1

TRANSPORTATION LAW (PUP COLLEGE OF LAW) ASSIGNED TOPICS AND

CASES FOR JANUARY 30, 2017
BY ALVIN CLARIDADES
TRANSPORTATION LAW (PUP COLLEGE OF LAW) ASSIGNED TOPICS AND
CASES FOR JANUARY 30, 2017
CHAPTER III COMMERCIAL CONTRACTS FOR TRANSPORTATION
A. Code of Commerce provisions and concepts
1. Bill of lading
a. Definition
Mindanao Bus Company vs. The Collector of Internal Revenue, GR L-
14078. Feb. 24, 1961, 1 SCRA 538
b. Two-fold character of a bill of lading
c. Functions of the bill of lading
d. Kinds of bills of lading
2. Duties of the carrier
C. Fisher vs. Yangco Steamship Co., GR L-8095. Nov. 5, 1914, 31 Phil. 1
3. Instances when a common carrier may lawfully decline to accept the goods
4. Period of delivery of goods
5. Effects of delay in the delivery of the goods
6. Instances when the consignee may refuse to receive the goods
7. Claim for damage, when and how made
8. When claim for damage may no longer be admitted
9. Rationale for the requisite period of giving notice of claim
Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., GR
87434. Aug. 5, 1992, 212 SCRA 194
10. 24-hour claim a condition precedent to an action against carrier
Charter Insurance Corp. v. Chemoil Lighterage Corp., GR 136888. June 29,
2005, 462 SCRA 77
11. Patent damage vis--vis latent damage
12. Rules on claim do not apply to undelivered goods
Roldan v. Lim Ponzo & Co., GR 11325. Dec. 7, 1917, 37 Phil. 285
13. Shorter period may validly be stipulated by the parties
American General Insurance Co., Inc. v. Sweet Lines, Inc., GR 87434. Aug.
5, 1992, 212 SCRA 194
14. Application of prescriptive periods under the Civil Code
15. Doctrine of combined or connecting services
Art. 373, Code of Commerce
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Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 87434 August 5, 1992

PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. and TAGUM PLASTICS,

INC., petitioners,
vs.
SWEET LINES, INC., DAVAO VETERANS ARRASTRE AND PORT SERVICES, INC.
and HON. COURT OF APPEALS, respondents.

De Lara, De Lunas & Rosales for petitioners.

Carlo L. Aquino for Sweet Lines, Inc.

REGALADO, J.:

A maritime suit 1 was commenced on May 12, 1978 by herein Petitioner Philippine American
General Insurance Co., Inc. (Philamgen) and Tagum Plastics, Inc. (TPI) against private
respondents Sweet Lines, Inc. (SLI) and Davao Veterans Arrastre and Port Services, Inc.
(DVAPSI), along with S.C.I. Line (The Shipping Corporation of India Limited) and F.E. Zuellig,
Inc., as co-defendants in the court a quo, seeking recovery of the cost of lost or damaged
shipment plus exemplary damages, attorney's fees and costs allegedly due to defendants'
negligence, with the following factual backdrop yielded by the findings of the court below and
adopted by respondent court:

It would appear that in or about March 1977, the vessel SS "VISHVA

YASH" belonging to or operated by the foreign common carrier, took on
board at Baton Rouge, LA, two (2) consignments of cargoes for shipment
to Manila and later for transhipment to Davao City, consisting of 600 bags
Low Density Polyethylene 631 and another 6,400 bags Low Density
Polyethylene 647, both consigned to the order of Far East Bank and Trust
Company of Manila, with arrival notice to Tagum Plastics, Inc., Madaum,
Tagum, Davao City. Said cargoes were covered, respectively, by Bills of
Lading Nos. 6 and 7 issued by the foreign common carrier (Exhs. E and
F). The necessary packing or Weight List (Exhs. A and B), as well as the
Commercial Invoices (Exhs. C and D) accompanied the shipment. The
cargoes were likewise insured by the Tagum Plastics Inc. with plaintiff
Philippine American General Insurance Co., Inc., (Exh. G).

In the course of time, the said vessel arrived at Manila and discharged its
cargoes in the Port of Manila for transhipment to Davao City. For this
purpose, the foreign carrier awaited and made use of the services of the
vessel called M/V "Sweet Love" owned and operated by defendant
interisland carrier.

Subject cargoes were loaded in Holds Nos. 2 and 3 of the interisland

carrier. These were commingled with similar cargoes belonging to
Evergreen Plantation and also Standfilco.
 3

On May 15, 1977, the shipment(s) were discharged from the interisland
carrier into the custody of the consignee. A later survey conducted on
July 8, 1977, upon the instance of the plaintiff, shows the following:

Of the cargo covered by Bill of Lading No. 25 or (2)6, supposed to contain

6,400 bags of Low Density Polyethylene 647 originally inside 160 pallets,
there were delivered to the consignee 5,413 bags in good order condition.
The survey shows shortages, damages and losses to be as follows:

Undelivered/Damaged bags as tallied during discharge

from vessel-173 bags; undelivered and damaged as noted
and observed whilst stored at the pier-699 bags; and
shortlanded-110 bags (Exhs. P and P-1).

Of the 600 bags of Low Density Polyethylene 631, the survey conducted
on the same day shows an actual delivery to the consignee of only 507
bags in good order condition. Likewise noted were the following losses,
damages and shortages, to wit:

Undelivered/damaged bags and tally sheets during

discharge from vessel-17 bags.

Undelivered and damaged as noted and observed whilst

stored at the pier-66 bags; Shortlanded-10 bags.

Therefore, of said shipment totalling 7,000 bags, originally contained in

175 pallets, only a total of 5,820 bags were delivered to the consignee in
good order condition, leaving a balance of 1,080 bags. Such loss from
this particular shipment is what any or all defendants may be answerable
to (sic).

As already stated, some bags were either shortlanded or were missing,

and some of the 1,080 bags were torn, the contents thereof partly spilled
or were fully/partially emptied, but, worse, the contents thereof
contaminated with foreign matters and therefore could no longer serve
their intended purpose. The position taken by the consignee was that
even those bags which still had some contents were considered as total
losses as the remaining contents were contaminated with foreign matters
and therefore did not (sic) longer serve the intended purpose of the
material. Each bag was valued, taking into account the customs duties
and other taxes paid as well as charges and the conversion value then of
a dollar to the peso, at P110.28 per bag (see Exhs. L and L-1 M and O). 2

Before trial, a compromise agreement was entered into between petitioners, as plaintiffs,
and defendants S.C.I. Line and F.E. Zuellig, upon the latter's payment of P532.65 in
settlement of the claim against them. Whereupon, the trial court in its order of August 12,
1981 3 granted plaintiffs' motion to dismiss grounded on said amicable settlement and the
case as to S.C.I. Line and F.E. Zuellig was consequently "dismissed with prejudice and
without pronouncement as to costs."

