transpo cases 1.1.3

8/13/2019 Transpo Cases 1.1.3

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[G.R. No. 101503. September 15, 1993.]

PLANTERS PRODUCTS, INC. , petitioner , vs. COURT OF APPEALS, SORIAMONTSTEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA , respondents .

Gonzales, Sinense, Jimenez & Associates for petitioner.

Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.

D E C I S I O N

BELLOSILLO , J p:

Does a charter-party 1 between a shipowner and a charterer transform a common carrier into a private one asto negate the civil law presumption of negligence in case of loss or damage to its cargo?

Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New York,U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK)from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of LadingNo. KP-1 signed by the master of the vessel and issued on the date of departure.

On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to theUniform General Charter 2 was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner,in Tokyo, Japan. 3 Riders to the aforesaid charter-party starting from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also subsequently entered into onthe 18th, 20th, 21st and 27th of May 1974, respectively.

Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably inspected by thecharterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the charter-partywhich reads:

"16.. . . At loading port, notice of readiness to be accomplished by certificate from National CargoBureau inspector or substitute appointed by charterers for his account certifying the vessel's readinessto receive cargo spaces. The vessel's hold to be properly swept, cleaned and dried at the vessel'sexpense and the vessel to be presented clean for use in bulk to the satisfaction of the inspector beforedaytime commences" (emphasis supplied).

After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper,the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, then tied withsteel bonds. The hatches remained closed and tightly sealed throughout the entire voyage. 5

Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with theuse of the vessel's boom. Petitioner unloaded the cargo from the holds into its steel-bodied dump trucks whichwere parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms andconditions of the charter-party (which provided for an F.I.O.S. clause). 6 The hatches remained openthroughout the duration of the discharge. 7
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Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported tothe consignee's warehouse located some fifty (50) meters from the wharf. Midway to the warehouse, thetrucks were made to pass through a weighing scale where they were individually weighed for the purpose ofascertaining the net weight of the cargo. The port area was windy, certain portions of the route to thewarehouse were sandy and the weather was variable, raining occasionally while the discharge was inprogress. 8 The petitioner's warehouse was made of corrugated galvanized iron (GI) sheets, with an openingat the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins andGI sheets were placed in-between and alongside the trucks to contain spillages of the fertilizer. 9

It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th,14th and 18th). 10 A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), washired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior toand after discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18M/T was contaminated with dirt. The same results were contained in a Certificate of Shortage/DamagedCargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of94.839 M/T and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust anddirt. 12

Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), theresident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the goodsshipped and the diminution in value of that portion said to have been contaminated with dirt. 13

Respondent SSA explained that they were not able to respond to the consignee's claim for payment because,according to them, what they received was just a request for shortlanded certificate and not a formal claim,and that this "request" was denied by them because they "had nothing to do with the discharge of theshipment." 14 Hence, on 18 July 1975, PPI filed an action for damages with the Court of First Instance ofManila. The defendant carrier argued that the strict public policy governing common carriers does not apply tothem because they have become private carriers by reason of the provisions of the charter-party. The court aquo however sustained the claim of the plaintiff against the defendant carrier for the value of the goods lost or

damaged when it ruled thus: 15

". . . Prescinding from the provision of the law that a common carrier is presumed negligent in case ofloss or damage of the goods it contracts to transport, all that a shipper has to do in a suit to recover forloss or damage is to show receipt by the carrier of the goods and delivery by it of less than what itreceived. After that, the burden of proving that the loss or damage was due to any of the causes whichexempt him from liability is shifted to the carrier, common or private he may be . Even if the provisionsof the charter-party aforequoted are deemed valid, and the defendants considered private carriers, itwas still incumbent upon them to prove that the shortage or contamination sustained by the cargo isattributable to the fault or negligence on the part of the shipper or consignee in the loading, stowing,trimming and discharge of the cargo. This they failed to do. By this omission, coupled with their failureto destroy the presumption of negligence against them, the defendants are liable" (italics supplied).

On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability for thevalue of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home Insurance Co. v. AmericanSteamship Agencies, Inc., 17 the appellate court ruled that the cargo vessel M/V "Sun Plum" owned by privaterespondent KKKK was a private carrier and not a common carrier by reason of the time charter-party.

Accordingly, the Civil Code provisions on common carriers which set forth a presumption of negligence do notfind application in the case at bar. Thus

". . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee to adducesufficient evidence to prove the negligence of the defendant carrier as alleged in its complaint. It is an
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old and well settled rule that if the plaintiff, upon whom rests the burden of proving his cause of action,fails to show in a satisfactory manner the facts upon which he bases his claim, the defendant is underno obligation to prove his exception or defense (Moran, Commentaries on the Rules of Court , Volume 6,p. 2, citing Belen v. Belen, 13 Phil. 202).

