, ownership of the pro$ect shall be

transferred to the latter for a consideration of onl& 9.3. <%.66 =Revised and Restated Aree#ent, 3ec. %%.%5 %ollo, p. 0>.

+n Ma& 4, %!!8, R.A. No. %", an DAct A#endin Certain 3ections of Republic Act No. 0!4, Entitled DAn Act Authoriin

the )inancin, Construction, +peration and Maintenance of *nfrastructure Pro$ects b& the Private 3ector, and for +ther

PurposesD was sined into law b& the President. The law was published in two newspapers of eneral circulation on Ma&

%', %!!8, and too1 effect %4 da&s thereafter or on Ma& '", %!!8. The law e(pressl& reconies BT sche#e and allows

direct neotiation of BT contracts.

**

*n their petition, petitioners arued that

=%> T:E AKREEMENT +) APR* '', %!!', A3 AMEN;E; B@ T:E 39PPEMENTA AKREEMENT +)

MA@ 0, %!!7, *N3+)AR A3 *T KRANT3 E;3A RT C+RP+RAT*+N, T;., A )+RE*KN

C+RP+RAT*+N, T:E +NER3:*P +) E;3A RT ***, A P9B*C 9T**T@, G*+ATE3 T:E

C+N3T*T9T*+N AN;, :ENCE, *3 9NC+N3T*T9T*+NA5

='> T:E B9*;-EA3E-TRAN3)ER 3C:EME PR+G*;E; *N T:E AKREEMENT3 *3 N+T ;E)*NE;

N+R REC+KN*OE; *N R.A. N+. 0!4 +R *T3 *MPEMENT*NK R9E3 AN; REK9AT*+N3 AN;,

:ENCE, *3 *EKA5

17



=7> T:E AAR; +) T:E C+NTRACT +N A NEK+T*ATE; BA3*3 G*+ATE3 R5 A. N+. 0!4 AN;,

:ENCE, *3 9NA)95

=8> T:E AAR; +) T:E C+NTRACT *N )AG+R +) RE3P+N;ENT E;3A RT C+RP+RAT*+N, T;.

G*+ATE3 T:E RE9*REMENT3 PR+G*;E; *N T:E *MPEMENT*NK R9E3 AN; REK9AT*+N3

+) T:E B+T A AN;, :ENCE, *3 *EKA5

=4> T:E AKREEMENT3 G*+ATE EEC9T*GE +R;ER N+ 7"6 )+R T:E*R )A*9RE T+ BEAR

PRE3*;ENT*A APPR+GA AN;, :ENCE, ARE *EKA AN; *NE))ECT*GE5 AN;

=0> T:E AKREEMENT3 ARE KR+33@ ;*3A;GANTAKE+93 T+ T:E K+GERNMENT =%ollo, pp. %4-

%0>.

3ecretar& Karcia and private respondent filed their co##ents separatel& and clai#ed that

=%> Petitioners are not the real parties-in-interest and have no leal standin to institute the present petition5

='> The writ of prohibition is not the proper re#ed& and the petition re?uires ascertain#ent of facts5

=7> The sche#e adopted in the Aree#ents is actuall& a build-transfer sche#e allowed b& the B+T aw5

=8> The nationalit& re?uire#ent for public utilities #andated b& the Constitution does not appl& to private respondent5

=4> The Aree#ents e(ecuted b& and between respondents have been approved b& President Ra#os and are not

disadvantaeous to the overn#ent5

=0> The award of the contract to private respondent throuh neotiation and not public biddin is allowed b& the B+T aw5

and

=> Krantin that the B+T aw re?uires public biddin, this has been a#ended b& R.A No. %" passed b& the eislature

+n Ma& %', %!!8, which provides for direct neotiation as a #ode of award of infrastructure pro$ects.

***

Respondents clai#ed that petitioners had no leal standin to initiate the instant action. Petitioners, however, countered

that the action was filed b& the# in their capacit& as 3enators and as ta(pa&ers.

The prevailin doctrines in ta(pa&ers suits are to allow ta(pa&ers to ?uestion contracts entered into b& the national

overn#ent or overn#ent-owned or controlled corporations alleedl& in contravention of the law =Jilosba&an, *nc. v.

Kuinona, '7' 3CRA %%6 %!!8> and to disallow the sa#e when onl& #unicipal contracts are involved =Buna&

Construction and ;evelop#ent Corporation v. aron, %0 3CRA. '86 %!"!>.

)or as lon as the rulin in 7ilosbayan on locus standi is not reversed, we have no choice but to follow it and uphold theleal standin of petitioners as ta(pa&ers to institute the present action.

*G

*n the #ain, petitioners asserted that the Revised and Restated Aree#ent of April '', %!!' and the 3upple#ental

Aree#ent of Ma& 0, %!!7 are unconstitutional and invalid for the followin reasons

18



=%> the E;3A RT *** is a public utilit&, and the ownership and operation thereof is li#ited b& the

Constitution to )ilipino citiens and do#estic corporations, not forein corporations li1e private

respondent5

='> the Build-ease-Transfer =BT> sche#e provided in the aree#ents is not the B+T or BT 3che#e

under the law5

=7> the contract to construct the E;3A RT *** was awarded to private respondent not throuh public

biddin which is the onl& #ode of awardin infrastructure pro$ects under the B+T law5 and

=8> the aree#ents are rossl& disadvantaeous to the overn#ent.

%. Private respondent E;3A RT Corporation, td. to who# the contract to construct the E;3A RT *** was awarded b&

public respondent, is ad#ittedl& a forein corporation Ddul& incorporated and e(istin under the laws of :on1onD =%ollo,

pp. 46, !>. There is also no dispute that once the E;3A RT *** is constructed, private respondent, as lessor, will turn it

over to ;+TC, as lessee, for the latter to operate the s&ste# and pa& rentals for said use.

The ?uestion posed b& petitioners is

Can respondent E;3A RT Corporation, td., a forein corporation own E;3A RT ***5 a public utilit&F

=%ollo, p. %>.

The phrasin of the ?uestion is erroneous5 it is loaded. hat private respondent owns are the rail trac1s, rollin stoc1s li1e

the coaches, rail stations, ter#inals and the power plant, not a public utilit&. hile a franchise is needed to operate these

facilities to serve the public, the& do not b& the#selves constitute a public utilit&. hat constitutes a public utilit& is not their

ownership but their use to serve the public =*loilo *ce L Cold 3torae Co. v. Public 3ervice Board, 88 Phil. 44%, 44 44"

%!'7>.

The Constitution, in no uncertain ter#s, re?uires a franchise for the operation of a public utilit&. :owever, it does not

re?uire a franchise before one can own the facilities needed to operate a public utilit& so lon as it does not operate the#

to serve the public.

3ection %% of Article ** of the Constitution provides

No franchise, certificate or an& other for# of authoriation for the operation of a public utility shall be

ranted e(cept to citiens of the Philippines or to corporations or associations oranied under the laws of

the Philippines at least si(t& per centum of whose capital is owned b& such citiens, nor shall such

franchise, certificate or authoriation be e(clusive character or for a loner period than fift& &ears . . .

=E#phasis supplied>.

*n law, there is a clear distinction between the DoperationD of a public utilit& and the ownership of the facilities and

e?uip#ent used to serve the public.

+wnership is defined as a relation in law b& virtue of which a thin pertainin to one person is co#pletel& sub$ected to his

will in ever&thin not prohibited b& law or the concurrence with the rihts of another =Tolentino, ** Co##entaries and

2urisprudence on the Civil Code of the Philippines 84 %!!'>.

The e(ercise of the rihts enco#passed in ownership is li#ited b& law so that a propert& cannot be operated and used to

serve the public as a public utilit& unless the operator has a franchise. The operation of a rail s&ste# as a public utilit&

includes the transportation of passeners fro# one point to another point, their loadin and unloadin at desinated

places and the #ove#ent of the trains at pre-scheduled ti#es =cf. Ariona Eastern R.R. Co. v. 2.A.. Matthews, '6 Ari

19



'"', %"6 P.%4!, A..R. %%8! %!%! 59nited 3tates )ire *ns. Co. v. Northern P.R. Co., 76 ash 'd. '', %!7 P. 'd "0", '

A..R. 'd %604 %!8">.

The riht to operate a public utilit& #a& e(ist independentl& and separatel& fro# the ownership of the facilities thereof.

+ne can own said facilities without operatin the# as a public utilit&, or conversel&, one #a& operate a public utilit& withou

ownin the facilities used to serve the public. The devotion of propert& to serve the public #a& be done b& the owner or b&

the person in control thereof who #a& not necessaril& be the owner thereof.

This dichoto#& between the operation of a public utilit& and the ownership of the facilities used to serve the public can bever& well appreciated when we consider the transportation industr&. Enfranchised airline and shippin co#panies #a&

lease their aircraft and vessels instead of ownin the# the#selves.

hile private respondent is the owner of the facilities necessar& to operate the E;3A. RT ***, it ad#its that it is not

enfranchised to operate a public utilit& =Revised and Restated Aree#ent, 3ec. 7.'5 %ollo, p. 4>. *n view of this

incapacit&, private respondent and ;+TC areed that on co#pletion date, private respondent will i##ediatel& deliver

possession of the RT s&ste# b& wa& of lease for '4 &ears, durin which period ;+TC shall operate the sa#e as a

co##on carrier and private respondent shall provide technical #aintenance and repair services to ;+TC =Revised and

Restated Aree#ent, 3ecs. 7.', 4.% and 4.'5 %ollo, pp. 4-4", 0%-0'>. Technical #aintenance consists of providin =%>

repair and #aintenance facilities for the depot and rail lines, services for routine clearin and securit&5 and ='> producin

and distributin #aintenance #anuals and drawins for the entire s&ste# =Revised and Restated Aree#ent, Anne( )>.

Private respondent shall also train ;+TC personnel for fa#iliariation with the operation, use, #aintenance and repair of

the rollin stoc1, power plant, substations, electrical, sinalin, co##unications and all other e?uip#ent as supplied in the

aree#ent =Revised and Restated Aree#ent, 3ec. %65 %ollo, pp. 00-0>. Trainin consists of theoretical and live trainin

of ;+TC operational personnel which includes actual drivin of liht rail vehicles under si#ulated operatin conditions,

control of operations, dealin with e#erencies, collection, countin and securin cash fro# the fare collection s&ste#

=Revised and Restated Aree#ent, Anne( E, 3ecs. '-7>. Personnel of ;+TC will wor1 under the direction and control of

private respondent onl& durin trainin =Revised and Restated Aree#ent, Anne( E, 3ec. 7.%>. The trainin ob$ectives,

however, shall be such that upon co#pletion of the E;3A RT *** and upon openin of nor#al revenue operation, ;+TC

shall have in their e#plo& personnel capable of underta1in trainin of all new and replace#ent personnel =Revised and

Restated Aree#ent, Anne( E 3ec. 4.%>. *n other words, b& the end of the three-&ear construction period and upon

co##ence#ent of nor#al revenue operation, ;+TC shall be able to operate the E;3A RT *** on its own and train allnew personnel b& itself.

)ees for private respondent s services shall be included in the rent, which li1ewise includes the pro$ect cost, cost of

replace#ent of plant e?uip#ent and spare parts, invest#ent and financin cost, plus a reasonable rate of return thereon

=Revised and Restated Aree#ent, 3ec. %5 %ollo, p. 48>.

3ince ;+TC shall operate the E;3A RT ***, it shall assu#e all the obliations and liabilities of a co##on carrier. )or this

purpose, ;+TC shall inde#nif& and hold har#less private respondent fro# an& losses, da#aes, in$uries or death which

#a& be clai#ed in the operation or i#ple#entation of the s&ste#, e(cept losses, da#aes, in$ur& or death due to defects

in the E;3A RT *** on account of the defective condition of e?uip#ent or facilities or the defective #aintenance of such

e?uip#ent facilities =Revised and Restated Aree#ent, 3ecs. %'.% and %'.'5 %ollo, p. 0">.

*n su#, private respondent will not run the liht rail vehicles and collect fees fro# the ridin public. *t will have no dealins

with the public and the public will have no riht to de#and an& services fro# it.

*t is well to point out that the role of private respondent as lessor durin the lease period #ust be distinuished fro# the

role of the Philippine Ka#in Manae#ent Corporation =PKMC> in the case of 7ilosbayan Inc. v. Guinona, '7' 3CRA

%%6 =%!!8>. Therein, the Contract of ease between PKMC and the Philippine Charit& 3weepsta1es +ffice =PC3+> was

actuall& a collaboration or $oint venture aree#ent prescribed under the charter of the PC3+. *n the Contract of ease5

PKMC, the lessor obliated itself to build, at its own e(pense, all the facilities necessar& to operate and #aintain a

20



nationwide on-line lotter& s&ste# fro# who# PC3+ was to lease the facilities and operate the sa#e. 9pon due

e(a#ination of the contract, the Court found that PKMCs participation was not confined to the construction and settin up

of the on-line lotter& s&ste#. *t spilled over to the actual operation thereof, beco#in indispensable to the pursuit, conduct,

ad#inistration and control of the hihl& technical and sophisticated lotter& s&ste#. *n effect, the PC3+ leased out its

franchise to PKMC which actuall& operated and #anaed the sa#e.

*ndeed, a #ere owner and lessor of the facilities used b& a public utilit& is not a public utilit& =Providence and .R. Co. v.

9nited 3tates, 80 ). 'd %8!, %4' %!765 Chippewa Power Co. v. Railroad Co##ission of isconsin, '64 N.. !66, !67,

%"" is. '80 %!'45 Ellis v. *nterstate Co##erce Co##ission, *ll 74 3. Ct. 084, 080, '7 9.3. 878, 4! . Ed. %670%!%8>. Neither are owners of tan1, refrierator, wine, poultr& and beer cars who suppl& cars under contract to railroad

co#panies considered as public utilities =Cr&stal Car ine v. 3tate Ta( Co##ission, %8 p. 'd !"8, !" %!80>.

Even the #ere for#ation of a public utilit& corporation does not ipso facto characterie the corporation as one operatin a

public utilit&. The #o#ent for deter#inin the re?uisite )ilipino nationalit& is when the entit& applies for a franchise,

certificate or an& other for# of authoriation for that purpose =People v. uasha, !7 Phil. 777 %!47>.

'. Petitioners further assert that the BT sche#e under the Aree#ents in ?uestion is not reconied in the B+T aw and

its *#ple#entin Rules and Reulations.

3ection ' of the B+T aw defines the B+T and BT sche#es as follows

=a> Build-operate-and-transfer sche#e / A contractual arrane#ent whereb& the contractor underta1es

the construction includin financin, of a iven infrastructure facilit&, and the operation and #aintenance

thereof. The contractor operates the facilit& over a fi(ed ter# durin which it is allowed to chare facilit&

users appropriate tolls, fees, rentals and chares sufficient to enable the contractor to recover its

operatin and #aintenance e(penses and its invest#ent in the pro$ect plus a reasonable rate of return

thereon. The contractor transfers the facilit& to the overn#ent aenc& or local overn#ent unit

concerned at the end of the fi(ed ter# which shall not e(ceed fift& =46> &ears. )or the construction stae,

the contractor #a& obtain financin fro# forein andHor do#estic sources andHor enae the services of a

forein andHor )ilipino constructor sic Provided, !hat the o0nership structure of the contractor of an

infrastructure facility 0hose operation re3uires a public utility franchise must be in accordance 0ith the

onstitution Provided, however, That in the case of corporate investors in the build-operate-and-transfercorporation, the citienship of each stoc1holder in the corporate investors shall be the basis for the

co#putation of )ilipino e?uit& in the said corporation Provided, further, That, in the case of forein

constructors sic , )ilipino labor shall be e#plo&ed or hired in the different phases of the construction

where )ilipino s1ills are available Provided, further#ore, that the financin of a forein or forein-

controlled contractor fro# Philippine overn#ent financin institutions shall not e(ceed twent& percent

='6I> of the total cost of the infrastructure facilit& or pro$ect Provided, finall&, That financin fro# forein

sources shall not re?uire a uarantee b& the Kovern#ent or b& overn#ent-owned or controlled

corporations. The build-operate-and-transfer sche#e shall include a suppl&-and-operate situation which is

a contractual aree#ent whereb& the supplier of e?uip#ent and #achiner& for a iven infrastructure

facilit&, if the interest of the Kovern#ent so re?uires, operates the facilit& providin in the process

technolo& transfer and trainin to )ilipino nationals.

=b> Build-and-transfer sche#e / DA contractual arrane#ent whereb& the contractor underta1es the

construction includin financin, of a iven infrastructure facilit&, and its turnover after co#pletion to the

overn#ent aenc& or local overn#ent unit concerned which shall pa& the contractor its total invest#ent

e(pended on the pro$ect, plus a reasonable rate of return thereon. This arrane#ent #a& be e#plo&ed in

the construction of an& infrastructure pro$ect includin critical facilities which for securit& or strateic

reasons, #ust be operated directl& b& the overn#ent =E#phasis supplied>.

21



econo#ic pro$ects for aricultural, industrial and power develop#ent as #a& be deter#ined b&

the National Econo#ic Council which are financed b& or throuh forein funds5 . . . .

7. The fact that the contract for the construction of the E;3A RT *** was awarded throuh neotiation and before

conressional approval on 2anuar& '' and '7, %!!' of the ist of National Pro$ects to be underta1en b& the private sector

pursuant to the B+T aw =%ollo, pp. 76!-7%'> does not suffice to invalidate the award.

3ubse?uent conressional approval of the list includin Drail-based pro$ects pac1aed with co##ercial develop#ent

opportunitiesD =%ollo, p. 7%6> under which the E;3A RT *** pro$ects falls, a#ounts to a ratification of the prior award of theE;3A RT *** contract under the B+T aw.

Petitioners insist that the pre?ualifications process which led to the neotiated award of the contract appears to have been

ried fro# the ver& beinnin to do awa& with the usual open international public biddin where ?ualified internationall&

1nown applicants could fairl& participate.

The records show that onl& one applicant passed the pre?ualification process. 3ince onl& one was left, to conduct a public

biddin in accordance with 3ection 4 of the B+T aw for that lone participant will be an absurb and pointless e(ercise

=cf. ;eloso v. 3andianba&an, '% 3CRA 8!, 0% %!!7>.

Contrar& to the co##ents of the E(ecutive 3ecretar& ;rilon, 3ection 4 of the B+T aw in relation to Presidential ;ecree

No. %4!8 allows the neotiated award of overn#ent infrastructure pro$ects.

Presidential ;ecree No. %4!8, DPrescribin Policies, Kuidelines, Rules and Reulations for Kovern#ent *nfrastructure

Contracts,D allows the neotiated award of overn#ent pro$ects in e(ceptional cases. 3ections 8 of the said law reads as

follows

'iddin . / Construction pro$ects shall enerall& be underta1en b& contract after co#petitive public

biddin. 8ro4ects may be undertaken by administration or force account or by neotiated contract only in

e2ceptional cases 0here time is of the essence, or 0here there is lack of 3ualified bidders or contractors,

or 0here there is conclusive evidence that reater economy and efficiency 0ould be achieved throuh

this arranement , and in accordance with provision of laws and acts on the #atter, sub$ect to the approva

of the Minister of Public or1s and Transportation and Co##unications, the Minister of Public :ihwa&s,or the Minister of Ener&, as the case #a& be, if the pro$ect cost is less than P% Million, and the President

of the Philippines, upon reco##endation of the Minister, if the pro$ect cost is P% Million or #ore

=E#phasis supplied>.

((( ((( (((

*ndeed, where there is a lac1 of ?ualified bidders or contractors, the award of overn#ent infrastructure contracts #a& he

#ade b& neotiation. Presidential ;ecree No. %4!8 is the eneral law on overn#ent infrastructure contracts while the

B+T aw overns particular arrane#ents or sche#es ai#ed at encourain private sector participation in overn#ent

infrastructure pro$ects. The two laws are not inconsistent with each other but are in pari materia and should be read

toether accordinl&.

*n the instant case, if the pre?ualification process was actuall& tainted b& foul pla&, one wonders wh& none of the

co#petin fir#s ever brouht the #atter before the PBAC, or intervened in this case before us =cf. Mala&an *nterated

*ndustries Corp. v. Court of Appeals, '%7 3CRA 086 %!!'5 Bureau Geritas v. +ffice of the President, '64 3CRA 64

%!!'>.

The challened aree#ents have been approved b& President Ra#os hi#self. Althouh then E(ecutive 3ecretar& ;rilon

#a& have disapproved the DAree#ent to Build, ease and Transfer a iht Rail Transit 3&ste# for E;3A,D there is

nothin in our laws that prohibits parties to a contract fro# reneotiatin and #odif&in in ood faith the ter#s and

23



conditions thereof so as to #eet leal, statutor& and constitutional re?uire#ents. 9nder the circu#stances, to re?uire the

parties to o bac1 to step one of the pre?ualification process would $ust be an idle cere#on&. 9seless bureaucratic Dred

tapeD should be eschewed because it discouraes private sector participation, the D#ain enineD for national rowth and

develop#ent =R.A. No. 0!4, 3ec. %>, and renders the B+T aw nuator&.

Republic Act No. %" reconies and defines a BT sche#e in 3ection ' thereof as

=e> Build-lease-and-transfer / A contractual arrane#ent whereb& a pro$ect proponent is authoried to

finance and construct an infrastructure or develop#ent facilit& and upon its co#pletion turns it over to theovern#ent aenc& or local overn#ent unit concerned on a lease arrane#ent for a fi(ed period after

which ownership of the facilit& is auto#aticall& transferred to the overn#ent unit concerned.

3ection 4-A of the law, which e(pressl& allows direct neotiation of contracts, provides

;irect Neotiation of Contracts. / ;irect neotiation shall be resorted to when there is onl& one

co#pl&in bidder left as defined hereunder.

=a> *f, after advertise#ent, onl& one contractor applies for pre?ualification and it #eets the pre?ualification

re?uire#ents, after which it is re?uired to sub#it a bid proposal which is subse?uentl& found b& the

aenc&Hlocal overn#ent unit =K9> to be co#pl&in.

=b> *f, after advertise#ent, #ore than one contractor applied for pre?ualification but onl& one #eets the

pre?ualification re?uire#ents, after which it sub#its bidHproposal which is found b& the aenc&Hlocal

overn#ent unit =K9> to be co#pl&in.

=c> *f, after pre?ualification of #ore than one contractor onl& one sub#its a bid which is found b& the

aenc&HK9 to be co#pl&in.

=d> *f, after pre?ualification, #ore than one contractor sub#it bids but onl& one is found b& the

aenc&HK9 to be co#pl&in. Provided, That, an& of the dis?ualified prospective bidder sic #a& appeal

the decision of the i#ple#entin aenc&, aenc&HK9s pre?ualification bids and awards co##ittee within

fifteen =%4> wor1in da&s to the head of the aenc&, in case of national pro$ects or to the ;epart#ent ofthe *nterior and ocal Kovern#ent, in case of local pro$ects fro# the date the dis?ualification was #ade

1nown to the dis?ualified bidder Provided, further#ore, That the i#ple#entin aenc&HK9s concerned

should act on the appeal within fort&-five =84> wor1in da&s fro# receipt thereof.

Petitioners clai# that the BT sche#e and direct neotiation of contracts are not conte#plated b& the B+T aw has now

been rendered #oot and acade#ic b& R.A. No. %". 3ection 7 of this law authories all overn#ent infrastructure

aencies, overn#ent-owned and controlled corporations and local overn#ent units to enter into contract with an& dul&

pre?ualified proponent for the financin, construction, operation and #aintenance of an& financiall& viable infrastructure or

develop#ent facilit& throuh a B+T, BT, BT, B++ =Build-own-and-operate>, CA+ =Contract-add-operate>, ;+T =;evelop-

operate-and-transfer>, R+T =Rehabilitate-operate-and-transfer>, and R++ =Rehabilitate-own-operate> =R.A. No. %",

3ec. ' b-$>.

)ro# the law itself, once and applicant has pre?ualified, it can enter into an& of the sche#es enu#erated in 3ection '

thereof, includin a BT arrane#ent, enu#erated and defined therein =3ec. 7>.

Republic Act No. %" is a curative statute. *t is intended to provide financial incentives and Da cli#ate of #ini#u#

overn#ent reulations and procedures and specific overn#ent underta1ins in support of the private sectorD =3ec. %>. A

curative statute #a1es valid that which before enact#ent of the statute was invalid. Thus, whatever doubts and alleed

procedural lapses private respondent and ;+TC #a& have enendered and co##itted in enterin into the ?uestioned

24



contracts, these have now been cured b& R.A. No. %" =cf. ;evelop#ent Ban1 of the Philippines v. Court of Appeals, !0

3CRA 78' %!"65 3antos G. ;uata, %8 3CRA %68% %!045 Adon G. Cheon 3en Kee, 87 Phil. 87 %!''.

8. astl&, petitioners clai# that the aree#ents are rossl& disadvantaeous to the overn#ent because the rental rates

are e(cessive and private respondents develop#ent rihts over the %7 stations and the depot will rob ;+TC of the best

ter#s durin the #ost productive &ears of the pro$ect.

*t #ust be noted that as part of the E;3A RT *** pro$ect, private respondent has been ranted, for a period of '4 &ears,

e(clusive rihts over the depot and the air space above the stations for develop#ent into co##ercial pre#ises for lease,sublease, transfer, or advertisin =3upple#ental Aree#ent, 3ec. %%5 %ollo, pp. !%-!'>. )or and in consideration of these

develop#ent rihts, private respondent shall pa& ;+TC in Philippine currenc& uaranteed revenues enerated therefro#

in the a#ounts set forth in the 3upple#ental Aree#ent =3ec. %%5%ollo, p. !7>. *n the event that ;+TC shall be unable to

collect the uaranteed revenues, ;+TC shall be allowed to deduct an& shortfalls fro# the #onthl& rent due private

respondent for the construction of the E;3A RT *** =3upple#ental Aree#ent, 3ec. %%5 %ollo, pp. !7-!8>. All rihts, titles,

interests and inco#e over all contracts on the co##ercial spaces shall revert to ;+TC upon e(piration of the '4-&ear

period. =3upple#ental Aree#ent, 3ec. %%5 %ollo, pp. !%-!'>.

The ter#s of the aree#ents were arrived at after a painsta1in stud& b& ;+TC. The deter#ination b& the proper

ad#inistrative aencies and officials who have ac?uired e(pertise, specialied s1ills and 1nowlede in the perfor#ance of

their functions should be accorded respect absent an& showin of rave abuse of discretion =)elipe @s#ael, 2r. L Co. v.

;eput& E(ecutive 3ecretar&, %!6 3CRA 07 %!!65 'oard of )edical 5ducation v. Alfonso, %0 3CRA 768 %!"!>.

Kovern#ent officials are presu#ed to perfor# their functions with reularit& and stron evidence is necessar& to rebut this

presu#ption. Petitioners have not presented evidence on the reasonable rentals to be paid b& the parties to each other.

The #atter of valuation is an esoteric field which is better left to the e(perts and which this Court is not eaer to

underta1e.

That the rantee of a overn#ent contract will profit therefro# and to that e(tent the overn#ent is deprived of the profits

if it enaes in the business itself, is not worth& of bein raised as an issue. *n all cases where a part& enters into a

contract with the overn#ent, he does so, not out of charit& and not to lose #one&, but to ain pecuniaril&.

4. ;efinitel&, the aree#ents in ?uestion have been entered into b& ;+TC in the e(ercise of its overn#ental function.;+TC is the pri#ar& polic&, plannin, prora##in, reulatin and ad#inistrative entit& of the E(ecutive branch of

overn#ent in the pro#otion, develop#ent and reulation of dependable and coordinated networ1s of transportation and

co##unications s&ste#s as well as in the fast, safe, efficient and reliable postal, transportation and co##unications

services =Ad#inistrative Code of %!", Boo1 *G, Title G, 3ec. '>. *t is the E(ecutive depart#ent, ;+TC in particular that

has the power, authorit& and technical e(pertise deter#ine whether or not a specific transportation or co##unication

pro$ect is necessar&, viable and beneficial to the people. The discretion to award a contract is vested in the overn#ent

aencies entrusted with that function =Bureau Geritas v. +ffice of the President, '64 3CRA 64 %!!'>.

:ERE)+RE, the petition is ;*3M*33E;.

3+ +R;ERE;

'ellosillo and 7apunan, JJ., concur.

8adilla and %ealado, JJ., concurs in the result.

%omero, J., is on leave.

25




SUPREME COURT

Manila

)*R3T ;*G*3*+N

G.R. No. L-690** M"y &9, 198

ESTERN SHIPPING LINES, INC., petitioner,vs.

INTERMEDITE PPELLTE COURT "#$ DEELOPMENT INSURNCE : SURET+ CORPORTION,respondents.

No. 1*8 M"y &9, 198

ESTERN SHIPPING LINES, INC., petitioner,

vs.

THE NISSHIN IRE ND MRINE INSURNCE CO., "#$ DO; IRE : MRINE INSURNCE CO.,

LTD.,respondents.

MELENCIO-HERRER, J.:

These two cases, both for the recover& of the value of caro insurance, arose fro# the sa#e incident, the sin1in of the

MH3 A3*AT*CA when it cauht fire, resultin in the total loss of ship and caro.

The basic facts are not in controvers&

*n G.%. 9o. :;<==, so#eti#e in or prior to 2une, %!, the MH3 A3*AT*CA, a vessel operated b& petitioner Eastern

3hippin ines, *nc., =referred to hereinafter as Petitioner Carrier> loaded at Jobe, 2apan for transportation to Manila,

4,666 pieces of caloried lance pipes in '" pac1aes valued at P'40,67!.66 consined to Philippine Bloo#in Mills Co.,

*nc., and cases of spare parts valued at P!',70%.4, consined to Central Te(tile Mills, *nc. Both sets of oods wereinsured aainst #arine ris1 for their stated value with respondent ;evelop#ent *nsurance and 3uret& Corporation.

*n G.%. 9o. >?=>@, durin the sa#e period, the sa#e vessel too1 on board %'" cartons of ar#ent fabrics and

accessories, in two ='> containers, consined to Mariveles Apparel Corporation, and two cases of surve&in instru#ents

consined to A#an Enterprises and Keneral Merchandise. The %'" cartons were insured for their stated value b&

respondent Nisshin )ire L Marine *nsurance Co., for 93 <80,4"7.66, and the ' cases b& respondent ;owa )ire L Marine

*nsurance Co., td., for 93 <%%,7"4.66.

Enroute for Jobe, 2apan, to Manila, the vessel cauht fire and san1, resultin in the total loss of ship and caro. The

respective respondent *nsurers paid the correspondin #arine insurance values to the consinees concerned and were

thus subroated unto the rihts of the latter as the insured.

G.%. 9O. :;<==

+n Ma& %%, %!", respondent ;evelop#ent *nsurance L 3uret& Corporation =;evelop#ent *nsurance, for short>, havin

been subroated unto the rihts of the two insured co#panies, filed suit aainst petitioner Carrier for the recover& of the

a#ounts it had paid to the insured before the then Court of )irst instance of Manila, Branch =Civil Case No. 06">.

26



Petitioner-Carrier denied liabilit& #ainl& on the round that the loss was due to an e(traordinar& fortuitous event, hence, it

is not liable under the law.

+n Auust 7%, %!!, the Trial Court rendered $ud#ent in favor of ;evelop#ent *nsurance in the a#ounts of P'40,67!.66

and P!',70%.4, respectivel&, with leal interest, plus P74,666.66 as attorne&s fees and costs. Petitioner Carrier too1 an

appeal to the then Court of Appeals which, on Auust %8, %!"8, affir#ed.

Petitioner Carrier is now before us on a Petition for Review on Certiorari.

G.%. 9O. >?=>@

+n 2une %0, %!", respondents Nisshin )ire L Marine *nsurance Co. N*33:*N for short>, and ;owa )ire L Marine

*nsurance Co., td. =;+A, for brevit&>, as subroees of the insured, filed suit aainst Petitioner Carrier for the recover&

of the insured value of the caro lost with the then Court of )irst *nstance of Manila, Branch %% =Civil Case No. %%0%4%>,

i#putin unseaworthiness of the ship and non-observance of e(traordinar& dilience b& petitioner Carrier.

Petitioner Carrier denied liabilit& on the principal rounds that the fire which caused the sin1in of the ship is an e(e#ptin

circu#stance under 3ection 8='> =b> of the Carriae of Koods b& 3ea Act =C+K3A>5 and that when the loss of fire is

established, the burden of provin nelience of the vessel is shifted to the caro shipper.

+n 3epte#ber %4, %!"6, the Trial Court rendered $ud#ent in favor of N*33:*N and ;+A in the a#ounts of 93

<80,4"7.66 and 93 <%%,7"4.66, respectivel&, with leal interest, plus attorne&s fees of P4,666.66 and costs. +n appeal b&

petitioner, the then Court of Appeals on 3epte#ber %6, %!"8, affir#ed with #odification the Trial Courts $ud#ent b&

decreasin the a#ount recoverable b& ;+A to 93 <%,666.66 because of <466 per pac1ae li#itation of liabilit& under

the C+K3A.

:ence, this Petition for Review on certiorari b& Petitioner Carrier.

Both Petitions were initiall& denied for lac1 of #erit. K.R. No. 0!688 on 2anuar& %0, %!"4 b& the )irst ;ivision, and K. R.

No. %8" on 3epte#ber '4, %!"4 b& the 3econd ;ivision. 9pon Petitioner Carriers Motion for Reconsideration,

however, K.R. No. 0!688 was iven due course on March '4, %!"4, and the parties were re?uired to sub#it their

respective Me#oranda, which the& have done.

+n the other hand, in K.R. No. %8", Petitioner Carrier souht reconsideration of the Resolution den&in the Petition for

Review and #oved for its consolidation with K.R. No. 0!688, the lower-nu#bered case, which was then pendin

resolution with the )irst ;ivision. The sa#e was ranted5 the Resolution of the 3econd ;ivision of 3epte#ber '4, %!"4

was set aside and the Petition was iven due course.

