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

BASCOS vs. CA

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

2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN PRESUMPTION OF NEGLIGENCE ARISES;

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

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

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

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

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

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

7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO BE. — Granting that the said evidence were not

self-serving, the same were not sufficient to prove that the contract was one of lease. It must be understood that a contract is what the law defines it to be and not what it is called by the contracting parties.

D E C I S I O N

CAMPOS, JR., J p:

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

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

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

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

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failed to deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount of the lost goods in accordance with the contract which stated that:

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

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

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

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

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

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

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

In her answer, petitioner interposed the following defenses: that there was no contract of carriage since CIPTRADE leased her cargo

truck to load the cargo from Manila Port Area to Laguna; that CIPTRADE was liable to petitioner in the amount of P11,000.00 for loading the cargo; that the truck carrying the cargo was hijacked along Canonigo St., Paco, Manila on the night of October 21, 1988; that the hijacking was immediately reported to CIPTRADE and that petitioner and the police exerted all efforts to locate the hijacked properties; that after preliminary investigation, an information for robbery and carnapping were filed against Jose Opriano, et al.; and that hijacking, being a force majeure, exculpated petitioner from any liability to CIPTRADE.

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

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

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

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

3. The costs of the suit.

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

SO ORDERED." 6

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

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

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

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

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

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

The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted in her answer that she did business under the name A.M. Bascos Trucking and that said admission dispensed with the presentation by private respondent, Rodolfo

Cipriano, of proofs that petitioner was a common carrier. The respondent Court also adopted in toto the trial court's decision that petitioner was a common carrier, Moreover, both courts appreciated the following pieces of evidence as indicators that petitioner was a common carrier: the fact that the truck driver of petitioner, Maximo Sanglay, received the cargo consisting of 400 bags of soya bean meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the truck helper, Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo was placed in petitioner's care.

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

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

Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged in the business

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

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

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

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

business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions."

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

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

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

In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from liability for the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held that

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hijacking, not being included in the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with Article 1745 of the Civil Code which provides:

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

xxx xxx xxx

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

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

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

To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial court and the Court

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

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

Having affirmed the findings of the respondent Court on the substantial issues involved, We find no reason to disturb the conclusion that the motion to lift/dissolve the writ of preliminary

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attachment has been rendered moot and academic by the decision on the merits.

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

SO ORDERED.

G.R. No. L-25599,

Home Insurance Company v. American Steamship Agencies and Luzon Stevedoring, 23 SCRA 24

"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;

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(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 party[[3]] 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

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common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier.[[8]]As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy,[[9]] and is deemed valid.

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

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

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

G.R. No. 98243 July 1, 1992

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

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

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

On March 24, 1982. petitioner entered into a contract with private respondent to safely transport as a common carrier, cargoes of the latter from San Carlos City, Negros Occidental to Mandaue City using one of petitioner's vessels, M/L Maya. The cargoes of private

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respondent consisted of 9,824 cases of beer empties valued at P176,824.80, were itemized as follows:

NO. OF CASES CARGO VALUE

7,515 CS PPW STENIE MTS P136.773.00

1,542 CS PLW GRANDE MTS 23,438.40

58 CS G.E. PLASTIC MTS 1,276.00

24 CS PLP MTS 456.00

37 CS CS WOODEN MTS 673.40

8 CS LAGERLITE PLASTIC MTS 128.00

640 CS STENEI PLASTIC MTS 14,080.00

9,824 CS P176,824.80

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

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

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

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

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

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

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

WHEREFORE, judgment is hereby rendered as follows:

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

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

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

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

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

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

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

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

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

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

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

Hence the present recourse.

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

Petitioner contends that it was not in the exercise of its function as a common carrier when it entered into a contract with private

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respondent,but was then acting as a private carrier not bound by the requirement of extraordinary diligence (Rollo, p. 15) and that the factual findings of the Board of Marine Inquiry and the Special Board of Marine Inquiry are binding and conclusive on the Court (Rollo, pp. 16-17).

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

The petition is devoid of merit.

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

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

Q. How many vessels are you operating?

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

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

A. Yes, sir.

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

A. Yes, sir,

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

A. Yes, sir,

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

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

In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate andonly cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize the loss before, during and after the occurrence of flood, storm or other natural disaster in order that the common carrier may be exempted

12

from liability for the destruction or deterioration of the goods (Article 1739, New Civil Code).

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

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

xxx xxx xxx

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

Respondent court's conclusion as to the negligence of petitioner is supported by evidence. It will be noted that Vivencio Babao knew of the impending typhoon on March 24, 1982 when the Philippine Coast Guard denied M/L Maya the issuance of a clearance to sail. Less than 24 hours elapsed since the time of the denial of said clearance and the time a clearance to sail was finally issued on March 25, 1982. Records will show that Babao did not ascertain where the typhoon was headed by the use of his vessel's barometer

and radio (Rorlo, p. 142). Neither did the captain of the vessel monitor and record the weather conditions everyday as required by Art, 612 of the Code of Commerce (Rollo, pp. 142-143). Had he done so while navigating for 31 hours, he could have anticipated the strong winds and big waves and taken shelter (Rollo, pp- 36; 145). His testimony on May 4, 1982 is as follows:

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

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

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

SPEED WAVE HT. SEA WEATHER

KNOTS (METERS) CONDITIONS

March 25

8 AM 15 1-2 slight cloudy skies

13

w/ rainshowers

2 PM 20-25 2.0-3.0 moderate overcast skies

to rough w/ some rains

8 PM 30 3.7 rough sea heaps up

white foam from

breaking waves

begin to be blown

in streaks along

the direction of

the wind;

Spindrift begins

2 AM 30 3.7 rough sea heaps up

white foam from

breaking waves

begin to be blown

in streaks along

the direction of the wind;

Spindrift begins

(Exh. 3)

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

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

Furthermore, the records show that the crew of M/L Maya did not have the required qualifications provided for in P.D. No. 97 or the Philippine Merchant Marine Officers Law, all of whom were

14

unlicensed. While it is true that they were given special permit to man the vessel, such permit was issued at the risk and responsibility of the owner (Rollo, p. 36).

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

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

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

PREMISES CONSIDERED, the appealed decision is AFFIRMED.

SO ORDERED.

G.R. No. 101503 September 15, 1993

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

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

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

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

15

were also subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively.

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

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

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

Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its steelbodied dump trucks which were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and conditions of the charter-partly (which provided for an F.I.O.S. clause). 6 The hatches remained open throughout the duration of the discharge. 7

Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to the consignee's

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

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

Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged

16

shortage in the goods shipped and the diminution in value of that portion said to have been contaminated with dirt. 13

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

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

failure to destroy the presumption of negligence against them, the defendants are liable (emphasis supplied).

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

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

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

17

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

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

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

A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person

for a specified time or use; 20 a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight; 21 Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. 22 In both cases, the charter-party provides for the hire of vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of the ship.

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

18

carriage of goods for a fee, the person or corporation offering such service is a private carrier. 24

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

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

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

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

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

As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used to convey the goods of one and of several persons. Where the ship herself is let to a charterer,

19

so that he takes over the charge and control of her, the case is different; the shipowner is not then a carrier. But where her services only are let, the same grounds for imposing a strict responsibility exist, whether he is employed by one or many. The master and the crew are in each case his servants, the freighter in each case is usually without any representative on board the ship; the same opportunities for fraud or collusion occur; and the same difficulty in discovering the truth as to what has taken place arises . . .

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

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

The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained close and tightly sealed while the ship

was in transit as the weight of the steel covers made it impossible for a person to open without the use of the ship's boom. 32

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

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

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

20

weather (TSN, 5 April 1978, p. 24); and, that to open these hatches, the seals would have to be broken, all the seals were found to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis supplied).

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

Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction or deterioration of the goods if caused by the charterer of the goods or defects in the packaging or in the containers. The Code of Commerce also provides that all losses and deterioration which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon the carrier. 37 The carrier, nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is proved, as

against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage has established among careful persons. 38

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

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

The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the fact

21

that the fertilizer was transported in "bulk," thereby exposing it to the inimical effects of the elements and the grimy condition of the various pieces of equipment used in transporting and hauling it.

The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into the vessel's holds during the voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred while the same was being transported from the ship to the dump trucks and finally to the consignee's warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bar order cargo" as contained in their report to PPI was just an approximation or estimate made by them after the fertilizer was discharged from the vessel and segregated from the rest of the cargo.

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

Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage. More so, with a variable weather condition prevalent during its unloading, as was the case at bar. This is a risk the shipper or the owner of the goods has to face. Clearly, respondent carrier

has sufficiently proved the inherent character of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its packaging which further contributed to the loss. On the other hand, no proof was adduced by the petitioner showing that the carrier was remise in the exercise of due diligence in order to minimize the loss or damage to the goods it carried.

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

Costs against petitioner.

SO ORDERED.

Davide, Jr. and Quiason, JJ., concur.

Cruz, J., took no part.

Griño-Aquino, J., is on leave.

G.R. No. 70876 July 19, 1990

BENEDICTO vs. IAC

This Petition for Review asks us to set aside the Decision of the then Intermediate Appellate Court dated 30 January 1985 in A.C.-G.R. CV No. 01454, which affirmed in toto the decision of the Regional Trial Court ("RTC") of Dagupan City in Civil Case No. 5206. There, the RTC

22

held petitioner Ma. Luisa Benedicto liable to pay private respondent Greenhills Wood Industries Company, Inc. ("Greenhills") the amounts of P16,016.00 and P2,000.00 representing the cost of Greenhills' lost sawn lumber and attorney's fees, respectively.

Private respondent Greenhills, a lumber manufacturing firm with business address at Dagupan City, operates sawmill in Maddela, Quirino.

Sometime in May 1980, private respondent bound itself to sell and deliver to Blue Star Mahogany, Inc., ("Blue Star") a company with business operations in Valenzuela, Bulacan 100,000 board feet of sawn lumber with the understanding that an initial delivery would be made on 15 May 1980. 1 To effect its first delivery, private respondent's resident manager in Maddela, Dominador Cruz, contracted Virgilio Licuden, the driver of a cargo truck bearing Plate No. 225 GA TH to transport its sawn lumber to the consignee Blue Star in Valenzuela, Bulacan. This cargo truck was registered in the name of petitioner Ma. Luisa Benedicto, the proprietor of Macoven Trucking, a business enterprise engaged in hauling freight, with main office in B.F. Homes, Parañaque.

On 15 May 1980, Cruz in the presence and with the consent of driver Licuden, supervised the loading of 7,690 board feet of sawn lumber with invoice value of P16,918.00 aboard the cargo truck. Before the cargo truck left Maddela for Valenzuela, Bulacan, Cruz issued to Licuden Charge Invoices Nos. 3259 and 3260 both of which were initialed by the latter at the bottom left corner. 2 The first invoice was for the amount of P11,822.80 representing the value of 5,374 board feet of sawn lumber, while the other set out the amount of P5,095.20 as the value of 2,316 board feet. Cruz

instructed Licuden to give the original copies of the two (2) invoices to the consignee upon arrival in Valenzuela, Bulacan 3and to retain the duplicate copies in order that he could afterwards claim the freightage from private respondent's Manila office. 4

On 16 May 1980, the Manager of Blue Star called up by long distance telephone Greenhills' president, Henry Lee Chuy, informing him that the sawn lumber on board the subject cargo truck had not yet arrived in Valenzuela, Bulacan. The latter in turn informed Greenhills' resident manager in its Maddela saw-mill of what had happened. In a letter 5 dated 18 May 1980, Blue Star's administrative and personnel manager, Manuel R. Bautista, formally informed Greenhills' president and general manager that Blue Star still had not received the sawn lumber which was supposed to arrive on 15 May 1980 and because of this delay, "they were constrained to look for other suppliers."

On 25 June 1980, after confirming the above with Blue Star and after trying vainly to persuade it to continue with their contract, private respondent Greenhill's filed Criminal Case No. 668 against driver Licuden for estafa. Greenhills also filed against petitioner Benedicto Civil Case No. D-5206 for recovery of the value of the lost sawn lumber plus damages before the RTC of Dagupan City.

In her answer, 6 petitioner Benedicto denied liability alleging that she was a complete stranger to the contract of carriage, the subject truck having been earlier sold by her to Benjamin Tee, on 28 February 1980 as evidenced by a deed of sale. 7She claimed that the truck had remained registered in her name notwithstanding its earlier sale to Tee because the latter had paid her only P50,000.00 out of the total agreed price of P68,000.00 However, she averred

23

that Tee had been operating the said truck in Central Luzon from that date (28 February 1980) onwards, and that, therefore, Licuden was Tee's employee and not hers.

On 20 June 1983, based on the finding that petitioner Benedicto was still the registered owner of the subject truck, and holding that Licuden was her employee, the trial court adjudged as follows:

WHEREFORE, in the light of the foregoing considerations, this Court hereby renders judgment against defendant Maria Luisa Benedicto, ordering her to pay the Greenhills Wood Industries Co. Inc., thru its President and General Manager, the amount of P16,016 cost of the sawn lumber loaded on the cargo truck, with legal rate of interest from the filing of the complaint to pay attorney's fees in the amount of P2,000.00; and to pay the costs of this suit.

SO ORDERED. 8

On 30 January 1985, upon appeal by petitioner, the Intermediate Appellate Court affirmed 9 the decision of the trial court in toto. Like the trial court, the appellate court held that since petitioner was the registered owner of the subject vehicle, Licuden the driver of the truck, was her employee, and that accordingly petitioner should be responsible for the negligence of said driver and bear the loss of the sawn lumber plus damages. Petitioner moved for reconsideration, without success. 10

In the present Petition for Review, the sole issue raised is whether or not under the facts and applicable law, the appellate court was correct in finding that petitioner, being the registered owner of the carrier, should be held liable for the value of the undelivered or lost sawn lumber.

Petitioner urges that she could not be held answerable for the loss of the cargo, because the doctrine which makes the registered owner of a common carrier vehicle answerable to the public for the negligence of the driver despite the sale of the vehicle to another person, applies only to cases involving death of or injury to passengers. What applies in the present case, according to petitioner, is the rule that a contract of carriage requires proper delivery of the goods to and acceptance by the carrier. Thus, petitioner contends that the delivery to a person falsely representing himself to be an agent of the carrier prevents liability from attaching to the registered owner.

The Court considers that petitioner has failed to show that appellate court committed reversible error in affirming the trial court's holding that petitioner was liable for the cost of the sawn lumber plus damages.

There is no dispute that petitioner Benedicto has been holding herself out to the public as engaged in the business of hauling or transporting goods for hire or compensation. Petitioner Benedicto is, in brief, a common carrier.

The prevailing doctrine on common carriers makes the registered owner liable for consequences flowing from the operations of the carrier, even though the specific vehicle involved may already have been transferred to another person. This doctrine rests upon the principle that in dealing with vehicles registered under the Public Service Law, the public has the right to assume that the registered owner is the actual or lawful owner thereof It would be very difficult and often impossible as a practical matter, for members of the general public to enforce the rights of action that they may have for

24

injuries inflicted by the vehicles being negligently operated if they should be required to prove who the actual owner is. 11 The registered owner is not allowed to deny liability by proving the identity of the alleged transferee. Thus, contrary to petitioner's claim, private respondent is not required to go beyond the vehicle's certificate of registration to ascertain the owner of the carrier. In this regard, the letter presented by petitioner allegedly written by Benjamin Tee admitting that Licuden was his driver, had no evidentiary value not only because Benjamin Tee was not presented in court to testify on this matter but also because of the aforementioned doctrine. To permit the ostensible or registered owner to prove who the actual owner is, would be to set at naught the purpose or public policy which infuses that doctrine.

In fact, private respondent had no reason at all to doubt the authority of Licuden to enter into a contract of carriage on behalf of the registered owner. It appears that, earlier, in the first week of May 1980, private respondent Greenhills had contracted Licuden who was then driving the same cargo truck to transport and carry a load of sawn lumber from the Maddela sawmill to Dagupan City. 12 No one came forward to question that contract or the authority of Licuden to represent the owner of the carrier truck.

Moreover, assuming the truth of her story, petitioner Benedicto retained registered ownership of the freight truck for her own benefit and convenience, that is, to secure the payment of the balance of the selling price of the truck. She may have been unaware of the legal security device of chattel mortgage; or she, or her buyer, may have been unwilling to absorb the expenses of registering a chattel mortgage over the truck. In either case, considerations both of public policy and of equity require that she

bear the consequences flowing from registered ownership of the subject vehicle.

Petitioner Benedicto, however, insists that the said principle should apply only to cases involving negligence and resulting injury to or death of passengers, and not to cases involving merely carriage of goods. We believe otherwise.

A common carrier, both from the nature of its business and for insistent reasons of public policy, is burdened by the law with the duty of exercising extraordinary diligence not only in ensuring the safety of passengers but also in caring for goods transported by it. 13 The loss or destruction or deterioration of goods turned over to the common carrier for conveyance to a designated destination, raises instantly a presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or damage arises from extreme circumstances such as a natural disaster or calamity or act of the public enemy in time of war, or from an act or omission of the shipper himself or from the character of the goods or their packaging or container. 14

This presumption may be overcome only by proof of extraordinary diligence on the part of the carrier. 15 Clearly, to permit a common carrier to escape its responsibility for the passengers or goods transported by it by proving a prior sale of the vehicle or means of transportation to an alleged vendee would be to attenuate drastically the carrier's duty of extraordinary diligence. It would also open wide the door to collusion between the carrier and the supposed vendee and to shifting liability from the carrier to one without financial capability to respond for the resulting damages. In other words, the thrust of the public policy here involved is as sharp

25

and real in the case of carriage of goods as it is in the transporting of human beings. Thus, to sustain petitioner Benedicto's contention, that is, to require the shipper to go behind a certificate of registration of a public utility vehicle, would be utterly subversive of the purpose of the law and doctrine.

Petitioner further insists that there was no perfected contract of carriage for the reason that there was no proof that her consent or that of Tee had been obtained; no proof that the driver, Licuden was authorized to bind the registered owner; and no proof that the parties had agreed on the freightage to be paid.

Once more, we are not persuaded by petitioner's arguments which appear to be a transparent attempt to evade statutory responsibilities. Driver Licuden was entrusted with possession and control of the freight truck by the registered owner (and by the alleged secret owner, for that matter).i•t•c-aüsl Driver Licuden, under the circumstances, was clothed with at least implied authority to contract to carry goods and to accept delivery of such goods for carriage to a specified destination. That the freight to be paid may-not have been fixed before loading and carriage, did not prevent the contract of carriage from arising, since the freight was at least determinable if not fixed by the tariff schedules in petitioner's main business office. Put in somewhat different terms, driver Licuden is in law regarded as the employee and agent of the petitioner, for whose acts petitioner must respond. A contract of carriage of goods was shown; the sawn lumber was loaded on board the freight truck; loss or non-delivery of the lumber at Blue Star's premises in Valenzuela, Bulacan was also proven; and petitioner has not proven either that she had exercised extraordinary diligence to prevent such loss or non-delivery or that the loss or non-delivery

was due to some casualty or force majeure inconsistent with her liability. 16 Petitioner's liability to private respondent Greenhills was thus fixed and complete, without prejudice to petitioner's right to proceed against her putative transferee Benjamin Tee and driver Licuden for reimbursement or contribution. 17

WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of the former Intermediate Appellate Court dated 30 January 1985 is hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

G.R. No. L-61464 May 28, 1988

BA FINANCE vs. CA

This is a petition for review seeking to set aside the decision of the Court of Appeals which affirmed the decision of the then Court of First Instance of Manila, dismissing the complaint instituted by the petitioner and ordering it to pay damages on the basis of the private respondent's counterclaim.

On July 1, 1975, private respondent Augusto Yulo secured a loan from the petitioner in the amount of P591,003.59 as evidenced by a promissory note he signed in his own behalf and as representative of the A & L Industries. Respondent Yulo presented an alleged special power of attorney executed by his wife, respondent Lily Yulo, who manages A & L Industries and under whose name the said business is registered, purportedly authorizing Augusto Yulo to procure the loan and sign the promissory note. About two months prior to the loan, however, Augusto Yulo had already left Lily Yulo and their children and had abandoned their conjugal home. When

26

the obligation became due and demandable, Augusto Yulo failed to pay the same.

On October 7, 1975, the petitioner filed its amended complaint against the spouses Augusto and Lily Yulo on the basis of the promissory note. It also prayed for the issuance of a writ of attatchment alleging that the said spouses were guilty of fraud in contracting the debt upon which the action was brought and that the fraud consisted of the spouses' inducing the petitioner to enter into a contract with them by executing a Deed of Assignment in favor of the petitioner, assigning all their rights, titles and interests over a construction contract executed by and between the spouses and A. Soriano Corporation on June 19, 1974 for a consideration of P615,732.50 when, in truth, the spouses did not have any intention of remitting the proceeds of the said construction contract to the petitioner because despite the provisions in the Deed of Assignment that the spouses shall, without compensation or costs, collect and receive in trust for the petitioner all payments made upon the construction contract and shall remit to the petitioner all collections therefrom, the said spouses failed and refuse to remit the collections and instead, misappropriated the proceeds for their own use and benefit, without the knowledge or consent of the petitioner.

The trial court issued the writ of attachment prayed for thereby enabling the petitioner to attach the properties of A & L Industries. Apparently not contented with the order, the petitioner filed another motion for the examination of attachment debtor, alleging that the properties attached by the sheriff were not sufficient to secure the satisfaction of any judgment that may be recovered by it in the case. This was likewise granted by the court.

Private respondent Lily Yulo filed her answer with counterclaim, alleging that although Augusta Yulo and she are husband and wife, the former had abandoned her and their children five (5) months before the filing of the complaint; that they were already separated when the promissory note was executed; that her signature in the special power of attorney was forged because she had never authorized Augusto Yulo in any capacity to transact any business for and in behalf of A & L Industries, which is owned by her as a single proprietor, that she never got a single centavo from the proceeds of the loan mentioned in the promissory note; and that as a result of the illegal attachment of her properties, which constituted the assets of the A & L Industries, the latter closed its business and was taken over by the new owner.

After hearing, the trial court rendered judgment dismissing the petitioner's complaint against the private respondent Lily Yulo and A & L Industries and ordering the petitioner to pay the respondent Lily Yulo P660,000.00 as actual damages; P500,000.00 as unrealized profits; P300,000.00 as exemplary damages; P30,000.00 as and for attorney's fees; and to pay the costs.

The petitioner appealed. The Court of Appeals affirmed the trial court's decision except for the exemplary damages which it reduced from P300,000.00 to P150,000.00 and the attorney's fees which were reduced from P30,000.00 to P20,000.00.

In resolving the question of whether or not the trial court erred in holding that the signature of respondent Lily Yulo in the special power of attorney was forged, the Court of Appeals said:

27

The crucial issue to be determined is whether or not the signatures of the appellee Lily Yulo in Exhibits B and B-1 are forged. Atty. Crispin Ordoña, the Notary Public, admitted in open court that the parties in the subject documents did not sign their signatures in his presence. The same were already signed by the supposed parties and their supposed witnesses at the time they were brought to him for ratification. We quote from the records the pertinent testimony of Atty. Ordoña, thus:

Q. This document marked as Exhibit B-1, when this was presented to you by that common friend, June Enriquez, it was already typewritten, it was already accomplished, all typewritten.?

A. Yes, sir.

Q And the parties had already affixed their signatures in this document?

A. Yes, sir.

Q. In this document marked as Exhibit B although it appears here that this is an acknowledgment, you have not stated here that the principal actually acknowledged this document to be her voluntary act and deed?

A This in one of those things that escaped my attention. Actually I have not gone over the second page. I believed it was in order I signed it. (TSN pp. 13-14, Hearing of Nov. 26, 1976).

The glaring admission by the Notary Public that he failed to state in the acknowledgment portion of Exhibit B-1 that the appellee Lily Yulo acknowledged the said document to be her own voluntary act

and deed, is a very strong and commanding circumstance to show that she did not appear personally before the said Notary Public and did not sign the document.

