REPUBLIC V. MERALCO (G.R. NO.

141314)

Facts:

MERALCO filed with petitioner ERB an application for the revision of its rate
schedules to reflect an average increase in its distribution charge. ERB granted a
provisional increase subject to the condition that should the COA thru its audit
report find MERALCO is entitled to a lesser increase, all excess amounts
collected from the latters customers shall either be refunded to them or
correspondingly credited in their favor. The COA report found that MERALCO
is entitled to a lesser increase, thus ERB ordered the refund or crediting of the
excess amounts. On appeal, the CA set aside the ERB decision. MRs were
denied.

Issue:

Whether or not the regulation of ERB as to the adjustment of rates of

MERALCO is valid.

Ruling: YES.

The regulation of rates to be charged by public utilities is founded upon the

police powers of the State and statutes prescribing rules for the control and
regulation of public utilities are a valid exercise thereof. When private property
is used for a public purpose and is affected with public interest, it ceases to be
juris privati only and becomes subject to regulation. The regulation is to promote
the common good. Submission to regulation may be withdrawn by the owner by
discontinuing use; but as long as use of the property is continued, the same is
subject to public regulation.

In regulating rates charged by public utilities, the State protects the public
against arbitrary and excessive rates while maintaining the efficiency and quality
of services rendered. However, the power to regulate rates does not give the
State the right to prescribe rates which are so low as to deprive the public utility
of a reasonable return on investment. Thus, the rates prescribed by the State must
be one that yields a fair return on the public utility upon the value of the property
performing the service and one that is reasonable to the public for the services
rendered. The fixing of just and reasonable rates involves a balancing of the
investor and the consumer interests.
 handling and port related services thereat, the law provides that such shall be in
accordance with P.D. 857 and other applicable laws and regulations. P.D. 857
Albano vs. Reyes (175 SCRA 264) expressly empowers the PPA to provide services within Port Districts whether
on its own, by contract, or otherwise.

Facts:
Even if the MICT is considered a public utility, its operation would not
necessarily need a franchise from the legislature because the law has granted
The Philippine Ports Authority (PPA) board directed the PPA management to certain administrative agencies the power to grant licenses for or to authorize the
prepare for the public bidding of the development, management and operation of operation of public utilities. Reading E.O. 30 and P.D. 857 together, it is clear
the Manila International Container Terminal (MICT) at the Port of Manila. A that the lawmaker has empowered the PPA to undertake by itself the operation
Bidding Committee was formed by the DOTC for the public bidding. After and management of the MICP or to authorize its operation and management by
evaluation of several bids, the Bidding Committee recommended the award of another by contract or other means, at its option.
the contract to respondent International Container Terminal Services, Inc.
(ICTSI). Accordingly, Rainerio Reyes, then DOTC secretary, declared the ICTSI
consortium as the winning bidder. Doctrine: The law granted certain administrative agencies the power to grant
licenses for the operation of public utilities. Theory that MICT is a wharf or a
dock, as contemplated under the Public Service Act, would not necessarily call
On May 18, 1988, the President of the Philippines approved the same with for a franchise from the Legislative Branch.
directives that PPA shall still have the responsibility for planning, detailed
engineering, construction, expansion, rehabilitation and capital dredging of the
port, as well as the determination of how the revenues of the port system shall be
allocated for future works; and the contractor shall not collect taxes and duties
except that in the case of wharfage or tonnage dues.

Petitioner Albano, as taxpayer and Congressman, assailed the legality of the

award and claimed that since the MICT is a public utility, it needs a legislative
franchise before it can legally operate as a public utility.

ISSUE: Whether a franchise is needed for the operation of the MICT?

