G.R. No. 85464 October 3, 1991 DAVID P. LLORENTE, petitioner, vs.

THE SANDIGANBAYAN (THIRD DIVISION), and PEOPLE OF THE PHILIPPINES, respondents. Padilla Law Office for petitioner.

SAMIENTO, J.:p The petitioner questions the Decision of the Sandiganbayan * holding him civilly liable in spite of an acquittal. The facts are not disputed: Atty. Llorente was employed in the PCA, a public corporation (Sec. 1, PD 1468) from 1975 to August 31, 1986, when he resigned. He occupied the positions of Assistant Corporate Secretary for a year, then Corporate Legal Counsel until November 2, 1981, and, finally, Deputy Administrator for Administrative Services, Finance Services, Legal Affairs Departments. ... As a result of a massive reorganization in 1981, hundreds of PCA employees resigned effective October 31, 1981. Among them were Mr. Curio, Mrs. Perez, Mr. Azucena, and Mrs. Javier (TSN, Oct. 22/87, p. 2; Exhs. M-2, N-1, and O-1). They were all required to apply for PCA clearances in support of their gratuity benefits (Exhs. C, M-2, N-1, and 0-1). Condition (a) of the clearance provided: The clearance shall be signed by the PCA officers concemed only when there is no item appearing under "PENDING ACCOUNTABILITY" or after every item previously entered thereunder is fully settled. Settlement thereof shall be written in RED ink. (Exhs. D or D-1 and 1-B) After the clearance was signed by the PCA officers concerned, it was to be approved, first, by Atty. Llorente, in the case of a rank-and-file employee, or by Col. Duefias, the acting administrator, in the case of an officer, and then by Atty. Rodriguez, the corporate auditor ... Notwithstanding Condition (a) just quoted, the clearances of Mrs Perez and Mr. Azucena both dated October 30, 1981, were favorably acted upon by the CPA officers concerned, including Mrs. Sotto, acting for the accounting division, even if the clearances showed they had pending accountabilities to the GSIS and the UCPB, and subsequently approved by Attys. Llorente and Rodriguez (Exhs. M and N). Thereafter, the vouchers for their gratuity benefits, also indicating their outstanding obligations were approved, among others, by Atty Llorente, and their gratuity benefits released to them after deducting those accountabilities. ... The clearanceof Mrs. Javier of the same date of October 30, 1991 was also signed by all PCA officers concerned, including Mrs. Sotto even though the former had unsettled obligations noted thereon, viz'SIS loan P5,387.00 and UCPB car loan P19,705.00, or a total of P25,092.00, and later on approveed by Col. Dueas, Mrs Javier being an officer, and Atty. Rodriguez "Exh. (O)". Similariv the, voucher of Mrs Javier for her gratuity benefits likewise recited her accountabilities of P25,092.00 plus P92.000.00, which was handwritten. Both accounts were deducted from her gratuity benefits, and the balance released to her on November 16, 1981. The voucher passed post-audit by Atty. Rodriguez on December 1, 1981 (Exhs. L, L-1, L-2, and L-3).

The said P92,000.00 was the disallowed portion of the cash advances received by Mr. Curio in connection with his duties as "super cargo" in the distribution of seed nuts throughout the country. He received them through and in the name of Mrs. Javier from the UCPB. When the amount was disallowed, the UCPB withheld from the PCA certain receivables; the latter, in turn, deducted the same amount from the gratuity benefits of Mrs. Javier, she being primarily liable therefor (Exhs, L, L-1, L-2, and L-3), At the time of the deduction, the additional liquidation papers had already been submitted and were in process. Just in case she would not be successful in having the entire amount wiped out, she requested Mr. Curio, who admittedly received it, to execute, as he did, an affidavit dated November 26, 1981, in which he assumed whatever portion thereof might not be allowed ... The clearance of Mr. Curio dated November 4,1981, (Exh. D or D-1) likewise favorably passed all officers concerned, including Mrs. Sotto, the latter signing despite the notation handwritten on December 8, 1981, that Mr. Curio had pending accountabilities, namely: GSIS loan 2,193.74, 201 accounts receivable P3,897.75, and UCPB loan P3,623.49, or a total of P10,714.78. However, when the clearance was submitted to Atty. Llorente for approval, he refused to approve it. For this reason, the clearance was held up in his office and did not reach Atty. Rodriguez, ... The reason given by Atty. Llorente was that when the clearance was presented to him on December 8, 1981, he was already aware of the affidavit dated November 26, 1981, in which Mr. Curio assumed to pay any residual liability for the disallowed cash advances, which at the time, December 8, 1981, stood at P92,000.00 (Exhs. 2 and 2-A). Moreover, Mr. Curio had other pending obligations noted on his clearance totalling Pl0,714.98 (Exh. 1-a). To justify his stand, Atty. Llorente invoked Condition (a) of the clearance (Exhs. D and I-B), which, he said, was "very stringent" and could not be interpreted in any other way ... On December 1, 1982, Mr. Curio brought the matter of his unapproved clearance to Col. Dueas (Exh. G), who referred it to the Legal Department, which was under Atty. Llorente as Deputy Administrator for legal affairs. After follow-up in that department, Mr. Curio received the answer of Col. Dueas dated February 11, 1983, saying that the clearance was being withheld until the former settled his alleged accountability for P92,000.00 reduced already to P56,000.00 (Exh. I). Mr. Curio elevated the matter to the Chairman of the PCA Board, who indorsed it to Col. Dueas, who, in turn, sent it to the Legal Department. This time the latter, through its Manager, Manuel F. Pastor, Jr., first cousin of Atty. Llorente, submitted a formal report under date of August 14, 1986, to the PCA Chairman, justifying the action taken by Atty. Llorente and Col. Dueas (Exh. 12). The PCA Chairman did not respond in writing, but advised Mr. Curio to wait for the resolution of the Tanodbayan with which he (Mr. Curio) had filed this case initially against Atty. Llorente and, later on, against Col. Duerias also. On August 31, 1986, Atty. Llorente resigned from the PCA; the clearance, however, could not be issued because, according to the PCA Corporate Legal Counsel, Arthur J. Liquate, the PCA did not want to preempt the Tanodbayan. On November 12, 1986, the latter decided to institlite this case in court ... Nine days thereafter, or on November 21, 1986, Mr. Curio accomplished another clearance, which no longer imposed Condition (a) of his earlier clearance (Exh. E). The new clearance was approved, even if he still had pending accountabilities, totalling P10,714.78 that had remained unsettled since December 1981. His voucher was also approved, and his gratuity benefits paid to him in the middle of December 1986, after deducting those obligations (Exh. F). Nothing was mentioned anymore about the disallowed cash advances of P92,000.00, which had been reduced to P55,000.00 ...

Between December 1981 and December 1986, Mr. Curio failed to get gainful employment; as a result, his family literally went hungry, In 1981, he applied for work with the Philippine Cotton Authority, but was refused, because he could not present his PCA clearance. The same thing happened when he sought employment with the Philippine Fish Marketing Administration in January 1982. In both prospective employers, the item

applied for was P2,500.00 a month. At that time, he was only about 45 years old and still competitive in the job market. But in 1986, being already past 50 years, he could no longer be hired permanently, there being a regulation to that effect. His present employment with the Philippine Ports Authority, which started on March 16, 1987, was casual for that reason. Had his gratuity benefits been paid in 1981, he would have received a bigger amount, considering that since then interest had accrued and the foreign exchange rate of the peso to the dollar had gone up ... 1
On December 10, 1986, an Information for violation of Section 3(c) of the Anti-Graft and Corrupt Practices Act was filed against the petitioner: That on or about December 8, 1981 and/or subsequent thereto, in Quezon City, Philippines, and within the jurisdiction of this Honorable Court, accused David Pastor Llorente, Deputy Administrator for the Philippine Coconut Authority (PCA), and as such was empowered among others to approve clearances of employees thereat, taking advantage of his position, through evident bad faith, did then and there, wilfully and unlawfully refuse to issue a certificate of clearance to Herminigildo M. Curio, an employee thereat, who was forced to resign as a result of the abolition of his item pursuant to the 1981 reorganization of the PCA, resulting in his deprivation to receive his gratuity benefits amounting to P29,854.90, and to secure employment with other offices to his damage and prejudice, and that of the public service. CONTRARY TO LAW.

Manila, Philippines, December 10, 1986. 2

As indicated at the outset, the Sandiganbayan acquitted the petitioner in the absence of any evidence that he acted in bad faith. 3 The Sandiganbayan cited three considerations that precluded bad faith: First, when Atty. Llorente withheld favorable action on the clearance on and after December 8, 1981, there was still the possibility, remote though it was when viewed after the fact, that the accountability, which Mrs. Javier was primarily liable therefor and which was fully settled by deduction from her gratuity benefits on November 16, 1981 (Exhs. L, L-1, L-2, and L-3), would be reinstated and charged directly to Mr. Curio, for the latter executed on November 26, 1981, an affidavit assuming responsibility for the obligation to the extent of the amount finally disallowed, and the affidavit was on December 8, 1981, already pending consideration by the PCA management (Exhs. 2 and 2-A). Second, Atty. Llorente was appointed Deputy Administrator for administrative services, finance services, and legal affairs departments only on November 2,1981 (TSN, March 9/87, p. 3). Being new in his job, it was but natural that he was zealous in the performance of his functions in fact, overzealous in the protection of the PCA interests, even if that protection was not necessary, as the P92,000.00 accountability had already been paid (See Exh. 12, 4th paragraph). Finally, Atty. Llorente was officiously, though incidentally, taking care also of the interest of Mrs. Javier who, justice and equity demanded, should not be made to shoulder the P92,000.00 unliquidated cash advances, for the reason that it was Mr. Curio who admittedly spent them or who, at the very least, should be able to get reimbursement of what she paid, totally or partially, from his gratuity benefits (See Exh. 5, pp. 2-3 ). 4 The Sandiganbayan, as we also indicated earlier, took the petitioner to task civilly, and ordered him to pay "compensatory damages" in the sum of P90,000.00. According to the Sandiganbayan, the petitioner was guilty nonetheless of abuse of right under Article 19 of the Civil Code and as a public officer, he was liable for damages suffered by the aggrieved party (under Article 27).

The petitioner claims that the Sandiganbayan's Decision is erroneous even if the Sandiganbayan acquitted him therein, because he was never in bad faith as indeed found by the Sandiganbayan. Under the 1985 Rules of Criminal Procedure, amending Rules 110 through 127 of the Rules of Court, the judgment of the court shall include, in case of acquittal, and unless there is a clear showing that the act from which the civil liability might arise did not exist, "a finding on the civil liability of the accused in favor of the offended party." 5 The rule is based on the provisions of substantive law, 6 that if acquittal proceeds from reasonable doubt, a civil action, lies nonetheless. The challenged judgment found that the petitioner, in refusing to issue a certificate of clearance in favor of the private offended party, Herminigildo Curio, did not act with "evident bad faith," one of the elements of Section 3(e) of Republic Act No. 3819. 7 We agree with tile judgment, insofar as it found lack of evident bad faith by the petitioner, for the reasons cited therein basicallv, because the petitioner was acting within the bounds of law in refusing to clear Curio although "[t]he practice was that the clearance was nevertheless approved, and then the amount of the unsettled obligation was deducted from the gratuity benefits of the employee." 8 We also agree with the Sandiganbaya (although the Sandiganbayan did not say it) that although the petitioner did not act with evident bad faith, he acted with bad faith nevertheless, for which he should respond for damages. The records show that the office practice indeed in the Philippine Coconut Authority was to clear the employee (retiree) and deduct his accountabilities from his gratuity benefits. There seems to be no debate about the existence of this practice (the petitioner admitted it later on) and in fact, he cleared three employees on the condition that their obligations should be deducted from their benefits. 9 We quote: Confronted with these evidence (sic), Atty. Llorente conceded, albeit grudgingly, the existence of the practice by the accounting division of not complying with Condition (a). He, however, claimed that he learned of the practice only during the trial of the case and that he must have inadvertently approved the clearances of Mrs. Perez, Mr. Azucena, and possibly others who were similarly situated (TSN, March 9/88,pp. 4-5). This the evidence belies. First, he himself testified that when the clearance of Mr. Curio was presented to him in December 1981, it already bore the signature of Mrs. Sotto of the accounting division and the notation set opposite her name about the outstanding accountabilities of Mr. Curio; but he (Atty. Llorente) significantly did not ask her why she signed the clearance (TSN, Nov. 24/87, pp. 2425). Second, in that month, Atty. Llorente approved Mrs. Perez's and Mr. Azucena's vouchers showing that hey has pending obligations to the GSIS and the UCPB, which were being deducted from their gratuity benefits. Attached to those vouchers were the clearances as supporting documents (Exhs. M-2 and N-1; TSN, Dec. 7/87, pp. 13,23). And third, in the same month, Atty. Llorente was already aware of the cae of Mrs. Javier whose clearance and voucher were, according to him, preciselywithheld because of her unsettled accountability for the cash advances of P92,000.00, but here later on given due course; and her gratuity benefits released on November 16, 1981, minus that amount (TSN, Nov. 24/87, pp. 31-32; Exhs. L, L-1, L-2 and L-3).

The cash advances of P92,000.00 were the primary obligation of Mrs. Javier, since they were secured through her and in her name from the UCPB. That was why they were charged to and deducted from, her gratuity benefits. Consequently, as early as that date and in so far as the PCA and the UCPB were concerned, the accountability was already fully paid. The assumption of residual liability by Mr. Curio for the cash advances on November 26, 1981, was a matter between him and Mrs. Javier (Exhs. 2 and 2-A). 10
The general rule is that this Court is bound by the findings of fact of the Sandiganbayan. 11 As we said, the acts of the petitioner were legal (that is, pursuant to procedures), as he insists in this petition, yet it does not follow, as we said, that his acts were done in good faith. For emphasis, he had no valid reason to "go legal" all of a sudden with respect to Mr. Curio, since he had cleared three employees who, as the

Sandiganbayan found, "were all similarly circumstanced in that they all had pending obligations when, their clearances were filed for consideration, warranting similar official action." 12 The Court is convinced that the petitioner had unjustly discriminated against Mr. Curio. It is no defense that the petitioner was motivated by no ill-will (a grudge, according to the Sandiganbayan), since the facts speak for themselves. It is no defense either that he was, after all, complying merely with legal procedures since, as we indicated, he was not as strict with respect to the three retiring other employees. There can be no other logical conclusion that he was acting unfairly, no more, no less, to Mr. Curio. It is the essence of Article 19 of the Civil Code, under which the petitioner was made to pay damages, together with Article 27, that the performance of duty be done with justice and good faith. In the case of Velayo vs. Shell Co. of the Philippines, 13 we held the defendant liable under Article 19 for disposing of its propertv a perfectly legal act in order to escape the reach of a creditor. In two fairly more recent cases, Sevilla vs. Court of Appeals 14and Valenzuela vs. Court of Appeals, 15 we held that a principal is liable under Article 19 in terminating the agency again, a legal act when terminating the agency would deprive the agent of his legitimate business. We believe that the petitioner is liable under Article 19. The Court finds the award of P90,000.00 to be justified bv Article 2202 of the Civil Code, which holds the defendant liable for all "natural and probable" damages. Hennenegildo Cunct presented evidence that as a consequence of the petitioner's refusal to clear him, he failed to land a job at the Philippine Cotton Authority and Philippine First Marketing Authority. He also testified that a job in either office would have earned him salary of P2,500.00 a month, or P150,000.00 in five years. Deducting his probable expenses of reasonably about P1,000.00 a month or P60,000.00 in five years, the petitioner owes him a total actual damages of P90,000.00 WHEREFORE, premises considered, the Petition is DENIED. No pronouncement as to costs. IT IS SO ORDERED.

G.R. No. 88694 January 11, 1993 ALBENSON ENTERPRISES CORP., JESSE YAP, AND BENJAMIN MENDIONA, petitioners, vs. THE COURT OF APPEALS AND EUGENIO S. BALTAO, respondents. Puruganan, Chato, Chato & Tan for petitioners. Lino M. Patajo, Francisco Ma. Chanco, Ananiano Desierto and Segundo Mangohig for private respondent.

BIDIN, J.: This petition assails the decision of respondent Court of Appeals in CA-GR CV No. 14948 entitled "Eugenio S. Baltao, plaintiff-appellee vs. Albenson Enterprises Corporation, et al, defendants-appellants", which modified the judgment of the Regional Trial Court of Quezon City, Branch XCVIII in Civil Case No. Q-40920 and ordered petitioner to pay private respondent, among others, the sum of P500,000.00 as moral damages and attorney's fees in the amount of P50,000.00.

