Facts: Jose was driving his car along Leon Guinto St.

in Manila, near President Qurino

Ave. He stopped at the intersection
because of the red light, and proceeded when the green light went on. However, in the
middle of the street, he was hit by a vehicle coming from the direction of Quirino Ave,
and going to Roxas Blvd.,; the latter vehicle however did not stop, and instead, run
away from the scene of the accident. Jose, however, was able to take a good look at the
plate number of the fleeing vehicle, and after verification with the Land Transportation
Office, was able to a certain that it is registered in the name of the company, Filcar. After
several demand letters to the company for reimbursement of expenses incurred by him
for the repair of the vehicle went unheeded, Jose filed a case for damages against the
company.
In its defense, the company argued that it cannot be held liable for damages incurred by
Jose because, while the car is indeed registered in the name of the company, it is
issued in the name of the Corporate Secretary of the corporation, and at the time of the
accident, was driven by Timoteo, the Corporate Secretarys personal driver, hence there
is no employer-employee relation between it and the personal driver as to make it liable
under Article 2176 in relation to Article 2180 of the New Civil Code.
Issue: May the registered owner of the vehicle liable for damages caused by its driver,
even if the latter is not an employee of the registered owner?
Held: Of course. According to the Supreme Court, it is liable for damages, for the
following reasons:
1. We cannot agree. It is well settled that in case of motor vehicle mishaps, the
registered owner of the motor vehicle is considered as the employer of the tortfeasordriver, and is made primarily liable for the tort committed by the latter under Article 2176,
in relation with Article 2180, of the Civil Code.
In Equitable Leasing Corporation v. Suyom, we ruled that in so far as third persons are
concerned, the registered owner of the motor vehicle is the employer of the negligent
driver, and the actual employer is considered merely as an agent of such owner.
2. Thus, whether the driver of the motor vehicle, Floresca, is an employee of Filcar is
irrelevant in arriving at the conclusion that Filcar is primarily and directly liable for the
damages sustained by Espinas. While Republic Act No. 4136 or the Land
Transportation and Traffic Code does not contain any provision on the liability of
registered owners in case of motor vehicle mishaps, Article 2176, in relation with Article
2180, of the Civil Code imposes an obligation upon Filcar, as registered owner, to
answer for the damages caused to Espinas car. This interpretation is consistent with
the strong public policy of maintaining road safety, thereby reinforcing the aim of the
State to promote the responsible operation of motor vehicles by its citizens.

This does not mean, however, that Filcar is left without any recourse against the actual
employer of the driver and the driver himself. Under the civil law principle of unjust
enrichment, the registered owner of the motor vehicle has a right to be indemnified by
the actual employer of the driver of the amount that he may be required to pay as
damages for the injury caused to another.
The set-up may be inconvenient for the registered owner of the motor vehicle, but the
inconvenience cannot outweigh the more important public policy being advanced by the
law in this case which is the protection of innocent persons who may be victims of
reckless drivers and irresponsible motor vehicle owners.

PHIL. EMPLOY SERVICES and RESOURCES, INC. vs. JOSEPH PARAMIO, ET AL.
[G.R. No. 144786 April 15, 2004]

CALLEJO, SR., J.:

FACTS: Respondents applied for employment in Taiwan with petitioner, Phil. Employ
Services and Resources, Inc. (PSRI for brevity). They paid P19,000 each as placement
fee. The respondents were deployed in Taiwan. When they encountered problems, they
brought their attention to the manager who told them to forget about it and refrain to air
their complaints.

Respondent Navarra and another employee, Pio Gabito, were summoned by the
management and told that they were to be repatriated, without specifying the ground or
cause therefor. They pleaded that they be informed of the cause or causes for their
repatriation, but their requests were rejected. The manager of their employer
summoned the police, who arrived and escorted them to the airport. Upon respondent
Navarra's arrival in Manila, the petitioner sought to settle his complaints. After the
negotiations, the petitioner agreed to pay P49,000 to the said respondent but, in
consideration thereof, the latter executed a quitclaim releasing the petitioner from any or
all liabilities for his repatriation.

Respondent Paramio got ill as a result of the employer's failure to give breakfast
on the said date and dinner the night before. His manager still ordered him to work.

When he pleaded that he be allowed to take some rest, the manager refused.
Respondent Paramio was, instead, made to carry a container weighing around 30
kilograms. Due to his condition, the container slipped from his hands and he injured his
thumb. He was brought to the hospital where he was operated on and treated for his
wound. Instead of giving him financial assistance for his hospital bills, his employer told
him a week after his release from the hospital that it would be better for him to go home
to the Philippines to recuperate. An official from the Taiwanese Labor Department
intervened for respondent Paramio and his employer was told that it had no right to
repatriate the respondent because the accident which caused the injury happened while
the latter was at work.

