G.R. No.

L-10051

March 9, 1916

ERLANGER & GALINGER, plaintiffs-appellants,

vs.
THE SWEDISH EAST ASIATIC CO., (LTD.) ET AL., defendants. THE "OELWERKE TEUTONIA" and NEW
ZEALAND INSURANCE CO. (LTD.), appellants.

S. S. `MANCHURIA', May 13, 1913.

All rescued from the Nippon . Stranded on extreme north end of shoal. Vessel stranded May 9.
She is full of water fore and aft and is badly ashore. Ship abandoned. Proceed Hongkong.

Gilbert, Haussermann, Cohn and Fisher for plaintiff-appellant.

Rohde and Wright and Lawrence, Ross and Block for defendant-appellants.

(Sgd.) "DIXON.

PER CURIAM:
The facts in this case are as follows:
First. The steamship Nippon loaded principally with copra and with some other general merchandise sailed
from Manila on May 7, 1913, bound for Singapore. Second. The steamship Nippon went aground on
Scarborough Reef about 4.30 in the afternoon of May 8, 1913. Third. Scarborough Reef is about 120 to 130
miles from the nearest point on the Island of Luzon. Fourth. On May 9, 1913, the chief officer, Weston, and
nine members of the crew left the Nippon and succeeded in reaching the coast of Luzon at Santa Cruz,
Zambales, on the morning of May 12, 1913. Fifth. On May 12, 1913, the chief officer sent a telegram to
Helm, the Director of the Bureau of Navigation, at Manila, which was as follows:

SANTA CRUZ, ZAMBALES,

May 12, 1913.

The captain of the Nippon saw the above message before it was sent. Thirteenth. On May 14, 1913, the
plaintiff applied to the Director of Navigation for a charter of a coast guard cutter, for the purpose of
proceeding to "the stranded and abandoned steamer Nippon ." Fourteenth. The coast guard
cutter Mindoro was chartered to the plaintiffs and started on its return to the S. S. Nippon on May 14,
1913. Fifteenth. The plaintiffs took possession of the Nippon on or about May 17, 1913, and continued in
possession until about the 1st of July, when the last of the cargo was shipped to Manila. Sixteenth.
The Nippon was floated and towed to Olongapo, where temporary repairs were made, and then brought to
Manila. Seventeenth. The Manchuria arrived at Hongkong on the evening of May 14, 1913. When the
captain and crew left the Nippon and went on board of Manchuria, they took with them the chronometer,
the ship's register, the ship's articles, the ship's log, and as much of the crew's baggage as a small boat
could carry. The balance of the baggage of the crew was packed and left on the deck of the Nippon and
was later removed to the Mindoro, without protest on the part of the captain of the Nippon , as above
indicated. Eighteenth. The cargo was brought to the port of Manila and the following values were fixed:

Copra (approximately 1317 tons) valued at, less cost of sale by Collector of Customs

P142,657.05

General cargo sold at customhouse

5,939.68

DIRECTOR OF BUREAU OF NAVIGATION, Manila.

Agar-agar

5,635.00

Nippon stranded on Scarborough Reef, wants immediate assistance for saving crew boats
gone. 12.15 p. m.

Camphor

1,850.00

Curios

150.00

(Sgd.) WESTON.
Total

Sixth. On the same day (May 12) at 1.30 p. m., the Government of the Philippine Islands ordered the coast
guard cutter Mindoro with life-saving appliances to the scene of the wreck of the Nippon . Seventh. On the
same day (May 12) at 3 p. m. the steamship Manchuria sailed from Manila for Hongkong and was
requested to pass by Scarborough Reef. Eighth. The Manchuria arrived at Scarborough Reef some time
before the arrival of the Mindoroon May 13, 1913, and took on board the captain and the remainder of the
crew. Ninth. The Manchuria was still near Scarborough Reef when the Mindoro arrived. The captain of
the Manchuria informed the captain of the Mindoro that the captain and crew of the Nippon were on
board the Manchuria and were proceeding to Hongkong. Tenth. The captain of the Mindoro offered to
render assistance to the captain and crew of the Nippon , which assistance was declined
The Mindoro proceeded to the Nippon and removed the balance of the baggage of the officers and crew,
which was found upon the deck. Eleventh. The Mindoro proceeded to Santa Cruz, Zambales, where the
chief officer, Weston, and the nine members of the crew were taken on board and brought to Manila,
arriving there on May 14, 1913. Twelfth. On May 13, 1913, Dixon, captain of the Manchuria sent the
following message:

156,231.73

Nineteenth. The ship was valued at P250.000. The plaintiffs' claim against the ship was settled for L15,000
or about P145,800.
The plaintiffs brought the present action (August 5, 1913; amended complaint, September 23, 1913)
against the insurance companies and underwriters, who represented the cargo salved from the Nippon, to
have the amount of salvage, to which the plaintiffs were entitled, determined.
The case came on for trial before the Honorable A. S. Crossfield. The Oelwerke Teutonia, a corporation,
appeared as claimant of the copra. The New Zealand Insurance Company appeared as insurer and assignee
of the owners of 33 crates of agar-agar; The Tokio Marine Insurance Company appeared as the insurer and
assignee of 1,000 cases of bean oil and two cases of bamboo lacquer work; and The Thames and Mersey
Marine Insurance Company appeared as a reinsurer to the extent of P6,500 on the cargo of copra. The
court found that the plaintiffs were "entitled to recover one-half of the net proceeds from the property

salved and sold (which has nothing to do with the steamship itself), and one-half the value of the property
delivered to the claimants."

The general rules and principles governing salvage services and salvage awards are well settled. This
branch of the law of the sea dates back to the early history of navigation. We find the recorded in the Laws
of Oleron, which were promulgated sometime before the year 1266, at article IV:

Judgment was entered as follows:

In favor of the plaintiffs, Erlanger & Galinger for one-half of the net proceeds of sales amounting
to P47,298.36 and one-half of the interest accruing thereon, and against Carl Maeckler for the
sum of P925, and against the New Zealand Insurance Company (Ltd.) for the sum of P2,800, and
against whomever the two cases marked R W, Copenhagen, were delivered to, and for the
sum of P2,370.68, out of the proceeds of the sale of 1,000 cases of vegetable oil, and in favor of
the 'Oelwerke Teutonia' for the sum of P71,328.53, now deposited with the Hongkong &
Shanghai Banking Corporation, together with one-half of the interest thereon.

If a vessel, departing with her lading from Bordeaux, or any other place, happens in the course
of her voyage, to be rendered unfit to proceed therein, and the mariners save as much of the
lading as possibly they can; if the merchants require their goods of the master, he may deliver
them if he pleases, they paying the freight in proportion to the part of the voyage that is
performed, and the costs of the salvage. But if the master can readily repair his vessel, he may
do it; of if he pleases, he may freight another ship to perform his voyage. And if he has promised
the people who help him to save the ship the third, or the half part of the goods saved for the
danger they ran, the judicatures of the country should consider the pains and trouble they have
been at, and reward them accordingly, without any regard to the promises made them by the
parties concerned in the time of their distress. (See 30 Fed. Cas., at page 1172).

No costs were taxed.

The Oelwerke Teutonia, The New Zealand Insurance Company (Ltd.), and Erlanger & Galinger appealed
from this decision. The Oelwerke Teutonia made the following assignments of error: "
(I) The court below erred in finding that the plaintiffs are salvors of the copra in question. (II)
The court erred in holding that the plaintiffs are entitled to recover one-half of the proceeds of
the copra. (III) The court erred in rendering judgment in favor of the plaintiffs for half of the
proceeds of the copra. (IV) The court erred in disallowing the defendants' counterclaim. (V) The
court erred in overruling defendant's motion for a new trial."
The New Zealand Insurance Company (Ltd.) made the following assignments of error:
Now comes the New Zealand Insurance Company (Ltd.), defendant and appellant in the aboveentitled cause, and avers that in the proceedings in the said cause, in the Court of First Instance
of Manila, there was manifest error to the prejudice of this appellant, in this, to wit:
(I) That said court found that the plaintiffs are entitled to one-half of the value of thirty crates of
agar-agar delivered to his appellant; (II) That the said court ordered judgment in favor of the
plaintiffs and against this appellant for the sum of P2,800; (III) That the said court denied the
motion of this appellant for a new trial.
The appellants, Erlanger & Galinger, made the following assignments of error:
Error No. 1. The court erred in ruling that the plaintiffs were not entitled to a reimbursement of
their expenses, out of the gross value of the salved property, before the division of the
remainder into moieties between the salvors and the claimants. Error No. 2. The court erred in
holding that the cargo and the vessel are equally chargeable with the expense of salvage. Error
No. 3. The court erred in refusing to award the plaintiffs, out of the proceeds of the sale of the
cargo, the sum of P28,755.86 as compensation and the sum of P98,720 as reimbursement of
expenses, or a total of P127,475.08. Error No. 4. The court erred in awarding into the claimaint
'Oelwerke Teutonia' the sum of P17,328.53, or any part thereof out of the proceeds of the
salved cargo. Error No. 5. The court erred in denying the motion of the plaintiffs for a new trial."
The assignments of error and the briefs of all of the appellants raised by three questions: (1) Was the ship
abandoned? (2) Was the salvage conducted with skill, diligence, and efficiency? (3) Was the award
justified?

The courts of the United States and England have, in a long line of adjudicated cases, discussed the various
phases of this important subject. In general, salvage may be defined as a service which one person renders
to the owner of a ship or goods, by his own labor, preserving the goods or the ship which the owner or
those entrusted with the care of them have either abandoned in distress at sea, or are unable to protect
and secure. The Supreme Court of the United States and the other Federal Courts of the United States have
had occasion numerous times to quote with approval the following definition from Flanders on Maritime
Law:
Salvage is founded on the equity of remunerating private and individual services performed in
saving, in whole or in part, a ship or its cargo from impending peril, or recovering them after
actual loss. It is a compensation for actual services rendered to the property charged with it,
and is allowed for meritorious conduct of the salvor, and in consideration of a benefit conferred
upon the person whose property he has saved. A claim for salvage rests on the principle that,
unless the property be in fact saved by those who claim the compensation, it can not be
allowed, however benevolent their intention and however heroic their conduct. (The Job H.
Jackson, 161 Fed. Rep., 1015, 1017; The Amelia, 1 Cranch, 1; The Alberta, 9 Cranch, 369; Clarke
vs. Dodge Healy, 4 Wash. C. C., 651; Fed. Cas. No. 2849.)
In the case of Williamson vs. The Alphonso (Fed. Cas., No. 17749; 30 Fed. Cas. 4, 5), the court laid down
practically the same rule.
The relief of property from an impending peril of the sea, by the voluntary exertions of those
who are under no legal obligation to render assistance, and the consequent ultimate safety of
the property, constitute a case of salvage. It may be a case of more or less merit, according to
the degree of peril in which the property was, and the danger and difficulty of relieving it; but
these circumstances affect the degree of the service and not its nature.
In Blackwall vs. Saucelito Tug Company (10 Wall., 1, 12), the court said:
Salvage is the compensation allowed to persons by whose assistance a ship or her cargo has
been saved, in whole or in part, from impending peril on the sea, or in recovering such property
from actual loss, as in case of shipwreck, derelict, or recapture.
It will be noticed from the above definitions that there are certain definite conditions which must always
exist in a case of pure salvage. The Supreme Court of the United States, speaking through Mr. Justice
Clifford, in the case ofThe Mayflower vs. The Sabine (101 U. S., 384) makes those conditions three (p. 384).
Three elements are necessary to a valid salvage claim: (1) A marine peril. (2) Service voluntarily
rendered when not required as an existing duty or from a special contract. (3) Success, in whole
or in part, or that the service rendered contributed to such success.

These are the general principles governing salvage.

The question whether or not a particular ship and her cargo is a fit object of salvage depends upon her
condition at the time the salvage services are performed. In the present case the plaintiff-appellant claims
that the Nippon was a derelict or quasi-derelict and that their claim should be adjudged upon this cases. A
derelict is defined as "A ship or her cargo which is abandoned and deserted at sea by those who were in
charge of it, without any hope of recovering it (sine spe recuperandi), or without any intention of returning
to it (sine animo revertendi). Whether property is to be adjudged derelict is determimed by ascertaining
what was the intention and expectation of those in charge of it when they quitted it. If those in charge left
with the intention of returning, or of procuring assistance, the property is not derelict, but if they quitted
the property with the intention of finally leaving it, it is derelict, and a change of their intention and an
attempt to return will not change its nature." (Abbott's Law of Merchant Ships and Seamen, Fourteenth
Edition, p. 994.)
This contention of the plaintiffs raises the first question: (1) Was the ship abandoned?
The defendant-appellant Oelwerke Teutonia contends that the captain and the crew did not leave the
ship sine animo revertendi, but that it was their intention to go to Hongkong and procure assistance with
which to save the ship and her cargo. Whether the intention to return exists in a particular case is always
difficult to determine. It is indeed a rare case when the master of the ship will leave without the intention
of returning, if there is the slightest hope of saving his vessel. In the case of The Coromandel (1 Swab., 208)
Dr. Lushington said:
It may be perfectly true that the master and these fifteen men, when they had got on board The
Young Frederick, and were sailing away to Yarmouth, intended, if possible, to employ steamers
to go and rescue the vessel, which was at no great distance. But is not that the case every day?
A master and crew abandon a vessel for the safety of their lives; he does not contemplate
returning to use his own exertions, but the master hardly ever abandons a vessel on the coast
without the intention, if he can obtain assistance, to save his vessel. That does not take away
the legal character of derelict. (Norcross vs. The Laura, 14 Wall., 336.)
Judge Crossfield found that:
At the time the plaintiff commenced the attempt to salve what was possible of the S.
S. Nippon and cargo, it was justified, from all the conditions existing, in believing that it had
been abandoned and in taking possession, even though the master of the vessel intended when
he left it, to return and attempt salvage.
Such intention, if it existed, does not appear to have been very firmly fixed, considering the
leisurely manner in which the master proceeded after he reached the Port of Hongkong.

(Sgd.) R. WESTON.

On the evening of the same day Weston sent the following telegram:

SANTA CRUZ, ZAMBALES,

May 12, 1913.

DIRECTOR OF BUREAU OF NAVIGATION, Manila.

Left with nine hands at noon, 9th, 26 men still on board, ship well on reef, stern part afloat,
about ten feed of water in holds, starboard list, heavy swell breaking over, little hope of saving
ship 6.27 p. m.

(Sgd.) WESTON.

On May 13, 1913, Captain Dixon of the S. S. Manchuria, after rescuing the remainder of the crew, left on
board theNippon , sent the following telegram to the Director of Navigation.

S. S. `MANCHURIA,' May 13, 1913.

All rescued from the Nippon . Stranded on extreme north end of shoal. Vessel stranded May
9th. She is full of water fore and aft, and is badly ashore. Ship abandoned. Proceeding Hongkong
9.40 a. m.

(Sgd.) DIXON, Master.

On May 14, 1913, after the members of the crew who came ashore with Weston had reached Manila, they
made the following signed statement:

The evidence amply supports this finding. The chief officer, Weston, upon reaching the coast of Zambales,
on May 12, 1913, sent the following telegram to the Director of the Bureau of Navigation:
MANILA, P. I., May 14, 1913.
SANTA CRUZ, ZAMBALES,
May 12, 1913.

DIRECTOR OF BUREAU OF NAVIGATION, Manila.

Nippon stranded on Scarborough Reef, wants immediate assistance for saving crew boats gone
12.15 p. m.

We, the undersigned officers and part of the crew of the Swedish steamer Nippon, do hereby
declare that the S. S. Nippon struck on Scarborough Reef, about 4.30 on the afternoon on
Thursday May 8 1913. Two of her boats were lost after we struck the reef, leaving only two on
board and those damaged. The ship was filled with water and pounding on the reef and we
considered her a wreck. In company with the chief officer, we left the ship about noon on
Friday, May 9, 1913, in a small boat and reached Sta. Cruz Zambales, a distance of 130 miles on
the morning of Monday, May 12, 1913, and immediately the chief officer wired the Director of

Navigation at Manila for assistance to rescue the balance of the crew left aboard the Nippon, as
we considered their lives in danger and the ship a wreck, with little hope of saving her.

(Signed.)
F. Carman
G.E. Johansson
W. Bratt
B. Nyolram

On my second trip to the wreck, May 15th, I examined Nippon more fully and I believe that if
the cargo is taken out the ship can be saved after the holes are pathed up, if this is done before
the heavy weather sets in.
Very respectfully,

A.G. Erickson
(Sgd.) GEO. ANDERSON,
Captain, 'Mindoro.'

F. Palm
J. Karlberg
E. Thulin

E. Petterson

On May 16, 1913, Captain Anderson of the Coast Guard cutter Mindoro made the following report to the
Director of Navigation.

S.S. Mindoro
Manila, P.I., May 16, 1913

Sir
I have the honor to make he following report of voyage made to Scarborough Reef, May 12 to
14, 1913 for officers and crew of S.S. Nippon.
May 13, 1913, being 2 1/2 miles sought of reef, I observed S. S. Nippon stranded on the N. E.
edge of reef. I immediately steered northward around the western edge of reef and arrived of
stranded ship at 9.30 a. m. S. S. Manchuria was laying to about 1 1/2 miles northward of reef,
making signals for me to come alongside. I immediately proceeded out to the Manchuria; upon
arrival alongside the Manchuria the captain of the same ship informed me that the S.
S. Nippon was abandoned and that he had the captain and crew on board for Hongkong. I then
asked the captain of the Manchuria if the captain of the Nippon cared to go to Hongkong, as I
was there to bring him and the crew to Manila if he desired to go. The captain of
the Manchuria again informed me that the captain of the Nippon intended to go to Hongkong. I
answered `All right, I will then go and have a look at the Nippon and see how badly she is
wrecked.' The captain of the Manchuria made the remark that she was half full of water and
that she was very badly wrecked, but that there was still some baggage left on broad. He also
informed me that he had a wire from the Director of Navigation ordering me to proceed to
Santa Cruz to pick up boat's crew from Nippon . I said, `All right. I will go and get baggage and
have a look at the wreck.' I then left the Manchuria and steamed over to the wreck. On arrival
alongside of the wreck I took on board all baggage packed standing on deck and sounded
around the ship, fore and aft, finding 11 feet of water forward at low water and 20 feet aft in
board, gradually decreasing from forward to aft and I found in holds about 8 feet of water and
the cargo as far as I could see, on top, was nice and dry, and it is my opinion that with the
position the ship is laying in and with the Southwest monsoon blowing the ship and most of the
cargo can be salved, if work is started before the heavy typhoon season sets in. After leaving the
wreck, I proceeded to Santa Cruz and picked up the first officer and crew of nine men and
brought them to Manila.

THE DIRECTOR OF NAVIGATION, Manila.

Copy sent Struckman & Company, May 16, 1913.
(Sgd.) "A. S. Thompson, chief clerk.
The testimony of Captain Eggert of the Nippon regarding the circumstances of the wreck, is as follows: (2d
part of record, p. 327). "(P. 334.)
Q.
When the Manchuria visited the scene of the wreck on May 13, how many of you went
on board?
A.

We all went on board.

Q.

By 'all' you mean yourself, passenger, and all the members of the crew that remained?

A.

Yes.

Q.

What did you take with you?

A.
Just personal luggage, not all, what you could carry in a small boat, it could not be very
much considering that the boat was broken and there were 27 men, the ship's chronometer and
ship's papers.
Q.

What do you mean by `ship's papers'?

A.

Register, articles.

Q.

Did you take the ship's log?

A.

Yes; that is the first thing I take.

Q.

That is the first thing you take under what circumstances?

A.
Under any circumstances of accidents to the ship; because it is the official record up to
the time an accident happens.
Q.
Do you mean to state, captain, that in the event of any accident to a ship, no matter how
slight, that the ship's log and register and articles are taken ashore?

A.

The ship's log on any occasion has to be brought before the Swedish Consul.

A.

Q.

How about the register and articles?

(P. 343.) Q. Captain, if your purpose in leaving the Nippon was to go to Hongkong for the
purpose of arranging for her salvage, why did you not leave some of the crew on board?

A.

Of course not.

Q.

Under what circumstances do you take ashore the ship's articles and register?

A.

When I leave the ship myself I have, of course, to take those papers with me.

Q.

Every time you leave the ship?

A.
No. Every time when I leave it stranded as she was. If I go on shore and try to get means
for taking my ship off the ground, I have to prove what ship it is and all that. In the meantime a
gale may come up and the ship be torn off the rock and destroyed and the papers lost."
(P. 336.) Q. What were the conditions prevailing aboard the ship from the time that she
stranded until theManchuria arrived?
A.
The first night there was very bad sea and high wind. The ship was came so much better
than we could send the boat off about 11 o'clock in the forenoon by using precautions, oil, etc.
The third and fourth day the weather was fine.

Yes. To their lives.

A.
How could I leave some of the crew on board when there was no attendant? There could
be a gale at any time and the ship would have slipped off and broken to pieces. I first of all was
responsible for their lives."
(P. 348.) Q. (By Mr. Rohde.) Captain, did you or did you not leave the Nippon , with the intention
of returning and the hope of recovering your ship and cargo?
A.
I left the Nippon with the full intention of returning to the ship and try to recover her, and
I discussed that matter during the three days we were on the reef with every member I could
see in the crew, and with the passenger. Everybody knew as soon as I put my foot on
the Manchuria it was for the purpose of getting assistance. Captain Dixon knew, his officers
knew it, and his crew knew it.
(Mr. Cohn.) You have not fully replied to the question asked you by counsel for the defendant,
which is whether you had the hope of recovering the ship.
A.

I had hope if the weather continued fine.

(Mr. Cohn.) If you had that hope why didn't you leave some of your crew on board?
(P. 337.) Q. And do you now admit that you were mighty glad to get off the Nippon ?
A.
A.

We were all mighty glad.

Q.

Why were you mighty glad?

Because the hope would not justify me leaving any of the crew on the ship.

(Mr. Cohn.) Your hope was so slight it did not warrant your leaving anybody on board?

A.
Chiefly because the crew had insisted on leaving the ship in some way, by building rafts,
or in that boat of ours. And secondly because of the uncertainty. We did not know if our boat
had reached shore. The scene of the accident was quite out of the track of any vessel, so it was
quite natural when we saw that ship coming up we were glad to get into communication with
the outside world.
Q.

You say that the crew had insisted on leaving the ship?

A.
They were not insisting on it because they can not insist against the master of a ship. But
they would like to get off.
Q.

A.
A hope is always slight. I mean to say your hope will never justify you to risk another
man's life, even if you have a very good foundation for your hope. Life comes before property.
(Mr. Cohn.) Just what do you mean by "hope"?
A.
I mean to say that if the weather continues fine there is no risk, but if there is a typhoon
or gale we will be worse off and the ship will be smashed and the crew perish. That is what I
mean by a "hope" in this occasion.
(Mr. Cohn.) What you mean, Captain, is that you were going to Hongkong and if you could find
some one that was willing to go out and look for your ship, and if your ship was still there, that
you would undertake to salve her if you could.

Why were they discussing the question?

A.

A.
Because they considered it better to leave the ship and reach land rather than stay on the
ship, not knowing if the boat had reached land or not.
Q.

They considered it better for what purpose?

A.

Being safe.

Q.

You mean better from the standpoint of safety of their life and limb?

Of course.

Chief Engineer Emil Gohde was asked why the crew wanted to get ashore.
(P. 353.) Q. Why did they want to get to shore?
A.
They wanted to save their lives. We didn't know the weather in the China Sea. We could
have expected a typhoon in a couple of days and very likely the ship would have gone into the
sea.

Captain Eggert sent the following cablegram to the owners of the Nippon , after reaching
Hongkong on May 14, 1913:
(P. 360.) Nippon wrecked during typhoon eight May Scarborough Shoal latitude 15 longitude
118 probably total wreck bottom seriously damaged ship full of water chief officer and nine
men took to boat for rescue landed twelfth Luzon mailsteamer Manchuria saved captain and
remaining crew morning thirteenth. Arrived Hongkong tonight. Wreck on edge of reef, will
probably slip off and sink by first gale captain arranging to visit wreck and attempt salvage.

Captain Eggert did not make any determined effort to arrange for the salvage of the Nippon, as will be seen
from the testimony.
(P. 330. Captain Eggert testifying).
What did you do upon your arrival in Hongkong?

A.
The first thing I did it was about 5 o'clock in the afternoon I went to the office of our
agents my owners' agents. It was then close up so I had to proceed to the private residence
of the manager. From there I dispatched a telegram to the owners.
xxx

xxx

A.
I tried to find out when the next steamer was leaving for Manila and there was none
leaving before the 20th, the steamer I took and proceeded here.
From the above it will be seen that Capt. Eggert had over two days in which to arrange for salvage
operations and he did nothing, while the plaintiffs, who were strangers and had no interest, sent out a
salvage expedition in twenty-four hours after they discovered that the ship was wrecked.

What date was this telegram sent?

A.

On the evening of the 14th.

Q.

Of what month?

A.

Of May.

Q.

Did you enter into any negotiations with persons or firms?

A.
Yes. The first thing in the morning of the 15th I visited together with the Swedish Consul
the Tykoo dockyard people, the Hongkong dockyard people, and went to the Mitsui Bussan
Kaisha branch office, and those people sent a wire to their home office in Nagasaki.
Q.
What, if anything, interrupted your negotiations with the firms and persons in Hongkong
relative to the salvage of the Nippon and her cargo?
A wire from my owners.
xxx

xxx

The Federal Courts have, a number of times, had presented to them cases in which the facts were very
similar to the facts in the present case. The claim for salvage was allowed in each of these cases. In The
Bee (Fed. Cas. No. 1219; 3 Fed. Cas., 41), the facts were as follows: The Bee sailed from Boston to Nova
Scotia. Three days after leaving port a gale was encountered which forced her to run into a cove on the
north side of Grand Manan Island, where an anchor was let out. The ship was somewhat injured from the
force of the storm. The master and the crew stayed on board for 24 hours and then went ashore to
procure assistance. The island was very sparsely settled. They met on shore a number of men (the
libelants) to whom they explained the predicament and position of the ship. These men immediately went
to the ship, boarded her, and took possession. After the master had been ashore about five hours he
returned to the ship and found the libelants in possession. The owners contended that the master was
excluded from the ship wrongfully and therefore the libelants could not claim salvage. The court stated the
law as follows (p. 44):

xxx

Q.

A.

What did you do then?

The evidence proves that the Nippon was in peril; that the captain left in order to protect his life and the
lives of the crew; that the animo revertendi was slight. The argument of the defendant-appellant to the
effect that the ship was in no danger is a bit out of place in view of the statement of the captain that she
would sink with the first gale, coupled with the fact that a typhoon was the cause of her stranding.

EGGERT.

Q.

Q.

xxx

Q.

When was this telegram received by you, Captain?

A.

On the 17th.