The facts are not disputed. In September, October, and November 1980, petitioner Albenson Enterprises Corporation (Albenson for short) delivered to Guaranteed Industries, Inc. (Guaranteed for short) located at 3267 V. Mapa Street, Sta. Mesa, Manila, the mild steel plates which the latter ordered. As part payment thereof, Albenson was given Pacific Banking Corporation Check No. 136361 in the amount of P2,575.00 and drawn against the account of E.L. Woodworks (Rollo, p. 148). When presented for payment, the check was dishonored for the reason "Account Closed." Thereafter, petitioner Albenson, through counsel, traced the origin of the dishonored check. From the records of the Securities and Exchange Commission (SEC), Albenson discovered that the president of Guaranteed, the recipient of the unpaid mild steel plates, was one "Eugenio S. Baltao." Upon further inquiry, Albenson was informed by the Ministry of Trade and Industry that E.L. Woodworks, a single proprietorship business, was registered in the name of one "Eugenio Baltao". In addition, upon verification with the drawee bank, Pacific Banking Corporation, Albenson was advised that the signature appearing on the subject check belonged to one "Eugenio Baltao." After obtaining the foregoing information, Albenson, through counsel, made an extrajudicial demand upon private respondent Eugenio S. Baltao, president of Guaranteed, to replace and/or make good the dishonored check. Respondent Baltao, through counsel, denied that he issued the check, or that the signature appearing thereon is his. He further alleged that Guaranteed was a defunct entity and hence, could not have transacted business with Albenson. On February 14, 1983, Albenson filed with the Office of the Provincial Fiscal of Rizal a complaint against Eugenio S. Baltao for violation of Batas Pambansa Bilang 22. Submitted to support said charges was an affidavit of petitioner Benjamin Mendiona, an employee of Albenson. In said affidavit, the above-mentioned circumstances were stated. It appears, however, that private respondent has a namesake, his son Eugenio Baltao III, who manages a business establishment, E.L. Woodworks, on the ground floor of the Baltao Building, 3267 V. Mapa Street, Sta. Mesa, Manila, the very same business address of Guaranteed. On September 5, 1983, Assistant Fiscal Ricardo Sumaway filed an information against Eugenio S. Baltao for Violation of Batas Pambansa Bilang 22. In filing said information, Fiscal Sumaway claimed that he had given Eugenio S. Baltao opportunity to submit controverting evidence, but the latter failed to do so and therefore, was deemed to have waived his right. Respondent Baltao, claiming ignorance of the complaint against him, immediately filed with the Provincial Fiscal of Rizal a motion for reinvestigation, alleging that it was not true that he had been given an opportunity to be heard in the preliminary investigation conducted by Fiscal Sumaway, and that he never had any dealings with Albenson or Benjamin Mendiona, consequently, the check for which he has been accused of having issued without funds was not issued by him and the signature in said check was not his. On January 30, 1984, Provincial Fiscal Mauro M. Castro of Rizal reversed the finding of Fiscal Sumaway and exonerated respondent Baltao. He also instructed the Trial Fiscal to move for dismissal of the information filed against Eugenio S. Baltao. Fiscal Castro found that the signature in PBC Check No. 136361 is not the signature of Eugenio S. Baltao. He also found that there is no showing in the records of the preliminary investigation that Eugenio S. Baltao actually received notice of the said investigation. Fiscal Castro then castigated Fiscal Sumaway for failing to exercise care and prudence in the performance of his duties, thereby causing injustice to respondent who was not properly notified of the complaint against him and of the requirement to submit his counter evidence. Because of the alleged unjust filing of a criminal case against him for allegedly issuing a check which bounced in violation of Batas Pambansa Bilang 22 for a measly amount of P2,575.00, respondent Baltao filed before the

Regional Trial Court of Quezon City a complaint for damages against herein petitioners Albenson Enterprises, Jesse Yap, its owner, and Benjamin Mendiona, its employee. In its decision, the lower court observed that "the check is drawn against the account of "E.L. Woodworks," not of Guaranteed Industries of which plaintiff used to be President. Guaranteed Industries had been inactive and had ceased to exist as a corporation since 1975. . . . . The possibility is that it was with Gene Baltao or Eugenio Baltao III, a son of plaintiff who had a business on the ground floor of Baltao Building located on V. Mapa Street, that the defendants may have been dealing with . . . ." (Rollo, pp. 41-42). The dispositive portion of the trial court 's decision reads: WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants ordering the latter to pay plaintiff jointly and severally: 1. actual or compensatory damages of P133,350.00; 2. moral damages of P1,000,000.00 (1 million pesos); 3. exemplary damages of P200,000.00; 4. attorney's fees of P100,000.00; 5 costs. Defendants' counterclaim against plaintiff and claim for damages against Mercantile Insurance Co. on the bond for the issuance of the writ of attachment at the instance of plaintiff are hereby dismissed for lack of merit. (Rollo, pp. 38-39). On appeal, respondent court modified the trial court's decision as follows: WHEREFORE, the decision appealed from is MODIFIED by reducing the moral damages awarded therein from P1,000,000.00 to P500,000.00 and the attorney's fees from P100,000.00 to P50,000.00, said decision being hereby affirmed in all its other aspects. With costs against appellants. (Rollo, pp. 50-51) Dissatisfied with the above ruling, petitioners Albenson Enterprises Corp., Jesse Yap, and Benjamin Mendiona filed the instant Petition, alleging that the appellate court erred in: 1. Concluding that private respondent's cause of action is not one based on malicious prosecution but one for abuse of rights under Article 21 of the Civil Code notwithstanding the fact that the basis of a civil action for malicious prosecution is Article 2219 in relation to Article 21 or Article 2176 of the Civil Code . . . . 2. Concluding that "hitting at and in effect maligning (private respondent) with an unjust criminal case was, without more, a plain case of abuse of rights by misdirection" and "was therefore, actionable by itself," and which "became inordinately blatant and grossly aggravated when . . . (private respondent) was deprived of his basic right to notice and a fair hearing in the so-called preliminary investigation . . . . " 3. Concluding that petitioner's "actuations in this case were coldly deliberate and calculated", no evidence having been adduced to support such a sweeping statement. 4. Holding the petitioner corporation, petitioner Yap and petitioner Mendiona jointly and severally liable without sufficient basis in law and in fact.

5. Awarding respondents 5.1. P133,350.00 as actual or compensatory damages, even in the absence of sufficient evidence to show that such was actually suffered. 5.2. P500,000.00 as moral damages considering that the evidence in this connection merely involved private respondent's alleged celebrated status as a businessman, there being no showing that the act complained of adversely affected private respondent's reputation or that it resulted to material loss. 5.3. P200,000.00 as exemplary damages despite the fact that petitioners were duly advised by counsel of their legal recourse. 5.4. P50,000.00 as attorney's fees, no evidence having been adduced to justify such an award (Rollo, pp. 4-6). Petitioners contend that the civil case filed in the lower court was one for malicious prosecution. Citing the case ofMadera vs. Lopez (102 SCRA 700 [1981]), they assert that the absence of malice on their part absolves them from any liability for malicious prosecution. Private respondent, on the other hand, anchored his complaint for Damages on Articles 19, 20, and 21 ** of the Civil Code. Article 19, known to contain what is commonly referred to as the principle of abuse of rights, sets certain standards which may be observed not only in the exercise of one's rights but also in the performance of one's duties. These standards are the following: to act with justice; to give everyone his due; and to observe honesty and good faith. The law, therefore, recognizes the primordial limitation on all rights: that in their exercise, the norms of human conduct set forth in Article 19 must be observed. A right, though by itself legal because recognized or granted by law as such, may nevertheless become the source of some illegality. When a right is exercised in a manner which does not conform with the norms enshrined in Article 19 and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be held responsible. Although the requirements of each provision is different, these three (3) articles are all related to each other. As the eminent Civilist Senator Arturo Tolentino puts it: "With this article (Article 21), combined with articles 19 and 20, the scope of our law on civil wrongs has been very greatly broadened; it has become much more supple and adaptable than the Anglo-American law on torts. It is now difficult to conceive of any malevolent exercise of a right which could not be checked by the application of these articles" (Tolentino, 1 Civil Code of the Philippines 72). There is however, no hard and fast rule which can be applied to determine whether or not the principle of abuse of rights may be invoked. The question of whether or not the principle of abuse of rights has been violated, resulting in damages under Articles 20 and 21 or other applicable provision of law, depends on the circumstances of each case. (Globe Mackay Cable and Radio Corporation vs. Court of Appeals, 176 SCRA 778 [1989]). The elements of an abuse of right under Article 19 are the following: (1) There is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another. Article 20 speaks of the general sanction for all other provisions of law which do not especially provide for their own sanction (Tolentino, supra, p. 71). Thus, anyone who, whether willfully or negligently, in the exercise of his legal right or duty, causes damage to another, shall indemnify his victim for injuries suffered thereby. Article 21 deals with acts contra bonus mores, and has the following elements: 1) There is an act which is legal; 2) but which is contrary to morals, good custom, public order, or public policy; 3) and it is done with intent to injure. Thus, under any of these three (3) provisions of law, an act which causes injury to another may be made the basis for an award of damages. There is a common element under Articles 19 and 21, and that is, the act must be intentional. However, Article 20 does not distinguish: the act may be done either "willfully", or "negligently". The trial court as well as the

respondent appellate court mistakenly lumped these three (3) articles together, and cited the same as the bases for the award of damages in the civil complaint filed against petitioners, thus: With the foregoing legal provisions (Articles 19, 20, and 21) in focus, there is not much difficulty in ascertaining the means by which appellants' first assigned error should be resolved, given the admitted fact that when there was an attempt to collect the amount of P2,575.00, the defendants were explicitly warned that plaintiff Eugenio S. Baltao is not the Eugenio Baltao defendants had been dealing with (supra, p. 5). When the defendants nevertheless insisted and persisted in filing a case a criminal case no less against plaintiff, said defendants ran afoul of the legal provisions (Articles 19, 20, and 21 of the Civil Code) cited by the lower court and heretofore quoted (supra). Defendants, not having been paid the amount of P2,575.00, certainly had the right to complain. But that right is limited by certain constraints. Beyond that limit is the area of excess, of abuse of rights. (Rollo, pp. 44-45). Assuming, arguendo, that all the three (3) articles, together and not independently of each one, could be validly made the bases for an award of damages based on the principle of "abuse of right", under the circumstances, We see no cogent reason for such an award of damages to be made in favor of private respondent. Certainly, petitioners could not be said to have violated the aforestated principle of abuse of right. What prompted petitioners to file the case for violation of Batas Pambansa Bilang 22 against private respondent was their failure to collect the amount of P2,575.00 due on a bounced check which they honestly believed was issued to them by private respondent. Petitioners had conducted inquiries regarding the origin of the check, and yielded the following results: from the records of the Securities and Exchange Commission, it was discovered that the President of Guaranteed (the recipient of the unpaid mild steel plates), was one "Eugenio S. Baltao"; an inquiry with the Ministry of Trade and Industry revealed that E.L. Woodworks, against whose account the check was drawn, was registered in the name of one "Eugenio Baltao"; verification with the drawee bank, the Pacific Banking Corporation, revealed that the signature appearing on the check belonged to one "Eugenio Baltao". In a letter dated December 16, 1983, counsel for petitioners wrote private respondent demanding that he make good the amount of the check. Counsel for private respondent wrote back and denied, among others, that private respondent ever transacted business with Albenson Enterprises Corporation; that he ever issued the check in question. Private respondent's counsel even went further: he made a warning to defendants to check the veracity of their claim. It is pivotal to note at this juncture that in this same letter, if indeed private respondent wanted to clear himself from the baseless accusation made against his person, he should have made mention of the fact that there are three (3) persons with the same name, i.e.: Eugenio Baltao, Sr., Eugenio S. Baltao, Jr. (private respondent), and Eugenio Baltao III (private respondent's son, who as it turned out later, was the issuer of the check). He, however, failed to do this. The last two Baltaos were doing business in the same building Baltao Building located at 3267 V. Mapa Street, Sta. Mesa, Manila. The mild steel plates were ordered in the name of Guaranteed of which respondent Eugenio S. Baltao is the president and delivered to Guaranteed at Baltao building. Thus, petitioners had every reason to believe that the Eugenio Baltao who issued the bouncing check is respondent Eugenio S. Baltao when their counsel wrote respondent to make good the amount of the check and upon refusal, filed the complaint for violation of BP Blg. 22. Private respondent, however, did nothing to clarify the case of mistaken identity at first hand. Instead, private respondent waited in ambush and thereafter pounced on the hapless petitioners at a time he thought was propitious by filing an action for damages. The Court will not countenance this devious scheme. The criminal complaint filed against private respondent after the latter refused to make good the amount of the bouncing check despite demand was a sincere attempt on the part of petitioners to find the best possible means by which they could collect the sum of money due them. A person who has not been paid an obligation owed to him will naturally seek ways to compel the debtor to pay him. It was normal for petitioners to find means to make the issuer of the check pay the amount thereof. In the absence of a wrongful act or omission or of fraud or bad faith, moral damages cannot be awarded and that the adverse result of an action does not per

se make the action wrongful and subject the actor to the payment of damages, for the law could not have meant to impose a penalty on the right to litigate (Rubio vs. Court of Appeals, 141 SCRA 488 [1986]). In the case at bar, private respondent does not deny that the mild steel plates were ordered by and delivered to Guaranteed at Baltao building and as part payment thereof, the bouncing check was issued by one Eugenio Baltao. Neither had private respondent conveyed to petitioner that there are two Eugenio Baltaos conducting business in the same building he and his son Eugenio Baltao III. Considering that Guaranteed, which received the goods in payment of which the bouncing check was issued is owned by respondent, petitioner acted in good faith and probable cause in filing the complaint before the provincial fiscal. To constitute malicious prosecution, there must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person, and that it was initiated deliberately by the defendant knowing that his charges were false and groundless. Concededly, the mere act of submitting a case to the authorities for prosecution does not make one liable for malicious prosecution. (Manila Gas Corporation vs. Court of Appeals, 100 SCRA 602 [1980]). Still, private respondent argues that liability under Articles 19, 20, and 21 of the Civil Code is so encompassing that it likewise includes liability for damages for malicious prosecution under Article 2219 (8). True, a civil action for damages for malicious prosecution is allowed under the New Civil Code, more specifically Articles 19, 20, 26, 29, 32, 33, 35, and 2219 (8) thereof. In order that such a case can prosper, however, the following three (3) elements must be present, to wit: (1) The fact of the prosecution and the further fact that the defendant was himself the prosecutor, and that the action was finally terminated with an acquittal; (2) That in bringing the action, the prosecutor acted without probable cause; (3) The prosecutor was actuated or impelled by legal malice (Lao vs. Court of Appeals, 199 SCRA 58, [1991]). Thus, a party injured by the filing of a court case against him, even if he is later on absolved, may file a case for damages grounded either on the principle of abuse of rights, or on malicious prosecution. As earlier stated, a complaint for damages based on malicious prosecution will prosper only if the three (3) elements aforecited are shown to exist. In the case at bar, the second and third elements were not shown to exist. It is well-settled that one cannot be held liable for maliciously instituting a prosecution where one has acted with probable cause. "Probable cause is the existence of such facts and circumstances as would excite the belief, in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the person charged was guilty of the crime for which he was prosecuted. In other words, a suit will lie only in cases where a legal prosecution has been carried on without probable cause. The reason for this rule is that it would be a very great discouragement to public justice, if prosecutors, who had tolerable ground of suspicion, were liable to be sued at law when their indictment miscarried" (Que vs. Intermediate Appellate Court, 169 SCRA 137 [1989]). The presence of probable cause signifies, as a legal consequence, the absence of malice. In the instant case, it is evident that petitioners were not motivated by malicious intent or by sinister design to unduly harass private respondent, but only by a well-founded anxiety to protect their rights when they filed the criminal complaint against private respondent. To constitute malicious prosecution, there must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person, that it was initiated deliberately by the defendant knowing that his charges were false and groundless. Concededly, the mere act of submitting a case to the authorities for prosecution does not make one liable for malicious prosecution. Proof and motive that the institution of the action was prompted by a sinister design to vex and humiliate a person must be clearly and preponderantly established to entitle the victims to damages (Ibid.). In the case at bar, there is no proof of a sinister design on the part of petitioners to vex or humiliate private respondent by instituting the criminal case against him. While petitioners may have been negligent to some extent in determining the liability of private respondent for the dishonored check, the same is not so gross or reckless as to amount to bad faith warranting an award of damages. The root of the controversy in this case is founded on a case of mistaken identity. It is possible that with a more assiduous investigation, petitioners would have eventually discovered that private respondent Eugenio S. Baltao is not the "Eugenio Baltao" responsible for the dishonored check. However, the record shows that petitioners did exert considerable effort in order to determine the liability of private respondent. Their

