PLANTERS PRODUCTS, INC., petitioner, vs.

COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA

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. 3 Riders 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 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

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 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." 14 Hence, 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).

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 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.

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, 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 facie presumption 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
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 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.
G.R. Nos. L-21477-81 April 29, 1966

FRANCISCA VILUAN, petitioner, vs. THE COURT OF APPEALS, PATRICIO HUFANA and GREGORIO HUFANA, respondents.

Seven persons were killed and thirteen others were injured in Bangar, La Union, on February 16, 1958, when a passenger bus on which they were
riding caught fire after hitting a post and crashing against a tree. The bus, owned by petitioner and driven by Hermenegildo Aquino, came from
San Fernando, La Union and was on its way to Candon, Ilocos Sur.

It appears that, as the bus neared the gate of the Gabaldon school building in the municipality of Bangar, another passenger bus owned by
Patricio Hufana and driven by Gregorio Hufana tried to overtake it but that instead of giving way, Aquino increased the speed of his bus and
raced with the overtaking bus. Aquino lost control of his bus as a result of which it hit a post, crashed against a tree and then burst into flames.

Among those who perished were Timoteo Mapanao, Francisca Lacsamana, Narcisa Mendoza and Gregorio Sibayan, whose heirs sued petitioner
and the latter's driver, Hermenegildo Aquino, for damages for breach of contract of carriage. Carolina Sabado, one of those injured, also sued
petitioner and the driver for damages. The complaints were filed in the Court of First Instance of La Union.

In their answer, petitioner and her driver blamed respondent Gregorio Hufana for the accident. With leave of court, they filed third party
complaints against Hufana and the latter's employer, Patricio Hufana.

After trial, the court found that the accident was due to the concurrent negligence of the drivers of the two buses and held both, together with
their respective employers, jointly and severally liable for damages.

The dispositive portion of its decision reads:

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered, declaring the plaintiff's entitled to damages to be paid jointly and severally by
the defendants and third-party defendants as follows:

(1) For plaintiff Juliana C. Vda. de Mapanao for the death of her son Timoteo Mapanao, the sum of P5,000.00 for actual damages, P1,000.00 as
moral damages and P250.00 as attorney's fees;

(2) For plaintiff Leon Lacsamana for the death of his daughter Francisca Lacsamana, the sum of P4,000.00 as actual damages, P1,000.00 as moral
damages and P250.00 as attorney's fees;

(3) For plaintiffs Juan Mendoza and Magdalena Mendoza for the death of their mother Narcisa Mendoza, the sum of P4,000.00 for actual
damages, P1,000.00 for moral damages and P250.00 as attorney's fees;

(4) For plaintiffs Agustina Sabado, Quintin Sibayan, Julita Sibayan, Primitivo Sibayan and Avelina Sibayan, the sum of P4,000.00 for actual
damages, P1,500.00 for moral damages and P250.00 as attorney's fees;

(5) For the injured passenger Carolina Sabado, P649.00 for actual damages, P1,000.00 for moral damages and P250.00 for attorney's fees.

All such amounts awarded as damages shall bear interest at the legal rate of six per cent (6%) per annum from the date of this decision until the
same shall have been duly paid in full.

Defendants and third-party defendants are further ordered to pay proportionate costs."

Both petitioner and her driver and the respondents herein appealed to the Court of Appeals. While affirming the finding that the accident was
due to the concurrent negligence of the drivers of both the Viluan and the Hufana buses, the Court of Appeals differed with the trial court in the
assessment of liabilities of the parties. In its view only petitioner Francisca Viluan, as operator of the bus, is liable for breach of contract of
carriage. The driver, Hermenegildo Aquino, cannot be made jointly and severally liable with petitioner because he is merely the latter's employee
and is in no way a party to the contract of carriage. The court added, however —

Hermenegildo Aquino is not entirely free from liability. He may be held liable, criminally and civilly, under the Revised Penal Code (Articles 100
and 103), but not in a civil suit for damages predicated upon a breach of contract, such as this one (Aguas, et al. vs. Vargas, et al., CA-G.R. No.
27161-R, Jan. 22, 1963). Furthermore, the common carrier, Francisca Viluan could recover from Aquino any damages that she might have
suffered by reason of the latter's negligence.

Neither may respondents Patricio Hufana and Gregorio Hufana be held liable in the opinion of the appellate court because the plaintiffs did not
amend complaints in the main action so as to assert a claim against the respondents as third party defendants.

The appellate court likewise disallowed the award of moral damages for P1,000.00 to Carolina Sabado, there being no showing that the common
carrier was guilty of fraud or bad faith in the performance of her obligation. Accordingly, it rendered judgment as follows:
IN VIEW OF ALL THE FOREGOING, we hereby find defendant-appellant Francisca Viluan solely liable to the plaintiffs-appellees for the damages
and attorney's fees awarded to them by the court below and further declare null and void the lower court's award of moral damages in the
amount of P1,000.00 in favor of plaintiff Carolina Sabado. Thus modified, the judgment appealed from is affirmed in all other respects, with costs
in this instance against defendant-appellant Francisca Viluan.

From this judgment petitioner brought this appeal. In brief, her position is that since the proximate cause of the accident was found to be the
concurrent negligence of the drivers of the two buses, then she and respondent Patricio and Gregorio Hufana should have been held equally
liable to the plaintiffs in the damage suits. The fact that the respondents were not sued as principal defendants but were brought into the cases
as third party defendants should not preclude a finding of their liability.

We agree with petitioner's contention. To begin with, the Court of Appeals' ruling is based on section 5 of Rule 12 of the former Rules of Court, 1
which was adopted from Rule 14-a of the Federal Rules of Civil Procedure. While the latter provision has indeed been held to preclude a
judgment in favor of a plaintiff and against a third party defendant where the plaintiff has not amended his complaint to assert a claim against a
third party defendant, 2 yet, as held in subsequent decisions, this rule applies only to cases where the third party defendant is brought in on an
allegation of liability to the defendants. The rule does not apply where a third-party defendant is impleaded on the ground of direct liability to
the plaintiffs, in which case no amendment of the plaintiffs complaint is necessary. 3 As explained in the Atlantic Coast Line R. Co. vs. U. S.
Fidelity & Guaranty Co., 52 F. Supp. 177 (1943):

From the sources of Rule 14 and the decisions herein cited, it is clear that this rule, like the admiralty rule, "covers two distinct subjects, the
addition of parties defendant to the main cause of action, and the bringing in of a third party for a defendant's remedy over." x x x

If the third party complaint alleges facts showing a third party's direct liability to plaintiff on the claim set out in plaintiff's petition, then third
party "shall" make his defenses as provided in Rule 12 and his counterclaims against plaintiff as provided in Rule 13. In the case of alleged direct
liability, no amendment is necessary or required. The subject-matter of the claim is contained in plaintiff's complaint, the ground of third party's
liability on that claim is alleged in third party complaint, and third party's defense to set up in his an to plaintiff's complaint. At that point and
without amendment, the plaintiff and third party are at issue as to their rights respecting the claim.

The provision in the rule that, "The third-party defendant may assert any defenses which the third-party plaintiff may assert to the plaintiff's
claim," applies to the other subject, namely, the alleged liability of third party defendant. The next sentence in the rule, "The third-party
defendant is bound by the adjudication of the third party plaintiff's liability to the plaintiff, as well as of his own to the plaintiff or to the third-
party plaintiff," applies to both subjects. If third party is brought in as liable only to defendant and judgment is rendered adjudicating plaintiff's
right to recover against defendant and defendant's rights to recover against third party, he is bound by both adjudications. That part of the
sentence refers to the second subject. If third party is brought in as liable to plaintiff, then third party is bound by the adjudication as between
him and plaintiff. That refers to the first subject. If third party is brought in as liable to plaintiff and also over to defendant, then third party is
bound by both adjudications. The next sentence in the rule, "The plaintiff may amend his pleadings to assert against the third-party defendant
any claim which the plaintiff might have asserted against the third-party defendant had he been joined originally as a defendant," refers to the
second subject, that is, to bringing in third party as liable to defendant only, and does not apply to the alleged liability of third party directly to
plaintiff."

In this case the third-party complaints filed by petitioner and her driver charged respondents with direct liability to the plaintiffs. It was
contended that the accident was due "to the fault, negligence, carelessness and imprudence of the third party defendant Gregorio Hufana" and,
in petitioner's motion for leave to file a third party complaint, it was stated that "Patricio Hufana and Gregorio Hufana were not made parties to
this action, although the defendants are entitled to indemnity and/or subrogation against them in respect of plaintiff's claim."

It should make no difference therefore whether the respondents were brought in as principal defendants or as third-party defendants. As Chief
Justice Moran points out, since the liability of the third-party defendant is already asserted in the third-party complaint, the amendment of the
complaint to assert such liability is merely a matter of form, to insist on which would not be in keeping with the liberal spirit of the Rules of
Court. 4

Nor should it make any difference that the liability of petitioner springs from contract while that of respondents arises from quasi-delict. As early
as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177,5 that in case of injury to a passenger due to the negligence of the driver of the
bus on which he was riding and of the driver of another vehicle, the drivers as well as the owners of the two vehicles are jointly and severally
liable for damages. Some members of the Court, though, are of the view that under the circumstances they are liable on quasi-delict.

Wherefore, the decision appealed from is hereby modified in the sense that petitioner as well as respondents Patricio Hufana and Gregorio
Hufana are jointly and severally liable for the damages awarded by the trial court. The disallowance of moral damages in the amount of
P1,000.00 is correct and should be affirmed. No costs.
G.R. No. L-28589 January 8, 1973

RAFAEL ZULUETA, ET AL., plaintiffs-appellees, vs. PAN AMERICAN WORLD AIRWAYS, INC., defendant-appellant.

Both parties in this case have moved for the reconsideration of the decision of this Court promulgated on February 29, 1972. Plaintiffs maintain
that the decision appealed from should be affirmed in toto. The defendant, in turn, prays that the decision of this Court be "set aside ... with or
without a new trial, ... and that the complaint be dismissed, with costs; or, in the alternative, that the amount of the award embodied therein be
considerably reduced." .

Subsequently to the filing of its motion for reconsideration, the defendant filed a "petition to annul proceedings and/or to order the dismissal of
plaintiffs-appellees' complaint" upon the ground that "appellees' complaint actually seeks the recovery of only P5,502.85 as actual damages,
because, for the purpose of determining the jurisdiction of the lower court, the unspecified sums representing items of alleged damages, may
not be considered, under the settled doctrines of this Honorable Court," and "the jurisdiction of courts of first instance when the complaint in
the present case was filed on Sept. 30, 1965" was limited to cases "in which the demand, exclusive of interest, or the value of the property in
controversy amounts to more than ten thousand pesos" and "the mere fact that the complaint also prays for unspecified moral damages and
attorney's fees, does not bring the action within the jurisdiction of the lower court."

We find no merit in this contention. To begin with, it is not true that "the unspecified sums representing items or other alleged damages, may
not be considered" — for the purpose of determining the jurisdiction of the court — "under the settled doctrines of this Honorable Court." In
fact, not a single case has been cited in support of this allegation.

Secondly, it has been held that a clam for moral damages is one not susceptible of pecuniary estimation. 1 In fact, Article 2217 of the Civil Code
of the Philippines explicitly provides that "(t)hough incapable of pecuniary computation, moral damages may be recovered if they are the
proximate result of the defendant's wrongful act or omission." Hence, "(n)o proof pecuniary loss necessary" — pursuant to Article 2216 of the
same Code — "in order that moral ... damages may be adjudicated." And "(t)he assessment of such damages ... is left to the discretion of the
court" - said article adds - "according to the circumstances of each case." Appellees' complaint is, therefore, within the original jurisdiction of
courts of first instance, which includes "all civil actions in which the subject of the litigation is not capable of pecuniary estimation." 2

Thirdly, in its answer to plaintiffs' original and amended complainants, defendant had set up a counterclaim in the aggregate sum of P12,000,
which is, also, within the original jurisdiction of said courts, thereby curing the alleged defect if any, in plaintiffs' complaint. 3

We need not consider the jurisdictional controversy as to the amount the appellant sues to recover because the counterclaim interposed
establishes the jurisdiction of the District Court. Merchants' Heat & Light Co. v. James B. Clow & Sons, 204 U.S. 286, 27 S. Ct. 285, 51 L. Ed. 488;
O. J. Lewis Mercantile Co. v. Klepner, 176 F. 343 (C.C.A. 2), certiorari denied 216 U.S. 620, 30 S Ct. 575, 54 L. Ed. 641. ... . 4

... courts have said that "when the jurisdictional amount is in question, the tendering of a counterclaim in an amount which in itself, or added to
the amount claimed in the petition, makes up a sum equal to the amount necessary to the jurisdiction of this court, jurisdiction is established,
whatever may be the state of the plaintiff's complaint." American Sheet & Tin Plate Co. v. Winzeler (D.C.) 227 F. 321, 324. 5

Thus, in Ago v. Buslon, 6 We held:

... . Then, too, petitioner's counterclaim for P37,000.00 was, also, within the exclusive original jurisdiction of the latter courts, and there are
ample precedents to the effect that "although the original claim involves less than the jurisdictional amount, ... jurisdiction can be sustained if
the counterclaim (of the compulsory type)" — such as the one set up by petitioner herein, based upon the damages allegedly suffered by him in
consequence of the filing of said complaint — "exceeds the jurisdictional amount." (Moore Federal Practice, 2nd ed. [1948], Vol. 3, p. 41;
Ginsburg vs. Pacific Mutual Life Ins. Co. of California, 69 Fed. [2d] 97; Home Life Ins. Co. vs. Sipp., 11 Fed. [2d]474; American Sheet & Tin Plate Co.
vs. Winzeler [D.C.], 227 Fed. 321, 324; Brix vs. People's Mutual Life Ins. Co., 41 P. 2d. 537, 2 Cal. 2d. 446; Emery vs. Pacific Employees Ins. Co., 67
P. 2d. 1046, 8 Cal. 2d. 663).

