[ G.R. NO.

217311, July 15, 2020 ]

ALESON SHIPPING LINES, PETITIONER, VS. CGU INTERNATIONAL INS. PLC. AND CANDADO SHIPPING
LINES, INC., RESPONDENTS.

This resolves a petition for review assailing the Decision and Resolution of the Court of Appeals in CA-G.R. CV. No.
95628, which held Aleson Shipping Lines, Inc. (Aleson Shipping) liable for the damages resulting from a vessel
collision.

In 2002, Candano Shipping Lines, Inc. (Candano Shipping) signed a time charter agreement with Apo Cement
Corporation (Apo Cement) over the former's vessel, M/V Romeo. The agreement was executed for the delivery of
Apo Cement's cargo consisting of cement from Cebu to Albay.1

M/V Romeo was loaded with 31,250 bags of cement, equivalent to 1,250 metric tons. The cargo was insured with
CGU International Insurance (CGU Insurance).2

On July 14, 2002, at around 12 midnight, M/V Romeo was on its way out of the pier in Apo channel when it collided
with M/V Aleson Carrier 5 (M/V Aleson), which was owned by Aleson Shipping.3 M/V Aleson's front hull hit the side
of M/V Romeo.4 As a result, a gaping hole in the mid-section of M/V Romeo caused it to instantly sink, taking with it
the bags of cement worth P3,427,500.5

Apo Cement demanded payment from Candano Shipping and Aleson Shipping, but to no avail; hence, it made an
insurance claim with CGU Insurance, which was granted.6

CGU Insurance then filed a case against Candano Shipping and Aleson Shipping before the Regional Trial Court,
claiming actual damages and attorney's fees.7

Aleson Shipping denied liability and asserted that only Candano Shipping should be held liable because the latter's
vessel, M/V Romeo, was at fault in the collision.8 On the other hand, its officers and crew at M/V Aleson have
exercised diligence and care to avoid the incident.9

Meanwhile, Candano Shipping maintained that M/V Romeo was seaworthy and that it exercised extraordinary
diligence in the care and custody of the cargo, and in the operation of the vessel. It blamed Aleson Shipping for the
incident, claiming that Aleson Shipping was careless in command of M/V Aleson Carrier 5.10

Further, Candano Shipping argued that the complaint should be dismissed, because CGU Insurance failed to
observe the arbitration clause under the time charter.11

CGU   Insurance's   surveyor   and   investigator,   Teodoro   R.   Lopez (Lopez), testified that based on his
interviews with the Chief Engineer of M/V Romeo and the stevedores and supervisor of the port, M/V Aleson hit and
caused an opening at the mid-section of M/V Romeo.12

Lopez found that the port authority instructed M/V Aleson to wait until M/V Romeo has cleared the last buoy, but
M/V Aleson still proceeded to enter the pier. In an interview with the captain of Apo Cement's tug boat, Lopez
likewise learned that the Captain of M/V Romeo asked the Captain of M/V Aleson to slow down, but the latter did not
heed instructions.13

Captain Ramil Fermin Cabeltes (Captain Cabeltes) of M/V Aleson testified for Aleson Shipping. He narrated that the
sea was calm during the incident and acknowledged that the Apo channel cannot accommodate two (2) vessels at a
time.14 When M/V Aleson was about to enter the pier, he admitted that he failed to verify from the radio operator
whether it can proceed to enter the pier. He merely relied on the message relayed to him by a crew that M/V Aleson
must "standby for proceeding to port."15
Further, while Captain Cabeltes initially claimed that he did not know any vessel present at the pier, he later
admitted that he knew M/V Romeo was loading cargo at that time. Moreover, when M/V Aleson was in stop position,
he neither contacted nor used its horn to signal the M/V Romeo. He likewise admitted that there was still around 200
meters of space on the right side of the vessel where he can maneuver to avoid the mishap, but he did not do so,
fearing that M/V Aleson will run aground.16

Maria Tessie Jadulco Flores (Flores), operations manager of Candano Shipping, claimed that M/V Aleson was at
fault in the collision. She averred that under the rule of the Apo channel, the vessel going out of the wharf has the
right of way, and vessels which are about to enter must wait until the wharf is cleared. Hence, M/V Aleson should
have waited until M/V Romeo exited the pier.17

Flores added that due to the incident, M/V Romeo's master of the vessel died instantly. While 14 members of the
crew survived, two (2) remained missing. She further narrated that M/V Romeo was no longer retrieved due to the
depth of the sea, while M/V Aleson remained afloat.18

In its Decision,19 the Regional Trial Court found Aleson Shipping solely liable for the collision. Thus:

WHEREFORE, in view of the foregoing considerations, this Court hereby FINDS in favor of the plaintiff against the
defendant ALESON, hence it hereby ORDERS defendant ALESON, to pay plaintiff the sum of Philippine Pesos:
THREE MILLION THREE HUNDRED SIXTY EIGHT THOUSAND SEVEN HUNDRED FIFTY (P3,368,750.00) with
interest at 6% percent per annum from date hereof until the finality of this decision and 12% per annum from finality
of this decision until fully paid and attorney's fee of P50,000.00 plus cost of suit.

The complaint against Candano is hereby DISMISSED in accordance with the provision of Article 826 of the Code of
Commerce. It states: "If a vessel would collide with another, through the fault, negligence, or lack of skill of the
captain, sailing mate, or any other member of the complement, the owner of the vessel at fault shall indemnify the
losses and damages suffered after expert appraisal.

Finally, the counterclaims filed by defendant Aleson against defendant Candano are hereby DISMISSED for
insufficiency of evidence.

SO ORDERED.20 (Emphasis in the original)

The trial court ruled that under Article 1733 of the New Civil Code, Aleson Shipping and Candano Shipping are
bound to observe extraordinary diligence as common carriers. If there was loss, destruction, or deterioration of the
goods it carries, common carriers are presumed responsible, unless they can prove that they observed
extraordinary diligence.21 Aleson Shipping failed to overcome this presumption. On the other hand, Candano
Shipping appeared to have observed the diligence required.22

The trial court admitted in evidence the testimonies of Flores and Lopez which were treated as part of res gestae,
being startling statements made immediately by persons who were near and at the place of the
incident.23 Moreover, it relied on the testimony of Captain Cabeltes, who admitted several lapses in his duty as the
captain of M/V Aleson.24

Based on the evidence, the impact of the collision was strong, as M/V Aleson created a gaping hole on the side of
M/V Romeo, causing the vessel to instantly sink after five (5) minutes. The trial court noted that Captain Cabletes of
M/V Aleson failed to wait until M/V Romeo has exited from the wharf, and merely assumed that it can enter the port
when he knew for a fact that there was a vessel loading at that time. Moreover, Captain Cabletes of M/V Aleson
admitted that the collision could have been avoided if only he maneuvered the vessel; but he chose not to, fearing
that M/V Aleson may be aground.25

In its Appeal, Aleson Shipping maintained that it was not at fault in the collision. It claimed that Captain Cabeltes
exerted all efforts to avoid the collision, and that the trial court twisted his testimony to make Aleson Shipping
liable.26
Further, it claimed that M/V Aleson dropped its anchor at some 3,200 meters from the pier while waiting for their turn
to approach the loading berth. Captain Cabeltes could not see the loading bay from its position and, thus, relied on
the instructions of the port operators, who relayed that it can already proceed to the loading bay.27It then went
towards the pier at a slow speed of two (2) knots, while M/V Romeo was navigating at full speed.28

Aleson Shipping claimed that this version of the story is more believable, as it coincides with Lopez's testimony
which confirmed that the collision site was three (3) kilometers away from the pier's last buoy. Thus, the trial court
erred in its observation that M/V Aleson failed to wait until M/V Romeo has exited the last buoy.29

Moreover, Aleson Shipping claimed that it was M/V Romeo that failed to maneuver the vessel to avoid the
collision.30 The trial court faulted Aleson Shipping for its failure to blow its horn, but there was no need to signal M/V
Romeo, since both ships have communicated with each other and have explicitly agreed to do a port-to-port passing
to avoid a collision. Further, sending a sound signal would only do more harm than good, since the master's
instructions to the crew will not be heard over the horn's sound.31

Aleson Shipping argued that the testimony of Captain Cabeltes must be given credence because of all the
witnesses, only he has first-hand knowledge of what transpired before, during, and after the collision. On the other
hand, Candano Shipping failed to present any of the surviving crew of M/V Romeo.32

Further, Aleson Shipping asserted that the trial court erred in relying on hearsay testimony and in applying the res
gestae rule.33 Candano Shipping's witness, Flores, was incompetent to testify on matters regarding the
collision.34 She admitted to having no personal knowledge of the incident, and even though she was not presented
as an expert witness, the trial court allowed her to inject her opinion as to who is at fault between the two (2)
vessels.35

Similarly, Aleson Shipping claimed that the trial court erred in considering the testimony of Lopez as part of res
gestae because, as the inspector, he only had secondary information and none of the sources of these information
were present at the site of the incident.36

The Court of Appeals affirmed the decision of the lower court.37 Thus:

IN VIEW OF ALL THESE, the Appeal is DENIED. The Decision of the lower court is AFFIRMED.

SO ORDERED.38 (Emphasis in the original)

The appellate court further held that it found no strong and cogent reason to depart from the conclusions and
findings of the trial court.39 It ruled that the evidence defeats Aleson Shipping's arguments. As the records bare, the
collision was due to the fault of M/V Aleson's Captain. Despite being informed that M/V Romeo was loading at the
pier, M/V Aleson still proceeded to enter. Captain Cabeltes likewise failed to blow its horn to alert M/V Romeo.40

Considering Captain Cabeltes' testimony, the Court of Appeals found that there is sufficient evidence to ascribe fault
to Aleson Shipping. Hence, Aleson Shipping's argument assailing the testimony of Flores is irrelevant.41

Aleson Shipping moved for the reconsideration of the decision, but it was denied.42

In this Petition, petitioner argues that the lower courts erred in applying the law on common carriers in determining
its liability, considering that it has no contract of carriage with respondent CGU Insurance or Apo Cement.43

It explains that in claiming subrogation rights, respondent CGU Insurance can only have as much rights and causes
of action as Apo Cement, which springs from the contract of insurance. Thus, it cannot be sued based on contract,
because it is a complete stranger to the time charter between respondent Candano Shipping and Apo Cement, as
well as to the contract of insurance between respondents.44
Thus, petitioner claims that respondent CGU Insurance's action against it is based on maritime tort governed by the
Code of Commerce.45 It follows that there can be no presumption of negligence against petitioner. It is not a
common carrier under a contract of carriage which must exercise extraordinary diligence. Moreover, the doctrine of
last clear chance will not then be applicable in this case, because under Article 827 of the Code of Commerce, if
both vessels may be blamed, both shall be jointly responsible for the damages.46

Necessarily, the trial court erred in applying laws and jurisprudence on common carriers, because the cause of
action in this case is based on maritime tort and not on the breach of contract of carriage.47

Petitioner further claims that respondent Candano Shipping was solely at fault for the collision which was due to the
error and negligence of its officers and crew. On the other hand, petitioner asserts that it exercised ordinary
diligence—the degree of diligence demanded from it under the Code of Commerce.48