The trial court thereafter rendered judgment in favor of herein petitioners on this
dispositive portion:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff

Philippine General American Insurance Company Inc. and against the
 4

remaining defendants, Sweet Lines Inc. and Davao Veterans Arrastre Inc.
as follows:

Defendant Sweet Lines, Inc. is ordered to pay said plaintiff the sum of
P34,902.00, with legal interest thereon from date of extrajudicial demand
on April 28, 1978 (Exh. M) until fully paid;

Defendant Sweet Lines Inc. and Davao Veterans Arrastre and (Port)
Services Inc. are directed to pay jointly and severally, the plaintiff the sum
of P49,747.55, with legal interest thereon from April 28, 1978 until fully
paid;

Each of said defendants are ordered to pay the plaintiffs the additional
sum of P5,000 is reimbursable attorney's fees and other litigation
expenses;

Each of said defendants shall pay one-fourth (1/4) costs. 4

Due to the reversal on appeal by respondent court of the trial court's decision on the
ground of prescription, 5 in effect dismissing the complaint of herein petitioners, and the
denial of their motion for reconsideration, 6 petitioners filed the instant petition for review
on certiorari, faulting respondent appellate court with the following errors: (1) in upholding,
without proof, the existence of the so-called prescriptive period; (2) granting arguendo that the
said prescriptive period does exist, in not finding the same to be null and void; and (3)
assuming arguendo that the said prescriptive period is valid and legal, in failing to conclude
that petitioners substantially complied therewith. 7

Parenthetically, we observe that herein petitioners are jointly pursuing this case,
considering their common interest in the shipment subject of the present controversy, to
obviate any question as to who the real party in interest is and to protect their respective
rights as insurer and insured. In any case, there is no impediment to the legal standing of
Petitioner Philamgen, even if it alone were to sue herein private respondents in its own
capacity as insurer, it having been subrogated to all rights of recovery for loss of or
damage to the shipment insured under its Marine Risk Note No. 438734 dated March 31,
1977 8 in view of the full settlement of the claim thereunder as evidenced by the subrogation receipt 9 issued in its
favor by Far East Bank and Trust Co., Davao Branch, for the account of petitioner TPI.

Upon payment of the loss covered by the policy, the insurer's entitlement to
subrogation pro tanto, being of the highest equity, equips it with a cause of action against
a third party in case of contractual breach. 10 Further, the insurer's subrogatory right to sue
for recovery under the bill of lading in case of loss of or damage to the cargo is
jurisprudentially upheld. 11 However, if an insurer, in the exercise of its subrogatory right, may
proceed against the erring carrier and for all intents and purposes stands in the place and in
substitution of the consignee, a fortiori such insurer is presumed to know and is just as bound
by the contractual terms under the bill of lading as the insured.

On the first issue, petitioners contend that it was error for the Court of Appeals to reverse
the appealed decision on the supposed ground of prescription when SLI failed to adduce
any evidence in support thereof and that the bills of lading said to contain the shortened
periods for filing a claim and for instituting a court action against the carrier were never
offered in evidence. Considering that the existence and tenor of this stipulation on the
aforesaid periods have allegedly not been established, petitioners maintain that it is
inconceivable how they can possibly comply therewith. 12 In refutation, SLI avers that it is
standard practice in its operations to issue bills of lading for shipments entrusted to it for
carriage and that it in fact issued bills of lading numbered MD-25 and MD-26 therefor with
proof of their existence manifest in the records of the case. 13 For its part, DVAPSI insists on
 5

the propriety of the dismissal of the complaint as to it due to petitioners' failure to prove its
direct responsibility for the loss of and/or damage to the cargo. 14

On this point, in denying petitioner's motion for reconsideration, the Court of Appeals
resolved that although the bills of lading were not offered in evidence, the litigation
obviously revolves on such bills of lading which are practically the documents or
contracts sued upon, hence, they are inevitably involved and their provisions cannot be
disregarded in the determination of the relative rights of the parties thereto. 15

Respondent court correctly passed upon the matter of prescription, since that defense
was so considered and controverted by the parties. This issue may accordingly be taken
cognizance of by the court even if not inceptively raised as a defense so long as its
existence is plainly apparent on the face of relevant pleadings. 16 In the case at bar,
prescription as an affirmative defense was seasonably raised by SLI in its answer, 17 except
that the bills of lading embodying the same were not formally offered in evidence, thus
reducing the bone of contention to whether or not prescription can be maintained as such
defense and, as in this case, consequently upheld on the strength of mere references thereto.

As petitioners are suing upon SLI's contractual obligation under the contract of carriage
as contained in the bills of lading, such bills of lading can be categorized as actionable
documents which under the Rules must be properly pleaded either as causes of action or
defenses, 18 and the genuineness and due execution of which are deemed admitted unless
specifically denied under oath by the adverse party. 19 The rules on actionable documents
cover and apply to both a cause of action or defense based on said documents. 20

In the present case and under the aforestated assumption that the time limit involved is a
prescriptive period, respondent carrier duly raised prescription as an affirmative defense
in its answer setting forth paragraph 5 of the pertinent bills of lading which comprised the
stipulation thereon by parties, to wit:

5. Claims for shortage, damage, must be made at the time of delivery to

consignee or agent, if container shows exterior signs of damage or
shortage. Claims for non-delivery, misdelivery, loss or damage must be
filed within 30 days from accrual. Suits arising from shortage, damage or
loss, non-delivery or misdelivery shall be instituted within 60 days from
date of accrual of right of action. Failure to file claims or institute judicial
proceedings as herein provided constitutes waiver of claim or right of
action. In no case shall carrier be liable for any delay, non-delivery,
misdelivery, loss of damage to cargo while cargo is not in actual custody
of carrier. 21

In their reply thereto, herein petitioners, by their own assertions that

2. In connection with Pars. 14 and 15 of defendant Sweet Lines, Inc.'s

Answer, plaintiffs state that such agreements are what the Supreme
Court considers as contracts of adhesion (see Sweet Lines, Inc. vs. Hon.
Bernardo Teves, et al., G.R. No. L-37750, May 19, 1978) and,
consequently, the provisions therein which are contrary to law and public
policy cannot be availed of by answering defendant as valid defenses. 22

thereby failed to controvert the existence of the bills of lading and the aforequoted
provisions therein, hence they impliedly admitted the same when they merely assailed
the validity of subject stipulations.

Petitioners' failure to specifically deny the existence, much less the genuineness and due
execution, of the instruments in question amounts to an admission. Judicial admissions,
 6

verbal or written, made by the parties in the pleadings or in the course of the trial or other
proceedings in the same case are conclusive, no evidence being required to prove the
same, and cannot be contradicted unless shown to have been made through palpable
mistake or that no such admission was made. 23 Moreover, when the due execution and
genuineness of an instrument are deemed admitted because of the adverse party's failure to
make a specific verified denial thereof, the instrument need not be presented formally in
evidence for it may be considered an admitted fact. 24

Even granting that petitioners' averment in their reply amounts to a denial, it has the
procedural earmarks of what in the law on pleadings is called a negative pregnant, that
is, a denial pregnant with the admission of the substantial facts in the pleading
responded to which are not squarely denied. It is in effect an admission of the averment it
is directed to. 25 Thus, while petitioners objected to the validity of such agreement for being
contrary to public policy, the existence of the bills of lading and said stipulations were
nevertheless impliedly admitted by them.

We find merit in respondent court's comments that petitioners failed to touch on the
matter of the non-presentation of the bills of lading in their brief and earlier on in the
appellate proceedings in this case, hence it is too late in the day to now allow the
litigation to be overturned on that score, for to do so would mean an over-indulgence in
technicalities. Hence, for the reasons already advanced, the non-inclusion of the
controverted bills of lading in the formal offer of evidence cannot, under the facts of this
particular case, be considered a fatal procedural lapse as would bar respondent carrier
from raising the defense of prescription. Petitioners' feigned ignorance of the provisions
of the bills of lading, particularly on the time limitations for filing a claim and for
commencing a suit in court, as their excuse for non-compliance therewith does not
deserve serious attention.

It is to be noted that the carriage of the cargo involved was effected pursuant to an
"Application for Delivery of Cargoes without Original Bill of Lading" issued on May 20,
1977 in Davao City 26 with the notation therein that said application corresponds to and is
subject to the terms of bills of lading MD-25 and MD-26. It would be a safe assessment to
interpret this to mean that, sight unseen, petitioners acknowledged the existence of said bills
of lading. By having the cargo shipped on respondent carrier's vessel and later making a
claim for loss on the basis of the bills of lading, petitioners for all intents and purposes
accepted said bills. Having done so they are bound by all stipulations contained
therein. 27 Verily, as petitioners are suing for recovery on the contract, and in fact even went
as far as assailing its validity by categorizing it as a contract of adhesion, then they
necessarily admit that there is such a contract, their knowledge of the existence of which with
its attendant stipulations they cannot now be allowed to deny.