When he could no longer bear the pain in his thumb, he took a break. When the
manager saw him resting, he was ordered to return to work. Respondent Paramio
refused and contended that he could not resume work because of his thumb injury.
Incensed, the manager told him that he had to stop working and would just have to wait
for his plane ticket for his repatriation. The respondent did as he was told. For failure to
report to work, he was asked to explain the reason thereof. He was given his paycheck
and later in the evening of the same day, respondent Paramio was repatriated to the
Philippines.
The Labor Arbiter declared that the dismissal of the respondents were illegal. The
NLRC set aside the decision of the NLRC. The respondents filed a motion for
reconsideration of the resolution, but the NLRC denied the motion in a Resolution.
Hence this petition for certiorari.

ISSUES:
1. Whether or not, the petitioners were illegally dismissed when they repatriated
by their Taiwan employees.
2. Whether or not, Navarras repatriation and execution of quitclaim and receipt
of P 49, 000 sufficient to conclude his waiver of right against illegal dismissal.
HELD:
(1) Yes. Respondents dismissal was not based on just, valid and legal grounds.
As such, the rule lex loci contractus (the law of the place where the contract is made)
governs. Therefore, the Labor Code, its implementing rules and regulations, and other
laws affecting labor, apply in this case. In order to effect a valid dismissal of an
employee, the law requires that there be just and valid cause as provided in Article 282

and that the employee was afforded an opportunity to be heard and to defend himself.
Dismissal may also be based on any of the authorized causes provided for in Articles
283 and 284 of the Labor Code.

The petitioner failed to substantiate its claim that respondent Navarra's

repatriation was based on a valid, legal and just cause. The petitioner merely alleged
that it was made clear to respondent Navarra that his repatriation was due to the fight
he had with his supervisor. It is not necessary that there be an express termination of
one's services before a case of illegal dismissal can exist. In the landmark case of
Philippine Japan Active Carbon Corporation vs. National Labor Relations Commission,
et al (171 SCRA 164) the Supreme Court ruled that "a constructive discharge is defined
as: "A quitting because continued employment is rendered impossible, unreasonable or
unlikely:" In the case at bar, the petitioners were made to suffer unbearable conditions in
the workplace and the inhuman treatment of their employer until they were left with no
choice but to quit. Thus, it cannot be said that the resignation and repatriation of
complainants Curameng, Bautista, Sarmienta and Guillermo was voluntary.
It cannot be gainsaid that the instant complaint for illegal dismissal indicates that
the resignations and repatriations of the petitioners were not done freely on their part. It
is highly unlikely that these workers, after having invested so much time, effort and
money to secure their employment abroad would just quit even before the expiration of
their contract. We have more reason to rule that the repatriations of petitioners Paramio
and Navarra were not voluntary.

We thus rule that the respondents were constructively dismissed from their
employment. There is constructive dismissal if an act of clear discrimination,
insensibility, or disdain by an employer becomes so unbearable on the part of the
employee that it would foreclose any choice by him except to forego his continued
employment. It exists where there is cessation of work because "continued employment
is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in
rank and a diminution in pay."

(2) We rule that the deed of release executed by respondent Navarra did not
completely release the petitioner from its liability on the latter's claim. As a rule,
quitclaims, waivers or releases are looked upon with disfavor and are commonly
frowned upon as contrary to public policy and ineffective to bar claims for the measure

of a worker's legal rights. If (a) there is clear proof that the waiver was wangled from an
unsuspecting or gullible person; or (b) the terms of the settlement are unconscionable,
and on their face invalid, such quitclaims must be struck down as invalid or illegal.

The records reveal that respondent Navarra executed a deed of release and
waiver for and in consideration of only P49,000. There is no evidence that he was
informed that he was entitled to much more than the said amount, including a refund for
the placement fee he paid to the petitioner. With regard to the deed of quitclaim and
acceptance, it is a well-settled principle that the law does not consider as valid any
agreement to receive less compensation than what a worker is entitled to recover nor
prevent him from demanding benefits to which he is entitled. Quitclaims executed are
ineffective to bar recovery for the full measure of the worker's rights. The reason why
quitclaims are commonly frowned upon as contrary to public policy and they are
ineffective to bar claims for the full measure of the worker's legal rights is because the
employer and employee do not stand on the same footing, such that quitclaims usually
take the form of contracts of adherence, not of choice. Assuming arguendo that the
quitclaim was executed voluntarily, still, it cannot diminish petitioner's entitlement to the
full compensation provided in their contract. At the most, such amount can be
considered an advance on his claim.