Additionally, the Notary Public admitted that, while June Enriquez is admittedly a mutual friend of his and the defendant Augusta Yulo, and who is also an instrumental witness in said Exhibit B-1., he could not recognize or tell which of the two signatures appearing therein, was the signature of this June Enriquez.

Furthermore, as the issue is one of credibility of a witness, the findings and conclusions of the trial court before whom said witness, Atty. Crispin Ordoña, the Notary Public before whom the questioned document was supposedly ratified and acknowledged, deserve great respect and are seldom disturbed on appeal by appellate tribunals, since it is in the best and peculiar advantage of determining and observing the conduct, demeanor and deportment of a particular witness while he is testifying in court, an opportunity not enjoyed by the appellate courts who merely have to rely on the recorded proceedings which transpired in the court below, and the records are bare of any circumstance of weight, which the trial court had overlooked and which if duly considered, may radically affect the outcome of the case.

On the other hand, the appellee Lily Yulo, to back up her claim of forgery of her signature in Exhibit B-1, presented in court a handwriting expert witness in the person of Police Captain Yakal Giron of the Integrated National Police Training Command, and who is also a Document Examiner of the same Command's Crime Laboratory at Fort Bonifacio, Metro Manila. His experience as an examiner of questioned and disputed documents, in our mind, is

28

quite impressive. To qualify him as a handwriting expert, he declared that he underwent extensive and actual studies and examination of disputed or questioned document, both at the National Bureau of Investigation Academy and National Bureau of Investigation Questioned Document Laboratory, respectively, from July 1964, up to his appointment as Document Examiner in June, 1975, and, to further his experience along this line, he attended the 297th Annual Conference of the American Society of Questioned Docurnent Examiners held at Seattle, Washington, in August 1971, as a representative of the Philippines, and likewise conducted an observation of the present and modern trends of crime laboratories in the West Coast, U.S.A., in 1971; that he likewise had conducted actual tests and examination of about 100,000 documents, as requested by the different courts, administrative, and governmental agencies of the Government, substantial portions of which relate to actual court cases.

In concluding that the signatures of the appellee Lily Yulo, in the disputed document in question (Exh. B-1), were all forgeries, and not her genuine signature, the expert witness categorically recited and specified in open court what he observed to be about twelve (12) glaring and material significant differences, in his comparison of the signatures appearing in the genuine specimen signatures of the said appellee and with those appearing in the questioned document (Exhibit B-1). Indeed, we have likewise seen the supposed notable differences, found in the standard or genuine signatures of the appellee which were lifted and obtained in the official files of the government, such as the Bureau of Internal Revenue on her income tax returns, as compared to the pretended signature of the appellee appearing in Exhibits B, B-1. It is also noteworthy to mention that

the appellant did not even bother to conduct a cross-examination of the handwriting expert witness, Capt. Giron, neither did the appellant present another handwriting expert, at least to counter-act or balance the appellee's handwriting expert.

Prescinding from the foregoing facts, we subscribe fully to the lower court's observations that the signatures of the appellee Lily Yulo in the questioned document (Exh. B-1) were forged. Hence, we find no factual basis to disagree. (pp. 28-30, Rollo)

As to the petitioner's contention that even if the signature of Lily Yulo was forged or even if the attached properties were her exclusive property, the same can be made answerable to the obligation because the said properties form part of the conjugal partnership of the spouses Yulo, the appellate court held that these contentions are without merit because there is strong preponderant evidence to show that A & L Industries belongs exclusively to respondent Lily Yulo, namely: a) The Certificate of Registration of A & L Industries, issued by the Bureau of Commerce, showing that said business is a single proprietorship, and that the registered owner thereof is only Lily Yulo; b) The Mayor's Permit issued in favor of A & L Industries, by the Caloocan City Mayor's Office showing compliance by said single proprietorship company with the City Ordinance governing business establishments; and c) The Special Power of Attorney itself, assuming but without admitting its due execution, is tangible proof that Augusto Yulo has no interest whatsoever in the A & L Industries, otherwise, there would have been no necessity for the Special Power of Attorney if he is a part owner of said single proprietorship.

29

With regard to the award of damages, the Court of Appeals affirmed the findings of the trial court that there was bad faith on the part of the petitioner as to entitle the private respondent to damages as shown not only by the fact that the petitioner did not present the Deed of Assignment or the construction agreement or any evidence whatsoever to support its claim of fraud on the part of the private respondent and to justify the issuance of a preliminary attachment, but also by the following findings:

Continuing and elaborating further on the appellant's mala fide actuations in securing the writ of attachment, the lower court stated as follows:

Plaintiff not satisfied with the instant case where an order for attachment has already been issued and enforced, on the strength of the same Promissory Note (Exhibit"A"), utilizing the Deed of Chattel Mortgage (Exhibit "4"), filed a foreclosure proceedings before the Office of the Sheriff of Caloocan (Exhibit"6") foreclosing the remaining properties found inside the premises formerly occupied by the A & L Industries. A minute examination of Exhibit "4" will show that the contracting parties thereto, as appearing in par. 1 thereof, are Augusto Yulo, doing business under the style of A & L Industries (should be A & L Glass Industries Corporation), as mortgagor and BA Finance Corporation as mortgagee, thus the enforcement of the Chattel Mortgage against the property of A & L Industries exclusively owned by Lily T. Yulo appears to be without any factual or legal basis whatsoever. The chattel mortgage, Exhibit "4" and the Promissory Note, Exhibit A, are based on one and the same obligation. Plaintiff tried to enforce as it did enforce its claim into two different modes a single obligation.

Aware that defendant Lily Yulo, filed a Motion to Suspend Proceedings by virtue of a complaint she filed with the Court of First Instance of Caloocan, seeking annulment of the Promissory Note, the very basis of the plaintiff in filing this complaint, immediately after the day it filed a Motion for the Issuance of an Alias Writ of Preliminary Attachment . . .Yet, inspite of the knowledge and the filing of this Motion to Suspend Proceedings, the Plaintiff still filed a Motion for the Issuance of a Writ of Attachment dated February 6, 1976 before this court. To add insult to injury, plaintiff even filed a Motion for Examination of the Attachment Debtor, although aware that Lily Yulo had already denied participation in the execution of Exhibits "A" and "B". These incidents and actions taken by plaintiff, to the thinking of the court, are sufficient to prove and establish the element of bad faith and malice on the part of plaintiff which may warrant the award of damages in favor of defendant Lily Yulo. (Ibid., pp. 102-103).<äre||anº•1àw>

Indeed, the existence of evident bad faith on the appellant's part in proceeding against the appellee Lily Yulo in the present case, may likewise be distressed on the fact that its officer Mr. Abraham Co, did not even bother to demand the production of at least the duplicate original of the Special Power of Attorney (Exhibit B) and merely contended himself with a mere xerox copy thereof, neither did he require a more specific authority from the A & L Industries to contract the loan in question, since from the very content and recitals of the disputed document, no authority, express or implied, has been delegated or granted to August Yulo to contract a loan, especially with the appellant. (pp. 33-34, Rollo)

Concerning the actual damages, the appellate court ruled that the petitioner should have presented evidence to disprove or rebut the

30

private respondent's claim but it remained quiet and chose not to disturb the testimony and the evidence presented by the private respondent to prove her claim.

In this petition for certiorari, the petitioner raises three issues. The first issue deals with the appellate court's affirmance of the trial court's findings that the signature of the private respondent on the Special Power of Attorney was forged. According to the petitioner, the Court of Appeals disregarded the direct mandate of Section 23, Rule 132 of the Rules of Court which states in part that evidence of handwriting by comparison may be made "with writings admitted or treated as genuine by the party against whom the evidence is offered, or proved to be genuine to the satisfaction of the judge," and that there is no evidence on record which proves or tends to prove the genuineness of the standards used.

There is no merit in this contention.

The records show that the signatures which were used as "standards" for comparison with the alleged signature of the private respondent in the Special Power of Attorney were those from the latter's residence certificates in the years 1973, 1974 and 1975, her income tax returns for the years 1973 and 1975 and from a document on long bond paper dated May 18, 1977. Not only were the signatures in the foregoing documents admitted by the private respondent as hers but most of the said documents were used by the private respondent in her transactions with the government. As was held in the case of Plymouth Saving & Loan Assn. No. 2 v. Kassing (125 NE 488, 494):

We believe the true rule deduced from the authorities to be that the genuineness of a "standard" writing may be established (1) by the admission of the person sought to be charged with the disputed writing made at or for the purposes of the trial or by his testimony; (2) by witnesses who saw the standards written or to whom or in whose hearing the person sought to be charged acknowledged the writing thereof; (3) by evidence showing that the reputed writer of the standard has acquiesced in or recognized the same, or that it has been adopted and acted upon by him his business transactions or other concerns....

Furthermore, the judge found such signatures to be sufficient as standards. In the case of Taylor-Wharton Iron & Steel Co. v. Earnshaw (156 N.E. 855, 856), it was held:

When a writing is offered as a standard of comparison it is for the presiding judge to decide whether it is the handwriting of the party to be charged. Unless his finding is founded upon error of law, or upon evidence which is, as matter of law, insufficient to justify the finding, this court will not revise it upon exceptions." (Costelo v. Crowell, 139 Mass. 588, 590, 2 N.E. 648; Nuñez v. Perry, 113 Mass, 274, 276.)

We cannot find any error on the part of the trial judge in using the above documents as standards and also in giving credence to the expert witness presented by the private respondent whose testimony the petitioner failed to rebut and whose credibility it likewise failed to impeach. But more important is the fact that the unrebutted handwriting expert's testimony noted twelve (12) glaring and material differences in the alleged signature of the private respondent in the Special Power of Attorney as compared

31

with the specimen signatures, something which the appellate court also took into account. In Cesar v. Sandiganbayan (134 SCRA 105, 132), we ruled:

Mr. Maniwang pointed to other significant divergences and distinctive characteristics between the sample signatures and the signatures on the questioned checks in his report which the court's Presiding Justice kept mentioning during Maniwang's testimony.

In the course of his cross-examination, NBI expert Tabayoyong admitted that he saw the differences between the exemplars used and the questioned signatures but he dismissed the differences because he did not consider them fundamental. We rule that significant differences are more fundamental than a few similarities. A forger always strives to master some similarities.

The second issue raised by the petitioner is that while it is true that A & L Industries is a single proprietorship and the registered owner thereof is private respondent Lily Yulo, the said proprietorship was established during the marriage and its assets were also acquired during the same. Therefore, it is presumed that this property forms part of the conjugal partnership of the spouses Augusto and Lily Yulo and thus, could be held liable for the obligations contracted by Augusto Yulo, as administrator of the partnership.

There is no dispute that A & L Industries was established during the marriage of Augusta and Lily Yulo and therefore the same is presumed conjugal and the fact that it was registered in the name of only one of the spouses does not destroy its conjugal nature (See Mendoza v. Reyes, 124 SCRA 161, 165). However, for the said property to be held liable, the obligation contracted by the husband

must have redounded to the benefit of the conjugal partnership under Article 161 of the Civil Code. In the present case, the obligation which the petitioner is seeking to enforce against the conjugal property managed by the private respondent Lily Yulo was undoubtedly contracted by Augusto Yulo for his own benefit because at the time he incurred the obligation he had already abandoned his family and had left their conjugal home. Worse, he made it appear that he was duly authorized by his wife in behalf of A & L Industries, to procure such loan from the petitioner. Clearly, to make A & L Industries liable now for the said loan would be unjust and contrary to the express provision of the Civil Code. As we have ruled in Luzon Surety Co., Inc. v. De Gracia (30 SCRA 111, 115-117):

As explained in the decision now under review: "It is true that the husband is the administrator of the conjugal property pursuant to the provisions of Art. 163 of the new Civil Code. However, as such administrator the only obligations incurred by the husband that are chargeable against the conjugal property are those incurred in the legitimate pursuit of his career, profession or business with the honest belief that he is doing right for the benefit of the family. This is not true in the case at bar for we believe that the husband in acting as guarantor or surety for another in an indemnity agreement as that involved in this case did not act for the benefit of the conjugal partnership. Such inference is more emphatic in this case, when no proof is presented that Vicente Garcia in acting as surety or guarantor received consideration therefore, which may redound to the benefit of the conjugal partnership.(Ibid, pp. 46-47).

xxx xxx xxx

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xxx xxx xxx

In the most categorical language, a conjugal partnership under that provision is liable only for such "debts and obligations contracted by the husband for the benefit of the conjugal partnership." There must be the requisite showing then of some advantage which clearly accrued to the welfare of the spouses. There is none in this case.

xxx xxx xxx

Moreover, it would negate the plain object of the additional requirement in the present Civil Code that a debt contracted by the husband to bind a conjugal partnership must redound to its benefit. That is still another provision indicative of the solicitude and tender regard that the law manifests for the family as a unit. Its interest is paramount; its welfare uppermost in the minds of the codifiers and legislators.

We, therefore, rule that the petitioner cannot enforce the obligation contracted by Augusto Yulo against his conjugal properties with respondent Lily Yulo. Thus, it follows that the writ of attachment cannot issue against the said properties.

Finally, the third issue assails the award of actual damages according to the petitioner, both the lower court and the appellate court overlooked the fact that the properties referred to are still subject to a levy on attachment. They are, therefore, still under custodia legis and thus, the assailed decision should have included a declaration as to who is entitled to the attached properties and that assuming arguendo that the attachment was erroneous, the lower court should have ordered the sheriff to

return to the private respondent the attached properties instead of condemning the petitioner to pay the value thereof by way of actual damages.

In the case of Lazatin v. Twaño (2 SCRA 842, 847), we ruled:

xxx xxx xxx

... It should be observed that Sec. 4 of Rule 59, does not prescribed the remedies available to the attachment defendant in case of a wrongful attachment, but merely provides an action for recovery upon the bond, based on the undertaking therein made and not upon the liability arising from a tortuous act, like the malicious suing out of an attachment. Under the first, where malice is not essential, the attachment defendant, is entitled to recover only the actual damages sustained by him by reason of the attachment. Under the second, where the attachment is maliciously sued out, the damages recoverable may include a compensation for every injury to his credit, business or feed (Tyler v. Mahoney, 168 NC 237, 84 SE 362; Pittsburg etc. 5 Wakefield, etc., 135 NC 73, 47 SE 234). ...

The question before us, therefore, is whether the attachment of the properties of A & L Industries was wrongful so as to entitle the petitioner to actual damages only or whether the said attachment was made in bad faith and with malice to warrant the award of other kinds of damages. Moreover, if the private respondent is entitled only to actual damages, was the court justified in ordering the petitioner to pay for the value of the attached properties instead of ordering the return of the said properties to the private respondent Yulo ?

33

Both the trial and appellate courts found that there was bad faith on the part of the petitioner in securing the writ of attachment. We do not think so. "An attachment may be said to be wrongful when, for instance, the plaintiff has no cause of action, or that there is no true ground therefore, or that the plaintiff has a sufficient security other than the property attached, which is tantamout to saying that the plaintiff is not entitled to attachment because the requirements of entitling him to the writ are wanting. (7 C.J.S., 664)" (p. 48, Section 4, Rule 57, Francisco, Revised Rules of Court).

Although the petitioner failed to prove the ground relied upon for the issuance of the writ of attachment, this failure cannot be equated with bad faith or malicious intent. The steps which were taken by the petitioner to ensure the security of its claim were premised, on the firm belief that the properties involved could be made answerable for the unpaid obligation due it. There is no question that a loan in the amount of P591,003.59 was borrowed from the bank.

We, thus, find that the petitioner is liable only for actual damages and not for exemplary damages and attorney's fees. Respondent Lily Yulo has manifested before this Court that she no longer desires the return of the attached properties since the said attachment caused her to close down the business. From that time she has become a mere employee of the new owner of the premises. She has grave doubts as to the running condition of the attached machineries and equipments considering that the attachment was effected way back in 1975. She states as a matter of fact that the petitioner has already caused the sale of the machineries for fear that they might be destroyed due to prolonged litigation. We, therefore, deem it just and equitable to allow private respondent Lily Yulo to recover

actual damages based on the value of the attached properties as proven in the trial court, in the amount of P660,000.00. In turn, if there are any remaining attached properties, they should be permanently released to herein petitioner.

We cannot, however, sustain the award of P500,000.00 representing unrealized profits because this amount was not proved or justified before the trial court. The basis of the alleged unearned profits is too speculative and conjectural to show actual damages for a future period. The private respondent failed to present reports on the average actual profits earned by her business and other evidence of profitability which are necessary to prove her claim for the said amount (See G. A. Machineries, Inc. v. Yaptinchay, 126 SCRA 78, 88).

The judgment is therefore set aside insofar as it holds the petitioner liable for P500,000.00 actual damages representing unrealized profits, P150,000.00 for exemplary damages and P20,000.00 for attorney's fees. As stated earlier, the attached properties, should be released in favor of the petitioner.

WHEREFORE, the decision of the Court of Appeals is hereby SET ASIDE and the petitioner is ordered to pay the private respondent Lily Yulo the amount of SIX HUNDRED SIXTY THOUSAND PESOS (P660,000.00) as actual damages. The remaining properties subject of the attachment are ordered released in favor of the petitioner.

SO ORDERED.

digest of F.C. Fisher v. Yangco Steamship Co. (G.R. No. 8095)

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

34

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

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

CARSON, J.:

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

Summarized briefly, the complaint alleges that plaintiff is a stockholder in the Yangco Steamship Company, the owner of a large number of steam vessels, duly licensed to engage in the coastwise trade of the Philippine Islands; that on or about June 10, 1912, the directors of the company adopted a resolution which was thereafter

ratified and affirmed by the shareholders of the company, "expressly declaring and providing that the classes of merchandise to be carried by the company in its business as a common carrier do not include dynamite, powder or other explosives, and expressly prohibiting the officers, agents and servants of the company from offering to carry, accepting for carriage said dynamite, powder or other explosives;" that thereafter the respondent Acting Collector of Customs demanded and required of the company the acceptance and carriage of such explosives; that he has refused and suspended the issuance of the necessary clearance documents of the vessels of the company unless and until the company consents to accept such explosives for carriage; that plaintiff is advised and believes that should the company decline to accept such explosives for carriage, the respondent Attorney-General of the Philippine Islands and the respondent prosecuting attorney of the city of Manila intend to institute proceedings under the penal provisions of sections 4, 5, and 6 of Act No. 98 of the Philippine Commission against the company, its managers, agents and servants, to enforce the requirements of the Acting Collector of Customs as to the acceptance of such explosives for carriage; that notwithstanding the demands of the plaintiff stockholder, the manager, agents and servants of the company decline and refuse to cease the carriage of such explosives, on the ground that by reason of the severity of the penalties with which they are threatened upon failure to carry such explosives, they cannot subject themselves to "the ruinous consequences which would inevitably result" from failure on their part to obey the demands and requirements of the Acting Collector of Customs as to the acceptance for carriage of explosives; that plaintiff believes that the Acting Collector of Customs erroneously construes the provisions of Act No. 98 in holding that they require

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the company to accept such explosives for carriage notwithstanding the above mentioned resolution of the directors and stockholders of the company, and that if the Act does in fact require the company to carry such explosives it is to that extent unconstitutional and void; that notwithstanding this belief of complainant as to the true meaning of the Act, the questions involved cannot be raised by the refusal of the company or its agents to comply with the demands of the Acting Collector of Customs, without the risk of irreparable loss and damage resulting from his refusal to facilitate the documentation of the company's vessels, and without assuming the company to test the questions involved by refusing to accept such explosives for carriage.

The prayer of the complaint is as follows:

Wherefore your petitioner prays to this honorable court as follows:

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

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

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

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

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

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

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regard to any question as to whether such conduct on the part of the steamship company and its officers involves in any instance an undue, unnecessary or unreasonable discrimination to the prejudice of any person, locality or particular kind of traffic.

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

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

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

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

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

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

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

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

We agree with counsel for petitioner that the provision of the Act which prescribes that, "No common carrier ... shall, under any pretense whatsoever, fail or refuse to receive for carriage ... to carry any person or property offering for carriage," is not to be construed in its literal sense and without regard to the context, so as to impose an imperative duty on all common carriers to accept for carriage, and to carry all and any kind of freight which may be offered for carriage without regard to the facilities which they may have at their disposal. The legislator could not have intended and did not intend to prescribe that a common carrier running passenger automobiles for hire must transport coal in his machines; nor that the owner of a tank steamer, expressly constructed in small watertight compartments for the carriage of crude oil must accept common carrier must accept and carry contraband articles, such as opium, morphine, cocaine, or the like, the mere possession of which is declared to be a criminal offense; nor that common carriers must accept eggs offered for transportation in paper parcels or any

merchandise whatever do defectively packed as to entail upon the company unreasonable and unnecessary care or risks.

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

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

So also we may dismiss without much discussion the contentions as to the invalidity of the statute, which are based on the alleged excessive severity of the penalties prescribed for violation of its provisions. Upon general principles it is peculiarly and exclusively within the province of the legislator to prescribe the pains and penalties which may be imposed upon persons convicted of

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violations of the laws in force within his territorial jurisdiction. With the exercise of his discretion in this regard where it is alleged that excessive fines or cruel and unusual punishments have been prescribed, and even in such cases the courts will not presume to interfere in the absence of the clearest and most convincing argument and proof in support of such contentions. (Weems vs. United States, 217 U.S., 349; U.S. vs. Pico, 18 Phil. Rep., 386.) We need hardly add that there is no ground upon which to rest a contention that the penalties prescribed in the statute under consideration are either excessive or cruel and unusual, in the sense in which these terms are used in the organic legislation in force in the Philippine Islands.

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

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

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

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

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complicated and technical character, and the ordinary case of a statute upon a subject requiring no such investigation, and over which the jurisdiction of the legislature is complete in any event.

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

An examination of the general provisions of our statute, of the circumstances under which it was enacted, the mischief which it sought to remedy and of the nature of the penalties prescribed for violations of its terms convinces us that, unlike the statutes under consideration in the above cited cases, its enactment involved no attempt to prevent common carriers "from resorting to the courts to test the validity of the legislation;" no "effort to prevent any inquiry" as to its validity. It imposes no arbitrary obligation upon the company to do or to refrain from doing anything. It makes no attempt to compel such carriers to do business at a fixed or arbitrarily designated rate, at the risk of separate criminal prosecutions for every demand of a higher or a different rate. Its penalties can be imposed only upon proof of "unreasonable," "unnecessary" and "unjust" discriminations, and range from a maximum which is certainly not excessive for willful, deliberate and contumacious violations of its provisions by a great and powerful corporation, to a minimum which may be a merely nominal fine. With so wide a range of discretion for a contention on the part of any common carrier that it or its officers are "intimidated from

resorting to the courts to test the validity" of the provisions of the statute prohibiting such "unreasonable," "unnecessary" and "unjust" discriminations, or to test in any particular case whether a given course of conduct does in fact involve such discrimination. We will presume, for the purpose of declaring the statute invalid, that there is so real a danger that the Courts of First Instance and this court on appeal will abuse the discretion thus conferred upon us, as to intimidate any common carrier, acting in good faith, from resorting to the courts to test the validity of the statute. Legislative enactments, penalizing unreasonable discriminations, unreasonable restraints of trade, and unreasonable conduct in various forms of human activity are so familiar and have been so frequently sustained in the courts, as to render extended discussion unnecessary to refute any contention as to the invalidity of the statute under consideration, merely it imposes upon the carrier the obligation of adopting one of various courses of conduct open to it, at the risk of incurring a prescribed penalty in the event that the course of conduct actually adopted by it should be held to have involved an unreasonable, unnecessary or unjust discrimination. Applying the test announced in Ex parte Young, supra, it will be seen that the validity of the Act does not depend upon "the existence of a fact which can be determined only after investigation of a very complicated and technical character," and that "the jurisdiction of the legislature" over the subject with which the statute deals "is complete in any event." There can be no real question as to the plenary power of the legislature to prohibit and to penalize the making of undue, unreasonable and unjust discriminations by common carriers to the prejudice of any person, locality or particular kind of traffic. (See Munn vs. Illinois, 94 U.S., 113, and other cases hereinafter cited in support of this proposition.)