At the outset, we re$ect Petitioner Carriers clai# that it is not the operator of the MH3 Asiatica but #erel& a charterer

thereof. e note that in K.R. No. 0!688, Petitioner Carrier stated in its Petition

There are about '' cases of the DA3*AT*CAD pendin in various courts where various plaintiffs are

represented b& various counsel representin various consinees or insurance co#panies. The co##on

defendant in these cases is petitioner herein, bein the operator of said vessel. ... 1

Petitioner Carrier should be held bound to said ad#ission. As a eneral rule, the facts alleed in a part&s pleadin are

dee#ed ad#issions of that part& and bindin upon it. & And an ad#ission in one pleadin in one action #a& be received in

evidence aainst the pleader or his successor-in-interest on the trial of another action to which he is a part&, in favor of a

part& to the latter action. 3

27



The threshold issues in both cases are =%> which law should overn / the Civil Code provisions on Co##on carriers or

the Carriae of Koods b& 3ea ActF and ='> who has the burden of proof to show nelience of the carrierF

On the (a0 Applicable

The law of the countr& to which the oods are to be transported overns the liabilit& of the co##on carrier in case of their

loss, destruction or deterioration. * As the caroes in ?uestion were transported fro# 2apan to the Philippines, the liabilit&

of Petitioner Carrier is overned pri#aril& b& the Civil Code. 5 :owever, in all #atters not reulated b& said Code, the

rihts and obliations of co##on carrier shall be overned b& the Code of Co##erce and b& special laws.6

Thus, theCarriae of Koods b& 3ea Act, a special law, is suppletor& to the provisions of the Civil Code.

On the 'urden of 8roof

9nder the Civil Code, co##on carriers, fro# the nature of their business and for reasons of public polic&, are bound to

observe e(traordinar& dilience in the viilance over oods, accordin to all the circu#stances of each case. 8 Co##on

carriers are responsible for the loss, destruction, or deterioration of the oods unless the sa#e is due to an& of the

followin causes onl&

=%> )lood, stor#, earth?ua1e, lihtnin or other natural disaster or cala#it&5

((( ((( ((( 9

Petitioner Carrier clai#s that the loss of the vessel b& fire e(e#pts it fro# liabilit& under the phrase Dnatural disaster or

cala#it&. D :owever, we are of the opinion that fire #a& not be considered a natural disaster or cala#it&. This #ust be so

as it arises al#ost invariabl& fro# so#e act of #an or b& hu#an #eans. 10 *t does not fall within the cateor& of an act of

Kod unless caused b& lihtnin 11 or b& other natural disaster or cala#it&. 1& *t #a& even be caused b& the actual fault or

privit& of the carrier. 13

Article %0"6 of the Civil Code, which considers fire as an e(traordinar& fortuitous event refers to leases of rural lands

where a reduction of the rent is allowed when #ore than one-half of the fruits have been lost due to such event,

considerin that the law adopts a protection polic& towards ariculture. 1*

As the peril of the fire is not co#prehended within the e(ception in Article %78, supra, Article %74 of the Civil Code

provides that all cases than those #ention in Article %78, the co##on carrier shall be presu#ed to have been at fault or

to have acted nelientl&, unless it proves that it has observed the e(traordinar& delience re?uired b& law.

*n this case, the respective *nsurers. as subroees of the caro shippers, have proven that the transported oods have

been lost. Petitioner Carrier has also proved that the loss was caused b& fire. The burden then is upon Petitioner Carrier

to proved that it has e(ercised the e(traordinar& dilience re?uired b& law. *n this reard, the Trial Court, concurred in b&

the Appellate Court, #ade the followin )indin of fact

The caroes in ?uestion were, accordin to the witnesses defendant placed in hatches No, ' and 7 cf the

vessel, Boatswain Ernesto Pastrana noticed that s#o1e was co#in out fro# hatch No. ' and hatch No.

75 that where the s#o1e was noticed, the fire was alread& bi5 that the fire #ust have started twent&-four

'8> our the sa#e was noticed5 that carbon dio(ide was ordered released and the crew was ordered to

open the hatch covers of No, ' tor co##ence#ent of fire fihtin b& sea water that all of these effort

were not enouh to control the fire.

Pursuant to Article %77, co##on carriers are bound to e(traordinar& dilience in the viilance over the

oods. The evidence of the defendant did not show that e(traordinar& viilance was observed b& the

vessel to prevent the occurrence of fire at hatches nu#bers ' and 7. ;efendants evidence did not

li1ewise show he a#ount of dilience #ade b& the crew, on orders, in the care of the caroes. hat28



appears is that after the caroes were stored in the hatches, no reular inspection was #ade as to their

condition durin the vo&ae. Conse?uentl&, the crew could not have even e(plain what could have

caused the fire. The defendant, in the Courts #ind, failed to satisfactoril& show that e(traordinar&

viilance and care had been #ade b& the crew to prevent the occurrence of the fire. The defendant, as a

co##on carrier, is liable to the consinees for said lac1 of delience re?uired of it under Article %77 of

the Civil Code. 15

:avin failed to dischare the burden of provin that it had e(ercised the e(traordinar& dilience re?uired b& law,

Petitioner Carrier cannot escape liabilit& for the loss of the caro.

And even if fire were to be considered a Dnatural disasterD within the #eanin of Article %78 of the Civil Code, it is

re?uired under Article %7! of the sa#e Code that the Dnatural disasterD #ust have been the Dpro(i#ate and onl& cause of

the loss,D and that the carrier has De(ercised due dilience to prevent or #ini#ie the loss before, durin or after the

occurrence of the disaster. D This Petitioner Carrier has also failed to establish satisfactoril&.

Nor #a& Petitioner Carrier see1 refue fro# liabilit& under the Carriae of Koods b& 3ea Act, *t is provided therein that

3ec. 8='>. Neither the carrier nor the ship shall be responsible for loss or da#ae arisin or resultin fro#

=b> )ire, unless caused b& the actual fault or privit& of the carrier.

((( ((( (((

*n this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that there was Dactual faultD of the

carrier shown b& Dlac1 of dilienceD in that Dwhen the s#o1e was noticed, the fire was alread& bi5 that the fire #ust have

started twent&-four ='8> hours before the sa#e was noticed5 D and that Dafter the caroes were stored in the hatches, no

reular inspection was #ade as to their condition durin the vo&ae.D The foreoin suffices to show that the

circu#stances under which the fire oriinated and spread are such as to show that Petitioner Carrier or its servants were

nelient in connection therewith. Conse?uentl&, the co#plete defense afforded b& the C+K3A when loss results fro# fire

is unavailin to Petitioner Carrier.

On the U& B<< 8er 8ackae (imitationC

Petitioner Carrier avers that its liabilit& if an&, should not e(ceed 93 <466 per pac1ae as provided in section 8=4> of the

C+K3A, which reads

=4> Neither the carrier nor the ship shall in an& event be or beco#e liable for an& loss or da#ae to or in

connection with the transportation of oods in an a#ount e(ceedin <466 per pac1ae lawful #one& of

the 9nited 3tates, or in case of oods not shipped in pac1aes, per custo#ar& freiht unit, or the

e?uivalent of that su# in other currenc&, unless the nature and value of such oods have been declared

b& the shipper before ship#ent and inserted in bill of ladin. This declaration if e#bodied in the bill of

ladin shall be pri#a facie evidence, but all be conclusive on the carrier.

B& aree#ent between the carrier, #aster or aent of the carrier, and the shipper another #a(i#u#

a#ount than that #entioned in this pararaph #a& be fi(ed Provided, That such #a(i#u# shall not be

less than the fiure above na#ed. *n no event shall the carrier be iable for #ore than the a#ount of

da#ae actuall& sustained.

((( ((( (((

Article %8! of the New Civil Code also allows the li#itations of liabilit& in this wise

29



Art. %8!. A stipulation that the co##on carriers liabilit& as li#ited to the value of the oods appearin in

the bill of ladin, unless the shipper or owner declares a reater value, is bindin.

*t is to be noted that the Civil Code does not of itself li#it the liabilit& of the co##on carrier to a fi(ed a#ount per pac1ae

althouh the Code e(pressl& per#its a stipulation li#itin such liabilit&. Thus, the C+K3A which is suppletor& to the

provisions of the Civil Code, steps in and supple#ents the Code b& establishin a statutor& provision li#itin the carriers

liabilit& in the absence of a declaration of a hiher value of the oods b& the shipper in the bill of ladin. The provisions of

the Carriae of Koods b&.3ea Act on li#ited liabilit& are as #uch a part of a bill of ladin as thouh ph&sicall& in it and as

#uch a part thereof as thouh placed therein b& aree#ent of the parties. 16

*n G.%. 9o. :;<==, there is no stipulation in the respective Bills of adin =E(hibits DC-'D and D*-7D> % li#itin the carriers

liabilit& for the loss or destruction of the oods. Nor is there a declaration of a hiher value of the oods. :ence, Petitioner

Carriers liabilit& should not e(ceed 93 <466 per pac1ae, or its peso e?uivalent, at the ti#e of pa&#ent of the value of

the oods lost, but in no case D#ore than the a#ount of da#ae actuall& sustained.D

The actual total loss for the 4,666 pieces of caloried lance pipes was P'40,67! =E(hibit DCD>, which was e(actl& the

a#ount of the insurance coverae b& ;evelop#ent *nsurance =E(hibit DAD>, and the a#ount affir#ed to be paid b&

respondent Court. The oods were shipped in '" pac1aes =E(hibit DC-'D> Multipl&in '" pac1aes b& <466 would result

in a product of <%8,666 which, at the current e(chane rate of P'6.88 to 93 <%, would be P'"0,%06, or D#ore than the

a#ount of da#ae actuall& sustained.D Conse?uentl&, the aforestated a#ount of P'40,67! should be upheld.

ith respect to the seven => cases of spare parts =E(hibit D*-7D>, their actual value was P!',70%.4 =E(hibit D*D>, which is

li1ewise the insured value of the caro =E(hibit D:D> and a#ount was affir#ed to be paid b& respondent Court. however,

#ultipl&in seven => cases b& <466 per pac1ae at the present prevailin rate of P'6.88 to 93 <% =93 <7,466 ( P'6.88>

would &ield P%,486 onl&, which is the a#ount that should be paid b& Petitioner Carrier for those spare parts, and not

P!',70%.4.

*n G.%. 9o. >?=>@, in so far as the two ='> cases of surve&in instru#ents are concerned, the a#ount awarded to ;+A

which was alread& reduced to <%,666 b& the Appellate Court followin the statutor& <466 liabilit& per pac1ae, is in order.

*n respect of the ship#ent of %'" cartons of ar#ent fabrics in two ='> containers and insured with N*33:*N, the Appellate

Court also li#ited Petitioner Carriers liabilit& to <466 per pac1ae and affir#ed the award of <80,4"7 to N*33:*N. it#ultiplied %'" cartons =considered as C+K3A pac1aes> b& <466 to arrive at the fiure of <08,666, and e(plained that

Dsince this a#ount is #ore than the insured value of the oods, that is <80,4"7, the Trial Court was correct in awardin

said a#ount onl& for the %'" cartons, which a#ount is less than the #a(i#u# li#itation of the carriers liabilit&.D

e find no reversible error. The %'" cartons and not the two ='> containers should be considered as the shippin unit.

*n )itsui / o., (td. vs. American 52port (ines, Inc. 070 ) 'd "6 =%!"%>, the consinees of tin inots and the shipper of

floor coverin brouht action aainst the vessel owner and operator to recover for loss of inots and floor coverin, which

had been shipped in vessel / supplied containers. The 9.3. ;istrict Court for the 3outhern ;istrict of New @or1 rendered

$ud#ent for the plaintiffs, and the defendant appealed. The 9nited 3tates Court of Appeals, 3econd ;ivision, #odified

and affir#ed holdin that

hen what would ordinaril& be considered pac1aes are shipped in a container supplied b& the carrier

and the nu#ber of such units is disclosed in the shippin docu#ents, each of those units and not the

container constitutes the Dpac1aeD referred to in liabilit& li#itation provision of Carriae of Koods b& 3ea

Act. Carriae of Koods b& 3ea Act, 8=4>, 80 9.3.C.A.L %768=4>.

Even if lanuae and purposes of Carriae of Koods b& 3ea Act left doubt as to whether carrier-furnished

containers whose contents are disclosed should be treated as pac1aes, the interest in securin

30



international unifor#it& would suest that the& should not be so treated. Carriae of Koods b& 3ea Act,

8=4>, 80 9.3.C.A. %768=4>.

... After ?uotin the state#ent in eathers Best, supra, 84% ) 'd at "%4, that treatin a container as a

pac1ae is inconsistent with the conressional purpose of establishin a reasonable #ini#u# level of

liabilit&, 2ude Bee1s wrote, 8%8 ). 3upp. at !6 =footnotes o#itted>

Althouh this approach has not co#pletel& escaped criticis#, there is, nonetheless, #uch

to co##end it. *t ives needed reconition to the responsibilit& of the courts to construeand appl& the statute as enacted, however reat #iht be the te#ptation to D#odernieD

or reconstitute it b& artful $udicial loss. *f C+K3As pac1ae li#itation sche#e suffers

fro# internal illness, Conress alone #ust underta1e the surer&. There is, in this reard,

obvious wisdo# in the Ninth Circuits conclusion in :artford that technoloical

advance#ents, whether or not forseeable b& the C+K3A pro#ulators, do not warrant a

distortion or artificial construction of the statutor& ter# Dpac1ae.D A rulin that these lare

reusable #etal pieces of transport e?uip#ent ?ualif& as C+K3A pac1aes / at least

where, as here, the& were carrier owned and supplied / would a#ount to $ust such a

distortion.

Certainl&, if the individual crates or cartons prepared b& the shipper and containin his

oods can rihtl& be considered Dpac1aesD standin b& the#selves, the& do notsuddenl& lose that character upon bein stowed in a carriers container. * would li1en

these containers to detachable stowae co#part#ents of the ship. The& si#pl& serve to

divide the ships overall caro stowae space into s#aller, #ore serviceable loci.

3hippers pac1aes are ?uite literall& DstowedD in the containers utiliin stevedorin

practices and #aterials analoous to those e#plo&ed in traditional on board stowae.

*n Derame2 International v. &.&. !ando,, %! A.M.C. %"6 =E.;. Ga.> revd on other rounds, 4!4 ) 'nd

!87 =8 Cir. %!!>, another district with #an& #ariti#e cases followed 2ude Bee1s reasonin in

Matsushita and si#ilarl& re$ected the functional econo#ics test. 2ude Jella# held that when rolls of

pol&ester oods are pac1ed into cardboard cartons which are then placed in containers, the cartons and

not the containers are the pac1aes.

((( ((( (((

The case of &mithreyhound v. )EV 5uryenes, 18 followed the Mitsui test

Eur&enes concerned a ship#ent of stereo e?uip#ent pac1aed b& the shipper into cartons which were

then placed b& the shipper into a carrier- furnished container. !he number of cartons 0as disclosed to the

carrier in the bill of ladin. 5uryenes follo0ed the )itsui test and treated the cartons, not the container,

as the OG&A packaes. :owever, Eur&enes indicated that a carrier could li#it its liabilit& to <466 per

container if the bill of ladin failed to disclose the nu#ber of cartons or units within the container, or if the

parties indicated, in clear and una#biuous lanuae, an aree#ent to treat the container as the

pac1ae.

=Ad#iralt& itiation in Perpetuu# The Continuin 3aa of Pac1ae i#itations and

Third orld ;eliver& Proble#s b& Chester ;. :ooper L Jeith . )lic1er, published in

)ordha# *nternational aw 2ournal, Gol. 0, %!"'-"7, Nu#ber %> =E#phasis supplied>

*n this case, the Bill of adin =E(hibit DAD> disclosed the followin data

' Containers

31



=%'"> Cartons>

Mens Kar#ents )abrics and Accessories )reiht Prepaid

3a& Two ='> Containers +nl&.

Considerin, therefore, that the Bill of adin clearl& disclosed the contents of the containers, the nu#ber of cartons or

units, as well as the nature of the oods, and appl&in the rulin in the )itsui and 5uryenes cases it is clear that the %'"

cartons, not the two ='> containers should be considered as the shippin unit sub$ect to the <466 li#itation of liabilit&.

True, the evidence does not disclose whether the containers involved herein were carrier-furnished or not. 9suall&,

however, containers are provided b& the carrier. 19 *n this case, the probabilit& is that the& were so furnished for Petitioner

Carrier was at libert& to pac1 and carr& the oods in containers if the& were not so pac1ed. Thus, at the dorsal side of the

Bill of adin =E(hibit DAD> appears the followin stipulation in fine print

%%. =9se of Container> here the oods receipt of which is ac1nowleded on the face of this Bill of adin

are not alread& pac1ed into container=s> at the ti#e of receipt, the Carrier shall be at libert& to pac1 and

carr& the# in an& t&pe of container=s>.

The foreoin would e(plain the use of the esti#ate D3a& Two ='> Containers +nl&D in the Bill of adin, #eanin that the

oods could probabl& fit in two ='> containers onl&. *t cannot #ean that the shipper had furnished the containers for if so,

DTwo ='> ContainersD appearin as the first entr& would have sufficed. and if there is an& a#biuit& in the Bill of adin, it

is a cardinal principle in the construction of contracts that the interpretation of obscure words or stipulations in a contract

shall not favor the part& who caused the obscurit&. &0 This applies with even reater force in a contract of adhesion where

a contract is alread& prepared and the other part& #erel& adheres to it, li1e the Bill of adin in this case, which is draw.

up b& the carrier. &1

On Alleed enial of Opportunity to 8resent eposition of Its "itnessesC =in K.R. No. 0!688 onl&>

Petitioner Carrier clai#s that the Trial Court did not ive it sufficient ti#e to ta1e the depositions of its witnesses in 2apan

b& written interroatories.

e do not aree. petitioner Carrier was iven- full opportunit& to present its evidence but it failed to do so. +n this point,

the Trial Court found

((( ((( (((

*ndeed, since after Nove#ber 0, %!", to Auust ', %!!, not to #ention the ti#e fro# 2une ', %!",

when its answer was prepared and filed in Court, until 3epte#ber '0, %!", when the pre-trial conference

was conducted for the last ti#e, the defendant had #ore than nine #onths to prepare its evidence. *ts

belated notice to ta1e deposition on written interroatories of its witnesses in 2apan, served upon the

plaintiff on Auust '4th, $ust two da&s before the hearin set for Auust 'th, 1nowin full& well that it was

its underta1in on 2ul& %% the that the deposition of the witnesses would be dispensed with if b& ne(t ti#e

it had not &et been obtained, onl& proves the lac1 of #erit of the defendants #otion for postpone#ent, for

which reason it deserves no s&#path& fro# the Court in that reard. The defendant has told the Court

since )ebruar& %0, %!!, that it was oin to ta1e the deposition of its witnesses in 2apan. h& did it ta1e

until Auust '4, %!!, or #ore than si( #onths, to prepare its written interroatories. +nl& the defendant

itself is to bla#e for its failure to adduce evidence in support of its defenses.

((( ((( ((( &&

32



Petitioner Carrier was afforded a#ple ti#e to present its side of the case. &3 *t cannot co#plain now that it was denied due

process when the Trial Court rendered its ;ecision on the basis of the evidence adduced. hat due process abhors is

absolute lac1 of opportunit& to be heard. &*

On the A0ard of Attorney1s eesC

Petitioner Carrier ?uestions the award of attorne&s fees. *n both cases, respondent Court affir#ed the award b& the Trial

Court of attorne&s fees of P74,666.66 in favor of ;evelop#ent *nsurance in K.R. No. 0!688, and P4,666.66 in favor of

N*33:*N and ;+A in K.R. No. %8".

Courts bein vested with discretion in fi(in the a#ount of attorne&s fees, it is believed that the a#ount of P4,666.66

would be #ore reasonable in K.R. No. 0!688. The award of P4,666.66 in K.R. No. %8" is affir#ed.

:ERE)+RE, %> in K.R. No. 0!688, the $ud#ent is #odified in that petitioner Eastern 3hippin ines shall pa& the

;evelop#ent *nsurance and 3uret& Corporation the a#ount of P'40,67! for the twent&-eiht ='"> pac1aes of caloried

lance pipes, and P%,486 for the seven => cases of spare parts, with interest at the leal rate fro# the date of the filin of

the co#plaint on 2une %7, %!", plus P4,666 as attorne&s fees, and the costs.

'> *n K.R.No.%8",the $ud#ent is hereb& affir#ed.

3+ +R;ERE;.

9arvasa, ru+, eliciano and Gancayco, JJ., concur.


SUPREME COURT

Manila

3EC+N; ;*G*3*+N

G.R. No. L-30&1& S/'/2/( 30, 198

IENENIDO GELISN, petitioner,

vs.

ENITO LD+, (/7'o#$/#.

PDILL, J.:

Review on certiorari of the $ud#ent < rendered b& the Court of Appeals, dated %% +ctober %!0", as a#ended b& its

resolution, dated %% )ebruar& %!0!, in CA-K.R. No. 7'06-R, entitled DBenito Alda&, plaintiff-appellant, vs. Roberto

Espiritu and Bienvenido Kelisan, defendants-appellees,D which ordered the herein petitioner Bienvenido Kelisan to pa&, $ointl& and severall&, with Roberto Espiritu, the respondent Benito Alda& the a#ount of P4,7!.76, with. leal interest

thereon fro# the filin of the co#plaint, and the costs of suit5 and for the said Roberto Espiritu to pa& or refund the

petitioner Bienvenido Kelisan whatever a#ount the latter #a& have paid to the respondent Benito Alda& b& virtue of the

$ud#ent.

The uncontroverted facts of the case are, as follows

33



;efendant Bienvenido Kelisan is the owner of a freiht truc1 bearin plate No. T:-'7. +n 2anuar& 7%,

%!0', defendant Bienvenido Kelisan and Roberto Espiritu entered into a contract #ar1ed E(hibit 7-

Kelisan under which Espiritu hired the sa#e freiht truc1 of Kelisan for the purpose of haulin rice, suar,

flour and fertilier at an areed price of P%".66 per trip within the li#its of the Cit& of Manila provided the

loads shall not e(ceed '66 sac1s. *t is also areed that Espiritu shall bear and pa& all losses and

da#aes attendin the carriae of the oods to be hauled b& hi#. The truc1 was ta1en b& a driver of

Roberto Espiritu on )ebruar& %, %!0'. Plaintiff Benito Alda&, a truc1in operator, and who owns about %4

freiht truc1s, had 1nown the defendant Roberto Espiritu since %!8" as a truc1 operator. Plaintiff had a

contract to haul the fertiliers of the Atlas )ertilier Corporation fro# Pier 8, North :arbor, to itsarehouse in Mandalu&on. Alda& #et Espiritu at the ate of Pier 8 and the latter offered the use of his

truc1 with the driver and helper at ! centavos per ba of fertilier. The offer was accepted b& plaintiff Alda&

and he instructed his chec1er Celso :enson to let Roberto Espiritu haul the fertilier. Espiritu #ade two

hauls of '66 bas of fertilier per trip. The fertilier was delivered to the driver and helper of Espiritu with

the necessar& wa& bill receipts, E(hibits A and B. Espiritu, however, did not deliver the fertilier to the

Atlas )ertolier bodea at Mandalu&on. The sinatures appearin in the wa& bill receipts E(hibits A and

B of the Alda& Transportation ad#ittedl& not the sinature of an& representative or e#plo&ee of the Atlas

)ertilier Corporation. Roberto Espiritu could not be found, and plaintiff reported the loss to the Manila

Police ;epart#ent. Roberto Espiritu was later arrested and boo1ed for theft. ...

3ubse?uentl&, plaintiff Aida& saw the truc1 in ?uestion on 3to. Cristo 3t. and he notified the Manila Police

;epart#ent, and it was i#pounded b& the police. *t was clai#ed b& Bienvenido Kelisan fro# the Police;epart#ent after he had been notified b& his e#plo&ees that the truc1 had been i#pounded b& the police5

but as he could not produce at the ti#e the reistration papers, the police would not release the truc1 to

Kelisan. As a result of the i#poundin of the truc1 accordin to Kelisan, ... and that for the release of the

truc1 he paid the pre#iu# of P766 to the suret& co#pan&.1

Benito Alda& was co#pelled to pa& the value of the 866 bas of fertilier, in the a#ount of P4,7!.77, to Atlas )ertilier

Corporation so that, on %' )ebruar& %!0', he =Alda&> filed a co#plaint aainst Roberto Espiritu and Bienvenido Kelisan

with the Court of )irst *nstance of Manila, doc1eted therein as Civil Case No. 8!067, for the recover& of da#aes suffered

b& hi# thru the cri#inal acts co##itted b& the defendants.

The defendant, Roberto Espiritu failed to file an answer and was, accordinl&, declared in default.

The defendant, Bienvenido Kelisan, upon the other hand, disowned responsibilit&. :e clai#ed that he had no contractual

relations with the plaintiff Benito Alda& as reards the haulin andHor deliver& of the 866 bas of fertilier #entioned in the

co#plaint5 that the alleed #isappropriation or nondeliver& b& defendant Roberto Espiritu of plaintiffs 866 bas of

fertilier, was entirel& be&ond his =Kelisans> control and 1nowlede, and which fact beca#e 1nown to hi#, for the first

ti#e, on " )ebruar& %!0' when his freiht truc1, with plate No. T:-'7, was i#pounded b& the Manila Police

;epart#ent, at the instance of the plaintiff5 and that in his written contract of hire with Roberto Espiritu, it was e(pressl&

provided that the latter will bear and pa& all loss and da#aes attendin the carriae of oods to be hauled b& said

Roberto Espiritu.

After trial, the Court of )irst *nstance of Manila ruled that Roberto Espiritu alone was liable to Benito Alda&, since

Bienvenido Kelisan was not priv& to the contract between Espiritu and Alda&. The dispositive portion of the decision reads,as follows

:ERE)+RE, $ud#ent is hereb& rendered in favor of the plaintiff and aainst the defendant Roberto

Espiritu for the su# of P0,666 with interest at the leal rate fro# the ti#e of the filin of the co#plaint, and

the costs of the suit. Plantiffs co#plaint is dis#issed with respect to defendant Bienvenido Kelisan, and

$ud#ent is rendered in favor of defendant Bienvenido Kelisan and aainst the plaintiff for the su# of

P746. &

34



+n appeal, however, the Court of Appeals, citin the case of )ontoya vs. Inacio, 3 found that Bienvenido Kelisan is

li1ewise liable for bein the reistered owner of the truc15 and that the lease contract, e(ecuted b& and between

Bienvenido Kelisan and Roberto Espiritu, is not bindin upon Benito Alda& for not havin been previousl& approved b& the

Public 3ervice Co##ission. Accordinl&, it sentenced Bienvenido Kelisan to pa&, $ointl& and severall& with Roberto

Espiritu, Benito Alda& the a#ount of P4,7!.76, with leal interest thereon fro# the filin of the co#plaint5 and to pa& the

costs. Roberto Espiritu, in turn, was ordered to pa& or refund Bienvenido Kelisan whatever a#ount the latter #a& have

paid to Benito Alda& b& virtue of the $ud#ent. *

:ence, the present recourse b& Bienvenido Kelisan.

The petition is without #erit. The $ud#ent rendered b& the Court of Appeals, which is souht to be reviewed, is in accord

with the facts and the law on the case and we find no coent reason to disturb the sa#e. The Court has invariabl& held in

several decisions that the reistered owner of a public service vehicle is responsible for da#aes that #a& arise fro#

conse?uences incident to its operation or that #a& be caused to an& of the passeners therein. 5 The clai# of the

petitioner that he is not hable in view of the lease contract e(ecuted b& and between hi# and Roberto Espiritu which

e(e#pts hi# fro# liabilit& to third persons, cannot be sustained because it appears that the lease contract, adverted to,

had not been approved b& the Public 3ervice Co##ission. *t is settled in our $urisprudence that if the propert& covered b&

a franchise is transferred or leased to another without obtainin the re?uisite approval, the transfer is not bindin upon the

public and third persons. 6

e also find no #erit in the petitioners aru#ent that the rule re?uirin the previous approval b& the Public 3erviceCo##ission, of the transfer or lease of the #otor vehicle, #a& be applied onl& in cases where there is no positive

*dentification of the owner or driver, or where there are ver& scant #eans of *dentification, but not in those instances

where the person responsible for da#aes has been fi(ed or deter#ined beforehand, as in the case at bar. The reason

for the rule we reiterate in the present case, was e(plained b& the Court in )ontoya vs. Inacio, thus

There is #erit in this contention. The law reall& re?uires the approval of the Public 3ervice Co##ission in

order that a franchise, or an& privilee pertainin thereto, #a& be sold or leased without infrinin the

certificate issued to the rantee. The reason is obvious. 3ince a franchise is personal in nature an&

transfer or lease thereof should be notified to the Public 3ervice Co##ission so that the latter #av ta1e

proper safeuards to protect the interest of the public. *n fact, the law re?uires that, before the approval is

ranted, there should be a public hearin, with notice to all interested parties, in order that theCo##ission #a& deter#ine if there are ood and reasonable rounds $ustif&in the transfer or lease of

the propert& covered b& the franchise, or if the sale or lease is detri#ental to public interest. 3uch bein

the reason and philosoph& behind this re?uire#ent, it follows that if the propert& covered b& the franchise

is transferred, or leased to another without obtainin the re?uisite approval, the transfer is not bindin

aainst the Public 3ervice Co##ission and in conte#plation of law the rantee continues to be

responsible under the franchise in relation to the Co##ission and to the Public. 3ince the lease of the

$eepne& in ?uestion was #ade without such approval the onl& conclusion that can be drawn is that

Marcelino *nacio still continues to be its operator in conte#plation of law, and as such is responsible for

the conse?uences incident to its operation, one of the# bein the collision under consideration.

Bienvenido Kelisan, the reistered owner, is not however without recourse. :e has a riht to be inde#nified b& Roberto

Espiritu for the a#ount titat he #a& be re?uired to pa& as da#aes for the in$ur& caused to Benito Alda&, since the leasecontract in ?uestion, althouh not effective aainst the public for not havin been approved b& the Public 3ervice

Co##ission, is valid and bindin between the contractin parties. 8

e also find no #erit in the petitioners contention that his liabilit& is onl& subsidiar&. The Court has consistentl&

considered the reistered ownerHoperator of a public service vehicle to be $ointl& and severall& liable with the driver for

da#aes incurred b& passeners or third persons as a conse?uence of in$uries sustained in the operation of said

vehicles. Thus, in the case of Varas vs. (ancay , 9 the Court said

35



e hold that the Court of Appeals erred in considerin appellant-petitioner ;iwata Garas onl&

subsidiaril& liable under Article %67 of the Revised Penal Code. This court, in previous decisions, has

alwa&s considered the reistered ownerHoperator of a passener vehicle, $ointl& and severall& liable with

the driver, for da#aes incurred b& passeners or third persons as a conse?uence of in$uries =or death>

sustained in the operation of said vehicles. =Monto&a vs. *nacio, !8 Phil., %"'5 Ti#bol vs. +sias, K.R. No

-48, April 76, %!445 Gda. de Medina vs. Cresencia, !! Phil., 4605 Necesito vs. Paras, %68 Phil., 45

Ereo vs. 2epte, %6' Phil., %675 Ta#a&o vs. A?uino and Ra&os vs Ta#a&o, %64 Phil., !8!5 40 +ff. Ka.

70 40%.> *n the case of Ereo vs. 2epte, &upra, e held

Q Q Q *n s&nthesis, we hold that the reistered owner, the defendant-appellant herein, is pri#aril&

responsible for the da#ae caused Q Q Q =E#phasis supplied>

*n the case of Ta#a&o vs. A?uino, supra, e said

Q Q Q As Ta#a&o is the reistered owner of the truc1, his responsibffit& to the public or to an& passener

ridin in the vehicle or truc1 #ust be direct Q Q Q =E#phasis supplied>

:ERE)+RE, the petition is hereb& ;EN*E;. ith costs aainst the petitioner.

3+ +R;ERE;.

Dap Fhairman, )elencio-#errera, 8aras and &armiento, JJ., concur.

T:*R; ;*G*3*+N

=G.R. No. 1&0553. Ju#/ 1, 199>

PHILTRNCO SERICE ENTERPRISES, INC. "#$ ROGCIONES MNILHIG, petitioner, vs. COURT O PPELS

"#$ HEIRS O THE LTE RMON CUEST, respondents.

D E C I S I O N

DIDE, JR., J .%

The petitioners interposed this appeal b& wa& of a petition for review under Rule 84 of the Rules of Court fro# the 7%

2anuar& %!!4 ;ecision of the Court of Appeals in CA-K.R. CG No. 8%%86 % affir#in the '' 2anuar& %!!7' ;ecision o

Branch 7% of the Reional Trial Court, Calba&o Cit&, in Civil Case No. 77, which ordered the petitioners to pa& the

private respondents da#aes as a result of a vehicular accident.

Civil Case No. 77 was an action aainst herein petitioners for da#aes instituted b& the heirs of Ra#on A. Acuesta

na#el&, Kreorio +. Acuesta5 2ulio +. Acuesta5 Ra#on +. Acuesta, 2r.5 Baltaar +. Acuesta5 Rufino +. Acuesta5 Ma(i#o

+. Acuesta5 Neri +. Acuesta5 *lu#inada +. Acuesta5 Rosario Acuesta-3an5 and Pa#filo +. Acuesta. Att&. 2ulio +. Acuesta

also appeared as counsel for the plaintiffs =herein private respondents>.

7

The private respondents alleed that thepetitioners were uilt& of ross nelience, rec1lessness, violation of traffic rules and reulations, abandon#ent of victi#

and atte#pt to escape fro# a cri#e.

To support their alleations, the private respondents presented eiht witnesses. +n %6 )ebruar& %!!', after the

cross-e(a#ination of the last witness, the private respondents counsel #ade a reservation to present a ninth witness. The

case was then set for continuation of the trial on 76 and 7% March %!!'. Because of the non-appearance of the petitioners

counsel, the 76 March %!!' hearin was cancelled.The ne(t da&, private respondents counsel #anifested that he would

36

http://sc.judiciary.gov.ph/jurisprudence/1997/jun1997/120553.htm#_edn1








no loner present the ninth witness. :e thereafter #ade an oral offer of evidence and rested the case. The trial cour

su##aried private respondents evidence in this wise

*n the earl& #ornin of March '8, %!!6, about 066 ocloc1, the victi# Ra#on A. Acuesta was ridin in his eas& rider

bic&cle =E(hibit +>, alon the Ko#e 3treet of Calba&o Cit&. The Ko#e 3treet is alon the side of Ni$aa Par1. +n the

Masa&sa& Blvd., also in Calba&o Cit&, defendant Philtranco 3ervice Enterprises, *nc. =Philtranco for brevit&> Bus No.

