Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 70462 August 11, 1988

PAN AMERICAN WORLD AIRWAYS, INC., petitioner,

vs.
INTERMEDIATE APPELLATE COURT, RENE V. PANGAN, SOTANG BASTOS PRODUCTIONS and ARCHER PRODUCTIONS, respondents.

Guerrero & Torres for petitioner.

Jose B. Layug for private respondents.

CORTES, J.:

Before the Court is a petition filed by an international air carrier seeking to limit its liability for lost baggage, containing promotional and advertising
materials for films to be exhibited in Guam and the U.S.A., clutch bags, barong tagalogs and personal belongings, to the amount specified in the
airline ticket absent a declaration of a higher valuation and the payment of additional charges.

The undisputed facts of the case, as found by the trial court and adopted by the appellate court, are as follows:

On April 25, 1978, plaintiff Rene V. Pangan, president and general manager of the plaintiffs Sotang Bastos and Archer Production
while in San Francisco, Califonia and Primo Quesada of Prime Films, San Francisco, California, entered into an agreement (Exh.
A) whereby the former, for and in consideration of the amount of US $2,500.00 per picture, bound himself to supply the latter with
three films. 'Ang Mabait, Masungit at ang Pangit,' 'Big Happening with Chikiting and Iking,' and 'Kambal Dragon' for exhibition in
the United States. It was also their agreement that plaintiffs would provide the necessary promotional and advertising materials for
said films on or before May 30, 1978.

On his way home to the Philippines, plaintiff Pangan visited Guam where he contacted Leo Slutchnick of the Hafa Adai
Organization. Plaintiff Pangan likewise entered into a verbal agreement with Slutchnick for the exhibition of two of the films above-
mentioned at the Hafa Adai Theater in Guam on May 30, 1978 for the consideration of P7,000.00 per picture (p. 11, tsn, June 20,
1979). Plaintiff Pangan undertook to provide the necessary promotional and advertising materials for said films on or before the
exhibition date on May 30,1978.
 By virtue of the above agreements, plaintiff Pangan caused the preparation of the requisite promotional handbills and still pictures
for which he paid the total sum of P12,900.00 (Exhs. B, B-1, C and C1). Likewise in preparation for his trip abroad to comply with
his contracts, plaintiff Pangan purchased fourteen clutch bags, four capiz lamps and four barong tagalog, with a total value of
P4,400.00 (Exhs. D, D-1, E, and F).

On May 18, 1978, plaintiff Pangan obtained from defendant Pan Am's Manila Office, through the Your Travel Guide, an economy
class airplane ticket with No. 0269207406324 (Exh. G) for passage from Manila to Guam on defendant's Flight No. 842 of May
27,1978, upon payment by said plaintiff of the regular fare. The Your Travel Guide is a tour and travel office owned and managed
by plaintiffs witness Mila de la Rama.

On May 27, 1978, two hours before departure time plaintiff Pangan was at the defendant's ticket counter at the Manila
International Airport and presented his ticket and checked in his two luggages, for which he was given baggage claim tickets Nos.
963633 and 963649 (Exhs. H and H-1). The two luggages contained the promotional and advertising materials, the clutch bags,
barong tagalog and his personal belongings. Subsequently, Pangan was informed that his name was not in the manifest and so
he could not take Flight No. 842 in the economy class. Since there was no space in the economy class, plaintiff Pangan took the
first class because he wanted to be on time in Guam to comply with his commitment, paying an additional sum of $112.00.

When plaintiff Pangan arrived in Guam on the date of May 27, 1978, his two luggages did not arrive with his flight, as a
consequence of which his agreements with Slutchnick and Quesada for the exhibition of the films in Guam and in the United
States were cancelled (Exh. L). Thereafter, he filed a written claim (Exh. J) for his missing luggages.

Upon arrival in the Philippines, Pangan contacted his lawyer, who made the necessary representations to protest as to the
treatment which he received from the employees of the defendant and the loss of his two luggages (Exh. M, O, Q, S, and T).
Defendant Pan Am assured plaintiff Pangan that his grievances would be investigated and given its immediate consideration
(Exhs. N, P and R). Due to the defendant's failure to communicate with Pangan about the action taken on his protests, the present
complaint was filed by the plaintiff. (Pages 4-7, Record On Appeal). [Rollo, pp. 27-29.]

On the basis of these facts, the Court of First Instance found petitioner liable and rendered judgment as follows:

(1) Ordering defendant Pan American World Airways, Inc. to pay all the plaintiffs the sum of P83,000.00, for actual damages, with
interest thereon at the rate of 14% per annum from December 6, 1978, when the complaint was filed, until the same is fully paid,
plus the further sum of P10,000.00 as attorney's fees;

(2) Ordering defendant Pan American World Airways, Inc. to pay plaintiff Rene V. Pangan the sum of P8,123.34, for additional
actual damages, with interest thereon at the rate of 14% per annum from December 6, 1978, until the same is fully paid;

(3) Dismissing the counterclaim interposed by defendant Pan American World Airways, Inc.; and
 (4) Ordering defendant Pan American World Airways, Inc. to pay the costs of suit. [Rollo, pp. 106-107.]

On appeal, the then Intermediate Appellate Court affirmed the trial court decision.

Hence, the instant recourse to this Court by petitioner.

The petition was given due course and the parties, as required, submitted their respective memoranda. In due time the case was submitted for
decision.

In assailing the decision of the Intermediate Appellate Court petitioner assigned the following errors:

1. The respondent court erred as a matter of law in affirming the trial court's award of actual damages beyond the limitation of liability set forth in
the Warsaw Convention and the contract of carriage.

2. The respondent court erred as a matter of law in affirming the trial court's award of actual damages consisting of alleged lost profits in the face
of this Court's ruling concerning special or consequential damages as set forth in Mendoza v. Philippine Airlines [90 Phil. 836 (1952).]

The assigned errors shall be discussed seriatim

1. The airline ticket (Exh. "G') contains the following conditions:

NOTICE

If the passenger's journey involves an ultimate destination or stop in a country other than the country of departure the Warsaw
Convention may be applicable and the Convention governs and in most cases limits the liability of carriers for death or personal
injury and in respect of loss of or damage to baggage. See also notice headed "Advice to International Passengers on Limitation
of Liability.

CONDITIONS OF CONTRACT

1. As used in this contract "ticket" means this passenger ticket and baggage check of which these conditions and the notices form
part, "carriage" is equivalent to "transportation," "carrier" means all air carriers that carry or undertake to carry the passenger or his
baggage hereunder or perform any other service incidental to such air carriage. "WARSAW CONVENTION" means the
convention for the Unification of Certain Rules Relating to International Carriage by Air signed at Warsaw, 12th October 1929, or
that Convention as amended at The Hague, 28th September 1955, whichever may be applicable.
 2. Carriage hereunder is subject to the rules and limitations relating to liability established by the Warsaw Convention unless such
carriage is not "international carriage" as defined by that Convention.

3. To the extent not in conflict with the foregoing carriage and other services performed by each carrier are subject to: (i)
provisions contained in this ticket, (ii) applicable tariffs, (iii) carrier's conditions of carriage and related regulations which are made
part hereof (and are available on application at the offices of carrier), except in transportation between a place in the United States
or Canada and any place outside thereof to which tariffs in force in those countries apply.

xxx xxx xxx

NOTICE OF BAGGAGE LIABILITY LIMITATIONS

Liability for loss, delay, or damage to baggage is limited as follows unless a higher value is declared in advance and additional
charges are paid: (1)for most international travel (including domestic portions of international journeys) to approximately $9.07 per
pound ($20.00 per kilo) for checked baggage and $400 per passenger for unchecked baggage: (2) for travel wholly between U.S.
points, to $750 per passenger on most carriers (a few have lower limits). Excess valuation may not be declared on certain types of
valuable articles. Carriers assume no liability for fragile or perishable articles. Further information may be obtained from the
carrier. [Emphasis supplied.].

On the basis of the foregoing stipulations printed at the back of the ticket, petitioner contends that its liability for the lost baggage of private
respondent Pangan is limited to $600.00 ($20.00 x 30 kilos) as the latter did not declare a higher value for his baggage and pay the corresponding
additional charges.

To support this contention, petitioner cites the case of Ong Yiu v. Court of Appeals [G.R. No. L-40597, June 29, 1979, 91 SCRA 223], where the
Court sustained the validity of a printed stipulation at the back of an airline ticket limiting the liability of the carrier for lost baggage to a specified
amount and ruled that the carrier's liability was limited to said amount since the passenger did not declare a higher value, much less pay additional
charges.

We find the ruling in Ong Yiu squarely applicable to the instant case. In said case, the Court, through Justice Melencio Herrera, stated:

Petitioner further contends that respondent Court committed grave error when it limited PAL's carriage liability to the amount of
P100.00 as stipulated at the back of the ticket....

We agree with the foregoing finding. The pertinent Condition of Carriage printed at the back of the plane ticket reads:

8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or damage baggage of the passenger is
LIMITED TO P100.00 for each ticket unless a passenger declares a higher valuation in excess of P100.00, but
 not in excess, however, of a total valuation of Pl,000.00 and additional charges are paid pursuant to Carrier's
tariffs.

There is no dispute that petitioner did not declare any higher value for his luggage, much less (lid he pay any additional
transportation charge.

But petitioner argues that there is nothing in the evidence to show that he had actually entered into a contract with PAL limiting the
latter's liability for loss or delay of the baggage of its passengers, and that Article 1750 * of the Civil Code has not been complied
with.

While it may be true that petitioner had not signed the plane ticket (Exh. "12"), he is nevertheless bound by the provisions thereof.
"Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of
the latter's lack of knowledge or assent to the regulation." [Tannebaum v. National Airline, Inc., 13 Misc. 2d 450,176 N.Y.S. 2d
400; Lichten v. Eastern Airlines, 87 Fed. Supp. 691; Migoski v. Eastern Air Lines, Inc., Fla., 63 So. 2d 634.] It is what is known as
a contract of "adhesion," in regards which it has been said that contracts of adhesion wherein one party imposes a ready made
form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to
the contract is in reality free to reject it entirely; if he adheres, he gives his consent,[Tolentino, Civil Code, Vol. IV, 1962 ed., p.
462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49]. And as held in Randolph v. American Airlines, 103
Ohio App. 172,144 N.E. 2d 878; Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483.] "a contract limiting liability upon an
agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence."

Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery in
excess of P100.00....

On the other hand, the ruling in Shewaram v. Philippine Air Lines, Inc. [G.R. No. L-20099, July 2, 1966, 17 SCRA 606], where the Court held that
the stipulation limiting the carrier's liability to a specified amount was invalid, finds no application in the instant case, as the ruling in said case was
premised on the finding that the conditions printed at the back of the ticket were so small and hard to read that they would not warrant the
presumption that the passenger was aware of the conditions and that he had freely and fairly agreed thereto. In the instant case, similar facts that
would make the case fall under the exception have not been alleged, much less shown to exist.

In view thereof petitioner's liability for the lost baggage is limited to $20.00 per kilo or $600.00, as stipulated at the back of the ticket.

At this juncture, in order to rectify certain misconceptions the Court finds it necessary to state that the Court of Appeal's reliance on a quotation
from Northwest Airlines, Inc. v. Cuenca [G.R. No. L-22425, August 31, 1965, 14 SCRA 1063] to sustain the view that "to apply the Warsaw
Convention which limits a carrier's liability to US$9.07 per pound or US$20.00 per kilo in cases of contractual breach of carriage ** is against
public policy" is utterly misplaced, to say the least. In said case, while the Court, as quoted in the Intermediate Appellate Court's decision, said:
 Petitioner argues that pursuant to those provisions, an air "carrier is liable only" in the event of death of a passenger or injury
suffered by him, or of destruction or loss of, or damages to any checked baggage or any goods, or of delay in the transportation
by air of passengers, baggage or goods. This pretense is not borne out by the language of said Articles. The same merely declare
the carrier liable for damages in enumerated cases, if the conditions therein specified are present. Neither said provisions nor
others in the aforementioned Convention regulate or exclude liability for other breaches of contract by the carrier. Under
petitioner's theory, an air carrier would be exempt from any liability for damages in the event of its absolute refusal, in bad faith, to
comply with a contract of carriage, which is absurd.

it prefaced this statement by explaining that:

...The case is now before us on petition for review by certiorari, upon the ground that the lower court has erred: (1) in holding that
the Warsaw Convention of October 12, 1929, relative to transportation by air is not in force in the Philippines: (2) in not holding
that respondent has no cause of action; and (3) in awarding P20,000 as nominal damages.

We deem it unnecessary to pass upon the First assignment of error because the same is the basis of the second assignment of
error, and the latter is devoid of merit, even if we assumed the former to be well taken. (Emphasis supplied.)

Thus, it is quite clear that the Court never intended to, and in fact never did, rule against the validity of provisions of the Warsaw Convention.
Consequently, by no stretch of the imagination may said quotation from Northwest be considered as supportive of the appellate court's statement
that the provisions of the Warsaw Convention limited a carrier's liability are against public policy.

2. The Court finds itself unable to agree with the decision of the trial court, and affirmed by the Court of Appeals, awarding private respondents
damages as and for lost profits when their contracts to show the films in Guam and San Francisco, California were cancelled.

The rule laid down in Mendoza v. Philippine Air Lines, Inc. [90 Phil. 836 (1952)] cannot be any clearer:

...Under Art.1107 of the Civil Code, a debtor in good faith like the defendant herein, may be held liable only for damages that were
foreseen or might have been foreseen at the time the contract of transportation was entered into. The trial court correctly found
that the defendant company could not have foreseen the damages that would be suffered by Mendoza upon failure to deliver the
can of film on the 17th of September, 1948 for the reason that the plans of Mendoza to exhibit that film during the town fiesta and
his preparations, specially the announcement of said exhibition by posters and advertisement in the newspaper, were not called to
the defendant's attention.

In our research for authorities we have found a case very similar to the one under consideration. In the case of Chapman vs. Fargo, L.R.A. (1918
F) p. 1049, the plaintiff in Troy, New York, delivered motion picture films to the defendant Fargo, an express company, consigned and to be
delivered to him in Utica. At the time of shipment the attention of the express company was called to the fact that the shipment involved motion
picture films to be exhibited in Utica, and that they should be sent to their destination, rush. There was delay in their delivery and it was found that
the plaintiff because of his failure to exhibit the film in Utica due to the delay suffered damages or loss of profits. But the highest court in the State
of New York refused to award him special damages. Said appellate court observed:

But before defendant could be held to special damages, such as the present alleged loss of profits on account of delay or failure
of delivery, it must have appeared that he had notice at the time of delivery to him of the particular circumstances attending the
shipment, and which probably would lead to such special loss if he defaulted. Or, as the rule has been stated in another form, in
order to purpose on the defaulting party further liability than for damages naturally and directly, i.e., in the ordinary course of
things, arising from a breach of contract, such unusual or extraordinary damages must have been brought within the
contemplation of the parties as the probable result of breach at the time of or prior to contracting. Generally, notice then of any
special circumstances which will show that the damages to be anticipated from a breach would be enhanced has been held
sufficient for this effect.

As may be seen, that New York case is a stronger one than the present case for the reason that the attention of the common carrier in said case
was called to the nature of the articles shipped, the purpose of shipment, and the desire to rush the shipment, circumstances and facts absent in
the present case. [Emphasis supplied.]

Thus, applying the foregoing ruling to the facts of the instant case, in the absence of a showing that petitioner's attention was called to the special
circumstances requiring prompt delivery of private respondent Pangan's luggages, petitioner cannot be held liable for the cancellation of private
respondents' contracts as it could not have foreseen such an eventuality when it accepted the luggages for transit.

The Court is unable to uphold the Intermediate Appellate Court's disregard of the rule laid down in Mendoza and affirmance of the trial court's
conclusion that petitioner is liable for damages based on the finding that "[tlhe undisputed fact is that the contracts of the plaintiffs for the exhibition
of the films in Guam and California were cancelled because of the loss of the two luggages in question." [Rollo, p. 36] The evidence reveals that
the proximate cause of the cancellation of the contracts was private respondent Pangan's failure to deliver the promotional and advertising
materials on the dates agreed upon. For this petitioner cannot be held liable. Private respondent Pangan had not declared the value of the two
luggages he had checked in and paid additional charges. Neither was petitioner privy to respondents' contracts nor was its attention called to the
condition therein requiring delivery of the promotional and advertising materials on or before a certain date.

3. With the Court's holding that petitioner's liability is limited to the amount stated in the ticket, the award of attorney's fees, which is grounded on
the alleged unjustified refusal of petitioner to satisfy private respondent's just and valid claim, loses support and must be set aside.

WHEREFORE, the Petition is hereby GRANTED and the Decision of the Intermediate Appellate Court is SET ASIDE and a new judgment is
rendered ordering petitioner to pay private respondents damages in the amount of US $600.00 or its equivalent in Philippine currency at the time
of actual payment.

SO ORDERED.

Fernan, C.J., Feliciano and Bidin JJ., concur.

Gutierrez, Jr., J., took no part.

ROESKE VS LAMB

Supreme Court of New MexicoFeb 11, 193539 N.M. 111 (N.M. 1935)
39 N.M. 111
41 P.2d 522

BICKLEY, Justice.

Appellant, plaintiff below, alleges in his complaint that he is engaged in the business of letting passenger motor vehicles for hire; that he lets his motor vehicles,
as any chattel is leased; that he does not furnish drivers or operators for the said motor vehicles; and that he has no custody nor control over the said motor
vehicles so long as the bailment continues. Plaintiff below, and appellant here, further alleges that he is not engaged in the business of carrier for hire, either
common, contract, or private; nor is he, nor the business which he carries on, within the provisions of chapter 154 of the Session Laws of New Mexico 1933.

Appellant further alleges that he is informed that the defendant below, and appellee here, the state corporation commission, is about to interfere with appellant in
the lawful conduct of his business; that the threatened action of the appellee will work irreparable harm and injury to the appellant in his business; and that the
appellant is without remedy at the law. He prays in his complaint for an order restraining the appellee from interfering with the conduct of the appellant's
business, and for general relief.

The appellee filed a demurrer to the complaint on the ground that "The Plaintiff comes within the definition of `contract motor carrier of Passengers' as defined in
section 14 (b) of Chapter 154, Laws of 1933." The demurrer was sustained. From the order sustaining the demurrer, the appellant appeals.

No question is raised as to the power of the Legislature to confer upon the state corporation commission the power to regulate the use of the public highways by
common carriers and contract carriers for hire, whether what is transported be passengers or property.

The following allegations of the complaint, the truth of which is confessed by the demurrer, identify the nature of the appellant's business:

"That the Plaintiff is engaged in the business of letting passenger motor vehicles in the State of New Mexico for hire.

"III. That the said Plaintiff lets his motor vehicles, as any chattel is leased; and that he, the said plaintiff, does not furnish drivers or operators for the said motor
vehicles; and that the said Plaintiff has no custody or control over the said motor vehicles so long as the bailment continues, and so long as the relation of lessor
and lessee exists between the said Plaintiff and his casual lessees.

"IV. That this Plaintiff is not engaged in the business of carrier for hire, either common, contract or private; nor is he, nor the business which he carries on, within
the provisions of Chapter 154 of the Session Laws of New Mexico of 1933."
A carrier has been defined: "A carrier is one that undertakes the transportation of persons or movable property. * * * A private carrier is one who, without being
engaged in such business undertakes to deliver goods in a particular case for hire or reward." 10 Corpus Juris 37, quoting Abbott's Law Dictionary.

"Carrier: (2) One * * * employed in, or engaged in the business of carrying goods for others for hire. * * *" Webster's New International Dictionary.

Counsel for appellant says: "In the business of carrier, there is inherently connected with the business the idea of a bailment of goods (or persons) for delivery by
the carrier. The essential element distinguishing the business of Appellant from that of Carrier is this: That Appellant does not deliver anything; That he is bailor
of the means of transportation only."

Counsel for both parties cite the cases of State v. Dabney, 176 Ark. 1071, 5 S.W.2d 304, and State v. Bee Hive Auto Service Co., 137 Wn. 372, 242 P. 384, 385,
as illuminating on the question of the status of driverless car companies as carriers. In the first, it was said: "The undisputed testimony shows that the appellee
was not engaged in the business of operating a jitney, taxicab, or motorbus line, but only in renting or hiring to individuals, who applied therefor, cars of different
styles and sizes to be operated by the hirer at his own risk and discretion. Such operation of such business did not constitute appellee either a private or public
carrier of passengers or his business the using of motor vehicles for the transportation or delivery of persons or passengers for hire within the meaning of the act.
He was not a carrier of passengers at all, nor liable to the payment of the additional tax required under section 36 (d) of the Act." (The emphasis is ours.)

In the second: "* * * It is true, of course, that the lessor, by the act of leasing, enters into certain obligations, so well understood as not to require enumeration
here; but we think it manifest that he does not by the act undertake to carry any one, and much less does he become by the act either a public or a private
common carrier of passengers for hire. His situation is not different in legal effect from that of the old-time occupation of livery stable keeper, who keeps teams
and carriages to let for hire. No court, in so far as we are aware, has ever held such a keeper to be a common carrier of passengers, and we think a like rule must
apply to the defendants in this instance. The judgments are affirmed." (Italics ours.)

The Attorney General further concedes that the Legislature cannot, by flat, convert one into a carrier when in fact he is not. But he argues the statute is
sufficiently broad to include regulation by the commission of all "Public Service Vehicles" whether used by the owner in the business of carrier or not.