When it saw M/V Romeo, M/V Aleson immediately requested for a port-to-port passing to avoid collision which the
former granted.49 Still, M/V Romeo did not change course. In its last attempt to avoid the collision, Captain Cabeltes
ordered to stop M/V Aleson's engine, but to no avail.50

For the sake of argument that it was negligent, petitioner avers that it should be made solidarily liable with
respondent Candano Shipping under Article 827 of the Code of Commerced.51

Further, petitioner questions the application of the res gestae rule to admit the testimonies of respondents'
witnesses.52

In particular, witness Floras, who admitted to having no personal lcnowledge on the incident, was allowed to inject
her own opinion as to who between the two (2) vessels was at fault. Petitioner claims this is against Rule 130,
Section 48 of the Rules of Court, which provides that the opinion of a witness is inadmissible unless presented as an
expert witness.53

Moreover, it alleges that Lopez's testimony was mere hearsay. As respondents' surveyor, the information he
proffered were obtained from the witnesses to the incident. Thus, these testimonies do not qualify as part of res
gestae.54

Lastly, petitioner maintains that Captain Cabeltes' testimony cannot be rejected for being self-serving, considering
that respondents were given the opportunity to cross-examine the witness in court.55

In its Comment, respondent CGU Insurance avers that the petition must be denied because it raises only questions
of facts, which are not within the ambit of a Rule 45 petition. Further, findings of facts in this case must be deemed
final and conclusive since the findings of the trial court are affirmed by the appellate court.56

Further, petitioner's claim that Captain Cabletes' testimony was misconstrued by the trial court is baseless.57 As
shown by the evidence, it was M/V Aleson that hit M/V Romeo. Petitioner claims that M/V Romeo failed to maneuver
the vessel to avoid the collision. But, as the lower courts found, the front hull of M/V Aleson rammed and hit the
portside section of M/V Romeo.58

Respondent also claims that it is not true that the collision could have been avoided if there was a port-to-port
passing, considering that the Apo channel cannot accommodate two (2) vessels at a time.59

Further, it alleges that Captain Cabletes gave an inconsistent testimony. The trial judge, who had witnessed and
observed the demeanor of Captain Cabletes, concluded that his testimony was not quite straightforward.60

For instance, Captain Cabletes claimed that it was his first time in the Apo channel when the incident happened, but
later retracted this statement and said that he has navigated the port at least eight (8) times.61 Further, he testified
that he did not know any vessels around the area at that time, but contradicted himself by saying that he knew M/V
Romeo was about to exit the channel. Lastly, he agreed during trial that a bigger vessel like M/V Romeo is harder to
maneuver than a small vessel like M/V Aleson, which does not have any cargo, but again, retracted this statement
later on.62

Apart from these inconsistent statements, it claimed that Captain Cabletes made several admissions demonstrating
his and his crew's negligence. Primarily, he admitted that the radio message allegedly stating that M/V Aleson can
proceed to the channel was only relayed to him by his crew, and that he did not verify this information with the
channel operator.63 His testimony further shows that the instruction from the operator is to "stand by," which, in
maritime parlance, merely meant to start the engine, and not to the actual moving of the vessel.64

Moreover, Captain Cabletes admitted that M/V Aleson had sufficient time to maneuver the vessel to avoid the
collision. He testified that from the time he knew the radio message, it had more or less 20 to 30 minutes to reach
the pier.65 Even when Captain Cabletes saw that M/V Romeo did not alter its course, he did not attempt to call the
latter nor to blow the vessel's horn to warn M/V Romeo.66 Petitioner points out that this is against the Collision
Regulations, which states that when maneuvering is authorized or required, sound blasts are required to signal their
course of action to the other vessel.67

Lastly, petitioner argues that Captain Cabletes had the last clear chance to avoid the collision. He divulged during
his testimony that he had more or less 200 meters to maneuver the vessel, but chose not to, fearing that M/V Aleson
would run aground.68

In a separate Comment, respondent Candano Shipping points out that the petition raises purely questions of fact.
While petitioner questions the applicable law, what petitioner actually seeks is the reversal of the factual findings of
the trial court.69

Respondent Candano Shipping asserts that the decision and findings of the trial court should not be disturbed,
because it is based on evidence and is in accordance with the law. Petitioner argues that respondents' evidence
must be rejected for being hearsay, but in reality, it only rejects the finding of liability which is based on the
testimony of its own witness.70

Lastly, respondent Candano Shipping argues that it is immaterial whether the lower courts erred in applying the
presumption of negligence against common carriers, because it is clear from the evidence on record that only
petitioner is at fault for the collision.71

The case raises the following issues for resolution:

First, whether or not the petition may raise questions of fact;

Second, whether or not the testimonies of respondents' witnesses are inadmissible for being hearsay; and

Third, whether or not there is cause of action against the petitioner. Subsumed under this are the following issues:
(1) whether or not the lower courts erred in applying the civil law provisions on common carriers; and (2) whether or
not the petitioner exercised the degree of diligence required.

As a rule, only questions of law may be raised in a Rule 45 petition. This Court is not a trier of facts, and it will not
delve into factual questions already settled by the lower courts.72 While this rule admits exceptions, the party must
demonstrate and prove that the petition falls under the exceptions.73

Here, the petition's resolution necessarily requires a re-evaluation of the lower courts' factual findings. To resolve
petitioner's liability, this Court is being asked to assess and weigh the evidence. Failing to allege and demonstrate
that this petition is an exception to the rule, We are bound to affirm the lower courts' factual findings.

In any case, even if this Court proceeds to resolve the petition, it must still be denied.
 II

Generally, a witness can only give a testimony with respect to matters of which he or she has personal
knowledge.74 Testimonies which are hearsay are inadmissible as evidence. The rules, however, allow for certain
exceptions. One of which is when the evidence is part of res gestae.15 Rule 130, Section 42 states:

SECTION 42. Part of res gestae. — Statements made by a person while a starting occurrence is taking place or
immediately prior or subsequent thereto with respect to the circumstances thereof, may be given in evidence as part
of res gestae. So, also, statements accompanying an equivocal act material to the issue, and giving it a legal
significance, may be received as part of the res gestae.76

Res gestae refers to "those circumstances which are the undesigned incidents of a particular litigated act
and which are admissible when illustrative of such act."77 It contemplates statements that were "voluntarily and
spontaneously made so nearly contemporaneous as to be in the presence of the transaction which they illustrate
and explain, and were made under such circumstances as necessarily to exclude the idea of design or
deliberation[.]"78

There are two (2) acts which form part of the res gestae: (1) in spontaneous exclamations where the res gestae is
the startling occurrence; and (2) in verbal acts where res gestae is the statement accompanying the equivocal
act.79

To be admissible under the first class of res gestae, the following elements must be present: (1) that the principal
act, the res gestae, be a startling occurrence; (2) that the statements were made before the declarant had time to
contrive or devise; (3) that the statements made must concern the occurrence in question and its immediately
attending circumstances.80

Under the second class of res gestae, the following requisites must be present: 1) the principal act to be
characterized must be equivocal; (2) the equivocal act must be material to the issue; (3) the statement must
accompany the equivocal act; and (4) the statements give a legal significance to the equivocal act.81

In general, the test is whether or not an act, declaration, or exclamation is "so intimately interwoven or connected
with the principal fact or event that it characterizes as to be regarded as a part of the transaction itself, and also
whether it clearly negatives any premeditation or purpose to manufacture testimony."82

The element of spontaneity is critical because the admissibility of res gestae is premised on human experience. The
rule presumes that an utterance made, immediately following a strong and stressful stimulus, is an honest and
uncontrolled reaction. In People v. Cudal,83 this Court explained:

The spontaneity of the utterance and its logical connection with the principal event, coupled with the fact that the
utterance was made while the declarant was still "strong" and subject to the stimulus of the nervous excitement of
the principal event, are deemed to preclude contrivance, deliberation, design or fabrication, and to give to the
utterance an inherent guaranty of trustworthiness. The admissibility of such exclamation is based on experience
that, under certain external circumstances of physical or mental shock, a stress of nervous excitement may be
produced in a spectator which stills the reflective faculties and removes their control, so that the utterance which
then occurs is a spontaneous and sincere response to the actual sensations and perceptions already produced by
the external shock. Since this utterance is made under the immediate and uncontrolled domination of the senses,
rather than reason and reflection, and during the brief period when consideration of self-interest could not have
been fully brought to bear, the utterance may be taken as expressing the real belief of the speaker as to the facts
just observed by him.84 (Citations omitted)

However, there is no fixed rule in determining the time interval within which the statement must be made for it to be
deemed spontaneous. The factual parameters of each case will require a different resolution.85 Nevertheless, the
following factors may guide courts in determining whether there is spontaneity in the declarant's statements, to wit:
(1) the time that lapsed between the occurrence of the act or transaction and the making of the statement; (2) the
place where the statement was made; (3) the condition of the declarant when he made the statement; (4) the
presence or absence of intervening events between the occurrence and the statement relative thereto; and (5) the
nature and circumstances of the statement itself.86

Here, petitioner assails the admissibility of witnesses Lopez and Flores' testimony, because they did not have
personal knowledge of what immediately transpired before, during, and after the collision of the vessels.87 It claims
that this is an erroneous application of the res gestae rule. We disagree.

Res gestae is one of the exceptions to the hearsay rule. It contemplates testimonial evidence on matters not
personally witnessed by the witness, but is relayed to him or her by a declarant.

Here, it appears that petitioner misconstrued the rule in assailing the application of res gestae merely on the basis
that the testimonies are hearsay.

The testimonies of the witnesses satisfy the requirements of the rule, in that: (1) the collision of the vessels and
sinking of M/V Romeo is a startling occurrence; (2) the statements made are with respect to the collision; and (3) the
statements of the declarants were made immediately after the incident.

As testified to by Lopez and Flores, when the collision happened in midnight of July 14, 2002, they immediately
went to the pier the following day, which was a few hours after the incident. The people they interviewed witnessed
the incident. In particular, Lopez was able to interview M/V Romeo's Chief Engineer, along with the stevedores and
the port's supervisors,88 while Flores's testimony was based on the narration of M/V Romeo's chief mate.89

These declarants witnessed a collision and a sinking of a vessel which almost claimed their lives. The spontaneity of
their statements with respect to the incident satisfies the rule on res gestae, making these testimonies admissible
even if the declarants were not presented in the witness stand.

In any case, even if this Court disregards the testimonies of Flores and Lopez, the remaining evidence still supports
a finding of petitioners' liability.

III

A vessel, functioning as a common carrier, may be held liable for damages under Article 1759 of the Civil
Code. It states:

ARTICLE 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or
wilful acts of the former's employees, although such employees may have acted beyond the scope of their authority
or in violation of the orders of the common carriers.

This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father
of a family in the selection and supervision of their employees.90

Further, a vessel is "bound to observe extraordinary diligence in the vigilance over the goods" it
transports.91 Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp.92 explains:

Common carriers, from the nature of their business and on public policy considerations, 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.