G.R. No. 149434

June 3, 2004

PHILIPPINE APPLIANCE CORPORATION (PHILACOR), petitioner,

vs.
THE COURT OF APPEALS, THE HONORABLE SECRETARY OF LABOR
BIENVENIDO E. LAGUESMA and UNITED PHILACOR WORKERS UNION-NAFLU,
respondents.
DECISION
YNARES-SANTIAGO, J.:
Before us is an appeal by certiorari under Rule 45 of the Rules of Court which seeks to
set aside the decision1 of the Court of Appeals in CA-G.R. SP No. 59011, denying due
course to petitioner Philippine Appliance Corporations partial appeal, as well as the
Resolution2 of the same court, dated August 10, 2001, denying the motion for
reconsideration.
Petitioner is a domestic corporation engaged in the business of manufacturing
refrigerators, freezers and washing machines. Respondent United Philacor Workers
Union-NAFLU is the duly elected collective bargaining representative of the rank-andfile employees of petitioner. During the collective bargaining negotiations between
petitioner and respondent union in 1997 (for the last two years of the collective
bargaining agreement covering the period of July 1, 1997 to August 31, 1999), petitioner
offered the amount of four thousand pesos (P4,000.00) to each employee as an "early
conclusion bonus". Petitioner claims that this bonus was promised as a unilateral
incentive for the speeding up of negotiations between the parties and to encourage
respondent union to exert their best efforts to conclude a CBA. Upon conclusion of the
CBA negotiations, petitioner accordingly gave this early signing bonus. 3
In view of the expiration of this CBA, respondent union sent notice to petitioner of its
desire to negotiate a new CBA. Petitioner and respondent union began their
negotiations. On October 22, 1999, after eleven meetings, respondent union expressed
dissatisfaction at the outcome of the negotiations and declared a deadlock. A few days
later, on October 26, 1999, respondent union filed a Notice of Strike with the National
Conciliation and Mediation Board (NCMB), Region IV in Calamba, Laguna, due to the
bargaining deadlock.4
A conciliation and mediation conference was held on October 30, 1999 at the NCMB in
Imus, Cavite, before Conciliator Jose L. Velasco. The conciliation meetings started with
eighteen unresolved items between petitioner and respondent union. At the meeting on
November 20, 1999, respondent union accepted petitioners proposals on fourteen
items,5 leaving the following items unresolved: wages, rice subsidy, signing, and
retroactive bonus.6

Petitioner and respondent union failed to arrive at an agreement concerning these four
remaining items. On January 18, 2000, respondent union went on strike at the
petitioners plant at Barangay Maunong, Calamba, Laguna and at its washing plant at
Paraaque, Metro Manila. The strike lasted for eleven days and resulted in the
stoppage of manufacturing operations as well as losses for petitioner, which constrained
it to file a petition before the Department of Labor and Employment (DOLE). Labor
Secretary Bienvenido Laguesma assumed jurisdiction over the dispute and, on January
28, 2000, ordered the striking workers to return to work within twenty-four hours from
notice and directed petitioner to accept back the said employees. 7
On April 14, 2000, Secretary Laguesma issued the following Order: 8
In view of the foregoing, we fix the wage increases at P30 per day for the first
year and P25 for the second year.
The rice subsidy and retroactive pay base are maintained at their existing levels
and rates.
Finally, this Office rules in favor of Companys proposal on signing bonus. We
believe that a P3,000 bonus is fair and reasonable under the circumstances.
WHEREFORE, premises considered, Philippine Appliance Corporation and
United Philacor Workers Union-NAFLU are hereby directed to conclude a
Collective Bargaining Agreement for the period July 1, 1999 to June 30, 2001.
The agreement is to incorporate the disposition set forth above and includes
other items already agreed upon in the course of negotiation and conciliation.
SO ORDERED. (Emphasis supplied)
On April 27, 2000, petitioner filed a Partial Motion for Reconsideration 9 stating that while
it accepted the decision of Secretary Laguesma, it took exception to the award of the
signing bonus. Petitioner argued that the award of the signing bonus was patently
erroneous since it was not part of the employees salaries or benefits or of the collective
bargaining agreement. It is not demandable or enforceable since it is in the nature of an
incentive. As no CBA was concluded through the mutual efforts of the parties, the
purpose for the signing bonus was not served. On May 22, 2000, Secretary Laguesma
issued an Order10 denying petitioners motion. He ruled that while the bargaining
negotiations might have failed and the signing of the agreement was delayed, this
cannot be attributed solely to respondent union. Moreover, the Secretary noted that the
signing bonus was granted in the previous CBA.
On June 2, 2000, petitioner filed a Petition for Certiorari with the Court of Appeals
docketed as CA-G.R. SP No. 59011 which was dismissed. The Labor Secretarys award
of the signing bonus was affirmed since petitioner itself offered the same as an incentive
to expedite the CBA negotiations. This offer was not withdrawn and was still outstanding