When a vessel is found at sea, deserted, and has been abandoned by the master and crew
without the intention of returning and resuming the possession, she is, in the sense of the law,
derelict, and the finder who takes the possession with the intention of saving her, gains a right
of possession, which he can maintain against the true owner. The owner does not, indeed,
renounce his right of property. This is not presumed to be his intention, nor does the finder
acquire any such right. But the owner does abandon temporarily his right of possession, which
is transferred to the finder, who becomes bound to preserve the property with good faith, and
bring it to a place of safety for the owner's use; and he acquired a right to be paid for his
services a reasonable and proper compensation, out of the property itself. He is not bound to
part with the possession until this is paid, or it is taken into the custody of the law, preparatory
to the amount of salvage being legally ascertained. Should be salvors meet with the owner after
an abandonment, and he should tender his assistance in saving and securing the property,
surely this ought not, without good reasons, to be refused, as this would be no bar to the right
of salvage, and should it be unreasonably rejected it might affect the judgment of a court
materially, as to the amount proper to be allowed. Still, as I understand the law, the right of
possession is in the salvor. But when the owner, or the master and crew who represent him,
leave a vessel temporarily, without any intention of a final abandonment, but with the intent to
return and resume the possession, she is not considered as a legal derelict, nor is the right of
possession lost by such temporary absence for the purpose of obtaining assistance, although no
individual may be remaining on board for the purpose of retaining the possession. Property is
not, in the sense of the law, derelict and the possession left vacant for the finder, until the spes
recuperandi is gone, and the animus revertendi is finally given up. (The Aquila, 1 C. Rob. Adm.,
41.) But when a man finds property thus temporarily left to the mercy of the elements, whether
from necessity or any other cause, though not finally abandoned and legally derelict, and he
takes possession of it with the bona fide intention of saving it for the owner, he will not be
treated as a trespasser. On the contrary, if by his exertions he contributes materially to the
preservation of the property, he will entitle himself to a remuneration according to the merits
of his service as a salvor.

The court allowed salvage in this case. They held that the master had taken insufficient precautions to
protect his vessel and although the ship was not a legal derelict, the libelants were salvors and entitled to
salvage.
In The John Gilpin (Fed. Cas. No. 7345; 13 Fed. Cas., 675) the ship John Gilpin, in attempting to leave New
York harbor in a winter storm, was driven ashore. The ship's crew sent for help and in the meantime put
forth every effort to get her off. Help arrived toward evening, but accomplished nothing. The master and
crew went ashore. The same night the libelants went out to the ship with equipment and started working.
It was contended that the master had gone ashore for assistance. He returned the next morning with a tug
and some men and demanded possession, which was refused. Salvage was allowed. The court said (p.
676):
The libelants, in the exercise of their calling as wreckers, coming to a vessel in that plight, would
be guilty of a dereliction of duty if they failed to employ all their means for the instantaneous
preservation of property so circumstanced. This may not be strictly and technically a case of
derelict (Clarke vs. The Dodge Healy, Case No. 2849), if really the master of the brig had gone to
the city to obtain the necessary help to save the cargo and brig, intending at the time, to return
with all practicable dispatch. It appears he came to the wreck by 8 or 9 a. m. the following day,
in a steam-tug, with men to assist in saving the cargo. The animus revertendi et recuperandi may
thus far have continued with the master, but this mental hope or purpose must be regarded
inoperative and unavailing as an actual occupancy of the vessel, or manifestation to others of a
continuing possession. She was absolutely deserted for 12 or 14 hours in a condition when her
instant destruction was menaced, and the lives of those who should attempt to remain by her
would be considered in highest jeopardy. She was quite derelict; and being thus found (The
Boston, Case no. 1673; Rowe vs. The Brig, Case no. 12093; 1 Sir Lionel Jenkins, 89) by the
libelants, the possession they took of her was lawful. (The Emulous, Case No. 4480.)
Possession being thus taken when the vessel was, in fact, abandoned and quite derelict, under
peril of instant destruction, the libelants had a right to retain it until the salvage was completed,
and no other person could interfere against them forcibly, provided they were able to effect the
purpose, and were conducting the business with fidelity and vigor.
In The Shawmut (155 Fed. Rep., 476) the court allowed salvage upon the following facts: The four-masted
schoonerMyrtle Tunnel sailed from Brunswick bound for New York. The first day out a hurricane struck her
and tore the sails away and carried off the deck load. She was badly damaged and leaking. The master of
the Myrtle Tunnelrequested towage by the steamship Mae to the port of Charleston. The Mae, on account
of her own damaged condition, was unable to tow but she took the master and crew of the Myrtle
Tunnel off and landed them at Charleston. The owners were notified and they started an expedition out in
search. Before this expedition reached her, the steamship Shawmut sighted the Myrtle Tunnel, and, finding
that she was abandoned and waterlogged, took her in two and succeeded in taking her to Charleston. The
owners of the Myrtle Tunnel contended that she was not derelict, because the master had gone ashore to
procure assistance. With reference to this question, the court said (p. 478):
The first question that arises is whether the Myrtle Tunnel is a derelict. Prima facie a vessel
found at sea in a situation of peril, with no one aboard of her, is a derelict; but where the
master and crew leave such vessel temporarily, without any intention of final abandonment, for
the purpose of obtaining assistance, and with the intent to return and resume possession, she is
not technically a derelict. It is not of substantial importance to decide that question. She was
what may be called a quasi-derelict; abandoned, helpless, her sails gone, entirely without power
in herself to save herself from a situation not of imminent, but of considerable peril; lying about
midway between the Gulf Stream and the shore, and about 30 miles from either. An east wind
would have driven her upon one, and a west wind into the other, where she should have
become a total loss. Lying in the pathway of commence, with nothing aboard to indicate an
intention to return and resume possession, it was a highly meritorious act upon the part of
the Shawmut to take possession of her, and the award must be governed by the rules which
govern in case of derelicts; the amount of it to be modified in some degree in the interest of the

owners in consideration of their prompt, intelligent, and praiseworthy efforts to resume

possession of her, wherein they incurred considerable expense.
The first of these cases was decided in 1836 and the last in 1907. The indicate that the abandonment of a
vessel by all on board, when the vessel is in peril, will justify third parties in taking possession with the
bona fide intention of saving the vessel and its cargo for its owners. The mental hope of the master and the
crew will in no way affect the possession nor the right to salvage. See also The Hyderabad (11 Fed. Rep.,
749), The Cairnsmore (20 Fed. Rep., 519), Pearce vs. The Ann L. Lockwood (37 Fed. Rep., 233).
This brings us to the second question raised by the assignments of error: (2) Was the salvage conducted
with skill, diligence, and efficiency? The court found:
While the plaintiff entered upon the salvage proceedings without proper means and not being
adapted by their business to conduct their work, and while it may appear that possibly the
salvage might have been conducted in a better manner and have accomplished somewhat
better results in the saving of the copra cargo, yet it appears that they quickly remedied their
lack of means and corrected the conduct of the work so that it accomplished fairly good results.
It does not appear from the evidence that anyone then or subsequently suggested or found any
other course which might have been pursued and which would have brought better results.
There was some dispute whether Manila or Hongkong should be used as a base for operations. Capt.
Robinson, who was the only one of the experts who had had any experience in handling wet copra,
unqualifiedly approved Manila as a base for operations. (P. 437, 3d part of record):
Q.
Assuming that you had been asked to undertake the work of salving the
steamer Nippon and her cargo, please state whether you would have undertaken that work
with the men and material available in Manila, or whether you would have gone to Hongkong
and used Hongkong men and material and made Hongkong your base on operations.
A.

Certainly not. I would have made Manila my base, which I always have done.

Lebreton, a stevedore, testified that he would have gotten some of his materials from Hongkong but that
he would have freighted the salved cargo to Manila. All other things being equal, the fact that Hongkong is
forty sailing hours from Scarborough Reef while Manila is less than twenty-four sailing hours would make
Manila by far the more logical base.
The plaintiffs sent men into the hold of the ship and sacked the copra and brought it to Manila where it
was sold. Some of the witnesses contended that other methods should have been used. They testified that
"grabs" or "claim shells" would have brought better results, but none of these witnesses had had any
experience in unloading wet copra. Capt. Robinson was the only witness called who had had any
experience in this class of work. He testified that the only way all the copra could be gotten out was by
sacks or by canvas slights; that "grabs" would be of no use because of the inability to work with them
between decks. The copra was in three layers. The top layer was dry, the middle layer was submerged
every time the tide rose, and the lower layer was submerged all of the time. It was manifestly impossible to
keep these layers separate by using "grabs" or "clam shells." The fact that wet copra is exceedingly difficult
to handle, on account of the gases which arise from it, is also of prime importance in weighing the
testimony of defendant's witnesses, because none of them had ever had experience with wet copra.
The plaintiffs commenced the actual work of salving the ship and cargo on May 18, 1913. The last of the
cargo was a brought to Manila the latter part of June. The last of the dry copra was brought to Manila on
June 5. The estimates of the experts with regard to the time necessary to remove the cargo ranged from
eight to twenty days. The greater portion of the cargo was brought in by the plaintiffs within fifteen days.
The delay after June 5 was due to the difficulty in inducing laborers to work with wet copra. This difficulty

would have arisen with any set of salvors and cannot be attributed to a lack of care or diligence on the part
of the plaintiffs.
The plaintiffs were diligent in commencing the work and were careful and efficient in its pursuit and
conclusion.
The third and last question is with regard to the amount of the award (3) Was the award justified?
Compensation as salvage is not viewed by the admiralty courts merely as pay on the principle
of quantum meruit or as a remuneration pro opere et labore, but as a reward given for perilous
services, voluntarily rendered, and as an inducement to mariners to embark in such dangerous
enterprises to save life and property. (The Mayflower vs. The Sabine, 101 U. S., 384.)
The plaintiff-appellant contends that the expenses incurred should be deducted from the entire amount of
the salved property and the remainder be divided as a reward for the services rendered. This contention
has no basis in the law of salvage compensation. The expenses incurred by the plaintiffs must be borne by
them. It is true that the award should be liberal enough to cover the expenses and give an extra amount as
a reward for the services rendered but the expenses are used in no other way as a basis for the final award.
A part of the risk that the plaintiffs incurred was that the goods salved would not pay them for the amount
expended in salving them. The plaintiffs knew this risk and they should not have spent more money than
their reasonable share of the proceeds would amount to under any circumstances.
In the case of The Carl Schurz (Case No. 2414; 5 Fed. Cas., 84) the actual expenditure by the libelant in
salving the vessel in question was $568.95. The ship when sold brought $792. The libelant wanted the
court to first deduct the expenses. The court refused to do this but decreed a moiety. The court said (p.
86):
A salvor, in the view of the maritime law, has an interest in the property; it is called a lien, but it
never goes, in the absence of a contract expressly made, upon the idea of a debt due by the
owner to the salvor for services rendered, as at common law, but upon the principle that the
service creates a property in the thing saved. He is, to all intents and purposes, a joint owner,
and if the property is lost he must bear his share like other joint owners.
This is the governing principle here. The libelant and the owners must mutually bear their
respective share of the loss in value by the sale. If the libelant has been unfortunate and has
spent his time and money in saving a property not worth the expenditure he made, or if, having
saved enough to compensate him, it is lost by the uncertainties of a judicial sale for partition, so
to speak, it is a misfortune not uncommon to all who seek gain by adventurous speculations in
values. The libelant says in his testimony that he relied entirely on his rights as a salvor. This
being so he knew the risk he ran and it was his own folly to expend more money in the service
than his reasonable share would have been worth under all circumstances and contingencies.
He can rely neither on the common law idea of an implied contract to pay for work on and
about one's property what the work is reasonably worth with alien attached by possession for
satisfaction, nor upon any notion of an implied maritime contract for the service, with a
maritime lien to secure it, as in the case of repairs, or supplies furnished a needy vessel, or the
like. In such a case the owner would lose all if the property did not satisfy the debt, when fairly
sold. But this doctrine has no place in the maritime law of salvage. It does not proceed upon any
theory of an implied obligation, either of the owner or the res, to pay a quantum meruit, nor
actual expenses incurred, but rather on that of a reasonable compensation or reward, as the
case may be, to one who has rescued the res from danger of total loss. If he gets the whole, the
property had as well been lost entirely, so far as the owner is concerned. (Smith vs. The Joseph
Stewart, Fed. Cas. No. 13070.) I think the public policy of encouragement for such service does
not, of itself, furnish sufficient support for a rule which would exclude the owner from all
benefit to be derived from the service.

In Williams vs. The Adolphe (Fed. Cas. No. 17712; 29 Fed. Cas., 1350) the court said (p. 1353):
The claim of the libelants is for salvage, the services rendered were salvage services and the
owners are to receive their property again, after paying salvage for the services rendered them.
What service would it be to them to take their property under circumstances calling for the
whole of it by way of indemnity? The mistake of the captain and the supercargo, and part
owner of the Triton as to the value of the property on board theAdolphe, should not operate to
the injury of the owners thereof; the salvors must bear the consequences of their own mistake,
taking such a proportion only of the property salved, as by the law of the admiralty should be
awarded them.
In The Edwards (12 Fed. Rep., 508, 509), the court said:
It is true that in rendering a salvage service the salvor assumes the risks of failure, and his
salvage depends upon his success and the amount of property saved; yet when there is enough
to fully compensate him for time and labor, and leave a reasonable proportion for the owner,
he should certainly be awarded that, if the amount will allow no more.
In The L. W. Perry (71 Fed. Rep., 745, 746), the court said:
Without regard to the element of reward which is intended by the salvage allowance, it is
manifest that remuneration pro opere et labore would be placed in excess of the fund here, if
such basis were allowable. Therefore, it is contended on behalf of the libelant that the entire
sum remaining should be awarded for the salvage service;. . . .
While salvage is of the nature of a reward of meritorious service, and for determination of its
amount the interests of the public and the encouragement of others to undertake like service
are taken into consideration, as well as the risk incurred, and the value of the property saved,
and where the proceeds for division are small, the proportion of allowance to the salvor may be
enlarged to answer these purposes, nevertheless, the doctrine of salvage requires, as a
prerequisite to any allowance, that the service `must be productive of some benefit to the
owners of the property salved; for, however meritorious the exertions of alleged salvors may
be, if they are not attended with benefit to the owners, they can not be compensated as such.'
(Abb. Shipp. [London Ed., 1892], 722.) The claim of the libelant can only be supported as one for
salvage. It does not constitute a personal demand, upon quantum meruit, against the owners,
but gives an interest in the property saved, which entitles the salvor to a liberal share of the
proceeds. . . .
(P. 747.) One of the grounds for liberality in salvage awards is the risk assumed by the salvor,
that he can have no recompense for service or expense unless he is successful in the rescue of
property, and that his reward must be within the measure of his success. He obtains an interest
in the property, and in its proceeds when sold, but accompanied by the same risk of any
misfortune or depreciation which may occur to reduce its value. In other words, he can only
have a portion, in any event; and the fact that his exertions were meritorious and that their
actual value, or the expense actually incurred, exceeded the amount produced by the service,
cannot operate to absorb the entire proceeds against the established rules of salvage. (The Carl
Schurz, Fed. Cas. No. 2414).
The plaintiff-appellants contends that the award of the lower court of one-half is the established rule in
cases of derelicts and should not be disturbed. It is well established now that the courts have a wide
discretion in settling the award. The award is now determined by the particular facts and the degree of
merit. In The Job H. Jackson (161 Fed. Rep., 1015, 1018), the court said:
There is no fixed rule for salvage allowance. The old rule in cases of a derelict was 50 per cent of
the property salved; but under modern decisions and practice, it may be less, or it may be more.

The allowance rests in the sound discretion of the court or judge, who hears the case, hears the
witnesses testify, looks into their eyes, and is acquainted with the environments of the rescue. .
. . An allowance for salvage should not be weighed in golden scales, but should be made as a
reward for meritorious voluntary services, rendered at a time when danger of loss is imminent,
as a reward for such services so rendered, and for the purpose of encouraging others in like
services.
In The Lamington (86 Fed. Rep., 675, 678), the court said:
While it appears most clearly that, since the old hard and fast rule of `50 per cent of a derelict'
was abandoned, the award is determined by a consideration of the peculiar facts of each case,
it is none the less true that the admiralty courts have always been careful not only to encourage
salving enterprises by liberality, when possible, but also to recognize the fact that it is, after all,
a speculation in which desert and reward will not always balance.
The award is largely in the discretion of the trial court and it is rare that the appellate court will disturb the
findings.
Appellate courts rarely reduce salvage awards, unless there has been some violation of just
principles, or some clear or palpable mistake. They are reluctant to disturb such award, solely
on the ground that the subordinate court gave too large a sum, unless they are clearly satisfied
that the court below made an exorbitant estimate of the services. It is equally true that, when
the law gives a party a right to appeal, he has the right to demand the conscientious judgment
of the appellate court on every question arising in the case, and the allowance of salvage
originally decreased has, in many cases, been increased or diminished in the appellate court,
even where it did not violate any of the just principles which should regulate the subject, but
was unreasonably excessive or inadequate. (Post vs. Jones, 19 How., 161). Although the amount
to be awarded as salvage rests, as it is said, in the discretion of the court awarding it, appellate
courts will look to see if that discretion has been exercised by the court of first instance in the
spirit of those decisions which higher tribunals have recognized and enforced, and will readjust
the amount if the decree below does not follow in the path of authority, even though no
principle has been violated or mistake made.
The property of the defendant-appellants which was salved was forced to pay the same proportion of the
award without distinction. The day copra and the agar-agar was salved with much more ease than the wet
copra. The courts have, almost universally, made a distinction in this regard. In The America (1 Fed. Cas.,
596), decided in 1836, the award was as follows: 25 per cent on cargo salved dry; 50 per cent on cargo
salved damaged; 60 per cent on cargo salved by diving.
In The Ajax (1 Fed. Cas., 252(, decided in 1836, the award was as follows: 33 per cent on the dry; 50 per
cent on the wet; 50 per cent on ship's materials. In The Nathaniel Kimball (Fed. Cas. No. 10033), decided in
1853, the award was as follows: 30 per cent on dry cargo; 50 per cent on wet, salved by diving and working
under water.

In The Northwester (Fed. Cas. No. 10333), decided in 1873, the award was as follows: 20 per cent on cotton
dry; 33 1/3 per cent on cotton wet and burnt; 40 per cent on materials; 50 per cent on property salved by
diving.
In Baker vs. Cargo etc. of The Slobodna (35 Fed. Rep., 537), decided in 1887, the award was as follows: 25
per cent on dry cotton; 33 1/3 per cent on wet cotton; 45 per cent on materials.
In the cases in which the full award of 50 per cent was allowed the court usually made the comment:
"services highly meritorious," "meritorious service," "with great labor and difficulty," or similar remarks.
In the salvage operations conducted by the plaintiff, the following property was involved:

First, the steamship Nippon , valued at

Second, copra, net value, salved

142,657.05

Third, agar-agar, net value, salved

5,635.00

Fourth, general cargo

5,939.68

Fifth, camphor, net value, salved

1,850.00

Sixth, curios, net value, salved

The plaintiff and the owners of the ship have heretofore, by mutual agreement, settled the question of the
amount of salvage of the ship. The plaintiff received for that part of their services the sum of L15,000 or
about P145,800.
No appeal was taken from the judgment of the lower court concerning the amount of salvage allowed by it
for the general cargo, the camphor, nor the curios salved.
The only question raised by the appellants is as to the amount of salvage which should be awarded to the
plaintiff-appellants for the copra and the agar-agar. After a careful study of the entire record and taking
into account the amount which the plaintiffs has heretofore received, we have arrived at the conclusion
that in equity and justice the plaintiff-appellants should receive for their services the following amounts:
(a) 40 per cent of the net value of the wet copra salved.
(b) 25 per cent of the net value of the dry copra salved.

In The Brewster (Fed. Cas. No. 1852), decided in 1848, the award was as follows: 33 per cent, and as to
some cargo where diving was necessary, 60 per cent.

(c) 20 per cent of the net value of the agar-agar salved.

In The Mulhouse (Fed. Cas. No. 9910), decided in 1859, the award was as follows: 25 per cent salving dry
deck cotton; 45 per cent salving cotton submerged between decks; 55 per cent salving cotton by diving.

The net value of the wet copra salved amounted to P40,381.94; 40 per cent of that amount would be
P16,152.78. The net value of the dry copra salved amounted to P102,272.11; 25 per cent of that amount
would be P25,568.77.

In The John Wesley (Fed. Cas. No. 7433), decided in 1866, the award was as follows: 15 per cent; on
damaged cotton a slightly higher per cent.

P250,000.00

In ascertaining the net value of the copra salved, the expenses incurred by the Collector of Customs in the
sale of the copra, amounting to P4,080.01, has been deducted from the total amount of the copra salved in
the proportion of 2.5 to 1. Dividing the expense in that proportion we have deducted from the amount of

150.00

the dry copra salved the sum of P2,914.39, and from the amount of the wet copra salved, the sum of
P1,165.62.
The net value of the agar-agar salved amounted to P5,636; 20 per cent of that amount would be P1,127.
In view of all of the foregoing, it is hereby ordered and decreed that the judgment of the lower court be
modified, and that a judgment be entered against the defendant-appellants and in favor of the plaintiffappellant, as follows: First, it is hereby ordered and decreed that a judgment be entered against the
defendant, the Oelwerke Teutonia, and in favor of the plaintiff in the sum of P41,721.55. Second, it is
further ordered and decreed that a judgment be entered against the defendant, the New Zealand
Insurance Company (Ltd.), and in favor of the plaintiff, in the sum of P1,127. Third, it is further ordered and
decreed that the amount of the judgment hereinbefore rendered in favor of the plaintiff be paid out of the
money which is now under the control of the Court of First Instance of the city of Manila. And without any
finding as to costs, it is so ordered.
Arellano, C.J., Torres, Johnson, Carson, and Trent, JJ.
G.R. No. L-17192

March 30, 1963

HONORIO M. BARRIOS, plaintiff-appellant,

vs.
CARLOS A. GO THONG & COMPANY, defendant-appellee.
Laput & Jardiel for plaintiff-appellant.
Quisumbing & Quisumbing for defendant-appellee.
BARRERA, J.:
From the decision of the Court of First Instance of Manila (in Civil Case No. 37219) dismissing with costs his
case against defendant Carlos A. Go Thong & Co., plaintiff Honorio M. Barrios, interposed the present
appeal.
The facts of the case, as found by the trial court, are briefly stated in its decision, to wit:
The plaintiff Honorio M. Barrios was, on May 1 and 2, 1958, captain and/or master of the MV Henry I of the
William Lines Incorporated, of Cebu City, plying between and to and from Cebu City and other southern
cities and ports, among which are Dumaguete City, Zamboanga City, and Davao City. At about 8:00 o'clock
on the evening of May 1, 1958, plaintiff in his capacity as such captain and/or master of the aforesaid MV
Henry I, received or otherwise intercepted an S.O.S. or distress signal by blinkers from the MV Don Alfredo,
owned and/or operated by the defendant Carlos A. Go Thong & Company. Acting on and/or answering the
S.O.S. call, the plaintiff Honorio M. Barrios, also in his capacity as captain and/or master of the MV Henry I,
which was then sailing or navigating from Dumaguete City, altered the course of said vessel, and steered
and headed towards the beckoning MV Don Alfredo, which plaintiff found to be in trouble, due to engine
failure and the loss of her propeller, for which reason, it was drifting slowly southward from Negros Island
towards Borneo in the open China Sea, at the mercy of a moderate easterly wind. At about 8:25 p.m. on
the same day, May 1, 1958, the MV Henry I, under the command of the plaintiff, succeeded in getting near
the MV Don Alfredo in fact as near as about seven meters from the latter ship and with the consent
and knowledge of the captain and/or master of the MV Don Alfredo, the plaintiff caused the latter vessel
to be tied to, or well-secured and connected with two lines from the MV Henry I; and in that manner,
position and situation, the latter had the MV Don Alfredo in tow and proceeded towards the direction of
Dumaguete City, as evidenced by a written certificate to this effect executed and accomplished by the
Master, the Chief Engineer, the Chief Officer, and the Second Engineer, of the MV Don Alfredo, who were
then on board the latter ship at the time of the occurrence stated above (Exh. A). At about 5:10 o'clock the
following morning, May 2, 1958, or after almost nine hours during the night, with the MV Don Alfredo still

in tow by the MV Henry I, and while both vessels were approaching the vicinity of Apo Islands off
Zamboanga town, Negros Oriental, the MV Lux, a sister ship of the MV Don Alfredo, was sighted heading
towards the direction of the aforesaid two vessels, reaching then fifteen minutes later, or at about 5:25
o'clock on that same morning. Thereupon, at the request and instance of the captain and/or master of the
MV Don Alfredo, the plaintiff caused the tow lines to be released, thereby also releasing the MV Don
Alfredo.
These are the main facts of the present case as to which plaintiff and defendant quite agree with each
other. As was manifested in its memorandum presented in this case on August 22, 1958, defendant thru
counsel said that there is, indeed, between the parties, no dispute as to the factual circumstances, but
counsel adds that where plaintiff concludes that they establish an impending sea peril from which salvage
of a ship worth more than P100,000.00, plus life and cargo was done, the defendant insists that the facts
made out no such case, but that what merely happened was only mere towage from which plaintiff cannot
claim any compensation or remuneration independently of the shipping company that owned the vessel
commanded by him.
On the basis of these facts, the trial court (on April 5, 1960) dismissed the case, stating:
Plaintiff bases his claim upon the provisions of the Salvage Law, Act No. 2616, .....
In accordance with the Salvage Law, a ship which is lost or abandoned at sea is considered a
derelict and, therefore, proper subject of salvage. A ship in a desperate condition, where
persons on board are incapable, by reason of their mental and physical condition, of doing
anything for their own safety, is a quasi-derelict and may, likewise, be the proper subject of
salvage. Was the MV Don Alfredo, on May 1, 1958, when her engine failed and, for that reason,
was left drifting without power on the high seas, a derelict or a quasi-derelict? In other words,
was it a ship that was lost or abandoned, or in a desperate condition, which could not be saved
by reason of incapacity or incapacity of its crew or the persons on board thereof? From all
appearances and from the evidence extant in the records, there can be no doubt, for it seems
clear enough, that the MV Don Alfredo was not a lost ship, nor was it abandoned. Can it be said
that the said ship was in a desperate condition, simply because S.O.S. signals were sent from it?.
From the testimony of the captain of the MV Don Alfredo, the engine failed and the ship already
lost power as early as 8:00 o'clock on the morning of May 1, 1958; although it was helpless, in
the sense that it could not move, it did not drift too far from the place where it was, at the time
it had an engine failure. The weather was fair in fact, as described by witnesses, the weather
was clear and good. The waves were small, too slight there were only ripples on the sea, and
the sea was quite smooth. And, during the night, while towing was going on, there was a
moonlight. Inasmuch as the MV Don Alfredo was drifting towards the open sea, there was no
danger of floundering. As testified to by one of the witnesses, it would take days or even weeks
before the ship could as much as approach an island. And, even then, upon the least indication,
the anchor could always be weighed down, in order to prevent the ship from striking against the
rocks.
"There was no danger of the vessel capsizing, in view of the fairness of the sea, and the
condition of the weather, as described above. As a matter of fact, although the MV Don Alfredo
had a motor launch, and two lifeboats, there was no attempt, much less, was there occasion or
necessity, to lower anyone or all of them, in order to evacuate the persons on board; nor did
the conditions then obtaining require an order to jettison the cargo.
But, it is insisted for the plaintiff that an S.O.S. or a distress signal was sent from aboard the MV
Don Alfredo, which was enough to establish the fact that it was exposed to imminent peril at
sea. It is admitted by the defendant that such S.O.S. signal was, in fact, sent by blinkers.
However, defendant's evidence shows that Captain Loresto of the MV Don Alfredo, did not
authorize the radio operator of the aforesaid ship to send an S.O.S. or distress signal, for the

ship was never in distress, nor was it exposed to a great imminent peril of the sea. What the
aforesaid Captain told the radio operator to transmit was a general call; for, at any rate,
message had been sent to defendant's office at Cebu City, which the latter had acknowledged,
by sending back a reply stating that help was on the way. However, as explained by the said
radio operator, in spite of his efforts to send a general call by radio, he did not receive any
response. For this reason, the Captain instructed him to send the general call by blinkers from
the deck of the ship; but the call by blinkers, which follows the dots and dashes method of
sending messages, could not be easily understood by deck officers who ordinarily are not radio
operators. Hence, the only way by which the attention of general officers on deck could be
called, was to send an S.O.S. signal which can be understood by all and sundry.
Be it as it may, the evidence further shows that when the two ships were already within hearing
distance (barely seven meters) of each other, there was a sustained conversation between
Masters and complement of the two vessels, by means of loud speakers and the radio; and, the
plaintiff must have learned of the exact nature and extent of the disability from which the MV
Don Alfredo had suffered that is, that the only trouble that the said vessel had developed
was an engine failure, due to the loss of its propellers..
It can thus be said that the MV Don Alfredo was not in a perilous condition wherein the
members of its crew would be incapable of doing anything to save passengers and cargo, and,
for this reason, it cannot be duly considered as a quasi-derelict; hence, it was not the proper
subject of salvage, and the Salvage Law, Act No. 2616, is not applicable.
Plaintiff, likewise, predicates his action upon the provisions of Article 2142 of the New Civil
Code, which reads as follows:
Certain lawful, voluntary and unilateral acts give to the juridical relation of quasicontract to the end that no one shall be unjustly enriched or benefited at the
expense of another.
This does not find clear application to the case at bar, for the reason that it is not the William
Lines, Inc., owners of the MV Henry I which is claiming for damages or remuneration, because it
has waived all such claims, but the plaintiff herein is the Captain of the salvaging ship, who has
not shown that, in his voluntary act done towards and which benefited the MV Don Alfredo, he
had been unduly prejudiced by his employers, the said William Lines, Incorporated.
What about equity? Does not equity permit plaintiff to recover for his services rendered and
sacrifices made? In this jurisdiction, equity may only be taken into account when the
circumstances warrant its application, and in the absence of any provision of law governing the
matter under litigation. That is not so in the present case.
In view of the foregoing, judgment is hereby rendered dismissing the case with costs against the
plaintiff; and inasmuch as the plaintiff has not been found to have brought the case maliciously,
the counterclaim of the defendant is, likewise, dismissed, without pronouncement as to costs.
SO ORDERED.
The main issue to be resolved in this appeal is, whether under the facts of the case, the service rendered by
plaintiff to defendant constituted "salvage" or "towage", and if so, whether plaintiff may recover from
defendant compensation for such service.
The pertinent provision of the Salvage Law (Act No. 2616), provides:

SECTION 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control of the crew, or
shall have been abandoned by them, and picked up and conveyed to a safe place by other persons, the
latter shall be entitled to a reward for the salvage.
Those who, not being included in the above paragraph, assist in saving a vessel or its cargo from shipwreck,
shall be entitled to a like reward.
According to this provision, those who assist in saving a vessel or its cargo from shipwreck, shall be entitled
to a reward (salvage). "Salvage" has been defined as "the compensation allowed to persons by whose
assistance a ship or her cargo has been saved, in whole or in part, from impending peril on the sea, or in
recovering such property from actual loss, as in case of shipwreck, derelict, or recapture." (Blackwall v.
Saucelito Tug Company, 10 Wall. 1, 12, cited in Erlanger & Galinger v. Swedish East Asiatic Co., Ltd., 34 Phil.
178.) In the Erlanger & Galinger case, it was held that three elements are necessary to a valid salvage
claim, namely, (1) a marine peril, (2) service voluntarily rendered when not required as an existing duty or
from a special contract, and (3) success in whole or in part, or that the service rendered contributed to
such success.1
Was there a marine peril, in the instant case, to justify a valid salvage claim by plaintiff against defendant?
Like the trial court, we do not think there was. It appears that although the defendant's vessel in question
was, on the night of May 1, 1958, in a helpless condition due to engine failure, it did not drift too far from
the place where it was. As found by the court a quo the weather was fair, clear, and good. The waves were
small and too slight, so much so, that there were only ripples on the sea, which was quite smooth. During
the towing of the vessel on the same night, there was moonlight. Although said vessel was drifting towards
the open sea, there was no danger of it floundering or being stranded, as it was far from any island or
rocks. In case of danger of stranding, its anchor could released, to prevent such occurrence. There was no
danger that defendant's vessel would sink, in view of the smoothness of the sea and the fairness of the
weather. That there was absence of danger is shown by the fact that said vessel or its crew did not even
find it necessary to lower its launch and two motor boats, in order to evacuate its passengers aboard.
Neither did they find occasion to jettison the vessel's cargo as a safety measure. Neither the passengers
nor the cargo were in danger of perishing. All that the vessel's crew members could not do was to move
the vessel on its own power. That did not make the vessel a quasi-derelict, considering that even before
the appellant extended the help to the distressed ship, a sister vessel was known to be on its way to succor
it.
If plaintiff's service to defendant does not constitute "salvage" within the purview of the Salvage Law, can
it be considered as a quasi-contract of "towage" created in the spirit of the new Civil Code? The answer
seems to incline in the affirmative, for in consenting to plaintiff's offer to tow the vessel, defendant
(through the captain of its vessel MV Don Alfredo) thereby impliedly entered into a juridical relation of
"towage" with the owner of the vessel MV Henry I, captained by plaintiff, the William Lines, Incorporated.
Tug which put line aboard liberty ship which was not in danger or peril but which had reduced
its engine speed because of hot grounds, and assisted ship over bar and, thereafter, dropped
towline and stood by while ship proceeded to dock under own power, was entitled, in absence
of written agreement as to amount to be paid for services, to payment for towage services, and
not for salvage services. (Sause, et al. v. United States, et al., 107 F. Supp. 489)
If the contract thus created, in this case, is one for towage, then only the owner of the towing vessel, to the
exclusion of the crew of the said vessel, may be entitled to remuneration.
It often becomes material too, for courts to draw a distinct line between salvage and towage, for the
reason that a reward ought sometimes to be given to the crew of the salvage vessel and to other
participants in salvage services; and such reward should not be given if the services were held to be merely
towage. (The Rebecca Shepherd, 148 F. 731.)

The master and members of the crew of a tug were not entitled to participate in payment by liberty ship
for services rendered by tug which were towage services and not salvage services. (Sause, et al. v. United
States, et al., supra.)
"The distinction between salvage and towage is of importance to the crew of the salvaging ship, for the
following reasons: If the contract for towage is in fact towage, then the crew does not have any interest or
rights in the remuneration pursuant to the contract. But if the owners of the respective vessels are of a
salvage nature, the crew of the salvaging ship is entitled to salvage, and can look to the salvaged vessel for
its share. (I Norris, The Law of Seamen, Sec. 222.)
And, as the vessel-owner, William Lines, Incorporated, had expressly waived its claim for compensation for
the towage service rendered to defendant, it is clear that plaintiff, whose right if at all depends upon and
not separate from the interest of his employer, is not entitled to payment for such towage service.
Neither may plaintiff invoke equity in support of his claim for compensation against defendant. There
being an express provision of law (Art. 2142, Civil Code) applicable to the relationship created in this case,
that is, that of a quasi-contract of towage where the crew is not entitled to compensation separate from
that of the vessel, there is no occasion to resort to equitable considerations.
WHEREFORE, finding no reversible error in the decision of the court a quo appealed from, the same is
hereby affirmed in all respects, with costs against the plaintiff-appellant. So ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes, Dizon, Regala and
Makalintal, JJ., concur.

Alhambra Cigar v. La Granja

G.R. No. L-10283

July 25, 1916

LIMPANGCO SONS, plaintiff-appellant,

vs.
YANGCO STEAMSHIP CO., defendant-appellee.
Lawrence, Ross, and Block for appellant.
Haussermann, Cohn, and Fisher for appellee.
PER CURIAM:
The following grounds moved the court to a reversal in this case:
On the 3d day of August, 1913, plaintiff employed defendant to tow from Guagua to Manila two cascos
loaded with 2,041.80 piculs of sugar, property of the plaintiff, of the value of P11,229.90. On that date the
cascos left Guagua towed by the launches Tahimic and Matulin , belonging to the defendant. When the
launches, together with their tows, arrived off the Malabon River, the patron of the launch Matulin ,
whether of his own motion, as contended by the casco men, or whether at the instance of the patrones of
the cascos, as he testified, decided to leave the cascos in the Malabon River. The launch Tahimic towed the
cascos into the Malabon River and the launch Matulincontinued the trip to Manila. The reason why this
was done, according to the testimony of the patron of the Matulin , was that, at that time, the weather
was threatening, and the cascos, heavily loaded as they were, to continue the voyage to Manila.

On Friday following, August 8, 1913, the launch Matulin was in the Malabon River and the patron talked to
the men in charge of the two cascos, which were at that time tied up at Tansa, and told them that on the
following day, the 9th of August, at daybreak, he would await them off the mouth of the Malabon River,
outside the bar, and that, if the weather was then favorable, he would tow them to Manila. It was agreed
between the patron of the Matulin and thepatrones of the cascos that the later should move out of the
river by means of their tikines or bamboo poles and, thus propelled, proceed to the place where the
launch Matulin was to be waiting for them. On the following day, 9th of August, 1913, at 6 a. m.,
the patron of the Matulin arrived with his launch off the mouth of the Malabon River and anchored outside
of the shallows, something like 1,500 meters from the mouth of the river. In accordance with the
agreement with the patron of the Matulin and under his instructions, the crews poled their cascos out of
the river following the channel. When they passed the shallow water they were met with high seas and
strong winds. The bamboo poles were unavailing, and , finding themselves in danger of being washed
ashore and destroyed, they claim they called to the Matulin , which was in plain sight, for help.
The patron of the Matulin, they allege, made no effect to assist them and, by reason of the high seas and
strong winds, they were driven ashore or on the shoals and their cargoes lost. The patron of the Matulin e
testified that he was unable to render assistance to cascos by reason of the shallow water in which they
were at the time they were caught by the winds and waves and washed ashore.
We are of the opinion that the judgment must be reversed on defendant's own statement of facts.
Defendant, in its brief, states the facts substantially as above, except that it denies that the crews of the
cascos, in their distress, called to the patron of the Matulin for assistance, or that the cascos were in deep
water at the time the wind and waves began to drive them toward the shore. We have no doubt, however,
from the facts and circumstances related that the crews of the cascos did call for help when they saw the
dangerous position in which they had been placed by the orders of the captain of the launch. It would be a
natural thing for them to do under the circumstances, and we have no doubt that they did. But whether
they really did or not we regard as of very little importance; and the same may be said with respect to the
position of the cascos when they first received the winds and waves. It was evident to the captain of
the Matulin that the cascos were in distress, in the open bay with winds and waves driving them ashore;
and if he had had anything like a proper conception of his duty he would have gone to their assistance. Nor
does the argument avail that he could not do so because his launch was of such draft that it would have
been impossible to navigate the shallow water in which the cascos were at the time the elements began to
drive them toward the shoals. That fact does not furnish a legal excuse. He came for the purpose of towing
the cascos to Manila; he knew that it was the reason when the southwest monsoon or other winds could
be expected to blow at any moment; he knew that two heavily loaded cascos with nothing to propel them
but bamboo poles in the hands of their crews and nothing to maintain their position in the water except
anchors so small as to be of little avail even in a moderate sea, would be at the mercy of wind and wave, if
there should be any, the moment they emerged from the mouth of the river. He must have known, if he
had any reasonable conception of his duty, that the cascos. propelled simply by bamboo poles, could make
no headway against wind and sea, and that it would be well night impossible, in view of the weather which
at any moment might prevail, to traverse a distance of 1,500 meters in an open sea. Fifteen hundred
meters is almost a mile; and that the captain of the Matulin should have expected that the two cascos
could successfully face the weather which would naturally be expected at that time while the crews
"poled" their heavily laden craft in the open bay for almost a mile demonstrates that he had no proper
conception of his obligation. It must be remembered that the Malabon River opens into Manila Bay toward
the southwest, almost directly in the teeth of the winds prevailing at the time. Every wind across Manila
Bay from the southwest blows almost squarely into the mouth of the Malabon River; and every craft
passing from the river in the bay in the monsoon season must be prepared to meet that the obstacle to its
progress. In view of this and the further fact that strong southwest winds were the rule rather than the
exception at that reason of the year, was the captain of theMatulin exercising reasonable care when he
asked the crews of two heavily loaded cascos carrying more than 2,000 piculs of sugar of the value of more
than P11,000 to attempt to cross a stretch of open water, nearly a mile in width, with nothing to propel
them but bamboo poles? And under the circumstances described, did the captain of theMatulin perform
his full duty when he ordered or even permitted the cascos to attempt such a journey when he himself was
without power or means to help them in case of need?
A vessel which undertakes a towage service is liable for reasonable care of the tow, and that reasonable
care is measured by the dangers and hazards to which the tow is or may be exposed, which it is the duty of
the master of the tug to know and to guard against not only by giving proper instructions for the

management of the tow, but by watching her when in a dangerous locality, to see that his directions are
obeyed. The duty of the tug to a tow is a continuous one from the time service commences until it is
completed. Its responsibility includes not only the proper and safe navigation of the tug on the journey, but
to furnish safe, sound and reasonable appliances and instrumentalities for the service to be performed, as
well as the giving of proper instructions as to the management of the tow; and if the locality in which the
two finds itself at any given time is more than ordinarily dangerous, the tug is held to a proportionately
higher degree of care and skill. It is well recognized that in towing a boat built only for the shallow water of
an inland stream, as the cascos mentioned in this case are, greater care must necessarily be used when
venturing upon an ocean voyage than with a vessel fitted for deep water; and this applies not only in the
choice of routes, to select the one having the smoothest water and affording shelter is stormy weather,
but in the handling of the tow. (The Jane McCrea, 121 Fed., 932; The Printer, 164 Fed., 314; The Somers N.
Smith, 120 Fed., 569; Ross vs. Erie R. Co., 120 Fed., 703; 38 Cyc., 564.)

MORELAND, J.:

In the case at bar the defendant failed to meet any of these requirements; it neglected to furnish suitable
appliances and instrumentalities; for the tug itself, as is demonstrated by the facts in this case, was
unsuitable for the purpose in hand. As we have said, it is negligence to leave two heavily loaded cascos in
Manila Bay at the mercy of weather likely to exist in the month of August for a distance of 1,500 meters
with no other motive power than bamboo poles. Also the captain of the Matulin failed to give proper
instructions to the tow. If it was negligence not to provide himself with appliances by which the cascos
could be protected while passing from the mouth of the river to the launch, it was negligence for him to
ask the cascos to move out into the open sea under such circumstances. It is clear, therefore, that the
defendant directly or through the captain failed in every duty laid upon it by the law, even though the law
applicable under the facts and circumstances of this case require the use of only ordinary diligence and
care; but, as a matter of fact, the law required the exercise of more than ordinary care under the
circumstances existing at the time the cascos were lost. The fact of time and season and of the probability
that in coming out of the river they would be met with wind and wave and, in their helpless condition,
would in all probability, if so met, be driven on the shoals, made the situation of the cascos one of more
than ordinary danger; and the tug should be held to a proportionately higher degree of care and skill.

While, says the defendant, "the case was tried below solely upon the theory that the negligence imputed
to defendant consisted in the failure of the launch to go to the assistance of the cascos when the
roughness of the sea made them unmanageable."

While the captain of the Matulin would not have been responsible for an act of God by which the cascos
were lost, it was his duty to foresee what the weather was likely to be, and to take such precautions as
were necessary to protect his tow. It was not an act of God by which the cascos were lost; it was the direct
result of the failure of the captain of the Matulin to meet the responsibilities which the occasion placed on
him. To be exempt from liability because of an act of God the tug must be free from any previous
negligence or misconduct by which that loss or danger may have been occasioned. For, although the
immediate or proximate cause of the loss in any given instance may have been what is termed an act of
God, yet, if the tug unnecessarily exposed the two to such accident by any culpable act or omission of its
own, it is not excluded. (Manresa, vol. 8, pages 91 et seq.; art. 1105, Civil Code.)
These are the grounds upon which the decision in this case was rested. So ordered.
Torres, Moreland, and Araullo, JJ., concur.
Johnson, J., concurs in the result.
Trent, J., dissents.

DECISION ON MOTION FOR REHEARING

November 2, 1916

This is a motion for a rehearing in a case decided by this court in which we held that the plaintiff was
entitled to a judgment against the defendant. The action was one for negligence in towing two cascos from
Guagua to Manila whereby they and their cargoes were lost. Reference is made to the decision in the main
case for a statement of the facts.
On this motion the defendant contends that "the decision of this honorable court in the above entitled
cause is based upon the ground that it was negligence for the patron of the defendant's launch to permit
the patrones of the cascos to attempt to move their vessels from their mooring place in the Malabon River
to the place where the launch was waiting for them outside the bar."

With this allegation as a basis the defendant says in its motion:

The decision of this honorable court is based upon the theory of the case which was not
advanced by plaintiff at the trial and is wholly at variance with the issues of law tendered at the
trial. The case was tried on the assumption that if it was in fact impossible for the launch to go
to the aid of the cascos, no liability for the loss would rest upon the defendant. It was never
once contended in the course of the trial that it was negligence per se for the defendant to
permit the cascos to make their way from the mouth of the river to the bar.
We are of the opinion that the defendant limits too severely the theory on which the case was tried below.
The complaint alleges facts sufficient to state a cause of action against the defendant from several points
of view. As shown by the statement of facts in the decision in the main case, which was but a restatement
of the facts alleged in the complaint, the defendant was charged with negligence for everything done by
him subsequent to the time when he placed the cascos in the Malabon River instead of continuing with
them to Manila. Indeed, the complaint even alleges that the placing of the cascos in the mouth of the
Malabon River was in itself an act of negligence. To say the least, the theory of the plaintiff was that the
negligence of the defendant began from the placing of the cascos in the river. While the fact that the
defendant's launch did not go to the assistance of the cascos when they found themselves unable to
navigate the waters of the bay was, perhaps, dwelt upon with more emphasis than the other features of
the case, there does not appear any intention on the part of the plaintiff of relying solely on that theory
and to renounce his rights against the defendant arising from other acts of negligence and to stand alone
upon the act on which particular emphasis was placed.
Moreover, the act of the patron of defendant's launch of calling the cascos out of the shelter of the
Malabon River into the dangers of the bay, while an act of negligence on the part of the
defendant's patron under the circumstances, is so closely connected both in point of time and in nature
with the inability of the patron to go to their assistance after they were called out as to make the two
inseparable to the extent that logically they cannot be divided for the purpose of claiming that one of the
acts or omissions was accepted as the theory of the case to the exclusion of the other. We held in the main
case that it was not only negligence for the patron of the defendant's launch to order the cascos out of the
shelter of the river into the dangers of the bay; but we also held that the failure of the defendant to
provide suitable means by which it could extend assistance to the cascos after they had reached the waters
of the bay was also negligence under all the circumstances. Indeed, one of the principal grounds of our
decision was that the defendant, after putting the property of the plaintiff in a dangerous position, found
itself without means of averting the catastrophe which its own acts invited.
For these reasons we are of the opinion that the theory on which the case was tried below was not so
narrow as the defendant assumes. Nor was the decision of this court so circumscribes as counsel
maintains. All of the facts upon which our decision was based were proved in the trial and were discussed

by the trial court. While he may not have drawn conclusions from some of the facts, that was due more to
the circumstance that he found for the defendant than that he was simply following a particular theory in
the trial of the cause.

[G.R. No. L-8194. July 11, 1956.]

EMERENCIANA M. VDA. DE MEDINA, ET AL., Plaintiffs-Appellees, vs. GUILLERMO CRESENCIA, ET
AL., Defendants. GUILLERMO CRESENCIA, Appellant.

Finally, the brief filed in the trial court by the plaintiff puts these questions:
DECISION
First, Was there reasonable ground for the defendant leaving the cascos in the Malabon River?
Second, Was not the loss of the cascos and their cargoes due to the negligence of the patron of
the launch 'Matulin '?
In arguing these questions counsel said: "The contract of towage is by its nature indivisible." Continuing the
argument he called attention to the fact that the patron of the Matulin summoned the cascos from the
Malabon River into the bay in the early morning and then left them to the mercy of the wind and waves.
Counsel then argued the legal responsibility of the defendant. He asserted that the patron of the
defendant's launch should have known the hours of the ebb and flow of the tide and the condition of the
bay and that he should not have called the cascos from the mouth of the river until the conditions were
such that they could navigate without assistance or until, if they needed assistance, he was able to offer it.
It is undoubtedly the law that, where a cause has been tried upon the theory that the pleadings are at
issue, or that a particular issue is made by the pleadings, or where an issue is tacitly accepted by all parties
as properly presented for trial and as the only issue, the appellate court will proceed upon the same
theory. (Lizarraga Hermanos vs. Yap Tico, 24 Phil. Rep., 504; Molina vs. Somes, 24 Phil. Rep., 49.) It would
be unjust and oppressive for the appellate court to adopt a theory at variance with that on which the case
was presented to and tried by the lower court. It would surprise the parties, take them unaware and off
their guard, and would, in effect, deprive them of their day in court. There is a difference, however,
between a change in the theory of the case and a shifting of the incidence of the emphasis placed during
the trial or in the briefs. The theory of the case is primarily determined by the pleadings. But the parties
may, by express or implied agreement during the trial, adopt and follow some other theory, in which case
the theory so adopted will control the case. Where, however, the theory of the case as set out in the
pleadings remains the theory throughout the progress of the cause, the change of emphasis from one
phase of the case as presented by one set of facts to another phase made prominent by another set of
facts, all of which facts were received in evidence without objection as clearly pertinent to the issues
framed by the parties in their pleadings, does not result in a change of theory, and particularly not where
the two sets of facts are so closely related both as to time and nature that they are to all intents and
purposes inseparable. In the case under discussion the action was based on the negligence of defendant
which resulted in the loss of plaintiff's cascos and their cargoes of sugar. The complaint contains a
complete history of the case and a statement of all of the defendant's acts from the time it received the
cascos in tow until they were lost. Those acts were proved in the trial. Plaintiff emphasized in particular
those facts which showed that defendant's patron refused or neglected to go to the assistance of the
cascos after he had summoned them from the safety of the river into the hazards to the bay and when he
saw them drifting helplessly on the shoals. But there was in the case the fact that the patron did call the
cascos out of the river into the bay knowing that he could not assist them should they need assistance
before they reached the deeper water where the launch could navigate, and knowing the state of the tide
and that bad weather might supervene at any moment at the season of the year. The court on appeal
emphasized, perhaps, but not intentionally, as it was unnecessary, the latter facts, holding that it was
negligence, under all the conditions, for the defendant to summon the cascos from the river into the bay
while the defendant had so circumstanced itself as to be unable to render assistance to the cascos if they
should need it. These two sets of facts are so closely related and inseparably connected in the theory of
plaintiff's case as stated in the pleadings and as tried that we do not believe it can reasonably be urged that
there was a change of theory in the appellate court. This court simply developed plaintiff's theory and its
facts; it did not change them. The motion is denied. So ordered.
Torres, Johnson, Carson, and Araullo, JJ., concur.

REYES, J.B.L., J.:

Appeal by Defendant Guillermo Cresencia from the judgment of the Court of First Instance of Manila in its
civil case No. 19890, sentencing Appellant, jointly and severally with his co-Defendant Brigido Avorque, to
pay Plaintiffs Emerencia M. Vda. de Medina and her minor children damages in the total amount of
P56,000, P5,000 attorneys fees, and costs.
It appears that on May 31, 1953, passenger jeepney bearing plate No. TPU-2232 (Manila), driven by Brigido
Avorque, smashed into a Meralco post on Azcarraga Street, resulting in the death of Vicente Medina, one
of its passengers. A criminal case for homicide through reckless imprudence was filed against Avorque
(criminal case No. 22775 of the Court of First Instance of Manila), to which he pleaded guilty on September
9, 1953. The heirs of the deceased, however, reserved their right to file a separate action for damages, and
on June 16, 1953, brought suit against the driver Brigido Avorque and Appellant Guillermo Cresencia, the
registered owner and operator of the jeepney in question. Defendant Brigido Avorque did not file any
answer; chan roblesvirtualawlibrarywhile DefendantCresencia answered, disclaiming liability on the ground
that he had sold the jeepney in question on October 14, 1950 to one Maria A. Cudiamat; chan
roblesvirtualawlibrarythat the jeepney had been repeatedly sold by one buyer after another, until the
vehicle was purchased on January 29, 1953 by Rosario Avorque, the absolute owner thereof at the time of
the accident. In view of Cresencias answer,Plaintiffs filed leave, and was allowed, to amend their
complaint making Rosario Avorque a co-Defendant; chan roblesvirtualawlibraryand the latter, by way of
answer, admitted having purchased the aforesaid jeepney on May 31, 1953, but alleged in defense that she
was never the public utility operator thereof. The case then proceeded to trial, during which, after
the Plaintiffs had presented their evidence,Defendants Guillermo Cresencia and Rosario Avorque made
manifestations admitting that the former was still the registered operator of the jeepney in question in the
records of the Motor Vehicles Office and the Public Service Commission, while the latter was the owner
thereof at the time of the accident; chan roblesvirtualawlibraryand submitted the case for the decision on
the question of who, as between the two, should be held liable to Plaintiffs for damages. The lower court,
by Judge Jose Zulueta, held that as far as the public is concerned, Defendant Cresencia, in the eyes of the
law, continued to be the legal owner of the jeepney in question; chan roblesvirtualawlibraryand rendered
judgment against him, jointly and severally with the driver Brigido Avorque, for P6,000 compensatory
damages, P30,000 moral damages, P10,000 exemplary damages, P10,000 nominal damages, P5,000
attorneys fees, and costs, while Defendant Rosario Avorque was absolved from liability. From this
judgment, Defendant Cresencia appealed.
We have already held in the case of Montoya vs. Ignacio, 94 Phil., 182 (December 29, 1953), which the
court below cited, that the law (section 20 [g], C. A. No. 146 as amended) requires the approval of the
Public Service Commission in order that a franchise, or any privilege pertaining thereto, may be sold or
leased without infringing the certificate issued to the grantee; chan roblesvirtualawlibraryand that if
property covered by the franchise is transferred or leased without this requisite approval, the transfer is
not binding against the public or the Service Commission; chan roblesvirtualawlibraryand in contemplation
of law, the grantee of record continues to be responsible under the franchise in relation to the Commission
and to the public. There we gave the reason for this rule to be as follows:chanroblesvirtuallawlibrary
cralaw Since a franchise is personal in nature any transfer or lease thereof should be notified to the Public
Service Commission so that the latter may take proper safeguards to protect the interest of the public. In
fact, the law requires that, before the approval is granted, there should be a public hearing, with notice to
all interested parties, in order that the Commission may determine if there are good and reasonable
grounds justifying the transfer or lease of the property covered by the franchise, or if the sale or lease is
detrimental to public interest cralaw .
The above ruling was later reiterated in the cases of Timbol vs. Osias, L-7547, April 30, 1955 and Roque vs.
Malibay Transit Inc., L- 8561, November 18, 1955.