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

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

"Whatever of force there may be in such arguments, as applied to mere personal property capable of removal and use elsewhere, or in other business, it is wholly without force as against railroad corporations, so large a proportion of whose investment is in the soil and fixtures appertaining thereto, which cannot be removed. For a government, whether that government be a single sovereign or one of the majority, to say to an individual who has invested his means in so laudable an enterprise as the construction of a railroad, one which tends so much to the wealth and prosperity of the community, that, if he finds that the rates imposed will cause him to do business at a loss, he may quit business, and abandon that road,

is the very irony of despotism. Apples of Sodom were fruit of joy in comparison. Reading, as I do, in the preamble of the Federal Constitution, that it was ordained to "establish justice," I can never believe that it is within the property of an individual invested in and used for a purpose in which even the Argus eyes of the police power can see nothing injurious to public morals, public health, or the general welfare. I read also in the first section of the bill of rights of this state that "all men are by nature free and equal, and have certain inalienable rights, among which are those of enjoying and defending life and liberty, acquiring, possessing, and protecting property, and pursuing and obtaining safety and happiness;" and I know that, while that remains as the supreme law of the state, no legislature can directly or indirectly lay its withering or destroying hand on a single dollar invested in the legitimate business of transportation." (Chicago & N.W. Ry. vs. Dey, 35 Fed. Rep., 866, 880.)

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

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

To this it is sufficient answer to say that there is nothing in the statute which would deprive any person of his liberty "by requiring him to engage in business against his will." The prohibitions of the statute against undue, unnecessary or unreasonable regulations which the legislator has seen fit to prescribe for the conduct of the

business in which the carrier is engaged of his own free will and accord. In so far as the self-imposed limitations by the carrier upon the business conducted by him, in the various examples given by counsel, do not involve an unreasonable or unnecessary discrimination the statute would not control his action in any wise whatever. It operates only in cases involving such unreasonable or unnecessary preferences or discriminations. Thus in the hypothetical case suggested by the petitioner, a carrier engaged in the carriage of green, blue or black jusi, and duly equipped therefor would manifestly be guilty of "giving an unnecessary and unreasonable preference to a particular kind of traffic" and of subjecting to "an undue and reasonable prejudice a particular kind of traffic," should he decline to carry red jusi, to the prejudice of a particular shipper or of those engaged in the manufacture of that kind of jusi, basing his refusal on the ground of "mere whim or caprice" or of mere personal convenience. So a public carrier of passengers would not be permitted under this statute to absolve himself from liability for a refusal to carry a Chinaman, a Spaniard, an American, a Filipino, or a mestizo by proof that from "mere whim or caprice or personal scruple," or to suit his own convenience, or in the hope of increasing his business and thus making larger profits, he had publicly announced his intention not to carry one or other of these classes of passengers.

The nature of the business of a common carrier as a public employment is such that it is clearly within the power of the state to impose such just and reasonable regulations thereon in the interest of the public as the legislator may deem proper. Of course such regulations must not have the effect of depriving an owner of his property without due process of law, nor of confiscating or

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appropriating private property without just compensation, nor of limiting or prescribing irrevocably vested rights or privileges lawfully acquired under a charter or franchise. But aside from such constitutional limitations, the determination of the nature and extent of the regulations which should be prescribed rests in the hands of the legislator.

Common carriers exercise a sort of public office, and have duties to perform in which the public is interested. Their business is, therefore, affected with a public interest, and is subject of public regulation. (New Jersey Steam Nav. Co. vs. Merchants Bank, 6 How., 344, 382; Munn vs. Illinois, 94 U.S., 113, 130.) Indeed, this right of regulation is so far beyond question that it is well settled that the power of the state to exercise legislative control over railroad companies and other carriers "in all respects necessary to protect the public against danger, injustice and oppression" may be exercised through boards of commissioners. (New York etc. R. Co. vs. Bristol, 151 U.S., 556, 571; Connecticut etc. R. Co. vs. Woodruff, 153 U.S., 689.)

Regulations limiting of passengers the number of passengers that may be carried in a particular vehicle or steam vessel, or forbidding the loading of a vessel beyond a certain point, or prescribing the number and qualifications of the personnel in the employ of a common carrier, or forbidding unjust discrimination as to rates, all tend to limit and restrict his liberty and to control to some degree the free exercise of his discretion in the conduct of his business. But since the Granger cases were decided by the Supreme Court of the United States no one questions the power of the legislator to prescribe such reasonable regulations upon property clothed with a public interest as he may deem expedient or necessary to protect

the public against danger, injustice or oppression. (Munn vs.Illinois, 94 U.S., 113, 130; Chicago etc. R. Co. vs. Cutts, 94 U.S., 155; Budd vs. New York, 143 U.S., 517; Cottingvs. Goddard, 183 U.S., 79.) The right to enter the public employment as a common carrier and to offer one's services to the public for hire does not carry with it the right to conduct that business as one pleases, without regard to the interest of the public and free from such reasonable and just regulations as may be prescribed for the protection of the public from the reckless or careless indifference of the carrier as to the public welfare and for the prevention of unjust and unreasonable discrimination of any kind whatsoever in the performance of the carrier's duties as a servant of the public.

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

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

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

Coal Co., 13 Ky. L. Rep., 832); and it is to be observed in passing that these common law rules are themselves regulations controlling, limiting and prescribing the conditions under which common carriers were permitted to conduct their business. (Munn vs. Illinois, 94 U. S., 113, 133.)

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

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

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

be substantial ones, such as will justify the courts in holding the discrimination to have been reasonable and necessary under all circumstances of the case.

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

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

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the steamship company is engaged is such as to preclude a finding that a refusal to accept such explosives on any of its vessels would subject the traffic in such explosives to an undue and unreasonable prejudice and discrimination.

Plaintiff's contention in this regard is as follows:

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

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

The words "dynamite, powder or other explosives" are broad enough to include matches, and other articles of like nature, and may fairly be held to include also kerosene oil, gasoline and similar products of a highly inflammable and explosive character. Many of these articles of merchandise are in the nature of necessities in any country open to modern progress and advancement. We are not fully advised as to the methods of transportation by which they are

made commercially available throughout the world, but certain it is that dynamite, gunpowder, matches, kerosene oil and gasoline are transported on many vessels sailing the high seas. Indeed it is a matter of common knowledge that common carriers throughout the world transport enormous quantities of these explosives, on both land and sea, and there can be little doubt that a general refusal of the common carriers in any country to accept such explosives for carriage would involve many persons, firms and enterprises in utter ruin, and would disastrously affect the interests of the public and the general welfare of the community.

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

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vessel for the transportation of such products ; the reasonable possibility of danger or disaster resulting from their transportation in the form and under the conditions in which they are offered for carriage; the general nature of the business done by the carrier and, in a word, all the attendant circumstances which might affect the question of the reasonable necessity for the refusal by the carrier to undertake the transportation of this class of merchandise.

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

As we construe the Philippine statute, the mere fact that violent and destructive explosions can be obtained by the use of dynamite

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

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

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such refusal a due or a necessary or a reasonable exercise of prudence and discretion on the part of the shipowner.

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

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

We think, however, that we should not finally dispose of the case without indicating that since the institution of these proceedings the enactment of Acts No. 2307 and No. 2362 (creating a Board of Public Utility Commissioners and for other purposes) may have materially modified the right to institute and maintain such proceedings in this jurisdiction. But the demurrer having been formallly submitted for judgment before the enactment of these statutes, counsel have not been heard in this connection. We therefore refrain from any comment upon any questions which might be raised as to whether or not there may be another adequate and appropriate remedy for the alleged wrong set forth in the complaint. Our disposition of the question raised by the demurrer renders that unnecessary at this time, though it may not be improper to observe that a careful examination of those acts confirms us in the holding upon which we base our ruling on this

demurrer, that is to say "That whatever may have been the rule at the common law, common carriers in this jurisdiction cannot lawfully decline to accept a particular class of goods for carriage, to the prejudice of the traffic in those goods, unless it appears that for some sufficient reason the discrimination against the traffic in such goods is reasonable and necessary. Mere prejudice or whim will not suffice. The grounds of the discrimination must be substantial ones, such as will justify the courts in holding the discrimination to have been reasonable and necessary under all the circumstances of the case."

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

Arellano, C.J., and Trent, J., concur.Torres and Johnson, JJ., concur in the result.

Separate Opinions

MORELAND, J., concurring.

I may briefly say, although the nature of the action is stated at length in the foregoing opinion, that it is an action by a shareholder of the Yangco Steamship Co. against the company itself and certain officials of the Insular Government for an injunction against the company prohibiting it from carrying dynamite on its ships and

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preventing the defendant officials from compelling the company to do so under Act No. 98.

A demurrer was filed to the complaint raising the question not only of its sufficiency in general, but putting in issue also the right of the plaintiff to maintain the action under the allegations of his complaint.

It should be noted that all of the boats of the defendant company, under the allegations of the complaint, are boatswhich carry passengers as well as freight, and that the holding of the opinion which I am discussing compelspassenger ships to carry dynamite and all other high explosives when offered for shipment. (See paragraph 3 of the complaint.)

I base my opinion for a dismissal of the complaint on the ground that the plaintiff has not alleged in his complaint a single one of the grounds, apart from that of being a stockholder, necessary for him to allege to maintain a shareholder's action.

In the case of Hawes vs. Oakland (104 U.S., 450) it was said relative to the right of a stockholder to bring an action which should regularly be bought by the company of which he is a stockholder:

We understand that doctrine to be that, to enable a stockholder in a corporation to sustain in a court of equity in his own name, a suit founded on a right of action existing in the corporation itself, and in which the corporation itself is the appropriate plaintiff, there must exist as the foundation of the suit:

Some action or threatened action of the managing board of directors or trustees of the corporation, which is beyond the

authority conferred on them by their character or other source of organization;

Or such a fraudulent transaction, completed or contemplated by the acting managers, in connection with some other party, or among themselves, or with other shareholders as will in serious injury to the corporation, or to the interest of the other shareholders;

Or where the board of directors, or a majority of them, are acting for their own interest, in a manner destructive of the corporation itself, or of the rights of the other shareholders;

Or where the majority of shareholders themselves are oppressively and illegally pursuing a course in the name of the corporation, which is in violation of the rights of the other shareholders, and which can only be restrained by the aid of a court of equity.

It was also said: "In this country the cases outside of the Federal Courts are not numerous, and while they admit the right of a stockholder to sue in cases where the corporation is the proper party to bring the suit, they limit this right to cases where the directors are guilty of a fraud or a breach of trust, or are proceeding ultra vires."

Further on in the same case we find: "Conceding appellant's construction of the company's charter to be correct, there is nothing which forbids the corporation from dealing with the city in the manner it has done. That city conferred on the company valuable rights by special ordinance; namely, the use of the streets for the laying of its pipes, and the privilege of furnishing water to the whole population.

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It may be the exercise of the highest wisdom, to let the city use the water in the manner complained of. The directors are better able to act understandingly on this subject than a stockholder residing in New York. The great body of the stockholders residing in Oakland or other places in California may take this view of it, and be content to abide by the action of their directors."

This case is conclusive of the right of the plaintiff in the case at bar to maintain the action. The complaint is devoid of allegations necessary to sustain a complaint by a shareholder.

The contention of the plaintiff based upon the case of Ex parte Young (209 U.S. 123) is not sustained by that case. The decision there requires precisely the same allegations in the complaint as does the case of Hawes vs.Oakland. Not one of those allegations appears in the complaint in the case at bar except the allegation that the plaintiff is a stockholder.

Indeed, not only does the complaint lack allegations essential to its sufficiency, but it contains allegations which affirmatively show the plaintiff is not entitled to maintain the action. I do not stop to enumerate them all. I call attention to one only, namely the allegation that the company, by its authorized officials, has acted in strict conformity with the plaintiff's wishes and has refused to accept dynamite for carriage. This allegation shows that the plaintiff has been able to obtain his remedy and accomplish his purpose within the corporation itself, and it is sufficient, therefore, under the case of Hawes vs. Oakland and that of Ex parte Young, to require that the demurrer be sustained.

I am opposed to a decision of this case on the merits.

In the first place, there has been no adequate discussion of the merits by the parties. Substantially all of the brief of the government was devoted to what may be called the technical defects of the complaint, such as I have referred to above. Indeed, it is doubtful if any portion of the brief can be said to be directly a discussion of the merits.

In the second place, there is no real pending in this court. It is clear from the complaint that the case is a collusive one (not in any improper sense) between the plaintiff and the defendant company. There is no reason found in the complaint why the company should not have brought the action itself, every member of the board of directors and every stockholder, according to the allegations of the complaint, being in absolute accord with the contentions of the plaintiff on the proposition that the company should not carry dynamite, and having passed unanimously resolutions to that effect. Moreover, there has been no violation of Act No. 98. No shipper, or any other person, has offered dynamite to the defendant company for shipment, and, accordingly, the defendant company has not refused t o accept dynamite for carriage. Nor have the defendant government officials begun proceedings, or threatened to bring proceedings, against the defendant company in any given case. According to the allegations of the complaint, the parties are straw parties and the case a straw case.

In the third place, Act No. 98, under which this proceeding is brought and under which, it is alleged, the defendant public officers are threatening to enforce, has been repealed, in so far as it affects public service corporations, by Act No. 2307, as amended by Act No. 2362. More than that; not only has the law been repealed, but proceedings of this character have been placed, in the first instance,

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under the exclusive jurisdiction of the Board of Public Utilities. I am unable to see why this court should, under the facts of this case, undertake to render a decision on the merits when the Act under which it is brought has been repealed and the jurisdiction to render a decision on the subject matter involved has been turned over to another body. As I have said before, it was unnecessary to a decision of this case to touch the merits in any way; and I am opposed to an attempt to lay down a doctrine on a subject which is within the exclusive jurisdiction of another body created by law expressly for the purpose of removing such cases as this from the jurisdiction of the courts.

I am of the opinion that the complaint should be dismissed, but upon grounds apart from the merits. If the merits of the case were alone to govern, I should be distinctly in favor of the plaintiff's contention so far as it relates to the carriage of dynamite on ships carrying passengers; and, while I am opposed to a decision on the merits of this case, nevertheless, the merits having been brought into the case by the opinion of some of my brethren, I desire to refer briefly to the jurisprudence of the subject.

So far as my researches go, the proposition that passenger boats must carry dynamite and other high explosives is without support in the decisions of any English speaking country. I have been unable to find a case anywhere which lays down such a doctrine. Indeed, I have been unable to find a case which holds that freight boats mustcarry dynamite or other high explosives. Every case that I have been able to find states a contrary doctrine; and neither in courts nor in text books is there even a hint supporting the contention of my brethren. The opinion cites no authorities to support it; and I am constrained to believe that, in any

opinion so elaborately written, cases to support its thesis would have been cited if any such existed.

On page 372, Vol. 6 of Cyc., will be found the following: "Common carriers owe to the public the duty of carrying indifferently for all who may employ them, and in the order in which the application is made, and without discrimination as to terms. They may, however, restrict their business so as to exclude particular classes of goods, and they are not bound to receive dangerous articles, such as nitro-glycerine, dynamite, gunpowder, oil of vitriol, matches, etc."

In the case of California Powder Works vs. Atlantic and Pacific R. R. Co. (113 Cal., 329), it was said: "Nor are the exemptions contained in the contract of the shipping order void for lack of consideration. The defendant was not obliged to received and transport the powder at all. A common carrier is not bound to receive ... dangerous articles, as nitro-glycerine, dynamite, gunpowder, aqua fortis, oil of vitriol, matches, etc."

This, so far as I can learn, is the universal doctrine. The California case is reproduced in 36 L.R.A., 648 and has appended to it a note. It is well known that the L.R.A. cites in its notes all of the cases reasonably obtainable relative to the subject matter of the case which it annotates. The note in L.R.A. with reference to the California case cites a considerable number of authorities holding that a carrier of goods is not obliged to receive dynamite or other dangerous explosives for carriage. It does not cite or refer to a case which holds the contrary.

The reporter of the L.R.A, at the beginning of the note with reference to the California case, says: "The law upon this question is

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to be drawn from inference or from dicta rather than from decided cases. California Powder Worksvs. Atlantic & Pacific R. R. Co. seems to be the first case to have squarely decided that the carrier is not bound to transport dangerous articles, although there has been what may be regarded as a general understanding that such is the fact."

In Hutchinson on Carriers (sec. 145), it is said, relative to the necessity of a carrier receiving for carriage dynamite or other dangerous explosives: "He may, for instance, lawfully refuse to receive them (the goods) if they are improperly packed or if they are otherwise in an unfit condition for carriage. Or he may show that the goods offered were of a dangerous character, which might subject him or his vehicle, or strangers or his passengers, or his other freight, to the risk of injury."

In a note to the text the author says: "Nor is he bound to accept such articles as nitro-glycerine, dynamite, gunpowder, oil of vitriol and the like."

In Elliot on Railroads (vol. 4, p. 151), appears the following: "Again, goods may properly be refused which are tendered in an unfit condition for transportation, or which are dangerous, or which are reasonably believed to be dangerous."

In the case of Boston & Albany Railroad Co. vs. Shanly (107 Mass., 568), the court said at page 576: "Both the dualin and the exploders are thus alleged to be explosive and dangerous articles. Each of them was sent without giving notice of its character to the plaintiffs, and they were ignorant in respect to it. The rule of law on this subject is in conformity with the dictates of common sense and

justice, and is well established. One who has in his possession a dangerous article, which he desires to send to another, am send it by a common carrier if he will take it; but it is his duty to give him notice of its character, so that he may either refuse to take it, or be enabled, if he takes it, to make suitable provision against the danger."

This case cites three English cases as follows, Williams vs. East India Co. (3 East, 192); Brass vs. Maitland (6 El. & Bl. 470; Farrant vs. Barnes (11 C.B. [N.S.], 553).

In the case of Porcher vs. Northeastern R. Co. (14 Rich. L., 181), the court quoted with approval the following from Story on Bailments: "If he (the carrier) refuses to take charge of the goods because his coach is full or because they are of a nature which will at the time expose them to extraordinary danger or to popular rage, or because he has no convenient means of carrying such goods with security, etc., these will furnish reasonable grounds for his refusal, and will, if true, be a sufficient legal defense to a suit for the non-carriage of the goods."

In the case of Fish vs. Chapman (2 Ga., 349), the court said: "A common carrier is bound to convey the goods of any person offering to pay his hire, unless his carriage be already full, or the risk sought to be imposed upon him extraordinary, or unless the goods be of a sort which he cannot convey or is not in the habit of conveying."

In the case of Farrant vs. Barnes, above cited, the court said that the shipper "knowing the dangerous character of the article and omitting to give notice of it to the carrier so that he might exercise

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his discretion as to whether he would take it or not was guilty of a clear breach of duty."

To the same effect, generally, are Jackson vs. Rodgers (2 Show., 327); Riley vs. Horne (5 Bing., 217); Lane vs.Cotton (1 Ld. Raym., 646); Edwards vs. Sheratt (1 East, 604); Elsee vs. Gatward (5 T. R., 143); Dwight vs.Brewster (1 Pick., 50); Jencks vs. Coleman (2 Summ., 221); Story on Bail., 322, 323; Patton vs. Magrath (31 Am. Dec., 552).

In Story on Bailments (sec. 508), is found the following: "If a carrier refuses to take charge of goods because his coach is full; or because the goods are of a nature which will at the time expose them to extraordinary danger; ... these will furnish reasonable grounds for his refusal; and will, if true, be a sufficient legal defense to a suit for the non-carriage of the goods."

It will be noted that all of these cases holding that a common carrier is not obliged to receive a dangerous substance, such as dynamite and other high explosives, refer exclusively to carriers of merchandise and not to carriers of passengers. If the authorities are uniform in holding that companies carrying freight are not obliged to accept dangerous explosives for carriage, there can be no question as to what the rule would be with reference to a carrier of passengers.

Far from requiring passenger boats to accept dynamite and other high explosives for carriage, the attitude of the people of the United States and of various States is shown by their statutes. The laws of the United States and of many of the States prohibit passengers boats and passenger trains from carrying dangerous explosives.

Sections 232, 233, 234, 2345 and 236 of the Criminal Code of the United States (Compiled Stat., 1901), read:

SEC. 232. It shall be unlawful to transport, carry, or convey, any dynamite, gunpowder, or other explosive, between a place in a foreign country and a place within or subject to the jurisdiction of the United States, or between a place in any State, Territory, or District of the United States, or place non-contiguous to but subject to the jurisdiction thereof, and a place in any other State, Territory, or District of the United States, or place non-contiguous to but subject to the jurisdiction thereof, on any vessel or vehicle of any description operated by a common carrier, which vessel or vehicle is carrying passengers for hire: . . ..

SEC. 233. The Interstate Commerce Commission shall formulate regulations for the safe transportation of explosives, which shall be binding all common carriers engaged in interstate or foreign commerce which transport explosives by land. Said commission, of its own motion, or upon application made by any interested party, may make changes or modifications in such regulations, made desirable by new information or altered conditions. Such regulations shall be in accord with the best known practicable means for securing in transit, covering the packing, marking, loading, handling while in transit, and the precautions necessary to determine whether the material when offered is in proper condition to transport.

Such regulations, as well as all changes or modifications thereof, shall take effect after ninety days after their formulation and publication commission and shall be in effect until reversed, set aside, or modified.

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SEC. 234. It shall be unlawful to transport, carry, or convey, liquid nitroglycerin, fulminate in bulk "in dry condition, or other like explosive, between a place in a foreign country and a place within or subject to the jurisdiction of the United States, or between a place in one State, Territory, or District of the United States, or place non-contiguous to but subject to the jurisdiction thereof, and a place in any other State, Territory, or District of the United States, or place non-contiguous to but subject to the jurisdiction thereof, on any vessel or vehicle of any description operated by a common carrier in the transportation of passengers or articles of commerce by land or water.

SEC. 235. Every package containing explosives or other dangerous articles when presented to a common carrier for shipment shall have plainly marked on the outside thereof the contents thereof; and it shall be unlawful for any person to deliver, or cause to be delivered, to any common carrier engaged in interstate or foreign commerce by land or water, for interstate or foreign transportation, or to carry upon any vessel or vehicle engaged in interstate or foreign transportation, any explosive, or other dangerous article, under any false or deceptive marking, description, invoice, shipping order, or other declaration, or without informing the agent of such carrier of the true character thereof, at or before the time such delivery or carriage is made. Whoever shall knowingly violate, or cause to be violated any provision of this section, or of the three sections last preceding, or any regulation made by the Interstate Commerce Commission in pursuance thereof, shall be fined not more than two thousand dollars, or imprisoned not more than eighteen months, or both.

SEC. 236. When the death or bodily injury of any person is caused by the explosion of any article named in the four sections last preceding, while the same is being placed upon any vessel or vehicle to be transported in violation thereof, or while the same is being so transported, or while the same is being removed from such vessel or vehicle, the person knowingly placing, or aiding or permitting the placing of such articles upon any such vessel or vehicle, to be so transported, shall be imprisoned not more than ten years.

Human ingenuity has been continuously exercised for ages to make sea travel safe, that men might sail the seas with as little risk as possible; that they might rely upon the quality of the ship and the character and experiences of the sailors who manned her; that they might feel that the dangers of the deep had been reduced to the minimum. Not only this; the abilities of legislators have been taxed to the same end; to frame that would ensure seaworthy ships, safe appliances, and reliable officers and crews; to curb the avarice of those who would subordinate the safety of passengers to a desire for freight; and to so regulate travel by sea that all might safely confide their property and their lives to the ships sailing under the flag of their country. Can a decision which requires passenger ships to carry dynamite and all high explosives be made to harmonize with this purpose? What is there in the Philippine Islands to justify the requirement that passenger ships carry dynamite, while in the United States the carrying of dynamite by passenger ships is a crime? Why should passengers in the Philippine Islands be subjected to conditions which are abhorent in the United States? Why compel shipowners in the Philippine Islands to perform acts which, if done in the United States, would send them to the penitentiary?

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I do not believe that we should require passengers to travel on ships carrying, perhaps, many tons of nitro-glycerine, dynamite or gunpowder in their holds; nor do I believe that any public official should do anything calculated to add to the calamity of fire, collision, or shipwreck the horrors of explosion.

