Transpo - 190213 FT

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-6055 June 12, 1953
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
WILLIAM H. QUASHA, defendant-appellant.
Jose P. Laurel for appellant and William H. Quasha in his own behalf.
Office of the Solicitor General Juan R. Liwag and Assistant Solicitor General
Francisco Carreon for appellee.
REYES, J.:
William H. Quasha, a member of the Philippine bar, was charged in the Court of
First Instance of Manila with the crime of falsification of a public and commercial
document in that, having been entrusted with the preparation and registration of
the article of incorporation of the Pacific Airways Corporation, a domestic
corporation organized for the purpose of engaging in business as a common
carrier, he caused it to appear in said article of incorporation that one Arsenio
Baylon, a Filipino citizen, had subscribed to and was the owner of 60.005 per cent
of the subscribed capital stock of the corporation when in reality, as the accused
well knew, such was not the case, the truth being that the owner of the portion
of the capital stock subscribed to by Baylon and the money paid thereon were
American citizen whose name did not appear in the article of incorporation, and
that the purpose for making this false statement was to circumvent the
constitutional mandate that no corporation shall be authorize to operate as a
public utility in the Philippines unless 60 per cent of its capital stock is owned by
Filipinos.
Found guilty after trial and sentenced to a term of imprisonment and a fine, the
accused has appealed to this Court.
The essential facts are not in dispute. On November 4,1946, the Pacific Airways
Corporation registered its articles of incorporation with the Securities and
Exchanged Commission. The article were prepared and the registration was
effected by the accused, who was in fact the organizer of the corporation. The
article stated that the primary purpose of the corporation was to carry on the
business of a common carrier by air, land or water; that its capital stock was
P1,000,000, represented by 9,000 preferred and 100,000 common shares, each
preferred share being of the par value of p100 and entitled to 1/3 vote and each
common share, of the par value of P1 and entitled to one vote; that the amount
capital stock actually subscribed was P200,000, and the names of the subscribers
were Arsenio Baylon, Eruin E. Shannahan, Albert W. Onstott, James O'Bannon,
Denzel J. Cavin, and William H. Quasha, the first being a Filipino and the other
five all Americans; that Baylon's subscription was for 1,145 preferred shares, of
the total value of P114,500, and for 6,500 common shares, of the total par value
of P6,500, while the aggregate subscriptions of the American subscribers were for
200 preferred shares, of the total par value of P20,000, and 59,000 common shares,
of the total par value of P59,000; and that Baylon and the American subscribers
had already paid 25 per cent of their respective subscriptions. Ostensibly the
owner of, or subscriber to, 60.005 per cent of the subscribed capital stock of the
corporation, Baylon nevertheless did not have the controlling vote because of the
difference in voting power between the preferred shares and the common shares.
Still, with the capital structure as it was, the article of incorporation were accepted
for registration and a certificate of incorporation was issued by the Securities and
Exchange Commission.
There is no question that Baylon actually subscribed to 60.005 per cent of the
subscribed capital stock of the corporation. But it is admitted that the money paid
on his subscription did not belong to him but to the Americans subscribers to the
corporate stock. In explanation, the accused testified, without contradiction, that
in the process of organization Baylon was made a trustee for the American
incorporators, and that the reason for making Baylon such trustee was as follows:
Q. According to this article of incorporation Arsenio Baylon subscribed to 1,135

preferred shares with a total value of P1,135. Do you know how that came to be?
A. Yes.
The people who were desirous of forming the corporation, whose names are listed
on page 7 of this certified copy came to my house, Messrs. Shannahan, Onstott,
O'Bannon, Caven, Perry and Anastasakas one evening. There was considerable
difficulty to get them all together at one time because they were pilots. They had
difficulty in deciding what their respective share holdings would be. Onstott had
invested a certain amount of money in airplane surplus property and they had
obtained a considerable amount of money on those planes and as I recall they
were desirous of getting a corporation formed right away. And they wanted to
have their respective shares holdings resolved at a latter date. They stated that
they could get together that they feel that they had no time to settle their
respective share holdings. We discussed the matter and finally it was decided that
the best way to handle the things was not to put the shares in the name of anyone
of the interested parties and to have someone act as trustee for their respective
shares holdings. So we looked around for a trustee. And he said "There are a lot of
people whom I trust." He said, "Is there someone around whom we could get right
away?" I said, "There is Arsenio. He was my boy during the liberation and he cared
for me when i was sick and i said i consider him my friend." I said. They all knew
Arsenio. He is a very kind man and that was what was done. That is how it came
about.
Defendant is accused under article 172 paragraph 1, in connection with article

171, paragraph 4, of the Revised Penal Code, which read:
ART. 171. Falsification by public officer, employee, or notary or ecclesiastic

minister. — The penalty of prision mayor and a fine not to exceed 5,000 pesos
shall be imposed upon any public officer, employee, or notary who, taking
advantage of his official position, shall falsify a document by committing any of
the following acts:
xxx xxx xxx
4. Making untruthful statements in a narration of facts.
ART. 172. Falsification by private individuals and use of falsified documents . —

The penalty of prision correccional in its medium and maximum period and a fine
of not more than 5,000 pesos shall be imposed upon:
xxx xxx xxx

1. Any private individual who shall commit any of the falsifications enumerated
in the next preceding article in any public or official document or letter of
exchange or any other kind of commercial document.
Commenting on the above provision, Justice Albert, in his well-known work on

the Revised Penal Code ( new edition, pp. 407-408), observes, on the authority
of U.S. vs. Reyes, (1 Phil., 341), that the perversion of truth in the narration of
facts must be made with the wrongful intent of injuring a third person; and on
the authority of U.S. vs. Lopez (15 Phil., 515), the same author further maintains
that even if such wrongful intent is proven, still the untruthful statement will not
constitute the crime of falsification if there is no legal obligation on the part of
the narrator to disclose the truth. Wrongful intent to injure a third person and
obligation on the part of the narrator to disclose the truth are thus essential to a
conviction for a crime of falsification under the above article of the Revised Penal
Code.
Now, as we see it, the falsification imputed in the accused in the present case
consists in not disclosing in the articles of incorporation that Baylon was a mere
trustee ( or dummy as the prosecution chooses to call him) of his American co-
incorporators, thus giving the impression that Baylon was the owner of the shares
subscribed to by him which, as above stated, amount to 60.005 per cent of the
sub-scribed capital stock. This, in the opinion of the trial court, is a malicious
perversion of the truth made with the wrongful intent circumventing section 8,
Article XIV of the Constitution, which provides that " no franchise, certificate, or
any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporation or other entities
organized under the law of the Philippines, sixty per centum of the capital of
which is owned by citizens of the Philippines . . . ." Plausible though it may appear
at first glance, this opinion loses validity once it is noted that it is predicated on
the erroneous assumption that the constitutional provision just quoted was meant
to prohibit the mere formation of a public utility corporation without 60 per cent
of its capital being owned by the Filipinos, a mistaken belief which has induced
the lower court to that the accused was under obligation to disclose the whole
truth about the nationality of the subscribed capital stock of the corporation by
revealing that Baylon was a mere trustee or dummy of his American co-
incorporators, and that in not making such disclosure defendant's intention was
to circumvent the Constitution to the detriment of the public interests. Contrary
to the lower court's assumption, the Constitution does not prohibit the mere
formation of a public utility corporation without the required formation of
Filipino capital. What it does prohibit is the granting of a franchise or other form
of authorization for the operation of a public utility to a corporation already in
existence but without the requisite proportion of Filipino capital. This is obvious
from the context, for the constitutional provision in question qualifies the terms
" franchise", "certificate", or "any other form of authorization" with the phrase "for
the operation of a public utility," thereby making it clear that the franchise meant
is not the "primary franchise" that invest a body of men with corporate existence
but the "secondary franchise" or the privilege to operate as a public utility after
the corporation has already come into being.
If the Constitution does not prohibit the mere formation of a public utility
corporation with the alien capital, then how can the accused be charged with
having wrongfully intended to circumvent that fundamental law by not revealing
in the articles of incorporation that Baylon was a mere trustee of his American
co-incorporation and that for that reason the subscribed capital stock of the
corporation was wholly American? For the mere formation of the corporation
such revelation was not essential, and the Corporation Law does not require it.
Defendant was, therefore, under no obligation to make it. In the absence of such
obligation and of the allege wrongful intent, defendant cannot be legally
convicted of the crime with which he is charged.
It is urged, however, that the formation of the corporation with 60 per cent of its
subscribed capital stock appearing in the name of Baylon was an indispensable
preparatory step to the subversion of the constitutional prohibition and the laws
implementing the policy expressed therein. This view is not correct. For a
corporation to be entitled to operate a public utility it is not necessary that it be
organized with 60 per cent of its capital owned by Filipinos from the start. A
corporation formed with capital that is entirely alien may subsequently change
the nationality of its capital through transfer of shares to Filipino citizens.
conversely, a corporation originally formed with Filipino capital may
subsequently change the national status of said capital through transfer of shares
to foreigners. What need is there then for a corporation that intends to operate a
public utility to have, at the time of its formation, 60 per cent of its capital owned
by Filipinos alone? That condition may anytime be attained thru the necessary
transfer of stocks. The moment for determining whether a corporation is entitled
to operate as a public utility is when it applies for a franchise, certificate, or any
other form of authorization for that purpose. And that can be done after the
corporation has already come into being and not while it is still being formed.
And at that moment, the corporation must show that it has complied not only
with the requirement of the Constitution as to the nationality of its capital, but
also with the requirements of the Civil Aviation Law if it is a common carrier by
air, the Revised Administrative Code if it is a common carrier by water, and the
Public Service Law if it is a common carrier by land or other kind of public service.
Equally untenable is the suggestion that defendant should at least be held guilty
of an "impossible crime" under article 59 of the Revised Penal Code. It not being
possible to suppose that defendant had intended to commit a crime for the simple
reason that the alleged constitutional prohibition which he is charged for having
tried to circumvent does not exist, conviction under that article is out of the
question.
The foregoing consideration can not but lead to the conclusion that the defendant
can not be held guilty of the crime charged. The majority of the court, however,
are also of the opinion that, even supposing that the act imputed to the defendant
constituted falsification at the time it was perpetrated, still with the approval of
the Party Amendment to the Constitution in March, 1947, which placed
Americans on the same footing as Filipino citizens with respect to the right to
operate public utilities in the Philippines, thus doing away with the prohibition
in section 8, Article XIV of the Constitution in so far as American citizens are
concerned, the said act has ceased to be an offense within the meaning of the law,
so that defendant can no longer be held criminally liable therefor.
In view of the foregoing, the judgment appealed from is reversed and the
defendant William H. Quasha acquitted, with costs de oficio.
Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Jugo, Bautista Angelo, and Labrador,
JJ., concur.
People v. Quasha DIGEST
DECEMBER 21, 2016 ~ VBDIAZ
People v. Quasha (1953)
G.R. No. L-6055
June 12, 1953
FACTS:
William H. Quasha
a member of the Philippine bar, committed a crime of falsification of a public and

