contract of sales of goods full text cases

8/11/2019 Contract of Sales of Goods Full Text Cases

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CONTRACT OF SALES OF GOODS

G.R. No. L-69044 May 29, 1987

EASTERN SHIPPING LINES, INC., petit io ner,

vs.

INTERMEDIATE APPELLA TE COURT and DEVELOPMENT INSURANCE & SURETYCORPORATION, respo ndent s.

No. 71478 May 29, 1987

EASTERN SHIPPING LINES, INC., petitioner,vs.THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE & MARINEINSURANCE CO., LTD., respondents.

MELENCIO-HERRERA, J.:

These two cases, both for the recovery of the value of cargo insurance, arose from the sameincident, the sinking of the M/S ASIATICA when it caught fire, resulting in the total loss of shipand cargo.

The basic facts are not in controversy:

In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel operated bypetitioner Eastern Shipping Lines, Inc., (referred to hereinafter as Petitioner Carrier) loaded atKobe, Japan for transportation to Manila, 5,000 pieces of calorized lance pipes in 28 packagesvalued at P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare

parts valued at P92,361.75, consigned to Central Textile Mills, Inc. Both sets of goods wereinsured against marine risk for their stated value with respondent Development Insurance andSurety Corporation.

In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons ofgarment fabrics and accessories, in two (2) containers, consigned to Mariveles ApparelCorporation, and two cases of surveying instruments consigned to Aman Enterprises andGeneral Merchandise. The 128 cartons were insured for their stated value by respondentNisshin Fire & Marine Insurance Co., for US $46,583.00, and the 2 cases by respondent DowaFire & Marine Insurance Co., Ltd., for US $11,385.00.

Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of

ship and cargo. The respective respondent Insurers paid the corresponding marine insurancevalues to the consignees concerned and were thus subrogated unto the rights of the latter asthe insured.

G.R. NO. 69044

On May 11, 1978, respondent Development Insurance & Surety Corporation (DevelopmentInsurance, for short), having been subrogated unto the rights of the two insured companies, filed


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suit against petitioner Carrier for the recovery of the amounts it had paid to the insured beforethe then Court of First instance of Manila, Branch XXX (Civil Case No. 6087).

Petitioner-Carrier denied liability mainly on the ground that the loss was due to an extraordinaryfortuitous event, hence, it is not liable under the law.

On August 31, 1979, the Trial Court rendered judgment in favor of Development Insurance inthe amounts of P256,039.00 and P92,361.75, respectively, with legal interest, plus P35,000.00as attorney's fees and costs. Petitioner Carrier took an appeal to the then Court of Appealswhich, on August 14, 1984, affirmed.

Petitioner Carrier is now before us on a Petition for Review on Certiorari.

G.R. NO. 71478

On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short), andDowa Fire & Marine Insurance Co., Ltd. (DOWA, for brevity), as subrogees of the insured, filedsuit against Petitioner Carrier for the recovery of the insured value of the cargo lost with the then

Court of First Instance of Manila, Branch 11 (Civil Case No. 116151), imputing unseaworthinessof the ship and non-observance of extraordinary diligence by petitioner Carrier.

Petitioner Carrier denied liability on the principal grounds that the fire which caused the sinkingof the ship is an exempting circumstance under Section 4(2) (b) of the Carriage of Goods bySea Act (COGSA); and that when the loss of fire is established, the burden of provingnegligence of the vessel is shifted to the cargo shipper.

On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and DOWA inthe amounts of US $46,583.00 and US $11,385.00, respectively, with legal interest, plusattorney's fees of P5,000.00 and costs. On appeal by petitioner, the then Court of Appeals onSeptember 10, 1984, affirmed with modification the Trial Court's judgment by decreasing the

amount recoverable by DOWA to US $1,000.00 because of $500 per package limitation ofliability under the COGSA.

Hence, this Petition for Review on certiorari by Petitioner Carrier.

Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16, 1985 by theFirst Division, and G. R. No. 71478 on September 25, 1985 by the Second Division. UponPetitioner Carrier's Motion for Reconsideration, however, G.R. No. 69044 was given due courseon March 25, 1985, and the parties were required to submit their respective Memoranda, whichthey have done.

On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of the

Resolution denying the Petition for Review and moved for its consolidation with G.R. No. 69044,the lower-numbered case, which was then pending resolution with the First Division. The samewas granted; the Resolution of the Second Division of September 25, 1985 was set aside andthe Petition was given due course.

At the outset, we reject Petitioner Carrier's claim that it is not the operator of the M/S Asiaticabut merely a charterer thereof. We note that in G.R. No. 69044, Petitioner Carrier stated in itsPetition:


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carrier shall be presumed to have been at fault or to have acted negligently, unless it provesthat it has observed the extraordinary deligence required by law.

In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that thetransported goods have been lost. Petitioner Carrier has also proved that the loss was causedby fire. The burden then is upon Petitioner Carrier to proved that it has exercised the

extraordinary diligence required by law. In this regard, the Trial Court, concurred in by theAppellate Court, made the following Finding of fact:

The cargoes in question were, according to the witnesses defendant placed in hatches No, 2and 3 cf the vessel, Boatswain Ernesto Pastrana noticed that smoke was coming out from hatchNo. 2 and hatch No. 3; that where the smoke was noticed, the fire was already big; that the firemust have started twenty-four 24) our the same was noticed; that carbon dioxide was orderedreleased and the crew was ordered to open the hatch covers of No, 2 tor commencement of firefighting by sea water: that all of these effort were not enough to control the fire.

Pursuant to Article 1733, common carriers are bound to extraordinary diligence in the vigilanceover the goods. The evidence of the defendant did not show that extraordinary vigilance was

observed by the vessel to prevent the occurrence of fire at hatches numbers 2 and 3.Defendant's evidence did not likewise show he amount of diligence made by the crew, onorders, in the care of the cargoes. What appears is that after the cargoes were stored in thehatches, no regular inspection was made as to their condition during the voyage. Consequently,the crew could not have even explain what could have caused the fire. The defendant, in theCourt's mind, failed to satisfactorily show that extraordinary vigilance and care had been madeby the crew to prevent the occurrence of the fire. The defendant, as a common carrier, is liableto the consignees for said lack of deligence required of it under Article 1733 of the Civil Code.15

Having failed to discharge the burden of proving that it had exercised the extraordinary diligencerequired by law, Petitioner Carrier cannot escape liability for the loss of the cargo.

And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 ofthe Civil Code, it is required under Article 1739 of the same Code that the "natural disaster"must have been the "proximate and only cause of the loss," and that the carrier has "exerciseddue diligence to prevent or minimize the loss before, during or after the occurrence of thedisaster. " This Petitioner Carrier has also failed to establish satisfactorily.

Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act, Itis provided therein that:

Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage arising orresulting from

(b) Fire, unless caused by the actual fault or privity of the carrier.

xxx xxx xxx

In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that therewas "actual fault" of the carrier shown by "lack of diligence" in that "when the smoke wasnoticed, the fire was already big; that the fire must have started twenty-four (24) hours beforethe same was noticed; " and that "after the cargoes were stored in the hatches, no regular


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inspection was made as to their condition during the voyage." The foregoing suffices to showthat the circumstances under which the fire originated and spread are such as to show thatPetitioner Carrier or its servants were negligent in connection therewith. Consequently, thecomplete defense afforded by the COGSA when loss results from fire is unavailing to PetitionerCarrier.

On the US $500 Per Package Limitation:

Petitioner Carrier avers that its liability if any, should not exceed US $500 per package asprovided in section 4(5) of the COGSA, which reads:

(5) Neither the carrier nor the ship shall in any event be or become liable for any loss ordamage to or in connection with the transportation of goods in an amount exceeding $500 perpackage lawful money of the United States, or in case of goods not shipped in packages, percustomary freight unit, or the equivalent of that sum in other currency, unless the nature andvalue of such goods have been declared by the shipper before shipment and inserted in bill oflading. This declaration if embodied in the bill of lading shall be prima facie evidence, but all beconclusive on the carrier.

By agreement between the carrier, master or agent of the carrier, and the shipper anothermaximum amount than that mentioned in this paragraph may be fixed: Provided, That suchmaximum shall not be less than the figure above named. In no event shall the carrier be Liablefor more than the amount of damage actually sustained.

xxx xxx xxx

Article 1749 of the New Civil Code also allows the limitations of liability in this wise:

Art. 1749. A stipulation that the common carrier's liability as limited to the value of the goodsappearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.

