cases for transpo law

7/29/2019 Cases for Transpo Law

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G.R. No. L-12475THE MANILA RAILROAD CO., plaintiff-appellant,vs.MACONDRAY and CO., defendant-appellant.

Hartigan and Welch for plaintiff-appellant.

Gilbert, Cohn and Fisher for defendant-appellant.

Street,J.:

This action was instituted by the plaintiff, the ManilaRailroad Company, upon February 24, 1916, in theCourt of First Instance of the city of Manila torecover of the defendant, Macondray and Co., thesum of P75,000, the alleged value of salvage servicerendered on April 6, 1915, by the steamer Hondagua,owned by the plaintiff, to the steamer Seward, whichwas owned by the defendant. At the hearingjudgment was rendered in favor of the plaintiff for

the sum of P4,000. From this judgment both partieshave appealed, the plaintiff insisting that the amountallowed by the lower court is inadequate, thedefendant that it is excessive.

The facts as found by the judge of the trial court aresubstantially these: On the date mentioned theSeward left Saigon for the Philippine Islands,encountering a moderately high sea. The ship wasladen with a cargo of rice, the weight of which, takenin connection with the condition of the sea, causedthe vessel to spring a leak, and her master feltcompelled to return to Saigon. At this juncture the

steamship Hondagua was sighted, whereupon theSeward flew the international code signal Indistress; want immediate assistance. The Hondaguachanged her course and approached the Seward, thelatter in succession displaying the following signals:I have sprung a leak; I wish to be taken in tow;Can you spare hawser; and The leak is gainingrapidly. In response to signals from the Hondaguathe Seward sent her own boat to the Hondagua for aheaving line, by means of which a hawser was passedfrom the Hondagua to the Seward and the former,with the latter in tow, then proceeded at half speedtowards Saigon. Shortly afterwards, the Seward

signaled The leak is gaining rapidly, after whichthe Hondagua went full speed ahead, until the arrivalof both vessels at Cape St. James, at the mouth of theSaigon River, where they anchored. The towingoccupied some four or five hours, and covered adistance of twenty five or thirty miles. The Sewardsengines were kept working until within an hour of herarrival at Cape St. James, when the water reached theengine room and put out the fires under the mainboiler, leaving only the auxiliary boiler in use.

The court further found that the value of the Sewardupon the arrival at Cape St. James did not exceedP20,000 and that the value of the cargo wasapproximately P54,000. The defendant company hadno interest in the cargo, other than that of carrier, andthe cargo was owned by shippers whose names do

not appear of record.

There is of course no question as to the liability of thedefendant, as owner of the Seward, for the servicerendered by the plaintiff in towing that ship to safety.Nor is there any dispute over the fact that the servicerendered was a salvage service and remunerable assuch. The tow questions properly presented fordecisions are these: (1) Is the plaintiff entitled torecover from the owner of the Seward, in this action,remuneration for saving the cargo as well as forsaving the ship? (2) What is the reasonablecompensation which should be allowed in thisaction?

Where a ship and its cargo are saved together, as aresult of services carried on with a view to savingboth, the salvage allowance should be apportionedbetween the ship and cargo in the proportion of theirrespective values, the same as in a case of generalaverage; and neither is liable for the salvage due fromthe other. (35 Cyc., 770; see also 24 Am. and Eng.Encyc. Law, 2d ed., p. 1219, The Alaska 23 Fed.,597, The Colonel Adams, 19 Fed., 795.)

The salvor must always bear in mind that . . . the

interests in ship and in cargo are only severally liable,each for its proportionate share of the salvageremuneration. If one who has saved both ship andcargo brings before the court in his salvage actiononly the ship, or only the cargo, he will get judgmentonly for such an amount of reward as the court findsto be due in respect of the value of that propertywhich is before the court. (Kennedy on Law of CivilSalvage, p. 186.)

In the case of The Mary Pleasants (Swab., 224),where salvage services had been rendered to thevessel herself and to the cargo aboard of her, the

salvors proceeded against the ship alone. In thecourse of his judgment the learned Dr. Lushingtonsaid: But the real difficulty is, that there is noproceeding against the cargo . . . . The difficulty, Isay, arises from this circumstance, because when thecourt considers the services rendered to the ship andcargo, it always estimates the amount of salvageremuneration according to the value of the ship andcargo taken together. It is contrary to all principles ofjustice, if a cargo has received and been benefited by


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the services so rendered, that the whole burden of thesalvage remuneration should fall on the ship itself.

Not only is the salvage charge a separate anddivisible burden as between ship and cargo, but alsoas between portions of the cargo belonging to

different owners. Thus, in an appeal by the claimantsof the cargo, it was said by the Supreme Court of theUnited States:

It is true that the salvage service was in one senseentire; but it certainly cannot deemed entire for thepurpose of founding a right against all the claimantsjointly, so as to make them all jointly responsible forthe whole salvage; on the contrary, each claimant isresponsible only for the salvage properly due andchargeable on the gross proceeds or sales of his ownproperty pro rata. It would otherwise follow that theproperty of one claimant might be made chargeable

with the payment of the whole salvage, which wouldbe against the clearest principles of law on thissubject. (Straton vs. Jarvis, 8 Pet. [U. S.], 4; see alsoShields vs. Thomas, 58 U. S., 3; Spear vs. Place, 11How., 521.)

These authorities show that there is no commonliability for the amounts due from the ship or otherportion of the cargo when the ship and cargo, oreither, are brought into the custody of the court as aresult of a proceeding in rem. The rule of liabilitymust be the same where a personal action is institutedagainst the owners of the one or the other. The

personal liability of each must be limited to theproportion of the salvage charge which should beborne by his own property.

If it had been alleged and proved that the ship wasunseaworthy when she put to sea or that the necessityfor the salvage service was due to the negligence ofthe master, or of the ships owner, the latter mighthave been liable, at least between himself and theshipper, for the entire cost of the service, and thispossibly might have changed the character of theships liability to the salvor; or, again, if the claim forcompensation had been limited to the value of the

service, considered on the simple basis of work andlabor done, it would have been proper, we think., toassess the entire cost of the service against theshipowner, because the service was rendered at therequest of the master. But when the claim is put uponthe basis of the salvage, the fixing of thecompensation goes beyond the limits of a quantummeruit for the work and labor done and involves theassessment of bounty. The amount to be allowedupon a claim of this character is in part determined

upon considerations of equity and public policy; andit is not proper, in our opinion, to make the ship, orthe ships owner, liable for the whole, in the absenceof some statutory provisions, or other positive rule oflaw, fixing such liability on the ship-owner. It resultsthat, as the owner of the cargo has not been made aparty, no recovery can be had in this action in regardto the service rendered to the cargo.

In fixing the amount of compensation to be awardedfor salvage service, it has bee n declared by theSupreme Court of the United States that the principalcircumstances to be taken into consideration are: (1)The labor expended by the salvors in rendering thesalvage service; (2) The promptitude, skill, andenergy displayed in rendering the service and savingthe property; (3) The value of the property employedby the salvors in rendering the service, and thedanger to which such property was exposed; (4) Therisk incurred by the salvors in rescuing the propertyfrom the impending peril; (5) The value of theproperty salved; and (6) The degree of danger fromwhich the property was rescued. (The Blackwall, 10Wall., 1; 19 L. ed., 870.)

In applying these criteria to the case now before us,the following circumstances, not already noted, arepertinent, namely: the Hondagua was delayed in hervoyage about nine hours, during five of which shewas engaged in towing the Seward. This delay causedher to enter at Iloilo, the port of her arrival instead ofthe late afternoon of the previous day; but theunloading of her cargo was not thereby retarded.Considered on the basis of charter party contractunder which she was operating, the Hondagua wasearning about P300 per day, which was consideredreasonable compensation for her use, including theservices off officers and crew. The service rendereddid not involve any further expenditure of labor onthe part of the salvors than such as was commonlyincident to working the ship. No unusual display ofskill and energy on their part was required; and thecondition of the sea was not such as to involve anyspecial risk either to the Hondagua or her crew.Finally, the danger from which the Seward wasrescued was real, as the ship when taken in tow was

confronted by a serious peril. The value of the vesselwhen saved was, we think, properly fixed by the trialcourt at P20,000.

In determining the amount of the award to be allowedin cases of this kind the aim should be to hold out toseafaring men a fair inducement to the performanceof salvage services without fixing a scale ofcompensation so high as to cause vessel in need of


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such services to hesitate and decline to receive thembecause of the ruinous cost. That the salvor isentitled, as of bounty, to something more than mereremuneration for his own work and the risk incurredby him, is conceded; but certainly the interests ofcommerce would not be promoted by theencouragement of exorbitant charges. Towage is notconsidered a salvage service of high order of merit;and when the risk is inconsiderable and otherconditions favorable, the compensation to be allowedshould be modest in its amount. Under all thecircumstances we think that the sum of P1,000 isadequate for the service rendered in this case. Thejudgment of the lower court must accordingly bereduced to the sum of one thousand pesos (P1,000),with interest at 6 per cent per annum from February24, 1916, and for this amount execution will issue.No special finding will be made as to costs of thisinstance.

With the modification above indicated the judgmentis affirmed. So ordered.

NEW WORLD INTERNATIONA DEVELOPMENT(PHILS.), INC.,

VS.

NYK-FILJAPAN SHIPPING CORP

These consolidated petitions involve a cargoowners right to recover damages from the loss of

insured goods under the Carriage of Goods by SeaAct and the Insurance Code.