Needless to say, having not only failed to question the jurisdiction of the trial court — either in that court or in this Court, before the rendition of
the latter's decision, and even subsequently thereto, by filing the aforementioned motion for reconsideration and seeking the reliefs therein
prayed for — but, also, urged both courts to exercise jurisdiction over the merits of the case, defendant is now estopped from impugning said
jurisdiction. 7

Before taking up the specific questions raised in defendant's motion for reconsideration, it should be noted that the same is mainly predicated
upon the premise that plaintiffs' version is inherently incredible, and that this Court should accept the theory of the defense to the effect that
petitioner was off-loaded because of a bomb-scare allegedly arising from his delay in boarding the aircraft and subsequent refusal to open his
bags for inspection. We need not repeat here the reasons given in Our decision for rejecting defendant's contention and not disturbing the
findings of fact of His Honor, the Trial Judge, who had the decided advantage — denied to Us — of observing the behaviour of the witnesses in
the course of the trial and found those of the plaintiffs worthy of credence, not the evidence for the defense.

It may not be amiss however, to stress the fact that, in his written report, made in transit from Wake to Manila — or immediately after the
occurrence and before the legal implications or consequences thereof could have been the object of mature deliberation, so that it could, in a
way, be considered as part of the res gestae — Capt. Zentner stated that Zulueta had been off-loaded "due to drinking" and "belligerent
attitude," thereby belying the story of the defense about said alleged bomb-scare, and confirming the view that said agent of the defendant had
acted out of resentment because his ego had been hurt by Mr. Zulueta's adamant refusal to be bullied by him. Indeed, had there been an iota of
truth in said story of the defense, Capt. Zentner would have caused every one of the passengers to be frisked or searched and the luggage of all
of them examined — as it is done now — before resuming the flight from Wake Island. His failure to do so merely makes the artificious nature of
defendant's version more manifest. Indeed, the fact that Mrs. Zulueta and Miss Zulueta were on board the plane shows beyond doubt that Mr.
Zulueta could not possibly have intended to blow it up.

The defense tries to explain its failure to introduce any evidence to contradict the testimony of Mr. Zulueta as to why he had gone to the beach
and what he did there, alleging that, in the very nature of things, nobody else could have witnessed it. Moreover, the defense insists, inter alia,
that the testimony of Mr. Zulueta is inherently incredible because he had no idea as to how many toilets the plane had; it could not have taken
him an hour to relieve himself in the beach; there were eight (8) commodes at the terminal toilet for men ; if he felt the need of relieving
himself, he would have seen to it that the soldiers did not beat him to the terminal toilets; he did not tell anybody about the reason for going to
the beach, until after the plane had taken off from Wake.

We find this pretense devoid of merit. Although Mr. Zulueta had to look for a secluded place in the beach to relieve himself, beyond the view of
others, defendant's airport manager, whom Mr. Zulueta informed about it, soon after the departure of the plane, could have forthwith checked
the veracity of Mr. Zulueta's statement by asking him to indicate the specific place where he had been in the beach and then proceeding thereto
for purposes of verification.

Then, again, the passenger of a plane seldom knows how many toilets it has. As a general rule, his knowledge is limited to the toilets for the class
— first class or tourist class — in which he is. Then, too, it takes several minutes for the passengers of big aircrafts, like those flying from the U.S.
to the Philippines, to deplane. Besides, the speed with which a given passenger may do so depends, largely, upon the location of his seat in
relation to the exit door. He cannot go over the heads of those nearer than he thereto. Again, Mr. Zulueta may have stayed in the toilet terminal
for some time, expecting one of the commodes therein to be vacated soon enough, before deciding to go elsewhere to look for a place suitable
to his purpose. But he had to walk, first, from the plane to the terminal building and, then, after vainly waiting therein for a while, cover a
distance of about 400 yards therefrom to the beach, and seek there a place not visible by the people in the plane and in the terminal, inasmuch
as the terrain at Wake Island is flat. What is more, he must have had to takeoff part, at least, of his clothing, because, without the facilities of a
toilet, he had to wash himself and, then, dry himself up before he could be properly attired and walk back the 400 yards that separated him from
the terminal building and/or the plane. Considering, in addition to the foregoing, the fact that he was not feeling well, at that time, We are not
prepared to hold that it could not have taken him around an hour to perform the acts narrated by him.

But, why — asks the defendant — did he not reveal the same before the plane took off? The record shows that, even before Mr. Zulueta had
reached the ramp leading to the plane, Capt. Zentner was already demonstrating at him in an intemperate and arrogant tone and attitude
("What do you think you are?), thereby impelling Mr. Zulueta to answer back in the same vein. As a consequence, there immediately ensued an
altercation in the course of which each apparently tried to show that he could not be cowed by the other. Then came the order of Capt. Zentner
to off-load all of the Zuluetas, including Mrs. Zulueta and the minor Miss Zulueta, as well as their luggage, their overcoats and other effects
handcarried by them; but, Mr. Zulueta requested that the ladies be allowed to continue the trip. Meanwhile, it had taken time to locate his four
(4) pieces of luggage. As a matter of fact, only three (3) of them were found, and the fourth eventually remained in the plane. In short, the issue
between Capt. Zentner and Mr. Zulueta had been limited to determining whether the latter would allow himself to be browbeaten by the
former. In the heat of the altercation, nobody had inquired about the cause of Mr. Zulueta's delay in returning to the plane, apart from the fact
that it was rather embarrassing for him to explain, in the presence and within the hearing of the passengers and the crew, then assembled
around them, why he had gone to the beach and why it had taken him some time to answer there a call of nature, instead of doing so in the
terminal building.

Defendant's motion for reconsideration assails: (1) the amount of damages awarded as excessive; (2) the propriety of accepting as credible
plaintiffs' theory; (3) plaintiffs' right to recover either moral or exemplary damages; (4) plaintiffs' right to recover attorney's fees; and (5) the
non-enforcement of the compromise agreement between the defendant and plaintiff's wife, Mrs. Zulueta. Upon the other hand, plaintiffs'
motion for reconsideration contests the decision of this Court reducing the amount of damages awarded by the trial court to approximately one-
half thereof, upon the ground, not only that, contrary to the findings of this Court, in said decision, plaintiff had not contributed to the
aggravation of his altercation or incident with Capt. Zentner by reacting to his provocation with extreme belligerency thereby allowing himself to
be dragged down to the level on which said agent of the defendant had placed himself, but, also, because the purchasing power of our local
currency is now much lower than when the trial court rendered its appealed decision, over five (5) years ago, on July 5, 1967, which is an
undeniable and undisputed fact. Precisely, for this reason, defendant's characterization as exorbitant of the aggregate award of over P700,000
by way of damages, apart from attorney's fees in the sum of P75,000, is untenable. Indeed, said award is now barely equivalent to around
100,000 U. S. dollars.

It further support of its contention, defendant cites the damages awarded in previous cases to passengers of airlines, 8 as well as in several
criminal cases, and some cases for libel and slander. None of these cases is, however, in point. Said cases against airlines referred to passengers
who were merely constrained to take a tourist class accommodation, despite the fact that they had first class tickets, and that although, in one of
such cases, there was proof that the airline involved had acted as it did to give preference to a "white" passenger, this motive was not disclosed
until the trial in court. In the case at bar, plaintiff Rafael Zulueta was "off-loaded" at Wake Island, for having dared to retort to defendant's agent
in a tone and manner matching, if not befitting his intemperate language and arrogant attitude. As a consequence, Capt. Zentner's attempt to
humiliate Rafael Zulueta had boomeranged against him (Zentner), in the presence of the other passengers and the crew. It was, also, in their
presence that defendant's agent had referred to the plaintiffs as "monkeys," a racial insult not made openly and publicly in the abovementioned
previous cases against airlines.

In other words, Mr. Zulueta was off-loaded, not to protect the safety of the aircraft and its passengers, but to retaliate and punish him for the
embarrassment and loss of face thus suffered by defendant's agent. This vindictive motive is made more manifest by the note delivered to Mr.
Zulueta by defendant's airport manager at Wake Island, Mr. Sitton, stating that the former's stay therein would be "for a minimum of one week,"
during which he would be charged $13.30 per day. This reference to a "minimum of one week" revealed the intention to keep him there
stranded that long, for no other plane, headed for Manila, was expected within said period of time, although Mr. Zulueta managed to board,
days later, a plane that brought him to Hawaii, whence he flew back to the Philippines, via Japan.

Neither may criminal cases, nor the cases for libel and slander cited in the defendant's motion for reconsideration, be equated with the present
case. Indeed, in ordinary criminal cases, the award for damages is, in actual practice, of purely academic value, for the convicts generally belong
to the poorest class of society. There is, moreover, a fundamental difference between said cases and the one at bar. The Zuluetas had a contract
of carriage with the defendant, as a common carrier, pursuant to which the latter was bound, for a substantial monetary consideration paid by
the former, not merely to transport them to Manila, but, also, to do so with "extraordinary diligence" or "utmost diligence." 9 The responsibility
of the common carrier, under said contract, as regards the passenger's safety, is of such a nature, affecting as it does public interest, that it
"cannot be dispensed with" or even "lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise." 10 In the present
case, the defendant did not only fail to comply with its obligation to transport Mr. Zulueta to Manila, but, also, acted in a manner calculated to
humiliate him, to chastise him, to make him suffer, to cause to him the greatest possible inconvenience, by leaving him in a desolate island, in
the expectation that he would be stranded there for a "minimum of one week" and, in addition thereto, charged therefor $13.30 a day.

It is urged by the defendant that exemplary damages are not recoverable in quasi-delicts, pursuant to Article 2231 of our Civil Code, except when
the defendant has acted with "gross negligence," and that there is no specific finding that it had so acted. It is obvious, however, that in off-
loading plaintiff at Wake Island, under the circumstances heretofore adverted to, defendant's agents had acted with malice aforethought and
evident bad faith. If "gross negligence" warrants the award of exemplary damages, with more reason is its imposition justified when the act
performed is deliberate, malicious and tainted with bad faith. Thus, in Lopez v. PANAM, 11 We held:

The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for public good. Defendant
having breached its contracts in bad faith, the court, as stated earlier, may award exemplary damages in addition to moral damages (Articles
2229, 2232, New Civil Code.)

Similarly, in NWA v. Cuenca, 12 this Court declared that an award for exemplary damages was justified by the fact that the airline's "agent had
acted in a wanton, reckless and oppressive manner" in compelling Cuenca, upon arrival at Okinawa, to transfer, over his objection, from the first
class, where he was accommodated from Manila to Okinawa, to the tourist class, in his trip to Japan, "under threat of otherwise leaving him in
Okinawa," despite the fact that he had paid in full the first class fare and was issued in Manila a first class ticket.

Defendant cites Rotea v. Halili, 13 in support of the proposition that a principal is not liable for exemplary damages owing to acts of his agent
unless the former has participated in said acts or ratified the same. Said case involved, however, the subsidiary civil liability of an employer
arising from criminal acts of his employee, and "exemplary damages ... may be imposed when the crime was committed with one or more
aggravating circumstances." 14 Accordingly, the Rotea case is not in point, for the case at bar involves a breach of contract, as well as a quasi-
delict.