The title of the act (chapter 154, Sess. Laws 1933) in part is as follows: "An Act Relating to the Supervision and Regulation of the Business of the Transportation
by Motor Vehicles for Hire Over the Public Highways of the State of New Mexico."

The title nowhere gives notice of an intention to regulate public service vehicles not used in the "Business of Transportation."

By its terms, the act regulates, not public service vehicles, but carriers, and carriers only. The act nowhere uses the phrase "Public Service Vehicles." If it was the
legislative intention to regulate "Public Service Vehicles" regardless of whether such vehicles are used in the business of a carrier of property or passengers for
hire, or not, it would have used language appropriate to indicate such intention.

The power of the Legislature has been adverted to. The question here involved is not the power of the Legislature to regulate "Public Service Vehicles,"
independently of their use in the carrier business, but has it undertaken to do so? We think it has not.

The judgment is reversed and the cause remanded with directions that the demurrer be overruled, and it is so ordered.
SADLER, C.J., and HUDSPETH, WATSON, and ZINN, JJ., concur.

FIRST DIVISION

G.R. No. 138334 August 25, 2003

ESTELA L. CRISOSTOMO, Petitioner,

vs.
The Court of Appeals and CARAVAN TRAVEL & TOURS INTERNATIONAL, INC., Respondents.

DECISION

YNARES-SANTIAGO, J.:

In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and Tours International, Inc. to arrange and facilitate her
booking, ticketing and accommodation in a tour dubbed "Jewels of Europe". The package tour included the countries of England, Holland, Germany, Austria,
Liechstenstein, Switzerland and France at a total cost of P74,322.70. Petitioner was given a 5% discount on the amount, which included airfare, and the booking
fee was also waived because petitioner’s niece, Meriam Menor, was respondent company’s ticketing manager.

Pursuant to said contract, Menor went to her aunt’s residence on June 12, 1991 – a Wednesday – to deliver petitioner’s travel documents and plane tickets.
Petitioner, in turn, gave Menor the full payment for the package tour. Menor then told her to be at the Ninoy Aquino International Airport (NAIA) on Saturday,
two hours before her flight on board British Airways.

Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to take the flight for the first leg of her journey from Manila to
Hongkong. To petitioner’s dismay, she discovered that the flight she was supposed to take had already departed the previous day. She learned that her plane
ticket was for the flight scheduled on June 14, 1991. She thus called up Menor to complain.

Subsequently, Menor prevailed upon petitioner to take another tour – the "British Pageant" – which included England, Scotland and Wales in its itinerary. For
this tour package, petitioner was asked anew to pay US$785.00 or P20,881.00 (at the then prevailing exchange rate of P26.60). She gave respondent US$300 or
P7,980.00 as partial payment and commenced the trip in July 1991.

Upon petitioner’s return from Europe, she demanded from respondent the reimbursement of P61,421.70, representing the difference between the sum she paid for
"Jewels of Europe" and the amount she owed respondent for the "British Pageant" tour. Despite several demands, respondent company refused to reimburse the
amount, contending that the same was non-refundable.1 Petitioner was thus constrained to file a complaint against respondent for breach of contract of carriage
and damages, which was docketed as Civil Case No. 92-133 and raffled to Branch 59 of the Regional Trial Court of Makati City.
In her complaint,2 petitioner alleged that her failure to join "Jewels of Europe" was due to respondent’s fault since it did not clearly indicate the departure date on
the plane ticket. Respondent was also negligent in informing her of the wrong flight schedule through its employee Menor. She insisted that the "British Pageant"
was merely a substitute for the "Jewels of Europe" tour, such that the cost of the former should be properly set-off against the sum paid for the latter.

For its part, respondent company, through its Operations Manager, Concepcion Chipeco, denied responsibility for petitioner’s failure to join the first tour.
Chipeco insisted that petitioner was informed of the correct departure date, which was clearly and legibly printed on the plane ticket. The travel documents were
given to petitioner two days ahead of the scheduled trip. Petitioner had only herself to blame for missing the flight, as she did not bother to read or confirm her
flight schedule as printed on the ticket.

Respondent explained that it can no longer reimburse the amount paid for "Jewels of Europe", considering that the same had already been remitted to its principal
in Singapore, Lotus Travel Ltd., which had already billed the same even if petitioner did not join the tour. Lotus’ European tour organizer, Insight International
Tours Ltd., determines the cost of a package tour based on a minimum number of projected participants. For this reason, it is accepted industry practice to
disallow refund for individuals who failed to take a booked tour.3

Lastly, respondent maintained that the "British Pageant" was not a substitute for the package tour that petitioner missed. This tour was independently procured by
petitioner after realizing that she made a mistake in missing her flight for "Jewels of Europe". Petitioner was allowed to make a partial payment of only
US$300.00 for the second tour because her niece was then an employee of the travel agency. Consequently, respondent prayed that petitioner be ordered to pay
the balance of P12,901.00 for the "British Pageant" package tour.

After due proceedings, the trial court rendered a decision,4 the dispositive part of which reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three
Centavos (P53,989.43) with legal interest thereon at the rate of twelve percent (12%) per annum starting January 16, 1992, the date when the complaint
was filed;

2. Ordering the defendant to pay the plaintiff the amount of Five Thousand (P5,000.00) Pesos as and for reasonable attorney’s fees;

3. Dismissing the defendant’s counterclaim, for lack of merit; and

4. With costs against the defendant.

SO ORDERED.5

The trial court held that respondent was negligent in erroneously advising petitioner of her departure date through its employee, Menor, who was not presented as
witness to rebut petitioner’s testimony. However, petitioner should have verified the exact date and time of departure by looking at her ticket and should have
simply not relied on Menor’s verbal representation. The trial court thus declared that petitioner was guilty of contributory negligence and accordingly, deducted
10% from the amount being claimed as refund.

Respondent appealed to the Court of Appeals, which likewise found both parties to be at fault. However, the appellate court held that petitioner is more negligent
than respondent because as a lawyer and well-traveled person, she should have known better than to simply rely on what was told to her. This being so, she is not
entitled to any form of damages. Petitioner also forfeited her right to the "Jewels of Europe" tour and must therefore pay respondent the balance of the price for
the "British Pageant" tour. The dispositive portion of the judgment appealed from reads as follows:

WHEREFORE, premises considered, the decision of the Regional Trial Court dated October 26, 1995 is hereby REVERSED and SET ASIDE. A new judgment
is hereby ENTERED requiring the plaintiff-appellee to pay to the defendant-appellant the amount of P12,901.00, representing the balance of the price of the
British Pageant Package Tour, the same to earn legal interest at the rate of SIX PERCENT (6%) per annum, to be computed from the time the counterclaim was
filed until the finality of this decision. After this decision becomes final and executory, the rate of TWELVE PERCENT (12%) interest per annum shall be
additionally imposed on the total obligation until payment thereof is satisfied. The award of attorney’s fees is DELETED. Costs against the plaintiff-appellee.

SO ORDERED.6

Upon denial of her motion for reconsideration,7 petitioner filed the instant petition under Rule 45 on the following grounds:

It is respectfully submitted that the Honorable Court of Appeals committed a reversible error in reversing and setting aside the decision of the trial court
by ruling that the petitioner is not entitled to a refund of the cost of unavailed "Jewels of Europe" tour she being equally, if not more, negligent than the
private respondent, for in the contract of carriage the common carrier is obliged to observe utmost care and extra-ordinary diligence which is higher in
degree than the ordinary diligence required of the passenger. Thus, even if the petitioner and private respondent were both negligent, the petitioner
cannot be considered to be equally, or worse, more guilty than the private respondent. At best, petitioner’s negligence is only contributory while the
private respondent [is guilty] of gross negligence making the principle of pari delicto inapplicable in the case;

II

The Honorable Court of Appeals also erred in not ruling that the "Jewels of Europe" tour was not indivisible and the amount paid therefor refundable;

III

The Honorable Court erred in not granting to the petitioner the consequential damages due her as a result of breach of contract of carriage.8

Petitioner contends that respondent did not observe the standard of care required of a common carrier when it informed her wrongly of the flight schedule. She
could not be deemed more negligent than respondent since the latter is required by law to exercise extraordinary diligence in the fulfillment of its obligation. If
she were negligent at all, the same is merely contributory and not the proximate cause of the damage she suffered. Her loss could only be attributed to respondent
as it was the direct consequence of its employee’s gross negligence.

Petitioner’s contention has no merit.

By definition, a contract of carriage or transportation is one whereby a certain person or association of persons obligate themselves to transport persons, things, or
news from one place to another for a fixed price.9 Such person or association of persons are regarded as carriers and are classified as private or special carriers
and common or public carriers.10 A common carrier is defined under Article 1732 of the Civil Code as persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public.

It is obvious from the above definition that respondent is not an entity engaged in the business of transporting either passengers or goods and is therefore, neither
a private nor a common carrier. Respondent did not undertake to transport petitioner from one place to another since its covenant with its customers is simply to
make travel arrangements in their behalf. Respondent’s services as a travel agency include procuring tickets and facilitating travel permits or visas as well as
booking customers for tours.

While petitioner concededly bought her plane ticket through the efforts of 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 petitioner ultimately contracted for her carriage to Europe. Respondent’s obligation to
petitioner in this regard was simply to see to it that petitioner was properly booked with the airline for the appointed date and time. Her transport to the place of
destination, meanwhile, pertained directly to the airline.

The object of petitioner’s contractual relation with respondent is the latter’s service of arranging and facilitating petitioner’s booking, ticketing and
accommodation in the package tour. In contrast, the object of a contract of carriage is the transportation of passengers or goods. It is in this sense that the contract
between the parties in this case was an ordinary one for services and not one of carriage. Petitioner’s submission is premised on a wrong assumption.

The nature of the contractual relation between petitioner and respondent is determinative of the degree of care required in the performance of the latter’s
obligation under the contract. For reasons of public policy, a common carrier in a contract of carriage is bound by law to carry passengers as far as human care
and foresight can provide using the utmost diligence of very cautious persons and with due regard for all the circumstances.11 As earlier stated, however,
respondent is not a common carrier but a travel agency. It is thus not bound under the law to observe extraordinary diligence in the performance of its obligation,
as petitioner claims.

Since the contract between the parties is an ordinary one for services, the standard of care required of respondent is that of a good father of a family under Article
1173 of the Civil Code.12 This connotes reasonable care consistent with that which an ordinarily prudent person would have observed when confronted with a
similar situation. The test to determine whether negligence attended the performance of an obligation is: did the defendant in doing the alleged negligent act use
that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence.13

In the case at bar, the lower court found Menor negligent when she allegedly informed petitioner of the wrong day of departure. Petitioner’s testimony was
accepted as indubitable evidence of Menor’s alleged negligent act since respondent did not call Menor to the witness stand to refute the allegation. The lower
court applied the presumption under Rule 131, Section 3 (e)14 of the Rules of Court that evidence willfully suppressed would be adverse if produced and thus
considered petitioner’s uncontradicted testimony to be sufficient proof of her claim.

On the other hand, respondent has consistently denied that Menor was negligent and maintains that petitioner’s assertion is belied by the evidence on record. The
date and time of departure was legibly written on the plane ticket and the travel papers were delivered two days in advance precisely so that petitioner could
prepare for the trip. It performed all its obligations to enable petitioner to join the tour and exercised due diligence in its dealings with the latter.

We agree with respondent.

Respondent’s failure to present Menor as witness to rebut petitioner’s testimony could not give rise to an inference unfavorable to the former. Menor was already
working in France at the time of the filing of the complaint,15 thereby making it physically impossible for respondent to present her as a witness. Then too, even
if it were possible for respondent to secure Menor’s testimony, the presumption under Rule 131, Section 3(e) would still not apply. The opportunity and
possibility for obtaining Menor’s testimony belonged to both parties, considering that Menor was not just respondent’s employee, but also petitioner’s niece. It
was thus error for the lower court to invoke the presumption that respondent willfully suppressed evidence under Rule 131, Section 3(e). Said presumption would
logically be inoperative if the evidence is not intentionally omitted but is simply unavailable, or when the same could have been obtained by both parties.16

In sum, we do not agree with the finding of the lower court that Menor’s negligence concurred with the negligence of petitioner and resultantly caused damage to
the latter. Menor’s negligence was not sufficiently proved, considering that the only evidence presented on this score was petitioner’s uncorroborated narration of
the events. It is well-settled that the party alleging a fact has the burden of proving it and a mere allegation cannot take the place of evidence.17 If the plaintiff,
upon whom rests the burden of proving his cause of action, fails to show in a satisfactory manner facts upon which he bases his claim, the defendant is under no
obligation to prove his exception or defense.18

Contrary to petitioner’s claim, the evidence on record shows that respondent exercised due diligence in performing its obligations under the contract and
followed standard procedure in rendering its services to petitioner. As correctly observed by the lower court, the plane ticket19 issued to petitioner clearly
reflected the departure date and time, contrary to petitioner’s contention. The travel documents, consisting of the tour itinerary, vouchers and instructions, were
likewise delivered to petitioner two days prior to the trip. Respondent also properly booked petitioner for the tour, prepared the necessary documents and
procured the plane tickets. It arranged petitioner’s hotel accommodation as well as food, land transfers and sightseeing excursions, in accordance with its avowed
undertaking.

Therefore, it is clear that respondent performed its prestation under the contract as well as everything else that was essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of her affairs, there would have been no reason for her to miss the flight. Needless to say, after the travel papers
were delivered to petitioner, it became incumbent upon her to take ordinary care of her concerns. This undoubtedly would require that she at least read the
documents in order to assure herself of the important details regarding the trip.

The negligence of the obligor in the performance of the obligation renders him liable for damages for the resulting loss suffered by the obligee. Fault or
negligence of the obligor consists in his failure to exercise due care and prudence in the performance of the obligation as the nature of the obligation so
demands.20 There is no fixed standard of diligence applicable to each and every contractual obligation and each case must be determined upon its particular
facts. The degree of diligence required depends on the circumstances of the specific obligation and whether one has been negligent is a question of fact that is to
be determined after taking into account the particulars of each case.21 1âwphi1
The lower court declared that respondent’s employee was negligent. This factual finding, however, is not supported by the evidence on record. While factual
findings below are generally conclusive upon this court, the rule is subject to certain exceptions, as when the trial court overlooked, misunderstood, or misapplied
some facts or circumstances of weight and substance which will affect the result of the case.22

In the case at bar, the evidence on record shows that respondent company performed its duty diligently and did not commit any contractual breach. Hence,
petitioner cannot recover and must bear her own damage.

WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly,
petitioner is ordered to pay respondent the amount of P12,901.00 representing the balance of the price of the British Pageant Package Tour, with legal interest
thereon at the rate of 6% per annum, to be computed from the time the counterclaim was filed until the finality of this Decision. After this Decision becomes final
and executory, the rate of 12% per annum shall be imposed until the obligation is fully settled, this interim period being deemed to be by then an equivalent to a
forbearance of credit.23

SO ORDERED.

Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.

Republic of the Philippines

SUPREME COURT

THIRD DIVISION

G.R. No. 161745 September 30, 2005

LEA MER INDUSTRIES, INC., Petitioners,

vs.
MALAYAN INSURANCE CO., INC.,* Respondent.

DECISION

PANGANIBAN, J.:

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

The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the October 9, 2002 Decision 2 and the December 29, 2003 Resolution 3 of the
Court of Appeals (CA) in CA-GR CV No. 66028. The challenged Decision disposed as follows:

"WHEREFORE, the appeal is GRANTED. The December 7, 1999 decision of the Regional Trial Court of Manila, Branch 42 in Civil Case No. 92-63159 is
hereby REVERSED and SET ASIDE. [Petitioner] is ordered to pay the [herein respondent] the value of the lost cargo in the amount of ₱565,000.00. Costs
against the [herein petitioner]."4

The assailed Resolution denied reconsideration.

The Facts

Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the shipment of 900 metric tons of silica sand valued at ₱565,000. 5
Consigned to Vulcan Industrial and Mining Corporation, the cargo was to be transported from Palawan to Manila. On October 25, 1991, the silica sand was
placed on board Judy VII, a barge leased by Lea Mer.6 During the voyage, the vessel sank, resulting in the loss of the cargo. 7

Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo.8 To recover the amount paid and in the exercise of its right of subrogation,
Malayan demanded reimbursement from Lea Mer, which refused to comply. Consequently, Malayan instituted a Complaint with the Regional Trial Court (RTC)
of Manila on September 4, 1992, for the collection of ₱565,000 representing the amount that respondent had paid Vulcan. 9

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

Ruling of the Court of Appeals

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

Hence, this recourse.13

The Issues

Petitioner states the issues in this wise:

"A. Whether or not the survey report of the cargo surveyor, Jesus Cortez, who had not been presented as a witness of the said report during the trial of this case
before the lower court can be admitted in evidence to prove the alleged facts cited in the said report.
"B. Whether or not the respondent, Court of Appeals, had validly or legally reversed the finding of fact of the Regional Trial Court which clearly and
unequivocally held that the loss of the cargo subject of this case was caused by fortuitous event for which herein petitioner could not be held liable.

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

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

The Court’s Ruling

The Petition has no merit.

First Issue:

Liability for Loss of Cargo

Question of Fact

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

Rule on Common Carriers

Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods, or both -- by land,
water, or air -- when this service is offered to the public for compensation. 17 Petitioner is clearly a common carrier, because it offers to the public its business of
transporting goods through its vessels.18

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

"Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner for the voyage or service stipulated. The charterer mans
the vessel with his own people and becomes, in effect, the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a
demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer; anything short of such a
complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all."20
The distinction is significant, because a demise or bareboat charter indicates a business undertaking that is private in character. 21 Consequently, the rights and
obligations of the parties to a contract of private carriage are governed principally by their stipulations, not by the law on common carriers.22

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

Extraordinary Diligence Required

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

Common carriers are presumed to have been at fault or to have acted negligently for loss or damage to the goods that they have transported.26 This presumption
can be rebutted only by proof that they observed extraordinary diligence, or that the loss or damage was occasioned by any of the following causes:27

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

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

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

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

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

Rule on Fortuitous Events

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

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

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

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

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

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

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

"Atty. Baldovino, Jr.:

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

xxxxxxxxx

Atty. Baldovino, Jr.:

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

xxxxxxxxx

Court:

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

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

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

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

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

Second Issue:

Admissibility of the Survey Report

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

The Survey Report Not the Sole Evidence

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

Rule on Independently

Relevant Statement

That witnesses must be examined and presented during the trial, 50 and that their testimonies must be confined to personal knowledge is required by the rules on
evidence, from which we quote:
"Section 36. Testimony generally confined to personal knowledge; hearsay excluded. –A witness can testify only to those facts which he knows of his personal
knowledge; that is, which are derived from his own perception, except as otherwise provided in these rules." 51

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

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

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

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

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

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 131166 September 30, 1999

CALTEX (PHILIPPINES), INC., petitioner,

vs.
SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO, EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S. GO, DOMINADOR S. GO,
RICARDO S. GO, EDWARD S. GO, ARTURO S. GO, EDGAR S. GO, EDMUND S. GO, FRANCISCO SORIANO, VECTOR SHIPPING
CORPORATION, TERESITA G. CAÑEZAL, AND SOTERA E. CAÑEZAL, respondents.
PARDO, J.:

Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel and a passenger ship?

When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying petroleum products of Caltex (Philippines), Inc. (hereinafter
Caltex) no one could have guessed that it would collide with MV Doña Paz, killing almost all the passengers and crew members of both ships, and
thus resulting in one of the country's worst maritime disasters.

The petition before us seeks to reverse the Court of Appeals decision 1 holding petitioner jointly liable with the operator of MT Vector for damages
when the latter collided with Sulpicio Lines, Inc.'s passenger ship MV Doña Paz.

The facts are as follows:

On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute to Masbate, loaded with 8,800 barrels of
petroleum products shipped by petitioner Caltex. 2 MT Vector is a tramping motor tanker owned and operated by Vector Shipping Corporation,
engaged in the business of transporting fuel products such as gasoline, kerosene, diesel and crude oil. During that particular voyage, the MT
Vector carried on board gasoline and other oil products owned by Caltex by virtue of a charter contract between
them. 3

On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doña Paz left the port of Tacloban headed for Manila with a complement of 59
crew members including the master and his officers, and passengers totaling 1,493 as indicated in the Coast Guard Clearance. 4 The MV Doña
Paz is a passenger and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the route of Manila/ Tacloban/ Catbalogan/ Manila/
Catbalogan/ Tacloban/ Manila, making trips twice a week.

At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea within the vicinity of Dumali Point between Marinduque and
Oriental Mindoro. All the crewmembers of MV Doña Paz died, while the two survivors from MT Vector claimed that they were sleeping at the time
of the incident.1âwphi1.nêt

The MV Doña Paz carried an estimated 4,000 passengers; many indeed, were not in the passenger manifest. Only 24 survived the tragedy after
having been rescued from the burning waters by vessels that responded to distress calls. 5 Among those who perished were public school teacher
Sebastian Cañezal (47 years old) and his daughter Corazon Cañezal (11 years old), both unmanifested passengers but proved to be on board the
vessel.

On March 22, 1988, the board of marine inquiry in BMI Case No. 659-87 after investigation found that the MT Vector, its registered operator
Francisco Soriano, and its owner and actual operator Vector Shipping Corporation, were at fault and responsible for its collision with MV Doña
Paz. 6
On February 13, 1989, Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal's wife and mother respectively, filed with the Regional Trial
Court, Branch 8, Manila, a complaint for "Damages Arising from Breach of Contract of Carriage" against Sulpicio Lines, Inc. (hereafter Sulpicio).
Sulpicio, in turn, filed a third party complaint against Francisco Soriano, Vector Shipping Corporation and Caltex (Philippines), Inc. Sulpicio alleged
that Caltex chartered MT Vector with gross and evident bad faith knowing fully well that MT Vector was improperly manned, ill-equipped,
unseaworthy and a hazard to safe navigation; as a result, it rammed against MV Doña Paz in the open sea setting MT Vector's highly flammable
cargo ablaze.