86'4 with plate No. EGA-'4 driven b& defendant Roasiones Manilhi & ;olira was bein pushed b& so#e persons in

order to start its enine. The Masa&sa& Blvd. runs perpendicular to Ko#e 3t. and the said Philtranco bus 86'4 was

headin in the eneral direction of the said Ko#e 3treet. 3o#e of the persons who were pushin the bus were on itsbac1, while the others were on the sides. As the bus was pushed, its enine started thereb& the bus continued on its

runnin #otion and it occurred at the ti#e when Ra#on A. Acuesta who was still ridin on his bic&cle was directl& in front

of the said bus. As the enine of the Philtranco bus started abruptl& and suddenl&, its runnin #otion was also enhanced

b& the said functionin enine, thereb& the sub$ect bus bu#ped on the victi# Ra#on A. Acuesta who, as a result thereof

fell and, thereafter, was run over b& the said bus. The bus did not stop althouh it had alread& bu#ped and ran sic over

the victi#5 instead, it proceeded runnin towards the direction of the Rosales Bride which is located at one side of the

Ni$aa Par1 and towards one end of the Ko#e 3t., to which direction the victi# was then headin when he was ridin on

his bic&cle. PH3t. @abao who was then $oin thru the Ko#e 3treet and was headin and #eetin the victi# Ra#on A.

Acuesta as the latter was ridin on his bic&cle, saw when the Philtranco bus was bein pushed b& so#e passeners,

when its enine abruptl& started and when the said bus bu#ped and ran over the victi#. :e approached the bus driver

defendant Manilhi herein and sinalled to hi# to stop, but the latter did not listen. 3o the police officer $u#ped into the

bus and introducin hi#self to the driver defendant as police#an, ordered the latter to stop.The said defendant driverstopped the Philtranco bus near the Ni$aa Par1 and 3t. @abao thereafter, told the driver to proceed to the Police

:ead?uarter which was onl& %66 #eters awa& fro# Ni$aa Par1 because he was apprehensive that the said driver #iht

be har#ed b& the relatives of the victi# who #iht co#e to the scene of the accident. Then 3t. @abao cordoned the

scene where the vehicular accident occurred and had PHCpl. Bartolo#e Baot, the Traffic *nvestiator, conduct an

investiation and #a1e a s1etch of the cri#e scene. 3t. @a#bao @abao was onl& about '6 #eters awa& when he saw

the bus of defendant Philtranco bu#ped sic and sic ran over the victi#. )ro# the place where the victi# was actuall&

bu#ped b& the bus, the said vehicle still had run to a distance of about %4 #eters awa&.8

)or their part, the petitioners filed an Answer 4 wherein the& alleed that petitioner Philtranco e(ercised the dilience

of a ood father of a fa#il& in the selection and supervision of its e#plo&ees, includin petitioner Manilhi who had

e(cellent record as a driver and had underone #onths of riid trainin before he was hired. Petitioner Manilhi had

alwa&s been a prudent professional driver, reliiousl& observin traffic rules and reulations. *n drivin Philtrancos buses

he e(ercised the dilience of a ver& cautious person.

As #iht be e(pected, the petitioners had a different version of the incident. The& alleed that in the #ornin of '8

March %!!6, Manilhi, in preparation for his trip bac1 to Pasa& Cit&, war#ed up the enine of the bus and #ade a few

rounds within the cit& proper of Calba&o. hile the bus was slowl& and #oderatel& cruisin alon Ko#e 3treet, the

victi#, who was bi1in towards the sa#e direction as the bus, suddenl& overtoo1 two tric&cles and swerved left to the

center of the road. The swervin was abrupt and so sudden that even as Manilhi applied the bra1es and blew the bus

horn, the victi# was bu#ped fro# behind and run over b& the bus. *t was neither willful nor deliberate on Manilhis part to

proceed with the trip after his bus bu#ped the victi#, the truth bein that when he loo1ed at his rear-view window, he saw

people crowdin around the victi#, with others runnin after his bus. )earin that he #iht be #obbed, he #oved awa&

fro# the scene of the accident and intended to report the incident to the police. After a #an boarded his bus andintroduced hi#self as a police#an, Manilhi ave hi#self up to the custod& of the police and reported the accident in

?uestion.

The petitioners further clai#ed that it was the nelience of the victi# in overta1in two tric&cles, without ta1in

precautions such as seein first that the road was clear, which caused the death of the victi#. The latter did not even ive

an& sinal of his intention to overta1e. The petitioners then counterclai#ed for P46,666 as and for attorne&s fees5 P%

#illion as #oral da#aes5 and P46,666 for litiation e(penses.

37







:owever, the petitioners were not able to present their evidence, as the& were dee#ed to have waived that riht b&

the failure of their counsel to appear at the scheduled hearins on 76 and 7% March %!!'. The trial court then issued an

+rder 0 declarin the case sub#itted for decision. Motions for the reconsideration of the said +rder were both denied.

+n '' 2anuar& %!!', the trial court handed down a decision orderin the petitioners to $ointl& and severall& pa& the

private respondents the followin a#ounts

%> P44, 0%4.' as actual da#aes5

'> P'66,666 as death inde#nit& for the death of the victi# Ra#on A. Acuesta5

7> P% #illion as #oral da#aes5

8> P466,666 b& wa& of e(e#plar& da#aes5

4> P46,666 as attorne&s fees5 and

0> the costs of suit.

9nsatisfied with the $ud#ent, the petitioners appealed to the Court of Appeals i#putin upon the trial court the

followin errors

=%> in preventin or barrin the# fro# presentin their evidence5

='> in findin that petitioner Manilhi was at fault5

=7> in not findin that Ra#on was the one at fault and his own fault caused, or at least contributed to, his

unfortunate accident5

=8> in awardin da#aes to the private respondents5 and

=4> in findin that petitioner Philtranco was solidaril& liable with Manilhi for da#aes. "

*n its decision of 7% 2anuar& %!!4, the Court of Appeals affir#ed the decision of the trial court. *t held that the

petitioners were not denied due process, as the& were iven an opportunit& to present their defense. The records show

that the& were notified of the assin#ent of the case for 76 and 7% March %!!'. @et, their counsel did not appear on the

said dates. Neither did he file a #otion for postpone#ent of the hearins, nor did he appeal fro# the denial of the #otions

for reconsideration of the 7% March %!!' +rder of the trial court. The petitioners have thereb& waived their riht to present

evidence. Their e(pectation that the& would have to ob$ect &et to a for#al offer of evidence b& the private respondents

was #isplaced, for it was within the sound discretion of the court to allow oral offer of evidence.

As to the second and third assined errors, the respondent court disposed as follows

... e cannot help but accord with the lower courts findin on appellant Manilhis fault. )irst, it is not disputed that the

bus driven b& appellant Manilhi was bein pushed at the ti#e of the unfortunate happenin. *t is of co##on 1nowlede

and e(perience that when a vehicle is pushed to a $u#p-start, its initial #ove#ent is far fro# slow. Rather, its #ove#ent is

abrupt and $er1& and it ta1es a while before the vehicle attains nor#al speed. The lower court had thus enouh basis to

conclude, as it did, that the bu#pin of the victi# was due to appellant Manilhis actionable nelience and

inattention.Prudence should have dictated aainst $u#p-startin the bus in a bus& section of the cit&. Militatin further

aainst appellants posture was the fact that the precarious pushin of sub$ect bus to a $u#pstart was done where the bus

had to ta1e a left turn, thereb& #a1in the #ove too ris1& to ta1e. The possibilit& that pedestrians on Ko#e 3treet, where

38











the bus turned left and the victi# was bi1in, would be unaware of a vehicle bein pushed to a $u#pstart, was too obvious

to be overloo1ed. Geril&, contrar& to their bare aru#ents, there was ross nelience on the part of appellants.

The doctrine of last clear chance theoried upon b& appellants, is inapplicable under the pre#ises because the victi#,

who was bu#ped fro# behind, obviousl&, did not of course anticipate a Philtranco bus bein pushed fro# a perpendicular

street.

The respondent court sustained the awards of #oral and e(e#plar& da#aes and of attorne&s fees, for the& are

warranted under Articles ''60, ''7%, and ''6"=%>, respectivel&, of the Civil Code. Anent the solidar& liabilit& of petitionerPhiltranco, the sa#e finds support in Articles '%"6 and '%!8 of the said Code. The defense that Philtranco e(ercised the

dilience of a ood father of a fa#il& in the selection and supervision of its e#plo&ees cru#bles in the face of the ross

nelience of its driver, which caused the unti#el& death of the victi#.

Their #otion for reconsideration havin been denied, the petitioners ca#e to us clai#in that the Court of Appeals

ravel& erred

I

...*N :+;*NK T:AT PET*T*+NER3 A*GE; T:E*R R*K:T T+ PRE3ENT T:E*R EG*;ENCE, AN; T:AT

PET*T*+NER3 ERE N+T ;EN*E; ;9E PR+CE33.

II

...*N APP@*NK ART. '%!8, *N3TEA; +) ART. '%"6, +) T:E C*G* C+;E, AN; *N :+;*NK T:AT PET*T*+NER

P:*TRANC+ CAN N+T *NG+JE T:E ;E)EN3E +) ;**KENCE +) A K++; )AT:ER +) A )AM*@.

III

...*N AAR;*NK ;AMAKE3 T+ RE3P+N;ENT3 AN;H+R *N N+T )*N;*NK T:E TR*A C+9RT3 AAR; +)

;AMAKE3 ECE33*GE.

e resolved to ive due course to the petition and re?uired the parties to sub#it their respective #e#oranda afterdue consideration of the alleations, issues, and aru#ents adduced in the petition, the co##ent thereon b& the private

respondents, and the repl& to the co##ent filed b& the petitioners. The petitioners filed their #e#orandu# in due ti#e

while the private respondents filed theirs onl& on 7 2anuar& %!!, after their counsel was fined in the a#ount of P%,666 fo

failure to sub#it the re?uired #e#orandu#.

The first i#puted error is without #erit. The petitioners and their counsel, Att&. 2ose Buban, were dul& notified in open

court of the order of the trial court of %6 )ebruar& %!!' settin the case for hearin on 76 and 7% March %!!'. ! +n both

dates neither the petitioners nor their counsel appeared. *n his #otion for reconsideration, %6 Att&. Buban ave the

followin reasons for his failure to appear on the said hearins

%. That when this case was called on March ', %!!', counsel was ver& #uch indisposed due to the riors of a ver&hectic ca#pain as he is a candidate for Cit& Councilor of Tacloban5 he wanted to leave for Calba&o Cit&, but he was

seied with sliht fever on the #ornin of said date5 but then, durin the last hearin, counsel was #ade to understand

that plaintiffs would for#all& offer their e(hibits in writin, for which reason, counsel for defendants waited for a cop& of

said for#al offer, but counsel did not receive an& cop& as counsel for plaintiffs opted to for#all& offer their e(hibits orall& in

open court5

'. That counsel for defendants, in ood faith believed that he would be iven reasonable ti#e within which to co##ent on

the for#al offer in writin, onl& to 1now that counsel for plaintiffs orall& offered their e(hibits in open court and that the

39







sa#e were ad#itted b& the :onorable Court5 and that when this case was called on March 76 and 7%, %!!', the

undersined counsel honestl& believed that said schedule would be cancelled, pendin on the sub#ission of the

co##ents #ade b& the defendants on the for#al offer5 but it was not so, as the e(hibits were ad#itted in open court. %%

*n its order of '0 Ma& %!!', the trial court denied the #otion, findin it to be Ddevoid of #eritorious basis,D as Att&.

Buban could have filed a #otion for postpone#ent.%' Att&. Buban then filed a #otion to reconsider %7 the order of denial

which was li1ewise denied b& the trial court in its order of %' Auust %!!'. %8 Nothin #ore was done b& the petitioners

after receipt of the order of %' Auust %!!'. A perusal of the first and second #otions for reconsideration discloses

absence of an& clai# that the petitioners have #eritorious defenses. Clearl&, therefore, the trial court co##itted no errorin declarin the case sub#itted for decision on the basis of private respondents evidence.

The second i#puted error is without #erit either.

Civil Case No. 77 is an action for da#aes based on 3uasi-delict %4 under Article '%0 and '%"6 of the Civil Code

aainst petitioner Manilhi and his e#plo&er, petitioner Philtranco, respectivel&. These articles pertinentl& provide

ART. '%0. hoever b& act or o#ission causes da#ae to another, there bein fault or nelience, is oblied to pa& for

the da#ae done. 3uch fault or nelience, if there is no pre-e(istin contractual relation between the parties, is called

a 3uasi-delict and is overned b& the provisions of this Chapter.

ART. '%"6. The obliation i#posed b& Article '%0 is de#andable not onl& for ones own acts or o#issions, but also for

those of persons for who# one is responsible.

...

The owners and #anaers of an establish#ent or enterprise are li1ewise responsible for da#aes caused b& their

e#plo&ees in the service of the branches in which the latter are e#plo&ed or on the occasion of their functions.

E#plo&ers shall be liable for the da#aes caused b& their e#plo&ees and household helpers actin within the scope of

their assined tas1s even thouh the for#er are not enaed in an& business or industr&.

...

The responsibilit& treated of in this article shall cease when the persons herein #entioned prove that the& observed all the

dilience of a ood father of a fa#il& to prevent da#ae.

e have consistentl& held that the liabilit& of the reistered owner of a public service vehicle, li1e petitioner

Philtranco,%0 for da#aes arisin fro# the tortious acts of the driver is pri#ar&, direct, and $oint and severa

or solidar& with the driver .% As to solidarit&, Article '%!8 e(pressl& provides

ART. '%!8. The responsibilit& of two or #ore persons who are liable for a ?uasi-delict is solidar&.

3ince the e#plo&ers liabilit& is pri#ar&, direct and solidar&, its onl& recourse if the $ud#ent for da#aes is satisfied b& itis to recover what it has paid fro# its e#plo&ee who co##itted the fault or nelience which ave rise to the action based

on ?uasi-delict. Article '%"% of the Civil Code provides

ART. '%"%. hoever pa&s for the da#ae caused b& his dependents or e#plo&ees #a& recover fro# the latter what he

has paid or delivered in satisfaction of the clai#.

There is, however, #erit in the third i#puted error.

40





















The trial court erroneousl& fi(ed the Ddeath inde#nit&D at P'66,666. The private respondents defended the award in

their +pposition to the Motion for Reconsideration b& sa&in that Din the case of Philippine Airlines, *nc. vs. Court of

Appeals, %"4 3CRA %%6, our 3upre#e Court held that the award of da#aes for death is co#puted on the basis of the life

e(pectanc& of the deceased.D *n that case, the Ddeath inde#nit&D was co#puted b& #ultipl&in the victi#s ross annua

inco#e b& his life e(pectanc&, less his &earl& livin e(penses. Clearl& then, the Ddeath inde#nit&D referred to was the

additional inde#nit& for the loss of earnin capacit& #entioned in Article ''60=%> of the Civil Code, and not the basic

inde#nit& for death #entioned in the first pararaph thereof. This article provides as follows

ART. ''60. The a#ount of da#aes for death caused b& a cri#e or ?uasi-delict shall be at least three thousand pesos,even thouh there #a& have been #itiatin circu#stances. *n addition

=%> The defendant shall be liable for the loss of the earnin capacit& of the deceased, and the inde#nit& shall be paid to

the heirs of the latter5 such inde#nit& shall in ever& case be assessed and awarded b& the court, unless the deceased on

account of per#anent ph&sical disabilit& not caused b& the defendant, had no earnin capacit& at the ti#e of his death5

='> *f the deceased was oblied to ive support accordin to the provisions of article '!%, the recipient who is not an heir

called to the decedents inheritance b& the law of testate or intestate succession, #a& de#and support fro# the person

causin the death, for a period of not e(ceedin five &ears, the e(act duration to be fi(ed b& the court5

=7> The spouse, leiti#ate and illeiti#ate descendants and ascendants of the deceased #a& de#and #oral da#aes for

#ental anuish b& reason of the death of the deceased.

e concur with petitioners view that the trial court intended the award of DP'66,666.66 as death inde#nit&D not as

co#pensation for loss of earnin capacit&. Even if the trial court intended the award as inde#nit& for loss of earnin

capacit&, the sa#e #ust be struc1 out for lac1 of basis. There is no evidence on the victi#s earnin capacit& and life

e(pectanc&.

+nl& inde#nit& for death under the openin pararaph of Article ''60 is due, the a#ount of which has been fi(ed b&

current $urisprudence at P46,666.%"

The award of P% #illion for #oral da#aes to the heirs of Ra#on Acuesta has no sufficient basis and is e(cessive

and unreasonable.This was based solel& on the testi#on& of one of the heirs, Att&. 2ulio Acuesta, contained in his D;irectTesti#on&... As Plaintiff, conducted b& :i#self,D%! to wit

. hat was &our feelin or reaction as a result of the death of &our father Ra#on A. AcuestaF

A. e, the fa#il& #e#bers, have suffered #uch fro# wounded feelins, #oral shoc1, #ental anuish, sleepless

nihts, to which we are entitled to #oral da#aes at the reasonable a#ount of +NE M**+N

=P%,666,666.66> PE3+3 or at the sound discretion of this :on. Court.D

3ince the other heirs of the deceased did not ta1e the witness stand, the trial court had no basis for its award of #ora

da#aes to those who did not testif& thereon.

Moral da#aes are e#phaticall& not intended to enrich a plaintiff at the e(pense of the defendant. The& are awarded

onl& to allow the for#er to obtain #eans, diversion, or a#use#ents that will serve to alleviate the #oral sufferin he has

underone due to the defendants culpable action and #ust, perforce, be proportional to the sufferin inflicted. '6 *n liht o

the circu#stances in this case, an award ofP46,666 for #oral da#aes is in order.

The award of P466,666 for e(e#plar& da#aes is also e(cessive. *n ?uasi-delicts, e(e#plar& da#aes #a& be

awarded if the part& at fault acted with ross nelience. '% The Court of Appeals found that there was ross nelience

on the part of petitioner Manilhi.'' 9nder Article '''! of the Civil Code, e(e#plar& da#aes are i#posed b& wa& of

e(a#ple or correction for the public ood, in addition to the #oral, te#perate, li?uidated, or co#pensator& da#aes.41

















Considerin its purpose, it #ust be fair and reasonable in ever& case and should not be awarded to un$ustl& enrich a

prevailin part&. *n the instant case, an award of P46,666 for the purpose would be ade?uate, fair, and reasonable.

)inall&, the award of P46,666 for attorne&s fees #ust be reduced. The eneral rule is that attorne&s fees cannot be

recovered as part of da#aes because of the polic& that no pre#iu# should be placed on the riht to litiate. '7 3tated

otherwise, the rant of attorne&s fees as part of da#aes is the e(ception rather than the rule, as counsels fees are not

awarded ever& ti#e a part& prevails in a suit. '8 3uch attorne&s fees can be awarded in the cases enu#erated in Article

''6" of the Civil Code, and in all cases it #ust be reasonable. *n the instant case, the counsel for the plaintiffs is hi#self a

co-plaintiff5 it is then unli1el& that he de#anded fro# his brothers and sisters P%66,666 as attorne&s fees as alleed in theco#plaint and testified to b& hi#. '4 :e did not present an& written contract for his fees. :e is, however, entitled to a

reasonable a#ount for attorne&s fees, considerin that e(e#plar& da#aes are awarded. A#on the instances

#entioned in Article ''6" of the Civil Code when attorne&s fees #a& be recovered is D=%> when e(e#plar& da#aes are

awarded.D 9nder the circu#stances in this case, an award of P'4,666 for attorne&s fees is reasonable.

The petitioners did not contest the award for actual da#aes fi(ed b& the trial court. :ence, such award shall stand.

IN IE; O THE OREGOING, the petition is hereb& partl& ranted and the challened decision of CA-K.R. CG No

8%%86 is A))*RME;, sub$ect to #odifications as to the da#aes awarded, which are reduced as follows

=a> ;eath inde#nit&, fro# P'66,666 to P46,6665

=b> Moral da#aes, fro# P% #illion to P46,6665

=c> E(e#plar& da#aes, fro# P466,666 to P46,6665 and

=d> Attorne&s fees, fro# P46,666 to P'4,666.

No pronounce#ents as to costs in this instance.

SO ORDERED.

9arvasa, .J., Fhairman, )elo, and 8ananiban, JJ., concur .

rancisco, J ., +n eave.


SUPREME COURT

Manila

)*R3T ;*G*3*+N

G.R. No. L-&6815 M"y &6, 19810

DOLO L. SNTOS, petitioner,

vs.

RHM SIUG "#$ COURT O PPELS, respondents.

42











MELENCIO-HERRER, J.:1äwphï1.ñët

The controvers& in this case will be resolved on the basis of the followin facts and e(positions. Prior to April '0, %!07 =the

ACC*;ENT ;ATE>, Gicente 9. Gidad =G*;A;, for short> was a dul& authoried passener $eepne& operator. Also prior to

the ACC*;ENT ;ATE, petitioner Adolfo . 3antos =3ANT+3, for short> was the owner of a passener $eep, but he had no

certificate of public convenience for the operation of the vehicle as a public passener $eep. 3ANT+3 then transferred his

$eep to the na#e of G*;A; so that it could be operated under the latters certificate of public convenience. ln other words,

3ANT+3 beca#e what is 1nown in ordinar& parlance as akabit operator. )or the protection of 3ANT+3, G*;A; e(ecuted

a re-transfer docu#ent to the for#er, which was to be a private docu#ent presu#abl& to be reistered if and where it wasdecided that the passener $eep of 3ANT+3 was to be withdrawn fro# the kabit arrane#ent.

+n the ACC*;ENT ;ATE, private respondent Abraha# 3ibu =3*B9K for short> was bu#ped b& a passener $eepne&

operated b& G*;A; and driven b& 3evere Kraas. As a result thereof, 3*B9K filed a co#plaint for da#aes aainst

G*;A; and Kraas with the Court of )irst *nstance of Manila, 'ranch HVII , then presided b& :on. Arsenic 3olidu#. That

Civil Case will hereinafter be referred to as the BRANC: G** CA3E.

+n ;ece#ber 4, %!07, a $ud#ent was rendered b& 'ranch HVII, sentencin G*;A; and Kraas, $ointl& and severall&, to

pa& 3*B9K the su#s of P460.'6 as actual da#aes5 P7,666.66 as #oral da#aes5 P466.66 as attorne&s fees, and

costs. 1

+n April %6, %!08, the 3heriff of Manila levied on a #otor vehicle, with Plate No. P92-787-08, reistered in the na#e ofG*;A;, and scheduled the public auction sale thereof on Ma& ",%!08.

+n April %%, %!08, 3ANT+3 presented a third-part& clai# with the 3heriff allein actual ownership of the #otor vehicle

levied upon, and statin that reistration thereof in the na#e of G*;A; was #erel& to enable 3ANT+3 to #a1e use of

G*;A;3 Certificate of Public Convenience. After the third-part& co#plaint was filed, 3*B9K sub#itted to the 3heriff a

bond issued b& the Philippine 3uret& *nsurance Co#pan& =T:E B+N;*NK C+MPAN@, for short>, To save the 3heriff fro#

liabilit& if he were to proceed with the sale and if 3ANT+3 third-part& clai# should be ulti#atel& upheld.

+n April '', %!08, that is, before the scheduled sale of Ma& ", %!08, 3ANT+3 instituted an action for ;a#aes and

in$unction with a pra&er for Preli#inar& Mandator& *n$unction aainst 3*B9K5 G*;A;5 and the 3heriff in Civil Case No.

40"8' of 'ranch H , of the sa#e Court of )irst *nstance of Manila =hereinafter referred to as the BRANC: CA3E>. Theco#plaint was later a#ended to include the B+N;*NK C+MPAN@ as a part& defendant althouh its bond had not

beco#e effective. ln the Co#plaint, 3ANT+3 alleed essentiall& that he was the actual owner of the #otor vehicle sub$ect

of lev& that a f ictitious ;eed of 3ale of said #otor vehicle was e(ecuted b& hi# in G*;A;3 favor for purposes of

operatin said vehicle as a passener $eepne& under the latters franchise5 that 3ANT+3 did not receive an& pa&#ent

fro# G*;A; in consideration of said sale5 that to protect 3ANT+3 proprietar& interest over the vehicle in ?uestion, G*;A;

in turn had e(ecuted a ;eed of 3ale in favor of 3ANT+3 on 2une ', %!0'5 that 3ANT+3 was not a part& in the BRANC:

G** CA3E and was not in an& #anner liable to the reistered owner G*;A; and the driver Kraas5 that 3ANT+3 derived

a dail& inco#e of P76.66 fro# the operation of said #otor vehicle as a passener $eepne& and stood to suffer irreparable

da#ae will possession of said #otor vehicle were not restored to hi#. 3ANT+3 then pra&ed that %,> pendin trial, a rit

of Preli#inar& Mandator& in$unction be issued e(-parte co##andin the 3heriff of Manila to restore the #otor vehicle to

hi# and that the 3heriff be en$oined fro# proceedin with its sale5 '> that, after trial, the ;eed of 3ale in favor of G*;A; be

declared absolutel& fictitious and, therefore, null and void, and ad$udin 3ANT+3 to be the absolute owner of the vehiclein ?uestioned and 7> that da#aes be awarded to 3ANT+3 as proven durin the trial plus attorne&s fees in the a#ount of

P846.66 and costs. &

No public sale was conducted on Ma& ", %!08. +n Ma& %%, %!08, 'ranch H issued a Restrainin +rder en$oinin the

3heriff fro# conductin the public auction sale of the #otor vehicle levied upon. 3 The Restrainin +rder was issued

wronfull&. 9nder the provisions of 3ection %, Rule 7!, the action ta1en b& the 3heriff cannot be restrained b& another

Court or b& another Branch of the sa#e Court. The 3heriff has the riht to continue with the public sale on his own

responsibilit&, or he can desist fro# conductin the public sale unless the attachin creditor files a bond securin hi#

43



aainst the third-part&-clai#. But the decision to proceed or not with the public sale lies with hi#. As said in 9& 8iaoco vs.

Osme6a ! Phil. '!!, 76, Dthe powers of the 3heriff involve both discretional power and personal liabilit&.D The #entioned

discretional power and personal liabilit& have been further elucidated in 8lanes and Verdon vs. )adrial / o., et al ., !8

Phil. 48, where it was held. ?0ph?.6Kt

The dut& of the sheriff in connection with the e(ecution and satisfaction of $ud#ent of the court is

overned b& Rule 7! of the Rules of Court. 3ection %4 thereof provides for the procedure to be. followed

where the propert& levied on e(ecution is clai#ed b& a b& person. lf the third-part& clai# is sufficient, the

sheriff, upon receivin it, is not bound to proceed with the lev& of the propert&, unless he is iven b& the $ud#ent creditor an inde#nit& bond aainst the clai# =Manaoan vs. Provincial 3heriff, !% Phil., 70">.

+f course, the sheriff #a& proceed with the lev& even without the *nde#nit& bond, but in such case he will

answer for an& da#aes with his own personal funds =aits vs. Peterson, et al., 3 Phil. 8%! Alua et al.

vs. 2ohnson, '% Phil., 76"5 Consults No. 78% de los aboados de 3#ith, Bell L Co., 8" Phil., 404>. And

the rule also provides that nothin therein contained shall prevent a third person fro# vindicatin his clai#

to the propert& b& an& proper action =3ec. %4 of Rule 7!.>.

*t appears fro# the above that if the attachin creditor should furnish an ade?uate bond. the 3heriff has to proceed with

the public auction. hen such bond is not filed, then the 3heriff shall decide whether to proceed. or to desist fro#

proceedin, with the public auction. lf he decides to proceed, he will incur personal liabilit& in favor of the successful third-

part& clai#ant.

+n +ctober %8, %!04, 'ranch H affir#ed 3ANT+3 ownership of the $eepne& in ?uestion based on the evidence adduced,

and decreed ?0ph?.6Kt

:ERE)+RE, $ud#ent is hereb& rendered, en$oinin the defendants fro# proceedin with the sale of

the vehicle in ?uestion orderin its return to the plaintiff and further#ore sentencin the defendant

Abraha# 3ibu to pa& the plaintiff the su# of P%4.66 a da& fro# April %6, %!08 until the vehicle is

returned to hi#, and P466.66 as attorne&s fees as well as the costs. *

This was subse?uentl& a#ended on ;ece#ber 4, %!04, upon #otion for reconsideration filed b& 3ANT+3, to include the

B+N;*NK C+MPAN@ as $ointl& slid severall& liable with 3*B9K. 51äwphï1.ñët

... provided that the liabilit& of the Philippine 3uret& L insurance Co., *nc. shall in no case e(ceed

P0,466.66. Abraha# 3ibu is further#ore conde#ned to pa& the Philippine 3uret& L *nsurance Co., *nc.

the sa#e su#s it is ordered to pa& under this decision.

The $ud#ent in the BRANC: CA3E appears to be ?uite leall& unpalatable )or instance, since the underta1in

furnished to the 3heriff b& the B+N;*NK C+MPAN@ did not beco#e effective for the reason that the $eep was not sold,

the public sale thereof havin been restrained, there was no reason for pro#ulatin $ud#ent aainst the B+N;*NK

C+MPAN@. lt has also been noted that the Co#plaint aainst G*;A; was dis#issed.

Most i#portant of all, the $ud#ent aainst 3*B9K was ine?uitable. ln assertin his rihts of ownership to the vehicle in

?uestion, 3ANT+3 candidl& ad#itted his participation in the illeal and pernicious practice in the transportation business

1nown as the kabit s&ste#. 3ec.. '6 => of the Public 3ervice Act, then the applicable law, specificall&

provided ?0ph?.6Kt

... it shall be unlawful for an& public service or for the owner, lessee or operator thereof, without the

approval and authoriation of the Co##ission previousl& had ... => to sell, alienate, #ortae,

encu#ber or lease its propert&, franchise, certificates, privilees, or rihts, or an& part thereof.

*n this case, 3ANT+3 had fictitiousl& sold the $eepne& to G*;A;, who had beco#e the reistered owner and operator of

record at the ti#e of the accident. lt is true that G*;A; had e(ecuted a re-sale to 3ANT+3, but the docu#ent was not

44



reistered. Althouh 3ANT+3, as the kabit was the true owner as aainst G*;A;, the latter, as the reistered

ownerHoperator and rantee of the franchise, is directl& and pri#aril& responsible and liable for the da#aes caused to

3*B9K, the in$ured part&, as a conse?uence of the nelient or careless operation of the vehicle. 6 This rulin is based on

the principle that the operator of record is considered the operator of the vehicle in conte#plation of law as reards the

public and third persons even if the vehicle involved in the accident had been sold to another where such sale had not

been approved b& the then Public 3ervice Co##ission. 8 )or the sa#e basic reason, as the vehicle here in ?uestion was

reistered in G*;A;3 na#e, the lev& on e(ecution aainst said vehicle should be enforced so that the $ud#ent in the

BRANC: G** CA3E #a& be satisfied, notwithstandin the fact that the secret ownership of the vehicle beloned to

another. 3ANT+3, as the kabit should not be allowed to defeat the lev& on his vehicle and to avoid his responsibilities asa kabit owner for he had led the public to believe that the vehicle beloned to G*;A;. This is one wa& of curbin the

pernicious kabit system that facilitates the co##ission of fraud aainst the travellin public.

As indicated in the Ereo case, supra, 3ANT+3 re#ed&. as the real owner of the vehicle, is to o aainst G*;A;, the

actual operator who was responsible for the accident, for the recover& of whatever da#aes 3ANT+3 #a& suffer b&

reason of the e(ecution. *n fact, if 3ANT+3, as the kabit had been i#pleaded as a part& defendant in the BRANC: G**

CA3E, he should be held $ointl& and severall& liable with G*;A; and the driver for da#aes suffered b& 3*B9K, 9 as well

as for e(e#plar& da#aes. 10

)ro# the $ud#ent in the BRANC: CA3E 3*B9K appealed. Meanwhile, 3ANT+3 #oved for i##idiatel& e(ecution.

3*B9K opposed it on the round that 'ranch H had no $urisdiction over the BRANC: G** CA3E, and that 'ranch H had

no power to interfere b& in$unction with the $ud#ent of Branch G** a Court of concurrent or coordinate $urisdiction. 11

+n Nove#ber %7, %!04, 'ranch H released an order authoriin i##ediate e(ecution on the theor& that the BRANC:

CA3E is Dprincipall& an action for the issuance of a writ of prohibition to forbid the 3heriff fro# sellin at public auction

propert& not belonin to the $ud#ent creditor =sic> and there bein no atte#pt in this case to interfere with the 2ud#ent

or decree of another court of concurrent $urisdiction.D 1&

ithout waitin for the resolution of his Motion for Reconsideration, 3*B9K souht relief fro# respondent Appellate Court

in a Petition for certiorari with Preli#inar& in$unction. +n Nove#ber %", %!04, respondent Court of Appeals en$oined the

enforce#ent of the 'ranch H ;ecision and the +rder of e(ecution issued b& said Branch. 13+n 3epte#ber '", %!00,

respondent Count of Appeals rendered the herein challened ;ecision nullif&in the $ud#ent renderred in the 'ranch

H Case and per#anentl& restrainin G fro# ta1in coniance of the BRANC: CA3E 3ANT+3. *t ruledthat ?0ph?.6Kt

... the respondent Court Branch , indeed, encroached and interfered with the $ud#ent of Branch G**

when it issued a restrainin order and finall& a decision per#anentl& en$oinin the other court fro#

e(cutin the decision rendered in Civil Case No. 48774. This to our #ind constitutes an interference with

the powers and authorit& of the other court havin co-e?ual and coordinate $urisdiction. To rule otherwise,

would indubitabl& lead to confusion which #iht ha#per or hinder the proper ad#inistration of

$ustice. ... 1*

Respondent Court further held that 3ANT+3 #a& not be per#itted to prove his ownership over a particular vehicle bein

levied upon but reistered in anothers na#e in a separated action, observin that ?0ph?.6Kt

As the vehicle in ?uestion was reistered in the na#e of Gicente 9. Gidad, the overn#ent or an& person

affected b& the representation that said vehicle is reistered under the na#e of a particular person had

the riht to rel& on his declaration of ownership and reistration and the reistered owner or an& other

person for that #atter cannot be per#itted to repudiate said declaration with the ob$ective of provin that

said reistered vehicle is owned b& another person and not b& the reistered owner =sec. 0", =a>, Rule

%'7, and art. %87%, New Civil Code>

((( ((( (((

45



ere we to allow a third person to prove that he is the real owner of a particular vehicle and not the

reistered owner it would in effect be tanta#ount to sanctionin the atte#pt of the reistered owner of the

particular vehicle in evadin responsibilit& for it cannot be dispelled that the door would be opened to

collusion between a person and a reistered owner for the latter to escape said responsibilit& to the public

or to an& person. ...