As the sale of the jeepney here in question was admittedly without the approval of the Public Service
Commission, Appellant herein, Guillermo Cresencia, who is the registered owner and operator thereof,
continued to be liable to the Commission and the public for the consequences incident to its operation.
Wherefore, the lower court did not err in holding him, and not the buyer Rosario Avorque, responsible for
the damages sustained by Plaintiff by reason of the death of Vicente Medina resulting from the reckless
negligence of the jeepneys driver, Brigido Avorque.
Appellant also argues that the basis of Plaintiffs action being the employers subsidiary liability under the
Revised Penal Code for damages arising from his employees criminal acts, it isDefendant Rosario Avorque
who should answer subsidiarily for the damages sustained byPlaintiffs, since she admits that she, and
not Appellant, is the employer of the negligent driver Brigido Avorque. The argument is untenable,
because Plaintiffs action for damages is independent of the criminal case filed against Brigido Avorque,
and based, not on the employers subsidiary liability under the Revised Penal Code, but on a breach of the
carriers contractual obligation to carry his passengers safely to their destination (culpa contractual). And it
is also for this reason that there is no need of first proving the insolvency of the driver Brigido Avorque
before damages can be recovered from the carrier, for in culpa contractual, the liability of the carrier is not
merely subsidiary or secondary, but direct and immediate (Articles 1755, 1756, and 1759, New Civil Code).
The propriety of the damages awarded has not been questioned, Nevertheless, it is patent upon the record
that the award of P10,000 by way of nominal damages is untenable as a matter of law, since nominal
damages cannot co-exist with compensatory damages. The purpose of nominal damages is to vindicate or
recognize a right that has been violated, in order to preclude further contest thereon; chan
roblesvirtualawlibraryand not for the purpose of indemnifying the Plaintiff for any loss suffered by him
(Articles 2221, 2223, new Civil Code.) Since the court below has already awarded compensatory and
exemplary damages that are in themselves a judicial recognition thatPlaintiffs right was violated, the
award of nominal damages is unnecessary and improper. Anyway, ten thousand pesos cannot, in common
sense, be deemed nominal.
With the modification that the award of P10,000 nominal damages be eliminated, the decision appealed
from is affirmed. Costs against Appellant. SO ORDERED.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion and
Endencia, JJ., concur.

Remulla, Estrella, Bihasa, Lata & Associates for respondents.

Austria & Vargas for respondents Federal Ins., Castro Ins. Agency and F.E. Zuellig Inc.
Rodolfo Ma. Acob for respondent Jaguar Transit Co., Inc.
Pedro Magpayo, Jr. for respondent Federal Zuellig.

RELOVA, J.:
This is a petition for review of the decision of the then Court of Appeals in CA. G. R. No. 56343-R, finding
petitioner liable for damages.
About 4:30 in the afternoon of March 21, 1971, a Toyota truck with Plate No. 12-90-4 CT '70 owned by
petitioner and operated by Ceferino Arevalo hit the right center side of a jeepney with Plate No. 24-97-403 1970 owned by Nicanor Silla and operated by Alfredo Rodolfo. There were fifteen (15) passengers of the
jeepney, namely: (1) Laureano Lacson, (2) Salome Bautista, (3) Chona Alcaraz, (4) Ruby Gonzaga, (5)
Felicitacion Gonzaga, (6) Epifania Bautista, (7) Avelino Ignacio, (8) Erlinda Candado, (9) Leniza Alcaraz, (10)
Sotera Ramirez, (11) Rosario Ordoez, (12) Maximina Bautista, (13) Cornelio Bautista, (14) Hermogena
Bautista and (15) Felicidad Alcaraz. The jeepney, at the time of the impact, was parked at Regiment Street,
Anabu Imus, Cavite. As a consequence, said jeepney turned turtle and was pushed to a cemented fence
owned by Lucila Reyes, pinning down to death Carlito Pakingan, Hipolito Caldo, Azucena CamaclangNavarrete and Fortunato Bonifacio. Likewise, the passengers: Laureano Lacson, Salome Bautista and Chona
Alcaraz died because of the injuries sustained in this incident; the other passengers suffered various
injuries on the different parts of their bodies.
The aforementioned jeepney and the wall fence were also damaged.

G.R. No. L-57298 September 7, 1984

MYC-AGRO-INDUSTRIAL CORPORATION, petitioner,
vs.
PURIFICACION CAMERINO VDA. DE CALDO, LEONILA, NEMENCIO, YOLANDA, EDNA, LORNA and GENY all
surnamed CALDO and represented herein by PURIFICACION CAMERINO VDA. DE CALDO; PETRA
SARDIDO DE ARO, TEODORA S. TABING, LUCILA RAMOS VDA. DE PAKINGAN, GERALDO, ROWENA, and
ISIDRO, all surnamed PAKINGAN and represented herein by LUCILA RAMOS VDA. DE PAKINGAN;
EMILIANO NAVARRETE, NEMENCIO NAVARRETE, RODOLFO NAVARRETE, EDUARDO NAVARRETE,
MELANIO NAVARRETE, AIDA, LUALHATI and DOMINADOR, all surnamed NAVARRETE and represented
herein by EMILIANO NAVARRETE; CONSTANCIA MANALAYSAY VDA. DE LACSON, ALMARIO, SOLEDAD,
SUSAN, ELVIRA, CAROLINA, CECILIA and ARIEL, all surnamed LACSON and represented herein by
CONSTANCIA MANALAYSAY VDA. DE LACSON; BELLA BALAJADIA, ERLINDA CANDADO, SOTERA RAMIREZ,
ROGELIO and FELICITACION GONZAGA, RUBY GONZAGA, represented herein by ROGELIO GONZAGA;
ALFREDO RODOLFO, ROSARIO GONZALES-ORDOEZ, HERMOGENA BAUTISTA, RODOLFO ALCARAZ,
FELICIDAD ALCARAZ, LENIZA ALCARAZ, represented herein by RODOLFO ALCARAZ; ANIANO BAUTISTA,
MAXIMINA BAUTISTA, EPIFANIA and CORNELIO BAUTISTA, represented herein by ANIANO BAUTISTA;
AVELINO IGNACIO, NICANOR SILLA and ROSILA REYES; and BENEDICTO KALAW KATIGBAK in his capacity
as the General Manager of the MYC Agro-Industrial Corporation; and CEFERINO AREVALO; and JAGUAR
TRANSPORTATION CO., INC., FEDERAL INSURANCE CO., INC., F. E. ZUELLIG, and CASTO MADAMBA
INSURANCE AGENCY; and HONORABLE COURT OF APPEALS, respondents.
V.E. del Rosario & Associates for petitioner.

Complaint for damages was filed by the owner of the wall fence, the aforementioned victims and the heirs
of the deceased victims against petitioner MYC-AGRO-INDUSTRIAL CORPORATION, the registered owner of
the Toyota truck; Ceferino Arevalo, the driver of said truck; and, Benedicto Kalaw-Katigbak, the general
manager of petitioner corporation.
In its responsive pleading, petitioner admitted ownership of the Toyota truck but alleged that the same,
together with nine (9) other units were leased to the Jaguar Transportation, Inc. and that Ceferino Arevalo,
as well as Benedicto Kalaw-Katigbak are not its (petitioner) employees. Thereafter, petitioner, defendant in
the damage suit, filed a third-party complaint against Jaguar Transportation Company.
Third-party Jaguar pleads that its liability is only secondary and that it had already complied with its
obligation under its contract of lease with petitioner when it secured a third-party liability insurance from
Federal Insurance Company, Inc. It then filed a fourth-party complaint against Federal Insurance Company,
Inc., F. E. Zuellig, Inc. and Casto Madamba, claiming that Jaguar had obtained an insurance policy from
Federal Insurance Company, Inc. of which F. E. Zuellig is its general manager, and fourth-party defendant
Casto Madamba is the general agent of defendant Federal Insurance Company, Inc.
In its answer to the fourth-party complaint, the fourth-party defendants alleged that Jaguar has no cause
of action against them because F. E. Zuellig is only the general manager of Federal Insurance Company,
Inc.; that Casto Madamba is only the general agent of Federal Insurance Company, Inc., and that the
proper party in interest is herein petitioner, the registered owner of the Toyota truck.

Ceferino Arevalo, driver of the truck in question was named defendant in Criminal Case No. 53-71 of the
then Court of First Instance of Cavite, Branch V. Upon arraignment, he pleaded guilty to the crimes of
multiple homicide, multiple serious physical injuries, multiple less serious physical injuries, slight physical
injuries and damage to property thru reckless imprudence.
Evidence is clear that the death of seven (7) persons and the injuries suffered by private respondents were
due to the negligence and reckless operation of the Toyota truck, owned by herein petitioner and driven by
Ceferino Arevalo. On March 21, 1971, when the accident happened, subject vehicle was registered in the
name of petitioner which, however, would want to exculpate itself from liability because of the contract of
lease with sale (Exhibit "1") allegedly executed on December 1, 1970 between it and Jaguar Transportation
Company. Petitioner claims that because of the lease contract with sale to Jaguar it had no more control
over the vehicle; that Ceferino Arevalo is not its employee but that of Jaguar. On this score, the trial court
as well as the then Court of Appeals made the finding that
... A reading of said contract cannot but produce the conviction that the same was
drawn up for no other purpose but to set up a buffer between MYC and the public. It
is really nothing but a simulated contract, a subterfuge, intended to shift liability
from MYC to Jaguar Transportation Company which appears to be nothing more
than a conduit of MYC. The obvious purpose is to create an apparent relationship of
employer-employee between Jaguar and the persons operating MYC's trucks. Thus,
while the contract is denominated as one of lease with sale and the ten Toyota
trucks were supposed to be leased to Jaguar; the right of Jaguar to use these trucks
was subject to a hauling contract with defendant MYC. The supposed lessee Jaguar
may use these trucks only if the lessor shall have no more need for the trucks herein
leased. (Par. 3 of Exhibit 1) Even if Jaguar should be able to lease these trucks to
other parties because the lessor MYC has no more need for the same as the milling
season is over, said contract executed by Jaguar with a third party shag be
terminated as soon as the milling season is over, said contract executed by Jaguar
with a third party shall be terminable as soon as the lessor shall have a need for the
leased motor vehicle. Par. 2 of the lease contract exposes the true nature of this
alleged contract of lease with sale as nothing more than a disguise effected by
defendant MYC to relieve itself of the burdens and responsibilities of an employer
with respect to these trucks. That the defendant MYC remained the true and real
owner and possessor of these trucks is further indicated by the fact that those
trucks, although purportedly sold to Jaguar on installment, were never mortgaged to
MYC by way of security; the same trucks leased and sold to Jaguar were exclusively
used for the business of MYC in the hauling of its agricultural products; said trucks
may not be sold, leased, alienated or encumbered by Jaguar without MYC's written
consent. During the 3 year period of the contract Exhibit I before full payment of the
supposed installment price of P362,129.10 by Jaguar all these trucks continue to be
under the effective dominion of MYC all the rights of ownership to use, enjoy
and dispose of these remained with MYC. As a matter of fact, the ownership was
not to be transferred until after three years. After the incident of March 21, 1971,
the trucks were all "repossessed" by defendant MYC, a mere ceremony since MYC
never lost possession. (pp. 175-177, Record on Appeal)

plaintiff Hermogena Bautista; P23,000.00 for plaintiffs Emiliano, Nemencio, Rodolfo, Eduardo, Melanio,
Aida, Lualhati, and Dominador, all surnamed Navarrete; P221.10 for plaintiff Alfredo Rodolfo and P300.00
for plaintiff Rosila Reyes; by way of actual and compensatory damages; by way of exemplary damages, the
amount of P50,000.00 likewise awarded to plaintiffs as exemplary damages to be divided among them in
proportion of their share of actual and compensatory damages. Defendant is further ordered to pay to
plaintiffs the amount of P20,000.00 as Attorney's fees and the costs of this suit. The Complaint against
Benedicto Katigbak, the counterclaim, the third-party and fourth party complaint are dismissed." (pp. 181182, Record on Appeal)
From the foregoing judgment which was affirmed in toto by respondent Court of Appeals, petitioner went
to this Court alleging in substance that the appellate court erred in holding that Jaguar Transportation
Company was a mere dummy or conduit of petitioner which should be considered as the true owner of the
vehicle.
We cannot uphold the contention of petitioner. In the first place, Jaguar's answer to third party complaint
tendered no genuine or real issue. Secondly, Jaguar's representative did not even appear in court after
impleading fourth party defendants and its President, Benedicto Katigbak, did not adduce evidence in his
behalf. Thirdly, the sign MYC which stands for petitioner still appears on subject vehicle and, as aptly
observed by the appellate court the agreement which allegedly transferred the truck from MYC to Jaguar
failed to provide for a chattel mortgage to secure said transfer. The well-known practice is that motor
vehicles acquired through installment payments are secured by a chattel mortgage over the vehicle sold.
None exists in the instant case (p. 51, Rollo)." Finally, it is undisputed that the registered owner of the
Toyota truck is petitioner. As held in Vargas vs. Langcay, 6 SCRA 174, "[t]he registered owner/operator of a
passenger vehicle is jointly and severally hable with the driver for damages incurred by passengers or third
persons as a consequence of injuries (or death) sustained in the operation of said vehicles. ... Regardless of
who the actual owner of a vehicle is, the operator of record continues to be the operator of the vehicles as
regards the public and third persons, and as such is directly and primarily responsible for the consequences
incident to its operation, so that, in contemplation of law, such owner/operator of record is the employer
of the driver, the actual operator and employer being considered merely as his agent."
ACCORDINGLY, the petition is hereby DENIED for lack of merit.
SO ORDERED.
G.R. No. 70876 July 19, 1990
MA. LUISA BENEDICTO, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT and GREENHILLS WOOD INDUSTRIES COMPANY,
INC.respondents.
Britanico, Panganiban, Benitez, Africa, Linsangan and Barinaga for petitioner.
Abelardo V. Viray for private respondent.

After trial, the lower court rendered judgment ordering "defendants MYC Agro-Industrial Corporation and
Ceferino Arevalo jointly and severally to pay to plaintiffs the following: P3,348.75 to Felicidad Alcaraz;
P3,399.15 to Rodolfo, Felicidad and Leniza, all surnamed Alcaraz; P18,000.00 to Rodolfo and Felicidad
Alcaraz; P4,689.80 for Sotera Ramirez; P20,300.00 for Teodora Sardido-Tabing and Petra de Aro;
P45,485.00 for Constancia Manalaysay Vda. de Lacson, Almario, Solidad, Susan, Elvira, Carolina, Cecilia, and
Ariel, all surnamed Lacson; P22,760.00 for Purificacion Camerino Vda. de Caldo, Leonila, Nemencia,
Yolanda, Edna, Lorna and Genie all surnamed Caldo; P21,000.00 for Lucila Ramos Vda. de Pakingan,
Geraldo, Rowena, and Isidro all surnamed Pakingan; P20,500.00 for plaintiff Bella Balajadia-Bonifacio;
P1,989.49 for Erlinda Candado; P230.50 for Avelino Ignacio; P8,484.00 for Nicanor Silla P2,150.00 for
Aniano Maximina, Epifania and Cornelio, all surnamed Bautista; P4,724.50 to plaintiffs Rogelio, Felicitacion
and Ruby, all surnamed Gonzaga; P1,724.55 for the injuries sustained by Ruby Gonzaga; P850.00 for

FELICIANO, J.:
This Petition for Review asks us to set aside the Decision of the then Intermediate Appellate Court dated 30
January 1985 in A.C.-G.R. CV No. 01454, which affirmed in toto the decision of the Regional Trial Court
("RTC") of Dagupan City in Civil Case No. 5206. There, the RTC held petitioner Ma. Luisa Benedicto liable to
pay private respondent Greenhills Wood Industries Company, Inc. ("Greenhills") the amounts of

P16,016.00 and P2,000.00 representing the cost of Greenhills' lost sawn lumber and attorney's fees,
respectively.
Private respondent Greenhills, a lumber manufacturing firm with business address at Dagupan City,
operates sawmill in Maddela, Quirino.
Sometime in May 1980, private respondent bound itself to sell and deliver to Blue Star Mahogany, Inc.,
("Blue Star") a company with business operations in Valenzuela, Bulacan 100,000 board feet of sawn
lumber with the understanding that an initial delivery would be made on 15 May 1980. 1 To effect its first
delivery, private respondent's resident manager in Maddela, Dominador Cruz, contracted Virgilio Licuden,
the driver of a cargo truck bearing Plate No. 225 GA TH to transport its sawn lumber to the consignee Blue
Star in Valenzuela, Bulacan. This cargo truck was registered in the name of petitioner Ma. Luisa Benedicto,
the proprietor of Macoven Trucking, a business enterprise engaged in hauling freight, with main office in
B.F. Homes, Paraaque.
On 15 May 1980, Cruz in the presence and with the consent of driver Licuden, supervised the loading of
7,690 board feet of sawn lumber with invoice value of P16,918.00 aboard the cargo truck. Before the cargo
truck left Maddela for Valenzuela, Bulacan, Cruz issued to Licuden Charge Invoices Nos. 3259 and 3260
both of which were initialed by the latter at the bottom left corner. 2 The first invoice was for the amount
of P11,822.80 representing the value of 5,374 board feet of sawn lumber, while the other set out the
amount of P5,095.20 as the value of 2,316 board feet. Cruz instructed Licuden to give the original copies of
the two (2) invoices to the consignee upon arrival in Valenzuela, Bulacan 3and to retain the duplicate copies
in order that he could afterwards claim the freightage from private respondent's Manila office. 4
On 16 May 1980, the Manager of Blue Star called up by long distance telephone Greenhills' president,
Henry Lee Chuy, informing him that the sawn lumber on board the subject cargo truck had not yet arrived
in Valenzuela, Bulacan. The latter in turn informed Greenhills' resident manager in its Maddela saw-mill of
what had happened. In a letter 5 dated 18 May 1980, Blue Star's administrative and personnel manager,
Manuel R. Bautista, formally informed Greenhills' president and general manager that Blue Star still had
not received the sawn lumber which was supposed to arrive on 15 May 1980 and because of this delay,
"they were constrained to look for other suppliers."
On 25 June 1980, after confirming the above with Blue Star and after trying vainly to persuade it to
continue with their contract, private respondent Greenhill's filed Criminal Case No. 668 against driver
Licuden for estafa. Greenhills also filed against petitioner Benedicto Civil Case No. D-5206 for recovery of
the value of the lost sawn lumber plus damages before the RTC of Dagupan City.
In her answer, 6 petitioner Benedicto denied liability alleging that she was a complete stranger to the
contract of carriage, the subject truck having been earlier sold by her to Benjamin Tee, on 28 February
1980 as evidenced by a deed of sale. 7She claimed that the truck had remained registered in her name
notwithstanding its earlier sale to Tee because the latter had paid her only P50,000.00 out of the total
agreed price of P68,000.00 However, she averred that Tee had been operating the said truck in Central
Luzon from that date (28 February 1980) onwards, and that, therefore, Licuden was Tee's employee and
not hers.
On 20 June 1983, based on the finding that petitioner Benedicto was still the registered owner of the
subject truck, and holding that Licuden was her employee, the trial court adjudged as follows:
WHEREFORE, in the light of the foregoing considerations, this Court hereby renders
judgment against defendant Maria Luisa Benedicto, ordering her to pay the
Greenhills Wood Industries Co. Inc., thru its President and General Manager, the
amount of P16,016 cost of the sawn lumber loaded on the cargo truck, with legal
rate of interest from the filing of the complaint to pay attorney's fees in the amount
of P2,000.00; and to pay the costs of this suit.

SO ORDERED. 8
On 30 January 1985, upon appeal by petitioner, the Intermediate Appellate Court affirmed 9 the decision of
the trial court in toto. Like the trial court, the appellate court held that since petitioner was the registered
owner of the subject vehicle, Licuden the driver of the truck, was her employee, and that accordingly
petitioner should be responsible for the negligence of said driver and bear the loss of the sawn lumber plus
damages. Petitioner moved for reconsideration, without success. 10
In the present Petition for Review, the sole issue raised is whether or not under the facts and applicable
law, the appellate court was correct in finding that petitioner, being the registered owner of the carrier,
should be held liable for the value of the undelivered or lost sawn lumber.
Petitioner urges that she could not be held answerable for the loss of the cargo, because the doctrine
which makes the registered owner of a common carrier vehicle answerable to the public for the negligence
of the driver despite the sale of the vehicle to another person, applies only to cases involving death of or
injury to passengers. What applies in the present case, according to petitioner, is the rule that a contract of
carriage requires proper delivery of the goods to and acceptance by the carrier. Thus, petitioner contends
that the delivery to a person falsely representing himself to be an agent of the carrier prevents liability
from attaching to the registered owner.
The Court considers that petitioner has failed to show that appellate court committed reversible error in
affirming the trial court's holding that petitioner was liable for the cost of the sawn lumber plus damages.
There is no dispute that petitioner Benedicto has been holding herself out to the public as engaged in the
business of hauling or transporting goods for hire or compensation. Petitioner Benedicto is, in brief, a
common carrier.
The prevailing doctrine on common carriers makes the registered owner liable for consequences flowing
from the operations of the carrier, even though the specific vehicle involved may already have been
transferred to another person. This doctrine rests upon the principle that in dealing with vehicles
registered under the Public Service Law, the public has the right to assume that the registered owner is the
actual or lawful owner thereof It would be very difficult and often impossible as a practical matter, for
members of the general public to enforce the rights of action that they may have for injuries inflicted by
the vehicles being negligently operated if they should be required to prove who the actual owner is. 11 The
registered owner is not allowed to deny liability by proving the identity of the alleged transferee. Thus,
contrary to petitioner's claim, private respondent is not required to go beyond the vehicle's certificate of
registration to ascertain the owner of the carrier. In this regard, the letter presented by petitioner allegedly
written by Benjamin Tee admitting that Licuden was his driver, had no evidentiary value not only because
Benjamin Tee was not presented in court to testify on this matter but also because of the aforementioned
doctrine. To permit the ostensible or registered owner to prove who the actual owner is, would be to set at
naught the purpose or public policy which infuses that doctrine.
In fact, private respondent had no reason at all to doubt the authority of Licuden to enter into a contract of
carriage on behalf of the registered owner. It appears that, earlier, in the first week of May 1980, private
respondent Greenhills had contracted Licuden who was then driving the same cargo truck to transport and
carry a load of sawn lumber from the Maddela sawmill to Dagupan City. 12 No one came forward to
question that contract or the authority of Licuden to represent the owner of the carrier truck.
Moreover, assuming the truth of her story, petitioner Benedicto retained registered ownership of the
freight truck for her own benefit and convenience, that is, to secure the payment of the balance of the
selling price of the truck. She may have been unaware of the legal security device of chattel mortgage; or
she, or her buyer, may have been unwilling to absorb the expenses of registering a chattel mortgage over
the truck. In either case, considerations both of public policy and of equity require that she bear the
consequences flowing from registered ownership of the subject vehicle.

Petitioner Benedicto, however, insists that the said principle should apply only to cases involving
negligence and resulting injury to or death of passengers, and not to cases involving merely carriage of
goods. We believe otherwise.
A common carrier, both from the nature of its business and for insistent reasons of public policy, is
burdened by the law with the duty of exercising extraordinary diligence not only in ensuring the safety
of passengers but also in caring for goods transported by it. 13 The loss or destruction or deterioration
of goods turned over to the common carrier for conveyance to a designated destination, raises instantly a
presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or
damage arises from extreme circumstances such as a natural disaster or calamity or act of the public
enemy in time of war, or from an act or omission of the shipper himself or from the character of the goods
or their packaging or container. 14
This presumption may be overcome only by proof of extraordinary diligence on the part of the
carrier. 15 Clearly, to permit a common carrier to escape its responsibility for the passengers or goods
transported by it by proving a prior sale of the vehicle or means of transportation to an alleged vendee
would be to attenuate drastically the carrier's duty of extraordinary diligence. It would also open wide the
door to collusion between the carrier and the supposed vendee and to shifting liability from the carrier to
one without financial capability to respond for the resulting damages. In other words, the thrust of the
public policy here involved is as sharp and real in the case of carriage of goods as it is in the transporting of
human beings. Thus, to sustain petitioner Benedicto's contention, that is, to require the shipper to go
behind a certificate of registration of a public utility vehicle, would be utterly subversive of the purpose of
the law and doctrine.
Petitioner further insists that there was no perfected contract of carriage for the reason that there was no
proof that her consent or that of Tee had been obtained; no proof that the driver, Licuden was authorized
to bind the registered owner; and no proof that the parties had agreed on the freightage to be paid.
Once more, we are not persuaded by petitioner's arguments which appear to be a transparent attempt to
evade statutory responsibilities. Driver Licuden was entrusted with possession and control of the freight
truck by the registered owner (and by the alleged secret owner, for that matter).itc-asl Driver Licuden,
under the circumstances, was clothed with at least implied authority to contract to carry goods and to
accept delivery of such goods for carriage to a specified destination. That the freight to be paid may-not
have been fixed before loading and carriage, did not prevent the contract of carriage from arising, since the
freight was at least determinable if not fixed by the tariff schedules in petitioner's main business office. Put
in somewhat different terms, driver Licuden is in law regarded as the employee and agent of the
petitioner, for whose acts petitioner must respond. A contract of carriage of goods was shown; the sawn
lumber was loaded on board the freight truck; loss or non-delivery of the lumber at Blue Star's premises in
Valenzuela, Bulacan was also proven; and petitioner has not proven either that she had exercised
extraordinary diligence to prevent such loss or non-delivery or that the loss or non-delivery was due to
some casualty or force majeure inconsistent with her liability. 16 Petitioner's liability to private respondent
Greenhills was thus fixed and complete, without prejudice to petitioner's right to proceed against her
putative transferee Benjamin Tee and driver Licuden for reimbursement or contribution. 17
WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of the former
Intermediate Appellate Court dated 30 January 1985 is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

GRIO-AQUINO. J.:
This case brings to the fore the importance of motor vehicle registration in determining who should be
liable for the death or injuries suffered by passengers or third persons as a consequence of the operation
of a motor vehicle.
On June 26, 1984, Crisostomo B. Vitug filed Civil Case No. 84-25186 in the Regional Trial Court of Manila.
Branch XLIII, against the defendant. First Malayan Leasing and Finance Corporation (FMLFC for short), to
recover damages for physical injuries, loss of personal effects, and the wreck of his car as a result of a
three-vehicle collision on December 14, 1983. involving his car, another car, and an Isuzu cargo truck
registered in the name of FMLFC and driven by one Crispin Sicat.
The evidence shows that while Vitug's car was at a full stop at the intersection of New York Street and
Epifanio delos Santos Avenue (EDSA) in Cubao, Quezon City, northward-bound, the on-coming Isuzu cargo
truck bumped, a Ford Granada car behind him with such force that the Ford car was thrown on top of
Vitug's car crushing its roof. The cargo truck thereafter struck Vitug's car in the rear causing the gas tank to
explode and setting the car ablaze.
Stunned by the impact. Vitug was fortunately extricated from his car by solicitous bystanders before the
vehicle exploded. However, two of his passengers were burned to death. Vitug's car, valued at P70,000,
was a total loss.
When he regained consciousness in the hospital, Vitug discovered that he had lost various personal articles
valued at P48,950, namely a necklace with a diamond pendant, a GP watch, a pair of Christian Dior
eyeglasses. a gold Cross pen and a pair of Bally shoes. Vitug also suffered injuries producing recurring pains
in his neck and back. Upon his physician's advice, he received further medical treatment in the United
States which cost him US$2,373.64 for his first trip, and US$5,596.64 for the second.
At the time of the accident on December 14, 1983, the Isuzu cargo truck was registered in the name of the
First Malayan Leasing and Finance Corporation (FMLFC).
However, FMLFC denied any liability, alleging that it was not the owner of the truck. neither the employer
of the driver Crispin Sicat, because it had sold the truck to Vicente Trinidad on September 24. 1980, after
the latter had paid all his monthly amortizations under the financing lease agreement between FMLFC and
Trinidad.
On FMLFC's motion, the lower court granted FMLFC's leave to file a third-party complaint against Trinidad
and admitted the third-party complaint filed therewith.
Answering the third-party complaint the Estate of Vicente Trinidad admitted that the truck was operated
by the deceased during his lifetime. Nevertheless it raised the defense that the estate of Vicente Trinidad
was no longer existing because the same had long been settled and partitioned extra judicially by his heirs.