Neither may the case of Palisoc v. Brillantes, 15 invoked by the defendant, be equated with the case at bar. The Palisoc case dealt with the
liability of school officials for damages arising from the death of a student (Palisoc) due to fist blows given by another student (Daffon), in the
course of a quarrel between them, while in a laboratory room of the Manila Technical Institute. In an action for damages, the head thereof and
the teacher in charge of said laboratory were held jointly and severally liable with the student who caused said death, for failure of the school to
provide "adequate supervision over the activities of the students in the school premises," to protect them "from harm, whether at the hands of
fellow students or other parties." Such liability was predicated upon Article 2180 of our Civil Code, the pertinent part of which reads:

ART. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for
whom one is responsible.

Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so
long as they remain in their custody.

Obviously, the amount of damages warded in the Palisoc case is not and cannot serve as the measure of the damages recoverable in the present
case, the latter having been caused directly and intentionally by an employee or agent of the defendant, whereas the student who killed the
young Palisoc was in no wise an agent of the school. Moreover, upon her arrival in the Philippines, Mrs. Zulueta reported her husband's
predicament to defendant's local manager and asked him to forthwith have him (Mr. Zulueta) brought to Manila, which defendant's
aforementioned manager refused to do, thereby impliedly ratifying the off-loading of Mr. Zulueta at Wake Island.
It is next urged that, under the contract of carriage with the defendant, Mr. Zulueta was bound to be present at the time scheduled for the
departure of defendant's plane and that he had, consequently, violated said contract when he did not show up at such time. This argument
might have had some weight had defendant's plane taken off before Mr. Zulueta had shown up. But the fact is that he was ready, willing and
able to board the plane about two hours before it actually took off, and that he was deliberately and maliciously off-loaded on account of his
altercation with Capt. Zentner. It should, also, be noted that, although Mr. Zulueta was delayed some 20 to 30 minutes, the arrival or departure
of planes is often delayed for much longer periods of time. Followed to its logical conclusion, the argument adduced by the defense suggests that
airlines should be held liable for damages due to the inconvenience and anxiety, aside from actual damages, suffered by many passengers either
in their haste to arrive at the airport on scheduled time just to find that their plane will not take off until later, or by reason of the late arrival of
the aircraft at its destination.

PANAM impugns the award of attorney's fees upon the ground that no penalty should be imposed upon the right to litigate; that, by law, it may
be awarded only in exceptional cases; that the claim for attorney's fees has not been proven; and that said defendant was justified in resisting
plaintiff's claim "because it was patently exorbitant."

Nothing, however, can be farther from the truth. Indeed apart from plaintiff's claim for actual damages, the amount of which is not contested,
plaintiffs did not ask any specific sum by way of exemplary and moral damages, as well as attorney's fees, and left the amount thereof to the
"sound discretion" of the lower court. This, precisely, is the reason why PANAM, now, alleges — without justification that the lower court had no
jurisdiction over the subject matter of the present case.

Moreover, Article 2208 of our Civil Code expressly authorizes the award of attorney's fees "when exemplary damages are awarded," — as they
are in this case —as well as "in any other case where the court deems it just and equitable that attorney's fees ... be recovered," and We so
deem it just and equitable in the present case, considering the "exceptional" circumstances obtaining therein, particularly the bad faith with
which defendant's agent had acted, the place where and the conditions under which Rafael Zulueta was left at Wake Island, the absolute refusal
of defendant's manager in Manila to take any step whatsoever to alleviate Mr. Zulueta's predicament at Wake and have him brought to Manila
— which, under their contract of carriage, was defendant's obligation to discharge with "extra-ordinary" or "utmost" diligence — and, the
"racial" factor that had, likewise, tainted the decision of defendant's agent, Capt. Zentner, to off-load him at Wake Island.

As regards the evidence necessary to justify the sum of P75,000 awarded as attorney's fees in this case, suffice it to say that the quantity and
quality of the services rendered by plaintiffs' counsel appearing on record, apart from the nature of the case and the amount involved therein, as
well as his prestige as one of the most distinguished members of the legal profession in the Philippines, of which judicial cognizance may be
taken, amply justify said award, which is a little over 10% of the damages (P700,000) collectible by plaintiffs herein. Indeed, the attorney's fees in
this case is proportionally much less than that adjudged in Lopez v. PANAM 16 in which the judgment rendered for attorney's fees (P50,000) was
almost 20% of the damages (P275,000) recovered by the plaintiffs therein.

The defense assails the last part of the decision sought to be reconsidered, in which — relying upon Article 172 of our Civil Code, which provides
that "(t)he wife cannot bind the conjugal partnership without the husband's consent, except in cases provided by law," and it is not claimed that
this is one of such cases — We denied a motion, filed by Mrs. Zulueta, for the dismissal of this case, insofar as she is concerned - she having
settled all her differences with the defendant, which appears to have paid her the sum of P50,000 therefor - "without prejudice to this sum being
deducted from the award made in said decision." Defendant now alleges that this is tantamount to holding that said compromise agreement is
both effective and ineffective.

This, of course, is not true. The payment is effective, insofar as it is deductible from the award, and, because it is due (or part of the amount due)
from the defendant, with or without its compromise agreement with Mrs. Zulueta. What is ineffective is the compromise agreement, insofar as
the conjugal partnership is concerned. Mrs. Zulueta's motion was for the dismissal of the case insofar as she was concerned, and the defense
cited in support thereof Article 113 of said Code, pursuant to which "(t)he husband must be joined in all suits by or against the wife except: ... (2)
If they have in fact been separated for at least one year." This provision, We held, however, refers to suits in which the wife is the principal or
real party in interest, not to the case at bar, "in which the husband is the main party in interest, both as the person principally aggrieved and as
administrator of the conjugal partnership ... he having acted in this capacity in entering into the contract of carriage with PANAM and paid the
amount due to the latter, under the contract, with funds of the conjugal partnership," to which the amounts recoverable for breach of said
contract, accordingly, belong. The damages suffered by Mrs. Zulueta were mainly an in accident of the humiliation to which her husband had
been subjected. The Court ordered that said sum of P50,00 paid by PANAM to Mrs. Zulueta be deducted from the aggregate award in favor of
the plaintiffs herein for the simple reason that upon liquidation of the conjugal partnership, as provided by law, said amount would have to be
reckoned with, either as part of her share in the partnership, or as part of the support which might have been or may be due to her as wife of
Rafael Zulueta. It would surely be inane to sentence the defendant to pay the P700,000 due to the plaintiffs and to direct Mrs. Zulueta to return
said P50,000 to the defendant.

In this connection, it is noteworthy that, for obvious reasons of public policy, she is not allowed by law to waive her share in the conjugal
partnership, before the dissolution thereof. 17 She cannot even acquire any property by gratuitous title, without the husband's consent, except
from her ascendants, descendants, parents-in-law, and collateral relatives within the fourth degree. 18

It is true that the law favors and encourages the settlement of litigations by compromise agreement between the contending parties, but, it
certainly does not favor a settlement with one of the spouses, both of whom are plaintiffs or defendants in a common cause, such as the defense
of the rights of the conjugal partnership, when the effect, even if indirect, of the compromise is to jeopardize "the solidarity of the family" —
which the law 19 seeks to protect — by creating an additional cause for the misunderstanding that had arisen between such spouses during the
litigation, and thus rendering more difficult a reconciliation between them.

It is urged that there is no proof as to the purpose of the trip of the plaintiffs, that neither is there any evidence that the money used to pay the
plane tickets came from the conjugal funds and that the award to Mrs. Zulueta was for her personal suffering or injuries. There was, however, no
individual or specific award in favor of Mrs. Zulueta or any of the plaintiffs. The award was made in their favor collectively. Again, in the absence
of said proof, the presumption is that the purpose of the trip was for the common benefit of the plaintiffs and that the money had come from
the conjugal funds, for, unless there is proof to the contrary, it is presumed "(t)hat things have happened according to the ordinary course of
nature and the ordinary habits of life." 20 In fact Manresa maintains 21 that they are deemed conjugal, when the source of the money used
therefor is not established, even if the purchase had been made by the wife. 22 And this is the rule obtaining in the Philippines. Even property
registered, under the Torrens system, in the name of one of the spouses, or in that of the wife only, if acquired during the marriage, is presumed
to belong to the conjugal partnership, unless there is competent proof to the contrary. 23

PANAM maintains that the damages involved in the case at bar are not among those forming part of the conjugal partnership pursuant to Article
153 of the Civil Code, reading:

ART. 153. The following are conjugal partnership property:

(1) That which is acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the
partnership, or for only one of the spouses;

(2) That which is obtained by the industry, or work, or as salary of the spouses, or of either of them;

(3) The fruits, rents or interests received or due during the marriage, coming from the common property or from the exclusive property of each
spouse.

Considering that the damages in question have arisen from, inter alia, a breach of plaintiffs' contract of carriage with the defendant, for which
plaintiffs paid their fare with funds presumably belonging to the conjugal partnership, We hold that said damages fall under paragraph (1) of said
Article 153, the right thereto having been "acquired by onerous title during the marriage ... ." This conclusion is bolstered up by Article 148 of our
Civil Code, according to which:

ART. 148. The following shall be the exclusive property of each spouse:

(1) That which is brought to the marriage as his or her own;

(2) That which each acquires, during the marriage, by lucrative title;

(3) That which is acquired by right of redemption or by exchange with other property belonging to only one of the spouses;

(4) That which is purchased with exclusive money of the wife or of the husband.

The damages involved in the case at bar do not come under any of these provisions or of the other provisions forming part of Chapter 3, Title VI,
of Book I of the Civil Code, which chapter is entitled "Paraphernal Property." What is more, if "(t)hat which is acquired by right of redemption or
by exchange with other property belonging to only one of the spouses," and "(t)hat which is purchased with exclusive money of the wife or of
the husband," 24 belong exclusively to such wife or husband, it follows necessarily that that which is acquired with money of the conjugal
partnership belongs thereto or forms part thereof. The rulings in Maramba v. Lozano 25 and Perez v. Lantin, 26 cited in defendant's motion for
reconsideration, are, in effect, adverse thereto. In both cases, it was merely held that the presumption under Article 160 of our Civil Code — to
the effect that all property of the marriage belong to the conjugal partnership — does not apply unless it is shown that it was acquired during
marriage. In the present case, the contract of carriage was concededly entered into, and the damages claimed by the plaintiffs were incurred,
during marriage. Hence, the rights accruing from said contract, including those resulting from breach thereof by the defendant, are presumed to
belong to the conjugal partnership of Mr. and Mrs. Zulueta. The fact that such breach of contract was coupled, also, with a quasi-delict
constitutes an aggravating circumstance and can not possibly have the effect of depriving the conjugal partnership of such property rights.

Defendant insists that the use of conjugal funds to redeem property does not make the property redeemed conjugal if the right of redemption
pertained to the wife. In the absence, however, of proof that such right of redemption pertains to the wife — and there is no proof that the
contract of carriage with PANAM or the money paid therefor belongs to Mrs. Zulueta — the property involved, or the rights arising therefrom,
must be presumed, therefore, to form part of the conjugal partnership.

It is true that in Lilius v. Manila Railroad Co., 27 it was held that the "patrimonial and moral damages" awarded to a young and beautiful woman
by reason of a scar — in consequence of an injury resulting from an automobile accident — which disfigured her face and fractured her left leg,
as well as caused a permanent deformity, are her paraphernal property. Defendant cites, also, in support of its contention the following passage
from Colin y Capitant:
This opinion is, however, undecisive, to say the least. It should be noted that Colin y Capitant were commenting on the French Civil Code; that
their comment referred to indemnities due in consequence of "accidentes del trabajo "resulting in physical injuries sustained by one of the
spouses (which Mrs. Zulueta has not suffered); and that said commentators admit that the question whether or not said damages are
paraphernal property or belong to the conjugal partnership is not settled under the Spanish law. 29 Besides, the French law and jurisprudence —
to which the comments of Planiol and Ripert, likewise, refer — are inapposite to the question under consideration, because they differ basically
from the Spanish law in the treatment of the property relations between husband and wife. Indeed, our Civil Code, like the Spanish Civil Code,
favors the system of conjugal partnership of gains. Accordingly, the former provides that, "(i)n the absence of marriage settlements, or when the
same are void, the system of relative community or conjugal partnership of gains ... shall govern the property relations between" the spouses. 30
Hence, "(a)ll property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the
husband or to the wife." 31

No similar rules are found in the French Civil Code. What is more, under the provisions thereof, the conjugal partnership exists only when so
stipulated in the "capitulaciones matrimoniales" or by way of exception. In the language of Manresa —

Again, Colin y Capitant, as well as the Lilius case, refer to damages recovered for physical injuries suffered by the wife. In the case at bar, the
party mainly injured, although not physically, is the husband.

Accordingly, the other Philippine cases 33 and those from Louisiana — whose civil law is based upon the French Civil Code — cited by the
defendant, which similarly refer to moral damages due to physical injuries suffered by the wife, are, likewise, inapplicable to the case at bar.