3ANT+3 now see1s a review of respondent Courts ;ecision contendin that ?0ph?.6Kt

%> The respondent Court of Appeals erred in holdin that Branch of the Court of )irst *nstance of Manilahas no $urisdiction to restrain b& rit of *n$unction the auction sale of petitioners #otor vehicle to satisf&

the $ud#ent indebtedness of another person

'> The respondent Court of Appeals erred in holdin that petitioner as owner of a #otor vehicle that was

levied upon pursuant to a rit of E(ecution issued b& Branch G** of the Court of i stance of Manila in

Civil Case No. 48774 cannot be allowed to prove in a separate suit filed in Branch of the sa#e court

=Civil Case No. 40"8'> that he is the true owner of the said #otor vehicle and not its reistered owner5

7> The respondent Court of Appeals erred in declarin null and void the decision of the Court of )irst

*nstance of Manila =Branch > in Civil Case No. 408"'.

e ave due course to the Petition for Review on certiorari on ;ece#ber %8, %!00 and considered the case sub#itted for

decision on 2ul& '6, %!0.

+ne of the issues ventilated for resolution is the eneral ?uestion of $urisdiction of a Court of )irst *nstance to issue, at the

instance of a third-part& clai#ant, an *n$unction restrainin the e(ecution sale of a passener $eepne& levied upon b& a

$ud#ent creditor in another Court of )irst *nstance. The corollar& issue is whether or not the third-part& clai#ant has a

riht to vindicate his clai# to the vehicle levied upon throuh a separate action.

3ince this case was sub#itted for decision in 2ul&, %!0, this Court, in Arabay, lnc. vs. #on. &erafin &alvador , 15spea1in

throuh Mr. 2ustice Ra#on A?uino, succinctl& held ?0ph?.6Kt

*t is noteworth& that, enerall&, the rule, that no court has authorit& to interfere b& in$unction with the $ud#ents or decrees of a concurrent or coordinate $urisdiction havin e?ual power to rant the in$unctive

relief, is applied in cases, where no third-part& clai#ant is involved, in order to prevent one court fro#

nullif&in the $ud#ent or process of another court of the sa#e ran1 or cateor&, a power which devolves

upon the proper appellate court.

((( ((( (((

hen the sheriff, actin be&ond the bounds of his authorit&, seies a straners propert&, the writ of

in$unction, which is issued to stop the auction sale of that propert&, is not an interference with the writ of

e(ecution issued b& another court because the writ of e(ecution was i#properl& i#ple#ented b& the

sheriff. 9nder that writ, he could attach the propert& of the $ud#ent debtor. :e is not authoried to lev&

upon the propert& of the third-part& clai#ant =Polaris Mar1etin Corporation vs. Plan, -86000, 2anuar&

'', %!0, 0! 3CRA !7, !5 Manila :erald Publishin Co., *nc. vs. Ra#os, "" Phil. !8, %6'>.

An earlier case, Abiera vs. #on. ourt of Appeals, et al ., 16 e(plained the doctrine #ore e(tensivel& ?0ph?.6Kt

ourtsL Jurisdiction ourts 0ithout po0er to interfere by in4unction 0ith 4udments or decrees of a court of

concurrent 4urisdiction. M No court has power to interfere b& in$unction with the $ud#ents or decrees of a

court of concurrent or coordinate $urisdiction havin e?ual power to rant the relief souht b& in$unction.

46



&ame, &ameL &ameL "hen applicable. )or this doctrine to appl&, the in$unction issued b& one court

#ust interfere with the $ud#ent or decree issued b& another court of e?ual or coordinate $urisdiction and

the relief souht b& such in$unction #ust be one which could be ranted b& the court which rendered the

$ud#ent or issued the decree.

&ame, &ame &ameL 52ception Judment rendered by another court in favor of a third person 0ho claims

property levied upon on e2ecution. M 9nder section % of Rule 7! a third person who clai#s propert&

levied upon on e(ecution #a& vindicate such clai# b& action. A $ud#ent rendered in his favor - declarin

hi# to be the owner of the propert& - would not constitute interference with the powers or processes of thecourt which rendered the $ud#ent to enforce which the e(ecution was levied. lf that be so - and it is so

because the propert&, bein that of a straner, is not sub$ect to lev& - then an interlocutor& order, such as

in$unction, upon a clai# and pri#a facie showin of ownership b& the clai#ant, cannot be considered as

such interference either.

52ecutionL "here property levied on claimed by third personL NActionN in section l>, %ule ; of the %ules

of ourt, interpreted M The riht of a person who clai#s to be the owner of propert& levied upon on

e(ecution to file a third-part& clai# with the sheriff is not e(clusive, and he #a& file an action to vindicate

his clai# even if the $ud#ent creditor files an inde#nit& bond in favor of the sheriff to answer for an&

da#aes that #a& be suffered b& the third part& clai#ant. B& DactionD, as stated in the Rule, what is

#eant is a separate and independent action.

Applied to the case at bar, it #ill have to be held that, contrar& to the rationale in the ;ecision of respondent Court, it was

appropriate, as a #atter of procedure, for 3ANT+3, as an ordinar& third-part& clai#ant, to vindicate his clai# of ownership

in a separate action under 3ection % of Rule 7!. And the $ud#ent rendered in his favor b& 'ranch H , declarin hi# to be

the owner of the propert&, did not as a basic proposition, constitute interference with the powers or processes of 'ranch

HVII which rendered the $ud#ent, to enforce which the was levied upon. And this is so because propert& belonin to a

straner is not ordinaril& sub$ect to lev&. hile it is true that the vehicle in ?uestion was in custodia leis, and should not

be interfered with without the per#ission of the proper Court, the propert& #ust be one in which the defendant has

proprietar& interest. here the 3heriff seies a straners propert&, the rule does not appl& and interference with his

custod& is not interference with another Courts +rder of attach#ent. 1

:owever, as a #atter of substance and on the #erits, the ulti#ate conclusion of respondent Court nullif&in the ;ecisionof 'ranch H per#anentl& en$oinin the auction sale, should be upheld. eall& spea1in, it was not a Dstraners propert&D

that was levied upon b& the 3heriff pursuant to the $ud#ent rendered b& 'ranch HVII. The vehicle was, in fact, reistered

in the na#e of G*;A;, one of the $ud#ent debtors. And what is #ore, the aspect of public service, with its effects on the

ridin public, is involved. hatever leal technicalities #a& be invo1ed, we find the $ud#ent of respondent Court of

Appeals to be in consonance with $ustice.

:ERE)+RE, as pra&ed for b& private respondent Abraha# 3ibu, the petition for review on certiorari filed b& Adolfo .

3antos is dis#issed with costs aainst the petitioner.

3+ +R;ERE;.

)akasiar, Guerrero and e astro, < JJ., concur.?0ph?.6Kt

!eehankee Fhairman, concurs in the result.


SUPREME COURT

Manila

3EC+N; ;*G*3*+N

47



G.R. No. L-65510 M"( 9, 198

TEJ MR4ETING ND?OR NGEL JUCIN, petitioner,

vs.

HONORLE INTERMEDITE PPELLTE COURT < ND PEDRO N. NLE, respondents.

irilo A. ia+, Jr. for petitioner.

#enry V. 'riuera for private respondent.

PRS, J.:

DE( pacto illicito non oritur actioD =No action arises out of illicit barain> is the ti#e-honored #a(i# that #ust be applied to

the parties in the case at bar. :avin entered into an illeal contract, neither can see1 relief fro# the courts, and each

#ust bear the conse?uences of his acts.D =ita Enterprises vs. *AC, %'! 3CRA "%.>

The factual bac1round of this case is undisputed. The sa#e is narrated b& the respondent court in its now assailed

decision, as follows

+n Ma& !, %!4, the defendant bouht fro# the plaintiff a #otorc&cle with co#plete accessories and a

sidecar in the total consideration of P",666.66 as shown b& *nvoice No. %88 =E(h. DAD>. +ut of the total

purchase price the defendant ave a downpa&#ent of P%,66.66 with a pro#ise that he would pa&

plaintiff the balance within si(t& da&s. The defendant, however, failed to co#pl& with his pro#ise and so

upon his own re?uest, the period of pa&in the balance was e(tended to one &ear in #onthl& install#ents

until 2anuar& %!0 when he stopped pa&in an&#ore. The plaintiff #ade de#ands but $ust the sa#e the

defendant failed to co#pl& with the sa#e thus forcin the plaintiff to consult a law&er and file this action

for his da#ae in the a#ount of P480.'% for attorne&s fees and P%66.66 for e(penses of litiation. The

plaintiff also clai#s that as of )ebruar& '6, %!", the total account of the defendant was alread&

P',7%.60 as shown in a state#ent of account =E(hibit. DBD>. This a#ount includes not onl& the balance of

P%,66.66 but an additional %'I interest per annu# on the said balance fro# 2anuar& '0, %!0 to)ebruar& ', %!"5 a 'I service chare5 and P 480.'% representin attorne&s fees.

*n this particular transaction a chattel #ortae =E(hibit %> was constituted as a securit& for the pa&#ent

of the balance of the purchase price. *t has been the practice of financin fir#s that whenever there is a

balance of the purchase price the reistration papers of the #otor vehicle sub$ect of the sale are not iven

to the bu&er. The records of the TC show that the #otorc&cle sold to the defendant was first #ortaed

to the Te$a Mar1etin b& Anel 2aucian thouh the Te$a Mar1etin and Anel 2aucian are one and the

sa#e, because it was #ade to appear that wa& onl& as the defendant had no franchise of his own and he

attached the unit to the plaintiffs MC: ine. The aree#ent also of the parties here was for the plaintiff to

underta1e the &earl& reistration of the #otorc&cle with the and Transportation Co##ission. Pursuant to

this aree#ent the defendant on )ebruar& '', %!0 ave the plaintiff P!6.66, the P".66 would be for the

#ortae fee and the P"'.66 for the reistration fee of the #otorc&cle. The plaintiff, however failed to

reister the #otorc&cle on that &ear on the round that the defendant failed to co#pl& with so#e

re?uire#ents such as the pa&#ent of the insurance pre#iu#s and the brinin of the #otorc&cle to the

TC for stencilin, the plaintiff sa&in that the defendant was hidin the #otorc&cle fro# hi#. astl&, the

plaintiff e(plained also that thouh the ownership of the #otorc&cle was alread& transferred to the

defendant the vehicle was still #ortaed with the consent of the defendant to the Rural Ban1 of

Ca#alian for the reason that all #otorc&cle purchased fro# the plaintiff on credit was rediscounted with

the ban1.

48



+n his part the defendant did not dispute the sale and the outstandin balance of P%,66. 66 still pa&able

to the plaintiff. The defendant was persuaded to bu& fro# the plaintiff the #otorc&cle with the side car

because of the condition that the plaintiff would be the one to reister ever& &ear the #otorc&cle with the

and Transportation Co##ission. *n %!0, however, the plaintfff failed to reister both the chattel

#ortae and the #otorc&cle with the TC notwithstandin the fact that the defendant ave hi# P!6.66

for #ortae fee and reistration fee and had the #otorc&cle insured with a Perla Co#pana de 3euros

=E(hibit D0D> as shown also b& the Certificate of cover =E(hibit D7D>. Because of this failure of the plaintiff to

co#pl& with his obliation to reister the #otorc&cle the defendant suffered da#aes when he failed to

clai# an& insurance inde#nit& which would a#ount to no less than P%4,666.66 for the #ore than twoti#es that the #otorc&cle fiured in accidents aside fro# the loss of the dail& inco#e of P%4.66 as

boundar& fee beinnin +ctober %!0 when the #otorc&cle was i#pounded b& the TC for not bein

reistered.

The defendant disputed the clai# of the plaintiff that he was hidin fro# the plaintiff the #otorc&cle

resultin in its not bein reistered. The truth bein that the #otorc&cle was bein used for transportin

passeners and it 1ept on travellin fro# one place to another. The #otor vehicle sold to hi# was

#ortaed b& the plaintiff with the Rural Ban1 of Ca#alian without his consent and 1nowlede and the

defendant was not even iven a cop& of the #ortae deed. The defendant clai#s that it is not true that

the #otorc&cle was #ortaed because of re-discountin for rediscountin is onl& true with Rural Ban1s

and the Central Ban1. The defendant puts the bla#e on the plaintiff for not reisterin the #otorc&cle with

the TC and for not ivin hi# the reistration papers inspite of de#ands #ade. )inall&, the evidence ofthe defendant shows that because of the filin of this case he was forced to retain the services of a law&er

for a fee on not less than P%,666.66.

((( ((( (((

... it also appears and the Court so finds that defendant purchased the #otorc&cle in ?uestion, particularl&

for the purpose of enain and usin the sa#e in the transportation business and for this purpose said

trimobile unit 0as attached to the plaintiffs transportation line 0ho had the franchise, so much so that in

the reistration certificate, the plaintiff appears to be the o0ner of the unit. )urther#ore, it appears to

have been areed, further between the plaintiff and the defendant, that plaintiff would underta1e the

&earl& reistration of the unit in ?uestion with the TC. Thus, for the reistration of the unit for the &ear%!0, per aree#ent, the defendant ave to the plaintiff the a#ount of P"'.66 for its reistration, as well

as the insurance coverae of the unit.

Eventuall&, petitioner Te$a Mar1etin andHor Anel 2aucian filed an action for D3u# of Mone& with ;a#aesD aainst

private respondent Pedro N. Nale in the Cit& Court of Naa Cit&. The Cit& Court rendered $ud#ent in favor of petitioner,

the dispositive portion of which reads

:ERE)+RE, decision is hereb& rendered dis#issin the counterclai# and orderin the defendant to

pa& plaintiff the su# of P%,66.66 representin the unpaid balance of the purchase price with leal rate of

interest fro# the date of the filin of the co#plaint until the sa#e is full& paid5 to pa& plaintiff the su# of

P480.'% as attorne&s fees5 to pa& plaintiff the su# of P'66.66 as e(penses of litiation5 and to pa& the

costs.

3+ +R;ERE;.

+n appeal to the Court of )irst *nstance of Ca#arines 3ur, the decision was affir#ed in toto. Private respondent filed a

petition for review with the *nter#ediate Appellate Court and on 2ul& %", %!"7 the said Court pro#ulated its decision, the

pertinent portion of which reads /

49



:owever, as the purchase of the #otorc&cle for operation as a tri#obile under the franchise of the private

respondent 2aucian, pursuant to what is co##onl& 1nown as the D1abit s&ste#D, without the prior

approval of the Board of Transportation =for#erl& the Public 3ervice Co##ission> was an illeal

transaction involvin the fictitious reistration of the #otor vehicle in the na#e of the private respondent

so that he #a& traffic with the privilees of his franchise, or certificate of public convenience, to operate a

tric&cle service, the parties bein in pari delicto, neither of the# #a& brin an action aainst the other to

enforce their illeal contract Art. %8%' =a>, Civil Code.

((( ((( (((

:ERE)+RE, the decision under review is hereb& set aside. The co#plaint of respondent Te$a

Mar1etin andHor Anel 2aucian, as well as the counterclai# of petitioner Pedro Nale in Civil Case No.

%%47 of the Court of )irst *nstance of Ca#arines 3ur =for#erl& Civil Case No. 4"40 of the Cit& Court of

Naa Cit&> are dis#issed. No pronounce#ent as to costs.

3+ +R;ERE;.

The decision is now before 9s on a petition for review, petitioner Te$a Mar1etin andHor Anel 2aucian presentin a lone

assin#ent of error / whether or not respondent court erred in appl&in the doctrine of Dpari delicto.D

e find the petition devoid of #erit.

9n?uestionabl&, the parties herein operated under an arrane#ent, co##onl& 1nown as the D1abit s&ste#D whereb& a

person who has been ranted a certificate of public convenience allows another person who owns #otor vehicles to

operate under such franchise for a fee. A certificate of public convenience is a special privilee conferred b& the

overn#ent. Abuse of this privilee b& the rantees thereof cannot be countenanced. The D1abit s&ste#D has been

*dentified as one of the root causes of the prevalence of raft and corruption in the overn#ent transportation offices.

Althouh not outrihtl& penalied as a cri#inal offense, the 1abit s&ste# is invariabl& reconied as bein contrar& to

public polic& and, therefore, void and in e(istent under Article %86! of the Civil Code. *t is a funda#ental principle that the

court will not aid either part& to enforce an illeal contract, but will leave both where it finds then. 9pon this pre#ise it

would be error to accord the parties relief fro# their predica#ent. Article %8%' of the Civil Code denies the# such aid. *tprovides

Art. %8%'. *f the act in which the unlawful or forbidden cause consists does not constitute a cri#inal

offense, the followin rules shall be observed

%. hen the fault is on the part of both contractin parties, neither #a& recover that he has iven b& virtue

of the contract, or de#and, the perfor#ance of the others underta1in.

The defect of in e(istence of a contract is per#anent and cannot be cured b& ratification or b& prescription. The #ere

lapse of ti#e cannot ive efficac& to contracts that are null and void.

:ERE)+RE, the petition is hereb& dis#issed for lac1 of #erit. The assailed decision of the *nter#ediate Appellate Cour

=now the Court of Appeals> is A))*RME;. No costs.

3+ +R;ERE;.

ernan Fhairman, Gutierre+, Jr., 8adilla, 'idin and orte+, JJ., concur.

Alampay, J., took no part.

50



Republic of the PhilippinesSUPREME COURT

Manila

)*R3T ;*G*3*+N

G.R. No. 9*151 '()l 30, 1991

ESTERN SHIPPING LINES, INC., petitioner,

vs.THE COURT O PPELS "#$ THE IRST NTION;IDE SSURNCE CORPORTION, respondents.

Jimene+, ala / *arao+a for petitioner.%eloy (a0 Office for private respondent.

GNC+CO, J.:

The e(tent of the liabilit& of the co##on carrier and its insurer for da#ae to the caro upon its deliver& to the arrastre

operator is the center of this controvers&.

The findins of fact of the trial court which were adopted b& the appellate court and which are not disputed are as follows

+n 3epte#ber 8, %!", thirteen coils of uncoated -wire stress relieved wire strand for prestressed concrete wereshipped on board the vessel D2apri Genture,D owned and operated b& the defendant Eastern 3hippin ines, *nc.,at Jobe, 2apan, for deliver& to 3tresste1 Post-Tensionin Phils., *nc. in Manila, as evidenced b& the bill of ladin,co##ercial invoice, pac1in list and co##ercial invoice #ar1ed E(hibits A, B, C, ;5 7, 8, 4 and 0-Raon whichwere insured b& the plaintiff )irst Nationwide Assurance Corporation for P%%,!'7 =E(hibit E>.

+n 3epte#ber %0, %!", the carr&in vessel arrived in Manila and dischared the caro to the custod& of thedefendant E. Raon, *nc. =E(hibits %, ', 7, 8 and 4-E3>, fro# who# the consinees custo#s bro1er received itfor deliver& to the consinees warehouse.

+n )ebruar& %!, %!!, the plaintiff inde#nified the consinee in the a#ount of P%%,!'7.66 for da#ae and lossto the insured caro, whereupon the for#er was subroated for the latter =E(hibit *>.

The plaintiff now see1s to recover fro# the defendants what it has inde#nified the consinee, less P8",'!7.6,the salvae value of the caro, or the total a#ount of P%'7,0'!.76.

*t appears that while enroute fro# Jobe to Manila, the carr&in vessel Dencountered ver& rouh seas and stor#&weatherD for three da&s, #ore or less, which caused it to roll and pound heavil&, #ovin its #aster to e(ecute a#arine note of protest upon arrival at the port of Manila on 3epte#ber %4, %!" =E(hibit %-Raon>5 that the coilswrapped in burlap cloth and cardboard paper were stored in the lower hold of the hatch of the vessel which wasflooded with water about one foot deep5 that the water entered the hatch when the vessel encountered heav&weather enroute to Manila =E(hibits K, ', 'A, 'B-Raon>5 that upon re?uest, a surve& of bad order caro wasconducted at the pier in the presence of the representatives of the consinee and the defendant E. Raon, *nc.and it was found that seven coils were rust& on one side each =E(hibits ) and %6-Raon>5 that upon surve&conducted at the consinees warehouse it was found that the Dwettin =of the caro> was caused b& fresh waterDthat entered the hatch when the vessel encountered heav& weather enroute to Manila =p. 7, E(hibit K>5 and thatall thirteen coils were e(tre#el& rust& and totall& unsuitable for the intended purpose =p. 7, E(hibit K>, =pp. '%-'%", ori. rec.>%

The co#plaint that was filed b& the )irst Nationwide Assurance Corporation =insurer> aainst Eastern 3hippin ines, *nc.and E. Raon, *nc., in the Reional Trial Court, Manila, was dis#issed in a decision dated Nove#ber '4, %!"4. An appeal

51

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therefro# was interposed b& the insurer to the Court of Appeals wherein in due course a decision was rendered on April', %!!6, the dispositive part of which reads as follows

:ERE)+RE, the $ud#ent appealed fro# is hereb& 3ET A3*;E. The appellees are ordered to pa& theappellant the su# of P%'7,0'!.76, with leal rate of interest fro# 2ul& '8, %!! until full& paid, Eastern 3hippinines, *nc. to assu#e "H%7 thereof, and E. Raon, *nc. to assu#e 4H%7 thereof. No pronounce#ent as to costs.

3+ +R;ERE;.'

+nl& Eastern 3hippin ines, *nc. filed this petition for review b& certiorari based on the followin assined errors

*. *T RE)93E; T+ C+N3*;ER T:E C+9NTER-A33*KNMENT +) ERR+R3 +) PET*T*+NER A3 C+NTA*NE;*N *T3 BR*E) )+R T:E ;E)EN;ANT-APPEEE EA3TERN 3:*PP*NK *NE3, *NC. AN; :*C: ARE +N@MEANT T+ 393TA*N T:E ;EC*3*+N +) ;*3M*33A +) T:E TR*A C+9RT5

**. AKA*N3T *T3 +N )*N;*NK3 +) )ACT T:AT T:E CARK+ A3 ;*3C:ARKE; AN; ;E*GERE;C+MPETE 9NT+ T:E C93T+;@ +) T:E ARRA3TRE +PERAT+R 9N;ER CEAN TA@ 3:EET3, *TNEGERT:EE33 ARB*TRAR*@ C+NC9;E; PET*T*+NER A3 *ABE )+R T:E CA*ME; ;AMAKE35

***. *T )A*E; T+ :+; PET*T*+NER RE*EGE; +) AN@ *AB**T@ +GER T:E CARK+ N+T*T:3TAN;*NK*T )+9N; T:AT T:E 3AME A3 ;*3C:ARKE; AN; ;E*GERE; 9NT+ T:E C93T+;@ +) T:E

ARRA3TRE +PERAT+R 9N;ER CEAN TA@ 3:EET3 AN; ERK+ T+ BE C+N3*;ERE; K++; +R;ERCARK+ :EN ;E*GERE;5 and,

*G. *T ARB*TRAR*@ AAR;E; *NTERE3T AT T:E EKA RATE T+ C+MMENCE )R+M T:E ;ATE +) T:EC+MPA*NT *N G*+AT*+N +) T:E ;+CTR*NA R9E T:AT *N CA3E +) 9N*9*;ATE; CA*M3 39C:

A3 T:E CA*M *N 9E3T*+N, *NTERE3T 3:+9; +N@ C+MMENCE )R+M T:E ;ATE +) T:E ;EC*3*+N+) T:E TR*A C+9RT.7

9nder the first assined error, petitioner contends that the appellate court did not consider its counter-assin#ent oferrors which was onl& #eant to sustain the decision of dis#issal of the trial court. An e(a#ination of the ?uestioneddecision shows that the appellate court did not consider the counter-assin#ent of errors of petitioner as it did not appealthe decision of the trial court.

Nevertheless, when such counter-assin#ents are intended to sustain the $ud#ent appealed fro# on other rounds, butnot to see1 #odification or reversal thereof, the appellate court should consider the sa#e in the deter#ination of the casebut no affir#ative relief can be ranted thereb& other than what had been obtained fro# the lower court. 8

The contention of petitioner on this aspect is, thus, well-ta1en.

Be that as it #a&, under the second and third assined errors, petitioner clai#s it should not be held liable as the ship#entwas dischared and delivered co#plete into the custod& of the arrastre operator under clean tall& sheets.

hile it is true the caro was delivered to the arrastre operator in apparent ood order condition, it is also undisputed thatwhile en route fro# Jobe to Manila, the vessel encountered Dver& rouh seas and stor#& weatherD, the coils wrapped inburlap cloth and cardboard paper were stored in the lower hatch of the vessel which was flooded with water about onefoot deep5 that the water entered the hatch5 that a surve& of bad order caro which was conducted in the pier in the

presence of representatives of the consinee and E. Raon, *nc., showed that seven coils were rust& on one side=E(hibits ) and %6-Raon>5 that a surve& conducted at the consinees warehouse also showed that the Dwettin =of thecaro> was caused b& fresh waterD that entered the hatch when the vessel encountered heav& rain en route to Manila=E(hibit K>5 and that all thirteen coils were e(tre#el& rust& and totall& unsuitable for the intended purpose.4

Conse?uentl&, based on these facts, the appellate court #ade the followin findins and conclusions

Plainl&, the heav& seas and rains referred to in the #asters report were not caso fortuito, but nor#al occurrencesthat an ocean-oin vessel, particularl& in the #onth of 3epte#ber which, in our area, is a #onth of rains andheav& seas would encounter as a #atter of routine. The& are not unforeseen nor unforeseeable. These are

52












conditions that ocean-oin vessels would encounter and provide for, in the ordinar& course of a vo&ae. Thatrain water =not sea water> found its wa& into the holds of the Jupri Venture is a clear indication that care andforesiht did not attend the closin of the ships hatches so that rain water would not find its wa& into the caroholds of the ship.

Moreover, under Article %77 of the Civil Code, co##on carriers are bound to observe De(tra-ordinar& viilanceover oods . . . .accordin to all circu#stances of each case,D and Article %74 of the sa#e Code states, to wit

Art. %74. *n all cases other than those #entioned in Nos. %, ', 7, 8, and 4 of the precedin article, if the

oods are lost, destro&ed or deteriorated, co##on carriers are presu#ed to have been at fault or to haveacted nelientl&, unless the& prove that the& observed e(traordinar& dilience as re?uired in article %77

3ince the carrier has failed to establish an& caso fortuito, the presu#ption b& law of fault or nelience on the partof the carrier applies5 and the carrier #ust present evidence that it has observed the e(traordinar& diliencere?uired b& Article %77 of the Civil Code in order to escape liabilit& for da#ae or destruction to the oods that ithad ad#ittedl& carried in this case. No such evidence e(ists of record. Thus, the carrier cannot escape liabilit&.

The Court arees with and is bound b& the foreoin findins of fact #ade b& the appellate court. The presu#ption,therefore, that the caro was in apparent ood condition when it was delivered b& the vessel to the arrastre operator b&the clean tall& sheets has been overturned and traversed. The evidence is clear to the effect that the da#ae to the carowas suffered while aboard petitioners vessel.

The last assined error is untenable. The interest due on the a#ount of the $ud#ent should co##ence fro# the date of $udicial de#and.0

:ERE)+RE, the petition is ;*3M*33E;, with costs aainst petitioner.?P0phi?

3+ +R;ERE;.

9arvasa, ru+, Gri6o-A3uino and )edialdea, JJ., concur.

3EC+N; ;*G*3*+N

=G.R. No. 161833. July 8, &005>

PHILIPPINE CHRTER INSURNCE CORPORTION, petitioner, vs. UN4NO;N O;NER O THE ESSEL M?

NTIONL HONOR, NTIONL SHIPPING CORPORTION O THE PHILIPPINES "#$ INTERNTIONL

CONTINER SERICES, INC., respondents.

D E C I S I O N

CLLEJO, SR., J .%

This is a petition for review under Rule 84 of the %!! Revised Rules of Civil Procedure assailin the

;ecision% dated 2anuar& %!, '668 of the Court of Appeals =CA> in CA-K.R. CG No. 474 which affir#ed the ;ecision

dated )ebruar& %, %!! of the Reional Trial Court =RTC> of Manila, Branch 7, in Civil Case No. !4-777".

T/ #//$/#

+n Nove#ber 4, %!!4, 2. Tradin Co. td. of 3eoul, Jorea, loaded a ship#ent of four units of parts and accessories

in the port of Pusan, Jorea, on board the vessel MHG 9ational #onor , represented in the Philippines b& its aent, Nationa

3hippin Corporation of the Philippines =N3CP>. The ship#ent was for deliver& to Manila, Philippines. )reiht forwarder

3a#hwa *nter-Trans Co., td., issued Bill of adin No. 3:!8%6760 ' in the na#e of the shipper consined to the order of

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Metropolitan Ban1 and Trust Co#pan& with arrival notice in Manila to ulti#ate consinee Blue Mono *nternationa

Co#pan&, *ncorporated =BM*C*>, Binondo, Manila.

N3CP, for its part, issued Bill of adin No. N3KPB3M4%'404 7 in the na#e of the freiht forwarder, as shipper

consined to the order of 3ta## *nternational *nc., Ma1ati, Philippines. *t is provided therein that

%'. This Bill of adin shall be prima facie evidence of the receipt of the Carrier in apparent ood order and condition

e(cept as, otherwise, noted of the total nu#ber of Containers or other pac1aes or units enu#erated overleaf. Proof to

the contrar& shall be ad#issible when this Bill of adin has been transferred to a third part& actin in ood faith. Norepresentation is #ade b& the Carrier as to the weiht, contents, #easure, ?uantit&, ?ualit&, description, condition, #ar1s,

nu#bers, or value of the Koods and the Carrier shall be under no responsibilit& whatsoever in respect of such description

or particulars.

%7. The shipper, whether principal or aent, represents and warrants that the oods are properl& described, #ar1ed,

secured, and pac1ed and #a& be handled in ordinar& course without da#ae to the oods, ship, or propert& or persons

and uarantees the correctness of the particulars, weiht or each piece or pac1ae and description of the oods and

arees to ascertain and to disclose in writin on ship#ent, an& condition, nature, ?ualit&, inredient or characteristic that

#a& cause da#ae, in$ur& or detri#ent to the oods, other propert&, the ship or to persons, and for the failure to do so the

shipper arees to be liable for and full& inde#nif& the carrier and hold it har#less in respect of an& in$ur& or death of an&

person and loss or da#ae to caro or propert&. The carrier shall be responsible as to the correctness of an& such #ar1,

descriptions or representations.8

The ship#ent was contained in two wooden crates, na#el&, Crate No. % and Crate No. ', co#plete and in ood order

condition, covered b& Co##ercial *nvoice No. @2-7408 ;T; 4 and a Pac1in ist.0 There were no #ar1ins on the oute

portion of the crates e(cept the na#e of the consinee. Crate No. % #easured '8 cubic #eters and weihed 7,0'6 1s.

*t contained the followin articles one =%> unit athe Machine co#plete with parts and accessories5 one =%> unit 3urface

Krinder co#plete with parts and accessories5 and one =%> unit Millin Machine co#plete with parts and accessories. +n

the floorin of the wooden crates were three wooden battens placed side b& side to support the weiht of the caro.

Crate No. ', on the other hand, #easured %6 cubic #eters and weihed ',606 1s. The athe Machine was stuffed in the

crate. The ship#ent had a total invoice value of 93<!6,666.66 CL) Manila." *t was insured for P',48,'6.66 with the

Philippine Charter *nsurance Corporation =PC*C> thru its eneral aent, )a#il& *nsurance and *nvest#ent Corporation!

under Marine Ris1 Note No. 0"687 dated +ctober '8, %!!8.%6

The MHG 9ational #onor arrived at the Manila *nternational Container Ter#inal =M*CT> on Nove#ber %8, %!!4. The

*nternational Container Ter#inal 3ervices, *ncorporated =*CT3*> was furnished with a cop& of the crate caro list and bill of

ladin, and it 1new the contents of the crate. %% The followin da&, the vessel started discharin its caroes usin its

winch crane. The crane was operated b& +leario Balsa, a winch#an fro# the *CT3*,%' the e(clusive arrastre operator o

M*CT.

;enasto ;au, 2r., the chec1er-inspector of the N3CP, alon with the crew and the surve&or of the *CT3*, conducted

an inspection of the caro.%7 The& inspected the hatches, chec1ed the caro and found it in apparent ood condition.%8 Claudio Cansino, the stevedore of the *CT3*, placed two slin cables on each end of Crate No. %. %4 No slin cable was

fastened on the #id-portion of the crate. *n ;aus e(perience, this was a nor#al procedure. %0 As the crate was bein

hoisted fro# the vessels hatch, the #id-portion of the wooden floorin suddenl& snapped in the air, about five feet hihfro# the vessels twin dec1, sendin all its contents crashin down hard, % resultin in e(tensive da#ae to the ship#ent.

BM*C*s custo#s bro1er, 2RM *ncorporated, too1 deliver& of the caro in such da#aed condition. %" 9pon receipt o

the da#aed ship#ent, BM*C* found that the sa#e could no loner be used for the intended purpose. The Mariners

Ad$ust#ent Corporation hired b& PC*C conducted a surve& and declared that the pac1in of the ship#ent was considered

insufficient. *t ruled out the possibilit& of ta(es due to insufficienc& of pac1in. *t opined that three to four pieces of cable

or wire rope slins, held in all e?ual settin, never b&-passin the center of the crate, should have been used, considerin

that the crate contained heav& #achiner&.%!

54












































BM*C* subse?uentl& filed separate clai#s aainst the N3CP,'6 the *CT3*,'% and its insurer, the PC*C,'' fo

93<0%,466.66. hen the other co#panies denied liabilit&, PC*C paid the clai# and was issued a 3ubroation

Receipt'7 for P%,86,078.46.

+n March '', %!!4, PC*C, as subroee, filed with the RTC of Manila, Branch 74, a Co#plaint for ;a#aes '8 aains

the 9n1nown owner of the vessel MHG National :onor, N3CP and *CT3*, as defendants.