when the dispute reached the DOLE. As such, petitioner can no longer adopt a contrary
stand and dispute its own offer.
Petitioner filed a Motion for Reconsideration but the same was denied. Hence this
petition for review raising a lone issue, to wit:
THE HONORABLE RESPONDENT COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION WHEN IT RENDERED A DECISION NOT IN
ACCORD WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT,
SPECIFICALLY THE CALTEX DOCTRINE OF 1997.
The petition is meritorious.
Petitioner invokes the doctrine laid down in the case of Caltex v. Brillantes,11 where it
was held that the award of the signing bonus by the Secretary of Labor was erroneous.
The said case involved similar facts concerning the CBA negotiations between Caltex
(Philippines), Inc. and the Caltex Refinery Employees Association (CREA). Upon
referral of the dispute to the DOLE, then Labor Secretary Brillantes ruled, inter alia:
Fifth, specifically on the issue of whether the signing bonus is covered under the
"maintenance of existing benefits" clause, we find that a clarification is indeed
imperative. Despite the expressed provision for a signing bonus in the previous
CBA, we uphold the principle that the award for a signing bonus should partake
the nature of an incentive and premium for peaceful negotiations and amicable
resolution of disputes which apparently are not present in the instant case. Thus,
we are constrained to rule that the award of signing bonus is not covered by the
"maintenance of existing benefits" clause.
On appeal to this Court, it was held:
Although proposed by [CREA], the signing bonus was not accepted by [Caltex
Philippines, Inc.]. Besides, a signing bonus is not a benefit which may be
demanded under the law. Rather, it is now claimed by petitioner under the
principle of "maintenance of existing benefits" of the old CBA. However, as
clearly explained by [Caltex], a signing bonus may not be demanded as a matter
of right. If it is not agreed upon by the parties or unilaterally offered as an
additional incentive by [Caltex], the condition for awarding it must be duly
satisfied. In the present case, the condition sine qua non for its granta nonstrike was not complied with.
In the case at bar, two things militate against the grant of the signing bonus: first, the
non-fulfillment of the condition for which it was offered, i.e., the speedy and amicable
conclusion of the CBA negotiations; and second, the failure of respondent union to
prove that the grant of the said bonus is a long established tradition or a "regular
practice" on the part of petitioner. Petitioner admits, and respondent union does not
dispute, that it offered an "early conclusion bonus" or an incentive for a swift finish to the

CBA negotiations. The offer was first made during the 1997 CBA negotiations and then
again at the start of the 1999 negotiations. The bonus offered is consistent with the very
concept of a signing bonus.
In the case of MERALCO v. The Honorable Secretary of Labor,12 we stated that the
signing bonus is a grant motivated by the goodwill generated when a CBA is
successfully negotiated and signed between the employer and the union. In that case,
we sustained the argument of the Solicitor General, viz:
When negotiations for the last two years of the 1992-1997 CBA broke down and
the parties sought the assistance of the NCMB, but which failed to reconcile their
differences, and when petitioner MERALCO bluntly invoked the jurisdiction of the
Secretary of Labor in the resolution of the labor dispute, whatever goodwill
existed between petitioner MERALCO and respondent union disappeared. . . .
Verily, a signing bonus is justified by and is the consideration paid for the goodwill
that existed in the negotiations that culminated in the signing of a CBA. 13
In the case at bar, the CBA negotiation between petitioner and respondent union failed
notwithstanding the intervention of the NCMB. Respondent union went on strike for
eleven days and blocked the ingress to and egress from petitioners two work plants.
The labor dispute had to be referred to the Secretary of Labor and Employment
because neither of the parties was willing to compromise their respective positions
regarding the four remaining items which stood unresolved. While we do not fault any
one party for the failure of the negotiations, it is apparent that there was no more
goodwill between the parties and that the CBA was clearly not signed through their
mutual efforts alone. Hence, the payment of the signing bonus is no longer justified and
to order such payment would be unfair and unreasonable for petitioner.
Furthermore, we have consistently ruled that a bonus is not a demandable and
enforceable obligation.14 True, it may nevertheless be granted on equitable
considerations as when the giving of such bonus has been the companys long and
regular practice.15 To be considered a "regular practice," however, the giving of the
bonus should have been done over a long period of time, and must be shown to have
been consistent and deliberate.16 The test or rationale of this rule on long practice
requires an indubitable showing that the employer agreed to continue giving the benefits
knowing fully well that said employees are not covered by the law requiring payment
thereof.17 Respondent does not contest the fact that petitioner initially offered a signing
bonus only during the previous CBA negotiation. Previous to that, there is no evidence
on record that petitioner ever offered the same or that the parties included a signing
bonus among the items to be resolved in the CBA negotiation. Hence, the giving of such
bonus cannot be deemed as an established practice considering that the same was
given only once, that is, during the 1997 CBA negotiation.
WHEREFORE, premises considered, the instant petition is GRANTED. The decision of
the Court of Appeals in CA-G.R. SP No. 59011 affirming the Order of the Secretary of