In maritime transportation, a bill of lading is issued by a common carrier as a contract, receipt and symbol of the
goods covered by it. If it has no notation of any defect or damage in the goods, it is considered as a "clean bill of
lading." A clean bill of lading constitutes prima facie evidence of the receipt by the carrier of the goods as therein
described.93 (Citations omitted)

The high degree of diligence exacted by the law creates a presumption against common carriers when goods are
lost, destroyed or deteriorated.  To overcome this presumption, common carriers must prove that they exercised
extraordinary diligence in the handling and transportation of the goods.94

In Regional Container Lines of Singapore v. The Netherlands Insurance Co. (Philippines),95 this Court summarized
the rules on the liability of a common carrier:

(1)    Common earners are bound to observe extraordinary diligence over the goods they transport,
according to all the circumstances of each case;

(2)    In the event of loss, destruction, or deterioration of the insured goods, common carriers are
responsible, unless they can prove that such loss, destruction, or deterioration was brought about by, among
others, "flood, storm, earthquake, lightning, or other natural disaster or calamity"; and

(3)    In all other cases not specified under Article 1734 of the Civil Code, common carriers are presumed to
have been at fault or to have acted negligently,  unless they observed  extraordinary diligence.96  (Citation
omitted)

In cases where cargos are lost, destroyed, or deteriorated, an action based on the contract of carriage may be filed
against the shipowner of the vessel based on Civil Code provisions on common earner.

For instance, in Eastern Shipping Lines, Inc., this Court held a shipowner liable because as a common carrier, the
shipowner failed to observe extraordinary diligence in the transportation of goods required under Article 1734. It held
that based on the bills of lading issued, the shipowner received the cargo in good condition, and their arrival in bad
order at their destination constitutes a presumption that the carrier was negligent.97

Similarly, in cases of damages resulting from maritime collision, the Civil Code provisions on common carrier are
applicable if the cause of action is based on contract of carriage.

In Maritime Co. of the Philippines v. Court of Appeals?98 an insurer-subrogee filed an action for damages against
the shipowner based on a bill of lading. In this case, Acme Electrical and National Development Company and
Maritime Company (the Company) executed a bill of lading for the transport of 800 packages of PVC compound
loaded on the latter's vessel, SS Doña Nati. While in transit, the goods were damaged after SS Dona Nati was
rammed by M/V Yasushima Maru. Rizal Surety, the insurer of the packages, paid the value of the lost goods and
filed an action for damages against the Company.

The trial court dismissed the complaint and held that the case should have been filed against the owner of M/V
Yasushima Maru, who was at fault in the collision. It ruled that under the Code of Commerce, the vessel at fault
should be made responsible for the damage to the cargo; hence, Rizal Surety has no cause of action against the
Company.99

Ultimately, this ruling was reversed. This Court held that Rizal Surety has a cause of action against the Company
based on their contract. Further, this Court ruled that as the subrogee, Rizal Surety has a cause of action against
the Company based on the contract of carriage as evidenced by the bill of lading. Since there are specific provisions
in the Civil Code regulating the liability of a common carrier, it follows that the Code of Commerce, which only
applies supplementarily, need not be applied. Thus, Rizal Surety's rights are to be determined by the Civil Code and
not the Code of Commerce. This Court then ruled that under Article 1734 of the Civil Code, the Company is a
common carrier bound to exercise extraordinary diligence in the transport of the cargo. Failing to do so, it was held
responsible for the loss of goods.100
However, if the cause of action is based on maritime tort, the provisions of the Code of Commerce are applicable.
An action based on quasi-delict resulting from maritime collision is not specifically regulated by the Civil Code, but
by the Code of Commerce.101 Thus, if the cause of action is based on quasi-delict and not on contract, the rules
provided by the Code of Commerce applies.

This was clarified in National Development Company v. Court of Appeals and Development Insurance & Surety
Corporation.102 In this case, Development Insurance filed an action for damages against National Development
Company and Maritime Company (the Company). Similarly, the insured cargo loaded on the latter's vessel SS Dona
Nati were lost after the vessel was rammed by M/V Yasushima Maru. The trial and appellate courts ruled in favor of
the Development Insurance. The lower courts held the Company liable under Article 827 of the Code of Commerce
and    A concluded that both vessels are at fault.

This Court affirmed the ruling and held that the provisions of the Code of Commerce on collision applies.
Specifically, under Article 827, if the collision is imputable to both vessels, the vessels are solidarily liable for the
damages. In disregarding the Civil Code provisions on common carrier, this Court held that the Code of Commerce
must be applied because maritime "collision falls among matters not specifically regulated by the Civil Code[.]"103 It
appears, however, that the cause of action in this case was based on tort and not contract. This Court held:

Moreover, the Court held that both the owner and agent (Naviero) should be declared jointly and severally liable,
since the obligation which is the subject of the action had its origin in a tortious act and did not arise from contract.
Consequently, the agent, even though he may not be the owner of the vessel, is liable to the shippers and owners of
the cargo transported by it, for losses and damages occasioned to such cargo, without prejudice, however, to his
rights against the owner of the ship, to the extent of the value of the vessel, its equipment, and the
freight.104 (Citations omitted)

Taking into consideration the ruling of this Court in these cases, the applicable law in resolving complaints for
damages would depend on the complainant's cause of action. If the action is based on contract of carriage, the Civil
Code provisions on common carrier are applicable. On the other hand, if the cause of action is based on tort, the
provisions of the Code of Commerce on vessel collision would govern.

Here, the cause of action of respondent CGU Insurance against petitioner is not based on the time charter
but on tort. Petitioner is not a common carrier with respect to any of the parties.

Accordingly, the applicable provisions are found in Articles 826 and 827 of the Code of Commerce, which state:

ARTICLE 826. If a vessel should collide with another through the fault, negligence, or lack of skill of the captain,
sailing mate, or any other member of the complement, the owner of the vessel at fault shall indemnify the losses and
damages suffered, after an expert appraisal.

ARTICLE 827. If both vessels may be blamed for the collision, each one shall be liable for his own damages, and
both shall be jointly responsible for the losses and damages suffered by their cargoes.

To be cleared of liability under these provisions, a vessel must show that it exercised ordinary diligence.105 This
level of diligence is the diligence which "an ordinary prudent man would exercise with regard to his own
property."106

Applying this standard to petitioner, this Court finds that it failed to observe the diligence by the law. Based on the
testimony of its own witness, M/V Aleson was recklessly operated. Captain Cabeltes admitted that M/V Romeo was
still in the pier when M/V Aleson was about to enter the Apo channel. Despite knowledge of this information, Captain
Cabeltes failed to act with caution. He himself declared that he was informed by the pier operator to standby and to
not enter the wharf yet, but it still proceeded.107

He later recanted this statement and claimed that a message was relayed to him saying that he may enter the wharf
already. Nevertheless, he confessed that he did not verify the veracity of the message.
In his testimony:

Atty. Abesames:

Q. Were you the one who personally received that radio message?

Witness:

A. Iyong duty officer.

Q. Did you verify if that message was correct?

A. Sinabi niya sa akin na, Sir, (umawag iyong Apo, papasok na tayo.

Q. So you had a radio officer?

A. Iyong in-charge na duly sa bridge. Everytime may duty ako sa bridge. Iyong ma-duty diyan, pay may tawag iyong
Apo Cement na papasok, sabihin mo sa akin. Gisingin mo ako ako dahil matulog ako. Paggising sa akin, Sir,
(umawag, Sir, papasok na raw tayo. Ganoon.

Q. So you did not go, take the radio personally to confirm whether that radio advice was correct or not?

A. Everytime ganoon man kami, Hang trip na kami do on medyo mat a gal lang na byahe, every time ganoon sila
tumatawag tapos hindi ko na kino-conjirm.108 (Emphasis supplied)

This   nonchalant  attitude  towards  his   duty   demonstrates   Captain Cabeltes'  lack of caution in commanding
M/V Aleson.    Due diligence demands that Captain Cabeltes ensures that every decision he made is deliberate and
calculated to guarantee the safety of M/V Aleson and nearby vessels. As the captain, he is required under the law
"[t]o be on deck at the time of sighting land and to take command on entering and leaving ports[.]"109 Instead,
Captain Cabeltes slept in and waited for his crew to confirm whether they can proceed to enter. Thus, it is highly
imprudent that Captain Cabeltes piloted the vessel to the pier without personally verifying if M/V Romeo had already
exited.

Moreover, even if Captain Cabeltes admittedly had the chance to avoid the collision, he chose not to maneuver M/V
Aleson, because he was worried that the vessel would run aground.110 This is despite his acknowledgment that
M/V Aleson was easier to maneuver than M/V Romeo because the latter was a bigger vessel and was fully loaded
at that time.111 His testimony reveals:

Q.   So, most probably when you saw for the first time that there was an outgoing vessel when you were already
going towards Apo wharf, more or less, you concluded that it was the M/V "Romeo"?

A.    Opo, Sir.

Q.    And you knew it was fully loaded. It... just came from loading?

A.    Opo, Sir.

Q.    It was a lot bigger than your vessel?

A.    Yes, Sir.

Q.    And as a master mariner or as the captain of the vessel or as a seafarer, you would understand and you would
agree with me that a fully loaded big vessel is much harder to maneuver than a small vessel that does not carry
anything?

A.    Tama po.

Q.   Because at that time you saw it for the first time and when you made that request for a port to port passing, you
knew already that given the things you see the courses of your vessel, you will meet each other?

A.    Yes, Sir.

Q. That early, you knew of the danger of collision, correct? A. Yes, Sir, dahil head on kami, nakaganito ang mga
barko namin eh.112 (emphasis supplied)

He likewise acknowledged that he failed to send sound signals to M/V Romeo in violation of the rules of
navigation.113

Further, Captain Cabeltes' claim that M/V Aleson was navigating slowly is contradicted by evidence. The strong
impact of the collision is evidenced by the gaping hole created by the front hull of M/V Aleson, which has caused
M/V Romeo to instantly sink within five (5) minutes. Further, the impact and location of the collision readily confirms
that M/V Aleson was not navigating slowly as Captain Cabeltes claims.114

Petitioner's contention that Captain Cabeltes's testimony was twisted and misinterpreted by the lower courts fails to
convince. It is a settled rule that the lower court's appreciation of the witnesses' testimony deserves the highest
respect because it "is best equipped to make the assessment of the witnesses' credibility and demeanor on the
witness stand[.]"115 Absent any showing of clear misappreciation, the trial court's findings are generally not
disturbed by this Court. In any case, petitioner did not address how Captain Cabeltes's testimony was
misappreciated when his clear statements on record support the finding of the lower courts.

Considering the evidence and the relevant law, this Court finds no cogent reason to depart from the ruling of the
lower courts.  With respect to respondent Candano Shipping, this Court affirms the findings of the lower courts
1âшphi1

which held that respondent Candano Shipping exercised the required diligence as a common carrier. As established
in the trial court, M/V Romeo was, in all respects, seaworthy and with full complement of officers and crew.116 The
testimony likewise confirmed that M/V Romeo called and requested M/V Aleson to slow down, because it had the
right of way. On the other hand, petitioner must be held liable for the damages caused by its vessel, M/V Aleson.
Despite petitioner's contention, this Court is not convinced that Captain Cabeltes exercised ordinary diligence in
commanding M/V Aleson.