ARAULLO, J., dissenting:

I do not agree with the decision of the majority of this court in this case, first, because one of the grounds of the demurrer to the complaint — the first one — is that of lack of legal capacity to sue on the part of the plaintiff and nothing is said in the decision regarding this very important point. It is one which ought to have received special attention, even before the other alleged in the demurrer that the complaint does not state facts sufficient to constitute a cause of action, and the only one that received any consideration in the decision in question. Second, because notwithstanding that in the decision no consideration was paid to the alleged lack of legal capacity on the part of the plaintiff, he is, reason of the demurrer being sustained, authorized to present an amended complaint within ten days, an authorization which could not and should not have on the part of said plaintiff was not lacking.

DECISION OF MARCH 31, 1915.

CARSON, J.:

This case is again before us upon a demurrer interposed by the respondent officials of the Philippine Government to an amended

complaint filed after publication of our decision sustaining the demurrer to the original complaint.

In our former opinion, entered November 5, 1914, we sustained the demurrer on the ground that the original complaint did not set forth facts sufficient to constitute a cause of action. In that decision we held that the statute (Act No. 98) the validity of which was attacked by counsel por plaintiff was, when rightly construed, a valid and constitutional enactment, and ruled:

That whatever may have been the rule at the common law, common carriers in this jurisdiction cannot lawfully decline to accept a particular class in those goods, unless it appears that for some sufficient reason the discrimination against the traffic in such goods is reasonable and necessary. Mere prejudice or whim will not suffice. The grounds of the discrimination must be substantial ones, such as will justify the courts in holding the discrimination to have been reasonable and necessary under all the circumstances of the case.

x x x x x x x x x

The traffic in dynamite, gunpowder and other explosives is vitally essential to the material and general welfare of the people of these Islands. If dynamite, gunpowder and other explosives are to continue in general use throughout the Philippines, they must be transported by water from port to port in the various islands which make up the Archipelago. We are satisfied therefore that the refusal by a particular vessel, engaged as a common carrier of merchandise in the coastwise trade of the Philippine Islands, to accept any or all of these explosives for carriage would constitute a violation of the

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prohibitions against discriminations penalized under the statue, unless it can be shown by affirmative evidence that there is so real and substantial a danger of disaster necessarily involved in the carriage of any or all of these articles of merchandise as to render such refusal a due or a necessary or a reasonable exercise of prudence and discretion on the part of the ship owner.

Resting our judgment on these rulings we held that the allegations of the complaint, which in substance alleged merely that the respondent officials were coercing the respondent steamship company to carry explosives upon some of their vessels, under authority of, and in reliance upon the provisions of the Act, did not set forth facts constituting a cause of action; or in other words, that the allegations of the complaint even if true, would sustain a finding that the respondent officials were acting "without or in excess of their jurisdiction" and lawful authority in the premises.

The amended complaint filed on November 14, 1914, is substantially identical with the original complaint, except that it charges the respondent officials, as of the date of the amended complaint, with the unlawful exercise of the authority or intent to exercise unlawful authority which should be restrained, and substitutes the names of the officers now holding the offices of Collector of Customs, Attorney-General and prosecuting attorney for those of the officials holding those offices at the date of the filing of the original complaint; and except further that it adds the following allegations:

That each and every one of the vessels of the defendant company is dedicated and devoted to the carriage of passengers between various ports in the Philippine Islands, and each of said vessels, on

all of said voyages between the said ports, usually and ordinarily does carry a large number of such passengers.

That dynamite, powder, and other explosives are dangerous commodities that cannot be handled and transported in the manner and from in which ordinary commodities are handled and transported. That no degree of care, preparation and special arrangement in the handling and transportation of dynamite, powder and other explosives will wholly eliminate the risk and danger of grave peril and loss therefrom, and that the highest possible degree of care, preparation of said commodities is only capable of reducing the degree of said danger and peril. That each and every one of the vessels of the defendant company is wholly without special means for the handling, carriage, or transportation of dynamite, powder and other explosives and such special means therefor which would appreciably and materially reduce the danger and peril therefrom cannot be installed in said vessels without a costs and expense unto said company that is unreasonable and prohibitive.

As we read them, the allegations of the original complaint were intended to raise and did in fact raise, upon demurrer, a single question which, if ruled upon favorably to the contention of plaintiff, would, doubtless, have put an end to this litigation and to the dispute between the plaintiff stockholder of the steamship company and the officials of the Philippine Government out of which it has arisen.

In their brief, counsel for plaintiff, in discussing their right to maintain an action for a writ of prohibition, relied upon the

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authority of Ex parte Young (209 U. S. [123] 163, 165), and asserted that:

Upon the authority, therefore, of Ex parte Young, supra, the merits of the question pending between petitioner and respondents in this action is duly presented to this court by the complaint of petitioner and general demurrer of respondents thereto. That question, in plain terms, is as follows:

Is the respondent Yangco Steamship Company legally required to accept for carriage and carry "any person or property offering for carriage?"

"The petitioner contends that the respondent company is a common carrier of only such articles of freight as they profess to carry and hold themselves out as carrying;" and in discussing the legal capacity of plaintiff to maintain this action, counsel in their printed brief asserted that "here we have no address to the court to determine whether a minority or a majority shall prevail in the corporate affairs; here we ask plainly and unmistakably who shall fix the limits of the corporate business — the shareholders and directors of the corporation, or certain officials of the government armed with an unconstitutional statute?

Counsel for plaintiff contended that under the guaranties of the Philippine Bill of Rights a common carrier in the Philippine Islands may arbitrarily decline to accept for carriage any shipment or merchandise of a class which it expressly or impliedly declines to accept from all shippers alike; that "the duty of a common carrier to carry for all who offer arises from the public profession he has made, and is limited by it;" that under this doctrine the respondent

steamship company might lawfully decline to accept for carriage "dynamite, powder or other explosives," without regard to any question as to the conditions under which such explosives are offered for carriage, or as to the suitableness of its vessels for the transportation of such explosives, or as to the possibility that the refusal to accept such articles of commerce in a particular case might have the effect of subjecting any person, locality or the traffic in such explosives to an undue, unreasonable or unnecessary prejudice or discrimination: and in line with these contentions counsel boldly asserted that Act No. 98 of the Philippine Commission is invalid and unconstitutional in so far as it announces a contrary doctrine or lays down a different rule. The pleader who drew up the original complaint appears to have studiously avoided the inclusion in that complaint of any allegation which might raise any other question. In doing so he was strictly within his rights, and having in mind the object sought to be attained, the original complaint is a model of skillful pleading, well calculated to secure the end in view, that is to say, a judgment on the precise legal issue which the pleader desired to raise as to the construction and validity of the statute, which would put an end to the controversy, if that issue were decided in his favor.

Had the contentions of plaintiff as to the unconstitutionality of the statute been well founded, a writ of prohibition from this court would have furnished an effective and appropriate remedy for the alleged wrong. The issue presented by the pleadings on the original complaint, involving a question as to the validity of a statute and affecting, as it did, the shipping and public interests of the whole Islands, and submitting be complicated question or series of questions of fact, was of such a nature that this court could not

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properly deny the right of the plaintiff to invoke its jurisdiction in original proceedings. We deemed it our duty therefore to resolve the real issue raised by the demurrer, and since we are of opinion that the contentions of counsel for plaintiff were not well founded, and since a ruling to that effect necessarily resulted in an order sustaining the demurrer, we did not deem it necessary or profitable to consider questions of practice or procedure which it might have been necessary to decide under a contrary ruling as to the principal question raised by the pleadings; nor did we stop to consider whether the "subject matter involved" in the controversy might properly be submitted to the Board of Public Utility Commissioners, because upon the authority of Ex parte Young (supra) we are satisfied as to the jurisdiction and competency of this court to deal with the real issues raised by the pleadings on the original complaint, and because, furthermore, the Act of the Philippine Legislature creating the Board of Public Utility Commissioners could not deprive this court of jurisdiction already invoked in prohibition proceedings instituted for the purpose of restraining the respondent official as of the Government from the alleged unlawful exercise of authority under color of an invalid and without jurisdiction in the premises.

The amended complaint, however, presents for adjudication in original prohibition proceedings in this court questions of a wholly different character from those submitted in the original complaint.

In so far as it reiterates the allegation s of the former complaint to the effect that the respondent officials are unlawfully coercing the steamship company by virtue and under color of the provisions of an invalid or unconstitutional statute, it is manifest, of course, that the amended complaint is no less subject to criticism than was the

original complaint. If, therefore, the action can be maintained upon its allegations that those officials are coercing the company to carry explosives on vessels which, as a matter of fact, are not suitably equipped for that purpose, and which from the nature of the business in which they are engaged should not be required to carry explosives.

It will readily be seen, under our former opinion, that these allegations raise no question as to the validity or constitutionality of any statute; that the real question which plaintiff seeks to submit to this court in original prohibition proceedings is whether the respondent officials of the Government are correctly exercising the discretion and authority with which they have been clothed; and that his contention in the amended complaint is not, as it was in the original complaint, that these officials are acting without authority and in reliance upon an invalid and unconstitutional statute, but rather that they are exercising their authority improvidently, unwisely or mistakenly.

Under the provisions of sections 226 and 516 of the Code of Civil Procedure jurisdiction in prohibition proceedings is conferred upon the courts when the complaint alleges "the proceedings of any inferior tribunal, corporation, board, or person, whether exercising functions judicial or ministerial, were without or in excess of the jurisdiction of such tribunal, corporation, board or person." It is manifest therefore that the allegations of the amended complaint, even if true, will not sustain the issuance of a writ of prohibition without further amendment unless they be construed to in effect a charge that the respondent officials are abusing the discretion conferred upon them in the exercise of their authority in such

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manner that the acts complained of should be held to be without or in excess of their jurisdiction.

It may well be doubted whether the doctrine of the case Ex parte Young (supra), relied upon by the plaintiff in his argument be invoked in support of a right of action predicated upon such premises; so also, since the acts complained of in the amended complaint are alleged to have been done at a date subsequent to the enactment of the statutes creating the Board of Public Utility Commissioners, it may well be doubted whether the courts should entertain prohibition proceedings seeking to restrain alleged abuses of discretion on the part of officers and officials of the Government, and of public service corporations with regard to the rules under which such corporations are operated, until and unless redress for the alleged wrong has been sought at the hands of the Board.

We do not deem it expedient or necessary, however, to consider or decide any of these questions at this time, because we are of opinion that we should not permit our original jurisdiction to be set in motion upon the allegations of the amended complaint.

It is true that this court is clothed with original jurisdiction in prohibition proceedings (sec. 516, Act No. 190). But this jurisdiction is concurrent with the original jurisdiction of the various Courts of First Instance throughout the Islands, except in cases where the writ runs to restrain those courts themselves, when of course it is exclusive; and we are satisfied that it could have been the intention of the legislator to require this court to assume original jurisdiction in all cases wherein the plaintiff elects to invoke it. Such a practice might result in overwhelming this court with the duty of entertaining and deciding original proceedings which from their

nature could much better be adjudicated in the trial courts; and in unnecessarily diverting the time and attention of the court from its important appellate functions to the settlement of controversies of no especial interest to the public at large, in the course of which it might become necessary to take testimony and to make findings touching complicated and hotly contested issues of fact.

We are of opinion and so hold that unless special reasons appear therefor, this court should decline to permit its original jurisdiction to be invoked in prohibition proceedings, and this especially when the adjudication of the issues raised involves the taking of evidence and the making of findings touching controverted facts, which, as a rule, can be done so much better in the first instance by a trial court than an appellate court organized as is ours.

Spelling on Injunctions and Other Extraordinary Remedies (vol. 2, p. 1493), in discussing the cases in which the appellate courts in the United States permit their original jurisdiction to be invoked where that jurisdiction is concurrent with that of some inferior court, says:

Of the plan of concurrent jurisdiction West Virginia may be taken as an illustration. The Supreme Court of Appeals of that State has concurrent original jurisdiction with the circuit courts in cases of prohibition, but by a rule adopted by the former court it will not take such original jurisdiction unless reasons appear therefor.

We deemed it proper to assume jurisdiction to adjudicate and decide the issues raised by the rulings on the original complaint, involving as they did a question as to the validity of a public statute of vital interest to shippers and shipowners generally as also to the public at large, presenting for determination no difficult or

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complicated questions of fact: but we are satisfied that we should decline to take jurisdiction of the matters relied upon in the amended complaint in support of plaintiff's prayer for the writ.

The question of the construction and validity of the statute having been disposed of in our ruling on the demurrer to the original complaint, it must be apparent that of the allegations of the amended complaint are sufficient to maintain the plaintiff's action for a writ of prohibition, a question as to which we expressly reserve our opinion, the action should be brought in one of the Courts of First Instance.

Twenty days hereafter let the complaint de dismissed at the costs of the plaintiff, unless in the meantime it is amended so as to disclose a right upon the part of the plaintiff to invoke the original jurisdiction of this court without first proceeding in one of the Courts of First Instance. So ordered.

Arellano, C.J., Torres, and Trent, JJ., concur.

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

Carson, J.

FACTS:

F.C. Fisher v. Yangco Steamship Co.

Fisher is a stockholder in the Yangco Steamship Company. The directors of the companyadopted a resolution which was thereafter ratified and affirmed by the shareholders of thecompany, expressly declaring and providing that the classes of merchandise to be carriedby the company in its business as a common carrier do not include dynamite, powder orother explosives, and expressly prohibiting the officers, agents and servants of thecompany from offering to carry, accepting for carriage said dynamite, powder or otherexplosives.

Then Acting Collector of Customs demanded and required of the company the acceptanceand carriage of such explosives. He has refused and suspended the issuance of thenecessary clearance documents of the vessels of the company unless and until thecompany consents to accept such explosives for carriage. Fisher was advised thatshould the company decline to accept such explosives for carriage, the respondentAttorney-General of the Philippine Islands and the respondent prosecuting attorney of thecity of Manila intend to institute proceedings under the penal provisions of sections 4, 5,and 6 of Act No. 98 of the Philippine Commission against the company, its managers,agents and servants.

Notwithstanding the demands of Fisher, the manager, agents and servants of the companydecline and refuse the carriage of such explosives.

ISSUE:

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WON the acts complained of had the effect of making or giving an unreasonable orunnecessary preference or advantage to any person, locality or particular kind of traffic, orof subjecting any person, locality, or particular kind of traffic to any undue or unreasonableprejudice or discrimination

HELD:

No.

There may be some vessels engaged in business as common carriers of merchandise,which for lack of suitable deck space or storage rooms might be justified in declining tocarry kerosene oil, gasoline, and similar products, even when offered for carriage securelypacked in cases; and few vessels are equipped to transport those products in bulk. But inany case of a refusal to carry such products which would subject any person, locality or thetraffic in such products would be necessary to hear evidence before making an affirmativefinding that such prejudice or discrimination was or was not unnecessary, undue orunreasonable. The making of such a finding would involve a consideration of the suitabilityof the vessel for the transportation of such products; the reasonable possibility of dangeror disaster resulting from their transportation in the form and under the conditions inwhich they are offered for carriage; the general nature of the business done by the carrierand, in a word, all the attendant circumstances which might affect the question of thereasonable necessity for the refusal by the carrier to undertake the transportation of thisclass of merchandise

PhilippineLaw.info » Jurisprudence » 1940 » June » PhilippineLaw.info » Jurisprudence » Phil. Rep. » Vol. 70 »

G.R. No. 47065, Pangasinan Transportation Co. Inc. v. Public Service Commission, 70 Phil. 221

Republic of the PhilippinesSUPREME COURTManila

EN BANC

June 26, 1940

G.R. No. 47065PANGASINAN TRANSPORTATION CO., INC., petitioner, vs.THE PUBLIC SERVICE COMMISSION, respondent.

C. de G. Alvear for petitioner.Evaristo R. Sandoval for respondent.

LAUREL, J.:

The petitioner has been engaged for the past twenty years in the business of transporting passengers in the Province of Pangasinan and Tarlac and, to a certain extent, in the Province of Nueva Ecija and Zambales, by means of motor vehicles commonly known as TPU buses, in accordance with the terms and conditions of the

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certificates of public convenience issued in its favor by the former Public Utility Commission in cases Nos. 24948, 30973, 36830, 32014 and 53090. On August 26, 1939, the petitioner filed with the Public Service Commission an application for authorization to operate ten additional new Brockway trucks (case No. 56641), on the ground that they were needed to comply with the terms and conditions of its existing certificates and as a result of the application of the Eight Hour Labor Law. In the decision of September 26, 1939, granting the petitioner's application for increase of equipment, the Public Service Commission ordered:

Y de acuerdo con que se provee por el articulo 15 de la ley No. 146 del Commonwealth, tal como ha sido enmendada por el articulo 1 de la Ley No. 454, por la presente se enmienda las condiciones de los certificados de convenciencia publica expedidos en los expedientes Nos. 24948, 30973, 36831, 32014 y la authorizacion el el expediente No. 53090, asi que se consideran incorporadas en los mismos las dos siguientes condiciones:

Que los certificados de conveniencia publica y authorizacion arriba mencionados seran validos y subsistentes solamente durante de veinticinco (25) anos, contados desde la fecha de la promulgacion de esta decision.

Que la empresa de la solicitante porda ser adquirida por el Commonwealth de Filipinas o por alguna dependencia del mismo en cualquier tiempo que lo deseare previo pago del precio d costo de su equipo util, menos una depreciacion razonable que se ha fijar por la Comision al tiempo de su adquisicion.

Not being agreeable to the two new conditions thus incorporated in its existing certificates, the petitioner filed on October 9, 1939 a motion for reconsideration which was denied by the Public Service Commission on November 14, 1939. Whereupon, on November 20, 1939, the present petition for a writ of certiorari was instituted in this court praying that an order be issued directing the secretary of the Public Service Commission to certify forthwith to this court the records of all proceedings in case No. 56641; that this court, after hearing, render a decision declaring section 1 of Commonwealth Act No. 454 unconstitutional and void; that, if this court should be of the opinion that section 1 of Commonwealth Act No. 454 is constitutional, a decision be rendered declaring that the provisions thereof are not applicable to valid and subsisting certificates issued prior to June 8, 1939. Stated in the language of the petitioner, it is contended:

1. That the legislative powers granted to the Public Service Commission by section 1 of Commonwealth Act No. 454, without limitation, guide or rule except the unfettered discretion and judgment of the Commission, constitute a complete and total abdication by the Legislature of its functions in the premises, and for that reason, the Act, in so far as those powers are concerned, is unconstitutional and void.

2. That even if it be assumed that section 1 of Commonwealth Act No. 454, is valid delegation of legislative powers, the Public Service Commission has exceeded its authority because: (a) The Act applies only to future certificates and not to valid and subsisting certificates issued prior to June 8, 1939, when said Act took effect, and (b) the Act, as applied by the Commission, violates constitutional guarantees.

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Section 15 of Commonwealth Act No. 146, as amended by section 1 of Commonwealth Act No. 454, invoked by the respondent Public Service Commission in the decision complained of in the present proceedings, reads as follows:

With the exception to those enumerated in the preceding section, no public service shall operate in the Philippines without possessing a valid and subsisting certificate from the Public Service Commission, known as "certificate of public convenience," or "certificate of convenience and public necessity," as the case may be, to the effect that the operation of said service and the authorization to do business will promote the public interests in a proper and suitable manner.

The Commission may prescribed as a condition for the issuance of the certificate provided in the preceding paragraph that the service can be acquired by the Commonwealth of the Philippines or by any instrumentality thereof upon payment of the cost price of its useful equipment, less reasonable depreciation; and likewise, that the certificate shall valid only for a definite period of time; and that the violation of any of these conditions shall produce the immediate cancellation of the certificate without the necessity of any express action on the part of the Commission.

In estimating the depreciation, the effect of the use of the equipment, its actual condition, the age of the model, or other circumstances affecting its value in the market shall be taken into consideration.

The foregoing is likewise applicable to any extension or amendment of certificates actually force and to those which may hereafter be

issued, to permits to modify itineraries and time schedules of public services and to authorization to renew and increase equipment and properties.

Under the first paragraph of the aforequoted section 15 of Act No. 146, as amended, no public service can operate without a certificate of public convenience or certificate of convenience and public necessity to the effect that the operation of said service and the authorization to do business will "public interests in a proper and suitable manner." Under the second paragraph, one of the conditions which the Public Service Commission may prescribed the issuance of the certificate provided for in the first paragraph is that "the service can be acquired by the Commonwealth of the Philippines or by any instrumental thereof upon payment of the cost price of its useful equipment, less reasonable depreciation," a condition which is virtually a restatement of the principle already embodied in the Constitution, section 6 of Article XII, which provides that "the State may, in the interest of national welfare and defense, establish and operate industries and means of transportation and communication, and, upon payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the Government. "Another condition which the Commission may prescribed, and which is assailed by the petitioner, is that the certificate "shall be valid only for a definite period of time." As there is a relation between the first and second paragraphs of said section 15, the two provisions must be read and interpreted together. That is to say, in issuing a certificate, the Commission must necessarily be satisfied that the operation of the service under said certificateduring a definite period fixed therein "will promote the public interests in a proper

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and suitable manner." Under section 16 (a) of Commonwealth Act. No. 146 which is a complement of section 15, the Commission is empowered to issue certificates of public convenience whenever it "finds that the operation of the public service proposed and the authorization to do business will promote the public interests in a proper and suitable manner." Inasmuch as the period to be fixed by the Commission under section 15 is inseparable from the certificate itself, said period cannot be disregarded by the Commission in determining the question whether the issuance of the certificate will promote the public interests in a proper and suitable manner. Conversely, in determining "a definite period of time," the Commission will be guided by "public interests," the only limitation to its power being that said period shall not exceed fifty years (sec. 16 (a), Commonwealth Act No. 146; Constitution, Art. XIII, sec. 8.) We have already ruled that "public interest" furnishes a sufficient standard. (People vs.Fernandez and Trinidad, G. R. No. 45655, promulgated June 15, 1938; People vs.Rosenthal and Osmeña, G. R. Nos. 46076 and 46077, promulgated June 12, 1939, citing New York Central Securities Corporation vs. U.S.A., 287 U.S. 12, 24, 25, 77 Law. ed. 138, 145, 146; Schenchter Poultry Corporation vs. I.S., 295, 540, 79 Law. ed. 1570, 1585;Ferrazzini vs. Gsell, 34 Phil., 697, 711- 712.)

Section 8 of Article XIII of the Constitution provides, among other things, that no franchise, certificate, or any other form of authorization for the operation of a public utility shall be "for a longer period than fifty years," and when it was ordained, in section 15 of Commonwealth Act No. 146, as amended by Commonwealth Act No. 454, that the Public Service Commission may prescribed as a condition for the issuance of a certificate that it "shall be valid only

for a definite period of time" and, in section 16 (a) that "no such certificates shall be issued for a period of more than fifty years," the National Assembly meant to give effect to the aforesaid constitutional mandate. More than this, it has thereby also declared its will that the period to be fixed by the Public Service Commission shall not be longer than fifty years. All that has been delegated to the Commission, therefore, is the administrative function, involving the use discretion, to carry out the will of the National Assembly having in view, in addition, the promotion of "public interests in a proper and suitable manner." The fact that the National Assembly may itself exercise the function and authority thus conferred upon the Public Service Commission does not make the provision in question constitutionally objectionable.

