CASE DIGEST (Transportation Law): Poliand Industrial Ltd vs.

National Development
Co. (NDC)
POLIAND INDUSTRIAL LIMITED vs. NATIONAL DEVELOPMENT COMPANY,
DEVELOPMENT BANK OF THE PHILIPPINES [G.R. No. 143866. August 22, 2005]
FACTS:
Poliand is an assignee of the of the rights of Asian Hardwood over the outstanding
obligation of National Development Corporation (NDC), the latter being the owner of
Galleon which previously secured credit accommodations from Asian Hardwood for
its expenses on provisions, oil, repair, among others.
Galleon also obtained loans from Japanese lenders to finance acquisition of vessels
which was guaranteed by DBP in consideration of a promise by Galleon to secure a
first mortgage on the vessels. DBP later transferred ownership of the vessel to NDC.
A collection suit was filed after repeated demands of Poliand for the satisfaction of
the obligation from Galleon, NDC and DBP went unheeded.
ISSUE: Whether POLIAND has a maritime lien enforceable against NDC or DBP or
both.
HELD:
Yes, Poliand has a maritime lien which is more superior than DBPs mortgage lien.
Before POLIANDs claim may be classified as superior to the mortgage constituted
on the vessel, it must be shown to be one of the enumerated claims which Section
17, P.D. No. 1521 declares as having preferential status in the event of the sale of
the vessel. One of such claims enumerated under Section 17, P.D. No. 1521 which is
considered to be superior to the preferred mortgage lien is a maritime lien arising
prior in time to the recording of the preferred mortgage. Such maritime lien is
described under Section 21, P.D. No. 1521, which reads:
SECTION 21. Maritime Lien for Necessaries; persons entitled to such lien. Any
person furnishing repairs, supplies, towage, use of dry dock or marine railway, or
other necessaries to any vessel, whether foreign or domestic, upon the order of the
owner of such vessel, or of a person authorized by the owner, shall have a maritime
lien on the vessel, which may be enforced by suit in rem, and it shall be necessary
to allege or prove that credit was given to the vessel.
Under the aforequoted provision, the expense must be incurred upon the order of
the owner of the vessel or its authorized person and prior to the recording of the
ship mortgage. Under the law, it must be established that the credit was extended
to the vessel itself.

The trial court found that GALLEONs advances obtained from Asian Hardwood were
used to cover for the payment of bunker oil/fuel, unused stores and oil, bonded
stores, provisions, and repair and docking of the GALLEON vessels. These expenses
clearly fall under Section 21, P.D. No. 1521.
The trial court also found that the advances from Asian Hardwood were spent for
ship modification cost and the crews salary and wages. DBP contends that a ship
modification cost is omitted under Section 17, P.D. No. 1521, hence, it does not
have a status superior to DBPs preferred mortgage lien.
As stated in Section 21, P.D. No. 1521, a maritime lien may consist in other
necessaries spent for the vessel. The ship modification cost may properly be
classified under this broad category because it was a necessary expenses for the
vessels navigation. As long as an expense on the vessel is indispensable to the
maintenance and navigation of the vessel, it may properly be treated as a maritime
lien for necessaries under Section 21, P.D. No. 1521."
However, Only NDC is liable on the maritime lien
x x x [O]nly NDC is liable for the payment of the maritime lien. A maritime lien is
akin to a mortgage lien in that in spite of the transfer of ownership, the lien is not
extinguished. The maritime lien is inseparable from the vessel and until discharged,
it follows the vessel. Hence, the enforcement of a maritime lien is in the nature and
character of a proceeding quasi in rem.[65] The expression action in rem is, in its
narrow application, used only with reference to certain proceedings in courts of
admiralty wherein the property alone is treated as responsible for the claim or
obligation upon which the proceedings are based.[66] Considering that DBP
subsequently transferred ownership of the vessels to NDC, the Court holds the latter
liable on the maritime lien. Notwithstanding the subsequent transfer of the vessels
to NDC, the maritime lien subsists.
CASE DIGEST (Transportation Law): Kilusang Mayo Uno vs. Garcia
KILUSANG MAYO UNO LABOR CENTER vs.HON. JESUS B. GARCIA, JR., the LAND
TRANSPORTATION FRANCHISING AND REGULATORY BOARD, and the PROVINCIAL
BUS OPERATORS ASSOCIATION OF THE PHILIPPINES G.R. No. 115381 December 23,
1994
FACTS :
Then Secretary of DOTC, Oscar M. Orbos, issued Memorandum Circular No. 90-395
to then LTFRB Chairman, Remedios A.S. Fernando allowing provincial bus operators
to charge passengers rates within a range of 15% above and 15% below the LTFRB
official rate for a period of one (1) year.

This range was later increased by LTFRB thru a Memorandum Circular No. 92-009
providing, among others, that "The existing authorized fare range system of plus or
minus 15 per cent for provincial buses and jeepneys shall be widened to 20% and
-25% limit in 1994 with the authorized fare to be replaced by an indicative or
reference rate as the basis for the expanded fare range."
Sometime in March, 1994, private respondent PBOAP, availing itself of the
deregulation policy of the DOTC allowing provincial bus operators to collect plus
20% and minus 25% of the prescribed fare without first having filed a petition for
the purpose and without the benefit of a public hearing, announced a fare increase
of twenty (20%) percent of the existing fares.
On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the
upward adjustment of bus fares, which the LTFRB dismissed for lack of merit.
ISSUE:
Whether or not the authority given by respondent LTFRB to provincial bus operators
to set a fare range of plus or minus fifteen (15%) percent, later increased to plus
twenty (20%) and minus twenty-five (-25%) percent, over and above the existing
authorized fare without having to file a petition for the purpose, is unconstitutional,
invalid and illegal.
HELD:
Yes.
xxx
Under section 16(c) of the Public Service Act, the Legislature delegated to the
defunct Public Service Commission the power of fixing the rates of public services.
Respondent LTFRB, the existing regulatory body today, is likewise vested with the
same under Executive Order No. 202 dated June 19, 1987. x x x However, nowhere
under the aforesaid provisions of law are the regulatory bodies, the PSC and LTFRB
alike, authorized to delegate that power to a common carrier, a transport operator,
or other public service.

Kilusang Mayo Uno Labor Center v. Jesus Garcia, Jr., LTFRB, Provincial
BusOperators Association of the Philippines (PBOAP)
G.R. No. 115381 December 23, 1994
Kapunan, J.

FACTS:

public utilities privately owned and operated businesses whose service are
essential
tothe general public; enterprises which specially cater to the needs of the public an
dconducive to their comfort and convenience

DOTC Sec. issued Memorandum Circular No. 90-395 to then LTFRB Chairman
allowingprovincial bus operators to charge passengers rates within a range of
15% above and 15%below the LTFRB official rate for a period of 1 year

PBOAP pursuant to Memo. Cir. it filed an application for fare rate increase. An
across-the-board increase of eight and a half centavos (P0.085) per
kilometer for all types of provincial buses with a minimum-maximum fare range of
fifteen (15%) percent over andbelow the proposed basic per kilometer fare rate,
with the said minimum-maximum farerange applying only to ordinary, first class
and premium class buses and a fifty-centavo(P0.50) minimum per kilometer fare
for aircon buses, was sought

respondent LTFRB rendered a decision granting the fare rate increase in accordance
with aspecified schedule of fares on a straight computation method

DOTC Sec. issued Department Order No. 92-587 defining the policy framework on
theregulation of transport services. It provides inter alia that Passenger fares shall
also
bederegulated, except for the lowest class of passenger service (normally third clas
spassenger transport) for which the government will
fix indicative or reference fares.Operators of particular services may fix their own
fares within a range 15% above andbelow the indicative or reference rate.