G. R. No. 91378 June 9, 1992

On August 25, 1986, the trial court rendered a decision sentencing FMLFC to pay Vitug the sum of
P133,950 with interest at the legal rate from the filing of the complaint until fully paid, plus the sum of
P10,000 as attorneys fees and costs.

FIRST MALAYAN LEASING AND FINANCE CORPORATION, petitioner,

vs.
THE HON. COURT OF APPEALS, CRISOSTOMO B. VITUG and ESTATE OF VICENTE TRINIDAD, Represented
by Widow GLORIA D. TRINIDAD, respondents.

FMLFC appealed in due time to the Court of Appeals which rendered a decision on November 27, 1989
modifying the appealed judgment by ordering the third-party defendant-appellee (Estate of Vicente
Trinidad) to indemnify the appellant, FMLFC, for whatever amount the latter may pay Vitug under the
judgment. In all other respects, the trial court's decision was affirmed.

FMLFC has filed this petition for review on certiorari praying that the decision of the appellate court be
reversed and set aside.

WHEREFORE, the petition for review is DENIED for lack of merit. Costs against the petitioner.
SO ORDERED.

On February 14, 1990, the Court dismissed the petition for insufficiency in form and substance, having
failed to comply with the Rules of Court and Circular 1-88 requiring the submission of (1) proof of service of
the petition on the adverse party, and (2) a certified true copy of the decision of the Court of Appeals.
Moreover, the petition was filed late on February 1, 1990, the due date being January 27, 1990.

G.R. No. 98275 November 13, 1992

The petitioner filed a motion for reconsideration. On April 16, 1990. we granted the same and reinstated
the petition. Without giving it due course, we required the respondents to comment.

BA FINANCE CORPORATION, petitioner,

vs.
HON. COURT OF APPEALS, REGIONAL TRIAL COURT OF ANGELES CITY, BRANCH LVI, CARLOS OCAMPO,
INOCENCIO TURLA, SPOUSES MOISES AGAPITO and SOCORRO M. AGAPITO and NICOLAS
CRUZ, respondents.

After deliberating on the petition, the comments of the private respondents and the petitioner's reply
thereto, we find the petition to be bereft of merit, hence, resolved to deny it.
In the first place, the factual finding of the trial court and the Court of Appeals that the Isuzu vehicle which
figured in the mishap was still registered in the name of FMLFC at the time of the accident is not
reviewable by this Court in a petition for certiorari under Rule 45 of Rules of Court.
This Court has consistently ruled that regardless of who the actual owner of a motor vehicle might be, the
registered owner is the operator of the same with respect to the public and third persons, and as such,
directly and primarily responsible for the consequences of its operation. In contemplation of law, the
owner/operator of record is the employer of the driver, the actual operator and employer being
considered merely as his agent (MYC-Agro-Industrial Corporation vs. Vda. de Caldo, 132 SCRA
10. citing Vargas vs. Langcay. 6 SCRA 174; Tamayo vs. Aquino. 105 Phil. 949).

MELO, J.:
The question of petitioner's responsibility for damages when on March 6, 1983, an accident occurred
involving petitioner's Isuzu ten-wheeler truck then driven by an employee of Lino Castro is the thrust of the
petition for review on certiorari now before Us considering that neither the driver nor Lino Castro appears
to be connected with petitioner.
On October 13, 1988, the disputed decision in the suit below was rendered by the court of origin in this
manner:

We believe that it is immaterial whether or not the driver was actually employed by
the operator of record. It is even not necessary to prove who the actual owner of the
vehicle and the employer of the driver is. Granting that, in this case, the father of the
driver is the actual owner and that he is the actual employer, following the wellsettled principle that the operator of record continues to be the operator of the
vehicle in contemplation of law, as regards the public and third persons, and as such
is responsible for the consequences incident to its operation we must hold and
consider such owner-operator of record as the employer, in contemplation of law, of
the driver. And, to give effect to this policy of law as enunciated in the above cited
decisions of this Court, we must now extend the same and consider the actual
operator and employer as the agent of the operator of record." (Vargas vs. Langcay,
6 SCRA 178; citing Montoya vs. Ignacio, G.R. No. L-5868, Dec. 29, 1953; Timbol vs.
Osias, G.R. No. L-7547, April 30, 1955; Vda. de Medina vs. Cresencia, G.R. No. L-8194,
July 11, 1956; Necesito vs. Paras, G.R. No. L10605, June 30, 1955.)

1. Ordering Rock B.A. and Rogelio Villar y Amare jointly and severally to pay the
plaintiffs as follows:

. . . Were the registered owner allowed to evade responsibility by proving who the
supposed transferee or owner is, it would be easy for him by collusion with others or
otherwise, to escape said responsibility and transfer the same to an indefinite
person, or to one who possesses no property with which to respond financially for
the damage or injury done (Erezo vs. Jepte, 102 Phil 103.)

3. Dismissing the third-party complaint against STRONGHOLD

. . . The registered owner or operator of record is the one liable for damages caused
by a vehicle regardless of any alleged sale or lease made thereon." (MYC-AgroIndustrial Corp. vs. Vda. de Caldo, 132 SCRA 11.)
In order for a transfer of ownership of a motor vehicle to be valid against third persons. it must be
recorded in the Land Transportation Office. For, although valid between the parties, the sale cannot affect
third persons who rely on the public registration of the motor vehicle as conclusive evidence of ownership.
In law, FMLFC was the owner and operator of the Izusu cargo truck, hence, fully liable to third parties
injured by its operation due to the fault or negligence of the driver thereof.

a) To the plaintiff Carlos Ocampo P121,650.00;

b) To the plaintiff Moises Ocampo P298,500.00
c) To the plaintiff Nicolas Cruz P154,740.00
d) To the plaintiff Inocencio Turla, Sr. 48,000.00
2. Dismissing the case against Lino Castro

4. Dismissing all the counterclaim of the defendants and third-party defendants.

5. Ordering ROCK to reimburse B.A. the total amount of P622,890.00 which the latter
is adjudged to pay to the plaintiffs. (p. 46, Rollo)
Respondent Court of Appeals affirmed the appealed disposition in toto through Justice Rasul, with Justices
De Pano, Jr. and Imperial concurring, on practically the same grounds arrived at by the court a quo (p.
28, Rollo). Efforts exerted towards re-evaluation of the adverse were futile (p. 37, Rollo). Hence, the instant
petition.
The lower court ascertained after due trial that Rogelio Villar y Amare, the driver of the Isuzu truck, was at
fault when the mishap occurred in as much as he was found guilty beyond reasonable doubt of reckless

imprudence resulting in triple homicide with multiple physical injuries with damage to property in a
decision rendered on February 16, 1984 by the Presiding Judge of Branch 6 of the Regional Trial Court
stationed at Malolos, Bulacan. Petitioner was adjudged liable for damages in as much as the truck was
registered in its name during the incident in question, following the doctrine laid down by this Court
in Perez vs. Gutierrez (53 SCRA 149 [1973]) and Erezo, et al. vs. Jepte (102 Phil. 103 [1957]). In the same
breadth, Rock Component Philippines, Inc. was ordered to reimburse petitioner for any amount that the
latter may be adjudged liable to pay herein private respondents as expressly stipulated in the contract of
lease between petitioner and Rock Component Philippines, Inc. Moreover, the trial court applied Article
2194 of the new Civil Code on solidary accountability of join tortfeasors insofar as the liability of the driver,
herein petitioner and Rock Component Philippines was concerned (pp. 6-7, Decision; pp. 44-45, Rollo).
To the question of whether petitioner can be held responsible to the victim albeit the truck was leased to
Rock Component Philippines when the incident occurred, the appellate court answered in the affirmative
on the basis of the jurisprudential dogmas which, as aforesaid, were relied upon by the trial court although
respondent court was quick to add the caveat embodied in the lease covenant between petitioner and
Rock Component Philippines relative to the latter's duty to reimburse any amount which may be adjudged
against petitioner (pp. 32-33, Rollo).
Petitioner asseverates that it should not have been haled to court and ordered to respond for the damage
in the manner arrived at by both the trial and appellate courts since paragraph 5 of the complaint lodged
by the plaintiffs below would indicate that petitioner was not the employer of the negligent driver who
was under the control an supervision of Lino Castro at the time of the accident, apart from the fact that the
Isuzu truck was in the physical possession of Rock Component Philippines by virtue of the lease agreement.
Aside from casting clouds of doubt on the propriety of invoking the Perez and Erezo doctrines, petitioner
continue to persist with the idea that the pronouncements of this Court in Duavit vs. Court of Appeals (173
SCRA 490 [1989]) and Duquillo vs. Bayot (67 Phil 131 [1939]) dovetail with the factual and legal scenario of
the case at hand. Furthermore, petitioner assumes, given the so-called hiatus on the basis for the award of
damages as decreed by the lower and appellate courts, that Article 2180 of the new Civil Code on vicarious
liability will divest petitioner of any responsibility absent as there is any employer-employee relationship
between petitioner and the driver.
Contrary to petitioner's expectations, the recourse instituted from the rebuffs it encountered may not
constitute a sufficient foundation for reversal of the impugned judgment of respondent court. Petitioner is
of the impression that the Perez and Erezo cases are inapplicable due to the variance of the generative
facts in said cases as against those obtaining in the controversy at bar. A contrario, the lesson imparted by
Justice Labrador in Erezo is still good law, thus:
. . . In previous decisions, We already have held that the registered owner of a
certificate of public convenience is liable to the public for the injuries or damages
suffered by passengers or third persons caused by the operation of said vehicle, even
though the same had been transferred to a third person. (Montoya vs. Ignacio, 94
Phil., 182 50 Off. Gaz., 108; Roque vs. Malibay Transit, Inc., G.R. No. L-8561,
November 18, 1955; Vda. de Medina vs. Cresencia, 99 Phil., 506, 52 Off. Gaz., [10],
4606.) The principle upon which this doctrine is based is that in dealing with vehicles
registered under the Public Service Law, the public has the right to assume or
presumed that the registered owner is the actual owner thereof, for it would be
difficult with the public to enforce the actions that they may have for injuries caused
to them by the vehicles being negligently operated if the public should be required
to prove who actual the owner is. How would the public or third persons know
against whom to enforce their rights in case of subsequent transfer of the vehicles?
We do not imply by this doctrine, however, that the registered owner may not
recover whatever amount he had paid by virtue of his liability to third persons from
the person to whom he had actually sold, assigned or conveyed the vehicle.

Under the same principle the registered owner of any vehicle, even if not used for a
public service, should primarily responsible to the public or to the third persons for
injuries caused the latter while the vehicle is being driven on the highways or streets.
The members of the Court are in agreement that the defendant-appellant should be
held liable to plaintiff-appellee for the injuries occasioned to the latter because of the
negligence of the driver, even if the defendant-appellant was no longer an owner of
the vehicle at the time of the damage because he had previously sold it to another.
What is the legal basis for his (defendants-appellant's) liability?
There is a presumption that the owner of the guilty vehicle is the defendantappellant as he is the registered owner in the Motor Vehicle Office. Should he not be
allowed to prove the truth, that he had sold it to another and thus shift the
responsibility for the injury to the real and the actual owner? The defendants hold
the affirmative of this proposition; the trial court hold the negative.
The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that the vehicle
may be used or operated upon any public highway unless the same is properly
registered. It has been stated that the system of licensing and the requirement that
each machine must carry a registration number, conspicuously displayed, is one of
the precautions taken to reduce the danger of injury of pedestrians and other
travelers from the careless management of automobiles, and to furnish a means of
ascertaining the identity of persons violating the laws and ordinances, regulating the
speed and operation of machines upon the highways (2 R. C. L. 1176). Not only are
vehicles to be registered and that no motor vehicles are to be used or operated
without being properly registered from the current year, furnish the Motor Vehicle
Office a report showing the name and address of each purchaser of motor vehicle
during the previous month and the manufacturer's serial number and motor
number. (Section 5[c], Act No. 3992, as amended.)
Registration is required not to make said registration the operative act by which
ownership in vehicles is transferred, as in land registration cases, because the
administrative proceeding of registration does not bear any essential relation to the
contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil.
888), but to permit the use and operation of the vehicle upon any public highway
(section 5[a], Act No. 3992, as amended). the main aim of motor vehicle registration
is to identify the owner so that if any accident happens, or that any damage or injury
is caused by the vehicle on the public highways, responsibility therefor can be fixed
on a definite individual, the registered owner. Instances are numerous where
vehicles running on public highways caused accidents or injuries to pedestrians or
other vehicles without positive identification of the owner or drivers, or with very
scant means of identification. It is to forestall these circumstances, so inconvenient
or prejudicial to the public, that the motor vehicle registration is primarily obtained,
in the interest of the determinations of persons responsible for damages or injuries
caused on public highways.
One of the principle purposes of motor vehicles legislation is
identification of the vehicle and of the operator, in case of
accident; and another is that the knowledge that means of
detection are always available my act as a deterrent from lax
observance of the law and of the rules of conservative and
safe operation. Whatever purpose there may be in these
statutes, it is subordinate at the last to the primary purpose of
rendering it certain that the violator of the law or of the rules
of safety shall not escape because of lack of means to discover
him. The purpose of the statute is thwarted, and the displayed
number becomes a "share and delusion," if courts would
entertain such defenses as that put forward by appellee in this

case. No responsible person or corporation could be held

liable for the most outrageous acts of negligence, if they
should be allowed to pace a "middleman" between them and
the public, and escape liability by the manner in which they
recompense their servants. (King vs. Breham Automobile Co.,
Inc. 145 S. W. 278, 279.)
With the above policy in mind, the question that defendant-appellant poses is:
should not the registered owner be allowed at the trial to prove who the actual and
real owner is, and in accordance with such proof escape or evade responsibility and
lay the same on the person actually owning the vehicle? We hold with the trial court
that the law does not allow him to do so; the law, with its aim and policy in mind,
does not relieve him directly of the responsibility that the law fixes and places upon
him as an incident or consequence of registration. Were a registered owner allowed
to evade responsibility by proving who the supposed transferee or owner is, it would
be easy for him, by collusion with others or otherwise, to escape said responsibility
and transfer the same to an indefinite person, or to one who possesses no property
with which to respond financially for the damage or injury done. A victim of
recklessness on the public highways is usually without means to discover or Identify
the person actually causing the injury or damage. He has no means other then by a
recourse to the registration in the Motor Vehicles Office to determine who is the
owner. The protection that the law aims to extend to him would become illusory
were the registered owner given the opportunity to escape liability by disproving his
ownership. If the policy of the law is to be enforced and carried out, the registered
owner should not be allowed to prove the contrary to the prejudice of the person
injured, that is, to prove that a third person or another has become the owner, so
that he may thereby be relieved of the responsibility to the injured person.
The above policy and application of the law may appear quite harsh and would seem
to conflict with truth and justice. We do not think it is so. A registered owner who
has already sold or transferred a vehicle has the recourse to a third-party complaint,
in the same action brought against him to recover for the damage or injury done,
against the vendee or transferee of the vehicle. The inconvenience of the suit is no
justification for relieving him of liability; said inconvenience is the price he pays for
failure to comply with the registration that the law demands and requires.
In synthesis, we hold that the registered owner, the defendant-appellant herein, is
primarily responsible for the damage caused to the vehicle of the plaintiff-appellee,
but he (defendant-appellant) has a right to be indemnified by the real or actual
owner of the amount that he may be required to pay as damage for the injury
caused to the plaintiff-appellant.
If the foregoing words of wisdom were applied in solving the circumstance whereof the vehicle had been
alienated or sold to another, there certainly can be no serious exception against utilizing the
same rationale to the antecedents of this case where the subject vehicle was merely leased by petitioner
to Rock Component Philippines, Inc., with petitioner retaining ownership over the vehicle.
Petitioner's reliance on the ruling of this Court in Duavit vs. Court of Appeals and in Duquillo vs.
Bayot (supra) is legally unpalatable for the purpose of the present discourse. The vehicles adverted to in
the two cases shared a common thread, so to speak, in that the jeep and the truck were driven in reckless
fashion without the consent or knowledge of the respective owners. Cognizant of the inculpatory
testimony spewed by defendant Sabiniano when he admitted that he took the jeep from the garage of
defendant Dauvit without the consent or authority of the latter, Justice Gutierrez, Jr. in Duavit remarked;
. . . Herein petitioner does not deny ownership of the vehicle involved in the mishap
but completely denies having employed the driver Sabiniano or even having

authorized the latter to drive his jeep. The jeep was virtually stolen from the
petitioner's garage. To hold, therefore, the petitioner liable for the accident caused
by the negligence of Sabiniano who was neither his driver nor employee would be
absurd as it would be like holding liable the owner of a stolen vehicle for an accident
caused by the person who stole such vehicle. In this regard, we cannot ignore the
many cases of vehicles forcibly taken from their owners at gunpoint or stolen from
garages and parking areas and the instances of service station attendants or
mechanics of auto repair shops using, without the owner's consent, vehicles
entrusted to them for servicing or repair.(at p. 496.)
In the Duquillo case, the defendant therein cannot, according to Justice Diaz, be held liable for anything
because of circumstances which indicated that the truck was driven without the consent or knowledge of
the owner thereof.
Consequently, there is no need for Us to discuss the matter of imputed negligence because petitioner
merely presumed, erroneously, however, that judgment was rendered against it on the basis of such
doctrine embodied under Article 2180 of the new Civil Code.
WHEREFORE, the petition is hereby DISMISSED and decision under review AFFIRMED without special
pronouncement as to costs.
SO ORDERED.
G.R. No. L-64693 April 27, 1984
LITA ENTERPRISES, INC., petitioner,
vs.
SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA
P. GARCIA, respondents.
Manuel A. Concordia for petitioner.
Nicasio Ocampo for himself and on behalf of his correspondents.

ESCOLIN, J.:+.wph!1
"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored maxim that
must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek
relief from the courts, and each must bear the consequences of his acts.
The factual background of this case is undisputed.
Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents,
purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to
be used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner Lita
Enterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate of
public convenience in consideration of an initial payment of P1,000.00 and a monthly rental of P200.00 per
taxicab unit. To effectuate Id agreement, the aforesaid cars were registered in the name of petitioner Lita
Enterprises, Inc, Possession, however, remained with tile spouses Ocampo who operated and maintained
the same under the name Acme Taxi, petitioner's trade name.

About a year later, on March 18, 1967, one of said taxicabs driven by their employee, Emeterio Martin,
collided with a motorcycle whose driver, one Florante Galvez, died from the head injuries sustained
therefrom. A criminal case was eventually filed against the driver Emeterio Martin, while a civil case for
damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc.,
as registered owner of the taxicab in the latter case, Civil Case No. 72067 of the Court of First Instance of
Manila, petitioner Lita Enterprises, Inc. was adjudged liable for damages in the amount of P25,000.00 and
P7,000.00 for attorney's fees.
This decision having become final, a writ of execution was issued. One of the vehicles of respondent
spouses with Engine No. 2R-914472 was levied upon and sold at public auction for 12,150.00 to one Sonnie
Cortez, the highest bidder. Another car with Engine No. 2R-915036 was likewise levied upon and sold at
public auction for P8,000.00 to a certain Mr. Lopez.
Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs in his name. He
requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration papers to him, but
the latter allegedly refused. Hence, he and his wife filed a complaint against Lita Enterprises, Inc., Rosita
Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for reconveyance of
motor vehicles with damages, docketed as Civil Case No. 90988 of the Court of First Instance of Manila.
Trial on the merits ensued and on July 22, 1975, the said court rendered a decision, the dispositive portion
of which reads: t.hqw
WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita
Sebastian Vda. de Galvez, Visayan Surety & Insurance Company and the Sheriff of
Manila are concerned.
Defendant Lita Enterprises, Inc., is ordered to transfer the registration certificate of
the three Toyota cars not levied upon with Engine Nos. 2R-230026, 2R-688740 and
2R-585884 [Exhs. A, B, C and D] by executing a deed of conveyance in favor of the
plaintiff.
Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears for
the certificate of convenience from March 1973 up to May 1973 at the rate of P200 a
month per unit for the three cars. (Annex A, Record on Appeal, p. 102-103, Rollo)
Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was denied by the
court a quo on October 27, 1975. (p. 121, Ibid.)
On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate Appellate Court modified the
decision by including as part of its dispositive portion another paragraph, to wit: t.hqw
In the event the condition of the three Toyota rears will no longer serve the purpose
of the deed of conveyance because of their deterioration, or because they are no
longer serviceable, or because they are no longer available, then Lita Enterprises, Inc.
is ordered to pay the plaintiffs their fair market value as of July 22, 1975. (Annex "D",
p. 167, Rollo.)
Its first and second motions for reconsideration having been denied, petitioner came to Us, praying
that: t.hqw

(a) the additional paragraph added by the public respondent to the DECISION of the
lower court (CFI) be deleted;
(b) that private respondents be declared liable to petitioner for whatever amount
the latter has paid or was declared liable (in Civil Case No. 72067) of the Court of
First Instance of Manila to Rosita Sebastian Vda. de Galvez, as heir of the victim
Florante Galvez, who died as a result ot the gross negligence of private respondents'
driver while driving one private respondents' taxicabs. (p. 39, Rollo.)
Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit system",
whereby a person who has been granted a certificate of convenience allows another person who owns
motors vehicles to operate under such franchise for a fee. A certificate of public convenience is a special
privilege conferred by the government . Abuse of this privilege by the grantees thereof cannot be
countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft
and corruption in the government transportation offices. In the words of Chief Justice Makalintal, 1 "this is
a pernicious system that cannot be too severely condemned. It constitutes an imposition upon the goo
faith of the government.
Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being
contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It is a
fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave
them both where it finds them. Upon this premise, it was flagrant error on the part of both the trial and
appellate courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Code
denies them such aid. It provides:t.hqw
ART. 1412. if the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed;
(1) when the fault, is on the part of both contracting parties, neither may recover
what he has given by virtue of the contract, or demand the performance of the
other's undertaking.
The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or
by prescription. As this Court said in Eugenio v. Perdido, 2 "the mere lapse of time cannot give efficacy to
contracts that are null void."
The principle of in pari delicto is well known not only in this jurisdiction but also in the United States where
common law prevails. Under American jurisdiction, the doctrine is stated thus: "The proposition is
universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its
specific performance, or to recover the property agreed to be sold or delivered, or damages for its
property agreed to be sold or delivered, or damages for its violation. The rule has sometimes been laid
down as though it was equally universal, that where the parties are in pari delicto, no affirmative relief of
any kind will be given to one against the other." 3 Although certain exceptions to the rule are provided by
law, We see no cogent reason why the full force of the rule should not be applied in the instant case.
WHEREFORE, all proceedings had in Civil Case No. 90988 entitled "Nicasio Ocampo and Francisca P. Garcia,
Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of the Court of First Instance of Manila and CAG.R. No. 59157-R entitled "Nicasio Ocampo and Francisca P. Garica, Plaintiffs-Appellees, versus Lita
Enterprises, Inc., Defendant-Appellant," of the Intermediate Appellate Court, as well as the decisions
rendered therein are hereby annuleled and set aside. No costs.

1. ...
SO ORDERED.1wph1.t
2. ... after legal proceedings, decision be rendered or resolution be issued, reversing,
annulling or amending the decision of public respondent so that:

[G.R. No. 125817. January 16, 2002]

ABELARDO LIM and ESMADITO GUNNABAN, petitioners, vs. COURT OF APPEALS and DONATO H.
GONZALES, respondents.
DECISION
BELLOSILLO, J.:
When a passenger jeepney covered by a certificate of public convenience is sold to another who
continues to operate it under the same certificate of public convenience under the so-called kabit system,
and in the course thereof the vehicle meets an accident through the fault of another vehicle, may the new
owner sue for damages against the erring vehicle? Otherwise stated, does the new owner have any legal
personality to bring the action, or is he the real party in interest in the suit, despite the fact that he is not
the registered owner under the certificate of public convenience?
Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu passenger jeepney from
Gomercino Vallarta, holder of a certificate of public convenience for the operation of public utility vehicles
plying the Monumento-Bulacan route. While private respondent Gonzales continued offering the jeepney
for public transport services he did not have the registration of the vehicle transferred in his name nor did
he secure for himself a certificate of public convenience for its operation. Thus Vallarta remained on
record as its registered owner and operator.
On 22 July 1990, while the jeepney was running northbound along the North Diversion Road
somewhere in Meycauayan, Bulacan, it collided with a ten-wheeler-truck owned by petitioner Abelardo
Lim and driven by his co-petitioner Esmadito Gunnaban. Gunnaban owned responsibility for the accident,
explaining that while he was traveling towards Manila the truck suddenly lost its brakes. To avoid colliding
with another vehicle, he swerved to the left until he reached the center island. However, as the center
island eventually came to an end, he veered farther to the left until he smashed into a Ferroza automobile,
and later, into private respondent's passenger jeepney driven by one Virgilio Gonzales. The impact caused
severe damage to both the Ferroza and the passenger jeepney and left one (1) passenger dead and many
others wounded.
Petitioner Lim shouldered the costs for hospitalization of the wounded, compensated the heirs of
the deceased passenger, and had the Ferroza restored to good condition. He also negotiated with private
respondent and offered to have the passenger jeepney repaired at his shop. Private respondent however
did not accept the offer so Lim offered himP20,000.00, the assessment of the damage as estimated by his
chief mechanic. Again, petitioner Lim's proposition was rejected; instead, private respondent demanded a
brand-new jeep or the amount of P236,000.00. Lim increased his bid to P40,000.00 but private respondent
was unyielding. Under the circumstances, negotiations had to be abandoned; hence, the filing of the
complaint for damages by private respondent against petitioners.
In his answer Lim denied liability by contending that he exercised due diligence in the selection and
supervision of his employees. He further asserted that as the jeepney was registered in Vallartas name, it
was Vallarta and not private respondent who was the real party in interest.[1] For his part, petitioner
Gunnaban averred that the accident was a fortuitous event which was beyond his control.[2]
Meanwhile, the damaged passenger jeepney was left by the roadside to corrode and decay. Private
respondent explained that although he wanted to take his jeepney home he had no capability, financial or
otherwise, to tow the damaged vehicle.[3]
The main point of contention between the parties related to the amount of damages due private
respondent. Private respondent Gonzales averred that per estimate made by an automobile repair shop
he would have to spend P236,000.00 to restore his jeepney to its original condition.[4] On the other hand,
petitioners insisted that they could have the vehicle repaired for P20,000.00.[5]