Labor and Employment, directing petitioner Philippine Appliance Corporation to pay

each of its employees a signing bonus in the amount of Three Thousand Pesos
(P3,000.00), is hereby REVERSED and SET ASIDE. No pronouncement as to costs.
SO ORDERED.

G.R. No. L-24033

February 22, 1968

PHOENIX ASSURANCE CO., LTD., plaintiff-appellant,

vs.
UNITED STATES LINES, defendant-appellee.
Quasha, Asperilla, Blanco & Associates for plaintiff-appellant.
Enriquez D. Perez for defendant-appellee.
BENGZON, J.P., J.:
The facts antecedent to this appeal from a decision dated October 31, 1964 of the
Court of First Instance of Manila, are as follows:
On June 29, 1962, General Motors shipped and consigned on a CIF basis to
Davao Parts and Service, Inc. at Davao City from New York aboard the United States
Lines' vessel SS "Pioneer Moor" a cargo of truck spare parts in 25 cases and 4 crates
(2 pieces unboxed), for which United States Lines issues a short form bill of lading No.
T-1 (Annex "A" and Exh. "1"), and which shipment was insured against loss and
damage with Phoenix Assurance Co., Ltd. The short form bill of lading No. T-1 indicated
Manila as the port of discharge and Davao City as the place where the goods were to
be transshipped, and expressly incorporated by reference the provisions contained in
the carrier's regular long form bill of lading (Annex "B" and Exh. "2").
The SS "Pioneer Moor" on July 28, 1962 discharged at Manila to the custody of
the Manila Port Service which was then the operator of the arrastre service at the Port
of Manila, the above described cargo, complete but with the exception of two crates,
namely, Crates Nos. 3139 and 3148 valued at P1,498.25.
On July 30, 1962, the Luzon Brokerage Corporation, Customs broker hired by the
United States Lines, filed in behalf of the latter a provisional claim against the Manila
Port Service for short landed, short-delivered and/or landed in bad order cargo exUnited States Lines' vessel.

On August 30, 1962, the afore-described cargo, with the exception of Crates Nos.
3139 and 3148 which were not discharged at the Manila Port, and Crates Nos. 3648
and 3649 which were discharged at the Manila Port but were lost in the custody of the
Manila Port Service, was transshipped by United States Lines to Davao through a
vessel of its Davao agent, Columbian Rope Company, and duly received in good order
by the Davao Parts and Service, Inc.
Davao Parts and Service, Inc. filed on December 26, 1962 a formal claim with the
United States Lines through the latter's agent, Columbian Rope Company, for the value
of Crates Nos. 3139, 3148, 3648 and 3649 in the total sum of P2,010.37.
The United States Lines, after proper verification, paid Davao Parts and Service,
Inc. the sum of P1,458.25, representing the value of Crates Nos. 3139 and 3148, when
it was discovered that these two crates had been overlanded in Honolulu, but refused to
pay for the value of Crates Nos. 3648 and 3649 for the reason that these crates had
been lost while in the custody of the Manila Port Service.
The two crates (Nos. 3139 and 3148) which were overlanded in Honolulu and for
which United States Lines paid Davao Parts and Service, Inc. the sum of P1,458.25,
were later recovered and returned to Davao Parts and Service, Inc. and the latter
refunded United States Lines for the sum it paid.
In view of United States Lines' refusal to pay for the two crates (Nos. 3648 and
3649) which were lost while in the custody of the Manila Port Service, Ker & Company,
Ltd., agent of Phoenix Assurance Co., Ltd., in the Philippines, and insurer of Davao
Parts and Service, Inc., paid to the latter the value of said crates in the sum of P552.12.
On March 25, 1963, the United States Lines, through the Columbian Rope
Company, by letter informed the Davao Parts and Service, Inc. that it was filing a claim
for the undelivered crates with the Manila Port Service. And true to its word, it filed on
March 30, 1963 a formal claim with the Manila Port Service for the value of Crates Nos.
3648 and 3649, but the latter declined to honor the same.
On June 26, 1963, United States Lines, through Columbian Rope Company, its
Davao agent, informed the Davao Parts and Service, Inc., inter alia, that the Manila Port
Service had not yet settled its claim, and that the one-year period provided by law within
which to bring action against the Manila Port Service for the two crates (Nos. 3648 and
3649) would expire on July 28, 1963.
Phoenix Assurance Co., Ltd., through Ker & Company Ltd., its agent in the
Philippines, wrote on July 24, 1963 the United States Lines expressing its appreciation
to the latter for taking action against the Manila Port Service. In the same letter it
requested for an extension of time to file suit against the United States Lines (the
prescriptive period for doing so being set to expire on July 28, 1963), explaining that it
could not file suit against any entity (including the Manila Port Service) except the