On the issue of the validity of the controverted paragraph 5 of the bills of lading above
quoted which unequivocally prescribes a time frame of thirty (30) days for filing a claim
with the carrier in case of loss of or damage to the cargo and sixty (60) days from accrual
of the right of action for instituting an action in court, which periods must concur,
petitioners posit that the alleged shorter prescriptive period which is in the nature of a
limitation on petitioners' right of recovery is unreasonable and that SLI has the burden of
proving otherwise, citing the earlier case of Southern Lines, Inc. vs. Court of Appeals, et
al. 28 They postulate this on the theory that the bills of lading containing the same constitute
contracts of adhesion and are, therefore, void for being contrary to public policy, supposedly
pursuant to the dictum in Sweet Lines, Inc. vs. Teves, et al. 29

Furthermore, they contend, since the liability of private respondents has been clearly
established, to bar petitioners' right of recovery on a mere technicality will pave the way
for unjust enrichment. 30 Contrarily, SLI asserts and defends the reasonableness of the time
limitation within which claims should be filed with the carrier; the necessity for the same, as
this condition for the carrier's liability is uniformly adopted by nearly all shipping companies if
 7

they are to survive the concomitant rigors and risks of the shipping industry; and the
countervailing balance afforded by such stipulation to the legal presumption of negligence
under which the carrier labors in the event of loss of or damage to the cargo. 31

It has long been held that Article 366 of the Code of Commerce applies not only to
overland and river transportation but also to maritime
transportation. 32 Moreover, we agree that in this jurisdiction, as viewed from another angle, it
is more accurate to state that the filing of a claim with the carrier within the time limitation
therefor under Article 366 actually constitutes a condition precedent to the accrual of a right of
action against a carrier for damages caused to the merchandise. The shipper or the
consignee must allege and prove the fulfillment of the condition and if he omits such
allegations and proof, no right of action against the carrier can accrue in his favor. As the
requirements in Article 366, restated with a slight modification in the assailed paragraph 5 of
the bills of lading, are reasonable conditions precedent, they are not limitations of
action. 33 Being conditions precedent, their performance must precede a suit for
enforcement 34 and the vesting of the right to file spit does not take place until the happening
of these conditions. 35

Now, before an action can properly be commenced all the essential elements of the
cause of action must be in existence, that is, the cause of action must be complete. All
valid conditions precedent to the institution of the particular action, whether prescribed by
statute, fixed by agreement of the parties or implied by law must be performed or
complied with before commencing the action, unless the conduct of the adverse party
has been such as to prevent or waive performance or excuse non-performance of the
condition. 36

It bears restating that a right of action is the right to presently enforce a cause of action,
while a cause of action consists of the operative facts which give rise to such right of
action. The right of action does not arise until the performance of all conditions precedent
to the action and may be taken away by the running of the statute of limitations, through
estoppel, or by other circumstances which do not affect the cause of
action. 37 Performance or fulfillment of all conditions precedent upon which a right of action
depends must be sufficiently alleged, 38 considering that the burden of proof to show that a
party has a right of action is upon the person initiating the suit. 39

More particularly, where the contract of shipment contains a reasonable requirement of

giving notice of loss of or injury to the goods, the giving of such notice is a condition
precedent to the action for loss or injury or the right to enforce the carrier's liability. Such
requirement is not an empty formalism. The fundamental reason or purpose of such a
stipulation is not to relieve the carrier from just liability, but reasonably to inform it that the
shipment has been damaged and that it is charged with liability therefor, and to give it an
opportunity to examine the nature and extent of the injury. This protects the carrier by
affording it an opportunity to make an investigation of a claim while the matter is fresh
and easily investigated so as to safeguard itself from false and fraudulent claims. 40

Stipulations in bills of lading or other contracts of shipment which require notice of claim
for loss of or damage to goods shipped in order to impose liability on the carrier operate
to prevent the enforcement of the contract when not complied with, that is, notice is a
condition precedent and the carrier is not liable if notice is not given in accordance with
the stipulation, 41 as the failure to comply with such a stipulation in a contract of carriage with
42
respect to notice of loss or claim for damage bars recovery for the loss or damage suffered.

On the other hand, the validity of a contractual limitation of time for filing the suit itself
against a carrier shorter than the statutory period therefor has generally been upheld as
such stipulation merely affects the shipper's remedy and does not affect the liability of the
carrier. In the absence of any statutory limitation and subject only to the requirement on
the reasonableness of the stipulated limitation period, the parties to a contract of carriage
 8

may fix by agreement a shorter time for the bringing of suit on a claim for the loss of or
damage to the shipment than that provided by the statute of limitations. Such limitation is
not contrary to public policy for it does not in any way defeat the complete vestiture of the
right to recover, but merely requires the assertion of that right by action at an earlier
period than would be necessary to defeat it through the operation of the ordinary statute
of limitations. 43

In the case at bar, there is neither any showing of compliance by petitioners with the
requirement for the filing of a notice of claim within the prescribed period nor any
allegation to that effect. It may then be said that while petitioners may possibly have a
cause of action, for failure to comply with the above condition precedent they lost
whatever right of action they may have in their favor or, token in another sense, that
remedial right or right to relief had prescribed. 44

The shipment in question was discharged into the custody of the consignee on May 15,
1977, and it was from this date that petitioners' cause of action accrued, with thirty (30)
days therefrom within which to file a claim with the carrier for any loss or damage which
may have been suffered by the cargo and thereby perfect their right of action. The
findings of respondent court as supported by petitioners' formal offer of evidence in the
court below show that the claim was filed with SLI only on April 28, 1978, way beyond the
period provided in the bills of lading 45 and violative of the contractual provision, the
inevitable consequence of which is the loss of petitioners' remedy or right to sue. Even the
filing of the complaint on May 12, 1978 is of no remedial or practical consequence, since the
time limits for the filing thereof, whether viewed as a condition precedent or as a prescriptive
period, would in this case be productive of the same result, that is, that petitioners had no
right of action to begin with or, at any rate, their claim was time-barred.

What the court finds rather odd is the fact that petitioner TPI filed a provisional claim with
DVAPSI as early as June 14, 1977 46 and, as found by the trial court, a survey fixing the
extent of loss of and/or damage to the cargo was conducted on July 8, 1977 at the instance of
petitioners. 47 If petitioners had the opportunity and awareness to file such provisional claim
and to cause a survey to be conducted soon after the discharge of the cargo, then they could
very easily have filed the necessary formal, or even a provisional, claim with SLI itself 48 within
the stipulated period therefor, instead of doing so only on April 28, 1978 despite the vessel's
arrival at the port of destination on May 15, 1977. Their failure to timely act brings us to no
inference other than the fact that petitioners slept on their rights and they must now face the
consequences of such inaction.

The ratiocination of the Court of Appeals on this aspect is worth reproducing:

xxx xxx xxx

It must be noted, at this juncture, that the aforestated time limitation in the
presentation of claim for loss or damage, is but a restatement of the rule
prescribed under Art. 366 of the Code of Commerce which reads as
follows:

Art. 366. Within the twenty-four hours following the receipt

of the merchandise, the claim against the carrier for
damage or average which may be found therein upon
opening the packages, may be made, provided that the
indications of the damage or average which gives rise to
the claim cannot be ascertained from the outside part of
the packages, in which case the claims shall be admitted
only at the time of the receipt.
 9

After the periods mentioned have elapsed, or the

transportation charges have been paid, no claim shall be
admitted against the carrier with regard to the condition in
which the goods transported were delivered.