"But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause ofaction, i.e., the alleged negligence of defendant carrier. It appears that the plaintiff was under theimpression that it did not have to establish defendant's negligence. Be that as it may, contrary to the

trial court's finding, the record of the instant case discloses ample evidence showing that defendantcarrier was not negligent in performing its obligations . . ." 18 (emphasis supplied).

Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of Appeals.Petitioner theorizes that the Home Insurance case has no bearing on the present controversy because theissue raised therein is the validity of a stipulation in the charter-party delimiting the liability of the shipownerfor loss or damage to goods caused by want of due diligence on its part or that of its manager to make thevessel seaworthy in all respects, and not whether the presumption of negligence provided under the Civil Codeapplies only to common carriers and not to private carriers. 19 Petitioner further argues that since thepossession and control of the vessel remain with the shipowner, absent any stipulation to the contrary, suchshipowner should be made liable for the negligence of the captain and crew. In fine, PPI faults the appellatecourt in not applying the presumption of negligence against respondent carrier, and instead shifting the onusprobandi on the shipper to show want of due diligence on the part of the carrier, when he was not even athand to witness what transpired during the entire voyage.

As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by reason ofa charter-party; in the negative, whether the shipowner in the instant case was able to prove that he hadexercised that degree of diligence required of him under the law.

It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so, we find itfitting to first define important terms which are relevant to our discussion.

A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by theowner to another person for a specified time or use; 20 a contract of affreightment by which the owner of aship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods,on a particular voyage, in consideration of the payment of freight; 21 Charter parties are of two types: (a)contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or asa whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which thewhole vessel is let to the charterer with a transfer to him of its entire command and possession andconsequent control over its navigation, including the master and the crew, who are his servants. Contract ofaffreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period oftime, or voyage charter, wherein the ship is leased for a single voyage. 22 In both cases, the charter-partyprovides for the hire of the vessel only, either for a determinate period of time or for a single or consecutivevoyage, the shipowner to supply the ship's stores, pay for the wages of the master and the crew, and defraythe expenses for the maintenance of the ship.

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. 23 Thedefinition extends to carriers either by land, air or water which hold themselves out as ready to engage incarrying goods or transporting passengers or both for compensation as a public employment and not as acasual occupation. The distinction between a "common or public carrier" and a "private or special carrier" liesin the character of the business, such that if the undertaking is a single transaction, not a part of the general
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business or occupation, although involving the carriage of goods for a fee, the person or corporation offeringsuch service is a private carrier. 24

Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business,should observe extraordinary diligence in the vigilance over the goods they carry. 25 In the case of privatecarriers, however, the exercise of ordinary diligence in the carriage of goods will suffice. Moreover, in case ofloss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or to haveacted negligently, and the burden of proving otherwise rests on them. 26 On the contrary, no suchpresumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carriedhas the onus of proving that the cause was the negligence of the carrier.

It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier,transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", theship captain, its officers and compliment were under the employ of the shipowner and therefore continued tobe under its direct supervision and control. Hardly then can we charge the charterer, a stranger to the crewand to the ship, with the duty of caring for his cargo when the charterer did not have any control of the meansin doing so. This is evident in the present case considering that the steering of the ship, the manning of thedecks, the determination of the course of the voyage and other technical incidents of maritime navigationwere all consigned to the officers and crew who were screened, chosen and hired by the shipowner. 27

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole orportion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of atime-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in abareboat or demise that a common carrier becomes private, at least insofar as the particular voyage coveringthe charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession andcontrol of the ship, although her holds may, for the moment, be the property of the charterer. 28

Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies,supra, is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation inthe charter-party exempting the shipowner from liability for loss due to the negligence of its agent, and not

the effects of a special charter on common carriers. At any rate, the rule in the United States that a shipchartered by a single shipper to carry special cargo is not a common carrier, 29 does not find application in our jurisdiction, for we have observed that the growing concern for safety in the transportation of passengersand/or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly,the rules governing common carriers.

We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30

"As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used toconvey the goods of one and of several persons. Where the ship herself is let to a charterer, so that hetakes over the charge and control of her, the case is different; the shipowner is not then a carrier. Butwhere her services only are let, the same grounds for imposing a strict responsibility exist, whether he

is employed by one or many. The master and the crew are in each case his servants, the freighter ineach case is usually without any representative on board the ship; the same opportunities for fraud orcollussion occur; and the same difficulty in discovering the truth as to what has taken place arises . . ."