On 1 October 1993 the trial court upheld private respondent's claim and awarded him P236,000.00
with legal interest from 22 July 1990 as compensatory damages andP30,000.00 as attorney's fees. In
support of its decision, the trial court ratiocinated that as vendee and current owner of the passenger
jeepney private respondent stood for all intents and purposes as the real party in interest. Even Vallarta
himself supported private respondent's assertion of interest over the jeepney for, when he was called to
testify, he dispossessed himself of any claim or pretension on the property. Gunnaban was found by the
trial court to have caused the accident since he panicked in the face of an emergency which was rather
palpable from his act of directing his vehicle to a perilous streak down the fast lane of the superhighway
then across the island and ultimately to the opposite lane where it collided with the jeepney.
On the other hand, petitioner Lim's liability for Gunnaban's negligence was premised on his want of
diligence in supervising his employees. It was admitted during trial that Gunnaban doubled as mechanic of
the ill-fated truck despite the fact that he was neither tutored nor trained to handle such task.[6]
Forthwith, petitioners appealed to the Court of Appeals which, on 17 July 1996, affirmed the
decision of the trial court. In upholding the decision of the court a quo the appeals court concluded that
while an operator under the kabit system could not sue without joining the registered owner of the vehicle
as his principal, equity demanded that the present case be made an exception.[7] Hence this petition.
It is petitioners' contention that the Court of Appeals erred in sustaining the decision of the trial
court despite their opposition to the well-established doctrine that an operator of a vehicle continues to be
its operator as long as he remains the operator of record. According to petitioners, to recognize an
operator under the kabit system as the real party in interest and to countenance his claim for damages is
utterly subversive of public policy. Petitioners further contend that inasmuch as the passenger jeepney
was purchased by private respondent for only P30,000.00, an award of P236,000.00 is inconceivably large
and would amount to unjust enrichment.[8]
Petitioners' attempt to illustrate that an affirmance of the appealed decision could be supportive of
the pernicious kabit system does not persuade. Their labored efforts to demonstrate how the questioned
rulings of the courts a quo are diametrically opposed to the policy of the law requiring operators of public
utility vehicles to secure a certificate of public convenience for their operation is quite unavailing.
The kabit system is an arrangement whereby a person who has been granted a certificate of public
convenience allows other persons who own motor vehicles to operate them under his license, sometimes
for a fee or percentage of the earnings.[9] Although the parties to such an agreement are not outrightly
penalized by law, the kabit system is invariably recognized as being contrary to public policy and therefore
void and inexistent under Art. 1409 of the Civil Code.
In the early case of Dizon v. Octavio[10] the Court explained that one of the primary factors
considered in the granting of a certificate of public convenience for the business of public transportation is
the financial capacity of the holder of the license, so that liabilities arising from accidents may be duly
compensated. The kabit system renders illusory such purpose and, worse, may still be availed of by the
grantee to escape civil liability caused by a negligent use of a vehicle owned by another and operated
under his license. If a registered owner is allowed to escape liability by proving who the supposed owner
of the vehicle is, it would be easy for him to transfer the subject vehicle to another who possesses no
property with which to respond financially for the damage done. Thus, for the safety of passengers and
the public who may have been wronged and deceived through the baneful kabit system, the registered
owner of the vehicle is not allowed to prove that another person has become the owner so that he may be
thereby relieved of responsibility. Subsequent cases affirm such basic doctrine.[11]
It would seem then that the thrust of the law in enjoining the kabit system is not so much as to
penalize the parties but to identify the person upon whom responsibility may be fixed in case of an
accident with the end view of protecting the riding public. The policy therefore loses its force if the public
at large is not deceived, much less involved.
In the present case it is at once apparent that the evil sought to be prevented in enjoining
the kabit system does not exist. First, neither of the parties to the pernicious kabitsystem is being held
liable for damages. Second, the case arose from the negligence of another vehicle in using the public road
to whom no representation, or misrepresentation, as regards the ownership and operation of the
passenger jeepney was made and to whom no such representation, or misrepresentation, was
necessary. Thus it cannot be said that private respondent Gonzales and the registered owner of the

jeepney were in estoppel for leading the public to believe that the jeepney belonged to the registered
owner. Third, the riding public was not bothered nor inconvenienced at the very least by the illegal
arrangement. On the contrary, it was private respondent himself who had been wronged and was
seeking compensation for the damage done to him. Certainly, it would be the height of inequity to deny
him his right.
In light of the foregoing, it is evident that private respondent has the right to proceed against
petitioners for the damage caused on his passenger jeepney as well as on his business. Any effort then to
frustrate his claim of damages by the ingenuity with which petitioners framed the issue should be
discouraged, if not repelled.
In awarding damages for tortuous injury, it becomes the sole design of the courts to provide for
adequate compensation by putting the plaintiff in the same financial position he was in prior to the tort. It
is a fundamental principle in the law on damages that a defendant cannot be held liable in damages for
more than the actual loss which he has inflicted and that a plaintiff is entitled to no more than the just and
adequate compensation for the injury suffered. His recovery is, in the absence of circumstances giving rise
to an allowance of punitive damages, limited to a fair compensation for the harm done. The law will not
put him in a position better than where he should be in had not the wrong happened.[12]
In the present case, petitioners insist that as the passenger jeepney was purchased in 1982 for
only P30,000.00 to award damages considerably greater than this amount would be improper and
unjustified. Petitioners are at best reminded that indemnification for damages comprehends not only the
value of the loss suffered but also that of the profits which the obligee failed to obtain. In other words,
indemnification for damages is not limited to damnum emergens or actual loss but extends to lucrum
cessans or the amount of profit lost.[13]
Had private respondent's jeepney not met an accident it could reasonably be expected that it would
have continued earning from the business in which it was engaged. Private respondent avers that he
derives an average income of P300.00 per day from his passenger jeepney and this earning was included in
the award of damages made by the trial court and upheld by the appeals court. The award therefore
of P236,000.00 as compensatory damages is not beyond reason nor speculative as it is based on a
reasonable estimate of the total damage suffered by private respondent, i.e. damage wrought upon his
jeepney and the income lost from his transportation business. Petitioners for their part did not offer any
substantive evidence to refute the estimate made by the courts a quo.
However, we are constrained to depart from the conclusion of the lower courts that upon the award
of compensatory damages legal interest should be imposed beginning 22 July 1990, i.e. the date of the
accident. Upon the provisions of Art. 2213 of the Civil Code, interest "cannot be recovered upon
unliquidated claims or damages, except when the demand can be established with reasonable certainty." It
is axiomatic that if the suit were for damages, unliquidated and not known until definitely ascertained,
assessed and determined by the courts after proof, interest at the rate of six percent (6%) per annum
should be from the date the judgment of the court is made (at which time the quantification of damages
may be deemed to be reasonably ascertained).[14]
In this case, the matter was not a liquidated obligation as the assessment of the damage on the
vehicle was heavily debated upon by the parties with private respondent's demand for P236,000.00 being
refuted by petitioners who argue that they could have the vehicle repaired easily for P20,000.00. In fine,
the amount due private respondent was not a liquidated account that was already demandable and
payable.
One last word. We have observed that private respondent left his passenger jeepney by the
roadside at the mercy of the elements. Article 2203 of the Civil Code exhorts parties suffering from loss or
injury to exercise the diligence of a good father of a family to minimize the damages resulting from the act
or omission in question. One who is injured then by the wrongful or negligent act of another should
exercise reasonable care and diligence to minimize the resulting damage. Anyway, he can recover from
the wrongdoer money lost in reasonable efforts to preserve the property injured and for injuries incurred
in attempting to prevent damage to it.[15]
However we sadly note that in the present case petitioners failed to offer in evidence the estimated
amount of the damage caused by private respondent's unconcern towards the damaged vehicle. It is the
burden of petitioners to show satisfactorily not only that the injured party could have mitigated his

damages but also the amount thereof; failing in this regard, the amount of damages awarded cannot be
proportionately reduced.
WHEREFORE, the questioned Decision awarding private respondent Donato Gonzales P236,000.00
with legal interest from 22 July 1990 as compensatory damages andP30,000.00 as attorney's fees is
MODIFIED. Interest at the rate of six percent (6%) per annum shall be computed from the time the
judgment of the lower court is made until the finality of this Decision. If the adjudged principal and
interest remain unpaid thereafter, the interest shall be twelve percent (12%) per annum computed from
the time judgment becomes final and executory until it is fully satisfied.
Costs against petitioners.
SO ORDERED.
[G.R. Nos. L-12634 & L-12720. May 29, 1959.]
JOSE G. TAMAYO, Petitioner, v. INOCENCIO AQUINO, ET AL., and SILVESTRE RAYOS,Respondents.
SILVESTRE RAYOS, Petitioner, v. JOSE G. TAMAYO and INOCENCIO AQUINO ET AL., Respondents.
Briones & Pascual for Petitioner.
Emiliano R. Navarro for respondent Inocencio Aquino Et. Al.
Jose C. Laureta and Naty-Belen N. Millan for respondent Silvestre Rayos.

SYLLABUS

1. DAMAGES; REGISTERED OWNER OF PUBLIC UTILITIES LIABLE FOR DAMAGES DESPITE TRANSFER OF
VEHICLE. The registered owner of a public service vehicle is responsible for damages that may be caused
to any of the passengers therein, even if the said vehicle had already been sold, leased or transferred to
another person who was, at the time of the accident, actually operating the vehicle.
2. ID.; LIABILITY OF REGISTERED OWNER DIRECT; REMEDY OF THE LATTER AGAINST TRANSFEREE. The
responsibility of a registered owner of a public vehicle to the public or to any passenger riding in the
vehicle is direct. However, the transferee, who operated the vehicle when the accident took place, and
who is directly responsible thereof, should in turn be made responsible to the registered owner for what
the latter may have been adjudged to pay. The remedy of the registered owner is by third-party
complaint.
3. ID.; MORAL DAMAGES; NO MORAL DAMAGES IN BREACH OF CONTRACT IN THE ABSENCE OF FRAUD OR
BAD FAITH; MEANING OF TERM "BAD FAITH." Article 2220 of the Civil Code expressly provides that
award of moral damages can be made in a suit for breach of contract only when the defendant acted
fraudulently or in bad faith. What the law would consider as bad faith which may furnish a ground for the
award of moral damages would be bad faith in the securing and in the execution of the contract and in the
enforcement of its terms, or any kind of deceit which may have been used by both defendants.

DECISION

LABRADOR, J.:

Inocencio Aquino and his children brought this action against Jose G. Tamayo, holder of a certificate of
public convenience to operate two trucks for damages for the death of Inocencios wife, Epifania Gonzales,
while riding aboard Tamayos truck. It is alleged that while his (Inocencio Aquino) wife was making a trip
aboard truck with Plate No. TPU-735, it bumped against a culvert on the side of the road in Bugallon,
Pangasinan; that as a consequence of this accident Epifania Gonzales was thrown away from the vehicle

and two pieces of wood embeded in her skull as a result of which she died; that the impact of the truck
against the culvert was so violent that the roof of the vehicle was ripped off from its body, one fender was
smashed and the engine damaged beyond repair. Complaint was filed for the recovery of P10,000 as actual
damages, P10,000 as moral damages, and costs.
Upon being summoned, defendant Tamayo answered alleging that the truck is owned by Silvestre Rayos,
so he filed a third-party complaint against the latter, alleging that he no longer had any interest
whatsoever in the said truck, as he had sold the same before the accident to the third-party defendant
Silvestre Rayos. Answering the third-party complaint, Rayos alleged that if any indemnity is due, it should
come from Jose G. Tamayo, because he did not have any transaction with him regarding such sale.
The Court of First Instance found that the truck with plate No. TPU-735 was one of the trucks of Tamayo
under a certificate of public convenience issued to him; that he had sold it to Rayos in March, 1953, but did
not inform the Public Service Commission of the sale until June 30, 1953, one month after the accident. On
the basis of the above facts, the Court of First Instance ordered the defendant Tamayo and the third-party
defendant Rayos to pay plaintiffs jointly and severally the sum of P6,000 as compensatory damages, and
another sum of P5,000 as moral damages, with interest, and authorized the defendant or third-party
defendant, whoever should pay the entire amount, to recover from the other any sum in excess of one-half
of the amount ordered to be paid, with interest. The court also dismissed the third-party complaint.
Appeal against the above decision was made to the Court of Appeals. This court affirmed the judgment of
the Court of First Instance in all respects, and against this judgment certiorari was issued by us on separate
petitions of Tamayo and Rayos.
Tamayo claims exemptionn from liability, arguing that the owner and operator of the truck at the time the
accident was not he but Rayos. In answer we state that we have already held in the cases of Medina v.
Cresencia, 99 Phil., 506; 52 Off. Gaz., (11) 4606; Timbol v. Osias, 98 Phil., 432; 52 Off. Gaz. (3) 1392;
Montoya v. Ignacio, 94 Phil., 182; 50 Off. Gaz., 108, and Roque v. Malibay, L-8561, Nov. 18, 1955, that the
registered owner of a public service vehicle is responsible for damages that may be caused to any of the
passengers therein, even if the said vehicle had already been sold, leased or transferred to another person
who was, at the time of the accident, actually operating the vehicle. This principle was also reafirmed in
the case of Erezo v. Jepte, 102 Phil., 103. The reason given by us for the above liability imposed upon the
registered owner of the vehicle under a certificate of public convenience is as
follows:jgc:chanrobles.com.ph
". . . we hold with the trial court that the law does not allow him to do so; the law, with its aim and policy in
mind, does not relieve him directly of the responsibility that the law fixes and places upon him as an
incident or consequence of registration. Were a registered owner allowed to evade responsibility by
proving who the supposed transferre or owner is, it would be easy for him by collusion with others or
otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who
possesses no property with which to respond financially for the damage or injury done. A victim of
recklessness on the public highways is usually without means to discover or identify the person actually
causing the injury or damage. He has no means other than by a recourse to the registration in the Motor
Vehicles Office to determine who is the owner. The protection that the law aims to extend to him would
become illusory were the registered owner given the opportunity to escape liability by disproving his
ownership. If the policy of the law is to be enforced and carried out, the registered owner should not be
allowed to prove the contrary to the prejudice of the person injured, that is, to prove that a third person or
another has become the owner, so that he may therebyy be relieved of the responsibility to the injured."
(Erezo v. Jepte, supra).
The decision of the Court of Appeals is alsoo attacked insofar as it holdds that inasmuch as the third-party
defendant had used the truck on a route not covered by the registered owners franchise, both the
registered owner and the actual owner and operator should be considered as joint tortfeasors and should
be made liable in accordance with Article 2194 of the Civil Code. This Article is as
follows:jgc:chanrobles.com.ph
"Art. 2194. The responsibility of two or more persons who are liable for a quasi-delict is solidary."cralaw
virtua1aw library

But the action instituted in the case at bar is one for breach of contract, for failure of the defendant to
carry safety the deceased to her destination. The liability for which he is made responsible, i. e., for the
death of the passenger, may not be considered as arising from a quasi-delict. As the registered owner
Tamayo and his tranferee Rayos may not be held guilty of tort or a quasi-delict; their responsibility is not
solidary as held by the Court of Appeals.
The question that poses, therefore, is how should the holder of the certificate of public convenience
Tamayo participate with his transferee, operator Rayos, in the damages recoverable by the heirs of the
deceased passenger, if their liability is not that of joint tortfeasors in accordance with Article 2194 of the
Civil Code. The following considerations must be borne in mind in determining this question. As Tamayo is
the registered owner of the truck, his responsibility to the public or to any passenger riding in the vehicle
or truck must be direct, for the reasons given in our decision in the case of Erezo v. Jepte, supra, as quoted
above. But as the transferee, who operated the vehicle when the passenger died, is the one directly
responsible for the accident and death he should in turn be made responsible to the registered owner for
what the latter may have been adjudged to pay. In operating the truck without transfer thereof having
been approved by the Public Service Commission, the transferee acted merely as agent of the registered
owner and should be responsible to him (the registered owner), for any damages that he may cause the
latter by his negligence.
In the case at bar, the court found, furthermore, that inspite of the fact that the agreement between
Tamayo and Rayos was for Rayos to use the truck in carrying of gasoline, the latter used the same in
transporting passengers outside the route covered by the franchise of Tamayo. For this additional reason,
the agent or Rayos must be held responsible to the registered owner, to the extent that the latter may
suffer damage by reason of the death caused during the accident. The responsibility of the transferee was
already adverted to by us in the case of Erezo v. Jepte, supra, when we held expressly.
"In synthesis, we hold that the registered owner, the defendant appellant herein, is primarily responsible
for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to
be indemnified by the real or actual owner of the amount that he may be required to pay as damage for
the injury caused to the plaintiff-appellant." (Erezo v. Jepte, supra.)
We hereby affirm that the responsibility of the transferee of the public vehicle be as above denied.
The procedural means by which the liability of the transferee to the holder of the certificate should be
enforced is that indicated by us in the above-quoted portion of the case of Erezo v. Jepte. This procedure
was adopted by Tamayo, the defendant herein, when he presented third-party complaint against Rayos.
The courts below should not have dismissed this third-party complaint, and should have adjudged the
responsibility to make indemnity in accordance therewith. The transferee is liable to indemnify the
registered owner for the damages that the latter may be required to pay for the accident, hence the
remedy is by third-party complaint (See Rule 12, Rules of Court).
We now come to the question of the damages that the Court of Appeals and the Court of First Instance
awarded to the plaintiffs. The actual or compensatory damage of P6,000 is not seriously questioned by any
of the defendants, but the award of P5,000 as moral damages is questioned by them in this appeal. We
agree with the appellants that as the responsibility of Tamayo and his agent Rayos is culpa-contractual, no
award of moral damages can be given. The law on this matter is expressed in Article 2220 of the Civil Code,
which provides:jgc:chanrobles.com.ph
"Willful injury to property may be a legal ground for awarding moral damages if the court should find that,
under the circumstances, such damages are justly due. The same rule applies to breaches of contract
where the defendant acted fraudulently or in bad faith."cralaw virtua1aw library
Both the Court of First Intance and the Court of Appeals considered the violation of the rules of the Public
Service Commission prohibiting transfer of public vehicles without approval by the Commission as
justifying the award of moral damages. We believe that both courts erred. The law expressly provides that
award of moral damages can be made in a suit for breach of contract only when the defendants acted
fraudulently or in bad faith. We do not believe that the holder of the certificate, defendant Tamayo, was

guilty of fraud or bad faith. There appears to be no fraud at all in the transfer. Transfers are prohibited only
if made without approval by the Public Service Commission. There may have been a violation of the
regulations because Tamayo did not secure a previous authority to transfer from said Commission, but he
actually applied for and obtained said permission or approval about a month after the accident. Besides,
the truck was transferred to Rayos with the understanding that the same was not to be used as a public
convenience, so that insofar as Tamayo is concerned, there could have been no shade or tint of bad faith at
all. Consequently, the ground upon which moral damages may be demanded from him by the plaintiffs
does not exist.
Neither can wee find that there was fraud or bad faith committed on the part of the transferee or agent.
There may have been a breach of the agreement between Tamayo and Rayos, but this was not the
immediate cause of the accident. It was the negligence of the driver. What the law would seem to consider
as bad faith which may furnish a ground for the award of moral damages in the case at bar would be bad
faith in the securing and in the execution of the contract and in the enforcement of its terms (Article 1338,
Civil Code), or any other kind of deceit which may have been used by both defendants. None can be said to
have been present in the case at bar. There was no bad faith on the part of the agent Rayos, there was
negligence of the driver employed by him, but this is certainly not bad faith on defendants part
contemplated by law.

devolve on one Panfilo Alajar, the actual owner, by purchase, of the said passenger jeepney when the
accident occurred and against whom she has filed a third-party complaint.
The deed of sale attached to the third-party complaint recites, inter alia,
That it is mutually agreed by the herein vendor and vendee that the TITLE to the
aforementioned vehicle shall remain with the VENDOR, pending approval of the
herein SALE by the Public Service Commission, said motor vehicle being registered as
a public utility auto-calesa under "AC" denomination; ...
That the vendee herein, by these presents, do [sic] hereby binds himself and do [sic]
hereby assume, [sic] responsibility for all actions, claims, demands, and rights of
action, and whatever kind and nature, that may hereafter develop as a consequence
of or in the course of operation of the aforementioned vehicle; ...

For the foregoing considerations, the judgment appealed from is hereby modified, in that the defendantappellant Tamayo is hereby ordered to pay to the plaintiff-appellees the sum of P6,000 as compensatory
damages for the death of the deceased, but that he (Tamayo) has the right to be indemnified by thirdparty defendant-appellant Rayos of the amount he is hereby ordered to pay. With costs against
appellants.

In his answer to the third-party complaint, Panfilo Alajar disclaimed responsibility for the accident, alleging
that (a) the mentioned deed of sale is null and void because it has not been registered with the Public
Service Commission despite repeated demands on the 3rd-party complainant to do so; (b) the said
passenger jeepney remained in the control of the 3rd-party complainant who, together with her lawyerhusband, had been collecting rentals from him for the use of the said vehicle; and (c) by express
agreement, title to the said vehicle remained with the 3rd-party complainant pending approval of the sale
by the Public Service Commission.

Paras, C.J., Bengzon, Montemayor, Reyes, A. Bautista Angelo, Concepcion and Endencia, JJ., concur.

The defendant Leopoldo Cordero was declared in default and did not appeal.

G.R. No. L-30115 September 28, 1973

FE PEREZ, plaintiff-appellant,
vs.
JOSEFINA GUTIERREZ, defendant third-party plaintiff-appellee, PANFILO ALAJAR, third-party defendantappellee.
Julian C. Gonzales, Jr. for plaintiff-appellant.
Gerardo E. Angeles for defendant-third-party plaintiff-appellee.
Apostadera, Palabrica and Muyco for third-party defendant-appellee.

CASTRO, J.:
This appeal from the decision dated June 9, 1967 of the Court of First Instance of Davao in its civil case
3163 poses objections to the manner the trial court adjudicated the claim for damages filed by the
plaintiff-appellant Fe Perez against the defendant-third-party plaintiff-appellee Josefina Gutierrez.

On June 9, 1967, after trial on the merits, the court a quo rendered its decision, in the main finding
Leopoldo Cordero guilty of reckless imprudence, and finding that Panfilo Alajar owned and operated the
auto calesa in question and, in fact, after the accident, even assumed responsibility for the payment of the
hospital bills due to the Brokenshire Memorial Hospital for treatment of the injuries suffered by Fe Perez.
Based on these findings as well as the proof of the damages suffered by Fe Perez, the court adjudged as
follows:
WHEREFORE, premises considered, judgment is hereby rendered ordering thirdparty defendant Panfilo Alajar to pay plaintiff the amount of P1,552.20 hospital
expenses; P2,000.00, actual damages; P5,000.00 moral damages; P500.00 incidental
expenses; and P2,000.00 attorney's fees.
Ordering likewise Panfilo Alajar to pay defendant third-party plaintiff Josefina
Gutierrez P500.00 moral damages; and P1,000.00 attorney's fees, and to pay the
costs of the proceedings on both cases.
The present appeal questions the correctness of the dispositive portion of the decision a quo which
adjudged Panfilo Alajar, instead of Josefina Gutierrez, as the party liable to her for the payment of the
damages adjudicated in her favor. Specifically, Fe Perez argues that the registered owner of a motor
vehicle should be the one held liable for damages resulting from breach of contract of carriage by a
common carrier.
We find the appeal meritorious and in accord with settled law on the matter.

The complaint (later amended) filed on October 29, 1959 by Fe Perez with the Court of First Instance of
Davao against Josefina Gutierrez, for breach of contract of carriage, alleges that on September 6, 1959
while she, together with nine co-teachers, was a passenger of an AC jeepney registered under the name of
the defendant Gutierrez, the said vehicle, due to the reckless negligence of its driver Leopoldo Cordero,
met with an accident, resulting in injuries to herself which required her hospitalization. In her answer,
Josefina Gutierrez averred that if the claim of Fe Perez is at all justified, responsibility therefor should

In Peralta vs. Mangusang 1 this Court, in approbation of a similar argument, said:

The law (Sec. 20 [g], Public Service Act) really requires the approval of the Public
Service Commission in order that a franchise, or any privileges pertaining thereto,

may be sold or leased without infringing the certificate issued to the grantee. The
reason is obvious. Since a franchise is personal in nature any transfer or lease
thereof should be submitted for approval of the Public Service Commission, so that
the latter may take proper safeguards to protect the interest of the public. It follows
that if the property covered by the franchise is transferred or leased to another
without obtaining the requisite approval, the transfer is not binding on the Public
Service Commission and, in contemplation of law, the grantee continues to be
responsible under the franchise in relation to the Commission and to the public for
the consequences incident to the operation of the vehicle, one of them being the
collision under consideration. (Montoya v. Ignacio, 50 O.G. No. 1. 108; Vda. de
Medina, et al. v. Cresencia, et al., 52 O.G. No. 10, 4604; Erezo v. Jepte, et al., G.R. No.
L-9605, Sept. 30, 1957; Tamayo v. Aquino, 56 O.G. No. 36,5617).
In the earlier case of Erezo vs. Jepte, 2 which is cited in the foregoing opinion, this Court held that the
doctrine making the registered owner of a common carrier answerable to the public for negligence injuries
to its passengers or third persons, even though the vehicle had already been transferred to another, is
based upon the principle
... that in dealing with vehicles registered under the Public Service Law, the public
has the right to assume or presume that the registered owner is the actual owner
thereof, for it would be difficult for the public to enforce the actions that they may
have for injuries caused to them by the vehicles being negligently operated if the
public should be required to prove who the actual owner is. How would the public or
third persons know against whom to enforce their rights in case of subsequent
transfers of the vehicles? We do not imply by this doctrine, however, that the
registered owner may not recover whatever amount he had paid by virtue of his
liability to third persons from the person to whom he had actually sold, assigned or
conveyed the vehicle.
In Tamayo vs. Aquino, 3 also cited in Mangusang, supra, this Court, reiterating what was stated en
passant in Jepte, supra, described the nature of the liability of the actual transferee of a vehicle the
negligent operation of which gives rise to injuries to its passengers:
The question that is posed, therefore, is how should the holder of the certificate of
public convenience Tamayo participate with his transferee operator Rayos, in the
damages recoverable by the heirs of the deceased passenger, if their liability is not
that of joint tortfeasors in accordance with Article 2194 of the Civil Code. The
following considerations must be borne in mind in determining this question. As
Tamayo is the registered owner of the truck, his responsibility to the public or to any
passenger riding in the vehicle or truck must be direct, for the reasons given in our
decision in the case of Erezo vs. Jepte,supra, as quoted above. But as the transferee,
who operated the vehicle when the passenger died, is the one directly responsible
for the accident and death, he should in turn be made responsible to the registered
owner for what the latter may have been adjudged to pay. In operating the truck
without transfer thereof having been approved by the Public Service Commission,
the transferee acted merely as agent of the registered owner and should be
responsible to him (the registered owner), for any damages that he may cause the
latter by his negligence."
Upon the foregoing, it is quite clear that the court below erred in holding Panfilo Alajar, rather than
Josefina Gutierrez, as the one directly liable to Fe Perez for the latter's injuries and the corresponding
damages incurred. This Court notes moreover, that the court below inexplicably failed to hold the driver
(Leopoldo Cordero), whom it found guilty of reckless imprudence, jointly and solidarily liable with Josefina
Gutierrez to Fe Perez in accordance with the provisions of article 2184 in relation to article 2180 of the new
Civil Code. 4

ACCORDINGLY, the judgment below is hereby modified in the sense that Josefina Gutierrez and Leopoldo
Cordero are hereby adjudged directly and jointly and solidarily liable to Fe Perez for the sums adjudicated
in the judgment below in her (Fe Perez') favor, while Panfilo Alajar is, in turn, hereby held answerable to
Josefina Gutierrez for such amount as the latter may pay to Fe Perez in satisfaction of the judgment
appealed from. Costs against both the defendant-third party plaintiff-appellee Josefina Gutierrez and the
third party defendant-appellee Panfilo Alajar.
Makalintal, Actg.. C.J., Zaldivar, Fernando, Teehankee, Barredo, Makasiar, Antonio and Esguerra, JJ.,
concur.
G.R. No. L-48747 September 30, 1982
ANGEL JEREOS, petitioner,
vs.
HON. COURT OF APPEALS, SOLEDAD RODRIGUEZ, FELICIA R. REYES, JOSE RODRIGUEZ, JESUS RODRIGUEZ,
Jr., ROBERTO RODRIGUEZ, FRANCISCO RODRIGUEZ, TERESITA RODRIGUEZ, MANUEL RODRIGUEZ,
ANTONIO RODRIGUEZ, DOMINGO PARDORLA, Jr., and NARCISO JARAVILLA, respondents.