Petitioner failed to show that the trial and appellate courts overlooked or misconstrued significant evidence that
would alter the resolution of the case. To reiterate, findings of the trial court, especially when affirmed by the Court
of Appeals, deserve great respect and are binding upon this Court. In this case, a review of the evidence and law
fails to compel this Court to disregard the factual findings of the lower courts.

WHEREFORE, premises considered, the petition for review is hereby DENIED. The Decision and Resolution of the
Court of Appeals in CA-G.R. CV. No. 95628 is AFFIRMED.

SO ORDERED.

G.R. No. 203865 March 13, 2019

UNITRANS INTERNATIONAL FORWARDERS, INC., Petitioner

vs.
INSURANCE COMPANY OF NORTH AMERICA, UNKNOWN CHARTERER OF THE VESSEL M/S "DORIS
WULLF", AND TMS SHIP AGENCIES, Respondents
Before the Court is a Petition for Review on Certiorari  (Petition) under Rule 45 of the Rules of Court filed by
1

petitioner Unitrans International Forwarders, Inc. (Unitrans) against respondents Insurance Company of North
America (ICNA), the unknown charterer of the vessel M/S "Doris Wullf" (unknown charterer of M/S Doris Wullf), and
TMS Ship Agencies (TSA).

The instant Petition assails the Decision  dated October 27, 2011 (assailed Decision) and Resolution  dated October
2 3

12, 2012 (assailed Resolution) rendered by the Court of Appeals  (CA) in CA-G.R. CV No. 95367.
4

The Facts and Antecedent Proceedings

As culled from the records of the case, the essential facts and antecedent proceedings of the instant case are as
follows:

On July 28, 2003, ICNA filed an Amended Complaint  for collection of sum of money (Complaint) arising from marine
5

insurance coverage on two (2) musical instruments imported from Melbourne Australia on April 22, 2002.

The Complaint, which was filed before the Regional Trial Court of Makati City, Branch 139 (RTC), was instituted
against South East Asia Container Line (SEACOL) and the unknown owner/charterer of the vessel M/S Buxcrown,
both doing business in the Philippines through its local ship agent Unitrans, and against the unknown charterer of
M/S Doris Wullf, doing business in the Philippines through its local ship agent TSA, for the collection of the principal
amount of Twenty-Two Thousand, Six Hundred Fifty-Seven Dollars and Eighty Three Cents (US$22,657.83) with
interests thereon and attorney's fees. The case was docketed as Civil Case No. 03-505.

ICNA alleged in its Complaint that:

1. On or about 22 April 2002, in Melbourne, Australia, SEACOL [, a foreign company,] solicited and received
shipment of pieces of STC musical instruments from the shipper Dominant Musical Instrument for transportation to
and delivery at the port of Manila, complete and in good condition, as evidenced by Bill of Lading No. 502645.
SEACOL then loaded the insured shipment on board M/S Buxcrown for transportation from Melbourne Australia to
Singapore. In Singapore, the shipment was transferred from M/S Buxcrown to M/S Doris Wullf for final
transportation to the port of Manila.

2. The aforesaid shipment was insured with ICNA against all risk under its Policy No. MOPA-06310 in favor of the
consignee, San Miguel Foundation for the Performing Arts (San Miguel).

3. On 12 May 2002, M/S Doris Wullf arrived and docked at the Manila International Container Port, North Harbor,
Manila. The container van was discharged from the vessel [, was received by Unitrans,] and upon stripping the
contents thereof, it was found that two of the cartons containing the musical instruments were in bad order condition,
per Turn Over Survey Report  dated 14 May 2002. Unitrans then delivered the subject shipment to the consignee.
6

After further inspection, it was found out that two units of musical instruments were damaged and could no longer be
used for their intended purpose, hence were declared a total loss;

4. Obviously, the damages sustained by the insured cargo were caused by the fault and negligence of the [therein]
defendants;

5. Formal claims were filed against [the therein] defendants but they refused and failed to pay the same without
valid and legal grounds;

6. As cargo-insurer of the subject shipment and by virtue of the insurance claim filed by the consignee, ICNA paid
the sum of $22,657.83.

7. By reason of the said payment, ICNA was subrogated to consignee's rights of recovery against [the] defendants
[therein];
8. Due to the unjustified refusal of the defendants [therein] to pay its claims, ICNA was constrained to engage the
services of counsel. 7

In its Answer with Counterclaim  dated July 8, 2004, Unitrans denied being a ship agent of SEACOL and the vessel
8

M/S Buxcrown's unknown owner or charter. According to Unitrans, BTI Logistics PTY LTD. (BTI Logistics), a foreign
freight forwarder, engaged its services as delivery or receiving agent in connection to the subject shipment. As such
agent, Unitrans' obligations were limited to receiving and handling the bill of lading sent to it by BTI Logistics,
prepare an inward cargo manifest, notify the party indicated of the arrival of the subject shipment, and release the
bill of lading upon order of the consignee or its representative so that the subject shipment could be withdrawn from
the pier/customs. It further alleged that the consignee, San Miguel, also engaged its services as customs broker for
the subject shipment. As such, Unitrans' obligation was limited to paying on behalf of San Miguel the necessary
duties and kindred fees, file with the Bureau of Customs (BOC) the Import Entry Internal Revenue Declaration
together with other pertinent documents, as well as to pick up the shipment and then transport and deliver the
said shipment to the consignee's premises in good condition.

On its part, TSA and the unknown charterer of M/S Doris Wullf alleged in their Amended Answer with Compulsory
Counterclaim  dated July 11, 2004 that while TSA is indeed the commercial agent of M/S Doris Wullf, both parties
9

are not parties whatsoever to the bill of lading and have no connection in any way with SEACOL, the unknown
owner and/or charterer of the vessel M/S Buxcrown and Unitrans. It was further alleged that the subject shipment
was discharged from the vessel M/S Doris Wullf complete and in the same condition as when it was loaded therein,
which is a fact stated in the Turn-Over Survey Report.

The Ruling of the RTC

In its Decision  dated March 29, 2010, the RTC granted the Complaint and held Unitrans liable to ICNA for the sum
10

of US$22,657.83 or its equivalent in Philippine Peso, i.e., One Million, Forty-Two Thousand, Two Hundred Sixty
Pesos and Eighteen Centavos (₱1,042,260.18) with interest. The dispositive portion of the RTC's Decision reads:

WHEREFORE, in view of the foregoing considerations, the Court hereby GRANTS in favor of the plaintiff against
defendant Unitrans, hence Unitrans is hereby ordered to pay plaintiff the sum of P1,042,260.18
(US$22,657.83XP46.00), with interest at six percent (6%) per annum from date hereof until finality, and twelve
percent (12%) per annum from finality until fully paid plus cost of suit.

The complaint against TMS is hereby DISMISSED for insufficiency of evidence including the counterclaim of TMS.

SO ORDERED. 11

The RTC found that the witness of Unitrans itself admitted in open court that "Unitrans is a non-vessel operating
common carrier (NVOCC). Moreover, this witness admitted that Unitrans is the delivery and collecting agent of BTI,
who is duty bound to [deliver] the subject shipment in good order and condition to San Miguel. Thus, Unitrans is a
common carrier. Under Article 1742 of the New Civil Code, it states: 'Even if the loss, destruction, or deterioration of
the goods should be caused by the character of the goods, or [the] faulty nature of the packing or of the containers,
the common carrier must exercise due diligence to forestall or lessen the loss.' It appears that Unitrans, as common
carrier, did not observe this requirement of the law."
12

Feeling aggrieved, Unitrans appealed the RTC's Decision before the CA. 13

The Ruling of the CA

In its assailed Decision, the CA denied Unitrans' appeal for lack of merit. The dispositive portion of the assailed
Decision reads:

WHEREFORE, the appeal is DENIED and the Decision appealed from is AFFIRMED.

IT IS SO ORDERED. 14

In sum, the CA denied Unitrans' argument that the failure of the Court to issue summons and acquire jurisdiction
with respect to SEACOL and the unknown charterer/owner of M/S Buxcrown, which are based abroad, is
tantamount to a failure to include indispensable parties because Unitrans failed to show that the aforesaid entities
are indispensable parties. As observed by the CA, "Unitrans merely concluded that the said parties were
indispensable because they were repeatedly impleaded by ICNA as defendants in its original complaint x x x." 15

Further, "[t]he contention of Unitrans, that the trial court x x x had no factual and legal basis in holding it liable as a
common carrier and agent of BTI Logistics is sorely bereft of merit." 16

Unitrans filed its Motion for Clarification and Reconsideration  of the assailed Decision on November 17, 2011,
17

which was denied by the CA in its assailed Resolution.

Hence, the instant Petition.

TSA and the unknown charterer of M/S Doris Wullf filed their Comment (To Petitioner's Petition for Review
on Certiorari)  on April 23, 2013. ICNA filed its Comment  on April 30, 2013. Unitrans filed its Consolidated Reply
18 19

Brief  on February 12, 2014.

20

On October 7, 2016, TSA and the unknown charterer of M/S Doris Wullf filed their Memorandum.  ICNA filed its
21

Memorandum  on October 18, 2016. Unitrans filed its Memorandum  on October 27, 2016.
22 23

Issue

The "central question to be resolved by the Court is whether the CA was correct in rendering the assailed Decision,
which affirmed the RTC's Decision holding Unitrans liable to ICNA.

The Court's Ruling

The instant Petition is centered on how "the RTC Decision only singled out herein petitioner [Unitrans] x x x [and] is
completely silent on how the rest of the defendants came to be absolved from any liability and/or exonerated from
being held solidarity liable with herein petitioner, notwithstanding a prayer therefor in the Complaint." 24

In the main, Unitrans posits the view that the RTC's finding of liability on the part of Unitrans, as affirmed by the CA,
supposedly amounts to a misapprehension of the evidence and the facts. 25

Unitrans even goes further by arguing that the RTC Decision is non-compliant with Section 14, Article VIII of the
1987 Constitution, which states that "[n]o decision shall be rendered by any court without expressing therein clearly
and distinctively the facts and the law on which it is based."  Unitrans opines that the RTC's Decision transgressed
26

the aforementioned constitutional provision because it was supposedly "totally left in the dark on how and why its
co-defendants, except for [TSA], had been absolved." 27

The instant Petition is bereft of merit.

First and foremost, Unitrans' issue on how the RTC and CA allegedly misapprehended the facts of the instant case
and failed to fully appreciate evidence on record is undoubtedly a question of fact, asking the Court to recalibrate,
reassess, and reexamine evidentiary matters.

A question of facts exists when the doubt or difference arises as to the truth or falsehood of facts or when the query
invites calibration of the whole evidence considering mainly the credibility of the witnesses, the existence and
relevancy of specific surrounding circumstances as well as their relation to each other and to the whole, and the
probability of the situation.  That is precisely what Unitrans is asking the Court to do - to reassess, reexamine, and
28

recalibrate the evidence on record.