LTFRB issued Memorandum Circular No. 92-009 promulgating the guidelines for thei
mplementation of DOTC Department Order No. 92-587, which provides, among
others,that:The issuance of a Certificate of Public Convenience is determined by
public need. Thepresumption of public need for a service shall be deemed in favor
of the applicant, whileburden of proving that there is no need for the proposed
service shall be the oppositors.The existing authorized fare range system of plus

or minus 15 per cent for provincialbuses and jeepneys shall be widened to 20% and
-25% limit in 1994 with the authorizedfare to be replaced by an indicative or
reference rate as the basis for the expanded farerange

PBOAP - availing itself of the deregulation policy of the DOTC allowing provincial
busoperators to collect plus 20% and minus 25% of the prescribed fare without first
havingfiled a petition for the purpose and without the benefit of a public hearing,
announced afare increase of twenty (20%) percent of the existing fares

KMU filed a petition before the LTFRB opposing the upward adjustment of bus fares.
ISSUE:
WON the above memoranda, circulars and/or orders of the DOTC and the
LTFRBwhich, among others, (a) authorize provincial bus and jeepney
operators to increase ordecrease the prescribed transportation fares without
application therefor with the LTFRB andwithout hearing and approval thereof by said
agency is in violation of Sec. 16(c) of CA 146,and in derogation of LTFRBs duty to fix
and determine just and reasonable fares bydelegating that function to bus
operators, and (b) establish a presumption of public need infavor of applicants for
certificates of public convenience and place on the oppositor theburden of proving
that there is no need for the proposed service, in patent violation not onlyof Sec.
16(c) of CA 146, as amended, but also of Sec. 20(a) of the same Act mandating
thatfares should be just and reasonable

HELD:
Yes.

Section 16(c) of the Public Service Act, as amended, reads:Sec. 16. Proceedings of
the Commission, upon notice and hearing. The Commission shallhave power,
upon proper notice and hearing in accordance with the rules and provisions of this
Act, subject to the limitations and exceptions mentioned and saving provisions to
thecontrary:xxx xxx
xxx(c) To fix and determine individual or joint rates, tolls, charges, classifications, or
schedules thereof, as well as commutation, mileage kilometrage, and other special
rateswhich shall be imposed, observed, and followed thereafter by any public
service: Provided, That the Commission may, in its discretion, approve rates
proposed by public servicesprovisionally and without necessity of any hearing; but it

shall call a hearing thereon

withinthirty days thereafter, upon publication and notice to the concerns operating i
n theterritory affected: Provided, further, That in case the
public service equipment of anoperator is used principally or secondarily for the
promotion of a private business, the netprofits of said private business shall be
considered in relation with the public service of such operator for the purpose
of fixing the rates.

LTFRB is authorized under EO 202, s. 1987 to determine, prescribe, approve andperi

odically review and adjust, reasonable fares, rates and other related charges,
relativeto the operation of public land transportation services provided by motorized
vehicles

LTFRB not authorized to delegate that power to a common carrier, a transport

operator,or other public service

authority given by the LTFRB to the provincial bus operators to set a fare range over
andabove the authorized existing fare, is illegal and invalid as it is tantamount to an
unduedelegation of legislative authority

rate should not be confiscatory as would place an operator in a situation where he

willcontinue to operate at a loss; rate should enable public utilities to generate
revenuessufficient to cover operational costs and provide reasonable return on
the investments

CPC - authorization granted by the LTFRB for the operation of land transportation
servicesfor public use as required by law. Pursuant to Section 16(a) of the Public
Service Act, asamended, the following requirements must be met before a CPC may
be granted, to wit: (i)the applicant must be a citizen of the
Philippines, or a corporation or co-partnership,association or joint-stock company co
nstituted and organized under the laws of thePhilippines, at least 60 per centum of
its stock or paid-up capital must belong entirely tocitizens of the Philippines; (ii) the
applicant must be financially capable of undertaking theproposed service and
meeting the responsibilities incident to its operation; and (iii)
theapplicant must prove that the operation of the public service proposed and thea
uthorization to do business will promote the public interest in a proper and

suitablemanner; there must be proper notice and hearing before the PSC can
exercise its power toissue a CPC

LTFRB Memorandum Circular No. 92-009, Part IV is incompatible and inconsistent

withSection 16(c)(iii) of the Public Service Act which requires that before a CPC will
be issued,the applicant must prove by proper notice and hearing that the operation
of the publicservice proposed will promote public interest in a proper and suitable
manner. On thecontrary, the policy guideline states that
the presumption of public need for a publicservice shall be deemed in favor of the
applicant.
ILUSANG MAYO UNO LABOR CENTER vs.HON. JESUS B. GARCIA, JR., the
LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD, and the
PROVINCIAL BUS OPERATORS ASSOCIATION OF THE PHILIPPINES G.R. No.
115381 December 23, 1994
FACTS :
Then Secretary of DOTC, Oscar M. Orbos, issued Memorandum Circular No. 90-395
to then LTFRB Chairman, Remedios A.S. Fernando allowing provincial bus operators
to charge passengers rates within a range of 15% above and 15% below the LTFRB
official rate for a period of one (1) year.
This range was later increased by LTFRB thru a Memorandum Circular No. 92-009
providing, among others, that The existing authorized fare range system of plus or
minus 15 per cent for provincial buses and jeepneys shall be widened to 20% and
-25% limit in 1994 with the authorized fare to be replaced by an indicative or
reference rate as the basis for the expanded fare range.
Sometime in March, 1994, private respondent PBOAP, availing itself of the
deregulation policy of the DOTC allowing provincial bus operators to collect plus
20% and minus 25% of the prescribed fare without first having filed a petition for
the purpose and without the benefit of a public hearing, announced a fare increase
of twenty (20%) percent of the existing fares.
On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the
upward adjustment of bus fares, which the LTFRB dismissed for lack of merit.
ISSUE:
Whether or not the authority given by respondent LTFRB to provincial bus operators
to set a fare range of plus or minus fifteen (15%) percent, later increased to plus
twenty (20%) and minus twenty-five (-25%) percent, over and above the existing
authorized fare without having to file a petition for the purpose, is unconstitutional,
invalid and illegal.