On September 15, 1992, the trial court rendered decision dismissing, the third party complaint against petitioner. The dispositive portion reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendant-3rd party plaintiff Sulpicio Lines, Inc., to
wit:

1. For the death of Sebastian E. Cañezal and his 11-year old daughter Corazon G. Cañezal, including loss of future earnings of
said Sebastian, moral and exemplary damages, attorney's fees, in the total amount of P 1,241,287.44 and finally;

2. The statutory costs of the proceedings.

Likewise, the 3rd party complaint is hereby DISMISSED for want of substantiation and with costs against the 3rd party plaintiff.

IT IS SO ORDERED.

DONE IN MANILA, this 15th day of September 1992.

ARSENIO M. GONONG

Judge 7

On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April 15, 1997, the Court of Appeal modified the trial court's ruling and
included petitioner Caltex as one of the those liable for damages. Thus:

WHEREFORE, in view of all the foregoing, the judgment rendered by the Regional Trial Court is hereby MODIFIED as follows:

WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of Sebastian E. Cañezal and Corazon Cañezal:

1. Compensatory damages for the death of Sebastian E. Cañezal and Corazon Cañezal the total amount of ONE HUNDRED
THOUSAND PESOS (P100,000);
 2. Compensatory damages representing the unearned income of Sebastian E. Cañezal, in the total amount of THREE HUNDRED
SIX THOUSAND FOUR HUNDRED EIGHTY (P306,480.00) PESOS;

3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS (P300,000.00);

4. Attorney's fees in the concept of actual damages in the amount of FIFTY THOUSAND PESOS (P50,000.00);

5. Costs of the suit.

Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held equally liable under the third party complaint to
reimburse/indemnify defendant Sulpicio Lines, Inc. of the above-mentioned damages, attorney's fees and costs which the latter is
adjudged to pay plaintiffs, the same to be shared half by Vector Shipping Co. (being the vessel at fault for the collision) and the
other half by Caltex (Phils.), Inc. (being the charterer that negligently caused the shipping of combustible cargo aboard an
unseaworthy vessel).

SO ORDERED.

JORGE S. IMPERIAL

Associate Justice

WE CONCUR:

RAMON U. MABUTAS, JR. PORTIA ALIÑO HERMACHUELOS

Associate Justice Associate Justice. 8

Hence, this petition.

We find the petition meritorious.

First: The charterer has no liability for damages under Philippine Maritime laws.

The respective rights and duties of a shipper and the carrier depends not on whether the carrier is public or private, but on whether the contract of
carriage is a bill of lading or equivalent shipping documents on the one hand, or a charter party or similar contract on the other. 9

Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter. 10
A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or
use; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or other person for
the conveyance of goods, on a particular voyage, in consideration of the payment of freight. 11

A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period of time, or voyage
charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a
determinate period of time or for a single or consecutive voyage, the ship owner to supply the ship's store, pay for the wages of the master of the
crew, and defray the expenses for the maintenance of the ship. 12

Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own people and becomes, in effect, the owner for
the voyage or service stipulated, subject to liability for damages caused by negligence.

If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the
responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship. 13

Second: MT Vector is a common carrier

Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage charter. Does a charter party agreement turn
the common carrier into a private one? We need to answer this question in order to shed light on the responsibilities of the parties.

In this case, the charter party agreement did not convert the common carrier into a private carrier. The parties entered into a voyage charter, which
retains the character of the vessel as a common carrier.

In Planters Products, Inc. vs. Court of Appeals, 14 we said:

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

Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals: 15

Although a charter party may transform a common carrier into a private one, the same however is not true in a contract of
affreightment . . .
A common carrier is a person or corporation whose regular business is to carry passengers or property for all persons who may choose to employ
and to remunerate him. 16 MT Vector fits the definition of a common carrier under Article 1732 of the Civil Code. In Guzman vs. Court of Appeals,
17
we ruled:

The Civil Code defines "common carriers" in the following terms:

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

The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one
offering such services on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1733 deliberately refrained from making
such distinctions.

It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-
hauled" goods for other merchants from Manila to Pangasinan, although such backhauling was done on a periodic, occasional
rather than regular or scheduled manner, and even though respondent's principal occupation was not the carriage of goods for
others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that the fee frequently fell
below commercial freight rates is not relevant here.

Under the Carriage of Goods by Sea Act :

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to —

(a) Make the ship seaworthy;

(b) Properly man, equip, and supply the ship;

xxx xxx xxx

Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be seaworthy, it must be adequately equipped for
the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy
condition the vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code. 18
The provisions owed their conception to the nature of the business of common carriers. This business is impressed with a special public duty. The
public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and safety of the passengers, especially
because with the modern development of science and invention, transportation has become more rapid, more complicated and somehow more
hazardous. 19 For these reasons, a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and its crew, the
carrier being obliged by law to impliedly warrant its seaworthiness.

This aside, we now rule on whether Caltex is liable for damages under the Civil Code.

Third: Is Caltex liable for damages under the Civil Code?

We rule that it is not.

Sulpicio argues that Caltex negligently shipped its highly combustible fuel cargo aboard an unseaworthy vessel such as the MT Vector when
Caltex:

1. Did not take steps to have M/T Vector's certificate of inspection and coastwise license renewed;

2. Proceeded to ship its cargo despite defects found by Mr. Carlos Tan of Bataan Refinery Corporation;

3. Witnessed M/T Vector submitting fake documents and certificates to the Philippine Coast Guard.

Sulpicio further argues that Caltex chose MT Vector transport its cargo despite these deficiencies.

1. The master of M/T Vector did not posses the required Chief Mate license to command and navigate the vessel;

2. The second mate, Ronaldo Tarife, had the license of a Minor Patron, authorized to navigate only in bays and rivers when the subject collision
occurred in the open sea;

3. The Chief Engineer, Filoteo Aguas, had no license to operate the engine of the vessel;

4. The vessel did not have a Third Mate, a radio operator and lookout; and

20
5. The vessel had a defective main engine.

As basis for the liability of Caltex, the Court of Appeals relied on Articles 20 and 2176 of the Civil Code, which provide:
 Art. 20. — Every person who contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the
same.

Art. 2176. — Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict
and is governed by the provisions of this Chapter.

And what is negligence?

The Civil Code provides:

Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith,
the provisions of Article 1171 and 2201 paragraph 2, shall apply.

If the law does not state the diligence which is to be observed in the performance, that which is expected of a good father of a
family shall be required.

In Southeastern College, Inc. vs. Court of Appeals, 21 we said that negligence, as commonly understood, is conduct which naturally or reasonably
creates undue risk or harm to others. It may be the failure to observe that degree of care, precaution, and vigilance, which the circumstances justly
demand, or the omission to do something which ordinarily regulate the conduct of human affairs, would do.

The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied with all legal requirements.
The duty rests upon the common carrier simply for being engaged in "public service." 22 The Civil Code demands diligence which is required by the
nature of the obligation and that which corresponds with the circumstances of the persons, the time and the place. Hence, considering the nature
of the obligation between Caltex and MT Vector, liability as found by the Court of Appeals is without basis.1âwphi1.nêt

The relationship between the parties in this case is governed by special laws. Because of the implied warranty of seaworthiness, 23 shippers of
goods, when transacting with common carriers, are not expected to inquire into the vessel's seaworthiness, genuineness of its licenses and
compliance with all maritime laws. To demand more from shippers and hold them liable in case of failure exhibits nothing but the futility of our
maritime laws insofar as the protection of the public in general is concerned. By the same token, we cannot expect passengers to inquire every
time they board a common carrier, whether the carrier possesses the necessary papers or that all the carrier's employees are qualified. Such a
practice would be an absurdity in a business where time is always of the essence. Considering the nature of transportation business, passengers
and shippers alike customarily presume that common carriers possess all the legal requisites in its operation.

Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping his cargoes.

A cursory reading of the records convinces us that Caltex had reasons to believe that MT Vector could legally transport cargo that time of the year.
 Atty. Poblador: Mr. Witness, I direct your attention to this portion here containing the entries here under "VESSEL'S DOCUMENTS

1. Certificate of Inspection No. 1290-85, issued December 21, 1986, and Expires December 7, 1987", Mr.
Witness, what steps did you take regarding the impending expiry of the C.I. or the Certificate of Inspection No.
1290-85 during the hiring of MT Vector?

Apolinario Ng: At the time when I extended the Contract, I did nothing because the tanker has a valid C.I. which
will expire on December 7, 1987 but on the last week of November, I called the attention of Mr. Abalos to ensure
that the C.I. be renewed and Mr. Abalos, in turn, assured me they will renew the same.

Q: What happened after that?

A: On the first week of December, I again made a follow-up from Mr. Abalos, and said they were going to send
me a copy as soon as possible, sir. 24

xxx xxx xxx

Q: What did you do with the C.I.?

A: We did not insist on getting a copy of the C.I. from Mr. Abalos on the first place, because of our long business
relation, we trust Mr. Abalos and the fact that the vessel was able to sail indicates that the documents are in
order. . . . 25

On cross examination —

Atty. Sarenas: This being the case, and this being an admission by you, this Certificate of Inspection has expired
on December 7. Did it occur to you not to let the vessel sail on that day because of the very approaching date of
expiration?

Apolinar Ng: No sir, because as I said before, the operation Manager assured us that they were able to secure a
renewal of the Certificate of Inspection and that they will in time submit us a
copy. 26

Finally, on Mr. Ng's redirect examination:

Atty. Poblador: Mr. Witness, were you aware of the pending expiry of the Certificate of Inspection in the coastwise
license on December 7, 1987. What was your assurance for the record that this document was renewed by the
MT Vector?
 Atty. Sarenas: . . .

Atty. Poblador: The certificate of Inspection?

A: As I said, firstly, we trusted Mr. Abalos as he is a long time business partner; secondly, those three years; they
were allowed to sail by the Coast Guard. That are some that make me believe that they in fact were able to
secure the necessary renewal.

Q: If the Coast Guard clears a vessel to sail, what would that mean?

Atty. Sarenas: Objection.

Court: He already answered that in the cross examination to the effect that if it was allowed, referring to MV
Vector, to sail, where it is loaded and that it was scheduled for a destination by the Coast Guard, it means that it
has Certificate of Inspection extended as assured to this witness by Restituto Abalos. That in no case MV Vector
will be allowed to sail if the Certificate of inspection is, indeed, not to be extended. That was his repeated
explanation to the cross-examination. So, there is no need to clarify the same in the re-direct examination. 27

Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years before the tragic incident occurred in 1987.
Past services rendered showed no reason for Caltex to observe a higher degree of diligence.

Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast Guard itself was
convinced of its seaworthiness. All things considered, we find no legal basis to hold petitioner liable for damages.

As Vector Shipping Corporation did not appeal from the Court of Appeals' decision, we limit our ruling to the liability of Caltex alone. However, we
maintain the Court of Appeals' ruling insofar as Vector is concerned.

WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDE the decision of the Court of Appeals in CA-G.R. CV No. 39626,
promulgated on April 15, 1997, insofar as it held Caltex liable under the third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc.
the damages the latter is adjudged to pay plaintiffs-appellees. The Court AFFIRMS the decision of the Court of Appeals insofar as it orders
Sulpicio Lines, Inc. to pay the heirs of Sebastian E. Cañezal and Corazon Cañezal damages as set forth therein. Third-party defendant-appellee
Vector Shipping Corporation and Francisco Soriano are held liable to reimburse/indemnify defendant Sulpicio Lines, Inc. whatever damages,
attorneys' fees and costs the latter is adjudged to pay plaintiffs-appellees in the case.1âwphi1.nêt

No costs in this instance.

SO ORDERED.
Davide, Jr., C.J., Kapunan and Ynares-Santiago, JJ., concur.

Puno, J., no part due to close relation with a party.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. L-47822 December 22, 1988

PEDRO DE GUZMAN, petitioner,

vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

FELICIANO, J.:

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 to Manila for resale. He utilized two (2) six-wheeler trucks which he owned
for hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants
wanted delivered to differing establishments in Pangasinan. For that service, respondent charged freight rates which were commonly lower than
regular commercial rates.

Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk Company (Philippines), Inc. in
Urdaneta, Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati,
Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 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 cartons were placed on board the
other truck which was driven by Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached petitioner, since the truck which carried these
boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper
and the cargo.

On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of Pangasinan, demanding payment of
P 22,150.00, the claimed value of the lost merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a
common carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be held liable for the value of the
undelivered goods.

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.

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 2,000.00 as attorney's fees.

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 fees.

The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in transporting return loads of freight
"as a casual
occupation — a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this Court by way of a Petition for Review
assigning as errors the following conclusions of the Court of Appeals:

1. that private respondent was not a common carrier;

2. that the hijacking of respondent's truck was force majeure; and

3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)

We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts earlier set forth, be properly characterized
as a common carrier.

The Civil Code defines "common carriers" in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community
or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733
deliberaom making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under the
Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the
Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:

... every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with
general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common
carrier, railroad, street railway, 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, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop,
wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage
system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services. ...
(Emphasis supplied)

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 on a periodic or occasional rather than regular or scheduled
manner, and even though private respondent's principal occupation was not the carriage of goods for others. There is no dispute that private
respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was not a common
carrier. This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such
carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a
certificate of public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because he has not
secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent
precisely for failing to comply with applicable statutory requirements. The business of a common carrier impinges directly and intimately upon the
safety and well being and property of those members of the general community who happen to deal with such carrier. The law imposes duties and
liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to
render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.

We turn then to the liability of private respondent as a common carrier.

Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very high degree of care and diligence
("extraordinary diligence") in the carriage of goods as well as of passengers. The specific import of extraordinary diligence in the care of goods
transported by a common carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil
Code.

Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which they
carry, "unless the same is due to any of the following causes only:

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

(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the containers; and
(5) Order or act of competent public authority.

It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the common carrier for responsibility
therefor, is a closed list. Causes falling outside the foregoing list, even if they appear to constitute a species of force majeure fall within the scope
of Article 1735, which provides as follows:

In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as required in Article 1733. (Emphasis supplied)

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant case — the hijacking of the carrier's
truck — does not fall within any of the five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of
the carrier's vehicle 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 have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on
the part of private respondent.

Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's goods. Petitioner argues that in the
circumstances of this case, private respondent should have hired a security guard presumably to ride with the truck carrying the 600 cartons of
Liberty filled milk. We do not believe, however, that in the instant case, the standard of 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 and the lives of the driver and his helper.

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 specific context of hijacking or armed robbery.

As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given additional specification not only by
Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:
 Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:

xxx xxx xxx

(5) that the common carrier shall not be responsible for the acts or omissions of his or its employees;

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

(7) that the common carrier shall not responsible for the loss, destruction or deterioration of goods on account of
the defective condition of the car vehicle, ship, airplane or other equipment used in the contract of carriage.
(Emphasis supplied)

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

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
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 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 with the 600 cartons of Liberty
filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the accused acted with
grave, if not irresistible, threat, violence or force.3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers not only took away
the 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 of First Instance convicted all the accused of
robbery, though not of robbery in band. 4

In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond 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 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 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.

Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 125948 December 29, 1998

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,

vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO, in her official capacity as
City Treasurer of Batangas, respondents.

MARTINEZ, J.:

This petition for review on certiorari assails the Decision of the Court of Appeals dated November 29, 1995, in CA-G.R. SP No. 36801,
affirming the decision of the Regional Trial Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners'
complaint for a business tax refund imposed by the City of Batangas.

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and operate oil pipelines.
The original pipeline concession was granted in 19671 and renewed by the Energy Regulatory Board in 1992. 2

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before the
mayor's permit could be issued, the respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the
fiscal year 1993 pursuant to the Local Government Code3. The respondent City Treasurer assessed a business tax on the petitioner
amounting to P956,076.04 payable in four installments based on the gross receipts for products pumped at GPS-1 for the fiscal year
1993 which amounted to P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in the amount of
P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the pertinent portion of which reads:

Please note that our Company (FPIC) is a pipeline operator with a government concession granted under the Petroleum
Act. It is engaged in the business of transporting petroleum products from the Batangas refineries, via pipeline, to Sucat
and JTF Pandacan Terminals. As such, our Company is exempt from paying tax on gross receipts under Section 133 of
the Local Government Code of 1991 . . . .

Moreover, Transportation contractors are not included in the enumeration of contractors under Section 131, Paragraph
(h) of the Local Government Code. Therefore, the authority to impose tax "on contractors and other independent
contractors" under Section 143, Paragraph (e) of the Local Government Code does not include the power to levy on
transportation contractors.

The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 of the Local
Government Code. The said section limits the imposition of fees and charges on business to such amounts as may be
commensurate to the cost of regulation, inspection, and licensing. Hence, assuming arguendo that FPIC is liable for the
license fee, the imposition thereof based on gross receipts is violative of the aforecited provision. The amount of
P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of regulation, inspection and licensing. The fee is
already a revenue raising measure, and not a mere regulatory imposition.4

On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot be considered engaged in
transportation business, thus it cannot claim exemption under Section 133 (j) of the Local Government Code.5

On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint6 for tax refund with prayer for writ of
preliminary injunction against respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint,
petitioner alleged, inter alia, that: (1) the imposition and collection of the business tax on its gross receipts violates Section 133 of the
Local Government Code; (2) the authority of cities to impose and collect a tax on the gross receipts of "contractors and independent
contractors" under Sec. 141 (e) and 151 does not include the authority to collect such taxes on transportation contractors for, as
defined under Sec. 131 (h), the term "contractors" excludes transportation contractors; and, (3) the City Treasurer illegally and
erroneously imposed and collected the said tax, thus meriting the immediate refund of the tax paid.7

Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under Section 133 (j) of the Local
Government Code as said exemption applies only to "transportation contractors and persons engaged in the transportation by hire and
common carriers by air, land and water." Respondents assert that pipelines are not included in the term "common carrier" which refers
solely to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that the term "common carrier" under the
said code pertains to the mode or manner by which a product is delivered to its destination.8

On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise:
 . . . Plaintiff is either a contractor or other independent contractor.

. . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are to be strictly
construed against the taxpayer, taxes being the lifeblood of the government. Exemption may therefore be granted only
by clear and unequivocal provisions of law.

Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387. (Exhibit A) whose concession was
lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession grant any tax
exemption upon the plaintiff.

Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax Code. Such being
the situation obtained in this case (exemption being unclear and equivocal) resort to distinctions or other considerations
may be of help:

1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so
as not to overburden the riding public or commuters with taxes. Plaintiff is not a common
carrier, but a special carrier extending its services and facilities to a single specific or
"special customer" under a "special contract."

2. The Local Tax Code of 1992 was basically enacted to give more and effective local
autonomy to local governments than the previous enactments, to make them economically
and financially viable to serve the people and discharge their functions with a concomitant
obligation to accept certain devolution of powers, . . . So, consistent with this policy even
franchise grantees are taxed (Sec. 137) and contractors are also taxed under Sec. 143 (e)
and 151 of the Code.9

Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27, 1995, we referred the case to the
respondent Court of Appeals for consideration and adjudication. 10 On November 29, 1995, the respondent court rendered a decision 11
affirming the trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18, 1996. 12

Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11, 1996. 13 Petitioner moved for a
reconsideration which was granted by this Court in a Resolution 14 of January 22, 1997. Thus, the petition was reinstated.

Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a common carrier or a transportation
contractor, and (2) the exemption sought for by petitioner is not clear under the law.

There is merit in the petition.

A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of transporting
persons or property from place to place, for compensation, offering his services to the public generally.

Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public."

The test for determining whether a party is a common carrier of goods is:

1. He must be engaged in the business of carrying goods for others as a public

employment, and must hold himself out as ready to engage in the transportation of goods
for person generally as a business and not as a casual occupation;

2. He must undertake to carry goods of the kind to which his business is confined;

3. He must undertake to carry by the method by which his business is conducted and over
his established roads; and

4. The transportation must be for hire. 15

Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of
transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact
that petitioner has a limited clientele does not exclude it from the definition of a common carrier. In De Guzman vs. Court of Appeals 16
we ruled that:

The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as a "sideline"). Article 1732 . . . avoids making any distinction between a person
or enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general community or population, and one
who offers services or solicits business only from a narrow segment of the general population. We think
that Article 1877 deliberately refrained from making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with
the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended)
which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section
13, paragraph (b) of the Public Service Act, "public service" includes:
 every person that now or hereafter may own, operate. manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common carrier,
railroad, street railway, 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, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of passengers or freight or
both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system gas, electric light heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. (Emphasis Supplied)

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Government Code refers only to
common carriers transporting goods and passengers through moving vehicles or vessels either by land, sea or water, is erroneous.

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction as to the means of
transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by
motor vehicle. In fact, in the United States, oil pipe line operators are considered common carriers. 17

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier." Thus, Article 86 thereof
provides that:

Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall have the preferential right to
utilize installations for the transportation of petroleum owned by him, but is obligated to utilize the
remaining transportation capacity pro rata for the transportation of such other petroleum as may be
offered by others for transport, and to charge without discrimination such rates as may have been
approved by the Secretary of Agriculture and Natural Resources.

Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof provides:

that everything relating to the exploration for and exploitation of petroleum . . . and everything relating to
the manufacture, refining, storage, or transportation by special methods of petroleum, is hereby declared
to be a public utility. (Emphasis Supplied)

The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-83, it declared:
 . . . since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum
products, it is considered a common carrier under Republic Act No. 387 . . . . Such being the case, it is
not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended.

From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore, exempt from the business tax as
provided for in Section 133 (j), of the Local Government Code, to wit:

Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. — Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following:

xxx xxx xxx

(j) Taxes on the gross receipts of transportation contractors and persons

engaged in the transportation of passengers or freight by hire and common
carriers by air, land or water, except as provided in this Code.

The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are illuminating:

MR. AQUINO (A). Thank you, Mr. Speaker.

Mr. Speaker, we would like to proceed to page 95, line

1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the Taxing Powers of Local Government
Units." . . .

MR. AQUINO (A.). Thank you Mr. Speaker.

Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one of
those being deemed to be exempted from the taxing powers of the local government units. May we know
the reason why the transportation business is being excluded from the taxing powers of the local
government units?

MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16,
paragraph 5. It states that local government units may not impose taxes on the business of
transportation, except as otherwise provided in this code.
 Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that
provinces have the power to impose a tax on business enjoying a franchise at the rate of not more than
one-half of 1 percent of the gross annual receipts. So, transportation contractors who are enjoying a
franchise would be subject to tax by the province. That is the exception, Mr. Speaker.

What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government units on
the carrier business. Local government units may impose taxes on top of what is already being imposed
by the National Internal Revenue Code which is the so-called "common carriers tax." We do not want a
duplication of this tax, so we just provided for an exception under Section 125 [now Sec. 137] that a
province may impose this tax at a specific rate.

MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . . 18

It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax
against common carriers is to prevent a duplication of the so-called "common carrier's tax."

Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the National Internal Revenue
Code. 19 To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local
Government Code.

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals dated November 29, 1995 in CA-G.R.
SP No. 36801 is REVERSED and SET ASIDE.

SO ORDERED.

Bellosillo, Puno and Mendoza, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 131621 September 28, 1999

LOADSTAR SHIPPING CO., INC., petitioner,
vs.
COURT OF APPEALS and THE MANILA INSURANCE CO., INC., respondents.

DAVIDE, JR., C.J.:

Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, seeks to reverse and set aside the following: (a) the 30 January 1997 decision 1 of the Court of Appeals in CA-G.R. CV No. 36401,
which affirmed the decision of 4 October 1991 2 of the Regional Trial Court of Manila, Branch 16, in Civil Case No. 85-29110, ordering LOADSTAR
to pay private respondent Manila Insurance Co. (hereafter MIC) the amount of P6,067,178, with legal interest from the filing of the compliant until
fully paid, P8,000 as attorney's fees, and the costs of the suit; and (b) its resolution of 19 November 1997, 3 denying LOADSTAR's motion for
reconsideration of said decision.

The facts are undisputed.1âwphi1.nêt

On 19 November 1984, LOADSTAR received on board its M/V "Cherokee" (hereafter, the vessel) the following goods for shipment:

a) 705 bales of lawanit hardwood;

b) 27 boxes and crates of tilewood assemblies and the others ;and

c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.

The goods, amounting to P6,067,178, were insured for the same amount with MIC against various risks including "TOTAL LOSS BY TOTAL OF
THE LOSS THE VESSEL." The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million. On 20
November 1984, on its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island. As a
result of the total loss of its shipment, the consignee made a claim with LOADSTAR which, however, ignored the same. As the insurer, MIC paid
P6,075,000 to the insured in full settlement of its claim, and the latter executed a subrogation receipt therefor.

On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the fault and
negligence of LOADSTAR and its employees. It also prayed that PGAI be ordered to pay the insurance proceeds from the loss the vessel directly
to MIC, said amount to be deducted from MIC's claim from LOADSTAR.

In its answer, LOADSTAR denied any liability for the loss of the shipper's goods and claimed that sinking of its vessel was due to force majeure.
PGAI, on the other hand, averred that MIC had no cause of action against it, LOADSTAR being the party insured. In any event, PGAI was later
dropped as a party defendant after it paid the insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting LOADSTAR to elevate the matter to the court of Appeals,
which, however, agreed with the trial court and affirmed its decision in toto.

In dismissing LOADSTAR's appeal, the appellate court made the following observations:

1) LOADSTAR cannot be considered a private carrier on the sole ground that there was a single shipper on that
fateful voyage. The court noted that the charter of the vessel was limited to the ship, but LOADSTAR retained
control over its crew. 4

2) As a common carrier, it is the Code of Commerce, not the Civil Code, which should be applied in determining
the rights and liabilities of the parties.

3) The vessel was not seaworthy because it was undermanned on the day of the voyage. If it had been
seaworthy, it could have withstood the "natural and inevitable action of the sea" on 20 November 1984, when the
condition of the sea was moderate. The vessel sank, not because of force majeure, but because it was not
seaworthy. LOADSTAR'S allegation that the sinking was probably due to the "convergence of the winds," as
stated by a PAGASA expert, was not duly proven at the trial. The "limited liability" rule, therefore, is not applicable
considering that, in this case, there was an actual finding of negligence on the part of the carrier.5

4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply because said provisions bind
only the shipper/consignee and the carrier. When MIC paid the shipper for the goods insured, it was subrogated
to the latter's rights as against the carrier, LOADSTAR. 6

5) There was a clear breach of the contract of carriage when the shipper's goods never reached their destination.
LOADSTAR's defense of "diligence of a good father of a family" in the training and selection of its crew is
unavailing because this is not a proper or complete defense in culpa contractual.

6) "Art. 361 (of the Code of Commerce) has been judicially construed to mean that when goods are delivered on
board a ship in good order and condition, and the shipowner delivers them to the shipper in bad order and
condition, it then devolves upon the shipowner to both allege and prove that the goods were damaged by reason
of some fact which legally exempts him from liability." Transportation of the merchandise at the risk and venture of
the shipper means that the latter bears the risk of loss or deterioration of his goods arising from fortuitous events,
force majeure, or the inherent nature and defects of the goods, but not those caused by the presumed negligence
or fault of the carrier, unless otherwise proved. 7

The errors assigned by LOADSTAR boil down to a determination of the following issues:

(1) Is the M/V "Cherokee" a private or a common carrier?

 (2) Did LOADSTAR observe due and/or ordinary diligence in these premises.

Regarding the first issue, LOADSTAR submits that the vessel was a private carrier because it was not issued certificate of public convenience, it
did not have a regular trip or schedule nor a fixed route, and there was only "one shipper, one consignee for a special cargo."

In refutation, MIC argues that the issue as to the classification of the M/V "Cherokee" was not timely raised below; hence, it is barred by estoppel.
While it is true that the vessel had on board only the cargo of wood products for delivery to one consignee, it was also carrying passengers as part
of its regular business. Moreover, the bills of lading in this case made no mention of any charter party but only a statement that the vessel was a
"general cargo carrier." Neither was there any "special arrangement" between LOADSTAR and the shipper regarding the shipment of the cargo.
The singular fact that the vessel was carrying a particular type of cargo for one shipper is not sufficient to convert the vessel into a private carrier.

As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed to have been negligent, and the burden of
proving otherwise devolved upon MIC. 8

LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19 November 1984, the vessel was allegedly dry docked
at Keppel Philippines Shipyard and was duly inspected by the maritime safety engineers of the Philippine Coast Guard, who certified that the ship
was fit to undertake a voyage. Its crew at the time was experienced, licensed and unquestionably competent. With all these precautions, there
could be no other conclusion except that LOADSTAR exercised the diligence of a good father of a family in ensuring the vessel's seaworthiness.

LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being due to force majeure. It points out that when the
vessel left Nasipit, Agusan del Norte, on 19 November 1984, the weather was fine until the next day when the vessel sank due to strong waves.
MCI's witness, Gracelia Tapel, fully established the existence of two typhoons, "WELFRING" and "YOLING," inside the Philippine area of
responsibility. In fact, on 20 November 1984, signal no. 1 was declared over Eastern Visayas, which includes Limasawa Island. Tapel also testified
that the convergence of winds brought about by these two typhoons strengthened wind velocity in the area, naturally producing strong waves and
winds, in turn, causing the vessel to list and eventually sink.

LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such as what transpired in this case, is valid. Since
the cargo was being shipped at "owner's risk," LOADSTAR was not liable for any loss or damage to the same. Therefore, the Court of Appeals
erred in holding that the provisions of the bills of lading apply only to the shipper and the carrier, and not to the insurer of the goods, which
conclusion runs counter to the Supreme Court's ruling in the case of St. Paul Fire & Marine Co. v. Macondray & Co., Inc., 9 and National Union
Fire Insurance Company of Pittsburgh v. Stolt-Nielsen Phils., Inc. 10

Finally, LOADSTAR avers that MIC's claim had already prescribed, the case having been instituted beyond the period stated in the bills of lading
for instituting the same — suits based upon claims arising from shortage, damage, or non-delivery of shipment shall be instituted within sixty days
from the accrual of the right of action. The vessel sank on 20 November 1984; yet, the case for recovery was filed only on 4 February 1985.

MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo was due to force majeure, because the
same concurred with LOADSTAR's fault or negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same must be deemed waived.

Thirdly, the " limited liability " theory is not applicable in the case at bar because LOADSTAR was at fault or negligent, and because it failed to
maintain a seaworthy vessel. Authorizing the voyage notwithstanding its knowledge of a typhoon is tantamount to negligence.

We find no merit in this petition.

Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of public
convenience, and this public character is not altered by the fact that the carriage of the goods in question was periodic, occasional, episodic or
unscheduled.

In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., 11 where this Court
held that a common carrier transporting special cargo or chartering the vessel to a special person becomes a private carrier that is not subject to
the provisions of the Civil Code. Any stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent is
void only if the strict policy governing common carriers is upheld. Such policy has no force where the public at is not involved, as in the case of a
ship totally chartered for the use of a single party. LOADSTAR also cited Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals 12
and National Steel Corp. v. Court of Appeals, 13 both of which upheld the Home Insurance doctrine.

These cases invoked by LOADSTAR are not applicable in the case at bar for the simple reason that the factual settings are different. The records
do not disclose that the M/V "Cherokee," on the date in question, undertook to carry a special cargo or was chartered to a special person only.
There was no charter party. The bills of lading failed to show any special arrangement, but only a general provision to the effect that the
M/V"Cherokee" was a "general cargo carrier." 14 Further, the bare fact that the vessel was carrying a particular type of cargo for one shipper, which
appears to be purely coincidental, is not reason enough to convert the vessel from a common to a private carrier, especially where, as in this case,
it was shown that the vessel was also carrying passengers.

Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common carrier under Article 1732 of the Civil Code.
In the case of De Guzman v. Court of Appeals,15 the Court juxtaposed the statutory definition of "common carriers" with the peculiar
circumstances of that case, viz.:

The Civil Code defines "common carriers" in the following terms:

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

The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as ancillary activity (in local idiom, as "a sideline". Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering
 such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community or population, and one who offers services or solicits business only
from a narrow segment of the general population. We think that Article 1733 deliberately refrained from making such distinctions.

xxx xxx xxx

It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-
hauled" goods for other merchants from Manila to Pangasinan, although such backhauling was done on a periodic or occasional
rather than regular or scheduled manner, and eventhough private respondent's principal occupation was not the carriage of goods
for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently fell
below commercial freight rates is not relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was
not a common carrier. This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability under
the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier,
without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and
implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private
respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience,
would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable
statutory requirements The business of a common carrier impinges directly and intimately upon the safety and well being and
property of those members of the general community who happen to deal with such carrier. The law imposes duties and liabilities
upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier
to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.

Moving on to the second assigned error, we find that the M/V "Cherokee" was not seaworthy when it embarked on its voyage on 19 November
1984. The vessel was not even sufficiently manned at the time. "For a vessel to be seaworthy, it must be adequately equipped for the voyage and
manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel
involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code." 16

Neither do we agree with LOADSTAR's argument that the "limited liability" theory should be applied in this case. The doctrine of limited liability
does not apply where there was negligence on the part of the vessel owner or agent. 17 LOADSTAR was at fault or negligent in not maintaining a
seaworthy vessel and in having allowed its vessel to sail despite knowledge of an approaching typhoon. In any event, it did not sink because of
any storm that may be deemed as force majeure, inasmuch as the wind condition in the performance of its duties, LOADSTAR cannot hide behind
the "limited liability" doctrine to escape responsibility for the loss of the vessel and its cargo.

LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the goods, in utter disregard of this Court's
pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray & Co., Inc., 18 and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc. 19 It
was ruled in these two cases that after paying the claim of the insured for damages under the insurance policy, the insurer is subrogated merely to
the rights of the assured, that is, it can recover only the amount that may, in turn, be recovered by the latter. Since the right of the assured in case
of loss or damage to the goods is limited or restricted by the provisions in the bills of lading, a suit by the insurer as subrogee is necessarily
subject to the same limitations and restrictions. We do not agree. In the first place, the cases relied on by LOADSTAR involved a limitation on the
carrier's liability to an amount fixed in the bill of lading which the parties may enter into, provided that the same was freely and fairly agreed upon
(Articles 1749-1750). On the other hand, the stipulation in the case at bar effectively reduces the common carrier's liability for the loss or
destruction of the goods to a degree less than extraordinary (Articles 1744 and 1745), that is, the carrier is not liable for any loss or damage to
shipments made at "owner's risk." Such stipulation is obviously null and void for being contrary to public policy." 20 It has been said:

Three kinds of stipulations have often been made in a bill of lading. The first one exempting the carrier from any and all liability for
loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an
agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher
value and pays a higher rate of. freight. According to an almost uniform weight of authority, the first and second kinds of
stipulations are invalid as being contrary to public policy, but the third is valid and enforceable. 21

Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was subrogated to all the rights which the
latter has against the common carrier, LOADSTAR.

Neither is there merit to the contention that the claim in this case was barred by prescription. MIC's cause of action had not yet prescribed at the
time it was concerned. Inasmuch as neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the
Carriage of Goods by Sea Act (COGSA) — which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes
sustained during transit — may be applied suppletorily to the case at bar. This one-year prescriptive period also applies to the insurer of the
goods. 22 In this case, the period for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year period is null
and void; 23 it must, accordingly, be struck down.

WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of the Court of Appeals in CA-G.R. CV No. 36401
is AFFIRMED. Costs against petitioner.1âwphi1.nêt

SO ORDERED.

Puno, Kapunan, Pardo and Ynares-Santiago, JJ., concur.

STONER VS UNDERSETH

Supreme Court of MontanaMay 8, 192985 Mont. 11 (Mont. 1929)

85 Mont. 11
277 P. 437
MR. JUSTICE MATTHEWS delivered the opinion of the court.

Defendants have appealed from a judgment in favor of plaintiff, holder of a permit or certificate from the Montana Railroad Commission authorizing him to
furnish freight and passenger service, by motor transportation, between Helena and Lincoln, in Lewis and Clark county, this state, which judgment purports
perpetually to enjoin the defendants from operating motor vehicles in intrastate commerce over the route served by plaintiff.

The route described in the record is along the public highway from Helena through the agricultural centers of Silver, Canyon Creek, Wilborn and Stemple to
Lincoln, a distance of fifty-two miles, with a side trip from Wilborn to the mining camp of Gould, five miles off of the route described in the plaintiff's permit.
While Gould is not mentioned in the permit, the pleadings allege and admit that plaintiff's privilege includes a connection to Gould and the record discloses that
the Railroad Commission has recognized this connection by the approval of time schedules and freight and passenger rates to and from Gould as well as all other
points on the route.

Plaintiff listed with the commission but one vehicle constructed for the carriage of freight and passengers, which he operates between Helena and Lincoln, and
operates a second truck from Gould to connect with the main route, but the permit for the first truck mentioned recites that "in case other or additional equipment
is used, you will be governed by Rule 6, page 7, of the Rules and Regulations." We are not advised by record as to the nature of this "rule"; however, it is alleged
and admitted, and the testimony is, that plaintiff had made all necessary payments to, and complied with all of the rules and regulation of, the commission.

Approaching both Lincoln and Gould the highway crosses the main divide at an altitude of approximately 6,600 feet and, during the winter months, for at least a
part of the time, this part of the route becomes impassable to motor vehicles and plaintiff is compelled to substitute horse-drawn vehicles. Plaintiff's time
schedule over the route, approved by the commission, includes Gould and gives the time of leaving each point on the route; it recites: "June 1 to October 31st,
Daily Round Trip; October 31 — June 1st, Daily one way. Winter schedule cannot be shown exactly on account of road conditions." The record, however, shows
that plaintiff ran as near on schedule time in the winter months as conditions permitted. The territory served by plaintiff is sparsely settled and it is clear from the
record that it will not support more than one carrier operating for profit.

Plaintiff has been the permittee since August, 1926, prior to which time defendant Theodore Underseth operated the Helena-Lincoln stage line, but refused to
comply with the law regulating such business (Chap. 154, Laws of 1923, as amended by Chap. 103, Laws of 1925), on the ground that his business would not
justify the payment of the fees and insurance charges required, amounting to over $300 a year. The permit under which plaintiff operated during the period
covered by this action was issued in April, 1928, effective for one year from date.

Plaintiff's grounds for injunctive relief, as alleged in his complaint, are that the defendants, from April 15, 1928, up to the time of the commencement of the
action in August, 1928, operated four motor-trucks, without license or permit, over his route, as common carriers for hire and in the same manner as he operated
and served the same portion of the public and the same points, soliciting business and exacting compensation for service; and that this was done first "by
subterfuge and artifice" and later "openly and notoriously."

Defendants filed a joint answer in which they deny that they have "by subterfuge or otherwise" operated "as common carriers for hire" over the route, or have
"infringed plaintiff's business as a common carrier * * * or have solicited the carriage of freight or passengers in competition with plaintiff." Reuben Underseth
alleges that he has no interest in the motor-trucks operated by his two brothers. Theodore Underseth alleges that, prior to 1926 he secured an "oral permit" from
the Railroad Commission to operate between Helena and Gould, which permit has never been revoked. Theodore and Carl Underseth then "admit the operation
of motor-trucks in the fulfillment of private contractual obligations of your defendant, Theodore Underseth," and deny that they have transported any person or
article other than in fulfillment of such obligations. In closing, the defendants "deny that plaintiff is entitled to the relief, or any part thereof, in said complaint
demanded, and pray the same advantage of this answer as if they had pleaded or demurred to said complaint."

After a full hearing the court made elaborate findings of fact and conclusions of law in favor of plaintiff; the findings with reference to the acts of defendants
follow the wording of the complaint summarized above. Defendants' specifications of error argued cover but the questions herein discussed.

On perfecting their appeal, without tendering a transcript of the evidence for consideration, defendants filed in this court an application for a stay of the
injunction, in which they represented that the New Gould Mining Company, at Gould, in its operation required the hauling of heavy machinery, timber, lumber,
high explosives and supplies, for which hauling plaintiff was not equipped; that there was no doctor at Gould and an emergency might arise at any time requiring
the immediate transportation of men injured or ill to Helena, and that defendant Theodore Underseth had a contract with the mining company to do this hauling.
We called the attention of counsel for the plaintiff to this application and he frankly admitted that the commission has no authority over private carriers and that
the decree here affects defendants only as common carriers; conceded that the injunction should not extend to the hauling of freight or passengers under contract
with the New Gould Mining Company and agreed that the court might provide for such transportation, and none other, pending the appeal. This court thereupon
issued its order staying the injunction pending appeal, in so far as it purports to interfere with the defendants' operations as private carriers pursuant to contract
with the mining company and permitting the carriage of freight and passengers under such contract, but provided therein that the order should not be construed to
permit the defendants to transport property or passengers for others than the mining company. A bond of $1,000 was required from the defendants, conditioned
that defendants would pay all damages which plaintiff should suffer by reason of the stay. The questions raised by defendants will be treated in their logical
order.

1. It is asserted that Chapter 154, Laws of 1923, provides for [1] the administration of the Act by the Railroad Commission and that courts should not be resorted
to for this purpose, at least until the matter in controversy has been "thrashed out" before the board; in other words, that an injunction will not lie in such a case as
this.

While "it is within the province of the board of railroad commissioners to whom the legislature has delegated authority to administer the Act" ( Interstate Transit
Co. v. Derr, 71 Mont. 222, 228 P. 624), no adequate provision is made in the Act for meeting such a situation as faced plaintiff by an appeal to the board for
relief. The board may refuse a permit to a person desiring to compete with a regularly licensed transportation company, but it cannot prevent illegal competition
and the Act (sec. 8) but provides that a violation of the Act or of the regulations of the board constitutes a misdemeanor. Prosecution under this section is not
such plain, speedy and adequate remedy as to deprive a court of equity of jurisdiction to grant injunctive relief; injunction will, therefore, lie at the instance of
one entitled to operate a transportation line for hire between fixed termini, to prevent a competitor operating without a license from conducting the same business
over the same route. ( Willis v. Buck, 81 Mont. 472, 263 P. 982; Northern Pacific Ry. Co. v. Bennett, 83 Mont. 483, 272 P. 987.)

2. Counsel for defendants assert that the Act under consideration does not apply to private carriers and that the defendants are private and not "common" carriers.
Conceding the correctness of the first statement, it has no application here, if, in fact, regardless of their statement to the effect that they never intended to
dedicate their equipment to the public, the defendants are common carriers.