commercial document for causing it to appear that Arsenio Baylon, a Filipino
citizen, had subscribed to and was the owner of 60.005 % of the subscribed capital
stock of Pacific Airways Corp. (Pacific) when in reality the money paid belongs
to an American citizen whose name did not appear in the article of incorporation,
to circumvent the constitutional mandate that no corp. shall be authorize to

operate as a public utility in the Philippines unless 60% of its capital stock is
owned by Filipinos.
Found guilty after trial and sentenced to a term of imprisonment and a fine
Quasha appealed to this Court
Primary purpose: to carry on the business of a common carrier by air, land or

water
Baylon did not have the controlling vote because of the difference in voting power
between the preferred shares and the common shares
ISSUE: For a corporation to be entitled to operate a public utility is it necessary

that it be organized with 60 per cent of its capital owned by Filipinos from the
start?
HELD: No. For a corporation to be entitled to operate a public utility it is not

necessary that it be organized with 60 per cent of its capital owned by Filipinos
from the start. A corporation formed with capital that is entirely alien may
subsequently change the nationality of its capital through transfer of shares to
Filipino citizens. Conversely, a corporation originally formed with Filipino capital
may subsequently change the national status of said capital through transfer of
shares to foreigners. What need is there then for a corporation that intends to
operate a public utility to have, at the time of its formation, 60 per cent of its
capital owned by Filipinos alone? That condition may anytime be attained thru
the necessary transfer of stocks. The moment for determining whether a
corporation is entitled to operate as a public utility is when it applies for a
franchise, certificate, or any other form of authorization for that purpose. And
that can be done after the corporation has already come into being and not while
it is still being formed. And at that moment, the corporation must show that it has
complied not only with the requirement of the Constitution as to the nationality
of its capital, but also with the requirements of the Civil Aviation Law if it is a
common carrier by air, the Revised Administrative Code if it is a common carrier
by water, and the Public Service Law if it is a common carrier by land or other
kind of public service.
FACTS:
William H. Quasha
a member of the Philippine bar, committed a crime of falsification of a public and

commercial document for causing it to appear that Arsenio Baylon, a Filipino
citizen, had subscribed to and was the owner of 60.005 % of the subscribed capital
stock of Pacific Airways Corp. (Pacific) when in reality the money paid belongs
to an American citizen whose name did not appear in the article of incorporation,
to circumvent the constitutional mandate that no corp. shall be authorize to

operate as a public utility in the Philippines unless 60% of its capital stock is
owned by Filipinos.
Found guilty after trial and sentenced to a term of imprisonment and a fine
Quasha appealed to this Court
Primary purpose: to carry on the business of a common carrier by air, land or

water
Baylon did not have the controlling vote because of the difference in voting power
between the preferred shares and the common shares
ART. 171. Falsification by public officer, employee, or notary or ecclesiastic

minister. — The penalty of prision mayor and a fine not to exceed 5,000 pesos
shall be imposed upon any public officer, employee, or notary who, taking
advantage of his official position, shall falsify a document by committing any of
the following acts:
4. Making untruthful statements in a narration of facts.
ART. 172. Falsification by private individuals and use of falsified documents . —

The penalty of prision correccional in its medium and maximum period and a fine
of not more than 5,000 pesos shall be imposed upon:
1. Any private individual who shall commit any of the falsifications

enumerated in the next preceding
article in any public or official document or letter of exchange or any

other kind of commercial
document.
ISSUE: W/N Quasha should be criminally liable
HELD: NO. Acquitted.
falsification consists in not disclosing in the articles of incorporation that Baylon

was a mere trustee ( or dummy as the prosecution chooses to call him) of his
American co-incorporators, thus giving the impression that Baylon was the owner
of the shares subscribed to by him
For the mere formation of the corporation such revelation was not essential, and
the Corporation Law does not require it
The moment for determining whether a corporation is entitled to operate as a

public utility is when it applies for a franchise, certificate, or any other form of
authorization for that purpose.
that can be done after the corporation has already come into being and not while
it is still being formed
so far as American citizens are concerned, the said act has ceased to be an offense
within the meaning of the law, so that defendant can no longer be held criminally
liable therefor.
SUPREME COURT
Manila
EN BANC
G.R. No. 166471 March 22, 2011
TAWANG MULTI-PURPOSE COOPERATIVE Petitioner,

vs.
LA TRINIDAD WATER DISTRICT, Respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari under Rule 45 of the Rules of Court. The
petition1 challenges the 1 October 2004 Judgment2 and 6 November 2004
Order3 of the Regional Trial Court (RTC), Judicial Region 1, Branch 62, La
Trinidad, Benguet, in Civil Case No. 03-CV-1878.
The Facts
Tawang Multi-Purpose Cooperative (TMPC) is a cooperative, registered with the

Cooperative Development Authority, and organized to provide domestic water
services in Barangay Tawang, La Trinidad, Benguet.
La Trinidad Water District (LTWD) is a local water utility created under

Presidential Decree (PD) No. 198, as amended. It is authorized to supply water for
domestic, industrial and commercial purposes within the municipality of La
Trinidad, Benguet.
On 9 October 2000, TMPC filed with the National Water Resources Board
(NWRB) an application for a certificate of public convenience (CPC) to operate
and maintain a waterworks system in Barangay Tawang. LTWD opposed TMPC’s
application. LTWD claimed that, under Section 47 of PD No. 198, as amended, its
franchise is exclusive. Section 47 states that:
Sec. 47. Exclusive Franchise. No franchise shall be granted to any other person or
agency for domestic, industrial or commercial water service within the district or
any portion thereof unless and except to the extent that the board of directors of
said district consents thereto by resolution duly adopted, such resolution,
however, shall be subject to review by the Administration.
In its Resolution No. 04-0702 dated 23 July 2002, the NWRB approved TMPC’s
application for a CPC. In its 15 August 2002 Decision,4 the NWRB held that
LTWD’s franchise cannot be exclusive since exclusive franchises are
unconstitutional and found that TMPC is legally and financially qualified to
operate and maintain a waterworks system. NWRB stated that:
With respect to LTWD’s opposition, this Board observes that:
1. It is a substantial reproduction of its opposition to the application for water

permits previously filed by this same CPC applicant, under WUC No. 98-17 and
98-62 which was decided upon by this Board on April 27, 2000. The issues being
raised by Oppositor had been already resolved when this Board said in pertinent
portions of its decision:
"The authority granted to LTWD by virtue of P.D. 198 is not Exclusive. While
Barangay Tawang is within their territorial jurisdiction, this does not mean that
all others are excluded in engaging in such service, especially, if the district is not
capable of supplying water within the area. This Board has time and again ruled
that the "Exclusive Franchise" provision under P.D. 198 has misled most water
districts to believe that it likewise extends to be [sic] the waters within their
territorial boundaries. Such ideological adherence collides head on with the
constitutional provision that "ALL WATERS AND NATURAL RESOURCES
BELONG TO THE STATE". (Sec. 2, Art. XII) and that "No franchise, certificate or
authorization for the operation of public [sic] shall be exclusive in character".
xxxx
All the foregoing premises all considered, and finding that Applicant is legally and
financially qualified to operate and maintain a waterworks system; that the said
operation shall redound to the benefit of the homeowners/residents of the
subdivision, thereby, promoting public service in a proper and suitable manner,
the instant application for a Certificate of Public Convenience is, hereby,
GRANTED.5
LTWD filed a motion for reconsideration. In its 18 November 2002