We find, therefore, no plausible reason to disturb the views expressed in Our decision promulgated on February 29, 1972.

WHEREFORE, the motions for reconsideration above-referred to should be, as they are hereby denied.
G.R. No. L-25292 November 29, 1969

ZAMBOANGA TRANSPORTATION COMPANY, INC., and ZAMBOANGA RAPIDS COMPANY, INC., petitioners, vs.

THE COURT OF APPEALS and JOSE MARIO DAGAMANUEL, represented by PASCUALA JULIAN DE PUNZALAN, respondents.

Appeal by certiorari from the decision of the Court of Appeals in CA-G.R. No. 28297-R, affirming, with modifications, the decision of the Court of
First Instance of Zamboanga City in its Civil Case No. 574 — for breach of contract of carriage — wherein herein petitioners-appellants, along
with their driver named Valeriano Marcos,1 were condemned to pay damages to herein private respondent minor Jose Mario Dagamanuel, for
the deaths of his father and mother while on board a passenger bus owned (by purchase) and operated by petitioner-appellant Zamboanga
Transportation Co., Inc. but which, at the time of the mishap causing the deaths referred to, was still registered with the Public Service
Commission in the name of petitioner-appellant Zamboanga Rapids Co., Inc.

The appeal being purely on question of law, We quote the antecedent facts, as set forth in the pertinent portions of the decision of the Court of
Appeals appealed from, as follows:

In the evening of August 13, 1955, the spouses Ramon and Josefina Dagamanuel boarded a bus at Manicahan, Zamboanga City, to attend a
benefit dance at the Bunguiao Elementary School, also in Zamboanga City, where Josefina was a public school teacher. After the dance, the
couple boarded the same bus to return to Manicahan. At around 1 o'clock in the early morning of August 14, 1955, the bus, with plate 1955 TPU-
1137, and driven by Valeriano Marcos, fell off the road and pinned to death the said spouses and several other passengers.

The plaintiff, the only child of the deceased spouses, through his maternal grandmother, as guardian ad-litem, instituted this action against the
defendants Zamboanga Transportation Co., Inc. and the Zamboanga Rapids Co., Inc. (hereinafter referred to as Zamtranco and Zambraco,
respectively) for breach of contract of carriage, alleging that the accident was due to the fault and negligence of the driver in operating the bus
and due to the negligence of the defendant companies in their supervision of their driver. The plaintiff asks for actual or compensatory damages
in the sum of P40,000, moral damages in the sum of P40,000, exemplary damages in the sum of P20,000, attorney's fees in the sum of P5,000 and costs.

The Zamtranco filed a third-party complaint against the driver Marcos, admitting that 'it is the owner by purchase of Motor Vehicle with plate
number 1955 TPU-11327 and employer' of said driver, but contending, among others, that the said driver had no authority to drive the bus,
hence, the driver alone should be adjudged liable. In addition, the said defendant company alleged that with intent to place his property beyond
the reach of the creditors, the driver sold his property to his brother, hence its additional prayer that the sale executed by the driver be declared
null and void. The Zambraco also filed a third-party complaint against the driver, admitting that "it is the registered owner of Motor Vehicle with
plate number 1955 TPU-11327 and employer of herein third-party defendant" (the driver), but also contending, among others, that the accident
occurred due solely to the negligence of the driver for taking out the bus without authority from it. It also asked for the annulment of the deed of
sale made by the driver of his property.

Answering the complaint, the Zambraco alleges that it is engaged in land transportation business and that at the time of the accident it was the
registered owner of the ill-fated vehicle. In exculpation, it denies that Marcos was authorized to operate the vehicle when it met with the
accident. In its own answer, the Zambraco admits that it is also engaged in land transportation business at the time of the accident, and likewise
claims that Marcos had no authority to operate the vehicle.

Finding that (1) the Zamtranco and the Zambraco were under one management at the time of the accident; (2) the accident was due to the
negligence of the driver who was under their employ; and (3) the sale made by Marcos of his property was done with intent to defraud his
creditors, the trial court rendered judgment (1) sentencing the three, jointly and severally, to pay the plaintiff P16,000 for the death of the
spouses, P4,000 as exemplary damages, P2,000 as attorney's fees, and costs; and (2) annulling the deed of sale executed by Marcos.

All the three defendants appealed. Marcos' appeal was later dismissed; hence as to him the judgment is already final and executory.

In their joint brief, the two appellant companies allege that the trial court erred in (1) "deciding the case against the defendant Zamboanga
Transportation Company, Inc., it being the wrong party"; (2) "awarding damages based on an alleged contract of carriage"; (3) "misquoting the
very provision on which it based its decision, and consequently gave a substantively wrong interpretation of the same to the detriment of the
appellants"; (4) "awarding excessive compensatory damages to the plaintiffs"; and (5) "awarding exemplary damages."

With respect to the contract of carriage, the testimony of the principal teacher Filoteo de los Reyes sufficiently establishes the existence of such
contract. The appellants have not introduced evidence to dispute the fact that De los Reyes entered into a contract for the bus to make the trip
to Bungiao, and that he paid for it. Neither have they contradicted Marcos' affidavit (exh. C-28) to the effect that he was authorized by the
manager of the Zamtranco to make the trip in question.

This being a case of violation of a contract of carriage resulting in death to passengers, the presumption is that the appellants as carriers have
been at fault or have acted negligently (art. 1756, new Civil Code; Sy vs. Malate Taxicab, L-8937, Nov. 29, 1957). This presumption can, however,
be rebutted by (1) proof of extraordinary diligence or (2) proof that the accident was due to a fortuitous event.

With respect to the first possible defense, the appellants have not even as much as hinted either at the trial or in this appeal that they had
exercised the diligence required of them as carriers. All they did was to deny that the driver was authorized to operate the vehicle in question. As
to the second, we note that only the driver has interposed fortuitous event below, but as we have already noted, his appeal has been dismissed,
and as to him, the decision a quo had already become final and executory. Anent his second defense, the appellants have raised this belatedly, as
they did it only on appeal. At all events, the occurrence of fortuitous event is belied by the report of investigation (exh. C) to the effect that the
driver was under the influence of liquor, and that the bus was running at a fast clip in spite of the fact that the road was slippery.

It is undisputed that Josefina was 32 years old it the time she died and a public school teacher receiving P120 a month or P1,440 a year, with the
prospect of increase in salary. The probabilities that she would live until she reached the compulsory retirement age of 65 cannot be discounted
for there is no evidence that she was suffering from any sickness. There is likewise no dispute that her husband Ramon was 27 years old at the
time of his death, a farmer by calling and in good health. All these have been established, and the appellants have not presented rebuttal
evidence (t.s.n. 60. id). Allowing him a minimum income of P120 a month, he was earning at least P1,440 a year. The probabilities of
advancement are also not remote as he was still young

. . . . The manner with which the driver operated the vehicle as described in exh. C, and appellants' absolute lack of precaution in assigning the
driver to this particularly dangerous night trip notwithstanding the driver's record of previous traffic violations (exh. C-47), are so reprehensible
as to call for the imposition of large exemplary damages to serve as a deterrent to others. To us, the amount of P5,000 could serve the purpose.

ACCORDINGLY, with the modification that the following damages are hereby awarded, to wit, (1) P12,000 for the death of the spouses Ramon
and Josefina Dagamanuel, (2) P11,520 for the loss of earnings of both spouses, (3) P5,000 as moral damages, and (4) P5,000 as exemplary
damages, the judgment a quo is affirmed in all other respects, at defendants-appellants' cost.

In due time petitioners-appellants moved for the reconsideration of the above-quoted judgment of the Court of Appeals, but the same was
denied; hence, this appeal via the present petition for certiorari.

Petitioners now contend that the Court of Appeals committed the following errors:

I. THE COURT OF APPEALS ERRED, AS A MATTER OF LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT, IN HOLDING PETITIONER
ZAMTRANCO, THE UNREGISTERED OWNER OF THE ILL-FATED VEHICLE, JOINTLY AND SEVERALLY LIABLE WITH THE ZAMBRACO, THE REGISTERED
OWNER, AND WITH THE DRIVER THEREOF.

II. THE COURT OF APPEALS ERRED, AS A MATTER OF LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT, IN (A) AWARDING EXCESSIVE
DAMAGES FOR THE DEATH OF THE PARENTS OF RESPONDENT DAGAMANUEL; EXCESSIVE COMPENSATORY DAMAGES; AND EXCESSIVE MORAL
DAMAGES TO RESPONDENT, WITHOUT THE LATTER APPEALING THE DECISION OF THE TRIAL COURT, AND (B) IN HOLDING PETITIONERS JOINTLY
AND SEVERALLY LIABLE WITH THE DRIVER BY WAY OF EXEMPLARY DAMAGES FOR THE LATTER'S WRONGFUL ACT.

That the Court of Appeals did not commit the first error assigned by appellants is obvious. While it is true that according to previous decisions of
this Court, transfer of a certificate of public convenience to operate a transportation service is not effective and binding insofar as the
responsibility of the grantee under the franchise in its relation to the public is concerned, without the approval of the transfer by the Public
Service Commission required by the Public Service Act,2 and that in contemplation of law, the transferor of such certificate continues to be the
operator of the service as long as the transfer is not yet approved, and as such operator, he is the one responsible jointly and severally with his
driver for damages incurred by passengers or third persons in consequence of injuries or deaths resulting from the operation of such service,3
We do not find any need for applying these rulings to the present petitioners for the simple reason that in their respective third-party
complaints, as noted by the Court of Appeals, they both admitted separately that they are the owners of the bus involved in the incident in
question and that Valeriano Marcos, the driver of said bus at the time of said incident, was in their employ. And there is nothing strange in this
because, as found by said appellate court:

There is abundant evidence that although the Zambraco appears to be the registered owner, Zamtranco was in fact the operator. To start with,
there is the testimony of Filoteo de los Reyes, principal teacher of Josefina, to the effect that for the trip to and from Bunguiao where the benefit
dance was held, he contracted with Zamtranco at Tetuan (t.s.n. 13-14, Aug. 7, 1956, Cabato); that he saw in Bunguiao the bus sent by Zamtranco
(t.s.n. 33, id.); and that he paid the fare to the driver of Zamtranco (t.s.n 21 id.). This testimony was never contradicted by the appellants, either
by documentary or testimonial evidence. . . .

In their own brief in this instance, appellants make these significant admissions:

The facts that TPU Bus No. 11327 which figured in the accident that caused the death of the spouses Ramon Dagamanuel and Josefina Punzalan
was registered in the name of Zambraco in the year 1955, is not disputed. At that time, the sale and merger of this Zambraco with the Zamtranco
was to be the subject of application with the Public Service Commission. Pending such approval, the ill-fated bus was again registered in the
name of the Zambraco in the year 1956, according to the testimony given at the trial by Leonardo Galvez, then Acting Registrar of the Motor
Vehicle Office in Zamboanga.

Indeed, under these circumstances, We cannot find any reason to disagree with Mr. Justice Fred Ruiz Castro who penned the appealed decision
in his ruling to the effect that:
We do not find any application of the ruling in the foregoing cases to the case at bar. There, the registered owners invariably sought to pass on
liability to the actual operators on the pretext that they had already sold or transferred their units to the latter, whereas in the present case, the
registered owner, the Zambraco, admits whatever liability it has and vigorously objects to any finding that the actual operator, the Zamtranco, is
also liable with it, claiming that as registered owner, it alone should be adjudged liable. We would not inquire into the motive of the Zambraco
why instead of sharing whatever liability it has with the Zamtranco, it prefers to shoulder it alone. But the fact stands out in bold relief that although
still the registered owner at the time of the accident, it had already sold the vehicle to Zamtranco and the latter was actually operating it.

It is our view that it is for the better protection of the public that both the owner of record and the actual operator, as held by us in the past,
should be adjudged jointly and severally liable with the driver (see Dizon vs. Octavio, et al., 51 O.G. No. 8, 4059-4061; Castanares vs. Pages, CA-
G.R. 21809-R, March 8, 1962; Redado vs. Bautista, CA-G.R. 19295-R, Sept. 19, 1961; Bering vs. Noeth, CA-G.R. 28483-R, April 29 1965).

The second assignment of error refers to the different items of damages awarded by the respondent court. Petitioners complain that the same
are excessive if not without legal basis. To a certain extent, petitioners are right.

It may be recalled that the trial court's judgment regarding the matter of damages was as follows:

1) P8,000.00 for the death of Ramon Dagamanuel;

2) P8,000.00 for the death of Josefina Punzalan;

3) P4,000.00 as exemplary damages;

4) P2,000.00 as attorney's fees; and

5) Costs.