In an action for recovery of damages against a common carrier on the goods shipped, the shipper orconsignee should first prove the fact of shipment and its consequent loss or damage while the same was inthe possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent toprove that he has exercised extraordinary diligence required by law or that the loss, damage or deteriorationof the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability. 31
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To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the primafacie presumption of negligence.

The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified thatbefore the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated.

After completing the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closedand sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins which were tied withsteel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight ofthe steel covers made it impossible for a person to open without the use of the ship's boom. 32

It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibilityof spillage of the cargo into the sea or seepage of water inside the hull of the vessel. 33 When M/V "Sun Plum"docked at its berthing place, representatives of the consignee boarded, and in the presence of arepresentative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI,opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the cargounder the watchful eyes of the shipmates who were overseeing the whole operation on rotation basis. 34

Verily, the presumption of negligence on the part of respondent carrier has been efficaciously overcome by theshowing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. This wasconfirmed by respondent appellate court thus

". . . Be that as it may, contrary to the trial court's finding, the record of the instant case disclosesample evidence showing that defendant carrier was not negligent in performing itsobligations. Particularly, the following testimonies of plaintiff-appellee's own witnesses clearly showabsence of negligence by the defendant carrier; that the hull of the vessel at the time of the dischargeof the cargo was sealed and nobody could open the same except in the presence of the owner of thecargo and the representatives of the vessel (TSN, 20 July 1977, p. 14); that the cover of the hatcheswas made of steel and it was overlaid with tarpaulins, three layers of tarpaulins and therefore theircontents were protected from the weather (TSN, 5 April 1978, p. 24); and, that to open these hatches,the seals would have to be broken, all the seals were found to be intact (TSN, 20 July 1977, pp. 15-

16)" (italics supplied).

The period during which private respondent was to observe the degree of diligence required of it as a publiccarrier began from the time the cargo was unconditionally placed in its charge after the vessel's holds wereduly inspected and passed scrutiny by the shipper, up to and until the vessel reached its destination and itshull was re-examined by the consignee, but prior to unloading. This is clear from the limitation clause agreedupon by the parties in the Addendum to the standard "GENCON" time charter-party which provided for anF.I.O.S., meaning, that the loading, stowing, trimming and discharge of the cargo was to be done by thecharterer, free from all risk and expense to the carrier. 35 Moreover, a shipowner is liable for damage to thecargo resulting from improper stowage only when the stowing is done by stevedores employed by him, andtherefore under his control and supervision, not when the same is done by the consignee or stevedores underthe employ of the latter. 36

Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destructionor deterioration of the goods if caused by the character of the goods or defects in the packaging or in thecontainers. The Code of Commerce also provides that all losses and deteriorations which the goods may sufferduring the transportation by reason of fortuitous event, force majeure, or the inherent defect of the goods,shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon thecarrier. 37 The carrier, nonetheless, shall be liable for the loss and damage resulting from the preceding causes
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if it is proved, as against him, that they arose through his negligence or by reason of his having failed to takethe precautions which usage has established among careful persons. 38

Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and theexpected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working with Atlas Fertilizer,described Urea as a chemical compound consisting mostly of ammonia and carbon monoxide compoundswhich are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water. However, duringstorage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that thetemperature inside the hull does not exceed eighty (80) degrees centigrade. Mr. Chupungco further added thatin unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operationamounting to one percent (1%) against the bill of lading is deemed "normal" or "tolerable." The primary causeof these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow awaysome of the materials during the unloading process.

The dissipation of quantities of fertilizer, or its deterioration in value, is caused either by an extremely hightemperature in its place of storage, or when it comes in contact with water. When Urea is drenched in water,either fresh or saline, some of its particles dissolve. But the salvaged portion which is in liquid form stillremains potent and usable although no longer saleable in its original market value.

The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was madegreater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical effects ofthe elements and the grimy condition of the various pieces of equipment used in transporting and hauling it.

The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into thevessel's holds during the voyage since the hull of the vessel was in good condition and her hatches weretightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the cargo shewas chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred whilethe same was being transported from the ship to the dump trucks and finally to the consignee's warehouse.This may be gleaned from the testimony of the marine and cargo surveyor of CSCI who supervised theunloading. He explained that the 18 M/T of alleged "bad order cargo" as contained in their report to PPI was

just an approximation or estimate made by them after the fertilizer was discharged from the vessel andsegregated from the rest of the cargo.