PC*C alleed that the loss was due to the fault and nelience of the defendants. *t pra&ed, a#on others

:ERE)+RE, it is respectfull& pra&ed of this :onorable Court that $ud#ent be rendered orderin defendants to pa&

plaintiff, $ointl& or in the alternative, the followin

%. Actual da#aes in the a#ount of P%,86,078.46 plus leal interest at the ti#e of the filin of this co#plaint

until full& paid5

'. Attorne&s fees in the a#ount of P%66,666.665

7. Cost of suit.'4

*CT3*, for its part, filed its Answer with Counterclai# and Cross-clai# aainst its co-defendant N3CP, clai#in that

the lossHda#ae of the ship#ent was caused e(clusivel& b& the defective #aterial of the wooden battens of the ship#ent

insufficient pac1in or acts of the shipper.

At the trial, Anthon& Abar?ue, the safet& inspector of *CT3*, testified that the wooden battens placed on the wooden

floorin of the crate was of ood #aterial but was not stron enouh to support the weiht of the #achines inside the

crate. :e averred that #ost stevedores did not 1now how to read and write5 hence, he placed the slin cables onl& on

those portions of the crate where the arrow sins were placed, as in the case of fraile caro. :e said that unless

otherwise indicated b& arrow sins, the *CT3* used onl& two cable slins on each side of the crate and would not place a

slin cable in the #id-section.'0 :e declared that the crate fell fro# the cranes because the wooden batten in the #id-

portion was bro1en as it was bein lifted.' :e concluded that the lossHda#ae was caused b& the failure of the shipper or

its pac1er to place wooden battens of stron #aterials under the floorin of the crate, and to place a sin in its #id-ter#

section where the slin cables would be placed.

The *CT3* adduced in evidence the report of the R.2. ;el Pan L Co., *nc. that the da#ae to the caro could be

attributed to insufficient pac1in and unbalanced weiht distribution of the caro inside the crate as evidenced b& the

t&pes and shapes of ite#s found.'"

The trial court rendered $ud#ent for PC*C and ordered the co#plaint dis#issed, thus

:ERE)+RE, the co#plaint of the plaintiff, and the respective counterclai#s of the two defendants are dis#issed, with

costs aainst the plaintiff.

3+ +R;ERE;.

'!

Accordin to the trial court, the loss of the ship#ent contained in Crate No. % was due to the internal defect and

wea1ness of the #aterials used in the fabrication of the crates. The #iddle wooden batten had a hole =bukon-bukon >.

The trial court re$ected the certification76 of the shipper, statin that the ship#ent was properl& pac1ed and secured, as

#ere hearsa& and devoid of an& evidentiar& weiht, the affiant not havin testified.

Not satisfied, PC*C appealed7% to the CA which rendered $ud#ent on 2anuar& %!, '668 affir#in in toto the

appealed decision, with this fallo

55





























:ERE)+RE, the decision of the Reional Trial Court of Manila, Branch 74, dated )ebruar& %, %!!, is A))*RME;.

3+ +R;ERE;.7'

The appellate court held, inter alia, that it was bound b& the findin of facts of the RTC, especiall& so where the

evidence in support thereof is #ore than substantial. *t ratiocinated that the loss of the ship#ent was due to an e(cepted

cause the character of the oods or defects in the pac1in or in the containers and the failure of the shipper to indicate

sins to notif& the stevedores that e(tra care should be e#plo&ed in handlin the ship#ent. 77 *t bla#ed the shipper for its

failure to use #aterials of stroner ?ualit& to support the heav& #achines and to indicate an arrow in the #iddle portion ofthe caro where additional slins should be attached.78 The CA concluded that co##on carriers are not absolute insurers

aainst all ris1s in the transport of the oods.74

:ence, this petition b& the PC*C, where it allees that

*.

T:E C+9RT +) APPEA3 C+MM*TTE; 3ER*+93 ERR+R +) A *N N+T :+;*NK T:AT RE3P+N;ENT

C+MM+N CARR*ER *3 *ABE )+R T:E ;AMAKE 393TA*NE; B@ T:E 3:*PMENT *N T:E P+33E33*+N +) T:E

ARRA3TRE +PERAT+R.

**.

T:E C+9RT +) APPEA3 C+MM*TTE; 3ER*+93 ERR+R +) A *N N+T APP@*NK T:E 3TAT9T+R@

PRE39MPT*+N +) )A9T AN; NEK*KENCE *N T:E CA3E AT BAR.

***.

T:E C+9RT +) APPEA3 KR+33@ M*3C+MPRE:EN;E; T:E )ACT3 *N )*N;*NK T:AT T:E ;AMAKE

393TA*NE; B@ T:E 3:*PMENT A3 ;9E T+ *T3 ;E)ECT*GE PACJ*NK AN; N+T T+ T:E )A9T AN;

NEK*KENCE +) T:E RE3P+N;ENT3.70

The petitioner asserts that the #ere proof of receipt of the ship#ent b& the co##on carrier =to the carrier> in oodorder, and their arrival at the place of destination in bad order #a1es out a prima facie case aainst it5 in such case, it is

liable for the loss or da#ae to the caro absent satisfactor& e(planation iven b& the carrier as to the e(ercise of

e(traordinar& dilience. The petitioner avers that the ship#ent was sufficientl& pac1ed in wooden bo(es, as shown b& the

fact that it was accepted on board the vessel and arrived in Manila safel&. *t e#phasies that the respondents did not

contest the contents of the bill of ladin, and that the respondents 1new that the #anner and condition of the pac1in of

the caro was nor#al and barren of defects. *t #aintains that it behooved the respondent *CT3* to place three to four

cables or wire slins in e?ual settins, includin the center portion of the crate to prevent da#ae to the caro

A si#ple loo1 at the #anifesto of the caro and the bill of ladin would have alerted respondents of the nature of the

caro consistin of thic1 and heav& #achiner&. E(tra-care should have been #ade and e(tended in the dischare of the

sub$ect ship#ent. :ad the respondent onl& bothered to chec1 the list of its contents, the& would have been nervous

enouh to place additional slins and cables to support those #assive #achines, which were co#posed al#ost entirel& of

thic1 steel, clearl& intended for heav& industries. As indicated in the list, the bo(es contained one lathe #achine, one

#illin #achine and one rindin #achine-all co#in with co#plete parts and accessories. @et, not one a#on the

respondents were cautious enouh. :ere lies the utter failure of the respondents to observed e(traordinar& dilience in

the handlin of the caro in their custod& and possession, which the Court of Appeals should have readil& observed in its

appreciation of the pertinent facts.7

The petitioner posits that the lossHda#ae was caused b& the #ishandlin of the ship#ent b& therein responden

*CT3*, the arrastre operator, and not b& its nelience.56


















The petitioner insists that the respondents did not observe e(traordinar& dilience in the care of the oods. *t arues

that in the perfor#ance of its obliations, the respondent *CT3* should observe the sa#e deree of dilience as that

re?uired of a co##on carrier under the New Civil Code of the Philippines. Citin 5astern &hippin (ines, Inc. v. ourt of

Appeals,7" it posits that respondents are liable in solidum to it, inas#uch as both are chared with the obliation to delive

the oods in ood condition to its consinee, BM*C*.

Respondent N3CP counters that if ever respondent *CT3* is ad$uded liable, it is not solidaril& liable with it. *t furthe

avers that the carrier cannot dischare directl& to the consinee because caro discharin is the #onopol& of the

arrastre. iabilit&, therefore, falls solel& upon the shoulder of respondent *CT3*, inas#uch as the discharin of caroesfro# the vessel was its e(clusive responsibilit&. Besides, the petitioner is raisin ?uestions of facts, i#proper in a petition

for review on certiorari .7!

Respondent *CT3* avers that the issues raised are factual, hence, i#proper under Rule 84 of the Rules of Court. *

clai#s that it is #erel& a depositor& and not a co##on carrier5 hence, it is not oblied to e(ercise e(traordinar& dilience.

*t reiterates that the lossHda#ae was caused b& the failure of the shipper or his pac1er to place a sin on the sides and

#iddle portion of the crate that e(tra care should be e#plo&ed in handlin the ship#ent, and that the #iddle wooden

batten on the floorin of the crate had a hole. The respondent asserts that the testi#on& of Anthon& Abar?ue, who

conducted his investiation at the site of the incident, should prevail over that of Rolando Balatbat. As an alternative, i

arues that if ever ad$uded liable, its liabilit& is li#ited onl& to P7,466.66 as e(pressed in the liabilit& clause of Kate Pass

C)3-BR-KP No. 7%!7.

The petition has no #erit.

The well-entrenched rule in our $urisdiction is that onl& ?uestions of law #a& be entertained b& this Court in a petition

for review on certiorari. This rule, however, is not ironclad and ad#its certain e(ceptions, such as when =%> the conclusion

is rounded on speculations, sur#ises or con$ectures5 ='> the inference is #anifestl& #ista1en, absurd or i#possible5 =7>

there is rave abuse of discretion5 =8> the $ud#ent is based on a #isapprehension of facts5 =4> the findins of fact are

conflictin5 =0> there is no citation of specific evidence on which the factual findins are based5 => the findins of absence

of facts are contradicted b& the presence of evidence on record5 ="> the findins of the Court of Appeals are contrar& to

those of the trial court5 =!> the Court of Appeals #anifestl& overloo1ed certain relevant and undisputed facts that, if

properl& considered, would $ustif& a different conclusion5 =%6> the findins of the Court of Appeals are be&ond the issues of

the case5 and =%%> such findins are contrar& to the ad#issions of both parties.86

e have reviewed the records and find no $ustification to warrant the application of an& e(ception to the eneral rule.

e aree with the contention of the petitioner that co##on carriers, fro# the nature of their business and for

reasons of public polic&, are #andated to observe e(traordinar& dilience in the viilance over the oods and for the

safet& of the passeners transported b& the#, accordin to all the circu#stances of each case. 8% The Court has defined

e(traordinar& dilience in the viilance over the oods as follows

The e(traordinar& dilience in the viilance over the oods tendered for ship#ent re?uires the co##on carrier to 1now

and to follow the re?uired precaution for avoidin da#ae to, or destruction of the oods entrusted to it for sale, carriae

and deliver&. *t re?uires co##on carriers to render service with the reatest s1ill and foresiht and to use all reasonable

#eans to ascertain the nature and characteristic of oods tendered for ship#ent, and to e(ercise due care in the handlin

and stowae, includin such #ethods as their nature re?uires.8'

The co##on carriers dut& to observe the re?uisite dilience in the ship#ent of oods lasts fro# the ti#e the articles

are surrendered to or unconditionall& placed in the possession of, and received b&, the carrier for transportation until

delivered to, or until the lapse of a reasonable ti#e for their acceptance, b& the person entitled to receive the#. 87 hen

the oods shipped are either lost or arrive in da#aed condition, a presu#ption arises aainst the carrier of its failure to

observe that dilience, and there need not be an e(press findin of nelience to hold it liable. 88 To overco#e the

57

















presu#ption of nelience in the case of loss, destruction or deterioration of the oods, the co##on carrier #ust prove

that it e(ercised e(traordinar& dilience.84

:owever, under Article %78 of the New Civil Code, the presu#ption of nelience does not appl& to an& of the

followin causes

%. )lood, stor#, earth?ua1e, lihtnin or other natural disaster or cala#it&5

'. Act of the public ene#& in war, whether international or civil5

7. Act or o#ission of the shipper or owner of the oods5

8. The character of the oods or defects in the pac1in or in the containers5

4. +rder or act of co#petent public authorit&.

*t bears stressin that the enu#eration in Article %78 of the New Civil Code which e(e#pts the co##on carrier for

the loss or da#ae to the caro is a closed list. 80 To e(culpate itself fro# liabilit& for the lossHda#ae to the caro under

an& of the causes, the co##on carrier is burdened to prove an& of the aforecited causes clai#ed b& it b& a

preponderance of evidence. *f the carrier succeeds, the burden of evidence is shifted to the shipper to prove that the

carrier is nelient.8

;efect is the want or absence of so#ethin necessar& for co#pleteness or perfection5 a lac1 or absence of

so#ethin essential to co#pleteness5 a deficienc& in so#ethin essential to the proper use for the purpose for which a

thin is to be used.8" +n the other hand, inferior #eans of poor ?ualit&, #ediocre, or second rate. 8! A thin #a& be of

inferior ?ualit& but not necessaril& defective. *n other words, defectiveness is not s&non&#ous with inferiorit&.

*n the present case, the trial court declared that based on the record, the loss of the ship#ent was caused b& the

nelience of the petitioner as the shipper

The sa#e #a& be said with respect to defendant *CT3*. The brea1ae and collapse of Crate No. % and the total

destruction of its contents were not i#putable to an& fault or nelience on the part of said defendant in handlin theunloadin of the caroes fro# the carr&in vessel, but was due solel& to the inherent defect and wea1ness of the

#aterials used in the fabrication of said crate.

The crate should have three solid and stron wooden batten placed side b& side underneath or on the floorin of the crate

to support the weiht of its contents. :owever, in the case of the crate in dispute, althouh there were three wooden

battens placed side b& side on its floorin, the #iddle wooden batten, which carried substantial volu#e of the weiht of

the crates contents, had a 1not hole or bukon-bukon , which considerabl& affected, reduced and wea1ened its strenth.

Because of the enor#ous weiht of the #achineries inside this crate, the #iddle wooden batten ave wa& and collapsed.

As the co#bined strenth of the other two wooden battens were not sufficient to hold and carr& the load, the& too

si#ultaneousl& with the #iddle wooden battens ave wa& and collapsed =T3N, 3ept. '0, %!!0, pp. '6-'8>.

Crate No. % was provided b& the shipper of the #achineries in 3eoul, Jorea. There is nothin in the record which would

indicate that defendant *CT3* had an& role in the choice of the #aterials used in fabricatin this crate. 3aid defendant,

therefore, cannot be held as bla#e worth& for the loss of the #achineries contained in Crate No. %. 46

The CA affir#ed the rulin of the RTC, thus

The case at bar falls under one of the e(ceptions #entioned in Article %78 of the Civil Code, particularl& nu#ber =8>

thereof, i.e., the character of the oods or defects in the pac1in or in the containers. The trial court found that the

58
















brea1ae of the crate was not due to the fault or nelience of *CT3*, but to the inherent defect and wea1ness of the

#aterials used in the fabrication of the said crate.

9pon e(a#ination of the records, e find no co#pellin reason to depart fro# the factual findins of the trial court.

*t appears that the wooden batten used as support for the floorin was not #ade of ood #aterials, which caused the

#iddle portion thereof to ive wa& when it was lifted. The shipper also failed to indicate sins to notif& the stevedores that

e(tra care should be e#plo&ed in handlin the ship#ent.

Claudio Cansino, a stevedore of *CT3*, testified before the court their duties and responsibilities

ith reard to crates, what do &ou do with the cratesF

A Ever&da& with the crates, there is an arrow drawn where the slin is placed, Maa#.

hen the crates have arrows drawn and where &ou placed the slins, what do &ou do with these cratesF

A A slin is placed on it, Maa#.

After &ou placed the slins, what do &ou do with the cratesF

A After * have placed a slin properl&, * as1 the crane =sic > to haul it, Maa#.

Now, what, if an&, were written or were #ar1ed on the crateF

A The thin that was #ar1ed on the caro is an arrow $ust li1e of a chain, Maa#.

And where did &ou see or what parts of the crate did &ou see those arrowsF

A At the corner of the crate, Maa#.

:ow #an& arrows did &ou seeF

A )our =8> on both sides, Maa#.

hat did &ou do with the arrowsF

A hen * saw the arrows, thats where * placed the slins, Maa#.

Now, did &ou find an& other #ar1s on the crateF

A Nothin #ore, Maa#.

Now, Mr. itness, if there are no arrows, would &ou place slins on the parts where there are no arrowsF

A @ou can not place slins if there are no arrows, Maa#.

Appellants alleation that since the caro arrived safel& fro# the port of Pusan, Jorea without defect, the fault should be

attributed to the arrastre operator who #ishandled the caro, is without #erit. The caro fell while it was bein carried

onl& at about five =4> feet hih above the round. *t would not have so easil& collapsed had the caro been properl&

pac1ed. The shipper should have used #aterials of stroner ?ualit& to support the heav& #achines. Not onl& did the

59



shipper fail to properl& pac1 the caro, it also failed to indicate an arrow in the #iddle portion of the caro where additional

slins should be attached. At an& rate, the issue of nelience is factual in nature and in this reard, it is settled that

factual findins of the lower courts are entitled to reat weiht and respect on appeal, and, in fact, accorded finalit& when

supported b& substantial evidence.4%

e aree with the trial and appellate courts.

The petitioner failed to adduce an& evidence to counter that of respondent *CT3*. The petitioner failed to rebut the

testi#on& of ;au, that the crates were sealed and that the contents thereof could not be seen fro# the outside.4'

hile iis true that the crate contained #achineries and spare parts, it cannot thereb& be concluded that the respondents 1new or

should have 1nown that the #iddle wooden batten had a hole, or that it was not stron enouh to bear the weiht of the

ship#ent.

There is no showin in the Bill of adin that the ship#ent was in ood order or condition when the carrier received

the caro, or that the three wooden battens under the floorin of the caro were not defective or insufficient or

inade?uate. +n the other hand, under Bill of adin No. N3KPB3M4%'404 issued b& the respondent N3CP and

accepted b& the petitioner, the latter represented and warranted that the oods were properl& pac1ed, and disclosed in

writin the condition, nature, ?ualit& or characteristic that #a& cause da#ae, in$ur& or detri#ent to the oods. Absen

an& sins on the ship#ent re?uirin the place#ent of a slin cable in the #id-portion of the crate, the respondent *CT3*

was not oblied to do so.

The state#ent in the Bill of adin, that the ship#ent was in apparent ood condition, is sufficient to sustain a findin

of absence of defects in the #erchandise. Case law has it that such state#ent will create a prima facie presu#ption onl&

as to the e(ternal condition and not to that not open to inspection. 47

IN LIGHT O LL THE OREGOING, the petition is ;EN*E; for lac1 of #erit.

SO ORDERED.

8uno, Fhairman, Austria-)artine+, !ina, and hico-9a+ario, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

3EC+N; ;*G*3*+N

G.R. No. 1*5*83 No@/2/( 19, &00*

LORENO SHIPPING CORP., petitioner,vs.J MRTHEL INTERNTIONL, INC., respondent.

; E C * 3 * + N

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C&linder iner % set 8,666.66

T+TA PR*CE )+B

MAN*A SSSSSSSSSSS

P',84,!66.66

;E*GER@ ithin ' #onths after receipt of fir# order.

TERM3 '4I upon deliver&, balance pa&able in 4 bi-#onthl& e?ual

*nstall#ents not to e(ceed !6 da&s.

e trust &ou find our above offer acceptable and loo1 forward to &our #ost valued order.

Ger& trul& &ours,

=3K;> :ENR@ PA2AR*+

3ales Manaer

Petitioner thereafter issued to respondent Purchase +rder No. %7"7!,7 dated 6' Nove#ber %!"!, for the procure#ent ofone set of c&linder liner, valued at P8,666, to be used for MHG ;adianas E(press. The purchase order was co-sinedb& 2ose Ko, 2r., petitioners vice-president, and :enr& Pa$arillo. uoted hereunder is the pertinent portion of the purchaseorder

Na#e of ;escription t&. A#ount

C@. *NER MHE % 3ET P8,666.66

N+T:*NK )++

*NG.

TERM +) PA@MENT '4I ;+N PA@MENT

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http://www.lawphil.net/judjuris/juri2004/nov2004/gr_145483_2004.html#fnt3




4 B*-M+NT:@ *N3TAMENT3

*nstead of pa&in the '4I down pa&#ent for the first c&linder liner, petitioner issued in favor of respondent ten postdatedchec1s8 to be drawn aainst the for#ers account with Allied Ban1in Corporation. The chec1s were supposed torepresent the full pa&#ent of the afore#entioned c&linder liner.

3ubse?uentl&, petitioner issued Purchase +rder No. %86%%,4 dated %4 2anuar& %!!6, for &et another unit of c&linder liner.This purchase order stated the ter# of pa&#ent to be D'4I upon deliver&, balance pa&able in 4 bi-#onthl& e?ualinstall#ents.D0 i1e the purchase order of 6' Nove#ber %!"!, the second purchase order did not state the date of thec&linder liners deliver&.

+n '0 2anuar& %!!6, respondent deposited petitioners chec1 that was postdated %" 2anuar& %!!6, however, the sa#ewas dishonored b& the drawee ban1 due to insufficienc& of funds. The re#ainin nine postdated chec1s were eventuall&returned b& respondent to petitioner.

The parties presented disparate accounts of what happened to the chec1 which was previousl& dishonored. Petitionerclai#ed that it replaced said chec1 with a ood one, the proceeds of which were applied to its other obliation torespondent. )or its part, respondent insisted that it returned said postdated chec1 to petitioner.

Respondent thereafter placed the order for the two c&linder liners with its principal in 2apan, ;aiei 3an&o Co. td., b&openin a letter of credit on '7 )ebruar& %!!6 under its own na#e with the )irst *nterstate Ban1 of To1&o.

+n '6 April %!!6, Pa$arillo delivered the two c&linder liners at petitioners warehouse in North :arbor, Manila. The salesinvoices evidencin the deliver& of the c&linder liners both contain the notation Dsub$ect to verificationD under which thesinature of Eric Ko, petitioners warehouse#an, appeared.

Respondent thereafter sent a 3tate#ent of Account dated %4 Nove#ber %!!6" to petitioner. hile the other ite#s listed insaid state#ent of account were full& paid b& petitioner, the two c&linder liners delivered to petitioner on '6 April %!!6re#ained unsettled. Conse?uentl&, Mr. Ale$andro Janaan, 2r., respondents vice-president, sent a de#and letter dated 6'2anuar& %!!%! to petitioner re?uirin the latter to pa& the value of the c&linder liners sub$ects of this case. *nstead ofheedin the de#and of respondent for the full pa&#ent of the value of the c&linder liners, petitioner sent the for#er a letter

dated %' March %!!%%6

offerin to pa& onl& P%46,666 for the c&linder liners. *n said letter, petitioner clai#ed that as thec&linder liners were delivered late and due to the scrappin of the MHG ;adianas E(press, it =petitioner> would have tosell the c&linder liners in 3inapore and pa& the balance fro# the proceeds of said sale.

3hortl& thereafter, another de#and letter dated ' March %!!%%% was furnished petitioner b& respondents counselre?uirin the for#er to settle its obliation to respondent toether with accrued interest and attorne&s fees.

;ue to the failure of the parties to settle the #atter, respondent filed an action for su# of #one& and da#aes before theReional Trial Court =RTC> of Ma1ati Cit&. *n its co#plaint,%' respondent =plaintiff below> alleed that despite its repeatedoral and written de#ands, petitioner obstinatel& refused to settle its obliations. Respondent pra&ed that petitioner beordered to pa& for the value of the c&linder liners plus accrued interest of P%%%,766 as of Ma& %!!% and additional interestof %8I per annu# to be rec1oned fro# 2une %!!% until the full pa&#ent of the principal5 attorne&s fees5 costs of suits5e(e#plar& da#aes5 actual da#aes5 and co#pensator& da#aes.

+n '4 2ul& %!!%, and prior to the filin of a responsive pleadin, respondent filed an a#ended co#plaint with preli#inar&attach#ent pursuant to 3ections ' and 7, Rule 4 of the then Rules of Court.%7 Aside fro# the pra&er for the issuance ofwrit of preli#inar& attach#ent, the a#end#ents also pertained to the issuance b& petitioner of the postdated chec1s andthe a#ounts of da#aes clai#ed.

*n an +rder dated '4 2ul& %!!%,%8 the court a ?uo ranted respondents pra&er for the issuance of a preli#inar&attach#ent. +n 6! Auust %!!%, petitioner filed an 9rent E(-Parte Motion to ;ischare rit of Attach#ent%4attachinthereto a counter-bond as re?uired b& the Rules of Court. +n even date, the trial court issued an +rder %0 liftin the lev& onpetitioners properties and the arnish#ent of its ban1 accounts.

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Petitioner afterwards filed its Answer % allein therein that ti#e was of the essence in the deliver& of the c&linder linersand that the deliver& on '6 April %!!6 of said ite#s was late as respondent co##itted to deliver said ite#s Dwithin two ='>#onths after receipt of fir# orderD%" fro# petitioner. Petitioner li1ewise souht counterclai#s for #oral da#aes,e(e#plar& da#aes, attorne&s fees plus appearance fees, and e(penses of litiation.

3ubse?uentl&, respondent filed a 3econd A#ended Co#plaint with Preli#inar& Attach#ent dated '4 +ctober %!!%.%! Thea#end#ent introduced dealt solel& with the nu#ber of postdated chec1s issued b& petitioner as full pa&#ent for the firstc&linder liner it ordered fro# respondent. hereas in the first a#ended co#plaint, onl& nine postdated chec1s wereinvolved, in its second a#ended co#plaint, respondent clai#ed that petitioner actuall& issued ten postdated chec1s.

;espite the opposition b& petitioner, the trial court ad#itted respondents 3econd A#ended Co#plaint with Preli#inar& Attach#ent.'6

Prior to the co##ence#ent of trial, petitioner filed a Motion =)or eave To 3ell C&linder iners>'% allein therein thatDwith the passae of ti#e and with no definite end in siht to the present litiation, the c&linder liners run the ris1 ofobsolescence and deteriorationD'' to the pre$udice of the parties to this case. Thus, petitioner pra&ed that it be allowed tosell the c&linder liners at the best possible price and to place the proceeds of said sale in escrow. This #otion, unopposedb& respondent, was ranted b& the trial court throuh the +rder of % March %!!%.'7

After trial, the court a ?uo dis#issed the action, the decretal portion of the ;ecision statin

:ERE)+RE, the co#plaint is hereb& dis#issed, with costs aainst the plaintiff, which is ordered to pa& P46,666.66 tothe defendant as and b& wa& of attorne&s fees.'8

The trial court held respondent bound to the ?uotation it sub#itted to petitioner particularl& with respect to the ter#s ofpa&#ent and deliver& of the c&linder liners. *t also declared that respondent had areed to the cancellation of the contractof sale when it returned the postdated chec1s issued b& petitioner. Respondents counterclai#s for #oral, e(e#plar&, andco#pensator& da#aes were dis#issed for insufficienc& of evidence.

Respondent #oved for the reconsideration of the trial courts ;ecision but the #otion was denied for lac1 of #erit. '4

Arieved b& the findins of the trial court, respondent filed an appeal with the Court of Appeals'0 which reversed and setaside the ;ecision of the court a ?uo. The appellate court brushed aside petitioners clai# that ti#e was of the essence inthe contract of sale between the parties herein considerin the fact that a sinificant period of ti#e had lapsed betweenrespondents offer and the issuance b& petitioner of its purchase orders. The dispositive portion of the ;ecision of theappellate court states

:ERE)+RE, the decision of the lower court is REGER3E; and 3ET A3*;E. The appellee is hereb&+R;ERE; to pa& the appellant the a#ount of P!48,666.66, and accrued interest co#puted at %8I per annu#rec1oned fro# Ma&, %!!%.'

The Court of Appeals also held that respondent could not have incurred dela& in the deliver& of c&linder liners as node#and, $udicial or e(tra$udicial, was #ade b& respondent upon petitioner in contravention of the e(press provision of

Article %%0! of the Civil Code which provides

Those oblied to deliver or to do so#ethin incur in dela& fro# the ti#e the obliee $udiciall& or e(tra$udiciall&de#ands fro# the# the fulfill#ent of their obliation.

i1ewise, the appellate court concluded that there was no evidence of the alleed cancellation of orders b& petitioner andthat the deliver& of the c&linder liners on '6 April %!!6 was reasonable under the circu#stances.

+n '' Ma& '666, petitioner filed a #otion for reconsideration of the ;ecision of the Court of Appeals but this was deniedthrouh the resolution of 60 +ctober '666.'" :ence, this petition for review which basicall& raises the issues of whether ornot respondent incurred dela& in perfor#in its obliation under the contract of sale and whether or not said contract wasvalidl& rescinded b& petitioner.

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That a contract of sale was entered into b& the parties is not disputed. Petitioner, however, #aintains that its obliation topa& full& the purchase price was e(tinuished because the adverted contract was validl& ter#inated due to respondentsfailure to deliver the c&linder liners within the two-#onth period stated in the for#al ?uotation dated 7% Ma& %!"!.

The threshold ?uestion, then, is as there late deliver& of the sub$ects of the contract of sale to $ustif& petitioner todisreard the ter#s of the contract considerin that ti#e was of the essence thereofF

*n deter#inin whether ti#e is of the essence in a contract, the ulti#ate criterion is the actual or apparent intention of theparties and before ti#e #a& be so rearded b& a court, there #ust be a sufficient #anifestation, either in the contract itself

or the surroundin circu#stances of that intention.'!

Petitioner insists that althouh its purchase orders did not specif& thedates when the c&linder liners were supposed to be delivered, nevertheless, respondent should abide b& the ter# ofdeliver& appearin on the ?uotation it sub#itted to petitioner.76 Petitioner theories that the ?uotation e#bodied the offerfro# respondent while the purchase order represented its =petitioners> acceptance of the proposed ter#s of the contractof sale.7% Thus, petitioner is of the view that these two docu#ents Dcannot be ta1en separatel& as if there were two distinctcontracts.D7' e do not aree.

*t is a cardinal rule in interpretation of contracts that if the ter#s thereof are clear and leave no doubt as to the intention ofthe contractin parties, the literal #eanin shall control.77 :owever, in order to ascertain the intention of the parties, theirconte#poraneous and subse?uent acts should be considered.78 hile this Court reconies the principle that contractsare respected as the law between the contractin parties, this principle is te#pered b& the rule that the intention of theparties is pri#ordial74 and Donce the intention of the parties has been ascertained, that ele#ent is dee#ed as an interalpart of the contract as thouh it has been oriinall& e(pressed in une?uivocal ter#s.D70

*n the present case, we cannot subscribe to the position of petitioner that the docu#ents, b& the#selves, e#bod& theter#s of the sale of the c&linder liners. +ne can easil& lean the sinificant differences in the ter#s as stated in the for#al?uotation and Purchase +rder No. %7"7! with reard to the due date of the down pa&#ent for the first c&linder liner andthe date of its deliver& as well as Purchase +rder No. %86%% with respect to the date of deliver& of the second c&linderliner. hile the ?uotation provided b& respondent evidentl& stated that the c&linder liners were supposed to be deliveredwithin two #onths fro# receipt of the fir# order of petitioner and that the '4I down pa&#ent was due upon the c&linderliners deliver&, the purchase orders prepared b& petitioner clearl& o#itted these sinificant ite#s. The petitionersPurchase +rder No. %7"7! #ade no #ention at all of the due dates of deliver& of the first c&linder liner and of thepa&#ent of '4I down pa&#ent. *ts Purchase +rder No. %86%% li1ewise did not indicate the due date of deliver& of thesecond c&linder liner.

*n the case of Buatti v. Court of Appeals,7 we reiterated the principle that Da contract underoes three distinct staes

preparation or neotiation, its perfection, and finall&, its consu##ation. Neotiation beins fro# the ti#e the prospectivecontractin parties #anifest their interest in the contract and ends at the #o#ent of aree#ent of the parties. Theperfection or birth of the contract ta1es place when the parties aree upon the essential ele#ents of the contract. The laststae is the consu##ation of the contract wherein the parties fulfill or perfor# the ter#s areed upon in the contract,cul#inatin in the e(tinuish#ent thereof.D

*n the instant case, the for#al ?uotation provided b& respondent represented the neotiation phase of the sub$ect contractof sale between the parties. As of that ti#e, the parties had not &et reached an aree#ent as reards the ter#s andconditions of the contract of sale of the c&linder liners. Petitioner could ver& well have inored the offer or tendered acounter-offer to respondent while the latter could have, under the pertinent provision of the Civil Code,7" withdrawn or#odified the sa#e. The parties were at libert& to discuss the provisions of the contract of sale prior to its perfection. *n thisconnection, we turn to the testi#onies of Pa$arillo and Janaan, 2r., that the ter#s of the offer were, indeed, reneotiatedprior to the issuance of Purchase +rder No. %7"7!.

;urin the hearin of the case on '" 2anuar& %!!7, Pa$arillo testified as follows

@ou testified Mr. itness, that &ou sub#itted a ?uotation with defendant oreno 3hippin Corporation datedrather #ar1ed as E(hibit A statin the ter#s of pa&#ent and deliver& of the c&linder liner, did &ou notF

A @es sir.

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* a# showin to &ou the ?uotation which is #ar1ed as E(hibit A there appears in the ?uotation that the deliver&of the c&linder liner will be #ade in two #onths ti#e fro# the ti#e &ou received the confir#ation of the order. *sthat correctF

A @es sir.

Now, after &ou #ade the for#al ?uotation which is E(hibit A how lon a ti#e did the defendant #a1e aconfir#ation of the orderF

A After si( #onths.

And this is contained in the purchase order iven to &ou b& oreno 3hippin CorporationF

A @es sir.

Now, in the purchase order dated Nove#ber ', %!"! there appears onl& the date the ter#s of pa&#ent which&ou re?uired of the# of '4I down pa&#ent, now, it is stated in the purchase order the date of deliver&, will &oue(plain to the court wh& the date of deliver& of the c&linder liner was not #entioned in the purchase order which isthe contract between &ou and oreno 3hippin CorporationF

A hen oreno 3hippin Corporation in?uired fro# us for that c&linder liner, we have in?uired with our supplier

in 2apan to ive us the price and deliver& of that ite#. hen we received that ?uotation fro# our supplier it isstated there that the& can deliver within two #onths but we have to et our confir#ed order within 2une.

But were &ou able to confir# the order fro# &our 2apanese supplier on 2une of that &earF

A No sir.

h&F ill &ou tell the court wh& &ou were not able to confir# &our order with &our 2apanese supplierF

A Because oreno 3hippin Corporation did not ive us the purchase order for that c&linder liner.

And it was onl& on Nove#ber ', %!"! when the& ave &ou the purchase orderF

A @es sir.

3o upon receipt of the purchase order fro# oreno 3hippin ines in %!"! did &ou confir# the order with &our2apanese supplier after receivin the purchase order dated Nove#ber ', %!"!F

A +nl& when oreno 3hippin Corporation will ive us the down pa&#ent of '4I.7!

)or his part, durin the cross-e(a#ination conducted b& counsel for petitioner, Janaan, 2r., testified in thefollowin #anner

*TNE33 This ter# said '4I upon deliver&. 3ubse?uentl&, in the final contract, what was areed upon b& bothparties was '4I down pa&#ent.

henF

A 9pon confir#ation of the order.

. . .