Resolution,6 the NWRB denied the motion.
LTWD appealed to the RTC.
The RTC’s Ruling
In its 1 October 2004 Judgment, the RTC set aside the NWRB’s 23 July 2002
Resolution and 15 August 2002 Decision and cancelled TMPC’s CPC. The RTC
held that Section 47 is valid. The RTC stated that:
The Constitution uses the term "exclusive in character". To give effect to this
provision, a reasonable, practical and logical interpretation should be adopted
without disregard to the ultimate purpose of the Constitution. What is this
ultimate purpose? It is for the state, through its authorized agencies or
instrumentalities, to be able to keep and maintain ultimate control and
supervision over the operation of public utilities. Essential part of this control and
supervision is the authority to grant a franchise for the operation of a public utility
to any person or entity, and to amend or repeal an existing franchise to serve the
requirements of public interest. Thus, what is repugnant to the Constitution is a
grant of franchise "exclusive in character" so as to preclude the State itself from
granting a franchise to any other person or entity than the present grantee when
public interest so requires. In other words, no franchise of whatever nature can
preclude the State, through its duly authorized agencies or instrumentalities, from
granting franchise to any person or entity, or to repeal or amend a franchise
already granted. Consequently, the Constitution does not necessarily prohibit a
franchise that is exclusive on its face, meaning, that the grantee shall be allowed
to exercise this present right or privilege to the exclusion of all others.
Nonetheless, the grantee cannot set up its exclusive franchise against the ultimate
authority of the State.7
TMPC filed a motion for reconsideration. In its 6 November 2004 Order, the RTC
denied the motion. Hence, the present petition.
Issue
TMPC raises as issue that the RTC erred in holding that Section 47 of PD No. 198,
as amended, is valid.
The Court’s Ruling
The petition is meritorious.
What cannot be legally done directly cannot be done indirectly. This rule is basic
and, to a reasonable mind, does not need explanation. Indeed, if acts that cannot
be legally done directly can be done indirectly, then all laws would be illusory.
In Alvarez v. PICOP Resources, Inc.,8 the Court held that, "What one cannot do
directly, he cannot do indirectly."9 In Akbayan Citizens Action Party v.
Aquino,10 quoting Agan, Jr. v. Philippine International Air Terminals Co.,
Inc.,11 the Court held that, "This Court has long and consistently adhered to the
legal maxim that those that cannot be done directly cannot be done
indirectly."12 In Central Bank Employees Association, Inc. v. Bangko Sentral ng
Pilipinas,13the Court held that, "No one is allowed to do indirectly what he is
prohibited to do directly."14
The President, Congress and the Court cannot create directly franchises for the
operation of a public utility that are exclusive in character. The 1935, 1973 and
1987 Constitutions expressly and clearly prohibit the creation of franchises that
are exclusive in character. Section 8, Article XIII of the 1935 Constitution states
that:
No franchise, certificate, or any other form of authorization for the operation of

a public utility shall be granted except to citizens of the Philippines or to
corporations or other entities organized under the laws of the Philippines, sixty
per centum of the capital of which is owned by citizens of the Philippines, nor
shall such franchise, certificate or authorization be exclusive in character or for a
longer period than fifty years. (Empahsis supplied)
Section 5, Article XIV of the 1973 Constitution states that:

corporations or associations organized under the laws of the Philippines at least
sixty per centum of the capital of which is owned by such citizens, nor shall such
franchise, certificate or authorization be exclusive in character or for a longer
period than fifty years. (Emphasis supplied)
Section 11, Article XII of the 1987 Constitution states that:

corporations or associations organized under the laws of the Philippines, at least
sixty per centum of whose capital is owned by such citizens, nor shall such
franchise, certificate or authorization be exclusive in character or for a longer
period than fifty years. (Emphasis supplied)
Plain words do not require explanation. The 1935, 1973 and 1987 Constitutions
are clear — franchises for the operation of a public utility cannot be exclusive in
character. The 1935, 1973 and 1987 Constitutions expressly and clearly state
that, "nor shall such franchise x x x be exclusive in character." There is no
exception.
When the law is clear, there is nothing for the courts to do but to apply it. The
duty of the Court is to apply the law the way it is worded. In Security Bank and
Trust Company v. Regional Trial Court of Makati, Branch 61,15 the Court held
that:
Basic is the rule of statutory construction that when the law is clear and
unambiguous, the court is left with no alternative but to apply the same according
to its clear language. As we have held in the case of Quijano v. Development Bank
of the Philippines:
"x x x We cannot see any room for interpretation or construction in the clear and
unambiguous language of the above-quoted provision of law. This Court had
steadfastly adhered to the doctrine that its first and fundamental duty is the
application of the law according to its express terms, interpretation being called for
only when such literal application is impossible. No process of interpretation or
construction need be resorted to where a provision of law peremptorily calls for
application. Where a requirement or condition is made in explicit and
unambiguous terms, no discretion is left to the judiciary. It must see to it that its
mandate is obeyed."16(Emphasis supplied)
In Republic of the Philippines v. Express Telecommunications Co., Inc.,17 the
Court held that, "The Constitution is quite emphatic that the operation of a public
utility shall not be exclusive."18 In Pilipino Telephone Corporation v. National
Telecommunications Commission,19 the Court held that, "Neither Congress nor
the NTC can grant an exclusive ‘franchise, certificate, or any other form of
authorization’ to operate a public utility."20 In National Power Corp. v. Court of
Appeals,21 the Court held that, "Exclusivity of any public franchise has not been
favored by this Court such that in most, if not all, grants by the government to
private corporations, the interpretation of rights, privileges or franchises is taken
against the grantee."22 In Radio Communications of the Philippines, Inc. v.
National Telecommunications Commission,23 the Court held that, "The
Constitution mandates that a franchise cannot be exclusive in nature."24
Indeed, the President, Congress and the Court cannot create directly franchises
that are exclusive in character. What the President, Congress and the Court
cannot legally do directly they cannot do indirectly. Thus, the President, Congress
and the Court cannot create indirectly franchises that are exclusive in character
by allowing the Board of Directors (BOD) of a water district and the Local Water
Utilities Administration (LWUA) to create franchises that are exclusive in
character.
In PD No. 198, as amended, former President Ferdinand E. Marcos (President

Marcos) created indirectly franchises that are exclusive in character by allowing
the BOD of LTWD and the LWUA to create directly franchises that are exclusive
in character. Section 47 of PD No. 198, as amended, allows the BOD and the
LWUA to create directly franchises that are exclusive in character. Section 47
states:
Sec. 47. Exclusive Franchise. No franchise shall be granted to any other person or
agency for domestic, industrial or commercial water service within the district or
any portion thereof unless and except to the extent that the board of directors of
said district consents thereto by resolution duly adopted, such resolution, however,
shall be subject to review by the Administration. (Emphasis supplied)
In case of conflict between the Constitution and a statute, the Constitution always
prevails because the Constitution is the basic law to which all other laws must
conform to. The duty of the Court is to uphold the Constitution and to declare
void all laws that do not conform to it.
In Social Justice Society v. Dangerous Drugs Board,25 the Court held that, "It is
basic that if a law or an administrative rule violates any norm of the Constitution,
that issuance is null and void and has no effect. The Constitution is the basic law
to which all laws must conform; no act shall be valid if it conflicts with the
Constitution."26 In Sabio v. Gordon,27 the Court held that, "the Constitution is the
highest law of the land. It is the ‘basic and paramount law to which all other laws
must conform.’"28 In Atty. Macalintal v. Commission on Elections,29the Court
held that, "The Constitution is the fundamental and paramount law of the nation
to which all other laws must conform and in accordance with which all private
rights must be determined and all public authority administered. Laws that do not
conform to the Constitution shall be stricken down for being
unconstitutional."30 In Manila Prince Hotel v. Government Service Insurance
System,31 the Court held that:
Under the doctrine of constitutional supremacy, if a law or contract violates any

norm of the constitution that law or contract whether promulgated by the
legislative or by the executive branch or entered into by private persons for private
purposes is null and void and without any force and effect. Thus, since the
Constitution is the fundamental, paramount and supreme law of the nation, it is
deemed written in every statute and contract."32 (Emphasis supplied)
To reiterate, the 1935, 1973 and 1987 Constitutions expressly prohibit the creation
of franchises that are exclusive in character. They uniformly command that "nor
shall such franchise x x x be exclusive in character." This constitutional prohibition
is absolute and accepts no exception. On the other hand, PD No. 198, as amended,
allows the BOD of LTWD and LWUA to create franchises that are exclusive in
character. Section 47 states that, "No franchise shall be granted to any other
person or agency x x x unless and except to the extent that the board of directors
consents thereto x x x subject to review by the Administration." Section 47 creates
a glaring exception to the absolute prohibition in the Constitution. Clearly, it is
patently unconstitutional.
Section 47 gives the BOD and the LWUA the authority to make an exception to
the absolute prohibition in the Constitution. In short, the BOD and the LWUA
are given the discretion to create franchises that are exclusive in character. The
BOD and the LWUA are not even legislative bodies. The BOD is not a regulatory
body but simply a management board of a water district. Indeed, neither the BOD
nor the LWUA can be granted the power to create any exception to the absolute
prohibition in the Constitution, a power that Congress itself cannot exercise.
In Metropolitan Cebu Water District v. Adala,33 the Court categorically declared

Section 47 void. The Court held that:
Nonetheless, while the prohibition in Section 47 of P.D. 198 applies to the

issuance of CPCs for the reasons discussed above, the same provision must be
deemed void ab initio for being irreconcilable with Article XIV, Section 5 of the
1973 Constitution which was ratified on January 17, 1973 — the constitution in
force when P.D. 198 was issued on May 25, 1973. Thus, Section 5 of Art. XIV of
the 1973 Constitution reads:
"SECTION 5. No franchise, certificate, or any other form of authorization for the