The theory of the separation of powers is designed by its originators to secure action and at the same time to forestall overaction which necessarily results from undue concentration of powers, and thereby obtain efficiency and prevent deposition. Thereby, the "rule of law" was established which narrows the range of governmental action and makes it subject to control by certain devices. As a corollary, we find the rule prohibiting delegation of legislative authority, and from the earliest time American legal authorities have proceeded on the theory that legislative power must be exercised by the legislature alone. It is frankness, however, to confess that as one delves into the mass of judicial pronouncement, he finds a great deal of confusion. One thing, however, is apparent in the development of the principle of separation of powers and that is that the maxim of delegatus non potest delegari or delegata potestas non potest delegari, attributed to Bracton (De Legius et Consuetedinious Angliae, edited by G. E. Woodbine, Yale University

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Press, 1922, vol. 2, p. 167) but which is also recognized in principle in the Roman Law (D. 17.18.3), has been made to adapt itself to the complexities of modern governments, giving rise to the adoption, within certain limits, of the principle of "subordinate legislation," not only in the United States and England but in practically all modern governments. (People vs. Rosenthal and Osmeña, G. R. Nos. 46076 and 46077, promulgated June 12, 1939.) Accordingly, with the growing complexity of modern life, the multiplication of the subjects of governmental regulation, and the increased difficulty of administering the laws, there is a constantly growing tendency toward the delegation of greater powers by the legislature, and toward the approval of the practice by the court. (Dillon Catfish Drainage Dist, v. Bank of Dillon, 141 S. E. 274, 275, 143 S. Ct. 178; State vs. Knox County, 54 S. W. 2d. 973, 976, 165 Tenn. 319.) In harmony with such growing tendency, this Court, since the decision in the case of Compañia General de Tabacos de Filipinas vs. Board of Public Utility Commissioner(34 Phil., 136), relied upon by the petitioner, has, in instances, extended its seal of approval to the "delegation of greater powers by the legislature." (Inchausti Steamship Co. vs. Public Utility Commissioner, 44 Phil., 363; Autobus Co. vs. De Jesus, 56 Phil., 446 ;People vs. Fernandez & Trinidad, G. R. No. 45655, promulgated June 15, 1938; People vs.Rosenthal & Osmeña, G. R. Nos. 46076, 46077, promulgated June 12, 1939; and Robb and Hilscher vs. People, G. R. No. 45866, promulgated June 12, 1939.)

Under the fourth paragraph of section 15 of Commonwealth Act No. 146, as amended by Commonwealth Act No. 454, the power of the Public Service Commission to prescribed the conditions "that the service can be acquired by the Commonwealth of the Philippines or

by any instrumentality thereof upon payment of the cost price of its useful equipment, less reasonable," and "that the certificate shall be valid only for a definite period of time" is expressly made applicable "to any extension or amendment of certificates actually in force" and "to authorizations to renew and increase equipment and properties." We have examined the legislative proceedings on the subject and have found that these conditions were purposely made applicable to existing certificates of public convenience. The history of Commonwealth Act No. 454 reveals that there was an attempt to suppress, by way of amendment, the sentence "and likewise, that the certificate shall be valid only for a definite period of time," but the attempt failed:

x x x x x x x x x

Sr. CUENCO. Se?or Presidente, para otra enmienda. En la misma pagina, lineas 23 y 24, pido que se supriman las palabras 'and likewise, that the certificate shall be valid only for a definite period time.' Esta disposicion del proyecto autoriza a la Comision de Servicios Publicos a fijar un plazo de vigencia certificado de conveniencia publica. Todo el mundo sabe que bo se puede determinar cuando los intereses del servicio publico requiren la explotacion de un servicio publico y ha de saber la Comision de Servisios, si en un tiempo determinado, la explotacion de algunos buses en cierta ruta ya no tiene de ser, sobre todo, si tiene en cuenta; que la explotacion de los servicios publicos depende de condiciones flutuantes, asi como del volumen como trafico y de otras condiciones. Ademas, el servicio publico se concede por la Comision de Servicios Publicos el interes publico asi lo exige. El interes publico no tiene duracion fija, no es permanente; es un

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proceso mas o menos indefinido en cuanto al tiempo. Se ha acordado eso en el caucus de anoche.

EL PRESIDENTE PRO TEMPORE. ?Que dice el Comite?

Sr. ALANO. El Comite siente tener que rechazar esa enmienda, en vista de que esto certificados de conveniencia publica es igual que la franquicia: sepuede extender. Si los servicios presentados por la compa?ia durante el tiempo de su certificado lo require, puede pedir la extension y se le extendera; pero no creo conveniente el que nosotros demos un certificado de conveniencia publica de una manera que podria pasar de cincuenta anos, porque seria anticonstitucional.

x x x x x x x x x

By a majority vote the proposed amendment was defeated. (Sesion de 17 de mayo de 1939, Asamblea Nacional.)

The petitioner is mistaken in the suggestion that, simply because its existing certificates had been granted before June 8, 1939, the date when Commonwealth Act No. 454, amendatory of section 15 of Commonwealth Act No. 146, was approved, it must be deemed to have the right of holding them in perpetuity. Section 74 of the Philippine Bill provided that "no franchise, privilege, or concession shall be granted to any corporation except under the conditions that it shall be subject to amendment, alteration, or repeal by the Congress of the United States." The Jones Law, incorporating a similar mandate, provided, in section 28, that "no franchise or right shall be granted to any individual, firm, or corporation except under the conditions that it shall be subject to amendment, alteration, or repeal by the Congress of the United States." Lastly, the

Constitution of the Philippines provided, in section 8 of Article XIII, that "no franchise or right shall be granted to any individual, firm, or corporation, except under the condition that it shall be subject to amendment, alteration, or repeal by the National Assembly when the public interest so requires." The National Assembly, by virtue of the Constitution, logically succeeded to the Congress of the United States in the power to amend, alter or repeal any franchise or right granted prior to or after the approval of the Constitution; and when Commonwealth Acts Nos. 146 and 454 were enacted, the National Assembly, to the extent therein provided, has declared its will and purpose to amend or alter existing certificates of public convenience.

Upon the other hand, statutes enacted for the regulation of public utilities, being a proper exercise by the state of its police power, are applicable not only to those public utilities coming into existence after its passage, but likewise to those already established and in operation.

Nor is there any merit in petitioner's contention, that, because of the establishment of petitioner's operations prior to May 1, 1917, they are not subject to the regulations of the Commission. Statutes for the regulation of public utilities are a proper exercise by the state of its police power. As soon as the power is exercised, all phases of operation of established utilities, become at once subject to the police power thus called into operation. Procedures' Transportation Co. v. Railroad Commission, 251 U. S. 228, 40 Sup. Ct. 131, 64 Law. ed. 239, Law v. Railroad Commission, 184 Cal. 737, 195 Pac. 423, 14 A. L. R. 249. The statute is applicable not only to those public utilities coming into existence after its passage, but likewise to those already established and in operation. The 'Auto

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Stage and Truck Transportation Act' (Stats. 1917, c. 213) is a statute passed in pursuance of the police power. The only distinction recognized in the statute between those established before and those established after the passage of the act is in the method of the creation of their operative rights. A certificate of public convenience and necessity it required for any new operation, but no such certificate is required of any transportation company for the operation which was actually carried on in good faith on May 1, 1917, This distinction in the creation of their operative rights in no way affects the power of the Commission to supervise and regulate them. Obviously the power of the Commission to hear and dispose of complaints is as effective against companies securing their operative rights prior to May 1, 1917, as against those subsequently securing such right under a certificate of public convenience and necessity. (Motor Transit Co. et al. v. Railroad Commission of California et al., 209 Pac. 586.)

Moreover, Commonwealth Acts Nos. 146 and 454 are not only the organic acts of the Public Service Commission but are "a part of the charter of every utility company operating or seeking to operate a franchise" in the Philippines. (Streator Aqueduct Co. v. et al., 295 Fed. 385.) The business of a common carrier holds such a peculiar relation to the public interest that there is superinduced upon it the right of public regulation. When private property is "affected with a public interest it ceased to be juris privationly." When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created. He may withdraw his grant by discounting the use, but so long as he

maintains the use he must submit to control. Indeed, this right of regulation is so far beyond question that it is well settled that the power of the state to exercise legislative control over public utilities may be exercised through boards of commissioners. (Fisher vs. Yangco Steamship Company, 31 Phil., 1 , citing Munn vs. Illinois, 94 U.S. 113; Georgia R. & Bkg. Co. vs. Smith, 128 U.S. 174; Budd vs. New York, 143 U.S. 517; New York etc. R. Co. vs. Bristol 151 U.S. 556, 571; Connecticut etc. R. Co. vs. Woodruff, 153 U.S. 689; Louisville etc. Ry Co. vs. Kentucky, 161 U.S. 677, 695.) This right of the state to regulate public utilities is founded upon the police power, and statutes for the control and regulation of utilities are a legitimate exercise thereof, for the protection of the public as well as of the utilities themselves. Such statutes are, therefore, not unconstitutional, either impairing the obligation of contracts, taking property without due process, or denying the equal protection of the laws, especially inasmuch as the question whether or not private property shall be devoted to a public and the consequent burdens assumed is ordinarily for the owner to decide; and if he voluntarily places his property in public service he cannot complain that it becomes subject to the regulatory powers of the state. (51 C. J., sec. 21, pp. 9-10.) in the light of authorities which hold that a certificate of public convenience constitutes neither a franchise nor contract, confers no property right, and is mere license or privilege. (Burgess vs. Mayor & Alderman of Brockton, 235 Mass. 95, 100, 126 N. E. 456; Roberto vs. Commisioners of Department of Public Utilities, 262 Mass. 583, 160 N. E. 321; Scheible vs. Hogan, 113 Ohio St. 83, 148 N. E. 581; Martz vs. Curtis [J. L.] Cartage Co. [1937], 132 Ohio St. 271, 7 N. E. [d] 220; Manila Yellow Taxicab Co. vs. Sabellano, 59 Phil., 773 .)

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Whilst the challenged provisions of Commonwealth Act No. 454 are valid and constitutional, we are, however, of the opinion that the decision of the Public Service Commission should be reversed and the case remanded thereto for further proceedings for the reason now to be stated. The Public Service Commission has power, upon proper notice and hearing, "to amend, modify or revoke at any time any certificate issued under the provisions of this Act, whenever the facts and circumstances on the strength of which said certificate was issued have been misrepresented or materially changed." (Section 16, par. [m], Commonwealth Act No. 146.) The petitioner's application here was for an increase of its equipment to enable it to comply with the conditions of its certificates of public convenience. On the matter of limitation to twenty five (25) years of the life of its certificates of public convenience, there had been neither notice nor opportunity given the petitioner to be heard or present evidence. The Commission appears to have taken advantage of the petitioner to augment petitioner's equipment in imposing the limitation of twenty-five (25) years which might as well be twenty or fifteen or any number of years. This is, to say the least, irregular and should not be sanctioned. There are cardinal primary rights which must be respected even in proceedings of this character. The first of these rights is the right to a hearing, which includes the right of the party interested or affected to present his own case and submit evidence in support thereof. In the language of Chief Justice Hughes, in Morgan v. U.S., (304 U.S. 1, 58 S. Ct. 773, 999, 82 Law. ed. 1129), "the liberty and property of the citizen shall be protected by the rudimentary requirements of fair play." Not only must the party be given an opportunity to present his case and to adduce evidence tending to establish the rights which he asserts but the tribunal must consider the evidence presented. (Chief Justice

Hughes in Morgan vs. U.S., 298 U.S. 468, 56 S. Ct. 906, 80 Law. ed. 1288.) In the language of this Court in Edwards vs. McCoy (22 Phil., 598), "the right to adduce evidence, without the corresponding duty on the part of the board to consider it, is vain. Such right is conspicuously futile if the person or persons to whom the evidence is presented can thrust it aside without or consideration." While the duty to deliberate does not impose the obligation to decide right, it does imply a necessity which cannot be disregarded, namely, that of having something to support its decision. A decision with absolutely nothing to support it is a nullity, at least when directly attacked. (Edwards vs. McCoy, supra.) This principle emanates from the more fundamental principle that the genius of constitutional government is contrary to the vesting of unlimited power anywhere. Law is both a grant and a limitation upon power.

The decision appealed from is hereby reversed and the case remanded to the Public Service Commission for further proceedings in accordance with law and this decision, without any pronouncement regarding costs. So ordered.

Avanceña, C.J., Imperial, Diaz, Concepcion and Moran, JJ., concur.

G.R. No. L-12191, Cangco v. Manila Railroad Co.

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PhilippineLaw.info » Jurisprudence » 1918 » October »

G.R. No. L-12191, Cangco v. Manila Railroad Co.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

DECISION

October 14, 1918

G.R. No. L-12191JOSE CANGCO, plaintiff-appellant,vs.MANILA RAILROAD CO., defendant-appellee.

Ramon Sotelo for appellant. Kincaid & Hartigan for appellee.

Fisher, J.:

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

exit through the door, took his position upon the steps of the coach, seizing the upright guardrail with his right hand for support.

On the side of the train where passengers alight at the San Mateo station there is a cement platform which begins to rise with a moderate gradient some distance away from the company's office and extends along in front of said office for a distance sufficient to cover the length of several coaches. As the train slowed down another passenger, named Emilio Zu

Cangco vs. Manila Railroad Co., 38 Phil. 768 , No. 12191, October 14, 1918

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

On the side of the train where passengers alight at the San Mateo station there is a cement platform which begins to rise with a moderate gradient some distance away from the company's office and extends along in front of said office for a distance sufficient to cover the length of several coaches. As the train slowed down

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another passenger, named Emilio Zuñiga, also an employee of the railroad company, got off the same car, alighting safely at the point where the platform begins to rise from the level of the ground. When the train had proceeded a little farther the plaintiff Jose Cangco stepped off also, but one or both of his feet came in contact with a sack of watermelons with the result that his feet slipped from under him and he fell violently on the platform. His body at once rolled from the platform and was drawn under the moving car, where his right arm was badly crushed and lacerated. It appears that after the plaintiff alighted from the train the car moved forward possibly six meters before it came to a full stop.

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

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

The plaintiff was drawn from under the car in an unconscious condition, and it appeared that the injuries which he had received were very serious. He was therefore brought at once to a certain hospital in the city of Manila where an examination was made and his arm was amputated. The result of this operation was unsatisfactory, and the plaintiff was then carried to another hospital where a second operation was performed and the member was again amputated higher up near the shoulder. It appears in evidence that the plaintiff expended the sum of P790.25 in the form of medical and surgical fees and for other expenses in connection with the process of his curation.

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

It can not be doubted that the employees of the railroad company were guilty of negligence in piling these sacks on the platform in the manner above stated; that their presence caused

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the plaintiff to fall as he alighted from the train; and that they therefore constituted an effective legal cause of the injuries sustained by the plaintiff. It necessarily follows that the defendant company is liable for the damage thereby occasioned unless recovery is barred by the plaintiff's own contributory negligence. In resolving this problem it is necessary that each of these conceptions of liability, to-wit, the primary responsibility of the defendant company and the contributory negligence of the plaintiff should be separately examined.

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

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

formerly connected by any legal tie" and culpa considered as an accident in the performance of an obligation already existing . . . ."

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

Upon this point the Court said:

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

This distinction is of the utmost importance. The liability, which, under the Spanish law, is, in certain cases imposed upon employers with respect to damages occasioned by the negligence of their employees to persons to whom they are not bound by contract, is not based, as in the English Common Law, upon the principle of respondeat superior — if it were, the master would be liable in every case and unconditionally — but upon the principle announced in article 1902 of the Civil Code, which imposes upon all persons who by their fault or negligence, do injury to another, the obligation of making good the damage caused. One who places a powerful automobile in the hands of a servant whom he knows to be ignorant of the method of managing such a vehicle, is himself guilty of an act of negligence which makes him liable for all the

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consequences of his imprudence. The obligation to make good the damage arises at the very instant that the unskillful servant, while acting within the scope of his employment causes the injury. The liability of the master is personal and direct. But, if the master has not been guilty of any negligence whatever in the selection and direction of the servant, he is not liable for the acts of the latter, whatever done within the scope of his employment or not, if the damage done by the servant does not amount to a breach of the contract between the master and the person injured.

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

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

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

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

This theory bases the responsibility of the master ultimately on his own negligence and not on that of his servant. This is the notable peculiarity of the Spanish law of negligence. It is, of course, in striking contrast to the American doctrine that, in relations with

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strangers, the negligence of the servant in conclusively the negligence of the master.

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

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

Every legal obligation must of necessity be extra-contractual or contractual. Extra-contractual obligation has its source in the breach or omission of those mutual duties which civilized society imposes upon it members, or which arise from these relations, other than contractual, of certain members of society to others, generally embraced in the concept of status. The legal rights of each member of society constitute the measure of the corresponding legal duties, mainly negative in character, which the existence of

those rights imposes upon all other members of society. The breach of these general duties whether due to willful intent or to mere inattention, if productive of injury, give rise to an obligation to indemnify the injured party. The fundamental distinction between obligations of this character and those which arise from contract, rests upon the fact that in cases of non-contractual obligation it is the wrongful or negligent act or omission itself which creates the vinculum juris, whereas in contractual relations the vinculum exists independently of the breach of the voluntary duty assumed by the parties when entering into the contractual relation.

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

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

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

As it is not necessary for the plaintiff in an action for the breach of a contract to show that the breach was due to the negligent conduct of defendant or of his servants, even though such be in fact the actual cause of the breach, it is obvious that proof on the part of defendant that the negligence or omission of his servants or agents caused the breach of the contract would not constitute a defense to the action. If the negligence of servants or agents could be invoked as a means of discharging the liability

arising from contract, the anomalous result would be that person acting through the medium of agents or servants in the performance of their contracts, would be in a better position than those acting in person. If one delivers a valuable watch to watchmaker who contract to repair it, and the bailee, by a personal negligent act causes its destruction, he is unquestionably liable. Would it be logical to free him from his liability for the breach of his contract, which involves the duty to exercise due care in the preservation of the watch, if he shows that it was his servant whose negligence caused the injury? If such a theory could be accepted, juridical persons would enjoy practically complete immunity from damages arising from the breach of their contracts if caused by negligent acts as such juridical persons can of necessity only act through agents or servants, and it would no doubt be true in most instances that reasonable care had been taken in selection and direction of such servants. If one delivers securities to a banking corporation as collateral, and they are lost by reason of the negligence of some clerk employed by the bank, would it be just and reasonable to permit the bank to relieve itself of liability for the breach of its contract to return the collateral upon the payment of the debt by proving that due care had been exercised in the selection and direction of the clerk?

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

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the Civil Code as a defense. The Spanish Supreme Court rejected defendant's contention, saying:

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

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

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

In the case of Baer Senior & Co's Successors vs. Compania Maritima (6 Phil. Rep., 215), the plaintiff sued the defendant for damages caused by the loss of a barge belonging to plaintiff which was allowed to get adrift by the negligence of defendant's servants in the course of the performance of a contract of towage. The court held, citing Manresa (vol. 8, pp. 29, 69) that if the "obligation of the defendant grew out of a contract made between it and the plaintiff .

. . we do not think that the provisions of articles 1902 and 1903 are applicable to the case."

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

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

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

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

squarely upon the theory of the breach of the contract, for defendant to have proved that it did in fact exercise care in the selection and control of the servant.

The true explanation of such cases is to be found by directing the attention to the relative spheres of contractual and extra-contractual obligations. The field of non- contractual obligation is much more broader than that of contractual obligations, comprising, as it does, the whole extent of juridical human relations. These two fields, figuratively speaking, concentric; that is to say, the mere fact that a person is bound to another by contract does not relieve him from extra-contractual liability to such person. When such a contractual relation exists the obligor may break the contract under such conditions that the same act which constitutes the source of an extra-contractual obligation had no contract existed between the parties.

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

The railroad company's defense involves the assumption that even granting that the negligent conduct of its servants in placing an obstruction upon the platform was a breach of its contractual obligation to maintain safe means of approaching and leaving its trains, the direct and proximate cause of the injury suffered by plaintiff was his own contributory negligence in failing to wait until the train had come to a complete stop before alighting. Under the

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doctrine of comparative negligence announced in the Rakes case (supra), if the accident was caused by plaintiff's own negligence, no liability is imposed upon defendant's negligence and plaintiff's negligence merely contributed to his injury, the damages should be apportioned. It is, therefore, important to ascertain if defendant was in fact guilty of negligence.

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

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

The test by which to determine whether the passenger has been guilty of negligence in attempting to alight from a moving

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

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

As the case now before us presents itself, the only fact from which a conclusion can be drawn to the effect that plaintiff was guilty of contributory negligence is that he stepped off the car without being able to discern clearly the condition of the platform and while the train was yet slowly moving. In considering the situation thus presented, it should not be overlooked that the plaintiff was, as we find, ignorant of the fact that the obstruction which was caused by the sacks of melons piled on the platform existed; and as the defendant was bound by reason of its duty as a public carrier to afford to its passengers facilities for safe egress from its trains, the plaintiff had a right to assume, in the absence of some circumstance to warn him to the contrary, that the platform was clear. The place, as we have already stated, was dark, or dimly

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lighted, and this also is proof of a failure upon the part of the defendant in the performance of a duty owing by it to the plaintiff; for if it were by any possibility concede that it had right to pile these sacks in the path of alighting passengers, the placing of them adequately so that their presence would be revealed.

As pertinent to the question of contributory negligence on the part of the plaintiff in this case the following circumstances are to be noted: The company's platform was constructed upon a level higher than that of the roadbed and the surrounding ground. The distance from the steps of the car to the spot where the alighting passenger would place his feet on the platform was thus reduced, thereby decreasing the risk incident to stepping off. The nature of the platform, constructed as it was of cement material, also assured to the passenger a stable and even surface on which to alight. Furthermore, the plaintiff was possessed of the vigor and agility of young manhood, and it was by no means so risky for him to get off while the train was yet moving as the same act would have been in an aged or feeble person. In determining the question of contributory negligence in performing such act — that is to say, whether the passenger acted prudently or recklessly — the age, sex, and physical condition of the passenger are circumstances necessarily affecting the safety of the passenger, and should be considered. Women, it has been observed, as a general rule are less capable than men of alighting with safety under such conditions, as the nature of their wearing apparel obstructs the free movement of the limbs. Again, it may be noted that the place was perfectly familiar to the plaintiff as it was his daily custom to get on and of the train at this station. There could, therefore, be no uncertainty in his mind with regard either to the length of the step which he was

required to take or the character of the platform where he was alighting. Our conclusion is that the conduct of the plaintiff in undertaking to alight while the train was yet slightly under way was not characterized by imprudence and that therefore he was not guilty of contributory negligence.

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

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

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

Separate Opinions

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MALCOLM, J., dissenting:

With one sentence in the majority decision, we are of full accord, namely, "It may be admitted that had plaintiff waited until the train had come to a full stop before alighting, the particular injury suffered by him could not have occurred." With the general rule relative to a passenger's contributory negligence, we are likewise in full accord, namely, "An attempt to alight from a moving train is negligence per se." Adding these two points together, should be absolved from the complaint, and judgment affirmed.

EN BANC

[G.R. No. L-8194. July 11, 1956.]

EMERENCIANA M. VDA. DE MEDINA, ET AL., Plaintiffs-Appellees, vs. GUILLERMO CRESENCIA, ET AL., Defendants. GUILLERMO CRESENCIA, Appellant.

D E C I S I O N

REYES, J.B.L., J.:

Appeal by Defendant Guillermo Cresencia from the judgment of the Court of First Instance of Manila in its civil case No. 19890, sentencing Appellant, jointly and severally with his co-Defendant Brigido Avorque, to pay Plaintiffs Emerencia M. Vda. de Medina and her minor children damages in the total amount of P56,000, P5,000 attorneys’ fees, and costs.