The allegation that defendants were operating under an "oral permit" which had never been revoked is not sustained by the evidence. It appears that Theodore
Underseth had a mail contract in the fall of 1924 and was then operating as a common carrier as well; he wrote the commission stating that he could not comply
with the law and pay for the insurance required, and closed his letter with the inquiry: "Can you grant me an exemption from the law until June 30, 1926, at
which time my contract expires?" He [2] asserts that thereafter the "chairman of the board" in private conversation granted him the oral permit. The record
discloses that no action was ever taken by the board. The chairman of the board, as such, has no authority apart from the board and his utterances, made without
notice to or ratification by the board as a whole, would be wholly ineffective. ( State ex rel. Boyle v. Hall, 53 Mont. 595, 165 P. 757.) Moreover, if the
commission has power to grant an oral exemption and one was granted, its limit was fixed by the defendant and while on the stand Theodore Underseth did not
contend that he was operating under oral permit, but testified that he ceased operating as a common carrier in 1926 and has done nothing but "contract work"
since.

It may be true that all of defendants' hauling was done under [3, 4] special contract, but, even if so, the fact would not necessarily place them in the category of
private carriers; every time you secure a bill of lading or purchase a ticket entitling you to ride on a stage-coach or railroad train, you enter into a contract for
transportation; the obligation to carry you or your goods is a contractual obligation.

No one will contend that a mine operator or a farmer is required to comply with the Act in question in order to carry his ore or produce to market over the public
highway, and if he hires another to do this for him, his agent or employee likewise cannot be compelled, by reason of such contract, to comply with the
provisions of the Act and thus dedicate his equipment to the public. A special undertaking for one man or a definite number does not render a person a common
carrier ( State v. Nelson, 65 Utah, 457, 42 A.L.R. 849, 238 P. 237; Fish v. Chapman, 2 Ga. 349, 46 Am. Dec. 393), nor does a general hiring for a single purpose
( Big Bend Auto Freight v. Ogers, 148 Wn. 521, 269 P. 802; Purple Truck Co. v. Campbell, 119 Or. 484, 51 A.L.R. 816, 250 P. 213; Michigan Public Utilities
Commission v. Duke, 266 U.S. 570, 69 L.Ed. 445, 45 Sup. Ct. Rep. 191, 36 A.L.R. 1105), and such private carrier might, on occasion, accommodate outsiders in
an emergency and accept compensation therefor without acquiring the character of a common carrier; the question of the good faith of the carrier in such a case is
controlling. ( Big Bend Auto Freight v. Ogers, above.)

The class to which a carrier is to be assigned depends upon the nature of his business, the character in which he holds himself out to the public, the terms of his
contract, and his relations generally to the parties with whom he deals and the public. "A private carrier is one who agrees, by special agreement or contract, to
transport persons or property from one place to another, either gratuitously or for hire; one who undertakes for the transportation in a particular instance only, not
making it a vocation, not holding himself out to the public ready to act for all who desire his services." "Common carriers, however, hold themselves out to carry
for all persons indiscriminately." (1 Moore on Carriers, secs. 1-4.)

Holding oneself out to the public does not necessarily consist in public declarations or advertisement; the undertaking may be evidenced by the carrier's own
notice or, practically, by a series of acts, by his known habitual continuance in the line of business; one who follows carrying for a livelihood or who gives out to
the world in any intelligible way that he will take goods, chattels or persons for transportation for hire, is a common carrier ( Fish v. Chapman, above; Varble v.
Bigley, 14 Bush (Ky.), 698, 29 Am. Rep. 435); and this is so although the carrier has no fixed schedule of charges, does not operate over a definite route, does not
always load his vehicle to capacity and refuses, on occasion, to accept freight or passengers whether his vehicle is engaged or not. ( Cushing v. White, 101 Wn.
172, L.R.A. 1918F, 463, 172 P. 229.)

In determining whether a business is that of common carrier, "the important thing is what it does, not what its charter says" ( Terminal Taxicab Co. v. Kutz, 241
U.S. 252, 60 L.Ed. 984, 36 Sup. Ct. Rep. 583, Ann. Cas. 1916D, 765), and owners of vehicles "should not too readily be permitted to enter into contracts, or
adopt measures, which will enable them to readily evade the letter or the spirit of the statutes intended to govern them." ( Goldsworthy v. Public Service
Commission, 141 Md. 674, 119 A. 693.)

A common carrier cannot, by making contracts for future transportation, prevent or postpone the exertion by the state of the power to regulate it. ( Producers'
Transportation Co. v. Railroad Commission, 251 U.S. 228, 64 L.Ed. 239, 40 Sup. Ct. Rep. 131.)
The regulation of motor transportation for the protection of the public is a legitimate and wise exercise of the police power of the state, and courts generally have
not been inclined to excuse the increasing number who earn their livelihood by the use of the public highways for the transportation of persons and property for
hire, from the responsibilities of common carriers on merely technical grounds, and they are particularly slow to excuse them when the plan of operation bears
evidence of a studied attempt to reap the rewards of common carriers without incurring the corresponding liabilities. ( Restivo v. Public Service Commission, 149
Md. 30, 129 A. 884; Craig v. Public Utilities Commission, 115 Ohio St. 512, 154 N.E. 795; Davis v. People ex rel. Public Utilities Commission, 79 Colo. 642,
247 P. 801; Sanger v. Lukins, 24 F.2d 226.)

In the case at bar the evidence fully warrants the court's [5] findings to the effect that defendants have regularly covered the route described in plaintiff's permit
for the purpose of obtaining freight and passengers for transportation for hire as a business and have so timed their trips as to secure the business in advance of
plaintiff's scheduled trips; this being established as a fact, it is immaterial that their major activities and the reasons for their maintaining motor-trucks at Gould
and over the route mentioned, were a mail contract and employment by the New Gould Mining Company to stand in readiness to meet any emergency that might
arise at the mines and to haul heavy machinery and high explosives, for which work plaintiff was not equipped. If these major activities constitute operations as a
private carrier, not subject to regulation by the commission, still, when, on trips made for the mining company, or otherwise, defendants transported passengers at
the expense of those carried, whether they were employees of the company or not, or transported property of individuals for hire, not as an isolated transaction
for the accommodation of the individual, but generally as a means of livelihood, their activities constituted operations as a common carrier and this is likewise
the effect of calling for and transporting all shipments received at Silver Station for the mining company under written direction to the railway company, given
by the manager of the mining company, to deliver freight "to anybody who calls for it."

Defendants attempted to justify their activities on the ground [6] that the plaintiff was not furnishing adequate service, although admitting by answer that he was;
but if he was not, such fact would not justify defendants in entering into competition with him without a license to do so, but was merely the subject for a
complaint to the commission as a basis for an order compelling plaintiff to furnish adequate service, or for the revocation of his license, or the granting of a
license to another to compete with him.

On the evidence adduced, the finding that the defendants were common carriers is fully justified.

3. With respect to the regulation of common carriers, the [7] constitutionality of the Act in question, attacked under the "due process" provision of the
Constitution, is no longer debatable. ( Northern Pacific Ry. Co. v. Bennett, above; Willis v. Buck, above; State v. Johnson, 75 Mont. 240, 243 P. 1073.)

4. Counsel for defendants urge that the statute and the [8] regulations of the commission made thereunder do not apply to persons in rural communities who, only
in isolated instances, carry passengers or freight for hire. The correctness of this statement of the law is granted. ( State v. Flagg, 75 Mont. 424, 242 P. 1023.)

Subdivision (e) of section 1 of the Act under consideration provides that "the Railroad Commissioners may exempt from the operation of this Act the
transportation of freight or passengers by motor vehicle in rural communities when not done on a commercial basis," which is, perhaps, a broader exemption than
that urged by counsel, and we have held that this exemption is a matter of right, construing the provision as though it read "must exempt" ( State v. Johnson,
above), but this exemption applies only when the transporting is "not done on a commercial basis," and, therefore, neither the exemption nor the rule as to
"isolated instances" aids the defendants who were shown to be transporting freight and passengers for hire "on a commercial basis" for the purpose of making a
livelihood and, in fact, were conducting a profitable business.
5. It is contended that the Railroad Commission has no [9] jurisdiction over stage lines operated by horse-power or where schedules and regular service are
observed but a part of the year.

As to the first, the record discloses that it is necessary to use horses and sleighs over the continental divide for an indefinite period during each winter, but the
remainder of the route is, during that period, served by plaintiff's auto-trucks, and that defendants operate in the same manner. While the commission could not
regulate service by horse-drawn vehicles under this Act, it cannot affect the operation of either plaintiff or defendants over the whole route during a part of the
year, or over the part of the route served by motor-trucks during the whole of the year and the mere fact that a part of the route cannot be covered by motor
transportation for a part of the year cannot under any reasonable construction of the Act, oust the commission from jurisdiction to regulate transportation by
motor vehicles over the route in so far as such transportation can be maintained. Nor does such a break in motor transportation change the character of the carrier
from that of a common or public carrier to that of a private carrier. "One who follows carrying for a livelihood or who gives out to the world in an intelligible
way that he will take goods or other things for transportation from place to place, whether for a year, a season, or less time, is a common carrier." ( Fish v.
Chapman, above.)

As to the schedules filed with the commission, the only difference between plaintiff's service during the summer and winter is that he agrees to make daily round
trips from June 1 to November 1, and but one-way trips the remainder of the year, and that "the winter schedule cannot be shown exactly on account of road
conditions." In other words, the plaintiff adheres to the schedule as nearly as possible at all times. The law never requires impossibilities (sec. 8760, Rev. Codes
1921), and plaintiff has agreed to do, and has done, all that could be required of him by the commission and by the public.

6. Defendants contend that the court's conclusion of law numbered one is erroneous in stating that the "defendants have no [10] right to * * * operate motor
vehicles in intrastate commerce over" plaintiff's route "as common carriers for hire, or otherwise," as, if defendants operate "otherwise" than as common carriers,
they do not come within the requirements of the statute. If counsel correctly construe this conclusion, it is erroneous; but if the meaning is that defendants may
not operate as common carriers in the manner stated "for hire or otherwise," the conclusion correctly states the law. The proper construction of the sentence is,
however, of no importance since the phrase to which exception is taken is not carried forward into the judgment and injunction.

7. Counsel for defendants assert that "an injunction `perpetually and forever' enjoining and restraining defendants cannot issue, for the reason that plaintiff's right
granted by plaintiff's certificate was temporary and expires within a year of the date of issuance, to wit, on April 1, 1929."

Counsel do not argue the question raised to any extent, but under this head say that the injunction is violative of the Fourteenth Amendment to the Constitution of
the United States, in that it takes defendants' property without due process of law. We have already disposed of the question raised.

However, the injunction is too broad, as worded. It is perpetual in so far as the issues determined are concerned, i.e., it was proper to "forever" enjoin defendants
from operating as common carriers, without a license, in competition with plaintiff operating under a valid license, but, it was not proper to make the injunction
perpetual under any and all circumstances; changed conditions might render the defendants not subject to injunction. For example, while plaintiff's permit is
exclusive as to these defendants under the conditions shown in the record, section 4 of the Act declares that a permit issued "shall not be an exclusive right or
license to operate over any route * * *"; on a proper showing made under the provisions of section 4 of the Act the Railroad Commission might, at any time, after
the issuance of the injunction, grant to the defendants a permit to operate over the route described; the injunction should not prohibit defendants from operating
under such conditions; yet it does.
Again, while a court of equity may enjoin the commission of [11, 12] criminal acts when such acts would result in irreparable injury to property rights, public or
private, or the creation or continuance of a public nuisance (32 C.J. 277), such a court has no jurisdiction to enjoin the commission of a crime, merely as a crime,
and thus substitute contempt proceedings for a constitutional trial by jury as a means of punishing future violations of a prohibitory statute ( State ex rel. Stewart
v. District Court, 77 Mont. 361, 49 A.L.R. 627, 251 P. 137). In the absence of the infringement of the rights of another, the legal remedy for the vindication of
Chapter 154, Laws of 1923, is found in the Act itself, wherein any violation of its provisions, or the rules and regulations of the board lawfully established
thereunder, is made a misdemeanor punishable by a fine of not less than fifty nor more than one thousand dollars (sec. 9), and this remedy is deemed fully
adequate and peculiarly appropriate. (21 C.J. 155.)

The injunction prohibits defendants from violating the provisions of the Act or the rules and regulations of the commission at any time in the future and on any
route, whether in competition with plaintiff or otherwise, and this exceeds the jurisdiction of the court.

8. Defendants complain that the injunction is too broad in [13] that it prohibits them from discharging their contractual obligations as a private carrier. In this
they are mistaken; the order merely restrains defendants from "operating motor vehicles" over the route described "in intrastate commerce" in "receiving,
carrying or discharging" freight, express, passengers or baggage to or from the points mentioned, over the highways extending between the termini, and "from
violating or attempting to violate the provisions of Chapter 154, Laws of 1923." "Commerce," as the term is used in this connection, means "business
intercourse" (Webster); commercial intercourse on a business basis ( United States v. Patterson, 55 Fed. 605), including the transportation of passengers and
property by common carrier ( In re Second Employers' Liability Case, 223 U.S. 1, 56 L.Ed. 327, 32 Sup. Ct. Rep. 169, 38 L.R.A. (n.s.) 44; Welton v. Missouri,
91 U.S. 275, 23 L. Ed 347; Corporation Commission v. Cannon Mfg. Co., 185 N.C. 17, 116 S.E. 178). "Transportation is essential to commerce, or, rather, it is
commerce itself." (Justice Strong in Hannibal St. Jo. R.R. Co. v. Husen, 95 U.S. 470, 24 L.Ed. 527.)

In the order made, defendants are but enjoined from carrying on the business of transporting passengers and property over a definite route within the state "in
intrastate commerce," ergo: as a common carrier.

For the reasons stated, the cause is remanded to the district court of Lewis and Clark county with direction to modify the judgment by striking from the injunctive
portion thereof the final clause reading "and from in any manner violating or attempting to violate the provisions of Chapter 154, Laws of 1923, of the State of
Montana, as amended, and the rules and regulations of the Board of Railroad Commissioners of the State of Montana lawfully established pursuant thereto," and
by substituting therefor: "while the plaintiff is the holder of a valid permit to operate over such route and the defendants are not," and as modified the judgment
will be affirmed.

MR. CHIEF JUSTICE CALLAWAY and ASSOCIATE JUSTICES GALEN, FORD and ANGSTMAN concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-28865 December 19, 1928

BATANGAS TRANSPORTATION CO., petitioner-appellant,
vs.
CAYETANO ORLANES, respondent-appellee.

L. D. Lockwood and C. de G. Alvear for appellant.

Paredes, Buencamino and Yulo and Menandro Quiogue for appellee.

STATEMENT

In his application for a permit, the appellee Orlanes alleges that he is the holder of a certificate of public convenience issued by the Public Service Commission in
case No. 7306, to operate an autobus line from Taal to Lucena, passing through Batangas, Bolbok and Bantilan, in the Province of Batangas, and Candelaria and
Sariaya, in the Province of Tayabas, without any fixed schedule; that by reason of the requirements of public convenience, he has applied for a fixed schedule
from Bantilan to Lucena and return; that in case No. 7306, he cannot accept passengers or cargo from Taal to any point before Balbok, and vice versa; that the
public convenience requires that he be converted into what is known as a regular operator on a fixed schedule between Taal and Bantilan and intermediate points,
and for that purpose, he has submitted to the Commission proposed schedule for a license to make trips between those and intermediate points. He then alleges
that by reason of increase of traffic, the public convenience also requires that he be permitted to accept passengers and cargo at points between Taal and Bantilan,
and he asked for authority to establish that schedule, and to accept passengers at all points between Taal and Bantilan.

To this petition the Batangas Transportation Company appeared and filed an application for a permit, in which it alleged that it is operating a regular service of
auto trucks between the principal municipalities of the Province of Batangas and some of those of the Province of Tayabas; that since 1918, it has been operating
a regular service between Taal and Rosario, and that in 1920, its service was extended to the municipality of San Juan de Bolbok, with a certificate of public
convenience issued by the Public Servise Commission; that in the year 1925 Orlanes obtained from the Commission a certificate of public convenience to operate
an irregular service of auto trucks between Taal, Province of Batangas, and Lucena, Province of Tayabas, passing through the municipalities of Bauan, Batangas,
Ibaan, Rosario, and San Juan de Bolbok, with the express limitation that he could not accept passengers from intermediate points between Taal and Bolbok,
except those which were going to points beyond San Juan de Bolbok or to the Province of Tayabas; that he inaugurated this irregular in March, 1926, but
maintained it on that part of the line between Taal and Bantilan only for about three months, when he abandoned that portion of it in the month of June and did
not renew it until five days before the hearing of case No. 10301, which was set for November 24, 1926, in which hearing the Batangas Transportation Company
asked for additional hours for its line between Batangas and Bantilan; that in June, 1926, Orlanes sought to obtain a license as a regular operator on that portion
of the line between Bantilan and Lucena without having asked for a permit for tat portion of the line between Bantilan and Taal; that from June, 1926, Orlanes
and the Batangas Transportation Company were jointly operating a regular service between Bantilan and Lucena, with trips every half an hour, and Orlanes not
having asked for a regular service between Bantilan and Taal, the Batangas Transportation Company remedied this lack of service under the authority of the
Commission, and increased its trips between Bantilan and Tayabas to make due and timely connections in Bantilan on a half-hour service between Bantilan and
Batangas with connections there for Taal and all other points in the Province of Batangas. It is then alleged that the service maintained by the company is
sufficient to satisafy the convenience of the public, and that the public convenience does not require the granting of the permit for the service which Orlanes
petitions, and that to do so would result in ruinous competition and to the grave prejudice of the company and without any benefit to the public, and it prayed that
the petition of Orlanes to operate a regular service be denied.

After the evidence was taken upon such issues, the Public Service Commission granted the petition of Orlanes, as prayed for, and the company then filed a
motion for a rehearing, which was denied, and the case is now before this court, in which the appellant assigns the following errors:
 The Commission erred in ordering that a certificate of public convenience be issued in favor of Cayetano Orlanes to operate the proposed service
without finding and declaring that the public interest will be prompted in a proper and suitable by the operation of such service, or when the evidence
does not show that the public interests will be so prompted.

That the Commission erred in denying the motion for a rehearing.

JOHNS, J.:

The questions presented involve a legal construction of the powers and duties of the Public Service Commission, and the purpose and intent for which it was
created, and the legal rights and privileges of a public utility operating under a prior license.

It must be conceded that an autobus line is a public utility, and that in all things and respects, it is what is legally known as a common carrier, and that it is an
important factor in the business conditions of the Islands, which is daily branching out and growing very fast.

Before such a business can be operated, it must apply for, and obtain, a license or permit from the Public Service Commission, and comply with certain defined
terms and conditions, and when license is once, granted, the operator must conform to, and comply with all, reasonable rules and regulations of the Public
Service Commission. The object and purpose of such a commission, among other things, is to look out for, and protect, the interests of the public, and, in the
instant case, to provide it with safe and suitable means of travel over the highways in question, in like manner that a railroad would be operated under like terms
and conditions. To all intents and purposes, the operation of an autobus line is very similar to that of a railroad, and a license for its operation should be granted
or refused on like terms and conditions. For many and different reasons, it has never been the policy of a public service commission to grant a license for the
operation of a new line of railroad which parallels and covers the same field and territory of another old established line, for the simple reason that it would result
in ruinous competition between the two lines, and would not be of any benefit or convenience to the public.

The Public Service Commission has ample power and authority to make any and all reasonable rules and regulations for the operation of any public utility and to
enforce complience with them, and for failure of such utility to comply with, or conform to, such reasonable rules and regulations, the Commission has power to
revoke the license for its operation. It also has ample power to specify and define what is a reasonable compensation for the services rendered to the traveling
public.

That is to say, the Public Service Commission, as such has the power to specify and define the terms and conditions upon which the public utility shall be
operated, and to make reasonable rules and regulations for its operation and the compensation which the utility shall receive for its services to the public, and for
any failure to comply with such rules and regulations or the violation of any of the terms and conditions for which the license was granted the Commission has
ample power to enforce the provisions of the license or even to revoke it, for any failure or neglect to comply with any of its terms and provisions.

Hence, and for such reasons, the fact that the Commission has previously granted a license to any person to operate a bus line over a given highway and refuses
to grant a similar license to another person over the same highway, does not in the least create a monopoly in the person of the licensee, for the reason that at all
times the Public Service Commission has the power to say what is a reasonable compensation to the utility, and to make reasonable rules and regulations for the
convenience of the traveling public and to enforce them.

In the instant case, Orlanes seek to have a certificate of public convenience to operate a line of auto trucks with fixed times of departure between Taal and
Bantilan, in the municipality of Bolbok, Province of Batangas, with the right to receive passengers and freight from intermediate points. The evidence is
conclusive that at the time of his application, Orlanes was what is known as an irregular operator between Bantilan and Taal, and that the Batangas operator
between Batangas and Rosario. Orlanes now seeks to have his irregular changed into a regular one, fixed hours of departure and arrival between Bantilan and
Taal, and to set aside and nullify the prohibition against him in his certificate of public convenience, in substance and to the effect that he shall not have or
receive any passengers or freight at any of the points served by the Batangas Transportation Company for which that company holds a prior license from the
Commission. His petition to become such a regular operator over such conflicting routes is largely based upon the fact that, to comply with the growing demands
of the public, the Batangas Transportation Company, in case No. 10301, applied to the Commission for a permit to increase the number of trip hours at and
between the same places from Batangas to Rosario, and or for an order that all irregular operators be prohibited from operating their respective licenses, unless
they should observe the interval of two hours before, or one hour after, the regular hours of the Batangas Transportation Company.