Gleanable therefrom is the fact that subject stipulation even lengthened

the period for presentation of claims thereunder. Such modification has
been sanctioned by the Supreme Court. In the case of Ong Yet (M)ua
Hardware Co., Inc. vs. Mitsui Steamship Co., Ltd., et al., 59 O.G. No. 17,
p. 2764, it ruled that Art. 366 of the Code of Commerce can be modified
by a bill of lading prescribing the period of 90 days after arrival of the
ship, for filing of written claim with the carrier or agent, instead of the 24-
hour time limit after delivery provided in the aforecited legal provision.

Tested, too, under paragraph 5 of said Bill of Lading, it is crystal clear that
the commencement of the instant suit on May 12, 1978 was indeed fatally
late. In view of the express provision that "suits arising from
. . . damage or loss shall be instituted within 60 days from date of accrual
of right of action," the present action necessarily fails on ground of
prescription.

In the absence of constitutional or statutory prohibition, it

is usually held or recognized that it is competent for the
parties to a contract of shipment to agree on a limitation of
time shorter than the statutory period, within which action
for breach of the contract shall be brought, and such
limitation will be enforced if reasonable . . . (13 C.J.S.
496-497)

A perusal of the pertinent provisions of law on the matter would disclose

that there is no constitutional or statutory prohibition infirming paragraph 5
of subject Bill of Lading. The stipulated period of 60 days is reasonable
enough for appellees to ascertain the facts and thereafter to sue, if need
be, and the 60-day period agreed upon by the parties which shortened
the statutory period within which to bring action for breach of contract is
valid and binding. . . . (Emphasis in the original text.) 49

As explained above, the shortened period for filing suit is not unreasonable and has in
fact been generally recognized to be a valid business practice in the shipping industry.
Petitioners' advertence to the Court's holding in the Southern Lines case, supra, is futile
as what was involved was a claim for refund of excess payment. We ruled therein that
non-compliance with the requirement of filing a notice of claim under Article 366 of the
Code of Commerce does not affect the consignee's right of action against the carrier
because said requirement applies only to cases for recovery of damages on account of
loss of or damage to cargo, not to an action for refund of overpayment, and on the further
consideration that neither the Code of Commerce nor the bills of lading therein provided
any time limitation for suing for refund of money paid in excess, except only that it be filed
within a reasonable time.

The ruling in Sweet Lines categorizing the stipulated limitation on venue of action
provided in the subject bill of lading as a contract of adhesion and, under the
circumstances therein, void for being contrary to public policy is evidently likewise
unavailing in view of the discrete environmental facts involved and the fact that the
restriction therein was unreasonable. In any case, Ong Yiu vs. Court of Appeals, et
al., 50 instructs us that "contracts of adhesion wherein one party imposes a ready-made form
of contract on the other . . . are contracts not entirely prohibited. The one who adheres to the
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contract is in reality free to reject it entirely; if he adheres he gives his consent." In the present
case, not even an allegation of ignorance of a party excuses non-compliance with the
contractual stipulations since the responsibility for ensuring full comprehension of the
provisions of a contract of carriage devolves not on the carrier but on the owner, shipper, or
consignee as the case may be.

While it is true that substantial compliance with provisions on filing of claim for loss of or
damage to cargo may sometimes suffice, the invocation of such an assumption must be
viewed vis-a-vis the object or purpose which such a provision seeks to attain and that is
to afford the carrier a reasonable opportunity to determine the merits and validity of the
claim and to protect itself against unfounded impositions. 51 Petitioners' would nevertheless
adopt an adamant posture hinged on the issuance by SLI of a "Report on Losses and
Damages," dated May 15, 1977, 52 from which petitioners theorize that this charges private
respondents with actual knowledge of the loss and damage involved in the present case as
would obviate the need for or render superfluous the filing of a claim within the stipulated
period.

Withal, it has merely to be pointed out that the aforementioned report bears this notation
at the lower part thereof: "Damaged by Mla. labor upon unloading; B/L noted at port of
origin," as an explanation for the cause of loss of and/or damage to the cargo, together
with an iterative note stating that "(t)his Copy should be submitted together with your
claim invoice or receipt within 30 days from date of issue otherwise your claim will not be
honored."

Moreover, knowledge on the part of the carrier of the loss of or damage to the goods
deducible from the issuance of said report is not equivalent to nor does it approximate
the legal purpose served by the filing of the requisite claim, that is, to promptly apprise
the carrier about a consignee's intention to file a claim and thus cause the prompt
investigation of the veracity and merit thereof for its protection. It would be an unfair
imposition to require the carrier, upon discovery in the process of preparing the report on
losses or damages of any and all such loss or damage, to presume the existence of a
claim against it when at that time the carrier is expectedly concerned merely with
accounting for each and every shipment and assessing its condition. Unless and until a
notice of claim is therewith timely filed, the carrier cannot be expected to presume that for
every loss or damage tallied, a corresponding claim therefor has been filed or is already
in existence as would alert it to the urgency for an immediate investigation of the
soundness of the claim. The report on losses and damages is not the claim referred to
and required by the bills of lading for it does not fix responsibility for the loss or damage,
but merely states the condition of the goods shipped. The claim contemplated herein, in
whatever form, must be something more than a notice that the goods have been lost or
damaged; it must contain a claim for compensation or indicate an intent to claim. 53

Thus, to put the legal effect of respondent carrier's report on losses or damages, the
preparation of which is standard procedure upon unloading of cargo at the port of
destination, on the same level as that of a notice of claim by imploring substantial
compliance is definitely farfetched. Besides, the cited notation on the carrier's report itself
makes it clear that the filing of a notice of claim in any case is imperative if carrier is to be
held liable at all for the loss of or damage to cargo.

Turning now to respondent DVAPSI and considering that whatever right of action
petitioners may have against respondent carrier was lost due to their failure to
seasonably file the requisite claim, it would be awkward, to say the least, that by some
convenient process of elimination DVAPSI should proverbially be left holding the bag,
and it would be pure speculation to assume that DVAPSI is probably responsible for the
loss of or damage to cargo. Unlike a common carrier, an arrastre operator does not labor
under a presumption of negligence in case of loss, destruction or deterioration of goods
discharged into its custody. In other words, to hold an arrastre operator liable for loss of
 11

and/or damage to goods entrusted to it there must be preponderant evidence that it did
not exercise due diligence in the handling and care of the goods.

Petitioners failed to pinpoint liability on any of the original defendants and in this
seemingly wild goose-chase, they cannot quite put their finger down on when, where,
how and under whose responsibility the loss or damage probably occurred, or as stated
in paragraph 8 of their basic complaint filed in the court below, whether "(u)pon discharge
of the cargoes from the original carrying vessel, the SS VISHVA YASH," and/or upon
discharge of the cargoes from the interisland vessel the MV "SWEET LOVE," in Davao
City and later while in the custody of defendant arrastre operator. 54

The testimony of petitioners' own witness, Roberto Cabato, Jr., Marine and Aviation
Claims Manager of petitioner Philamgen, was definitely inconclusive and the
responsibility for the loss or damage could still not be ascertained therefrom:

Q In other words, Mr. Cabato, you only computed the loss

on the basis of the figures submitted to you and based on
the documents like the survey certificate and the
certificate of the arrastre?

A Yes, sir.

Q Therefore, Mr. Cabato, you have no idea how or where

these losses were incurred?