From this judgment, only petitioners appealed. Private respondents did not appeal. Accordingly, petitioners are correct in inviting Our attention
thus:

The respondent did not appeal any portion of the decision of the lower Court, thus indicating that he is fully satisfied with the same. On the
other hand, the driver of the ill-fated bus failed to perfect his appeal and consequently, as against him, the decision of the lower Court is already
final.

The lower Court rendered a decision against the driver of the bus and the two petitioners herein for the death of the parents of the respondent
in the sum of P16,000.00 together with P4,000.00 exemplary damages. But notwithstanding the automatic exclusion of the driver from the
effects of the appealed decision, the Court of Appeals, while reducing the death award to P12,000.00 increased the exemplary damages to
P5,000.00 adding thereto P11,520.00 compensatory damages and P5,000.00 moral damages. We humbly contend that to award damages when
none was allowed by the lower Court, and to increase damages when the successful party did not appeal, is simply improper and amounts to
pure abuse of discretion on the part of the respondent appellate Court, contrary to the doctrines laid down by the Honorable Supreme Court in
the following cases, to wit:

"The discretion in fixing moral and exemplary damages primarily lay in the trial court and the same should be respected. (Coleongco vs.
Claparols, No. L-18616, March 31, 1964; emphasis ours)."

"It is well-settled rule in this jurisdiction that whenever an appeal is taken in a civil case, an appellee who has not himself appealed cannot obtain
from the appellate court any affirmative relief other than the ones granted in the decision of the court below. An appellee, who is not appellant,
may assign errors in his brief where his purpose is to maintain the judgment on other grounds, but he may not do so if his purpose is to have the
judgment modified or reversed, for, in such a case, he must appeal. HERE, THE RESPONDENT DID NOT APPEAL AND SO IT WAS ERROR FOR THE
COURT OF APPEALS TO AWARD HIM A RELIEF NOT GRANTED BY THE LOWER COURT. (Dy, et al. vs. Kuison, L-16654, Nov. 30, 1961)

Furthermore, it is respectfully submitted, that a child 3-year old, as the respondent herein was when his parents died, cannot yet feel the mental
anguish resulting from their death, as to warrant such excessive award of P5,000.00 moral damages. We venture to ask, therefore, what degree
of mental torture could have been possibly endured by a boy of such tender age? We believe that the measure of moral damages, if any, must
be commensurate with the mental anguish suffered by the heir. (Mercado, et al. vs. Lira, et al., Nos. L-13328-29 and L-13358, Sept. 29, 1961.)

True it is, the awards of P8,000 each for the death of the parents of respondent Jose Mario Dagamanuel may not be increased anymore, but We
cannot say that they should be reduced. Quite, on the contrary, We consider the judgment of the Court of Appeals in respect to the matter of
damages to be more in accordance with the facts, except perhaps, as to the item of moral damages, considering the tender age of the above-
named respondent child, and We would have upheld the same had private respondent appealed from the decision of the trial court.4 Indeed,
the Court of Appeals properly interpreted the P16,000 awarded by the trial court as including not only damages for the deceased couple but also
the other items of recoverable damages, like compensatory or actual, etc. Thus viewed, the amounts awarded by the trial court cannot be
considered excessive. IN VIEW OF ALL THE FOREGOING, the judgment of the Court of Appeals is affirmed, with the modification that as to
damages, petitioners are sentenced to pay jointly and severally no more than the amounts of damages adjudged by the trial court.
G.R. Nos. L-19815-16 May 19, 1966

FILEMON YEPES and MATEO SUSAYA, plaintiffs and appellees, vs. SAMAR EXPRESS TRANSIT

On July 23, 1959, appellees boarded appellant's Bus No. 56, with its driver, Alfredo Acol, at the wheel, at Borongan, bound for Dolores, both of
the province of Samar. While on its way the bus turned turtle and caught fire, causing injuries to some of its passengers, amongst them the
appellees who suffered serious burns. Appellant had them taken to the Borongan Emergency Hospital in Borongan, Samar, where they received
medical treatment, but were later brought, upon their request, to the Leyte Provincial Hospital at Tacloban City, for further treatment. Appellant
paid all the expenses for their hospitalization and medical treatment. It appears that before their transfer to the Leyte Provincial Hospital,
appellees were asked to sign as, in fact, they signed the document Exhibit I wherein they stated that "in consideration of the expenses which said
operator has incurred in properly giving us the proper medical treatment, we hereby manifest our desire to waive any and all claims against the
operator of the Samar Express Transit." This document notwithstanding, appellees filed with the lower court separate complaints for damages
for breach of contract of carriage (Civil Cases Nos. 2709 and 2815) against appellant. In its answers to the complaints the latter invoked the
following defenses: (a) that the accident was due to a fortuitous event beyond its control and/or due to the negligence of one of its passengers,
and (b) that the plaintiffs (appellees here) had waived their right to claim for damages against it.

After a joint trial, the lower court rendered judgment ruling the above-mentioned waiver null and void as being contrary to public policy, and
awarding damages in the sum of P204.00 and P272.00 to appellees Filemon Yepes and Mateo Susaya, respectively, and the further sum of
P300.00 as attorney's fees, and costs. Hence the. present appeal.

Sole contention of appellant is that the lower court erred in declaring that the "waiver" made by appellees pursuant to Exhibit I is against public
policy and morals, and therefore void. This claim, in our opinion, is without merit.

Even a cursory examination of the document mentioned above will readily show that appellees did not actually waive their right to claim
damages from appellant for the latter's failure to comply with their contract of carriage. All that said document proves is that they expressed a
"desire" to make the waiver — which obviously is not the same as making an actual waiver of their right. A waiver of the kind invoked by
appellant must be clear and unequivocal (Decision of the Supreme Court of Spain of July 8, 1887) — which is not the case of the one relied upon
in this appeal.1äwphï1.ñët

In the light of the above conclusion, We deem it unnecessary to consider the question of whether or not such waiver if actually made upon the
consideration stated in the document already referred to, is against public policy and morals.

Wherefore, the decision appealed from is affirmed, with costs

G.R. No. L-37750 May 19, 1978

SWEET LINES, INC., petitioner, vs. HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII, LEOVIGILDO TANDOG, JR., and
ROGELIO TIRO, respondents.

This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to restrain respondent Judge from proceeding further with Civil
Case No. 4091, entitled Leovigildo D. Tandog, Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he denied petitioner's Motion to Dismiss the
complaint, and the Motion for Reconsideration of said order. 1

Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and Rogelio Tiro, a contractor by professions, bought tickets Nos.
0011736 and 011737 for Voyage 90 on December 31, 1971 at the branch office of petitioner, a shipping company transporting inter-island
passengers and cargoes, at Cagayan de Oro City. Respondents were to board petitioner's vessel, M/S "Sweet Hope" bound for Tagbilaran City via
the port of Cebu. Upon learning that the vessel was not proceeding to Bohol, since many passengers were bound for Surigao, private
respondents per advice, went to the branch office for proper relocation to M/S "Sweet Town". Because the said vessel was already filled to
capacity, they were forced to agree "to hide at the cargo section to avoid inspection of the officers of the Philippine Coastguard." Private
respondents alleged that they were, during the trip," "exposed to the scorching heat of the sun and the dust coming from the ship's cargo of
corn grits," and that the tickets they bought at Cagayan de Oro City for Tagbilaran were not honored and they were constrained to pay for other
tickets. In view thereof, private respondents sued petitioner for damages and for breach of contract of carriage in the alleged sum of P10,000.00
before respondents Court of First Instance of Misamis Oriental. 2

Petitioner moved to dismiss the complaint on the ground of improper venue. This motion was premised on the condition printed at the back of
the tickets, i.e., Condition No. 14, which reads:

14. It is hereby agreed and understood that any and all actions arising out of the conditions and provisions of this ticket, irrespective of where it
is issued, shall be filed in the competent courts in the City of Cebu. 3

The motion was denied by the trial court. 4 Petitioner moved to reconnsider the order of denial, but no avail. 5 Hence, this instant petition for
prohibition for preliminary injunction, 'alleging that the respondent judge has departed from the accepted and usual course of judicial
preoceeding" and "had acted without or in excess or in error of his jurisdicton or in gross abuse of discretion. 6

In Our resolution of November 20, 1973, We restrained respondent Judge from proceeding further with the case and required respondent to
comment. 7 On January 18, 1974, We gave due course to the petition and required respondent to answer. 8 Thereafter, the parties submitted
their respesctive memoranda in support of their respective contentions. 9

Presented thus for Our resolution is a question is aquestion which, to all appearances, is one of first impression, to wit — Is Condition No. 14
printed at the back of the petitioner's passage tickets purchased by private respondents, which limits the venue of actions arising from the
contract of carriage to theCourt of First Instance of Cebu, valid and enforceable? Otherwise stated, may a common carrier engaged in inter-
island shipping stipulate thru condition printed at the back of passage tickets to its vessels that any and all actions arising out of the ocntract of
carriage should be filed only in a particular province or city, in this case the City of Cebu, to the exclusion of all others?

Petitioner contends thaty Condition No. 14 is valid and enforceable, since private respndents acceded to tit when they purchased passage tickets
at its Cagayan de Oro branch office and took its vessel M/S "Sweet Town" for passage to Tagbilaran, Bohol — that the condition of the venue of
actions in the City of Cebu is proper since venue may be validly waived, citing cases; 10 that is an effective waiver of venue, valid and binding as
such, since it is printed in bold and capital letters and not in fine print and merely assigns the place where the action sing from the contract is
institution likewise citing cases; 11 and that condition No. 14 is unequivocal and mandatory, the words and phrases "any and all", "irrespective of
where it is issued," and "shag" leave no doubt that the intention of Condition No. 14 is to fix the venue in the City of Cebu, to the exclusion of
other places; that the orders of the respondent Judge are an unwarranted departure from established jurisprudence governing the case; and
that he acted without or in excess of his jurisdiction in is the orders complained of. 12

On the other hand, private respondents claim that Condition No. 14 is not valid, that the same is not an essential element of the contract of
carriage, being in itself a different agreement which requires the mutual consent of the parties to it; that they had no say in its preparation, the
existence of which they could not refuse, hence, they had no choice but to pay for the tickets and to avail of petitioner's shipping facilities out of
necessity; that the carrier "has been exacting too much from the public by inserting impositions in the passage tickets too burdensome to bear,"
that the condition which was printed in fine letters is an imposition on the riding public and does not bind respondents, citing cases; 13 that
while venue 6f actions may be transferred from one province to another, such arrangement requires the "written agreement of the parties", not
to be imposed unilaterally; and that assuming that the condition is valid, it is not exclusive and does not, therefore, exclude the filing of the
action in Misamis Oriental, 14

There is no question that there was a valid contract of carriage entered into by petitioner and private respondents and that the passage tickets,
upon which the latter based their complaint, are the best evidence thereof. All the essential elements of a valid contract, i.e., consent, cause or
consideration and object, are present. As held in Peralta de Guerrero, et al. v. Madrigal Shipping Co., Inc., 15
It is a matter of common knowledge that whenever a passenger boards a ship for transportation from one place to another he is issued a ticket
by the shipper which has all the elements of a written contract, Namely: (1) the consent of the contracting parties manifested by the fact that
the passenger boards the ship and the shipper consents or accepts him in the ship for transportation; (2) cause or consideration which is the fare
paid by the passenger as stated in the ticket; (3) object, which is the transportation of the passenger from the place of departure to the place of
destination which are stated in the ticket.

It should be borne in mind, however, that with respect to the fourteen (14) conditions — one of which is "Condition No. 14" which is in issue in
this case — printed at the back of the passage tickets, these are commonly known as "contracts of adhesion," the validity and/or enforceability
of which will have to be determined by the peculiar circumstances obtaining in each case and the nature of the conditions or terms sought to be
enforced. For, "(W)hile generally, stipulations in a contract come about after deliberate drafting by the parties thereto, ... there are certain
contracts almost all the provisions of which have been drafted only by one party, usually a corporation. Such contracts are called contracts of
adhesion, because the only participation of the party is the signing of his signature or his 'adhesion' thereto. Insurance contracts, bills of lading,
contracts of make of lots on the installment plan fall into this category" 16

By the peculiar circumstances under which contracts of adhesion are entered into — namely, that it is drafted only by one party, usually the
corporation, and is sought to be accepted or adhered to by the other party, in this instance the passengers, private respondents, who cannot
change the same and who are thus made to adhere thereto on the "take it or leave it" basis — certain guidelines in the determination of their
validity and/or enforceability have been formulated in order to that justice and fan play characterize the relationship of the contracting parties.
Thus, this Court speaking through Justice J.B.L. Reyes in Qua Chee Gan v. Law Union and Rock Insurance Co., 17 and later through Justice
Fernando in Fieldman Insurance v. Vargas, 18 held —

The courts cannot ignore that nowadays, monopolies, cartels and concentration of capital endowed with overwhelm economic power, manage
to impose upon parties d with them y prepared 'agreements' that the weaker party may not change one whit his participation in the 'agreement'
being reduced to the alternative 'to take it or leave it,' labelled since Raymond Saleilles 'contracts by adherence' (contracts d' adhesion) in
contrast to those entered into by parties bargaining on an equal footing. Such contracts (of which policies of insurance and international bill of
lading are prime examples) obviously cap for greater strictness and vigilance on the part of the courts of justice with a view to protecting the
weaker party from abuses and imposition, and prevent their becoming traps for the unwary.