It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to afixed amount per package although the Code expressly permits a stipulation limiting suchliability. Thus, the COGSA which is suppletory to the provisions of the Civil Code, steps in andsupplements the Code by establishing a statutory provision limiting the carrier's liability in theabsence of a declaration of a higher value of the goods by the shipper in the bill of lading. Theprovisions of the Carriage of Goods by.Sea Act on limited liability are as much a part of a bill oflading as though physically in it and as much a part thereof as though placed therein byagreement of the parties. 16

In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for the loss or destruction of the goods. Nor is there a

declaration of a higher value of the goods. Hence, Petitioner Carrier's liability should not exceedUS $500 per package, or its peso equivalent, at the time of payment of the value of the goodslost, but in no case "more than the amount of damage actually sustained."

The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 (Exhibit "C"),which was exactly the amount of the insurance coverage by Development Insurance (Exhibit"A"), and the amount affirmed to be paid by respondent Court. The goods were shipped in 28packages (Exhibit "C-2") Multiplying 28 packages by $500 would result in a product of $14,000which, at the current exchange rate of P20.44 to US $1, would be P286,160, or "more than the


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amount of damage actually sustained." Consequently, the aforestated amount of P256,039should be upheld.

With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value wasP92,361.75 (Exhibit "I"), which is likewise the insured value of the cargo (Exhibit "H") andamount was affirmed to be paid by respondent Court. however, multiplying seven (7) cases by

$500 per package at the present prevailing rate of P20.44 to US $1 (US $3,500 x P20.44) wouldyield P71,540 only, which is the amount that should be paid by Petitioner Carrier for those spareparts, and not P92,361.75.

In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are concerned, theamount awarded to DOWA which was already reduced to $1,000 by the Appellate Courtfollowing the statutory $500 liability per package, is in order.

In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and insuredwith NISSHIN, the Appellate Court also limited Petitioner Carrier's liability to $500 per packageand affirmed the award of $46,583 to NISSHIN. it multiplied 128 cartons (considered as COGSApackages) by $500 to arrive at the figure of $64,000, and explained that "since this amount is

more than the insured value of the goods, that is $46,583, the Trial Court was correct inawarding said amount only for the 128 cartons, which amount is less than the maximumlimitation of the carrier's liability."

We find no reversible error. The 128 cartons and not the two (2) containers should beconsidered as the shipping unit.

In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of tiningots and the shipper of floor covering brought action against the vessel owner and operator torecover for loss of ingots and floor covering, which had been shipped in vessel suppliedcontainers. The U.S. District Court for the Southern District of New York rendered judgment forthe plaintiffs, and the defendant appealed. The United States Court of Appeals, Second

Division, modified and affirmed holding that:

When what would ordinarily be considered packages are shipped in a container supplied by thecarrier and the number of such units is disclosed in the shipping documents, each of those unitsand not the container constitutes the "package" referred to in liability limitation provision ofCarriage of Goods by Sea Act. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A.& 1304(5).

Even if language and purposes of Carriage of Goods by Sea Act left doubt as to whethercarrier-furnished containers whose contents are disclosed should be treated as packages, theinterest in securing international uniformity would suggest that they should not be so treated.Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5).

... After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that treating a containeras a package is inconsistent with the congressional purpose of establishing a reasonableminimum level of liability, Judge Beeks wrote, 414 F. Supp. at 907 (footnotes omitted):

Although this approach has not completely escaped criticism, there is, nonetheless, much tocommend it. It gives needed recognition to the responsibility of the courts to construe and applythe statute as enacted, however great might be the temptation to "modernize" or reconstitute itby artful judicial gloss. If COGSA's package limitation scheme suffers from internal illness,Congress alone must undertake the surgery. There is, in this regard, obvious wisdom in the


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Ninth Circuit's conclusion in Hartford that technological advancements, whether or notforseeable by the COGSA promulgators, do not warrant a distortion or artificial construction ofthe statutory term "package." A ruling that these large reusable metal pieces of transportequipment qualify as COGSA packages at least where, as here, they were carrier owned andsupplied would amount to just such a distortion.

Certainly, if the individual crates or cartons prepared by the shipper and containing his goodscan rightly be considered "packages" standing by themselves, they do not suddenly lose thatcharacter upon being stowed in a carrier's container. I would liken these containers todetachable stowage compartments of the ship. They simply serve to divide the ship's overallcargo stowage space into smaller, more serviceable loci. Shippers' packages are quite literally"stowed" in the containers utilizing stevedoring practices and materials analogous to thoseemployed in traditional on board stowage.

In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on other grounds,595 F 2nd 943 (4 Cir. 1979), another district with many maritime cases followed Judge Beeks'reasoning in Matsushita and similarly rejected the functional economics test. Judge Kellam heldthat when rolls of polyester goods are packed into cardboard cartons which are then placed in

containers, the cartons and not the containers are the packages.

xxx xxx xxx

The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test:

Eurygenes concerned a shipment of stereo equipment packaged by the shipper into cartonswhich were then placed by the shipper into a carrier- furnished container. The number ofcartons was disclosed to the carrier in the bill of lading. Eurygenes followed the Mitsui test andtreated the cartons, not the container, as the COGSA packages. However, Eurygenes indicatedthat a carrier could limit its liability to $500 per container if the bill of lading failed to disclose thenumber of cartons or units within the container, or if the parties indicated, in clear and

unambiguous language, an agreement to treat the container as the package.

(Admiralty Litigation in Perpetuum: The Continuing Saga of Package Limitations and ThirdWorld Delivery Problems by Chester D. Hooper & Keith L. Flicker, published in FordhamInternational Law Journal, Vol. 6, 1982-83, Number 1) (Emphasis supplied)

In this case, the Bill of Lading (Exhibit "A") disclosed the following data:

2 Containers

(128) Cartons)

Men's Garments Fabrics and Accessories Freight Prepaid

Say: Two (2) Containers Only.

Considering, therefore, that the Bill of Lading clearly disclosed the contents of the containers,the number of cartons or units, as well as the nature of the goods, and applying the ruling in theMitsui and Eurygenes cases it is clear that the 128 cartons, not the two (2) containers should beconsidered as the shipping unit subject to the $500 limitation of liability.


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True, the evidence does not disclose whether the containers involved herein were carrier-furnished or not. Usually, however, containers are provided by the carrier. 19 In this case, theprobability is that they were so furnished for Petitioner Carrier was at liberty to pack and carrythe goods in containers if they were not so packed. Thus, at the dorsal side of the Bill of Lading(Exhibit "A") appears the following stipulation in fine print:

11. (Use of Container) Where the goods receipt of which is acknowledged on the face of thisBill of Lading are not already packed into container(s) at the time of receipt, the Carrier shall beat liberty to pack and carry them in any type of container(s).

The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the Bill ofLading, meaning that the goods could probably fit in two (2) containers only. It cannot mean thatthe shipper had furnished the containers for if so, "Two (2) Containers" appearing as the firstentry would have sufficed. and if there is any ambiguity in the Bill of Lading, it is a cardinalprinciple in the construction of contracts that the interpretation of obscure words or stipulationsin a contract shall not favor the party who caused the obscurity. 20 This applies with evengreater force in a contract of adhesion where a contract is already prepared and the other partymerely adheres to it, like the Bill of Lading in this case, which is draw. up by the carrier. 21

On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No. 69044only)

Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the depositionsof its witnesses in Japan by written interrogatories.

We do not agree. petitioner Carrier was given- full opportunity to present its evidence but itfailed to do so. On this point, the Trial Court found:

xxx xxx xxx

Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time from June27, 1978, when its answer was prepared and filed in Court, until September 26, 1978, when thepre-trial conference was conducted for the last time, the defendant had more than nine monthsto prepare its evidence. Its belated notice to take deposition on written interrogatories of itswitnesses in Japan, served upon the plaintiff on August 25th, just two days before the hearingset for August 27th, knowing fully well that it was its undertaking on July 11 the that thedeposition of the witnesses would be dispensed with if by next time it had not yet been obtained,only proves the lack of merit of the defendant's motion for postponement, for which reason itdeserves no sympathy from the Court in that regard. The defendant has told the Court sinceFebruary 16, 1979, that it was going to take the deposition of its witnesses in Japan. Why did ittake until August 25, 1979, or more than six months, to prepare its written interrogatories. Onlythe defendant itself is to blame for its failure to adduce evidence in support of its defenses.

xxx xxx xxx 22

Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot complainnow that it was denied due process when the Trial Court rendered its Decision on the basis ofthe evidence adduced. What due process abhors is absolute lack of opportunity to be heard. 24

On the Award of Attorney's Fees:


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Petitioner Carrier questions the award of attorney's fees. In both cases, respondent Courtaffirmed the award by the Trial Court of attorney's fees of P35,000.00 in favor of DevelopmentInsurance in G.R. No. 69044, and P5,000.00 in favor of NISSHIN and DOWA in G.R. No.71478.