HELD:
Yes.
Under section 16(c) of the Public Service Act, the Legislature delegated to the
defunct Public Service Commission the power of fixing the rates of public services.
Respondent LTFRB, the existing regulatory body today, is likewise vested with the
same under Executive Order No. 202 dated June 19, 1987. x x x However, nowhere
under the aforesaid provisions of law are the regulatory bodies, the PSC and LTFRB
alike, authorized to delegate that power to a common carrier, a transport operator,
or other public service.
LITA ENTERPRISES, INC., vs.INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO
and FRANCISCA P. GARCIA.
[G.R. No. L-64693 April 27, 1984]
FACTS:
Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein
private respondents, purchased in installment from the Delta Motor Sales
Corporation five (5) Toyota Corona Standard cars to be used as taxicabs. Since they
had no franchise to operate taxicabs, they contracted with petitioner Lita
Enterprises, Inc., through its representative, Manuel Concordia, for the use of the
latter's certificate of public convenience in consideration of an initial payment of
P1,000.00 and a monthly rental of P200.00 per taxicab unit. To effectuate Id
agreement, the aforesaid cars were registered in the name of petitioner Lita
Enterprises, Inc, Possession, however, remained with tile spouses Ocampo who
operated and maintained the same under the name Acme Taxi, petitioner's trade
name.
About a year later one of said taxicabs driven by their employee, Emeterio Martin,
collided with a motorcycle whose driver, one Florante Galvez, died from the head
injuries sustained therefrom. A criminal case was eventually filed against the driver
Emeterio Martin, while a civil case for damages was instituted by Rosita Sebastian
Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., as registered owner
of the taxicab in the latter case. Petitioner Lita Enterprises, Inc. was adjudged liable
for damages by the CFI.
This decision having become final, a writ of execution was issued. Two of the
vehicles of respondent spouses were levied upon and sold at public auction.
Thereafter, Nicasio Ocampo decided to register his taxicabs in his name. He
requested the manager of petitioner Lita Enterprises, Inc. to turn over the
registration papers to him, but the latter allegedly refused. Hence, he and his wife
filed a complaint against Lita Enterprises, Inc., Mrs. de Galvez and the Sheriff of
Manila for reconveyance of motor vehicles with damages.

ISSUE: Whether or not petitioner has a cause of action against defendants.

HELD:
No.
Unquestionably, the parties herein operated under an arrangement, commonly
known as the "kabit system", whereby a person who has been granted a certificate
of convenience allows another person who owns motors vehicles to operate under
such franchise for a fee. A certificate of public convenience is a special privilege
conferred by the government . Abuse of this privilege by the grantees thereof
cannot be countenanced. The "kabit system" has been Identified as one of the root
causes of the prevalence of graft and corruption in the government transportation
offices. In the words of Chief Justice Makalintal, "this is a pernicious system that
cannot be too severely condemned. It constitutes an imposition upon the goo faith
of the government.
Although not outrightly penalized as a criminal offense, the "kabit system" is
invariably recognized as being contrary to public policy and, therefore, void and
inexistent under Article 1409 of the Civil Code, It is a fundamental principle that the
court will not aid either party to enforce an illegal contract, but will leave them both
where it finds them. Upon this premise, it was flagrant error on the part of both the
trial and appellate courts to have accorded the parties relief from their predicament.
Article 1412 of the Civil Code denies them such aid. It provides:
ART. 1412. if the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed:
(1) when the fault, is on the part of both contracting parties, neither may recover
what he has given by virtue of the contract, or demand the performance of the
other's undertaking.
Having entered into an illegal contract, neither can seek relief from the courts, and
each must bear the consequences of his acts.
The defect of inexistence of a contract is permanent and incurable, and cannot be
cured by ratification or by prescription. As this Court said in Eugenio v. Perdido, "the
mere lapse of time cannot give efficacy to contracts that are null void."
The principle of in pari delicto is well known not only in this jurisdiction but also in
the United States where common law prevails. Under American jurisdiction, the
doctrine is stated thus: "The proposition is universal that no action arises, in equity
or at law, from an illegal contract; no suit can be maintained for its specific
performance, or to recover the property agreed to be sold or delivered, or damages
for its property agreed to be sold or delivered, or damages for its violation. The rule

has sometimes been laid down as though it was equally universal, that where the
parties are in pari delicto, no affirmative relief of any kind will be given to one
against the other." Although certain exceptions to the rule are provided by law, We
see no cogent reason why the full force of the rule should not be applied in the
instant case.
resaid cars were then registered in the name of LitaEnterprises

one of the taxicabs driven by Ocampo and Garcias employee, Emeterio Martin,
collidedwith a motorcycle whose driver, Florante Galvez, died from the head injuries
sustainedtherefrom

a criminal case was filed against the driver Martin, while a civil case for damages
wasinstituted by heir of the victim against Lita Enterprises
ISSUE:
WON Lita Enterprises is liable to the heir of the victim who died as a result of
thegross negligence of Ocampo and Garcias driver while driving one private respon
dentstaxicabs
HELD:
Yes.

kabit system
system whereby a person who has been granted a certificate of convenience allow
s another person who owns motors vehicles to operate under suchfranchise for a
fee; contrary to public policy and, therefore, void and inexistent underArticle 1409
of the Civil Code; as a result, the court will not aid either party to enforce anillegal
contract, but will leave them both where it finds them (pari delicto rule)

Art. 1412: If the act in which the unlawful or forbidden cause consists does not
constitutea criminal offense, the following rules shall be observed; (1) when the
fault, is on the partof both contracting parties, neither may recover what he has
given by virtue of thecontract, or demand the performance of the others
undertaking.

the defect of inexistence of a contract is permanent and incurable, and cannot be

cured byratification or by prescription
BATANGAS CATV, INC. vs. THE COURT OF APPEALS, THE BATANGAS CITY
SANGGUNIANG PANLUNGSOD and BATANGAS CITY MAYOR [G.R. No. 138810.
September 29, 2004]
FACTS:
On July 28, 1986, respondent Sangguniang Panlungsod enacted Resolution No. 210
granting petitioner a permit to construct, install, and operate a CATV system in
Batangas City. Section 8 of the Resolution provides that petitioner is authorized to
charge its subscribers the maximum rates specified therein, provided, however,
that any increase of rates shall be subject to the approval of the Sangguniang
Panlungsod.
Sometime in November 1993, petitioner increased its subscriber rates from P88.00
to P180.00 per month. As a result, respondent Mayor wrote petitioner a letter
threatening to cancel its permit unless it secures the approval of respondent
Sangguniang Panlungsod, pursuant to Resolution No. 210.
Petitioner then filed with the RTC, Branch 7, Batangas City, a petition for injunction
alleging that respondent Sangguniang Panlungsod has no authority to regulate the
subscriber rates charged by CATV operators because under Executive Order No.
205, the National Telecommunications Commission (NTC) has the sole authority to
regulate the CATV operation in the Philippines.
ISSUE :
may a local government unit (LGU) regulate the subscriber rates charged by CATV
operators within its territorial jurisdiction?
HELD: No.
xxx
The logical conclusion, therefore, is that in light of the above laws and E.O. No. 436,
the NTC exercises regulatory power over CATV operators to the exclusion of other
bodies.
xxx
Like any other enterprise, CATV operation maybe regulated by LGUs under the
general welfare clause. This is primarily because the CATV system commits the
indiscretion of crossing public properties. (It uses public properties in order to reach
subscribers.) The physical realities of constructing CATV system the use of public