operation of a public utility shall be granted except to citizens of the Philippines
or to corporations or associations organized under the laws of the Philippines at
least sixty per centum of the capital of which is owned by such citizens, nor shall
such franchise, certificate, or authorization be exclusive in character or for a
longer period than fifty years. Neither shall any such franchise or right be granted
except under the condition that it shall be subject to amendment, alteration, or
repeal by the Batasang Pambansa when the public interest so requires. The State
shall encourage equity participation in public utiltities by the general public. The
participation of foreign investors in the governing body of any public utility
enterprise shall be limited to their proportionate share in the capital thereof."
This provision has been substantially reproduced in Article XII Section 11 of the
1987 Constitution, including the prohibition against exclusive franchises.
xxxx
Since Section 47 of P.D. 198, which vests an "exclusive franchise" upon public
utilities, is clearly repugnant to Article XIV, Section 5 of the 1973 Constitution, it
is unconstitutional and may not, therefore, be relied upon by petitioner in support
of its opposition against respondent’s application for CPC and the subsequent
grant thereof by the NWRB.
WHEREFORE, Section 47 of P.D. 198 is unconstitutional.34 (Emphasis supplied)
The dissenting opinion declares Section 47 valid and constitutional. In effect, the
dissenting opinion holds that (1) President Marcos can create indirectly franchises
that are exclusive in character; (2) the BOD can create directly franchises that are
exclusive in character; (3) the LWUA can create directly franchises that are
exclusive in character; and (4) the Court should allow the creation of franchises
that are exclusive in character.
Stated differently, the dissenting opinion holds that (1) President Marcos can
violate indirectly the Constitution; (2) the BOD can violate directly the
Constitution; (3) the LWUA can violate directly the Constitution; and (4) the
Court should allow the violation of the Constitution.
The dissenting opinion states that the BOD and the LWUA can create franchises
that are exclusive in character "based on reasonable and legitimate grounds," and
such creation "should not be construed as a violation of the constitutional mandate
on the non-exclusivity of a franchise" because it "merely refers to regulation"
which is part of "the government’s inherent right to exercise police power in
regulating public utilities" and that their violation of the Constitution "would
carry with it the legal presumption that public officers regularly perform their
official functions." The dissenting opinion states that:
To begin with, a government agency’s refusal to grant a franchise to another

entity, based on reasonable and legitimate grounds, should not be construed as a
violation of the constitutional mandate on the non-exclusivity of a franchise; this
merely refers to regulation, which the Constitution does not prohibit. To say that
a legal provision is unconstitutional simply because it enables a government
instrumentality to determine the propriety of granting a franchise is contrary to
the government’s inherent right to exercise police power in regulating public
utilities for the protection of the public and the utilities themselves. The refusal
of the local water district or the LWUA to consent to the grant of other franchises
would carry with it the legal presumption that public officers regularly perform
their official functions.
The dissenting opinion states two "reasonable and legitimate grounds" for the
creation of exclusive franchise: (1) protection of "the government’s
investment,"35 and (2) avoidance of "a situation where ruinous competition could
compromise the supply of public utilities in poor and remote areas."36
There is no "reasonable and legitimate" ground to violate the Constitution. The

Constitution should never be violated by anyone. Right or wrong, the President,
Congress, the Court, the BOD and the LWUA have no choice but to follow the
Constitution. Any act, however noble its intentions, is void if it violates the
Constitution. This rule is basic.
In Social Justice Society,37 the Court held that, "In the discharge of their defined
functions, the three departments of government have no choice but to yield
obedience to the commands of the Constitution. Whatever limits it imposes must
be observed."38 In Sabio,39 the Court held that, "the Constitution is the highest law
of the land. It is ‘the basic and paramount law to which x x x all persons, including
the highest officials of the land, must defer. No act shall be valid, however noble its
intentions, if it conflicts with the Constitution.’"40 In Bengzon v. Drilon,41 the
Court held that, "the three branches of government must discharge their
respective functions within the limits of authority conferred by the
Constitution."42 In Mutuc v. Commission on Elections,43 the Court held that, "The
three departments of government in the discharge of the functions with which it
is [sic] entrusted have no choice but to yield obedience to [the
Constitution’s] commands. Whatever limits it imposes must be observed."44
Police power does not include the power to violate the Constitution. Police power
is the plenary power vested in Congress to make laws not repugnant to the
Constitution. This rule is basic.
In Metropolitan Manila Development Authority v. Viron Transportation Co.,

Inc.,45 the Court held that, "Police power is the plenary power vested in the
legislature to make, ordain, and establish wholesome and reasonable laws, statutes
and ordinances, not repugnant to the Constitution."46 In Carlos Superdrug Corp. v.
Department of Social Welfare and Development,47 the Court held that, police
power "is ‘the power vested in the legislature by the constitution to make, ordain,
and establish all manner of wholesome and reasonable laws, statutes, and
ordinances x x x not repugnant to the constitution.’"48 In Metropolitan Manila
Development Authority v. Garin,49 the Court held that, "police power, as an
inherent attribute of sovereignty, is the power vested by the Constitution in the
legislature to make, ordain, and establish all manner of wholesome and reasonable
laws, statutes and ordinances x x x not repugnant to the Constitution."50
There is no question that the effect of Section 47 is the creation of franchises that
are exclusive in character. Section 47 expressly allows the BOD and the LWUA to
create franchises that are exclusive in character.
The dissenting opinion explains why the BOD and the LWUA should be allowed
to create franchises that are exclusive in character — to protect "the government’s
investment" and to avoid "a situation where ruinous competition could
compromise the supply of public utilities in poor and remote areas." The
dissenting opinion declares that these are "reasonable and legitimate grounds."
The dissenting opinion also states that, "The refusal of the local water district or
the LWUA to consent to the grant of other franchises would carry with it the
legal presumption that public officers regularly perform their official functions."
When the effect of a law is unconstitutional, it is void. In Sabio,51 the Court held
that, "A statute may be declared unconstitutional because it is not within the
legislative power to enact; or it creates or establishes methods or forms that
infringe constitutional principles; or its purpose or effect violates the
Constitution or its basic principles."52 The effect of Section 47 violates the
Constitution, thus, it is void.
In Strategic Alliance Development Corporation v. Radstock Securities

Limited,53 the Court held that, "This Court must perform its duty to defend and
uphold the Constitution."54 In Bengzon,55 the Court held that, "The Constitution
expressly confers on the judiciary the power to maintain inviolate what it
decrees."56 In Mutuc,57 the Court held that:
The concept of the Constitution as the fundamental law, setting forth the criterion
for the validity of any public act whether proceeding from the highest official or
the lowest functionary, is a postulate of our system of government. That is to
manifest fealty to the rule of law, with priority accorded to that which occupies
the topmost rung in the legal hierarchy. The three departments of government in
the discharge of the functions with which it is [sic] entrusted have no choice but
to yield obedience to its commands. Whatever limits it imposes must be observed.
Congress in the enactment of statutes must ever be on guard lest the restrictions
on its authority, whether substantive or formal, be transcended. The Presidency
in the execution of the laws cannot ignore or disregard what it ordains. In its task
of applying the law to the facts as found in deciding cases, the judiciary is called
upon to maintain inviolate what is decreed by the fundamental law. Even its
power of judicial review to pass upon the validity of the acts of the coordinate
branches in the course of adjudication is a logical corollary of this basic principle
that the Constitution is paramount. It overrides any governmental measure that
fails to live up to its mandates. Thereby there is a recognition of its being the
supreme law.58
Sustaining the RTC’s ruling would make a dangerous precedent. It will allow
Congress to do indirectly what it cannot do directly. In order to circumvent the
constitutional prohibition on franchises that are exclusive in character, all
Congress has to do is to create a law allowing the BOD and the LWUA to create
franchises that are exclusive in character, as in the present case.
WHEREFORE, we GRANT the petition. We DECLARE Section 47 of Presidential

Decree No. 198 UNCONSTITUTIONAL. We SET ASIDE the 1 October 2004
Judgment and 6 November 2004 Order of the Regional Trial Court, Judicial
Region 1, Branch 62, La Trinidad, Benguet, in Civil Case No. 03-CV-1878
and REINSTATE the 23 July 2002 Resolution and 15 August 2002 Decision of the
National Water Resources Board.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
RENATO C. CORONA
Chief Justice
CONCHITA CARPIO MORALES PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice
ANTONIO EDUARDO B. TERESITA J. LEONARDO-DE
NACHURA CASTRO
ARTURO D. BRION DIOSDADO M. PERALTA

LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO

ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.

JOSE PORTUGAL PEREZ JOSE C. MENDOZA

MARIA LOURDES P. A. SERENO

Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court.
RENATO C. CORONA
Chief Justice
Footnotes
1 Rollo, pp. 9-19.
2 Id. at 22-40. Penned by Judge Fernando P. Cabato.
3 Id. at 41-44.
4 Id. at 45-49.
5 Id. at 47-49.
6 Id. at 50-52.
7 Id. at 35.
8 G.R. Nos. 162243, 164516 and 171875, 3 December 2009, 606 SCRA 444.
9 Id. at 485.
10 G.R. No. 170516, 16 July 2008, 558 SCRA 468.
11 450 Phil. 744 (2003).
12 Supra note 10 at 540.
13 487 Phil. 531 (2004).
14 Id. at 579.
15 G.R. No. 113926, 23 October 1996, 263 SCRA 483.
16 Id. at 488.
17 424 Phil. 372 (2002).
18 Id. at 400.
19 457 Phil. 101 (2003).
20 Id. at 117.
21 345 Phil. 9 (1997).
22 Id. at 34.
23 234 Phil. 443 (1987).
24 Id. at 451.
25 G.R. Nos. 157870, 158633 and 161658, 3 November 2008, 570 SCRA 410.
26 Id. at 422-423.
27 G.R. No. 174340, 17 October 2006, 504 SCRA 704.
28 Id. at 731.
29 453 Phil. 586 (2003).
30 Id. at 631.
31 335 Phil. 82 (1997).
32 Id. at 101.
33 G.R. No. 168914, 4 July 2007, 526 SCRA 465.
34 Id. at 479-482.
35 Id. at 13.
36 Id.
37 Supra note 25.
38 Id. at 423.
39 Supra note 27.
40 Id. at 731.
41 G.R. No. 103524, 15 April 1992, 208 SCRA 133.
42 Id. at 142.
43 146 Phil. 798 (1970).
44 Id. at 806.
45 G.R. Nos. 170656 and 170657, 15 August 2007, 530 SCRA 341.
46 Id. at 362.
47 G.R. No. 166494, 29 June 2007, 526 SCRA 130.
48 Id. at 144.
49 496 Phil. 83 (2005)
50 Id. at 91-92.
51 Supra note 27.
52 Id. at 730.
53 G.R. Nos. 178158 and 180428, 4 December 2009, 607 SCRA 413.
54 Id. at 528.
55 Supra note 41.
56 Id. at 142.
57 Supra note 43.
58 Id. at 806-807.
TAWANG MULTI-PURPOSE COOPERATIVE v. LA TRINIDAD WATER
DISTRICT
G.R. No. 166471, March 22, 2011
FACTS:
Petitioner Tawang Multi-Purpose Cooperative (TMPC) was organized to provide

