PHILIPPINE AIRLINES, INC.

, petitioner,
vs.
CIVIL AERONAUTICS BOARD and GRAND
INTERNATIONAL AIRWAYS,
INC., respondents.
TORRES, JR., J.:
Facts:

Ruling:
Yes, there is no legal obstacle in the
exercise of CAB of its jurisdiction. As
mentioned by the CAB, it is duly authorized to
do so under Republic Act 776 and a legislative
franchise is not necessary before it may do
so, since Congress has delegated the
authority to authorize the operation of
domestic air transport services to the CAB, an
administrative agency. The delegation of such
authority is not without limits since Congress
had set specific standard and limitations on
how such authority should be exercised.

Grand Air applied for a Certificate of Public

Convenience and Necessity with the Civil
Aeronautics Board (CAB). The Chief Hearing
Officer issued a notice of hearing directing
Grand Air to serve a copy of the application
and notice to all scheduled Philippine
Domestic operators. Grand Air filed its
compliance and requested for a Temporary
Operating Permit (TOP). PAL filed an
opposition to the application on the ground
that the CAB had no jurisdiction to hear the
application until Grand Air first obtains a
franchise to operate from Congress. The Chief
Hearing Officer denied the opposition and the
CAB approved the issuance of the TOP for a
period of 3 months. Petitioner opposed private
respondent's application for a temporary
permit maintaining that:

Public convenience and necessity

exists when the proposed facility will meet a
reasonable want of the public and supply a
need which the existing facilities do not
adequately afford.
1. The Board is expressly authorized by
Republic Act 776 to issue a temporary
operating permit or Certificate of
Public Convenience and Necessity, and
nothing contained in the said law
negates the power to issue said permit
before
the
completion
of
the
applicant's evidence and that of the
oppositor thereto on the main petition.
Indeed, the CAB's authority to grant a
temporary permit "upon its own
initiative" strongly suggests the power
to exercise said authority, even before
the presentation of said evidence has
begun.

1. The applicant does not

possess the required fitness
and capability of operating the
services applied for under RA
776; and,
2. Applicant has failed to prove
that there is clear and urgent
public need for the services
applied for.6

2. Congress
has
granted
certain
administrative agencies the power to
grant licenses for, or to authorize the
operation of certain public utilities.
With the growing complexity of
modern life, the multiplication of the
subjects of governmental regulation,
and
the
increased
difficulty
of
administering the laws, there is a
constantly growing tendency towards
the delegation of greater powers by
the legislature, and towards the
approval of the practice by the
courts. 14

The opposition for the TOP was

likewise denied. The CAB justified its
assumption of jurisdiction over Grand Airs
application on the basis of Republic Act 776
which gives it the specific power to issue any
TOP or Certificate of Public Convenience and
Necessity. It held that CAB can issue not only
a TOP but also a Certificate of Public
Convenience and Necessity (CPCN) to a
qualified applicant therefor in the absence of
a legislative franchise and that fanchises by
Congress are not required before each and
every public utility may operate when the law
has granted certain administrative agencies
the power to grant licenses for or to authorize
the operation of certain public utilities
Issue:

3.

Whether or not the CAB can issue a Certificate

of Public Convenience and Necessity or TOP
even though the prospective operator does
not have a legislative franchise?

There is nothing in the law nor in the

Constitution, which indicates that a
legislative
franchise
is
an
indispensable requirement for an
entity to operate as a domestic air
transport operator. Although Section
11 of Article XII recognizes Congress'

control over any franchise, certificate

or authority to operate a public utility,
it does not mean Congress has
exclusive authority to issue the same.
Franchises issued by Congress are not
required before each and every public
utility
may
operate. 19 In
many
instances, Congress has seen it fit to
delegate this function to government
agencies, specialized particularly in
their respective areas of public service.

PHILIPPINES FIRST INSURANCE CO.,

INC., Petitioner,
vs.
WALLEM
PHILS.
SHIPPING,
INC.,
UNKNOWN OWNER AND/OR UNKNOWN
CHARTERER
OF
THE
VESSEL
M/S
"OFFSHORE MASTER" AND "SHANGHAI
FAREAST
SHIP
BUSINESS
COMPANY," Respondents.
Facts:
Anhui Chemicals Import & Export
Corporation loaded on board M/S
Offshore Master a shipment consisting
of 10,000 bags of sodium sulphate
anhydrous complete and in good order
for transportation to and delivery at
the port of Manila for consignee, L.G.
Atkimson
Import-Export,
Inc.
(consignee), covered by a Clean Bill of
Lading.
The Owner and/or Charterer of M/V
Offshore Master is unknown while the
shipper of the shipment is Shanghai
Fareast Ship Business Company. Both
are foreign firms doing business in the
Philippines, thru its local ship agent,
respondent
Wallem
Philippines
Shipping, Inc. (Wallem).
shipment arrived at the port of Manila on
board the vessel M/S Offshore Master from
which it was subsequently discharged. It
was disclosed during the discharge that
the poly bags (bags) were in bad order
and condition,
Asia Star Freight Services, Inc. undertook
the delivery of the subject shipment from
the pier to the consignees warehouse
During the unloading, it was found and
noted that the bags had been
discharged in damaged and bad order
condition.
Upon inspection, it was discovered that
shipment had sustained unrecovered
spillages, while others had been
exposed and contaminated
consignee filed a formal claim with
Wallem for the value of the damaged
shipment, to no avail.
Since the shipment was insured with
petitioner Philippines First Insurance
Co., Inc., consignee filed a formal
claim with petitioner for the damage
and losses sustained by the shipment
which petitioner approved

4. Clear intent of Congress to delegate

the authority to regulate the issuance
of a license to operate domestic air
transport services:
Sec. 10. Powers and Duties of
the Board. (A) Except as
otherwise provided herein, the
Board shall have the power
to regulate the economic
aspect of air transportation,
and
shall
have
general
supervision and regulation of,
the jurisdiction and control over
air carriers, general sales
agents, cargo sales agents, and
air freight forwarders as well as
their
property
rights,
equipment,
facilities
and
franchise, insofar as may be
necessary for the purpose of
carrying out the provision of
this Act.
o

In support of the Board's

authority as stated above, it is
given specific powers and
duties

Congress, in this instance, has

set specific limitations on how
such
authority
should
be
exercised.