A No, sir.

xxx xxx xxx

Q Mr. Witness, you said that you processed and

investigated the claim involving the shipment in question.
Is it not a fact that in your processing and investigation
you considered how the shipment was transported?
Where the losses could have occurred and what is the
extent of the respective responsibilities of the bailees
and/or carriers involved?

xxx xxx xxx

A With respect to the shipment being transported, we

have of course to get into it in order to check whether the
shipment coming in to this port is in accordance with the
policy condition, like in this particular case, the shipment
was transported to Manila and transhipped through an
interisland vessel in accordance with the policy. With
respect to the losses, we have a general view where
losses could have occurred. Of course we will have to
consider the different bailees wherein the shipment must
have passed through, like the ocean vessel, the
interisland vessel and the arrastre, but definitely at that
point and time we cannot determine the extent of each
liability. We are only interested at that point and time in
the liability as regards the underwriter in accordance with
the policy that we issued.

xxx xxx xxx

 12

Q Mr. Witness, from the documents, namely, the survey of

Manila Adjusters and Surveyors Company, the survey of
Davao Arrastre contractor and the bills of lading issued by
the defendant Sweet Lines, will you be able to tell the
respective liabilities of the bailees and/or carriers
concerned?

A No, sir. (Emphasis ours.) 55

Neither did nor could the trial court, much less the Court of Appeals, precisely establish
the stage in the course of the shipment when the goods were lost, destroyed or
damaged. What can only be inferred from the factual findings of the trial court is that by
the time the cargo was discharged to DVAPSI, loss or damage had already occurred and
that the same could not have possibly occurred while the same was in the custody of
DVAPSI, as demonstrated by the observations of the trial court quoted at the start of this
opinion.

ACCORDINGLY, on the foregoing premises, the instant petition is DENIED and the
dismissal of the complaint in the court a quo as decreed by respondent Court of Appeals
in its challenged judgment is hereby AFFIRMED.

SO ORDERED.

Narvasa, C.J., Padilla and Nocon, JJ., concur.

 13

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-8095 March 31, 1915

F.C. FISHER, plaintiff,

vs.
YANGCO STEAMSHIP COMPANY, J.S. STANLEY, as Acting Collector of Customs
of the Philippine Islands, IGNACIO VILLAMOR, as Attorney-General of the
Philippine Islands, and W.H. BISHOP, as prosecuting attorney of the city of
Manila, respondents.

Haussermann, Cohn and Fisher for plaintiff.

Office of the Solicitor-General Harvey for respondents.

CARSON, J.:

The real question involved in these proceedings is whether the refusal of the owners and
officers of a steam vessel, duly licensed to engage in the coastwise trade of the
Philippine Islands and engaged in that trade as a common carrier, to accept for carriage
"dynamite, powder or other explosives" from any and all shippers who may offer such
explosives for carriage can be held to be a lawful act without regard to any question as to
the conditions under which such explosives are offered to carriage, or as to the
suitableness of the vessel for the transportation of such explosives, or as to the
possibility that the refusal to accept such articles of commerce in a particular case may
have the effect of subjecting any person or locality or the traffic in such explosives to an
undue, unreasonable or unnecessary prejudice or discrimination.

Summarized briefly, the complaint alleges that plaintiff is a stockholder in the Yangco
Steamship Company, the owner of a large number of steam vessels, duly licensed to
engage in the coastwise trade of the Philippine Islands; that on or about June 10, 1912,
the directors of the company adopted a resolution which was thereafter ratified and
affirmed by the shareholders of the company, "expressly declaring and providing that the
classes of merchandise to be carried by the company in its business as a common
carrier do not include dynamite, powder or other explosives, and expressly prohibiting the
officers, agents and servants of the company from offering to carry, accepting for
carriage said dynamite, powder or other explosives;" that thereafter the respondent
Acting Collector of Customs demanded and required of the company the acceptance and
carriage of such explosives; that he has refused and suspended the issuance of the
necessary clearance documents of the vessels of the company unless and until the
company consents to accept such explosives for carriage; that plaintiff is advised and
believes that should the company decline to accept such explosives for carriage, the
respondent Attorney-General of the Philippine Islands and the respondent prosecuting
attorney of the city of Manila intend to institute proceedings under the penal provisions of
sections 4, 5, and 6 of Act No. 98 of the Philippine Commission against the company, its
managers, agents and servants, to enforce the requirements of the Acting Collector of
Customs as to the acceptance of such explosives for carriage; that notwithstanding the
demands of the plaintiff stockholder, the manager, agents and servants of the company
decline and refuse to cease the carriage of such explosives, on the ground that by
reason of the severity of the penalties with which they are threatened upon failure to
carry such explosives, they cannot subject themselves to "the ruinous consequences
which would inevitably result" from failure on their part to obey the demands and
requirements of the Acting Collector of Customs as to the acceptance for carriage of
 14

explosives; that plaintiff believes that the Acting Collector of Customs erroneously
construes the provisions of Act No. 98 in holding that they require the company to accept
such explosives for carriage notwithstanding the above mentioned resolution of the
directors and stockholders of the company, and that if the Act does in fact require the
company to carry such explosives it is to that extent unconstitutional and void; that
notwithstanding this belief of complainant as to the true meaning of the Act, the questions
involved cannot be raised by the refusal of the company or its agents to comply with the
demands of the Acting Collector of Customs, without the risk of irreparable loss and
damage resulting from his refusal to facilitate the documentation of the company's
vessels, and without assuming the company to test the questions involved by refusing to
accept such explosives for carriage.

The prayer of the complaint is as follows:

Wherefore your petitioner prays to this honorable court as follows:

First. That to the due hearing of the above entitled action be issued a writ of
prohibition perpetually restraining the respondent Yangco Steamship Company,
its appraisers, agents, servants or other representatives from accepting to carry
and from carrying, in steamers of said company dynamite, powder or other
explosive substance, in accordance with the resolution of the board of directors
and of the shareholders of said company.

Second. That a writ of prohibition be issued perpetually enjoining the respondent

J.S. Stanley as Acting Collector of Customs of the Philippine Islands, his
successors, deputies, servants or other representatives, from obligating the said
Yangco Steamship Company, by any means whatever, to carry dynamite,
powder or other explosive substance.

Third. That a writ of prohibition be issued perpetually enjoining the respondent

Ignacio Villamor as Attorney-General of the Philippine Islands, and W.H. Bishop
as prosecuting attorney of the city of Manila, their deputies representatives or
employees, from accusing the said Yangco Steamship Company, its officers,
agents or servants, of the violation of Act No. 98 by reason of the failure or
omission of the said company to accept for carriage out to carry dynamite powder
or other explosive.

Fourth. That the petitioner be granted such other remedy as may be meet and
proper.

To this complaint the respondents demurred, and we are of opinion that the demurrer
must be sustained, on the ground that the complaint does not set forth facts sufficient to
constitute a cause of action.

It will readily be seen that plaintiff seeks in these proceedings to enjoin the steamship
company from accepting for carriage on any of its vessels, dynamite, powder or other
explosives, under any conditions whatsoever; to prohibit the Collector of Customs and
the prosecuting officers of the government from all attempts to compel the company to
accept such explosives for carriage on any of its vessels under any conditions
whatsoever; and to prohibit these officials from any attempt to invoke the penal
provisions of Act No. 98, in any case of a refusal by the company or its officers so to do;
and this without regard to the conditions as to safety and so forth under which such
explosives are offered for carriage, and without regard also to any question as to the
suitableness for the transportation of such explosives of the particular vessel upon which
the shipper offers them for carriage; and further without regard to any question as to
whether such conduct on the part of the steamship company and its officers involves in
 15

any instance an undue, unnecessary or unreasonable discrimination to the prejudice of

any person, locality or particular kind of traffic.

There are no allegations in the complaint that for some special and sufficient reasons all
or indeed any of the company's vessels are unsuitable for the business of transporting
explosives; or that shippers have declined or will in future decline to comply with such
reasonable regulations and to take such reasonable precautions as may be necessary
and proper to secure the safety of the vessels of the company in transporting such
explosives. Indeed the contention of petitioner is that a common carrier in the Philippine
Islands may decline to accept for carriage any shipment of merchandise of a class which
it expressly or impliedly declines to accept from all shippers alike, because as he
contends "the duty of a common carrier to carry for all who offer arises from the public
profession he has made, and limited by it."