It appears that on May 31, 1953, passenger jeepney bearing plate No. TPU-2232 (Manila), driven by Brigido Avorque, smashed into a Meralco post on Azcarraga Street, resulting in the death of Vicente Medina, one of its passengers. A criminal case for homicide through reckless imprudence was filed against Avorque (criminal case No. 22775 of the Court of First Instance of Manila), to which he pleaded guilty on September 9, 1953. The heirs of the deceased, however, reserved their right to file a separate action for damages, and on June 16, 1953, brought suit against the driver Brigido Avorque and Appellant Guillermo Cresencia, the registered owner and operator of the jeepney in question. Defendant Brigido Avorque did not file any answer; chan roblesvirtualawlibrarywhile Defendant Cresencia answered, disclaiming liability on the ground that he had sold the jeepney in question on October 14, 1950 to one Maria A. Cudiamat; chan roblesvirtualawlibrarythat the jeepney had been repeatedly sold by one buyer after another, until the vehicle was purchased on January 29, 1953 by Rosario Avorque, the absolute owner thereof at the time of the accident. In view of Cresencia’s answer, Plaintiffs filed leave, and was allowed, to amend their complaint making Rosario Avorque a co-Defendant; chan roblesvirtualawlibraryand the latter, by way of answer, admitted having purchased the aforesaid jeepney

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on May 31, 1953, but alleged in defense that she was never the public utility operator thereof. The case then proceeded to trial, during which, after the Plaintiffs had presented their evidence, Defendants Guillermo Cresencia and Rosario Avorque made manifestations admitting that the former was still the registered operator of the jeepney in question in the records of the Motor Vehicles Office and the Public Service Commission, while the latter was the owner thereof at the time of the accident; chan roblesvirtualawlibraryand submitted the case for the decision on the question of who, as between the two, should be held liable to Plaintiffs for damages. The lower court, by Judge Jose Zulueta, held that as far as the public is concerned, Defendant Cresencia, in the eyes of the law, continued to be the legal owner of the jeepney in question; chan roblesvirtualawlibraryand rendered judgment against him, jointly and severally with the driver Brigido Avorque, for P6,000 compensatory damages, P30,000 moral damages, P10,000 exemplary damages, P10,000 nominal damages, P5,000 attorneys fees, and costs, while Defendant Rosario Avorque was absolved from liability. From this judgment, Defendant Cresencia appealed.

We have already held in the case of Montoya vs. Ignacio, 94 Phil., 182 (December 29, 1953), which the court below cited, that the law (section 20 [g], C. A. No. 146 as amended) requires the approval of the Public Service Commission in order that a franchise, or any privilege pertaining thereto, may be sold or leased without infringing the certificate issued to the grantee; chan roblesvirtualawlibraryand that if property covered by the franchise is transferred or leased without this requisite approval, the transfer is not binding against the public or the Service Commission; chan

roblesvirtualawlibraryand in contemplation of law, the grantee of record continues to be responsible under the franchise in relation to the Commission and to the public. There we gave the reason for this rule to be as follows:chanroblesvirtuallawlibrary

“ cralaw Since a franchise is personal in nature any transfer or lease thereof should be notified to the Public Service Commission so that the latter may take proper safeguards to protect the interest of the public. In fact, the law requires that, before the approval is granted, there should be a public hearing, with notice to all interested parties, in order that the Commission may determine if there are good and reasonable grounds justifying the transfer or lease of the property covered by the franchise, or if the sale or lease is detrimental to public interest cralaw .”

The above ruling was later reiterated in the cases of Timbol vs. Osias, L-7547, April 30, 1955 and Roque vs. Malibay Transit Inc., L- 8561, November 18, 1955.

As the sale of the jeepney here in question was admittedly without the approval of the Public Service Commission, Appellant herein, Guillermo Cresencia, who is the registered owner and operator thereof, continued to be liable to the Commission and the public for the consequences incident to its operation. Wherefore, the lower court did not err in holding him, and not the buyer Rosario Avorque, responsible for the damages sustained by Plaintiff by reason of the death of Vicente Medina resulting from the reckless negligence of the jeepney’s driver, Brigido Avorque.

Appellant also argues that the basis of Plaintiffs’ action being the employer’s subsidiary liability under the Revised Penal Code for

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damages arising from his employee’s criminal acts, it is Defendant Rosario Avorque who should answer subsidiarily for the damages sustained byPlaintiffs, since she admits that she, and not Appellant, is the employer of the negligent driver Brigido Avorque. The argument is untenable, because Plaintiffs’ action for damages is independent of the criminal case filed against Brigido Avorque, and based, not on the employer’s subsidiary liability under the Revised Penal Code, but on a breach of the carrier’s contractual obligation to carry his passengers safely to their destination (culpa contractual). And it is also for this reason that there is no need of first proving the insolvency of the driver Brigido Avorque before damages can be recovered from the carrier, for in culpa contractual, the liability of the carrier is not merely subsidiary or secondary, but direct and immediate (Articles 1755, 1756, and 1759, New Civil Code).

The propriety of the damages awarded has not been questioned, Nevertheless, it is patent upon the record that the award of P10,000 by way of nominal damages is untenable as a matter of law, since nominal damages cannot co-exist with compensatory damages. The purpose of nominal damages is to vindicate or recognize a right that has been violated, in order to preclude further contest thereon; chan roblesvirtualawlibrary“and not for the purpose of indemnifying the Plaintiff for any loss suffered by him” (Articles 2221, 2223, new Civil Code.) Since the court below has already awarded compensatory and exemplary damages that are in themselves a judicial recognition that Plaintiff’s right was violated, the award of nominal damages is unnecessary and improper. Anyway, ten thousand pesos cannot, in common sense, be deemed “nominal”.

With the modification that the award of P10,000 nominal damages” be eliminated, the decision appealed from is affirmed. Costs against Appellant. SO ORDERED.

Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion and Endencia, JJ., concur.

FIRST DIVISION

[G.R. No. L-46558 : July 31, 1981.]

PHILIPPINE AIR LINES, INC., Petitioner, vs. THE COURT OF APPEALS and JESUS V. SAMSON, Respondents.

D E C I S I O N

GUERRERO, J.:

This is a petition for review on Certiorari of the decision of the Court of Appeals 1 dated April 18, 1977, affirming with modification the decision of the Court of First Instance of Albay in Civil Case No. 1279, entitled “Jesus V. Samson, plaintiff, vs. Philippine Air Lines, Inc., defendant,” for damages.

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The dispositive portion of the trial court’s decision reads:

“WHEREFORE, for all the foregoing considerations, judgment is hereby rendered in favor of the plaintiff and against the defendant ordering the defendant to pay the plaintiff, the following sums: P1988,000.00 as unearned income or damages; P50,000.00 for moral damages; P20,000.00 as attorney’s fees and P5,000.00 as expenses of litigation, or a total of P273,000.00. Costs against the defendant.”

The appellate court modified the above decision, to wit:

“However, Plaintiff-Appellee, who has been deprived of his job since 1954, is entitled to the legal rate of interest on the P198,000.00 unearned income from the filing of the complaint cranad(Sec. 8, Rule 51, Rules of Court).

WHEREFORE, with the modification indicated above, the judgment appealed from is affirmed, with costs against defendant-appellant.”

The complaint filed on July 1, 1954 by plaintiff Jesus V. Samson, private respondent herein, averred that on January 8, 1951, he flew as co-pilot on a regular flight from Manila to Legaspi with stops at Daet, Camarines Norte and Pili, Camarines Sur, with Captain Delfin Bustamante as commanding pilot of a C-47 plane belonging to defendant Philippine Air Lines, Inc., now the herein petitioner; that on attempting to land the plane at Daet airport, Captain Delfin Bustamante due to his very slow reaction and poor judgment overshot the airfield and as a result, notwithstanding the diligent efforts of the plaintiff co-pilot to avert an accident, the airplane crashlanded beyond the runway; that the jolt caused the head of the plaintiff to hit and break through the thick front windshield of

the airplane causing him severe brain concussion, wounds and abrasions on the forehead with intense pain and suffering cranad(par. 6, complaint).:onad

The complaint further alleged that instead of giving plaintiff expert and proper medical treatment called for by the nature and severity of his injuries, defendant simply referred him to a company physician, a general medical practitioner, who limited the treatment to the exterior injuries without examining the severe brain concussion of plaintiff cranad(par. 7, complaint); that several days after the accident, defendant Philippine Air Lines called back the plaintiff to active duty as co-pilot, and inspite of the latter’s repeated request for expert medical assistance, defendant had not given him anycranad(par. 8, complaint); that as a consequence of the brain injury sustained by plaintiff from the crash, he had been having periodic dizzy spells and had been suffering from general debility and nervousness cranad(par. 9, complaint); that defendant airline company instead of submitting the plaintiff to expert medical treatment, discharged the latter from its employ on December 21, 1953 on grounds of physical disability, thereby causing plaintiff not only to lose his job but to become physically unfit to continue as aviator due to defendant’s negligence in not giving him the proper medical attentioncranad(pars. 10-11, complaint). Plaintiff prayed for damages in the amount of P180,000.00 representing his unearned income, P50,000.00 as moral damages, P20,000.00 as attorney’s fees and P5,000.00 as expenses, or a total of P255,000.00.

In its answer filed on July 28, 1954, defendant PAL denied the substantial averments in the complaint, alleging among others, that the accident was due solely and exclusively to inevitable unforeseen circumstances whereby plaintiff sustained only superficial wounds

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and minor injuries which were promptly treated by defendant’s medical personnel cranad(par. 5, answer); that plaintiff did not sustain brain injury or cerebral concussion from the accident since he passed the annual physical and medical examination given thereafter on April 24, 1951; that the headaches and dizziness experienced by plaintiff were due to emotional disturbance over his inability to pass the required up-grading or promotional course given by defendant company cranad(par. 6, answer), and that, as confirmed by an expert neuro-surgeon, plaintiff was suffering-from neurosis and in view of this unfitness and disqualification from continuing as a pilot, defendant had to terminate plaintiff’s employment cranad(pars. 7, 9, answer).

Further, defendant alleged that by the very nature of its business as a common carrier, it is bound to employ only pilots who are proficient and in good mental, emotional and physical condition; that the pilot, Captain Delfin Bustamante, was a competent and proficient pilot, and although he was already afflicted with a tumor of the nasopharynx even before the accident of January 8, 1951, the Civil Aeronautics Administration, in passing upon the fitness of pilots, gave Capt. Bustamante a waiver of physical standards to enable him to retain his first class airman certificate since the affliction had not in the least affected his proficiency cranad(pars. 16-17, answer). By way of counterclaim, defendant prayed for P10,000.00 as expenses for the litigation.

On March 25, 1958, defendant filed a Motion to Dismiss on the ground that the complaint is essentially a Workmen’s Compensation claim, stating a cause of action not cognizable within the general jurisdiction of the court. The Motion to Dismiss was denied in the order of April 14, 1958. After the reception of evidence, the trial

court rendered on January 15, 1973 the decision, the dispositive portion of which has been earlier cited.

The defendant Philippine Air Lines, Inc. appealed the decision to the Court of Appeals as being contrary to law and unsupported by the evidence. It raised as errors of the trial court cranad(a) the holding that the damages allegedly suffered by plaintiff are attributable to the accident of January 8, 1951 which was due to the negligence of defendant in having allowed Capt. Delfin Bustamante to continue flying despite his alleged slow reaction and poor judgment; cranad(b) the finding that defendant was negligent in not having given plaintiff proper and adequate expert medical treatment and assistance for the injuries allegedly sustained in the accident of January 8, 1951; andcranad(c) in ordering defendant to pay actual or compensatory damages, moral damages and attorney’s fees to the plaintiff.

On April 18, 1977, the Court of Appeals rendered its decision affirming the judgment of the lower court but modified the award of damages by imposing legal rate of interest on the P198,000.00 unearned income from the filing of the complaint, citing Sec. 8, Rule 51 of the Rules of Court.

Its motion for reconsideration of the above judgment having been denied, Philippine Air Lines, Inc. filed this instant petition for Certiorari on the ground that the decision is not in accord with law or with the applicable jurisprudence, aside from its being replete with findings in the nature of speculation, surmises and conjectures not borne out by the evidence on record thereby resulting to misapprehension of facts and amounting to a grave abuse of discretion cranad(p. 7, Petition).

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Petitioner raises the fundamental question in the case at bar as follows: Is there a causal connection between the injuries suffered by private respondent during the accident on 8 January 1951 and the subsequent “periodic dizzy spells, headache and general debility” of which private respondent complained every now and then, on the one hand, and such “periodic dizzy spells, headache and general debility” allegedly caused by the accident and private respondent’s eventual discharge from employment, on the other? PAL submits that respondent court’s award of damages to private respondent is anchored on findings in the nature of speculations, surmises and conjectures and not borne out by the evidence on record, thereby resulting in a misapprehension of facts and amounting to a grave abuse of discretion.

Petitioner’s submission is without merit.

As found by the respondent court, the following are the essential facts of the case:

“It appears that plaintiff, a licensee aviator, was employed by defendant a few years prior to January 8, 1951 as a regular co-pilot on a guaranteed basic salary of P750.00 a month. He was assigned to and/or paired with pilot Delfin Bustamante.

Sometime in December 1950, he complained to defendant through its authorized official about the slow reaction and poor judgment of pilot Delfin Bustamante. Notwithstanding said complaint, defendant allowed the pilot to continue flying.

On January 8, 1951, the two manned the regular afternoon flight of defendant’s plane from Manila to Legaspi, with stops at Daet, Camarines Norte, and Pili, Camarines Sur. Upon making a landing at

Daet, the pilot, with his slow reaction and poor judgment, overshot the airfield and, as a result of and notwithstanding diligent efforts of plaintiff to avert an accident, the airplane crash-landed beyond the runway into a mangrove. The jolt and impact caused plaintiff to hit his head upon the front windshield of the plane thereby causing his brain concussions and wounds on the forehead, with concomittant intense pain.

Plaintiff was not given proper medical attention and treatment demanded by the nature and severity of his injuries. Defendant merely referred him to its clinic attended by general practitioners on his external injuries. His brain injury was never examined, much less treated. On top of that negligence, defendant recalled plaintiff to active duty as a co-pilot, completely ignoring his plea for expert medical assistance.

Suffering periodic dizzy spells, headache and general debility, plaintiff every now and then complained to defendant. To make matters worst for plaintiff, defendant discharged him from his employment on December 21, 1953. In consequence, plaintiff has been beset with additional worries, basically financial. He is now a liability instead of a provider, of his family.

On July 1, 1954, plaintiff filed a complaint for damages. Defendant vainly sought to dismiss the complaint after filing an answer. Then, the judgment and this appeal.”

Continuing, the respondent Court of Appeals further held:

“There is no question about the employment of plaintiff by defendant, his age and salary, the overshooting by pilot Bustamante of the airfield and crashlanding in a mangrove, his hitting his head

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on the front windshield of the plane, his intermittent dizzy spells, headache and general debility for which he was discharged from his employment on December 21, 1953. As the lower court aptly stated:

‘From the evidence adduced by the parties, the Court finds the following facts to be uncontroverted: That the plaintiff Jesus V. Samson, on January 8, 1951 and a few years prior thereto, December 21, 1953, was a duly licensed pilot employed as a regular co-pilot of the defendant with assignment in its domestic air service in the Philippines; that on January 8, 1951, the defendant’s airplane met an accident in crashlanding at the Daet Airport, Camarines Norte by overshooting the runway and reaching the mangroves at the edge of the landing strip; that the jolt caused plaintiff’s head to hit the front windshield of the airplane causing him to suffer wounds and abrasion on the forehead; that the defendant, instead of giving the plaintiff expert and proper medical treatment called for by the nature and severity of the injuries of the plaintiff, simply referred him to the clinic of the defendant’s physicians who are only general medical practitioners and not brain specialists; that the defendant’s physicians limited their treatment to the exterior injuries on the forehead of the plaintiff and made no examination of the severe concussion of the brain of the plaintiff; that the Medical Director and Flight Surgeon of the defendant were not able to definitely determine the cause of the complaint of the plaintiff as to the periodic attack of dizziness, spells and headache; that due to this laxity of the defendant’s physician and the continuous suffering of the ailment of the plaintiff complained of, he demanded for expert medical assistance for his brain injury and to send him to the United States, which demand was turned down and in effect denied

by the defendant; that instead the defendant referred the plaintiff to a neurologist, Dr. Victor Reyes; that from the time that said accident occurred on January 21, 1953, he was ordered grounded on several occasions because of his complaint of dizzy spells and headache; that instead of submitting the plaintiff to expert medical treatment as demanded by him and denied by the defendant, he was discharged from its employment on December 21, 1953 on the ground of physical disability, and that the plaintiff, at the time when the defendant’s plane met the accident, up to the time he was discharged, was regularly employed as a co-pilot and receiving a basic salary of P750.00 a month plus extra pay for flying time, and bonuses amounting to P300.00 a month.’

Even defendant-appellant itself admits as not controverted the following facts which generally admit what have been stated above as not controverted.

“In the case at bar, the following facts are not the subject of controversy:

‘(1) First, that from July 1950 to 21 December 1953, plaintiff was employed with defendant company as a first officer or co-pilot and served in that capacity in defendant’s domestic services.

(2) Second, that on January 1951, plaintiff did fly on defendant’s PI-C 94, as first officer or co-pilot, with the late Capt. Delfin Bustamante in command as pilot; that while making a landing at the Daet airport on that date, PI-C 94 did meet an accident as stated above.

(3) Third, that at or about the time of the discharge from defendant company, plaintiff had complained of “spells of dizziness,”

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“headaches” and “nervousness”, by reason of which he was grounded from flight duty. In short, that at that time, or approximately from November 1953 up to the date of his discharge on 21 December 1953, plaintiff was actually physically unfit to discharge his duties as pilot.

(4) Fourth, that plaintiff’s unfitness for flight duty was properly established after a thorough medical examination by competent medical experts.’cralaw cranad(pp. 11-12, appellant’s brief)

hence, there can hardly be an issue, factual, legal or medical.”

Taking exception from “the rest of the essential facts of the case as found by the respondent court” PAL claims said facts are not fully borne out by the evidence on record and insists that the injuries suffered by private respondent during the accident on January 8, 1951 were superficial in nature; that the “periodic spells, headache, and general debility” complaint of every now and then by private respondent subsequent to the Jan. 8, 1951 incident were due to emotional disturbances and that no negligence can be attributed to Capt. Delfin Bustamante much less to PAL for the occurrence on January 8, 1951, hence PAL cannot be held liable for damages.

Petitioner claims absence of any causal connection between private respondent’s superficial injuries and his alleged subsequent “periodic spells, headache and general debility,” pointing out that these subsequent ailments were found by competent physician, including an expert neuro-surgeon, to be due to emotional disturbances insights the conclusions of Dr. Trajano V. Bernardo that respondent’s complaints were “psychosomatic symptoms” on the basis of declarations made by respondent himself, which

conclusions are supported by similar diagnosis made by Drs. Damaceno J. Ago and Villaraza stating that respondent Samson was suffering from neurosis as well as the report of Dr. Victor Reyes, a neurological specialist, indicating that the symptoms were probably, most probably due to psychogenic factors and have no organic basis.

In claiming that there is no factual basis for the finding of the respondent court that the crash-landing caused respondent’s “brain concussion . cra ., with concomittant intense pain, for on the contrary, testimonial evidence establish the superficiality of the injuries sustained by respondent during the accident of January 8, 1951,” petitioner quotes portions of the testimony of Dr. Manuel S. Sayas, who declared that he removed the band-aid on the forehead of respondent and that he found out after removal that the latter had two contussed superficial wounds over the supra orbiter regions or just above the eyes measuring one centimeter long and one millimeter deep. He examined and found his blood pressure normal, no discharges from the nose and ears. Dr. Trajano V. Bernardo also testified that when he examined respondent Samson three days after the accident, the wound was already healed and found nothing wrong with his ears, nose and throat so that he was declared fit for duty after the sixth day.

Petitioner goes further. It contends that there is no causal connection between respondent’s superficial injuries sustained during the accident on January 8, 1951 and plaintiff’s discharge from employment with PAL on December 21, 1953. According to PAL, it was the repeated recurrence of respondent’s neurasthenic symptoms cranad(dizzy spells, headache, nervousness) which prompted PAL’s Flight Surgeon, Dr. Bernardo, to recommend that

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plaintiff be grounded permanently as respondent was “psychologically unfit to resume his duties as pilot.” PAL concludes that respondent’s eventual discharge from employment with PAL was effected for absolutely valid reasons, and only after he was thoroughly examined and found unfit to carry out his responsibilities and duties as a pilot.:onad

We agree with the respondent court in finding that the dizzy spells, headache and general debility of private respondent Samson was an after-effect of the crash-landing and We find that such holding is supported by substantial evidence, which We quote from the court’s decision, to wit:

“Defendant would imply that plaintiff suffered only superficial wounds which were treated and not brain injury. It would, by the opinion of its company doctors, Dr. Bernardo and Dr. Reyes, attribute the dizzy spells and headache to organic or as phychosomatic, neurasthenic or psychogenic, which we find outlandishly exaggerated.

That plaintiff’s condition as psychosomatic rather than organic in nature is allegedly confirmed by the fact that on six cranad(6) separate occasions after the accident he passed the required CAA physical examination for airman’s certificate. cranad(Exhs. 78, 79, 80, 81, 83 and 92). We noticed, however, that there were other similar physical examinations conducted by the CAA on the person of plaintiff the report on which were not presented in evidence. Obviously, only those which suited defendants cause were hand-picked and offered in evidence.

We hesitate to accept the opinion of the defendant’s two physicians, considering that Dr. Bernardo admittedly referred to Dr. Reyes because he could not determine the cause of the dizzy spells and headache and the latter admitted that ‘it is extremely hard to be certain of the cause of his dizzy spells,’ and suggested a possibility that it ‘was due to postraumatic syndrome, evidently due to the injuries suffered by the plaintiff in hitting the forehead against the windshield of the plane during the accident.’ Judgment are not based on possibilities.

The admitted difficulty of defendant’s doctors in determining the cause of the dizzy spells and headache cannot be a sound basis for finding against the plaintiff and in favor of defendant. Whatever it might be, the fact is that such dizzy spells, headache and general debility was an after-effect of the crash-landing. Be it brain injury or psychosomatic, neurasthenic or psychogenic, there is no gainsaying the fact that it was caused by the crash-landing. As an effect of the cause, not fabricated or concocted, plaintiff has to be indemnified. The fact is that such effect caused his discharge.

We are prone to believe the testimony of the plaintiff’s doctors.

Dr. Morales, a surgeon, found that blood was coming from plaintiff’s ears and nose. He testified that plaintiff was suffering from cerebral concussion as a result of traumatic injury to the brain caused by his head hitting on the windshield of the plane during the crash-landing cranad(Exhibit “G”).

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Dr. Conrado Aramil, a neurologist and psychiatrist with experience in two hospitals abroad, found abnormality reflected by the electroencephalogram examination in the frontal area on both sides of plaintiff’s head cranad(Exhibits “K”, “K-1”).

The opinion of these two specialist renders unnecessary that of plaintiff’s wife who is a physician in her own right and because of her relation to the plaintiff, her testimony and opinion may not be discussed here, although her testimony is crystallized by the opinions of Dr. Ador Dionisio, Dr. Marquez, Dr. Jose O. Chan, Dr. Yambao and Dr. Sandico.

Even the doctors presented by defendant admit vital facts about plaintiff’s brain injury. Dr. Bernardo admits that due to the incident, the plaintiff continuously complained of his fainting spells, dizziness and headache everytime he flew as a co-pilot and everytime he went to defendant’s clinic no less than 25 timescranad(Exhibits “15” to “36”), that he complained of the same to Dr. Reyes; that he promised to help send plaintiff to the United States for expert medical assistance provided that whatever finding thereat should not be attributed to the crash-landing incident to which plaintiff did not agree and that plaintiff was completely ignored by the defendant in his plea for expert medical assistance. They admitted that they could not determine definitely the cause of the fainting spells, dizziness and headache, which justifies the demand for expert medical assistance.”

We also find the imputation of gross negligence by respondent court to PAL for having allowed Capt. Delfin Bustamante to fly on that fateful day of the accident on January 8, 1951 to be correct, and We affirm the same, duly supported as it is by substantial

evidence, clearly established and cited in the decision of said court which states as follows:

“The pilot was sick. He admittedly had tumor of the nasopharynx cranad(nose). He is now in the Great Beyond. The spot is very near the brain and the eyes. Tumor on the spot will affect the sinus, the breathing, the eyes which are very near it. No one will certify the fitness to fly a plane of one suffering from the disease.