The Facts and the Case

Petitioner New World InternationalDevelopment (Phils.), Inc. (New World) bought fromDMT Corporation (DMT) through its agent,Advatech Industries, Inc. (Advatech) threeemergency generator sets worth US$721,500.00.

DMT shipped the generator sets by truck

from Wisconsin, United States, to LEP ProfitInternational, Inc. (LEP Profit) in Chicago, Illinois.From there, the shipment went by train to Oakland,California, where it was loaded on S/S CaliforniaLuna V59, owned and operated by NYK Fil-JapanShipping Corporation (NYK) for delivery topetitioner New World in Manila. NYK issued a billof lading, declaring that it received the goods in goodcondition.

NYK unloaded the shipment in Hong Kongand transshipped it to S/S ACX Ruby V/72 that italso owned and operated. On its journey to Manila,however, ACX Ruby encountered typhoon Kadiangwhose captain filed a sea protest on arrival at theManila South Harbor on October 5, 1993 respectingthe loss and damage that the goods on board hisvessel suffered.

Marina Port Services, Inc. (Marina), theManila South Harbor arrastre or cargo-handlingoperator, received the shipment on October 7, 1993.Upon inspection of the three container vansseparately carrying the generator sets, two vans boresigns of external damage while the third vanappeared unscathed. The shipment remained at Pier3s Container Yard under Marinas care pendingclearance from the Bureau of Customs. Eventually,on October 20, 1993 customs authorities allowedpetitioners customs broker, Serbros CarrierCorporation (Serbros), to withdraw the shipment anddeliver the same to petitioner New Worlds job site inMakati City.

An examination of the three generator setsin the presence of petitioner New Worldsrepresentatives, Federal Builders (the projectcontractor) and surveyors of petitioner New Worldsinsurer, SeaboardEastern Insurance Company(Seaboard), revealed that all three sets sufferedextensive damage and could no longer be repaired.For these reasons, New World demanded recompensefor its loss from respondents NYK, DMT, Advatech,LEP Profit, LEP International Philippines, Inc.(LEP), Marina, and Serbros. While LEP and NYKacknowledged receipt of the demand, both deniedliability for the loss.

Since Seaboard covered the goods with amarine insurance policy, petitioner New World sent ita formal claim dated November 16, 1993. Replyingon February 14, 1994, Seaboard required petitionerNew World to submit to it an itemized list of thedamaged units, parts, and accessories, withcorresponding values, for the processing of the claim.But petitioner New World did not submit what wasrequired of it, insisting that the insurance policy didnot include the submission of such a list inconnection with an insurance claim. Reacting to this,Seaboard refused to process the claim.

On October 11, 1994 petitioner New Worldfiled an action for specific performance and damagesagainst all the respondents before the Regional Trial


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Court (RTC) of Makati City, Branch 62, in CivilCase 94-2770.

On August 16, 2001 the RTC rendered adecision absolving the various respondents fromliability with the exception of NYK. The RTC found

that the generator sets were damaged during transitwhile in the care of NYKs vessel, ACX Ruby. Thelatter failed, according to the RTC, to exercise thedegree of diligence required of it in the face of aforetold raging typhoon in its path.

The RTC ruled, however, that petitionerNew World filed its claim against the vessel ownerNYK beyond the one year provided under theCarriage of Goods by Sea Act (COGSA). NewWorld filed its complaint on October 11, 1994 whenthe deadline for filing the action (on or beforeOctober 7, 1994) had already lapsed. The RTC held

that the one-year period should be counted from thedate the goods were delivered to the arrastre operatorand not from the date they were delivered topetitioners job site.1[1]

As regards petitioner New Worlds claimagainst Seaboard, its insurer, the RTC held that thelatter cannot be faulted for denying the claim againstit since New World refused to submit the itemizedlist that Seaboard needed for assessing the damage tothe shipment. Likewise, the belated filing of thecomplaint prejudiced Seaboards right to pursue aclaim against NYK in the event of subrogation.

On appeal, the Court of Appeals (CA)rendered judgment on January 31, 2006,2[2]affirming the RTCs rulings except with respect toSeaboards liability. The CA held that petitionerNew World can still recoup its loss from Seaboardsmarine insurance policy, considering a) that thesubmission of the itemized listing is an unreasonableimposition and b) that the one-year prescriptiveperiod under the COGSA did not affect New Worldsright under the insurance policy since it was theInsurance Code that governed the relation betweenthe insurer and the insured.

Although petitioner New World promptlyfiled a petition for review of the CA decision beforethe Court in G.R. 171468, Seaboard chose to file amotion for reconsideration of that decision. OnAugust 17, 2006 the CA rendered an amended

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decision, reversing itself as regards the claim againstSeaboard. The CA held that the submission of theitemized listing was a reasonable requirement thatSeaboard asked of New World. Further, the CA heldthat the one-year prescriptive period for maritimeclaims applied to Seaboard, as insurer and subrogeeof New Worlds right against the vessel owner. NewWorlds failure to comply promptly with what wasrequired of it prejudiced such right.

Instead of filing a motion for reconsideration, petitioner instituted a second petitionfor review before the Court in G.R. 174241, assailingthe CAs amended decision.

The Issues Presented

The issues presented in this case are asfollows:

a) In G.R. 171468, whether or not theCA erred in affirming the RTCs release fromliability of respondents DMT, Advatech, LEP, LEPProfit, Marina, and Serbros who were at one time oranother involved in handling the shipment; and

b) In G.R. 174241, 1) whether or notthe CA erred in ruling that Seaboards request frompetitioner New World for an itemized list is areasonable imposition and did not violate theinsurance contract between them; and 2) whether ornot the CA erred in failing to rule that the one-year

COGSA prescriptive period for marine claims doesnot apply to petitioner New Worlds prosecution ofits claim against Seaboard, its insurer.

The Courts Rulings

In G.R. 171468 --

Petitioner New World asserts that the rolesof respondents DMT, Advatech, LEP, LEP Profit,Marina and Serbros in handling and transporting itsshipment from Wisconsin to Manila collectively

resulted in the damage to the same, rendering suchrespondents solidarily liable with NYK, the vesselowner.

But the issue regarding which of the partiesto a dispute incurred negligence is factual and is not aproper subject of a petition for review on certiorari.And petitioner New World has been unable to make


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out an exception to this rule.3[3] Consequently, theCourt will not disturb the finding of the RTC,affirmed by the CA, that the generator sets weretotally damaged during the typhoon which beset thevessels voyage from Hong Kong to Manila and thatit was her negligence in continuing with that journeydespite the adverse condition which caused petitionerNew Worlds loss.

That the loss was occasioned by a typhoon,an exempting cause under Article 1734 of the CivilCode, does not automatically relieve the commoncarrier of liability. The latter had the burden ofproving that the typhoon was the proximate and onlycause of loss and that it exercised due diligence toprevent or minimize such loss before, during, andafter the disastrous typhoon.4[4] As found by theRTC and the CA, NYK failed to discharge thisburden.

In G.R. 174241 --

One. The Court does not regard assubstantial the question of reasonableness ofSeaboards additional requirement of an itemizedlisting of the damage that the generator sets suffered.The record shows that petitioner New Worldcomplied with the documentary requirementsevidencing damage to its generator sets.

The marine open policy that Seaboard issuedto New World was an all-risk policy. Such a policy

insured against all causes of conceivable loss ordamage except when otherwise excluded or when theloss or damage was due to fraud or intentionalmisconduct committed by the insured. The policycovered all losses during the voyage whether or notarising from a marine peril.5[5]

Here, the policy enumerated certainexceptions like unsuitable packaging, inherent vice,delay in voyage, or vessels unseaworthiness, amongothers.6[6] But Seaboard had been unable to showthat petitioner New Worlds loss or damage fellwithin some or one of the enumerated exceptions.

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What is more, Seaboard had been unable toexplain how it could not verify the damage that NewWorlds goods suffered going by the documents thatit already submitted, namely, (1) copy of theSuppliers Invoice KL2504; (2) copy of the PackingList; (3) copy of the Bill of Lading 01130E93004458;(4) the Delivery of Waybill Receipts 1135, 1222, and1224; (5) original copy of Marine Insurance PolicyMA-HO-000266; (6) copies of Damage Report fromSupplier and Insurance Adjusters; (7) ConsumptionReport from the Customs Examiner; and (8) Copiesof Received Formal Claim from the following: a)LEP International Philippines, Inc.; b) Marina PortServices, Inc.; and c) Serbros Carrier Corporation.7[7]Notably, Seaboards own marine surveyor attendedthe inspection of the generator sets.

Seaboard cannot pretend that the abovedocuments are inadequate since they were preciselythe documents listed in its insurance policy.8[8]Being a contract of adhesion, an insurance policy isconstrued strongly against the insurer who preparedit. The Court cannot read a requirement in the policythat was not there.

Further, it appears from the exchanges ofcommunications between Seaboard and Advatechthat submission of the requested itemized listing wasincumbent on the latter as the seller DMTs localagent. Petitioner New World should not be made to

suffer for Advatechs shortcomings.

Two. Regarding prescription of claims,Section 3(6) of the COGSA provides that the carrierand the ship shall be discharged from all liability incase of loss or damage unless the suit is broughtwithin one year after delivery of the goods or the datewhen the goods should have been delivered.

But whose fault was it that the suit againstNYK, the common carrier, was not brought to court

on time? The last day for filing such a suit fell onOctober 7, 1994. The record shows that petitionerNew World filed its formal claim for its loss withSeaboard, its insurer, a remedy it had the right totake, as early as November 16, 1993 or about 11

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months before the suit against NYK would havefallen due.