And when was the down pa&#ent supposed to be paidF

66





A *t was not stated when we were supposed to receive that. Nor#all&, we e(pect to receive at the earliestpossible ti#e. Aain, that would depend on the custo#ers. Even after receipt of the purchase order which waswhat happened here, the& re-neotiated the ter#s and so#eti#es we do accept that.

as there a re-neotiation of this ter#F

A This offer, &es. e offered a final re?uire#ent of '4I down pa&#ent upon deliver&.

hat was the re-neotiated ter#F

A '4I down pa&#ent

To be paid whenF

A 3upposed to be paid upon order.86

The above declarations re#ain unassailed. +ther than its bare assertion that the sub$ect contracts of sale did not underofurther reneotiation, petitioner failed to proffer sufficient evidence to refute the above testi#onies of Pa$arillo and Janaan,2r.

Notabl&, petitioner was the one who caused the preparation of Purchase +rders No. %7"7! and No. %86%% &et it utterl&

failed to adduce an& $ustification as to wh& said docu#ents contained ter#s which are at variance with those stated in the?uotation provided b& respondent. The onl& plausible reason for such failure on the part of petitioner is that the partieshad, in fact, reneotiated the proposed ter#s of the contract of sale. Moreover, as the obscurit& in the ter#s of thecontract between respondent and petitioner was caused b& the latter when it o#itted the date of deliver& of the c&linderliners in the purchase orders and varied the ter# with respect to the due date of the down pa&#ent,8% said obscurit& #ustbe resolved aainst it.8'

Relative to the above discussion, we find the case of 3#ith, Bell L Co., td. v. Matti,87 instructive. There, we held that

hen the ti#e of deliver& is not fi(ed or is stated in eneral and indefinite ter#s, ti#e is not of the essence of thecontract. . . .

*n such cases, the deliver& #ust be #ade within a reasonable ti#e.

The law i#plies, however, that if no ti#e is fi(ed, deliver& shall be #ade within a reasonable ti#e, in the absence ofan&thin to show that an i##ediate deliver& intended. . . .

e also find sinificant the fact that while petitioner allees that the c&linder liners were to be used for dr& doc1 repair and#aintenance of its MHG ;adianas E(press between the later part of ;ece#ber %!"! to earl& 2anuar& %!!6, the record isbereft of an& indication that respondent was aware of such fact. The failure of petitioner to notif& respondent of said date isfatal to its clai# that ti#e was of the essence in the sub$ect contracts of sale.

*n addition, we ?uote, with approval, the 1een observation of the Court of Appeals

. . . *t #ust be noted that in the purchase orders issued b& the appellee, dated Nove#ber ', %!"! and 2anuar& %4,

%!!6, no specific date of deliver& was indicated therein. *f ti#e was reall& of the essence as clai#ed b& theappellee, the& should have stated the sa#e in the said purchase orders, and not #erel& relied on the ?uotationissued b& the appellant considerin the lapse of ti#e between the ?uotation issued b& the appellant and thepurchase orders of the appellee.

*n the instant case, the appellee should have provided for an allowance of ti#e and #ade the purchase orderearlier if indeed the said c&linder liner was necessar& for the repair of the vessel scheduled on the first wee1 of2anuar&, %!!6. *n fact, the appellee should have cancelled the first purchase order when the c&linder liner was notdelivered on the date it now sa&s was necessar&. *nstead it issued another purchase order for the second set of

67













c&linder liner. This fact neates appellees clai# that ti#e was indeed of the essence in the consu##ation of thecontract of sale between the parties.88

)inall&, the ten postdated chec1s issued in Nove#ber %!"! b& petitioner and received b& the respondent as full pa&#entof the purchase price of the first c&linder liner supposed to be delivered on 6' 2anuar& %!!6 fail to i#press. *t is not anindication of failure to honor a co##it#ent on the part of the respondent. The earliest #aturit& date of the chec1s was %"2anuar& %!!6. As deliver& of said chec1s could produce the effect of pa&#ent onl& when the& have beencashed,84 respondents obliation to deliver the first c&linder liner could not have arisen as earl& as 6' 2anuar& %!!6 asclai#ed b& petitioner since b& that ti#e, petitioner had &et to fulfill its underta1in to full& pa& for the value of the first

c&linder liner. As e(plained b& respondent, it proceeded with the place#ent of the order for the c&linder liners with itsprincipal in 2apan solel& on the basis of its previousl& har#onious business relationship with petitioner.

As an aside, let it be underscored that Deven where ti#e is of the essence, a breach of the contract in that respect b& oneof the parties #a& be waived b& the other part&s subse?uentl& treatin the contract as still in force.D 80 Petitioners receiptof the c&linder liners when the& were delivered to its warehouse on '6 April %!!6 clearl& indicates that it considered thecontract of sale to be still subsistin up to that ti#e. *ndeed, had the contract of sale been cancelled alread& as clai#ed b&petitioner, it no loner had an& business receivin the c&linder liners even if said receipt was Dsub$ect to verification.D B&acceptin the c&linder liners when these were delivered to its warehouse, petitioner indisputabl& waived the clai#ed dela&in the deliver& of said ite#s.

e, therefore, hold that in the sub$ect contracts, ti#e was not of the essence. The deliver& of the c&linder liners on '6 April %!!6 was #ade within a reasonable period of ti#e considerin that respondent had to place the order for the

c&linder liners with its principal in 2apan and that the latter was, at that ti#e, beset b& heav& volu#e of wor1.8

There havin been no failure on the part of the respondent to perfor# its obliation, the power to rescind the contract isunavailin to the petitioner. Article %%!% of the New Civil Code runs as follows

The power to rescind obliations is i#plied in reciprocal ones, in case one of the obliors should not co#pl& withwhat is incu#bent upon hi#.

The law e(plicitl& ives either part& the riht to rescind the contract onl& upon the failure of the other to perfor# theobliation assu#ed thereunder .8" The riht, however, is not an unbridled one. This Court in the case of 9niversit& of thePhilippines v. ;e los Aneles,8! spea1in throuh the e#inent civilist 2ustice 2.B.. Re&es, e(horts

+f course, it #ust be understood that the act of a part& in treatin a contract as cancelled or resolved on account ofinfractions b& the other contractin part& #ust be #ade 1nown to the other and is alwa&s provisional, bein ever sub$ectto scrutin& and review b& the proper court. *f the other part& denied that rescission is $ustified, it is free to resort to $udicialaction in its own behalf, and brin the #atter to court. Then, should the court, after due hearin, decide that the resolutionof the contract was not warranted, the responsible part& will be sentenced to da#aes5 in the contrar& case, the resolutionwill be affir#ed, and the conse?uent inde#nit& awarded to the part& pre$udiced. =E#phasis supplied>

*n other words, the part& who dee#s the contract violated #a& consider it resolved or rescinded, and act accordinl&,without previous court action, but it proceeds at its own ris1. )or it is onl& the final $ud#ent of the correspondin courtthat will conclusivel& and finall& settle whether the action ta1en was or was not correct in law. But the law definitel& doesnot re?uire that the contractin part& who believes itself in$ured #ust first file suit and wait for a $ud#ent before ta1ine(tra$udicial steps to protect its interest. +therwise, the part& in$ured b& the others breach will have to passivel& sit andwatch its da#aes accu#ulate durin the pendenc& of the suit until the final $ud#ent of rescission is rendered when thelaw itself re?uires that he should e(ercise due dilience to #ini#ie its own da#aes.46

:ere, there is no showin that petitioner notified respondent of its intention to rescind the contract of sale between the#.uite the contrar&, respondents act of proceedin with the openin of an irrevocable letter of credit on '7 )ebruar& %!!6belies petitioners clai# that it notified respondent of the cancellation of the contract of sale. Trul&, no prudentbusiness#an would pursue such action 1nowin that the contract of sale, for which the letter of credit was opened, wasalread& rescinded b& the other part&.

:ERE)+RE, pre#ises considered, the instant Petition for Review on Certiorari is ;EN*E;. The ;ecision of the Court of Appeals, dated '" April '666, and its Resolution, dated 60 +ctober '666, are hereb& A))*RME;. No costs.

68





















3+ +R;ERE;.

8uno, Fhairman, Austria-)artine+, alle4o, &r., and !ina, JJ., concur.


SUPREME COURT

Manila

3EC+N; ;*G*3*+N

G.R. No. 1*9019 uAu7 15, &006

DELSN TRNSPORT LINES, INC., Petitioner,

vs.

MERICN HOME SSURNCE CORPORTION, Respondent.

; E C * 3 * + N

GRCI, J .%

B& this petition for review on certiorari under Rule 84 of the Rules of Court, petitioner ;elsan Transport ines, *nc. =;elsanhereafter> assails and see1s to set aside the ;ecision, % dated 2ul& %0, '66%, of the Court of Appeals =CA> in CA-K.R. CG

No. 86!4% affir#in an earlier decision of the Reional Trial Court =RTC> of Manila, Branch *, in two separate co#plaints

for da#aes doc1eted as Civil Case No. "4-'!74 and Civil Case No. "4-7644!.

The facts

;elsan is a do#estic corporation which owns and operates the vessel MT arusan. +n the other hand, respondent

A#erican :o#e Assurance Corporation =A:AC for brevit&> is a forein insurance co#pan& dul& licensed to do business in

the Philippines throuh its aent, the A#erican-*nternational 9nderwriters, *nc. =Phils.>. *t is enaed, a#on others, in

insurin caroes for transportation within the Philippines.

+n Auust 4, %!"8, ;elsan received on board MT arusan a ship#ent consistin of %,!"0.0' 1Hl Auto#otive ;iesel +il

=diesel oil> at the Bataan Refiner& Corporation for transportation and deliver& to the bul1 depot in Bacolod Cit& of Calte(

Phils., *nc. =Calte(>, pursuant to a Contract of Afreiht#ent. The ship#ent was insured b& respondent A:AC aainst all

ris1s under *nland )loater Polic& No. A:-*)08-%6%%48!P and Marine Ris1 Note No. 78-46!7-0.

+n Auust , %!"8, the ship#ent arrived in Bacolod Cit&. *##ediatel& thereafter, unloadin operations co##enced. The

discharin of the diesel oil started at about %76 PM of the sa#e da&. :owever, at about %676 PM, the discharin had

to be stopped on account of the discover& that the port bow #oorin of the vessel was intentionall& cut or stolen b&

un1nown persons. Because there was nothin holdin it, the vessel drifted westward, draed and stretched the fle(ible

rubber hose attached to the riser, bro1e the elbow into pieces, severed co#pletel& the rubber hose connected to the

tan1er fro# the #ain deliver& line at sea bed level and ulti#atel& caused the diesel oil to spill into the sea. To avoid further

spillae, the vesselUs crew tried water flushin to clear the line of the diesel oil but to no avail. *n the #eanti#e, the shore

tender, who was waitin for the co#pletion of the water flushin, was surprised when the tan1er sinaled a Dred lihtD

which #eant stop pu#pin. 9naware of what happened, the shore tender, thin1in that the vessel would, at an& ti#e,

resu#e pu#pin, did not shut the storae tan1 ate valve. As all the ate valves re#ained open, the diesel oil that was

earlier dischared fro# the vessel into the shore tan1 bac1flowed. ;ue to non-availabilit& of a pu#p boat, the vessel could

not send so#ebod& ashore to infor# the people at the depot about what happened. After al#ost an hour, a auer and an

assistant surve&or fro# the Calte(Us Bul1 ;epot +ffice boarded the vessel. *t was onl& then that the& found out what had

happened. Thereafter, the duo i##ediatel& went ashore to see to it that the shore tan1 ate valve was closed. The loss of

diesel oil due to spillae was placed at %%7."" 1Hl while so#e 874,6"% 1Hl thereof bac1flowed fro# the shore tan1.

69

http://www.lawphil.net/judjuris/juri2006/aug2006/gr_149019_2006.html#fnt1




As a result of spillae and bac1flow of diesel oil, Calte( souht recover& of the loss fro# ;elsan, but the latter refused to

pa&. As insurer, A:AC paid Calte( the su# of P8!,'0'.4 for spillae, pursuant to Marine Ris1 Note No. 78-46!7-0,

and P%,!7!,44.7 for bac1flow of the diesel oil pursuant to *nland )loater Polic& No. A:-%)08-%6%%48!P.

+n )ebruar& %!, %!"4, A:AC, as Calte(Us subroee, instituted Civil Case No. "4-'!74 aainst ;elsan before the Manila

RTC, Branch !, for loss caused b& the spillae. *t li1ewise pra&ed that it be inde#nified for da#aes suffered in the

a#ount of P04',87'.4 plus leal interest thereon.

Also, on Ma& 4, %!"4, in the Manila RTC, Branch 7%, A:AC instituted Civil Case No. "4-7644! aainst ;elsan for the losscaused b& the bac1flow. *t li1ewise pra&ed that it be awarded the a#ount of P%,!7!,44.7 for da#aes and reasonable

attorne&Us fees. As counterclai# in both cases, A:AC pra&ed for attorne&Us fees in the a#ount ofP'66,666.66

and P466.66 for ever& court appearance.

3ince the cause of action in both cases arose out of the sa#e incident and involved the sa#e issues, the two were

consolidated and assined to Branch ! of the court.

+n Auust 7%, %!"!, the trial court rendered its decision ' in favor of A:AC holdin ;elsan liable for the loss of the caro

for its nelience in its dut& as a co##on carrier. ;ispositivel&, the decision reads

:ERE)+RE, $ud#ent is hereb& rendered

A>. *n Civil Case No. "4-7644!

=%> +rderin the defendant =petitioner ;elsan> to pa& plaintiff =respondent A:AC> the su# of P%,!7!,44.7 with interest

thereon at the leal rate fro# Nove#ber '%, %!"8 until full& paid and satisfied5 and

='> +rderin defendant to pa& plaintiff the su# of P%6,666.66 as and for attorne&Us fees.

)or lac1 of #erit, the counterclai# is hereb& dis#issed.

B>. *n Civil Case No. "4-'!74

=%> +rderin defendant to pa& plaintiff the su# of P8!,'0'.4 with interest thereon at the leal rate fro# )ebruar& 0,

%!"4 until full& paid and satisfied5

='> +rderin defendant to pa& plaintiff the su# of P4,666.66 as and for attorne&Us fees.

)or lac1 of #erit, the counterclai# is hereb& dis#issed.

Costs aainst the defendant.

3+ +R;ERE;.

*n ti#e, ;elsan appealed to the CA whereat its recourse was doc1eted as CA-K.R. CG No. 86!4%.

*n the herein challened decision, 7 the CA affir#ed the findins of the trial court. *n so rulin, the CA declared that ;elsan

failed to e(ercise the e(traordinar& dilience of a ood father of a fa#il& in the handlin of its caro. Appl&in Article

%70 8 of the Civil Code, the CA ruled that since the discharin of the diesel oil into Calte( bul1 depot had not been

co#pleted at the ti#e the losses occurred, there was no reason to i#pl& that there was actual deliver& of the caro to

Calte(, the consinee. e ?uote the fallo of the CA decision

70











:ERE)+RE, pre#ises considered, the appealed ;ecision of the Reional Trial Court of Manila, Branch 6! in Civil Case

Nos. "4-'!74 and "4-7644! is hereb& A))*RME; with a #odification that attorne&Us fees awarded in Civil Case Nos. "4-

'!74 and "4-7644! are hereb& ;EETE;.

3+ +R;ERE;.

;elsan is now before the Court raisin substantiall& the sa#e issues proffered before the CA.

Principall&, ;elsan insists that the CA co##itted reversible error in rulin that Article %78 of the Civil Code cannote(culpate it fro# liabilit& for the loss of the sub$ect caro and in not appl&in the rule on contributor& nelience aainst

Calte(, the shipper-owner of the caro, and in not ta1in into consideration the fact that the loss due to bac1flow occurred

when the diesel oil was alread& co#pletel& delivered to Calte(.

e are not persuaded.

*n resolvin this appeal, the Court reiterates the oft-stated doctrine that factual findins of the CA, affir#ator& of those of

the trial court, are bindin on the Court unless there is a clear showin that such findins are tainted with arbitrariness,

capriciousness or palpable error. 4

;elsan would have the Court absolve it fro# liabilit& for the loss of its caro on two rounds. )irst, the loss throuh

spillae was partl& due to the contributor& nelience of Calte(5 and 3econd, the loss throuh bac1flow should not be

borne b& ;elsan because it was alread& delivered to Calte(Us shore tan1.

Co##on carriers are bound to observe e(traordinar& dilience in the viilance over the oods transported b& the#. The&

are presu#ed to have been at fault or to have acted nelientl& if the oods are lost, destro&ed or deteriorated. 0 To

overco#e the presu#ption of nelience in case of loss, destruction or deterioration of the oods, the co##on carrier

#ust prove that it e(ercised e(traordinar& dilience. There are, however, e(ceptions to this rule. Article %78 of the Civil

Code enu#erates the instances when the presu#ption of nelience does not attach

Art. %78. Co##on carriers are responsible for the loss, destruction, or deterioration of the oods, unless the sa#e is due

to an& of the followin causes onl&

%> )lood stor#, earth?ua1e, lihtnin, or other natural disaster or cala#it&5

'> Act of the public ene#& in war, whether international or civil5

7> Act or o#ission of the shipper or owner of the oods5

8> The character of the oods or defects in the pac1in or in the containers5

4> +rder or act of co#petent public authorit&.

Both the trial court and the CA unifor#l& ruled that ;elsan failed to prove its clai# that there was a contributor& nelienceon the part of the owner of the oods Calte(. e see no reason to depart therefro#. As aptl& pointed out b& the CA, it

had been established that the pro(i#ate cause of the spillae and bac1flow of the diesel oil was due to the severance of

the port bow #oorin line of the vessel and the failure of the shore tender to close the storae tan1 ate valve even as a

chec1 on the drain coc1 showed that there was still a product on the pipeline. To the two courts below, the actuation of the

auer and the escort surve&or, both personnel fro# the Calte( Bul1 ;epot, neates the alleation that Calte( was re#iss

in its duties. As we see it, the crew of the vessel should have pro#ptl& infor#ed the shore tender that the port #oorin line

was cut off. :owever, ;elsan did not do so on the la#e e(cuse that there was no available banca. As it is, ;elsanUs

personnel sinaled a Dred lihtD which was not a sufficient warnin because such sinal onl& #eant that the pu#pin of

71







diesel oil had been finished. Neither did the blowin of whistle suffice considerin the distance of #ore than ' 1ilo#eters

between the vessel and the Calte( Bul1 ;epot, aside fro# the fact that it was not the areed sinal. :ad the auer and

the escort surve&or fro# Calte( Bul1 ;epot not one aboard the vessel to #a1e in?uiries, the shore tender would have

not 1nown what reall& happened. The crew of the vessel should have e(erted ut#ost effort to i##ediatel& infor# the

shore tender that the port bow #oorin line was severed.

To be sure, ;elsan, as the owner of the vessel, was oblied to prove that the loss was caused b& one of the e(cepted

causes if it were to see1 e(e#ption fro# responsibilit&. 9nfortunatel&, it #iserabl& failed to dischare this burden b& the

re?uired ?uantu# of proof.

;elsanUs aru#ent that it should not be held liable for the loss of diesel oil due to bac1flow because the sa#e had alread&

been actuall& and leall& delivered to Calte( at the ti#e it entered the shore tan1 holds no water. *t had been settled that

the sub$ect caro was still in the custod& of ;elsan because the discharin thereof has not &et been finished when the

bac1flow occurred. 3ince the discharin of the caro into the depot has not &et been co#pleted at the ti#e of the

spillae when the bac1flow occurred, there is no reason to i#pl& that there was actual deliver& of the caro to the

consinee. ;elsan is strainin the issue b& insistin that when the diesel oil entered into the tan1 of Calte( on shore, there

was leall&, at that #o#ent, a co#plete deliver& thereof to Calte(. To be sure, the e(traordinar& responsibilit& of co##on

carrier lasts fro# the ti#e the oods are unconditionall& placed in the possession of, and received b&, the carrier for

transportation until the sa#e are delivered, actuall& or constructivel&, b& the carrier to the consinee, or to a person who

has the riht to receive the#. " The discharin of oil products to Calte( Bul1 ;epot has not &et been finished, ;elsan still

has the dut& to uard and to preserve the caro. The carrier still has in it the responsibilit& to uard and preserve theoods, a dut& incident to its havin the oods transported.

To recapitulate, co##on carriers, fro# the nature of their business and for reasons of public polic&, are bound to observe

e(traordinar& dilience in viilance over the oods and for the safet& of the passeners transported b& the#, accordin to

all the circu#stances of each case. ! The #ere proof of deliver& of oods in ood order to the carrier, and their arrival in

the place of destination in bad order, #a1e out a pri#a facie case aainst the carrier, so that if no e(planation is iven as

to how the in$ur& occurred, the carrier #ust be held responsible. *t is incu#bent upon the carrier to prove that the loss was

due to accident or so#e other circu#stances inconsistent with its liabilit&. %6

All told, ;elsan, bein a co##on carrier, should have e(ercised e(traordinar& dilience in the perfor#ance of its duties.

Conse?uentl&, it is oblied to prove that the da#ae to its caro was caused b& one of the e(cepted causes if it were tosee1 e(e#ption fro# responsibilit&. %% :avin failed to do so, ;elsan #ust bear the conse?uences.

:ERE)+RE, petition is ;EN*E; and the assailed decision of the CA is A))*RME; in toto.

Cost aainst petitioner.

3+ +R;ERE;.

CNCIO C. GRCI

Associate 2ustice

3EC+N; ;*G*3*+N

=G.R. No. 135. M"( 31, &005>

GU INSURNCE CORPORTION, petitioner, vs. THE COURT O PPELS, SN MIGUEL CORPORTION, "#$

ESTTE O NG GUI, (/'(/7/#/$ 2y LUCIO, JULIN, "#$ JIME, "ll 7u(#"/$ NG, "#$ CO

TO,respondents.

=G.R. No. 1*00*. M"( 31, &005>

72
















ESTTE O NG GUI, R/'(/7/#/$ 2y LUCIO, JULIN "#$ JIME, "ll 7u(#"/$ NG, "#$ CO TO, petitioners, vs

THE HONORLE COURT O PPELS, SN MIGUEL CORP., "#$ GU INSURNCE CORP.,respondents.

D E C I S I O N

CHICO-NRIO, J .%

Before 9s are two separate Petitions for review assailin the ;ecision % of the Court of Appeals in CA-K.R. CG No

8!0'8 entitled, 3an Miuel Corporation, Plaintiff-Appellee versus Estate of An Kui, represented b& ucio, 2ulian and2ai#e, all surna#ed An, and Co To, ;efendants-Appellants, ThirdPart& Plaintiffs versus )K9 *nsurance Corporation,

Third-Part& ;efendant-Appellant, which affir#ed in toto the decision' of the Reional Trial Court of Cebu Cit&, Branch ''

The dispositive portion of the Court of Appeals decision reads

:ERE)+RE, for all the foreoin, $ud#ent is hereb& rendered as follows

%> +rderin defendants to pa& plaintiff the su# of P%,780,%!.66 and an interest of

0I per annu# to be rec1oned fro# the filin of this case on +ctober ', %!!65

'> +rderin defendants to pa& plaintiff the su# of P'4,666.66 for attorne&s fees

and an additional su# of P%6,666.66 as litiation e(penses5

7> ith cost aainst defendants.

)or the Third-Part& Co#plaint

%> +rderin third-part& defendant )K9 *nsurance Co#pan& to pa& and rei#burse defendants the a#ount of P07',66.66.7

T/ "7

Evidence shows that Anco Enterprises Co#pan& =ANC+>, a partnership between An Kui and Co To, was enaed

in the shippin business. *t owned the MHT ANC+ tuboat and the ;HB ucio bare which were operated as co##oncarriers. 3ince the ;HB ucio had no enine of its own, it could not #aneuver b& itself and had to be towed b& a tuboat

for it to #ove fro# one place to another.

+n '7 3epte#ber %!!, 3an Miuel Corporation =3MC> shipped fro# Mandaue Cit&, Cebu, on board the ;HB ucio,

for towae b& MHT ANC+, the followin caroes

Bill of adin No. 3hip#ent ;estination

% '4,666 cases Pale Pilsen Estancia, *loilo

746 cases Cervea Nera Estancia, *loilo

' %4,666 cases Pale Pilsen 3an 2ose, Anti?ue

'66 cases Cervea Nera 3an 2ose, Anti?ue

The consinee for the caroes covered b& Bill of adin No. % was 3MCs Beer Mar1etin ;ivision =BM;>-Estancia

Beer 3ales +ffice, Estancia, *loilo, while the consinee for the caroes covered b& Bill of adin No. ' was 3MCs BM;-

3an 2ose Beer 3ales +ffice, 3an 2ose, Anti?ue.

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http://sc.judiciary.gov.ph/jurisprudence/2005/mar2005/137775.htm#_ftn1









The ;HB ucio was towed b& the MHT ANC+ all the wa& fro# Mandaue Cit& to 3an 2ose, Anti?ue. The vessels arrived

at 3an 2ose, Anti?ue, at about one ocloc1 in the afternoon of 76 3epte#ber %!!. The tuboat MHT ANC+ left the bare

i##ediatel& after reachin 3an 2ose, Anti?ue.

hen the bare and tuboat arrived at 3an 2ose, Anti?ue, in the afternoon of 76 3epte#ber %!!, the clouds over

the area were dar1 and the waves were alread& bi. The arrastre wor1ers unloadin the caroes of 3MC on board the ;HB

ucio bean to co#plain about their difficult& in unloadin the caroes. 3MCs ;istrict 3ales 3upervisor, )ernando

Macabua, re?uested ANC+s representative to transfer the bare to a safer place because the vessel #iht not be able

to withstand the bi waves.

ANC+s representative did not heed the re?uest because he was confident that the bare could withstand the waves

This, notwithstandin the fact that at that ti#e, onl& the MHT ANC+ was left at the wharf of 3an 2ose, Anti?ue, as all other

vessels alread& left the wharf to see1 shelter. ith the waves rowin bier and bier, onl& Ten Thousand 3even

:undred Ninet& =%6,!6> cases of beer were dischared into the custod& of the arrastre operator.

At about ten to eleven ocloc1 in the evenin of 6% +ctober %!!, the crew of ;HB ucio abandoned the vesse

because the bares rope attached to the wharf was cut off b& the bi waves. At around #idniht, the bare run around

and was bro1en and the caroes of beer in the bare were swept awa&.

As a result, ANC+ failed to deliver to 3MCs consinee Twent&-Nine Thousand Two :undred Ten ='!,'%6> cases of

Pale Pilsen and )ive :undred )ift& =446> cases of Cervea Nera. The value per case of Pale Pilsen was )ort&-)ivePesos and Twent& Centavos =P84.'6>. The value of a case of Cervea Nera was )ort&-3even Pesos and Ten Centavos

=P8.%6>, hence, 3MCs clai# aainst ANC+ a#ounted to +ne Million Three :undred )ort&-3i( Thousand +ne :undred

Ninet&-3even Pesos =P%,780,%!.66>.

As a conse?uence of the incident, 3MC filed a co#plaint for Breach of Contract of Carriae and ;a#aes aainst

ANC+ for the a#ount of +ne Million Three :undred )ort&-3i( Thousand +ne :undred Ninet&-3even Pesos

=P%,780,%!.66> plus interest, litiation e(penses and Twent&-)ive Percent ='4I> of the total clai# as attorne&s fees.

9pon An Kuis death, ANC+, as a partnership, was dissolved hence, on '0 2anuar& %!!7, 3MC filed a second

a#ended co#plaint which was ad#itted b& the Court i#pleadin the survivin partner, Co To and the Estate of An Ku

represented b& ucio, 2ulian and 2ai#e, all surna#ed An. The substituted defendants adopted the oriinal answer withcounterclai# of ANC+ since the substantial alleations of the oriinal co#plaint and the a#ended co#plaint are

practicall& the sa#e.

ANC+ ad#itted that the cases of beer Pale Pilsen and Cervea Nera #entioned in the co#plaint were indeed

loaded on the vessel belonin to ANC+. *t clai#ed however that it had an aree#ent with 3MC that ANC+ would not be

liable for an& losses or da#aes resultin to the caroes b& reason of fortuitous event. 3ince the cases of beer Pale

Pilsen and Cervea Nera were lost b& reason of a stor#, a fortuitous event which battered and sun1 the vessel in which

the& were loaded, the& should not be held liable. ANC+ further asserted that there was an aree#ent between the# and

3MC to insure the caroes in order to recover inde#nit& in case of loss. Pursuant to that aree#ent, the caroes to the

e(tent of Twent& Thousand ='6,666> cases was insured with )K9 *nsurance Corporation =)K9> for the total a#ount of

Eiht :undred )ift&-Eiht Thousand )ive :undred Pesos =P"4",466.66> per Marine *nsurance Polic& No. '!4!%.

3ubse?uentl&, ANC+, with leave of court, filed a Third-Part& Co#plaint aainst )K9, allein that before the vessel

of ANC+ left for 3an 2ose, Anti?ue with the caroes owned b& 3MC, the caroes, to the e(tent of Twent& Thousand

='6,666> cases, were insured with )K9 for a total a#ount of Eiht :undred )ift&-Eiht Thousand )ive :undred Pesos

=P"4",466.66> under Marine *nsurance Polic& No. '!4!%. ANC+ further alleed that on or about 6' +ctober %!!, b&

reason of ver& stron winds and heav& waves brouht about b& a passin t&phoon, the vessel run around near the

vicinit& of 3an 2ose, Anti?ue, as a result of which, the vessel was totall& wrec1ed and its caroes owned b& 3MC were lost

andHor destro&ed. Accordin to ANC+, the loss of said caroes occurred as a result of ris1s insured aainst in the

insurance polic& and durin the e(istence and lifeti#e of said insurance polic&. ANC+ went on to assert that in the re#ote

74



possibilit& that the court will order ANC+ to pa& 3MCs clai#, the third-part& defendant corporation should be held liable to

inde#nif& or rei#burse ANC+ whatever a#ounts, or da#aes, it #a& be re?uired to pa& to 3MC.

*n its answer to the Third-Part& co#plaint, third-part& defendant )K9 ad#itted the e(istence of the *nsurance Polic&

under Marine Cover Note No. '!4!% but #aintained that the alleed loss of the caroes covered b& the said insurance

polic& cannot be attributed directl& or indirectl& to an& of the ris1s insured aainst in the said insurance polic&. Accordin to

)K9, it is onl& liable under the polic& to Third-part& Plaintiff ANC+ andHor Plaintiff 3MC in case of an& of the followin

a> total loss of the entire ship#ent5

b> loss of an& case as a result of the sin1in of the vessel5 or

c> loss as a result of the vessel bein on fire.

)urther#ore, )K9 alleed that the Third-Part& Plaintiff ANC+ and Plaintiff 3MC failed to e(ercise ordinar& dilience

or the dilience of a ood father of the fa#il& in the care and supervision of the caroes insured to prevent its loss andHor

destruction.

Third-Part& defendant )K9 pra&ed for the dis#issal of the Third-Part& Co#plaint and as1ed for actual, #oral, and

e(e#plar& da#aes and attorne&s fees.%

The trial court found that while the caroes were indeed lost due to fortuitous event, there was failure on ANC+s part

throuh their representatives, to observe the deree of dilience re?uired that would e(onerate the# fro# liabilit&. The tria

court thus held the Estate of An Kui and Co To liable to 3MC for the a#ount of the lost ship#ent. ith respect to the

Third-Part& co#plaint, the court a ?uo found )K9 liable to bear )ift&-Three Percent =47I> of the a#ount of the lost

caroes. Accordin to the trial court

. . . Evidence is to the effect that the ;HB ucio, on which the caro insured, run-around and was bro1en and the beer

caroes on the said bare were swept awa&. It is the sense of this ourt that the risk insured aainst 0as the cause of the

loss.

. . .

3ince the total caro was 86,446 cases which had a total a#ount of P%,"77,!64.66 and the a#ount of the polic& was onl&

for P"4",466.66, defendants as assured, therefore, 0ere considered co-insurers of third-party defendant GU Insurance

orporation to the e2tent of ;>B,=<B.<< value of the caro.Conse?uentl&, inas#uch as there was partial loss of onl&

P%,780,%!.66, the assured shall bear 47I of the loss8 E#phasis ours

The appellate court affir#ed in toto the decision of the lower court and denied the #otion for reconsideration and the

supple#ental #otion for reconsideration.

:ence, the petitions.

T/ I77u/7

*n K.R. No. %74, the rounds for review raised b& petitioner )K9 can be su##aried into two %> hether or not

respondent Court of Appeals co##itted rave abuse of discretion in holdin )K9 liable under the insurance contract

considerin the circu#stances surroundin the loss of the caroes5 and '> hether or not the Court of Appeals co##itted

an error of law in holdin that the doctrine of res 4udicata applies in the instant case.

75






*n K.R. No. %8668, petitioner Estate of An Kui and Co To assail the decision of the appellate court based on the

followin assin#ents of error %> The Court of Appeals co##itted rave abuse of discretion in affir#in the findins of

the lower court that the nelience of the crew#e#bers of the ;HB ucio was the pro(i#ate cause of the loss of the

caroes5 and '> The respondent court acted with rave abuse of discretion when it ruled that the appeal was without #erit

despite the fact that said court had accepted the decision in Civil Case No. R-%!78%, as affir#ed b& the Court of Appeals

and the 3upre#e Court, as res 4udicata.

Rul)#A o / Cou(

)irst, we shall endeavor to dispose of the co##on issue raised b& both petitioners in their respective petitions for

review, that is, whether or not the doctrine of res 4udicata applies in the instant case.

*t is ANC+s contention that the decision in Civil Case No. R-%!78%, 4 which was decided in its favor, constitutes res

4udicata with respect to the issues raised in the case at bar.

The contention is without #erit. There can be no res 4udicata as between Civil Case No. R-%!78% and the case a

bar. *n order for res 4udicata to be #ade applicable in a case, the followin essential re?uisites #ust be present %> the

for#er $ud#ent #ust be final5 '> the for#er $ud#ent #ust have been rendered b& a court havin $urisdiction over the

sub$ect #atter and the parties5 7> the for#er $ud#ent #ust be a $ud#ent or order on the #erits5 and 8> there must be

bet0een the first and second action identity of parties, identity of sub4ect matter, and identity of causes of action. 0

There is no ?uestion that the first three ele#ents of res $udicata as enu#erated above are indeed satisfied b& the

decision in Civil Case No. R-%!78%. :owever, the doctrine is still inapplicable due to the absence of the last essential

re?uisite of identit& of parties, sub$ect #atter and causes of action.

