CASE DIGEST

 Baylon did not have the controlling vote because of the

People v. Quasha DIGEST difference in voting power between the preferred shares and the
D EC EM B E R 2 1 , 2 0 1 6 ~ V BD I A Z
People v. Quasha (1953) common shares
G.R. No. L-6055
June 12, 1953 ISSUE: For a corporation to be entitled to operate a public utility is
it necessary that it be organized with 60 per cent of its capital owned
FACTS:
by Filipinos from the start?
 William H. Quasha
HELD: No. For a corporation to be entitled to operate a public utility
 a member of the Philippine bar, committed a crime of
it is not necessary that it be organized with 60 per cent of its capital
falsification of a public and commercial document for
owned by Filipinos from the start. A corporation formed with capital
causing it to appear that Arsenio Baylon, a Filipino citizen,
that is entirely alien may subsequently change the nationality of its
had subscribed to and was the owner of 60.005 % of the
capital through transfer of shares to Filipino citizens. Conversely, a
subscribed capital stock of Pacific Airways Corp.
corporation originally formed with Filipino capital may
(Pacific) when in reality the money paid belongs to an
subsequently change the national status of said capital through
American citizen whose name did not appear in the article of
transfer of shares to foreigners. What need is there then for a
incorporation,
corporation that intends to operate a public utility to have, at the time
o to circumvent the constitutional mandate that no corp.
of its formation, 60 per cent of its capital owned by Filipinos alone?
shall be authorize to operate as a public utility in the
That condition may anytime be attained thru the necessary transfer
Philippines unless 60% of its capital stock is owned by
of stocks. The moment for determining whether a corporation is
Filipinos.
entitled to operate as a public utility is when it applies for a franchise,
 Found guilty after trial and sentenced to a term of
certificate, or any other form of authorization for that purpose. And
imprisonment and a fine
that can be done after the corporation has already come into being
 Quasha appealed to this Court
and not while it is still being formed. And at that moment, the
 Primary purpose: to carry on the business of a common carrier
corporation must show that it has complied not only with the
by air, land or water
requirement of the Constitution as to the nationality of its capital, but
also with the requirements of the Civil Aviation Law if it is a
 constitutional mandate that no corporation shall be authorize to operate as a
common carrier by air, the Revised Administrative Code if it is a public utility in the Philippines unless 60 per cent of its capital stock is owned by
common carrier by water, and the Public Service Law if it is a Filipinos.