In the ordinary course, if Seaboard hadprocessed that claim and paid the same, Seaboardwould have been subrogated to petitioner New

Worlds right to recover from NYK. And it couldhave then filed the suit as a subrogee. But, asdiscussed above, Seaboard made an unreasonabledemand on February 14, 1994 for an itemized list ofthe damaged units, parts, and accessories, withcorresponding values when it appeared settled thatNew Worlds loss was total and when the insurancepolicy did not require the production of such a list inthe event of a claim.

Besides, when petitioner New Worlddeclined to comply with the demand for the list,Seaboard against whom a formal claim was pending

should not have remained obstinate in refusing toprocess that claim. It should have examined thesame, found it unsubstantiated by documents if thatwere the case, and formally rejected it. That wouldhave at least given petitioner New World a clearsignal that it needed to promptly file its suit directlyagainst NYK and the others. Ultimately, the fault forthe delayed court suit could be brought to Seaboardsdoorstep.

Section 241 of the Insurance Code providesthat no insurance company doing business in thePhilippines shall refuse without just cause to pay or

settle claims arising under coverages provided by itspolicies. And, under Section 243, the insurer has 30days after proof of loss is received and ascertainmentof the loss or damage within which to pay the claim.If such ascertainment is not had within 60 days fromreceipt of evidence of loss, the insurer has 90 days topay or settle the claim. And, in case the insurerrefuses or fails to pay within the prescribed time, theinsured shall be entitled to interest on the proceeds ofthe policy for the duration of delay at the rate oftwice the ceiling prescribed by the Monetary Board.

Notably, Seaboard already incurred delay

when it failed to settle petitioner New Worlds claimas Section 243 required. Under Section 244, aprimafacie evidence of unreasonable delay in payment ofthe claim is created by the failure of the insurer topay the claim within the time fixed in Section 243.

Consequently, Seaboard should pay intereston the proceeds of the policy for the duration of thedelay until the claim is fully satisfied at the rate oftwice the ceiling prescribed by the Monetary Board.

The term ceiling prescribed by the Monetary Boardmeans the legal rate of interest of 12% per annumprovided in Central Bank Circular 416, pursuant toPresidential Decree 116.9[9] Section 244 of theInsurance Code also provides for an award ofattorneys fees and other expenses incurred by theassured due to the unreasonable withholding ofpayment of his claim.

In Prudential Guarantee and Assurance,Inc. v. Trans-Asia Shipping Lines, Inc.,10[10] theCourt regarded as proper an award of 10% of theinsurance proceeds as attorneys fees. Such amount isfair considering the length of time that has passed inprosecuting the claim.11[11] Pursuant to the Courtsruling in Eastern Shipping Lines, Inc. v. Court of

Appeals,12[12] a 12% interest per annum from thefinality of judgment until full satisfaction of the claimshould likewise be imposed, the interim periodequivalent to a forbearance of credit.

Petitioner New World is entitled to the valuestated in the policy which is commensurate to thevalue of the three emergency generator sets orUS$721,500.00 with double interest plus attorneysfees as discussed above.

WHEREFORE, the Court DENIES thepetition in G.R. 171468 and AFFIRMS the Court ofAppeals decision of January 31, 2006 insofar aspetitioner New World International Development(Phils.), Inc. is not allowed to recover against

respondents DMT Corporation, Advatech Industries,Inc., LEP International Philippines, Inc., LEP ProfitInternational, Inc., Marina Port Services, Inc. andSerbros Carrier Corporation. With respect to G.R.174241, the Court GRANTS the petition andREVERSES and SETS ASIDE the Court of AppealsAmended Decision of August 17, 2006. The CourtDIRECTS Seaboard-Eastern Insurance Company,Inc. to pay petitioner New World InternationalDevelopment (Phils.), Inc. US$721,500.00 underPolicy MA-HO-000266, with 24% interest perannum for the duration of delay in accordance withSections 243 and 244 of the Insurance Code andattorneys fees equivalent to 10% of the insuranceproceeds. Seaboard shall also pay, from finality of

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judgment, a 12% interest per annum on the totalamount due to petitioner until its full satisfaction.

ATO vs. Spouses David

Spouses David and Elisea Ramos

(respondents) discovered that a portion of their landregistered under Transfer Certificate of Title No. T-58894 of the Baguio City land records with an area of985 square meters, more or less, was being used aspart of the runway and running shoulder of theLoakan Airport being operated by petitioner AirTransportation Office (ATO). On August 11, 1995,the respondents agreed after negotiations to conveythe affected portion by deed of sale to the ATO inconsideration of the amount of P778,150.00.However, the ATO failed to pay despite repeatedverbal and written demands.

Thus, on April 29, 1998, the respondentsfiled an action for collection against the ATO andsome of its officials in the RTC (docketed as CivilCase No. 4017-R and entitled Spouses David and

Elisea Ramos v. Air Transportation Office, Capt.Panfilo Villaruel, Gen. Carlos Tanega, and Mr.

Cesar de Jesus).

In their answer, the ATO and its co-defendants invoked as an affirmative defense theissuance of Proclamation No. 1358, wherebyPresident Marcos had reserved certain parcels of landthat included the respondents affected portion for

use of the Loakan Airport. They asserted that theRTC had no jurisdiction to entertain the actionwithout the States consent considering that the deedof sale had been entered into in the performance ofgovernmental functions.

On November 10, 1998, the RTC denied theATOs motion for a preliminary hearing of theaffirmative defense.

After the RTC likewise denied the ATOsmotion for reconsideration on December 10, 1998,the ATO commenced a special civil action forcertiorari in the CA to assail the RTCs orders. TheCA dismissed the petition for certiorari, however,upon its finding that the assailed orders were nottainted with grave abuse of discretion.13[3]

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Subsequently, February 21, 2001, the RTCrendered its decision on the merits,14[4] disposing:

WHEREFORE, thejudgment is rendered ORDERINGthe defendant Air Transportation

Office to pay the plaintiffs DAVIDand ELISEA RAMOS thefollowing: (1) The amount ofP778,150.00 being the value of theparcel of land appropriated by thedefendant ATO as embodied in theDeed of Sale, plus an annualinterest of 12% from August 11,1995, the date of the Deed of Saleuntil fully paid; (2) The amount ofP150,000.00 by way of moraldamages and P150,000.00 asexemplary damages; (3) the amountof P50,000.00 by way of attorneysfees plus P15,000.00 representingthe 10, more or less, courtappearances of plaintiffs counsel;(4) The costs of this suit.

SO ORDERED.

In due course, the ATO appealed to the CA,which affirmed the RTCs decision on May 14,2003,15[5] viz:

IN VIEW OF ALL THE

FOREGOING, the appealeddecision is hereby AFFIRMED,with MODIFICATION that theawarded cost therein is deleted,while that of moral and exemplarydamages is reduced to P30,000.00each, and attorneys fees is loweredto P10,000.00.

No cost.

SO ORDERED.

Hence, this appeal by petition for review oncertiorari.

Issue

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The only issue presented for resolution iswhether the ATO could be sued without the Statesconsent.

Ruling

The petition for review has no merit.

The immunity of the State from suit, knownalso as the doctrine of sovereign immunity or non-suability of the State, is expressly provided in ArticleXVI of the 1987 Constitution, viz:

Section 3. The State may notbe sued without its consent.

The immunity from suit is based on thepolitical truism that the State, as a sovereign, can dono wrong. Moreover, as the eminent Justice Holmessaid inKawananakoa v. Polyblank:16[6]

The territory [of Hawaii], ofcourse, could waive its exemption(Smith v. Reeves, 178 US 436, 44L ed 1140, 20 Sup. Ct. Rep. 919),and it took no objection to theproceedings in the cases cited if itcould have done so. xxx But in thecase at bar it did object, and thequestion raised is whether theplaintiffs were bound to yield.Some doubts have been expressedas to the source of the immunity ofa sovereign power from suitwithout its own permission, but theanswer has been public propertysince before the days of Hobbes.

Leviathan, chap. 26, 2. A sovereignis exempt from suit, not because ofany formal conception or obsoletetheory, but on the logical andpractical ground that there can beno legal right as against theauthority that makes the law onwhich the right depends. Car on

peut bien recevoir loy d'autruy,mais il est impossible par nature de

se donner loy. Bodin,Republique,1, chap. 8, ed. 1629, p. 132; SirJohn Eliot, De Jure Maiestatis,chap. 3. Nemo suo statuto ligaturnecessitative. Baldus, De Leg. et

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Const. Digna Vox, 2. ed. 1496, fol.51b, ed. 1539, fol. 61.17[7]

Practical considerations dictate theestablishment of an immunity from suit in favor ofthe State. Otherwise, and the State is suable at the

instance of every other individual, governmentservice may be severely obstructed and public safetyendangered because of the number of suits that theState has to defend against.18[8] Several justificationshave been offered to support the adoption of thedoctrine in the Philippines, but that offered in

Providence Washington Insurance Co. v. Republic of

the Philippines19[9] is the most acceptableexplanation, according to Father Bernas, arecognized commentator on Constitutional Law,20

[10] to wit:

[A] continued adherence to

the doctrine of non-suability is notto be deplored for as against theinconvenience that may be causedprivate parties, the loss ofgovernmental efficiency and theobstacle to the performance of itsmultifarious functions are fargreater if such a fundamentalprinciple were abandoned and theavailability of judicial remedy werenot thus restricted. With the well-known propensity on the part of ourpeople to go to court, at the leastprovocation, the loss of time andenergy required to defend againstlaw suits, in the absence of such abasic principle that constitutes suchan effective obstacle, could verywell be imagined.