Courts being vested with discretion in fixing the amount of attorney's fees, it is believed that the

amount of P5,000.00 would be more reasonable in G.R. No. 69044. The award of P5,000.00 inG.R. No. 71478 is affirmed.

WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner EasternShipping Lines shall pay the Development Insurance and Surety Corporation the amount ofP256,039 for the twenty-eight (28) packages of calorized lance pipes, and P71,540 for theseven (7) cases of spare parts, with interest at the legal rate from the date of the filing of thecomplaint on June 13, 1978, plus P5,000 as attorney's fees, and the costs.

2) In G.R.No.71478,the judgment is hereby affirmed.

SO ORDERED.


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G.R. No. 93252 Au gu st 5, 1991

RODOLFO T. GANZON, petition er,

vs.

THE HONORABLE COURT OF APPEALS and LUIS T. SANTOS, respond ents.

G.R. No. 93746 August 5,1991

MARY ANN RIVERA ARTIEDA, petitioner,vs.HON. LUIS SANTOS, in his capacity as Secretary of the Department of Local Government,NICANOR M. PATRICIO, in his capacity as Chief, Legal Service of the Department of LocalGovernment and SALVADOR CABALUNA JR., respondents.

G.R. No. 95245 August 5,1991

RODOLFO T. GANZON, petitioner,vs.

THE HONORABLE COURT OF APPEALS and LUIS T. SANTOS, in his capacity as theSecretary of the Department of Local Government, respondents.

Nicolas P. Sonalan for petitioner in 93252.

Romeo A. Gerochi for petitioner in 93746.

Eugenio Original for petitioner in 95245.

SARMIENTO, J.:p

The petitioners take common issue on the power of the President (acting through the Secretaryof Local Government), to suspend and/or remove local officials.

The petitioners are the Mayor of Iloilo City (G.R. Nos. 93252 and 95245) and a member of theSangguniang Panglunsod thereof (G.R. No. 93746), respectively.

The petitions of Mayor Ganzon originated from a series of administrative complaints, ten innumber, filed against him by various city officials sometime in 1988, on various charges, amongthem, abuse of authority, oppression, grave misconduct, disgraceful and immoral conduct,intimidation, culpable violation of the Constitution, and arbitrary detention. 1 The personalitiesinvolved are Joceleehn Cabaluna, a clerk at the city health office; Salvador Cabaluna, her

husband; Dr. Felicidad Ortigoza, Assistant City Health Officer; Mansueto Malabor, Vice-Mayor;Rolando Dabao, Dan Dalido, German Gonzales, Larry Ong, and Eduardo Pefia Redondomembers of the Sangguniang Panglunsod; and Pancho Erbite, a barangay tanod. Thecomplaints against the Mayor are set forth in the opinion of the respondent Court of Appeals. 2We quote:

xxx xxx xxx


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In her verified complaint (Annex A), Mrs. Cabaluna, a clerk assigned to the City Health, Office ofIloilo City charged that due to political reasons, having supported the rival candidate, Mrs. Rosa0. Caram, the petitioner City Mayor, using as an excuse the exigency of the service and theinterest of the public, pulled her out from rightful office where her qualifications are best suitedand assigned her to a work that should be the function of a non-career service employee. Tomake matters worse, a utility worker in the office of the Public Services, whose duties are alien

to the complainant's duties and functions, has been detailed to take her place. The petitioner'sact are pure harassments aimed at luring her away from her permanent position or force her toresign.

In the case of Dra. Felicidad Ortigoza, she claims that the petitioner handpicked her to performtask not befitting her position as Assistant City Health Officer of Iloilo City; that her office waspadlocked without any explanation or justification; that her salary was withheld without causesince April 1, 1988; that when she filed her vacation leave, she was given the run-aroundtreatment in the approval of her leave in connivance with Dr. Rodolfo Villegas and that she wasthe object of a well-engineered trumped-up charge in an administrative complaint filed by Dr.Rodolfo Villegas (Annex B).

On the other hand, Mansuelo Malabor is the duly elected Vice-Mayor of Iloilo City andcomplainants Rolando Dabao, Dan Dalido, German Gonzales, Larry Ong and Eduardo PefiaPedondo are members of the Sangguniang Panglunsod of the City of Iloilo. Their complaintarose out from the case where Councilor Larry Ong, whose key to his office wasunceremoniously and without previous notice, taken by petitioner. Without an office, CouncilorOng had to hold office at Plaza Libertad, The Vice-Mayor and the other complainantssympathized with him and decided to do the same. However, the petitioner, together with itsfully-armed security men, forcefully drove them away from Plaza Libertad. Councilor Ongdenounced the petitioner's actuations the following day in the radio station and decided to holdoffice at the Freedom Grandstand at Iloilo City and there were so many people who gathered towitness the incident. However, before the group could reach the area, the petitioner, togetherwith his security men, led the firemen using a firetruck in dozing water to the people and the

bystanders.

Another administrative case was filed by Pancho Erbite, a barangay tanod, appointed by formermayor Rosa O. Caram. On March 13, 1988, without the benefit of charges filed against him andno warrant of arrest was issued, Erbite was arrested and detained at the City Jail of Iloilo Cityupon orders of petitioner. In jail, he was allegedly mauled by other detainees thereby causinginjuries He was released only the following day. 3

The Mayor thereafter answered 4 and the cases were shortly set for hearing. The opinion of theCourt of Appeals also set forth the succeeding events:

xxx xxx xxx

The initial hearing in the Cabaluna and Ortigoza cases were set for hearing on June 20-21,1988 at the Regional Office of the Department of Local Government in Iloilo City. Notices,through telegrams, were sent to the parties (Annex L) and the parties received them, includingthe petitioner. The petitioner asked for a postponement before the scheduled date of hearingand was represented by counsel, Atty. Samuel Castro. The hearing officers, Atty. SalvadorQuebral and Atty. Marino Bermudez had to come all the way from Manila for the two-dayhearings but was actually held only on June 20,1988 in view of the inability and unpreparednessof petitioner's counsel.


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The next hearings were re-set to July 25, 26, 27,1988 in the same venue-Iloilo City. Again, thepetitioner attempted to delay the proceedings and moved for a postponement under the excusethat he had just hired his counsel. Nonetheless, the hearing officers denied the motion topostpone, in view of the fact that the parties were notified by telegrams of the scheduledhearings (Annex M).

In the said hearings, petitioner's counsel cross-examined the complainants and their witnesses.

Finding probable grounds and reasons, the respondent issued a preventive suspension orderon August 11, 1988 to last until October 11,1988 for a period of sixty (60) days.

Then the next investigation was set on September 21, 1988 and the petitioner again asked for apostponement to September 26,1988. On September 26, 1988, the complainants and petitionerwere present, together with their respective counsel. The petitioner sought for a postponementwhich was denied. In these hearings which were held in Mala the petitioner testified in Adm.Case No. C-10298 and 10299.

The investigation was continued regarding the Malabor case and the complainants testifiedincluding their witnesses.

On October 10, 1988, petitioner's counsel, Atty. Original moved for a postponement of theOctober 24, 1988 hearing to November 7 to 11, 1988 which was granted. However, the motionfor change of venue as denied due to lack of funds. At the hearing on November 7, 1988, theparties and counsel were present. Petitioner reiterated his motion to change venue and movedfor postponement anew. The counsel discussed a proposal to take the deposition of witnessesin Iloilo City so the hearing was indefinitely postponed. However, the parties failed to come toterms and after the parties were notified of the hearing, the investigation was set to December13 to 15, 1988.

The petitioner sought for another postponement on the ground that his witnesses were sick orcannot attend the investigation due to lack of transportation. The motion was denied and thepetitioner was given up to December 14, 1988 to present his evidence.

On December 14,1988, petitioner's counsel insisted on his motion for postponement and thehearing officers gave petitioner up to December 15, 1988 to present his evidence. OnDecember 15, 1988, the petitioner failed to present evidence and the cases were consideredsubmitted for resolution.