common carrier by land or other kind of public service. Found guilty after trial and sentenced to a term of imprisonment and a fine, the
accused has appealed to this Court.
______________________________________________________________
__________________ The essential facts are not in dispute. On November 4,1946, the Pacific Airways
Corporation registered its articles of incorporation with the Securities and
Exchanged Commission. The article were prepared and the registration was
effected by the accused, who was in fact the organizer of the corporation. The
Republic of the Philippines article stated that the primary purpose of the corporation was to carry on the
SUPREME COURT business of a common carrier by air, land or water; that its capital stock was
Manila P1,000,000, represented by 9,000 preferred and 100,000 common shares, each
preferred share being of the par value of p100 and entitled to 1/3 vote and each
EN BANC common share, of the par value of P1 and entitled to one vote; that the amount
capital stock actually subscribed was P200,000, and the names of the
subscribers were Arsenio Baylon, Eruin E. Shannahan, Albert W. Onstott,
G.R. No. L-6055 June 12, 1953
James O'Bannon, Denzel J. Cavin, and William H. Quasha, the first being a
Filipino and the other five all Americans; that Baylon's subscription was for 1,145
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, preferred shares, of the total value of P114,500, and for 6,500 common shares,
vs. of the total par value of P6,500, while the aggregate subscriptions of the
WILLIAM H. QUASHA, defendant-appellant. American subscribers were for 200 preferred shares, of the total par value of
P20,000, and 59,000 common shares, of the total par value of P59,000; and that
Jose P. Laurel for appellant and William H. Quasha in his own behalf. Baylon and the American subscribers had already paid 25 per cent of their
Office of the Solicitor General Juan R. Liwag and Assistant Solicitor General respective subscriptions. Ostensibly the owner of, or subscriber to, 60.005 per
Francisco Carreon for appellee. cent of the subscribed capital stock of the corporation, Baylon nevertheless did
not have the controlling vote because of the difference in voting power between
REYES, J.: the preferred shares and the common shares. Still, with the capital structure as
it was, the article of incorporation were accepted for registration and a certificate
William H. Quasha, a member of the Philippine bar, was charged in the Court of of incorporation was issued by the Securities and Exchange Commission.
First Instance of Manila with the crime of falsification of a public and commercial
document in that, having been entrusted with the preparation and registration of There is no question that Baylon actually subscribed to 60.005 per cent of the
the article of incorporation of the Pacific Airways Corporation, a domestic subscribed capital stock of the corporation. But it is admitted that the money paid
corporation organized for the purpose of engaging in business as a common on his subscription did not belong to him but to the Americans subscribers to the
carrier, he caused it to appear in said article of incorporation that one Arsenio corporate stock. In explanation, the accused testified, without contradiction, that
Baylon, a Filipino citizen, had subscribed to and was the owner of 60.005 per in the process of organization Baylon was made a trustee for the American
cent of the subscribed capital stock of the corporation when in reality, as the incorporators, and that the reason for making Baylon such trustee was as
accused well knew, such was not the case, the truth being that the owner of the follows:
portion of the capital stock subscribed to by Baylon and the money paid thereon
were American citizen whose name did not appear in the article of incorporation,
and that the purpose for making this false statement was to circumvent the
 Q. According to this article of incorporation Arsenio Baylon subscribed maximum period and a fine of not more than 5,000 pesos shall be
to 1,135 preferred shares with a total value of P1,135. Do you know how imposed upon:
that came to be?
xxx xxx xxx
A. Yes.
1. Any private individual who shall commit any of the falsifications
The people who were desirous of forming the corporation, whose names are enumerated in the next preceding article in any public or official
listed on page 7 of this certified copy came to my house, Messrs. Shannahan, document or letter of exchange or any other kind of commercial
Onstott, O'Bannon, Caven, Perry and Anastasakas one evening. There was document.
considerable difficulty to get them all together at one time because they were
pilots. They had difficulty in deciding what their respective share holdings would Commenting on the above provision, Justice Albert, in his well-known work on
be. Onstott had invested a certain amount of money in airplane surplus property the Revised Penal Code ( new edition, pp. 407-408), observes, on the authority
and they had obtained a considerable amount of money on those planes and as of U.S. vs. Reyes, (1 Phil., 341), that the perversion of truth in the narration of
I recall they were desirous of getting a corporation formed right away. And they facts must be made with the wrongful intent of injuring a third person; and on the
wanted to have their respective shares holdings resolved at a latter date. They authority of U.S. vs. Lopez (15 Phil., 515), the same author further maintains
stated that they could get together that they feel that they had no time to settle that even if such wrongful intent is proven, still the untruthful statement will not
their respective share holdings. We discussed the matter and finally it was constitute the crime of falsification if there is no legal obligation on the part of the
decided that the best way to handle the things was not to put the shares in the narrator to disclose the truth. Wrongful intent to injure a third person and
name of anyone of the interested parties and to have someone act as trustee obligation on the part of the narrator to disclose the truth are thus essential to a
for their respective shares holdings. So we looked around for a trustee. And he conviction for a crime of falsification under the above article of the Revised Penal
said "There are a lot of people whom I trust." He said, "Is there someone around Code.
whom we could get right away?" I said, "There is Arsenio. He was my boy during
the liberation and he cared for me when i was sick and i said i consider him my Now, as we see it, the falsification imputed in the accused in the present case
friend." I said. They all knew Arsenio. He is a very kind man and that was what consists in not disclosing in the articles of incorporation that Baylon was a mere
was done. That is how it came about. trustee ( or dummy as the prosecution chooses to call him) of his American co-
incorporators, thus giving the impression that Baylon was the owner of the
Defendant is accused under article 172 paragraph 1, in connection with article shares subscribed to by him which, as above stated, amount to 60.005 per cent
171, paragraph 4, of the Revised Penal Code, which read: of the sub-scribed capital stock. This, in the opinion of the trial court, is a
malicious perversion of the truth made with the wrongful intent circumventing
ART. 171. Falsification by public officer, employee, or notary or section 8, Article XIV of the Constitution, which provides that " no franchise,
ecclesiastic minister. — The penalty of prision mayor and a fine not to certificate, or any other form of authorization for the operation of a public utility
exceed 5,000 pesos shall be imposed upon any public officer, employee, shall be granted except to citizens of the Philippines or to corporation or other
or notary who, taking advantage of his official position, shall falsify a entities organized under the law of the Philippines, sixty per centum of the
document by committing any of the following acts: capital of which is owned by citizens of the Philippines . . . ." Plausible though it
may appear at first glance, this opinion loses validity once it is noted that it is
xxx xxx xxx predicated on the erroneous assumption that the constitutional provision just
quoted was meant to prohibit the mere formation of a public utility corporation
4. Making untruthful statements in a narration of facts. without 60 per cent of its capital being owned by the Filipinos, a mistaken belief
which has induced the lower court to that the accused was under obligation to
disclose the whole truth about the nationality of the subscribed capital stock of
ART. 172. Falsification by private individuals and use of falsified
the corporation by revealing that Baylon was a mere trustee or dummy of his
documents. — The penalty of prision correccional in its medium and
American co-incorporators, and that in not making such disclosure defendant's
intention was to circumvent the Constitution to the detriment of the public of its capital, but also with the requirements of the Civil Aviation Law if it is a
interests. Contrary to the lower court's assumption, the Constitution does not common carrier by air, the Revised Administrative Code if it is a common carrier
prohibit the mere formation of a public utility corporation without the required by water, and the Public Service Law if it is a common carrier by land or other
formation of Filipino capital. What it does prohibit is the granting of a franchise kind of public service.
or other form of authorization for the operation of a public utility to a corporation
already in existence but without the requisite proportion of Filipino capital. This Equally untenable is the suggestion that defendant should at least be held guilty
is obvious from the context, for the constitutional provision in question qualifies of an "impossible crime" under article 59 of the Revised Penal Code. It not being
the terms " franchise", "certificate", or "any other form of authorization" with the possible to suppose that defendant had intended to commit a crime for the
phrase "for the operation of a public utility," thereby making it clear that the simple reason that the alleged constitutional prohibition which he is charged for
franchise meant is not the "primary franchise" that invest a body of men with having tried to circumvent does not exist, conviction under that article is out of
corporate existence but the "secondary franchise" or the privilege to operate as the question.
a public utility after the corporation has already come into being.
The foregoing consideration can not but lead to the conclusion that the
If the Constitution does not prohibit the mere formation of a public utility defendant can not be held guilty of the crime charged. The majority of the court,
corporation with the alien capital, then how can the accused be charged with however, are also of the opinion that, even supposing that the act imputed to the
having wrongfully intended to circumvent that fundamental law by not revealing defendant constituted falsification at the time it was perpetrated, still with the
in the articles of incorporation that Baylon was a mere trustee of his American approval of the Party Amendment to the Constitution in March, 1947, which
co-incorporation and that for that reason the subscribed capital stock of the placed Americans on the same footing as Filipino citizens with respect to the
corporation was wholly American? For the mere formation of the corporation right to operate public utilities in the Philippines, thus doing away with the
such revelation was not essential, and the Corporation Law does not require it. prohibition in section 8, Article XIV of the Constitution in so far as American
Defendant was, therefore, under no obligation to make it. In the absence of such citizens are concerned, the said act has ceased to be an offense within the
obligation and of the allege wrongful intent, defendant cannot be legally meaning of the law, so that defendant can no longer be held criminally liable
convicted of the crime with which he is charged. therefor.

It is urged, however, that the formation of the corporation with 60 per cent of its In view of the foregoing, the judgment appealed from is reversed and the
subscribed capital stock appearing in the name of Baylon was an indispensable defendant William H. Quasha acquitted, with costs de oficio.
preparatory step to the subversion of the constitutional prohibition and the laws
implementing the policy expressed therein. This view is not correct. For a Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Jugo, Bautista Angelo, and
corporation to be entitled to operate a public utility it is not necessary that it be Labrador, JJ., concur.
organized with 60 per cent of its capital owned by Filipinos from the start. A
corporation formed with capital that is entirely alien may subsequently change
the nationality of its capital through transfer of shares to Filipino citizens.
conversely, a corporation originally formed with Filipino capital may
subsequently change the national status of said capital through transfer of
shares to foreigners. What need is there then for a corporation that intends to
operate a public utility to have, at the time of its formation, 60 per cent of its
capital owned by Filipinos alone? That condition may anytime be attained thru
the necessary transfer of stocks. The moment for determining whether a
corporation is entitled to operate as a public utility is when it applies for a Tawang Multi-Purpose Cooperative v. La Trinidad
franchise, certificate, or any other form of authorization for that purpose. And
that can be done after the corporation has already come into being and not while Water District
it is still being formed. And at that moment, the corporation must show that it has TAWANG MULTI-PURPOSE COOPERATIVE v. LA TRINIDAD WATER
complied not only with the requirement of the Constitution as to the nationality DISTRICT
G.R. No. 166471, March 22, 2011

FACTS:

 Petitioner Tawang Multi-Purpose Cooperative (TMPC) was organized to

provide domestic water services in Brgy. Twang, La Trinidad, Benguet. Respondent
La Trinidad Water District (LTWD) is a government owned and controlled
corporation, a local water utility created under PD No. 198, authorized to supply
water for domestic, industrial and commercial purpose within municipality of La
Trinidad, Benguet.
 October 9, 2000, TMPC filed with National Water Resources Board an
application for Certificate of Public Convenience (CPC) to operate and maintain a
waterworks system in Brgy. Tawang LTWD claimed that under Sec. 47 of PD No.
198, as amended, its franchise is exclusive. Republic of the Philippines
 August 15, 2002, the NWRB held that LTWD’s franchise cannot be SUPREME COURT
exclusive since exclusive franchises are unconstitutional under Sec. 2, Art. XII. Manila
 October 1, 2004, upon appeal of LTWD to the RTC, the latter cancelled
TMPC’s CPC and held that Sec. 47 of PD No. 198 is valid; that the ultimate purpose EN BANC
of the Constitution is for the State, through its authorized agencies or
instrumentalities, to be able to keep and maintain ultimate control and supervision G.R. No. 166471 March 22, 2011
over the operation of public utilities. What is repugnant to the Constitution is a grant
of franchise exclusive in character so as to preclude the State itself from granting a
franchise to any other person or entity than the present grantee when public interest TAWANG MULTI-PURPOSE COOPERATIVE Petitioner,
so requires. vs.
LA TRINIDAD WATER DISTRICT, Respondent.
 November 6, 2004, RTC denied the motion for reconsideration filed by
TMPC.
DECISION
ISSUE:
CARPIO, J.:
 Whether RTC erred in holding that Sec. 47 of PD No. 198 is valid
The Case
HELD:
 Yes, the Supreme Court ruled in favor of petitioner. Quando aliquid
This is a petition for review on certiorari under Rule 45 of the Rules of Court.
prohibetur ex directo, prohibetur et per obliquum – Those that cannot be done
directly cannot be done indirectly. Under Sec. 2 and 11, Art. XII of the 1987
The petition1 challenges the 1 October 2004 Judgment2 and 6 November 2004
Constitution, The President, Congress, and Court cannot create indirectly franchises Order3 of the Regional Trial Court (RTC), Judicial Region 1, Branch 62, La
that are exclusive in character by allowing the Board of Directors (BOD) of a water Trinidad, Benguet, in Civil Case No. 03-CV-1878.
district and Local Water Utilities Administration (LWUA) to create franchises that are
exclusive in character. Sec. 47 of PD no. 198 is in conflict with the above-mentioned The Facts
provision of the Constitution. And the rule is that in case of conflict between the
Constitution and a statute, the former prevails, because the constitution is the basic Tawang Multi-Purpose Cooperative (TMPC) is a cooperative, registered with the
law to which all other laws must conform to. Cooperative Development Authority, and organized to provide domestic water
services in Barangay Tawang, La Trinidad, Benguet.
La Trinidad Water District (LTWD) is a local water utility created under xxxx
Presidential Decree (PD) No. 198, as amended. It is authorized to supply water
for domestic, industrial and commercial purposes within the municipality of La All the foregoing premises all considered, and finding that Applicant is legally
Trinidad, Benguet. and financially qualified to operate and maintain a waterworks system; that the
said operation shall redound to the benefit of the homeowners/residents of the
On 9 October 2000, TMPC filed with the National Water Resources Board subdivision, thereby, promoting public service in a proper and suitable manner,
(NWRB) an application for a certificate of public convenience (CPC) to operate the instant application for a Certificate of Public Convenience is, hereby,
and maintain a waterworks system in Barangay Tawang. LTWD opposed GRANTED.5
TMPC’s application. LTWD claimed that, under Section 47 of PD No. 198, as
amended, its franchise is exclusive. Section 47 states that: LTWD filed a motion for reconsideration. In its 18 November 2002
Resolution,6 the NWRB denied the motion.
Sec. 47. Exclusive Franchise. No franchise shall be granted to any other person
or agency for domestic, industrial or commercial water service within the district LTWD appealed to the RTC.
or any portion thereof unless and except to the extent that the board of directors
of said district consents thereto by resolution duly adopted, such resolution, The RTC’s Ruling
however, shall be subject to review by the Administration.
In its 1 October 2004 Judgment, the RTC set aside the NWRB’s 23 July 2002
In its Resolution No. 04-0702 dated 23 July 2002, the NWRB approved TMPC’s Resolution and 15 August 2002 Decision and cancelled TMPC’s CPC. The RTC
application for a CPC. In its 15 August 2002 Decision,4 the NWRB held that held that Section 47 is valid. The RTC stated that:
LTWD’s franchise cannot be exclusive since exclusive franchises are
unconstitutional and found that TMPC is legally and financially qualified to
The Constitution uses the term "exclusive in character". To give effect to this
operate and maintain a waterworks system. NWRB stated that:
provision, a reasonable, practical and logical interpretation should be adopted
without disregard to the ultimate purpose of the Constitution. What is this
With respect to LTWD’s opposition, this Board observes that: ultimate purpose? It is for the state, through its authorized agencies or
instrumentalities, to be able to keep and maintain ultimate control and
1. It is a substantial reproduction of its opposition to the application for water supervision over the operation of public utilities. Essential part of this control and
permits previously filed by this same CPC applicant, under WUC No. 98-17 and supervision is the authority to grant a franchise for the operation of a public utility
98-62 which was decided upon by this Board on April 27, 2000. The issues being to any person or entity, and to amend or repeal an existing franchise to serve
raised by Oppositor had been already resolved when this Board said in pertinent the requirements of public interest. Thus, what is repugnant to the Constitution
portions of its decision: is a grant of franchise "exclusive in character" so as to preclude the State itself
from granting a franchise to any other person or entity than the present grantee
"The authority granted to LTWD by virtue of P.D. 198 is not Exclusive. While when public interest so requires. In other words, no franchise of whatever nature
Barangay Tawang is within their territorial jurisdiction, this does not mean that can preclude the State, through its duly authorized agencies or instrumentalities,
all others are excluded in engaging in such service, especially, if the district is from granting franchise to any person or entity, or to repeal or amend a franchise
not capable of supplying water within the area. This Board has time and again already granted. Consequently, the Constitution does not necessarily prohibit a
ruled that the "Exclusive Franchise" provision under P.D. 198 has misled most franchise that is exclusive on its face, meaning, that the grantee shall be allowed
water districts to believe that it likewise extends to be [sic] the waters within their to exercise this present right or privilege to the exclusion of all others.
territorial boundaries. Such ideological adherence collides head on with the Nonetheless, the grantee cannot set up its exclusive franchise against the
constitutional provision that "ALL WATERS AND NATURAL RESOURCES ultimate authority of the State.7
BELONG TO THE STATE". (Sec. 2, Art. XII) and that "No franchise, certificate
or authorization for the operation of public [sic] shall be exclusive in character". TMPC filed a motion for reconsideration. In its 6 November 2004 Order, the RTC
denied the motion. Hence, the present petition.
Issue such franchise, certificate or authorization be exclusive in character or for a
longer period than fifty years. (Emphasis supplied)
TMPC raises as issue that the RTC erred in holding that Section 47 of PD No.
198, as amended, is valid. Section 11, Article XII of the 1987 Constitution states that:

The Court’s Ruling No franchise, certificate, or any other form of authorization for the operation of a
public utility shall be granted except to citizens of the Philippines or to
The petition is meritorious. corporations or associations organized under the laws of the Philippines, at least
sixty per centum of whose capital is owned by such citizens, nor shall such
What cannot be legally done directly cannot be done indirectly. This rule is basic franchise, certificate or authorization be exclusive in character or for a longer
and, to a reasonable mind, does not need explanation. Indeed, if acts that cannot period than fifty years. (Emphasis supplied)
be legally done directly can be done indirectly, then all laws would be illusory.
Plain words do not require explanation. The 1935, 1973 and 1987 Constitutions
In Alvarez v. PICOP Resources, Inc., the Court held that, "What one cannot do
8 are clear — franchises for the operation of a public utility cannot be exclusive in
directly, he cannot do indirectly."9 In Akbayan Citizens Action Party v. character. The 1935, 1973 and 1987 Constitutions expressly and clearly state
Aquino,10 quoting Agan, Jr. v. Philippine International Air Terminals Co., that, "nor shall such franchise x x x be exclusive in character." There is no
Inc.,11 the Court held that, "This Court has long and consistently adhered to the exception.
legal maxim that those that cannot be done directly cannot be done
indirectly."12 In Central Bank Employees Association, Inc. v. Bangko Sentral ng When the law is clear, there is nothing for the courts to do but to apply it. The
Pilipinas,13the Court held that, "No one is allowed to do indirectly what he is duty of the Court is to apply the law the way it is worded. In Security Bank and
prohibited to do directly."14 Trust Company v. Regional Trial Court of Makati, Branch 61,15 the Court held
that:
The President, Congress and the Court cannot create directly franchises for the
operation of a public utility that are exclusive in character. The 1935, 1973 and Basic is the rule of statutory construction that when the law is clear and
1987 Constitutions expressly and clearly prohibit the creation of franchises that unambiguous, the court is left with no alternative but to apply the same
are exclusive in character. Section 8, Article XIII of the 1935 Constitution states according to its clear language. As we have held in the case of Quijano v.
that: Development Bank of the Philippines:

No franchise, certificate, or any other form of authorization for the operation of a "x x x We cannot see any room for interpretation or construction in the clear and
public utility shall be granted except to citizens of the Philippines or to unambiguous language of the above-quoted provision of law. This Court had
corporations or other entities organized under the laws of the Philippines, sixty steadfastly adhered to the doctrine that its first and fundamental duty is
per centum of the capital of which is owned by citizens of the Philippines, nor the application of the law according to its express terms, interpretation
shall such franchise, certificate or authorization be exclusive in character or being called for only when such literal application is impossible. No process of
for a longer period than fifty years. (Empahsis supplied) interpretation or construction need be resorted to where a provision of law
peremptorily calls for application. Where a requirement or condition is made
Section 5, Article XIV of the 1973 Constitution states that: in explicit and unambiguous terms, no discretion is left to the judiciary. It
must see to it that its mandate is obeyed."16(Emphasis supplied)
No franchise, certificate, or any other form of authorization for the operation of a
public utility shall be granted except to citizens of the Philippines or to In Republic of the Philippines v. Express Telecommunications Co., Inc.,17 the
corporations or associations organized under the laws of the Philippines at least Court held that, "The Constitution is quite emphatic that the operation of a public
sixty per centum of the capital of which is owned by such citizens, nor shall utility shall not be exclusive."18 In Pilipino Telephone Corporation v. National
Telecommunications Commission,19 the Court held that, "Neither Congress nor
the NTC can grant an exclusive ‘franchise, certificate, or any other form of must conform.’"28 In Atty. Macalintal v. Commission on Elections,29the Court held
authorization’ to operate a public utility."20 In National Power Corp. v. Court of that, "The Constitution is the fundamental and paramount law of the nation to
Appeals,21 the Court held that, "Exclusivity of any public franchise has not been which all other laws must conform and in accordance with which all private rights
favored by this Court such that in most, if not all, grants by the government to must be determined and all public authority administered. Laws that do not
private corporations, the interpretation of rights, privileges or franchises is taken conform to the Constitution shall be stricken down for being
against the grantee."22 In Radio Communications of the Philippines, Inc. v. unconstitutional."30 In Manila Prince Hotel v. Government Service Insurance
National Telecommunications Commission,23 the Court held that, "The System,31 the Court held that:
Constitution mandates that a franchise cannot be exclusive in nature."24
Under the doctrine of constitutional supremacy, if a law or contract violates any
Indeed, the President, Congress and the Court cannot create directly franchises norm of the constitution that law or contract whether promulgated by the
that are exclusive in character. What the President, Congress and the Court legislative or by the executive branch or entered into by private persons for
cannot legally do directly they cannot do indirectly. Thus, the President, private purposes is null and void and without any force and effect.
Congress and the Court cannot create indirectly franchises that are exclusive in Thus, since the Constitution is the fundamental, paramount and supreme
character by allowing the Board of Directors (BOD) of a water district and the law of the nation, it is deemed written in every statute and
Local Water Utilities Administration (LWUA) to create franchises that are contract."32 (Emphasis supplied)
exclusive in character.
To reiterate, the 1935, 1973 and 1987 Constitutions expressly prohibit the
In PD No. 198, as amended, former President Ferdinand E. Marcos (President creation of franchises that are exclusive in character. They uniformly command
Marcos) created indirectly franchises that are exclusive in character by allowing that "nor shall such franchise x x x be exclusive in character." This
the BOD of LTWD and the LWUA to create directly franchises that are exclusive constitutional prohibition is absolute and accepts no exception. On the other
in character. Section 47 of PD No. 198, as amended, allows the BOD and the hand, PD No. 198, as amended, allows the BOD of LTWD and LWUA to create
LWUA to create directly franchises that are exclusive in character. Section 47 franchises that are exclusive in character. Section 47 states that, "No franchise
states: shall be granted to any other person or agency x x x unless and except to the
extent that the board of directors consents thereto x x x subject to review
Sec. 47. Exclusive Franchise. No franchise shall be granted to any other by the Administration." Section 47 creates a glaring exception to the absolute
person or agency for domestic, industrial or commercial water service within prohibition in the Constitution. Clearly, it is patently unconstitutional.
the district or any portion thereof unless and except to the extent that the
board of directors of said district consents thereto by resolution duly Section 47 gives the BOD and the LWUA the authority to make an exception to
adopted, such resolution, however, shall be subject to review by the the absolute prohibition in the Constitution. In short, the BOD and the LWUA are
Administration. (Emphasis supplied) given the discretion to create franchises that are exclusive in character. The
BOD and the LWUA are not even legislative bodies. The BOD is not a regulatory
In case of conflict between the Constitution and a statute, the Constitution body but simply a management board of a water district. Indeed, neither the
always prevails because the Constitution is the basic law to which all other laws BOD nor the LWUA can be granted the power to create any exception to the
must conform to. The duty of the Court is to uphold the Constitution and to absolute prohibition in the Constitution, a power that Congress itself cannot
declare void all laws that do not conform to it. exercise.