domestic water services in Brgy. Twang, La Trinidad, Benguet. Respondent La
Trinidad Water District (LTWD) is a government owned and controlled
corporation, a local water utility created under PD No. 198, authorized to supply
water for domestic, industrial and commercial purpose within municipality of La
Trinidad, Benguet.
October 9, 2000, TMPC filed with National Water Resources Board an application
for Certificate of Public Convenience (CPC) to operate and maintain a
waterworks system in Brgy. Tawang LTWD claimed that under Sec. 47 of PD No.
198, as amended, its franchise is exclusive.
August 15, 2002, the NWRB held that LTWD’s franchise cannot be exclusive since
exclusive franchises are unconstitutional under Sec. 2, Art. XII.
October 1, 2004, upon appeal of LTWD to the RTC, the latter cancelled TMPC’s
CPC and held that Sec. 47 of PD No. 198 is valid; that the ultimate purpose of the
Constitution is for the State, through its authorized agencies or instrumentalities,
to be able to keep and maintain ultimate control and supervision over the
operation of public utilities. What is repugnant to the Constitution is a grant of
franchise exclusive in character so as to preclude the State itself from granting a
franchise to any other person or entity than the present grantee when public
interest so requires.
November 6, 2004, RTC denied the motion for reconsideration filed by TMPC.
ISSUE:
Whether RTC erred in holding that Sec. 47 of PD No. 198 is valid

HELD:
Yes, the Supreme Court ruled in favor of petitioner. Quando aliquid prohibetur
ex directo, prohibetur et per obliquum – Those that cannot be done directly
cannot be done indirectly. Under Sec. 2 and 11, Art. XII of the 1987 Constitution,
The President, Congress, and Court cannot create indirectly franchises that are
exclusive in character by allowing the Board of Directors (BOD) of a water district
and Local Water Utilities Administration (LWUA) to create franchises that are
exclusive in character. Sec. 47 of PD no. 198 is in conflict with the above-
mentioned provision of the Constitution. And the rule is that in case of conflict
between the Constitution and a statute, the former prevails, because the
constitution is the basic law to which all other laws must conform to.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,

vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used

bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of
such scrap material, respondent would bring such material to Manila for resale.
He utilized two (2) six-wheeler trucks which he owned for hauling the material
to Manila. On the return trip to Pangasinan, respondent would load his vehicles
with cargo which various merchants wanted delivered to differing establishments
in Pangasinan. For that service, respondent charged freight rates which were
commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and

authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta,
Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty
filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's
establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1
December 1970, respondent loaded in Makati the merchandise on to his trucks:
150 cartons were loaded on a truck driven by respondent himself, while 600
cartons were placed on board the other truck which was driven by Manuel
Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600
boxes never reached petitioner, since the truck which carried these boxes was
hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed
men who took with them the truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in

the Court of First Instance of Pangasinan, demanding payment of P 22,150.00, the
claimed value of the lost merchandise, plus damages and attorney's fees. Petitioner
argued that private respondent, being a common carrier, and having failed to
exercise the extraordinary diligence required of him by the law, should be held
liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common carrier and
argued that he could not be held responsible for the value of the lost goods, such
loss having been due to force majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding private

respondent to be a common carrier and holding him liable for the value of the
undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P
2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had
erred in considering him a common carrier; in finding that he had habitually
offered trucking services to the public; in not exempting him from liability on the
ground of force majeure; and in ordering him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that
respondent had been engaged in transporting return loads of freight "as a casual
occupation — a sideline to his scrap iron business" and not as a common carrier.
Petitioner came to this Court by way of a Petition for Review assigning as errors
the following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p.
111)
We consider first the issue of whether or not private respondent Ernesto Cendana
may, under the facts earlier set forth, be properly characterized as a common
carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations

engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local Idiom as "a sideline"). Article 1732
also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering
such service on an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the "general public," i.e.,
the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that
Article 1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen
to coincide neatly with the notion of "public service," under the Public Service
Act (Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code. Under
Section 13, paragraph (b) of the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar
public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a

common carrier even though he merely "back-hauled" goods for other merchants
from Manila to Pangasinan, although such back-hauling was done on a periodic
or occasional rather than regular or scheduled manner, and even though private
respondent's principal occupation was not the carriage of goods for others. There
is no dispute that private respondent charged his customers a fee for hauling their
goods; that fee frequently fell below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no
certificate of public convenience, and concluded he was not a common carrier.
This is palpable error. A certificate of public convenience is not a requisite for the
incurring of liability under the Civil Code provisions governing common carriers.
That liability arises the moment a person or firm acts as a common carrier,
without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations
and has been granted a certificate of public convenience or other franchise. To
exempt private respondent from the liabilities of a common carrier because he has
not secured the necessary certificate of public convenience, would be offensive to
sound public policy; that would be to reward private respondent precisely for
failing to comply with applicable statutory requirements. The business of a
common carrier impinges directly and intimately upon the safety and well being
and property of those members of the general community who happen to deal
with such carrier. The law imposes duties and liabilities upon common carriers
for the safety and protection of those who utilize their services and the law cannot
allow a common carrier to render such duties and liabilities merely facultative by
simply failing to obtain the necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public
policy" 2 are held to a very high degree of care and diligence ("extraordinary
diligence") in the carriage of goods as well as of passengers. The specific import of
extraordinary diligence in the care of goods transported by a common carrier is,
according to Article 1733, "further expressed in Articles 1734,1735 and 1745,
numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for
the loss, destruction or deterioration of the goods which they carry, " unless the
same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or
deterioration which exempt the common carrier for responsibility therefor, is a
closed list. Causes falling outside the foregoing list, even if they appear to
constitute a species of force majeure fall within the scope of Article 1735, which
provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding
article, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as required in Article 1733. (Emphasis
supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the
specific cause alleged in the instant case — the hijacking of the carrier's truck —
does not fall within any of the five (5) categories of exempting causes listed in
Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle
must be dealt with under the provisions of Article 1735, in other words, that the
private respondent as common carrier is presumed to have been at fault or to have
acted negligently. This presumption, however, may be overthrown by proof of
extraordinary diligence on the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary

diligence in the care of petitioner's goods. Petitioner argues that in the
circumstances of this case, private respondent should have hired a security guard
presumably to ride with the truck carrying the 600 cartons of Liberty filled milk.
We do not believe, however, that in the instant case, the standard of extraordinary
diligence required private respondent to retain a security guard to ride with the
truck and to engage brigands in a firelight at the risk of his own life and the lives
of the driver and his helper.
The precise issue that we address here relates to the specific requirements of the
duty of extraordinary diligence in the vigilance over the goods carried in the
specific context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods
is, under Article 1733, given additional specification not only by Articles 1734 and
1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in
relevant part:
Any of the following or similar stipulations shall be considered unreasonable,

unjust and contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or omissions of
his or its employees;
(6) that the common carrier's liability for acts committed by thieves, or of
robbers who donot act with grave or irresistible threat, violence or force, is
dispensed with or diminished; and
(7) that the common carrier shall not responsible for the loss, destruction or
deterioration of goods on account of the defective condition of the car vehicle,
ship, airplane or other equipment used in the contract of carriage. (Emphasis
supplied)
Under Article 1745 (6) above, a common carrier is held responsible — and will
not be allowed to divest or to diminish such responsibility — even for acts of
strangers like thieves or robbers, except where such thieves or robbers in fact
acted "with grave or irresistible threat, violence or force." We believe and so hold
that the limits of the duty of extraordinary diligence in the vigilance over the
goods carried are reached where the goods are lost as a result of a robbery which
is attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private
respondent which carried petitioner's cargo. The record shows that an
information for robbery in band was filed in the Court of First Instance of Tarlac,
Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. Felipe
Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe ."
There, the accused were charged with willfully and unlawfully taking and
carrying away with them the second truck, driven by Manuel Estrada and loaded
with the 600 cartons of Liberty filled milk destined for delivery at petitioner's
store in Urdaneta, Pangasinan. The decision of the trial court shows that the
accused acted with grave, if not irresistible, threat, violence or force.3 Three (3) of
the five (5) hold-uppers were armed with firearms. The robbers not only took
away the truck and its cargo but also kidnapped the driver and his helper,
detaining them for several days and later releasing them in another province (in
Zambales). The hijacked truck was subsequently found by the police in Quezon
City. The Court of First Instance convicted all the accused of robbery, though not
of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably
be regarded as quite beyond the control of the common carrier and properly
regarded as a fortuitous event. It is necessary to recall that even common carriers
are not made absolute insurers against all risks of travel and of transport of goods,
and are not held liable for acts or events which cannot be foreseen or are
inevitable, provided that they shall have complied with the rigorous standard of
extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private
respondent Cendana is not liable for the value of the undelivered merchandise
which was lost because of an event entirely beyond private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and

the Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Footnotes
1 Rollo, p. 14.
2 Article 1733, Civil Code.
3 Rollo, p. 22.
4 The evidence of the prosecution did not show that more than three (3) of the
five (5) hold-uppers were armed. Thus, the existence of a "band" within the
technical meaning of Article 306 of the Revised Penal Code, was not affirmatively
proved by the prosecution.
FACTS:
Respondent Ernesto Cendana was a junk dealer. He buys scrap materials and
brings those that he gathered to Manila for resale using 2 six-wheeler trucks. On
the return trip to Pangasinan, respondent would load his vehicle with cargo
which various merchants wanted delivered, charging fee lower than the
commercial rates. Sometime in November 1970, petitioner Pedro de Guzman
contracted with respondent for the delivery of 750 cartons of Liberty Milk. On
December 1, 1970, respondent loaded the cargo. Only 150 boxes were delivered
to petitioner because the truck carrying the boxes was hijacked along the way.
Petitioner commenced an action claiming the value of the lost merchandise.
Petitioner argues that respondent, being a common carrier, is bound to exercise
extraordinary diligence, which it failed to do. Private respondent denied that he
was a common carrier, and so he could not be held liable for force majeure. The
trial court ruled against the respondent, but such was reversed by the Court of
Appeals.
ISSUE:
(1) Whether or not private respondent is a common carrier
(2) Whether private respondent is liable for the loss of the goods
HELD:
(1) Article 1732 makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity. Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the “general public,” i.e., the general community or
population, and one who offers services or solicits business only from a narrow
segment of the general population. It appears to the Court that private respondent
is properly characterized as a common carrier even though he merely “back-
hauled” goods for other merchants from Manila to Pangasinan, although such
backhauling was done on a periodic or occasional rather than regular or scheduled
manner, and even though private respondent’s principal occupation was not the
carriage of goods for others. There is no dispute that private respondent charged
his customers a fee for hauling their goods; that fee frequently fell below
commercial freight rates is not relevant here. A certificate of public convenience
is not a requisite for the incurring of liability under the Civil Code provisions
governing common carriers.
(2) Article 1734 establishes the general rule that common carriers are responsible
for the loss, destruction or deterioration of the goods which they carry, “unless
the same is due to any of the following causes only:
Flood, storm, earthquake, lightning, or other natural disaster or calamity;
Act of the public enemy in war, whether international or civil;
Act or omission of the shipper or owner of the goods;
The character of the goods or defects in the packing or in the containers; and
Order or act of competent public authority.”
The hijacking of the carrier’s truck – does not fall within any of the five (5)
categories of exempting causes listed in Article 1734. Private respondent as
common carrier is presumed to have been at fault or to have acted negligently.
This presumption, however, may be overthrown by proof of extraordinary
diligence on the part of private respondent. We believe and so hold that the limits
of the duty of extraordinary diligence in the vigilance over the goods carried are
reached where the goods are lost as a result of a robbery which is attended by
“grave or irresistible threat, violence or force.” we hold that the occurrence of the
loss must reasonably be regarded as quite beyond the control of the common
carrier and properly regarded as a fortuitous event. It is necessary to recall that
even common carriers are not made absolute insurers against all risks of travel and
of transport of goods, and are not held liable for acts or events which cannot be
foreseen or are inevitable, provided that they shall have complied with the
rigorous standard of extraordinary diligence.
FIRST DIVISION
[G.R. No. 138334. August 25, 2003]
ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT OF

APPEALS and CARAVAN TRAVEL & TOURS INTERNATIONAL,
INC., respondents.
DECISION
YNARES-SANTIAGO, J.:
In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent

Caravan Travel and Tours International, Inc. to arrange and facilitate her booking,
ticketing and accommodation in a tour dubbed Jewels of Europe. The package
tour included the countries of England, Holland, Germany, Austria,
Liechstenstein, Switzerland and France at a total cost of P74,322.70. Petitioner
was given a 5% discount on the amount, which included airfare, and the booking
fee was also waived because petitioners niece, Meriam Menor, was respondent
companys ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a
Wednesday to deliver petitioners travel documents and plane tickets. Petitioner,
in turn, gave Menor the full payment for the package tour. Menor then told her
to be at the Ninoy Aquino International Airport (NAIA) on Saturday, two hours
before her flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday,

June 15, 1991, to take the flight for the first leg of her journey from Manila to
Hongkong. To petitioners dismay, she discovered that the flight she was supposed
to take had already departed the previous day. She learned that her plane ticket
was for the flight scheduled on June 14, 1991. She thus called up Menor to
complain.
Subsequently, Menor prevailed upon petitioner to take another tour the British
Pageant which included England, Scotland and Wales in its itinerary. For this tour
package, petitioner was asked anew to pay US$785.00 or P20,881.00 (at the then
prevailing exchange rate of P26.60). She gave respondent US$300 or P7,980.00 as
partial payment and commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum she
paid for Jewels of Europe and the amount she owed respondent for the British
Pageant tour. Despite several demands, respondent company refused to reimburse
the amount, contending that the same was non-refundable.[1] Petitioner was thus
constrained to file a complaint against respondent for breach of contract of
carriage and damages, which was docketed as Civil Case No. 92-133 and raffled to
Branch 59 of the Regional Trial Court of Makati City.
In her complaint,[2] petitioner alleged that her failure to join Jewels of Europe was
due to respondents fault since it did not clearly indicate the departure date on the
plane ticket. Respondent was also negligent in informing her of the wrong flight
schedule through its employee Menor. She insisted that the British Pageant was
merely a substitute for the Jewels of Europe tour, such that the cost of the former
should be properly set-off against the sum paid for the latter.
For its part, respondent company, through its Operations Manager, Concepcion
Chipeco, denied responsibility for petitioners failure to join the first tour. Chipeco
insisted that petitioner was informed of the correct departure date, which was
clearly and legibly printed on the plane ticket. The travel documents were given
to petitioner two days ahead of the scheduled trip. Petitioner had only herself to
blame for missing the flight, as she did not bother to read or confirm her flight
schedule as printed on the ticket.
Respondent explained that it can no longer reimburse the amount paid for Jewels
of Europe, considering that the same had already been remitted to its principal in
Singapore, Lotus Travel Ltd., which had already billed the same even if petitioner
did not join the tour. Lotus European tour organizer, Insight International Tours
Ltd., determines the cost of a package tour based on a minimum number of
projected participants. For this reason, it is accepted industry practice to disallow
refund for individuals who failed to take a booked tour.[3]
Lastly, respondent maintained that the British Pageant was not a substitute for
the package tour that petitioner missed. This tour was independently procured by
petitioner after realizing that she made a mistake in missing her flight for Jewels
of Europe. Petitioner was allowed to make a partial payment of only US$300.00
for the second tour because her niece was then an employee of the travel
agency. Consequently, respondent prayed that petitioner be ordered to pay the
balance of P12,901.00 for the British Pageant package tour.
After due proceedings, the trial court rendered a decision,[4] the dispositive part of
which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to return and/or refund to the plaintiff the amount of
Fifty Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos
(P53,989.43) with legal interest thereon at the rate of twelve percent (12%) per
annum starting January 16, 1992, the date when the complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand
(P5,000.00) Pesos as and for reasonable attorneys fees;
3. Dismissing the defendants counterclaim, for lack of merit; and
4. With costs against the defendant.
SO ORDERED.[5]
The trial court held that respondent was negligent in erroneously advising
petitioner of her departure date through its employee, Menor, who was not
presented as witness to rebut petitioners testimony. However, petitioner should
have verified the exact date and time of departure by looking at her ticket and
should have simply not relied on Menors verbal representation. The trial court
thus declared that petitioner was guilty of contributory negligence and
accordingly, deducted 10% from the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties
to be at fault. However, the appellate court held that petitioner is more negligent
than respondent because as a lawyer and well-traveled person, she should have
known better than to simply rely on what was told to her. This being so, she is
not entitled to any form of damages. Petitioner also forfeited her right to the
Jewels of Europe tour and must therefore pay respondent the balance of the price
for the British Pageant tour. The dispositive portion of the judgment appealed
from reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court
dated October 26, 1995 is hereby REVERSED and SET ASIDE. A new judgment
is hereby ENTERED requiring the plaintiff-appellee to pay to the defendant-
appellant the amount of P12,901.00, representing the balance of the price of the
British Pageant Package Tour, the same to earn legal interest at the rate of SIX
PERCENT (6%) per annum, to be computed from the time the counterclaim was
filed until the finality of this decision. After this decision becomes final and
executory, the rate of TWELVE PERCENT (12%) interest per annum shall be
additionally imposed on the total obligation until payment thereof is satisfied. The
award of attorneys fees is DELETED. Costs against the plaintiff-appellee.
SO ORDERED.[6]
Upon denial of her motion for reconsideration,[7] petitioner filed the instant
petition under Rule 45 on the following grounds:
It is respectfully submitted that the Honorable Court of Appeals committed a

reversible error in reversing and setting aside the decision of the trial court by
ruling that the petitioner is not entitled to a refund of the cost of unavailed Jewels
of Europe tour she being equally, if not more, negligent than the private
respondent, for in the contract of carriage the common carrier is obliged to
observe utmost care and extra-ordinary diligence which is higher in degree than
the ordinary diligence required of the passenger. Thus, even if the petitioner and
private respondent were both negligent, the petitioner cannot be considered to be
equally, or worse, more guilty than the private respondent. At best, petitioners
negligence is only contributory while the private respondent [is guilty] of gross
negligence making the principle of pari delicto inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling that the Jewels of Europe
tour was not indivisible and the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the petitioner the consequential
damages due her as a result of breach of contract of carriage.[8]
Petitioner contends that respondent did not observe the standard of care required
of a common carrier when it informed her wrongly of the flight schedule. She
could not be deemed more negligent than respondent since the latter is required
by law to exercise extraordinary diligence in the fulfillment of its obligation. If
she were negligent at all, the same is merely contributory and not the proximate
cause of the damage she suffered. Her loss could only be attributed to respondent
as it was the direct consequence of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain

person or association of persons obligate themselves to transport persons, things,
or news from one place to another for a fixed price.[9] Such person or association
of persons are regarded as carriers and are classified as private or special carriers
and common or public carriers.[10] A common carrier is defined under Article 1732
of the Civil Code as persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water
or air, for compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an entity engaged
in the business of transporting either passengers or goods and is therefore, neither
a private nor a common carrier. Respondent did not undertake to transport
petitioner from one place to another since its covenant with its customers is
simply to make travel arrangements in their behalf. Respondents services as a
travel agency include procuring tickets and facilitating travel permits or visas as
well as booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a common
carrier. At most, respondent acted merely as an agent of the airline, with whom
petitioner ultimately contracted for her carriage to Europe. Respondents
obligation to petitioner in this regard was simply to see to it that petitioner was
properly booked with the airline for the appointed date and time. Her transport
to the place of destination, meanwhile, pertained directly to the airline.
The object of petitioners contractual relation with respondent is the latters service
of arranging and facilitating petitioners booking, ticketing and accommodation in
the package tour. In contrast, the object of a contract of carriage is
the transportation of passengers or goods. It is in this sense that the contract
between the parties in this case was an ordinary one for services and not one of
carriage. Petitioners submission is premised on a wrong assumption.
The nature of the contractual relation between petitioner and respondent is

determinative of the degree of care required in the performance of the latters
obligation under the contract. For reasons of public policy, a common carrier in a
contract of carriage is bound by law to carry passengers as far as human care and
foresight can provide using the utmost diligence of very cautious persons and with
due regard for all the circumstances.[11] As earlier stated, however, respondent is
not a common carrier but a travel agency. It is thus not bound under the law to
observe extraordinary diligence in the performance of its obligation, as petitioner
claims.
Since the contract between the parties is an ordinary one for services, the standard
of care required of respondent is that of a good father of a family under Article
1173 of the Civil Code.[12] This connotes reasonable care consistent with that
which an ordinarily prudent person would have observed when confronted with
a similar situation. The test to determine whether negligence attended the
performance of an obligation is: did the defendant in doing the alleged negligent
act use that reasonable care and caution which an ordinarily prudent person
would have used in the same situation? If not, then he is guilty of negligence.[13]
In the case at bar, the lower court found Menor negligent when she allegedly
informed petitioner of the wrong day of departure. Petitioners testimony was
accepted as indubitable evidence of Menors alleged negligent act since respondent
did not call Menor to the witness stand to refute the allegation. The lower court
applied the presumption under Rule 131, Section 3 (e)[14] of the Rules of Court that
evidence willfully suppressed would be adverse if produced and thus considered
petitioners uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was negligent
and maintains that petitioners assertion is belied by the evidence on record. The
date and time of departure was legibly written on the plane ticket and the travel
papers were delivered two days in advance precisely so that petitioner could
prepare for the trip. It performed all its obligations to enable petitioner to join the
tour and exercised due diligence in its dealings with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut petitioners testimony

could not give rise to an inference unfavorable to the former. Menor was already
working in France at the time of the filing of the complaint,[15] thereby making it
physically impossible for respondent to present her as a witness. Then too, even
if it were possible for respondent to secure Menors testimony, the presumption
under Rule 131, Section 3(e) would still not apply. The opportunity and possibility
for obtaining Menors testimony belonged to both parties, considering that Menor
was not just respondents employee, but also petitioners niece. It was thus error
for the lower court to invoke the presumption that respondent willfully
suppressed evidence under Rule 131, Section 3(e). Said presumption would
logically be inoperative if the evidence is not intentionally omitted but is simply
unavailable, or when the same could have been obtained by both parties.[16]
In sum, we do not agree with the finding of the lower court that Menors
negligence concurred with the negligence of petitioner and resultantly caused
damage to the latter. Menors negligence was not sufficiently proved, considering
that the only evidence presented on this score was petitioners uncorroborated
narration of the events. It is well-settled that the party alleging a fact has the
burden of proving it and a mere allegation cannot take the place of evidence.[17] If
the plaintiff, upon whom rests the burden of proving his cause of action, fails to
show in a satisfactory manner facts upon which he bases his claim, the defendant
is under no obligation to prove his exception or defense.[18]
Contrary to petitioners claim, the evidence on record shows that respondent

exercised due diligence in performing its obligations under the contract and
followed standard procedure in rendering its services to petitioner. As correctly
observed by the lower court, the plane ticket[19]issued to petitioner clearly
reflected the departure date and time, contrary to petitioners contention. The
travel documents, consisting of the tour itinerary, vouchers and instructions, were
likewise delivered to petitioner two days prior to the trip. Respondent also
properly booked petitioner for the tour, prepared the necessary documents and
procured the plane tickets. It arranged petitioners hotel accommodation as well
as food, land transfers and sightseeing excursions, in accordance with its avowed
undertaking.
Therefore, it is clear that respondent performed its prestation under the contract
as well as everything else that was essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of her affairs, there would have
been no reason for her to miss the flight. Needless to say, after the travel papers
were delivered to petitioner, it became incumbent upon her to take ordinary care
of her concerns. This undoubtedly would require that she at least read the
documents in order to assure herself of the important details regarding the trip.
The negligence of the obligor in the performance of the obligation renders him
liable for damages for the resulting loss suffered by the obligee. Fault or negligence
of the obligor consists in his failure to exercise due care and prudence in the
performance of the obligation as the nature of the obligation so demands.[20] There
is no fixed standard of diligence applicable to each and every contractual
obligation and each case must be determined upon its particular facts. The degree
of diligence required depends on the circumstances of the specific obligation and
whether one has been negligent is a question of fact that is to be determined after
taking into account the particulars of each case.[21]
The lower court declared that respondents employee was negligent. This factual
finding, however, is not supported by the evidence on record. While factual
findings below are generally conclusive upon this court, the rule is subject to
certain exceptions, as when the trial court overlooked, misunderstood, or
misapplied some facts or circumstances of weight and substance which will affect
the result of the case.[22]
In the case at bar, the evidence on record shows that respondent company
performed its duty diligently and did not commit any contractual breach. Hence,
petitioner cannot recover and must bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of
the Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly,
petitioner is ordered to pay respondent the amount of P12,901.00 representing
the balance of the price of the British Pageant Package Tour, with legal interest
thereon at the rate of 6% per annum, to be computed from the time the
counterclaim was filed until the finality of this Decision. After this Decision
becomes final and executory, the rate of 12% per annum shall be imposed until
the obligation is fully settled, this interim period being deemed to be by then an
equivalent to a forbearance of credit.[23]
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.
[1] TSN, March 4, 1993, pp. 4-6.

[2] RTC Records, p. 1.
[3] TSN, August 30, 1994, pp. 6-9.
[4] Rollo, pp. 38-43.
[5] Id. at 43; penned by Judge Lucia Violago Isnani.
[6] Id. at 36.
[7] Id. at 37.
[8] Id. at 15.
[9] Commentaries and Jurisprudence on the Commercial Laws of the Philippines,
Vol. 4 (1993 Edition), Aguedo F. Agbayani, p. 1, citing 1 Blanco 640.
[10] Id. at 4.
[11] Civil Code of the Philippines, Article 1755.
[12] Article 1173. The fault or negligence of the obligor consists in the omission of
that diligence which is required by the nature of the obligation and corresponds
with the circumstances of the persons, of the time and of the place. When
negligence shows bad faith, the provisions of Articles 1171 and 2201, paragraph
2, shall apply.
If the law or contract does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be required.
[13] Jarco Marketing Corporation v. Court of Appeals, 378 Phil. 991, 1003 (1999),
citing Picart v. Smith, 37 Phil. 809 (1918).
[14] This rule states:
SEC. 3. Disputable presumptions. The following presumptions are satisfactory if

uncontradicted, but may be contradicted and overcome by other evidence:
xxxxxxxxx
(e) That evidence willfully suppressed would be adverse if produced;
xxxxxxxxx
[15] Supra, note 3 at 10.
[16] The Revised Rules of Court in the Philippines, Vol. VII, Part II (1999 Edition)
V. Francisco, p. 92.
[17] Pimentel v. Court of Appeals, 307 SCRA 38.
[18] Castilex Industrial Corporation v. Vasquez, Jr., 378 Phil. 1009, 1018 (1999),
citing Belen v. Belen, 13 Phil. 202, 206 (1909), cited in Martin v. Court of Appeals,
G.R. No. 82248, 205 SCRA 591 (1992).
[19] Supra, note 2 at 60 & 94.
[20] Bayne Adjusters and Surveyors, Inc. v. Court of Appeals, G.R. No. 116332, 323
SCRA 231 (2000), citing Articles 1170, 1172-73, Civil Code; Southeastern College,
Inc. v. Court of Appeals, 354 Phil 434 (1998).
[21] Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. IV
(1999 Edition), Arturo M. Tolentino, p. 124.
[22] Supra, note 13, citing Borillo v. CA, G.R. No. 55691, 209 SCRA 130 (1992);
Mckee v. Intermediate Appellate Court, G.R. No. 68102, 211 SCRA 517 (1992);
and Salvador v. Court of Appeals, 313 Phil. 36 (1995).
[23] Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, 12 July 1994,
234 SCRA 78, 97.
Crisostomo vs. CA, G.R. No. 138334 August 25, 2003
FACTS:

ticketing and accommodation in a tour dubbed “Jewels of Europe”. The package
Liechstenstein, Switzerland and France at a total cost of P74,322.70.Petitioner was
given a 5% discount on the amount, which included airfare, and the booking fee
was also waived because petitioner’s niece, Meriam Menor, was respondent
company’s ticketing manager.
Pursuant to said contract, Menor went to her aunt’s residence on June 12, 1991 –
a Wednesday – to deliver petitioner’s travel documents and plane
tickets.Petitioner, in turn, gave Menor the full payment for the package
tour.Menor then told her to be at the Ninoy Aquino International Airport (NAIA)
on Saturday,two hours before her flight on board British Airways.