To the same effect and import, and, in recognition of the character of contracts of this kind, the protection of the disadvantaged is expressly
enjoined by the New Civil Code —

In all contractual property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance
indigence, mental weakness, tender age and other handicap, the courts must be vigilant for his

protection.

Considered in the light Of the foregoing norms and in the context Of circumstances Prevailing in the inter-island ship. ping industry in the country
today, We find and hold that Condition No. 14 printed at the back of the passage tickets should be held as void and unenforceable for the
following reasons first, under circumstances obligation in the inter-island ship. ping industry, it is not just and fair to bind passengers to the terms
of the conditions printed at the back of the passage tickets, on which Condition No. 14 is Printed in fine letters, and second, Condition No. 14
subverts the public policy on transfer of venue of proceedings of this nature, since the same will prejudice rights and interests of innumerable
passengers in different s of the country who, under Condition No. 14, will have to file suits against petitioner only in the City of Cebu.

1. It is a matter of public knowledge, of which We can take judicial notice, that there is a dearth of and acute shortage in inter- island vessels
plying between the country's several islands, and the facilities they offer leave much to be desired. Thus, even under ordinary circumstances, the
piers are congested with passengers and their cargo waiting to be transported. The conditions are even worse at peak and/or the rainy seasons,
when Passengers literally scramble to whatever accommodations may be availed of, even through circuitous routes, and/or at the risk of their
safety — their immediate concern, for the moment, being to be able to board vessels with the hope of reaching their destinations. The schedules
are — as often as not if not more so — delayed or altered. This was precisely the experience of private respondents when they were relocated to
M/S "Sweet Town" from M/S "Sweet Hope" and then any to the scorching heat of the sun and the dust coming from the ship's cargo of corn
grits, " because even the latter was filed to capacity.

Under these circumstances, it is hardly just and proper to expect the passengers to examine their tickets received from crowded/congested
counters, more often than not during rush hours, for conditions that may be printed much charge them with having consented to the conditions,
so printed, especially if there are a number of such conditions m fine print, as in this case. 20

Again, it should be noted that Condition No. 14 was prepared solely at the ms of the petitioner, respondents had no say in its preparation.
Neither did the latter have the opportunity to take the into account prior to the purpose chase of their tickets. For, unlike the small print
provisions of contracts — the common example of contracts of adherence — which are entered into by the insured in his awareness of said
conditions, since the insured is afforded the op to and co the same, passengers of inter-island v do not have the same chance, since their alleged
adhesion is presumed only from the fact that they purpose chased the tickets.
It should also be stressed that slapping companies are franchise holders of certificates of public convenience and therefore, posses a virtual
monopoly over the business of transporting passengers between the ports covered by their franchise. This being so, shipping companies, like
petitioner, engaged in inter-island shipping, have a virtual monopoly of the business of transporting passengers and may thus dictate their terms
of passage, leaving passengers with no choice but to buy their tickets and avail of their vessels and facilities. Finally, judicial notice may be taken
of the fact that the bulk of those who board these inter-island vested come from the low-income groups and are less literate, and who have little
or no choice but to avail of petitioner's vessels.

2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For, although venue may be changed or transferred from one
province to another by agreement of the parties in writing t to Rule 4, Section 3, of the Rules of Court, such an agreement will not be held valid
where it practically negates the action of the claimants, such as the private respondents herein. The philosophy underlying the provisions on
transfer of venue of actions is the convenience of the plaintiffs as well as his witnesses and to promote 21 the ends of justice. Considering the
expense and trouble a passenger residing outside of Cebu City would incur to prosecute a claim in the City of Cebu, he would most probably
decide not to file the action at all. The condition will thus defeat, instead of enhance, the ends of justice. Upon the other hand, petitioner has
branches or offices in the respective ports of call of its vessels and can afford to litigate in any of these places. Hence, the filing of the suit in the
CFI of Misamis Oriental, as was done in the instant case, will not cause inconvenience to, much less prejudice, petitioner.

Public policy is ". . . that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to
the public or against the public good ... 22 Under this principle" ... freedom of contract or private dealing is restricted by law for the good of the
public. 23 Clearly, Condition No. 14, if enforced, will be subversive of the public good or interest, since it will frustrate in meritorious cases,
actions of passenger cants outside of Cebu City, thus placing petitioner company at a decided advantage over said persons, who may have
perfectly legitimate claims against it. The said condition should, therefore, be declared void and unenforceable, as contrary to public policy — to
make the courts accessible to all who may have need of their services.

WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order issued on November 20, 1973, is hereby LIFTED and SET ASIDE.
Costs against petitioner.

Sweet Lines, Inc. v. Teves (1978)

G.R. No. L-37750 May 19, 1978

Lessons Applicable: Contract of Adhesion (Transportation)

Laws Applicable:

FACTS:

Atty. Leovigildo Tandog and Rogelio Tiro bought tickets for Tagbilaran City via the port of Cebu. Since many passengers were bound for Surigao,
M/S "Sweet Hope would not be proceeding to Bohol. They went to the proper branch office and was relocated to M/S "Sweet Town" where they
were forced to agree "to hide at the cargo section to avoid inspection of the officers of the Philippine Coastguard." and they were exposed to the
scorching heat of the sun and the dust coming from the ship's cargo of corn grits and their tickets were not honored so they had to purchase a
new one. They sued Sweet Lines for damages and for breach of contract of carriage before the Court of First Instance of Misamis Oriental who
dismissed the compalitn for improper venue A motion was premised on the condition printed at the back of the tickets –dismissed instant
petition for prohibition for preliminary injunction.

ISSUE:

W/N a common carrier engaged in inter-island shipping stipulate thru condition printed at the back of passage tickets to its vessels that any and
all actions arising out of the contract of carriage should be filed only in a particular province or city

HELD:

NO. Petition for prohibition is DISMISSED. Restraining order LIFTED and SET ASIDE. Contract of Adhesion is not that kind of a contract where the
parties sit down to deliberate, discuss and agree specifically on all its terms, but rather, one which respondents took no part at all in preparing ,
just imposed upon them when they paid for the fare for the freight they wanted to ship

We find and hold that Condition No. 14 printed at the back of the passage tickets should be held as void and unenforceable for the following
reasons:

1.) circumstances obligation in the inter-island ship

2.) will prejudice rights and interests of innumerable passengers in different s of the country who, under Condition No. 14, will have to file
suits against petitioner only in the City of Cebu
3.) subversive of public policy on transfers of venue of actions
4.) philosophy underlying the provisions on transfer of venue of actions is the convenience of the plaintiffs as well as his witnesses and to
promote 21 the ends of justice
[G.R. No. 125948. December 29, 1998]

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY

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

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and operate oil pipelines. The
original pipeline concession was granted in 1967[1] and renewed by the Energy Regulatory Board in 1992.[2]

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before the mayor's
permit could be issued, the respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993
pursuant to the Local Government Code.[3] The respondent City Treasurer assessed a business tax on the petitioner amounting to P956,076.04
payable in four installments based on the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted to
P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter
of 1993.

On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the pertinent portion of which reads:

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

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

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

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

On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint[6] for tax refund with prayer for a writ of preliminary
injunction against respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged,
inter alia, that: (1) the imposition and collection of the business tax on its gross receipts violates Section 133 of the Local Government Code; (2)
the authority of cities to impose and collect a tax on the gross receipts of "contractors and independent contractors" under Sec. 141 (e) and 151
does not include the authority to collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term "contractors"
excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously imposed and collected the said tax, thus meriting the
immediate refund of the tax paid.[7]

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

On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise:

"xxx Plaintiff is either a contractor or other independent contractor.

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

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

"Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax Code. Such being the situation obtained in
this case (exemption being unclear and equivocal) resort to distinctions or other considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as not to overburden the riding public or commuters
with taxes. Plaintiff is not a common carrier, but a special carrier extending its services and facilities to a single specific or "special customer"
under a "special contract."

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

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

Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11, 1996.[13] Petitioner moved for a
reconsideration which was granted by this Court in a Resolution[14] of January 20, 1997. Thus, the petition was reinstated.

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

There is merit in the petition.

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

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

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

1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for
person generally as a business and not as a casual occupation;

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

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

4. The transportation must be for hire.[15]

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

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

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

'every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway,
traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in
the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation
system gas, electric light heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire
or wireless broadcasting stations and other similar public services.' "(Underscoring Supplied)

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Government Code refers only to common
carriers transporting goods and passengers through moving vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction as to the means of transporting,
as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in
the United States, oil pipe line operators are considered common carriers.[17]

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

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

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

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

The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-83, it declared:

"x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum products, it is considered a common carrier
under Republic Act No. 387 x x x. Such being the case, it is not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as
amended."

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

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

(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and
common carriers by air, land or water, except as provided in this Code."

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

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

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

First Philippine Industrial Corp. vs. CA

Facts:

Petitioner is a grantee of a pipeline concession under Republic Act No. 387. Sometime in January 1995, petitioner applied for mayor’s permit in Batangas. However, the
Treasurer required petitioner to pay a local tax based on gross receipts amounting to P956,076.04. In order not to hamper its operations, petitioner paid the taxes for the first
quarter of 1993 amounting to P239,019.01 under protest. On January 20, 1994, petitioner filed a letter-protest to the City Treasurer, claiming that it is exempt from local tax
since it is engaged in transportation business. The respondent City Treasurer denied the protest, thus, petitioner filed a complaint before the Regional Trial Court of Batangas
for tax refund. Respondents assert that pipelines are not included in the term “common carrier” which refers solely to ordinary carriers or motor vehicles. The trial court
dismissed the complaint, and such was affirmed by the Court of Appeals.

Issue: Whether a pipeline business is included in the term “common carrier” so as to entitle the petitioner to the exemption

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

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

(1) He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for
person generally as a business and not as a casual occupation; (2) He must undertake to carry goods of the kind to which his business is confined;(3) He must undertake to carry
by the method by which his business is conducted and over his established roads; and(4) The transportation must be for hire.

Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e.
petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all pe rsons who choose to employ its services, and transports
the goods by land and for compensation. The fact that petitioner has a limited
G.R. No. L-61461 August 21, 1987

EPITACIO SAN PABLO, (Substituted by Heirs of E. San Pablo), petitioners, vs. PANTRANCO SOUTH EXPRESS, INC., respondent.

The question that is posed in these petitions for review is whether the sea can be considered as a continuation of the highway. The corollary
issue is whether a land transportation company can be authorized to operate a ferry service or coastwise or interisland shipping service along its
authorized route as an incident to its franchise without the need of filing a separate application for the same.

The Pantranco South Express, Inc., hereinafter referred to as PANTRANCO is a domestic corporation engaged in the land transportation business
with PUB service for passengers and freight and various certificates for public conveniences CPC to operate passenger buses from Metro Manila
to Bicol Region and Eastern Samar. On March 27,1980 PANTRANCO through its counsel wrote to Maritime Industry Authority (MARINA)
requesting authority to lease/purchase a vessel named M/V "Black Double" "to be used for its project to operate a ferryboat service from
Matnog, Sorsogon and Allen, Samar that will provide service to company buses and freight trucks that have to cross San Bernardo Strait. 1 In a
reply of April 29,1981 PANTRANCO was informed by MARINA that it cannot give due course to the request on the basis of the following
observations:

1. The Matnog-Allen run is adequately serviced by Cardinal Shipping Corp. and Epitacio San Pablo; MARINA policies on interisland shipping
restrict the entry of new operators to Liner trade routes where these are adequately serviced by existing/authorized operators.