“. cra . The fact First Pilot Bustamante has a long standing tumor of the Nasopharynx for which reason he was grounded since November 1947 is admitted in the letter cranad(Exh. 69-A) of Dr. Bernardo to the Medical Director of the CAA requesting waiver of physical standards. The request for waiver of physical standards is itself a positive proof that the physical condition of Capt. Bustamante is short of the standard set by the CAA. The Deputy Administrator of the CAA granted the request relying on the representation and recommendation made by Dr. Bernardo cranad(See Exh. 69). We noted, however, that the request cranad(Exh. 69-A) says that ‘it is believed that his continuing to fly as a co-pilot does not involve any hazard.’cralaw cranad(Italics supplied). Flying as a First Officer entails a very different responsibility than flying as a mere co-pilot. Defendant requested the CAA to allow Capt. Bustamante to fly merely as a co-pilot and it is safe to conclude that the CAA approved the request thus allowing Bustamante to fly only as a co-pilot. For having allowed Bustamante to fly as a First Officer on January 8, 1951, defendant is guilty of gross negligence and therefore should be made liable for the resulting accident.

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As established by the evidence, the pilot used to get treatments from Dr. Sycangco. He used to complain of pain in the face more particularly in the nose which caused him to have sleepless nights. Plaintiff’s observation of the pilot was reported to the Chief Pilot who did nothing about it. Captain Carbonel of the defendant corroborated plaintiff of this matter. The complaint against the slow reaction of the pilot at least proved the observation. The observation could be disregarded. The fact that the complaint was not in writing does not detract anything from the seriousness thereof, considering that a miscalculation would not only cause the death of the crew but also of the passengers.

One month prior to the crash-landing, when the pilot was preparing to land in Daet, plaintiff warned him that they were not in the vicinity of Daet but above the town of Ligao. The plane hit outside the airstrip. In another instance, the pilot would hit the Mayon Volcano had not plaintiff warned him. These more than prove what plaintiff had complained of. Disregard thereof by defendant is condemnable.

To bolster the claim that Capt. Bustamante has not suffered from any kind of sickness which hampered his flying ability, appellant contends that for at least one or more years following the accident of January 8, 1951, Capt. Bustamante continued to fly for defendant company as a pilot, and did so with great skill and proficiency, and without any further accident or mishap, citing tsn. pp. 756-765, January 20, 1965. We have painstakingly perused the records, particularly the transcript of stenographic notes cited, but found nothing therein to substantiate appellant’s contention. Instead, We discovered that the citation covers the testimony of Dr. Bernardo on the physical condition of Bustamante and nothing about his skills or

proficiency to fly nor on the mishaps or accidents, matters which are beyond Dr. Bernardo’s competence anyway.

Assuming that the pilot was not sick or that the tumor did not affect the pilot in managing the plane, the evidence shows that the overshooting of the runway and crash-landing at the mangrove was caused by the pilot for which acts the defendant must answer for damages caused thereby. And for this negligence of defendant’s employee, it is liable cranad(Joaquin vs. Aniceto, 12 SCRA 308). At least, the law presumes the employer negligent imposing upon it the burden of proving that it exercised the diligence of a good father of a family in the supervision of its employees.

Defendant would want to tie plaintiff to the report he signed about the crash-landing. The report was prepared by his pilot and because the latter pleaded that he had a family too and would have nowhere to go if he lost his job, plaintiff’s compassion would not upturn the truth about the crash-landing. We are for the truth not logic of any argumentation.

At any rate, it is incorrect to say that the Accident Report cranad(Exh. 12 & 12-A), signed by plaintiff, exculpated Capt. Bustamante from any fault. We observed that the Report does not categorically state that Capt. Bustamante was not at fault. It merely relates in chronological sequence what Capt. Bustamante and plaintiff did from the take-off from Manila to the landing in Daet which resulted in an accident. On the contrary, we may infer the negligence of Bustamante from the following portion of the Report, to wit:

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“. cra . I felt his brakes strong but as we neared the intersection of the NE-SW runway, the brakes were not as strong and I glanced at the system pressure which indicated 900 lbs. per sq. m.”

It was during the above precise instance that Capt. Bustamante lost his bearing and disposition. Had he maintained the pressure on the brakes the plane would not have overshot the runway. Verily, Bustamante displayed slow reaction and poor judgment.cranad(CA decision, pp. 8-12).

This Court is not impressed by, much less can We accept petitioner’s invocation to calibrate once again the evidence testified to in detail and plucked from the voluminous transcript to support petitioner’s own conclusion. It is not the task of this Court to discharge the functions of a trier of facts much less to enter into a calibration of the evidence, notwithstanding petitioner’s wail that the judgment of the respondent court is based entirely on speculations, surmises and conjectures. We are convinced that respondent court’s judgment is supported by strong, clear and substantial evidence.:onad

Petitioner is a common carrier 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, as defined in Art. 1732, New Civil Code. The law is clear in requiring a common carrier to exercise the highest degree of care in the discharge of its duty and business of carriage and transportation under Arts. 1733, 1755 and 1756 of the New Civil Code. These Articles provide:

Art. 1733. 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 the passengers transported by them, according to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.

Art. 1755. A common carrier is bound to carry the passenger safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.

Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755.

The duty to exercise the utmost diligence on the part of common carriers is for the safety of passengers as well as for the members of the crew or the complement operating the carrier, the airplane in the case at bar. And this must be so for any omission, lapse or neglect thereof will certainly result to the damage, prejudice, nay injuries and even death to all aboard the plane, passengers and crew members alike.

Now to the damages. The Court of Appeals affirmed the award of damages made by the trial court, stating that “the damages awarded plaintiff by the lower court are in accordance with the facts, law and jurisprudence.” The court further observed that “defendant-appellant is still fortunate, considering that the

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unearned income was reckoned with only up to 1968 and not up to the present as plaintiff-appellee is still living. Whatever mathematical error defendant-appellant could show by abstract argumentation, the same must be compensated by such deficiency of the damages awarded to plaintiff-appellee.”

As awarded by the trial court, private respondent was entitled to P198,000.00 as unearned income or compensatory damages; P50,000.00 for moral damages, P20,000.00 as attorney’s fees and P5,000.00 as expenses of litigation, or a total of P273,000.00.

The trial court arrived at the sum of P198,000.00 as unearned income or damages by considering that respondent Samson “could have continued to work as airline pilot for fifteen more years, he being only 38 years at the time the services were terminated by the defendant cranad(PAL) and he would have earned P120,000.00 from 1954 to 1963 or a period of ten cranad(10) years at the rate of one thousand per month cranad(P750.00 basic salary plus P300.00 extra pay for extra flying time and bonuses; and considering further that in 1964 the basic pay of defendant’s pilot was increased to P12,000.00 annually, the plaintiff could have earned from 1964 to 1968 the sum of P60,000.00 in the form of salaries and another P18,000.00 as bonuses and extra pay for extra flying time at the same rate of P300 a month, or a grand total of P198,000.00 for the entire period. This claim of the plaintiff for loss or impairment of earning capacity is based on the provision of Article 2205 of the New Civil Code of the Philippines which provides that “damages may be recovered for loss or impairment of earning capacity in cases of temporary or permanent personal injury.” This provision of law has been construed and interpreted in the case of Aureliano Ropato, et al. vs. La Mallorca General Partnership, 56 O.G., 7812,

which rules that law allows the recovery of damages for loss or impairment of earning capacity in cases of temporary or permanent personal injury.” chanroblesvirtualawlibrary(Decision, CFI, pp. 98-99, Record on Appeal)

The respondent appellate court modified the above award by ordering payment of legal interest on the P198,000.00 unearned income from the filing of the claim, citing Sec. 8, Rule 51 of the Rules of Court.

Petitioner assails the award of the total sum of P198,000.00 as unearned income up to 1968 as being tenuous because firstly, the trial court’s finding affirmed by the respondent court is allegedly based on pure speculation and conjecture and secondly, the award of P300.00 a month as extra pay for extra flying time from 1954 to 1968 is likewise speculative. PAL likewise rejects the award of moral damages in the amount of P50,000.00 on the ground that private respondent’s action before the trial court does not fall under any of the cases enumerated in the law cranad(Art. 2219 of the New Civil Code) for which moral damages are recoverable and that although private respondent’s action gives the appearance that it is covered under quasi-delict as provided in Art. 21 of the New Civil Code, the definition of quasi-delict in Art. 2176 of the New Civil Code expressly excludes cases where there is a pre-existing contractual relation between the parties, as in the case under consideration, where an employer-employee relationship existed between PAL and private respondent. It is further argued that private respondent’s action cannot be deemed to be covered by Art. 21, inasmuch as there is no evidence on record to show that PAL “wilfully cause(d) loss or injury tocranad(private respondent) in a manner that is contrary to morals, good customs or public policy . cra .” Nor can private

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respondent’s action be considered “analogous” to either of the foregoing, for the reasons are obvious that it is not.” chanroblesvirtualawlibrary(Memorandum of petitioner, pp. 418-421, Records)

Having affirmed the gross negligence of PAL in allowing Capt. Delfin Bustamante to fly the plane to Daet on January 8, 1951 whose slow reaction and poor judgment was the cause of the crash-landing of the plane which resulted in private respondent Samson hitting his head against the windshield and causing him injuries for which reason PAL terminated his services and employment as pilot after refusing to provide him with the necessary medical treatment of respondent’s periodic spells, headache and general debility produced from said injuries, We must necessarily affirm likewise the award of damages or compensation under the provisions of Art. 1711 and Art. 1712 of the New Civil Code which provide:

Art. 1711. Owners of enterprises and other employers are obliged to pay compensation for the death or injuries to their laborers, workmen, mechanics or other employees, even though the event may have been purely accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the course of the employment. The employer is also liable for compensation if the employee contracts any illness or disease caused by such employment or as the result of the nature of the employment. If the mishap was due to the employee’s own notorious negligence, or voluntary act, or drunkenness, the employer shall not be liable for compensation. When the employee’s lack of due care contributed to his death or injury, the compensation shall be equitably reduced.

Art. 1712. If the death or injury is due to the negligence of a fellow-worker, the latter and the employer shall be solidarily liable for compensation. If a fellow-worker’s intentional or malicious act is the only cause of the death or injury, the employer shall not be answerable, unless it should be shown that the latter did not exercise due diligence in the selection or supervision of the plaintiffs fellow-worker.

The grant of compensatory damages to the private respondent made by the trial court and affirmed by the appellate court by computing his basic salary per annum at P750.00 a month as basic salary and P300.00 a month for extra pay for extra flying time including bonus given in December every year is justified. The correct computation however should be P750 plus P300 x 12 months = P12,600 per annum x 10 years = P126,000.00 cranad(not P120,000.00 as computed by the court a quo). The further grant of increase in the basic pay of the pilots to P12,000 annually for 1964 to 1968 totalling P60,000.00 and another P18,000.00 as bonuses and extra pay for extra flying time at the same rate of P300.00 a month totals P78,000.00. Adding P126,000.00 cranad(1964 to 1968 compensation) makes a grand total of P204,000.00 cranad(not P198,000.00 as originally computed).

As to the grant of moral damages in the sum of P50,000.00 We also approve the same. We have noted and considered the holding of the appellate court in the matter of bad faith on the part of PAL, stated hereunder, this wise:

“None of the essential facts material to the determination of the case have been seriously assailed: the overshooting of runway and crash-landing into the mangroves; the hitting of plaintiff’s head to

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the front windshield of the plane; the oozing of blood out of his ears, nose and mouth; the intermittent dizzy spells, headaches and general debility thereafter for which he was discharged from his employment; the condition of not to attribute the cause of the ailment to the crash-landing imposed in bad faith for a demanded special medical service abroad; and the resultant brain injury which defendant’s doctors could not understand nor diagnose.”

x x x

“The act of defendant-appellant in unjustly refusing plaintiff-appellee’s demand for special medical service abroad for the reason that plaintiff-appellee’s deteriorating physical condition was not due to the accident violates the provisions of Article 19 of the Civil Code on human relations “to act with justice, give everyone his due, and observe honesty and good faith.” chanroblesvirtualawlibrary(CA Resolution, pp. 151-152, Records)

We reject the theory of petitioner that private respondent is not entitled to moral damages. Under the facts found by the trial court and affirmed by the appellate court and under the law and jurisprudence cited and applied, the grant of moral damages in the amount of P50,000.00 is proper and justified.

The fact that private respondent suffered physical injuries in the head when the plane crash-landed due to the negligence of Capt. Bustamante is undeniable. The negligence of the latter is clearly a quasi-delict and therefore Article 2219, cranad(2) New Civil Code is applicable, justifying the recovery of moral damages.

Even from the standpoint of the petitioner that there is an employer-employee relationship between it and private respondent

arising from the contract of employment, private respondent is still entitled to moral damages in view of the finding of bad faith or malice by the appellate court, which finding We hereby affirm, applying the provisions of Art. 2220, New Civil Code which provides that willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.

The justification in the award of moral damages under Art. 19 of the New Civil Code on Human Relations which requires that every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith, as applied by respondent court is also well-taken and We hereby give Our affirmance thereto.

With respect to the award of attorney’s fees in the sum of P20,000.00 the same is likewise correct. As pointed out in the decision of the Court of Appeals, “the plaintiff is entitled to attorney’s fees because he was forced to litigate in order to enforce his valid claim cranad(Ganaban vs. Bayle, 30 SCRA 365; De la Cruz vs. De la Cruz, 22 SCRA 33; and many others); defendant acted in bad faith in refusing plaintiff’s valid claimcranad(Filipino Pipe Foundry Corporation vs. Central Bank, 23 SCRA 1044); and plaintiff was dismissed and was forced to go to court to vindicate his right cranad(Nadura vs. Benguet Consolidated, Inc., 5 SCRA 879).”

We also agree with the modification made by the appellate court in ordering payment of legal interest from the date judicial demand was made by Pilot Samson against PAL with the filing of the

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complaint in the lower court. We affirm the ruling of the respondent court which reads:

“Lastly, the defendant-appellant claims that the legal rate of interest on the unearned compensation should be computed from the date of the judgment in the lower court, not from the filing of the complaint, citing a case where the issue raised in the Supreme Court was limited to when the judgment was rendered in the lower court or in the appellate court, which does not mean that it should not be computed from the filing of the complaint.

Articles 1169, 2209 and 2212 of the Civil Code govern when interest shall be computed. Thereunder interest begins to accrue upon demand, extrajudicial or judicial. A complaint is a judicial demand cranad(Cabarroguis vs. Vicente, 107 Phil. 340). Under Article 2212 of the Civil Code, interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point.” chanroblesvirtualawlibrary(CA Resolution, pp. 153-154, Records).

The correct amount of compensatory damages upon which legal interest shall accrue from the filing of the complaint is P204,000.00 as herein computed and not P198,000.00.

WHEREFORE, in view of all the foregoing, the judgment of the appellate court is hereby affirmed with slight modification in that the correct amount of compensatory damages is P204,000.00. With costs against petitioner.

SO ORDERED.

Makasiar and De Castro, JJ., concur.

Teehankee and Melencio-Herrera, JJ., concur in the result.

[G.R. No. 127473. December 8, 2003]

PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS, JUDY AMOR, JANE GAMIL, minors GIAN CARLO AMOR represented by ATTY. OWEN AMOR, and CARLO BENITEZ represented by JOSEPHINE BENITEZ, respondents.

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal of the decision[1] dated August 12, 1996, in CA-G.R. CV No. 38327[2] and the Resolution dated November 15, 1996 denying the motion for reconsideration of Philippine Airlines, Inc. (petitioner for brevity).

Private respondents Judy Amor, Jane Gamil, minor Gian Carlo Amor, represented by his father, Atty. Owen Amor, and, minor Carlo Benitez, represented by his mother, Josephine Benitez, filed with the Regional Trial Court (Branch 53), Sorsogon, Sorsogon, a complaint[3] for damages against petitioner due to the latter’s failure to honor their confirmed tickets.

In support of their claim, private respondents presented evidence establishing the following facts:

Private respondent Judy Amor purchased three confirmed plane tickets for her and her infant son, Gian Carlo Amor as well as her

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sister Jane Gamil for theMay 8, 1988, 7:10 a.m. flight, PR 178, bound for Manila from defendant’s branch office in Legaspi City. Judy Amor, a dentist and a member of the Board of Directors of the Sorsogon Dental Association, was scheduled to attend the National Convention of the Philippine Dental Association from May 8 to 14, 1988 at the Philippine International Convention Center. [4]

On May 8, 1988, Judy with Gian, Jane and minor Carlo Benitez, nephew of Judy and Jane, arrived at the Legaspi Airport at 6:20 a.m. for PR 178. Carlo Benitez was supposed to use the confirmed ticket of a certain Dra. Emily Chua.[5] They were accompanied by Atty. Owen Amor and the latter’s cousin, Salvador Gonzales who fell in line at the check-in counter with four persons ahead of him and three persons behind him[6] while plaintiff Judy went to the office of the station manager to request that minor plaintiff Carlo Benitez be allowed to use the ticket of Dra. Chua.[7] While waiting for his turn, Gonzales was asked by Lloyd Fojas, the check-in clerk on duty, to approach the counter. Fojas wrote something on the tickets which Gonzales later read as “late check-in 7:05”. When Gonzales’ turn came, Fojas gave him the tickets of private respondents Judy, Jane and Gian and told him to proceed to the cashier to make arrangements.[8]

Salvador then went to Atty. Amor and told him about the situation. Atty. Amor pleaded with Fojas, pointing out that it is only 6:45 a.m., but the latter did not even look at him or utter any word. Atty. Amor then tried to plead with Delfin Canonizado and George Carranza, employees of petitioner, but still to no avail. Private respondents were not able to board said flight. The

plane left at 7:30 a.m., twenty minutes behind the original schedule.[9]

Private respondents went to the bus terminals hoping to catch a ride for Manila. Finding none, they went back to the airport and tried to catch an afternoon flight.[10] Unfortunately, the 2:30 p.m. flight, PR 278, was cancelled due to “aircraft situation”.[11] Private respondents were told to wait for the 5:30 p.m. flight, PR 180. They checked-in their bags and were told to hand in their tickets. Later, a PAL employee at the check-in counter called out the name of private respondent minor Carlo Benitez. Plaintiff Judy approached the counter and was told by the PAL personnel that they cannot be accommodated. Fojas who was also at the counter then removed the boarding passes inserted in private respondents’ tickets as well as the tags from their luggages.[12]

Manuel Baltazar, a former Acting Manager of petitioner in Legaspi City in May 1988, testified that based on his investigation, the private respondents, although confirmed passengers, were not able to board PR 178 in the morning of May 8, 1988 because there were “go-show” or “waitlisted” and non-revenue passengers who were accommodated in said flight. He also noted that there was overbooking for PR 178.[13]

On the other hand, petitioner contends that private respondents are not entitled to their claim for damages because they were late in checking-in for PR 178; and that they were only chance or waitlisted passengers for PR 180 and were not accommodated because all confirmed passengers of the flight had checked-in. In support thereof, petitioner presented Lloyd Fojas, who testified, as follows:

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In the morning of May 8, 1988, he was on duty at the check-in counter of the Legaspi Airport. He was the one who attended to the tickets of private respondents which were tendered by Salvador Gonzales at 7:05 a.m. when the counter was already closed. The clock at the check-in counter showed that it was already 7:05 and so he told Gonzales that they are already late and wrote “late check-in, 7:05” on private respondents’ tickets. The flight was scheduled to leave at 7:10 a.m. and checking-in is allowed only until 30 minutes before departure time. At the time private respondents went to the check-in counter, passengers were already leaving the pre-departure area and going towards the plane and there were no more passengers in the check-in area, not even waitlisted passengers. The baggages of the passengers have been loaded in the aircraft. Gonzales left and later came back with Atty. Amor who pleaded that plaintiffs be accommodated in the flight. He told Atty. Amor to go to his supervisor to re-book the tickets because there were no more boarding passes and it was already time for boarding the plane. Atty. Amor then left the counter. [14]

On cross-examination, Fojas testified that he did not know how many waitlisted or non-revenue passengers were accommodated or issued boarding passes in the 7:00 a. m. and in the afternoon flight of May 8, 1988.[15]

After trial, the RTC rendered judgment upholding the evidence presented by private respondents, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered:

(a) ordering the defendant to reimburse the plaintiffs the amount of P1,171.60 representing the purchase price of the four (4) plane tickets;

(b) condemning the defendant to pay plaintiffs Judy Amor and Jane Gamil the amount of P250,000.00 each as moral damages, P200,000.00 as exemplary damages, plusP100,000.00 as actual damages;

(c) for the defendant to pay plaintiffs the amount of P30,000.00 as attorney’s fees, plus P500.00 for every appearance, or a total of P10,500.00 for 21 actual appearance (sic) in court, P2,000.00 as incidental litigation expenses, and to pay the cost of the suit.

SO ORDERED.[16]

Aggrieved, petitioner appealed to the Court of Appeals (CA for brevity) which affirmed the judgment of the trial court in toto and denied petitioner’s motion for reconsideration.

Hence, the present petition of PAL, raising the following issues:

I

WHETHER PRIVATE RESPONDENTS WERE LATE CHECKED-IN PASSENGERS AND WHETHER THE FAILURE OF AN AIRLINE TO ACCOMMODATE A PASSENGER WHO CHECKED IN LATE IS ACTIONABLE SO AS TO ENTITLE THEM TO DAMAGES.

II

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ASSUMING ARGUENDO THAT PETITIONER IS LIABLE, WHETHER THE AMOUNT OF DAMAGES AWARDED TO PRIVATE RESPONDENTS IS EXCESSIVE, UNCONSCIONABLE AND UNREASONABLE.[17]

In support of the first issue, petitioner argues:

(1) While ordinarily, the findings of the CA are accepted as conclusive by this Court, there are instances when the Court may make its own findings such as when the appellate court based its findings on speculation, surmises or conjectures. The appellate court erroneously gave too much reliance on the testimony of Baltazar who is a disgruntled former employee and relative of private respondent Amor. He was not present at the time of the incident. Baltazarmerely interpreted the flight manifest and made a lot of speculations which is undeserving of attention and merit.

(2) Its employees are adequately trained and service oriented that they would not dare violate company rules and regulations. They are aware of the drastic consequences that may befall them as what happened to Baltazar.

(3) As to PR 180, private respondents were merely waitlisted in said flight hence it was known to them that their accommodation in said flight was dependent upon the failure of any confirmed passenger to check-in within the regulation check-in time. Unfortunately for them, all the confirmed passengers on PR 180 checked-in on time.

In support of the second issue, petitioner contends:

(1) The award of actual, moral and exemplary damages to private respondents have no factual nor legal basis at all. Its failure

to accommodate private respondents on Flights PR 178, 278 and 180 was not motivated by bad faith or malice but due to a situation which private respondents brought upon themselves. It had exerted utmost and sincere effort to lessen the “agony and predicament” of private respondents. They immediately made protective bookings for private respondents on the 2:30 p.m. flight, PR 278, which unfortunately was cancelled due to “aircraft situation”. Upon cancellation of PR 278, they made special arrangements to enable private respondents to have first priority in PR 180 in case of a “no show” confirmed passenger.

(2) To award damages to a passenger who checked-in late would place a premium or reward for breach of contract that would encourage passengers to intentionally check-in late with the expectation of an award of damages.

(3) Moral and exemplary damages as well as attorney’s fees are not recoverable in damage suits predicated on breach of contract of carriage unless there is evidence of fraud, malice or bad faith on the part of the carrier. Even assuming arguendo that petitioner is liable for damages, the amounts awarded in favor of private respondents are excessive, unreasonable and unconscionable. The primary object of an award of damages in a civil action is compensation or indemnity or to repair the wrong that has been done. Damages awarded should be equal to, and commensurate with, the injury sustained.

(4) It was erroneous to award damages in favor of Jane Gamil when she never appeared before the trial court to prove her claim for damages.

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In their Comment, private respondents stress that the fact they were not late in checking-in for PR 178 has been substantially established in the hearing before the trial court and affirmed by the CA. They maintain that, contrary to the assertion of petitioner, they have established their case not only by a preponderance of evidence but by proof that is more than what is required by law justifying the factual findings of the trial court and the CA.

Private respondents point out that since the issues raised by this petition are factual and do not fall under exceptional circumstances, there is nothing left to be reviewed or examined by the Supreme Court.