The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo. Itrained from time to time at the harbor area while the cargo was being discharged according to the supplyofficer of PPI, who also testified that it was windy at the waterfront and along the shoreline where the dumptrucks passed enroute to the consignee's warehouse.

Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer carries withit the risk of loss or damage. More so, with a variable weather condition prevalent during its unloading, as wasthe case at bar. This is a risk the shipper or the owner of the goods has to face. Clearly, respondent carrierhas sufficiently proved the inherent character of the goods which makes it highly vulnerable to deterioration;as well as the inadequacy of its packaging which further contributed to the loss. On the other hand, no proofwas adduced by the petitioner showing that the carrier was remiss in the exercise of due diligence in order tominimize the loss or damage to the goods it carried.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which reversed thetrial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the First Instance, nowRegional Trial Court, of Manila should be, as it is hereby, DISMISSED.

Costs against petitioner.
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SO ORDERED.

Davide, Jr . and Quiason, JJ . , concur.

Cruz, J . , took no part.

Grio-Aquino, J . , is on leave.

[G.R. No. L-61461 & 61501. August 21, 1987.]

EPITACIO SAN PABLO (substituted by Heirs of E. San Pablo) , petitioners , vs. PANTRANCOSOUTH EXPRESS, INC. , respondent .

CARDINAL SHIPPING CORPORATION , petitioner , vs. HONORABLE BOARD OFTRANSPORTATION and PANTRANCO SOUTH EXPRESS, INC. ,respondents .

SYLLABUS

1.MERCANTILE LAW; PUBLIC SERVICE ACT; COMMON CARRIERS; FERRY SERVICE DISTINGUISHED FROINTERISLAND SERVICE. In Javellana case (98 Phil. 964) We made clear distinction between a ferry serviceand coastwise or interisland service by holding that:" . . . We are inclined to believe that the Legislatureintended ferry to mean the service either by barges or rafts, even by motor or steam vessels, between thebanks of a river or stream to continue the highway which is interrupted by the body of water, or in somecases, to connect two points on opposite shores of an arm of the sea such as bay or lake which does notinvolve too great a distance or too long a time to navigate. But where the line or service involves crossing theopen 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 withbig waves where small boat, barge or raft are not adapted to the service,' then it is more reasonable to regardsaid line or service as more properly belonging to interisland or coastwise trade." . . .

2.ID.; ID.; ID.; CONVEYANCE OF PASSENGERS, TRUCKS AND CARGO TRAVERSING SAN BERNARDINOSTRAIT, AN INTERISLAND SHIPPING SERVICE; CASE AT BAR. 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 theisland of Luzon and within the province of Sorsogon and Allen which is on the northeastern tip of the island ofSamar, is traversed by the San Bernardino Strait which leads towards the Pacific Ocean. The parties admit thatthe distance between Matnog and Allen is about 23 kilometers which maybe negotiated by motorboat or vesselin about 1-1/2 hours as claimed by respondent PANTRANCO to 2 hours according to petitioners. As the SanBernardino Strait which separates Matnog and Allen leads to the ocean it must at times be choppy and roughso that it will not be safe to navigate the same by small boats or barges but only by such steamboats orvessels as the M/V "Black Double." Considering the environmental circumstances of the case, the conveyanceof passengers, trucks and cargo from Matnog to Allen is certainly not a ferryboat service but a coastwise orinterisland shipping service.

3.ID.; ID.; ID.; OPEN SEA, NOT A CONTINUATION OF HIGHWAY. Under no circumstance can the seabetween Matnog and Allen be considered a continuation of the highway. While a ferryboat service has beenconsidered as a continuation of the highway when crossing rivers or even lakes, which are small body of


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waters separating the land, however, when as in this case the two terminals, Matnog and Allen are separatedby an open sea it can not be considered as a continuation of the highway.

4.ID.; ID.; ID.; ID.; SEPARATE CERTIFICATE OF PUBLIC CONVENIENCE MUST BE SECURED. RespondentPANTRANCO should secure a separate CPC for the operation of an interisland or coastwise shipping service inaccordance with the provisions of law. Its CPC as a bus transportation cannot be merely amended to includethis water service under the guise that it is a mere private ferry service. Thus the Court holds that the watertransport service between Matnog and Allen is not a ferryboat service but a coastwise or interisland shippingservice. Before private respondent may be issued a franchise or CPC for the operation of the said service as acommon 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, amongothers, as provided by law.