investigation pointed to private respondent as the "Eugenio Baltao" who issued and signed the dishonored check as the president of the debtor-corporation Guaranteed Enterprises. Their error in proceeding against the wrong individual was obviously in the nature of an innocent mistake, and cannot be characterized as having been committed in bad faith. This error could have been discovered if respondent had submitted his counteraffidavit before investigating fiscal Sumaway and was immediately rectified by Provincial Fiscal Mauro Castro upon discovery thereof, i.e., during the reinvestigation resulting in the dismissal of the complaint. Furthermore, the adverse result of an action does not per se make the act wrongful and subject the actor to the payment of moral damages. The law could not have meant to impose a penalty on the right to litigate, such right is so precious that moral damages may not be charged on those who may even exercise it erroneously. And an adverse decision does not ipso facto justify the award of attorney's fees to the winning party (Garcia vs. Gonzales, 183 SCRA 72 [1990]). Thus, an award of damages and attorney's fees is unwarranted where the action was filed in good faith. If damage results from a person's exercising his legal rights, it is damnum absque injuria (Ilocos Norte Electric Company vs. Court of Appeals, 179 SCRA 5 [1989]). Coming now to the claim of private respondent for actual or compensatory damages, the records show that the same was based solely on his allegations without proof to substantiate the same. He did not present proof of the cost of the medical treatment which he claimed to have undergone as a result of the nervous breakdown he suffered, nor did he present proof of the actual loss to his business caused by the unjust litigation against him. In determining actual damages, the court cannot rely on speculation, conjectures or guesswork as to the amount. Without the actual proof of loss, the award of actual damages becomes erroneous (Guilatco vs. City of Dagupan, 171 SCRA 382 [1989]). Actual and compensatory damages are those recoverable because of pecuniary loss in business, trade, property, profession, job or occupation and the same must be proved, otherwise, if the proof is flimsy and unsubstantiated, no damages will be given (Rubio vs. Court of Appeals, 141 SCRA 488 [1986]). For these reasons, it was gravely erroneous for respondent court to have affirmed the award of actual damages in favor of private respondent in the absence of proof thereof. Where there is no evidence of the other party having acted in wanton, fraudulent or reckless, or oppressive manner, neither may exemplary damages be awarded (Dee Hua Liong Electrical Equipment Corporation vs. Reyes, 145 SCRA 488 [1986]). As to the award of attorney's fees, it is well-settled that the same is the exception rather than the general rule. Needless to say, the award of attorney's fees must be disallowed where the award of exemplary damages is eliminated (Article 2208, Civil Code; Agustin vs. Court of Appeals, 186 SCRA 375 [1990]). Moreover, in view of the fact that there was no malicious prosecution against private respondent, attorney's fees cannot be awarded him on that ground. In the final analysis, there is no proof or showing that petitioners acted maliciously or in bad faith in the filing of the case against private respondent. Consequently, in the absence of proof of fraud and bad faith committed by petitioners, they cannot be held liable for damages (Escritor, Jr. vs. Intermediate Appellate Court, 155 SCRA 577 [1987]). No damages can be awarded in the instant case, whether based on the principle of abuse of rights, or for malicious prosecution. The questioned judgment in the instant case attests to the propensity of trial judges to award damages without basis. Lower courts are hereby cautioned anew against awarding unconscionable sums as damages without bases therefor. WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals in C.A. G.R. C.V. No. 14948 dated May 13, 1989, is hereby REVERSED and SET ASIDE. Costs against respondent Baltao. SO ORDERED.

BPI

EXPRESS CARD CORPORATION, petitioner, vs. COURT APPEALS and RICARDO J. MARASIGAN, respondents. DECISION

OF

KAPUNAN, J.:

The question before this Court is whether private respondent can recover moral damages arising from the cancellation of his credit card by petitioner credit card corporation. The facts of the case are as stated in the decision of the respondent court,[1] to wit:

The case arose from the dishonor of the credit card of the plaintiff Atty. Ricardo J. Marasigan by Cafe Adriatico, a business establishment accredited with the defendant-appellant BPI Express Card Corporation (BECC for brevity) on December 8, 1989 when the plaintiff entertained some guests thereat. The records of this case show that plaintiff, who is a lawyer by profession was a complimentary member of BECC from February 1988 to February 1989 and was issued Credit Card No. 100-012-5534 with a credit limit of P3,000.00 and with a monthly billing every 27th of the month (Exh. N), subject to the terms and conditions stipulated in the contract (Exh. 1-b). His membership was renewed for another year or until February 1990 and the credit limit was increased to P5,000.00 (Exh. A). The plaintiff oftentimes exceeded his credit limits (Exhs. I, I-1 to I-12) but this was never taken against him by the defendant and even his mode of paying his monthly bills in check was tolerated. Their contractual relations went on smoothly until his statement of account for October, 1989 amounting to P8,987.84 was not paid in due time. The plaintiff admitted having inadvertently failed to pay his account for the said month because he was in Quezon province attending to some professional and personal commitments. He was informed by his secretary that defendant was demanding immediate payment of his outstanding account, was requiring him to issue a check for P15,000.00 which would include his future bills, and was threatening to suspend his credit card. Plaintiff issued Far East Bank and Trust Co. Check No. 494675 in the amount of P15,000.00, postdated December 15, 1989 which was received on November 23, 1989 by Tess Lorenzo, an employee of the defendant (Exhs. J and J-1), who in turn gave the said check to Jeng Angeles, a co-employee who handles the account of the plaintiff. The check remained in the custody of Jeng Angeles. Mr. Roberto Maniquiz, head of the collection department of defendant was formally informed of the postdated check about a week later. On November 28, 1989, defendant served plaintiff a letter by ordinary mail informing him of the temporary suspension of the privileges of his credit card and the inclusion

of his account number in their Caution List. He was also told to refrain from further use of his credit card to avoid any inconvenience/embarrassment and that unless he settles his outstanding account with the defendant within 5 days from receipt of the letter, his membership will be permanently cancelled (Exh. 3). There is no showing that the plaintiff received this letter before December 8, 1989. Confident that he had settled his account with the issuance of the postdated check, plaintiff invited some guests on December 8, 1989 and entertained them at Caf Adriatico. When he presented his credit card to Caf Adriatico for the bill amounting to P735.32, said card was dishonored. One of his guests, Mary Ellen Ringler, paid the bill by using her own credit card, a Unibankard (Exhs. M, M-1 and M-2). In a letter addressed to the defendant dated December 12, 1989, plaintiff requested that he be sent the exact billing due him as of December 15, 1989, to withhold the deposit of his postdated check and that said check be returned to him because he had already instructed his bank to stop the payment thereof as the defendant violated their agreement that the plaintiff issue the check to the defendant to cover his account amounting to only P8,987.84 on the condition that the defendant will not suspend the effectivity of the card (Exh. D). A letter dated December 16, 1989 was sent by the plaintiff to the manager of FEBTC, Ramada Branch, Manila requesting the bank to stop the payment of the check (Exhs. E, E-1). No reply was received by plaintiff from the defendant to his letter dated December 12, 1989. Plaintiff sent defendant another letter dated March 12, 1990 reminding the latter that he had long rescinded and cancelled whatever arrangement he entered into with defendant and requesting for his correct billing, less the improper charges and penalties, and for an explanation within five (5) days from receipt thereof why his card was dishonored on December 8, 1989 despite assurance to the contrary by defendant's personnel-in-charge, otherwise the necessary court action shall be filed to hold defendant responsible for the humiliation and embarrassment suffered by him (Exh. F). Plaintiff alleged further that after a few days, a certain Atty. Albano, representing himself to be working with office of Atty. Lopez, called him inquiring as to how the matter can be threshed out extrajudicially but the latter said that such is a serious matter which cannot be discussed over the phone. The defendant served its final demand to the plaintiff dated March 21, 1990 requiring him to pay in full his overdue account, including stipulated fees and charges, within 5 days from receipt thereof or face court action also to replace the postdated check with cash within the same period or face criminal suit for violation of the Bouncing Check Law (Exh. G/Exh. 13). The plaintiff, in a reply letter dated April 5, 1990 (Exh. H), demanded defendant's compliance with his request in his first

letter dated March 12, 1990 within three (3) days from receipt, otherwise the plaintiff will file a case against them, x x x.[2]
Thus, on May 7, 1990 private respondent filed a complaint for damages against petitioner before the Regional Trial Court of Makati, Branch 150, docketed as Civil Case No. 90-1174. After trial, the trial court ruled for private respondent, finding that herein petitioner abused its right in contravention of Article 19 of the Civil Code.[3] The dispositive portion of the decision reads:

Wherefore, judgment is hereby rendered ordering the defendant to pay plaintiff the following: 1. P100,000.00 as moral damages; 2. P50,000.00 as exemplary damages; and 3. P20,000.00 by way of attorney's fees. On the other hand, plaintiff is ordered to pay defendant its outstanding obligation in the amount of P14,439.41, amount due as of December 15, 1989.[4]
The trial court's ruling was based on its findings and conclusions, to wit:

There is no question that plaintiff had been in default in the payment of his billings for more than two months, prompting defendant to call him and reminded him of his obligation. Unable to personally talk with him, this Court is convinced that somehow one or another employee of defendant called him up more than once. However, while it is true that, as indicated in the terms and conditions of the application for BPI credit card, upon failure of the cardholder to pay his outstanding obligation for more than thirty (30) days, the defendant can automatically suspend or cancel the credit card, that reserved right should not have been abused, as it was in fact abused, in plaintiff's case. What is more peculiar here is that there have been admitted communications between plaintiff and defendant prior to the suspension or cancellation of plaintiff's credit card and his inclusion in the caution list. However, nowhere in any of these communications was there ever a hint given to plaintiff that his card had already been suspended or cancelled. In fact, the Court observed that while defendant was trying its best to persuade plaintiff to update its account and pay its obligation, it had already taken steps to suspend/cancel plaintiff's card and include him in the caution list. While the Court admires defendant's diplomacy in dealing with its clients, it cannot help but frown upon the backhanded way defendant dealt with plaintiff's case. For despite Tess Lorenzo's denial, there is reason to believe that plaintiff was indeed assured by

defendant of the continued honoring of his credit card so long as he pays his obligation of P15,000.00. Worst, upon receipt of the postdated check, defendant kept the same until a few days before it became due and said check was presented to the head of the collection department, Mr. Maniquiz, to take steps thereon, resulting to the embarrassing situation plaintiff found himself in on December 8, 1989. Moreover, Mr. Maniquiz himself admitted that his request for plaintiff to replace the check with cash was not because it was a postdated check but merely to tally the payment with the account due. Likewise, the Court is not persuaded by the sweeping denials made by Tess Lorenzo and her claim that her only participation was to receive the subject check. Her immediate superior, Mr. Maniquiz testified that he had instructed Lorenzo to communicate with plaintiff once or twice to request the latter to replace the questioned check with cash, thus giving support to the testimony of plaintiff's witness, Dolores Quizon, that it was one Tess Lorenzo who she had talked over the phone regarding plaintiff's account and plaintiff's own statement that it was this woman who assured him that his card has not yet been and will not be cancelled/suspended if he would pay defendant the sum of P15,000.00. Now, on the issue of whether or not upon receipt of the subject check, defendant had agreed that the card shall remain effective, the Court takes note of the following: 1. An employee of defendant corporation unconditionally accepted the subject check upon its delivery, despite its being a postdated one; and the amount did not tally with plaintiff's obligation; 2. Defendant did not deny nor controvert plaintiff's claim that all his payments were made in checks; 3. Defendant's main witness, Mr. Maniquiz, categorically stated that the request for plaintiff to replace his postdated check with cash was merely for the purpose of tallying plaintiff's outstanding obligation with his payment and not to question the postdated check; 4. That the card was suspended almost a week after receipt of the postdated check; 5. That despite the many instances that defendant could have informed plaintiff over the phone of the cancellation or suspension of his credit card, it did not do so, which could have prevented the incident of December 8, 1989, the notice allegedly sent thru ordinary mail is not only unreliable but takes a long time. Such action as suspension

of credit card must be immediately relayed to the person affected so as to avoid embarrassing situations. 6. And that the postdated check was deposited on December 20, 1989. In view of the foregoing observations, it is needless to say that there was indeed an arrangement between plaintiff and the defendant, as can be inferred from the acts of the defendant's employees, that the subject credit card is still good and could still be used by the plaintiff as it would be honored by the duly accredited establishment of defendant.[5]
Not satisfied with the Regional Trial Court's decision, petitioner appealed to the Court of Appeals, which, in a decision promulgated on March 9, 1995 ruled in its dispositive portion:

WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED with the MODIFICATION that the defendant-appellant shall pay the plaintiff-appellee the following: P50,000.00 as moral damages; P25,000.00 as exemplary damages; and P10,000.00 by way of attorney's fees. SO ORDERED.[6]
Hence, the present petition on the following assignment of errors:
I

THE LOWER COURT ERRED IN DECLARING THAT THERE WAS INDEED AN AGREEMENT OR ARRANGEMENT ENTERED INTO BETWEEN THE PARTIES WHEREIN THE DEFENDANT REQUIRED THE PLAINTIFF TO ISSUE A POSTDATED CHECK IN ITS FAVOR IN THE AMOUNT OF P15,000.00 AS PAYMENT FOR HIS OVERDUE ACCOUNTS, WITH THE CONDITION THAT THE PLAINTIFF'S CREDIT CARD WILL NOT BE SUSPENDED OR CANCELLED.
II

THE LOWER COURT ERRED IN HOLDING DEFENDANT LIABLE FOR DAMAGES AND ATTORNEY'S FEES ARISING OUT FROM THE DISHONOR OF THE PLAINTIFF'S CREDIT CARD.[7]
We find the petition meritorious. The first issue to be resolved is whether petitioner had the right to suspend the credit card of the private respondent. Under the terms and conditions of the credit card, signed by the private respondent, any card with outstanding balances after thirty (30) days from original billing/statement shall automatically be suspended, thus:

PAYMENT OF CHARGES - BECC shall furnish the Cardholder a monthly statement of account made through the use of the CARD and the Cardholder agrees that all charges made through the use of the CARD shall be paid by the Cardholder on or before the last day for payments, which is twenty (20) days from the date of the said statement of account, and such payment due date may be changed to an earlier date if the Cardholder's account is considered overdue and/or with balances in excess of the approved credit limit; or to such other date as may be deemed proper by the CARD issuer with notice to the Cardholder on the same monthly statement of account. If the last day for payment falls on a Saturday, Sunday or Holiday, the last day for payment automatically becomes the last working day prior to said payment date. However, notwithstanding the absence or lack of proof of service of the statement of charges to the Cardholder, the latter shall pay any or all charges made through the use of the CARD within thirty (30) days from the date or dates thereof. Failure of Cardholder to pay any and all charges made through the CARD within the payment period as stated in the statement of charges or within thirty (30) days from actual date or dates whichever occur earlier, shall render him in default without the necessity of demand from BECC, which the Cardholder expressly waives. These charges or balance thereof remaining unpaid after the payment due date indicated on the monthly statement of account shall bear interest at the rate of 3% per month and an additional penalty fee equivalent to another 3% of the amount due for every month or a fraction of a month's delay. PROVIDED, that if there occurs any change on the prevailing market rates. BECC shall have the option to adjust the rate of interest and/or penalty fee due on the outstanding obligation with prior notice to the Cardholder.
xxx xxx xxx

Any CARD with outstanding balances unpaid after thirty (30) days from original billing/statement date shall automatically be suspended, and those with accounts unpaid after sixty (60) days from said original billing/statement date shall automatically be cancelled, without prejudice to BECC's right to suspend or cancel any CARD any time and for whatever reason. In case of default in his obligation as provided for in the preceding paragraph, Cardholder shall surrender his CARD to BECC and shall in addition to the interest and penalty charges aforementioned, pay the following liquidated damages and/or fees (a) a collection fee of 25% of the amount due if the account is referred to a collection agency or attorney; (b) a service fee of P100 for every dishonored check issued by the Cardholder in payment of his account, with prejudice, however, to BECC's right of considering Cardholder's obligation unpaid, cable cost for demanding payment or advising cancellation

of membership shall also be for Cardholder's account; and (c) a final fee equivalent to 25% of the unpaid balance, exclusive of litigation expenses and judicial costs, if the payment of the account is enforced through court action.[8]
The aforequoted provision of the credit card cannot be any clearer. By his own admission, private respondent made no payment within thirty days for his original billing/statement dated 27 September 1989. Neither did he make payment for his original billing/statement dated 27 October 1989. Consequently, as early as 28 October 1989, thirty days from the non-payment of his billing dated 27 September 1989, petitioner corporation could automatically suspend his credit card. The next issue is whether prior to the suspension of private respondent's credit card on 28 November 1989, the parties entered into an agreement whereby the card could still be used and would be duly honored by duly accredited establisments. We agree with the findings of the respondent court, that there was an arrangement between the parties, wherein the petitioner required the private respondent to issue a check worth P15,000 as payment for the latter's billings. However, we find that the private respondent was not able to comply with his obligation. As the testimony of private respondent himself bears out, the agreement was for the immediate payment of the outstanding account:
Q In said statement of account that you are supposed to pay the P8,974.84 the charge of interest and penalties, did you note that? A Yes, sir. I noted the date. Q When? A When I returned from the Quezon province, sir. Q When? A I think November 22, sir. Q So that before you used again the credit card you were not able to pay immediately this P8,987.84 in cash? A I paid P15,000.00, sir. Q My question Mr. Witness is, did you pay this P8,987.84 in charge of interest and penalties immediately in cash? A In cash no, but in check, sir. Q You said that you noted the word "immediately" in bold letters in your statement of account, why did you not pay immediately? A Because I received that late, sir. Q Yes, on November 22 when you received from the secretary of the defendant telling you to pay the principal amount of P8,987.84, why did you not pay? A There was a communication between me and the defendant, I was required to pay P8,000.00 but I paid in check for P15,000.00, sir.