In the meantime, a prima facie evidence was found to exist in the arbitrary detention case filedby Pancho Erbite so the respondent ordered the petitioner's second preventive suspensiondated October 11, 1988 for another sixty (60) days. The petitioner was able to obtain a

restraining order and a writ of preliminary injunction in the Regional Trial Court, Branch 33 ofIloilo City. The second preventive suspension was not enforced. 5

Amidst the two successive suspensions, Mayor Ganzon instituted an action for prohibitionagainst the respondent Secretary of Local Government (now, Interior) in the Regional TrialCourt, Iloilo City, where he succeeded in obtaining a writ of preliminary injunction. Presently, heinstituted CA-G.R. SP No. 16417, an action for prohibition, in the respondent Court of Appeals.


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Meanwhile, on May 3, 1990, the respondent Secretary issued another order, preventivelysuspending Mayor Ganzon for another sixty days, the third time in twenty months, anddesignating meantime Vice-Mayor Mansueto Malabor as acting mayor. Undaunted, MayorGanzon commenced CA-G.R. SP No. 20736 of the Court of Appeals, a petition for prohibition, 6(Malabor it is to be noted, is one of the complainants, and hence, he is interested in seeingMayor Ganzon ousted.)

On September 7, 1989, the Court of Appeals rendered judgment, dismissing CA-G.R. SP No.16417. On July 5, 1990, it likewise promulgated a decision, dismissing CA-G.R. SP No. 20736.In a Resolution dated January 24, 1990, it issued a Resolution certifying the petition of Mary

Ann Artieda, who had been similary charged by the respondent Secretary, to this Court.

On June 26,1990, we issued a Temporary Restraining Order, barring the respondent Secretaryfrom implementing the suspension orders, and restraining the enforcement of the Court of

Appeals' two decisions.

In our Resolution of November 29, 1990, we consolidated all three cases. In our Resolutions ofJanuary 15, 1991, we gave due course thereto.

Mayor Ganzon claims as a preliminary (GR No. 93252), that the Department of LocalGovernment in hearing the ten cases against him, had denied him due process of law and thatthe respondent Secretary had been "biased, prejudicial and hostile" towards him 7 arising fromhis (Mayor Ganzon's) alleged refusal to join the Laban ng Demokratikong Pilipino party 8 andthe running political rivalry they maintained in the last congressional and local elections; 9 andhis alleged refusal to operate a lottery in Iloilo City. 10 He also alleges that he requested theSecretary to lift his suspension since it had come ninety days prior to an election (the barangayelections of November 14, 1988), 11 notwithstanding which, the latter proceeded with thehearing and meted out two more suspension orders of the aforementioned cases. 12 Helikewise contends that he sought to bring the cases to Iloilo City (they were held in Manila) inorder to reduce the costs of proceeding, but the Secretary rejected his request. 13 He states

that he asked for postponement on "valid and justifiable" 14 grounds, among them, that he wassuffering from a heart ailment which required confinement; that his "vital" 15 witness was alsohospitalized 16 but that the latter unduly denied his request. 17

Mayor Ganzon's primary argument (G.R. Nos. 93252 and 95245) is that the Secretary of LocalGovernment is devoid, in any event, of any authority to suspend and remove local officials, anargument reiterated by the petitioner Mary Ann Rivera Artieda (G.R. No. 93746).

As to Mayor Ganzon's charges of denial of due process, the records do not show very clearly inwhat manner the Mayor might have been deprived of his rights by the respondent Secretary. Hisclaims that he and Secretary Luis-Santos were (are) political rivals and that his "persecution"was politically motivated are pure speculation and although the latter does not appear to have

denied these contentions (as he, Mayor Ganzon, claims), we can not take his word for it the waywe would have under less political circumstances, considering furthermore that "political feud"has often been a good excuse in contesting complaints.

The Mayor has failed furthermore to substantiate his say-so's that Secretary Santos hadattempted to seduce him to join the administration party and to operate a lottery in Iloilo City.

Again, although the Secretary failed to rebut his allegations, we can not accept them, at facevalue, much more, as judicial admissions as he would have us accept them 18 for the samereasons above-stated and furthermore, because his say so's were never corroborated by


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independent testimonies. As a responsible public official, Secretary Santos, in pursuing anofficial function, is presumed to be performing his duties regularly and in the absence of contraryevidence, no ill motive can be ascribed to him.

As to Mayor Ganzon's contention that he had requested the respondent Secretary to defer thehearing on account of the ninety-day ban prescribed by Section 62 of Batas Blg. 337, the Court

finds the question to be moot and academic since we have in fact restrained the Secretary fromfurther hearing the complaints against the petitioners. 19

As to his request, finally, for postponements, the Court is afraid that he has not given anycompelling reason why we should overturn the Court of Appeals, which found no convincingreason to overrule Secretary Santos in denying his requests. Besides, postponements are amatter of discretion on the part of the hearing officer, and based on Mayor Ganzon's abovestory, we are not convinced that the Secretary has been guilty of a grave abuse of discretion.

The Court can not say, under these circumstances, that Secretary Santos' actuations deprivedMayor Ganzon of due process of law.

We come to the core question: Whether or not the Secretary of Local Government, as thePresident's alter ego, can suspend and/or remove local officials.

It is the petitioners' argument that the 1987 Constitution 20 no longer allows the President, asthe 1935 and 1973 Constitutions did, to exercise the power of suspension and/or removal overlocal officials. According to both petitioners, the Constitution is meant, first, to strengthen self-rule by local government units and second, by deleting the phrase 21 as may be provided bylaw to strip the President of the power of control over local governments. It is a view, so theycontend, that finds support in the debates of the Constitutional Commission. The provision inquestion reads as follows:

Sec. 4. The President of the Philippines shall exercise general supervision over local

governments. Provinces with respect to component cities and municipalities, and cities andmunicipalities with respect to component barangays shall ensure that the acts of theircomponent units are within the scope of their prescribed powers and functions. 22

It modifies a counterpart provision appearing in the 1935 Constitution, which we quote:

Sec. 10. The President shall have control of all the executive departments, bureaus, or offices,exercise general supervision over all Local governments as may be provided by law, and takecare that the laws be faithfully executed. 23

The petitioners submit that the deletion (of "as may be provided by law") is significant, as theirargument goes, since: (1) the power of the President is "provided by law" and (2) hence, no law

may provide for it any longer.

It is to be noted that in meting out the suspensions under question, the Secretary of LocalGovernment acted in consonance with the specific legal provisions of Batas Blg. 337, the LocalGovernment Code, we quote:

Sec. 62. Notice of Hearing. Within seven days after the complaint is filed, the Minister of localGovernment, or the sanggunian concerned, as the case may be, shall require the respondent tosubmit his verified answer within seven days from receipt of said complaint, and commence the


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hearing and investigation of the case within ten days after receipt of such answer of therespondent. No investigation shall be held within ninety days immediately prior to an election,and no preventive suspension shall be imposed with the said period. If preventive suspensionhas been imposed prior to the aforesaid period, the preventive suspension shall be lifted. 24

Sec. 63. Preventive Suspension. (1) Preventive suspension may be imposed by the

Minister of Local Government if the respondent is a provincial or city official, by the provincialgovernor if the respondent is an elective municipal official, or by the city or municipal mayor ifthe respondent is an elective barangay official.

(2) Preventive suspension may be imposed at any time after the issues are joined, whenthere is reasonable ground to believe that the respondent has committed the act or actscomplained of, when the evidence of culpability is strong, when the gravity of the offense sowarrants, or when the continuance in office of the respondent could influence the witnesses orpose a threat to the safety and integrity of the records and other evidence. In all cases,preventive suspension shall not extend beyond sixty days after the start of said suspension.

(3) At the expiration of sixty days, the suspended official shall be deemed reinstated in office

without prejudice to the continuation of the proceedings against him until its termination.However ' if the delay in the proceedings of the case is due to his fault, neglect or request, thetime of the delay shall not be counted in computing the time of suspension. 25

The issue, as the Court understands it, consists of three questions: (1) Did the 1987Constitution, in deleting the phrase "as may be provided by law" intend to divest the President ofthe power to investigate, suspend, discipline, and/or remove local officials? (2) Has theConstitution repealed Sections 62 and 63 of the Local Government Code? (3) What is thesignificance of the change in the constitutional language?