In his petition Orlanes sought to be releived from his prohibition to become a regular operator, and for a license to become a regular operator with a permission to
make three trips daily between Bantilan and Taal, the granting of which make him a regular operator between those points and bring him in direct conflict and
competition over the same points with the Batangas Transportation Company under its prior license, and in legal effect that was the order which the Commission
made, of which the Batangas Transportation Company now complains.

The appellant squarely plants its case on the proposition:

Is a certificate of public convenience going to be issued to a second operator to operate a public utility in a field where, and in competition with, a first
operator who is already operating, adequate and satisfactory service?

There is no claim or pretense that the Batangas Transportation Company has violated any of the terms and conditions of its license. Neiher does the Public
Service Commission find as a fact that the grantring of a license to Orlanes as a regular operator between the points in question is required or necessary for the
convenience of the traveling public, or that there is any complaint or criticism by the public of the services rendered by the Batangas Transportation Company
over the route in question.

The law creating the Public service Commission of the Philippine Islands is known as Act No. 3108, as amended by Act No. 3316, and under it the supervision
and control of public utilities is very broad and comprehensive.

Section 15 of Act No. 3108 provides that the Commission shall have power, after hearing, upon notice, by order in writing to require every public utility:

(a) To comply with the laws of the Philippine Islands;

(b) To furnish safe, adequate, and proper service as regards the manner of furnishing the same as well as the maintenance of the necessary material equipment,
etc;
(c) To establish, construct, maintain, and operate any reasonable extention of its existing facilities, where such extension is reasonable and practicable and will
furnish sufficient business to justify the construction and maintenance of the same;

(d) To keep a uniform system of books, records and accounts;

(e) To make specific answer with regard to any point on which the Commission requires information, and to furnish annual reports of finance and operations;

(f) To carry, whenever the Commission may require, a proper and adequate depreciation account;

(g) To notify the Commission of all accidents;

(h) That when any public utility purposes to increase or reduce any existing individual rates, it shall give the Commission written notice thirty days prior to the
proposed change; and

(i) "No public utility as herein defind shall operate in the Philippine Islands without having first secured from the Commission a certificate, which shall be known
as Certificate of Public Convenience, to the effect that the operation of said public utility and the authorization to do busibness wikll promote the public interest
in a proper and suitable maner."

Section 16 specially prohibits any discrimination in the handling of freight charges.

In construing a similar law of the State of Kansas, the United States Supreme Court, in an opinion written by Chief Justice Taft, in Wichita Railroad and Light
Co. vs. Public Utilities Commission of Kansas (260 U. S. 48; 67 Law. ed., 124), said:

The proceeding we are considering is governed by section 13. That is the general section of the act comprehensively describing the duty of the
Commission, vesting it with power to fix and order substituted new rates for existing rates. The power is expressly made to depend on the condition that,
after full hearing and investigation, the Commission shall find existing rates to be unjust, unreasonable, unjustly discriminatory, or unduly preferential.
We conclude that a valid order of the Commission under the act must contain a finding of fact after hearing and investigation, upon which the order is
founded, and that, for lack of such a finding, the order in this case was void.

This conclusion accords with the construction put upon similar statutes in other states. (State Public Utilities Commission ex rel. Springfield vs.
Springfield Gas and E. Co., 291 Ill., 209; P. U. R., 1920C, 640; 125 N. E. 891; State Public Utilities Co. vs. Baltimore and O. S. W. R. Co., 281 Ill; 405;
P. U. R., 1918B, 655; 118 N. E., 81.) Moreover, it accords with general principles of constitutional government. The maxim that a legislature may not
delegate legislative power has some qualifications, as in the creation of municipalities, and also in the creation of administrative boards to apply to the
myriad details of rate schedule the regulatory police power of the state. The latter qualification is made necessary in order that the legislative power may
be effectively exercised. In creating such an administrative agency, the legislature, to prevent its being a pure delegation of legislative power, must
enjoin upon a certain course of procedure and certain rules of decision in the perfomance of its function. It is a wholesome and necessary principle that
such an agency must pursue the procedure and rules enjoined, and show a substantial compliance therewith, to give validity to its action. When,
 therefore, such an administrative agency is required, as a condition precedent to an order, to make a finding of facts, the validity of the order rest upon
the needed finding. It is lacking, the order is ineffective.

It is pressed on us that the lack of an express finding may be supplied by implication and by reference to the averments of the petition invoking the
action of the Commission. We cannot agree to this point. It is doubtful whether the facts averred in the petition were sufficient to justify a finding that
the contract rates were unreasonably low; but we do not find it necessay to answer this question. We rest our decision on the principle that an express
finding of unreasonableness by the Commission was indispensable under the statutes of the state.

That is to say, in legal effect, that the power of the Commission to issue a certificate of public convenience depends on the condition precedent that, after a full
hearing and investigation, the Commission shall have found as a fact that the operation of the proposed public service and its authority to do business must be
based upon the finding that it is for the convenience of the public.

In the Philippine Islands the cetificate of public convenience is as folows:

CERTIFICATE OF PUBLIC CONVENIENCE

To whom it may concern:

THIS IS TO CERTIFY, That in pursuance of the power and authority conferred upon it by subsection (i) of section 15 of Act No. 3108 of the Philippine
Legislature,

THE PUBLIC SERVICE COMMISSION OF THE PHILIPPINE ISLANDS, after having duly considered the application of ................. for a certificate
of public convenience the operation of ........................ in connection with the evidence submitted in support thereof, has rendered its decision
on................, 192...., in case No. ............, declaring that the operation by the applicant ...................... of the business above described will promote the
public interests in a proper and suitable manner, and granting................. to this effect the corresponding authority, subject to the conditions prescribed in
said decision.

Given at Manila Philippine Islands, this ......... day of ....................., 192 .....

PUBLIC SERVICE COMMISSION OF THE PHILIPPINE ISLANDS

By..................................
Commissioner
 Attested:
.....................................
Secretary

That is to say, that the certificate of public convenince granted to Orlanes in the instant case expressly recites that it "will promote the public interests in a proper
and suitable manner." Yet no such finding of fact was made by the Commission.

In the instant case, the evidence is conclusive that the Batangas Transportation Company operated its line five years before Orlanes ever turned a wheel, yet the
legal effect of the decision of the Public Service Commission is to give an irregular operator, who was the last in the field, a preferential right over a regular
operator, who was the first in the field. That is not the law, and there is no legal principle upon which it can be sustained.

So long as the first licensee keeps and performs the terms and conditions of its license and complies with the reasonable rules and regulations of the Commission
and meets the reasonable demands of the public, it should have more or less of a vested and preferential right over a person who seeks to acquire another and a
later license over the same route. Otherwise, the first license would not have protection on his investment, and would be subject to ruinous competition and thus
defeat the very purpose and intent for which the Public Service Commission was created.

It does not appear that the public has ever made any complaint the Batangas Transportation Company, yet on its own volition and to meet the increase of its
business, it has applied to the Public Service Commission for authority to increase the number of daily trips to nineteen, thus showing a spirit that ought to be
commended.

Such is the rule laid down in the case of Re B. F. Davis Motor Lines, cited by the Public Service Commission of Indiana (P. U. R., 1927-B, page 729), in which it
was held:

A motor vehicle operator having received a certificate with a voluntary stipulation not to make stops (that is not to carry passengers) on a part of a route
served by other carriers, and having contracted with such carries not to make the stops, will not subsequently are able to carry all passengers who
present theselves for transportation within the restricted district.

And in Re Mount Baker Development Co., the Public Service Commission of Washington (P. U. R., 1925D, 705), held:

A cerificate authorizing through motor carrier service should not authorize local service between points served by the holders of a certificate, without
first giving the certificate holders an opportunity to render additional service desired.

In the National Coal Company case (47 Phil., 356), this court said:

When there is no monopoly. — There is no such thing as a monopoly where a property is operated as a public utility under the rules and regulations of
the Public Utility Commission and the terms and provision of the Public Utility Act.
Section 775 of Pond on Public Utilities, which is recognized as a standard authority, states the rule thus:

The policy of regulation, upon which our present public utility commission plan is based and which tends to do away with competition among public
utilities as they are natural monopolies, is at once reason and the justification for the holding of our courts that the regulation of an existing system of
transportation, which is properly serving a given field, or may be required to do so, is to be preferred to competition among several independent
systems. While requiring a proper service from, a single system for a city or territory in consideration for protecting it as a monopoly for all service
required and in conserving its resources, no economic waste results and service may be furnished at the minimum cost. The prime object and real
purpose of commission control is to secure adequate sustained service for the public at the least possible cost, and to protect and conserve investments
already made for this purpose. Experience has demonstrated beyond any question that competition among natural monopolies is wasteful economically
and results finally in insufficient and unsatisfactory service and extravagant rates.

The rule has been laid down, without dissent in numerous decisions, that where an operator is rendering good, sufficient and adequate service to the public, that
the convenince does not require and the public interests will not be promoted in a proper and suitable manner by giving another operator a certificate of public
convenience to operate a competing line over the same ruote.

In Re Haydis (Cal.), P. U. R., 1920A, 923:

A certificate of convenience and necessity for the operation of an auto truck line in occupied territory will not be granted, where there is no complaint as
to existing rates and the present company is rendering adequate service.

In Re Chester Auto Bus Line (Pa.), P. U. R., 1923E, 384:

A Commission should not approve an additional charter and grant an additional certificate to a second bus company to operate in territory covered by a
certificate granted to another bus company as a subsidiary of a railway company for operation in conjunction with the trolley system where one bus
service would be ample for all requirements.

In Re Branham (Ariz.), P. U. R., 1924C, 500:

A showing must be clear and affirmative that an existing is unable or has refused to maintain adequate and satisfactory service, before a certificate of
convenience and necessity will be granted for the operation of an additional service.

In Re Lambert (N. H.), P. U. R., 1923D, 572:

Authority to operate a jitney bus should be refused when permision has been given to other parties to operate and, from the evidence, they are equipped
adequately to accommodate the public in this respect, no complaints having been received in regard to service rendered.

In Re White (Md.), P. U. R., 1924E, 316:

 A motor vehicle operator who has built up a business between specified points after years of effort should not be deprived of the fruits of his labor and
of the capital he has invested in his operation by a larger concern desiring to operate between the same points.

In Re Kocin (Mont.), P. U. R., 1924C, 214:

A certificate authorizing the operation of passenger motor service should be denied where the record shows that the admission of another operator into
the territory served by present licensees is not necessary and would render their licensee oppressive and confiscatory because of further division and
depletion of revenues and would defeat the purpose of the statue and disorganize the public service.

In Re Nevada California Stage Co., P. U. R., 1924A, 460:

The Nevada Commission denied an application for a certificate of convenience and necessity for the operation of an automobile passenger service in
view of the fact that the service within the territory proposed to be served appeared to be adequate and it was the policy of the Commission to protect the
established line in the enjoyment of business which it had built, and in view of the further fact that it was very uncertain whether the applicant could
secure sufficient business to enable him to operate profitably.

In Re Idaho Light & P. Co. (Idaho), P. U. R., 1915A, 2:

Unless it is shown that the utility desiring to enter a competitive field can give such service as will be a positive advantage to the public, a certificate of
convenience will be denied by the Idaho Commission, provided that the existing utility furnishing adequate service at reasonable rates at the time of the
threatened competition.

In Scott, vs. Latham (N. Y. 2d Dist), P. U. R., 1921C, 714:

Competition between bus lines should be prohibited the same as competition between common carriers.

In Re Portland Taxicab Co. (Me.), P. U. R., 1923E, 772:

Certificates permitting the operation of motor vehicles for carrying passengers for hire over regular routes between points served by steam and electric
railways should not be granted when the existing service is reasonable, safe, and adequate as required by statue.

In Re Murphy (Minnesota), P.U.R., 1927C, 807:

Authority to operate an auto transportation service over a route which is served by another auto transportation company should be denied if no necessity
is shown for additional service.

In Re Hall, editorial notes, P. U. R., 1927E:

 A certificate of convenience and necessity for the operation of a motor carrier service has been denied by the Colorado Commission where the only
ground adduced for the certificate was that competition thereby afforded to an existing utility would benefit the public by lowering rates. The
Commission said: "Up to the present time the Commission has never issued a certificate authorizing a duplication of motor vehicle operation over a
given route unless it appeared that the service already rendered was not adequate, that there was no ruinous competition or that the second applicant
could, while operating on a sound businesslike basis, afford transportation at cheaper rates than those already in effect. There has been no complaint to
date as to the rates now being charged on the routes over which the applicant desires to serve. Moreover, the Commission stand ready, at any time the
unreasonable of the rates of any carrier are questioned, to determine their reasonableness and to order them reduced if they are shown to be
unreasonable." In this case the Commission also expressed its disappoval of the practice of an applicant securing a certificate for the sole purpose of
transferring it to another.

In Re Sumner (Utah), P. U. R., 1927D, 734:

The operation of an automobile stage line will not be authorized over a route adequately served by a railroad and other bus line, although the proposed
service would be an added convenience to the territory.

In Bartonville Bus Line vs. Eagle Motor Coach Line (Ill. Sup. Court), 157 N. E., 175; P. U. R., 1927E, 333:

The policy of the state is to compel an established public utility occupying a given filed to provide adequate service and at the same time protect it from
ruinous competition, and to allow it an apportunity to provide additional service when required instead of permitting such service by a newly established
competitor.

Upon the question of "Reason and Rule for Regulation," in section 775, Pond says:

The policy of regulation, upon which our present public utility commission plan is based and which tends to do away with competition among public
utilities as they are natural monopolies, is at once the reason and the justification for the holding of our courts that the regulation of an existing system of
transportation, which is properly serving a given field or may be required to do so, is to be preferred to competition among several independent systems.
While requiring a proper service from a single system for a city or territory in consideration for protecting it as a monopoly for all the service required
and in conserving its resources, no economic waste results and service may be furnished at the minimum cost. The prime object and real purpose of
commission control is to secure adequate sustained service for the public at the least possible cost, and to protect and conserve investments already
made for this purpose. Experience has demostrated beyond any question that competition among natural monopolies is wasteful economically and
results finally in insufficient and unsatisfactory service and extravagant rates. Neither the number of the individuals demanding other service nor the
question of the fares constitutes the entire question, but rather what the proper agency should be to furnish the best service to the public generally and
continuously at the least cost. Anything which tends to cripple seriously or destroy an established system of transportation that is necessary to a
community is not a convenience and necessity for the public and its introduction would be a handicap rather than a help ultimately in such a field.

That is the legal construction which should be placed on paragraph (e) of section 14, and paragraph (b) and (c) of section 15 of the Public Service Law.
We are clearly of the opinion that the order of the Commission granting the petition of Orlanes in question, for the reason therein stated, is null and void, and that
it is in direct conflict with the underlying and fundamental priciples for which the Commission was created.1awphi1.net

The question presented is very important and far-reaching and one of first impression in this court, and for such reasons we have given this case the careful
consideration which its importance deserves. The Government having taken over the control and supervision of all public utilities, so long as an operator under a
prior license complies with the terms and conditions of his license and reasonable rules and regulation for its operation and meets the reasonable demands of the
public, it is the duty of the Commission to protect rather than to destroy his investment by the granting of a subsequent license to another for the same thing over
the same route of travel. The granting of such a license does not serve its convenience or promote the interests of the public.

The decision of the Public Service Commission, granting to Orlanes the license in question, is revoked and set aside, and the case is remanded to the Commission
for such other and further proceedings as are not inconsistent with this opinion. Neither party to recover costs on this appeal. So ordered.

Johnson, Street, Malcolm and Ostrand, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-15122 March 10, 1920

THE UNITED STATES, plaintiff-appellee,

vs.
TAN PIACO, VENTURA ESTUYA, PEDRO HOMERES, MAXIMINO GALSA and EMILIO LEOPANDO, defendants.
TAN PIACO, appellant.

Recaredo Ma. Calvo for appellant.

Attorney-General Paredes for appellee.

JOHNSON, J.:

Said defendants were charged with a violation of the Public Utility Law (Act No. 2307 as amended by Acts Nos. 2362 and 2694), in that they were operating a
public utility without permission from the Public Utility Commissioner.
Upon the complain presented each of said defendants were arrested and brought to trial. After hearing the evidence the Honorable Cayetano Lukban, judge,
found that the evidence was insufficient to support the charges against Ventura Estuya, Pedro Homeres, Maximino Galsa and Emilio Leopando, and absolved
them from all liability under the complaint and discharged them from all liability under the complaint and discharged them from the custody of the law. The
lower court found the defendant Tan Piaco guilty of the crime charged in the complaint and sentence him to pay a fine of P100, and, in case of insolvency, to
suffer subsidiary imprisonment, and to pay one-fifth part of the costs. From that sentence Tan Piaco appealed to this court.

The facts proved during the trial of the cause may be stated as follows:

The appellant rented two automobile trucks and was using them upon the highways of the Province of Leyte for the purpose of carrying some passengers and
freight; that he carried passengers and freight under a special contract in each case; that he had not held himself out to carry all passengers and all freight for all
persons who might offer passengers and freight.

The Attorney-General, in a carefully prepared brief, says: "The question is whether the appellant, under the above facts, was a public utility under the foregoing
definitions," and was therefore subject to the control and regulation of the Public Utility Commission. "We have not found anything in the evidence showing that
the appellant operated the trucks in question for public use. These trucks, so far as indicated by the evidence and as far as the appellant is concerned, furnished
service under special agreements to carry particular persons and property. . . . For all that we can deduce from the evidence, these passengers, or the owners of
the freight, may have controlled the whole vehicles 'both as to content, direction, and time of use,' which facts, under all the circumstances of the case, would, in
our opinion, take away the defendant's business from the provisions of the Public Utility Act."

In support of the conclusion of the Attorney-General, he cites the case of Terminal Taxicab Co. vs. Kutz (241 U. S.. 252). In that case the Terminal Taxicab Co.
furnished automobiles from its central garage on special orders and did not hold itself out to accommodate any and all persons. The plaintiff reserve to itself the
right to refuse service. The Supreme Court of the United States, speaking through Mr. Justice Holmes, said: "The bargains made by the plaintiff are individual,
and however much they may tend towards uniformity in price, probably have not the mechanical fixity of charges that attend the use of taxicabs from the stations
to the hotels. The court is of the opinion that that part of the business is not to be regarded as a public utility. It is true that all business, and for the matter of that,
every life in all its details, has a public aspect, some bearing upon the welfare of the country in which it is passed." The court held that by virtue of the fact that
said company did not hold itself out to serve any and all persons, it was not a public utility and was not subject to the jurisdiction of the public utility
commission.

Upon the facts adduced during the trial of the cause, and for the foregoing reasons, the Attorney-General recommends that the sentence of the lower court be
revoked and that the appellant be absolved from all liability under the complaint.

Section 14 of Act No. 2307, as amended by section 9 of Act No. 2694, provides that: "The Public Utility Commission or Commissioners shall have general
supervision and regulation of, jurisdiction and control over, all public utilities. . . . The term 'public utility' is hereby defined to include every individual,
copartnership, association, corporation or joint stock company, etc., etc., that now or hereafter may own, operate, managed, or control any common carrier,
railroad, street railway, etc., etc., engaged in the transportation of passengers, cargo, etc., etc., for public use."

Under the provisions of said section, two things are necessary: (a) The individual, copartnership, etc., etc., must be a public utility; and (b) the business in which
such individual, copartnership, etc. etc., is engaged must be for public use. So long as the individual or copartnership, etc., etc., is engaged in a purely private
enterprise, without attempting to render service to all who may apply, he can in no sense be considered a public utility, for public use.
"Public use" means the same as "use by the public." The essential feature of the public use is that it is not confined to privilege individuals, but is open to the
indefinite public. It is this indefinite or unrestricted quality that gives it its public character. In determining whether a use is public, we must look not only the
character of the business to be done, but also to the proposed mode of doing it. If the use is merely optional with the owners, or the public benefit is merely
incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility commission. There must be, in general, a right which the law
compels the power to give to the general public. It is not enough that the general prosperity of the public is promoted. Public use is not synonymous with public
interest. The true criterion by which to judge of the character of the use is whether the public may enjoy it by right or only by permission.

For all of the foregoing reasons, we agree with the Attorney-General that the appellant was not operating a public utility, for public use, and was not, therefore,
subject to the jurisdiction of the Public Utility Commission.

Therefore, the sentence of the lower court is hereby revoked, and it is hereby ordered and decreed that the complaint be dismissed and that the defendant be
absolved from all liability under the same, and that he be discharged from the custody of the law, without any finding as to costs. So ordered.

Arellano, C.J., Torres, Araullo, Street, Malcolm and Avanceña, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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

HOME INSURANCE COMPANY, plaintiff-appellee,

vs.
AMERICAN STEAMSHIP AGENCIES, INC. and LUZON STEVEDORING CORPORATION, defendants,
AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellant.

William H. Quasha and Associates for plaintiff-appellee.

Ross, Selph, Salcedo and Associates for defendant-appellant.

BENGZON, J.P., J.:

"Consorcio Pesquero del Peru of South America" shipped freight pre-paid at Chimbate, Peru, 21,740 jute bags of Peruvian fish meal through SS Crowborough,
covered by clean bills of lading Numbers 1 and 2, both dated January 17, 1963. The cargo, consigned to San Miguel Brewery, Inc., now San Miguel Corporation,
and insured by Home Insurance Company for $202,505, arrived in Manila on March 7, 1963 and was discharged into the lighters of Luzon Stevedoring
Company. When the cargo was delivered to consignee San Miguel Brewery Inc., there were shortages amounting to P12,033.85, causing the latter to lay claims
against Luzon Stevedoring Corporation, Home Insurance Company and the American Steamship Agencies, owner and operator of SS Crowborough.
Because the others denied liability, Home Insurance Company paid the consignee P14,870.71 — the insurance value of the loss, as full settlement of the claim.
Having been refused reimbursement by both the Luzon Stevedoring Corporation and American Steamship Agencies, Home Insurance Company, as subrogee to
the consignee, filed against them on March 6, 1964 before the Court of First Instance of Manila a complaint for recovery of P14,870.71 with legal interest, plus
attorney's fees.