Hongkong. To petitioner’s dismay, she discovered that the flight she was supposed
to take had already departed the previous day.She learned that her plane ticket
was for the flight scheduled on June 14, 1991. She thus called up Menor to
complain.
Subsequently, Menor prevailed upon petitioner to take another tour – the “British
Pageant” – which included England, Scotland and Wales in its itinerary. For this
tour package, petitioner was asked anew to pay US$785.00 or P20,881.00 (at the
then prevailing exchange rate of P26.60). She gave respondent US$300 or
P7,980.00 as partial payment and commenced the trip in July 1991.
Upon petitioner’s return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum she
paid for “Jewels of Europe” and the amount she owed respondent for the “British
Pageant” tour. Despite several demands, respondent company refused to
reimburse the amount, contending that the same was non-refundable.Petitioner
was thus constrained to file a complaint against respondent for breach of contract
of carriage and damages, which was docketed as Civil Case No. 92-133 and raffled
to Branch 59 of the Regional Trial Court of Makati City.
After due proceedings, the trial court rendered a decision in favor of Estela
Crisostomo.
But it was reversed by the Court of Appeals. Hence, this petition.
ISSUE: Is the Caravan Travel and Tours liable for reimbursement and damages?
HELD: Petition DENIED.
By definition, a contract of carriage or transportation is one whereby a certain

or news from one place to another for a fixed price. Such person or association of
persons are regarded as carriers and are classified as private or special carriers and
common or public carriers. A common carrier is defined under Article 1732 of the
Civil Code as persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public.
simply to make travel arrangements in their behalf. Respondent’s services as a
petitioner ultimately contracted for her carriage to Europe. Respondent’s
The object of petitioner’s contractual relation with respondent is the latter’s

service of arranging and facilitating petitioner’s booking, ticketing and
accommodation in the package tour. In contrast, the object of a contract of
carriage is the transportation of passengers or goods. It is in this sense that the
contract between the parties in this case was an ordinary one for services and not
one of carriage. Petitioner’s submission is premised on a wrong assumption.It is
thus not bound under the law to observe extraordinary diligence in the
performance of its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the standard
of care required of respondent is that of a good father of a family under Article
1173 of the Civil Code.This connotes reasonable care consistent with that which
an ordinarily prudent person would have observed when confronted with a
similar situation. The test to determine whether negligence attended the
performance of an obligation is: did the defendant in doing the alleged negligent
act use that reasonable care and caution which an ordinarily prudent person
would have used in the same situation?If not, then he is guilty of negligence.
We do not agree with the finding of the lower court that Menor’s negligence
concurred with the negligence of petitioner and resultantly caused damage to the
latter. Contrary to petitioner’s claim, the evidence on record shows that
respondent exercised due diligence in performing its obligations under the
contract and followed standard procedure in rendering its services to petitioner.
As correctly observed by the lower court, the plane ticket. issued to petitioner
clearly reflected the departure date and time, contrary to petitioner’s contention.
The travel documents, consisting of the tour itinerary, vouchers and instructions,
were likewise delivered to petitioner two days prior to the trip. Respondent also
properly booked petitioner for the tour, prepared the necessary documents and
procured the plane tickets. It arranged petitioner’s hotel accommodation as well
as food, land transfers and sightseeing excursions, in accordance with its avowed
undertaking. Therefore, it is clear that respondent performed its prestation under
the contract as well as everything else that was essential to book petitioner for the
tour.
Hence, petitioner cannot recover and must bear her own damage.
FACTS:

ticketing and accommodation in a tour dubbed “Jewels of Europe”. The package
Liechstenstein, Switzerland and France at a total cost of P74,322.70. Pursuant to
said contract, Menor, respondent Company’s ticketing manager, went to her
aunt’s residence on June 12, 1991 – Wednesday – to deliver petitioner’s travel
documents and plane tickets. Menor then told her to be at the Ninoy Aquino
International Airport (NAIA) on Saturday, two hours before her flight on board
British Airways.

Hong Kong. To petitioner’s dismay, she discovered that the flight she was
supposed to take had already departed the previous day. She learned that her plane
ticket was for the flight scheduled on June 14, 1991. She thus called up Menor to
complain. Subsequently, Menor prevailed upon petitioner to take another tour
the “British Pageant” which included England, Scotland and Wales in its itinerary.
For this tour package, petitioner was asked anew to pay US$785.00 or P20,881.00.
She gave respondent US$300 or P7,980.00 as partial payment and commenced the
trip in July 1991. Upon petitioner’s return from Europe, she demanded from
respondent the reimbursement of P61,421.70, representing the difference
between the sum she paid for “Jewels of Europe” and the amount she owed
respondent for the “British Pageant” tour. Despite several demands, respondent
company refused to reimburse the amount, contending that the same was non-
refundable. Petitioner was thus constrained to file a complaint against respondent
for breach of contract of carriage and damages at Regional Trial Court of Makati
City.
The trial court held that respondent was negligent in erroneously advising
petitioner of her departure date through its employee, Menor, who was not
presented as witness to rebut petitioner’s testimony. However, petitioner should
have verified the exact date and time of departure by looking at her ticket and
should have simply not relied on Menor’s verbal representation. The trial court
thus declared that petitioner was guilty of contributory negligence and
accordingly, deducted 10% from the amount being claimed as refund. Respondent
appealed to the Court of Appeals, which likewise found both parties to be at fault.
However, the appellate court held that petitioner is more negligent than
respondent because as a lawyer and well-traveled person, she should have known
better than to simply rely on what was told to her. This being so, she is not entitled
to any form of damages. Petitioner also forfeited her right to the “Jewels of
Europe” tour and must therefore pay respondent the balance of the price for the
“British Pageant” tour.
ISSUE:
Is the contract a Contract of Carriage?
HELD:
No. By definition, a contract of carriage or transportation is one whereby a certain

or news from one place to another for a fixed price.9 Such person or association
of persons are regarded as carriers and are classified as private or special carriers
and common or public carriers. A common carrier is defined under Article 1732
of the Civil Code as persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water
or air, for compensation, offering their services to the public.
simply to make travel arrangements in their behalf. Respondent’s services as a
petitioner ultimately contracted for her carriage to Europe. Respondent’s
The object of petitioner’s contractual relation with respondent is the latter’s
service of arranging and facilitating petitioner’s booking, ticketing and
accommodation in the package tour. In contrast, the object of a contract of
carriage is the transportation of passengers or goods. It is in this sense that the
contract between the parties in this case was an ordinary one for services and not
one of carriage. Petitioner’s submission is premised on a wrong assumption.

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Republic of the Philippines

G.R. No. L-6055 June 12, 1953

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

Q. According to this article of incorporation Arsenio Baylon subscribed to 1,135

Defendant is accused under article 172 paragraph 1, in connection with article

ART. 171. Falsification by public officer, employee, or notary or ecclesiastic

xxx xxx xxx

4. Making untruthful statements in a narration of facts.

ART. 172. Falsification by private individuals and use of falsified documents . —

xxx xxx xxx

Commenting on the above provision, Justice Albert, in his well-known work on

DECEMBER 21, 2016 ~ VBDIAZ

People v. Quasha (1953)

G.R. No. L-6055

June 12, 1953

a member of the Philippine bar, committed a crime of falsification of a public and

to circumvent the constitutional mandate that no corp. shall be authorize to

Quasha appealed to this Court

Primary purpose: to carry on the business of a common carrier by air, land or

ISSUE: For a corporation to be entitled to operate a public utility is it necessary

HELD: No. For a corporation to be entitled to operate a public utility it is not

a member of the Philippine bar, committed a crime of falsification of a public and

to circumvent the constitutional mandate that no corp. shall be authorize to

Quasha appealed to this Court

Primary purpose: to carry on the business of a common carrier by air, land or

ART. 171. Falsification by public officer, employee, or notary or ecclesiastic

4. Making untruthful statements in a narration of facts.

ART. 172. Falsification by private individuals and use of falsified documents . —

1. Any private individual who shall commit any of the falsifications

article in any public or official document or letter of exchange or any

ISSUE: W/N Quasha should be criminally liable

HELD: NO. Acquitted.

falsification consists in not disclosing in the articles of incorporation that Baylon

The moment for determining whether a corporation is entitled to operate as a

G.R. No. 166471 March 22, 2011

TAWANG MULTI-PURPOSE COOPERATIVE Petitioner,

Tawang Multi-Purpose Cooperative (TMPC) is a cooperative, registered with the

La Trinidad Water District (LTWD) is a local water utility created under

With respect to LTWD’s opposition, this Board observes that:

1. It is a substantial reproduction of its opposition to the application for water

LTWD filed a motion for reconsideration. In its 18 November 2002

LTWD appealed to the RTC.

The RTC’s Ruling

The Court’s Ruling

The petition is meritorious.

No franchise, certificate, or any other form of authorization for the operation of

Section 5, Article XIV of the 1973 Constitution states that:

No franchise, certificate, or any other form of authorization for the operation of

Section 11, Article XII of the 1987 Constitution states that:

No franchise, certificate, or any other form of authorization for the operation of

In PD No. 198, as amended, former President Ferdinand E. Marcos (President

Under the doctrine of constitutional supremacy, if a law or contract violates any

In Metropolitan Cebu Water District v. Adala,33 the Court categorically declared

Nonetheless, while the prohibition in Section 47 of P.D. 198 applies to the

"SECTION 5. No franchise, certificate, or any other form of authorization for the

To begin with, a government agency’s refusal to grant a franchise to another

There is no "reasonable and legitimate" ground to violate the Constitution. The

In Metropolitan Manila Development Authority v. Viron Transportation Co.,

In Strategic Alliance Development Corporation v. Radstock Securities

WHEREFORE, we GRANT the petition. We DECLARE Section 47 of Presidential

CONCHITA CARPIO MORALES PRESBITERO J. VELASCO, JR.

ARTURO D. BRION DIOSDADO M. PERALTA

LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO

ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.