In support of this contention counsel cites for a number of English and American
authorities, discussing and applying the doctrine of the common law with reference to
common carriers. But it is unnecessary now to decide whether, in the absence of statute,
the principles on which the American and English cases were decided would be
applicable in this jurisdiction. The duties and liabilities of common carriers in this
jurisdiction are defined and fully set forth in Act No. 98 of the Philippine Commission, and
until and unless that statute be declared invalid or unconstitutional, we are bound by its
provisions.

Sections 2, 3 and 4 of the Act are as follows:

SEC. 2. It shall be unlawful for any common carrier engaged in the transportation
of passengers or property as above set forth to make or give any unnecessary or
unreasonable preference or advantage to any particular person, company, firm,
corporation or locality, or any particular kind of traffic in any respect whatsoever,
or to subject any particular person, company, firm, corporation or locality, or any
particular kind of traffic, to undue or unreasonable prejudice or discrimination
whatsoever, and such unjust preference or discrimination is also hereby
prohibited and declared to be unlawful.

SEC. 3. No common carrier engaged in the carriage of passengers or property as

aforesaid shall, under any pretense whatsoever, fail or refuse to receive for
carriage, and as promptly as it is able to do so without discrimination, to carry any
person or property offering for carriage, and in the order in which such persons or
property are offered for carriage, nor shall any such common carrier enter into
any arrangement, contract or agreement with any other person or corporation
whereby the latter is given an exclusive or preferential or monopolize the carriage
any class or kind of property to the exclusion or partial exclusion of any other
person or persons, and the entering into any such arrangement, contract or
agreement, under any form or pretense whatsoever, is hereby prohibited and
declared to be unlawful.

SEC. 4. Any willful violation of the provisions of this Act by any common carrier
engaged in the transportation of passengers or property as hereinbefore set forth
is hereby declared to be punishable by a fine not exceeding five thousand dollars
money of the United States, or by imprisonment not exceeding two years, or
both, within the discretion of the court.

The validity of this Act has been questioned on various grounds, and it is vigorously
contended that in so far as it imposes any obligation on a common carrier to accept for
carriage merchandise of a class which he makes no public profession to carry, or which
 16

he has expressly or impliedly announced his intention to decline to accept for carriage
from all shippers alike, it is ultra vires, unconstitutional and void.

We may dismiss without extended discussion any argument or contention as to the

invalidity of the statute based on alleged absurdities inherent in its provisions or on
alleged unreasonable or impossible requirements which may be read into it by a strained
construction of its terms.

We agree with counsel for petitioner that the provision of the Act which prescribes that,
"No common carrier ... shall, under any pretense whatsoever, fail or refuse to receive for
carriage ... to carry any person or property offering for carriage," is not to be construed in
its literal sense and without regard to the context, so as to impose an imperative duty on
all common carriers to accept for carriage, and to carry all and any kind of freight which
may be offered for carriage without regard to the facilities which they may have at their
disposal. The legislator could not have intended and did not intend to prescribe that a
common carrier running passenger automobiles for hire must transport coal in his
machines; nor that the owner of a tank steamer, expressly constructed in small watertight
compartments for the carriage of crude oil must accept common carrier must accept and
carry contraband articles, such as opium, morphine, cocaine, or the like, the mere
possession of which is declared to be a criminal offense; nor that common carriers must
accept eggs offered for transportation in paper parcels or any merchandise whatever do
defectively packed as to entail upon the company unreasonable and unnecessary care or
risks.

Read in connection with its context this, as well as all the other mandatory and
prohibitory provisions of the statute, was clearly intended merely to forbid failures or
refusals to receive persons or property for carriage involving any "unnecessary or
unreasonable preference or advantage to any particular person, company, firm,
corporation, or locality, or any particular kind of traffic in any respect whatsoever," or
which would "subject any particular person, company, firm, corporation or locality, or any
particular kind of traffic to any undue or unreasonable prejudice or discrimination
whatsoever."

The question, then, of construing and applying the statute, in cases of alleged violations
of its provisions, always involves a consideration as to whether the acts complained of
had the effect of making or giving an "unreasonable or unnecessary preference or
advantage" to any person, locality or particular kind of traffic, or of subjecting any person,
locality, or particular kind of traffic to any undue or unreasonable prejudice or
discrimination. It is very clear therefore that the language of the statute itself refutes any
contention as to its invalidity based on the alleged unreasonableness of its mandatory or
prohibitory provisions.

So also we may dismiss without much discussion the contentions as to the invalidity of
the statute, which are based on the alleged excessive severity of the penalties prescribed
for violation of its provisions. Upon general principles it is peculiarly and exclusively within
the province of the legislator to prescribe the pains and penalties which may be imposed
upon persons convicted of violations of the laws in force within his territorial jurisdiction.
With the exercise of his discretion in this regard where it is alleged that excessive fines or
cruel and unusual punishments have been prescribed, and even in such cases the courts
will not presume to interfere in the absence of the clearest and most convincing argument
and proof in support of such contentions. (Weems vs. United States, 217 U.S., 349;
U.S. vs. Pico, 18 Phil. Rep., 386.) We need hardly add that there is no ground upon
which to rest a contention that the penalties prescribed in the statute under consideration
are either excessive or cruel and unusual, in the sense in which these terms are used in
the organic legislation in force in the Philippine Islands.
 17

But it is contended that on account of the penalties prescribed the statute should be held
invalid upon the principles announced in Ex parte Young (209 U.S., 123, 147, 148);
Cotting vs. Goddard (183 U.S., 79, 102); Mercantile Trust Co. vs. Texas Co. (51 Fed.,
529); Louisville Ry. vs. McCord (103 Fed., 216); Cons. Gas Co. vs. Mayer (416 Fed.,
150). We are satisfied however that the reasoning of those cases is not applicable to the
statute under consideration. The principles announced in those decisions are fairly
indicated in the following citations found in petitioner's brief:

But when the legislature, in an effort to prevent any inquiry of the validity of a particular
statute, so burdens any challenge thereof in the courts that the party affected is
necessarily constrained to submit rather than take the chances of the penalties imposed,
then it becomes a serious question whether the party is not deprived of the equal
protection of the laws. (Cotting vs. Goddard, 183 U. S., 79, 102.)

It may therefore be said that when the penalties for disobedience are by fines so
enormous and imprisonment so severe as to intimidate the company and its
officers from resorting to the courts to test the validity of the legislation, the result
is the same as if the law in terms prohibited the company from seeking judicial
construction of laws which deeply affect its rights.

It is urged that there is no principle upon which to base the claim that a person is
entitled to disobey a statute at least once, for the purpose of testing its validity,
without subjecting himself to the penalties for disobedience provided by the
statute in case it is valid. This is not an accurate statement of the case. Ordinarily
a law creating offenses in the nature of misdemeanors or felonies relates to a
subject over which the jurisdiction of the legislature is complete in any event. In
the case, however, of the establishment of certain rates without any hearing, the
validity of such rates necessarily depends upon whether they are high enough to
permit at least some return upon the investment (how much it is not now
necessary to state), and an inquiry as to that fact is a proper subject of judicial
investigation. If it turns out that the rates are too low for that purpose, then they
are illegal. Now, to impose upon a party interested the burden of obtaining a
judicial decision of such a question (no prior hearing having been given) only
upon the condition that, if unsuccessful, he must suffer imprisonment and pay
fines, as provided in these acts, is, in effect, to close up all approaches to the
courts, and thus prevent any hearing upon the question whether the rates as
provided by the acts are not too low, and therefore invalid. The distinction is
obvious between a case where the validity of the act depends upon the existence
of a fact which can be determined only after investigation of a very complicated
and technical character, and the ordinary case of a statute upon a subject
requiring no such investigation, and over which the jurisdiction of the legislature is
complete in any event.