Q Do you have any evidence to show that the defendant required you to pay in check for P15,000.00? A Yes, sir. Q Where is it? A It was by telecommunication, sir. Q So there is no written communication between you and the defendant? A There was none, sir. Q There is no written agreement which says that P8,987.84 should be paid for P15,000.00 in check, there is none? A Yes, no written agreement, sir. Q And you as a lawyer you know that a check is not considered as cash specially when it is postdated sent to the defendant? A That is correct, sir.

Clearly, the purpose of the arrangement between the parties on November 22, 1989, was for the immediate payment of the private respondent's outstanding account, in order that his credit card would not be suspended. As agreed upon by the parties, on the following day, private respondent did issue a check for P15,000. However, the check was postdated 15 December 1989. Settled is the doctrine that a check is only a substitute for money and not money, the delivery of such an instrument does not, by itself operate as payment.[9] This is especially true in the case of a postdated check. Thus, the issuance by the private respondent of the postdated check was not effective payment. It did not comply with his obligation under the arrangement with Miss Lorenzo. Petitioner corporation was therefore justified in suspending his credit card. Finally, we find no legal and factual basis for private respondent's assertion that in canceling the credit card of the private respondent, petitioner abused its right under the terms and conditions of the contract. To find the existence of an abuse of right under Article 19 the following elements must be present: (1) There is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another.[10] Time and again this Court has held that good faith is presumed and the burden of proving bad faith is on the party alleging it.[11] This private respondent failed to do. In fact, the action of the petitioner belies the existence of bad faith. As early as 28 October 1989, petitioner could have suspended private respondent's card outright. Instead, petitioner allowed private respondent to use his card for several weeks. Petitioner had even notified private respondent of the impending suspension of his credit card and made special accommodations for him for settling his outstanding account. As such, petitioner cannot be said to have capriciously and arbitrarily canceled the private respondent's credit card. We do not dispute the findings of the lower court that private respondent suffered damages as a result of the cancellation of his credit card. However, there is a material distinction between

damages and injury. Injury is the illegal invasion of a legal right; damage is the loss, hurt, or harm which results from the injury; and damages are the recompense or compensation awarded for the damage suffered. Thus, there can be damage without injury in those instances in which the loss or harm was not the result of a violation of a legal duty. In such cases, the consequences must be borne by the injured person alone, the law affords no remedy for damages resulting from an act which does not amount to a legal injury or wrong. These situations are often called damnum absque injuria.[12] In other words, in order that a plaintiff may maintain an action for the injuries of which he complains, he must establish that such injuries resulted from a breach of duty which the defendant owed to the plaintiff - a concurrence of injury to the plaintiff and legal responsibility by the person causing it. The underlying basis for the award of tort damages is the premise that an individual was injured in contemplation of law. Thus, there must first be a breach of some duty and the imposition of liability for that breach before damages may be awarded; [13] and the breach of such duty should be the proximate cause of the injury. We therefore disagree with the ruling of the respondent court that the dishonor of the credit card of the private respondent by Caf Adriatico is attributable to petitioner for its willful or gross neglect to inform the private respondent of the suspension of his credit card, the unfortunate consequence of which brought social humiliation and embarrassment to the private respondent.[14] It was petitioner's failure to settle his obligation which caused the suspension of his credit card and subsequent dishonor at Caf Adriatico. He can not now pass the blame to the petitioner for not notifying him of the suspension of his card. As quoted earlier, the application contained the stipulation that the petitioner could automatically suspend a card whose billing has not been paid for more than thirty days. Nowhere is it stated in the terms and conditions of the application that there is a need of notice before suspension may be effected as private respondent claims.[15] This notwithstanding, on November 28, 1989, the day of the suspension of private respondent's card, petitioner sent a letter by ordinary mail notifying private respondent that his card had been temporarily suspended. Under the Rules on Evidence, there is a disputable presumption that letters duly directed and mailed were received on the regular course of mail.[16] Aside from the private respondent's bare denial, he failed to present evidence to rebut the presumption that he received said notice. In fact upon cross examination, private respondent admitted that he did received the letter notifying him of the cancellation:
Q Now you were saying that there was a first letter sent to you by the defendant? A Your letter, sir. Q Was that the first letter that you received? A Yes, sir. Q Is it that there was a communication first between you and the defendant? A There was none, sir. I received a cancellation notice but that was after November 27.[17]

As it was private respondent's own negligence which was the proximate cause of his embarrassing and humiliating experience, we find the award of damages by the respondent court

clearly unjustified. We take note of the fact that private respondent has not yet paid his outstanding account with petitioner. IN VIEW OF THE FOREGOING, the decision of the Court of Appeals ordering petitioner to pay private respondent P100,000.00 as moral damages, P50,000.00 as exemplary damages and P20,000.00 as attorney's fees, is SET ASIDE. Private respondent is DIRECTED to pay his outstanding obligation with the petitioner in the amount of P14,439.41. SO ORDERED.

WILDVALLEY SHIPPING APPEALS and INC., respondents.

CO., LTD. petitioner, vs. COURT OF PHILIPPINE PRESIDENT LINES DECISION

BUENA, J.:

This is a petition for review on certiorari seeking to set aside the decision of the Court of Appeals which reversed the decision of the lower court in CAG.R. CV No. 36821, entitled "Wildvalley Shipping Co., Ltd., plaintiff-appellant, versus Philippine President Lines, Inc., defendant-appellant." The antecedent facts of the case are as follows: Sometime in February 1988, the Philippine Roxas, a vessel owned by Philippine President Lines, Inc., private respondent herein, arrived in Puerto Ordaz, Venezuela, to load iron ore. Upon the completion of the loading and when the vessel was ready to leave port, Mr. Ezzar del Valle Solarzano Vasquez, an official pilot of Venezuela, was designated by the harbour authorities in Puerto Ordaz to navigate the Philippine Roxas through the Orinoco River.[1] He was asked to pilot the said vessel on February 11, 1988[2] boarding it that night at 11:00 p.m.[3] The master (captain) of the Philippine Roxas, Captain Nicandro Colon, was at the bridge together with the pilot (Vasquez), the vessel's third mate (then the officer on watch), and a helmsman when the vessel left the port[4] at 1:40 a.m. on February 12, 1988.[5] Captain Colon left the bridge when the vessel was under way.[6] The Philippine Roxas experienced some vibrations when it entered the San Roque Channel at mile 172.[7] The vessel proceeded on its way, with the pilot assuring the watch officer that the vibration was a result of the shallowness of the channel.[8]

Between mile 158 and 157, the vessel again experienced some vibrations.[9] These occurred at 4:12 a.m.[10] It was then that the watch officer called the master to the bridge.[11] The master (captain) checked the position of the vessel[12] and verified that it was in the centre of the channel.[13] He then went to confirm, or set down, the position of the vessel on the chart.[14] He ordered Simplicio A. Monis, Chief Officer of the President Roxas, to check all the double bottom tanks.[15] At around 4:35 a.m., the Philippine Roxas ran aground in the Orinoco River,[16] thus obstructing the ingress and egress of vessels. As a result of the blockage, the Malandrinon, a vessel owned by herein petitioner Wildvalley Shipping Company, Ltd., was unable to sail out of Puerto Ordaz on that day. Subsequently, Wildvalley Shipping Company, Ltd. filed a suit with the Regional Trial Court of Manila, Branch III against Philippine President Lines, Inc. and Pioneer Insurance Company (the underwriter/insurer of Philippine Roxas) for damages in the form of unearned profits, and interest thereon amounting to US $400,000.00 plus attorney's fees, costs, and expenses of litigation. The complaint against Pioneer Insurance Company was dismissed in an Order dated November 7, 1988.[17] At the pre-trial conference, the parties agreed on the following facts: "1. The jurisdictional facts, as specified in their respective pleadings; "2. That defendant PPL was the owner of the vessel Philippine Roxas at the time of the incident; "3. That defendant Pioneer Insurance was the insurance underwriter for defendant PPL; "4. That plaintiff Wildvalley Shipping Co., Inc. is the owner of the vessel Malandrinon, whose passage was obstructed by the vessel Philippine Roxas at Puerto Ordaz, Venezuela, as specified in par. 4, page 2 of the complaint; "5. That on February 12, 1988, while the Philippine Roxas was navigating the channel at Puerto Ordaz, the said vessel grounded and as a result, obstructed navigation at the channel; "6. That the Orinoco River in Puerto Ordaz is a compulsory pilotage channel;

"7. That at the time of the incident, the vessel, Philippine Roxas, was under the command of the pilot Ezzar Solarzano, assigned by the government thereat, but plaintiff claims that it is under the command of the master; "8. The plaintiff filed a case in Middleburg, Holland which is related to the present case; "9. The plaintiff caused the arrest of the Philippine Collier, a vessel owned by the defendant PPL; "10. The Orinoco River is 150 miles long and it takes approximately 12 hours to navigate out of the said river; "11. That no security for the plaintiff's claim was given until after the Philippine Collier was arrested; and "12. That a letter of guarantee, dated 12-May-88 was issued by the Steamship Mutual Underwriters Ltd."[18] The trial court rendered its decision on October 16, 1991 in favor of the petitioner, Wildvalley Shipping Co., Ltd. The dispositive portion thereof reads as follows: "WHEREFORE, judgment is rendered for the plaintiff, ordering defendant Philippine President Lines, Inc. to pay to the plaintiff the sum of U.S. $259,243.43, as actual and compensatory damages, and U.S. $162,031.53, as expenses incurred abroad for its foreign lawyers, plus additional sum of U.S. $22,000.00, as and for attorney's fees of plaintiff's local lawyer, and to pay the cost of this suit. "Defendant's counterclaim is dismissed for lack of merit. "SO ORDERED."[19] Both parties appealed: the petitioner appealing the non-award of interest with the private respondent questioning the decision on the merits of the case. After the requisite pleadings had been filed, the Court of Appeals came out with its questioned decision dated June 14, 1994,[20] the dispositive portion of which reads as follows: "WHEREFORE, finding defendant-appellant's appeal to be meritorious, judgment is hereby rendered reversing the Decision of the lower court. Plaintiff-appellant's Complaint is dismissed and it is ordered to pay defendant-appellant the amount of

Three Hundred Twenty-three Thousand, Forty-two Pesos and Fifty-three Centavos (P323,042.53) as and for attorney's fees plus cost of suit. Plaintiff-appellant's appeal is DISMISSED. "SO ORDERED."[21] Petitioner filed a motion for reconsideration[22] but
merit in the resolution dated March 29, 1995.
[23]

the same was denied for lack of

Hence, this petition. The petitioner assigns the following errors to the court a quo:
1. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT UNDER PHILIPPINE LAW NO FAULT OR NEGLIGENCE CAN BE ATTRIBUTED TO THE MASTER NOR THE OWNER OF THE "PHILIPPINE ROXAS" FOR THE GROUNDING OF SAID VESSEL RESULTING IN THE BLOCKAGE OF THE RIO ORINOCO; 2. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN REVERSING THE FINDINGS OF FACTS OF THE TRIAL COURT CONTRARY TO EVIDENCE; 3. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT THE "PHILIPPINE ROXAS" IS SEAWORTHY; 4. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN DISREGARDING VENEZUELAN LAW DESPITE THE FACT THAT THE SAME HAS BEEN SUBSTANTIALLY PROVED IN THE TRIAL COURT WITHOUT ANY OBJECTION FROM PRIVATE RESPONDENT, AND WHOSE OBJECTION WAS INTERPOSED BELATEDLY ON APPEAL; 5. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN AWARDING ATTORNEY'S FEES AND COSTS TO PRIVATE RESPONDENT WITHOUT ANY FAIR OR REASONABLE BASIS WHATSOEVER; 6. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN NOT FINDING THAT PETITIONER'S CAUSE IS MERITORIOUS HENCE, PETITIONER SHOULD BE ENTITLED TO ATTORNEY'S FEES, COSTS AND INTEREST.

The petition is without merit. The primary issue to be determined is whether or not Venezuelan law is applicable to the case at bar. It is well-settled that foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice of them. Like any other fact, they must be alleged and proved.[24] A distinction is to be made as to the manner of proving a written and an unwritten law. The former falls under Section 24, Rule 132 of the Rules of Court, as amended, the entire provision of which is quoted hereunder. Where the foreign law sought to be proved is "unwritten," the oral testimony of expert

witnesses is admissible, as are printed and published books of reports of decisions of the courts of the country concerned if proved to be commonly admitted in such courts.[25] Section 24 of Rule 132 of the Rules of Court, as amended, provides: "Sec. 24. Proof of official record. -- The record of public documents referred to in paragraph (a) of Section 19, when admissible for any purpose, may be evidenced by an official publication thereof or by a copy attested by the officer having the legal custody of the record, or by his deputy, and accompanied, if the record is not kept in the Philippines, with a certificate that such officer has the custody. If the office in which the record is kept is in a foreign country, the certificate may be made by a secretary of the embassy or legation, consul general, consul, vice consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept, and authenticated by the seal of his office." (Underscoring supplied) The court has interpreted Section 25 (now Section 24) to include competent evidence like the testimony of a witness to prove the existence of a written foreign law.[26] In the noted case of Willamette Iron & Steel Works vs. Muzzal,[27] it
held that: was

" Mr. Arthur W. Bolton, an attorney-at-law of San Francisco, California, since the year 1918 under oath, quoted verbatim section 322 of the California Civil Code and stated that said section was in force at the time the obligations of defendant to the plaintiff were incurred, i.e. on November 5, 1928 and December 22, 1928. This evidence sufficiently established the fact that the section in question was the law of the State of California on the above dates. A reading of sections 300 and 301 of our Code of Civil Procedure will convince one that these sections do not exclude the presentation of other competent evidence to prove the existence of a foreign law. "`The foreign law is a matter of fact You ask the witness what the law is; he may, from his recollection, or on producing and referring to books, say what it is.' (Lord Campbell concurring in an opinion of Lord Chief Justice Denman in a well-known English case where a witness was called upon to prove the Roman laws of marriage and was permitted to testify, though he referred to a book containing the decrees of the Council of Trent as controlling, Jones on Evidence, Second Edition, Volume 4, pages 3148-3152.) x x x. We do not dispute the competency of Capt. Oscar Leon Monzon, the Assistant Harbor Master and Chief of Pilots at Puerto Ordaz, Venezuela,[28] to

testify on the existence of the Reglamento General de la Ley de Pilotaje (pilotage law of Venezuela)[29] and the Reglamento Para la Zona de Pilotaje No 1 del Orinoco (rules governing the navigation of the Orinoco River). Captain Monzon has held the aforementioned posts for eight years.[30] As such he is in charge of designating the pilots for maneuvering and navigating the Orinoco River. He is also in charge of the documents that come into the office of the harbour masters.[31] Nevertheless, we take note that these written laws were not proven in the manner provided by Section 24 of Rule 132 of the Rules of Court. The Reglamento General de la Ley de Pilotaje was published in the Gaceta Oficial[32]of the Republic of Venezuela. A photocopy of the Gaceta Oficial was presented in evidence as an official publication of the Republic of Venezuela. The Reglamento Para la Zona de Pilotaje No 1 del Orinoco is published in a book issued by the Ministerio de Comunicaciones of Venezuela.[33] Only a photocopy of the said rules was likewise presented as evidence. Both of these documents are considered in Philippine jurisprudence to be public documents for they are the written official acts, or records of the official acts of the sovereign authority, official bodies and tribunals, and public officers of Venezuela.[34] For a copy of a foreign public document to be admissible, the following requisites are mandatory: (1) It must be attested by the officer having legal custody of the records or by his deputy; and (2) It must be accompanied by a certificate by a secretary of the embassy or legation, consul general, consul, vice consular or consular agent or foreign service officer, and with the seal of his office.[35] The latter requirement is not a mere technicality but is intended to justify the giving of full faith and credit to the genuineness of a document in a foreign country.[36] It is not enough that the Gaceta Oficial, or a book published by the Ministerio de Comunicaciones of Venezuela, was presented as evidence with Captain Monzon attesting it. It is also required by Section 24 of Rule 132 of the Rules of Court that a certificate that Captain Monzon, who attested the documents, is the officer who had legal custody of those records made by a secretary of the embassy or legation, consul general, consul, vice consul or consular agent or by any officer in the foreign service of the Philippines stationed in Venezuela, and authenticated by the seal of his office accompanying the copy of the public document. No such certificate could be found in the records of the case.