An unincorporated government agencywithout any separate juridical personality of its ownenjoys immunity from suit because it is invested withan inherent power of sovereignty. Accordingly, aclaim for damages against the agency cannot prosper;otherwise, the doctrine of sovereign immunity isviolated.21[11] However, the need to distinguishbetween an unincorporated government agency

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performing governmental function and oneperforming proprietary functions has arisen. Theimmunity has been upheld in favor of the formerbecause its function is governmental or incidental tosuch function;22[12] it has not been upheld in favor ofthe latter whose function was not in pursuit of anecessary function of government but was essentiallya business.23[13]

Should the doctrine of sovereignty immunityor non-suability of the State be extended to the ATO?

In its challenged decision,24[14] the CAanswered in the negative, holding:

On the first assignment oferror, appellants seek to impressupon Us that the subject contract ofsale partook of a governmental

character. Apropos, the lower courterred in applying the High Courtsruling in National AirportsCorporation vs. Teodoro (91 Phil.203 [1952]), arguing that inTeodoro, the matter involved thecollection of landing and parkingfees which is a proprietaryfunction, while the case at barinvolves the maintenance andoperation of aircraft and airnavigational facilities and serviceswhich are governmental functions.

We are not persuaded.Contrary to appellants

conclusions, it was not merely thecollection of landing and parkingfees which was declared asproprietary in nature by the HighCourt in Teodoro, but managementand maintenance of airportoperations as a whole, as well.Thus, in the much later case ofCivil Aeronautics Administration

vs. Court of Appeals (167 SCRA 28[1988]), the Supreme Court,

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23

24

reiterating the pronouncements laiddown in Teodoro, declared that theCAA (predecessor ofATO) is anagency not immune from suit, itbeing engaged in functionspertaining to a private entity. Itwent on to explain in this wise:

x x x

The Civil Aeronautics Administrationcomes under the category of a privateentity. Although not a body corporate itwas created, like the National AirportsCorporation, not to maintain anecessary function of government, butto run what is essentially a business,even if revenues be not its primeobjective but rather the promotion oftravel and the convenience of the

travelling public. It is engaged in anenterprise which, far from being theexclusive prerogative of state, may,more than the construction of publicroads, be undertaken by privateconcerns. [National Airports Corp. v.Teodoro, supra, p. 207.]x x xTrue, the law prevailing in 1952 whenthe Teodoro case was promulgated wasExec. Order 365 (Reorganizing the

Civil Aeronautics Administration andAbolishing the National AirportsCorporation). Republic Act No. 776(Civil Aeronautics Act of thePhilippines), subsequently enacted onJune 20, 1952, did not alter thecharacter of the CAAs objectives underExec. Order 365. The pertinentprovisions cited in the Teodoro case,particularly Secs. 3 and 4 of Exec.Order 365, which led the Court toconsider the CAA in the category of aprivate entity were retained

substantially in Republic Act 776, Sec.32(24) and (25). Said Act provides:Sec. 32. Powers and Duties of the

Administrator. Subject to the generalcontrol and supervision of theDepartment Head, the Administratorshall have among others, the followingpowers and duties:


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x x x(24) To administer, operate, manage,control, maintain and develop the

Manila International Airport and all

government-owned aerodromes exceptthose controlled or operated by theArmed Forces of the Philippinesincluding such powers and duties as:(a) to plan, design, construct, equip,expand, improve, repair or alteraerodromes or such structures,improvement or air navigation facilities;(b) to enter into, make and executecontracts of any kind with any person,firm, or public or private corporation orentity; (25) To determine, fix, impose, collectand receive landing fees, parking spacefees, royalties on sales or deliveries,

direct or indirect, to any aircraft for itsuse of aviation gasoline, oil andlubricants, spare parts, accessories andsupplies, tools, other royalties, fees orrentals for the use of any of the propertyunder its management and control.x x xFrom the foregoing, it can be seen thatthe CAA is tasked with private or non-governmental functions which operateto remove it from the purview of the

rule on State immunity from suit. Forthe correct rule as set forth in theTeodoro case states:x x xNot all government entities, whethercorporate or non-corporate, are immunefrom suits. Immunity from suits isdetermined by the character of the

objects for which the entity was

organized. The rule is thus stated inCorpus Juris:

Suits against State agencies withrelation to matters in which they haveassumed to act in private or non-governmental capacity, and varioussuits against certain corporationscreated by the state for public purposes,but to engage in matters partaking moreof the nature of ordinary business ratherthan functions of a governmental or

political character, are not regarded assuits against the state. The latter is true,although the state may own stock orproperty of such a corporation for byengaging in business operations througha corporation, the state divests itself sofar of its sovereign character, and byimplication consents to suits against thecorporation. (59 C.J., 313) [NationalAirports Corporation v. Teodoro,supra,pp. 206-207; Italics supplied.]This doctrine has been reaffirmed in therecent case ofMalong v. Philippine

National Railways [G.R. No. L-49930,August 7, 1985, 138 SCRA 63], whereit was held that the Philippine NationalRailways, although owned and operatedby the government, was not immunefrom suit as it does not exercise

sovereign but purely proprietary andbusiness functions. Accordingly, as theCAA was created to undertake themanagement of airport operationswhich primarily involve proprietaryfunctions, it cannot avail of theimmunity from suit accorded togovernment agencies performingstrictly governmental functions.25[15]

In our view, the CA thereby correctlyappreciated the juridical character of the ATO as anagency of the Government not performing a purely

governmental or sovereign function, but was insteadinvolved in the management and maintenance of theLoakan Airport, an activity that was not the exclusiveprerogative of the State in its sovereign capacity.Hence, the ATO had no claim to the Statesimmunity from suit. We uphold the CAs aforequotedholding.

We further observe the doctrine of sovereignimmunity cannot be successfully invoked to defeat avalid claim for compensation arising from the takingwithout just compensation and without the properexpropriation proceedings being first resorted to ofthe plaintiffs property.26[16] Thus, inDe los Santosv. Intermediate Appellate Court,27[17] the trial courtsdismissal based on the doctrine of non-suability of

25

26


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the State of two cases (one of which was fordamages) filed by owners of property where a road 9meters wide and 128.70 meters long occupying atotal area of 1,165 square meters and an artificialcreek 23.20 meters wide and 128.69 meters longoccupying an area of 2,906 square meters had beenconstructed by the provincial engineer of Rizal and aprivate contractor without the owners knowledgeand consent was reversed and the cases remanded fortrial on the merits. The Supreme Court ruled that thedoctrine of sovereign immunity was not aninstrument for perpetrating any injustice on a citizen.In exercising the right of eminent domain, the Courtexplained, the State exercised its jus imperii, asdistinguished from its proprietary rights, or jus

gestionis; yet, even in that area, where privateproperty had been taken in expropriation without justcompensation being paid, the defense of immunityfrom suit could not be set up by the State against anaction for payment by the owners.

Lastly, the issue of whether or not the ATOcould be sued without the States consent has beenrendered moot by the passage of Republic Act No.9497, otherwise known as the Civil Aviation

Authority Act of 2008.

R.A. No. 9497 abolished the ATO, to wit:

Section 4. Creation of the Authority. There is hereby created an independent regulatorybody with quasi-judicial and quasi-legislative powers

and possessing corporate attributes to be known asthe Civil Aviation Authority of the Philippines(CAAP), herein after referred to as the Authorityattached to the Department of Transportation andCommunications (DOTC) for the purpose of policycoordination. For this purpose, the existing Airtransportation Office created under the provisions ofRepublic Act No. 776, as amended is herebyabolished.

x x x

Under its Transitory Provisions, R.A. No. 9497

established in place of the ATO the Civil AviationAuthority of the Philippines (CAAP), which therebyassumed all of the ATOs powers, duties and rights,assets, real and personal properties, funds, andrevenues, viz:

CHAPTER XIITRANSITORTY PROVISIONS

27

Section 85. Abolition of the

Air Transportation Office. TheAir Transportation Office (ATO)created under Republic Act No.776, a sectoral office of theDepartment of Transportation andCommunications (DOTC), ishereby abolished.

All powers, duties and rights

vested by law and exercised by theATO is hereby transferred to theAuthority.

All assets, real and personal

properties, funds and revenuesowned by or vested in the differentoffices of the ATO are transferredto the Authority. All contracts,

records and documents relating tothe operations of the abolishedagency and its offices and branchesare likewise transferred to theAuthority. Any real propertyowned by the national governmentor government-owned corporationor authority which is being usedand utilized as office or facility bythe ATO shall be transferred andtitled in favor of the Authority.

Section 23 of R.A. No. 9497 enumerates the

corporate powers vested in the CAAP, including thepower to sue and be sued, to enter into contracts ofevery class, kind and description, to construct,acquire, own, hold, operate, maintain, administer andlease personal and real properties, and to settle, undersuch terms and conditions most advantageous to it,any claim by or against it.28[18]

With the CAAP having legally succeededthe ATO pursuant to R.A. No. 9497, the obligationsthat the ATO had incurred by virtue of the deed ofsale with the Ramos spouses might now be enforcedagainst the CAAP.