Held: No. While the PPA has been tasked under E.O. No. 30 with the
management and operation of the MICT and to undertake the provision of cargo
 Congress has granted certain administrative agencies thepower to grant licenses
for, or to authorize the operation of certainpublic utilities.With the growing
complexity of modern life, themultiplication of the subjects of governmental
regulation, and theincreased difficulty of administering the laws, there is a
PHIL. AIRLINES INC. vs. CIVIL AERONAUTICS BOARD
constantlygrowing tendency towards the delegation of greater powers by
270 SCRA 538, G.R. No. 119528, March 26, 1997 thelegislature, and towards the approval of the practice by the courts.It is
generally recognized that a franchise may be derivedindirectly from the state
Facts: through a duly designated agency, and tothis extent, the power to grant
franchises has frequently beendelegated, even to agencies other than those of a
On November 24, 1994, GrandAir applied for a Certificateof Public legislativenature. In pursuance of this, it has been held that privilegesconferred
Convenience and Necessity with the Board. Accordingly,the Chief Hearing by grant by local authorities as agents for the stateconstitute as much a legislative
Officer of the CAB issued a Notice of Hearingsetting the application for initial franchise as though the grant hadbeen made by an act of the Legislature."The
hearing and directing GrandAir toserve a copy of the application and franchise is a legislative grant, whether made directlyby the legislature itself, or
corresponding notice to allscheduled Philippine Domestic operators.GrandAir by any one of its properly constitutedinstrumentalities. The grant, when made,
filed its Compliance, and requested for theissuance of a Temporary Operating binds the public, and is,directly or indirectly, the act of the state."Congress, by
Permit. PAL, a holder of alegislative franchise to operate air transport services, giving the respondent Board the power toissue permits for the operation of
filed anOpposition to the application for a Certificate of Public Convenienceand domestic transport services, hasdelegated to the said body the authority to
Necessity on December 16, 1995 on the following grounds: TheCAB has no determine the capabilityand competence of a prospective domestic air transport
jurisdiction to hear the petitioner's application until thelatter has first obtained a operator toengage in such venture. This is not an instance of transforming
franchise to operate from Congress.At the initial hearing for the application, therespondent Board into a mini-legislative body, with unbridledauthority to
petitioner raisedthe issue of lack of jurisdiction of the Board to hear the choose who should be given authority to operatedomestic air transport
applicationbecause GrandAir did not possess a legislative services."To be valid, the delegation itself must be circumscribedby legislative
franchise. ChiefHearing Officer of CAB issued an Order denying restrictions, not a "roving commission" that will givethe delegate unlimited
petitioner'sOpposition.PAL alleges that the CAB has no jurisdiction to hear legislative authority. It must not be adelegation "running riot" and "not canalized
thepetitioner's application until the latter has first obtained a franchiseto operate with banks that keep itfrom overflowing." Otherwise, the delegation is in legal
from Congress. The Civil Aeronautics Board has jurisdiction to hear and resolve effect anabdication of legislative authority, a total surrender by thelegislature of
the application.In Avia Filipina vs. CAB, CA G.R. No. 23365, it has beenruled its prerogatives in favor of the delegate.
that under Section 10 (c) (I) of R.A. 776, the Board possessesthis specific power
and duty. In view thereof, the opposition of PALon this ground is hereby denied.

Issue:

Whether or not the Congress , in enacting Republic Act776, has delegated the
authority to authorize the operation ofdomestic air transport services to the
respondent Board, such thatCongressional mandate for the approval of such
authority is nolonger necessary.