Presence
policies

More importantly, the said law

has
enumerated
the
requirements to determine the
competency of a prospective
operator to engage in the
public
service
of
air
transportation.

of

guidelines

procedure for the processing of

the application of a Certificate
of Public Convenience and
Necessity had been established
to ensure the weeding out of
those entities that are not
deserving of public service. 25

or

Issue:

a. Respondents
carrier.

Consequently, petitioner paid the

consignee the sum of P397,879.69 and
the latter signed a subrogation receipt.
Petitioner, in the exercise of its right of
subrogation, sent a demand letter to
Wallem for the recovery of the amount
paid by petitioner to the consignee.
However, despite receipt of the letter,
Wallem did not settle nor even send a
response to petitioners claim.
Petitioner instituted an action before
the
RTC
for
damages
against
respondents
for
the
recovery
ofP397,879.69 representing the actual
damages suffered by petitioner plus
legal interest thereon
Trial
Court:
Petitioner;
order
respondents to pay Petitioner
o attributed the damage and
losses
sustained
by
the
shipment
to
the
arrastre
operators mishandling in the
discharge of the shipment.
o shipping company and the
arrastre
operator
solidarily
liable since both the arrastre
operator and the carrier are
charged with and obligated to
deliver the goods in good order
condition to the consignee.
o that ship functioned as a
common
carrier
and
was
obliged to observe the degree
of care required of a common
carrier in handling cargoes.
Court of Appeals: reversed and set
aside the RTCs decision.
o no solidary liability between the
carrier
and
the
arrastre
operator because it was clearly
established by the court a
quo that the damage and losses
of the shipment were attributed
to the mishandling by the
arrastre
operator
in
the
discharge of the shipment
hence, the arrastre operator
should be held solely liable to
the consignee.

vessel

is

common

Common carriers, from the nature of

their business and for reasons of public
policy,
are
bound
to
observe
extraordinary diligence in the vigilance
over the goods transported by
them. Subject to certain exceptions
enumerated under Article 1734 of the
Civil Code, common carriers are
responsible for the loss, destruction, or
deterioration of the goods. The
extraordinary responsibility of the
common carrier lasts from the time
the goods are unconditionally
placed in the possession of, and
received
by
the
carrier
for
transportation until the same are
delivered,
actually
or
constructively, by the carrier to
the consignee, or to the person
who has a right to receive them.

Incorporated in the bill of lading

between the shipper Shanghai Fareast
Business Co., and the consignee, to
wit:
4. PERIOD OF RESPONSIBILITY.
The responsibility of the carrier
shall commence from the time
when the goods are loaded on
board the vessel and shall
cease
when
they
are
discharged from the vessel.

b. On the other hand, the functions of an

arrastre operator involve the handling
of cargo deposited on the wharf or
between the establishment of the
consignee or shipper and the ship's
tackle. Being the custodian of the
goods discharged from a vessel, an
arrastre operator's duty is to take good
care of the goods and to turn them
over to the party entitled to their
possession.

1. Whether or not the carrier, or the

arrastre operator, or both, should be
held liable for the cost of the damaged
shipment?
Ruling:
The common carrier should be the only
one held liable for the cost of the
damaged shipment.

The liability of the arrastre operator

was reiterated in Eastern Shipping

Lines, Inc. v. Court of Appeals36 with

the clarification that the arrastre
operator and the carrier are not always
and necessarily solidarily liable as the
facts of a case may vary the rule.

from the vessel. Article 619 of the

Code of Commerce holds a ship
captain liable for the cargo from the
time it is turned over to him until its
delivery at the port of unloading.

Thus, in this case the appellate

court is correct insofar as it ruled that
an arrastre operator and a carrier may
not be held solidarily liable at all times.
But the precise question is which entity
had custody of the shipment during its
unloading from the vessel?

In a case decided by a U.S.

Circuit Court, Nichimen Company v.
M./V. Farland, it was ruled that like
the duty of seaworthiness, the
duty of care of the cargo is nondelegable,38 and the carrier is
accordingly responsible for the
acts of the master, the crew, the
stevedore, and his other agents.

c. GOODS
WERE
UNDER
CUSTODY OF THE CARRIER

THE
It is settled in maritime law
jurisprudence that cargoes while being
unloaded generally remain under the
custody of the carrier. In the instant
case, the damage or losses were
incurred during the discharge of the
shipment while under the supervision
of the carrier. Consequently, the carrier
is liable for the damage or losses
caused to the shipment.

Section 3(2) of the COGSA states that

among the carriers responsibilities are
to properly and carefully load, care for
and discharge the goods carried. The
bill of lading covering the subject
shipment likewise stipulates that the
carriers liability for loss or damage to
the goods ceases after its discharge