WHEREFORE, the Court denies the petitionfor review on certiorari, and affirms the decisionpromulgated by the Court of Appeals.

G.R. No. L-31056 August 4, 1988

28


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LUCILA O. MANZANAL, petitioner,vs.MAURO A. AUSEJO and PUBLIC SERVICECOMMISSION, respondents.

Pastor C. Bacani and Rogelio E. Subong for

petitioner.

Mauro A. Ausejo for and in his own behalf.

Leonor S. Saplala for public respondent.

MEDIALDEA,J.:

This is a petition for review on certiorari of the ordersof the Public Service Commission dated June 30,

1967 and September 1, 1969 in PSC Case No. 66-20-OC, entitled "Mauro A. Ausejo, Complainant, vs.Lucila O. Manzanal, Respondent," wherein thecertificate of public convenience to operate a taxicabservice in Manila and suburbs of herein petitionerLucila O. Manzanal was cancelled and revoked andher third motion for reconsideration was denied.

The case stemmed from the affidavit of Mauro A.Ausejo, with the Complaint, Investigation andEnforcement Office (CIEO) of the Public ServiceCommission narrating a hold up incident on March13, 1966. In this affidavit, he implicated a taxicab

unit whose plate number was said to be "6100" andwhich was allegedly boarded by three (3) robbers asthey escaped from Roxas Boulevard in front of the L& S Building at about 6:00 a.m. of March 13, 1966,after affiant and a companion, Mr. Jose Caballeswere accosted and held-up. On the basis of thisaffidavit, respondent Commission issued a "Show-Cause Order" dated May 25, 1966 upon petitioner, towit:

... respondent (Petitioner Manzanal)is hereby ordered to appeal beforethis Commission, on this 24th day

of June, 1966, at 9:00 o'clock in themorning to show cause why hercertificate of public convenienceissued under Case No. 62-4503should not be cancelled for notrendering safe, adequate and properservice by employing a driver withcriminal tendencies, in violation ofSection 19 (a) of the Public Service

Law and Section 47 of the RevisedOrder No. 1 of this Commission.

Failure on the part of therespondent to appear at the hearingset will be considered as a waiver

of her right to be heard and thisCommission will decide the caseon its merits. (Page 13, Rollo)

From October 10, 1966 to March 20, 1967, trial wasconducted by the respondent Public ServiceCommission. Mr. Ausejo and Mr. Caballes bothnarrated the alleged hold-up incident as follows: Bothwere strolling along the seasided embankment ofDewey or Roxas Boulevard at about 6:00 o'clock inthe morning of March 13, 1966 towards the directionof Pasay City. As they were in front of the L & SBuilding, they noticed that the three (3) men alighted

from a vehicle behind them. Immediately thereafter,these men accosted and held-up both of them. Sincethe two offered some resistance, they attracted theattention of other promenaders as well as theattention of about twelve passing motorists whostopped to watch the spectacle, Two of the hold-uppers went after Mr. Caballes and the other one tookcare of Mr. Ausejo who fought back and succeededin disarming the hold-uppers of his knife. He thendrew his pistol and tried to shoot him but it jammed.As the two other hold-uppers ran towards hisdirection, presumably to assist their companion, theywere warned that Mr. Ausejo had a gun and so theystopped and rushed instead to a waiting taxi bearingPlate No. 6100.

At the trial, Mr. Caballes testified that the taxi wasred in the entire body while private respondentAusejo said that the taxi was red and it had partspainted blue. Both however said that the plate colorwas orange.

On the part of petitioner, Manzanal, she submitteddocuments disputing the possibility that the taxicab inquestion was hers. She submitted the decision of thePSC in Case No. 65-2149 where it appears that the

commercial name of the taxi is Crisman Taxi and thatthe color is "red top with emerald green body" andtwo certifications to the effect that the color of theplate in 1965 was white with maroon background.

On June 30, 1967, the Public Service CommissionerEnrique Medina issued an order deploring the factthat the respondent did not file a formal answer orexplanation. The Commission found that (a) therewas no motive on the part of the said witnesses for


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the complainant to testify against the operator oragainst the driver of taxi with Plate No. 61 00; (b) theattention of the witnesses was concentrated on thenumber of the registration plate and it isunderstandable that they paid little or no attention atall to the colors; and (c) the conduct of the operatorgave the impression that instead of applying a strongarm against the erring driver, she has tried to protectand shield him.

Accordingly, respondent Commission considered thecharges proven since the hold-up incident was dulyestablished and ordered the certificate of publicconvenience issued in Case No. 62-4503, for fiveunits revoked and cancelled.

Upon denial of her three motions for reconsideration,she filed this petition for review on certiorariassigning these errors:

I. The Respondent Commissionerred in cancelling and revokingthe certificate of petitionerManzanal on charges of failure torender safe, proper and adequateservice under Section. 19 (a) of thePublic Service Act as amended andfor employing a driver withcriminal record under Sec. 47 ofthe Revised Order No. 1, as therewas absolutely no evidencewhatever presented to prove such

charges.

II. The respondent Commissionerred when it cancelled andrevoked the certificate of petitionerManzanal simply because one ofher taxicab units allegedly gotinvolved in a hold-up incidentwhen some, hold-uppers allegedlyboarded the same while escapingsince this circumstance is not oneof the grounds for cancellation.

III. The respondent Commissionerred in finding petitionerManzanal guilty of protecting andshielding the driver of the taxicabunit in question by not letting himtestify and not taking disciplinaryaction against him, in the face ofabsolute absence of evidence tosupport such findings.

Petitioner included in her petition a prayer for theissuance of a preliminary mandatory injunction toallow petitioner to resume operations during thependency of this petition and to enjoin respondentCommission from snowing another to appropriate hercertificate and/or line. She reiterated this prayer in amotion dated January 9, 1970. On February 16, 1970,this Court issued a writ of preliminary injunctionupon petitioner posting a bond of P1,000.00 byallowing her to resume operations and at the sametime enjoining the operations of Yolanda Escolin ,whose application for "appropriation" was granted inPSC Case No. 68-9712. Upon motion of saidYolanda Escolin, this Court allowed her to interveneand lifted the preliminary injunction issued upon herfiling a bond of P5,000.00. However, on June 23,1970, this Court modified the order lifting the writ sothat the first part thereof allowing petitioner toresume operation of her taxicab service is deemedexcluded from said order of lifting.

Respondent Public Service Commission filed ananswer to the petition stating that the cancellation ofpetitioner's certificate was warranted by the evidenceadduced during the hearing pointing to the fact thatthe petitioner's driver was conclusively involved inthe hold-up.

Private respondent Mauro A. Ausejo on the otherhand, manifested that he has chosen not to file ananswer to the petition. He, however, filed hiscomment to petitioner's motion reiterating the prayerfor the issuance of a writ of preliminary injunction.He affirmed therein the presence of Felicisimo M.Valdez the driver of taxicab No. 6100 during thehearings but stated, that he could not be sure then asto whether he was the driver of the vehicle used bythe hold-uppers. He likewise stated that he executedan affidavit dated January 5, 1970 to the effect thatthe sole purpose of his complaint before the PublicService Commission was merely to verify the driverof the taxi then bearing Plate No. 6100 so said drivercould help the police in the apprehension andprosecution of the hold-uppers and that in view of thedeath of said driver during the pendency of theinvestigation, he is wining to forget everything.

We find the petition impressed with merit and agreewith petitioner that the charges lodged against herhave not been duly proved. The respondent PublicService Commission anchors the charges againstpetitioner on the following provisions, to wit:


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Section 19. Unlawful acts. I tshall be unlawful for any publicservice:

(a) to provide or maintain anyservice that is unsafe, improper, or

inadequate, or withhold or refineany service which can reasonablybe demanded and furnished, asfound and determined by theCommission in a final order whichshall be conclusive and shall takeeffect in accordance with this Actupon appeal or otherwise. (ThePublic Service Act, as amended)

Section 47. Courtesy, character,record, etc. Each operator shagemploy only such chauffeurs,

conductors, agents, inspectors,auditors, and other employees whoare courteous and of good moralcharacter, and in no case shall heemploy any person who has beenconvicted by competent court ofhomicide and/or serious physicalinjuries, theft, estafa, robbery, andcrimes against chastity. Operatorsare prohibited from employing aschauffeurs persons who do nothave professional drivers" license.(Revised Order No. 1)

Section 19 (a) of the Public Service Act contemplatesof failure to provide a service that is safe, proper oradequate and refusal to render any service which canreasonably be demanded and furnished. It refersspecifically to the operator's inability to providereliable vehicles to transport the riding public to theirplaces of destination and to the failure to provide anadequate number of units authorized under hisfranchise at all times to secure the public of sustainedservice. While the words "unsafe, inadequate andimproper" may be broad enough to cover a lot ofthings, they must be interpreted in consonance withthe purpose of the Public Service Law, which wasspecifically enacted, among other things, to protectthe public against unreasonable charges and poorinefficient service (Luzon Stevedoring Co., Inc. vs.PSC, 93 Phil. 735) and to secure adequate sustainedservice for the public at the least possible costs.(Batangas Transportation Co. vs. Orlanes, 52 Phil.455). The facts of the case are bereft and wanting ofany evidence to the effect that petitioner rendered aservice that is unsafe, inadequate and improper.