A catena of cases has consistently held that questions of fact cannot be raised in an appeal via certiorari before the
Court and are not proper for its consideration.  The Court is not a trier of facts. It is not the Court's function to
29

examine and weigh all over again the evidence presented in the proceedings below. 30

Upon careful review of the records of the instant case, the Court finds no cogent reason to reverse the RTC's and
CA's factual findings and their appreciation of the evidence on record. The Court finds that the RTC's and CA's
factual and legal conclusion that Unitrans is liable to ICNA with respect to the damaged musical instruments is
amply supported by the evidence on record.

As found by the RTC in its Decision, and as affirmed by the CA in its assailed Decision, Unitrans' own witness, Mr.
Gerardo Estanislao Del Rosario (Del Rosario) himself testified in open court that Unitrans, as a freight forwarding
entity and an accredited non-vessel operating common carrier, was the one engaged by BTI Logistics as its
delivery agent in Manila. Del Rosario attested that BTI Logistics was the forwarding agent in Australia who received
the cargo shipment from the consignor" for shipment to Manila. Del Rosario further testified that Unitrans acted as
the delivery/forwarding agent of BTI Logistics with respect to the subject shipment. Del Rosario unequivocally
testified that under its agreement with BTI Logistics, Unitrans engaged itself "to handle the cargo and to make
sure that it was delivered to the consignee from the port of Manila to the consignee."  As noted by the CA,
31

"Del Rosario also admitted that in so far as the subject shipment is concerned, Unitrans acted as a local agent of
BTI Logistics, which was duty bound to deliver the same to the right party."32

Moreover, to reiterate, in its Answer with Counterclaim, Unitrans had already expressly admitted that San Miguel
also engaged its services as customs broker for the subject shipment; one of its obligations was to pick up the
shipment and then transport and deliver the same to the consignee's premises in good condition.

Having been placed with the obligation to deliver the subject shipment from the port of Manila to San Miguel's
premises in good condition, during the pre-trial conference conducted on June 20, 2007, it was admitted by Unitrans
that "[t]he subject shipment was delivered by [petitioner] Unitrans."  Yet, it is not disputed by any party that the
33

subject shipment, i.e., musical instruments, were severely damaged beyond use and did not arrive in good condition
at the premises of the consignee, San Miguel. It is indubitably clear that Unitrans failed to fulfill its obligation to
deliver the subject shipment in good condition.

Emphasis must be placed on the fact that Unitrans itself admitted, through its own witness and general manager,
Del Rosario, that in handling the subject shipment and making sure that it was delivered to the consignee's
premises in good condition as the delivery/forwarding agent, Unitrans was acting as a freight forwarding entity and
an accredited non-vessel operating common carrier. 1âшphi1

Article 1735 of the Civil Code states that if the goods are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733.

In turn, Article 1733 states that 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 and for the safety of
the passengers transported by them, according to all the circumstances of each case.

Hence, jurisprudence holds that a common carrier is presumed to have been negligent if it fails to prove that it
exercised extraordinary vigilance over the goods it transported. When the goods shipped are either lost or arrived 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, the
common carrier must establish by adequate proof that it exercised extraordinary diligence over the goods.
It must do more than merely show that some other party could be responsible for the damage. 34

In the instant case, considering that it is undisputed that the subject goods were severely damaged, the presumption
of negligence on the part of the common carrier, i.e., Unitrans, arose. Hence, it had to discharge the burden, by way
of adequate proof, that it exercised extraordinary diligence over the goods; it is not enough to show that some other
party might have been responsible for the damage. Unitrans failed to discharge this burden. Hence, it cannot
escape liability.

With respect to Unitrans' argument that it was unfair for it to be subjected to sole liability, as aptly explained by the
RTC in its Decision, Unitrans itself, through its own witness, Del Rosario, "declared [that TSA] never had an
occasion to handle this subject cargo."  Hence, the RTC noted that "[t]he witness for [petitioner] Unitrans has
35

practically exempted [respondent TSA] when he stated that the subject cargo [was] never in possession of [TSA].
Thus, [respondent TSA] could not be made liable for [this] obvious reason." 36

Hence, for the reasons explained above, the Court is not convinced of Unitrans' argument that the RTC's Decision
violated Section 14, Article VIII of the 1987 Constitution. To the contrary, the Court finds that the RTC's Decision
clearly and distinctively narrated the facts and the applicable law; the RTC's Decision clearly explained the reason
why Unitrans is the entity imposed with the liability.

WHEREFORE, premised considered, the instant Petition is hereby DENIED. The Decision dated October 27, 2011
and Resolution dated October 12, 2012 rendered by the Court of Appeals in CA-G.R. CV No. 95367 are AFFIRMED
with MODIFICATION. The total of the amount adjudged against petitioner and the 6% interest thereon computed by
the RTC from its Decision until finality shall earn interest at 6% per annum from finality of this Decision until fully
paid plus cost of suit.

SO ORDERED.

G.R. No. 199455, June 27, 2018

FEDERAL EXPRESS CORPORATION, Petitioner, v. LUWALHATI R. ANTONINO AND ELIZA

BETTINA RICASA ANTONINO, Respondents.

The duty of common carriers to observe extraordinary diligence in shipping goods does not
terminate until delivery to the consignee or to the specific person authorized to receive the
shipped goods. Failure to deliver to the person authorized to receive the goods is
tantamount to loss of the goods, thereby engendering the common carrier's liability for
loss. Ambiguities in contracts of carriage, which are contracts of adhesion, must be
interpreted against the common carrier that prepared these contracts.

This resolves a Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure
praying that the assailed Court of Appeals August 31, 2011 Decision2 and November 21, 2011
Resolution3 in CA-G.R. CV No. 91216 be reversed and set aside and that Luwalhati R. Antonino
(Luwalhati) and Eliza Bettina Ricasa Antonino (Eliza) be held liable on Federal Express Corporation's
(FedEx) counterclaim.

The assailed Court of Appeals August 31, 2011 Decision denied the appeal filed by FedEx and
affirmed the May 8, 2008 Decision4 of Branch 217, Regional Trial Court, Quezon City, awarding moral
and exemplary damages, and attorney's fees to Luwalhati and Eliza.5 In its assailed November 21,
2011 Resolution, the Court of Appeals denied FedEx's Motion for Reconsideration.6

Eliza was the owner of Unit 22-A (the Unit) in Allegro Condominium, located at 62 West 62nd St., New
York, United States.7 In November 2003, monthly common charges on the Unit became due. These
charges were for the period of July 2003 to November 2003, and were for a total amount of
US$9,742.81.8

On December 15, 2003, Luwalhati and Eliza were in the Philippines. As the monthly common charges
on the Unit had become due, they decided to send several Citibank checks to Veronica Z. Sison
(Sison), who was based in New York. Citibank checks allegedly amounting to US$17,726.18 for the
payment of monthly charges and US$11,619.35 for the payment of real estate taxes were sent by
Luwalhati through FedEx with Account No. x2546-4948-1 and Tracking No. 8442 4588 4268. The
package was addressed to Sison who was tasked to deliver the checks payable to Maxwell-Kates, Inc.
and to the New York County Department of Finance. Sison allegedly did not receive the package,
resulting in the non-payment of Luwalhati and Eliza's obligations and the foreclosure of the Unit.9

Upon learning that the checks were sent on December 15, 2003, Sison contacted FedEx on February
9, 2004 to inquire about the non-delivery. She was informed that the package was delivered to her
neighbor but there was no signed receipt.10

On March 14, 2004, Luwalhati and Eliza, through their counsel, sent a demand letter to FedEx for
payment of damages due to the non-delivery of the package, but FedEx refused to heed their
demand.11 Hence, on April 5, 2004, they filed their Complaint12 for damages.

FedEx claimed that Luwalhati and Eliza "ha[d] no cause of action against it because [they] failed to
comply with a condition precedent, that of filing a written notice of claim within the 45 calendar days
from the acceptance of the shipment."13 It added that it was absolved of liability as Luwalhati and
Eliza shipped prohibited items and misdeclared these items as "documents."14 It pointed to conditions
under its Air Waybill prohibiting the "transportation of money (including but not limited to coins or
negotiable instruments equivalent to cash such as endorsed stocks and bonds)."15

In its May 8, 2008 Decision,16 the Regional Trial Court ruled for Luwalhati and Eliza, awarding them
moral and exemplary damages, and attorney's fees.17

The Regional Trial Court found that Luwalhati failed to accurately declare the contents of the package
as "checks."18 However, it ruled that a check is not legal tender or a "negotiable instrument
equivalent to cash," as prohibited by the Air Waybill.19 It explained that common carriers are
presumed to be at fault whenever goods are lost.20 Luwalhati testified on the non-delivery of the
package. FedEx, on the other hand, claimed that the shipment was released without the signature of
the actual recipient, as authorized by the shipper or recipient. However, it failed to show that this
authorization was made; thus, it was still liable for the loss of the package.21

On non-compliance with a condition precedent, it ruled that under the Air Waybill, the prescriptive
period for filing an action was "within two (2) years from the date of delivery of the shipment or from
the date on which the shipment should have been delivered."22 Luwalhati and Eliza's demand letter
made on March 11, 2004 was within the two (2)-year period sanctioned by the Air Waybill.23 The trial
court also noted that they were given a "run-around" by FedEx employees, and thus, were deemed
to have complied with the filing of the formal claim.24

The dispositive portion of the Regional Trial Court May 8, 2008 Decision read:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs Luwalhati R. Antonino and Eliza
Bettina Ricasa Antonino ordering the following:

1) The amount of P200,000.00 by way of moral damages;

2) The amount of P100,000.00 by way of exemplary damages; and
[3]) The amount of P150,000.00 as and for attorney's fees. Costs against defendant.

The counterclaim is ordered dismissed.

SO ORDERED.25
In its assailed August 31, 2011 Decision,26 the Court of Appeals affirmed the ruling of the Regional
Trial Court.27 According to it, by accepting the package despite its supposed defect, FedEx was
deemed to have acquiesced to the transaction. Thus, it must deliver the package in good condition
and could not subsequently deny liability for loss.28 The Court of Appeals sustained the Regional Trial
Court's conclusion that checks are not legal tender, and thus, not covered by the Air Waybill's
prohibition.29 It further noted that an Air Waybill is a contract of adhesion and should be construed
against the party that drafted it.30

The dispositive portion of the Court of Appeals August 31, 2011 Decision read:

WHEREFORE, premises considered, the present appeal is hereby DENIED. The assailed May 08, 2008
Decision of the Regional Trial Court, Branch 217, Quezon City in Civil case No. Q-04-52325 is
AFFIRMED. Costs against the herein appellant.

SO ORDERED.31

Following the Court of Appeals' denial32 of its Motion for Reconsideration, FedEx filed the present
Petition.

For resolution of this Court is the sole issue of whether or not petitioner Federal Express
Corporation may be held liable for damages on account of its failure to deliver the checks
shipped by respondents Luwalhati R. Antonino and Eliza Bettina Ricasa Antonino to the
consignee Veronica Sison.