We hold, therefore, that the provisions of the acts relating to the enforcement of
the rates, either for freight or passengers, by imposing such enormous fines and
possible imprisonment as a result of an unsuccessful effort to test the validity of
the laws themselves, are unconstitutional on their face, without regard to the
question of the insufficiency of those rates. (Ex parte Young, 209 U.S., 123 147,
148.)

An examination of the general provisions of our statute, of the circumstances under

which it was enacted, the mischief which it sought to remedy and of the nature of the
penalties prescribed for violations of its terms convinces us that, unlike the statutes under
consideration in the above cited cases, its enactment involved no attempt to prevent
common carriers "from resorting to the courts to test the validity of the legislation;" no
"effort to prevent any inquiry" as to its validity. It imposes no arbitrary obligation upon the
company to do or to refrain from doing anything. It makes no attempt to compel such
 18

carriers to do business at a fixed or arbitrarily designated rate, at the risk of separate

criminal prosecutions for every demand of a higher or a different rate. Its penalties can be
imposed only upon proof of "unreasonable," "unnecessary" and "unjust" discriminations,
and range from a maximum which is certainly not excessive for willful, deliberate and
contumacious violations of its provisions by a great and powerful corporation, to a
minimum which may be a merely nominal fine. With so wide a range of discretion for a
contention on the part of any common carrier that it or its officers are "intimidated from
resorting to the courts to test the validity" of the provisions of the statute prohibiting such
"unreasonable," "unnecessary" and "unjust" discriminations, or to test in any particular
case whether a given course of conduct does in fact involve such discrimination. We will
presume, for the purpose of declaring the statute invalid, that there is so real a danger
that the Courts of First Instance and this court on appeal will abuse the discretion thus
conferred upon us, as to intimidate any common carrier, acting in good faith, from
resorting to the courts to test the validity of the statute. Legislative enactments, penalizing
unreasonable discriminations, unreasonable restraints of trade, and unreasonable
conduct in various forms of human activity are so familiar and have been so frequently
sustained in the courts, as to render extended discussion unnecessary to refute any
contention as to the invalidity of the statute under consideration, merely it imposes upon
the carrier the obligation of adopting one of various courses of conduct open to it, at the
risk of incurring a prescribed penalty in the event that the course of conduct actually
adopted by it should be held to have involved an unreasonable, unnecessary or unjust
discrimination. Applying the test announced in Ex parte Young, supra, it will be seen that
the validity of the Act does not depend upon "the existence of a fact which can be
determined only after investigation of a very complicated and technical character," and
that "the jurisdiction of the legislature" over the subject with which the statute deals "is
complete in any event." There can be no real question as to the plenary power of the
legislature to prohibit and to penalize the making of undue, unreasonable and unjust
discriminations by common carriers to the prejudice of any person, locality or particular
kind of traffic. (See Munn vs. Illinois, 94 U.S., 113, and other cases hereinafter cited in
support of this proposition.)

Counsel for petitioner contends also that the statute, if construed so as to deny the right
of the steamship company to elect at will whether or not it will engage in a particular
business, such as that of carrying explosives, is unconstitutional "because it is a
confiscation of property, a taking of the carrier's property without due process of law,"
and because it deprives him of his liberty by compelling him to engage in business
against his will. The argument continues as follows:

To require of a carrier, as a condition to his continuing in said business, that he

must carry anything and every thing is to render useless the facilities he may
have for the carriage of certain lines of freight. It would be almost as complete a
confiscation of such facilities as if the same were destroyed. Their value as a
means of livelihood would be utterly taken away. The law is a prohibition to him to
continue in business; the alternative is to get out or to go into some other
business the same alternative as was offered in the case of the Chicago &
N.W. Ry. vs. Dey (35 Fed. Rep., 866, 880), and which was there commented on
as follows:

"Whatever of force there may be in such arguments, as applied to mere

personal property capable of removal and use elsewhere, or in other
business, it is wholly without force as against railroad corporations, so
large a proportion of whose investment is in the soil and fixtures
appertaining thereto, which cannot be removed. For a government,
whether that government be a single sovereign or one of the majority, to
say to an individual who has invested his means in so laudable an
enterprise as the construction of a railroad, one which tends so much to
the wealth and prosperity of the community, that, if he finds that the rates
 19

imposed will cause him to do business at a loss, he may quit business,

and abandon that road, is the very irony of despotism. Apples of Sodom
were fruit of joy in comparison. Reading, as I do, in the preamble of the
Federal Constitution, that it was ordained to "establish justice," I can
never believe that it is within the property of an individual invested in and
used for a purpose in which even the Argus eyes of the police power can
see nothing injurious to public morals, public health, or the general
welfare. I read also in the first section of the bill of rights of this state that
"all men are by nature free and equal, and have certain inalienable rights,
among which are those of enjoying and defending life and liberty,
acquiring, possessing, and protecting property, and pursuing and
obtaining safety and happiness;" and I know that, while that remains as
the supreme law of the state, no legislature can directly or indirectly lay its
withering or destroying hand on a single dollar invested in the legitimate
business of transportation." (Chicago & N.W. Ry. vs. Dey, 35 Fed. Rep.,
866, 880.)

It is manifest, however, that this contention is directed against a construction of the

statute, which, as we have said, is not warranted by its terms. As we have already
indicated, the statute does not "require of a carrier, as a condition to his continuing in
said business, that he must carry anything and everything," and thereby "render useless
the facilities he may have for the carriage of certain lines of freight." It merely forbids
failures or refusals to receive persons or property for carriage which have the effect of
giving an "unreasonable or unnecessary preference or advantage" to any person, locality
or particular kind of traffic, or of subjecting any person, locality or particular kind of traffic
to any undue or unreasonable prejudice or discrimination.

Counsel expressly admits that the statute, "as a prohibition against discrimination is a
fair, reasonable and valid exercise of government," and that "it is necessary and proper
that such discrimination be prohibited and prevented," but he contends that "on the other
hand there is no reasonable warrant nor valid excuse for depriving a person of his liberty
by requiring him to engage in business against his will. If he has a rolling boat, unsuitable
and unprofitable for passenger trade, he may devote it to lumber carrying. To prohibit him
from using it unless it is fitted out with doctors and stewards and staterooms to carry
passengers would be an invalid confiscation of this property. A carrier may limit his
business to the branches thereof that suit his convenience. If his wagon be old, or the
route dangerous, he may avoid liability for loss of passengers' lives and limbs by carrying
freight only. If his vehicles require expensive pneumatic tires, unsuitable for freight
transportation, ha may nevertheless carry passengers. The only limitation upon his action
that it is competent for the governing authority to impose is to require him to treat all
alike. His limitations must apply to all, and they must be established limitations. He
cannot refuse to carry a case of red jusi on the ground that he has carried for others
 20

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-14078 February 24, 1961

MINDANAO BUS COMPANY, petitioner,

vs.
THE COLLECTOR OF INTERNAL REVENUE, respondent.

Felimon B. Barria and I.V. Binamira for petitioner.

Office of the Solicitor General for respondent.

LABRADOR, J.:

Appeal by certiorari from a decision of the Court of Tax Appeals, ordering the petitioner-
appellant Mindanao Bus Company to pay P15,704.16, as documentary stamp taxes for
the period from January 1, 1948 up to September 16, 1953. The decision sought to be
reviewed modifies an assessment by the Collector of Internal Revenue eliminating the
compromise penalty imposed by the Collector.