D E C I S I O N

GANCAYCO , J p:

The question that is posed in these petitions for review is whether the sea can be considered as a continuationof the highway. The corollary issue is whether a land transportation company can be authorized to operate aferry service or coastwise or interisland shipping service along its authorized route as an incident to itsfranchise 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 engagedin the land transportation business with PUB service for passengers and freight and various certificates forpublic 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 tooperate a ferryboat service from Matnog, Sorsogon and Allen, Samar that will provide service to companybuses and freight trucks that have to cross San Bernardo Strait. 1 In a reply of April 29, 1981 PANTRANCO wasinformed 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 wherethese are adequately serviced by existing/authorized operators.

2.Market conditions in the proposed route cannot support the entry of additional tonnage; vesselacquisitions intended for operations therein are necessarily limited to those intended for replacementpurposes only." 2

PANTRANCO nevertheless acquired the vessel M/V "Black Double" on May 27, 1981 for P3 Million pesos. Itwrote the Chairman of the Board of Transportation (BOT) through its counsel, that it proposes to operate aferry service to carry its passenger buses and freight trucks between Allen and Matnog in connection with itstrips to Tacloban City invoking the case of Javellana vs. Public Service Commission. 3 PANTRANCO claims thatit can operate a ferry service in connection with its franchise for bus operation in the highway from Pasay Cityto Tacloban City "for the purpose of continuing the highway, which is interrupted by a small body of water, thesaid proposed ferry operation is merely a necessary and incidental service to its main service and obligation oftransporting its passengers from Pasay City to Tacloban City. Such being the case . . . there is no need . . . to
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obtain a separate certificate for public convenience to operate a ferry service between Allen and Matnog tocater exclusively to its passenger buses and freight trucks. 4

Without awaiting action on its request PANTRANCO started to operate said ferry service. Acting Chairman JoseC. 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 M/V "Black Double"otherwise it will be cited to show cause why its CPC should not be suspended or the pending applicationdenied. 6

Epitacio San Pablo (now represented by his heirs) and Cardinal Shipping Corporation who are franchise holdersof the ferry service in this area interposed their opposition. They claim they adequately servicethe PANTRANCO by ferrying its buses, trucks and passengers. BOT then asked the legal opinion from theMinister of Justice whether or not a bus company with an existing CPC between Pasay City and Tacloban Citymay still be required to secure another certificate in order to operate a ferry service between two terminals ofa small body of water . On October 20, 1981 then Minister of Justice Ricardo Puno rendered an opinion to theeffect that there is no need for bus operators to secure a separate CPC to operate a ferryboat service holdingas 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, 110 NE 521; Louiseville and N.R. Co. vs. Railroad Commissioners, 58 SO543) It is the right of the public which has accepted the service of a public utility operator to demandthat 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 publicconvenience to provide adequate and convenient service to its riders. Requiring said bus company toobtain another certificate to operate such ferry service when it merely forms a part and constitutesan 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 ferryboat service is part of itsCPC 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. beamended to embody the grant of authority to operate a private ferryboat service as one of theconditions for the grant of the certificate subject to the condition that the ferryboat shall be for theexclusive use of Pantranco buses, its passengers and freight trucks, and should it offer itself to thepublic for hire other than its own passengers, it must apply for a separate certificate of publicconvenience as a public ferryboat 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 saiddecision and San Pablo filed a supplemental motion for reconsideration that were denied by the BOT on July21, 1981. 9

Hence, San Pablo filed the herein petition for review on certiorari with prayer for preliminaryinjunction 10 seeking the revocation of said decision, and pending consideration of the petition, the issuance ofa restraining order or preliminary injunction against the operation by PANTRANCO of said ferry service. SanPablo raised the following issues: Cdpr
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"A.DID THE RESPONDENT BOARD VIOLATE PETITIONERS' RIGHT TO DUE PROCESS, THE RULES OFPROCEDURE AND SECTION 16 (m) OF THE PUBLIC SERVICE ACT, WHEN IT ISSUED IN A COMPLAINTCASE THE DECISION DATED OCTOBER 23, 1981 WHICHMOTU PROPIO AMENDED RESPONDENTPANTRANCO'S PUB CERTIFICATE TO INCLUDE AND AUTHORIZE OPERATION OF A SHIPPING SERVICEON THE ROUTE MATNOG, SORSOGON ALLEN, SAMAR EVEN AS THERE MUST BE A FORMAL

APPLICATION FOR AMENDMENT AND SEPARATE PROCEEDINGS HELD THEREFOR, ASSUMING AMENDMENT IS PROPER?