2. Market conditions in the proposed route cannot support the entry of additional tonnage; vessel acquisitions intended for operations therein
are necessarily limited to those intended for replacement purposes only. 2

PANTRANCO nevertheless acquired the vessel MV "Black Double" on May 27, 1981 for P3 Million pesos. It wrote the Chairman of the Board of
Transportation (BOT) through its counsel, that it proposes to operate a ferry service to carry its passenger buses and freight trucks between Allen
and Matnog in connection with its trips to Tacloban City invoking the case of Javellana vs. Public Service Commission. 3 PANTRANCO claims that
it can operate a ferry service in connection with its franchise for bus operation in the highway from Pasay City to Tacloban City "for the purpose
of continuing the highway, which is interrupted by a small body of water, the said proposed ferry operation is merely a necessary and incidental
service to its main service and obligation of transporting its passengers from Pasay City to Tacloban City. Such being the case ... there is no need
... to obtain a separate certificate for public convenience to operate a ferry service between Allen and Matnog to cater exclusively to its
passenger buses and freight trucks. 4

Without awaiting action on its request PANTRANCO started to operate said ferry service. Acting Chairman Jose C. Campos, Jr. of BOT ordered
PANTRANCO not to operate its vessel until the application for hearing on Oct. 1, 1981 at 10:00 A.M. 5 In another order BOT enjoined
PANTRANCO from operating the MV "Black Double" otherwise it will be cited to show cause why its CPC should not be suspended or the pending
application denied. 6

Epitacio San Pablo (now represented by his heirs) and Cardinal Shipping Corporation who are franchise holders of the ferry service in this area
interposed their opposition. They claim they adequately service the PANTRANCO by ferrying its buses, trucks and passengers. BOT then asked
the legal opinion from the Minister of Justice whether or not a bus company with an existing CPC between Pasay City and Tacloban City may still
be required to secure another certificate in order to operate a ferry service between two terminals of a small body of water. On October 20,
1981 then Minister of Justice Ricardo Puno rendered an opinion to the effect that there is no need for bus operators to secure a separate CPC to
operate a ferryboat service holding as follows:

Further, a common carrier which has been granted a certificate of public convenience is expected to provide efficient, convenient and adequate
service to the riding public. (Hocking Valley Railroad Co. vs. Public Utilities Commission, 1 10 NE 521; Louiseville and NR Co. vs. Railroad
Commissioners, 58 SO 543) It is the right of the public which has accepted the service of a public utility operator to demand that the service
should be conducted with reasonable efficiency. (Almario, supra, citing 73 C.J.S. 990-991) Thus, when the bus company in the case at bar
proposes to add a ferry service to its Pasay Tacloban route, it merely does so in the discharge of its duty under its current certificate of public
convenience to provide adequate and convenient service to its riders. Requiring said bus company to obtain another certificate to operate such
ferry service when it merely forms a part — and constitutes an improvement — of its existing transportation service would simply be duplicitous
and superfluous. 7

Thus on October 23, 1981 the BOT rendered its decision holding that the ferry boat service is part of its CPC to operate from Pasay to
Samar/Leyte by amending PANTRANCO's CPC so as to reflect the same in this wise:

Let the original Certificate of public convenience granted to Pantranco South Express Co., Inc. be amended to embody the grant of authority to
operate a private ferry boat service as one of the conditions for the grant of the certificate subject to the condition that the ferryboat shall be for
the exclusive use of Pantranco buses, its passengers and freight trucks, and should it offer itself to the public for hire other than its own
passengers, it must apply for a separate certificate of public convenience as a public ferry boat service, separate and distinct from its land
transport systems.

Cardinal Shipping Corporation and the heirs of San Pablo filed separate motions for reconsideration of said decision and San Pablo filed a
supplemental motion for reconsideration that were denied by the BOT on July 21, 1981. 9
Hence, San Pablo filed the herein petition for review on certiorari with prayer for preliminary injunction 10 seeking the revocation of said
decision, and pending consideration of the petition, the issuance of a restraining order or preliminary injunction against the operation by
PANTRANCO of said ferry service. San Pablo raised the following issues:

A. DID THE RESPONDENT BOARD VIOLATE PETITIONERS' RIGHT TO DUE PROCESS, THE RULES OF PROCEDURE AND SECTION 16 (m) OF THE
PUBLIC SERVICE ACT, WHEN IT ISSUED IN A COMPLAINT CASE THE DECISION DATED OCTOBER 23, 1981 WHICH MOTU PROPIO AMENDED
RESPONDENT PANTRANCO'S PUB CERTIFICATE TO INCLUDE AND AUTHORIZE OPERATION OF A SHIPPING SERVICE ON THE ROUTE MATNOG,
SORSOGON — ALLEN, SAMAR — EVEN AS THERE MUST BE A FORMAL APPLICATION FOR AMENDMENT AND SEPARATE PROCEEDINGS HELD
THEREFORE, ASSUMING AMENDMENT IS PROPER?

B. DID THE RESPONDENT BOARD ERR IN FINDING IN ITS DECISION OF OCTOBER 23, 1981, THAT THE SEA FROM THE PORT OF MATNOG,
SORSOGON, LUZON ISLAND TO THE PORT OF ALLEN, SAMAR ISLAND, OR FROM LUZON ISLAND TO SAMAR ISLAND IS A MERE FERRY OR
CONTINUATION OF THE HIGHWAY — IT BEING 23 KILOMETERS OF ROUGH AND OPEN SEA AND ABOUT 2 HOURS TRAVEL TIME REQUIRING BIG
INTER-ISLAND VESSELS, NOT MERE BARGES, RAFTS OR SMALL BOATS UTILIZED IN FERRY SERVICE?

C. DID THE RESPONDENT BOARD ERR WHEN IT RULED THAT RESPONDENT PANTRANCO'S VESSEL M/V BLACK DOUBLE IS MERELY A PRIVATE
CARRIER, NOT A PUBLIC FERRY OPERATING FOR PUBLIC SERVICE (ASSUMING THAT THE MATNOG-ALLEN SEA ROUTE IS A MERE FERRY OR
CONTINUATION OF HIGHWAY) EVEN IF SAID VESSEL IS FOR HIRE AND COLLECTS SEPARATE FARES AND CATERS TO THE PUBLIC EVEN FOR A
LIMITED CLIENTELE?

D. DID THE RESPONDENT BOARD ERR WHEN IT GRANTED RESPONDENT PANTRANCO AUTHORITY TO OPERATE A SHIPPING SERVICE IN THE FACE
OF THE LATTER'S CONTENTION AS AN AFTER THOUGH THAT IT NEED NOT APPLY THEREFOR, AND IN SPITE OF ITS FAILURE TO SECURE THE PRE-
REQUISITE MARITIME INDUSTRY AUTHORITY (MARINA) APPROVAL TO ACQUIRE A VESSEL UNDER ITS MEMORANDUM CIRCULAR NO. 8-A AS
WELL AS ITS PRIOR FAVORABLE ENDORSEMENT BEFORE ANY SHIPPING AUTHORIZATION MAY BE GRANTED UNDER BOT — MARINA AGREEMENT
OF AUGUST 10, 1976 AND FEBRUARY 26, 1982?

E. DID RESPONDENT BOARD ERR WHEN IT GRANTED RESPONDENT PANTRANCO AUTHORITY TO OPERATE A SHIPPING SERVICE ON A ROUTE
ADEQUATELY SERVICED IF NOT ALREADY "SATURATED" WITH THE SERVICES OF TWO 12) EXISTING OPERATORS PETITIONERS AND CARDINAL
SHIPPING CORP.) IN VIOLATION OF THE PRINCIPLE OF PRIOR OPERATOR RULE'? 11

By the same token Cardinal Shipping Corporation filed a separate petition raising similar issues, namely:

a. the decision did not conform to the procedures laid down by law for an amendment of the original certificate of public convenience, and the
authority to operate a private ferry boat service to PANTRANCO was issued without ascertaining the established essential requisites for such
grant, hence, violative of due process requirements;

b. the grant to PANTRANCO of authority to operate a ferryboat service as a private carrier on said route contravenes existing government
policies relative to the rationalization of operations of all water transport utilities;

c. it contravenes the memorandum of agreement between MARINA and the Board of Transportation; d. the grant of authority to operate a ferry
service as a private carrier is not feasible; it lessens PANTRANCO's liability to passengers and cargo to a degree less than extraordinary diligence?

e. PANTRANCO is not a private carrier when it operates its ferry service;

f. it runs counter to the "old operator" doctrine; and

g. the operation by PANTRANCO of the ferry service c•nstitutes undue competition.

The foregoing considerations constitutes the substantial errors committed by the respondent Board which would more than amply justify review
of the questioned decision by this Honorable Court.12

Both cases were consolidated and are now admitted for decision.

The resolution of all said issues raised revolves on the validity of the questioned BOT decision.

The BOT resolved the issue of whether a ferry service is an extension of the highway and thus is a part of the authority originally granted
PANTRANCO in the following manner:

A ferry service, in law, is treated as a continuation of the highway from one side of the water over which passes to the other side for
transportation of passengers or of travellers with their teams vehicles and such other property as, they may carry or have with them. (U.S. vs.
Pudget Sound Nev. Co. DC Washington, 24 F. Supp. 431). It maybe said to be a necessary service of a specially constructed boat to carry
passengers and property across rivers or bodies of water from a place in one shore to a point conveniently opposite on the other shore and
continuation of the highway making a connection with the thoroughfare at each terminal (U.S. vs. Canadian Pac. N.Y. Co. 4 P. Supp, 85). It
comprises not merely the privilege of transportation but also the use for that purpose of the respective landings with outlets therefrom. (Nole vs.
Record, 74 OKL. 77; 176 Pac. 756). A ferry service maybe a public ferry or a private ferry. A public ferry service is one which all the public have the
right to resort to and for which a regular fare is established and the ferryman is a common carrier be inbound to take an who apply and bound to
keep his ferry in operation and good repair. (Hudspeth v. Hall, 11 Oa. 510; 36 SB 770). A ferry (private) service is mainly for the use of the owner
and though he may take pay for ferriage, he does not follow it as a business. His ferry is not open to the public at its demand and he may or may
not keep it in operation (Hudspeth vs. Hall, supra, St. Paul Fire and Marine Ins. 696), Harrison, 140 Ark 158; 215 S.W. 698).

The ferry boat service of Pantranco is a continuation of the highway traversed by its buses from Pasay City to Samar, Leyte passing through
Matnog (Sorsogon) through San Bernardino Strait to Alien (Samar). It is a private carrier because it will be used exclusively to transport its own
buses, passengers and freight trucks traversing the said route. It will cater exclusively to the needs of its own clientele (passengers on board-
Pantranco buses) and will not offer itself indiscriminately for hire or for compensation to the general public. Legally therefore, Pantranco has the
right to operate the ferry boat M/V BLACK DOUBLE, along the route from Matnog (Sorsogon) to Allen (Samar) and vice versa for the exclusive use
of its own buses, passengers and freight trucks without the need of applying for a separate certificate of public convenience or provisional
authority. Since its operation is an integral part of its land transport system, its original certificate of public convenience should be amended to
include the operation of such ferryboat for its own exclusive use

In Javellana 14 this Court recited the following definition of ferry :

The term "ferry" implied the continuation by means of boats, barges, or rafts, of a highway or the connection of highways located on the
opposite banks of a stream or other body of water. The term necessarily implies transportation for a short distance, almost invariably between
two points, which is unrelated to other transportation .(Emphasis supplied)

The term "ferry" is often employed to denote the right or franchise granted by the state or its authorized mandatories to continue by means of
boats, an interrupted land highway over the interrupting waters and to charge toll for the use thereof by the public. In this sense it has also been
defined as a privilege, a liberty, to take tolls for transporting passengers and goods across a lake or stream or some other body of water, with no
essential difference from a bridge franchise except as to the mode of transportation, 22 Am. Jur. 553.

A "ferry" has been defined by many courts as "a public highway or thoroughfare across a stream of water or river by boat instead of a bridge."
(St. Clare Country v. Interstate Car and Sand Transfer Co., 192 U.S. 454, 48 L. ed. 518; etc.)

The term ferry is often employed to denote the right or franchise granted by the state or its authorized mandatories to continue by means of
boats, an interrupted land highway over the interrupting waters and to charge toll for the use thereof by the public"Ferry" is service necessity for
common good to reach point across a stream lagoon, lake, or bay. (U.S. vs. Canadian Pac. Ry. Co. DC Was., 4 Supp. 851,853)'

"Ferry" properly means a place of transit across a river or arm of the sea, but in law it is treated as a franchise, and defined as the exclusive right
to carry passengers across a river, or arm of the sea, from one vill to another, or to connect a continuous line of road leading from township or
vill to another. (Canadian Pac. Ry. Co. vs. C.C. A. Wash. 73 F. 2d. 831, 832)'

Includes various waters: (1) But an arm of the sea may include various subordinate descriptions of waters, where the tide ebbs and flows. It may
be a river, harbor, creek, basin, or bay; and it is sometimes used to designate very extensive reaches of waters within the projecting capes or
points or a country. (See Rex vs. Bruce, Deach C.C. 1093). (2) In an early case the court said: "The distinction between rivers navigable and not
navigable, that is, where the sea does, or does not, ebb and flow, is very ancient. Rex vs. Smith, 2 Dougl. 441, 99 Reprint 283. The former are
called arms of the sea, while the latter pass under the denomination of private or inland rivers" Adams vs. Pease 2 Conn. 481, 484In the cases of
Cababa vs. Public Service Commission, 16 Cababa vs. Remigio & Carillo and Municipality of Gattaran vs. Elizaga 17 this Court considered as ferry
service such water service that crosses rivers.