The parties in Civil Case No. R-%!78% were ANC+ as plaintiff and )K9 as defendant while in the instant case, 3MC

is the plaintiff and the Estate of An Kui represented b& ucio, 2ulian and 2ai#e, all surna#ed An and Co To as

defendants, with the latter #erel& i#pleadin )K9 as third-part& defendant.

The sub$ect #atter of Civil Case No. R-%!78% was the insurance contract entered into b& ANC+, the owner of the

vessel, with )K9 coverin the vessel ;HB ucio, while in the instant case, the sub$ect #atter of litiation is the loss of the

caroes of 3MC, as shipper, loaded in the ;HB ucio and the resultin failure of ANC+ to deliver to 3MCs consinees thelost caro. +therwise stated, the controvers& in the first case involved the rihts and liabilities of the shipowner vis--

vis that of the insurer, while the present case involves the rihts and liabilities of the shipper vis--vis that of the shipowner

3pecificall&, Civil Case No. R-%!78% was an action for 3pecific Perfor#ance and ;a#aes based on )K9 Marine :ull

*nsurance Polic& No. GM)-M:-%74%! coverin the vessel ;HB ucio, while the instant case is an action for Breach of

Contract of Carriae and ;a#aes filed b& 3MC aainst ANC+ based on Bill of adin No. % and No. ', with defendant

ANC+ see1in rei#burse#ent fro# )K9 under *nsurance Polic& No. MA-4"8"0, should the for#er be held liable to pa&

3MC.

Moreover, the sub$ect #atter of the third-part& co#plaint aainst )K9 in this case is different fro# that in Civil Case

No. R-%!78%. *n the latter, ANC+ was suin )K9 for the insurance contract over the vessel while in the for#er, the third-

part& co#plaint arose fro# the insurance contract coverin the caroes on board the ;HB ucio.

The doctrine of res 4udicata precludes the re-litiation of a particular fact or issue alread& passed upon b& a court of

co#petent $urisdiction in a for#er $ud#ent, in another action between the sa#e parties based on a different clai# or

cause of action. The $ud#ent in the prior action operates as estoppel onl& as to those #atters in issue or points

controverted, upon the deter#ination of which the findin or $ud#ent was rendered. *f a particular point or ?uestion is in

issue in the second action, and the $ud#ent will depend on the deter#ination of that particular point or ?uestion, a for#er

$ud#ent between the sa#e parties or their privies will be final and conclusive in the second if that sa#e point or ?uestion

was in issue and ad$udicated in the first suit."

76












3ince the case at bar arose fro# the sa#e incident as that involved in Civil Case No. R-%!78%, onl& findins with

respect to #atters passed upon b& the court in the for#er $ud#ent are conclusive in the disposition of the instant case. A

careful perusal of the decision in Civil Case No. R-%!78% will reveal that the pivotal issues resolved b& the lower court, as

affir#ed b& both the Court of Appeals and the 3upre#e Court, can be su##aried into three leal conclusions %> that the

;HB ucio before and durin the vo&ae was seaworth&5 '> that there was proper notice of loss #ade b& ANC+ within the

rele#entar& period5 and 7> that the vessel ;HB ucio was a constructive total loss.

3aid decision, however, did not pass upon the issues raised in the instant case. Absent therein was an& discussion

reardin the liabilit& of ANC+ for the loss of the caroes. Neither did the lower court pass upon the issue of the alleednelience of the crew#e#bers of the ;HB ucio bein the cause of the loss of the caroes owned b& 3MC.

Therefore, based on the foreoin discussion, we are reversin the findins of the Court of Appeals that there is res

4udicata.

Anent ANC+s first assin#ent of error, i.e., the appellate court co##itted error in concludin that the nelience of

ANC+s representatives was the pro(i#ate cause of the loss, said issue is a ?uestion of fact assailin the lower courts

appreciation of evidence on the nelience or lac1 thereof of the crew#e#bers of the ;HB ucio. As a rule, findins of fac

of lower courts, particularl& when affir#ed b& the appellate court, are dee#ed final and conclusive. The 3upre#e Court

cannot review such findins on appeal, especiall& when the& are borne out b& the records or are based on substantia

evidence.! As held in the case of onato v. ourt of Appeals,%6 in this $urisdiction, it is a funda#ental and settled rule tha

findins of fact b& the trial court are entitled to reat weiht on appeal and should not be disturbed unless for stron andcoent reasons because the trial court is in a better position to e(a#ine real evidence, as well as to observe the

de#eanor of the witnesses while testif&in in the case.%%

*t is not the function of this Court to anal&e or weih evidence all over aain, unless there is a showin that the

findins of the lower court are totall& devoid of support or are larinl& erroneous as to constitute palpable error or rave

abuse of discretion.%'

A careful stud& of the records shows no coent reason to fault the findins of the lower court, as sustained b& the

appellate court, that ANC+s representatives failed to e(ercise the e(traordinar& deree of dilience re?uired b& the law to

e(culpate the# fro# liabilit& for the loss of the caroes.

irst , ANC+ ad#itted that the& failed to deliver to the desinated consinee the Twent& Nine Thousand Two :undred

Ten ='!,'%6> cases of Pale Pilsen and )ive :undred )ift& =446> cases of Cervea Nera.

&econd , it is borne out in the testi#on& of the witnesses on record that the bare ;HB ucio had no enine of its own

and could not #aneuver b& itself. @et, the patron of ANC+s tuboat MHT ANC+ left it to fend for itself notwithstandin the

fact that as the two vessels arrived at the port of 3an 2ose, Anti?ue, sins of the i#pendin stor# were alread& #anifest.

As stated b& the lower court, witness Mr. Anastacio Manila testified that the captain or patron of the tuboat MHT ANC+

left the bare ;HB ucio i##ediatel& after it reached 3an 2ose, Anti?ue, despite the fact that there were alread& bi waves

and the area was alread& dar1. This is corroborated b& defendants own witness, Mr. )ernando Macabue. %7

The trial court continued

At that precise #o#ent, since it is the dut& of the defendant to e(ercise and observe e(traordinar& dilience in the

viilance over the caro of the plaintiff, the patron or captain of MHT ANC+, representin the defendant could have placed

;HB ucio in a ver& safe location before the& left 1nowin or sensin at that ti#e the co#in of a t&phoon. The presence of

bi waves and dar1 clouds could have warned the patron or captain of MHT ANC+ to insure the safet& of ;HB ucio

includin its caro. ;HB ucio bein a bare, without its enine, as the patron or captain of MHT ANC+ 1new, could not

possibl& #aneuver b& itself. :ad the patron or captain of MHT ANC+, the representative of the defendants observed

e(traordinar& dilience in placin the ;HB ucio in a safe place, the loss to the caro of the plaintiff could not have

77














occurred. *n short, therefore, defendants throuh their representatives, failed to observe the deree of dilience re?uired

of the# under the provision of Art. %77 of the Civil Code of the Philippines.%8

Petitioners Estate of An Kui and Co To, in their )emorandum, asserted that the contention of respondents 3MC and

)K9 that the crew#e#bers of ;HB ucio should have left port at the onset of the t&phoon is li1e advisin the fish to $u#p

fro# the fr&in pan into the fire and an advice that borders on #adness. %4

The aru#ent does not persuade. The records show that the ;HB ucio was the onl& vessel left at 3an 2ose, Anti?ue

durin the ti#e in ?uestion. The other vessels were transferred and te#poraril& #oved to Malandon, 4 1ilo#eters fro#wharf where the bare re#ained.%0Clearl&, the transferred vessels were definitel& safer in Malandon than at the port of

3an 2ose, Anti?ue, at that particular ti#e, a fact which petitioners failed to dispute

ANC+s aru#ents boil down to the clai# that the loss of the caroes was caused b& the t&phoon &isan , a fortuitous

event =caso fortuito>, and there was no fault or nelience on their part. *n fact, ANC+ clai#s that their crew#e#bers

e(ercised due dilience to prevent or #ini#ie the loss of the caroes but their efforts proved no #atch to the forces

unleashed b& the t&phoon which, in petitioners own words was, b& an& &ardstic1, a natural cala#it&, a fortuitous event, an

act of Kod, the conse?uences of which petitioners could not be held liable for.%

The Civil Code provides

(. 133. Co##on carriers, fro# the nature of their business and for reasons of public polic& are bound to observe

e(traordinar& dilience in the viilance over the oods and for the safet& of the passeners transported b& the#,

accordin to all the circu#stances of each case.

3uch e(traordinar& dilience in viilance over the oods is further e(pressed in Articles %78, %74, and %84 Nos. 4, 0,

and . . .

(. 13*. Co##on carriers are responsible for the loss, destruction, or deterioration of the oods, unless the sa#e is

due to an& of the followin causes onl&

=%> )lood, stor#, earth?ua1e, lihtnin, or other natural disaster or cala#it&5

. . .

(. 139. In order that the common carrier may be exempted from responsibility, the natral disaster mst have

been the proximate and only case of the loss. :owever, the co##on carrier #ust e(ercise due dilience to prevent

or #ini#ie loss before, durin and after the occurrence of flood, stor#, or other natural disaster in order that the co##on

carrier #a& be e(e#pted fro# liabilit& for the loss, destruction, or deterioration of the oods . . . =E#phasis supplied>

aso fortuito or force ma4eure =which in law are identical insofar as the& e(e#pt an oblior fro# liabilit&> %" b&

definition, are e(traordinar& events not foreseeable or avoidable, events that could not be foreseen, or which thouh

foreseen, were inevitable. *t is therefore not enouh that the event should not have been foreseen or anticipated, as is

co##onl& believed but it #ust be one i#possible to foresee or to avoid.%!

*n this case, the cala#it& which caused the loss of the caroes was not unforeseen nor was it unavoidable. *n fact,

the other vessels in the port of 3an 2ose, Anti?ue, #anaed to transfer to another place, a circu#stance which pro#pted

3MCs ;istrict 3ales 3upervisor to re?uest that the ;HB ucio be li1ewise transferred, but to no avail. The ;HB ucio had

no enine and could not #aneuver b& itself. Even if ANC+s representatives wanted to transfer it, the& no loner had an&

#eans to do so as the tuboat MHT ANC+ had alread& departed, leavin the bare to its own devices. The captain of the

tuboat should have had the foresiht not to leave the bare alone considerin the pendin stor#.

78















hile the loss of the caroes was ad#ittedl& caused b& the t&phoon &isan , a natural disaster, ANC+ could no

escape liabilit& to respondent 3MC. The records clearl& show the failure of petitioners representatives to e(ercise the

e(traordinar& deree of dilience #andated b& law. To be e(e#pted fro# responsibilit&, the natural disaster should have

been the pro(i#ate and onl& cause of the loss. '6There #ust have been no contributor& nelience on the part of the

co##on carrier. As held in the case of (impanco &ons v. Danco &teamship o.'%

. . . To be e(e#pt fro# liabilit& because of an act of Kod, the tu #ust be free fro# an& previous nelience or #isconduct

b& which that loss or da#ae #a& have been occasioned. )or, althouh the i##ediate or pro(i#ate cause of the loss in

an& iven instance #a& have been what is ter#ed an act of Kod, &et, if the tu unnecessaril& e(posed the two to suchaccident b& an& culpable act or o#ission of its own, it is not e(cused. ''

Therefore, as correctl& pointed out b& the appellate court, there was blatant nelience on the part of MHT ANC+s

crew#e#bers, first in leavin the enine-less bare ;HB ucio at the #erc& of the stor# without the assistance of the

tuboat, and aain in failin to heed the re?uest of 3MCs representatives to have the bare transferred to a safer place

as was done b& the other vessels in the port5 thus, #a1in said blatant nelience the pro(i#ate cause of the loss of the

caroes.

e now co#e to the issue of whether or not )K9 can be held liable under the insurance polic& to rei#burse ANC+

for the loss of the caroes despite the findins of the respondent court that such loss was occasioned b& the blatant

nelience of the latters e#plo&ees.

+ne of the purposes for ta1in out insurance is to protect the insured aainst the conse?uences of his own

nelience and that of his aents. Thus, it is a basic rule in insurance that the carelessness and nelience of the insured

or his aents constitute no defense on the part of the insurer.'7 This rule however presupposes that the loss has occurred

due to causes which could not have been prevented b& the insured, despite the e(ercise of due dilience.

The ?uestion now is whether there is a certain deree of nelience on the part of the insured or his aents that will

deprive hi# the riht to recover under the insurance contract. e sa& there is. :owever, to what e(tent such nelience

#ust o in order to e(onerate the insurer fro# liabilit& #ust be evaluated in liht of the circu#stances surroundin each

case. hen evidence show that the insureds nelience or rec1lessness is so ross as to be sufficient to constitute a

willful act, the insurer #ust be e(onerated.

*n the case of &tandard )arine Ins. o. v. 9ome 'each (. / !. o.,'8 the 9nited 3tates 3upre#e Court held that

The ordinar& nelience of the insured and his aents has lon been held as a part of the ris1 which the insurer ta1es

upon hi#self, and the e(istence of which, where it is the pro(i#ate cause of the loss, does not absolve the insurer fro#

liabilit&. 'ut 0illful e2posure, ross nelience, nelience amountin to misconduct, etc., have often been held to release

the insurer from such liability .'4 E#phasis ours

. . .

*n the case of illia#s v. New Enland *nsurance Co., 7 Cliff. '88, )ed. Cas. No. %,7%, the owners of an insured vessel

atte#pted to put her across the bar at :atteras *nlet. 3he struc1 on the bar and was wrec1ed. The #aster 1new that the

depth of water on the bar was such as to #a1e the atte#pted passae danerous. 2ude Clifford held that, under the

circu#stances, the loss was not within the protection of the polic&, sa&in

Authorities to prove that persons insured cannot recover for a loss occasioned b& their own wronful acts are hardl&

necessar&, as the proposition involves an ele#entar& principle of universal application. osses #a& be recovered b& the

insured, thouh re#otel& occasioned b& the nelience or #isconduct of the #aster or crew, if pro(i#atel& caused b& the

perils insured aainst, because such #ista1es and nelience are incident to naviation and constitute a part of the perils

which those who enae in such adventures are oblied to incur5 but it 0as never supposed that the insured could

79


















recover indemnity for a loss occasioned by his o0n 0ronful act or by that of any aent for 0hose conduct he 0as

responsible.'0 E#phasis ours

)ro# the above-#entioned decision, the 9nited 3tates 3upre#e Court has #ade a distinction between ordinar&

nelience and ross nelience or nelience a#ountin to #isconduct and its effect on the insureds riht to recover

under the insurance contract. Accordin to the Court, while #ista1e and nelience of the #aster or crew are incident to

naviation and constitute a part of the perils that the insurer is oblied to incur, such nelience or rec1lessness #ust not

be of such ross character as to a#ount to #isconduct or wronful acts5 otherwise, such nelience shall release the

insurer fro# liabilit& under the insurance contract.

*n the case at bar, both the trial court and the appellate court had concluded fro# the evidence that the

crew#e#bers of both the ;HB ucio and the MHT ANC+ were blatantl& nelient. To wit

There was blatant nelience on the part of the e#plo&ees of defendants-appellants when the patron =operator> of the tu

boat i##ediatel& left the bare at the 3an 2ose, Anti?ue wharf despite the loo#in bad weather. Nelience was li1ewise

e(hibited b& the defendants-appellants representative who did not heed Macabuas re?uest that the bare be #oved to a

#ore secure place. The prudent thin to do, as was done b& the other sea vessels at 3an 2ose, Anti?ue durin the ti#e in

?uestion, was to transfer the vessel to a safer wharf. !he nelience of the defendants-appellants is proved by the fact

that on <? October ?;>;, the only simple vessel left at the 0harf in &an Jose 0as the E' (ucio .' E#phasis ours

As stated earlier, this Court does not find an& reason to deviate fro# the conclusion drawn b& the lower court, assustained b& the Court of Appeals, that ANC+s representatives had failed to e(ercise e(traordinar& dilience re?uired of

co##on carriers in the ship#ent of 3MCs caroes. 3uch blatant nelience bein the pro(i#ate cause of the loss of the

caroes a#ountin to +ne Million Three :undred )ort&-3i( Thousand +ne :undred Ninet&-3even Pesos =P%,780,%!.66>

This Court, ta1in into account the circu#stances present in the instant case, concludes that the blatant nelience

of ANC+s e#plo&ees is of such ross character that it a#ounts to a wronful act which #ust e(onerate )K9 fro# liabilit&

under the insurance contract.

;HEREORE, pre#ises considered, the ;ecision of the Court of Appeals dated '8 )ebruar& %!!! is hereb&

A))*RME; with M+;*)*CAT*+N dis#issin the third-part& co#plaint.

SO ORDERED.

8uno, Fhairman, Austria-)artine+, alle4o, &r., and !ina, JJ., concur.


SUPREME COURT

Manila

3EC+N; ;*G*3*+N

G.R. No. 101*&6 M"y 1, 1993

PHILIPPINE MERICN GENERL INSURNCE COMPN+, INC., petitioner,

vs.

COURT O PPELS "#$ TRNSPCIIC TO;GE, INC., respondents.

80








anchor chain stopper ave wa&. The vessel sustained holes in the enine roo# and there was a power

failure in the vessel. ater started to fill the enine roo# and at about 0%4 A.M. the enine bro1e down.

The ship#aster had no choice but to order the ship to be abandoned. :e told the crew to secure the

vessel while he went to the Municipal Ma&or of Pasacao to re?uest for police assistance to prevent

pilferae of the vessel and its caro. :e was, however, unable to et an& assistance. hen he returned to

the vessel he found that it was bein continuousl& pounded b& the stron sea waves aainst the roc1s.

This caused the vessel to brea1 into two ='> parts and to sin1 partiall&. The ship#aster reported the

incident to the Philippine Coast Kuard but inspite the presence of three =7> coast uards, nothin could bedone about the pilferae done on the vessel and its caro. Al#ost the whole barrio and because there

were so #an& of the# the crew and the uards were helpless to stop the pilferae and lootin. As a result

of the incident the caro of ce#ent was da#aed while the K* sheets were looted and nothin was left of

the undischared pieces.

The total nu#ber of ce#ent bas da#aed andHor lost was '0,8'8 costin P%,640,!06.66 while there

were 8,666 pieces of the K* sheets unrecovered, the cost of which was P848,'46.66.

Because the caro was insured b& it the Philippine A#erican Keneral *nsurance Co., *nc. paid the shipper

;avao 9nion Mar1etin Corporation the su# of P%,4%%,'%6.66. Thereafter, the said insurer #ade

de#ands upon the Transpacific Towae, *nc. for the pa&#ent of said a#ount as subroee of the insured,

clai#in that the loss of the caro was directl& and e(clusivel& brouht about b& the fault and nelienceof the ship#aster and the crew of MHG DCra& :orseD. Because the latter refused to pa& the a#ount of

P%,4%%,'%6.66 de#anded, the Philippine A#erican Keneral *nsurance Co., *nc. filed the present

co#plaint.

The lower court found that althouh the i##ediate cause of the loss #a& have been due to an act of Kod

the defendant carrier had e(posed the propert& to the accident. The court also found plaintiff uilt& of

contributor& nelience and #itiated the plaintiffs clai# to three-fourths =7H8> of its value. Thus the lower

court, in its ;ecision, ordered the defendant

%> To pa& plaintiff the #itiated a#ount of P%,%77,86".66 plus %'I leal interest per annumco#puted

fro# the date of the filin of herein co#plaint on Ma& %4, %!"0, until dul& paid5

'> To pa& P",666.66 as attorne&s fees5 and

7> To pa& costs of suit.

3+ +R;ERE;.

*n its now assailed decision, respondent Court of Appeals reversed the decision of the trial court and ruled instead that

private respondent, as a co##on carrier, is not responsible for the loss of the insured caro involved in the case at bar, as

said loss was due solel& to a fortituous event.

Petitioner in the present petition contends that respondent appellate court erred in not holdin private respondent liable for

the loss of the said insured caro.

e affir# the decision of the Court of Appeals.

*t is not disputed that private respondent is a co##on carrier as defined in Article %7' of the Civil Code. 3 The followin

facts are also not contested =%> that the caro-carr&in vessel was wrec1ed and partiall& san1 on %" +ctober %!"4 due to

t&phoon D3alinD5 ='> that t&phoon D3alinD was a fortuitous event5 and =7> that at the ti#e said vessel san1, the re#ainin

undischared caro, consistin of '0,8'8 ce#ent bas and 8,666 pieces of K.*. sheets, were still on board the vessel.82



:owever, the Court notes the fact that as of % +ctober %!"4, the ti#e when the Pasacao area was placed under stor#

sinal No. 7 due to D3alinD, the unloadin of the caro fro# the vessel was still unfinished, notwithstandin the lapse of

fort& =86> da&s fro# the ti#e the vessel arrived in Pasacao on 3epte#ber %!"4, or the lapse of thirt&-four =78> da&s fro#

the ti#e actual dischare of the caro co##enceds on %7 3epte#ber %!"4.

*n the opinion of the trial court, this lapse of thirt& four =78> da&s with private respondent not havin co#pleted the

unloadin of the oods, is tanta#ount to unreasonable dela&, which dela& e(posed the unloaded caro to accident. The

trial court held private respondent liable for the loss of oods under Article %86 of the Civil Code which provides that if the

co##on carrier neliently incurs in dela& in transportin the oods, a natural disaster shall not free the carrier fro#responsibilit&.

+n the other hand, the appellate court ruled out an& nelience co##itted b& private respondent and held that the dela&

in full& unloadin the caro fro# the vessel Dwas occasioned b& causes that #a& not be attributed solel& to hu#an factors,

a#on which were the natural conditions of the port where the MHG DCra& :orseD had doc1ed, the custo#s of the place

and the weather conditions. *

The appellate court in e(e#ptin private respondent fro# liabilit& applied Article %7! of the Civil Code which provides as

follows

*n order that the co##on carrier #a& be e(e#pted fro# responsibilit&, the natural disaster #ust have

been the pro(i#ate and onl& cause of the loss. :owever, the co##on carrier #ust e(ercise due dilienceto prevent or #ini#ie loss before, durin and after the occurrence of flood, stor#, or other natural

disaster in order that the co##on carrier #a& be e(e#pted fro# liabilit& for the loss, destruction, or

deterioration of the oods.

The appellate court ruled that the los of caro in the present case was due solel& to t&phoon D3alinD and that private

respondent had shown that it had observed due dilience before, durin and after the occurrence of D3alinD5 hence, it

should not be liable under Article %7!.

Considerin the disputed fact that there reall& was dela& in co#pletin the unloadin of the oods fro# the vessel, the

Court believes that the real issue at bar centers on the application of Article %86 of the Civil Code. *n short, the principal

?uestion, in deter#inin which of the parties in the present case should bear the loss of the oods, is whether the dela&involved in the unloadin of the oods is dee#ed nelientl& incurred in, so as not to free private respondent fro# liabilit&,

notwithstandin the fact that the ulti#ate cause of the loss of the oods was the sin1in of the vessel brouht about b&

t&phoon D3alin.D

*ndeed, fro# the ti#e the vessel arrived at port Pasacao on 3epte#ber %!"4 up to % +ctober %!"4 when the Pasacao

area was placed under stor# sinal No. 7 due to t&phoon D3alinD, fort& =86> da&s had passed. 9nder nor#al conditions, a

period of fort& =86> da&s is undoubtedl& #ore than enouh ti#e within which the unloadin of the caro =iven its nature>

fro# the vessel could be co#pleted. :ence, the ?uestion boils down further to which part& should be faulted for this dela&.

Private respondent arues that its dut& to unload ceased on 3epte#ber %!"4 when the ship#aster notified the

consinees DNotif&-Part&D that the vessel was read& to dischare the caro. +n the other hand, petitioner contends that

the dut& to unload the caro fro# the vessel continued to re#ain with private respondent. Respondent appellate court,

however, ruled that the ?uestion as to which part& had the tas1 to dischare the caro is actuall& i##aterial under the

circu#stances, as the dela& could not be attributed to an& of the parties, but to several causes such as the natural

conditions of the Pasacao port, the custo#s of the place and the weather conditions obtainin at the ti#e. The appellate

court #ade the followin observations

((( ((( (((

83



Althouh we find private respondent free fro# liabilit& for the loss of the caro, we disaree with its contention that the

doctrine of res 4udicata applies in the case at bar, because the Board of Marine *n?uir& rendered a decision dated %% April

%!"" =actin on the #arine protest filed on %! +ctober %!"4 b& the ship#aster of MHG DCra& :orseD> holdin that said

ship#aster was not uilt& of Dnelience as the pro(i#ate cause of the roundin and subse?uent wrec1ae of MH3

DCra& :orseD, hence, reco##endin that the captain, his officers and crew be absolved fro# an& ad#inistrative liabilit&

arisin out of the sub$ect incident.D

The resolution of the present case is not barred b& the $ud#ent of the Board of Marine *n?uir&. +ne of the re?uisites of

the principle of res 4udicata is that there #ust be, a#on other thins, identit& of sub$ect #atters and causes of actionbetween a first and second case in order that the $ud#ent in the prior case #a& bar that in the subse?uent case. 8

The cause of action in the #arine protest was to enforce the ad#inistrative liabilit& of the ship#asterHcaptain of MHG

DCra& :orseD, its officers and crew for the wrec1ae and sin1in of the sub$ect vessel. +n the other hand, the cause of

action at bar is to enforce the civil liabilit& of private respondent, a co##on carrier, for its failure to unload the sub$ect

caro within a period of ti#e considered unreasonabl& lon b& the petitioner. hile it #a& be true that the Court is bound

to accord reat weiht to factual findins of the Board, 9 we hold that the protest filed before it and the present case assert

different causes of action and see1 different reliefs.

All told, we find private respondent not leall& liable for the loss of the insured caro involved in the present case.

:ERE)+RE, the petition is ;EN*E;. The appealed decision of the Court of Appeals, dated 7% 2ul& %!!%, rendered inCA-K.R. CG No. '%'4', is hereb& A))*RME;.

3+ +R;ERE;.

9arvasa, .J., %ealado and 9ocon, JJ., concur.

T:*R; ;*G*3*+N

=G.R. No. 1*6018. Ju#/ &5, &003>

EDGR CO4LIONG SHIPPING LINES, INC., petitioner, vs. UCP GENERL INSURNCE COMPN+INC.,respondent .

D E C I S I O N

PNGNIN, J .%

The liabilit& of a co##on carrier for the loss of oods #a&, b& stipulation in the bill of ladin, be li#ited to the value

declared b& the shipper. +n the other hand, the liabilit& of the insurer is deter#ined b& the actual value covered b& the

insurance polic& and the insurance pre#iu#s paid therefor, and not necessaril& b& the value declared in the bill of ladin.

T/ C"7/

Before the Court is a Petition for Review% under Rule 84 of the Rules of Court, see1in to set aside the Auust 7%,

'666 ;ecision' and the Nove#ber %, '666 Resolution7 of the Court of Appeals 8 =CA> in CA-KR 3P No. 0'4%. The

dispositive part of the ;ecision reads

*N T:E *K:T +) T:E )+REK+*NK, the appeal is GRNTED. The ;ecision appealed fro# is REERSED. Petitioner

is hereb& conde#ned to pa& to respondent the total a#ount of P%8",466.66, with interest thereon, at the rate of 0I per

85

http://sc.judiciary.gov.ph/jurisprudence/2003/jun2003/146018.htm#_ftn1











annu#, fro# date of this ;ecision of the Court.Respondents clai# for attorne&s fees is DISMISSED. Petitioners

counterclai#s are DISMISSED.4

The assailed Resolution denied petitioners Motion for Reconsideration.

+n the other hand, the disposition of the Reional Trial Courts 0 ;ecision, which was later reversed b& the CA

states

:ERE)+RE, pre#ises considered, the case is hereb& ;*3M*33E; for lac1 of #erit.

No cost."

T/ "7

The facts of the case are su##aried b& the appellate court in this wise

3o#eti#e on ;ece#ber %%, %!!%, Nestor Anelia delivered to the Edar Co1alion 3hippin ines, *nc. =now Co1alion

3hippin ines>, ='/))o#/(> o( 2(/@)y, caro consistin of one =%> carton of Christ#as dcor and two ='> sac1s of plastic

to&s, to be transported on board the M? T"#$"A on itsoy"A/ No. T-189 scheduled to depart fro# Cebu Cit&, on

;ece#ber %', %!!%, for Tanda, 3uriao del 3ur. Petitioner issued )ll o L"$)#A No. 58, freiht prepaid, coverin the

caro. Nestor Anelia was both the shipper and consinee of the caro valued, on the face thereof, in the a#ount

ofP0,466.66. Oosi#o Mercado li1ewise delivered caro to petitioner, consistin of two ='> cartons of plastic to&s and

Christ#as decor, one =%> roll of floor #at and one =%> bundle of various or assorted oods for transportation thereof fro#

Cebu Cit& to Tanda, 3uriao del 3ur, on board the said vessel, and said vo&ae. Petitioner issued )ll o L"$)#A No.

59 coverin the caro which, on the face thereof, was valued in the a#ount of P%8,666.66. 9nder the)ll o L"$)#A,

Oosi#o Mercado was both the shipper and consinee of the caro.

+n ;ece#ber %', %!!%, )eliciana easpi insured the caro, covered b& )ll o L"$)#A No. 59, with the 9CPB Keneral

*nsurance Co., *nc., =(/7'o#$/#> o( 2(/@)y, for the a#ount of P%66,666.66 aainst all ris1s under O'/# Pol)y No.

00&?91?&5* for which she was issued, b& respondent, M"()#/ R)7B No/ No. 18*09 on said date. 3he also insured the

caro covered b& )ll o L"$)#A No. 58, with respondent, for the a#ount of P46,666.66, under O'/# Pol)y No.

00&?91?&5* on the basis of which respondent issued M"()#/ R)7B No/ No. 18*10 on said date.

hen the vessel left port, it had thirt&-four =78> passeners and assorted caro on board, includin the oods of

easpi. After the vessel had passed b& the Mandaue-Mactan Bride, fire ensued in the enine roo#, and, despite

earnest efforts of the officers and crew of the vessel, the fire enulfed and destro&ed the entire vessel resultin in the loss

of the vessel and the caroes therein. The Captain filed the re?uired M"()#/ P(o/7.

3hortl& thereafter, )eliciana easpi filed a clai#, with respondent, for the value of the caro insured under M"()#/ R)7B

No/ No. 18*09 and covered b& )ll o L"$)#A No. 59. 3he sub#itted, in support of her clai#, a R//)', dated

;ece#ber %%, %!!%, purportedl& sined b& Oosi#o Mercado, andO($/( Sl)'7 purportedl& sined b& hi# for the oods he

received fro# )eliciana easpi valued in the a#ount of P%%6,640.66. Respondent approved the clai# of )eliciana

easpi and drew and issued 9CPB Chec1 No. 0%'!7!, dated March !, %!!', in the net a#ount of P!!,666.66, in

settle#ent of her clai# after which she e(ecuted a Su2(oA")o# R//)'?D//$, for said a#ount, in favor of respondent.

3he also filed a clai# for the value of the caro covered b& )ll o L"$)#A No. 58. 3he sub#itted to respondent

a R//)', dated ;ece#ber %%, %!!% and O($/( Sl)'7, purportedl& sined b& Nestor Anelia for the oods he received

fro# )eliciana easpi valued at P06,77".66. Respondent approved her clai# and re#itted to )eliciana easpi the net

a#ount of P8!,466.66, after which she sined a Su2(oA")o# R//)'?D//$, dated March !, %!!', in favor of

respondent.

+n 2ul& %8, %!!', respondent, as subroee of )eliciana easpi, filed a co#plaint anchored on torts aainst petitioner,

with the Reional Trial Court of Ma1ati Cit&, for the collection of the total principal a#ount of P%8",466.66, which it paid to

86













)eliciana easpi for the loss of the caro, pra&in that $ud#ent be rendered in its favor and aainst the petitioner as

follows

:ERE)+RE, it is respectfull& pra&ed of this :onorable Court that after due hearin, $ud#ent be rendered orderin

petitioner to pa& respondent the followin.

%. Actual da#aes in the a#ount of P%8",466.66 plus interest thereon at the leal rate fro# the ti#e of filin of this

co#plaint until full& paid5

'. Attorne&s fees in the a#ount of P%6,666.665 and

7. Cost of suit.

Respondent further pra&s for such other reliefs and re#edies as this :onorable Court #a& dee# $ust and e?uitable

under the pre#ises.

Respondent alleed, inter alia, in its co#plaint, that the caro sub$ect of its co#plaint was delivered to, and received b&,

petitioner for transportation to Tanda, 3uriao del 3ur under )ll o L"$)#A7, Anne(es A and B of the co#plaint5 that the

loss of the caro was due to the nelience of the petitioner5 and that )eliciana easpi had e(ecuted Su2(oA")o#

R//)'7?D//$7 in favor of respondent after pa&in to her the value of the caro on account of theM"()#/ R)7B No/7 it

issued in her favor coverin the caro.

*n its Answer to the co#plaint, petitioner alleed that =a> petitioner was cleared b& the Board of Marine *n?uir& of an&

nelience in the burnin of the vessel5 =b> the co#plaint stated no cause of action aainst petitioner5 and =c> the

shippersHconsinee had alread& been paid the value of the oods as stated in the )ll o L"$)#A and, hence, petitioner

cannot be held liable for the loss of the caro be&ond the value thereof declared in the )ll o L"$)#A.