Petitioner is a common carrier engaged in transporting passengers and freight by means

of auto-buses in Northern Mindanao, under certificates of public convenience issued by
the Public Service Commission. Sometime in September, 1953, an agent of the
respondent Collector of Internal Revenue examined the books of accounts of the
petitioner and found that the freight tickets used by it do not contain the required
documentary stamp tax. Said agent took with him 500 booklets of tickets used by the
petitioner and counted the freight receipts contained therein. He counted 1,305 freight
tickets. Assuming that each freight ticket covers baggage valued at more than P5.00, the
Collector of Internal Revenue, upon recommendation of the agent, assessed against the
petitioner the sum of P15,704.16, exclusive of compromise penalty, as documentary
stamp taxes from January 1, 1948 up to September 16, 1953. The tax is computed in the
following manner:

Number of registered booklets of 100 tickets each,

from Oct. 29, 1948 to September 16, 1953 86,282
Number of booklets assessed to have been used
from Jan. 1, 1948 to Oct. 31, 1948 14,000
TOTAL NUMBER OF BOOKLETS USED FROM
Jan. 1, 1948 to Sept. 16, 1953 100,282
Number of Ticket Booklets verified as basis
for assessment 500
Number of freight tickets per booklet
of 100 tickets each 2.61
Total number of ticket booklets used
Jan. 1, 1948 to Sept. 16, 1953 100,282
Multiply by average number of freight tickets
per booklet 2.61
Documentary stamp tax on 261,736 Freight Tickets P15,704.16
TOTAL AMOUNT DUE & COLLECTIBLE P15,704.16
 21

The assessment of the Collector was appealed to the Court of Tax Appeals. In that court
the respondent Collector was declared in default and the petitioner presented its
evidence. The tax court, modified the decision of the Collector and ordered the petitioner
to pay only P15,704.16 as documentary stamp tax for the period above-stated, without
any compromise penalty. Upon petitioner's motion for reconsideration, the court resolved
to reopen the case, for the sole purpose of allowing the petitioner to present as evidence
the 500 booklets and 17 sackful, respectively, of passenger and freight tickets of the
petitioner. During the rehearing of the case, the petitioner, however, failed to submit the
said evidence; instead it presented stub tickets, Exhibits "X-1" and "X-2, which were
already in its possession during the first hearing. The Court of Tax Appeals denied the
motion for reconsideration. Hence, this appeal.

In this Court, petitioner-appellant presents the following assignments of error:

I. THE TAX COURT ERRED IN PRESUMING THE CORRECTNESS OF THE

ASSESSMENT, AND IN NOT FINDING SAME NOT BASED UPON THE BEST
EVIDENCE OBTAINABLE, BUT IS ARBITRARY, SPECULATIVE,
HYPOTHETICAL, GROSSLY EXAGGERATED AND WITHOUT FACTUAL
BASES.

II. THE TAX COURT ERRED IN HOLDING THAT THE TICKETS ISSUED FOR
EXCESS BAGGAGE ARE BILLS OF LADING SUBJECT TO THE
DOCUMENTARY STAMP TAX.

III. THE TAX COURT ERRED IN NOT FINDING AND DECLARING SECTION
127 OF REGULATION NO. 26 OF THE DEPARTMENT OF FINANCE
UNCONSTITUTIONAL.

IV. THE TAX COURT ERRED IN HOLDING THE PETITIONER LIABLE AND
REQUIRING IT TO PAY THE TAX ASSESSMENT OF P15,704.16.

In support of its first assignment of error, the petitioner-appellant claims that the
computation made by the respondent is not based upon the best available evidence, but
on mere presumptions. This claim is devoid of merit. The agent of the Bureau of Internal
Revenue who investigated the petitioner's books of accounts found it impossible to count
one by one the freight tickets contained in used booklets dumped inside the petitioner's
bodega, because the booklets were so numerous and most of them were either torn or
destroyed. The procedure followed by said agent, which is the average method, in
ascertaining the total number of freight tickets used during the period under review, can
not be improved because an actual count of the freight tickets is practically impossible.
The average method is the only way by which the agent could determine the number of
booklets used during the period in question.

The agent also correctly assumed that the value of the goods covered by each freight
ticket is not less than P5.00. It is a common practice of passengers in the rural areas not
to secure receipts for cargoes of small value and to demand receipts only for valuable
cargo (Interprovincial Autobus Co., Inc. vs. Collector of Internal Revenue, G.R. No. L-
6741, January 31, 1956.) If the freight tickets were issued, the baggage carried must
have been valuable enough.

On the other hand, it was the duty of petitioner to present evidence to show inaccuracy in
the above method of assessment (Interprovincial Autobus Co., Inc. vs. Collector, supra;
Perez vs. C.T.A., G.R. No. L-9193, May 29, 1957; Perez vs. C.T.A., et al., G.R. No. L-
10507, May 30, 1958; Government of P. I. vs. Monte de Piedad, 35 Phil. 42), but it failed
to do so. The claim of petitioner that the freight tickets issued by it are not bills of lading
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subject to documentary stamp tax must also be dismissed in view of our ruling in the
case of Interprovincial Autobus Co., Inc. vs. Collector, supra: .

But the claim that freight tickets of bus companies are not 'bills of lading or
receipts' within the meaning of the Documentary Stamp Tax Law is without merit.
Bills of Lading, in modern jurisprudence, are not those issued by masters of
vessels alone; they now comprehend all forms of transportation, whether by sea
or land, and includes the receipts for cargo transported.

The term 'bill of lading' is frequently defined, especially by the older authorities as
a writing signed by the master of a vessel acknowledging the receipts of goods
on board to be transported to a certain port and there delivered to a designated
person or on his order. This definition was formulated at a time when goods were
principally transported by sea and, while adequate in view of the conditions
existing at that early day, is too narrow to suit present conditions. As
comprehending all methods of transportation, a bill of lading may be defined as a
written acknowledgment of the receipt of goods and an agreement to transport
and to deliver them at a specified place to a person named or on his order. Such
instruments are sometimes called 'shipping receipts,' 'forwarders' receipts,' and
'receipts for transportation." The designation, however, is not material, and
neither is the form of the instrument. If it contains an acknowledgment by the
carrier of the receipt of goods for transportation, it is, in legal effect, a bill of
lading." (9 Am. Jur. 662, emphasis supplied) .

Section 227 of the National Internal Revenue Code imposes the tax on receipts
for goods or effects shipped from one port or place to another port or place in the
Philippines. The use of the word place after port and of the, word 'receipt' shows
that the receipts for goods shipped on land are included.

As its third assignment of error, the petitioner-appellant questions the validity of Section
127 of Regulation No. 26, insofar as it provides that chits, memoranda and other papers
not in the usual commercial form of bill of lading, when used by the common carrier in the
transportation of goods for the collection of fares, are to be considered bills of lading
subject to documentary stamp tax, alleging that said section is beyond the powers of the
Secretary of Finance, which are contained in Section 388 of the Tax Code. This
argument should also be dismissed for lack of merit. As the Solicitor General correctly
argues the validity of Section 127 of Regulation No. 26 should be upheld under the
principle of legislative approval by reenactment. Section 127 of said regulation sought to
implement Section 1449 (q) and (r) of the Revised Administrative Code, and the latter
provisions were reenacted in Section 227 of the National Internal Revenue Code. Section
127 is in the same Regulations as Section 121. We are quoting hereunder a portion of
the decision of this Court in the case of Interprovincial Autobus Co., Inc. vs. Collector,
supra, to sustain our ruling that the third assignment of error in the case at bar should be
dismissed:

Another reason for sustaining the validity of the regulation, may be found in the
principle of legislative approval by reenactment. The regulations were approved
on September 16, 1924. When the National Internal Revenue Code was
approved on February 18, 1939, the same provisions on stamp tax, bills of lading
and receipts were reenacted. There is a presumption that the legislature
reenacted the law on the tax with full knowledge of the contents of the regulations
then in force regarding bills of lading and receipts, and that it approved or
confirmed them because they carry out the legislative purpose.The fourth
assignment of error, being only a consequence of the first three, the same should
also be dismissed WHEREFORE, the decision appealed from should be affirmed,
with costs against petitioner-appellant.
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