It is the considered opinion of the Court that notwithstanding the change in the constitutionallanguage, the charter did not intend to divest the legislature of its right or the President of her

prerogative as conferred by existing legislation to provide administrative sanctions against localofficials. It is our opinion that the omission (of "as may be provided by law") signifies nothingmore than to underscore local governments' autonomy from congress and to break Congress'"control" over local government affairs. The Constitution did not, however, intend, for the sake oflocal autonomy, to deprive the legislature of all authority over municipal corporations, inparticular, concerning discipline.

Autonomy does not, after all, contemplate making mini-states out of local government units, asin the federal governments of the United States of America (or Brazil or Germany), althoughJefferson is said to have compared municipal corporations euphemistically to "small republics."26 Autonomy, in the constitutional sense, is subject to the guiding star, though not control, of thelegislature, albeit the legislative responsibility under the Constitution and as the "supervision

clause" itself suggest-is to wean local government units from over-dependence on the centralgovernment.

It is noteworthy that under the Charter, "local autonomy" is not instantly self-executing, butsubject to, among other things, the passage of a local government code, 27 a local tax law, 28income distribution legislation, 29 and a national representation law, 30 and measures 31designed to realize autonomy at the local level. It is also noteworthy that in spite of autonomy,the Constitution places the local government under the general supervision of the Executive. Itis noteworthy finally, that the Charter allows Congress to include in the local government code


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provisions for removal of local officials, which suggest that Congress may exercise removalpowers, and as the existing Local Government Code has done, delegate its exercise to thePresident. Thus:

Sec. 3. The Congress shall enact a local government code which shall provide for a moreresponsive and accountable local government structure instituted through a system of

decentralization with effective mechanisms of recall, initiative, and referendum, allocate amongthe different local government units their powers, responsibilities and resources, and provide forthe qualifications, election, appointment and removal, term, salaries, powers and functions andduties of local officials, and all other matters relating to the organization and operation of thelocal units. 32

As hereinabove indicated, the deletion of "as may be provided by law" was meant to stress, subsilencio, the objective of the framers to strengthen local autonomy by severing congressionalcontrol of its affairs, as observed by the Court of Appeals, like the power of local legislation. 33The Constitution did nothing more, however, and insofar as existing legislation authorizes thePresident (through the Secretary of Local Government) to proceed against local officialsadministratively, the Constitution contains no prohibition.

The petitioners are under the impression that the Constitution has left the President meresupervisory powers, which supposedly excludes the power of investigation, and denied hercontrol, which allegedly embraces disciplinary authority. It is a mistaken impression becauselegally, "supervision" is not incompatible with disciplinary authority as this Court has held, 34thus:

xxx xxx xxx

It is true that in the case of Mondano vs. Silvosa, 51 Off. Gaz., No. 6 p. 2884, this Court hadoccasion to discuss the scope and extent of the power of supervision by the President over localgovernment officials in contrast to the power of control given to him over executive officials of

our government wherein it was emphasized that the two terms, control and supervision, are twodifferent things which differ one from the other in meaning and extent. Thus in that case theCourt has made the following digression: "In administration law supervision means overseeingor the power or authority of an officer to see that subordinate officers perform their duties. If thelatter fail or neglect to fulfill them the former may take such action or step as prescribed by lawto make them perform their duties. Control, on the other hand, means the power of an officer toalter or modify or nullify of set aside what a subordinate officer had done in the performance ofhis duties and to substitute the judgment of the former for that of the latter." But from thispronouncement it cannot be reasonably inferred that the power of supervision of the Presidentover local government officials does not include the power of investigation when in his opinionthe good of the public service so requires, as postulated in Section 64(c) of the Revised

Administrative Code. ... 35

xxx xxx xxx

"Control" has been defined as "the power of an officer to alter or modify or nullify or set asidewhat a subordinate officer had done in the performance of his duties and to substitute the

judgment of the former for test of the latter." 36 "Supervision" on the other hand means"overseeing or the power or authority of an officer to see that subordinate officers perform theirduties. 37 As we held, 38 however, "investigating" is not inconsistent with "overseeing",although it is a lesser power than "altering". The impression is apparently exacerbated by the


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Court's pronouncements in at least three cases, Lacson v. Roque, 39 Hebron v. Reyes, 40 andMondano v. Silvosa, 41 and possibly, a fourth one, Pelaez v. Auditor General. 42 In Lacson, thisCourt said that the President enjoyed no control powers but only supervision "as may beprovided by law," 43 a rule we reiterated in Hebron, and Mondano. In Pelaez, we stated that thePresident "may not . . . suspend an elective official of a regular municipality or take anydisciplinary action against him, except on appeal from a decision of the corresponding provincial

board." 44 However, neither Lacson nor Hebron nor Mondano categorically banned the ChiefExecutive from exercising acts of disciplinary authority because she did not exercise controlpowers, but because no law allowed her to exercise disciplinary authority. Thus, according toLacson:

The contention that the President has inherent power to remove or suspend municipal officers iswithout doubt not well taken. Removal and suspension of public officers are always controlledby the particular law applicable and its proper construction subject to constitutional limitations.45

In Hebron we stated:

Accordingly, when the procedure for the suspension of an officer is specified by law, the samemust be deemed mandatory and adhered to strictly, in the absence of express or clear provisionto the contrary-which does not et with respect to municipal officers ... 46

In Mondano, the Court held:

... The Congress has expressly and specifically lodged the provincial supervision over municipalofficials in the provincial governor who is authorized to "receive and investigate complaintsmade under oath against municipal officers for neglect of duty, oppression, corruption or otherform of maladministration of office, and conviction by final judgment of any crime involving moralturpitude." And if the charges are serious, "he shall submit written charges touching the matterto the provincial board, furnishing a copy of such charges to the accused either personally or by

registered mail, and he may in such case suspend the officer (not being the municipal treasurer)pending action by the board, if in his opinion the charge by one affecting the official integrity ofthe officer in question." Section 86 of the Revised Administration Code adds nothing to thepower of supervision to be exercised by the Department Head over the administration of ...municipalities ... . If it be construed that it does and such additional power is the same authorityas that vested in the Department Head by section 79(c) of the Revised Administrative Code,then such additional power must be deemed to have been abrogated by Section 110(l), ArticleVII of the Constitution. 47

xxx xxx xxx

In Pelaez, we stated that the President can not impose disciplinary measures on local officials

except on appeal from the provincial board pursuant to the Administrative Code. 48

Thus, in those case that this Court denied the President the power (to suspend/remove) it wasnot because we did not think that the President can not exercise it on account of his limitedpower, but because the law lodged the power elsewhere. But in those cases ii which the lawgave him the power, the Court, as in Ganzon v. Kayanan, found little difficulty in sustaining him.49


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The Court does not believe that the petitioners can rightfully point to the debates of theConstitutional Commission to defeat the President's powers. The Court believes that thedeliberations are by themselves inconclusive, because although Commissioner Jose Nolledowould exclude the power of removal from the President, 50 Commissioner Blas Ople would not.51

The Court is consequently reluctant to say that the new Constitution has repealed the LocalGovernment Code, Batas Blg. 37. As we said, "supervision" and "removal" are not incompatibleterms and one may stand with the other notwithstanding the stronger expression of localautonomy under the new Charter. We have indeed held that in spite of the approval of theCharter, Batas Blg. 337 is still in force and effect. 52

As the Constitution itself declares, local autonomy means "a more responsive and accountablelocal government structure instituted through a system of decentralization." 53 The Constitutionas we observed, does nothing more than to break up the monopoly of the national governmentover the affairs of local governments and as put by political adherents, to "liberate the localgovernments from the imperialism of Manila." Autonomy, however, is not meant to end therelation of partnership and inter-dependence between the central administration and local

government units, or otherwise, to user in a regime of federalism. The Charter has not takensuch a radical step. Local governments, under the Constitution, are subject to regulation,however limited, and for no other purpose than precisely, albeit paradoxically, to enhance self-government.

As we observed in one case, 54 decentralization means devolution of national administrationbut not power to the local levels. Thus:

Now, autonomy is either decentralization of administration or decentralization of power. There isdecentralization of administration when the central government delegates administrative powersto political subdivisions in order to broaden the base of government power and in the process tomake local governments "more responsive and accountable," and "ensure their fullest

development as self-reliant communities and make them more effective partners in the pursuitof national development and social progress." At the same time, it relieves the centralgovernment of the burden of managing local affairs and enables it to concentrate on nationalconcerns. The President exercises "general supervision" over them, but only to "ensure thatlocal affairs are administered according to law." He has no control over their acts in the sensethat he can substitute their judgments with his own.