In Social Justice Society v. Dangerous Drugs Board,25 the Court held that, "It is In Metropolitan Cebu Water District v. Adala,33 the Court categorically declared
basic that if a law or an administrative rule violates any norm of the Constitution, Section 47 void. The Court held that:
that issuance is null and void and has no effect. The Constitution is the basic
law to which all laws must conform; no act shall be valid if it conflicts with the Nonetheless, while the prohibition in Section 47 of P.D. 198 applies to the
Constitution."26 In Sabio v. Gordon,27 the Court held that, "the Constitution is the issuance of CPCs for the reasons discussed above, the same provision must
highest law of the land. It is the ‘basic and paramount law to which all other laws be deemed void ab initio for being irreconcilable with Article XIV, Section
5 of the 1973 Constitution which was ratified on January 17, 1973 — the The dissenting opinion states that the BOD and the LWUA can create franchises
constitution in force when P.D. 198 was issued on May 25, 1973. Thus, Section that are exclusive in character "based on reasonable and legitimate grounds,"
5 of Art. XIV of the 1973 Constitution reads: and such creation "should not be construed as a violation of the constitutional
mandate on the non-exclusivity of a franchise" because it "merely refers to
"SECTION 5. No franchise, certificate, or any other form of authorization for the regulation" which is part of "the government’s inherent right to exercise police
operation of a public utility shall be granted except to citizens of the Philippines power in regulating public utilities" and that their violation of the Constitution
or to corporations or associations organized under the laws of the Philippines at "would carry with it the legal presumption that public officers regularly perform
least sixty per centum of the capital of which is owned by such citizens, nor shall their official functions." The dissenting opinion states that:
such franchise, certificate, or authorization be exclusive in character or for a
longer period than fifty years. Neither shall any such franchise or right be granted To begin with, a government agency’s refusal to grant a franchise to another
except under the condition that it shall be subject to amendment, alteration, or entity, based on reasonable and legitimate grounds, should not be construed as
repeal by the Batasang Pambansa when the public interest so requires. The a violation of the constitutional mandate on the non-exclusivity of a franchise;
State shall encourage equity participation in public utiltities by the general public. this merely refers to regulation, which the Constitution does not prohibit. To say
The participation of foreign investors in the governing body of any public utility that a legal provision is unconstitutional simply because it enables a government
enterprise shall be limited to their proportionate share in the capital thereof." instrumentality to determine the propriety of granting a franchise is contrary to
the government’s inherent right to exercise police power in regulating public
This provision has been substantially reproduced in Article XII Section 11 of the utilities for the protection of the public and the utilities themselves. The refusal
1987 Constitution, including the prohibition against exclusive franchises. of the local water district or the LWUA to consent to the grant of other franchises
would carry with it the legal presumption that public officers regularly perform
xxxx their official functions.