Held:
 Bolbok, with the express limitation that he could not accept passengers
from intermediate points between Taal and Bolbok, except those which
were going to points beyond San Juan de Bolbok or to the Province of Tayabas;
that he inaugurated this irregular in March, 1926, butmaintained it on that part of
the line between Taal and Bantilan only for about three months, when he
abandoned that portion of it in the month of June and did not renew it until
five days before the hearing of case No. 10301, which was set for
BATANGAS TRANSPORTATION CO.,petitioner-appellant,vs.CAYETANO November 24, 1926, in which hearing the Batangas Transportation Company
ORLANES,respondent-appelleeG.R. No. L-28865December 19, 1928 asked for additional hours for its line between Batangas and Bantilan; that in
June, 1926, Orlanes sought to obtain a license as a regular operator on that
FACTS: The appellee Orlanes, in his application for a permit,alleges that he is portion of the line between Bantilan and Lucena without having asked for a
the holder of a certificate of public convenience issued by the Public Service permit for tat portion of the line between Bantilan and Taal; that from June,
Commission in case No. 7306, to operate an autobus line from Taal to Lucena, 1926, Orlanes and the Batangas Transportation Company were jointly operating
passing through Batangas, Bolbok and Bantilan, in the Province of Batangas, a regular service between Bantilan and Lucena, with trips every half an hour, and
and Candelaria and Sariaya, in the Province of Tayabas, without any fixed Orlanes not having asked for a regular service between Bantilan and Taal, the
schedule; that by reason of the requirements of public convenience, he has Batangas Transportation Company remedied this lack of service under the
applied for a fixed schedule from Bantilan to Lucena and return; that in case No. authority of the Commission, and increased its trips between Bantilan and
7306, he cannot accept passengers or cargo from Taal to any point before Tayabas to make due and timely connections in Bantilan on a half-hour service
Balbok, and vice versa; that the public convenience requires that he be between Bantilan and Batangas with connections there for Taal and all other
convertedinto what is known as a regular operator on a fixed schedule points in the Province of Batangas. It is then alleged that the service maintained
between Taal and Bantilan and intermediate points, and for that purpose, by the company is sufficient to satisafy the convenience of the public, and that
he has submitted to the Commission proposed schedule for a license to the public convenience does not require the granting of the permit for the service
make trips between those and intermediate points. He then alleges that by which Orlanes petitions, and that to do so would result in ruinous competition
reason of increase of traffic, the public convenience also requires that he be and to the grave prejudice of the company and without any benefit to the public,
permitted to accept passengers and cargo at points between Taal and Bantilan, and it prayed that the petition of Orlanes to operate a regular service be denied.
and he asked for authority to establish that schedule, and to accept passengers at
all points between Taal and Bantilan. After the evidence was taken upon such issues, the Public Service Commission
granted the petition of Orlanes, as prayed for, and the company then filed a
On the other hand, the Batangas Transportation Company appeared and filed an motion for a rehearing, which was denied, and thecase is now before this court.
application for a permit, in which it alleged that it is operating a regular service
of auto trucks between the principal municipalities of the Province of Batangas ISSUE: WON the Commission can issue certificate of public convenience going
and some of thoseof the Province of Tayabas; that since 1918, it has been to be issued to a second operator(Orlanes)to operate a public utility in a
operating a regular service between Taal and Rosario, and that in 1920, fieldwhere, and in competition with, a first operator(Batangas)who is already
its service was extended to the municipality of San Juan de Bolbok, with operating, adequate and satisfactory service.
a certificate of public convenience issued by the Public Servise
DECISION: There is no claim or pretense that the Batangas Transportation
Commission; that inthe year 1925 Orlanes obtained from the Commission a
Company has violated any of the terms and conditions of its license.
certificate of public convenience to operate an irregular service of auto trucks
Neitherdoes the Public Service Commission find as a fact that the grantingof a
between Taal, Province of Batangas, and Lucena, Province of Tayabas, passing
license to Orlanes as a regular operator between the points in question is
through the municipalities of Bauan, Batangas, Ibaan, Rosario, and San Juan de
required or necessary for the convenience of the traveling public, or that there is furnished at the minimum cost. The prime object and real purpose of
any complaint or criticism by the public of the services rendered by the Batangas commission control is to secure adequate sustained service for the public at the
Transportation Company over the route in question. least possible cost, and to protect and conserve investments already made for
this purpose. Experience has demonstratedbeyond any question that
So long as the first licensee keeps and performs the terms and conditions competition among natural monopolies is wasteful economically and results
of its license and complies with the reasonable rules and regulations of the finally in insufficient and unsatisfactory service and extravagant rates. Neither
Commission and meets the reasonable demands of the public, it should have the number of the individuals demanding other service nor the question of the
more or less of a vested and preferential right over a person who seeks to acquire fares constitutes the entire question, but rather what the proper agency
another and a later license over the same route. Otherwise, the first license would should be to furnish the best service to the public generally and
not have protection on his investment, and would be subject to ruinous continuously at the least cost. Anything which tends to cripple seriously or
competition and thus defeat the very purpose and intent for which the Public destroy an established system of transportation that is necessary to a community
Service Commission was created. is not a convenience and necessity for the public and its introduction would be a
handicap rather than a help ultimately in such a field.
It does not appear that the public has ever made any complaint the Batangas
Transportation Company, yet on its own volition and to meet the increase of its We are clearly of the opinion that the order of the Commission granting the
business, it has applied to the Public Service Commission for authority to petition of Orlanes in question, for the reason therein stated, is null and void, and
increase the number of daily trips to nineteen, thus showing a spirit that ought to that it is in direct conflict with the underlying and fundamental principles for
be commended. which the Commission was created.1awphi1.netThe question presented is very
important and far-reaching and one of first impression in this court, and for such
And in Re Mount Baker Development Co., the Public Service Commission of
reasons we have given this case the careful consideration which its importance
Washington (P. U. R., 1925D, 705), held: A certificate authorizing through motor
deserves. The Government havingtaken over the control and supervision of all
carrier service should not authorize local service between points served by the
public utilities, so long as an operator under a prior license complies with
holders of a certificate, without first giving the certificate holders an opportunity
the terms and conditions of his license and reasonable rules and regulation
to render additional service desired.
for its operation and meets the reasonable demands of the public, it is the duty of
In the National Coal Company case (47 Phil., 356), this court said:When there is the Commission to protect rather than to destroy his investment by the granting
no monopoly. There is no such thing as a monopoly where a property is of a subsequent license to another for the same thing over the same route of
operated as a public utility under the rules and regulations of the Public Utility travel. The granting of such a license does not serve its convenience or promote
Commission and the terms and provision of the Public Utility Act. the interests of the public.The decision of the Public Service Commission,
granting to Orlanes the license in question, is revoked and set aside, and thecase
Upon the question of "Reason and Rule for Regulation," in section 775, Pond is remanded to the Commission for such other and further proceedings as are not
says: The policy of regulation, upon which our present public utility commission inconsistent with this opinion. Neither party to recover costs on this appeal.
plan is based and which tends to do away with competition among public utilities
as they are natural monopolies, is at once the reason and the justification for the
holding of our courts that the regulation of an existing system of transportation,
which is properly serving a given field or may be required to do so, is to
be preferred to competition among several independent systems. While
requiring a proper service from a single system for a city or territory in
consideration for protecting it as a monopoly for all the service required and in
conserving its resources, no economic waste results and service may be
 passenger buses and freight trucks between Allen and Matnog in connection with
its trips to Tacloban City. (Important wrong argument)