Decentralization of power, on the other hand, involves an abdication of political power in thefavor of local governments units declared to be autonomous, In that case, the autonomousgovernment is free to chart its own destiny and shape its future with minimum intervention fromcentral authorities. According to a constitutional author, decentralization of power amounts to"self-immolation," since in that event, the autonomous government becomes accountable not to

the central authorities but to its constituency. 55

The successive sixty-day suspensions imposed on Mayor Rodolfo Ganzon is albeit anothermatter. What bothers the Court, and what indeed looms very large, is the fact that since theMayor is facing ten administrative charges, the Mayor is in fact facing the possibility of 600 daysof suspension, in the event that all ten cases yield prima facie findings. The Court is not ofcourse tolerating misfeasance in public office (assuming that Mayor Ganzon is guilty ofmisfeasance) but it is certainly another question to make him serve 600 days of suspension,which is effectively, to suspend him out of office. As we held: 56


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2. Petitioner is a duly elected municipal mayor of Lianga, Surigao del Sur. His term of officedoes not expire until 1986. Were it not for this information and the suspension decreed by theSandiganbayan according to the Anti-Graft and Corrupt Practices Act, he would have been allthis while in the full discharge of his functions as such municipal mayor. He was electedprecisely to do so. As of October 26, 1983, he has been unable to. it is a basic assumption of

the electoral process implicit in the right of suffrage that the people are entitled to the services ofelective officials of their choice. For misfeasance or malfeasance, any of them could, of course,be proceeded against administratively or, as in this instance, criminally. In either case, Msculpability must be established. Moreover, if there be a criminal action, he is entitled to theconstitutional presumption of innocence. A preventive suspension may be justified. Itscontinuance, however, for an unreasonable length of time raises a due process question. Foreven if thereafter he were acquitted, in the meanwhile his right to hold office had been nullified.Clearly, there would be in such a case an injustice suffered by him. Nor is he the only victim.There is injustice inflicted likewise on the people of Lianga They were deprived of the servicesof the man they had elected to serve as mayor. In that sense, to paraphrase Justice Cardozo,the protracted continuance of this preventive suspension had outrun the bounds of reason andresulted in sheer oppression. A denial of due process is thus quite manifest. It is to avoid such

an unconstitutional application that the order of suspension should be lifted. 57

The plain truth is that this Court has been ill at ease with suspensions, for the above reasons,58 and so also, because it is out of the ordinary to have a vacancy in local government. Thesole objective of a suspension, as we have held, 59 is simply "to prevent the accused fromhampering the normal cause of the investigation with his influence and authority over possiblewitnesses" 60 or to keep him off "the records and other evidence. 61

It is a means, and no more, to assist prosecutors in firming up a case, if any, against an erringlocal official. Under the Local Government Code, it can not exceed sixty days, 62 which is to saythat it need not be exactly sixty days long if a shorter period is otherwise sufficient, and which isalso to say that it ought to be lifted if prosecutors have achieved their purpose in a shorter span.

Suspension is not a penalty and is not unlike preventive imprisonment in which the accused isheld to insure his presence at the trial. In both cases, the accused (the respondent) enjoys apresumption of innocence unless and until found guilty.

Suspension finally is temporary and as the Local Government Code provides, it may beimposed for no more than sixty days. As we held, 63 a longer suspension is unjust andunreasonable, and we might add, nothing less than tyranny.

As we observed earlier, imposing 600 days of suspension which is not a remote possibilityMayor Ganzon is to all intents and purposes, to make him spend the rest of his term in inactivity.It is also to make, to all intents and purposes, his suspension permanent.

It is also, in fact, to mete out punishment in spite of the fact that the Mayor's guilt has not beenproven. Worse, any absolution will be for naught because needless to say, the length of hissuspension would have, by the time he is reinstated, wiped out his tenure considerably.

The Court is not to be mistaken for obstructing the efforts of the respondent Secretary to seethat justice is done in Iloilo City, yet it is hardly any argument to inflict on Mayor Ganzonsuccessive suspensions when apparently, the respondent Secretary has had sufficient time togather the necessary evidence to build a case against the Mayor without suspending him a day


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longer. What is intriguing is that the respondent Secretary has been cracking down, so to speak,on the Mayor piecemeal apparently, to pin him down ten times the pain, when he, therespondent Secretary, could have pursued a consolidated effort.

We reiterate that we are not precluding the President, through the Secretary of Interior fromexercising a legal power, yet we are of the opinion that the Secretary of Interior is exercising

that power oppressively, and needless to say, with a grave abuse of discretion.

The Court is aware that only the third suspension is under questions, and that any talk of futuresuspensions is in fact premature. The fact remains, however, that Mayor Ganzon has beenmade to serve a total of 120 days of suspension and the possibility of sixty days more isarguably around the corner (which amounts to a violation of the Local Government Code whichbrings to light a pattern of suspensions intended to suspend the Mayor the rest of his naturaltenure. The Court is simply foreclosing what appears to us as a concerted effort of the State toperpetuate an arbitrary act.

As we said, we can not tolerate such a state of affairs.

We are therefore allowing Mayor Rodolfo Ganzon to suffer the duration of his third suspensionand lifting, for the purpose, the Temporary Restraining Order earlier issued. Insofar as theseven remaining charges are concerned, we are urging the Department of Local Government,upon the finality of this Decision, to undertake steps to expedite the same, subject to MayorGanzon's usual remedies of appeal, judicial or administrative, or certiorari, if warranted, andmeanwhile, we are precluding the Secretary from meting out further suspensions based onthose remaining complaints, notwithstanding findings of prima facie evidence.

In resume the Court is laying down the following rules:

1. Local autonomy, under the Constitution, involves a mere decentralization ofadministration, not of power, in which local officials remain accountable to the central

government in the manner the law may provide;

2. The new Constitution does not prescribe federalism;

3. The change in constitutional language (with respect to the supervision clause) wasmeant but to deny legislative control over local governments; it did not exempt the latter fromlegislative regulations provided regulation is consistent with the fundamental premise ofautonomy;

4. Since local governments remain accountable to the national authority, the latter may, bylaw, and in the manner set forth therein, impose disciplinary action against local officials;

5. "Supervision" and "investigation" are not inconsistent terms; "investigation" does notsignify "control" (which the President does not have);

6. The petitioner, Mayor Rodolfo Ganzon. may serve the suspension so far ordered, butmay no longer be suspended for the offenses he was charged originally; provided:

a) that delays in the investigation of those charges "due to his fault, neglect or request, (thetime of the delay) shall not be counted in computing the time of suspension. [Supra, sec. 63(3)]


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b) that if during, or after the expiration of, his preventive suspension, the petitioner commitsanother or other crimes and abuses for which proper charges are filed against him by theaggrieved party or parties, his previous suspension shall not be a bar to his being preventivelysuspended again, if warranted under subpar. (2), Section 63 of the Local Government Code.

WHEREFORE, premises considered, the petitions are DISMISSED. The Temporary Restraining

Order issued is LIFTED. The suspensions of the petitioners are AFFIRMED, provided that thepetitioner, Mayor Rodolfo Ganzon, may not be made to serve future suspensions on account ofany of the remaining administrative charges pending against him for acts committed prior to

August 11, 1988. The Secretary of Interior is ORDERED to consolidate all such administrativecases pending against Mayor Ganzon.

The sixty-day suspension against the petitioner, Mary Ann Rivera Artieda, is AFFIRMED. Nocosts.

SO ORDERED.


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[G.R. No. 148496. Marc h 19, 2002]

VIRGINES CALVO doing b usin ess und er the name and style TRANSORIENT CONTAINER

TERMINAL SERVICES, INC., peti tio ner, vs . UCPB GENERAL INSURANCE CO., INC.

(form erly Alli ed Guarantee Ins. Co., Inc.) respo ndent .

D E C I S I O N

MENDOZA, J.:

This is a petition for review of the decision,[1] dated May 31, 2001, of the Court of Appeals,affirming the decision[2] of the Regional Trial Court, Makati City, Branch 148, which orderedpetitioner to pay respondent, as subrogee, the amount of P93,112.00 with legal interest,representing the value of damaged cargo handled by petitioner, 25% thereof as attorneys fees,and the cost of the suit.