United States Lines with whom its subrogee the Davao Parts and Service, Inc., was in
contract.
No reply having been received by it from the United States Lines, the Phoenix
Assurance Co., Ltd. on July 29, 1963 filed a suit praying that judgment be rendered
against the former for the sum of P552.12, with interest at the legal rate, plus attorney's
fees and expenses of litigation. 1
On August 16, 1963, the United States Lines filed its answer with counterclaim,
while Phoenix Assurance Co., Ltd. filed its answer to said counterclaim on August 26,
1963.
On March 9, 1964, the parties submitted a Partial Stipulation of Facts.

After trial, the lower court on October 31, 1964 rendered a decision dismissing
plaintiff's complaint. 4
Thus this appeal, raising the sole issue of whether or not the lower court erred in
dismissing the complaint and in exonerating defendant-appellee from liability for the
value of the two undelivered crates Nos. 3648 and 3649.
It must be stated at the outset that a bill of lading operates both as a receipt and
as a contract. It is a receipt for the goods shipped and a contract to transport and deliver
the same as therein stipulated. As a receipt, it recites the date and place of shipment,
describes the goods as to quantity, weight, dimensions, identification marks and
condition, quality, and value. As a contract, it names the contracting parties, which
include the consignee, fixes the route, destination, and freight rate or charges, and
stipulates the rights and obligations assumed by the parties. 5
In this jurisdiction, it is a statutory and decisional rule of law that a contract is the
law between the contracting parties, 6 and where there is nothing in it which is contrary
to law, morals, good customs, public policy, or public order, the validity of the contract
must be sustained. 7
The Bill of Lading (short form) No. T-1 dated June 29, 1962 (Annex "A" and Exh.
1) provides under Section 1 thereof (Exh. that, "It is agreed that the receipt, custody
carriage, delivery and transshipping of the goods are subject to the norms appearing on
the face and back hereof and also to the terms contained in the carrier's regular long
form, bill of lading, used in this service, including any clauses presently being stamped
or endorsed thereon which shall be deemed to be incorporated in this bill of lading,
which shall govern the relations whatsoever they may be between shipper, consignee,
carrier and ship in every contingency, wheresoever and whensoever occurring and
whether the carrier be acting as such or as bailee, . . . . (Emphasis supplied.)
On the other hand, the regular long form Bill of Lading (Annex "B" and Exh. "2")
provides, inter alia, that:1wph1.t