streets, rights of ways, the founding of structures, and the parceling of large regions
allow an LGU a certain degree of regulation over CATV operators.
xxx
But, while we recognize the LGUs power under the general welfare clause, we
cannot sustain Resolution No. 210. We are convinced that respondents strayed from
the well recognized limits of its power. The flaws in Resolution No. 210 are: (1) it
violates the mandate of existing laws and (2) it violates the States deregulation
policy over the CATV industry.
LGUs must recognize that technical matters concerning CATV operation are within
the exclusive regulatory power of the NTC.
COGEO-CUBAO OPERATORS AND DRIVERS ASSOCIATION vs. THE COURT OF
APPEALS, LUNGSOD SILANGAN TRANSPORT SERVICES, CORP., INC. G.R. No. 100727
March 18, 1992 FACTS: It appears that a certificate of public convenience to operate
a jeepney service was ordered to be issued in favor of Lungsod Silangan to ply the
Cogeo-Cubao route sometime in 1983 on the justification that public necessity and
convenience will best be served, and in the absence of existing authorized
operators on the lined apply for . . . On the other hand, defendant-Association was
registered as a nonstock, non-profit organization with the Securities and Exchange
Commission on October 30, 1985 . . . with the main purpose of representing
plaintiff-appellee for whatever contract and/or agreement it will have regarding the
ownership of units, and the like, of the members of the Association . . . Perturbed by
plaintiffs' Board Resolution No. 9 . . . adopting a Bandera' System under which a
member of the cooperative is permitted to queue for passenger at the disputed
pathway in exchange for the ticket worth twenty pesos, the proceeds of which shall
be utilized for Christmas programs of the drivers and other benefits, and on the
strength of defendants' registration as a collective body with the Securities and
Exchange Commission, defendants-appellants, led by Romeo Oliva decided to form
a human barricade on November 11, 1985 and assumed the dispatching of
passenger jeepneys . . . This development as initiated by defendants-appellants
gave rise to the suit for damages. Defendant-Association's Answer contained
vehement denials to the insinuation of take over and at the same time raised as a
defense the circumstance that the organization was formed not to compete with
plaintiff-cooperative. It, however, admitted that it is not authorized to transport
passengers . . . ISSUE : Whether or not the petitioner usurped the property right of
the respondent. HELD: Yes. xxx Under the Public Service Law, a certificate of public
convenience is an authorization issued by the Public Service Commission for the
operation of public services for which no franchise is required by law. In the instant
case, a certificate of public convenience was issued to respondent corporation on
January 24, 1983 to operate a public utility jeepney service on the Cogeo-Cubao
route. x x x A certification of public convenience is included in the term "property"

in the broad sense of the term. Under the Public Service Law, a certificate of public
convenience can be sold by the holder thereof because it has considerable material
value and is considered as valuable asset (Raymundo v. Luneta Motor Co., et al., 58
Phil. 889). Although there is no doubt that it is private property, it is affected with a
public interest and must be submitted to the control of the government for the
common good (Pangasinan Transportation Co. v. PSC, 70 Phil 221). Hence, insofar as
the interest of the State is involved, a certificate of public convenience does not
confer upon the holder any proprietary right or interest or franchise in the route
covered thereby and in the public highways (Lugue v. Villegas, L22545, Nov . 28,
1969, 30 SCRA 409). However, with respect to other persons and other public
utilities, a certificate of public convenience as property, which represents the right
and authority to operate its facilities for public service, cannot be taken or
interfered with without due process of law. Appropriate actions may be maintained
in courts by the holder of the certificate against those who have not been
authorized to operate in competition with the former and those who invade the
rights which the former has pursuant to the authority granted by the Public Service
Commission (A.L. Ammen Transportation Co. v. Golingco. 43 Phil. 280). In the case
at bar, the trial court found that petitioner association forcibly took over the
operation of the jeepney service in the Cogeo-Cubao route without any
authorization from the Public Service Commission and in violation of the right of
respondent corporation to operate its services in the said route under its certificate
of public convenience
C. B. WILLIAMS vs. TEODORO R. YANGCO
G.R. No. L-8325. March 10, 1914
FACTS:
The steamer Subic, owned by the defendant, collided with the lunch Euclid owned
by the plaintiff, in the Bay of Manila at an early hour on the morning of January 9,
1911, and the Euclid sank five minutes thereafter. This action was brought to
recover the value of the Euclid.
The court below held from the evidence submitted that the Euclid was worth at a
fair valuation P10,000; that both vessels were responsible for the collision; and that
the loss should be divided equally between the respective owners, P5,000 to be
paid the plaintiff by the defendant, and P5,000 to be borne by the plaintiff himself.
From this judgment both defendant and plaintiff appealed.
ISSUE:
Whether or not plaintiff should not be held liable on account of doctrine of last clear
chancethe defendant having the last opportunity to avoid the collision.
HELD:
No.

In cases of a disaster arising from the mutual negligence of two parties, the party
who has a last clear opportunity of avoiding the accident, notwithstanding the
negligence of his opponent, is considered wholly responsible for it under the
common-law rule of liability as applied in the courts of common law of the United
States. But this rule (which is not recognized in the courts of admiralty in the United
States, wherein the loss is divided in cases of mutual and concurring negligence, as
also where the error of one vessel has exposed her to danger of collision which was
consummated by he further rule, that where the previous application by the further
rule, that where the previous act of negligence of one vessel has created a position
of danger, the other vessel is not necessarily liable for the mere failure to recognize
the perilous situation; and it is only when in fact it does discover it in time to avoid
the casualty by the use of ordinary care, that it becomes liable for the failure to
make use of this last clear opportunity to avoid the accident. (See cases cited in
Notes, 7 Cyc., pp. 311, 312, 313.) So, under the English rule which conforms very
nearly to the common-law rule as applied in the American courts, it has been held
that the fault of the first vessel in failing to exhibit proper lights or to take the
proper side of the channel will relieve from liability one who negligently runs into
such vessels before he sees it; although it will not be a defense to one who, having
timely warning of the danger of collision, fails to use proper care to avoid it. (Pollock
on Torts, 374.). In the case at bar, the most that can be said in support of plaintiff's
contention is that there was negligence on the part of the officers on defendant's
vessel in failing to recognize the perilous situation created by the negligence of
those in charge of plaintiff's launch, and that had they recognized it in time, they
might have avoided the accident. But since it does not appear from the evidence
that they did, in fact, discover the perilous situation of the launch in time to avoid
the accident by the exercise of ordinary care, it is very clear that under the above
set out limitation to the rule, the plaintiff cannot escape the legal consequences of
the contributory negligence of his launch, even were we to hold that the doctrine is
applicable in the jurisdiction, upon which point we expressly reserve our decision at
this time.
COMMISSIONER OF CUSTOMS vs.THE COURT OF APPEALS
G.R. Nos. 111202-05 January 31, 2006
FACTS:
The whole controversy revolves around a vessel and its cargo. On January 7, 1989,
the vessel M/V "Star Ace," coming from Singapore laden with cargo, entered the Port
of San Fernando, La Union (SFLU) for needed repairs. The vessel and the cargo had
an appraised value, at that time, of more or less Two Hundred Million Pesos
(P200,000,000). When the Bureau of Customs later became suspicious that the
vessels real purpose in docking was to smuggle its cargo into the country, seizure
proceedings were instituted under S.I. Nos. 02-89 and 03-89 and, subsequently, two
Warrants of Seizure and Detention were issued for the vessel and its cargo.