I
Petitioner disclaims liability because of respondents' failure to comply with a condition precedent,
that is, the filing of a written notice of a claim for non-delivery or misdelivery within 45 days from
acceptance of the shipment.33 The Regional Trial Court found the condition precedent to have been
substantially complied with and attributed respondents' noncompliance to FedEx for giving them a
run-around.34 This Court affirms this finding.

A provision in a contract of carriage requiring the filing of a formal claim within a specified period is a
valid stipulation. Jurisprudence maintains that compliance with this provision is a legitimate condition
precedent to an action for damages arising from loss of the shipment:

More particularly, where the contract of shipment contains a reasonable requirement of giving notice
of loss of or injury to the goods, the giving of such notice is a condition precedent to the action for
loss or injury or the right to enforce the carrier's liability. Such requirement is not an empty
formalism. The fundamental reason or purpose of such a stipulation is not to relieve the carrier from
just liability, but reasonably to inform it that the shipment has been damaged and that it is charged
with liability therefor, and to give it an opportunity to examine the nature and extent of the injury.
This protects the carrier by affording it an opportunity to make an investigation of a claim while the
matter is fresh and easily investigated so as to safeguard itself from false and fraudulent
claims.35 (Citation omitted)

Petitioner's Air Waybill stipulates the following on filing of claims:

Claims for Loss, Damage, or Delay. All claims must be made in writing and within strict time limits.
See any applicable tariff, our service guide or our standard conditions for carriage for details.
The right to damages against us shall be extinguished unless an action is brought within two (2)
years from the date of delivery of the shipment or from the date on which the shipment should have
been delivered.

Within forty-five (45) days after notification of the claim, it must be documented by sending to us [all
the] relevant information about it.36

For their claim to prosper, respondents must, thus, surpass two (2) hurdles: first, the filing of their
formal claim within 45 days; and second, the subsequent filing of the action within two (2) years.

There is no dispute on respondents' compliance with the second period as their Complaint was filed
on April 5, 2004.37

In appraising respondents' compliance with the first condition, this Court is guided by settled
standards in jurisprudence.

In Philippine Airlines, Inc. v. Court of Appeals,38 Philippine Airlines alleged that shipper Gilda Mejia
(Mejia) failed to file a formal claim within the period stated in the Air Waybill.39 This Court ruled that
there was substantial compliance with the period because of the zealous efforts demonstrated by
Mejia in following up her claim.40 These efforts coupled with Philippine Airlines' "tossing around the
claim and leaving it unresolved for an indefinite period of time" led this Court to deem the requisite
period satisfied.41 This is pursuant to Article 1186 of the New Civil Code which provides that "[t]he
condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment":42

Considering the abovementioned incident and private respondent Mejia's own zealous efforts in
following up the claim, it was clearly not her fault that the letter of demand for damages could only
be filed, after months of exasperating follow-up of the claim, on August 13, 1990. If there was any
failure at all to file the formal claim within the prescriptive period contemplated in the air waybill, this
was largely because of PAL's own doing, the consequences of which cannot, in all fairness, be
attributed to private respondent.

Even if the claim for damages was conditioned on the timely filing of a formal claim, 'under Article
1186 of the Civil Code that condition was deemed fulfilled, considering that the collective action of
PAL's personnel in tossing around the claim and leaving it unresolved for an indefinite period of time
was tantamount to "voluntarily preventing its fulfillment." On grounds of equity, the filing of the
baggage freight claim, which sufficiently informed PAL of the damage sustained by private
respondent's cargo, constituted substantial compliance with the requirement in the contract for the
filing of a formal claim.43 (Citations omitted)

Here, the Court of Appeals detailed the efforts made by respondent Luwalhati and consignee Sison. It
also noted petitioner's ambiguous and evasive responses, nonchalant handling of respondents'
concerns, and how these bogged down respondents' actions and impaired their compliance with the
required 45-day period:

Anent the issues concerning lack of cause of action and their so-called "run-around" matter, We
uphold the lower court's finding that the herein appellees complied with the requirement for the
immediate filing of a formal claim for damages as required in the Air Waybill or, at least, We find that
there was substantial compliance therewith. Luwalhati testified that the addressee, Veronica Z. Sison
promptly traced the whereabouts of the said package, but to no avail. Her testimony narrated what
happened thereafter, thus:
"COURT: All right. She was informed that it was lost. What steps did you take to find out or to recover
back this package?
 
"ATTY. ALENTAJAN:
"Q What did you do to Fedex?
WITNESS: First, I asked the secretary here to call Fedex Manila and they said, the record show that it was
sent to New York, Your Honor.
ATTY. ALENTAJAN:
"Q After calling Fedex, what did Fedex do?
"A None, sir. They washed their hands because according to them it is New York because they
have sent it. Their records show that New York received it, Sir.
"Q New York Fedex?
"A Yes, Sir.
"Q Now what else did you do after that?
"A And then I asked my friend Mrs. Veronica Sison to trace it, Sir.
"Q What did she report to you?
"A She reported to me that first, she checked with the Fedex and the first answer was they were
going to trace it. The second answer was that, it was delivered to the lady, her neighbor and the
neighbor completely denied it and as they show a signature that is not my signature, so the
next time she called again, another person answered. She called to say that the neighbor did
not receive and the person on the other line I think she got his name, said that, it is because it is
December and we usually do that just leave it and then they cut the line and so I asked my
friend to issue a sworn statement in the form of affidavit and have it notarized in the Philippine
Embassy or Consulate, Sir. That is what she did.
"Q On your part here in the Philippines after doing that, after instructing Veronica Sison, what
else did you do because of this violation?
"A I think the next step was to issue a demand letter because any way I do not want to go to Court,
it is so hard, Sir."

The foregoing event show Luwalhati's own ardent campaign in following up the claim. To the Court's
mind, it is beyond her control why the demand letter for damages was only sent subsequent to her
infuriating follow-ups regarding the whereabouts of the said package. We can surmise that if there
was any omission at all to file the said claim within the prescriptive period provided for under the Air
Waybill it was mostly due to herein appellant's own behavior, the outcome thereof cannot, by any
chance, be imputed to the herein appellees.44 (Grammatical errors in the original)

Petitioner has been unable to persuasively refute Luwalhati's recollection of the efforts that she and
Sison exerted, and of the responses it gave them. It instead insists that the 45-day period stated in
its Air Waybill is sacrosanct. This Court is unable to bring itself to sustaining petitioner's appeal to a
convenient reprieve. It is one with the Regional Trial Court and the Court of Appeals in stressing that
respondents' inability to expediently file a formal claim can only be attributed to petitioner hampering
its fulfillment. Thus, respondents must be deemed to have substantially complied with the requisite
45-day period for filing a formal claim.

II
The Civil Code mandates common carriers to observe extraordinary diligence in caring for the goods
they are transporting:

Article 1733. 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 and
for the safety of the passengers transported by them, according to all the circumstances of
each case.

"Extraordinary diligence is that extreme measure of care and caution which persons of
unusual prudence and circumspection use for securing and preserving their own property
or rights."45 Consistent with the mandate of extraordinary diligence, the Civil Code
stipulates that in case of loss or damage to goods, common carriers are presumed to be
negligent or at fault,46 except in the following instances:

(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 or competent public authority.47

In all other cases, common carriers must prove that they exercised extraordinary diligence
in the performance of their duties, if they are to be absolved of liability.48

The responsibility of common carriers to exercise extraordinary diligence lasts from the
time the goods are unconditionally placed in their possession until they are delivered "to
the consignee, or to the person who has a right to receive them."49 Thus, part of the
extraordinary responsibility of common carriers is the duty to ensure that shipments are
received by none but "the person who has a right to receive them." 50 Common carriers
must ascertain the identity of the recipient. Failing to deliver shipment to the designated
recipient amounts to a failure to deliver. The shipment shall then be considered lost, and
liability for this loss ensues.

Petitioner is unable to prove that it exercised extraordinary diligence in ensuring delivery of the
package to its designated consignee. It claims to have made a delivery but it even admits that it was
not to the designated consignee. It asserts instead that it was authorized to release the package
without the signature of the designated recipient and that the neighbor of the consignee, one
identified only as "LGAA 385507," received it.51 This fails to impress.

The assertion that receipt was made by "LGAA 385507" amounts to little, if any, value in proving
petitioner's successful discharge of its duty. "LGAA 385507" is nothing but an alphanumeric code that
outside of petitioner's personnel and internal systems signifies nothing. This code does not represent
a definite, readily identifiable person, contrary to how commonly accepted identifiers, such as
numbers attached to official, public, or professional identifications like social security numbers and
professional license numbers, function. Reliance on this code is tantamount to reliance on nothing
more than petitioner's bare, self-serving allegations. Certainly, this cannot satisfy the requisite of
extraordinary diligence consummated through delivery to none but "the person who has a right to
receive"52 the package.

Given the circumstances in this case, the more reasonable conclusion is that the package was not
delivered. The package shipped by respondents should then be considered lost, thereby engendering
the liability of a common carrier for this loss.

Petitioner cannot but be liable for this loss. It failed to ensure that the package was delivered to the
named consignee. It admitted to delivering to a mere neighbor. Even as it claimed this, it failed to
identify that neighbor.

III
Petitioner further asserts that respondents violated the terms of the Air Waybill by shipping checks. It
adds that this violation exempts it from liability.53

This is untenable.

Petitioner's International Air Waybill states:

Items Not Acceptable for Transportation. We do not accept transportation of money (including
but not limited to coins or negotiable instruments equivalent to cash such as endorsed stocks and
bonds). We exclude all liability for shipments of such items accepted by mistake. Other items may be
accepted for carriage only to limited destinations or under restricted conditions. We reserve the right
to reject packages based upon these limitations or for reasons of safety or security. You may consult
our Service Guide, Standard Conditions of Carriage, or any applicable tariff for specific
details.54 (Emphasis in the original)

The prohibition has a singular object: money. What follows the phrase "transportation of money" is a
phrase enclosed in parentheses, and commencing with the words "including but not limited to." The
additional phrase, enclosed as it is in parentheses, is not the object of the prohibition, but merely a
postscript to the word "money." Moreover, its introductory words "including but not limited to" signify
that the items that follow are illustrative examples; they are not qualifiers that are integral to or
inseverable from "money." Despite the utterance of the enclosed phrase, the singular prohibition
remains: money.