As to the damages awarded, private respondents contend that the amounts awarded are not excessive, unconscionable or unreasonable because of the high-handed, malicious, dictatorial and savage act of petitioner’s employee which caused them untold mental anguish, excruciating pain, public contempt and ridicule, sleepless nights and other forms of moral suffering.

In its Reply, petitioner reiterates its earlier points and questions once more the credibility of private respondents’ witnesses, particularly Atty. Owen Amor, Salvador Gonzales and Manuel Baltazar who are related to the respondents by blood or affinity.

In their Rejoinder, private respondents aver that the findings of facts of the courts a quo were based not only on the testimonies of their witnesses but also on petitioner’s own employee, Lloyd Fojas, who testified that there were non-revenue, go-show and waitlisted passengers who were accommodated in PR 178. They reiterate their

position that where there is a question regarding the credibility of witnesses, the findings of trial courts are generally not disturbed by appellate courts. Finally, as to the damages awarded, private respondents claim that there was substantial basis in awarding such amounts.

Evidently, in resolving the two issues raised in the present petition, it is inevitable and most crucial that we first determine the question whether or not the CA erred in upholding the RTC ruling that private respondents were late in checking-in. Both issues call for a review of the factual findings of the lower courts.

In petitions for review on certiorari under Rule 45 of the Rules of Court, the general rule is that only questions of law may be raised by the parties and passed upon by this Court.[18] Factual findings of the appellate court are generally binding on us especially when in complete accord with the findings of the trial court.[19]This is because it is not our function to analyze or weigh the evidence all over again.[20] However, this general rule admits of exceptions, to wit:

(a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises or conjectures; (c) when the inference made is manifestly mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was based on a misapprehension of facts; (e) when the factual findings are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; (g) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a

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different conclusion; and, (h) where the findings of fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions without citation of specific evidence, or where the facts set forth by the petitioner are not disputed by the respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record.[21]

Petitioner invokes exception (b).

As to the first issue: Whether or not private respondents checked-in on time for PR 178. The determination of this issue is necessary because it is expressly stipulated in the airline tickets issued to private respondents that PAL will consider the reserved seat cancelled if the passenger fails to check-in at least thirty minutes before the published departure time.[22]

After a careful review of the records, we find no reason to disturb the affirmance by the CA of the findings of the trial court that the private respondents have checked-in on time; that they reached the airport at 6:20 a.m., based on the testimonies of private respondent Judy Amor, and witnesses Salvador Gonzales and Atty. Owen Amor who were consistent in their declarations on the witness stand and corroborated one another’s statements; and that the testimony of petitioner’s lone witness, Lloyd Fojas is not sufficient to overcome private respondents’ evidence.

We have repeatedly held that the truth is established not by the number of witnesses but by the quality of their testimonies.[23] In the present case, it cannot be said that the quality of the testimony of petitioner’s lone witness is greater than those of the private

respondents. Fojas testified that when respondents went to the check-in counter, there were no more persons in that area since all the passengers already boarded the plane.[24] However, the testimonies of Manuel Baltazarand Judy Amor together with the manifest, Exhibits “E”, “E-1” and “E-2”, point to the fact that many passengers were not able to board said flight, including confirmed passengers, because of overbooking.[25]

It is a well-entrenched principle that absent any showing of grave abuse of discretion or any palpable error in its findings, this Court will not question the probative weight accorded by the lower courts to the various evidence presented by the parties. As we explained in Superlines Transportation Co. Inc., vs. ICC Leasing & Financing Corporation:[26]

The Court is not tasked to calibrate and assess the probative weight of evidence adduced by the parties during trial all over again…So long as the findings of facts of the Court of Appeals are consistent with or are not palpably contrary to the evidence on record, this Court shall decline to embark on a review on the probative weight of the evidence of the parties.[27] (Emphasis supplied)

It is also well established that findings of trial courts on the credibility of witnesses is entitled to great respect and will not be disturbed on appeal except on very strong and cogent grounds.[28] Petitioner failed to demonstrate that the trial court committed any error in upholding the testimonies of private respondents’ witnesses. We find that the CA committed no reversible error in sustaining the findings of facts of the trial court.

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Private respondents who had confirmed tickets for PR 178 were bumped-off in favor of non-revenue passengers. Witness Manuel Baltazar, a former Acting Manager of petitioner, evaluated the manifest for PR 178 and found that there were non-revenue passengers allowed to go on board. He specifically identified the family of Labanda, a certain Mr. Luz, petitioner’s former branch manager, and, a certain Mr. Moyo. [29] Although petitioner had every opportunity to refute such testimony, it failed to present any countervailing evidence. Instead, petitioner merely focused on assailing the credibility of Baltazar on the ground that he was a disgruntled employee and a relative of private respondents. Apart from the bare allegations in petitioner’s pleadings, no evidence was ever presented in court to substantiate its claim that Baltazar was a disgruntled employee that impelled him to testify against petitioner.

As to his relationship with private respondents, this Court has repeatedly held that a witness’ relationship to the victim does not automatically affect the veracity of his or her testimony.[30] While this principle is often applied in criminal cases, we deem that the same principle may apply in this case, albeit civil in nature. If a witness’ relationship with a party does not ipso facto render him a biased witness in criminal cases where the quantum of evidence required is proof beyond reasonable doubt, there is no reason why the same principle should not apply in civil cases where the quantum of evidence is only preponderance of evidence.

As aptly observed by the CA which we hereby adopt:

Ironically for the defendant, aside from appellant’s assumption that Baltazar could be a disgruntled former employee of their company and could be biased (which same reason could be

attributed to Lloyd Fojas) due to a distant relationship with the plaintiff, it offered no proof or evidence to rebut, demean and contradict the substance of the testimony of Baltazar on the crucial point that plaintiffs-appellees were bumped off to accommodate non-revenue, waitlisted or go-show passengers. On this fact alone, defendant’s position weakens while credibly establishing that indeed plaintiffs arrived at the airport on time to check-in for Flight PR 178. Further emphasis must be made that Lloyd Fojas even affirmed in court that he can not recall how many PR 178 boarding passes he had at the check-in counter because management has authority to accommodate in any flight and correspondingly issue boarding passes to non-revenue passengers (pages 15-16, TSN, January 24, 1990).[31]

Indeed, petitioner, through its lone witness Fojas, could only answer during his examination on the witness stand that he is unable to recall the circumstances recommending the issuances of boarding passes to waitlisted and that it is the management which has the authority to issue boarding passes to non-revenue passengers.[32] Even in the afternoon flight, PR 180, Fojas could not squarely deny that confirmed paying passengers were bumped-off in favor of non-revenue ones.[33]

The CA likewise correctly concluded that there was overbooking in the morning flight on the basis of the testimony of private respondents’ witness ManuelBaltazar, to wit:

ATTY. CALICA:

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Q- There was a memorandum order of the PAL prohibiting overbooking. Are you aware of CAB Regulation No. 7 on boarding passengers?

WITNESS:

A- Yes.

ATTY. CALICA:

Q- You will agree with me that this regulation allows only overbooking by 10%?

WITNESS:

A- Yes, that is a government regulation and the company regulation is different.

COURT:

Q- But in the morning flight of May 8, 1988, granting that the government regulation allows only 10% overbooking, can you tell the Court from the manifest itself whether it exceeded the 10% overbooking allowed by the regulation reckoning from the 109 passenger seater?

WITNESS:

A- With the capacity of 109, 10% of it will be 10 or 11, so if we add this it will not exceed 120 passengers.

COURT:

Q- In that flight how many were confirmed?

WITNESS:

Q- In that flight those passengers that were confirmed have a total of 126.

COURT:

Q- Even if when allowed the government regulation of overbooking, you will still exceed the allowable overbooking number?

WITNESS:

A- Yes.[34] (Emphasis supplied)

This fact of overbooking, again, was not adequately refuted by petitioner’s evidence.

The appellate court aptly sustained the trial court in giving probative weight to the testimony of private respondent Judy Amor that there were other passengers who were not accommodated in flight PR 178, to wit:

Q: And how about you, what did you do when you arrived at the Legaspi Airport at 6:20 while Salvador Gonzales was at the check-in counter to pay the tickets?

A: I went to the Office of the OIC Manager at the right side of the Legaspi Terminal.

…

Q: Who was that Manager?

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A: I was able to know his name as Delfin Canonizado.

Q: There were also people there near the table of Mr. Canonizado, do you know what were they doing?

A: They were making complaints also because they were also scheduled for flight on that day. They were not accommodated.[35] (Emphasis supplied)

We have noted an inconsistency in the testimony of private respondents’ witness, Salvador Gonzales in the direct and cross-examinations. In his direct testimony, Gonzales stated that while he was waiting in line at the check-in counter, with four persons still ahead of him, Lloyd Fojas asked him to approach the counter, took private respondents’ tickets and wrote something on them. It was only later on when his turn came, that he found out that what Fojas wrote on the tickets was “late check-n 7:05”. On cross-examination, Gonzales testified that it was only after the four persons ahead of him were accommodated that Fojaswrote on the tickets “late check-in 7:05”. However, upon clarificatory questions propounded by the trial court, Gonzales was able to clarify that Fojas had written the time on the ticket before the four persons ahead of him were entertained at the counter.[36] Understandably, the lower courts found no cogent reason to discredit the testimony of witness Gonzales.

We have held in an earlier case that a witness may contradict himself on the circumstances of an act or different acts due to a long series of questions on cross-examination during which the mind becomes tired to such a degree that the witness does not understand what he is testifying about, especially if the questions,

in their majority are leading and tend to make him ratify a former contrary declaration.[37]

In fine, the findings of fact of the trial court, as sustained by the CA, have to be respected. As we have consistently held, trial courts enjoy the unique advantage of observing at close range the demeanor, deportment and conduct of witnesses as they give their testimonies. Thus, assignment to declarations on the witness stand is best done by them who, unlike appellate magistrates, can weigh firsthand the testimony of a witness.[38]

Anent the second issue as to whether or not the damages awarded are excessive, we rule in the affirmative. The Court of Appeals committed an error in sustaining the ruling of the trial court requiring petitioner to reimburse private respondents the amount of four plane tickets, including the ticket for private respondent minor Carlo Benitez.

As admitted by private respondent Judy in her testimony, the only confirmed tickets for the morning flight (PR 178) are the tickets for herself, her infant son,Gian Carlo and her sister Jane Gamil. They had another ticket which Judy bought for a certain Dra. Emily Chua who backed out and whose ticket they had intended to be transferred to Carlo Benitez.[39] Although it is clearly stated in the ticket that the same is non-transferrable,[40] Judy testified that a PAL employee issued another ticket in the name of Carlo Benitez in lieu of the ticket issued for Dra. Chua. However, an examination of the ticket issued, Exhibit “C”, discloses that it does not state therein the flight number or time of departure. Consequently, in the absence of competent evidence, private respondent Carlo Benitez’ complaint should be dismissed.

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We find no justifiable reason that warrants the award of P100,000.00 as actual damages in favor of all private respondents. Article 2199 of the Civil Code, provides that actual or compensatory damages may only be given for such pecuniary loss suffered by him as he has duly proved. We explained in Chan vs.Maceda [41] that:

…A court cannot rely on speculations, conjectures or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have been suffered by the injured party and on the best obtainable evidence of the actual amount thereof. It must point out specific facts which could afford a basis for measuring whatever compensatory or actual damages are borne.[42]

All that was proved by herein private respondents was the amount of the purchase price of the plane tickets of private respondents Judy, Jane and Gian Carlo. Only said amounts should therefore be considered in awarding actual damages. As borne by the records, private respondent Judy Amor paid P466.00 each for her ticket and that of Jane; while she paid P46.60 for her infant Gian Carlo.[43] The amount of actual damages should therefore be reduced to P978.60, payable to private respondent Judy Amor.

As to moral damages.

It should be stressed that moral damages are not intended to enrich a plaintiff at he expense of the defendant but are awarded only to allow the former to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has undergone due to the defendant’s culpable action.[44] We emphasized in Philippine

National Bank vs. Court of Appeals that moral damages are not punitive in nature but are designed to somehow alleviate the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury unjustly caused to a person. We have held that even though moral damages are incapable of pecuniary computation, it should nevertheless be proportional to and in approximation of the suffering inflicted. And, to be recoverable, such damage must be the proximate result of a wrongful act or omission the factual basis for which is satisfactorily established by the aggrieved party. [45]

In the case at bar, private respondent Judy Amor testified that she felt “ashamed” when the plane took off and they were left at the airport since there were many people there who saw them including dentists like her. She also related that she missed the Philippine Dental Convention scheduled on the 8th of May, 1988 where she was supposed to attend as a dentist and officer of the Sorsogon Dental Association. They tried to look for buses bound for Manila but missed those scheduled in the morning. They went back to the airport but still failed to take an afternoon flight. Hence, she was forced to take a bus that evening forManila which did not allow her to sleep that night.[46] Private respondent Judy however did not miss the whole convention as she was able to leave on the night of the first day of the week-long convention.

While there is no hard and fast rule for determining what would be a fair amount of moral damages, generally, the amount awarded should be commensurate with the actual loss or injury suffered.[47]

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The CA erred in upholding the trial court’s award of moral damages based on Judy Amor’s claim that there was a denigration of her social and financial standing. Private respondent Judy failed to show that she was treated rudely or disrespectfully by petitioner’s employees despite her stature as a dentist. As we held in Kierulf vs. Court of Appeals [48]

The social and financial standing of Lucila cannot be considered in awarding moral damages. The factual circumstances prior to the accident show that no “rude and rough” reception, no “menacing attitude,” no “supercilious manner,” no “abusive language and highly scornful reference” was given her. The social and financial standing of a claimant of moral damages may be considered in awarding moral damages only if he or she was subjected to contemptuous conduct despite the offender’s knowledge of his or her social and financial standing.[49] (Emphasis supplied)

Nevertheless, we hold that private respondent Judy Amor is entitled to moral damages. In a number of cases, we have pronounced that air carriage is a business possessed with special qualities. In Singson vs. Court of Appeals ,[50] we explained that:

A contract of air carriage is a peculiar one. Imbued with public interest, common carriers are required by law to carry passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard for all the circumstances. A contract to transport passengers is quite different in kind and degree from any other contractual relation. And this because its business is mainly with the traveling public. It invites people to avail of the comforts and advantages it offers. The contract of carriage, therefore, generates a relation

attended with a public duty. Failure of the carrier to observe this high degree of care and extraordinary diligence renders it liable for any damage that may be sustained by its passengers.[51]

As the lower courts have found, evidence positively show that petitioner has accommodated waitlisted and non-revenue passengers and had overbooked more than what is allowed by law, to the prejudice of private respondents who had confirmed tickets. Overbooking amounts to bad faith[52] and therefore petitioner is liable to pay moral damages to respondent Judy Amor.

Considering all the foregoing, we deem that the award of P250,000.00 as moral damages in favor of private respondent Judy Amor is exorbitant. Where the damages awarded are far too excessive compared to the actual losses sustained by the aggrieved party, the same should be reduced to a more reasonable amount.[53] We find the amount of P100,000.00 to be sufficient, just and reasonable.

We consider the award of actual damages in favor of private respondent Jane Gamil to be inappropriate considering the testimony of Judy Amor that she was the one who paid for the tickets.[54] Likewise, the appellate court erred in sustaining the award of moral damages in favor of Jane Gamil as she never testified in court. It has been held that where the plaintiff fails to take the witness stand and testify as to his social humiliation, wounded feelings and anxiety, moral damages cannot be recovered”.[55]

As to the award of exemplary damages, Article 2234 of the Civil Code provides that the claimant must show that he would be

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entitled to moral, temperate or compensatory damages before the court may consider the question whether or not exemplary damages should be awarded.

Consequently, private respondent Jane Gamil, not being entitled to actual and moral damages, is not entitled to exemplary damages.

The award of exemplary damages in favor of private respondent Judy Amor is warranted in this case.[56] Waitlisted and non-revenue passengers were accommodated while private respondent Judy Amor who had fully paid her fare and was a confirmed passenger was unduly deprived of enplaning. Petitioner was guilty of overbooking its flight to the prejudice of its confirmed passengers. This practice cannot be countenanced especially considering that the business of air carriage is imbued with public character. We have ruled that where in breaching the contract of carriage, the airline is shown to have acted in bad faith, as in this case,[57] the award of exemplary damages in addition to moral and actual damages is proper.[58] However, as in the matter of the moral damages awarded by the trial court, we consider the amount of P200,000.00 as exemplary damages to be far too excessive. The amount of P25,000.00 is just and proper.

We find the award of attorney’s fees in this case to be in order since it is well settled that the same may be awarded when the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest.[59]

WHEREFORE, we affirm the decision of the Court of Appeals with the following MODIFICATIONS:

1. Petitioner is ordered to pay private respondent Judy Amor the amount of P978.60 as and for actual damages; P100,000.00 as moral damages;P25,000.00 as exemplary damages; and attorney’s fees in the amount of P30,000.00 plus P500.00 for every appearance of private respondent’s lawyer, or a total of P10,500.00 for 21 actual appearances in court; P2,000.00 as incidental litigation expenses; and costs of suit.

2. The claim for damages of private respondent Jane Gamil is DENIED for lack of evidence.

3. The complaint of private respondent Carlo Benitez is DISMISSED for lack of cause of action.

No pronouncement as to costs.

G.R. No. 94149 May 5, 1992

AMERICAN HOME vs. CA

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

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The undisputed facts of the case are follows:

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

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

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

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

As the shipment was insured with petitioner in the amount of US$837,500.00, Mayleen Paper, Inc. sought recovery from the

former. Upon demand and submission of proper documentation, American Home Assurance paid Mayleen Paper, Inc. the adjusted amount of P31,506.75 for the damages/losses suffered by the shipment, hence, the former was subrogated to the rights and interests on Mayleen Paper, Inc.

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

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

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

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

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

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

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

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

xxx xxx xxx

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

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

defendant claims that plaintiff is barred from suing for recovery.

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

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

as distinguished from general average which

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

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

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

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

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

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

Hence, this petition.

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

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

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

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

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

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

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

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suppletorily as they provide for the extent of the common carriers' liability.

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

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

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

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

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

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

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

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

SO ORDERED.

G.R. No. 15652,

Ynchausti Steamship Company v. Dexter and Unson, 41 Phil. 289

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

On July 23, 1918, the Government of the Philippine Islands, acting by and through the respondent Insular Purchasing Agent, employed the services of the petitioner, Ynchausti Steamship Co., a common carrier, for the transportation, on board the steamship Venus, from the port of Manila to the port of Aparri, Cagayan, of a consignment of merchandise, consisting of thirty (30) cases of "White Rose" mineral oil of two five-gallon cans to the case; and on September 18, 1918, the said Government likewise employed the services of petitioner for the transportation on board the steamship Venus, from Manila to Aparri, Cagayan, of ninety-six cases of "Cock" Brand mineral oil, ten gallons to the case. The goods were delivered by the shipper to the carrier, which accordingly received them, and to evidence the contract of transportation, the parties duly executed and delivered what is popularly called the Government bill of lading (General Form 9-A), hereto attached, marked Exhibit A and made a

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part hereof, wherein and whereby it was stipulated that the carrier, the petitioner Ynchausti & Co., received the above-mentioned supplies in apparent good condition, obligating itself to carry said supplies to the place agreed upon, in accordance with the authorized and prescribed rates and classifications, and subject to the law of common carriers in force on the date of the shipment, and to the conditions prescribed by the Insular Collector of Customs in Philippine Marine Regulations at page 16 under the heading of "Bill of Lading Conditions," hereto attached, marked Exhibit B and made a part hereof.

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

Thereafter, notwithstanding the protestations of the petitioner, Ynchausti Steamship Co., that said shortages were due to causes entirely unknown to it, and were not due to any fault or negligence on its part, or on the part of its agents or servants, the Acting Insular Purchasing Agent of the Philippine Islands notified the petitioners herein that after due investigation the Insular Auditor found and decided that the leakages of the two whole cases were due to its negligence and that the deduction of the sum of P22.53, the invoice value of the goods lost, and held by the Auditor to be the true value thereof had been authorized by the said Insular Auditor.

Petitioner thereupon protested against the threatened deduction, and demanded that it be paid the full amount due for the

transportation of the two said shipments of merchandise, to wit, the sum of P82.79, as shown by its transportation voucher presented in this cause, hereto attached. marked Exhibit C and made a part hereof.

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

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

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

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

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admitted statement of facts to support it. It results that if that allegation is material to the relief here sought, the petition must fail.

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

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

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

loss was due to accident or some other circumstance inconsistent with its liability. (Articles

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

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

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

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

G.R. No. 29721,

Mirasol v. The Robert Dollar Co., 53 Phil. 124

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STATEMENT

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

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

Plaintiff prays for corresponding judgment, with legal interest from the filing of the complaint and costs.

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

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

As a fourth special defense, defendant alleges that the damage, if any, was caused by "sea water," and that the bill of lading exempts

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defendant from liability for that cause. That damage by "sea water" is a shipper's risk, and that defendant is not liable.

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

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

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

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

The defendant assigns the following errors:

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

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

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

JOHNS, J.:

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

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

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

1. Restrictions of the liability of a steamship company for its own negligence or failure of duty toward the passenger, being against

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the public policy enforced by the courts of the United States, will not to be upheld, though the ticket was issued and accepted in a foreign country and contained a condition making it subject to the law thereof, which sustained such stipulation.

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

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

Both the facts upon which it is based and the legal principles involved are square in point in this case.

The defendant having received the two boxes in good condition, its legal duty was to deliver them to the plaintiff in the same condition in which it received them. From the time of their delivery to the defendant in New York until they are delivered to the plaintiff in Manila, the boxes were under the control and supervision of the defendant and beyond the control of the plaintiff. The defendant having admitted that the boxes were damaged while in transit and in its possession, the burden of proof then shifted, and it devolved upon the defendant to both allege and prove that the damage was caused by reason of some fact which exempted it from liability. As

to how the boxes were damaged, when or where, was a matter peculiarly and exclusively within the knowledge of the defendant and in the very nature of things could not be in the knowledge of the plaintiff. To require the plaintiff to prove as to when and how the damage was caused would force him to call and rely upon the employees of the defendant's ship, which in legal effect would be to say that he could not recover any damage for any reason. That is not the law.

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

The lower court in its opinion says:

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

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

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Merchandise shall be transported at the risk and venture of the shipper, if the contrary was not expressly stipulated.

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

The proof of these accidents is incumbent on the carrier.

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

Defendant also cites and relies on the case of Government of the Philippine Islands vs. Ynchausti & Company (40 Phil., 219) , but it appears from a reading of that case that the facts are very different and, hence, it is not in point. In the instant case, there is no claim or pretense that the two cases were not in good order when received on board the ship, and it is admitted that they were in bad order on

their arrival at Manila. Hence, they must have been damaged in transit. In the very nature of things, if they were damaged by reason of a tempest, rocks, icebergs, foundering, stranding or the perils of the sea, that would be a matter exclusively within the knowledge of the officers of defendant's ship, and in the very nature of things would not be within plaintiff's knowledge, and upon all of such questions, there is a failure of proof.

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

Johnson, Malcolm, Ostrand, Romualdez, and Villa-Real, JJ., concur.

Separate Opinions

STREET, J., dissenting in part:

I gave a hesitating adherence to the decision of this case in division, and upon further reflection, I am now constrained to record my belief that the decision is in part erroneous. I agree with the court that the defendant is liable to the plaintiff, but I think that its liability is limited, under clause 13, printed on the back of the bill of lading, to the amount of 250 dollars for each of the two boxes of books comprising this consignment. While the law does not permit a carrier gratuitously to exempt itself from liability for the negligence of its servants, it cannot effectually do so for a valuable consideration; and where freight rates are adjusted upon the basis of a reasonable limited value per package, where a higher value is not declared by the shipper, the limitation as to the

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value is binding. This court in two well

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considered decisions has heretofore upheld a limitation of exactly the character of that indicated in clause 13 (H.E. Heacock Co. vs. Macondray & Co., 42 Phil., 205; Freixas & Co. vs. Pacific Mail Steamship Co., 42 Phil., 198); and I am unable to see any sufficient reason for ignoring those decisions.

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