B.DID THE RESPONDENT BOARD ERR IN FINDING IN ITS DECISION OF OCTOBER 23, 1981, THATTHE SEA FROM THE PORT OF MATNOG, SORSOGON, LUZON ISLAND TO THE PORT OF ALLEN, SAMARISLAND, OR FROM LUZON ISLAND TO SAMAR ISLAND IS A MERE FERRY OR CONTINUATION OF THEHIGHWAY IT BEING 23 KILOMETERS OF ROUGH AND OPEN SEA AND ABOUT 2 HOURS TRAVELTIME REQUIRING BIG INTER-ISLAND VESSELS, NOT MERE BARGES, RAFTS OR SMALL BOATSUTILIZED IN FERRY SERVICE?

C.DID THE RESPONDENT BOARD ERR WHEN IT RULED THAT RESPONDENT PANTRANCO'S VESSELM/V BLACK DOUBLE IS MERELY A PRIVATE CARRIER, NOT A PUBLIC FERRY OPERATING FOR PUBLICSERVICE (ASSUMING THAT THE MATNOG-ALLEN SEA ROUTE IS A MERE FERRY OR CONTINUATIONOF HIGHWAY) EVEN IF SAID VESSEL IS FOR HIRE AND COLLECTS SEPARATE FARES AND CATERS TOTHE PUBLIC EVEN FOR A LIMITED CLIENTELE?

D.DID THE RESPONDENT BOARD ERR WHEN IT GRANTED RESPONDENT PANTRANCO AUTHORITY TOOPERATE A SHIPPING SERVICE IN THE FACE OF THE LATTER'S CONTENTION AS AN AFTER THOUGHTTHAT 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 UNDERITS MEMORANDUM CIRCULAR NO. 8-A AS WELL AS ITS PRIOR FAVORABLE ENDORSEMENT BEFORE

ANY SHIPPING AUTHORIZATION MAY BE GRANTED UNDER BOT MARINA AGREEMENT OF AUGUST10, 1976 AND FEBRUARY 26, 1982?

E.DID RESPONDENT BOARD ERR WHEN IT GRANTED RESPONDENT PANTRANCO AUTHORITY TOOPERATE A SHIPPING SERVICE ON A ROUTE ADEQUATELY SERVICED IF NOT ALREADY 'SATURATED'WITH THE SERVICES OF TWO (2) EXISTING OPERATORS (PETITIONERS AND CARDINAL SHIPPINGCORP.) 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: LibLex

"a.the decision did not conform to the procedures laid down by law for an amendment of the originalcertificate of public convenience, and the authority to operate a private ferry boat service toPANTRANCO 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 routecontravenes existing government policies relative to the rationalization of operations of all watertransport 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 lessensPANTRANCO'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
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g.the operation by PANTRANCO of the ferry service constitutes undue competition.

The foregoing considerations constitutes the substantial errors committed by the respondent Boardwhich 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 theauthority 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 overwhich passes to the other side for transportation of passengers or of travellers with their teamsvehicles and such other property as, they may carry or have with them. (U.S. vs. Pudget Sound Nev.Co. D.C. Washington, 24 F. Supp. 431). It maybe said to be a necessary service of a speciallyconstructed boat to carry passengers and property across rivers or bodies of water from a place in oneshore to a point conveniently opposite on the other shore and continuation of the highway making aconnection with the thoroughfare at each terminal (U.S. vs. Canadian Pac, N.Y. Co. 4 P. Supp. 85). Itcomprises not merely the privilege of transportation but also the use for that purpose of the respectivelandings with outlets therefrom. (Nole vs. Record, 74 OKL. 77; 176 Pac. 756). A ferry service maybe apublic ferry or a private ferry. A public ferry service is one which all the public have the right to resortto and for which a regular fare is established and the ferryman is a common carrier be inbound to takeall who apply and bound to keep his ferry in operation and good repair. (Hudspeth v. Hall, 11 Oa. 510;36 S.B. 770). A ferry (private) service is mainly for the use of the owner and though he may take payfor ferriage, he does not follow it as a business. His ferry is not open to the public at its demand and hemay 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 ferryboat service of Pantranco is a continuation of the highway traversed by its buses from PasayCity to Samar, Leyte passing through Matnog (Sorsogon) through San Bernardino Strait to Allen(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 ownclientele (passengers on board Pantranco buses) and will not offer itself indiscriminately for hire orfor compensation to the general public. Legally therefore, Pantranco has the right to operate theferryboat M/V BLACK DOUBLE, along the route from Matnog (Sorsogon) to Allen (Samar) and viceversa for the exclusive use of its own buses, passengers and freight trucks without the need ofapplying for a separate certificate of public convenience or provisional authority. Since its operation isan integral part of its land transport system, its original certificate of public convenience should beamended to include the operation of such ferryboat for its own exclusive use." 13

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 highwayor 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 twopoints, which is unrelated to other transportation, (Oppositors' Emphasis.)