Respondent Cesar S. Urbino, Sr., does not own the vessel or any of its cargo but
claimed a preferred maritime lien under a Salvage Agreement dated June 8, 1989.
To protect his claim, Urbino initially filed two motions in the seizure and detention
cases: a Motion to Dismiss and a Motion to Lift Warrant of Seizure and Detention.
Apparently not content with his administrative remedies, Urbino sought relief with
the regular courts by filing a case for Prohibition, Mandamus and Damages before
the RTC of SFLU, seeking to restrain the District Collector of Customs from
interfering with his salvage operation. The RTC of SFLU dismissed the case for lack
of jurisdiction because of the pending seizure and detention cases. Urbino then
elevated the matter to the CA. The Commissioner of Customs, in response, filed a
Motion to Suspend Proceedings, advising the CA that it intends to question the
jurisdiction of the CA before this Court. The motion was denied. Hence, in this
petition the Commissioner of Customs assails the Resolution "F" recited above and
seeks to prohibit the CA from continuing to hear the case.
ISSUE:
Whether Urbino's claim is a preferred lien in this case.
HELD:
No.
xxx
First of all, the Court finds the decision of the RTC of Manila, in so far as it relates to
the vessel M/V "Star Ace," to be void as jurisdiction was never acquired over the
vessel. In filing the case, Urbino had impleaded the vessel as a defendant to enforce
his alleged maritime lien. This meant that he brought an action in rem under the
Code of Commerce under which the vessel may be attached and sold. However, the
basic operative fact for the institution and perfection of proceedings in rem is the
actual or constructive possession of the res by the tribunal empowered by law to
conduct the proceedings. This means that to acquire jurisdiction over the vessel, as
a defendant, the trial court must have obtained either actual or constructive
possession over it. Neither was accomplished by the RTC of Manila.
In his comment to the petition, Urbino plainly stated that "petitioner has actual[sic]
physical custody not only of the goods and/or cargo but the subject vessel, M/V Star
Ace, as well." This is clearly an admission that the RTC of Manila did not have
jurisdiction over the res. While Urbino contends that the Commissioner of Customs
custody was illegal, such fact, even if true, does not deprive the Commissioner of
Customs of jurisdiction thereon. This is a question that ought to be resolved in the
seizure and forfeiture cases, which are now pending with the CTA, and not by the
regular courts as a collateral matter to enforce his lien. By simply filing a case in
rem against the vessel, despite its being in the custody of customs officials, Urbino
has circumvented the rule that regular trial courts are devoid of any competence to

pass upon the validity or regularity of seizure and forfeiture proceedings conducted
in the Bureau of Customs, on his mere assertion that the administrative proceedings
were a nullity.
On the other hand, the Bureau of Customs had acquired jurisdiction over the res
ahead and to the exclusion of the RTC of Manila. The forfeiture proceedings
conducted by the Bureau of Customs are in the nature of proceedings in rem and
jurisdiction was obtained from the moment the vessel entered the SFLU port.
Moreover, there is no question that forfeiture proceedings were instituted and the
vessel was seized even before the filing of the RTC of Manila case.
The Court is aware that Urbino seeks to enforce a maritime lien and, because of its
nature, it is equivalent to an attachment from the time of its existence.
Nevertheless, despite his liens constructive attachment, Urbino still cannot claim
an advantage as his lien only came about after the warrant of seizure and detention
was issued and implemented. The Salvage Agreement, upon which Urbino based his
lien, was entered into on June 8, 1989. The warrants of seizure and detention, on
the other hand, were issued on January 19 and 20, 1989. And to remove further
doubts that the forfeiture case takes precedence over the RTC of Manila case, it
should be noted that forfeiture retroacts to the date of the commission of the
offense, in this case the day the vessel entered the country. A maritime lien, in
contrast, relates back to the period when it first attached, in this case the earliest
retroactive date can only be the date of the Salvage Agreement. Thus, when the
vessel and its cargo are ordered forfeited, the effect will retroact to the moment the
vessel entered Philippine waters.
Accordingly, the RTC of Manila decision never attained finality as to the defendant
vessel, inasmuch as no jurisdiction was acquired over it, and the decision cannot be
binding and the writ of execution issued in connection therewith is null and void.
PHILIPPINE CHARTER INSURANCE CORPORATION vs. UNKNOWN OWNER OF THE
VESSEL M/V NATIONAL HONOR, NATIONAL SHIPPING CORPORATION OF THE
PHILIPPINES and INTERNATIONAL CONTAINER SERVICES, INC.
[G.R. No. 161833. July 8, 2005]
FACTS:
Petitioner Philippine Charter Insurance Corporation (PCIC) is the insurer of a
shipment on board the vessel M/V National Honor, represented in the Philippines
by its agent, National Shipping Corporation of the Philippines (NSCP).
The M/V National Honor arrived at the Manila International Container Terminal
(MICT). The International Container Terminal Services, Incorporated (ICTSI) was
furnished with a copy of the crate cargo list and bill of lading, and it knew the
contents of the crate. The following day, the vessel started discharging its cargoes

using its winch crane. The crane was operated by Olegario Balsa, a winchman from
the ICTSI, exclusive arrastre operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the
surveyor of the ICTSI, conducted an inspection of the cargo. They inspected the
hatches, checked the cargo and found it in apparent good condition. Claudio
Cansino, the stevedore of the ICTSI, placed two sling cables on each end of Crate
No. 1. No sling cable was fastened on the mid-portion of the crate. In Dauzs
experience, this was a normal procedure. As the crate was being hoisted from the
vessels hatch, the mid-portion of the wooden flooring suddenly snapped in the air,
about five feet high from the vessels twin deck, sending all its contents crashing
down hard, resulting in extensive damage to the shipment.
PCIC paid the damage, and as subrogee, filed a case against M/V National Honor,
NSCP and ICTSI. Both RTC and CA dismissed the complaint.
ISSUE:
Whether or not the presumption of negligence is applicable in the instant case.
HELD:
No.
We agree with the contention of the petitioner that common carriers, from the
nature of their business and for reasons of public policy, are mandated to observe
extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.
he Court has defined extraordinary diligence in the vigilance over the goods as
follows:
The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for sale, carriage
and delivery. It requires common carriers to render service with the greatest skill
and foresight and to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires.
The common carriers duty to observe the requisite diligence in the shipment of
goods lasts from the time the articles are surrendered to or unconditionally placed
in the possession of, and received by, the carrier for transportation until delivered
to, or until the lapse of a reasonable time for their acceptance, by the person
entitled to receive them.] >When the goods shipped are either lost or arrive in
damaged condition, a presumption arises against the carrier of its failure to observe
that diligence, and there need not be an express finding of negligence to hold it
liable. To overcome the presumption of negligence in the case of loss, destruction or

deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence.
However, under Article 1734 of the New Civil Code, the presumption of negligence
does not apply to any of the following causes:
1.
2.
3.
4.
5.

Flood, storm, earthquake, lightning or other natural disaster or calamity;

Act of the public enemy in war, whether international or civil;
Act or omission of the shipper or owner of the goods;
The character of the goods or defects in the packing or in the containers;
Order or act of competent public authority.