Since Section 47 of P.D. 198, which vests an "exclusive franchise" upon The dissenting opinion states two "reasonable and legitimate grounds" for the
public utilities, is clearly repugnant to Article XIV, Section 5 of the 1973 creation of exclusive franchise: (1) protection of "the government’s
Constitution, it is unconstitutional and may not, therefore, be relied upon by investment,"35 and (2) avoidance of "a situation where ruinous competition could
petitioner in support of its opposition against respondent’s application for CPC compromise the supply of public utilities in poor and remote areas."36
and the subsequent grant thereof by the NWRB.
There is no "reasonable and legitimate" ground to violate the Constitution. The
WHEREFORE, Section 47 of P.D. 198 is unconstitutional. (Emphasis 34 Constitution should never be violated by anyone. Right or wrong, the President,
supplied) Congress, the Court, the BOD and the LWUA have no choice but to follow the
Constitution. Any act, however noble its intentions, is void if it violates the
Constitution. This rule is basic.
The dissenting opinion declares Section 47 valid and constitutional. In effect, the
dissenting opinion holds that (1) President Marcos can create indirectly
franchises that are exclusive in character; (2) the BOD can create directly In Social Justice Society,37 the Court held that, "In the discharge of their defined
franchises that are exclusive in character; (3) the LWUA can create directly functions, the three departments of government have no choice but to yield
franchises that are exclusive in character; and (4) the Court should allow the obedience to the commands of the Constitution. Whatever limits it
creation of franchises that are exclusive in character. imposes must be observed."38 In Sabio,39 the Court held that, "the Constitution
is the highest law of the land. It is ‘the basic and paramount law to which x x
x all persons, including the highest officials of the land, must defer. No act
Stated differently, the dissenting opinion holds that (1) President Marcos can
shall be valid, however noble its intentions, if it conflicts with the
violate indirectly the Constitution; (2) the BOD can violate directly the
Constitution.’"40 In Bengzon v. Drilon,41 the Court held that, "the three branches
Constitution; (3) the LWUA can violate directly the Constitution; and (4) the Court
of government must discharge their respective functions within the limits of
should allow the violation of the Constitution.
authority conferred by the Constitution."42 In Mutuc v. Commission on
Elections,43 the Court held that, "The three departments of government in the In Strategic Alliance Development Corporation v. Radstock Securities
discharge of the functions with which it is [sic] entrusted have no choice Limited,53 the Court held that, "This Court must perform its duty to defend and
but to yield obedience to [the Constitution’s] commands. Whatever limits uphold the Constitution."54 In Bengzon,55 the Court held that, "The Constitution
it imposes must be observed."44 expressly confers on the judiciary the power to maintain inviolate what it
decrees."56 In Mutuc,57 the Court held that:
Police power does not include the power to violate the Constitution. Police power
is the plenary power vested in Congress to make laws not repugnant to the The concept of the Constitution as the fundamental law, setting forth the criterion
Constitution. This rule is basic. for the validity of any public act whether proceeding from the highest official or
the lowest functionary, is a postulate of our system of government. That is to
In Metropolitan Manila Development Authority v. Viron Transportation Co., manifest fealty to the rule of law, with priority accorded to that which occupies
Inc.,45 the Court held that, "Police power is the plenary power vested in the the topmost rung in the legal hierarchy. The three departments of government
legislature to make, ordain, and establish wholesome and reasonable laws, in the discharge of the functions with which it is [sic] entrusted have no choice
statutes and ordinances, not repugnant to the Constitution."46 In Carlos but to yield obedience to its commands. Whatever limits it imposes must be
Superdrug Corp. v. Department of Social Welfare and Development,47 the Court observed. Congress in the enactment of statutes must ever be on guard lest the
held that, police power "is ‘the power vested in the legislature by the constitution restrictions on its authority, whether substantive or formal, be transcended. The
to make, ordain, and establish all manner of wholesome and reasonable laws, Presidency in the execution of the laws cannot ignore or disregard what it
statutes, and ordinances x x x not repugnant to the ordains. In its task of applying the law to the facts as found in deciding cases,
constitution.’"48 In Metropolitan Manila Development Authority v. Garin,49 the the judiciary is called upon to maintain inviolate what is decreed by the
Court held that, "police power, as an inherent attribute of sovereignty, is the fundamental law. Even its power of judicial review to pass upon the validity of
power vested by the Constitution in the legislature to make, ordain, and establish the acts of the coordinate branches in the course of adjudication is a logical
all manner of wholesome and reasonable laws, statutes and ordinances x x corollary of this basic principle that the Constitution is paramount. It overrides
x not repugnant to the Constitution."50 any governmental measure that fails to live up to its mandates. Thereby there is
a recognition of its being the supreme law.58
There is no question that the effect of Section 47 is the creation of franchises
that are exclusive in character. Section 47 expressly allows the BOD and the Sustaining the RTC’s ruling would make a dangerous precedent. It will allow
LWUA to create franchises that are exclusive in character. Congress to do indirectly what it cannot do directly. In order to circumvent the
constitutional prohibition on franchises that are exclusive in character, all
The dissenting opinion explains why the BOD and the LWUA should be allowed Congress has to do is to create a law allowing the BOD and the LWUA to create
to create franchises that are exclusive in character — to protect "the franchises that are exclusive in character, as in the present case.
government’s investment" and to avoid "a situation where ruinous competition
could compromise the supply of public utilities in poor and remote areas." The WHEREFORE, we GRANT the petition. We DECLARE Section 47 of
dissenting opinion declares that these are "reasonable and legitimate grounds." Presidential Decree No. 198 UNCONSTITUTIONAL. We SET ASIDE the 1
The dissenting opinion also states that, "The refusal of the local water district or October 2004 Judgment and 6 November 2004 Order of the Regional Trial
the LWUA to consent to the grant of other franchises would carry with it the legal Court, Judicial Region 1, Branch 62, La Trinidad, Benguet, in Civil Case No. 03-
presumption that public officers regularly perform their official functions." CV-1878 and REINSTATE the 23 July 2002 Resolution and 15 August 2002
Decision of the National Water Resources Board.
When the effect of a law is unconstitutional, it is void. In Sabio,51 the Court held
that, "A statute may be declared unconstitutional because it is not within the SO ORDERED.
legislative power to enact; or it creates or establishes methods or forms that
infringe constitutional principles; or its purpose or effect violates the ANTONIO T. CARPIO
Constitution or its basic principles."52 The effect of Section 47 violates the Associate Justice
Constitution, thus, it is void.
WE CONCUR: (1) Article 1732 makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity. Article 1732 also carefully avoids
making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general
population. It appears to the Court that private respondent is properly
De Guzman v. CA characterized as a common carrier even though he merely "back-hauled"
goods for other merchants from Manila to Pangasinan, although such
backhauling was done on a periodic or occasional rather than regular or
Facts: scheduled manner, and even though private respondent's principal
occupation was not the carriage of goods for others. There is no dispute that
Respondent Ernesto Cendana was a junk dealer. He buys scrap materials and private respondent charged his customers a fee for hauling their goods; that
brings those that he gathered to Manila for resale using 2 six-wheeler trucks. fee frequently fell below commercial freight rates is not relevant here. A
On the return trip to Pangasinan, respondent would load his vehicle with certificate of public convenience is not a requisite for the incurring of liability
cargo which various merchants wanted delivered, charging fee lower than under the Civil Code provisions governing common carriers.
the commercial rates. Sometime in November 1970, petitioner Pedro de
Guzman contracted with respondent for the delivery of 750 cartons of (2) Article 1734 establishes the general rule that common carriers are
Liberty Milk. On December 1, 1970, respondent loaded the cargo. Only 150 responsible for the loss, destruction or deterioration of the goods which they
boxes were delivered to petitioner because the truck carrying the boxes was carry, "unless the same is due to any of the following causes only:
hijacked along the way. Petitioner commenced an action claiming the value
of the lost merchandise. Petitioner argues that respondent, being a common a. Flood, storm, earthquake, lightning, or other natural disaster or calamity;
carrier, is bound to exercise extraordinary diligence, which it failed to do.
Private respondent denied that he was a common carrier, and so he could b. Act of the public enemy in war, whether international or civil;
not be held liable for force majeure. The trial court ruled against the
respondent, but such was reversed by the Court of Appeals. c. Act or omission of the shipper or owner of the goods;

Issues: d. The character of the goods or defects in the packing or in the containers;
and
(1) Whether or not private respondent is a common carrier
e. Order or act of competent public authority."
(2) Whether private respondent is liable for the loss of the goods
The hijacking of the carrier's truck - does not fall within any of the five (5)
Held: categories of exempting causes listed in Article 1734. Private respondent as
common carrier is presumed to have been at fault or to have acted
negligently. This presumption, however, may be overthrown by proof of Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty
extraordinary diligence on the part of private respondent. We believe and so filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's
hold that the limits of the duty of extraordinary diligence in the vigilance over establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1
the goods carried are reached where the goods are lost as a result of a robbery December 1970, respondent loaded in Makati the merchandise on to his trucks:
150 cartons were loaded on a truck driven by respondent himself, while 600
which is attended by "grave or irresistible threat, violence or force." we hold
cartons were placed on board the other truck which was driven by Manuel
that the occurrence of the loss must reasonably be regarded as quite beyond Estrada, respondent's driver and employee.
the control of the common carrier and properly regarded as a fortuitous
event. It is necessary to recall that even common carriers are not made Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600
absolute insurers against all risks of travel and of transport of goods, and are boxes never reached petitioner, since the truck which carried these boxes was
not held liable for acts or events which cannot be foreseen or are inevitable, hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed
provided that they shall have complied with the rigorous standard of men who took with them the truck, its driver, his helper and the cargo.
extraordinary diligence.
On 6 January 1971, petitioner commenced action against private respondent in
Republic of the Philippines the Court of First Instance of Pangasinan, demanding payment of P 22,150.00,
SUPREME COURT the claimed value of the lost merchandise, plus damages and attorney's fees.
Manila Petitioner argued that private respondent, being a common carrier, and having
failed to exercise the extraordinary diligence required of him by the law, should
THIRD DIVISION be held liable for the value of the undelivered goods.

G.R. No. L-47822 December 22, 1988 In his Answer, private respondent denied that he was a common carrier and
argued that he could not be held responsible for the value of the lost goods, such
loss having been due to force majeure.
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents. On 10 December 1975, the trial court rendered a Decision 1 finding private
respondent to be a common carrier and holding him liable for the value of the
undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P
Vicente D. Millora for petitioner. 2,000.00 as attorney's fees.
Jacinto Callanta for private respondent. On appeal before the Court of Appeals, respondent urged that the trial court had
erred in considering him a common carrier; in finding that he had habitually
offered trucking services to the public; in not exempting him from liability on the
ground of force majeure; and in ordering him to pay damages and attorney's
FELICIANO, J.: fees.