There was no testimony whatsoever that her vehiclesare of such kind which may endanger the lives of thepassengers or are not suitable for the peculiarcharacteristics of the area serviced. There is no proofthat petitioner is not in a position to cope with theobligations and responsibilities of the service and tomaintain a complete number of units as authorized.While we agree with respondent Commission thatsaid provision does not necessarily require a"passenger-operator" relationship, We disagree that asingle hold-up incident which does not clearly linkpetition's taxicab can be comprehended within itsmeaning.

Section 47 of the Revised Order No. 1, on the otherhand, refers to the kind of persons an operator mustkeep under his employ, namely: courteous, of goodmoral character and no record of criminal conviction.Contrary to the claim of petitioner, this restrictionequally applies to those who are already employed aswell as those merely seeking admission to theservice. (Pangasinan Transportation Co. vs. CIR, L-9736, May 20, 1957, 101 Phil. 480) The reasonbehind this requirement of courtesy and good moralcharacter cannot be assailed and is understandable. Apublic service operator deals directly with thepatronizing community and the nature of suchundertaking necessarily demands of the company themaintenance of a personnel with unquestionablerecord of good moral character for the public entrusttheir lives, properties and interests in said servicesand deserve utmost courtesy, efficiency and safety inreturn. (Ibid.) But nowhere in the presentation of the

facts of the case was there any proof that petitionerviolated this provision. There is no proof that she hashired a driver with criminal record or bad moralcharacter or has kept under her employ, such driverdespite knowledge about his moral behavior,discourteous conduct or criminal record. Besides, theshow cause order merely speaks of employing adriver with "criminal tendencies" while Section 47 iscouched in unmistakable mandatory terms; it forbidsthe employment of persons "convicted" of offensesenumerated therein.

All that was proved during the investigation was the

hold-up incident of March 13, 1966. But proof of thehold-up incident is not proof of the charges underSection 19 (a) of the Public Service Law and Sec. 47of the Revised Order No. 17. Most importantly, eventhe precise Identity of the taxicab boarded by thehold-uppers as they escaped had not been established.The only testimony linking the taxicab of petitionerwas that of the companion of private respondentAusejo that he saw the malefactors scamper away


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and seize a taxi whose plate number was "6100".With respect to the description of the alleged taxi, hesaid that the taxi was red in the entire body whileprivate respondent Ausejo said that the taxi was redand it had parts painted blue. Both confirmed eachother that the plate color was orange.

We find that petitioner has successfully refuted thealleged participation of her taxi. The decision datedDecember 28, 1965 of respondent Commissiongranting her petition for approval of her color schemewhich authorized all her five (5) units to be paintedwith emerald green; the certification of Mr. PedroMorales of the Land Transportation Commission,Chief of the Plate Section, to the effect that the platesfor taxis for 1965 have a maroon background; and thecertification of Mr. Marcelo Vasquez of the VasquezBros. & Co., Inc., the makers of vehicle plates for theLand Transportation Commission that the orangecolored plates are given to privately owned vehiclesand that No. 6100 has been given to both taxis andprivately owned vehicles all cast a cloud of doubt onthe real Identity of the vehicle used by themalefactors.

Even on the assumption that it was petitioner'staxicab that was used by the escaping hold-uppers,there is no evidence that the driver is a co-conspiratorin the commission of the offense of robbery.Conspiracy must be proved by clear and convincingevidence. The mere claim that the taxicab was thereand probably waiting is not proof of conspiracy inthis case as it should be recalled that there were abouttwelve vehicles that stopped to view the spectacle.Further, it is possible that the driver did not actvoluntarily as no person in his right senses woulddefy the wishes of armed passengers. Even on theassumption that the driver had participatedvoluntarily in the incident, his culpability should notbe made a ground for the cancellation of thecertificate of petitioner. While an employer may besubsidiarily liable for the employee's civil liability ina criminal action, subsidiary liability presupposes thatthere was a criminal action. Besides, in order that anemployer may be subsidiarily liable, it should beshown that the employee committed the offense in

the discharge of his duties. While it is true also thatan employer may be primarily liable under Article2180 of the Civil Code for the acts or omissions ofpersons for whom one is responsible, this liabilityextends only to damages caused by his employeesacting within the scope of their assigned tasks.Clearly, the act in question is totally alien to thebusiness of petitioner as an operator and hence, thedriver's illicit act is not within the scope of the

functions entrusted to him. Moreover, the actionbefore respondent Commission is neither a criminalprosecution nor an action for quasi-delict. Hence,there is absolutely no ground to hold petitioner liablefor the driver's act.

Finally, under Section 16 (n) of the Public ServiceAct, the power of the Commission to suspend orrevoke any certificate received under the provisionsof the Act may only be exercised whenever theholder thereof has violated or willfully andcontumaciously refused to comply with any order,rule or regulation of the Commission or anyprovision of the Act. In the absence of showing thatthere is willful and contumacious violation on thepart of petitioner, no certificate of public conveniencemay be validly revoked.

The following are some instances where the

cancellation of a certificate of public conveniencewhere held valid: (1) where the holder is a meredummy (Pecson vs. Pecson, 78 Phil. 522); (2) wherethe operator ceased operation and placed his buses onstorage (Parades vs. Public Service Commission, L-7111, May 30, 1955); and (3) where the operatorabandons, totally the service (Collector vs. Buan, L-11438, July 31, 1958; Regodon vs. Public ServiceCommission, L-11899, Sept. 23, 1958; Paez vs.Marcelo, L-1530, March 30, 1962). None of thewillful acts in patent violation of the Public ServiceLaw can be attributed to petitioner herein.

Apropos, We find the respondent Commission'sfinding that the circumstances surrounding the case,specially the conduct of petitioner, gave theimpression that the petitioner instead of applying astrong arm against the erring driver has tried toprotect and shield him has no basis in fact. While therule is that the commission's findings of fact, ifsupported by substantial evidence, are conclusiveupon this Court, We are authorized to modify orignore them when it clearly appears that there is noevidence to support reasonably such conclusion.(Javellana vs. La Paz Ice Plant & Cold Storage Co.,63 Phil. 621; Philippine Shipowners Association vs.Public Utility Commissioner, 43 Phil. 328; SanMiguel Brewery vs. Lapid, 53 Phil. 539; Ice & ColdStorage Industries of the Phil., Inc. vs. Valero, 85Phil. 7; Halili vs. Daplas, 14 SCRA 14)

In the case at bar, it has been duly established that thedriver of the taxicab, Felicisimo M. Valdez, wasalways present during the initial hearings of this casebefore his death on September 18, 1966. This fact isindicative of his willingness to take the witness stand


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but death sealed his lips. For her part, petitionerexplained that she did not testify because she wascandid enough not to pretend to know the exactwhereabouts of her taxi at the fateful time. Hence, theconclusion of respondent Commission that she triedto protect or shield her driver by her refusal to refuteor deny the claim of respondent Ausejo and Mr.Caballes is not warranted by the facts of the case.

ACCORDINGLY, the instant petition for review ishereby GRANTED and the decision of respondentPublic Service Commission (now LandTransportation Franchising and Regulatory Board[LTFRB]) dated June 30, 1967 cancelling andrevoking the certificate of public convenience ofpetitioner to operate a taxicab service in Manila forfive (5) units under Case No. 62-4503 as well as theorder denying the motion for reconsideration arehereby REVERSED and SET ASIDE.

G.R. No. L-34978 February 26, 1988

ANGELES C. VDA. DE LAT, CAROLINA LAT

PEREZ DE TAGLE, and PEDRO C. LAT, JR.,

petitioners,vs.THE PUBLIC SERVICE COMMISSION and

ROBERTO C. DIAZ, respondents.

GANCAYCO,J.:

This is a petition for the review of a Decision of thePublic Service Commission, dated February 24,1972, granting the application of the herein privaterespondent, Roberto C. Diaz, for a Certificate ofPublic Convenience.

The facts of the case are as follows:

On May 11, 1970, the herein private respondentRoberto C. Diaz filed an application with therespondent Public Service Commission for a

Certificate of Public Convenience and Necessity tooperate and maintain an ice plant service in DavaoCity alleging among others that he is financiallycapable to operate and maintain the proposed service,and that public necessity and convenience will bepromoted in a proper and suitable manner with theapproval of his application. 1 Said application waspublished in two newspapers of general circulationnamely: El Debate and The Philippine Herald, andcopies thereof were sent to affected operators

including the herein petitioners Angeles C. Vda. deLat Carolina Lat, Perez de Tagle and Pedro C. Lat, Jr.Only the petitioners filed an Opposition to theApplication and the same was submitted on July3,1970.

By agreement of the parties, the hearing of theApplication and the Opposition was set by therespondent Commission for August 17,1970 at 9o'clock in the morning. However, when the case wascalled for hearing as late as 10 o'clock in the morningon the said date, neither the oppositors nor theircounsel was present. Hence, the respondentCommission declared the case uncontested andreceived the evidence of the private respondent.

In this petition, the petitioners contend that they filedan Urgent Motion for Postponement and of Hearingon August 17, 1970, with the respondent Commission

on the ground that their counsel made the mistake ofnoting down in his calendar the hearing on August 6,1970, a Sunday and that it was already too late whenhe discovered the said mistake. 2 On August18,1970,the petitioners filed a motion for reopeningof the case and allowance to present evidence butunfortunately, on the same date respondentCommission issued an Order granting the privaterespondent provisional authority to operate the iceplant for six (6) months. This was based on thefindings of the Commission that there was indeed anurgent need for an ice plant in Davao City as itspopulation has increased tremendously. Petitionersthen filed a motion for reconsideration but this wasdenied in a Resolution signed by all the members ofthe respondent Commission, said motion having beenheard by the Commission en banc. 3

The above-mentioned provisional authority grantedto the private respondent was extended twice. Thefirst extension was given on February 12, 1971 andthe second, on December 10, 1971. Finally onFebruary 24, 1972, the respondent Commissionhanded down a Decision approving the Applicationof the private respondent and granting him aCertificate of Public Convenience to operate a 2-tonice plant in Davao City.