CONCEPCION JR., J.:

Review on certiorari of the decision rendered by the respondent Court of Appeals in case CA-G.R. & No.
60232-R, entitled: "Soledad Rodriguez, et al., plaintiffs-appellants, versus Narciso Jaravilla, et al.,
defendants; Narciso Jaravilla and Domingo Pardorla, Jr., defendants-appellants; Angel Jereos, defendantappellee."
Private respondent, Domingo Pardorla, Jr. is the holder of a certificate of public convenience for the
operation of a jeepney line in Iloilo City. On February 23, 1971, one of his jeepneys, driven by Narciso
Jaravilla, hit Judge Jesus S. Rodriguez and his wife, Soledad, while they were crossing Bonifacio Drive, Iloilo
City, causing injuries to them, which resulted in the death of Judge Rodriguez. Narciso Jaravilla was
prosecuted and, on his plea of guilty, was convicted of the crime of Homicide and Physical Injuries through
Reckless Imprudence and sentenced accordingly. Thereafter, Soledad Rodriguez and her children filed with
the Court of First Instance of Iloilo an action for damages against Narciso Jaravilla, Domingo Pardorla, Jr.,
and Angel Jereos, the actual owner of the jeepney. 1
Angel Jereos denied ownership of the jeepney in question and claimed that the plaintiffs have no cause of
action against him. 2
Domingo Pardorla, Jr., upon the other hand, claimed that he was only the franchise owner and has nothing
to do with the actual operation and supervision of the passenger jeepney in question which is under the
actual control, operation and supervision of Angel Jereos who operates the same under the "kabit
system." 3
After appropriate proceedings, the Court of First Instance of Iloilo rendered judgment on October 24, 1978,
ordering Narciso Jaravilla and Doming Pardorla, Jr. to pay, jointly and severally, damages to the plaintiffs.
Angel Jereos was exonerated for the reason that the Court found no credible evidence to support plaintiffs'
as well as defendant Pardorla's contention that defendant Jereos was the operator of the passenger
jeepney in question at the time of the accident which happened on February 3, 1971, defendant Jereos
sold on November 19, 1970 the said passenger jeepney to Flaviana Tanoy as shown in the notarized deed
of sale (Exh. 1-Jereos) who later transferred ownership thereof to defendant Pardorla, Jr., whose
registration certificate thereof is marked Exh. 3-B-Jereos was issued by the Land Transportation
Commission on November 24, 1970. 4

Both plaintiffs and the defendants Narciso Jaravilla and Domingo Pardorla, Jr., appealed to the Court of
Appeals. The plaintiffs contended that the trial court erred in not finding the defendant Angel Jereos jointly
and severally liable with the their defendants for the damages incurred by them. The defendants Narciso
Jaravilla and Domingo Pardorla, Jr., however, did not file their brief.
On July 10, 1978, the Court of Appeals rendered a decision, modifying the decision of the trial court, and
holding that Angel Jereos is jointly and severally liable with the other defendants for the damages awarded
by the trial court to the plaintiffs, for the reason that the rule stated in the case of Vargas vs. Langcay (6
SCRA 174) that it is the registered owner of a passenger vehicle who is jointly and severally liable with the
driver for damages incurred by passengers or third persons as a consequence of injuries or death sustained
in the operation of said motor vehicle, which is invoked by Angel Jereos, cannot be applied in this case
since the sale of the jeepney by Angel Jereos to his own sister-in-law, Flaviana Panoy, and its registration in
the name of Domingo Pardorla, Jr., were simulated, fictitious transactions, parts and parcel of a strategem,
to place Angel Jereos beyond the reach of his creditors past or future. 5
Angel Jereos appeals from this decision. He contends that the respondent Court, of Appeals erred in
holding that the sale of the jeep to Flaviana Tanoy was simulated and fictitious and hence, it erred in
finding him the actual or real owner of the illfated jeepney.
The respondents claim, however, that the issue of whether or not the sale of the vehicle in question to
Flaviana Tanoy and 'hereafter, to Domingo Pardorla, Jr. is simulated or fictitious, is one of fact and may not
be reviewed by this Court on appeal.
But, the petitioner counters that the findings of fact of the respondent appellate court is reviewable
because the said findings are contrary to those of the trial court which were based upon an evaluation of
the credibility of witnesses and should not have been disturbed by the appellate court, following the rule
that trial courts are in a better position to judge and evaluate the evidence presented in the course of the
trial.
The established rule in this jurisdiction is that findings of fact of the Court of Appeals, when supported by
substantial evidence, is not reviewable on appeal by certiorari. Said findings of the appellate court are final
and cannot be disturbed by the Supreme Court. However, where the findings of the Court of Appeals are
contrary to those of the trial court, a minute scrutiny by the Supreme Court is in order and resort to duly
proven evidence becomes necessary. 6
In the instant case, the Court of Appeals found that the trial court, in exempting Angel Jereos from liability,
"relied solely on the deed of sale (Exh. 1-Jereos)- ignoring altogether the testimony of Flora Jaravilla (wife
of the driver) and of appellee Domingo Pardorla, Jr. " Hence, it had reason to exercise its appellate
jurisdiction over the lower courts and modify the findings of fact of the trial court.
The respondent Domingo Pardorla, Jr., in whose line the jeepney in question was registered under the
"kabit system" declared that:

the name of Flaviana Tanoy, my sister-in-law but the jeep is still mine that is why I
am the one who is paying you.
His testimony is corroborated by Adriano Saladero, an employee of Pardorla, Jr., to whom Angel Jereos
pays the monthly dues for the registration of his jeepneys under the certificate of public convenience
issued to Pardorla, Jr., and by Flora Jaravilla, the wife of the driver of the jeepney, who categorically stated
that the jeepney driven by her husband, Narciso Jaravilla, was owned by Angel Jereos to whom they pay a
daily "boundary" of P16.80; and that they park the said jeepney near the house of Angel Jereos after
returning it at night.
Finally, the petitioner, citing the case of Vargas vs. Langcay, 7 contends that it is the registered owner of
the vehicle, rather than the actual owner, who must be jointly and severally liable with the driver of the
passenger vehicle for damages incurred by third persons as a consequence of injuries or death sustained in
the operation of said vehicle.
The contention is devoid of merit. While the Court therein ruled that the registered owner or operator of a
passenger vehicle is jointly and severally liable with the driver of the said vehicle for damages incurred by
passengers or third persons as a consequence of injuries or death sustained in the operation of the said
vehicle, the Court did so to correct the erroneous findings of the Court of Appeals that the liability of the
registered owner or operator of a passenger vehicle is merely subsidiary, as contemplated in Art. 103 of
the Revised Penal Code. In no case did the Court exempt the actual owner of the passenger vehicle from
liability. On the contrary, it adhered to the rule followed in the cases of Erezo vs. Jepte, 8 Tamayo vs.
Aquino, 9 and De Peralta vs. Mangusang, 10 among others, that the registered owner or operator has the
right to be indemnified by the real or actual owner of the amount that he may be required to pay as
damage for the injury caused.
The right to be indemnified being recognized, recovery by the registered owner or operator may be made
in any form-either by a cross-claim, third-party complaint, or an independent action. The result is the
same.
WHEREFORE, the petition should be, as it is hereby, DENIED. With costs against the petitioner.
SO ORDERED.
G.R. No. L-50127-28 March 30, 1979
VICTOR JUANIZA, Heirs of Josefa P. Leus etc., et al., plaintiffs and appellees,
vs.
EUGENIO JOSE, THE ECONOMIC INSURANCE COMPANY, INC., and ROSALIA ARROYO, defendants and
appellants.
Victoriano O. Javier and Ricardo A. Fabros, Jr. for appellees.

... this jeep was formerly attached to Imelda Mirasol then one of the units of Imelda
Mirasol met an accident which cost many lives. Now, Angel Jereos was afraid that
later on his jeep might be attached since there is a pending case against Mirasol.
Now according to Angel Jereos he went to see Imelda Mirasol and asked her to
execute a deed of sale in favor of Angel Jeroes. Now, when Angel Jereos came to me
and asked if there is still vacancy in my line I told him there is. He told me that his
jeep will be transferred under my line. I told him yes, prepare the papers. Now, after
he has prepared the papers and he came back to me he told me he will just put it
under the name of Flaviana Tanoy, his sister-in-law but I asked him that cannot be,
what is your reason. According to him so that later on it can be hardly traced when
something wrong with the case of Imelda Mirasol comes, then I will just put it under

Luis Viscocho and Francisco E. Rodrigo, Jr. for appellants.

DE CASTRO, J.:
This case was certified by the Court of Appeals to this Court on the ground that the questions raised in the
appeal of the decision of the Court of First Instance of Laguna are purely questions of law.

Eugenio Jose was the registered owner and operator of the passenger jeepney involved in an accident of
collision with a freight train of the Philippine National Railways that took place on November 23, 1969
which resulted in the death to seven (7) and physical injuries to five (5) of its passengers. At the time of the
accident, Eugenio Jose was legally married to Socorro Ramos but had been cohabiting with defendantappellant, Rosalia Arroyo, for sixteen (16) years in a relationship akin to that of husband and wife.
In the resulting cages for damages filed in the Court of First Instance of Laguna, decision was rendered, the
dispositive part of which reads as follows:
(4) In Civil Case No. SP-867 ordering defendants Eugenio Jose and Rosalia Arroyo
jointly and severally to pay plaintiff Victor Juaniza the sum of P1,600.00 plus legal
interest from date of complaint until fully paid and costs of suit;
(5) In Civil Case No. SP-872, ordering defendants Eugenio Jose and Rosalia Arroyo
jointly and severally to pay the respective heirs of the deceased Josefa P. Leus,
Fausto Retrita, Nestor del Rosario Aonuevo and Arceli de la Cueva in the sum of
P12,000.00 for the life of each of said deceased, with legal interest from date of
complaint, and costs of suit. (pp. 47-48, Rello).
Motion for reconsideration was filed by Rosalia Arroyo praying that the decision be reconsidered insofar as
it condemns her to pay damages jointly and severally with her co-defendant, but was denied. The lower
court based her liability on the provision of Article 144 of the Civil Code which reads:
When a man and woman driving together as husband and wife, but they are not
married, or their marriage is void from the beginning, the property acquired by
either or both of them through their work or industry or their wages and salaries
shall be governed by the rules on co-ownership.
Rosalia Arroyo then filed her appeal with the Court of Appeals which, as previously stated, certified the
same to Us, the question raised being purely legal as may be seen from the lone assigned error as follows:
The lower court erred in holding defendant-appellant Rosalia Arroyo liable 'for
damages resulting from the death and physical injuries suffered by the passengers'
of the jeepney registered in the name of Eugenio Jose, on the erroneous theory that
Eugenio Jose and Rosalia Arroyo, having lived together as husband and wife, without
the benefit of marriage, are co- owners of said jeepney. (p. 2, Appellant's Brief).
The issues thus to be resolved are as follows: (1) whether or not Article 144 of the Civil Code is applicable
in a case where one of the parties in a common-law relationship is incapacitated to marry, and (2) whether
or not Rosalia who is not a registered owner of the jeepney can be held jointly and severally liable for
damages with the registered owner of the same.

responsible for damages that may arise from consequences incident to its operation, or maybe caused to
any of the passengers therein. (De Peralta vs. Mangusang, L-18110, July 31, 1964, 11 SCRA 598; Tamayo vs.
Aquino, L-12634 and L-12720, May 29, 1959; Roque vs. Malibay Transit, L-8561, November 18,1955;
Montoya vs. Ignacio, L-5868, December 29, 1953).
WHEREFORE, in view of the foregoing, Rosalia Arroyo is hereby declared free from any liability for damages
and the appealed decision is hereby modified accordingly. No costs.

G.R. No. L-25962 September 30, 1975

MARTIRES ERENO CO., petitioner,
vs.
PUBLIC SERVICE COMMISSION and VELASCO and CO., respondents.
Andres M. Hagad for petitioner.
Vicente Ampil for private respondent.

MARTIN, J.:
This is a petition to review the decision of the defunct Public Service Commission in its Case 62-7137,
denying petitioner's application for certificate of public convenience to operate an ice plant.
Petitioner company is a general co-partnership between Pedro M. Martires and Jose Ereno, organized
under the laws of the Philippines, and registered with the Securities and Exchange Commission. On
February 15, 1963, it applied for a certificate of public convenience to install, operate and maintain a 10ton ice plant in the municipality of Casiguran, Sorsogon and to sell the ice produced in the said municipality
as well as in the neighboring municipalities of Juban, Magallanes and Irosin, Province of Sorsogon. The
application was opposed by respondent Velasco & Co., Rafael Aquino and Bulan Electric and Ice Plant, but
only respondent Velasco & Co. prosecuted its opposition, claiming that public convenience and necessity
do not demand the operation of an ice plant in the municipality of Casiguran, since the need of ice in said
municipality as well as in the aforementioned municipalities is duly and efficiently served by it, and that
petitioner company is not legally and financially qualified to install, operate and maintain the proposed ice
plant.
After due hearing, the Public Service Commission 1 rendered a decision on September 3, 1965, disposing:

It has been consistently ruled by this Court that the co-ownership contemplated in Article 144 of the Civil
Code requires that the man and the woman living together must not in any way be incapacitated to
contract marriage. (Camporedondo vs. Aznar, L-11483, February 4, 1958, 102 Phil. 1055, 1068; Osmea vs.
Rodriguez, 54 OG 5526; Malajacan vs. Rubi, 42 OG 5576). Since Eugenio Jose is legally married to Socorro
Ramos, there is an impediment for him to contract marriage with Rosalia Arroyo. Under the aforecited
provision of the Civil Code, Arroyo cannot be a co-owner of the jeepney. The jeepney belongs to the
conjugal partnership of Jose and his legal wife. There is therefore no basis for the liability of Arroyo for
damages arising from the death of, and physical injuries suffered by, the passengers of the jeepney which
figured in the collision.

The Commission has gone over the evidence of record and we believe that it
[petitioner-applicant] has not proven to the satisfaction of the Commission that
there is need for establishing an ice plant in Casiguran, Sorsogon. On the contrary,
oppositor [respondent company] has proven that it has not been remiss in its
obligation to serve the municipalities composing its territory, for it has filed and was
granted authority to increase its daily productive capacity if and when it feels that
there is need for such additional capacity. Besides, Ereno failed to prove his Filipino
citizenship as has been discussed above.

Rosalia Arroyo, who is not the registered owner of the jeepney can neither be liable for damages caused by
its operation. It is settled in our jurisprudence that only the registered owner of a public service vehicle is

In view of the foregoing circumstances, we are constrained to dismiss, as we hereby

order that the application filed in this case, be as the same is hereby dismissed."
(Stress supplied; subsequent italics with like intention).

Forthwith, petitioner company elevated the matter to Us thru the present petition.
As gathered, the imperative issues in this case are, first, whether necessity exists for the establishment of
an ice plant in the municipality of Casiguran to serve the said municipality as well as the municipalities of
Irosin, Juban and Magallanes, and second, whether petitioner company is legally qualified to undertake the
maintenance and operation of the ice plant.
Although the general rule is that this Court will not disturb the decision of the Public Service Commission if
reasonably supported by evidence, 2 We feel that the present petition for review should be granted and the
decision of the Public Service Commission reversed. 3
In the granting of certificates of public convenience, the principle that overrides all others is that public
interest, necessity and convenience should be the first and paramount consideration. 4 The number of
persons to be benefited by the proposed service is immaterial. 5
In the case before Us, it was shown that in the municipalities of Casiguran, Juban, Irosin and Magallanes,
there is no ice plant. The inhabitants of these municipalities procure their ice requirements from the
Velasco Ice Plant of respondent company in Sorsogon or from the Bulan Ice Plant in Bulan, through the
conductors of Alatco or Ammen Transportation Company by sending money and empty sacks, 6 because
the respondent company has no delivery truck. 7 Casiguran is around 21 kilometers from Sorsogon and 45
kilometers from Bulan. 8 It has a population of 15,043 inhabitants and 67 registered business
establishments. Its residents are engaged in fishing and they preserve their catch with ice. 9 On December
17, 1962, the Municipal Council of Casiguran favorably endorsed the application of petitioner company to
operate an ice plant in the municipality. 10 Juban is a neighboring town of Casiguran, about 4 kilometers
away, with a population as big as Casiguran. Likewise, its residents are engaged in fishing and they too
preserve their catch with ice. 11 On February 23, 1964, the Municipal Council of Juban adopted Resolution
No. 20, endorsing the application of petitioner. 12 Magallanes is 18 kilometers away from Casiguran, 47
kilometers from Sorsogon, and 40-50 kilometers from Bulan. 13 It has a population of 18,144 inhabitants
and 134 business establishments. It is a fishing center where the National Fishing Development is
proposing to establish a canning factory. Its fishermen, like those of Casiguran and Juban, send their catch
to Manila and Albay and preserve it with ice they get from the Sorsogon Ice Plant. 14 Irosin is 24 kilometers
from Casiguran, 21 kilometers from Bulan, and 15 kilometers from Sorsogon. It has a population of 53,106
inhabitants and 180 business establishments, such as restaurants, carinderias, ice cream manufacturers,
and fish and meat vendors. 15
A fortiori, it cannot be lightly said that necessity does not obtain to compel the establishment of an ice
plant in Casiguran. In fact, in view of the universal and widespread demand for ice, 16 "no evidence is
necessary to show that an ice plant in the locality is much more advantageous to the general public as to
facility in acquiring said article of commodity, not to say of domestic necessity, without loss in weight, than
a plant some kilometers from said locality, which distributes to its customers by means of delivery trucks at
certain hours of the day. Even in the case where an outside manufacturer has an ice depository in the
locality, this court has found and held that it is always more advantageous to have an ice plant in the same
locality." 17 The mere fact that the ice plants at Sorsogon and Bulan supply and sell ice in these
municipalities is no impediment to the subsequent authorization of an applicant in these localities, taking
into consideration the distance between Sorsogon and Bulan and Casiguran, Juban, Magallanes and Irosin.
This is not a case of land transportation company with a time-table, whose service may be increased or
decreased according to the needs of the public, but that of a company supplying ice manufactured by it,
whose efficiency to satisfy the needs of the buying public depends upon its promptness and economy in so
doing. 18 The rule should apply with more force where the applicant proposes not only to sell and distribute
ice in the localities covered by his application but to establish an ice plant in one of them. 19 That an old
operator can fill up the deficiency at any time, and for that reason it is not advisable to grant a new
applicant a permit to operate, is not worthy of any consideration as he should have applied to the
Commission for that purpose before the new applicant presented his application. 20 Respondent company's
alleged continuous supply of ice to an ice seller at Magallanes and two ice dealers at Casiguran to secure
ice requirements thereof is no valid legal barrier; this notwithstanding, still the installation of an ice plant in
these municipalities is more advantageous.

The "prior operator" and "protection of investment" rules cannot prevail over the convenience of the
public. At present, there is no ice plant in any of the municipalities of Casiguran, Juban, Magallanes and
Irosin, where a great demand for ice exists, as can be gleaned from the successive increase in the
productive capacity of respondent company's ice plant from 2 tons in 1948 to 7 tons in 1950 and to 13.5
tons in 1952. 21 Said "protection of investment" rule is not absolute, for nobody has exclusive right to
secure a franchise or a certificate of public convenience. 22 It cannot be applied unqualifiedly for that would
encourage violation or disregard of the terms and conditions of the certificate and the Commission's
directives and regulations, and would close the door to other applicants who could establish, operate and
provide adequate, efficient and satisfactory service for the benefit and convenience of the inhabitants. 23
Nor could an unfair or ruinous competition result from the authorization of the ice plant applied for. In
order that the opposition based on ruinous competition may prosper, it must be shown that the oppositor
would be deprived of fair profits on the capital invested in its business. The mere possibility of reduction in
the earnings of a business is not sufficient to prove ruinous competition. It must be shown that the
business would not have sufficient gains to pay a fair rate of interest on its capital. 24 This, respondent
company has not convincingly shown. Its apparent apprehension that it may lose the P6,000- net earnings
realized by the company in 1963 which, according to its formulation, is the fair return of the P59,700capital investment, cannot be accurately relied upon, in the absence of proof of its accuracy, for the
purpose of proving ruinous competition. Besides, respondent company has been in operation
since 1948 and there is no showing that the said P6,000-profit in 1963 was due to the ice it sells in the
municipalities of Casiguran, Juban, Magallanes and Irosin. As its present facilities are not enough to supply
ice to the inhabitants of these four municipalities, it may not raise the alarm that there is bound to be a
"ruinous" competition upon failure to present concrete proof that the establishment of another ice plant
would reduce its business to the extent that its profit would no longer amount to a fair return of its
investment. 25 On the contrary the resulting competition will undoubtedly benefit the people of these
municipalities through improvement in the service and reduction in retail price. 26 And this should be
allowed, because it tends to promote satisfaction and efficiency, 27rather than a monopoly which would be
a burden to the community. 28
Next, respondent company impugns, as it did before the respondent Commission, the financial capacity of
petitioner company to maintain and operate the ice plant applied for. However, We note that the
respondent Commission found no insufficiency or deficiency, in the financial capacity of petitioner
company. In breadth, respondent Commission denied the application because petitioner company "has not
proven to the satisfaction of the Commission that there is need for establishing an ice plant in Casiguran,
Sorsogon" and that "Ereno failed to prove his Filipino citizenship." 29 Upon the record, this finding is not
patently justified. 30 Moreover, with the nature of petitioner's partnership as general where the liabilities
of the partners are unlimited and extend to their private properties (Article 1816, Civil Code), of which the
partners Martires and Ereno are possessed (consisting of real properties), it is not likely that it would
encounter difficulties in starting with its P40,000-capital which the partners are even willing to
increase. 31 This is different from an individual applicant whose resources are but limited to his personal
assets.
Finally, respondent company contests the citizenship of Jose Ereno, a son of a Chinese father, for want of
proof of his election of the Philippine citizenship and the nonregistration of his election with the nearest
civil registry. Before the respondent Commission, Jose Ereno declared under oath that he is a Filipino
citizen, a registered voter, who has been voting since before the second world war, and that he was
elected as barrio councilor in Casiguran. 32 In 1938, upon reaching the age of majority, he took his oath of
allegiance as a Filipino citizen before the Justice of the Peace of Casiguran, with whom he subsequently
filed his election of Filipino citizenship. However he lost his copy during the war. These acts are sufficient to
show Jose Ereno's preference for Philippine citizenship. Indeed, it would be unfair to expect the
presentation of a formal deed of election considering that prior to the enactment of Commonwealth Act
625 on June 7, 1941, no particular proceeding was required to exercise the option to elect Philippine
citizenship, granted to the proper party by Section 1, subsection 4, Article IV of the 1935
Constitution. 33 What is more when no contrary proof was presented by respondent company, which, in
the first place, should not rely on the weakness of Ereno's proofs, if weakness there is, but on the strength
of its own evidence. The adverse finding of the respondent Commission on Ereno's citizenship (which was

principally based on Ereno's failure to present his document of election), while it has the power to inquire
into, 34 is not conclusive. 35
ACCORDINGLY, the decision under review is hereby reversed and set aside and the respondent
Commission, or whichever office or agency has taken over its functions, is hereby directed to grant to
petitioner company the certificate of public convenience, as applied for. No costs.
SO ORDERED.

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 Pasay City to Tacloban City. Such being the case
... there is no need ... to obtain a separate certificate for public convenience to operate a ferry service
between Allen and Matnog to cater exclusively to its passenger buses and freight trucks. 4
Without awaiting action on its request PANTRANCO started to operate said ferry service. Acting Chairman
Jose C. Campos, Jr. of BOT ordered PANTRANCO not to operate its vessel until the application for hearing
on Oct. 1, 1981 at 10:00 A.M. 5 In another order BOT enjoined PANTRANCO from operating the MV "Black
Double" otherwise it will be cited to show cause why its CPC should not be suspended or the pending
application denied. 6

G.R. No. L-61461 August 21, 1987

EPITACIO SAN PABLO, (Substituted by Heirs of E. San Pablo), petitioners,
vs.
PANTRANCO SOUTH EXPRESS, INC., respondent.
CARDINAL SHIPPING CORPORATION, petitioner,
vs.
HONORABLE BOARD OF TRANSPORTATION AND PANTRANCO SOUTH EXPRESS, INC., respondents.