It bears stressing that the enumeration in Article 1734 of the New Civil Code which
exempts the common carrier for the loss or damage to the cargo is a closed list. To
exculpate itself from liability for the loss/damage to the cargo under any of the
causes, the common carrier is burdened to prove any of the aforecited causes
claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of
evidence is shifted to the shipper to prove that the carrier is negligent.
Defect is the want or absence of something necessary for completeness or
perfection; a lack or absence of something essential to completeness; a deficiency
in something essential to the proper use for the purpose for which a thing is to be
used. On the other hand, inferior means of poor quality, mediocre, or second rate. A
thing may be of inferior quality but not necessarily defective. In other words,
defectiveness is not synonymous with inferiority.
xxx
In the present case, the trial court declared that based on the record, the loss of the
shipment was caused by the negligence of the petitioner as the shipper:
The same may be said with respect to defendant ICTSI. The breakage and collapse
of Crate No. 1 and the total destruction of its contents were not imputable to any
fault or negligence on the part of said defendant in handling the unloading of the
cargoes from the carrying vessel, but was due solely to the inherent defect and
weakness of the materials used in the fabrication of said crate.
The crate should have three solid and strong wooden batten placed side by side
underneath or on the flooring of the crate to support the weight of its contents.
[G.R. No. 161833. July 8, 2005]PHILIPPINE CHARTER INSURANCE
CORPORATION,
petitioner,

vs
UNKNOWN OWNER OF THE VESSEL M/V NATIONAL HONOR,
NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES
andINTERNATIONAL CONTAINER SERVICES, INC.,
respondents.
FACTS:
carrier - National Shipping Corporation of the Philippines (NSCP)

Consignee - Blue Mono International Company, Incorporated (BMICI)

Insurer - Philippine Charter Insurance Corporation (PCIC)

Arrastre Operator - International Container Terminal Services, Incorporated (ICTSI)

On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four
units of parts andaccessories in the port of Pusan, Korea, on board the vessel M/V
National Honor
,

represented in thePhilippines by its agent,

National Shipping Corporation of the Philippines (NSCP).
The goods were tobe delivered to the ultimate consignee
Blue Mono International Company, Incorporated (BMICI)
. Theshipment was contained in two wooden crates, namely, Crate No. 1 and Crate
No. 2, complete and ingood order condition. There were no markings on the outer
portion of the crates except the name ofthe consignee.
[7]

Crate No. 1 measured 24 cubic meters and weighed 3,620 kgs. On the flooring of
the woodencrates were three wooden battens placed side by side to support
the weight of the cargo.

Crate No. 2, on the other hand, measured 10 cubic meters and weighed 2,060 kgs.

It was insured for P2,547,270.00 with the

Philippine Charter Insurance Corporation (PCIC).
Uponarrival,
the International Container Terminal Services, Incorporated (ICTSI)
was furnished with a copyof the crate cargo list and bill of lading, and it knew the
contents of the crate.
[11]
The following day,the vessel started discharging its cargoes using its winch crane.
Claudio Cansino, the stevedore of theICTSI, placed two sling cables on each end of
Crate No. 1.
[15]
No sling cable was fastened on the mid- portion of the crate.
In Dauzs experience, this was a normal procedure.
[16]
As the crate was beinghoisted
from the vessels hatch, the mid
-portion of the wooden flooring suddenly snapped in the air,

about five feet high from the vessels twin deck, sending all its contents crashing
down
hard ,
[17]
r esulting in extensive damage to the shipment.
BMICIs customs broker, JRM Incorporated,
took delivery of the cargo in such damaged condition.
[18]
Upon receipt of the damaged shipment,BMICI found that the same could no longer
be used for the intended purpose.
BMICI subsequentlyfiled separate claims against the NSCP,
the ICTSI,
and its insurer, the PCIC,
forUS$61,500.00. When the other companies denied liability, PCIC paid the claim
and was issued aSubrogation Receipt
for P1,740,634.50. On March 22, 1995, PCIC, as subrogee,

filed with the RTC ofManila, Branch 35, a Complaint for Damages

against the Unknown owner of the vessel M/V

National Honor, NSCP and ICTSI, as defendants. PCIC alleged that the loss was due
to the fault and
negligence of the defendants.

RTC - rendered judgment for PCIC and ordered the complaint dismissed.

The loss was due to the internal defect and weakness of the materials used in
thefabrication of the crates. The middle wooden batten had a hole (
bukong-bukong
).

CA

affirmed in toto the RTCs decision

The loss of the shipment was due to an excepted cause

*t
]he character of the goods or
defects in the packing or in the containers and the failure of the shipper to indicate
signs to
notify the stevedores that extra care should be employed in handling the shipment.
ISSUE:

W/N respondents should be held liable for the damage of the goods.
HELD:
NO. Common carriers, from the nature of their business and for reasons of public
policy, are mandatedto observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengerstransported by them, according to all the
circumstances of each case.The extraordinary diligence in thevigilance over the
goods tendered for shipment requires the common carrier to know and to follow
therequired precaution for avoiding damage to, or destruction of the goods
entrusted to it for sale, carriage anddelivery.
It requires common carriers to render service with the greatest skill and foresight
and to use all
reasonable means to ascertain the nature and characteristic of goods tendered for
shipment, and to exercise
due care in the handling and stowage, including such methods as their nature
requires.

The common carriers duty to observe the requisite dili

gence in the shipment of goods lasts from the timethe articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier
fortransportation until delivered to, or until the lapse of a reasonable time for their
acceptance, by the personentitled to receive them.
When the goods shipped are either lost or arrive in damaged condition,
apresumption arises against the carrier of its failure to observe that diligence,
and there need not be an expressfinding of negligence to hold it liable.
To overcome the presumption of negligence in the case of loss,destruction or
deterioration of the goods, the common carrier must prove that it exercised
extraordinarydiligence.
However, under Article 1734 of the New Civil Code, the presumption of negligence
does not apply to anyof the following causes:1. Flood, storm, earthquake,
lightning or other natural disaster or calamity;2. Act of the public enemy in war,
whether international or civil;3. Act or omission of the shipper or owner of
the goods;
4. The character of the goods or defects in the packing or in
the containers;
5. Order or act of competent public authority.

Defect is the want or absence of somethin

g necessary for completeness or perfection; a lack or absenceof something
essential to completeness; a deficiency in something essential to the proper use for
the purposefor which a thing is to be used.
On the other hand, inferior means of poor quality, mediocre, or secondrate.
A thing may be of inferior quality but not necessarily defective.
In other words, defectiveness is notsynonymous with inferiority.
In the present case, the trial court declared that based on the record, the loss
of the shipment was causedby the negligence of the petitioner as the shipper:The
case at bar falls under one of the exceptions mentioned in Article 1734 of the Civil
Code, particularlynumber (4) thereof,
i.e.
, the character of the goods or defects in the packing or in the containers. The
trialcourt found that the breakage of the crate was not due to the fault or
negligence of ICTSI, but to the inherentdefect and weakness of the materials used in
the fabrication of the said crate.