The facts are as follows:

Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI),a sole proprietorship customs broker. At the time material to this case, petitioner entered into a

contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemicalfluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMCs warehouseat the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was insured byrespondent UCPB General Insurance Co., Inc.

On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila onboard M/V Hayakawa Maru and, after 24 hours, were unloaded from the vessel to the custodyof the arrastre operator, Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner,pursuant to her contract with SMC, withdrew the cargo from the arrastre operator and deliveredit to SMCs warehouse in Ermita, Manila. On July 25, 1990, the goods were inspected byMarine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting paper werewet/stained/torn and 3 reels of kraft liner board were likewise torn. The damage was placed at

P93,112.00.

SMC collected payment from respondent UCPB under its insurance contract for theaforementioned amount. In turn, respondent, as subrogee of SMC, brought suit againstpetitioner in the Regional Trial Court, Branch 148, Makati City, which, on December 20, 1995,rendered judgment finding petitioner liable to respondent for the damage to the shipment.

The trial court held:

It cannot be denied . . . that the subject cargoes sustained damage while in the custody ofdefendants. Evidence such as the Warehouse Entry Slip (Exh. E); the Damage Report (Exh.F) with entries appearing therein, classified as TED and TSN, which the claims processor,

Ms. Agrifina De Luna, claimed to be tearrage at the end and tearrage at the middle of thesubject damaged cargoes respectively, coupled with the Marine Cargo Survey Report (Exh. H- H-4-A) confirms the fact of the damaged condition of the subject cargoes. The surveyor[s]report (Exh. H-4-A) in particular, which provides among others that:

. .. we opine that damages sustained by shipment is attributable to improper handling in transitpresumably whilst in the custody of the broker . . . .

is a finding which cannot be traversed and overturned.


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It will be convenient to deal with these contentions in the inverse order, for if petitioner is not acommon carrier, although both the trial court and the Court of Appeals held otherwise, then sheis indeed not liable beyond what ordinary diligence in the vigilance over the goods transportedby her, would require.[6] Consequently, any damage to the cargo she agrees to transportcannot be presumed to have been due to her fault or negligence.

Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, sheis not a common carrier but a private carrier because, as a customs broker and warehouseman,she does not indiscriminately hold her services out to the public but only offers the same toselect parties with whom she may contract in the conduct of her business.

The contention has no merit. In De Guzman v. Court of Appeals,[7] the Court dismissed asimilar contention and held the party to be a common carrier, thus

The Civil Code defines common carriers in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in thebusiness 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 thecarrying of persons or goods or both, and one who does such carrying only as an ancillaryactivity . . . Article 1732 also carefully avoids making any distinction between a person orenterprise offering transportation service on a regular or scheduled basis and one offering suchservice on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguishbetween a carrier offering its services to the general public, i.e., the general community orpopulation, and one who offers services or solicits business only from a narrow segment of thegeneral population. We think that Article 1732 deliberately refrained from making suchdistinctions.

So understood, the concept of common carrier under Article 1732 may be seen to coincideneatly 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 inthe Civil Code. Under Section 13, paragraph (b) of the Public Service Act, public serviceincludes:

x x x every person that now or hereafter may own, operate, manage, or control in thePhilippines, 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, orboth, with or without fixed route and whatever may be its classification, freight or carrier serviceof 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, heatand power, water supply and power petroleum, sewerage system, wire or wirelesscommunications systems, wire or wireless broadcasting stations and other similar publicservices. x x x [8]

There is greater reason for holding petitioner to be a common carrier because the transportationof goods is an integral part of her business. To uphold petitioners contention would be todeprive those with whom she contracts the protection which the law affords them


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notwithstanding the fact that the obligation to carry goods for her customers, as already noted,is part and parcel of petitioners business.

Now, as to petitioners liability, Art. 1733 of the Civil Code provides:

Common carriers, from the nature of their business and for reasons of public policy, are bound

to observe extraordinary diligence in the vigilance over the goods and for the safety of thepassengers transported by them, according to all the circumstances of each case. . . .

In Compania Maritima v. Court of Appeals,[9] the meaning of extraordinary diligence in thevigilance over goods was explained thus:

The extraordinary diligence in the vigilance over the goods tendered for shipment requires thecommon carrier to know and to follow the required precaution for avoiding damage to, ordestruction of the goods entrusted to it for sale, carriage and delivery. It requires commoncarriers to render service with the greatest skill and foresight and to use all reasonable meansto ascertain the nature and characteristic of goods tendered for shipment, and to exercise duecare in the handling and stowage, including such methods as their nature requires.

In the case at bar, petitioner denies liability for the damage to the cargo. She claims that thespoilage or wettage took place while the goods were in the custody of either the carryingvessel M/V Hayakawa Maru, which transported the cargo to Manila, or the arrastre operator, towhom the goods were unloaded and who allegedly kept them in open air for nine days from July14 to July 23, 1998 notwithstanding the fact that some of the containers were deformed,cracked, or otherwise damaged, as noted in the Marine Survey Report (Exh. H), to wit:

MAXU-2062880 - rain gutter deformed/cracked

ICSU-363461-3 - left side rubber gasket on door distorted/partly loose

PERU-204209-4 - with pinholes on roof panel right portion

TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked

MAXU-201406-0 - with dent/crack on roof panel

ICSU-412105-0 - rubber gasket on left side/door panel partly detachedloosened.[10]

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that he hasno personal knowledge on whether the container vans were first stored in petitionerswarehouse prior to their delivery to the consignee. She likewise claims that after withdrawing

the container vans from the arrastre operator, her driver, Ricardo Nazarro, immediatelydelivered the cargo to SMCs warehouse in Ermita, Manila, which is a mere thirty -minute drivefrom the Port Area where the cargo came from. Thus, the damage to the cargo could not havetaken place while these were in her custody.[11]

Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyorsindicates that when the shipper transferred the cargo in question to the arrastre operator, thesewere covered by clean Equipment Interchange Report (EIR) and, when petitioners employeeswithdrew the cargo from the arrastre operator, they did so without exception or protest either


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with regard to the condition of container vans or their contents. The Survey Reportpertinently reads

Details of Discharge:

Shipment, provided with our protective supervision was noted discharged ex vessel to dock of

Pier #13 South Harbor, Manila on 14 July 1990, containerized onto 30 x 20 secure metal vans,covered by clean EIRs. Except for slight dents and paint scratches on side and roof panels,these containers were deemed to have [been] received in good condition.

. . . .

Transfer/Delivery:

On July 23, 1990, shipment housed onto 30 x 20 cargo containers was [withdrawn] byTransorient Container Services, Inc. . . . without exception.

[The cargo] was finally delivered to the consignees storage warehouse located at

Tabacalera Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.[12]

As found by the Court of Appeals:

From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to thearrastre, Marina Port Services Inc., in good order and condition as evidenced by cleanEquipment Interchange Reports (EIRs). Had there been any damage to the shipment, therewould have been a report to that effect made by the arrastre operator. The cargoes werewithdrawn by the defendant-appellant from the arrastre still in good order and condition as thesame were received by the former without exception, that is, without any report of damage orloss. Surely, if the container vans were deformed, cracked, distorted or dented, the defendant-appellant would report it immediately to the consignee or make an exception on the delivery

receipt or note the same in the Warehouse Entry Slip (WES). None of these took place. To putit simply, the defendant-appellant received the shipment in good order and condition anddelivered the same to the consignee damaged. We can only conclude that the damages to thecargo occurred while it was in the possession of the defendant-appellant. Whenever the thing islost (or damaged) in the possession of the debtor (or obligor), it shall be presumed that the loss(or damage) was due to his fault, unless there is proof to the contrary. No proof was profferedto rebut this legal presumption and the presumption of negligence attached to a common carrierin case of loss or damage to the goods.[13]

Anent petitioners insistence that the cargo could not have been damaged while in her custodyas she immediately delivered the containers to SMCs compound, suffice it to say that to provethe exercise of extraordinary diligence, petitioner must do more than merely show the possibility

that some other party could be responsible for the damage. It must prove that it used allreasonable means to ascertain the nature and characteristic of goods tendered for [transport]and that [it] exercise[d] due care in the handling [thereof]. Petitioner failed to do this.

Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides

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


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. . . .

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

. . . .