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

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

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

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

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

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

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

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

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

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

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

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

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

Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private
carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void only if the strict public
policy governing common carriers is applied. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the
use of a single party.

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

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

Reyes, J.B.L., Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
Dizon J., took no part.
Concepcion, C.J., is on leave.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-28999 May 24, 1977

COMPAÑIA MARITIMA, plaintiff-appellee,

vs.
ALLIED FREE WORKERS UNION, SALVADOR T. LLUCH, MARIANO LL. BADELLES, individually and in their capacities as President and
Vice-President, respectively of the Allied Free Workers Union, NICANOR HALEBAS and LAURENTINO LL. BADELLES, individually and
officers of Allied Free Workers Union, defendants-appellants.

Halibas, Badelles, Padilla & Sepulveda and Vicente A. Rafael & Associates for defendants-appellants.

Rufino J. Abadies, Francisco Obach & Jesus Quijano for appellee.

AQUINO, J.:

Antecedents. - Since the onset in 1954 of litigation between the parties herein, this is the fifth case between them that has been elevated to this
Court. The incidents preceding the instant appeal are as follows:

On August 11, 1952 the Compañia Maritima and the Allied Free Workers Union entered into a written contract whereby the union agreed to
perform arrastre and stevedoring work for the consignees. vessels at Iligan City. The contract was to be effective for one month counted from
August 12, 1952.

It was stipulated that the company could revoke the contract before the expiration of the term if the union failed to render proper service. The
contract could be renewed by agreement of the parties (Exh. J).

At the time the contract was entered into, the union had just been organized. Its primordial desire was to find work for its members. The union
agreed to the stipulation that the company would not be liable for the payment of the services of the union "for the loading, unloading and
deliveries of cargoes" and that the compensation for such services would be paid "by the owners and consigness of the cargoes" as "has been the
practice in the port of Iligan City" (Par. 2 of Exh. J).

The union found out later that that stipulation was oppressive and that the company was unduly favored by that arrangement.
Under the contract, the work of the union consisted of arrastre and stevedoring service. Arrastre, a Spanish word which refers to hauling of cargo,
comprehends the handling of cargo on the wharf or between the establishment of the consignee or shipper and the ship's tackle. The service is
usually performed by longshoremen.

On the other hand, stevedoring refers to the handling of the cargo in the holds of the vessel or between the ship's tackle and the holds of the
vessel.

The shippers and consignees paid the union oth for the arrastre work. They refused to pay for the stevedoring service. They claimed that the
shipowner was the one obligated to pay for the stevedoring service because the bill of lading provided that the unloading of the cargo was at the
shipowner's expense (Exh. 1).

On the other hand, the company refused to pay for the stevedoring service because the contract (Exh. J) explicitly provided that the compensation
for both arrastre and stevedoring work should be paid by the shippers and consignees, as was the alleged practice in Iligan City, and that the
shipowner would not be liable for the payment of such services.

Thus, the issue of whether the company should pay for the stevedoring service became a sore point of contention between the parties. The union
members labored under the impression that they were not being compensated for their stevedoring service as distinguished from arrastre service.

Although the arrastre and stevedoring contract (Exh. J) was disadvantageous to the union, it did not terminate the contract because its members
were in dire need of work and work, which was not adequately compensated, was preferable to having no work at all (204, 214-5, 226-7 tsn May
20, 1960).

Upon the expiration of the one-month period, the said contract was verbally renewed. The company allowed the union to continue performing
arrastre and stevedoring work.

On July 23, 1954 the union sent a letter to the company requesting that it be recognized as the exclusive bargaining unit to load and unload the
cargo of its vessels at Iligan City. The company ignored that demand. So, the union filed on August 6, 1954 in the Court of Industrial Relations
(CIR) a petition praying that it be certified as the sole collective bargaining unit.

Despite that certification case, the company on August 24, 1954 served a written notice on the union that, in accordance with payment of the 1952
contract, the same would be terminated on August 31, 1954. Because of that notice, the union on August 26, 1954 filed in the CIR charges of
unfair labor practice against the company.

On August 31, 1954 the company entered into a new stevedoring and arrastre contract with the Iligan Stevedoring Association. On the following
day, September 1, the union members picketed the wharf and prevented the Iligan Stevedoring Association from performing arrastre and
stevedoring work. The picket lasted for nine days.
On September 8, 1954 the company sued the union and its officers in the Court of First Instance of Lanao for the rescission of the aforementioned
1952 contract, to enjoin the union from interfering with the loading and unloading of the cargo, and for the recovery of damages.

On the following day, September 9, the lower court issued ex parte a writ of preliminary injunction after the company had posted a bond in the sum
of P20,000. A few hours lateron that same day the union was allowed to file a counterbond. The injunction was lifted. The union members
resumed their arrastre and stevedoring work.

Later, the union assailed in a prohibition action in this Court the jurisdiction of the trial court to entertain the action for damages, and injunction.

A majority of this Court held that the lower court had jurisdiction to issue the injunction and to take cognizance of the damage suit filed by the
company but that the injunction was void because it was issued ex parte and the procedure laid down in section 9(d) of Republic Act No. 875 was
not followed by the trial court (Allied Free Workers Union vs. Judge Apostol, 102 Phil. 292, 298).

After trial, the lower court rendered a decision dated December 5, 1960, amended on January 11, 1961, (1) declaring the arrastre and stevedoring
contract terminated on August $1, 1954; (2) dismissing the union's counterclaim; (3) ordering the union and its officers to pay solidarily to the
company P520,000 as damages, with six percent interest per annum from September 9, 1954, when the complaint. was filed; (4) permanently
enjoining the union from performing any arrastre and stevedoring work for the company at Iligan City, and (5) requiring the union to post a
supersedeas bond in the sum of P520,000 to stay execution.

The union filed a motion for reconsideration. On the other hand, the company filed a motion for the execution pending appeal of the money
judgment. It filed another motion for the immediate issuance of a writ of injunction. That second motion was filed in the municipal court of Iligan
City in view of the absence of the District Judge.

The municipal court issued the writ of injunction. However, this Court set it aside because it was not an interlocutory order and no special reasons
were adduced to justify its issuance (Allied Free Workers Union vs. Judge Estipona, 113 Phil. 748).

The union on January 6, 1961 had perfected an appeal from the lower court's original decision. It did not appeal from the amended decision. On
March 24, 1962 the lower court issued an order declaring its amended decision final and executory in view of the union's failure to appeal
therefrom. The court directed the clerk of court to issue a writ of execution. That order was assailed by the union in a certiorari action filed in this
Court. A preliminary injunction was issued by this Court to restrain the execution of the judgment.

On May 16, 1962 this Court dissolved the injunction at the instance of the company which had filed a counterbond. Thereupon, the 225 members
of the union yielded their ten-year old jobs to the new set of workers contracted by the company.

The certiorari incident was decided on June 30, 1966. This Court noted that the lower court amended its decision for the purpose of correcting
certain errors and omissions which were not substantial in character and that its amended decision was served upon the parties after the union
had perfected its appeal from the original decision.
Under those circumstances, this Court held that the union's appeal should be given due coarse, subject to the amendment of its record on appeal.
This Court reserved to the members of the union the right to secure restitution under sections 2 and 5, Rule 39 of the Rules of Court (Allied Free
Workers Union vs. Estipona, L-19651, June 30, 1966,17 SCRA 513, 64 O.G. 2701).

Pursuant to that reservation, the union on December 16, 1966 filed a motion for restitution, praying that its 225 members be restored to their jobs
and that the company be ordered to pay P 1,620,000 as damages, consisting of the lost earnings during the four-years period from May 8, 1962 to
May 8, 1966.

On the other hand, the company in its motion of January 18, 1967 reiterated its 1960 motion for the execution of the lower court's judgment as to
the damages, of P520,000 and the permanent injunction.

Later, the company called the lower court's attention to this Court's decision dated January 31, 1967. In that decision, this Court affirmed the CIR's
decision holding that the company did not commit any unfair labor practice and reversed the CIR's directive that a certification election be held to
determine whether the union should be the exonemtod bargaining unit. This Court held that the union could not act as a collective bargaining unit
because the union was an independent contractor and its members were not employees of the company (Allied Free Workers Union vs.
Compañia Maritima, L-22951-2 and L-22971, 19 SCRA 258).

The lower court in its order of April 25, 1967 (1) denied the union's motion for restitution and to stay execution of its amended decision on January
11, 1961 and (2) required the union to file a supersedeas bond in the sum of P100,000 within thirty days from notice. The bond was reduced to
P50,000 in the lower court's order of August 16, 1967. The union posted the bond on August 24,1967.

The lower court approved the union's amended record on appeal in its order of October 6, 1967.

The union appealed directly to this Court because the amount involved exceeds P200,000. The appeal was perfected before Republic Act No.
5440 took effect on September 9,1968.

Other proceedings. - The company in its original complaint prayed that the union and its officials be ordered to pay actual damages, amounting to
P15,000 for the union's failure to load and unload cargo in and from the consignees. vessels from September 1 to 8, 1954; P50,000 as damages,
due to the union's inefficiency in performing arrastre and stevedoring work "during the latter part of the existence" of the contract; P50,000 as
moral and exemplary damages, (not supported by any allegation in the body of the complaint) and P5,000 as attorney's Considering (10-12,
Record on Appeal).

On September 15, 1954 the company added a fourth cause ofaction to its complaint. It alleged that by reason of the acts of harassment and
obstruction perpetrated by the union in the loading and unloading ofcargo the company suffered additional damage in the form of lost and
unrealized freight and passenger charges in the amount of P10,000 for September 9 and 10, 1954 (66, Record on Appeal).
On November 2, 1954 the company attached to its motion for the revival of the injunction against the union an auditor's report dated September
15, 1954 wherein it was indicated that the company lost freight revenues amounting to P178,579.20 during the period from January 1 to
September 7, 1954 (121-143, Record on Appeal).

On November 27, 1954 the company filed another motion for the restoration of the injunction. In support of that motion the company attached a
trip operation report showing the unloaded cargoes on the consignees. vessels, when they docked at Iligan City on September 14, 19, 22 and 26
and October 3 and 5, 1954, as well as the delays in their departure (157-162, Record on Appeal).

On March 5, 1955 the company added a fifth cause ofaction too its complaint. It alleged that during the period from September 12 to December
28, 1954 it lost freight charges on unloaded cargoes in the sum of P62,680.12, as shown in a detailed statement, and that it incurred an estimated
amount of P20,000 for overhead expenses. for the delay in the dismissal of its vessels attributable to the union's unsatisfactory stevedoring and
arrastre work (225-229, 237-8, Record on Appeal).

Also on March 5, 1955 the union answered the original and supplemental complaints. It denied that its members had rendered inefficient service. It
averred that the termination of the contract was prompted by the consignees. desire to give the work to the Iligan Stevedoring Association which
the company had allegedly organized and subsidized. The union filed a counterclaim for P200,000 as compensation for its services to the
company and P500,000 as other damages, (239-252, Record on Appeal).

On March 9, 1960 the company filed a third supplemental complaint, It alleged that the continuation of the stevedoring and arrastre work by the
union for the company from 1955 to date had caused losses to the company at the rate of P25,000 annually in the form of lost freight on shutout
cargoes and the expenses. for the equipment used to assist the union members in performing their work (320-3, Record on Appeal).

Plaintiff company's evidence. - Jose C. Teves, the consignees. branch manager at Iligan City, testified that on August 24, 1954 he terminated the
arrastre and stevedoring contract with the union (Exh. J) upon instruction of the head office. The contract was terminated in order to avoid further
losses to the company caused by the union's inefficient service (85-86 tsn March 11, 1960).

After the termination of the contract, the members of the union allegedly harassed the company with the help of goons. The cargoes could not be
unloaded in spite of the fact that the company had sought the protection of the law-enforcing authorities (88). The consignees. last recourse was to
go to court. (89).

The company supposedly suffered losses as a result of the union's inefficient service since September 1, 1954 (91). Teves hired auditors to
ascertain the losses suffered by the company during the period from January 1 to September 11, 1954.

The trial court awarded actual damages, amounting to P450,000 on the basis of the auditor's reports, Exhibits A to I. It did not carefully examine
the said exhibits. Contrary to the trial court's impression, Exhibits B, C and D are not auditors' reports.
The trial court did not bother to make a breakdown of the alleged damages, totalling P450,000. The reports of the two hired accountants, Demetrio
S. Jayme and M. J. Siojo, show the following alleged damages, in the aggregate amount of P349,245.37 (not P412,663.17, as erroneously added
by the consignees. counsel, 161,163-4 tsn March 11, 1960):

TABULATION OF ALLEGED

DAMAGES CLAIMED BY COMPAÑIA MARITIMA

(1) Freight for 74,751 bags of fertilizer

allegedly booked for shipment in the

company's vessels but loaded in other vessels

during the period from Jan. 1 to August 31,

1954, Statement A in Exh. A, CPA Jayme's

report......................................................... P29,900.40

(2) Lost freight on other shutout cargoes

for January 1 to August 31, 1954, Statement A

in Exh. A, of CPA Jayme ......................... 4,339.64

(3) Lost freight on shutout cargoes for

September 2 to 7, 1954 booked for shipment in

M. V. Mindoro, Panay and Masterhead Knot,

Statement B in Exh. A, CPA Jayme's report... 6,167.16

(4) Losses sustained in voyages of M.V.

Panay and Mindoro in four voyages from

September 4 to 11, 1954, with estimates,

Statement B, Exh. A............................... 3,764.50

(5) Other estimated losses for the said

voyages of M.V. Panay and Mindoro for the

same period, based on interviews of parties at

the wharf, Statement B, Exh. A............... 10,000.00

(6) Additional subsistence expenses. for the

M.V. Mindoro and Panay due to the delays in

their dismissal from January 1 to August 31,

1954 as certified by the pursers of the two

vessels, Statement C, Exh. A..................... 4,407.50

(7) Estimated loss in freight and passenger

revenue for the period from January 1 to

August 31, 1954, based on 1953 freight revenue

for the same period Statement D, Exh. A..... 100,000.00

(8) Estimated loss in passenger fares for

the period from September to December 31,

1954, Statement D, Exh. A....................... 20,000.00

(9) Lost freight charges from September

12 to December 28, 1954, as certified by the

chief clerk of the consignees. Iligan office. Exh.

B............................................................. 62,680.12
(10) Estimated overhead expenses for

delay of vessels in port, Exh. B................. 20,000.00

(11) Forklift operating expenses. for 1955,

consisting of salaries and maintenance

expenses, Exh. E- 1.................................... 5,677.54

(12) Lost freight revenue for 1955, Exh. E-

2............................................................... 17,838.78

(13) Forklift operating expenses. for 1956,

Exh. F- 1................................................... 3,520.90

(14) Lost freight revenue for 1956, Exh. F-2 3,849.56

(15) Forklift operating expenses. for 1957,

Exh. G- 1................................................... 8,259.08

(16) Lost freight revenue for 1957, Exh. G-

2.................................................................... 14,538.10

(17) Forklift operating expenses. for 1958,

Exh. H-1................................................... 7,503.45

(18) Lost freight revenue for 1958, Exh. H-

2............................................................. 10,193.46

(19) Forklift operating expenses. for 1959,

Exh. I-1.................................................... 8,745.35

(20) Lost freight revenue for 1959, Exh. I-2 7,959.83

T OT A L - P349,245.37

We tabulated the alleged damages, to show that the trial court's award to the company of P450,000 as damages, is not supported by the
evidence. On the other hand, the statement of the consignees. counsel that the damages, totalled P412,663.17 (162- 164 tsn March 11, 1960) is
wrong.

Teves, the consignees. branch manager, submitted a statement (Exh. K) showing the alleged cost of three forklifts, 200 pieces of pallet boards,
530 pieces of wire rope slings and two pieces of tarpaulins in the total sum of P27,215. In that statement, he claims that the damages, to the
company by reason of the depreciation of the said items of equipment amounted to P38,835 or more than the cost thereof.

The company's counsel, in his summary of the damages, ignored the alleged damages, of P38,835 indicated by Teves in Exhibit K. The
consignees. counsel relied oth on the auditors' reports, Exhibits A and E to I and on Exhibit B, the chief clerk's statement. As already noted, those
documents show that the total damages, claimed by the company amounted to P349,245.37.

The best evidence on the cost of the said equipment would have been the sales invoices instead of the oral testimony of Teves. He did not
produce the sales invoices.

Teves further testified that Salvador T. Lluch was the president of the union; Nicanor Halibas, the treasurer; Mariano Badelles, the general
manager, and Luarentino Badelles, a vice president.

Appellants' statement of facts. - To sustain their appeal, the appellants made the following exceedingly short and deficient recital of the facts:

Sometime in the month of August, 1954, defendant, Allied Free Workers Union filed an unfair labor practice case against
defendant (should be plaintiff) and its branch manager, Mr. Jose Teves, with the Court of Industrial Relations, Manila, and
docketed as Case No. 426-UPL: defendant union also filed a petition for certification election docketed as Case No, 175-MC
against plaintiff; defendant union also filed a notice of strike dated August 27, 1954; the Secretary of Labor wired the public
defender, Iligan City, on August 27, 1954 (see annexes 1-4, motion to dismiss, Record on Appeal, pp. 54-65).

To counteract these legitimate moves of labor, plaintiff filed the complaint docketed as Civil Case No. 577 in the Court of First
Instance of Lanao (now Lanao del Norte) for damages, and/or resolution of contract with writ of preliminary injunction, On a
decision adverse to their interests, defendants take this appeal.

On the question of jurisdiction taken before this Honorable Tribunal in G.R. No. L-8876, it was held:

... for the instant case merely refers to the recovery of damages, occasioned by the picketing undertaken by the members of the
union and the rescission of the arrastre and stevedoring contract previously entered into between the parties.
The appellants did not discuss their oral and documentary evidence. *

First assignment of error. - The appellants contend that the trial court erred in awarding to the company actual damages, amounting to P450,000,
moral damages, of P50,000 and attorney's Considering of P20,000, and in holding that the four officers of the union are solidarily liable for the said
damages.

Appellants' counsel assailed the award of actual damages, on the ground that the auditors' reports, on which they were based, were hearsay.

After analyzing the nature of the damages, awarded, how the same were computed, and the trustworthiness of the company's evidence, we find
the first assignment of error meritorious.

We have already stress that, on the basis of the reports of the two accountants, the damages, claimed by the complaint as a matter of simple
addition, does not reach the sum of P 450,000 fixed by the trial court. The damages, shown in the accountants' reports and in the statement made
by the consignees. chief clerk (who did not testify) amount to P349,245.37, or much less than P450,000.

The company argues that the accountants' reports are admissible in evidence because of the rule that "when the original consists of numerous
accounts or other documents which cannot be examined in court without great loss-of time and the fact sought to be established from them is oth
the general result of the whole", the original writings need not be produced (Sec. 2[e], Rule 130, Rules of Court).

That rule cannot be applied in this case because the voluminous character of the records, on which the accountants' reports were based, was not
duly established (U. S. vs. Razon and Tayag, 37 Phil. 856, 861; 29 Am Jur 2nd 529).

It is also a requisite for the application of the rule that the records and accounts should be made accessible to the adverse party so that the
company, of the summary may be tested on cross-examination (29 Am Jur 2nd 517-8; 32A C.J.S. 111).

What applies to this case is the general rule "that an audit made by, or the testimony of, a private auditor, is inadmissible in evidence as proof of
the original records, books of accounts, reports or the like" (Anno 52 ALR 1266).

That general rule cannot be relaxed in this case because the company failed to make a preliminary showing as to the difficulty or impossibility
attending the production of the records in court and their examination and analysis as evidence by the court (29 Am Jur 2nd 529).

A close scrutiny of the accountants' reports reveals their lack of probative value. The propriety of allowing the different items of damages, is
discussed below.

Unrealized freight and passenger revenue for 1954 ascertained by Accountant Demetrio S. Jayme. - In his report (Exh. A, pp. 134 to 147, Record
on Appeal), Jayme used the pronouns "we" and "our" and made reference to the examination made by the "auditors" and his accounting office.

He did not disclose the names of other "auditors" who assisted him in making the examination of the consignees. records.
He gave the impression that he was an independent accountant hired by the company to make a "special investigation" of the consignees. losses
for the period from January 1 to September 7, 1954.

The truth is that Jayme was a "personal friend" of Teves, the consignees. branch manager at Iligan City. Teves was the consignees. principal
witness in this case. He verified the complaint. herein. He signed for the company the stevedoring and arrastre contract which he later rescinded.
In fact, Teves intervened in the drafting of the contract. It was his Idea that the company should not pay the arrastre and stevedoring Considering
and that those charges should be borne by the shippers and consignees.

Jayme was not only the friend of Teves but was also his co-employee. Jayme was the consignees. branch manager at Ozamis City and later at
Cagayan de Oro City (217-8 tsn May 20, 1960; Exh. 12). He suppressed that fact in his report of examination. Apparently, the practice of
accounting was his sideline or he practised accounting and, as the saying goes, he moonlighted as the consignees. branch manager. Obviously,
Jayme would be biased for the company. He violated a rule of the accountants' code of ethics by not disclosing in his report of examination that he
was an employee of the company (84 tsn June 2, 1960).