With respect to proof of written laws, parol proof is objectionable, for the written law itself is the best evidence. According to the weight of authority, when a foreign statute is involved, the best evidence rule requires that it be proved by a duly authenticated copy of the statute.[37] At this juncture, we have to point out that the Venezuelan law was not pleaded before the lower court. A foreign law is considered to be pleaded if there is an allegation in the pleading about the existence of the foreign law, its import and legal consequence on the event or transaction in issue.[38] A review of the Complaint[39] revealed that it was never alleged or invoked despite the fact that the grounding of the M/V Philippine Roxas occurred within the territorial jurisdiction of Venezuela. We reiterate that under the rules of private international law, a foreign law must be properly pleaded and proved as a fact. In the absence of pleading and proof, the laws of a foreign country, or state, will be presumed to be the same as our own local or domestic law and this is known as processual presumption.[40] Having cleared this point, we now proceed to a thorough study of the errors assigned by the petitioner. Petitioner alleges that there was negligence on the part of the private respondent that would warrant the award of damages. There being no contractual obligation, the private respondent is obliged to give only the diligence required of a good father of a family in accordance with the provisions of Article 1173 of the New Civil Code, thus: Art. 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. The diligence of a good father of a family requires only that diligence which an ordinary prudent man would exercise with regard to his own property. This we have found private respondent to have exercised when the vessel sailed only after the "main engine, machineries, and other auxiliaries" were checked and found to be in good running condition;[41] when the master

left a competent officer, the officer on watch on the bridge with a pilot who is experienced in navigating the Orinoco River; when the master ordered the inspection of the vessel's double bottom tanks when the vibrations occurred anew.[42] The Philippine rules on pilotage, embodied in Philippine Ports Authority Administrative Order No. 03-85, otherwise known as the Rules and Regulations Governing Pilotage Services, the Conduct of Pilots and Pilotage Fees in Philippine Ports enunciate the duties and responsibilities of a master of a vessel and its pilot, among other things. The pertinent provisions of the said administrative order governing these persons are quoted hereunder: Sec. 11. Control of Vessels and Liability for Damage. -- On compulsory pilotage grounds, the Harbor Pilot providing the service to a vessel shall be responsible for the damage caused to a vessel or to life and property at ports due to his negligence or fault. He can be absolved from liability if the accident is caused by force majeure or natural calamities provided he has exercised prudence and extra diligence to prevent or minimize the damage. The Master shall retain overall command of the vessel even on pilotage grounds whereby he can countermand or overrule the order or command of the Harbor Pilot on board. In such event, any damage caused to a vessel or to life and property at ports by reason of the fault or negligence of the Master shall be the responsibility and liability of the registered owner of the vessel concerned without prejudice to recourse against said Master. Such liability of the owner or Master of the vessel or its pilots shall be determined by competent authority in appropriate proceedings in the light of the facts and circumstances of each particular case. x x x Sec. 32. Duties and Responsibilities of the Pilots or Pilots Association. -- The duties and responsibilities of the Harbor Pilot shall be as follows: x x x f) A pilot shall be held responsible for the direction of a vessel from the time he assumes his work as a pilot thereof until he leaves it anchored or berthed safely; Provided, however, that his responsibility shall cease at the moment the Master neglects or refuses to carry out his order."

The Code of Commerce likewise provides for the obligations expected of a captain of a vessel, to wit: Art. 612. The following obligations shall be inherent in the office of captain: x x x "7. To be on deck on reaching land and to take command on entering and leaving ports, canals, roadsteads, and rivers, unless there is a pilot on board discharging his duties. x x x. The law is very explicit. The master remains the overall commander of the vessel even when there is a pilot on board. He remains in control of the ship as he can still perform the duties conferred upon him by law[43] despite the presence of a pilot who is temporarily in charge of the vessel. It is not required of him to be on the bridge while the vessel is being navigated by a pilot. However, Section 8 of PPA Administrative Order No. 03-85, provides: Sec. 8. Compulsory Pilotage Service - For entering a harbor and anchoring thereat, or passing through rivers or straits within a pilotage district, as well as docking and undocking at any pier/wharf, or shifting from one berth or another, every vessel engaged in coastwise and foreign trade shall be under compulsory pilotage. xxx. The Orinoco River being a compulsory pilotage channel necessitated the engaging of a pilot who was presumed to be knowledgeable of every shoal, bank, deep and shallow ends of the river. In his deposition, pilot Ezzar Solarzano Vasquez testified that he is an official pilot in the Harbour at Port Ordaz, Venezuela,[44] and that he had been a pilot for twelve (12) years.[45] He also had experience in navigating the waters of the Orinoco River.[46] The law does provide that the master can countermand or overrule the order or command of the harbor pilot on board. The master of the Philippine Roxas deemed it best not to order him (the pilot) to stop the vessel,[47] mayhap, because the latter had assured him that they were navigating normally before the grounding of the vessel.[48] Moreover, the pilot had admitted that on account of his experience he was very familiar with the configuration of the river as well as the course headings, and that he does not even refer to river charts when navigating the Orinoco River.[49] Based on these declarations, it comes as no surprise to us that the master chose not to regain control of the ship. Admitting his limited knowledge of the

Orinoco River, Captain Colon relied on the knowledge and experience of pilot Vasquez to guide the vessel safely. Licensed pilots, enjoying the emoluments of compulsory pilotage, are in a different class from ordinary employees, for they assume to have a skill and a knowledge of navigation in the particular waters over which their licenses extend superior to that of the master; pilots are bound to use due diligence and reasonable care and skill. A pilot's ordinary skill is in proportion to the pilot's responsibilities, and implies a knowledge and observance of the usual rules of navigation, acquaintance with the waters piloted in their ordinary condition, and nautical skill in avoiding all known obstructions. The character of the skill and knowledge required of a pilot in charge of a vessel on the rivers of a country is very different from that which enables a navigator to carry a vessel safely in the ocean. On the ocean, a knowledge of the rules of navigation, with charts that disclose the places of hidden rocks, dangerous shores, or other dangers of the way, are the main elements of a pilot's knowledge and skill. But the pilot of a river vessel, like the harbor pilot, is selected for the individual's personal knowledge of the topography through which the vessel is steered."[50] We find that the grounding of the vessel is attributable to the pilot. When the vibrations were first felt the watch officer asked him what was going on, and pilot Vasquez replied that "(they) were in the middle of the channel and that the vibration was as (sic) a result of the shallowness of the channel."[51] Pilot Ezzar Solarzano Vasquez was assigned to pilot the vessel Philippine Roxas as well as other vessels on the Orinoco River due to his knowledge of the same. In his experience as a pilot, he should have been aware of the portions which are shallow and which are not. His failure to determine the depth of the said river and his decision to plod on his set course, in all probability, caused damage to the vessel. Thus, we hold him as negligent and liable for its grounding. In the case of Homer Ramsdell Transportation Company vs. La Compagnie Generale Transatlantique, 182 U.S. 406, it was held that: x x x The master of a ship, and the owner also, is liable for any injury done by the negligence of the crew employed in the ship. The same doctrine will apply to the case of a pilot employed by the master or owner, by whose negligence any injury happens to a third person or his property: as, for example, by a collision with another ship, occasioned by his negligence. And it will make no difference in the case that the pilot, if any is employed, is required to be a licensed pilot; provided the master is at liberty to take a pilot, or not, at his pleasure, for in such a case the master acts voluntarily, although he is necessarily required to select from a particular class. On the other hand, if it is compulsive upon the master to take a pilot, and, a fortiori, if he is

bound to do so under penalty, then, and in such case, neither he nor the owner will be liable for injuries occasioned by the negligence of the pilot; for in such a case the pilot cannot be deemed properly the servant of the master or the owner, but is forced upon them, and the maxim Qui facit per alium facit per se does not apply." (Underscoring supplied) Anent the river passage plan, we find that, while there was none,[52] the
voyage has been sufficiently planned and monitored as shown by the following actions undertaken by the pilot, Ezzar Solarzano Vasquez, to wit: contacting the radio marina via VHF for information regarding the [53] [54] channel, river traffic, soundings of the river, depth of the river, bulletin on the buoys. The officer on [55] watch also monitored the voyage.

We, therefore, do not find the absence of a river passage plan to be the cause for the grounding of the vessel. The doctrine of res ipsa loquitur does not apply to the case at bar because the circumstances surrounding the injury do not clearly indicate negligence on the part of the private respondent.For the said doctrine to apply, the following conditions must be met: (1) the accident was of such character as to warrant an inference that it would not have happened except for defendant's negligence; (2) the accident must have been caused by an agency or instrumentality within the exclusive management or control of the person charged with the negligence complained of; and (3) the accident must not have been due to any voluntary action or contribution on the part of the person injured.[56] As has already been held above, there was a temporary shift of control over the ship from the master of the vessel to the pilot on a compulsory pilotage channel. Thus, two of the requisites necessary for the doctrine to apply, i.e., negligence and control, to render the respondent liable, are absent. As to the claim that the ship was unseaworthy, we hold that it is not. The Lloyds Register of Shipping confirmed the vessels seaworthiness in a Confirmation of Class issued on February 16, 1988 by finding that "the above named ship (Philippine Roxas) maintained the class "+100A1 Strengthened for Ore Cargoes, Nos. 2 and 8 Holds may be empty (CC) and +LMC" from 31/12/87 up until the time of casualty on or about 12/2/88."[57] The same would not have been issued had not the vessel been built according to the standards set by Lloyd's. Samuel Lim, a marine surveyor, at Lloyd's Register of Shipping testified thus:
"Q Now, in your opinion, as a surveyor, did top side tank have any bearing at all to the seaworthiness of the vessel?

"A Well, judging on this particular vessel, and also basing on the class record of the vessel, wherein recommendations were made on the top side tank, and it was given sufficient time to be repaired, it means that the vessel is fit to travel even with those defects on the ship. "COURT What do you mean by that? You explain. The vessel is fit to travel even with defects? Is that what you mean? Explain. "WITNESS "A Yes, your Honor. Because the class society which register (sic) is the third party looking into the condition of the vessel and as far as their record states, the vessel was class or maintained, and she is fit to travel during that voyage." x x x "ATTY. MISA Before we proceed to other matter, will you kindly tell us what is (sic) the 'class +100A1 Strengthened for Ore Cargoes', mean? "WITNESS "A Plus 100A1 means that the vessel was built according to Lloyd's rules and she is capable of carrying ore bulk cargoes, but she is particularly capable of carrying Ore Cargoes with No. 2 and No. 8 holds empty. x x x "COURT The vessel is classed, meaning? "A Meaning she is fit to travel, your Honor, or seaworthy."[58]

It is not required that the vessel must be perfect. To be seaworthy, a ship must be reasonably fit to perform the services, and to encounter the ordinary perils of the voyage, contemplated by the parties to the policy.[59] As further evidence that the vessel was seaworthy, we quote the deposition of pilot Vasquez:
"Q Was there any instance when your orders or directions were not complied with because of the inability of the vessel to do so? "A No. "Q. Was the vessel able to respond to all your commands and orders? "A. The vessel was navigating normally.[60]

Eduardo P. Mata, Second Engineer of the Philippine Roxas submitted an accident report wherein he stated that on February 11, 1988, he checked and prepared the main engine, machineries and all other auxiliaries and found them all to be in good running condition and ready for maneuvering. That

same day the main engine, bridge and engine telegraph and steering gear motor were also tested.[61] Engineer Mata also prepared the fuel for consumption for maneuvering and checked the engine generators.[62] Finally, we find the award of attorneys fee justified. Article 2208 of the New Civil Code provides that: "Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except: x x x "(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered. x x x Due to the unfounded filing of this case, the private respondent was unjustifiably forced to litigate, thus the award of attorneys fees was proper. WHEREFORE, IN VIEW OF THE FOREGOING, the petition is DENIED and the decision of the Court of Appeals in CA G.R. CV No. 36821 is AFFIRMED. SO ORDERED.
NORSE MANAGEMENT CO. (PTE) and PACIFIC SEAMEN SERVICES, INC., petitioners, vs. NATIONAL SEAMEN BOARD, HON. CRESCENCIO M. SIDDAYAO, OSCAR M. TORRES, REBENE C. CARRERA and RESTITUTA C. ABORDO, respondents. Bito, Misa & Lozada Law Offices for petitioners. The Solicitor General and Jose A. Rico for respondents.

RELOVA, J.: In this petition for certiorari, petitioners pray that the order dated June 20, 1979 of the National Seamen Board, and the decision dated December 11, 1979 of the Ministry of Labor be nullified and set aside, and that "if petitioners are found liable to private respondent, such a liability be reduced to P30,000.00 only, in accordance with respondent NSB's Standard Format of a Service Agreement." Napoleon B. Abordo, the deceased husband of private respondent Restituta C. Abordo, was the Second Engineer of M.T. "Cherry Earl" when he died from an apoplectic stroke in the course of his employment with petitioner NORSE MANAGEMENT COMPANY (PTE). The M.T. "Cherry Earl" is a vessel of Singaporean Registry. The late Napoleon B. Abordo at the time of his death was receiving a monthly salary of US$850.00 (Petition, page 5).

In her complaint for "death compensation benefits, accrued leave pay and time-off allowances, funeral expenses, attorney's fees and other benefits and reliefs available in connection with the death of Napoleon B. Abordo," filed before the National Seamen Board, Restituta C. Abordo alleged that the amount of compensation due her from petitioners Norse Management Co. (PTE) and Pacific Seamen Services, Inc., principal and agent, respectively, should be based on the law where the vessel is registered. On the other hand, petitioners contend that the law of Singapore should not be applied in this case because the National Seamen Board cannot take judicial notice of the Workmen's Insurance Law of Singapore. As an alternative, they offered to pay private respondent Restituta C. Abordo the sum of P30,000.00 as death benefits based on the Board's Memorandum Circular No. 25 which they claim should apply in this case. The Hearing Officer III, Rebene C. Carrera of the Ministry of Labor and Employment, after hearing the case, rendered judgment on June 20, 1979, ordering herein petitioners "to pay jointly and severally the following: I. US$30,600 (the 36-month salary of the decreased)) or its equivalent in Philippine currency as death compensation benefits; II. US$500.00 or its equivalent in Philippine currency as funeral expenses; III. US$3,110 or 10% of the total amount recovered as attorney's fees. It is also ordered that payment must be made thru the National Seamen Board within ten (10) days from receipt of this decision. Petitioners appealed to the Ministry of Labor. On December 11, 1979, the Ministry rendered its decision in this case as follows: Motion for reconsideration filed by respondents from the Order of this Board dated 20 June 1979 requiring them to pay complainant, jointly and severally, the amount of Thirty-four thousand and two hundred ten dollars ($34,210.00) representing death benefits, funeral expenses and attorney's fees. The facts in the main are not disputed. The deceased, husband of complainant herein, was employed as a Second Engineer by respondents and served as such in the vessel "M.T. Cherry Earl" until that fatal day in May 1978 when, while at sea, he suffered an apoplectic stroke and died four days later or on 29 May 1978. In her complaint filed before this Board, Abordo argued that the amount of compensation due her should be based on the law where the vessel is registered, which is Singapore law. Agreeing with said argument, this Board issued the questioned Order. Hence this Motion for Reconsideration. In their motion for reconsideration, respondents strongly argue that the law of Singapore should not be applied in the case considering that their responsibility was not alleged in the complaint that no proof of the existence of the Workmen's Insurance Law of Singapore was ever presented and that the Board cannot take judicial notice of the Workmen's Insurance Law of Singapore. As an alternative, they offered to pay complainant the amount of Thirty Thousand Pesos (P30,000.00) as death benefits based on this Board's Memorandum Circular No. 25 which, they maintained, should apply in this case. The only issue we are called upon to rule is whether or not the law of Singapore ought to be applied in this case. After an exhaustive study of jurisprudence on the matter. we rule in the affirmative. Respondents came out with a well-prepared motion which, to our mind, is more appropriate and perhaps acceptable in the regular court of justice. Nothing is raised in their motion but question of evidence. But evidence is usually a matter of procedure of which this Board, being merely a quasi-judicial body, is not strict about.