PANTRANCO claims that it can operate a ferry service in connection with its
franchise for bus operation in the highway from Pasay City to Tacloban City "for
the purpose of continuing the highway, which is interrupted by a small body of
water, the said proposed ferry operation is merely a necessary and incidental
service to its main service and obligation of transporting its passengers from
San Pablo vs Pantranco
Pasay City to Tacloban City.
FACTS:
Such being the case there is no need to obtain a separate certificate for public
The Pantranco South Express, Inc., hereinafter referred to as PANTRANCO is a convenience to operate a ferry service between Allen and Matnog to cater
domestic corporation engaged in the land transportation business with PUB exclusively to its passenger buses and freight trucks. Without awaiting action on
service for passengers and freight and various certificates for public its request PANTRANCO started to operate said ferry service.
conveniences (CPC) to operate passenger buses from Metro Manila to Bicol
Acting Chairman Jose C. Campos, Jr. of BOT ordered PANTRANCO not to
Region and Eastern Samar. On March 27,1980 PANTRANCO through its
operate its vessel until the application for hearing on Oct. 1, 1981.
counsel wrote to Maritime Industry Authority (MARINA)
In another order BOT enjoined PANTRANCO from operating the MN "Black
requesting authority to lease/purchase a vessel named MN "Black Double"
Double" otherwise it will be cited to show cause why its CPC should not be
"to be used for its project to operate a ferryboat service from Matnog, Sorsogon suspended or the pending application denied. Epitacio San Pablo (now
and Allen, Samar that will provide service to company buses and freight trucks represented by his heirs) and Cardinal Shipping Corporation who are franchise
that have to cross San Bernardo Strait. In a reply of April 29,1981 holders of the ferry service in this area interposed their opposition. They claim
PANTRANCO was informed by MARINA that it cannot give due course to the they adequately service the PANTRANCO by ferrying its buses, trucks and
request, based on the following observations. passengers. BOT then asked the legal opinion from the Minister of Justice
whether or not a bus company with an existing CPC between Pasay City and
1.) Tacloban City may still be required to secure another certificate in order to
operate a ferry service between two terminals of a small body of water.
The Matnog-Allen run is adequately serviced by Cardinal Shipping Corp. and
Epitacio San Pablo; MARINA policies on interisland shipping restrict the entry On October 20, 1981 then Minister of Justice Ricardo Puno rendered an opinion
of new operators to Liner trade routes where these are adequately serviced by to the effect that there is no need for bus operators to secure a separate CPC to
existing/authorized operators. operate a ferryboat service.