Money is "what is generally acceptable in exchange for goods."55 It can take many forms, most
commonly as coins and banknotes. Despite its myriad forms, its key element is its general
acceptability.56 Laws usually define what can be considered as a generally acceptable medium of
exchange.57 In the Philippines, Republic Act No. 7653, otherwise known as The New Central Bank Act,
defines "legal tender" as follows:

All notes and coins issued by the Bangko Sentral shall be fully guaranteed by the Government of the
Republic of the Philippines and shall be legal tender in the Philippines for all debts, both public and
private: Provided, however, That, unless otherwise fixed by the Monetary Board, coins shall be legal
tender in amounts not exceeding Fifty pesos (P50.00) for denomination of Twenty-five centavos and
above, and in amounts not exceeding Twenty pesos (P20.00) for denominations of Ten centavos or
less.58
It is settled in jurisprudence that checks, being only negotiable instruments, are only substitutes for
money and are not legal tender; more so when the check has a named payee and is not payable to
bearer. In Philippine Airlines, Inc. v. Court of Appeals,59 this Court ruled that the payment of a check
to the sheriff did not satisfy the judgment debt as checks are not considered legal tender. This has
been maintained in other cases decided by this Court. In Cebu International Finance Corporation v.
Court of Appeals,60 this Court held that the debts paid in a money market transaction through the use
of a check is not a valid tender of payment as a check is not legal tender in the Philippines. Further,
in Bank of the Philippine Islands v. Court of Appeals,61 this Court held that "a check, whether a
manager's check or ordinary check, is not legal tender."62

The Air Waybill's prohibition mentions "negotiable instruments" only in the course of making an
example. Thus, they are not prohibited items themselves. Moreover, the illustrative example does
not even pertain to negotiable instruments per se but to "negotiable instruments equivalent to
cash."63

The checks involved here are payable to specific payees, Maxwell-Kates, Inc. and the New York
County Department of Finance.64 Thus, they are order instruments. They are not payable to their
bearer, i.e., bearer instruments. Order instruments differ from bearer instruments in their manner of
negotiation:

Under Section 30 of the [Negotiable Instruments Law], an order instrument requires an

indorsement from the payee or holder before it may be validly negotiated. A bearer
instrument, on the other hand, does not require an indorsement to be validly negotiated.65

There is no question that checks, whether payable to order or to bearer, so long as they comply with
the requirements under Section 1 of the Negotiable Instruments Law, are negotiable
instruments.66 The more relevant consideration is whether checks with a specified payee
are negotiable instruments equivalent to cash, as contemplated in the example added to the Air
Waybill's prohibition.

This Court thinks not. An order instrument, which has to be endorsed by the payee before it may be
negotiated,67 cannot be a negotiable instrument equivalent to cash. It is worth emphasizing that the
instruments given as further examples under the Air Waybill must be endorsed to be considered
equivalent to cash:68

Items Not Acceptable for Transportation. We do not accept transportation of money (including
but not limited to coins or negotiable instruments equivalent to cash such as endorsed stocks and
bonds). ... (Emphasis in the original)69

What this Court's protracted discussion reveals is that petitioner's Air Waybill lends itself to a great
deal of confusion. The clarity of its terms leaves much to be desired. This lack of clarity can only
militate against petitioner's cause.

The contract between petitioner and respondents is a contract of adhesion; it was prepared solely by
petitioner for respondents to conform to.70 Although not automatically void, any ambiguity in a
contract of adhesion is construed strictly against the party that prepared it.71 Accordingly, the
prohibition against transporting money must be restrictively construed against petitioner and liberally
for respondents. Viewed through this lens, with greater reason should respondents be exculpated
from liability for shipping documents or instruments, which are reasonably understood as not being
money, and for being unable to declare them as such.
Ultimately, in shipping checks, respondents were not violating petitioner's Air Waybill. From this, it
follows that they committed no breach of warranty that would absolve petitioner of liability.

WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed August 31, 2011
Decision and November 21, 2011 Resolution of the Court of Appeals in CA-G.R. CV No. 91216
are AFFIRMED.

SO ORDERED.

G.R. No. 242860, March 11, 2019

THE LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD (LTFRB) AND THE
DEPARTMENT OF TRANSPORTATION (DOTR), PETITIONERS, v. HON. CARLOS A.
VALENZUELA, IN HIS CAPACITY AS PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF
MANDALUYONG CITY, BRANCH 213 AND DBDOYC, INC., RESPONDENTS.

Assailed in this petition for certiorari1 is the Order2 dated August 20, 2018 (Assailed Order) rendered
by public respondent Judge Carlos A. Valenzuela of the Regional Trial Court of Mandaluyong City,
Branch 213 (RTC) in R-MND-18-01453-SC which directed the issuance of a writ of preliminary
injunction in favor of private respondent DBDOYC, Inc. (DBDOYC) essentially enjoining petitioners
the Land Transportation Franchising and Regulatory Board (LTFRB) and the Department of
Transportation (DOTr; collectively, petitioners) from regulating DBDOYC's business operations
conducted through the Angkas mobile application.

The Facts

On May 8, 2015, the Department of Transportation and Communications (DOTC), the predecessor of
DOTr, issued Department Order No. (DO) 2015-11,3 amending DO 97-1097,4 which set the standard
classifications for public transport conveyances to be used as basis for the issuance of a Certificate of
Public Convenience (CPC)5 for public utility vehicles (PUVs). In recognition of technological
innovations which allowed for the proliferation of new ways of delivering and offering public
transportation, the DOTC, through DO 2015-11, created two (2) new classifications,
namely, Transportation Network Companies (TNC) and Transportation Network Vehicle
Service (TNVS).6

Under DO 2015-11, a TNC is defined as an "organization whether a corporation, partnership,

sole proprietor, or other form, that provides pre-arranged transportation services for
compensation using an online-enabled application or platform technology to connect
passengers with drivers using their personal vehicles."7 Although DO 2015-11 made mention
of TNVS, the term was not clearly defined until June 19, 2017, when the DOTr issued DO 2017-
118 which set the rules and procedures on the issuance of franchises for public transport routes and
services,9 including TNCs and TNVS. Under DO 2017-11, TNVS is defined as "a [PUV] accredited
with a [TNC], which is granted authority or franchise by the LTFRB to run a public
transport service."10 DO 2017-11 further provided in Item 2.2 thereof that "[m]otorcycles x x x
are likewise not allowed as public transport conveyance."11

Consequently, the LTFRB issued various memorandum circulars12 to govern the issuance of the
necessary CPC for a TNVS and the accreditation of a TNC. In its issuances, the LTFRB declared that
a TNC is treated as a transport provider.13 whose accountability commences from the acceptance by
its TNVS while online.14 On the other hand, the accountability of the TNVS, as a common carrier,
attaches from the time the TNVS is online and offers its services to the riding public.15

Meanwhile, on May 26, 2016, DBDOYC registered its business with the Securities and Exchange
Commission (SEC), and subsequently, in December 2016, launched "Angkas," an online and on-
demand motorcycle-hailing mobile application (Angkas or Angkas app) that pairs drivers of
motorcycles with potential passengers without, however, obtaining the mandatory certificate of TNC
accreditation from the LTFRB. In this regard, DBDOYC accredited Angkas drivers and allowed them to
offer their transport services to the public despite the absence of CPCs.16

Cognizant of the foregoing, the LTFRB issued a press release on January 27, 2017 informing the
riding public that DBDOYC, which is considered as a TNC, cannot legally operate.17 Despite such
warning, however, DBDOYC continued to operate and offer its services to the riding public sans any
effort to obtain a certificate of TNC accreditation.18

In response, DBDOYC, on July 4, 2018, filed a Petition for Declaratory Relief with Application for
Temporary Restraining Order/Writ of Preliminary Injunction19 against petitioners before the RTC
alleging that:

(a) it is not a public transportation provider since Angkas app is a mere tool that connects the
passenger and the motorcycle driver; (b) Angkas and its drivers are not engaged in the delivery of a
public service; (c) alternatively, should it be determined that it is performing a public service that
requires the issuance of a certificate of accreditation and/or CPC, then DO 2017-11 should be
declared invalid because it violates Section 7 of Republic Act No. (RA) 4136 or the "Land and
Transportation Traffic Code,"20 which does not prohibit motorcycles from being used as a PUV; and
(d) neither the LTFRB nor the DOTr has jurisdiction to regulate motorcycles for hire.21

The RTC Proceedings and The Assailed Order

In an Order22 dated July 13, 2018, the RTC issued a Temporary Restraining Order (TRO) finding
DBDOYC's business not subject to any regulation nor prohibited under existing law. It added that
since the use of DBDOYC's internet-based mobile application is not contrary to law, morals, good
customs, public order, or public policy,23 a clear and unmistakable right has been established in favor
of DBDOYC such that if petitioners prohibit the operation of Angkas, the same would cause
irreparable injury to the company.24

Proceedings were thereafter conducted relative to the application for a writ of preliminary injunction.
Eventually, through the Assailed Order,25 the RTC issued the said writ to enjoin petitioners and
anyone acting on their behalf: (a) from interfering, whether directly or indirectly, with DBDOYC's
operations; (b) from apprehending Angkas bikers who are in lawful pursuit of their trade or
occupation based on Angkas mobile application; and (c) from performing any act/acts that will
impede, obstruct, frustrate, or defeat DBDOYC's pursuit of its lawful business or trade as owner and
operator of Angkas.26

In so ruling, the RTC found that DBDOYC has a clear and unmistakable right "to conduct its business
based on its constitutional right to liberty," which includes "the right of an individual to x x x earn his
livelihood by any lawful calling; [and] to pursue any [vocation] and essentially to do and perform
anything unless otherwise prohibited by law."27 In this light, the RTC concluded that DBDOYC has a
right to enter into an independent contract with its Angkas riders as an application provider, further
reiterating that DBDOYC's business is not yet subject to any regulation nor prohibited by any existing
law, and that the Angkas biker's offer of transportation services to a potential passenger is a purely
private arrangement using DBDOYC's application.28 Thus, should petitioners prohibit DBDOYC from
operating Angkas, an irreparable injury will result, thereby entitling it to the issuance of the
injunctive relief prayed for.29

Aggrieved, petitioners are now before the Court ascribing grave abuse of discretion on the part of the
RTC in issuing the writ of preliminary injunction through the Assailed Order. Notably, in the present
petition, petitioners sought the issuance of a TRO to enjoin the RTC from enforcing its injunctive writ,
which the Court granted in a Resolution30 dated December 5, 2018.

The Issue Before the Court

The core issue for the Court's resolution is whether or not the RTC committed grave abuse of
discretion amounting to lack or in excess of jurisdiction in issuing a writ of preliminary injunction in
favor of DBDOYC and against petitioners.

The Court's Ruling

Preliminarily, despite the absence of the required prior motion for reconsideration,31 the Court finds it
proper to give due course to the petition in view of the public interest involved, and further, the
urgent necessity of resolving this case so as not to prejudice the interests of the government.32

The petition is meritorious.

Case law states that "grave abuse of discretion arises when a lower court or tribunal patently violates
the Constitution, the law or existing jurisprudence."33 According to its classic formulation:

By grave abuse of discretion is meant capricious and whimsical exercise of judgment as is equivalent
to lack of jurisdiction. Mere abuse of discretion is not enough. It must be grave abuse of discretion as
when the power is exercised in an arbitrary or despotic manner by reason of passion or personal
hostility, and must be so patent and so gross as to amount to an evasion of a positive duty or to a
virtual refusal to perform the duty enjoined or to act at all in contemplation of law.34
In ruling on whether or not the RTC gravely abused its discretion in this case, the Court turns to the
basic principles governing the issuance of preliminary injunctive writs.