Accountant Jayme allegedly found from the consignees. records at Iligan City that its freight and passenger revenue for the eight- month period
from January 1 to August 31, 1953 amounted to P373,333.14 and that for the same period in 1954, that revenue amounted to P470,716.29, or an
increase of P97,383.12 (Statement D of Exh. A, 145, Record on Appeal).

Jayme interpreted those figures as signifying that the company would have realized more revenue if the union had rendered better service. He
reasoned out that there was a big volume of business in Iligan City due to the Maria Cristina Fertilizer Plant, Iligan Steel Mill and NPC
Hydroelectric Plant. He imagined that the consignees. freight revenue during the first eight months of 1954 could have amounted to at least
P600,000 and that since it actually realized oth P 470,716.29, its loss of freight revenue for that period could be "conservatively" estimated at least
P100,000 (item 7 of the tabulation of damages).

He stated that he attached to his report on the comparative statement of gross revenue a certificate of the captain of the vessel Panay showing the
delays in its dismissal in Iligan City as indicated in its logbook. No such document was attached to Jayme's report.

And from the fact that the total fares received by the company during the eight-month period were reduced in the sum of P3,951.58 (Jayme fixed
the reduction at the round figure of P4,000), he calculated that the company suffered a loss of at least P20,000 in passenger revenue up to
December 31, 1954 (Item 8 of the tabulation of damages).

Jayme also included in his report (a) damages, amounting to P10,000 as his estimate of losses supposedly "based on interviews with disinterested
parties at the wharf and city proper customers"; (b) damages, amounting to P3,764.50 allegedly suffered in the operation of the vessels Mindoro
and Panay from September 4 to 11, 1954, consisting of extra meals, expenses. for unloading cargo, estimated loss in passage revenue for four
voyages, and estimated loss from 14 re-routed freights to competing vessels" (consisting of rice, corn and bananas), and (e) the sum of P4,407.50
as alleged additional subsistence incurred for the crew of the Panay and Mindoro from January 1 to August 31, 1954 (items 4, 5 and 6 of the
tabulation of damages). The records of the purser and chief steward were allegedly examined in ascertaining those damages.
It would not be proper to allow Jayme's estimates as recoverable damages. They are not supported by reliable evidence. They can hardly be
sanctioned by the "generally accepted auditing standards" alluded to in Jayme's report. The pertinent records of the company should have been
produced in court. The purser and steward did not testify.

The rule is that the auditor's summary should not include his conclusions or inferences (29 Am Jur 2d 519). His opinion is not evidence.

The trial court unreservedly gave credence to the conjectures of Jayme. Obviously, his inflated guesses are inherently speculative and devoid of
probative value. Furthermore, his estimate of the unrealized freight revenue for January 1 to August 31, 1954 overlapped with his computation of
the lost freight for the unloaded 74,751 bags of fertilizer and other cargoes covering the same period (Statement A of Exh. A).

The foregoing discussion shows Jayme's unreliable modus operandi in ascertaining the 1954 losses which the company claimed to have suffered
in consequence of the union's alleged inefficiency or poor service. It is noteworthy that those losses were not averred with particularity and
certitude in the consignees. complaint.

The same observations apply with equal cogency to the damages, amounting to P40,407.20 as lost freight revenue also for the year 1954 (items 1
to 3 of the tabulation of damages) which were computed by Accountant Jayme.

Those items refer to (1) the sum of P29,900.40 as lost freight revenue on 74,751 bags of fertilizer, already mentioned, which were booked for
shipment in the consignees. vessels from January 1 to August 31, 1954 but which were allegedly loaded in other vessels; (2) P4,339.64 as
unrealized freight revenue for other cargoes booked in the consignees. vessels but not loaded therein during the same eight-month period, and (3)
P6,167,16 as unrealized freight revenue on shutout cargoes not loaded in the consignees. vessels during the six-day period from September 2 to
7, 1954.

Jayme allegedly based his computations on the records of the company which were not produced in court. The union objected to Jayme's report
as inadmissible under the hearsay rule or as not being the best evidence.

Even if the presentation of the records themselves as exhibits should have been dispensed with, yet the complaint to show good faith and fair
dealing, could have brought the records in court (manifests, bills of lading, receipts for the freights, if any, etc.) and enabled the court and the
union's counsel and its expert accountant to verify the accuracy of Jayme's summaries.

Photostatic copies of some manifests and bills of lading proving that the company was not able to collect the stipulated freight on the alleged
shutout cargoes should have been proforma. in evidence as supporting papers for Jayme's report. No such exhibits were presented.

The flaw or error in relying merely on Jayme's summaries is that, as pointed out by witness Mariano LL. Badelles, cargoes might be shutout due to
causes other than the supposed inefficiency of the union. He testified that cargoes were shutout deliberately by the company because they could
not be loaded in one vessel (for example, 50,000 bags of fertilizer), or a shipper had no allotment, or because the company did not want to load
cargoes like bananas (189-194 tsn May 20, 1960). Jayme's summaries did not take into account the probability that a part of the cargo booked in
the consignees. vessel for a certain date might not have been loaded on that date but was loaded in another vessel of the company which docked
at the port a few days later, In that case, there would be no loss of freight revenue. The mere shutting out of cargo in a particular voyage did not
ipso facto produce loss of freight revenue.

Our conclusion is that an injustice would be perpetrated if the damages, aggregating P178,579 computed and estimated in the report of Jayme, a
biased witness, should be accepted at their face value.

Damages computed by Salvador M. Magante. - The company also claims as damages, for the period from September 12 to December 28, 1954
lost freight charges on shutout cargoes in the sum of P62,680.12, and the sum of P20,000 as "overhead expenses. for delay of vessels in port", as
set forth by Salvador M. Magante, the consignees. chief clerk at Iligan City, in his statement, Exhibit B (items 9 and 10 of the tabulation of
damages).

Magante did not testify on his statement. Instead, accountant Jayme, substituting for Magante, testified on that statement. Jayme said that he
verified the consignees. records on which Magante based his statement. Jayme assured the court that the figures in Magante's statement were
supported by the consignees. records.

But as to the damages, of P20,000, Jayme said that he could not certify as to their company, because he had not finished his investigation (33 tsn
March 9, 1955). In spite of that admission, the trial court allowed that item of damages.

The trial court erred in allowing the damages, totalling P82,680.12 because Magante's statement, Exhibit B, is hearsay. Magante should have
been proforma. as a witness. Jayme was not competent to take his place since the statement was prepared by Magante, not by Jayme. More
appropriate still, the documents and records on which the statement was based should have been proforma. as evidence or at least brought to the
court for examination by the union's counsel and its accountant. The trial court required the production of the manifests supporting Magante's
statement (85-86 tsn march 9, 1955). Only one such manifest, Exhibit C, was produced. The nonproduction of the other records was not
explained.

Lost freight revenue and operating expenses for the forklifts. - The company claimed as damages, the sum of P87,986.05 (P151,403.85 as
erroneously computed by the consignees. counsel, 163 tsn March 11, 1950) consisting of supposed unrealized freight charges for shutout or
unloaded cargoes for the year 1955 to 1959 (Exh. E to I, Items 11 to 20 of the tabulation of damages).

The claim is covered by the company's third supplemental complaint dated March 9, 1960 wherein it was alleged that due to the acts of the union
and its officers the company had suffered damages, of not less than P25,000 annually since 1955 (320-3, Record on Appeal). That supplemental
complaint was hurriedly filed during the trial as directed by the trial court.

The said damages, were computed in the reports of Miguel J. Siojo, an accountant who, for two days and nights, March 8 to 10, 1960, or shortly
before and during the trial, allegedly examined the consignees. record at Iligan City, such as its cash book, cash vouchers, reports to the head
office, shipping manifests, and liquidation reports. Those records were not produced in court. Their nonproduction was not explained. If the
accountant was able to summarize the contents of those records in two days, they could not have been very voluminous. They should have been
offered in evidence.
The alleged expenses. in the operation of the forklifts consisted of (a) the wates of the operators hired by the company and (b) the cost of gasoline
and oil and expenses. for repair.

The company's theory is that under the 1952 contract (Exh. J) the union was obligated to provide for forklifts in the loading and unloading of cargo.
Inasmuch as the union allegedly did not have forklifts, the complaint to expedite the arrastre and stevedoring work, purchase forklifts, hired
laborers to operate the same, and paid for the maintenance expenses. The company treated those expenses as losses or damages.

Those alleged damages, amounting to P87,986.05 are in the same category as the depreciation allowances amounting to P38,835 which the
company claimed for the forklifts, pallet boards, tarpaulins and wire rope slings that it purchased for oth P27,215, We have stated that the
consignees. counsel ignored that depreciation in his recapitulation of the damages, claimed by the plaintiff.

The union contends that Siojo's reports (Exh. E to I) were inadmissible evidence because they were hearsay, meaning that the original
documents, on which the reports were based, were not presented in evidence and, therefore, appellants' counsel and the court itself were not able
to gauge the correctness of the figures or data contained in the said reports. The person who had personal knowledge of the operating expenses.
was not examined in court.

We are of the opinion that, to avoid fraud or fabrication, the documents evidencing the alleged expenses. should have been proforma. in evidence.
Siojo's reports were not the best evidence on the said operating expenses. The explanation of Badelles with respect to shutout cargoes and our
observations on Jayme's summaries are applicable to accountant Siojo's reports.

A more substantial ground for rejecting Siojo's reports is that the said expenses, if really incurred, cannot be properly treated as darn ages to the
company.

The union's witness, Mariano LI. Badelles, testified that the consignees. forklifts were not used exclusively on the wharf. They were used in the
fertilizer and carbide plants. Sometimes, the union supplied the driver and the gasoline for the operation of the forklifts (174-177 tsn May 20,
1960).

Moreover, as stated earlier, the company was not paying the union a single centavo for arrastre and stevedoring work. The shippers and
consignees paid for the arrastre service rendered by the union. The union did not receive any compensation for stevedoring work.

The company complained that the union had been rendering unsatisfactory arrastre and stevedoring services. That grievance was controverted by
the union.

The use of the forklifts, tarpaulins pallet boards and wire rope slings immeasurably benefitted the company. It is not proper nor just that the
consignees. investment in those pieces of equipment should be considered damages, just because it was able to bind the union to a one-sided
contract which exempted it from the payment of arrastre and stevedoring Considering and which impliedly obligated the union to purchase the said
equipment.
If the service rendered by the union members was unsatisfactory, it must be because the poor stevedores were underfed and underpaid. They
were underfed and underpaid because the company was astute enough to insure that it would obtain stevedoring service without paying for it.

If to improve the arrastre and stevedoring service, the company had to incur expenses. for the purchase of forklifts, pallet boards, tarpaulins and
wire rope slings and for the operation of the forklifts, the union should not be required to reimburse the company for those expenses. The company
should bear those expenses. because the same redounded to its benefit.

The trial court erred in ordering the union and its officials to pay the amount of the said expenses. as damages, to the company.

Moral damages and attorney's fees. - Considering that the consignees. claim for moral damages, was based on the same facts on which it
predicated its claim for actual deduction which we have found to be groundless, it follows that the company, a juridical person, is not entitled to
moral damages.

Anyway, the company did not plead and prove moral damages. It merely claimed moral damages, in the prayer of its complaint. That is not
sufficient (Darang vs. Ty Belizar, L-19487, January 31, 1967, 19 SCRA 214, 222).

Under the facts of this case, we do not find any justification for awarding attorney's Considering to the company. Hence, the trial court's award of
P20,000 as attorney's Considering is set aside.

Appellants' first assignment of error, although not properly argued by their counsel, should be sustained.

Other assignments of error. - The union and its officers contend that the lower court erred in dismissing their counterclaims. Their counsel did not
even bother to state in their brief the amount of the counterclaims.

The union filed counterclaims for P200,000 as compensation for stevedoring services from August, 1952 to March 4, 1955; P500,000 as deduction
P10,000 as attorney's Considering and P5,000 as premium on the counterbond (251-2, Record on Appeal). In their supplemental counterclaim,
they demanded P500,000 as stevedoring charges for the period from March 4, 1955 to March 4, 1960 and additional damages, of P10,000 (308-
10, Record on Appeal). The trial court dismissed the said counterclaims.

The appellants in their three-sentence argument in support of their counterclaims alleged that the company's bill of lading provided that the
unloading of the cargoes was at the consignees. expense (Exh. 1); that the company had not paid the sum of P500,000 as compensation for the
stevedoring services rendered by the laborers up to 1960, and that the stipulation in the arrastre contract, "that the Compañia Maritima shall not be
liable for the payment of the services rendered by the Allied Free Workers Union for the loading and deliveries of cargoes as same is payable by
the owners and consignees of cargoes, as it has been the practice in the port of Iligan City" (Exh. J, pp. 14, 334, 359, 500 Record on Appeal), was
'non- operative" and void, "being contrary to morals and public policy".
That superficial argument is not well-taken. The printed stipulation in the bill of lading was superseded by the contractual stipulation. The contract
was prepared by the union officials. As already noted, it was stipulated in the contract that the stevedoring and arrastre charges should be paid by
the shippers and consignees in consonance with the practice in Iligan City. That stipulation was binding and enforceable.

The supposed illegality of that stipulation was not squarely raised by the union and its officials in their answer. They merely averred that the
contract did not express the true agreement of the parties. They did not sue for reformation of the instrument evidencing the contract. The lower
court did not err in dismissing defendants' counterclaims.

The other two errors assigned by the appellants, namely, that the lower court erred in issuing a permanent injunction against them and in
executing its decision pending appeal, are devoid of merit.

The appellants invoke section 9(d) of the Magna Carta of Labor regarding the issuance of injunctions. That section has no application to this case
because it was definitively ruled by this Court in the certification and unfair labor practice cases that there is no employer-employee relationship
between the company and the stevedores. (They work under the cabo system).

The lower court did not execute the money aspect of its judgment. It merely required the defendants to file a supersedeas bond of P50,000.

As to the injunction, it should be recalled that it was this Court which, in its resolution of May 16, 1962 in the execution and appeal incident (L-
19651, 17 SCRA 513), allowed the company to terminate the stevedoring and arrastre work of the union and to use another union to perform that
work.

The company had the contractual right to terminate the 1952 contract (Taylor vs. Uy Teng Piao, 43 Phil. 873). The lower court did not err in
sustaining the consignees. rescission of the contract and in enjoining the union from performing arrastre and stevedoring work.

WHEREFORE, that portion of the trial court's judgment declaring the arrastre and stevedoring contract terminated, permanently enjoining the
union and its officials from performing arrastre and stevedoring work for the vessels of the Compañia Maritima, and dismissing defendants'
counterclaim is affirmed.

The lower court's award of damages, is reversed and set aside. No costs.

SO ORDERED.

Barredo, Antonio, and Martin, JJ., concur.

Concepcion Jr., J., took no part.

Martin, J., was designated to sit in the Second Division.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-23033 January 5, 1967

LUA KIAN, plaintiff and appellee,

vs.
MANILA RAILROAD COMPANY and MANILA PORT SERVICE, defendants and appellants.

D. F. Macaranas and S. V. Pampolina Jr. for defendants and appellants.

San Juan, Laig and Associates for plaintiff and appellee.

BENGZON, J. P., J.:

The present suit was filed by Lua Kian against the Manila Railroad Co. and Manila Port Service for the recovery of the invoice value of imported evaporated
"Carnation" milk alleged to have been undelivered. The following stipulation of facts was made:

1. They admit each other's legal personality, and that during the time material to this action, defendant Manila Port Service as a subsidiary of defendant
Manila Railroad Company operated the arrastre service at the Port of Manila under and pursuant to the Management Contract entered into by and
between the Bureau of Customs and defendant Manila Port Service on February 29, 1956;

2. On December 31, 1959, plaintiff Lua Kian imported 2,000 cases of Carnation Milk from the Carnation Company of San Francisco, California, and
shipped on Board SS "GOLDEN BEAR" per Bill of Lading No. 17;

3. Out of the aforesaid shipment of 2,000 cases of Carnation Milk per Bill of Lading No. 17, only 1,829 cases marked `LUA KIAN 1458' were
discharged from the vessel SS `GOLDEN BEAR' and received by defendant Manila Port Service per pertinent tally sheets issued by the said carrying
vessel, on January 24, 1960;

4. Discharged from the same vessel on the same date unto the custody of defendant Manila Port Service were 3,171 cases of Carnation Milk marked
"CEBU UNITED 4860-PH-MANILA" consigned to Cebu United Enterprises, per Bill of Lading No. 18, and on this shipment, Cebu United Enterprises
has a pending claim for short-delivery against defendant Manila Port Service;

5. Defendant Manila Port Service delivered to the plaintiff thru its broker, Ildefonso Tionloc, Inc. 1,913 cases of Carnation Milk marked "LUA KIAN
1458" per pertinent gate passes and broker's delivery receipts;
 6. A provisional claim was filed by the consignee's broker for and in behalf of the plaintiff on January 19, 1960, with defendant Manila Port Service;

7. The invoice value of the 87 cases of Carnation Milk claimed by the plaintiff to have been short-delivered by defendant Manila Port Service is
P1,183.11 while the invoice value of the 87 cases of Carnation Milk claimed by the defendant Manila Port Service to have been over-delivered by it to
plaintiff is P1,130.65;

8. The 1,913 cases of Carnation mentioned in paragraph 5 hereof were taken by the broker at Pier 13, Shed 3, sometime in February, 1960, where at the
time, there were stored therein, aside from the shipment involved herein, 1000 cases of Carnation Milk bearing the same marks and also consigned to
plaintiff Lua Kian but had been discharged from SS `STEEL ADVOCATE' and covered by Bill of Lading No. 11;

9. Of the shipment of 1000 cases of Carnation Milk which also came from the Carnation Company, San Francisco, California, U.S.A. and bearing the
same marks as the shipment herein but had been discharged from S/S "STEEL ADVOCATE" and covered by Bill of Lading No. 11, Lua Kian as
consignee thereof filed a claim for short-delivery against defendant Manila Port Service, and said defendant Manila Port Service paid Lua Kian plaintiff
herein, P750.00 in settlement of its claim;

10. They reserve the right to submit documentary evidence;

11. They submit the matter of attorney's fees and costs to the sound discretion of the Court.

On these facts and documentary evidence subsequently presented, the Court of First Instance of Manila ruled that 1,829 cases marked Lua Kian (171 cases less
than the 2,000 cases indicated in the bill of lading and 3,171 cases marked "Cebu United" (171 cases over the 3,000 cases in the bill of lading were discharged to
the Manila Port Service. Considering that Lua Kian and Cebu United Enterprises were the only consignees of the shipment of 5,000 cases of "Carnation" milk, it
found that of the 3,171 cases marked "Cebu United", 171 should have been delivered to Lua Kian. Inasmuch as the defendant Manila Port Service actually
delivered 1,913 cases to plaintiff,1 which is only 87 cases short of 2,000 cases as per bill of lading the former was ordered to pay Lua Kian the sum of P1,183.11
representing such shortage of 87 cases, with legal interest from the date of the suit, plus P500 as attorney's fees.

Defendants appealed to Us and contend that they should not be made to answer for the undelivered cases of milk, insisting that Manila Port Service was bound to
deliver only 1,829 cases to Lua Kian and that it had there before in fact over-delivered to the latter.

The bill of lading in favor of Cebu United Enterprises indicated that only 3,000 cases were due to said consignee, although 3,171 cases were marked in its favor.
Accordingly, the excess 171 cases marked "Cebu United" placed the defendant arrastre operator in a dilemma, for should it deliver them to Lua Kian the goods
could be claimed by the consignee Cebu United Enterprises whose markings they bore, and should it deliver according to markings, to Cebu United Enterprises,
it might be sued by the consignee, Lua Kian whose bill of lading indicated that it should receive 171 cases more. The dilemma itself, however, offered the
solution. The legal relationship between an arrastre operator and the consignee is akin to that of a depositor and warehouseman.2 As custodian of the goods
discharged from the vessel, it was defendant arrastre operator's duty, like that of any ordinary depositary, to take good care of the goods and to turn them over to
the party entitled to their possession.3 Under this particular set of circumstances, said defendant should have withheld delivery because of the discrepancy
between the bill of lading and the markings and conducted its own investigation, not unlike that under Section 18 of the Warehouse Receipts Law, or called upon
the parties, to interplead, such as in a case under Section 17 of the same law, in order to determine the rightful owner of the goods.
It is true that Section 12 of the Management Contract exempts the arrastre operator from responsibility for misdelivery or non-delivery due to improper or
insufficient marking. We cannot however excuse the aforestated defendant from liability in this case before Us now because the bill of lading showed that only
3,000 cases were consigned to Cebu United Enterprises. The fact that the excess of 171 cases were marked for Cebu United Enterprises and that the consignment
to Lua Kian was 171 cases less than the 2,000 in the bill of lading, should have been sufficient reason for the defendant Manila Port Service to withhold the
goods pending determination of their rightful ownership.

We therefore find the defendants liable, without prejudice to their taking whatever proper legal steps they may consider worthwhile to recover the excess
delivered to Cebu United Enterprises.

With respect to the attorney's fees awarded below, this Court notices that the same is about 50 per cent of the litigated amount of P1,183.11. We therefore deem it
reasonable to decrease the attorney's fees to P300.00.

Wherefore, with the aforesaid reservation, and with the modification that the attorney's fee is reduced to P300.00, the judgment appealed from is affirmed, with
costs against appellants. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, Sanchez and Castro, JJ., concur.