2.) Thus on October 23, 1981 the BOT rendered its decision holding that the
ferryboat service is part of its CPC to operate from Pasay to Samar/Leyte by
Market conditions in the proposed route cannot support the entry of additional
amending PANTRANCO's CPC so as to reflect the same. Cardinal Shipping
tonnage; vessel acquisitions intended for operations therein are necessarily
Corporation and the heirs of San Pablo filed separate motions for reconsideration
limited to those intended for replacement purposes only." PANTRANCO
of said decision and San Pablo filed a supplemental motion for reconsideration
nevertheless acquired the vessel MN "Black Double" on May 27, 1981 for P3
that were denied by the BOT on July 21, 1981.
Million pesos. It wrote the Chairman of the Board of Transportation (BOT)
through its counsel, that it proposes to operate a ferry service to carry its
Hence, San Pablo filed the herein petition for review on certiorari with prayer for Javellana case (98 Phil. 964) We made clear distinction between a ferry service
preliminary injunction seeking the revocation of said decision, and pending and coastwise or interisland service by holding that:" . . . We are inclined to
consideration of the petition the issuance of a restraining order or preliminary believe that the Legislature intended ferry to mean the service either by barges or
injunction against the operation by PANTRANCO of said ferry service rafts, even by motor or steam vessels, between the banks of a river or stream to
continue the highway which is interrupted by the body of water, or in some
ISSUES: cases, to connect two points on opposite shores of an arm of the sea such as bay
or lake which does not involve too great a distance or too long a time to navigate.
1.) Whether the sea can be considered as a continuation of the highway?
But where the line or service involves crossing the open sea like the body of
2.) Is PANTRANCO a private carrier? water between the province of Batangas and the island of Mindoro which the
oppositors describe thus "the intervening waters between Calapan and Batangas
3.) Whether a land transportation company can be authorized to operate a ferry are wide and dangerous with big waves where small boat, barge or raft are not
service or coastwise or interisland shipping service along its authorized route as adapted to the service,' then it is more reasonable to regard said line or service as
an incident to its franchise without the need of filing a separate application for more properly belonging to interisland or coastwise trade." . . .
the same.
Separate certificate of public convenience must be secured
Held:
Respondent PANTRANCO should secure a separate CPC for the operation of an
Open sea, not a continuation of highway. interisland or coastwise shipping service in accordance with the provisions of
law. Its CPC as a bus transportation cannot be merely amended to include this
Under no circumstance can the sea between Matnog and Allen be considered a
water service under the guise that it is a mere private ferry service. Thus the
continuation of the highway. While a ferryboat service has been considered as a
Court holds that the water transport service between Matnog and Allen is not a
continuation of the highway when crossing rivers or even lakes, which are small
ferryboat service but a coastwise or interisland shipping service. Before private
body of waters separating the land, however, when as in this case the two
respondent may be issued a franchise or CPC for the operation of the said service
terminals, Matnog and Allen are separated by an open sea it can not be
as a common carrier, it must comply with the usual requirements of filing an
considered as a continuation of the highway. The contention of private
application, payment of the fees, publication, adducing evidence at a hearing and
respondent PANTRANCO that its ferry service operation is as a private carrier,
affording the oppositors the opportunity to be heard, among others, as provided
not as a common carrier for its exclusive use in the ferrying of its passenger
by law. WHEREFORE, the petitions are hereby GRANTED and the Decision of
buses and cargo trucks is absurd. PANTRANCO does not deny that it charges its
the respondent Board of Transportation (BOT) of October 23, 1981 in BOT Case
passengers separately from the charges for the bus trips and issues separate
No. 81-348-C and its Order of July 21, 1982 in the same case denying the
tickets whenever they board the MN "Black Double" that crosses Matnog to
motions for reconsideration filed by petitioners are hereby Reversed and set
Allen. Nevertheless, considering that the authority granted to PANTRANCO is
aside and declared null and void. Respondent PANTRANCO is hereby
to operate a private ferry, it can still assert that it cannot be held to account as a
permanently enjoined from operating the ferryboat service and/or
common carrier towards its passengers and cargo. Such an anomalous situation
coastwise/interisland services between Matnog and Allen until it shall have
that will jeopardize the safety and interests of its passengers and the cargo
secured the appropriate Certificate of Public Convenience (CPC) in accordance
owners cannot be allowed.
with the requirements of the law, with costs against respondent PANTRANCO.
Ferry service distinguished from interisland service.