The first and foremost requisite in the issuance of a writ of preliminary injunction is the existence of
a clear legal right. The rationale therefor hews with the nature of these writs being mere
provisional reliefs. In Department of Public Works and Highways v. City Advertising Ventures
Corporation,35 the Court explained that a writ of preliminary injunction is issued to:
[P]revent threatened or continuous irremediable injury to some of the parties before their claims can
be thoroughly studied and adjudicated. Its sole aim is to preserve the status quo until the merits of
the case can be heard fully[.] Thus, it will be issued only upon a showing of a clear and
unmistakable right that is violated. Moreover, an urgent necessity for its issuance must be shown
by the applicant.36 (Emphasis and underscoring supplied)

In Spouses Nisce v. Equitable PCI Bank, Inc.,37 the Court held that "[t]he plaintiff praying for a writ of
preliminary injunction must x x x establish[, inter alia,] that he or she has a present and
unmistakable right to be protected; x x x [t]hus, where the plaintiffs right is doubtful or
disputed, a preliminary injunction is not proper. The possibility of irreparable damage without
proof of an actual existing right is not a ground for a preliminary injunction."38

In this case, the RTC premised its issuance of the assailed injunctive writ on DBDOYC's purported
clear and unmistakable legal right "to conduct its business based on its constitutional right to
liberty."39 Prescinding therefrom, the RTC concludes that DBDOYC has "the right to enter into an
independent contract with its Angkas bikers as an [application] provider [without] initially requiring it
to secure [a CPC]."40

As in all fundamental rights, the State has a legitimate interest in regulating these rights when their
exercise clearly affects the public. To recount, "[p]olice power is the inherent power of the State to
regulate or to restrain the use of liberty and property for public welfare."41 Accordingly, the State
"may interfere with personal liberty, property, lawful businesses and occupations to promote the
general welfare [as long as] the interference [is] reasonable and not arbitrary."42

Here, it is petitioners' position that DBDOYC is a transportation provider  and its accredited

drivers are common carriers engaged in rendering public service which is subject to their
regulation.43 The regulatory measures against DBDOYC, as mentioned above, pertain to DOs 2015-11
and 2017-11, which have created new classifications of transportation services, namely TNC and
TNVS, in light of modern innovations. These issuances may be traced to Commonwealth Act No.
146,44 otherwise known as the "Public Service Act," as amended.45 Under Section 13 (b) thereof, a
"public service" is defined as follows:
(b) The term "public service" includes every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, sub-way motor vehicle,
either for freight or passenger, or both with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat or steamship line,
pontines, ferries, and water craft, engaged in the transportation of passengers or freight or both,
shipyard, marine railway, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system, gas electric light, heat and power, water supply and power, petroleum, sewerage
system, wire or wireless communications system, wire or wireless broadcasting stations and other
similar public services; Provided, however, That a person engaged in agriculture, not otherwise a
public service, who owns a motor vehicle and uses it personally and/or enters into a special contract
whereby said motor vehicle is offered for hire or compensation to a third party or third [parties]
engaged in agriculture, not itself or themselves a public service, for operation by the latter for a
limited time and for a specific purpose directly connected with the cultivation of his or their farm, the
transportation, processing, and marketing of agricultural products of such third party or third parties
shall not be considered as operating a public service for the purposes of this Act. (Emphases and
underscoring supplied).
Section 15 of the same law requires that, except for certain exemptions, no public service shall
operate in the Philippines without possessing a CPC.46 In turn, the then DOTC (which had supervision
and control over the LTFRB that had assumed certain powers of the old Public Service Commission47 )
issued DO 97-1097 providing for the standard classifications of all PUVs before they can be issued a
CPC. This department order was later amended by the above-stated DOs 2015-11 and 2017-11 and
thereafter, the LTFRB issued various memorandum circulars governing the rules for TNC and TNVS
accreditation, which rules DBDOYC purportedly failed to comply.

As stated in the Public Service Act, the term "public service" covers any person who owns, operates,
manages, or controls in the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business purposes, any common
carrier.48 The Civil Code defines "common earners" in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public. (Emphases supplied)

For its part, DBDOYC claims reprieve from the above-stated regulatory measures, claiming that it
and its accredited drivers are not common carriers or transportation providers.49 It argues that "[its]
technology [only] allows a biker willing to give a ride and a passenger willing to pay the set price to
meet and contract with each other. Under this set-up, an Angkas biker does not offer his/her service
to an indefinite public."50 Since the application "merely pairs an Angkas biker with a potential
passenger under a fare scheme which [DBDOYC] fixes for both, [DBDOYC] may not compel
an Angkas driver to pick up a potential passenger even after the latter confirms a booking because as
between the biker and the passenger, there is but a purely private contractual arrangement."51
However, it seems that DBDOYC's proffered operations is not enough to extricate its business from
the definition of common carriers, which, as mentioned, fall under the scope of the term "public
service." As the DBDOYC itself describes, Angkas is a mobile application which seeks to "pair an
available and willing Angkas biker with a potential passenger, who requested for a motorcycle ride,
relying on geo-location technology."52 Accordingly, it appears that it is practically functioning as a
booking agent, or at the very least, acts as a third-party liaison for its accredited bikers.
Irrespective of the application's limited market scope, i.e., Angkas users, it remains that, on the one
hand, these bikers offer transportation services to wiling public consumers, and on the other hand,
these services may be readily accessed by anyone who chooses to download the Angkas app.

In De Guzman v. Court of Appeals,53 the Court discussed the relation between Article 1732 of the
Civil Code and Section 13 (b) of the Public Service Act, explaining that Article 1732 of the Civil Code
does not distinguish between a carrier who offers its services to the general public and one who
offers services or solicits business only from a narrow segment of the general population:
The above article makes no distinction between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying only as an ancillary activity (in local
idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the "general public," i.e.,
the general community or population, and one who offers services or solicits business only
from a narrow segment of the general population. We think that Article [1732] deliberately
refrained from making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide
neatly with the notion of "public service ," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law on common carriers set forth in the
Civil Code. x x x.54 (Emphases and underscoring supplied)

In this relation, DBDOYC posits that its accredited bikers are private carriers as they do not hold out
their services generally to the public because they cannot just be hailed on the street as they only
contract via the Angkas online front. However, the Court is hard-pressed to rule - at least at this
point, and for the purpose of determining the validity of the writ of preliminary injunction - that these
bikers are only private carriers who may publicly ply their trade without any regulation. As the Court
observes, the genius behind the Angkas app is that it removes the inconvenience of having to
physically hail for public transportation by creating a virtual system wherein practically the same
activity may now be done at the tip of one's fingers. As it is the trend of modern technology,
previously cumbersome mundane activities, such as paying bills, ordering food, or reserving
accommodations, can now be accomplished through a variety of online platforms. By DBDOYC's own
description,55 it seems to be that Angkas app is one of such platforms. As such, the fact that its
drivers are not physically hailed on the street does not automatically render Angkas-
accredited drivers as private carriers.

While DBDOYC further claims that another distinguishing factor of its business is that "[its] drivers
may refuse at any time any legitimate demand for service by simply not going online or not logging
in to the online platform,"56 still when they do so log-in, they make their services publicly
available. In other words, when they put themselves online, their services are bound for
indiscriminate public consumption. Again, as also-mentioned above, Article 1732 defining a common
carrier "[c]arefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis."57 This doctrinal statement seems to be the apt response to DBDOYC's
assertion.
Moreover, based on the way the app works, it appears that there is really no contractual
discretion between the Angkas bikers and would-be passengers because the app automatically
pairs them up based on algorithmic procedures. Whether or not the parties once paired with each
other have the choice to freely accept, reject, or modify the terms of their engagement based solely
on their discretion is a matter which appears to have not yet been traversed in the proceedings
below. Verily, the absence of any true choice on these material contractual points apparently
contradicts the postulation that the Angkas app merely facilitates a purely private arrangement
between the biker and his passenger.

At any rate, even if it is assumed that Angkas-accredited bikers are not treated as common carriers
and hence, would not make DBDOYC fall under the "public service" definition, it does not necessarily
mean that the business of holding out private motorcycles for hire is a legitimate commercial
venture. Section 7 of RA 4136 states that:
Section 7. Registration Classification. - Every motor vehicle shall be registered under one of the
following described classifications:

(a) private passenger automobiles; (b) private trucks; and (c) private motorcycles, scooters, or
motor wheel attachments. Motor vehicles registered under these classifications shall not be used
for hire under any circumstances and shall not be used to solicit, accept, or be used to
transport passengers or freight for pay.

x x x x (Emphases and underscoring supplied)

That being said, the Court therefore concludes that no clear and unmistakable right exists in
DBDOYC's favor; hence, the RTC gravely abused its discretion in issuing the assailed injunctive
writ. In the final analysis, the business of holding one's self out as a transportation service provider,
whether done through online platforms or not, appears to be one which is imbued with public interest
and thus, deserves appropriate regulations. With the safety of the public further in mind, and given
that, at any rate, the above-said administrative issuances are presumed to be valid until and unless
they are set aside,58 the nullification of the assailed injunctive writ on the ground of grave abuse of
discretion is in order.

Lest it be misunderstood, the pronounced grave abuse of discretion of the RTC exists only with
respect to its issuance of the assailed injunctive writ. It is fundamental that preliminary injunction
proceedings are separate and distinct from the main case. In Buyco v. Baraquia,59 the Court
discussed the ancillary and provisional nature of these writs:
A writ of preliminary injunction is an order granted at any stage of an action or proceeding prior to
the judgment or final order, requiring a party or a court, agency or a person to refrain from a
particular act or acts. It is merely a provisional remedy, adjunct to the main case subject to the
latter's outcome. It is not a cause of action in itself. Being an ancillary or auxiliary remedy, it is
available during the pendency of the action which may be resorted to by a litigant to preserve and
protect certain rights and interests therein pending rendition, and for purposes of the ultimate
effects, of a final judgment in the case.

The writ is provisional because it constitutes a temporary measure availed of during the pendency of
the action and it is ancillary because it is a mere incident in and is dependent upon the result of the
main action.60
Under this limited scope, it is thus beyond the power of the Court to determine the ultimate rights
and obligations of the parties, else it unduly prejudges the main case for declaratory relief which is
still pending before the court a quo. While the Court acknowledges the contemporary relevance of
the topic at hand, it remains self-aware of this case's procedural and jurisdictional parameters.
Accordingly, the definitive resolution of the issue of regulating ride-booking or ride-sharing
applications must await the proper case therefor.
As a final word, "[e]very court should remember that an injunction should not be granted lightly or
precipitately because it is a limitation upon the freedom of the defendant's action. It should be
granted only when the court is fully satisfied that the law permits it and the emergency demands it,
for no power exists whose exercise is more delicate, which requires greater caution and deliberation,
or is more dangerous in a doubtful case, than the issuance of an injunction."61

WHEREFORE, the petition is GRANTED. The Order dated August 20, 2018 issued by the Regional
Trial Court of Mandaluyong City, Branch 213 (RTC) directing the issuance of a writ of preliminary
injunction in R-MND-18-01453-SC is ANNULLED and SET ASIDE. The RTC is hereby ORDERED to
conduct further proceedings, and thereafter, resolve R-MND-18-01453-SC with utmost dispatch.

SO ORDERED.