The term 'ferry' is often employed to denote the right or franchise granted by the state orits authorized mandatories to continue by means of boats, an interrupted land highway over theinterrupting waters and to charge toll for the use thereof by the public. In this sense it has alsobeen defined as a privilege, a liberty, to take tolls for transporting passengers and goods across alake or stream, or some other body of water, with no essential difference from a bridge franchiseexcept as to the mode of transportation 22 Am. Jur. 553.


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A 'ferry' has been defined by many courts as 'a public highway or thoroughfare across astream of water or river by boat instead of a bridge. ' (St. Claire Country v. Interstate Car and SandTransfer Co., 192 U.S. 464, 48 L. ed. 518; etc.).

'The term ferry is often employed to denote the right or franchise granted by the state or itsauthorized mandatories to continue by means of boats, an interrupted land highway over theinterrupting 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.) (Oppositors' Italics.).

'Ferry' is service necessity for common good to reach point across a stream, lagoon, lake, orbay. (U.S. vs. Canadian Pac. Ry. Co. D.C. Was., 4 Supp. 851, 853)'

'Ferry' properly means a place of transit across a river or arm of the sea, but in law it istreated as a franchise, and defined as the exclusive right to carry passengers across a river, or armof the sea, from one vill to another, or to connect a continuous line of road leading from township orvill 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 subordinatedescriptions of waters, where the tide ebbs and flows. It may be a river, harbor, creek, basin, orbay; and it is sometimes used to designate very extensive reaches of waters within the projectingcapes or points or a country. (See Rex. vs. Bruce, Deach, C.C. 1093). (2) In an early case the courtsaid: 'The distinction between rivers navigable and not navigable, that is, where the sea does, ordoes 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, 15 Cababa vs. Remigio & Carillo 16 and Municipality ofGattaran vs. Elizaga 17 this Court considered as ferry service such water service that crosses rivers. cdrep

However, in Javellana We made clear distinction between a ferry service and coastwise or interisland serviceby holding that:

"We are not unmindful of the reasons adduced by the Commission in considering the motorboat servicebetween Calapan and Batangas as ferry; but from our consideration of the law as it stands, particularlyCommonwealth 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 ofCustoms over documentation, registration, licensing, inspection, etc. of steamboats, motorboats ormotor vessels, and the definition of ferry as above quoted, we have the impression and we are inclinedto believe that the Legislature intended ferry to mean the service either by barges or rafts, even bymotor or steam vessels, between the banks of a river or stream to continue the highway which isinterrupted by the body of water, or in some cases, to connect two points on opposite shores of an armof the sea such as bay or lake which does not involve too great a distance or too long a time tonavigate. But where the line or service involves crossing the open sea like the body of water betweenthe province of Batangas and the island of Mindoro which the oppositors describe thus " the interveningwaters 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 asmore properly belonging to interisland or coastwise trade. According to the finding of the Commissionitself the distance between Calapan and Batangas 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 ferrieswhether within the jurisdiction of a single municipality or ferries between two municipalities orprovinces. 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 ofthe 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 andOroquieta or Cagayan de Oro.


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The Commission makes the distinction between ferry service and motorship in the coastwise trade,thus: cdll

'A ferry service is distinguished from a motorship or motorboat service engaged in the coastwise tradein that the latter is intended for the transportation of passengers and/or freight for hire orcompensation 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 ferryservice. Again, a vessel of the Compaia 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 ratherinterisland or coastwise trade.