It is true that the law of Singapore was not alleged and proved in the course of the hearing. And following Supreme Court decisions in a long line of cases that a foreign law, being a matter of evidence, must be alleged and proved, the law of Singapore ought not to be recognized in this case. But it is our considered opinion that the jurisprudence on this matter was never meant to apply to cases before administrative or quasi-judicial bodies such as the National Seamen Board. For well-settled also is the rule that administrative and quasi-judicial bodies are not bound strictly by technical rules. It has always been the policy of this Board, as enunciated in a long line of cases, that in cases of valid claims for benefits on account of injury or death while in the course of employment, the law of the country in which the vessel is registered shall be considered. We see no reason to deviate from this well-considered policy. Certainly not on technical grounds as movants herein would like us to. WHEREFORE, the motion for reconsideration is hereby denied and the Order of tills Board dated 20 June 1979 affirmed. Let execution issue immediately. In Section 5(B) of the "Employment Agreement" between Norse Management Co. (PTE) and the late Napoleon B. Abordo, which is Annex "C" of the Supplemental Complaint, it was stipulated that: In the event of illness or injury to Employee arising out of and in the course of his employment and not due to his own willful misconduct and occurring whilst on board any vessel to which he may be assigned, but not any other time, the EMPLOYER win provide employee with free medical attention, including hospital treatment, also essential medical treatment in the course of repatriation and until EMPLOYEE's arrival at his point of origin. If such illness or injury incapacitates the EMPLOYEE to the extent the EMPLOYEE's services must be terminated as determined by a qualified physician designated by the EMPLOYER and provided such illness or injury was not due in part or whole to his willful act, neglect or misconduct compensation shall be paid to employee in accordance with and subject to the limitations of the Workmen's Compensation Act of the Republic of the Philippines or the Workmen's Insurance Law of registry of the vessel whichever is greater. (Emphasis supplied) In the aforementioned "Employment Agreement" between petitioners and the late Napoleon B. Abordo, it is clear that compensation shall be paid under Philippine Law or the law of registry of petitioners' vessel, whichever is greater. Since private respondent Restituta C. Abordo was offered P30,000.00 only by the petitioners, Singapore law was properly applied in this case. The "Employment Agreement" is attached to the Supplemental Complaint of Restituta C. Abordo and, therefore, it forms part thereof. As it is familiar with Singapore Law, the National Seamen Board is justified in taking judicial notice of and in applying that law. In the case of VirJen Shipping and Marine Services, Inc. vs. National Seamen Board, et al (L41297), the respondent Board promulgated a decision, as follows: The facts established and/or admitted by the parties are the following: that the late Remigio Roldan was hired by the respondent as Ordinary Seamen on board the M/V "Singapura Pertama," a vessel of Singapore Registry; that on September 27, 1973, the deceased Remigio Roldan met an accident resulting in his death while on board the said M/V "Singapura Pertama" during the performance of his duties; that on December 3, 1973, the respondent Virjen Shipping and Marine Services, Inc. paid the complainant Natividad Roldan the amount of P6,000.00 representing Workmen's Compensation benefits and donations of the company; that the amount of P4,870 was spent by the respondent company as burial expenses of the deceased Remegio Roldan. The only issue therefore remaining to be resolved by the Board in connection with the particular case, is whether or not under the existing laws (Philippine and foreign), the complainant Natividad Roldan is entitled to additional benefits other than those mentioned earlier. The Board takes judicial notice, (as a matter of fact, the respondent having admitted in its memorandum) of the fact that "Singapura Pertama" is a foreign vessel of Singapore Registry and it is the policy of this Board that in case of award of benefits to seamen who were either injured in the performance of its duties or who died while in the course of

employment is to consider the benefits allowed by the country where the vessel is registered. Likewise, the Board takes notice that Singapore maritime laws relating to workmen's compensation benefits are similar to that of the Hongkong maritime laws which provides that in case of death, the heirs of the deceased seaman should receive the equivalent of 36 months wages of the deceased seaman; in other words, 36 months multiplied by the basic monthly wages. In the employment contract submitted with this Board, the terms of which have never been at issue, is shown that the monthly salary of the deceased Remigio Roldan at the time of his death was US$80.00; such that, 36 months multiplied by $80 would come up to US$2,880 and at the rate of P7.00 to $1.00, the benefits due the claimant would be P20,160. However, since there was voluntary payment made in the amount of P6,000 and funeral expenses which under the Workmen's Compensation Law had a maximum of P200.00, the amount of P6,200.00 should be deducted from P20,160 and the difference would be P13,960.00. WHEREFORE, the Board orders the respondent Virjen Shipping and Marine Services, Inc. to pay the complainant Natividad Roldan the amount of P13,960.00 within ten (10) days from receipt of this Decision. The Board also orders the respondent that payment should be made through the National Seamen Board. The foregoing decision was assailed as null and void for allegedly having been rendered without jurisdiction and for awarding compensation benefits beyond the maximum allowable and on the ground of res judicata. This Court in its resolution dated October 27, 1975 and December 12, 1975, respectively dismissed for lack of merit the petition as well as the motion for reconsideration in said G.R. No. L- 41297. Furthermore, Article 20, Labor Code of the Philippines, provides that the National Seamen Board has original and exclusive jurisdiction over all matters or cases including money claims, involving employer-employee relations, arising out of or by virtue of any law or contracts involving Filipino seamen for overseas employment. Thus, it is safe to assume that the Board is familiar with pertinent Singapore maritime laws relative to workmen's compensation. Moreover, the Board may apply the rule on judicial notice and, "in administrative proceedings, the technical rules of procedure particularly of evidence applied in judicial trials, do not strictly apply." (Oromeca Lumber Co. Inc. vs. Social Security Commission, 4 SCRA 1188). Finally, Article IV of the Labor Code provides that "all doubts in the implementation and interpretation of the provisions of this code, including its implementing rules and resolved in favor of labor. For lack of merit, this petition is DENIED. SO ORDERED. G.R. Nos. L-57999, 58143-53 August 15, 1989 RESURRECCION SUZARA, CESAR DIMAANDAL, ANGELITO MENDOZA, ANTONIO TANEDO, AMORSOLO CABRERA, DOMINADOR SANTOS, ISIDRO BRACIA, RAMON DE BELEN, ERNESTO SABADO, MARTIN MALABANAN, ROMEO HUERTO and VITALIANO PANGUE, petitioners, vs. THE HON. JUDGE ALFREDO L. BENIPAYO and MAGSAYSAY LINES, INC., respondents. G.R. Nos. L-64781-99 August 15, 1989 RESURRECCION SUZARA, CESAR DIMAANDAL, ANGELITO MENDOZA, ANTONIO TANEDO, RAYMUNDO PEREZ, AMORSOLO CABRERA, DOMINADOR SANTOS, ISIDRO BRACIA, CATALINO CASICA, VITALIANO PANGUE, RAMON DE BELEN, EDUARDO PAGTALUNAN, ANTONIO MIRANDA, RAMON UNIANA, ERNESTO SABADO, MARTIN MALABANAN, ROMEO HUERTO and WILFREDO CRISTOBAL, petitioners, vs.

THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, THE NATIONAL SEAMEN BOARD (now the Philippine Overseas Employment Administration), and MAGSAYSAY LINES, INC., respondents. Quasha, Asperilla, Ancheta, Pe;a and Nolasco for petitioners. Samson S. Alcantara for private respondent.

GUTIERREZ, JR., J.: These petitions ask for a re-examination of this Court's precedent setting decision in Vir-Jen Shipping and Marine Services Inc. v. National Labor Relations Commission, et al. (125 SCRA 577 [1983]). On constitutional, statutory, and factual grounds, we find no reason to disturb the doctrine in Vir-Jen Shipping and to turn back the clock of progress for sea-based overseas workers. The experience gained in the past few years shows that, following said doctrine, we should neither deny nor diminish the enjoyment by Filipino seamen of the same rights and freedoms taken for granted by other working-men here and abroad. The cases at bar involve a group of Filipino seamen who were declared by the defunct National Seamen Board (NSB) guilty of breaching their employment contracts with the private respondent because they demanded, upon the intervention and assistance of a third party, the International Transport Worker's Federation (ITF), the payment of wages over and above their contracted rates without the approval of the NSB. The petitioners were ordered to reimburse the total amount of US$91,348.44 or its equivalent in Philippine Currency representing the said over-payments and to be suspended from the NSB registry for a period of three years. The National Labor Relations Commission (NLRC) affirmed the decision of the NSB. In a corollary development, the private respondent, for failure of the petitioners to return the overpayments made to them upon demand by the former, filed estafa charges against some of the petitioners. The criminal cases were eventually consolidated in the sala of then respondent Judge Alfredo Benipayo. Hence, these consolidated petitions, G.R. No. 64781-99 and G.R. Nos. 57999 and 58143-53, which respectively pray for the nullification of the decisions of the NLRC and the NSB, and the dismissal of the criminal cases against the petitioners. The facts are found in the questioned decision of the NSB in G.R. No. 64781-99. From the records of this case it appears that the facts established and/or admitted by the parties are the following: that on different dates in 1977 and 1978 respondents entered into separate contracts of employment (Exhs. "B" to "B-17", inclusive) with complainant (private respondent) to work aboard vessels owned/operated/manned by the latter for a period of 12 calendar months and with different rating/position, salary, overtime pay and allowance, hereinbelow specified: ...; that aforesaid employment contracts were verified and approved by this Board; that on different dates in April 1978 respondents (petitioners) joined the M/V "GRACE RIVER"; that on or about October 30, 1978 aforesaid vessel, with the respondents on board, arrived at the port of Vancouver, Canada; that at this port respondent received additional wages under rates prescribed by the Intemational Transport Worker's Federation (ITF) in the total amount of US$98,261.70; that the respondents received the amounts appearing opposite their names, to wit: ...; that aforesaid amounts were over and above the rates of pay of respondents as appearing in their employment contracts approved by this Board; that on November 10, 1978, aforesaid vessel, with respondent on board, left Vancouver, Canada for Yokohama, Japan; that on December 14, 1978, while aforesaid vessel, was at Yura, Japan, they were made to disembark. (pp. 64-66, Rollo) Furthermore, according to the petitioners, while the vessel was docked at Nagoya, Japan, a certain Atty. Oscar Torres of the NSB Legal Department boarded the vessel and called a meeting of the seamen including the petitioners, telling them that for their own good and safety they should sign an agreement prepared by him on board the vessel and that if they do, the cases filed against them with NSB on November 17, 1978 would be

dismissed. Thus, the petitioners signed the. "Agreement" dated December 5, 1978. (Annex C of Petition) However, when they were later furnished xerox copies of what they had signed, they noticed that the line "which amount(s) was/were received and held by CREWMEMBERS in trust for SHIPOWNERS" was inserted therein, thereby making it appear that the amounts given to the petitioners representing the increase in their wages based on ITF rates were only received by them in trust for the private respondent. When the vessel reached Manila, the private respondent demanded from the petitioners the "overpayments" made to them in Canada. As the petitioners refused to give back the said amounts, charges were filed against some of them with the NSB and the Professional Regulations Commission. Estafa charges were also filed before different branches of the then Court of First Instance of Manila which, as earlier stated, were subsequently consolidated in the sala of the respondent Judge Alfredo Benipayo and which eventually led to G.R. Nos. 57999 and 58143-53. In G.R. Nos. 64781-99, the petitioners claimed before the NSB that contrary to the private respondent's allegations, they did not commit any illegal act nor stage a strike while they were on board the vessel; that the "Special Agreement" entered into in Vancouver to pay their salary differentials is valid, having been executed after peaceful negotiations. Petitioners further argued that the amounts they received were in accordance with the provision of law, citing among others, Section 18, Rule VI, Book I of the Rules and Regulations Implementing the Labor Code which provides that "the basic minimum salary of seamen shall not be less than the prevailing minimum rates established by the International Labor Organization (ILO) or those prevailing in the country whose flag the employing vessel carries, whichever is higher ..."; and that the "Agreement" executed in Nagoya, Japan had been forced upon them and that intercalations were made to make it appear that they were merely trustees of the amounts they received in Vancouver. On the other hand, the private respondent alleged that the petitioners breached their employment contracts when they, acting in concert and with the active participations of the ITF while the vessel was in Vancouver, staged an illegal strike and by means of threats, coercion and intimidation compelled the owners of the vessel to pay to them various sums totalling US$104,244.35; that the respondent entered into the "Special Agreement" to pay the petitioners' wage differentials because it was under duress as the vessel would not be allowed to leave Vancouver unless the said agreement was signed, and to prevent the shipowner from incurring further delay in the shipment of goods; and that in view of petitioners' breach of contract, the latter's names must be removed from the NSB's Registry and that they should be ordered to return the amounts they received over and above their contracted rates. The respondent NSB ruled that the petitioners were guilty of breach of contract because despite subsisting and valid NSB-approved employment contracts, the petitioners sought the assistance of a third party (ITF) to demand from the private respondent wages in accordance with the ITF rates, which rates are over and above their rates of pay as appearing in their NSB-approved contracts. As bases for this conclusion, the NSB stated: 1) The fact that respondents sought the aid of a third party (ITF) and demanded for wages and overtime pay based on ITF rates is shown in the entries of their respective Pay-Off Clearance Slips which were marked as their Exhs. "1" to "18", and we quote "DEMANDED ITF WAGES, OVERTIME, DIFFERENTIALS APRIL TO OCTOBER 1978". Respondent Suzara admitted that the entries in his Pay-Off Clearance Slip (Exh. "1") are correct (TSN., p. 16, Dec. 6, 1979). Moreover, it is the policy (reiterated very often) by the ITF that it does not interfere in the affairs of the crewmembers and masters and/or owners of a vessel unless its assistance is sought by the crewmembers themselves. Under this pronounced policy of the ITF, it is reasonable to assume that the representatives of the ITF in Vancouver, Canada assisted and intervened by reason of the assistance sought by the latter.
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2) The fact that the ITF assisted and intervened for and in behalf of the respondents in the latter's demand for higher wages could be gleaned from the answer of the respondents when they admitted that the ITF acted in their behalf in the negotiations for increase of wages. Moreover, respondent Cesar Dimaandal admitted that the ITF differential pay was computed by the ITF representative (TSN, p. 7, Dec. 12, 1979)

3) The fact that complainant and the owner/operator of the vessel were compelled to sign the Special Agreement (Exh. "20") and to pay ITF differentials to respondents in order not to delay the departure of the vessel and to prevent further losses is shown in the "Agreement" (Exhs. "R-21") ... (pp. 69-70, Rollo) The NSB further said: While the Board recognizes the rights of the respondents to demand for higher wages, provided the means are peaceful and legal, it could not, however, sanction the same if the means employed are violent and illegal. In the case at bar, the means employed are violent and illegal for in demanding higher wages the respondents sought the aid of a third party and in turn the latter intervened in their behalf and prohibited the vessel from sailing unless the owner and/or operator of the vessel acceded to respondents' demand for higher wages. To avoid suffering further incalculable losses, the owner and/or operator of the vessel had no altemative but to pay respondents' wages in accordance with the ITF scale. The Board condemns the act of a party who enters into a contract and with the use of force/or intimidation causes the other party to modify said contract. If the respondents believe that they have a valid ground to demand from the complainant a revision of the terms of their contracts, the same should have been done in accordance with law and not thru illegal means. (at p. 72, Rollo). Although the respondent NSB found that the petitioners were entitled to the payment of earned wages and overtime pay/allowance from November 1, 1978 to December 14, 1978, it nevertheless ruled that the computation should be based on the rates of pay as appearing in the petitioners' NSB-approved contracts. It ordered that the amounts to which the petitioners are entitled under the said computation should be deducted from the amounts that the petitioners must return to the private respondent. On appeal, the NLRC affirmed the NSB's findings. Hence, the petition in G.R. Nos. 64781-99. Meanwhile, the petitioners in G.R. Nos. 57999 and 58143-53 moved to quash the criminal cases of estafa filed against them on the ground that the alleged crimes were committed, if at all, in Vancouver, Canada and, therefore, Philippine courts have no jurisdiction. The respondent judge denied the motion. Hence, the second petition. The principal issue in these consolidated petitions is whether or not the petitioners are entitled to the amounts they received from the private respondent representing additional wages as determined in the special agreement. If they are, then the decision of the NLRC and NSB must be reversed. Similarly, the criminal cases of estafa must be dismissed because it follows as a consequence that the amounts received by the petitioners belong to them and not to the private respondent. In arriving at the questioned decision, the NSB ruled that the petitioners are not entitled to the wage differentials as determined by the ITF because the means employed by them in obtaining the same were violent and illegal and because in demanding higher wages the petitioners sought the aid of a third party, which, in turn, intervened in their behalf and prohibited the vessel from sailing unless the owner and/or operator of the vessel acceded to respondents' demand for higher wages. And as proof of this conclusion, the NSB cited the following: (a) the entries in the petitioners Pay-Off Clearance Slip which contained the phrase "DEMANDED ITF WAGES ..."; (b) the alleged policy of the ITF in not interfering with crewmembers of a vessel unless its intervention is sought by the crewmembers themselves; (c), the petitioners' admission that ITF acted in their behalf; and (d) the fact that the private respondent was compelled to sign the special agreement at Vancouver, Canada. There is nothing in the public and private respondents' pleadings, to support the allegations that the petitioners used force and violence to secure the special agreement signed in Vancouver. British Columbia. There was no need for any form of intimidation coming from the Filipino seamen because the Canadian Brotherhood of Railways and Transport Workers (CBRT), a strong Canadian labor union, backed by an international labor federation was actually doing all the influencing not only on the ship-owners and employers but also against