GANCAYCO, J.:
The question that is posed in these petitions for review is whether the sea can be considered as a
continuation of the highway. The corollary issue is whether a land transportation company can be
authorized to operate a ferry service or coastwise or interisland shipping service along its authorized route
as an incident to its franchise without the need of filing a separate application for the same.
The Pantranco South Express, Inc., hereinafter referred to as PANTRANCO is a domestic corporation
engaged in the land transportation business with PUB service for passengers and freight and various
certificates for public conveniences CPC to operate passenger buses from Metro Manila to Bicol Region
and Eastern Samar. On March 27,1980 PANTRANCO through its counsel wrote to Maritime Industry
Authority (MARINA) requesting authority to lease/purchase a vessel named M/V "Black Double" "to be
used for its project to operate a ferryboat service from Matnog, Sorsogon and Allen, Samar that will
provide service to company buses and freight trucks that have to cross San Bernardo Strait. 1 In a reply of
April 29,1981 PANTRANCO was informed by MARINA that it cannot give due course to the request on the
basis of the following observations:
1. The Matnog-Allen run is adequately serviced by Cardinal Shipping Corp. and
Epitacio San Pablo; MARINA policies on interisland shipping restrict the entry of new
operators to Liner trade routes where these are adequately serviced by
existing/authorized operators.
2. Market conditions in the proposed route cannot support the entry of additional
tonnage; vessel acquisitions intended for operations therein are necessarily limited
to those intended for replacement purposes only. 2
PANTRANCO nevertheless acquired the vessel MV "Black Double" on May 27, 1981 for P3 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 passenger buses and freight trucks between Allen and Matnog in connection with
its trips to Tacloban City invoking the case of Javellana vs. Public Service Commission. 3 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

Epitacio San Pablo (now represented by his heirs) and Cardinal Shipping Corporation who are franchise
holders of the ferry service in this area interposed their opposition. They claim they adequately service the
PANTRANCO by ferrying its buses, trucks and 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 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. On October 20, 1981 then Minister of Justice Ricardo Puno rendered an
opinion to the effect that there is no need for bus operators to secure a separate CPC to operate a
ferryboat service holding as follows:
Further, a common carrier which has been granted a certificate of public
convenience is expected to provide efficient, convenient and adequate service to the
riding public. (Hocking Valley Railroad Co. vs. Public Utilities Commission, 1 10 NE
521; Louiseville and NR Co. vs. Railroad Commissioners, 58 SO 543) It is the right of
the public which has accepted the service of a public utility operator to demand that
the service should be conducted with reasonable efficiency. (Almario, supra, citing
73 C.J.S. 990-991) Thus, when the bus company in the case at bar proposes to add a
ferry service to its Pasay Tacloban route, it merely does so in the discharge of its duty
under its current certificate of public convenience to provide adequate and
convenient service to its riders. Requiring said bus company to obtain another
certificate to operate such ferry service when it merely forms a part and
constitutes an improvement of its existing transportation service would simply be
duplicitous and superfluous. 7
Thus on October 23, 1981 the BOT rendered its decision holding that the ferry boat service is part of its
CPC to operate from Pasay to Samar/Leyte by amending PANTRANCO's CPC so as to reflect the same in this
wise:
Let the original Certificate of public convenience granted to Pantranco South Express
Co., Inc. be amended to embody the grant of authority to operate a private ferry
boat service as one of the conditions for the grant of the certificate subject to the
condition that the ferryboat shall be for the exclusive use of Pantranco buses, its
passengers and freight trucks, and should it offer itself to the public for hire other
than its own passengers, it must apply for a separate certificate of public
convenience as a public ferry boat service, separate and distinct from its land
transport systems. 8
Cardinal Shipping Corporation and the heirs of San Pablo filed separate motions for reconsideration of said
decision and San Pablo filed a supplemental motion for reconsideration that were denied by the BOT on
July 21, 1981. 9
Hence, San Pablo filed the herein petition for review on certiorari with prayer for preliminary
injunction 10 seeking the revocation of said decision, and pending consideration of the petition, the
issuance of a restraining order or preliminary injunction against the operation by PANTRANCO of said ferry
service. San Pablo raised the following issues:

A. DID THE RESPONDENT BOARD VIOLATE PETITIONERS' RIGHT TO DUE PROCESS,

THE RULES OF PROCEDURE AND SECTION 16 (m) OF THE PUBLIC SERVICE ACT, WHEN
IT ISSUED IN A COMPLAINT CASE THE DECISION DATED OCTOBER 23, 1981
WHICH MOTU PROPIOAMENDED RESPONDENT PANTRANCO'S PUB CERTIFICATE TO
INCLUDE AND AUTHORIZE OPERATION OF A SHIPPING SERVICE ON THE ROUTE
MATNOG, SORSOGON ALLEN, SAMAR EVEN AS THERE MUST BE A FORMAL
APPLICATION FOR AMENDMENT AND SEPARATE PROCEEDINGS HELD THEREFORE,
ASSUMING AMENDMENT IS PROPER?
B. DID THE RESPONDENT BOARD ERR IN FINDING IN ITS DECISION OF OCTOBER 23,
1981, THAT THE SEA FROM THE PORT OF MATNOG, SORSOGON, LUZON ISLAND TO
THE PORT OF ALLEN, SAMAR ISLAND, OR FROM LUZON ISLAND TO SAMAR ISLAND IS
A MERE FERRY OR CONTINUATION OF THE HIGHWAY IT BEING 23 KILOMETERS OF
ROUGH AND OPEN SEA AND ABOUT 2 HOURS TRAVEL TIME REQUIRING BIG INTERISLAND VESSELS, NOT MERE BARGES, RAFTS OR SMALL BOATS UTILIZED IN FERRY
SERVICE?
C. DID THE RESPONDENT BOARD ERR WHEN IT RULED THAT RESPONDENT
PANTRANCO'S VESSEL M/V BLACK DOUBLE IS MERELY A PRIVATE CARRIER, NOT A
PUBLIC FERRY OPERATING FOR PUBLIC SERVICE (ASSUMING THAT THE MATNOGALLEN SEA ROUTE IS A MERE FERRY OR CONTINUATION OF HIGHWAY) EVEN IF SAID
VESSEL IS FOR HIRE AND COLLECTS SEPARATE FARES AND CATERS TO THE PUBLIC
EVEN FOR A LIMITED CLIENTELE?
D. DID THE RESPONDENT BOARD ERR WHEN IT GRANTED RESPONDENT PANTRANCO
AUTHORITY TO OPERATE A SHIPPING SERVICE IN THE FACE OF THE LATTER'S
CONTENTION AS AN AFTER THOUGH THAT IT NEED NOT APPLY THEREFOR, AND IN
SPITE OF ITS FAILURE TO SECURE THE PRE-REQUISITE MARITIME INDUSTRY
AUTHORITY (MARINA) APPROVAL TO ACQUIRE A VESSEL UNDER ITS MEMORANDUM
CIRCULAR NO. 8-A AS WELL AS ITS PRIOR FAVORABLE ENDORSEMENT BEFORE ANY
SHIPPING AUTHORIZATION MAY BE GRANTED UNDER BOT MARINA AGREEMENT
OF AUGUST 10, 1976 AND FEBRUARY 26, 1982?
E. DID RESPONDENT BOARD ERR WHEN IT GRANTED RESPONDENT PANTRANCO
AUTHORITY TO OPERATE A SHIPPING SERVICE ON A ROUTE ADEQUATELY SERVICED
IF NOT ALREADY "SATURATED" WITH THE SERVICES OF TWO 12) EXISTING
OPERATORS PETITIONERS AND CARDINAL SHIPPING CORP.) IN VIOLATION OF THE
PRINCIPLE OF PRIOR OPERATOR RULE'? 11
By the same token Cardinal Shipping Corporation filed a separate petition raising similar issues, namely:
a. the decision did not conform to the procedures laid down by law for an
amendment of the original certificate of public convenience, and the authority to
operate a private ferry boat service to PANTRANCO was issued without ascertaining
the established essential requisites for such grant, hence, violative of due process
requirements;
b. the grant to PANTRANCO of authority to operate a ferryboat service as a private
carrier on said route contravenes existing government policies relative to the
rationalization of operations of all water transport utilities;
c. it contravenes the memorandum of agreement between MARINA and the Board of
Transportation; d. the grant of authority to operate a ferry service as a private carrier
is not feasible; it lessens PANTRANCO's liability to passengers and cargo to a degree
less than extraordinary diligence?

e. PANTRANCO is not a private carrier when it operates its ferry service;

f. it runs counter to the "old operator" doctrine; and
g. the operation by PANTRANCO of the ferry service cnstitutes undue competition.
The foregoing considerations constitutes the substantial errors committed by the
respondent Board which would more than amply justify review of the questioned
decision by this Honorable Court.12
Both cases were consolidated and are now admitted for decision.
The resolution of all said issues raised revolves on the validity of the questioned BOT decision.
The BOT resolved the issue of whether a ferry service is an extension of the highway and thus is a part of
the authority originally granted PANTRANCO in the following manner:
A ferry service, in law, is treated as a continuation of the highway from one side of
the water over which passes to the other side for transportation of passengers or of
travellers with their teams vehicles and such other property as, they may carry or
have with them. (U.S. vs. Pudget Sound Nev. Co. DC Washington, 24 F. Supp. 431). It
maybe said to be a necessary service of a specially constructed boat to carry
passengers and property across rivers or bodies of water from a place in one shore
to a point conveniently opposite on the other shore and continuation of the highway
making a connection with the thoroughfare at each terminal (U.S. vs. Canadian Pac.
N.Y. Co. 4 P. Supp, 85). It comprises not merely the privilege of transportation but
also the use for that purpose of the respective landings with outlets therefrom. (Nole
vs. Record, 74 OKL. 77; 176 Pac. 756). A ferry service maybe a public ferry or a
private ferry. A public ferry service is one which all the public have the right to resort
to and for which a regular fare is established and the ferryman is a common carrier
be inbound to take an who apply and bound to keep his ferry in operation and good
repair. (Hudspeth v. Hall, 11 Oa. 510; 36 SB 770). A ferry (private) service is mainly
for the use of the owner and though he may take pay for ferriage, he does not follow
it as a business. His ferry is not open to the public at its demand and he may or may
not keep it in operation (Hudspeth vs. Hall, supra, St. Paul Fire and Marine Ins. 696),
Harrison, 140 Ark 158; 215 S.W. 698).
The ferry boat service of Pantranco is a continuation of the highway traversed by its
buses from Pasay City to Samar, Leyte passing through Matnog (Sorsogon) through
San Bernardino Strait to Alien (Samar). It is a private carrier because it will be used
exclusively to transport its own buses, passengers and freight trucks traversing the
said route. It will cater exclusively to the needs of its own clientele (passengers on
board- Pantranco buses) and will not offer itself indiscriminately for hire or for
compensation to the general public. Legally therefore, Pantranco has the right to
operate the ferry boat M/V BLACK DOUBLE, along the route from Matnog (Sorsogon)
to Allen (Samar) and vice versa for the exclusive use of its own buses, passengers and
freight trucks without the need of applying for a separate certificate of public
convenience or provisional authority. Since its operation is an integral part of its land
transport system, its original certificate of public convenience should be amended to
include the operation of such ferryboat for its own exclusive use
In Javellana 14 this Court recited the following definition of ferry :

The term "ferry" implied the continuation by means of boats, barges, or rafts, of a
highway or the connection of highways located on the opposite banks of a stream or
other body of water. The term necessarily implies transportation for a short distance,
almost invariably between two points, which is unrelated to other transportation
.(Emphasis supplied)
The term "ferry" is often employed to denote the right or franchise granted by the
state or its authorized mandatories to continue by means of boats, an interrupted
land highway over the interrupting waters and to charge toll for the use thereof by
the public. In this sense it has also been defined as a privilege, a liberty, to take
tolls for transporting passengers and goods across a lake or stream or some other
body of water, with no essential difference from a bridge franchise except as to the
mode of transportation, 22 Am. Jur. 553.
A "ferry" has been defined by many courts as "a public highway or thoroughfare
across a stream of water or river by boat instead of a bridge." (St. Clare Country v.
Interstate Car and Sand Transfer Co., 192 U.S. 454, 48 L. ed. 518; etc.)
The term ferry is often employed to denote the right or franchise granted by the
state or its authorized mandatories to continue by means of boats, an interrupted
land highway over the interrupting waters and to charge toll for the use thereof by
the public. (Vallejo Ferry Co. vs. Solano Aquatic Club, 165 Cal. 255, 131 P. 864, Ann.
Cas. 1914C 1179; etc.) (Emphasis supplied)
"Ferry" is service necessity for common good to reach point across a stream lagoon,
lake, or bay. (U.S. vs. Canadian Pac. Ry. Co. DC Was., 4 Supp. 851,853)'
"Ferry" properly means a place of transit across a river or arm of the sea, but in law it
is treated as a franchise, and defined as the exclusive right to carry passengers across
a river, or arm of the sea, from one vill to another, or to connect a continuous line of
road leading from township or vill to another. (Canadian Pac. Ry. Co. vs. C.C. A.
Wash. 73 F. 2d. 831, 832)'
Includes various waters: (1) But an arm of the sea may include various subordinate
descriptions of waters, where the tide ebbs and flows. It may be a river, harbor,
creek, basin, or bay; and it is sometimes used to designate very extensive reaches of
waters within the projecting capes or points or a country. (See Rex vs. Bruce, Deach
C.C. 1093). (2) In an early case the court said: "The distinction between rivers
navigable and not navigable, that is, where the sea does, or does not, ebb and flow,
is very ancient. Rex vs. Smith, 2 Dougl. 441, 99 Reprint 283. The former are called
arms of the sea, while the latter pass under the denomination of private or inland
rivers" Adams vs. Pease 2 Conn. 481, 484. (Emphasis supplied)
In the cases of Cababa vs. Public Service Commission, 16 Cababa vs. Remigio & Carillo and Municipality of
Gattaran vs. Elizaga 17 this Court considered as ferry service such water service that crosses rivers.
However, in Javellana We made clear distinction between a ferry service and coastwise or interisland
service by holding that:
We are not unmindful of the reasons adduced by the Commission in considering the
motorboat service between Calapan and Batangas as ferry; but from our
consideration of the law as it stands, particularly Commonwealth Act No. 146, known
as the Public Service Act and the provisions of the Revised Administrative Code
regarding municipal ferries and those regarding the jurisdiction of the Bureau of
Customs over documentation, registration, licensing, inspection, etc. of steamboats,

motorboats or motor vessels, and the definition of ferry as above quoted we have
the impression and we are inclined to believe that the Legislature intended ferry to
mean the service either by barges or 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 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 But where the line or service involves crossing the open sea like
the body of water between the province of Batangas and the island of Mindoro which
the oppositors describe thus "the intervening waters between Calapan and Batangas
are wide and dangerous with big waves where small boat barge, or raft are not
adapted to the service," then it is more reasonable to regard said line or service as
more properly belonging to interisland or coastwise trade. According to the finding of
the Commission itself the distance between Calapan is about 24 nautical miles or
about 44.5 kilometers. We do not believe that this is the short distance
contemplated by the Legislature in referring to ferries whether within the
jurisdiction of a single municipality or ferries between two municipalities or
provinces. If we are to grant that water transportation between Calapan and
Batangas is ferry service, then there would be no reason for not considering the
same service between the different islands of the Philippines, such as Boac
Marinduque and Batangas; Roxas City of Capiz and Romblon; Cebu City, Cebu and
Ormoc, Leyte; Guian, Samar and Surigao, Surigao; and Dumaguete, Negros Oriental
and Oroquieta or Cagayan de Oro.
The Commission makes the distinction between ferry service and motorship in the
coastwise trade, thus:
A ferry service is distinguished from a motorship or motorboat service engaged in
the coastwise trade in that the latter is intended for the transportation of passengers
and/or freight for hire or compensation between ports or places in the Philippines
without definite routes or lines of service.
We cannot agree. The definiteness of the route of a boat is not the deciding factor. A
boat of say the William Lines, Inc. goes from Manila to Davao City via Cebu,
Tagbilaran, Dumaguete, Zamboanga, every week. It has a definite route, and yet it
may not for that reason be regarded as engaged in ferry service. Again, a vessel of
the Compania Maritima makes the trip from Manila to Tacloban and back, twice a
week. Certainly, it has a definite route. But that service is not ferry service, but
rather interisland or coastwise trade.
We believe that it will be more in consonance with the spirit of the law to consider
steamboat or motorboat service between the different islands, involving more or less
great distance and over more or less turbulent and dangerous waters of the open
sea, to be coastwise or inter-island service. Anyway, whether said service between
the different islands is regarded as ferry service or coastwise trade service, as long as
the water craft used are steamboats, motorboats or motor vessels, the result will be
the same as far as the Commission is concerned. " 18 (Emphasis supplied)
This Court takes judicial notice of the fact, and as shown by an examination of the map of the Philippines,
that Matnog which is on the southern tip of the island of Luzon and within the province of Sorsogon and
Allen which is on the northeastern tip of the island of Samar, is traversed by the San Bernardino Strait
which leads towards the Pacific Ocean. The parties admit that the distance between Matnog and Allen is
about 23 kilometers which maybe negotiated by motorboat or vessel in about 1-1/2 hours as claimed by
respondent PANTRANCO to 2 hours according to petitioners. As the San Bernardino Strait which separates
Matnog and Allen leads to the ocean it must at times be choppy and rough so that it will not be safe to
navigate the same by small boats or barges but only by such steamboats or vessels as the MV "Black
Double. 19

Considering the environmental circumstances of the case, the conveyance of passengers, trucks and cargo
from Matnog to Allen is certainly not a ferry boat service but a coastwise or interisland shipping service.
Under no circumstance can the sea between Matnog and Allen be considered a continuation of the
highway. While a ferry boat service has been considered as a continuation of the highway when crossing
rivers or even lakes, which are small body of waters - separating the land, however, when as in this case
the two terminals, Matnog and Allen are separated by an open sea it can not be considered as a
continuation of the highway. Respondent PANTRANCO should secure a separate CPC for the operation of
an 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 water service under the guise that it is a mere
private ferry service.

G.R. No. 169493

The contention of private respondent PANTRANCO that its ferry service operation is as a private carrier,
not as a common carrier for its exclusive use in the ferrying of its passenger buses and cargo trucks is
absurd. PANTRANCO does not deny that it charges its passengers separately from the charges for the bus
trips and issues separate tickets whenever they board the MV "Black Double" that crosses Matnog to
Allen, 20 PANTRANCO cannot pretend that in issuing tickets to its passengers it did so as a private carrier
and not as a common carrier. The Court does not see any reason why inspite of its amended franchise to
operate a private ferry boat service it cannot accept walk-in passengers just for the purpose of crossing the
sea between Matnog and Allen. Indeed evidence to this effect has been submitted. 21 What is even more
difficult to comprehend is that while in one breath respondent PANTRANCO claims that it is a private
carrier insofar as the ferryboat service is concerned, in another breath it states that it does not thereby
abdicate from its obligation as a common carrier to observe extraordinary diligence and vigilance in the
transportation of its passengers and goods. Nevertheless, considering that the authority granted to
PANTRANCO is to operate a private ferry, it can still assert that it cannot be held to account as a common
carrier towards its passengers and cargo. Such an anomalous situation that will jeopardize the safety and
interests of its passengers and the cargo owners cannot be allowed.

Sta. Clara Shipping Corporation (Sta. Clara) assails the May 31, 2005 decision1 and July 27, 2005
resolutions2 of the Court of Appeals (CA) which annulled its certificate of convenience (CPC) to operate MV
King Frederick.

What appears clear from the record is that at the beginning PANTRANCO planned to operate such ferry
boat service between Matnog and Alien as a common carrier so it requested authority from MARINA to
purchase the vessel M/V "Black Double 22 in accordance with the procedure provided for by law for such
application for a certificate of public convenience. 23 However when its request was denied as the said
routes "are adequately serviced by existing/authorized operators, 24 it nevertheless purchased the vessel
and started operating the same. Obviously to go about this obstacle to its operation, it then contrived a
novel theory that what it proposes to operate is a private ferryboat service across a small body of water for
the exclusive use of its buses, trucks and passengers as an incident to its franchise to convey passengers
and cargo on land from Pasay City to Tacloban so that it believes it need not secure a separate certificate of
public convenience. 25 Based on this representation, no less than the Secretary of Justice was led to render
an affirmative opinion on October 20, 1981, 26 followed a few days later by the questioned decision of
public respondent of October 23, 1981. 27 Certainly the Court cannot give its imprimatur to such a
situation.
Thus the Court holds that the water transport service between Matnog and Allen is not a ferry boat service
but a coastwise or interisland shipping service. Before private respondent may be issued a franchise or CPC
for the operation of the said service as a common carrier, it must comply with the usual requirements of
filing an application, payment of the fees, publication, adducing evidence at a hearing and affording the
oppositors the opportunity to be heard, among others, as provided by law. 28
WHEREFORE, the petitions are hereby GRANTED and the Decision of the respondent Board of
Transportation (BOT) of October 23, 1981 in BOT Case No. 81-348-C and its Order of July 21, 1982 in the
same case denying the motions for reconsideration filed by petitioners are hereby Reversed and set aside
and declared null and void. Respondent PANTRANCO is hereby permanently enjoined from operating the
ferryboat service and/or coastwise/interisland services between Matnog and Allen until it shall have
secured the appropriate Certificate of Public Convenience (CPC) in accordance with the requirements of
the law, with costs against respondent PANTRANCO.
SO ORDERED.

March 15, 2010

STA. CLARA SHIPPING CORPORATION, Petitioner,

vs.
EUGENIA T. SAN PABLO, Respondent.
DECISION
CORONA, J.:

The facts are undisputed.

Sta. Clara filed an application, docketed as Case No. 2001-033, with Maritime Industry Authority (MARINA)
for a CPC to operate MV King Frederick along the route Matnog, SorsogonAllen, Northern Samar and vice
versa.3 The application was opposed by the pioneering operators Bicolandia Lines, Inc. and Eugenia T. San
Pablo/E Tabinas Enterprises (San Pablo) on the ground that, with five vessels4 already plying the route, the
entry of a sixth vessel would cause grievous problems in berthing space and time schedule.5
MARINA granted the application of Sta. Clara in a decision dated January 26, 2004, the dispositive portion
of which read:
WHEREFORE, for all foregoing considerations and finding that the Applicant is a domestic corporation,
legally and financially capable to operate and maintain the existing service; that the approval of the instant
application will promote public interest and convenience in a proper and suitable manner, this Authority
hereby grants Applicant, Sta. Clara Shipping Corporation, a Certificate of Public Convenience (CPC) to
operate the ship, MV KING FREDERICK, in the route: Matnog, Sorsogon Allen, Northern Samar and viceversa, for the carriage of passengers and cargoes, for a period of FIVE (5) YEARS from date hereof, subject
to the following conditions:
1. That the terms and conditions set forth in the attached Certificate of Public Convenience and
its Rider thereto shall remain in full force and effect;
2. That the Applicant shall submit the ship's renewed Certificate of Inspection (CI), Coastwise
License (CWL), Radio/Ship Station License, Class Certificate and Safety Management Certificate
prior to every expiration thereof, and the ship's Passenger Insurance Coverage fifteen (15) days
prior to every expiration thereof, otherwise, this Certificate of Public Convenience (CPC) shall be
deemed suspended until compliance/submission thereof;
3. That the Applicant shall at all times carry on board its ship a copy of the latest authority to
operate (CPC/PA/SP), the PMMRR 1997, relevant MARINA/PCG/PPA Circulars/Issuances, the
SOLAS 74 as amended, Collision Regulations 1972, STCW Convention 1978/95, among other
IMO Conventions;
4. That the Applicant shall comply with the provisions of MARINA Memorandum Circular No.
154 dated 23 February 2000 on "Reiteration of Safety-Related Policies/Guidelines/Rules and
Regulations For Guidance and Strict Compliance"; and
5. That any violation of the terms and conditions of this Certificate of Public Convenience shall
result to the suspension/cancellation and/or revocation thereof.

(Approved during the 99th Quasi-Judicial Board Meeting held on 22 December 2003.)

On July 27, 2005, the CA issued two resolutions, one denying Sta. Clara's motion for reconsideration,21 and
another granting the motion of San Pablo to cancel the new CPC issued to Sta. Clara by the LMRO:

SO ORDERED.6
7

Accordingly, a CPC was issued to Sta. Clara to operate MV King Frederick for a period of five (5) years
beginning January 26, 2004.
Counsel for San Pablo received copy of the decision on February 26, 2004.8 Her authorized representative
received another copy on February 27, 2004.9 However, it was only on May 14, 2004 that San Pablo filed
with MARINA a motion for reconsideration.10 Consequently, MARINA denied the motion for
reconsideration for having been filed out of time, citing Rule 17 of Memorandum Circular No. 74-A which
provides that a decision becomes final unless a motion for reconsideration or appeal is filed within 15 days
from receipt thereof.111avvphi1
San Pablo filed a petition for review with the CA.12
The CA granted the petition in a decision dated May 31, 2005, the dispositive portion of which read:
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the petition at bench must be, as it is hereby GRANTED.
The decision of the MARINA in Maritime Industry Case No. 2001-033 dated January 26, 2004 and its
Resolution dated September 16, 2004 denying petitioner's Motion for Reconsideration are hereby
VACATED and SET ASIDE. Without costs in this instance.
SO ORDERED.13

WHEREFORE, public respondent Marina's Decision dated June 6, 2005, in so far as it grants private
respondent Sta. Clara Shipping Corporation a Certificate of Public Convenience (CPC) to operate the vessel
KING FREDERICK is hereby RESCINDED, NULLIFIED and SET ASIDE. The public respondent Legaspi Maritime
Regional Office (LMRO), through its Regional Director, Mr. Lucita T. Madarang, is thus ordered to explain
why she should not be cited for contempt for rendering the assailed decision in LMRO 05-056.
SO ORDERED.22
Hence, Santa Clara took the present recourse on the following grounds:
I. The honorable Court of Appeals gravely and seriously erred in failing to consider and take
judicial notice of the passage of RA 9295 in the resolution of the petition filed before it.
II. The honorable Court of Appeals gravely and seriously erred in reversing the decision of the
honorable MARINA [despite] the fact that it has become final and executory.
III. The honorable Court of Appeals gravely and seriously erred in reversing the decision of the
honorable MARINA despite the fact that the decision is in perfect accord with law and
jurisprudence.
IV. The honorable Court of Appeals gravely and seriously erred in nullifying the CPC issued to
petitioner pursuant to RA 9295.23

Meanwhile, two events transpired which altered the state of facts in this case.
The petition has merit outside of its arguments.
First, Republic Act (RA) 929514 and its implementing rules and regulations15 were issued requiring existing
operators to apply for CPCs under the new law.16 Thus, on May 4, 2005, Sta. Clara filed with the Legaspi
Maritime Regional Office (LMRO) an application, docketed as Case No. LMRO 05-056, for a new CPC to
operate MV King Frederick and two other vessels in several routes including Matnog, SorsogonAllen,
Northern Samar and vice versa.17

The Court notes that Sta. Clara repeatedly argued in its pleadings that the January 26, 2004 MARINA
decision was superseded by the June 6, 2005 LMRO decision, and that the old CPC of MV King Frederick
was replaced by a new CPC issued in accordance with RA 9295 and its implementing rules.24 San Pablo
herself agreed that the January 26, 2004 MARINA decision was deemed abandoned when Sta. Clara
applied for and obtained a new CPC.25

Second, on June 6, 2005, LMRO granted the application of Sta. Clara for a new CPC:
There is no dispute then that the January 26, 2004 MARINA decision and the old CPC are now defunct.
WHEREFORE, upon the foregoing holdings, and finding that applicant corporation is legally and financially
capable to operate and maintain the proposed service; that the approval of the instant application will
promote public interest and convenience in proper and suitable manner, this Authority hereby grants
applicant corporation STA. CLARA SHIPPING CORPORATION a CERTIFICATE OF PUBLIC CONVENIENCE (CPC)
to operate the vessels MV KING FREDERICK, MV NELVIN JULES and MV HANSEL JOBETT for conveyance of
passengers and cargoes in the applied route valid for a period of FIFTEEN (15) YEARS from date hereof,
subject to the terms and conditions set forth in the attached Certificate of Public Convenience.
This decision takes effect immediately and shall become final, unless an appeal or a timely motion for
reconsideration has been filed within fifteen (15) days from receipt hereof.
SO ORDERED.18
Yet, on June 24, 2005, Sta. Clara filed a motion for reconsideration19 of the CA decision without disclosing
that it had obtained a new CPC for MV King Frederick. It was San Pablo who reported this development to
the CA when she filed a motion to hold Sta. Clara in contempt of court and to cancel its new CPC.20

The January 26, 2004 MARINA decision and the old CPC were the subject matter of the petition of San
Pablo before the CA. The reversal of the decision and the revocation of the CPC were the reliefs sought in
that petition. However, the passage of RA 9295 and the filing by Sta. Clara of an application for a new CPC
under the new law supervened and rendered the January 26, 2004 MARINA decision and old CPC of no
consequence. There was no more justiciable controversy for the CA to decide, no remedy to grant or deny.
The petition before the CA had become purely hypothetical, there being nothing left to act upon.26
Although Sta. Clara filed with the CA a motion for reconsideration of its May 31, 2005 decision without
disclosing the foregoing developments, by the time the CA resolved the motion for reconsideration, it was
already aware of the changes in the situation of the parties: specifically, that Sta. Clara had filed a new
application under RA 9295 and that the LMRO had issued Sta. Clara a new CPC.27 More significantly, the
new CPC issued to Sta. Clara was now subject to the rules implementing RA 9295. Under Rule XV, Sec. 1
thereof, a peculiar process of administrative remedy provides that the MARINA Administrator, and not the
CA, is vested with primary jurisdiction over matters relating to the issuance of a CPC.281avvphi1
Under the altered state of facts, the CA should have refrained from resolving the pending motions before it
and should have declared the case mooted by supervening events.29 Besides, questions on the validity of

the new CPC are cognizable by the MARINA Administrator and, consonant with the doctrine of primary
administrative jurisdiction, the CA should have referred San Pablo to MARINA for the resolution of her
challenge to the validity of the new CPC of Sta. Clara. The CA ought to have given due deference to the
exercise by MARINA of its sound administrative discretion in applying its special knowledge, experience
and expertise to determine the technical and intricate factual matters relating to the new CPC of Sta.
Clara.30

The Court finds no need to resolve the other issues raised by San Pablo for they deal with the merits of the
very controversy which supervening events have rendered merely theoretical. The Court must refrain from
even expressing an opinion on the remaining issues as the determination thereof would be of no practical
use or value, there being no more justiciable controversy to speak of.31
WHEREFORE, the decision dated May 31, 2005 and resolutions dated July 27, 2005 of the Court of Appeals
are hereby ANNULLED and SET ASIDE on the ground of mootness.