It appears that the wooden batten used as support for the flooring was not made
of good materials, whichcaused the middle portion thereof to give way when it was
lifted. The shipper also failed to indicate signs tonotify the stevedores that extra
care should be employed in handling the shipment.The petitioner failed to rebut the
evidence of respondent, that the crates were sealed and that thecontents thereof
could not be seen from the outside.
[52]
While it is true that the crate contained machineriesand spare parts, it cannot
thereby be concluded that the respondents knew or should have known that
themiddle wooden batten had a hole, or that it was not strong enough to bear the
weight of the shipment.
MONARCH INSURANCE CO., INC vs. COURT OF APPEALS and ABOITIZ SHIPPING
CORPORATION
G.R. No. 92735. June 8, 2000
FACTS:
Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified the
shippers and were consequently subrogated to their rights, interests and actions
against Aboitiz, the cargo carrier. Because Aboitiz refused to compensate Monarch,

it filed two complaints against Aboitiz which were consolidated and jointly tried.
Aboitiz rejected responsibility for the claims on the ground that the sinking of its
cargo vessel was due to force majeure or an act of God. Aboitiz was subsequently
declared as in default and allowed Monarch and Tabacalera to present evidence exparte.
ISSUE:
Whether or not the doctrine of limited liability applies in the instant case.
HELD:
Yes.
The failure of Aboitiz to present sufficient evidence to exculpate itself from fault
and/or negligence in the sinking of its vessel in the face of the foregoing expert
testimony constrains us to hold that Aboitiz was concurrently at fault and/or
negligent with the ship captain and crew of the M/V P. Aboitiz. [This is in accordance
with the rule that in cases involving the limited liability of shipowners, the initial
burden of proof of negligence or unseaworthiness rests on the claimants. However,
once the vessel owner or any party asserts the right to limit its liability, the burden
of proof as to lack of privity or knowledge on its part with respect to the matter of
negligence or unseaworthiness is shifted to it. This burden, Aboitiz had
unfortunately failed to discharge.] That Aboitiz failed to discharge the burden of
proving that the unseaworthiness of its vessel was not due to its fault and/or
negligence should not however mean that the limited liability rule will not be
applied to the present cases. The peculiar circumstances here demand that there
should be no strict adherence to procedural rules on evidence lest the just claims of
shippers/insurers be frustrated. The rule on limited liability should be applied in
accordance with the latest ruling in Aboitiz Shipping Corporation v. General Accident
Fire and Life Assurance Corporation, Ltd.,] promulgated on January 21, 1993, that
claimants be treated as "creditors in an insolvent corporation whose assets are not
enough to satisfy the totality of claims against it."
Aboitiz v New India G..R. No. 156978 May 2, 2006
J. Quisimbing

Facts:
Textile cargo owned by General Textile was shipped to Manila using M/V P. Aboitiz.
Before departing, the vessel was advised that it was safe to travel to its destination,
but while at sea, the vessel received a report of a typhoon moving within its path. It
was at the edge of a typhoon when its hull leaker. The vessel sank, but the captain
and his crew were saved.

The captain filed his Marine Protest, stating that the weather was moderate
breeze, small waves, becoming longer, fairly frequent white horse
General Textile lodged a claim with respondent for the amount of its loss.
Respondent paid General Textile and was subrogated to the rights of the latter.
After investigation, the cause was found to be the vessels unsearworthiness.
General filed a complaint with Aboitiz and the trial court consequently ruled in favor
of the former.
Petitioner elevated the case to the Court of Appeals, which in turn, affirmed the trial
courts decision. It moved for reconsideration but the same was denied. Hence, this
petition for review

Issue:
WON the limited liability doctrine applies in this case

Held: No

Ratio:
Where the shipowner fails to overcome the presumption of negligence, the doctrine
of limited liability cannot be applied.
From the nature of their business and for reasons of public policy, common carriers
are bound to observe extraordinary diligence over the goods they transport
according to all the circumstances of each case. In the event of loss, destruction or
deterioration of the insured goods, common carriers are responsible, unless they
can prove that the loss, destruction or deterioration was brought about by the
causes specified in Article 1734 of the Civil Code. In all other cases, common
carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence. Moreover, where the vessel
is found unseaworthy, the shipowner is also presumed to be negligent since it is
tasked with the maintenance of its vessel. Though this duty can be delegated, still,
the shipowner must exercise close supervision over its men.
In the present case, petitioner has the burden of showing that it exercised
extraordinary diligence in the transport of the goods it had on board in order to
invoke the limited liability doctrine. Differently put, to limit its liability to the

amount of the insurance proceeds, petitioner has the burden of proving that the
unseaworthiness of its vessel was not due to its fault or negligence.
Considering the evidence presented and the circumstances obtaining in this case,
we find that petitioner failed to discharge this burden. Both the trial and the
appellate courts, in this case, found that the sinking was not due to the typhoon but
to its unseaworthiness. Evidence on record showed that the weather was moderate
when the vessel sank. These factual findings of the Court of Appeals, affirming
those of the trial court are not to be disturbed on appeal, but must be accorded
great weight. These findings are conclusive not only on the parties but on this Court
as well.
ABOITIZ SHIPPING CORPORATION vs. NEW INDIA ASSURANCE COMPANY, LTD G..R.
No. 156978 May 2, 2006
FACTS:
Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals
from France on board a vessel owned by Franco-Belgian Services, Inc. The cargo
was consigned to General Textile, Inc., in Manila and insured by respondent New
India Assurance Company, Ltd. While in Hong Kong, the cargo was transferred to
M/V P. Aboitiz for transshipment to Manila.
Before departing, the vessel was advised by the Japanese Meteorological Center
that it was safe to travel to its destination. But while at sea, the vessel received a
report of a typhoon moving within its general path. To avoid the typhoon, the vessel
changed its course. However, it was still at the fringe of the typhoon when its hull
leaked. On October 31, 1980, the vessel sank, but the captain and his crew were
saved.
Both the trial and the appellate courts found that the sinking was not due to the
typhoon but to its unseaworthiness.
ISSUE:
Whether the limited liability doctrine, which limits respondents award of damages
to its pro-rata share in the insurance proceeds, applies in this case.
HELD:
No. x x x An exception to the limited liability doctrine is when the damage is due to
the fault of the shipowner or to the concurrent negligence of the shipowner and the
captain. In which case, the shipowner shall be liable to the full-extent of the
damage.
xxx

In the present case, petitioner has the burden of showing that it exercised
extraordinary diligence in the transport of the goods it had on board in order to
invoke the limited liability doctrine. Differently put, to limit its liability to the amount
of the insurance proceeds, petitioner has the burden of proving that the
unseaworthiness of its vessel was not due to its fault or negligence. Considering the
evidence presented and the circumstances obtaining in this case, we find that
petitioner failed to discharge this burden. It initially attributed the sinking to the
typhoon and relied on the BMI findings that it was not at fault. However, both the
trial and the appellate courts, in this case, found that the sinking was not due to the
typhoon but to its unseaworthiness. Evidence on record showed that the weather
was moderate when the vessel sank. These factual findings of the Court of Appeals,
affirming those of the trial court are not to be disturbed on appeal, but must be
accorded great weight. These findings are conclusive not only on the parties but on
this Court as well.

PHILCONSA VS. GIMENEZ

FACTS
RA No. 3836, An Act Amending Subsection , Section 12 of Commonwealth Act
Numbered 186. As Amended by Republic Act Numbered 3096, allows a Senator or
a member of the House of Representatives and an elective officer of either House of
Congress to retire regardless of age and whose service must be at least 12 years.
Philippine Constitution Association, Inc. , a non-profit civic organization duly
incorporated under Philippine laws instituted this petition challenging the
constitutionality of the law in question.
ISSUE
Whether or not the little of RA No. 3836 is germane to the subject matter expressed
in the act.
HELD
No. It is to be observed that under RA No. 3836, amending the first paragraph of
section 12, subsection c of CA No. 186, retirement benefits are granted to members
of GSIS. This paragraph is related and germane to the subject of CA No. 186. The
succeeding paragraph of RA. No 3836 refers to members of Congress and elective in
any manner to the subject of CA. No. 186 establishing the GSIS and which provides
both retirement and issuance benefits to its members.
The constitutionality requirement with respect to titles of statutes as
sufficient to reflect their contents is not met by the title of said RA. No. 3836, thus ,
void.