However, in Javellana We made clear distinction between a ferry service and coastwise or interisland service by holding that:

We are not unmindful of the reasons adduced by the Commission in considering the motorboat service between Calapan and Batangas as ferry;
but from our consideration of the law as it stands, particularly Commonwealth Act No. 146, known as the Public Service Act and the provisions of
the Revised Administrative Code regarding municipal ferries and those regarding the jurisdiction of the Bureau of Customs over documentation,
registration, licensing, inspection, etc. of steamboats, motorboats or motor vessels, and the definition of ferry as above quoted we have the
impression and we are inclined to believe that the Legislature intended ferry to mean the service either by barges or rafts, even by motor or
steam vessels, between the banks of a river or stream to continue the highway which is interrupted by the body of water, or in some cases to
connect two points on opposite shores of an arm of the sea such as bay or lake which does not involve too great a distance or too long a time to
navigate But where the line or service involves crossing the open sea like the body of water between the province of Batangas and the island of
Mindoro which the oppositors describe thus "the intervening waters between Calapan and Batangas are wide and dangerous with big waves
where small boat barge, or raft are not adapted to the service," then it is more reasonable to regard said line or service as more properly
belonging to interisland or coastwise trade. According to the finding of the Commission itself the distance between Calapan is about 24 nautical
miles or about 44.5 kilometers. We do not believe that this is the short distance contemplated by the Legislature in referring to ferries whether
within the jurisdiction of a single municipality or ferries between two municipalities or provinces. If we are to grant that water transportation
between Calapan and Batangas is ferry service, then there would be no reason for not considering the same service between the different
islands of the Philippines, such as Boac Marinduque and Batangas; Roxas City of Capiz and Romblon; Cebu City, Cebu and Ormoc, Leyte; Guian,
Samar and Surigao, Surigao; and Dumaguete, Negros Oriental and Oroquieta or Cagayan de Oro.
The Commission makes the distinction between ferry service and motorship in the coastwise trade, thus:

A ferry service is distinguished from a motorship or motorboat service engaged in the coastwise trade in that the latter is intended for the
transportation of passengers and/or freight for hire or compensation between ports or places in the Philippines without definite routes or lines
of service.

We cannot agree. The definiteness of the route of a boat is not the deciding factor. A boat of say the William Lines, Inc. goes from Manila to
Davao City via Cebu, Tagbilaran, Dumaguete, Zamboanga, every week. It has a definite route, and yet it may not for that reason be regarded as
engaged in ferry service. Again, a vessel of the Compania Maritima makes the trip from Manila to Tacloban and back, twice a week. Certainly, it
has a definite route. But that service is not ferry service, but rather interisland or coastwise trade.

We believe that it will be more in consonance with the spirit of the law to consider steamboat or motorboat service between the different
islands, involving more or less great distance and over more or less turbulent and dangerous waters of the open sea, to be coastwise or inter-
island service. Anyway, whether said service between the different islands is regarded as ferry service or coastwise trade service, as long as the
water craft used are steamboats, motorboats or motor vessels, the result will be the same as far as the Commission is concerned. This Court
takes judicial notice of the fact, and as shown by an examination of the map of the Philippines, that Matnog which is on the southern tip of the
island of Luzon and within the province of Sorsogon and Allen which is on the northeastern tip of the island of Samar, is traversed by the San
Bernardino Strait which leads towards the Pacific Ocean. The parties admit that the distance between Matnog and Allen is about 23 kilometers
which maybe negotiated by motorboat or vessel in about 1-1/2 hours as claimed by respondent PANTRANCO to 2 hours according to petitioners.
As the San Bernardino Strait which separates Matnog and Allen leads to the ocean it must at times be choppy and rough so that it will not be
safe to navigate the same by small boats or barges but only by such steamboats or vessels as the MV "Black Double. 19

Considering the environmental circumstances of the case, the conveyance of passengers, trucks and cargo from Matnog to Allen is certainly not a
ferry boat service but a coastwise or interisland shipping service. Under no circumstance can the sea between Matnog and Allen be considered a
continuation of the highway. While a ferry boat service has been considered as a continuation of the highway when crossing rivers or even lakes,
which are small body of waters - separating the land, however, when as in this case the two terminals, Matnog and Allen are separated by an
open sea it can not be considered as a continuation of the highway. Respondent PANTRANCO should secure a separate CPC for the operation of
an interisland or coastwise shipping service in accordance with the provisions of law. Its CPC as a bus transportation cannot be merely amended
to include this water service under the guise that it is a mere private ferry service.

The contention of private respondent PANTRANCO that its ferry service operation is as a private carrier, not as a common carrier for its exclusive
use in the ferrying of its passenger buses and cargo trucks is absurd. PANTRANCO does not deny that it charges its passengers separately from
the charges for the bus trips and issues separate tickets whenever they board the MV "Black Double" that crosses Matnog to Allen, 20
PANTRANCO cannot pretend that in issuing tickets to its passengers it did so as a private carrier and not as a common carrier. The Court does not
see any reason why inspite of its amended franchise to operate a private ferry boat service it cannot accept walk-in passengers just for the
purpose of crossing the sea between Matnog and Allen. Indeed evidence to this effect has been submitted. 21 What is even more difficult to
comprehend is that while in one breath respondent PANTRANCO claims that it is a private carrier insofar as the ferryboat service is concerned, in
another breath it states that it does not thereby abdicate from its obligation as a common carrier to observe extraordinary diligence and
vigilance in the transportation of its passengers and goods. Nevertheless, considering that the authority granted to PANTRANCO is to operate a
private ferry, it can still assert that it cannot be held to account as a common carrier towards its passengers and cargo. Such an anomalous
situation that will jeopardize the safety and interests of its passengers and the cargo owners cannot be allowed.

What appears clear from the record is that at the beginning PANTRANCO planned to operate such ferry boat service between Matnog and Alien
as a common carrier so it requested authority from MARINA to purchase the vessel M/V "Black Double 22 in accordance with the procedure
provided for by law for such application for a certificate of public convenience. 23 However when its request was denied as the said routes "are
adequately serviced by existing/authorized operators, 24 it nevertheless purchased the vessel and started operating the same. Obviously to go
about this obstacle to its operation, it then contrived a novel theory that what it proposes to operate is a private ferryboat service across a small
body of water for the exclusive use of its buses, trucks and passengers as an incident to its franchise to convey passengers and cargo on land
from Pasay City to Tacloban so that it believes it need not secure a separate certificate of public convenience. 25 Based on this representation,
no less than the Secretary of Justice was led to render an affirmative opinion on October 20, 1981, 26 followed a few days later by the
questioned decision of public respondent of October 23, 1981. 27 Certainly the Court cannot give its imprimatur to such a situation.

Thus the Court holds that the water transport service between Matnog and Allen is not a ferry boat service but a coastwise or interisland
shipping service. Before private respondent may be issued a franchise or CPC for the operation of the said service as a common carrier, it must
comply with the usual requirements of filing an application, payment of the fees, publication, adducing evidence at a hearing and affording the
oppositors the opportunity to be heard, among others, as provided by law. 28

WHEREFORE, the petitions are hereby GRANTED and the Decision of the respondent Board of Transportation (BOT) of October 23, 1981 in BOT
Case No. 81-348-C and its Order of July 21, 1982 in the same case denying the motions for reconsideration filed by petitioners are hereby
Reversed and set aside and declared null and void. Respondent PANTRANCO is hereby permanently enjoined from operating the ferryboat
service and/or coastwise/interisland services between Matnog and Allen until it shall have secured the appropriate Certificate of Public
Convenience (CPC) in accordance with the requirements of the law, with costs against respondent PANTRANCO.
National Steel Corp vs. CA and Vlasons Shipping, Inc. G.R. No. 112287. December 12, 1997

Vlasons Shipping vs. CA and NSC G.R. No. 112350. December 12, 1997

Facts:

The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or shipment for the general public. Its services
are available only to specific persons who enter into a special contract of charter party with its owner. It is undisputed that the ship is a private
carrier. And it is in this capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of voyage charter hire
with National Steel Corporation.

On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons Shipping, Inc. (VSI) as Owner, entered into a
Contract of Voyage Charter Hire whereby NSC hired VSI’s vessel, the MV ‘VLASONS I’ to make one (1) voyage to load steel products at Iligan City
and discharge them at North Harbor, Manila. On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV
‘VLASONS I’ loaded at plaintiff’s pier at Iligan City, the NSC’s shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total
of 1,769 packages with a total weight of about 2,481.19 metric tons for carriage to Manila. The shipment was placed in the three (3) hatches of
the ship. The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The following day, August 13, 1974, when the
vessel’s three (3) hatches containing the shipment were opened by plaintiff’s agents, nearly all the skids of tinplates and hot rolled sheets were
allegedly found to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was completed
only on August 24, 1974 after incurring a delay of eleven (11) days due to the heavy rain which interrupted the unloading operations.

To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment by the Manila Adjusters and Surveyors
Company (MASCO). In a letter to the NSC dated March 17, 1975 (Exhibit ‘G’), MASCO made a report of its ocular inspection conducted on the
cargo, both while it was still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was taken and
stored. MASCO reported that it found wetting and rusting of the packages of hot rolled sheets and metal covers of the tinplates; that tarpaulin
hatch covers were noted torn at various extents; that container/metal casings of the skids were rusting all over. MASCO ventured the opinion
that ‘rusting of the tinplates was caused by contact with SEA WATER sustained while still on board the vessel as a consequence of the heavy
weather and rough seas encountered while en route to destination. It was also reported that MASCO’s surveyors drew at random samples of bad
order packing materials of the tinplates and delivered the same to the M.I.T. Testing Laboratories for analysis. On August 31, 1974, the M.I.T.
Testing Laboratories issued Report No. 1770 which in part, states, ‘The analysis of bad order samples of packing materials xxx shows that wetting
was caused by contact with SEA WATER’.

On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the defendant its claim for damages suffered due to the
downgrading of the damaged tinplates in the amount of P941,145.18. NSC demanded damages of P941,145.18 as a result of the act, neglect and
default of the master and crew in the management of the vessel as well as the want of due diligence on the part of the defendant to make the
vessel seaworthy and to make the holds and all other parts of the vessel in which the cargo was carried, fit and safe for its reception, carriage
and preservation -- all in violation of defendant’s undertaking under their Contract of Voyage Charter Hire. Vlasons Shipping denied liability for
the alleged damages; claiming that the MV ‘VLASONS I’ was seaworthy in all respects for the carriage of plaintiff’s cargo; that said vessel was not
a ‘common carrier’ inasmuch as she was under voyage charter contract with the plaintiff as charterer under the charter party; that in the course
of the voyage from Iligan City to Manila, the MV ‘VLASONS I’ encountered very rough seas, strong winds and adverse weather condition, causing
strong winds and big waves to continuously pound against the vessel and seawater to overflow on its deck and hatch covers; that under the
Contract of Voyage Charter Hire, Vlasons shall not be responsible for losses/damages except on proven willful negligence of the officers of the
vessel, that the officers of said MV ‘VLASONS I’ exercised due diligence and proper seamanship and were not willfully negligent; that furthermore
the Voyage Charter Party provides that loading and discharging of the cargo was on FIOST terms which means that the vessel was free of risk and
expense in connection with the loading and discharging of the cargo RTC rendered decision in favor of Vlasons Shipping; that the vessel is
seaworthy, properly manned, equipped and supplied, and that there is no proof of willful negligence of the vessel’s officers CA modified the
decision of RTC regarding the awards of damages.

ISSUE: Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant to which there exist[s] a presumption of
negligence against the common carrier in case of loss or damage to the cargo are applicable to a private carrier.

HELD: VSI did not offer its services to the general public. As found by the Regional Trial Court, it carried passengers or goods only for those it
chose under a “special contract of charter party.”

[13] As correctly concluded by the Court of Appeals, the MV Vlasons I “was not a common but a private carrier.” Consequently, the rights and
obligations of VSI and NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations in their contract
of private carriage or charter party. Recently, in Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers
Shipping Corporation, the Court ruled:“ x x x in a contract of private carriage, the parties may freely stipulate their duties and obligations

which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public.
Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship
transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a
charter party that lessen or remove the protection given by law in contracts involving common carriers.