We believe that it will be more in consonance with the spirit of the law to consider steamboat ormotorboat service between the different islands, involving more or less great distance and over more orless 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 tradeservice, as long as the water craft used are steamboats, motorboats or motor vessels, the result will bethe 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, thatMatnog which is on the southern tip of the island of Luzon and within the province of Sorsogon and Allenwhich is on the northeastern tip of the island of Samar, is traversed by the San Bernardino Strait which leadstowards the Pacific Ocean. The parties admit that the distance between Matnog and Allen is about 23kilometers which maybe negotiated by motorboat or vessel in about 1-1/2 hours as claimed by respondentPANTRANCO 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 sameby small boats or barges but only by such steamboats or vessels as the M/V "Black Double." 19

Considering the environmental circumstances of the case, the conveyance of passengers, trucks and cargofrom Matnog to Allen is certainly not a ferryboat service but a coastwise or interisland shipping service. Underno circumstance can the sea between Matnog and Allen be considered a continuation of the highway. While aferryboat 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, Matnogand Allen are separated by an open sea it can not be considered as a continuation of the highway. RespondentPANTRANCO should secure a separate CPC for the operation of an interisland or coastwise shipping service inaccordance with the provisions of law. Its CPC as a bus transportation cannot be merely amended to includethis water service under the guise that it is a mere private ferry service.

The contention of private respondent PANTRANCO that its ferry service operation is as a private carrier, not asa 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 M/V "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 andnot as a common carrier. The Court does not see any reason why inspite of its amended franchise to operate aprivate ferryboat service it cannot accept walk-in passengers just for the purpose of crossing the sea betweenMatnog and Allen. Indeed evidence to this effect has been submitted. 21 What is even more difficult tocomprehend is that while in one breath respondent PANTRANCO claims that it is a private carrier insofar asthe ferryboat service is concerned, in another breath it states that it does not thereby abdicate from itsobligation as a common carrier to observe extraordinary diligence and vigilance in the transportation of itspassengers and goods. Nevertheless, considering that the authority granted to PANTRANCO is to operate a
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private ferry, it can still assert that it cannot be held to account as a common carrier towards its passengersand cargo. Such an anomalous situation that will jeopardize the safety and interests of its passengers and thecargo owners cannot be allowed. LLjur

What appears clear from the record is that at the beginning PANTRANCO planned to operate such ferryboatservice between Matnog and Allen as a common carrier so it requested authority from MARINA to purchasethe vessel M/V "Black Double" 22 in accordance with the procedure provided for by law for such application fora certificate of public convenience. 23 However when its request was denied as the said routes "are adequatelyserviced by existing/authorized operators," 24 it nevertheless purchased the vessel and started operating thesame. Obviously to go about this obstacle to its operation, it then contrived a novel theory that what itproposes to operate is a private ferryboat service across a small body of water for the exclusive use of itsbuses, trucks and passengers as an incident to its franchise to convey passengers and cargo on land fromPasay City to Tacloban so that it believes it need not secure a separate certificate of publicconvenience. 25 Based on this representation, no less than the Secretary of Justice was led to render anaffirmative opinion on October 20, 1981 26 followed a few days later by the questioned decision of publicrespondent 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 ferryboat service buta 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 anapplication, payment of the fees, publication, adducing evidence at a hearing and affording the oppositors theopportunity 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 denyingthe motions for reconsideration filed by petitioners are hereby Reversed and set aside and declared null andvoid. Respondent PANTRANCO is hereby permanently enjoined from operating the ferryboat service and/orcoastwise/interisland services between Matnog and Allen until it shall have secured the appropriate Certificateof Public Convenience (CPC) in accordance with the requirements of the law, with costs against respondentPANTRANCO.

SO ORDERED.

Teehankee (C.J.), Narvasa, Cruz and Paras, JJ., concur.

[G.R. No. 149038. April 9, 2003.]

PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY , petitioner , vs . PKSSHIPPING COMPANY , respondent .

Gerard M. Linsangan for petitioner.

Arthur D. Lim for respondent.

SYNOPSIS
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Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS shipping company(PKS) to transport its 75,000 bags of cement. DUMC insured the full amount of the goods with the petitionerinsurance company (Philamgen). Ironically, the barge sank bringing down the entire cargo of 75,000 bags ofcement. DUMC filed a formal claim for the entire amount of insurance, to which Philamgen promptly paid.Philamgen then sought a reimbursement of the amount it paid to DUMC but the PKS refused to pay, whichprompted Philamgen to file a suit against PKS. The trial court, finding the cause of the loss to be throughfortuitous event, dismissed the complaint filed. Philamgen interposed an appeal to the Court of Appeals whichaffirmed in toto the decision of the trial court. In this appeal before the Supreme Court, Philamgen contendedthat the appellate court committed patent error in ruling that PKS is not a common carrier and it is not liablefor the loss of the subject cargo.

According to the Supreme Court, the issue of whether a carrier is private or common carrier on the basis offacts found by the trial court or the appellate court can be a valid and reviewable question of law. Contrary tothe conclusion made by the appellate court, its factual findings indicated that PKS engaged itself in thebus

transpo cases 1.1.3

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