The carrier shall not be liable in any capacity whatsoever for any loss or
damage to the goods while the goods are not in its actual custody. (Par. 2, last
subpar. Emphasis supplied.)
The carrier or master, in the exercise of its or his discretion and altho'
transshipment or forwarding of the goods may have been contemplated or
provided for herein, may at port of discharge or any other place whatsoever
transship or forward the goods or any part thereof by any means at the risk and
expense of the goods and at any time, whether before or after loading on the
ship named and by any route, whether within or outside the scope of the voyage
or beyond the port of discharge or destination of the goods and without notice to
the shipper or consignee. The carrier or master may delay such transshipping or
forwarding for any reason, including but not limited to awaiting a vessel or other
means of transportation whether by the carrier or others.
The carrier or master in making arrangements with any person for or in
connection with all transshipping or forwarding of the goods or the use of any
means of transportation not used or operated by the carrier shall be considered
solely the agent of the shipper and consignee and without any other
responsibility whatsoever or for the cost thereof . The receipt, custody, carriage
and delivery of the goods by any such person or on carrier and all transshipping
and forwarding shall be subject to all the provisions whatsoever of such person's
or on carrier's form of bill of lading or agreement then in use, whether or not
issued and even though such provisions may be less favorable to the shipper or
consignee in any respect than the provisions of this bill of lading. The shipper
and consignee authorize the carrier or master to arrange with any such person or
on-carrier that the lowest valuation or limitation of liability contained in the bill of
lading or other agreement of such person or on-carrier shall apply.
All responsibility of the carrier in any capacity shall altogether cease and
the goods shall be deemed delivered by it and this contract of carriage shall be
deemed fully performed on actual or constructive delivery of the goods to itself
as such agent of the shipper and consignee or to any such person or on carrier
at port of discharge from ship or elsewhere in case of an earlier transshipment.
The shipper and consignee shall be liable to this carrier for and shall
indemnify it against all expense of forwarding and transshipping, including any
increase in or additional freight or other charges whatsoever.
Pending or during forwarding or transshipping this carrier or the master
may store the goods ashore or afloat solely as agent of the shipper and at the
risk and expense of the goods and this carrier shall not be responsible for the
acts, neglect, delay or failure to act of anyone to whom the goods are entrusted
or delivered for storage, handling, or any service incidental thereto.

In case the carrier issues a bill of lading covering transportation by a local

or other carrier prior to the goods being delivered to and put into the physical
custody of the carrier, it shall not be under any responsibility or liability
whatsoever for any loss or damage to the goods occurring prior to or until the
actual receipt or custody of the goods by it at the port or place of transportation to
such port or place where the goods are put in its physical custody, it acts solely
as the agent of the shipper. (Par. 16, emphasis supplied.)
It is admitted by both parties that the crates subject matter of this action were lost
while in the possession and custody of the Manila Port Service. Since the long form of
Bill of Lading (Annex "B" and Exh. "2") provides that "The carrier shall not be liable in
any capacity whatsoever for any loss or damage to the goods while the goods are not in
its actual custody," appellee cannot be held responsible for the loss of said crates. For
as correctly observed by the lower court, it is hardly fair to make appellee accountable
for a loss not due to its acts or omissions or over which it had no control. 8
Contrary to appellant's stand, the appellee did not undertake to carry and deliver
safely the cargo to the consignee in Davao City. The short form Bill of Lading (Annex "A"
and Exh. "1") states in no uncertain terms that the port of discharge of the cargo is
Manila, but that the same was to be transshipped beyond the port of discharge to
Davao City. Pursuant to the terms of the long form Bill of Lading (Annex "B" and Exh.
"2"), appellee's responsibility as a common carrier ceased the moment the goods were
unloaded in Manila; and in the matter of transshipment, appellee acted merely as an
agent of the shipper and consignee. Contrary likewise to appellant's contention, the
cargo was not transshipped with the use of transportation used or operated by appellee.
It is true that the vessel used for transshipment is owned and operated by appellee's
Davao agent, the Columbian Rope Company, but there is no proof that said vessel is
owned or operated by appellee. The vessels of appellee's agent are being erroneously
presumed by appellant to be owned and operated by appellee.
Appellant argues that the provisions of the Bill of Lading exculpating the appellee
from liability for cargo losses, do not apply where full cargo freight is paid up to and
beyond the point of stipulated discharge, and here defendant-appellee agreed to absorb
all costs of forwarding and transshipment freight having been prepaid up to Davao
City. But the receipt of full cargo freight up to Davao City cannot render inoperative the
provisions of the Bill of Lading relied upon by appellee inasmuch as such a situation is
not provided therein as an exception. In fact, one searches the Bills of Lading (short and
long forms) in vain for such an exception. Besides, it is for the convenience of both
parties that full freight up to Davao City had been prepaid, otherwise there would have
been need to make further arrangements regarding the transshipment of the cargo to
Davao City. After all, the long form Bill of Lading provides that, "The shipper and
consignee shall be liable to this carrier for and shall indemnify it against all expense of
forwarding and transshipping, including any increase in or additional freight or other
charge whatsoever." (Annex "B" and Exh. "2", par. 6, subpar. 4)