After respondent rested its case, petitioner pra&ed for and was allowed, b& the Court a !o, to ta1e the depositions of

Chester Co1alion, the Gice-President and Chief +peratin +fficer of petitioner, and a resident of Cebu Cit&, and of Noel

Tan&u, an officer of the E?uitable Ban1in Corporation, in Cebu Cit&, and a resident of Cebu Cit&, to be iven before the

Presidin 2ude of Branch %60 of the Reional Trial Court of Cebu Cit&. Chester Co1alion and Noel Tan&u did testif&, b&

wa& of deposition, before the Court and declared inter alia, that petitioner is a fa#il& corporation li1e the C/7/(M"(B/)#A, I#.5 Nestor Anelia had been doin business with petitioner and Chester Mar1etin, *nc., for &ears, and

incurred an account with Chester Mar1etin, *nc. for his purchases fro# said corporation5 petitioner did issue )ll7 o

L"$)#A No7. 58 "#$ 59 for the caro described therein with Oosi#o Mercado and Nestor Anelia as shippersHconsinees

respectivel&5 the enine roo# of the M? T"#$"A cauht fire after it passed the MandaueHMactan Bride resultin in the

total loss of the vessel and its caro5 an investiation was conducted b& the Board of Marine *n?uir& of the Philippine

Coast Kuard which rendered a Report, dated )ebruar& %7, %!!' absolvin petitioner of an& responsibilit& on account of

the fire, which Report of the Board was approved b& the ;istrict Co##ander of the Philippine Coast Kuard5 a few da&s

after the sin1in of the vessel, a representative of the easpi Mar1etin filed clai#s for the values of the oods

under )ll7 o L"$)#A No7. 58 "#$ 59 in behalf of the shippersHconsinees, Nestor Anelia and Oosi#o Mercado5

petitioner was able to ascertain, fro# the shippersHconsinees and the representative of the easpi Mar1etin that the

caro covered b& )ll o L"$)#A No. 59 was owned b& easpi Mar1etin and consined to Oosi#o Mercado while that

covered b& )ll o L"$)#A No. 58 was purchased b& Nestor Anelia fro# the easpi Mar1etin5 that petitioner approved

the clai# of easpi Mar1etin for the value of the caro under )ll o L"$)#A No. 59 and re#itted to easpi Mar1etin

the said a#ount under E?uitable Ban1in Corporation Chec1 No. '6'768"0 dated Auust %', %!!', in the a#ount

ofP%8,666.66 for which the representative of the easpi Mar1etin sined Goucher No. 87!, dated Auust %', %!!', for

the said a#ount of P%8,666.66 in full pa&#ent of clai#s under )ll o L"$)#A No. 595 that petitioner approved the clai#

of Nestor Anelia in the a#ount of P0,466.66 but that since the latter owed Chester Mar1etin, *nc., for so#e purchases,

petitioner #erel& set off the a#ount due to Nestor Anelia under )ll o L"$)#A No. 58 aainst his account with Chester

Mar1etin, *nc.5 petitioner lostH#isplaced the oriinal of the chec1 after it was received b& easpi Mar1etin, hence, the

production of the #icrofil# cop& b& Noel Tan&u of the E?uitable Ban1in Corporation5 petitioner never 1new, before

87



settlin with easpi Mar1etin and Nestor Anelia that the caro under both )ll7 o L"$)#A were insured with

respondent, or that )eliciana easpi filed clai#s for the value of the caro with respondent and that the latter approved

the clai#s of )eliciana easpi and paid the total a#ount of P%8",466.66 to her5 petitioner ca#e to 1now, for the first

ti#e, of the pa&#ents b& respondent of the clai#s of )eliciana easpi when it was served with the su##ons and

co#plaint, on +ctober ", %!!'5 after settlin his clai#, Nestor Anelia ( ( ( e(ecuted the R/l/"7/ "#$ !u)l"), dated

2ul& ', %!!7, and )$"@), dated 2ul& ', %!!7 in favor of respondent5 hence, petitioner was absolved of an& liabilit& for

the loss of the caro covered b& )ll7 o L"$)#A No7. 58 "#$ 595 and even if it was, its liabilit& should not e(ceed the

value of the caro as stated in the )ll7 o L"$)#A.

Petitioner did not an&#ore present an& other witnesses on its evidence-in-chief. ( ( ( ! =Citations o#itted>

Rul)#A o / Cou( o ''/"l7

The CA held that petitioner had failed to prove that the fire which consu#ed the vessel and its caro was caused b&

so#ethin other than its nelience in the up1eep, #aintenance and operation of the vessel. %6

Petitioner had paid P%8,666 to easpi Mar1etin for the caro covered b& Bill of adin No. 4!. The CA, however

held that the pa&#ent did not e(tinuish petitioners obliation to respondent, because there was no evidence that

)eliciana easpi =the insured> was the ownerHproprietor of easpi Mar1etin. The CA also pointed out the i#propriet& of

treatin the clai# under Bill of adin No. 4" -- coverin caro valued therein at P0,466 -- as a setoff aainst Nestor

Anelias account with Chester Enterprises, *nc.

)inall&, it ruled that respondent is not bound b& the valuation of the caro under the Bills of adin, ( ( ( nor is the

value of the caro under said Bills of adin conclusive on the respondent. This is so because, in the first place, the

oods were insured with the respondent for the total a#ount of P%46,666.66, which a#ount #a& be considered as the

face value of the oods.%%

:ence this Petition.%'

I77u/7

Petitioner raises for our consideration the followin alleed errors of the CA

I

The :onorable Court of Appeals erred, rantin aruendo that petitioner is liable, in holdin that petitioners liabilit& should

be based on the actual insured value of the oods and not fro# actual valuation declared b& the shipperHconsinee in the

bill of ladin.

II

The Court of Appeals erred in not affir#in the findins of the Philippine Coast Kuard, as sustained b& the trial court a

?uo, holdin that the cause of loss of the aforesaid caroes under Bill of adin Nos. 4" and 4! was due to force #a$eureand due dilience was e(ercised b& petitioner prior to, durin and i##ediatel& after the fire on petitioners vessel.

III

The Court of Appeals erred in not holdin that respondent 9CPB Keneral *nsurance has no cause of action aainst the

petitioner .%7

88














*n su#, the issues are =%> *s petitioner liable for the loss of the oodsF ='> *f it is liable, what is the e(tent of its

liabilit&F

T)7 Cou(7 Rul)#A

The Petition is partl& #eritorious.

)(7 I77u/%

"iability for "oss

Petitioner arues that the cause of the loss of the oods, sub$ect of this case, was force #a$eure. *t adds that its

e(ercise of due dilience was ade?uatel& proven b& the findins of the Philippine Coast Kuard.

e are not convinced. The uncontroverted findins of the Philippine Coast Kuard show that the )EV !anda san1

due to a fire, which resulted fro# a crac1 in the au(iliar& enine fuel oil service tan1. )uel spurted out of the crac1 and

dripped to the heatin e(haust #anifold, causin the ship to burst into fla#es. The crac1 was located on the side of the

fuel oil tan1, which had a #ere two-inch ap fro# the enine roo# wallin, thus precludin constant inspection and care

b& the crew.

:avin oriinated fro# an unchec1ed crac1 in the fuel oil service tan1, the fire could not have been caused b& force

#a$eure. Broadl& spea1in, force #a$eure enerall& applies to a natural accident, such as that caused b& a lihtnin, an

earth?ua1e, a te#pest or a public ene#&.%8 :ence, fire is not considered a natural disaster or cala#it&. *n 5astern

&hippin (ines, Inc. v. Intermediate Appellate ourt ,%4 we e(plained

( ( (. This #ust be so as it arises al#ost invariabl& fro# so#e act of #an or b& hu#an #eans. *t does not fall within the

cateor& of an act of Kod unless caused b& lihtin or b& other natural disaster or cala#it&. *t #a& even be caused b& the

actual fault or privit& of the carrier.

Article %0"6 of the Civil Code, which considers fire as an e(traordinar& fortuitous event refers to leases or rural lands

where a reduction of the rent is allowed when #ore than one-half of the fruits have been lost due to such event,

considerin that the law adopts a protective polic& towards ariculture.

As the peril of fire is not co#prehended within the e(ceptions in Article %78, supra, Article %74 of the Civil Code

provides that in all cases other than those #entioned in Article %78, the co##on carrier shall be presu#ed to have been

at fault or to have acted nelientl&, unless it proves that it has observed the e(traordinar& dilience re?uired b& law.

here loss of caro results fro# the failure of the officers of a vessel to inspect their ship fre?uentl& so as to discover

the e(istence of crac1ed parts, that loss cannot be attributed to force #a$eure, but to the nelience of those officials.%0

The law provides that a co##on carrier is presu#ed to have been nelient if it fails to prove that it e(ercised

e(traordinar& viilance over the oods it transported. Ensurin the seaworthiness of the vessel is the first step in

e(ercisin the re?uired viilance. Petitioner did not present sufficient evidence showin what #easures or acts it hadunderta1en to ensure the seaworthiness of the vessel. *t failed to show when the last inspection and care of the au(iliar&

enine fuel oil service tan1 was #ade, what the nor#al practice was for its #aintenance, or so#e other evidence to

establish that it had e(ercised e(traordinar& dilience. *t #erel& stated that constant inspection and care were no

possible, and that the last ti#e the vessel was dr&-doc1ed was in Nove#ber %!!6. Necessaril&, in accordance with Article

%74% of the Civil Code, we hold petitioner responsible for the loss of the oods covered b& Bills of adin Nos. 4" and

4!.

S/o#$ I77u/%

89













#xtent of "iability

Respondent contends that petitioners liabilit& should be based on the actual insured value of the oods, sub$ect of

this case. +n the other hand, petitioner clai#s that its liabilit& should be li#ited to the value declared b& the

shipperHconsinee in the Bill of adin.

The records%" show that the Bills of adin coverin the lost oods contain the stipulation that in case of clai# for

loss or for da#ae to the shipped #erchandise or propert&, the liabilit& of the co##on carrier ( ( ( shall not e(ceed the

value of the oods as appearin in the bill of ladin.%!

The atte#pt b& respondent to #a1e liht of this stipulation isunconvincin. As it had the consinees copies of the Bills of adin,'6 it could have easil& produced those copies, instead

of rel&in on #ere alleations and suppositions. :owever, it presented #ere photocopies thereof to disprove petitioners

evidence showin the e(istence of the above stipulation.

A stipulation that li#its liabilit& is valid'% as lon as it is not aainst public polic&. *n 5verett &teamship orporation v

ourt of Appeals,'' the Court stated

A stipulation in the bill of ladin li#itin the co##on carriers liabilit& for loss or destruction of a caro to a certain su#,

unless the shipper or owner declares a reater value, is sanctioned b& law, particularl& Articles %8! and %46 of the Civil

Code which provides

Art. %8!. A stipulation that the co##on carriers liabilit& is li#ited to the value of the oods appearin in the bill of ladin,

unless the shipper or owner declares a reater value, is bindin.

Art. %46. A contract fi(in the su# that #a& be recovered b& the owner or shipper for the loss, destruction, or

deterioration of the oods is valid, if it is reasonable and $ust under the circu#stances, and has been freel& and fairl&

areed upon.

3uch li#ited-liabilit& clause has also been consistentl& upheld b& this Court in a nu#ber of cases. Thus, in &ea-(and

&ervice, Inc. vs. Intermediate Appellate ourt , we ruled

*t see#s clear that even if said section 8 =4> of the Carriae of Koods b& 3ea Act did not e(ist, the validit& and bindin

effect of the liabilit& li#itation clause in the bill of ladin here are nevertheless full& sustainable on the basis alone of thecited Civil Code Provisions. That said stipulation is $ust and reasonable is aruable fro# the fact that it echoes Art. %46

itself in providin a li#it to liabilit& onl& if a reater value is not declared for the ship#ent in the bill of ladin. To hold

otherwise would a#ount to ?uestionin the $ustness and fairness of the law itself, and this the private respondent does not

pretend to do. But over and above that consideration, the $ust and reasonable character of such stipulation is i#plicit in it

ivin the shipper or owner the option of avoidin accrual of liabilit& li#itation b& the si#ple and surel& far fro# onerous

e(pedient of declarin the nature and value of the ship#ent in the bill of ladin.

Pursuant to the afore-?uoted provisions of law, it is re?uired that the stipulation li#itin the co##on carriers liabilit& for

loss #ust be reasonable and $ust under the circu#stances, and has been freel& and fairl& areed upon.

The bill of ladin sub$ect of the present controvers& specificall& provides, a#on others

%". All clai#s for which the carrier #a& be liable shall be ad$usted and settled on the basis of the shippers net invoice cost

plus freiht and insurance pre#iu#s, if paid, and in no event shall the carrier be liable for an& loss of possible profits or

an& conse?uential loss.

The carrier shall not be liable for an& loss of or an& da#ae to or in an& connection with, oods in an a#ount e(ceedin

+ne :undred Thousand @en in 2apanese Currenc& =%66,666.66> or its e?uivalent in an& other currenc& per pac1ae or

custo#ar& freiht unit =whichever is least> unless the value of the oods hiher than this amount is declared in 0ritin by

90
















the shipper before receipt of the oods by the carrier and inserted in the 'ill of (adin and e2tra freiht is paid as

re3uired.

The above stipulations are, to our #ind, reasonable and $ust. *n the bill of ladin, the carrier #ade it clear that its liabilit&

would onl& be up to +ne :undred Thousand =@%66,666.66> @en. :owever, the shipper, Maru#an Tradin, had the option

to declare a hiher valuation if the value of its caro 0as hiher than the limited liability of the carrier. onsiderin that the

shipper did not declare a hiher valuation, it had itself to blame for not complyin 0ith the stipulations. =*talics supplied>

*n the present case, the stipulation li#itin petitioners liabilit& is not contrar& to public polic&. *n fact, its $ust andreasonable character is evident. The shippersHconsinees #a& recover the full value of the oods b& the si#ple e(pedient

of declarin the true value of the ship#ent in the Bill of adin. +ther than the pa&#ent of a hiher freiht, there was

nothin to stop the# fro# placin the actual value of the oods therein. *n fact, the& co##itted fraud aainst the co##on

carrier b& deliberatel& undervaluin the oods in their Bill of adin, thus deprivin the carrier of its proper and $ust

transport fare.

Concededl&, the purpose of the li#itin stipulation in the Bill of adin is to protect the co##on carrier. 3uch

stipulation oblies the shipperHconsinee to notif& the co##on carrier of the a#ount that the latter #a& be liable for in

case of loss of the oods. The co##on carrier can then ta1e appropriate #easures -- ettin insurance, if needed, to

cover or protect itself. This precaution on the part of the carrier is reasonable and prudent. :ence, a shipperHconsinee

that undervalues the real worth of the oods it see1s to transport does not onl& violate a valid contractual stipulation, but

co##its a fraudulent act when it see1s to #a1e the co##on carrier liable for #ore than the a#ount it declared in the billof ladin.

*ndeed, Oosi#o Mercado and Nestor Anelia #isled petitioner b& undervaluin the oods in their respective Bills of

adin. :ence, petitioner was e(posed to a ris1 that was deliberatel& hidden fro# it, and fro# which it could not protect

itself.

*t is well to point out that, for assu#in a hiher ris1 =the alleed actual value of the oods> the insurance co#pan&

was paid the correct hiher pre#iu# b& )eliciana easpi5 while petitioner was paid a fee lower than what it was entitled

to for transportin the oods that had been deliberatel& undervalued b& the shippers in the Bill of adin. Between the two

of the#, the insurer should bear the loss in e(cess of the value declared in the Bills of adin. This is the $ust and

e?uitable solution.

*n Aboiti+ &hippin orporation v. ourt of Appeals,'7 the description of the nature and the value of the oods

shipped were declared and reflected in the bill of ladin, li1e in the present case. The Court therein considered this

declaration as the basis of the carriers liabilit& and ordered pa&#ent based on such a#ount. )ollowin this rulin,

petitioner should not be held liable for #ore than what was declared b& the shippersHconsinees as the value of the oods

in the bills of ladin.

e find no coent reason to disturb the CAs findin that )eliciana easpi was the owner of the oods covered b&

Bills of adin Nos. 4" and 4!. 9ndoubtedl&, the oods were #erel& consined to Nestor Anelia and Oosi#o Mercado,

respectivel&5 thus, )eliciana easpi or her subroee =respondent> was entitled to the oods or, in case of loss, to

co#pensation therefor. There is no evidence showin that petitioner paid her for the loss of those oods. *t does not even

clai# to have paid her.

+n the other hand, easpi Mar1etin filed with petitioner a clai# for the lost oods under Bill of adin No. 4!, for

which the latter subse?uentl& paid P%8,666. But nothin in the records convincinl& shows that the for#er was the owner

of the oods. Respondent was, however, able to prove that it was )eliciana easpi who owned those oods, and who

was thus entitled to pa&#ent for their loss. :ence, the clai# for the oods under Bill of adin No. 4! cannot be dee#ed

to have been e(tinuished, because pa&#ent was #ade to a person who was not entitled thereto.

91






ith reard to the clai# for the oods that were covered b& Bill of adin No. 4" and valued at P0,466, the parties

have not convinced us to disturb the findins of the CA that co#pensation could not validl& ta1e place. Thus, we uphold

the appellate courts rulin on this point.

;HEREORE, the Petition is hereb& 8A%!IA((D G%A9!5. The assailed ;ecision is )OII5 in the sense tha

petitioner isO%5%5 to pa& respondent the su#s of P%8,666 and P0,466, which represent the value of the oods stated

in Bills of adin Nos. 4! and 4", respectivel&. No costs.

SO ORDERED.

8uno, Fhairman, &andoval-Gutierre+, orona, and arpio-)orales, JJ., concur .

T:*R; ;*G*3*+N

=G.R. No. 10&316. Ju#/ 30, 199>

LENUEL HRD;OOD ND INDUSTRIL SUPPL+, INC., petitioner , vs. COURT O PPELS ND SEEN

ROTHERS SHIPPING CORPORTION, respondents.

D E C I S I O N

PNGNIN, J.%

*s a stipulation in a charter part& that the =o>wners shall not be responsible for loss, split, short-landin, brea1aes

and an& 1ind of da#aes to the caro % validF This is the #ain ?uestion raised in this petition for review assailin the

;ecision of Respondent Court of Appeals ' in CA-K.R. No. CG-'6%40 pro#ulated on +ctober %4, %!!%. The Court o

Appeals #odified the $ud#ent of the Reional Trial Court of Galenuela, Metro Manila, Branch %%, the dispositive

portion of which reads

:ERE)+RE, 2ud#ent is hereb& rendered orderin 3outh 3ea 3uret& and *nsurance Co., *nc. to pa& plaintiff the su#of T+ M**+N PE3+3 =P',666,666.66> representin the value of the polic& of the lost los with leal interest thereon

fro# the date of de#and on )ebruar& ', %!"8 until the a#ount is full& paid or in the alternative, defendant 3even Brothers

3hippin Corporation to pa& plaintiff the a#ount of T+ M**+N PE3+3 =P',666,666.66> representin the value of lost

los plus leal interest fro# the date of de#and on April '8, %!"8 until full pa&#ent thereof5 the reasonable attorne&s fees

in the a#ount e?uivalent to five =4> percent of the a#ount of the clai# and the costs of the suit.

Plaintiff is hereb& ordered to pa& defendant 3even Brothers 3hippin Corporation the su# of T+ :9N;RE; T:*RT@

T:+93AN; PE3+3 =P'76,666.66> representin the balance of the stipulated freiht chares.

;efendant 3outh 3ea 3uret& and *nsurance Co#pan&s counterclai# is hereb& dis#issed.

*n its assailed ;ecision, Respondent Court of Appeals held

:ERE)+RE, the appealed $ud#ent is hereb& A))*RME; e(cept in so far =sic> as the liabilit& of the 3even Brothers

3hippin Corporation to the plaintiff is concerned which is hereb& REGER3E; and 3ET A3*;E.7

T/ "7

The factual antecedents of this case as narrated in the Court of Appeals ;ecision are as follows

92









A. The trial court erred in holdin that Gictorio Chua was an aent of defendant-appellant 3outh 3ea 3uret& and *nsurance

Co#pan&, *nc. and li1ewise erred in not holdin that he was the representative of the insurance bro1er Colu#bia

*nsurance Bro1ers, td.

B. The trial court erred in holdin that Gictorio Chua received co#pensationHco##ission on the pre#iu#s paid on the

policies issued b& the defendant-appellant 3outh 3ea 3uret& and *nsurance Co#pan&, *nc.

C. The trial court erred in not appl&in 3ection of the *nsurance Code.

;. The trial court erred in disreardin the receipt of pa&#ent clause attached to and for#in part of the Marine Caro

*nsurance Polic& No. "8H'8''!.

E. The trial court in disreardin the state#ent of account or bill statin the a#ount of pre#iu# and docu#entar& sta#ps

to be paid on the polic& b& the plaintiff-appellee.

). The trial court erred in disreardin the indorse#ent of cancellation of the polic& due to non-pa&#ent of pre#iu# and

docu#entar& sta#ps.

K. The trial court erred in orderin defendant-appellant 3outh 3ea 3uret& and *nsurance Co#pan&, *nc. to pa& plaintiff-

appellee P',666,666.66 representin value of the polic& with leal interest fro# ' )ebruar& %!"8 until the a#ount is full&

paid,

:. The trial court erred in not awardin to the defendant-appellant the attorne&s fees alleed and proven in its

counterclai#.

The pri#ar& issue to be resolved before us is whether defendants shippin corporation and the suret& co#pan& are liable

to the plaintiff for the latters lost los.8

The Court of Appeals affir#ed in part the RTC $ud#ent b& sustainin the liabilit& of 3outh 3ea 3uret& and *nsurance

Co#pan& =3outh 3ea>, but #odified it b& holdin that 3even Brothers 3hippin Corporation =3even Brothers> was not

liable for the lost caro. 4 *n #odif&in the RTC $ud#ent, the respondent appellate court ratiocinated thus

*t appears that there is a stipulation in the charter part& that the ship owner would be e(e#pted fro# liabilit& in case of

loss.

The court a ?uo erred in appl&in the provisions of the Civil Code on co##on carriers to establish the liabilit& of the

shippin corporation. The provisions on co##on carriers should not be applied where the carrier is not actin as such but

as a private carrier.

9nder A#erican $urisprudence, a co##on carrier underta1in to carr& a special caro or chartered to a special person

onl&, beco#es a private carrier.

As a private carrier, a stipulation e(e#ptin the owner fro# liabilit& even for the nelience of its aent is valid =:o#e*nsurance Co#pan&, *nc. vs. A#erican 3tea#ship Aencies, *nc., '7 3CRA '8>.

The shippin corporation should not therefore be held liable for the loss of the los. 0

3outh 3ea and herein Petitioner Galenuela :ardwood and *ndustrial 3uppl&, *nc. =Galenuela> filed separate

petitions for review before this Court. *n a Resolution dated 2une ', %!!4, this Court denied the petition of 3outh 3ea There the Court found no reason to reverse the factual findins of the trial court and the Court of Appeals that Chua was

94













Petitioner Galenuela adds that the stipulation is void for bein contrar& to Articles 4"0 and 4" of the Code of

Co##erce%8 and Articles %%6 and %%7 of the Civil Code. Citin Article %760 and pararaph %, Article %86! of the Civil

Code,%4 petitioner further contends that said stipulation ives no dut& or obliation to the private respondent to observe

the dilience of a ood father of a fa#il& in the custod& and transportation of the caro.D

The Court is not persuaded. As adverted to earlier, it is undisputed that private respondent had acted as a private

carrier in transportin petitioners lauan los. Thus, Article %84 and other Civil Code provisions on co##on carriers which

were cited b& petitioner #a& not be applied unless e(pressl& stipulated b& the parties in their charter part&.%0

*n a contract of private carriae, the parties #a& validl& stipulate that responsibilit& for the caro rests solel& on the

charterer, e(e#ptin the shipowner fro# liabilit& for loss of or da#ae to the caro caused even b& the nelience of the

ship captain. Pursuant to Article %760 %of the Civil Code, such stipulation is valid because it is freel& entered into b& the

parties and the sa#e is not contrar& to law, #orals, ood custo#s, public order, or public polic&. *ndeed, their contract of

private carriae is not even a contract of adhesion. e stress that in a contract of private carriae, the parties #a& freel&

stipulate their duties and obliations which perforce would be bindin on the#. 9nli1e in a contract involvin a co##on

carrier, private carriae does not involve the eneral public. :ence, the strinent provisions of the Civil Code on co##on

carriers protectin the eneral public cannot $ustifiabl& be applied to a ship transportin co##ercial oods as a private

carrier.Conse?uentl&, the public polic& e#bodied therein is not contravened b& stipulations in a charter part& that lessen or

re#ove the protection iven b& law in contracts involvin co##on carriers.

The issue posed in this case and the aru#ents raised b& petitioner are not novel5 the& were resolved lon ao b&this Court in #ome Insurance o. vs. American &teamship Aencies, Inc.%" *n that case, the trial court si#ilarl& nullified a

stipulation identical to that involved in the present case for bein contrar& to public polic& based on Article %88 of the Civi

Code and Article 4" of the Code of Co##erce.Conse?uentl&, the trial court held the shipowner liable for da#aes

resultin fro# the partial loss of the caro. This Court reversed the trial court and laid down, throuh Mr. 2ustice 2ose P

Benon, the followin well-settled observation and doctrine

The provisions of our Civil Code on co##on carriers were ta1en fro# Anlo-A#erican law. 9nder A#erican

$urisprudence, a co##on carrier underta1in to carr& a special caro or chartered to a special person onl&, beco#es a

private carrier. As a private carrier, a stipulation e(e#ptin the owner fro# liabilit& for the nelience of its aent is not

aainst public polic&, and is dee#ed valid.

3uch doctrine e find reasonable. The Civil Code provisions on co##on carriers should not be applied where the carrier

is not actin as such but as a private carrier. The stipulation in the charter part& absolvin the owner fro# liabilit& for loss

due to the nelience of its aent would be void onl& if the strict public polic& overnin co##on carriers is applied. 3uch

polic& has no force where the public at lare is not involved, as in this case of a ship totall& chartered for the use of a

sinle part&. %! =9nderscorin supplied.>

*ndeed, where the reason for the rule ceases, the rule itself does not appl&. The eneral public enters into a contract

of transportation with co##on carriers without a hand or a voice in the preparation thereof. The ridin public #erel&

adheres to the contract5 even if the public wants to, it cannot sub#it its own stipulations for the approval of the co##on

carrier. Thus, the law on co##on carriers e(tends its protective #antle aainst one-sided stipulations inserted in tic1ets,

invoices or other docu#ents over which the ridin public has no understandin or, worse, no choice. Co#pared to the

eneral public, a charterer in a contract of private carriae is not si#ilarl& situated. *t can -- and in fact it usuall& does --enter into a free and voluntar& aree#ent. *n practice, the parties in a contract of private carriae can stipulate the carriers

obliations and liabilities over the ship#ent which, in turn, deter#ine the price or consideration of the charter. Thus, a

charterer, in e(chane for convenience and econo#&, #a& opt to set aside the protection of the law on co##on

carriers. hen the charterer decides to e(ercise this option, he ta1es a nor#al business ris1.

Petitioner contends that the rule in #ome Insurance is not applicable to the present case because it covers onl& a

stipulation e(e#ptin a private carrier fro# liabilit& for the nelience of his aent, but it does not appl& to a stipulation

e(e#ptin a private carrier li1e private respondent fro# the nelience of his e#plo&ee or servant which is the situation in

96

















this case.'6 This contention of petitioner is bereft of #erit, for it raises a distinction without an& substantive difference. The

case of #ome Insurance specificall& dealt with the liabilit& of the shipowner for acts or nelience of its captain and

crew'% and a charter part& stipulation which e(e#pts the owner of the vessel fro# an& loss or da#ae or dela& arisin

fro# an& other source, even fro# the nelect or fault of the captain or crew or so#e other person e#plo&ed b& the owner

on board, for whose acts the owner would ordinaril& be liable e(cept for said pararaph. '' 9ndoubtedl&, #ome

Insurance is applicable to the case at bar.

The na1ed assertion of petitioner that the A#erican rule enunciated in #ome Insurance is not the rule in the

Philippines

'7

deserves scant consideration. The Court there cateoricall& held that said rule was reasonable andproceeded to appl& it in the resolution of that case. Petitioner #iserabl& failed to show such circu#stances or aru#ents

which would necessitate a departure fro# a well-settled rule.Conse?uentl&, our rulin in said case re#ains a bindin

$udicial precedent based on the doctrine of stare decisis and Article " of the Civil Code which provides that =$>udicia

decisions appl&in or interpretin the laws or the Constitution shall for# part of the leal s&ste# of the Philippines.

*n fine, the respondent appellate court aptl& stated that in the case of a private carrier, a stipulation e(e#ptin the

owner fro# liabilit& even for the nelience of its aent is valid. '8

O/( (Au/#7

+n the basis of the foreoin alone, the present petition #a& alread& be denied5 the Court, however, will discuss the

other aru#ents of petitioner for the benefit and satisfaction of all concerned.

%rticles &'( and &'), *ode of *ommerce

Petitioner Galenuela insists that the charter part& stipulation is contrar& to Articles 4"0 and 4" of the Code of

Co##erce which confer on petitioner the riht to recover da#aes fro# the shipowner and ship aent for the acts or

conduct of the captain.'4 e are not persuaded. hatever rihts petitioner #a& have under the afore#entioned statutor&

provisions were waived when it entered into the charter part&.

Article 0 of the Civil Code provides that =r>ihts #a& be waived, unless the waiver is contrar& to law, public order

public polic&, #orals, or ood custo#s, or pre$udicial to a person with a riht reconied b& law. As a eneral rule

patri#onial rihts #a& be waived as opposed to rihts to personalit& and fa#il& rihts which #a& not be #ade the sub$ectof waiver .'0 Bein patentl& and undoubtedl& patri#onial, petitioners riht conferred under said articles #a& be

waived. This, the petitioner did b& accedin to the contractual stipulation that it is solel& responsible for an& da#ae to the

caro, thereb& e(e#ptin the private carrier fro# an& responsibilit& for loss or da#ae thereto.)urther#ore, as discussed

above, the contract of private carriae binds petitioner and private respondent alone5 it is not i#bued with public polic&

considerations for the eneral public or third persons are not affected thereb&.

%rticles 11)+ and 11), *ivil *ode

Petitioner li1ewise arues that the stipulation sub$ect of this controvers& is void for bein contrar& to Articles %%6 and

%%7 of the Civil Code' which read

Art. %%6. Those who in the perfor#ance of their obliations are uilt& of fraud, nelience, or dela&, and those who in an&

#anner contravene the tenor thereof, are liable for da#aes

Art. %%7. The fault or nelience of the oblior consists in the o#ission of that dilience which is re?uired b& the nature of

the obliation and corresponds with the circu#stances of the persons, of the ti#e and of the place. hen nelience

shows bad faith, the provisions of articles %%% and ''6%, shall appl&.

*f the law does not state the dilience which is to be observed in the perfor#ance, that which is e(pected of a ood father

of a fa#il& shall be re?uired.97























The Court notes that the foreoin articles are applicable onl& to the oblior or the one with an obliation to

perfor#. *n the instant case, Private Respondent 3even Brothers is not an oblior in respect of the caro, for this

obliation to bear the loss was shifted to petitioner b& virtue of the charter part&. This shiftin of responsibilit&, as earlier

observed, is not void. The provisions cited b& petitioner are, therefore, inapplicable to the present case.

Moreover, the factual #ilieu of this case does not $ustif& the application of the second pararaph of Article %%7 of the

Civil Code which prescribes the standard of dilience to be observed in the event the law or the contract is silent. *n the

instant case, Article 70' of the Code of Co##erce'" provides the standard of ordinar& dilience for the carriae of oods

b& a carrier. The standard of dilience under this statutor& provision #a&, however, be #odified in a contract of privatecarriae as the petitioner and private respondent had done in their charter part&.

*ases *ited by -etitioner Inapplicable

Petitioner cites &he0aram vs. 8hilippine Airlines, Inc. '! which, in turn, ?uoted Juan Dsmael / o. vs. Gabino 'arreto

/ o.76 and arues that the public polic& considerations stated there vis--vis contractual stipulations li#itin the carriers

liabilit& be applied with e?ual force to this case. 7% *t also cites )anila %ailroad o. vs. ompaia !ransatlantica 7' and

contends that stipulations e(e#ptin a part& fro# liabilit& for da#aes due to nelience should not be countenanced and

should be strictl& construed aainst the part& clai#in its benefit.77e disaree.

The cases of &he0aram and Dsmael both involve a co##on carrier5 thus, the& necessaril& $ustif& the application of

such polic& considerations and conco#itantl& stricter rules. As alread& discussed above, the public polic& considerationsbehind the riorous treat#ent of co##on carriers are absent in the case of private carriers. :ence, the strinent laws

applicable to co##on carriers are not applied to private carriers. The case of )anila %ailroad is also inapplicable because

the action for da#aes there does not involve a contract for transportation. )urther#ore, the defendant therein #ade a

pro#ise to use due care in the liftin operations and, conse?uentl&, it was bound b& its underta1in5 besides, the

e(e#ption was intended to cover accidents due to hidden defects in the apparatus or other unforseeable occurrences not

caused b& its personal nelience. This pro#ise was thus construed to #a1e sense toether with the stipulation aainst

liabilit& for da#aes.78 *n the present case, we stress that the private respondent #ade no such pro#ise. The aree#ent

of the parties to e(e#pt the shipowner fro# responsibilit& for an& da#ae to the caro and place responsibilit& over the

sa#e to petitioner is the lone stipulation considered now b& this Court.

)inall&, petitioner points to &tandard Oil o. of 9e0 Dork vs. (ope+ ostelo,74

"alter A. &mith / o. vs. ad0alladerGibson (umber o.,70 9. !. #ashim and o. vs. %ocha and o.,7 Ohta evelopment o. vs.

&teamship8ompey 7" and (impanco &ons vs. Danco &teamship o. 7! in support of its contention that the shipowner be

held liable for da#aes.86 These however are not on all fours with the present case because the& do not involve a si#ilar

factual #ilieu or an identical stipulation in the charter part& e(pressl& e(e#ptin the shipowner fro# responsibilit& for an&

da#ae to the caro.

#ffect of the Sou S/" esoltion

*n its #e#orandu#, 3even Brothers arues that petitioner has no cause of action aainst it because this Court has

earlier affir#ed the liabilit& of 3outh 3ea for the loss suffered b& petitioner. Private respondent sub#its that petitioner is

not leall& entitled to collect twice for a sinle loss. 8% *n view of the above dis?uisition upholdin the validit& of the

?uestioned charter part& stipulation and holdin that petitioner #a& not recover fro# private respondent, the present issue

is #oot and acade#ic. *t suffices to state that the Resolution of this Court dated 2une ', %!!4 8' affir#in the liabilit& o

3outh 3ea does not, b& itself, necessaril& preclude the petitioner fro# proceedin aainst private respondent. An

arieved part& #a& still recover the deficienc& fro# the person causin the loss in the event the a#ount paid b& the

insurance co#pan& does not full& cover the loss. Article ''6 of the Civil Code provides

ART. ''6. *f the plaintiffs propert& has been insured, and he has received inde#nit& fro# the insurance co#pan& for the

in$ur& or loss arisin out of the wron or breach of contract co#plained of, the insurance co#pan& shall be subroated to

the rihts of the insured aainst the wrondoer or the person who has violated the contract. *f the a#ount paid b& the

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