In this petition for review, the petitioners are askingthat the Decision rendered by the respondentCommission on February 24, 1972 be set aside anddeclared null and void, as it has been renderedwithout due process. Their claim is that they weredeprived of their day in court when they were notallowed to cross-examine the witnesses of the privaterespondent and to present their evidence in support of


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their Opposition. 4 Furthermore, they submit that thedecision awarding the Certificate of PublicConvenience to the private respondent was basedmerely on the latter's uncorroborated testimony andwould amount to competition that would damagetheir business. 5

Two issues are raised in this petition. The first iswhether or not the petitioners were deprived of theirday in Court to make the proceeding in therespondent Public Service Commission nun and void.And the other is whether or not the privaterespondent was validly awarded the questionedCertificate of Public Convenience to operate an iceplant in Davao City.

As regards the first issue, We reject the petitioners'assertion that their right to due process was violated.It is very clear from the records that the petitioners

were given notice and opportunity to be heardnegating the petitioners' declaration that they weredeprived of their day in court.

Going back to the facts of this Case, We find, as therespondent Commission did, 6 that the privaterespondent duly complied with the required notice ofhearing. There was publication. 7 The petitionerscould not have been denied the right to be heardbecause as their counsel even admits, he agreed to thesetting of the hearing of the case for August 19, 1970at 9 o'clock in the morning. 8

The Petitioners should have known about the date ofthe hearing. Yet, when the case was called, neitherthey nor their counsel showed up. There was not evenany word from them. Their lame excuse that theirlawyer made the mistake of noting down the healingon a Sunday instead of a Monday is unacceptable.There were three of them who presented themselvesas oppositors. It is unbelievable that no one of themfound out about the mistake of their counsel had theyshown any slight interest in the case. Theirnegligence cannot now be passed on to therespondent Commission which only did the rightthing of proceeding with the case, which had become

uncontested.

Nor can it be said that the Decision of the respondentCommission is arbitrary. The application was notoutrightly approved upon reception of the evidence ofthe private respondent. On the contrary, therespondent Commission took time to consider andweigh such evidence as can be seen from the fact thatthe private respondent was granted only a provisionalauthority on August 18, 1970, which was twice

extended, before the case was finally determined onFebruary 24, 1972.

We are convinced that the private respondentdeserves to be awarded the Certificate of PublicConvenience. He was able to fully satisfy the

requisites before such a certificate may be granted,namely: (1) the applicant must be a citizen of thePhilippines, or a corporation or co-partnership,association or joint stock company constituted andorganized under the laws of the Philippines, 60 percentum at least of the stock or paid-up capital ofwhich belong entirely to citizens of the Philippines;(2) the applicant must be financially capable ofundertaking the proposed service and meeting theresponsibilities incident to its operations; and (3) theapplicant must prove that the operation of the publicservice proposed and the authorization to do businesswig promote the public interest in a proper andsuitable manner. 9

There is no question that the private respondent is aFilipino Citizen. Regarding his financial capacity andpublic necessity for the ice plant, the finding of thePublic Service Commission on these are relevant, towit:

It appears from the evidence adduced by theapplicant, that he is a co-owner of a parcel ofland situated at Barrio Magugpo, Tagum, Davao(Exhibit "F" & "F-l") with an area of 15,738square meters and having a present market value

of P25,000.00 (Exhibits "G" & "G-1") with theBank of the Philippine Islands; and that, he isengaged in the fishing business with aninvestment of P10,000.00 to P15,000.00 andfrom which he earns a monthly income ofP2,000.00 to P3,000.00. As regards the necessityfor the service applied for, applicant testified thatthe only oppositors here are serving almost 1/3of the population of Davao; that Davao City is atourist belt and the population has increasedfrom 225.7 in 1960 to 389.3 in 1970, asevidenced by Exhibit "1"; that there are two (2)or (3) three barrios in said city; that being afishing ground, there are plenty of fish whereinice is very much needed in order to preservethem; that he received a request from the BarrioCaptain of Bo. Buhangin, Davao City (Exhibit"J") clamoring for ice in behalf of its 9,431inhabitants; and that there is an urgent need foran ice plant in Davao City, to serve therequirements for ice in the said city. 10


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Before We end, it is apt to stress the principle thatnobody has the exclusive right to secure a franchiseor a Certificate of Public Convenience. Theparamount consideration should always be the publicinterest and public convenience. 11

Furthermore, the allegation of the petitioners that thegrant of Certificate of Public Convenience to theprivate respondent would result in ruinouscompetition amounting to damage of their business 12

is unconvincing. The grant is for the operation of amere 2-ton ice plant and only in Davao City whereasthe petitioners are big operators producing no lessthan 63 tons of ice daily and who are authorized tooperate ice plants not only in the City of Davao butalso in the three Davao provinces. And We have heldbefore, in order that the opposition based on ruinouscompetition may prosper, it must be shown that theopponent would be deprived of their profits on thecapital invested in its business. The mere possibilityof reduction in the earnings of a business is notsufficient to prove ruinous competition. It must beshown that the business would not have sufficientgains to pay a fair rate of interest on its capitalinvestments. 13

WHEREFORE, the decision of the Public ServiceCommission appealed from is hereby AFFIRMED,with costs against the petitioners.

Insurance Company of North America vs. Asian

terminals

This is a petition for review oncertiorari29[1] of the Decision of the Regional TrialCourt (RTC) of Makati City, Branch 138 (trial court)in Civil Case No. 05-809 and its Order datedDecember 4, 2007 on the ground that the trial courtcommitted reversible error of law.

The trial court dismissed petitionerscomplaint for actual damages on the ground ofprescription under the Carriage of Goods by Sea Act

(COGSA).

The facts are as follows:

On November 9, 2002, Macro-Lite KoreaCorporation shipped to San Miguel Corporation,through M/V "DIMI P" vessel, one hundred eighty-

29

five (185) packages (231,000 sheets) of electrolytictin free steel, complete and in good order conditionand covered by Bill of Lading No.POBUPOHMAN20638.30[2] The shipment had adeclared value of US$169,850.3531[3] and wasinsured with petitioner Insurance Company of NorthAmerica against all risks under Marine Policy No.MOPA-06310.32[4]

The carrying vessel arrived at the port ofManila on November 19, 2002, and when theshipment was discharged therefrom, it was noted thatseven (7) packages thereof were damaged and in badorder.33[5] The shipment was then turned over to thecustody of respondent Asian Terminals, Inc. (ATI) onNovember 21, 2002 for storage and safekeepingpending its withdrawal by the consignee's authorizedcustoms broker, R.V. Marzan Brokerage Corp.(Marzan).

On November 22, 23 and 29, 2002, thesubject shipment was withdrawn by Marzan from thecustody of respondent. On November 29, 2002, priorto the last withdrawal of the shipment, a jointinspection of the said cargo was conducted per theRequest for Bad Order Survey34[6] dated November29, 2002, and the examination report, which waswritten on the same request, showed that anadditional five (5) packages were found to bedamaged and in bad order.

On January 6, 2003, the consignee, San

Miguel Corporation, filed separate claims35

[7] againstrespondent and petitioner for the damage to 11,200sheets of electrolytic tin free steel.

Petitioner engaged the services of anindependent adjuster/surveyor, BA McLarens Phils.,Inc., to conduct an investigation and evaluation onthe claim and to prepare the necessary report.36[8]

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BA McLarens Phils., Inc. submitted to petitioner anSurvey Report37[9] dated January 22, 2003 andanother report38[10] dated May 5, 2003 regarding thedamaged shipment. It noted that out of the reportedtwelve (12) damaged skids, nine (9) of them wererejected and three (3) skids were accepted by theconsignees representative as good order. BAMcLarens Phils., Inc. evaluated the total cost ofdamage to the nine (9) rejected skids (11,200 sheetsof electrolytic tin free steel) to be P431,592.14.

The petitioner, as insurer of the said cargo,paid the consignee the amount of P431,592.14 forthe damage caused to the shipment, as evidenced bythe Subrogation Receipt dated January 8, 2004.Thereafter, petitioner, formally demanded reparationagainst respondent. As respondent failed to satisfy itsdemand, petitioner filed an action for damages withthe RTC of Makati City.

The trial court found, thus:

The Court finds that thesubject shipment indeed sufferedadditional damages. The Requestfor Bad Order Survey No. 56422shows that prior to the turn over ofthe shipment from the custody ofATI to the consignee, aside fromthe seven (7) packages which werealready damaged upon arrival at theport of Manila, five (5) morepackages were found with "dent,

cut and crumple" while in thecustody of ATI. This document wasissued by ATI and was jointlyexecuted by the representatives ofATI, consignee and customs, andthe Shed Supervisor. Thus, ATI isnow estopped from claiming thatthere was no additional damagesuffered by the shipment. It is,therefore, only logical to concludethat the damage was caused solelyby the negligence of defendantATI. This evidence of the plaintiff

was refuted by the defendant bymerely alleging that "the damage tothe 5 Tin Plates is only in itsexternal packaging. However, thefact remains that the consignee hasrejected the same as total loss for

37

38

not being suitable for their intendedpurpose. In addition, thephotographs presented by theplaintiff show that the shipmentalso suffered severe dents and somepackages were even criticallycrumpled.39[11]

As to the extent of liability, ATI invokedthe Contract for Cargo Handling Services executedbetween the Philippine Ports Authority and MarinaPorts Services, Inc. (now Asian Terminals, Inc.).Under the said contract, ATI's liability for damage tocargoes in its custody is limited to P5,000.00 foreach package, unless the value of the cargo shipmentis otherwise specified or manifested or communicated in writing, together with the declaredBill of Lading value and supported by a certifiedpacking list to the contractor by the interested party

or parties before the discharge or lading unto vesselof the goods.