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in
Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring such material
The Court of Appeals reversed the judgment of the trial court and held that
to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material to Manila. On respondent had been engaged in transporting return loads of freight "as a casual
the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted occupation — a sideline to his scrap iron business" and not as a common carrier.
delivered to differing establishments in Pangasinan. For that service, respondent charged freight rates which
were commonly lower than regular commercial rates. Petitioner came to this Court by way of a Petition for Review assigning as errors
the following conclusions of the Court of Appeals:
Sometime in November 1970, petitioner Pedro de Guzman a merchant and
authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta, 1. that private respondent was not a common carrier;
 2. that the hijacking of respondent's truck was force majeure; express service, steamboat, or steamship line, pontines, ferries
and and water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or dock, ice
3. that respondent was not liable for the value of the undelivered plant,
cargo. (Rollo, p. 111) ice-refrigeration plant, canal, irrigation system, gas, electric light,
heat and power, water supply and power petroleum, sewerage
We consider first the issue of whether or not private respondent Ernesto system, wire or wireless communications systems, wire or
Cendana may, under the facts earlier set forth, be properly characterized as a wireless broadcasting stations and other similar public services.
common carrier. ... (Emphasis supplied)

The Civil Code defines "common carriers" in the following terms: It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely "back-hauled" goods for other
merchants from Manila to Pangasinan, although such back-hauling was done
Article 1732. Common carriers are persons, corporations, firms
on a periodic or occasional rather than regular or scheduled manner, and even
or associations engaged in the business of carrying or
though private respondent's principal occupation was not the carriage of goods
transporting passengers or goods or both, by land, water, or air
for others. There is no dispute that private respondent charged his customers a
for compensation, offering their services to the public.
fee for hauling their goods; that fee frequently fell below commercial freight rates
is not relevant here.
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
The Court of Appeals referred to the fact that private respondent held no
carrying only as an ancillary activity (in local Idiom as "a sideline"). Article 1732
certificate of public convenience, and concluded he was not a common carrier.
also carefully avoids making any distinction between a person or enterprise
This is palpable error. A certificate of public convenience is not a requisite for
offering transportation service on a regular or scheduled basis and one offering
the incurring of liability under the Civil Code provisions governing common
such service on an occasional, episodic or unscheduled basis. Neither does
carriers. That liability arises the moment a person or firm acts as a common
Article 1732 distinguish between a carrier offering its services to the "general
carrier, without regard to whether or not such carrier has also complied with the
public," i.e., the general community or population, and one who offers services
requirements of the applicable regulatory statute and implementing regulations
or solicits business only from a narrow segment of the general population. We
and has been granted a certificate of public convenience or other franchise. To
think that Article 1733 deliberaom making such distinctions.
exempt private respondent from the liabilities of a common carrier because he
has not secured the necessary certificate of public convenience, would be
So understood, the concept of "common carrier" under Article 1732 may be seen offensive to sound public policy; that would be to reward private respondent
to coincide neatly with the notion of "public service," under the Public Service precisely for failing to comply with applicable statutory requirements. The
Act (Commonwealth Act No. 1416, as amended) which at least partially business of a common carrier impinges directly and intimately upon the safety
supplements the law on common carriers set forth in the Civil Code. Under and well being and property of those members of the general community who
Section 13, paragraph (b) of the Public Service Act, "public service" includes: happen to deal with such carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of those who utilize their services
... every person that now or hereafter may own, operate, and the law cannot allow a common carrier to render such duties and liabilities
manage, or control in the Philippines, for hire or merely facultative by simply failing to obtain the necessary permits and
compensation, with general or limited clientele, whether authorizations.
permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street railway, We turn then to the liability of private respondent as a common carrier.
traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may
be its classification, freight or carrier service of any class,
Common carriers, "by the nature of their business and for reasons of public Petitioner insists that private respondent had not observed extraordinary
policy" 2 are held to a very high degree of care and diligence ("extraordinary diligence in the care of petitioner's goods. Petitioner argues that in the
diligence") in the carriage of goods as well as of passengers. The specific import circumstances of this case, private respondent should have hired a security
of extraordinary diligence in the care of goods transported by a common carrier guard presumably to ride with the truck carrying the 600 cartons of Liberty filled
is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745, milk. We do not believe, however, that in the instant case, the standard of
numbers 5, 6 and 7" of the Civil Code. extraordinary diligence required private respondent to retain a security guard to
ride with the truck and to engage brigands in a firelight at the risk of his own life
Article 1734 establishes the general rule that common carriers are responsible and the lives of the driver and his helper.
for the loss, destruction or deterioration of the goods which they carry,
"unless the same is due to any of the following causes only: The precise issue that we address here relates to the specific requirements of
the duty of extraordinary diligence in the vigilance over the goods carried in the
(1) Flood, storm, earthquake, lightning or other specific context of hijacking or armed robbery.
natural disaster or calamity;
(2) Act of the public enemy in war, whether As noted earlier, the duty of extraordinary diligence in the vigilance over goods
international or civil; is, under Article 1733, given additional specification not only by Articles 1734
(3) Act or omission of the shipper or owner of the and 1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in
goods; relevant part:
(4) The character-of the goods or defects in the
packing or-in the containers; and Any of the following or similar stipulations shall be considered
(5) Order or act of competent public authority. unreasonable, unjust and contrary to public policy:

It is important to point out that the above list of causes of loss, destruction or xxx xxx xxx
deterioration which exempt the common carrier for responsibility therefor, is a
closed list. Causes falling outside the foregoing list, even if they appear to (5) that the common carrier shall not be
constitute a species of force majeure fall within the scope of Article 1735, which responsible for the acts or omissions of his or its
provides as follows: employees;