Thus the Court holds that the water transport service between Matnog and Allen
is not a ferryboat service but a coastwise or interisland shipping service. In
 sought the help of the residents of that place and applied water to Lara but to no
avail. They brought Lara to the nearest place where they could find a doctor and
not having found any they took him to St. Josephs clinic of Kidapwan. But
when Lara arrived, he was already dead. From there they proceeded to Davao
City and immediately notified the local authorities.

ISSUES & ARGUMENTS

Lara v. Valencia W/N defendant is duty bound to exercise extraordinary diligence as required of a
common carrier by our law?
FACTS
HOLDING & RATIO DECIDENDI
Lara was an inspector for the Bureau of Forestry. The defendant is engaged in
the business of exporting logs from his lumber concession in Cotabato. Lara No. Defendant is only required to observe ordinary care, and is not in duty
went to said concession upon instructions of his chief to classify the logs of bound to exercise extraordinary diligence
defendant which were about to be loaded on a ship anchored in the port of
Parang. The work of Lara lasted for six days during which he contracted malaria
fever. On a later date, Lara who then in a hurry to return to Davao asked
defendant if he could if he could take him in his pick-up as there was then no It therefore appears that the deceased, as well his companions who rode in the
other means of transportation, to which defendant agree, and in that same pick-up of defendant, were merely accommodation passengers who paid nothing
morning the pick-up left Parang bound for Davao taking along six passengers, for the service and so they can be considered as invited guests within the
including Lara. meaning of the law. As accommodation passengers or invited guests, defendant
as owner and driver of the pick-up owes to them merely the duty to exercise
The pick-up has a front seat where the driver and two passengers can be reasonable care so that they may be transported safely to their destination. Thus,
accommodated and the back has a steel flooring enclosed with a steel walling of "The rule is established by the weight of authority that the owner or operator of
16 to 17 inches tall on the sides and with a 19 inches tall walling at the back. In an automobile owes the duty to an invited guest to exercise reasonable care in its
the middle Lara sat on a bag. Before leaving, Parang, defendant invited Lara to operation, and not unreasonably to expose him to danger and injury by
sit with him on the front seat but Lara declined. It was their understanding increasing the hazard of travel. This rule, as frequently stated by the courts, is
that upon reaching barrio Samoay, Cotabato, the passengers would alight and that an owner of an automobile owes a guest the duty to exercise ordinary or
take a passenger bus bound for Davao, but when they arrived at that place, only reasonable care to avoid injuring him. Since one riding in an automobile is no
one alighted and the other passengers requested defendant to allow them to ride less a guest because he asked for the privilege of doing so, the same obligation of
with him up to Davao because there was then no available bus that they could care is imposed upon the driver as in the case of one expressly invited to ride" (5
take in going to that place. Defendant again accommodated the passengers. Am. Jur., 626-627). Defendant, therefore, is only required to observe ordinary
care, and is not in duty bound to exercise extraordinary diligence as required of a
When they continued their trip, the sitting arrangement of the passengers
common carrier by our law (Articles 1755 and 1756, new Civil Code).
remained the same, Lara being seated on a bag in the middle with his arms on a
suitcase and his head covered by a jacket. Upon reaching Km. 96, barrio
Catidtuan, Lara accidentally fell from the pick-up and as a result he suffered
serious injuries. Valencia stopped the pick-up to see what happened to Lara. He
 Insurance Company the amount demanded with legal interest plus attorneys
fees.