The trial court found that there wascompliance by the shipper and consignee with theabove requirement. The Bill of Lading, together withthe corresponding invoice and packing list, wasshown to ATI prior to the discharge of the goodsfrom the vessel. Since the shipment was releasedfrom the custody of ATI, the trial court found thatthe same was declared for tax purposes as well as forthe assessment of arrastre charges and other fees. Forthe purpose, the presentation of the invoice, packinglist and other shipping documents to ATI for the

proper assessment of the arrastre charges and otherfees satisfied the condition of declaration of theactual invoices of the value of the goods to overcomethe limitation of liability of the arrastre operator.40

[12]Further, the trial court found that there was

a valid subrogation between the petitioner and theassured/consignee San Miguel Corporation. Therespondent admitted the existence of Global MarinePolicy No. MOPA-06310 with San MiguelCorporation and Marine Risk Note No. 3445,41[13]which showed that the cargo was indeed insuredwith petitioner. The trial court held that petitioners

claim is compensable because the SubrogationReceipt,16 which was admitted as to its existence byrespondent, was sufficient to establish not only the

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relationship of the insurer and the assured, but alsothe amount paid to settle the insurance claim.42[14]

However, the trial court dismissed thecomplaint on the ground that the petitioners claimwas already barred by the statute of limitations. Itheld that COGSA, embodied in Commonwealth Act(CA) No. 65, applies to this case, since the goodswere shipped from a foreign port to the Philippines.The trial court stated that under the said law,particularly paragraph 4, Section 3 (6)43[15] thereof,the shipper has the right to bring a suit within oneyear after the delivery of the goods or the date whenthe goods should have been delivered, in respect ofloss or damage thereto.

The trial court held:

In the case at bar, the

records show that the shipment wasdelivered to the consignee on 22,23 and 29 of November 2002. Theplaintiff took almost a year toapprove and pay the claim of itsassured, San Miguel, despite thefact that it had initially received thelatter's claim as well as theinspection report and survey reportof McLarens as early as January2003. The assured/consignee hadonly until November of 2003within which to file a suit againstthe defendant. However, the instantcase was filed only on September7, 2005 or almost three (3) yearsfrom the date the subject shipmentwas delivered to the consignee. Theplaintiff, as insurer of the shipmentwhich has paid the claim of theinsured, is subrogated to all therights of the said insured in relationto the reimbursement of such claim.As such, the plaintiff cannotacquire better rights than that of theinsured. Thus, the plaintiff has noone but itself to blame for having

acted lackadaisically on SanMiguel's claim.

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WHEREFORE, thecomplaint and counterclaim arehereby DISMISSED.44[16]

Petitioners motion for reconsideration wasdenied by the trial court in the Order45[17] datedDecember 4, 2007.

Petitioner filed this petition under Rule 45 ofthe Rules of Court directly before this Court, allegingthat it is raising a pure question of law

THE TRIAL COURTCOMMITTED A PURE ANDSERIOUS ERROR OF LAW INAPPLYING THE ONE-YEAR

PRESCRIPTIVE PERIOD FORFILING A SUIT UNDER THECARRIAGE OF GOODS BY SEAACT (COGSA) TO ANARRASTRE OPERATOR.46[18]

Petitioner states that while it is in full accordwith the trial court in finding respondent liable for thedamaged shipment, it submits that the trial courtsdismissal of the complaint on the ground ofprescription under the COGSA is legally erroneous.It contends that the one-year limitation period for

bringing a suit in court under the COGSA is notapplicable to this case, because the prescriptiveperiod applies only to the carrier and the ship. Itargues that respondent, which is engaged inwarehousing, arrastre and stevedoring business, is nota carrier as defined by the COGSA, because it is notengaged in the business of transportation of goods bysea in international trade as a common carrier.Petitioner asserts that since the complaint was filedagainst respondent arrastre operator only, withoutimpleading the carrier, the prescriptive period underthe COGSA is not applicable to this case.

Moreover, petitioner contends that the termcarriage of goods in the COGSA covers the periodfrom the time the goods are loaded to the vessel tothe time they are discharged therefrom. It points out

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that it sued respondent only for the additional five (5)packages of the subject shipment that were founddamaged while in respondents custody, long afterthe shipment was discharged from the vessel. Thesaid damage was confirmed by the trial court andproved by the Request for Bad Order Survey No.56422.47[19]

Petitioner prays that the decision of the trialcourt be reversed and set aside and a new judgmentbe promulgated granting its prayer for actualdamages.

The main issues are: (1) whether or not theone-year prescriptive period for filing a suit under theCOGSA applies to this action for damages againstrespondent arrastre operator; and (2) whether or notpetitioner is entitled to recover actual damages in theamount of P431,592.14 from respondent.

To reiterate, petitioner came straight to thisCourt to appeal from the decision of the trial courtunder Rule 45 of the Rules of Court on the groundthat it is raising only a question of law.

Microsoft Corporation v. Maxicorp, Inc.48

[20] explains the difference between questions oflaw and questions of fact, thus:

The distinction betweenquestions of law and questions offact is settled. A question of lawexists when the doubt or differencecenters on what the law is on acertain state of facts. A question offact exists if the doubt centers on thetruth or falsity of the alleged facts.Though this delineation seemssimple, determining the true natureand extent of the distinction issometimes problematic. Forexample, it is incorrect to presumethat allcases where the facts are not

in dispute automatically involvepurely questions of law.

There is a question of law ifthe issue raised is capable of beingresolved without need of reviewing

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48

the probative value of the evidence.The resolution of the issue must restsolely on what the law provides onthe given set of circumstances.Once it is clear that the issue invitesa review of the evidence presented,the question posed is one of fact. Ifthe query requires a re-evaluation ofthe credibility of witnesses, or theexistence or relevance of surrounding circumstances and theirrelation to each other, the issue inthat query is factual. x x x49[21]

In this case, although petitioner alleged thatit is merely raising a question of law, that is, whetheror not the prescriptive period under the COGSAapplies to an action for damages against respondent

arrastre operator, yet petitioner prays for the reversalof the decision of the trial court and that it be grantedthe relief sought, which is the award of actualdamages in the amount of P431,592.14. For aquestion to be one of law, it must not involve anexamination of the probative value of the evidencepresented by the litigants or any of them.50[22]However, to resolve the issue of whether or notpetitioner is entitled to recover actual damages fromrespondent requires the Court to evaluate theevidence on record; hence, petitioner is also raising aquestion of fact.

Under Section 1, Rule 45, providing forappeals by certioraribefore the Supreme Court, it isclearly enunciated that only questions of law may beset forth.51[23] The Court may resolve questions offact only when the case falls under the followingexceptions:

(1) when the findings are groundedentirely on speculation, surmises, orconjectures; (2) when the inferencemade is manifestly mistaken, absurd,or impossible; (3) when there isgrave abuse of discretion; (4) whenthe judgment is based on a

misapprehension of facts; (5) whenthe findings of fact are conflicting;

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(6) when in making its findings theCourt of Appeals went beyond theissues of the case, or its findings arecontrary to the admissions of boththe appellant and the appellee; (7)when the findings are contrary tothose of the trial court; (8) when thefindings are conclusions withoutcitation of specific evidence onwhich they are based; (9) when thefacts set forth in the petition as wellas in the petitioner's main and replybriefs are not disputed by therespondent; and (10) when thefindings of fact are premised on thesupposed absence of evidence andcontradicted by the evidence onrecord.52[24]

In this case, the fourth exception cited aboveapplies, as the trial court rendered judgment based ona misapprehension of facts.

We first resolve the issue on whether or notthe one-year prescriptive period for filing a suit underthe COGSA applies to respondent arrastre operator.

The Carriage of Goods by Sea Act(COGSA), Public Act No. 521 of the 74th USCongress, was accepted to be made applicable to allcontracts for the carriage of goods by sea to and from

Philippine ports in foreign trade by virtue of CA No.65.

Section 1 of CA No. 65 states:

Section 1. That theprovisions of Public Act NumberedFive hundred and twenty-one of theSeventy-fourth Congress of theUnited States, approved on Aprilsixteenth, nineteen hundred andthirty-six, be accepted, as it ishereby accepted to be made

applicable to all contracts for thecarriage of goods by sea to and

from Philippine ports in foreign

trade: Provided, That nothing inthe Act shall be construed asrepealing any existing provision ofthe Code of Commerce which is

52

now in force, or as limiting itsapplication.

Section 1, Title I of CA No. 65 defines therelevant terms in Carriage of Goods by Sea, thus:

Section 1. When used in this Act -

(a) The term "carrier"

includes the owner or the chartererwho enters into a contract ofcarriage with a shipper.

(b) The term "contract ofcarriage" applies only to contracts ofcarriage covered by a bill of ladingor any similar document of title,insofar as such document relates to

the carriage of goods b

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