In all cases other than those mentioned in numbers 1, 2, 3, 4 and (6) that the common carrier's liability for acts
5 of the preceding article, if the goods are lost, destroyed or committed by thieves, or of robbers who
deteriorated, common carriers are presumed to have been at donot act with grave or irresistible threat,
fault or to have acted negligently, unless they prove that they violence or force, is dispensed with or
observed extraordinary diligence as required in Article 1733. diminished; and
(Emphasis supplied)
(7) that the common carrier shall not responsible
Applying the above-quoted Articles 1734 and 1735, we note firstly that the for the loss, destruction or deterioration of goods
specific cause alleged in the instant case — the hijacking of the carrier's truck on account of the defective condition of the car
— does not fall within any of the five (5) categories of exempting causes listed vehicle, ship, airplane or other equipment used
in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle in the contract of carriage. (Emphasis supplied)
must be dealt with under the provisions of Article 1735, in other words, that the
private respondent as common carrier is presumed to have been at fault or to
Under Article 1745 (6) above, a common carrier is held responsible — and will
have acted negligently. This presumption, however, may be overthrown by proof
not be allowed to divest or to diminish such responsibility — even for acts of
of extraordinary diligence on the part of private respondent.
strangers like thieves or robbers, except where such thieves or robbers in fact
acted "with grave or irresistible threat, violence or force." We believe and so hold
that the limits of the duty of extraordinary diligence in the vigilance over the
goods carried are reached where the goods are lost as a result of a robbery Footnotes
which is attended by "grave or irresistible threat, violence or force."
1 Rollo, p. 14.
In the instant case, armed men held up the second truck owned by private
respondent which carried petitioner's cargo. The record shows that an 2 Article 1733, Civil Code.
information for robbery in band was filed in the Court of First Instance of Tarlac,
Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. Felipe
3 Rollo, p. 22.
Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe."
There, the accused were charged with willfully and unlawfully taking and
carrying away with them the second truck, driven by Manuel Estrada and loaded 4 The evidence of the prosecution did not show that more than
with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store three (3) of the five (5) hold-uppers were armed. Thus, the
in Urdaneta, Pangasinan. The decision of the trial court shows that the accused existence of a "band" within the technical meaning of Article 306
acted with grave, if not irresistible, threat, violence or force.3 Three (3) of the five of the Revised Penal Code, was not affirmatively proved by the
(5) hold-uppers were armed with firearms. The robbers not only took away the prosecution.
truck and its cargo but also kidnapped the driver and his helper, detaining them
for several days and later releasing them in another province (in Zambales). The
hijacked truck was subsequently found by the police in Quezon City. The Court
Crisostomo v. Court of Appeals
of First Instance convicted all the accused of robbery, though not of robbery in G.R. No. 138334; August 25, 2003
band. 4
YNARES-SANTIAGO, J.:
In these circumstances, we hold that the occurrence of the loss must reasonably Topic: Common Carrier
be regarded as quite beyond the control of the common carrier and properly Doctrine: CONTRACT BETWEEN THE TRAVEL AGENCY AND ITS
regarded as a fortuitous event. It is necessary to recall that even common
CLIENT IS ONE FOR SERVICES AND NOT ONE OF CARRIAGE
carriers are not made absolute insurers against all risks of travel and of transport
of goods, and are not held liable for acts or events which cannot be foreseen or FACTS:
are inevitable, provided that they shall have complied with the rigorous standard
of extraordinary diligence.

We, therefore, agree with the result reached by the Court of Appeals that private
respondent Cendana is not liable for the value of the undelivered merchandise
which was lost because of an event entirely beyond private respondent's control.

ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the
Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No
pronouncement as to costs.

SO ORDERED.
In May 1991, petitioner Estela L. Crisostomo contracted the services of
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.
respondent Caravan Travel and Tours International, Inc. to arrange and facilitate
her booking, ticketing and accommodation in a tour dubbed “Jewels of Europe”. known better than to simply rely on what was told to her. This being so, she is
The package tour included the countries of England, Holland, Germany, Austria, not entitled to any form of damages. Petitioner also forfeited her right to the
Liechstenstein, Switzerland and France at a total cost of P74,322.70. Pursuant to “Jewels of Europe” tour and must therefore pay respondent the balance of the
said contract, Menor, respondent Company’s ticketing manager, went to her price for the “British Pageant” tour.
aunt’s residence on June 12, 1991 – Wednesday – to deliver petitioner’s travel
documents and plane tickets. Menor then told her to be at the Ninoy Aquino ISSUE:
International Airport (NAIA) on Saturday, two hours before her flight on board Is the contract a Contract of Carriage?
British Airways.
HELD:
Without checking her travel documents, petitioner went to NAIA on Saturday, No. By definition, a contract of carriage or transportation is one whereby a
June 15, 1991, to take the flight for the first leg of her journey from Manila to certain person or association of persons obligate themselves to transport persons,
Hong Kong. To petitioner’s dismay, she discovered that the flight she was things, or news from one place to another for a fixed price.9 Such person or
supposed to take had already departed the previous day. She learned that her association of persons are regarded as carriers and are classified as private or
plane ticket was for the flight scheduled on June 14, 1991. She thus called up special carriers and common or public carriers. A common carrier is defined
Menor to complain. Subsequently, Menor prevailed upon petitioner to take under Article 1732 of the Civil Code as persons, corporations, firms or
another tour the “British Pageant” which included England, Scotland and Wales associations engaged in the business of carrying or transporting passengers or
in its itinerary. For this tour package, petitioner was asked anew to pay goods or both, by land, water or air, for compensation, offering their services to
US$785.00 or P20,881.00. the public.
It is obvious from the above definition that respondent is not an entity engaged
She gave respondent US$300 or P7,980.00 as partial payment and commenced in the business of transporting either passengers or goods and is therefore, neither
the trip in July 1991. Upon petitioner’s return from Europe, she demanded from a private nor a common carrier. Respondent did not undertake to transport
respondent the reimbursement of P61,421.70, representing the difference petitioner from one place to another since its covenant with its customers is
between the sum she paid for “Jewels of Europe” and the amount she owed simply to make travel arrangements in their behalf. Respondent’s services as a
respondent for the “British Pageant” tour. Despite several demands, respondent travel agency include procuring tickets and facilitating travel permits or visas as
company refused to reimburse the amount, contending that the same was non- well as booking customers for tours.
refundable. Petitioner was thus constrained to file a complaint against respondent
for breach of contract of carriage and damages at Regional Trial Court of Makati While petitioner concededly bought her plane ticket through the efforts of
City. respondent company, this does not mean that the latter ipso facto is a common
carrier. At most, respondent acted merely as an agent of the airline, with whom
The trial court held that respondent was negligent in erroneously advising petitioner ultimately contracted for her carriage to Europe. Respondent’s
petitioner of her departure date through its employee, Menor, who was not obligation to petitioner in this regard was simply to see to it that petitioner was
presented as witness to rebut petitioner’s testimony. However, petitioner should properly booked with the airline for the appointed date and time. Her transport
have verified the exact date and time of departure by looking at her ticket and to the place of destination, meanwhile, pertained directly to the airline.
should have simply not relied on Menor’s verbal representation. The trial court The object of petitioner’s contractual relation with respondent is the latter’s
thus declared that petitioner was guilty of contributory negligence and service of arranging and facilitating petitioner’s booking, ticketing and
accordingly, deducted 10% from the amount being claimed as refund. accommodation in the package tour. In contrast, the object of a contract of
Respondent appealed to the Court of Appeals, which likewise found both parties carriage is the transportation of passengers or goods. It is in this sense that the
to be at fault. However, the appellate court held that petitioner is more negligent contract between the parties in this case was an ordinary one for services and not
than respondent because as a lawyer and well-traveled person, she should have one of carriage. Petitioner’s submission is premised on a wrong assumption.