The filing of a claim by defendant-appellee with the Manila Port Service for the
value of the losses cannot be considered as an indication that it is answerable for cargo
losses up to Davao City. On the contrary, it is a convincing proof that said party was not
remiss in its duties as agent of the consignee. That appellee captioned its claim against
the Manila Port Service as "SS 'Pioneer Moor' Voy. 25, Reb. 1067 New York/Davao via
Manila B/L T-1 31 Packages Truck Spare Parts Cons: Davao Parts and Service,"
likewise, is no proof that appellee knowingly assumed liability for cargo losses up to
Davao City. It merely showed that the goods would have to be, as indeed they were,
first unloaded in Manila and thereafter transshipped to Davao City.
Through the short form Bill of Lading (Annex "A" and Exh. "1"), incorporating by
reference the terms of the regular long form bill of lading (Annex "B" and Exh. "2"), the
United States Lines acknowledged the receipt of the cargo of truck spare parts that it
carried, and stated the conditions under which it was to carry the cargo, the place where
it was to be transshipped, the entity to which delivery is to be made, and the rate of
compensation for the carriage. This it delivered to the Davao Parts and Service, Inc. as
evidence of a contract between them. By receiving the bill of lading, Davao Parts and
Service, Inc. assented to the terms of the consignment contained therein, and became
bound thereby, so far as the conditions named are reasonable in the eyes of the law.
Since either appellant nor appellee alleges that any provision therein is contrary to law,
morals, good customs, public policy, or public order, and indeed We found none
the validity of the Bill of Lading must be sustained and the provisions therein properly
applied to resolve the conflict between the parties.
WHEREFORE, the decision appealed from is hereby affirmed, with costs against
the appellant.

SPOUSES CHUNG V. ULANDAY CONSTRUCTION OCTOBER 11, 2010

FACTS:
In February 1985, the petitioners contracted with respondent Ulanday Construction, Inc.
to construct, within a 150-day period,the concrete structural shell of the formers twostorey residential house in Urdaneta Village, Makati City at the contract price of P3,
291,142.00. The contract stipulated among others that the petitioners shall pay a
P987,342.60 downpayment, with the balance to be paid in progress payments based on
actual work completed; (c) the Construction Manager or Architect shall check the
respondents request for progress payment and endorse it to the petitioners for payment
within 3 days from receipt, (d) the petitioners shall pay the respondents within 7 days
from receipt of the Construction Managers or Architects certificate; (e) the respondent
cannot change or alter the plans, specifications, and works without the petitioners prior
written approval. Respondent gave 12 progress billings but the petitioners were only
able to pay 7 of them. On their part, the respondent effected 19 change orders without
the consent of the petitioners amounting to P912, 885.91. Respondents demanded the
remaining balance from the petitioners which the petitioners denied asserting that the
respondents violated the contract.
ISSUE:
Whether or not the petitioners are liable for the remaining balance
RULING:
In contractual relations, the law allows the parties leeway and considers their agreement
as the law between them.Contract stipulations that are not contrary to law, morals, good
customs, public order or public policy shall be binding and should be complied with in
good faith. No party is permitted to change his mind or disavow and go back upon his
own acts, or to proceed contrary thereto, to the prejudice of the other party. In the
present case, we find that both parties failed to comply strictly with their contractual
stipulations on the progress billings and change orders that caused the delays in the
completion of the project. Under the circumstances, fairness and reason dictate that we
simply order the set-off of the petitioners contractual liabilities totaling P575,922.13
against the repair cost for the defective gutter, pegged at P717,524.00, leaving the
amount of P141,601.87 still due from the respondent. Support in law for this ruling for
partial legal compensation proceeds from Articles 1278, 1279, 1281, and 1283 of the
Civil Code. In short, both parties are creditors and debtors of each other, although in
different amounts that are already due and demandable.

FGU INSURANCE CORP. VS. G.P. SARMIENTO TRUCKING CORP. (GPS)G.R. No. 141910.
August 6, 2002
Facts: GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. One day, it was to
deliver certaingoods of Concepcion Industries, Inc. aboard one of its trucks. On its way, the truck
collided with an unidentifiedtruck, resulting in damage to the cargoes.FGU, insurer of the shipment
paid to Concepcion Industries, Inc. the amount of the damage and filed a suit againstGPS. GPS filed
a motion to dismiss for failure to prove that it was a common carrier.
Issue: Whether or not GPS falls under the category of a common carrier
.Held: Note that GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. offering its
service to noother individual or entity. A common carrier is one which offers its services whether to the
public in general or to a limited clientele in particular but never on an exclusive basis. Therefore, GPS
does not fit the category of a common carrier although it is not freedfrom its liability based on culpa
contractual