For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s inthe container, is/are known to the carrier or his employees or apparent upon ordinaryobservation, but he nevertheless accepts the same without protest or exception notwithstandingsuch condition, he is not relieved of liability for damage resulting therefrom.[14] In this case,petitioner accepted the cargo without exception despite the apparent defects in some of thecontainer vans. Hence, for failure of petitioner to prove that she exercised extraordinarydiligence in the carriage of goods in this case or that she is exempt from liability, thepresumption of negligence as provided under Art. 1735[15] holds.

WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is AFFIRMED.

SO ORDERED.


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[G.R. No. 143133. Ju ne 5, 2002]

BELG IAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES

TRANSPORT SERVICES, INC., petitio ner s, vs. PHILIPPINE FIRST INSURANCE CO ., INC.,

respondent.

D E C I S I O NPANGANIBAN, J.:

Proof of the delivery of goods in good order to a common carrier and of their arrival in bad orderat their destination constitutes prima facie fault or negligence on the part of the carrier. If noadequate explanation is given as to how the loss, the destruction or the deterioration of thegoods happened, the carrier shall be held liable therefor.

Statement of the Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15,1998 Decision[1] and the May 2, 2000 Resolution[2] of the Court of Appeals[3] (CA) in CA-GR

CV No. 53571. The decretal portion of the Decision reads as follows:

WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is herebyREVERSED and SET ASIDE. Defendants-appellees are ORDERED to jointly and severally payplaintiffs-appellants the following:

1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100 (P451,027.32) asactual damages, representing the value of the damaged cargo, plus interest at the legal ratefrom the time of filing of the complaint on July 25, 1991, until fully paid;

2) Attorneys fees amounting to 20% of the claim; and

3) Costs of suit.[4]

The assailed Resolution denied petitioners Motion for Reconsideration.

The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch 134),which had disposed as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing thecomplaint, as well as defendants counterclaim.[5]

The Facts

The factual antecedents of the case are summarized by the Court of Appeals in this wise:

On June 13, 1990, CMC Trading A.G. shipped on board the MN Anangel Sky at Hamburg,Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manilaconsigned to the Philippine Steel Trading Corporation. On July 28, 1990, MN Anangel Skyarrived at the port of Manila and, within the subsequent days, discharged the subject cargo.Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four (4)coils in their damaged state to be unfit for the intended purpose, the consignee Philippine SteelTrading Corporation declared the same as total loss.


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Despite receipt of a formal demand, defendants-appellees refused to submit to the consigneesclaim. Consequently, plaintiff-appellant paid the consignee five hundred six thousand eighty six& 50/100 pesos (P506,086.50), and was subrogated to the latters rights and causes of actionagainst defendants-appellees. Subsequently, plaintiff-appellant instituted this complaint forrecovery of the amount paid by them, to the consignee as insured.

Impugning the propriety of the suit against them, defendants-appellees imputed that thedamage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect ofthe goods, or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, orto the act or omission of the shipper of the goods or their representatives. In addition thereto,defendants-appellees argued that their liability, if there be any, should not exceed the limitationsof liability provided for in the bill of lading and other pertinent laws. Finally, defendants-appellees averred that, in any event, they exercised due diligence and foresight required by lawto prevent any damage/loss to said shipment.[6]

Ruling of the Trial Court

The RTC dismissed the Complaint because respondent had failed to prove its claims with thequantum of proof required by law.[7]

It likewise debunked petitioners counterclaim, because respondents suit was not manifestlyfrivolous or primarily intended to harass them.[8]

Ruling of the Court of Appeals

In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage ofthe goods shipped, because they had failed to overcome the presumption of negligenceimposed on common carriers.

The CA further held as inadequately proven petitioners claim that the loss or the deterioration ofthe goods was due to pre-shipment damage.[9] It likewise opined that the notation metalenvelopes rust stained and slightly dented placed on the Bill of Lading had not been theproximate cause of the damage to the four (4) coils.[10]

As to the extent of petitioners liability, the CA held that the package limitation under COGSAwas not applicable, because the words L/C No. 90/02447 indicated that a higher valuation ofthe cargo had been declared by the shipper. The CA, however, affirmed the award of attorneysfees.

Hence, this Petition.[11]

Issues

In their Memorandum, petitioners raise the following issues for the Courts consideration:

I

Whether or not plaintiff by presenting only one witness who has never seen the subjectshipment and whose testimony is purely hearsay is sufficient to pave the way for theapplicability of Article 1735 of the Civil Code;


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II

Whether or not the consignee/plaintiff filed the required notice of loss within the time requiredby law;

III

Whether or not a notation in the bill of lading at the time of loading is sufficient to show pre-shipment damage and to exempt herein defendants from liability;

IV

Whether or not the PACKAGE LIMITATION of liability under Section 4 (5) of COGSA isapplicable to the case at bar.[12]

In sum, the issues boil down to three:

1. Whether petitioners have overcome the presumption of negligence of a common carrier

2. Whether the notice of loss was timely filed

3. Whether the package limitation of liability is applicable

This Courts Ruling

The Petition is partly meritorious.

First Issue:Proof of Negligence

Petitioners contend that the presumption of fault imposed on common carriers should not beapplied on the basis of the lone testimony offered by private respondent. The contention isuntenable.

Well-settled is the rule that common carriers, from the nature of their business and for reasonsof public policy, are bound to observe extraordinary diligence and vigilance with respect to thesafety of the goods and the passengers they transport.[13] Thus, common carriers are requiredto render service with the greatest skill and foresight and to use all reason[a]ble means toascertain the nature and characteristics of the goods tendered for shipment, and to exercise duecare in the handling and stowage, including such methods as their nature requires.[14] Theextraordinary responsibility lasts from the time the goods are unconditionally placed in the

possession of and received for transportation by the carrier until they are delivered, actually orconstructively, to the consignee or to the person who has a right to receive them.[15]

This strict requirement is justified by the fact that, without a hand or a voice in the preparation ofsuch contract, the riding public enters into a contract of transportation with common carriers.[16]Even if it wants to, it cannot submit its own stipulations for their approval.[17] Hence, it merelyadheres to the agreement prepared by them.


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Owing to this high degree of diligence required of them, common carriers, as a general rule, arepresumed to have been at fault or negligent if the goods they transported deteriorated or got lostor destroyed.[18] That is, unless they prove that they exercised extraordinary diligence intransporting the goods.[19] In order to avoid responsibility for any loss or damage, therefore,they have the burden of proving that they observed such diligence.[20]

However, the presumption of fault or negligence will not arise[21] if the loss is due to any of thefollowing causes: (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2)an act of the public enemy in war, whether international or civil; (3) an act or omission of theshipper or owner of the goods; (4) the character of the goods or defects in the packing or thecontainer; or (5) an order or act of competent public authority.[22] This is a closed list. If thecause of destruction, loss or deterioration is other than the enumerated circumstances, then thecarrier is liable therefor.[23]

Corollary to the foregoing, mere proof of delivery of the goods in good order to a commoncarrier and of their arrival in bad order at their destination constitutes a prima facie case of faultor negligence against the carrier. If no adequate explanation is given as to how thedeterioration, the loss or the destruction of the goods happened, the transporter shall be held

responsible.[24]

That petitioners failed to rebut the prima facie presumption of negligence is revealed in the caseat bar by a review of the records and more so by the evidence adduced by respondent.[25]

First, as stated in the Bill of Lading, petitioners received the subject shipment in good order andcondition in Hamburg, Germany.[26]

Second, prior to the unloading of the cargo, an Inspection Report[27] prepared and signed byrepresentatives of both parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and rusty.

Third, Bad Order Tally Sheet No. 154979[28] issued by Jardine Davies Transport Services, Inc.,stated that the four coils were in bad order and condition. Normally, a request for a bad ordersurvey is made in case there is an apparent or a presumed loss or damage.[29]

Fourth, the Certificate of Analysis[30] stated that, based on the sample submitted and tested,the steel sheets found in bad order were wet with fresh water.

Fifth, petitioners -- in a letter[31] addressed to the Philippine Steel Coating Corporation anddated October 12, 1990 -- admitted that they were aware of the condition of the four coils foundin bad order and condition.

These facts were confirmed by Ruperto Esmerio, head checker of BM Santos Checkers

Agency. Pertinent portions of his testimony are reproduce hereunder:

Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the HonorableCourt with what company you are connected?

A. BM Santos Checkers Agency, sir.

Q. How is BM Santos Checkers Agency related or connected with defendant Jardine DaviesTransport Services?


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A. It is the company who contracts the checkers, sir.

Q. You mentioned that you are a Head Checker, will you inform this Honorable Court yo

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