Disagreeing with such judgment, American Steamship Agencies appealed

directly to Us.

ISSUE: Is the stipulation in the charter party of the owners non-liability valid so
as to absolve the American Steamship Agencies from liability for loss?

HELD: The judgment appealed from is hereby reversed and appellant is

HOME INSURANCE COMPANY vs. AMERICAN STEAMSHIP AGENCIES, absolved from liability to plaintiff.
INC. and LUZON STEVEDORING CORPORATION
YES
G.R. No. L-25599
The bills of lading, covering the shipment of Peruvian fish meal provide at the
April 4, 1968 back thereof that the bills of lading shall be governed by and subject to the terms
and conditions of the charter party, if any, otherwise, the bills of lading prevail
FACTS: Consorcio Pesquero del Peru of South America shipped freight pre-
over all the agreements. On the bills are stamped Freight prepaid as per charter
paid at Peru, jute bags of Peruvian fish meal through SS Crowborough, covered
party. Subject to all terms, conditions and exceptions of charter party dated
by clean bills of lading. The cargo, consigned to San Miguel Brewery, Inc., now
London, Dec. 13, 1962.
San Miguel Corporation, and insured by Home Insurance Company arrived in
Manila and was discharged into the lighters of Luzon Stevedoring Company. Section 2, paragraph 2 of the charter party, provides that the owner is liable for
When the cargo was delivered to consignee San Miguel Brewery Inc., there were loss or damage to the goods caused by personal want of due diligence on its part
shortages causing the latter to lay claims against Luzon Stevedoring Corporation, or its manager to make the vessel in all respects seaworthy and to secure that she
Home Insurance Company and the American Steamship Agencies (shipowner), be properly manned, equipped and supplied or by the personal act or default of
owner and operator of SS Crowborough. the owner or its manager. Said paragraph, however, exempts the owner of the
vessel from any loss or damage or delay arising from any other source, even
Because the others denied liability, Home Insurance Company paid SMBI the
from the neglect or fault of the captain or crew or some other person employed
insurance value of the loss, as full settlement of the claim. Having been refused
by the owner on board, for whose acts the owner would ordinarily be liable
reimbursement by both the Luzon Stevedoring Corporation and American
except for said paragraph..
Steamship Agencies, Home Insurance Company, as subrogee to the consignee,
filed against them before the CFI of Manila a complaint for recovery of the The provisions of our Civil Code on common carriers were taken from Anglo-
payment paid with legal interest, plus attorneys fees. American law. Under American jurisprudence, a common carrier undertaking to
carry a special cargo or chartered to a special person only, becomes a private
In answer, Luzon Stevedoring Corporation alleged that it delivered with due
carrier. As a private carrier, a stipulation exempting the owner from liability for
diligence the goods in the same quantity and quality that it had received the same
the negligence of its agent is not against public policy, and is deemed valid.
from the carrier.
Such doctrine We find reasonable. The Civil Code provisions on common
The CFI, after trial, absolved Luzon Stevedoring Corporation, having found the
carriers should not be applied where the carrier is not acting as such but as a
latter to have merely delivered what it received from the carrier in the same
private carrier. The stipulation in the charter party absolving the owner from
condition and quality, and ordered American Steamship Agencies to pay Home
liability for loss due to the negligence of its agent would be void only if the strict
public policy governing common carriers is applied. Such policy has no force
where the public at large is not involved, as in the case of a ship totally chartered
for the use of a single party.

And furthermore, in a charter of the entire vessel, the bill of lading issued by the
master to the charterer, as shipper, is in fact and legal contemplation merely a
receipt and a document of title not a contract, for the contract is the charter party.
The consignee may not claim ignorance of said charter party because the bills of
lading expressly referred to the same. Accordingly, the consignees under the bills
of lading must likewise abide by the terms of the charter party. And as stated,
recovery cannot be had thereunder, for loss or damage to the cargo, against the
shipowners, unless the same is due to personal acts or negligence of said owner
or its manager, as distinguished from its other agents or employees. In this case,
no such personal act or negligence has been proved.