third world seamen themselves who, by receiving lower wages and cheaper accommodations, were threatening the employment and livelihood of seamen from developed nations. The bases used by the respondent NSB to support its decision do not prove that the petitioners initiated a conspiracy with the ITF or deliberately sought its assistance in order to receive higher wages. They only prove that when ITF acted in petitioners' behalf for an increase in wages, the latter manifested their support. This would be a logical and natural reaction for any worker in whose benefit the ITF or any other labor group had intervened. The petitioners admit that while they expressed their conformity to and their sentiments for higher wages by means of placards, they, nevertheless, continued working and going about their usual chores. In other words, all they did was to exercise their freedom of speech in a most peaceful way. The ITF people, in turn, did not employ any violent means to force the private respondent to accede to their demands. Instead, they simply applied effective pressure when they intimated the possibility of interdiction should the shipowner fail to heed the call for an upward adjustment of the rates of the Filipino seamen. Interdiction is nothing more than a refusal of ITF members to render service for the ship, such as to load or unload its cargo, to provision it or to perform such other chores ordinarily incident to the docking of the ship at a certain port. It was the fear of ITF interdiction, not any action taken by the seamen on board the vessel which led the shipowners to yield. The NSB's contusion that it is ITF's policy not to intervene with the plight of crewmembers of a vessel unless its intervention was sought is without basis. This Court is cognizant of the fact that during the period covered by the labor controversies in Wallem Philippines Shipping, Inc. v. Minister of Labor (102 SCRA 835 [1981]; Vir-Jen Shipping and Marine Services, Inc. v. NLRC (supra) and these consolidated petitions, the ITF was militant worldwide especially in Canada, Australia, Scandinavia, and various European countries, interdicting foreign vessels and demanding wage increases for third world seamen. There was no need for Filipino or other seamen to seek ITF intervention. The ITF was waiting on its own volition in all Canadian ports, not particularly for the petitioners' vessel but for all ships similarly situated. As earlier stated, the ITF was not really acting for the petitioners out of pure altruism. The ITF was merely protecting the interests of its own members. The petitioners happened to be pawns in a higher and broader struggle between the ITF on one hand and shipowners and third world seamen, on the other. To subject our seamen to criminal prosecution and punishment for having been caught in such a struggle is out of the question. As stated in Vir-Jen Shipping (supra): The seamen had done no act which under Philippine law or any other civilized law would be termed illegal, oppressive, or malicious. Whatever pressure existed, it was mild compared to accepted and valid modes of labor activity. (at page 591) Given these factual situations, therefore, we cannot affirm the NSB and NLRC's finding that there was violence, physical or otherwise employed by the petitioners in demanding for additional wages. The fact that the petitioners placed placards on the gangway of their ship to show support for ITF's demands for wage differentials for their own benefit and the resulting ITF's threatened interdiction do not constitute violence. The petitioners were exercising their freedom of speech and expressing sentiments in their hearts when they placed the placard We Want ITF Rates." Under the facts and circumstances of these petitions, we see no reason to deprive the seamen of their right to freedom of expression guaranteed by the Philippine Constitution and the fundamental law of Canada where they happened to exercise it. As we have ruled in Wallem Phil. Shipping Inc. v. Minister of Labor, et al. supra: Petitioner claims that the dismissal of private respondents was justified because the latter threatened the ship authorities in acceding to their demands, and this constitutes serious misconduct as contemplated by the Labor Code. This contention is now well-taken. The records fail to establish clearly the commission of any threat. But even if there had been such a threat, respondents' behavior should not be censured because it is but natural for them to employ some means of pressing their demands for petitioner, who refused to abide with the terms of the Special Agreement, to honor and respect the same. They were only acting in the exercise of their rights, and to deprive them of their freedom of expression is contrary to law and public policy. ... (at page 843)

We likewise, find the public respondents' conclusions that the acts of the petitioners in demanding and receiving wages over and above the rates appearing in their NSB-approved contracts is in effect an alteration of their valid and subsisting contracts because the same were not obtained through. mutual consent and without the prior approval of the NSB to be without basis, not only because the private respondent's consent to pay additional wages was not vitiated by any violence or intimidation on the part of the petitioners but because the said NSB-approved form contracts are not unalterable contracts that can have no room for improvement during their effectivity or which ban any amendments during their term. For one thing, the employer can always improve the working conditions without violating any law or stipulation. We stated in the Vir-Jen case (supra) that: The form contracts approved by the National Seamen Board are designed to protect Filipino seamen not foreign shipowners who can take care of themselves. The standard forms embody the basic minimums which must be incorporated as parts of the employment contract. (Section 15, Rule V, Rules and Regulations Implementing the Labor Code). They are not collective bargaining agreements or immutable contracts which the parties cannot improve upon or modify in the course of the agreed period of time. To state, therefore, that the affected seamen cannot petition their employer for higher salaries during the 12 months duration of the contract runs counter to estabhshed principles of labor legislation. The National Labor Relations Commission, as the appellate tribunal from the decisions of the National Seamen Board, correctly ruled that the seamen did not violate their contracts to warrant their dismissal. (at page 589)
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It is impractical for the NSB to require the petitioners, caught in the middle of a labor struggle between the ITF and owners of ocean going vessels halfway around the world in Vancouver, British Columbia to first secure the approval of the NSB in Manila before signing an agreement which the employer was willing to sign. It is also totally unrealistic to expect the petitioners while in Canada to exhibit the will and strength to oppose the ITF's demand for an increase in their wages, assuming they were so minded. An examination of Annex C of the petition, the agreement signed in Japan by the crewmembers of the M/V Grace River and a certain M. Tabei, representative of the Japanese shipowner lends credence to the petitioners' claim that the clause "which amount(s) was received and held by CREWMEMBERS in trust for SHIPOWNER" was an intercalation added after the execution of the agreement. The clause appears too closely typed below the names of the 19 crewmen and their wages with no similar intervening space as that which appears between all the paragraphs and the triple space which appears between the list of crewmembers and their wages on one hand and the paragraph above which introduces the list, on the other. The verb "were" was also inserted above the verb "was" to make the clause grammatically correct but the insertion of "were" is already on the same line as "Antonio Miranda and 5,221.06" where it clearly does not belong. There is no other space where the word "were" could be intercalated. (See Rollo, page 80). At any rate, the proposition that the petitioners should have pretended to accept the increased wages while in Vancouver but returned them to the shipowner when they reached its country, Japan, has already been answered earlier by the Court: Filipino seamen are admittedly as competent and reliable as seamen from any other country in the world. Otherwise, there would not be so many of them in the vessels sailing in every ocean and sea on this globe. It is competence and reliability, not cheap labor that makes our seamen so greatly in demand. Filipino seamen have never demanded the same high salaries as seamen from the United States, the United Kingdom, Japan and other developed nations. But certainly they are entitled to government protection when they ask for fair and decent treatment by their employer and when they exercise the right to petition for improved terms of employment, especially when they feel that these are sub-standard or are capable of improvement according to internationally accepted rules. In the domestic scene, there are marginal employers who prepare two sets of payrolls for their employees one in keeping with minimum wages and the other recording the sub-standard wages that the employees really receive. The reliable employers, however, not only meet the minimums required by fair

labor standards legislation but even go away above the minimums while earning reasonable profits and prospering. The same is true of international employment. There is no reason why this court and the Ministry of Labor and Employment or its agencies and commissions should come out with pronouncements based on the standards and practices of unscrupulous or inefficient shipowners, who claim they cannot survive without resorting to tricky and deceptive schemes, instead of Government maintaining labor law and jurisprudence according to the practices of honorable, competent, and law-abiding employers, domestic or foreign. (Vir-Jen Shipping, supra, pp. 587-588) It is noteworthy to emphasize that while the Intemational Labor Organization (ILO) set the minimum basic wage of able seamen at US$187.00 as early as October 1976, it was only in 1979 that the respondent NSB issued Memo Circular No. 45, enjoining all shipping companies to adopt the said minimum basic wage. It was correct for the respondent NSB to state in its decision that when the petitioners entered into separate contracts between 1977-1978, the monthly minimum basic wage for able seamen ordered by NSB was still fixed at US$130.00. However, it is not the fault of the petitioners that the NSB not only violated the Labor Code which created it and the Rules and Regulations Implementing the Labor Code but also seeks to punish the seamen for a shortcoming of NSB itself. Article 21(c) of the Labor Code, when it created the NSB, mandated the Board to "(O)btain the best possible terms and conditions of employment for seamen." Section 15, Rule V of Book I of the Rules and Regulations Implementing the Labor Code provides: Sec. 15. Model contract of employment. The NSB shall devise a model contract of employment which shall embody all the requirements of pertinent labor and social legislations and the prevailing standards set by applicable International Labor Organization Conventions. The model contract shall set the minimum standards of the terms and conditions to govern the employment of Filipinos on board vessels engaged in overseas trade. All employers of Filipinos shall adopt the model contract in connection with the hiring and engagement of the services of Filipino seafarers, and in no case shall a shipboard employment contract be allowed where the same provides for benefits less than those enumerated in the model employment contract, or in any way conflicts with any other provisions embodied in the model contract. Section 18 of Rule VI of the same Rules and Regulations provides: Sec. 18. Basic minimum salary of able-seamen. The basic minimum salary of seamen shall be not less than the prevailing minimxun rates established by the International Labor Organization or those prevailing in the country whose flag the employing vessel carries, whichever is higher. However, this provision shall not apply if any shipping company pays its crew members salaries above the minimum herein provided. Section 8, Rule X, Book I of the Omnibus Rules provides: Section 8. Use of standard format of service agreement. The Board shall adopt a standard format of service agreement in accordance with pertinent labor and social legislation and prevailing standards set by applicable International Labor Organization Conventions. The standard format shall set the minimum standard of the terms and conditions to govern the employment of Filipino seafarers but in no case shall a shipboard employment contract (sic), or in any way conflict with any other provision embodied in the standard format. It took three years for the NSB to implement requirements which, under the law, they were obliged to follow and execute immediately. During those three years, the incident in Vancouver happened. The terms and conditions agreed upon in Vancouver were well within ILO rates even if they were above NSB standards at the time.

The sanctions applied by NSB and affirmed by NLRC are moreover not in keeping with the basic premise that this Court stressed in the Vir-Jen Shipping case (supra) that the Ministry now the Department of Labor and Employment and all its agencies exist primarily for the workingman's interest and the nation's as a whole. Implicit in these petitions and the only reason for the NSB to take the side of foreign shipowners against Filipino seamen is the "killing the goose which lays the golden eggs" argument. We reiterate the ruling of the Court in Vir-Jen Shipping (supra) There are various arguments raised by the petitioners but the common thread running through all of them is the contention, if not the dismal prophecy, that if the respondent seamen are sustained by this Court, we would in effect "kill the hen that lays the golden egg." In other words, Filipino seamen, admittedly among the best in the world, should remain satisfied with relatively lower if not the lowest, international rates of compensation, should not agitate for higher wages while their contracts of employment are subsisting, should accept as sacred, iron clad, and immutable the side contracts which require: them to falsely pretend to be members of international labor federations, pretend to receive higher salaries at certain foreign ports only to return the increased pay once the ship leaves that port, should stifle not only their right to ask for improved terms of employment but their freedom of speech and expression, and should suffer instant termination of employment at the slightest sign of dissatisfaction with no protection from their Government and their courts. Otherwise, the petitioners contend that Filipinos would no longer be accepted as seamen, those employed would lose their jobs, and the still unemployed would be left hopeless. This is not the first time and it will not be the last where the threat of unemployment and loss of jobs would be used to argue against the interests of labor; where efforts by workingmen to better their terms of employment would be characterized as prejudicing the interests of labor as a whole. xxx xxx xxx Unionism, employers' liability acts, minimum wages, workmen's compensation, social security and collective bargaining to name a few were all initially opposed by employers and even well meaning leaders of government and society as "killing the hen or goose which lays the golden eggs." The claims of workingmen were described as outrageously injurious not only to the employer but more so to the employees themselves before these claims or demands were established by law and jurisprudence as "rights" and before these were proved beneficial to management, labor, and the national as a whole beyond reasonable doubt. The case before us does not represent any major advance in the rights of labor and the workingmen. The private respondents merely sought rights already established. No matter how much the petitioner-employer tries to present itself as speaking for the entire industry, there is no evidence that it is typical of employers hiring Filipino seamen or that it can speak for them. The contention that manning industries in the Philippines would not survive if the instant case is not decided in favor of the petitioner is not supported by evidence. The Wallem case was decided on February 20, 1981. There have been no severe repercussions, no drying up of employment opportunities for seamen, and none of the dire consequences repeatedly emphasized by the petitioner. Why should Vir-Jen be an exception? The wages of seamen engaged in international shipping are shouldered by the foreign principal. The local manning office is an agent whose primary function is recruitment and who usually gets a lump sum from the shipowner to defray the salaries of the crew. The hiring of seamen and the determination of their compensation is subject to the interplay of various market factors and one key factor is how much in terms of profits the local manning office and the foreign shipowner may realize after the costs of the voyage are met. And costs include salaries of officers and crew members. (at pp. 585-586)

The Wallem Shipping case, was decided in 1981. Vir-Jen Shipping was decided in 1983. It is now 1989. There has'been no drying up of employment opportunities for Filipino seamen. Not only have their wages improved thus leading ITF to be placid and quiet all these years insofar as Filipinos are concerned but the hiring of Philippine seamen is at its highest level ever. Reporting its activities for the year 1988, the Philippine Overseas Employment Administration (POEA) stated that there will be an increase in demand for seamen based overseas in 1989 boosting the number to as high as 105,000. This will represent a 9.5 percent increase from the 1988 aggregate. (Business World, News Briefs,January 11, 1989 at page 2) According to the POEA, seabased workers numbering 95,913 in 1988 exceeded by a wide margin of 28.15 percent the year end total in 1987. The report shows that sea-based workers posted bigger monthly increments compared to those of landbased workers. (The Business Star, Indicators, January 11, 1988 at page 2) Augmenting this optimistic report of POEA Administrator Tomas Achacoso is the statement of Secretary of Labor Franklin M. Drilon that the Philippines has a big jump over other crewing nations because of the Filipinos' abilities compared with any European or westem crewing country. Drilon added that cruise shipping is also a growing market for Filipino seafarers because of their flexibility in handling odd jobs and their expertise in handling almost all types of ships, including luxury liners. (Manila Bulletin, More Filipino Seamen Expected Development, December 27, 1988 at page 29). Parenthetically, the minimum monthly salary of able bodied seamen set by the ILO and adhered to by the Philippines is now $276.00 (id.) more than double the $130.00 sought to be enforced by the public respondents in these petitions.
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The experience from 1981 to the present vindicates the finding in Vir-Jen Shipping that a decision in favor of the seamen would not necessarily mean severe repercussions, drying up of employment opportunities for seamen, and other dire consequences predicted by manning agencies and recruiters in the Philippines. From the foregoing, we find that the NSB and NLRC committed grave abuse of discretion in finding the petitioners guilty of using intimidation and illegal means in breaching their contracts of employment and punishing them for these alleged offenses. Consequently, the criminal prosecutions for estafa in G.R. Nos. 57999 and 58143-53 should be dismissed. WHEREFORE, the petitions are hereby GRANTED. The decisions of the National Seamen Board and National Labor Relations Commission in G. R. Nos. 64781-99 are REVERSED and SET ASIDE and a new one is entered holding the petitioners not guilty of the offenses for which they were charged. The petitioners' suspension from the National Seamen Board's Registry for three (3) years is LIFTED. The private respondent is ordered to pay the petitioners their earned but unpaid wages and overtime pay/allowance from November 1, 1978 to December 14, 1978 according to the rates in the Special Agreement that the parties entered into in Vancouver, Canada. The criminal cases for estafa, subject matter of G. R. Nos. 57999 and 58143-53, are ordered DISMISSED. SO ORDERED. JOSE B. ATIENZA, petitioner, vs. PHILIMARE SHIPPING AND EQUIPMENT SUPPLY, TRANS OCEAN LINER (Pte) LTD., PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION and NATIONAL LABOR RELATIONS COMMISSION, respondents. Linsangan Law Office for petitioner. Prudencio Cruz for private respondents.