PHILCONSA v. PEDRO M. GIMENEZ G.R. No. L-23326 December 18, 1965

Facts:
Philippine Constitution Association, Inc (PHILCONSA) assails the validity of
RA 3836 insofar as the same allows retirement gratuity and commutation of
vacation and sick leave to Senators and Representatives, and to the elective
officials of both Houses (of Congress). The provision on retirement gratuity is an
attempt to circumvent the Constitutional ban on increase of salaries of the
members of Congress during their term of office, contrary to the provisions of Article
VI, Section 14 of the Constitution. The same provision constitutes selfish class
legislation because it allows members and officers of Congress to retire after
twelve (12) years of service and gives them a gratuity equivalent to one year salary
for every four years of service, which is not refundable in case of reinstatement or
re election of the retiree, while all other officers and employees of the government
can retire only after at least twenty (20) years of service and are given a gratuity
which is only equivalent to one month salary for every year of service, which, in any
case, cannot exceed 24 months. The provision on vacation and sick leave,
commutable at the highest rate received, insofar as members of Congress are
concerned, is another attempt of the legislator to further increase their
compensation in violation of the Constitution.
The Solicitor General counter-argued alleging that the grant of retirement or
pension benefits under Republic Act No. 3836 to the officers objected to by the
petitioner does not constitute forbidden compensation within the meaning of
Section 14 of Article VI of the Philippine Constitution. The law in question does not
constitute class legislation. The payment of commutable vacation and sick leave
benefits under the said Act is merely in the nature of a basis for computing the
gratuity due each retiring member and, therefore, is not an indirect scheme to
increase their salary.
Issue:
whether Republic Act 3836 violates Section 14, Article VI, of the
Constitution which reads as follows:
The senators and the Members of the House of Representatives shall, unless
otherwise provided by law, receive an annual compensation of seven thousand two
hundred pesos each, including per diems and other emoluments or allowances, and
exclusive only of travelling expenses to and from their respective districts in the
case of Members of the House of Representative and to and from their places of
residence in the case of Senators, when attending sessions of the Congress. No
increase in said compensation shall take effect until after the expiration of the full
term of all the Members of the Senate and of the House of Representatives
approving such increase. Until otherwise provided by law, the President of the

Senate and the Speaker of the House of Representatives shall each receive an
annual compensation of sixteen thousand pesos.
Held:
Yes. When the Constitutional Convention first determined the
compensation for the Members of Congress, the amount fixed by it was only
P5,000.00 per annum but it embodies a special proviso which reads as follows: No
increase in said compensation shall take effect until after the expiration of the full
term of all the members of the National Assembly elected subsequent to approval of
such increase. In other words, under the original constitutional provision regarding
the power of the National Assembly to increase the salaries of its members, no
increase would take effect until after the expiration of the full term of the members
of the Assembly elected subsequent to the approval of such increase.
The Constitutional provision in the aforementioned Section 14, Article VI, includes in
the term compensation other emoluments. This is the pivotal point on this
fundamental question as to whether the retirement benefit as provided for in
Republic Act 3836 fall within the purview of the term other emoluments.
Emolument is defined as the profit arising from office or employment; that which is
received as compensation for services or which is annexed to the possession of an
office, as salary, fees and perquisites.
It is evident that retirement benefit is a form or another species of emolument,
because it is a part of compensation for services of one possessing any office.
Republic Act 3836 provides for an increase in the emoluments of Senators and
Members of the House of Representatives, to take effect upon the approval of said
Act, which was on June 22, 1963. Retirement benefits were immediately available
thereunder, without awaiting the expiration of the full term of all the Members of
the Senate and the House of Representatives approving such increase. Such
provision clearly runs counter to the prohibition in Article VI, Section 14 of the
Constitution. RA 3836 is therefore unconstitutional.
Philippine Constitution Association, Inc. vs Pedro Gimenez
Philippine Constitution Association, Inc (PHILCONSA) assails the validity of Republic
Act No. 3836 insofar as the same allows retirement gratuity and commutation of
vacation and sick leave to Senators and Representatives. PHILCONSA now seeks to
enjoin Pedor Gimenez, the Auditor General, from disbursing funds therefor.
According to PHILCONSA, the provision on retirement gratuity is an attempt to
circumvent the Constitutional ban on increase of salaries of the members of
Congress during their term of office, contrary to the provisions of Article VI, Section
14 of the Constitution. The same provision constitutes selfish class legislation
because it allows members and officers of Congress to retire after twelve (12) years

of service and gives them a gratuity equivalent to one year salary for every four
years of service, which is not refundable in case of reinstatement or re-election of
the retiree, while all other officers and employees of the government can retire only
after at least twenty (20) years of service and are given a gratuity which is only
equivalent to one month salary for every year of service, which, in any case, cannot
exceed 24 months. The provision on vacation and sick leave, commutable at the
highest rate received, insofar as members of Congress are concerned, is another
attempt of the legislator to further increase their compensation in violation of the
Constitution.
The Solicitor General, arguing for Congress, averred that the grant of retirement or
pension benefits under Republic Act No. 3836 to the officers does not constitute
forbidden compensation within the meaning of Section 14 of Article VI of the
Philippine Constitution. The law in question does not constitute class legislation. The
payment of commutable vacation and sick leave benefits under the said Act is
merely in the nature of a basis for computing the gratuity due each retiring
member and, therefore, is not an indirect scheme to increase their salary.
ISSUE: Whether or not RA 3836 is constitutional.
HELD: No, the said law is unconstitutional. Section 14, Article VI, of the
Constitution, provides:
The senators and the Members of the House of Representatives shall, unless
otherwise provided by law, receive an annual compensation of seven thousand two
hundred pesos each, including per diems and other emoluments or allowances, and
exclusive only of travelling expenses to and from their respective district in the
case of Members of the House of Representatives and to and from their places of
residence in the case of Senators, when attending sessions of the Congress. No
increase in said compensation shall take effect until after the expiration of the full
term of all the Members of the Senate and of the House of Representatives
approving such increase. Until otherwise provided by law, the President of the
Senate and the Speaker of the House of Representatives shall each receive an
annual compensation of sixteen thousand pesos.
When the Constitutional Convention first determined the compensation for the
Members of Congress, the amount fixed by it was only P5,000.00 per annum but it
embodies a special proviso which reads as follows:
No increase in said compensation shall take effect until after the expiration of the
full term of all the members of the National Assembly elected subsequent to
approval of such increase.
In other words, under the original constitutional provision regarding the power of
the National Assembly to increase the salaries of its members, no increase would

take effect until after the expiration of the full term of the members of the Assembly
elected subsequent to the approval of such increase.
The Constitutional provision in the aforementioned Section 14, Article VI, includes in
the term compensation other emoluments.
Emolument is the profit arising from office or employment; that which is received
as compensation for services or which is annexed to the possession of an office, as
salary, fees and perquisites.
It is evident that retirement benefit is a form or another species of emolument,
because it is a part of compensation for services of one possessing any office.
RA 3836 provides for an increase in the emoluments of Senators and Members of
the House of Representatives, to take effect upon the approval of said Act, which
was on June 22, 1963. Retirement benefits were immediately available thereunder,
without awaiting the expiration of the full term of all the Members of the Senate and
the House of Representatives approving such increase. Such provision clearly runs
counter to the prohibition in Article VI, Section 14 of the Constitution. RA 3836 is
hereby declared unconstitutional by the SC.