CRUZ, J.: The facts of this case are not disputed. Even the legal issues are simple and are soon resolved. Joseph B. Atienza was engaged by Philimare Shipping and Equipment Supply, as agent for Trans Ocean Liner Pte. Ltd. of Germany, based on Singapore, to work as Third Mate on board the MV Tibati for the stipulated compensation of US$850.00 a month from January 20, 1981 to January 20, 1982. 1 The, Crew Agreement signed by the parties on January 3, 1981, provided for insurance benefits "as per NSB Standard Format" and was validated and approved by the National Seamen Board on January 14,1981. 2 On May 12, 1981, Atienza died as a result of an accident which befell him while working on the vessel in Bombay, India. 3 In due time, his father, the herein petitioner, filed a claim for death benefits computed at the rate of 36 months times the seaman's monthly salary plus ten per cent thereof in accordance with the Workmen's Compensation Law of Singapore, for a total of $30,600.00. The, private respondents, while admitting liability, contended that this was limited to only P40,000.00 under Section D(1) of the NSB Standard Format. On November 6, 1984, the Philippine Overseas Employment Administration sustained the private respondent and held that the applicable law was Philippine law. 4 On appeal, the decision was affirmed by the National Labor Relations Commission except that it increased the award to P75,000.00 pursuant to NSB Memorandum Circular No. 71, Series of 1981. 5 In the petition before us, we are asked to reverse the public respondent on the ground that Singaporean law should have been applied in line with our ruling in Norse Management Co. v. National Seamen Board, 6 where the foreign law was held controlling because it provided for greater benefits for the claimant. For their part, the private respondents question the application of NSB Memorandum Circular No. 71, Series of 1981, which they say became effective after the seaman's death. 7 On the first issue, our ruling is that Norse is not applicable to the present petition. The, reason is that in that case, it was specifically stipulated by the parties in the Crew Agreement that "compensation shall be paid to employee in accordance with and subject to the limitations of the Workmen's Compensation Act of the Philippines or the Workmen's Insurance Law of the registry of the vessel, whichever is greater. 8 That was why the higher benefits prescribed by the foreign law were awarded. By contrast, no such stipulation appears in the Crew Agreement now under consideration. Instead, it is clearly stated therein that the insurance benefits shall be "as per NSB Standard Format," in the event "of death of the seaman during the term of his contract, over and above the benefits for which the Philippine Government is liable under Philippine law. 9 The petitioner argues that the Standard Format prescribed only the minimum benefits and does not preclude the parties from stipulating for higher compensation. That may be true enough. But the point is that the parties in this case did not provide for such higher benefits as the parties did in the Norse case. There was no stipulation in the Crew Agreement of January 3, 1981, that the employee would be entitled to whichever greater insurance benefits were offered by either Philippine law or the foreign law; on the contrary, it was plainly provided that insurance benefits would be determined according to the NSB Standard Format then in force. The consequence is that the petitioner cannot now claim a higher award than the compensation prescribed in the said format. As We said in Bagong Filipinas Overseas Corporation v. NLRC: 10 We hold that the shipboard employment contract is controlling in this case. The contract provides that the beneficiaries of the seaman are entitled to P20,000.00 over and above the benefits' for which the Philippine Government is liable under Philippine Law. Hongkong law on workmen's compensation is not the applicable law. The, case of Norse Management Co. v. National Seaman Board, G.R. No. 54204, September 30, 1982, 117 SCRA 486 cannot be a precedent because it was expressly stipulated in the employment contract in that case that the workmen's compensation payable to the employee should be in

accordance with Philippine Law or the Workmen's Insurance Law of the country where the vessel is registered "whichever is greater." The next issue involves the effectivity of NSB Memorandum Circular No. 71, which appears to have been retroactively applied by the NLRC in increasing the compensation from P40,000.00 The amended award was based by the POEA on NSB Memorandum Circular No. 46, which became effective in 1979. 11 The NLRC, apparently laboring under the belief that Memorandum Circular No. 71 was already effective at the time of the seaman's death on May 12, 1981, increased the death benefits to P75,000.00 as provided thereunder. The fact, though, is that the new rule became effective only in December 1981, as certified by the POEA itself, 12 or seven months after Atienza's fatal accident. On the petitioner's claim that the award should be adjusted in view of the decrease in the purchasing power of the Philippine peso, it suffices to cite the following relevant ruling of the Court in Sta. Rita and Well Run Maritime SA Ltd. v. NLRC: 13 Regarding the third contention of the petitioners, the records show that when Sta. Rita died on September 14, 1981, NSB Memorandum Circular No. 46 (Series of 1979) was the applicable law. Pursuant to this circular, in case of a seaman's death during the terms of his contract, the company shall pay his beneficiaries the amount of P30,000.00. On November 18, 1981 or more than one month after Sta. Rita's death the administrative regulations were amended to increase death compensation for seamen to P50,000.00, effective December 1, 1981. Considering that the applicable law governing death compensation for seamen at the time of Sta. Rita's death was Memorandum Circular No. 46, Series of 1979, the petitioner's liability should be limited to P30,000.00. Moreover, if manning agents or shipping corporations secure employer's insurance to cover their liabilities for death, total disability and sickness of officers and ratings on board foreign going vessels, the extent of the coverage is based on the applicable law at the time. It would be unjust to compel them to pay benefits based on a law not yet in effect at the time the contingency occurs. WHEREFORE, the decision of the NLRC dated 15 July 1985 is SET ASIDE and that of the POEA is REINSTATED, without any pronouncement as to costs. It is so ordered. G.R. No. 76633 October 18, 1988 EASTERN SHIPPING LINES, INC., petitioner, vs. PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA), MINISTER OF LABOR AND EMPLOYMENT, HEARING OFFICER ABDUL BASAR and KATHLEEN D. SACO, respondents. Jimenea, Dala & Zaragoza Law Office for petitioner. The Solicitor General for public respondent. Dizon Law Office for respondent Kathleen D. Saco.

CRUZ, J.: The private respondent in this case was awarded the sum of P192,000.00 by the Philippine Overseas Employment Administration (POEA) for the death of her husband. The decision is challenged by the petitioner on the principal ground that the POEA had no jurisdiction over the case as the husband was not an overseas worker.

Vitaliano Saco was Chief Officer of the M/V Eastern Polaris when he was killed in an accident in Tokyo, Japan, March 15, 1985. His widow sued for damages under Executive Order No. 797 and Memorandum Circular No. 2 of the POEA. The petitioner, as owner of the vessel, argued that the complaint was cognizable not by the POEA but by the Social Security System and should have been filed against the State Insurance Fund. The POEA nevertheless assumed jurisdiction and after considering the position papers of the parties ruled in favor of the complainant. The award consisted of P180,000.00 as death benefits and P12,000.00 for burial expenses. The petitioner immediately came to this Court, prompting the Solicitor General to move for dismissal on the ground of non-exhaustion of administrative remedies. Ordinarily, the decisions of the POEA should first be appealed to the National Labor Relations Commission, on the theory inter alia that the agency should be given an opportunity to correct the errors, if any, of its subordinates. This case comes under one of the exceptions, however, as the questions the petitioner is raising are essentially questions of law. 1 Moreover, the private respondent himself has not objected to the petitioner's direct resort to this Court, observing that the usual procedure would delay the disposition of the case to her prejudice. The Philippine Overseas Employment Administration was created under Executive Order No. 797, promulgated on May 1, 1982, to promote and monitor the overseas employment of Filipinos and to protect their rights. It replaced the National Seamen Board created earlier under Article 20 of the Labor Code in 1974. Under Section 4(a) of the said executive order, the POEA is vested with "original and exclusive jurisdiction over all cases, including money claims, involving employee-employer relations arising out of or by virtue of any law or contract involving Filipino contract workers, including seamen." These cases, according to the 1985 Rules and Regulations on Overseas Employment issued by the POEA, include "claims for death, disability and other benefits" arising out of such employment. 2 The petitioner does not contend that Saco was not its employee or that the claim of his widow is not compensable. What it does urge is that he was not an overseas worker but a 'domestic employee and consequently his widow's claim should have been filed with Social Security System, subject to appeal to the Employees Compensation Commission. We see no reason to disturb the factual finding of the POEA that Vitaliano Saco was an overseas employee of the petitioner at the time he met with the fatal accident in Japan in 1985. Under the 1985 Rules and Regulations on Overseas Employment, overseas employment is defined as "employment of a worker outside the Philippines, including employment on board vessels plying international waters, covered by a valid contract. 3 A contract worker is described as "any person working or who has worked overseas under a valid employment contract and shall include seamen" 4 or "any person working overseas or who has been employed by another which may be a local employer, foreign employer, principal or partner under a valid employment contract and shall include seamen." 5 These definitions clearly apply to Vitaliano Saco for it is not disputed that he died while under a contract of employment with the petitioner and alongside the petitioner's vessel, the M/V Eastern Polaris, while berthed in a foreign country. 6 It is worth observing that the petitioner performed at least two acts which constitute implied or tacit recognition of the nature of Saco's employment at the time of his death in 1985. The first is its submission of its shipping articles to the POEA for processing, formalization and approval in the exercise of its regulatory power over overseas employment under Executive Order NO. 797. 7 The second is its payment 8 of the contributions mandated by law and regulations to the Welfare Fund for Overseas Workers, which was created by P.D. No. 1694 "for the purpose of providing social and welfare services to Filipino overseas workers." Significantly, the office administering this fund, in the receipt it prepared for the private respondent's signature, described the subject of the burial benefits as "overseas contract worker Vitaliano Saco." 9 While this receipt is certainly not controlling, it does indicate, in the light of the petitioner's own previous acts, that the petitioner and the Fund to which it had made contributions considered Saco to be an overseas employee.

The petitioner argues that the deceased employee should be likened to the employees of the Philippine Air Lines who, although working abroad in its international flights, are not considered overseas workers. If this be so, the petitioner should not have found it necessary to submit its shipping articles to the POEA for processing, formalization and approval or to contribute to the Welfare Fund which is available only to overseas workers. Moreover, the analogy is hardly appropriate as the employees of the PAL cannot under the definitions given be considered seamen nor are their appointments coursed through the POEA. The award of P180,000.00 for death benefits and P12,000.00 for burial expenses was made by the POEA pursuant to its Memorandum Circular No. 2, which became effective on February 1, 1984. This circular prescribed a standard contract to be adopted by both foreign and domestic shipping companies in the hiring of Filipino seamen for overseas employment. A similar contract had earlier been required by the National Seamen Board and had been sustained in a number of cases by this Court. 10 The petitioner claims that it had never entered into such a contract with the deceased Saco, but that is hardly a serious argument. In the first place, it should have done so as required by the circular, which specifically declared that "all parties to the employment of any Filipino seamen on board any ocean-going vessel are advised to adopt and use this employment contract effective 01 February 1984 and to desist from using any other format of employment contract effective that date." In the second place, even if it had not done so, the provisions of the said circular are nevertheless deemed written into the contract with Saco as a postulate of the police power of the State. 11 But the petitioner questions the validity of Memorandum Circular No. 2 itself as violative of the principle of nondelegation of legislative power. It contends that no authority had been given the POEA to promulgate the said regulation; and even with such authorization, the regulation represents an exercise of legislative discretion which, under the principle, is not subject to delegation. The authority to issue the said regulation is clearly provided in Section 4(a) of Executive Order No. 797, reading as follows: ... The governing Board of the Administration (POEA), as hereunder provided shall promulgate the necessary rules and regulations to govern the exercise of the adjudicatory functions of the Administration (POEA). Similar authorization had been granted the National Seamen Board, which, as earlier observed, had itself prescribed a standard shipping contract substantially the same as the format adopted by the POEA. The second challenge is more serious as it is true that legislative discretion as to the substantive contents of the law cannot be delegated. What can be delegated is the discretion to determine how the law may be enforced, notwhat the law shall be. The ascertainment of the latter subject is a prerogative of the legislature. This prerogative cannot be abdicated or surrendered by the legislature to the delegate. Thus, in Ynot v. Intermediate Apellate Court 12 which annulled Executive Order No. 626, this Court held: We also mark, on top of all this, the questionable manner of the disposition of the confiscated property as prescribed in the questioned executive order. It is there authorized that the seized property shall be distributed to charitable institutions and other similar institutions as the Chairman of the National Meat Inspection Commission may see fit, in the case of carabaos.' (Italics supplied.) The phrase "may see fit" is an extremely generous and dangerous condition, if condition it is. It is laden with perilous opportunities for partiality and abuse, and even corruption. One searches in vain for the usual standard and the reasonable guidelines, or better still, the limitations that the officers must observe when they make their distribution. There is none. Their options are apparently boundless. Who shall be the fortunate beneficiaries of their generosity and by what criteria shall they be chosen? Only the officers named can supply the answer, they and they alone may choose the grantee as they see fit, and in their own exclusive discretion. Definitely, there is here a 'roving commission a wide and sweeping authority that is not canalized within banks that keep it from overflowing,' in short a clearly profligate and therefore invalid delegation of legislative powers. There are two accepted tests to determine whether or not there is a valid delegation of legislative power, viz, the completeness test and the sufficient standard test. Under the first test, the law must be complete in all its

terms and conditions when it leaves the legislature such that when it reaches the delegate the only thing he will have to do is enforce it. 13 Under the sufficient standard test, there must be adequate guidelines or stations in the law to map out the boundaries of the delegate's authority and prevent the delegation from running riot. 14 Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not allowed to step into the shoes of the legislature and exercise a power essentially legislative. The principle of non-delegation of powers is applicable to all the three major powers of the Government but is especially important in the case of the legislative power because of the many instances when its delegation is permitted. The occasions are rare when executive or judicial powers have to be delegated by the authorities to which they legally certain. In the case of the legislative power, however, such occasions have become more and more frequent, if not necessary. This had led to the observation that the delegation of legislative power has become the rule and its non-delegation the exception. The reason is the increasing complexity of the task of government and the growing inability of the legislature to cope directly with the myriad problems demanding its attention. The growth of society has ramified its activities and created peculiar and sophisticated problems that the legislature cannot be expected reasonably to comprehend. Specialization even in legislation has become necessary. To many of the problems attendant upon present-day undertakings, the legislature may not have the competence to provide the required direct and efficacious, not to say, specific solutions. These solutions may, however, be expected from its delegates, who are supposed to be experts in the particular fields assigned to them. The reasons given above for the delegation of legislative powers in general are particularly applicable to administrative bodies. With the proliferation of specialized activities and their attendant peculiar problems, the national legislature has found it more and more necessary to entrust to administrative agencies the authority to issue rules to carry out the general provisions of the statute. This is called the "power of subordinate legislation." With this power, administrative bodies may implement the broad policies laid down in a statute by "filling in' the details which the Congress may not have the opportunity or competence to provide. This is effected by their promulgation of what are known as supplementary regulations, such as the implementing rules issued by the Department of Labor on the new Labor Code. These regulations have the force and effect of law. Memorandum Circular No. 2 is one such administrative regulation. The model contract prescribed thereby has been applied in a significant number of the cases without challenge by the employer. The power of the POEA (and before it the National Seamen Board) in requiring the model contract is not unlimited as there is a sufficient standard guiding the delegate in the exercise of the said authority. That standard is discoverable in the executive order itself which, in creating the Philippine Overseas Employment Administration, mandated it to protect the rights of overseas Filipino workers to "fair and equitable employment practices." Parenthetically, it is recalled that this Court has accepted as sufficient standards "Public interest" in People v. Rosenthal 15 "justice and equity" in Antamok Gold Fields v. CIR 16 "public convenience and welfare" in Calalang v. Williams 17 and "simplicity, economy and efficiency" in Cervantes v. Auditor General, 18 to mention only a few cases. In the United States, the "sense and experience of men" was accepted in Mutual Film Corp. v. Industrial Commission, 19 and "national security" in Hirabayashi v. United States. 20 It is not denied that the private respondent has been receiving a monthly death benefit pension of P514.42 since March 1985 and that she was also paid a P1,000.00 funeral benefit by the Social Security System. In addition, as already observed, she also received a P5,000.00 burial gratuity from the Welfare Fund for Overseas Workers. These payments will not preclude allowance of the private respondent's claim against the petitioner because it is specifically reserved in the standard contract of employment for Filipino seamen under Memorandum Circular No. 2, Series of 1984, that Section C. Compensation and Benefits.

1. In case of death of the seamen during the term of his Contract, the employer shall pay his beneficiaries the amount of: a. P220,000.00 for master and chief engineers b. P180,000.00 for other officers, including radio operators and master electrician c. P 130,000.00 for ratings. 2. It is understood and agreed that the benefits mentioned above shall be separate and distinct from, and will be in addition to whatever benefits which the seaman is entitled to under Philippine laws. ... 3. ... c. If the remains of the seaman is buried in the Philippines, the owners shall pay the beneficiaries of the seaman an amount not exceeding P18,000.00 for burial expenses. The underscored portion is merely a reiteration of Memorandum Circular No. 22, issued by the National Seamen Board on July 12,1976, providing an follows: Income Benefits under this Rule Shall be Considered Additional Benefits.

All compensation benefits under Title II, Book Four of the Labor Code of the Philippines (Employees Compensation and State Insurance Fund) shall be granted, in addition to whatever benefits, gratuities or allowances that the seaman or his beneficiaries may be entitled to under the employment contract approved by the NSB. If applicable, all benefits under the Social Security Law and the Philippine Medicare Law shall be enjoyed by the seaman or his beneficiaries in accordance with such laws.
The above provisions are manifestations of the concern of the State for the working class, consistently with the social justice policy and the specific provisions in the Constitution for the protection of the working class and the promotion of its interest. One last challenge of the petitioner must be dealt with to close t case. Its argument that it has been denied due process because the same POEA that issued Memorandum Circular No. 2 has also sustained and applied it is an uninformed criticism of administrative law itself. Administrative agencies are vested with two basic powers, the quasi-legislative and the quasi-judicial. The first enables them to promulgate implementing rules and regulations, and the second enables them to interpret and apply such regulations. Examples abound: the Bureau of Internal Revenue adjudicates on its own revenue regulations, the Central Bank on its own circulars, the Securities and Exchange Commission on its own rules, as so too do the Philippine Patent Office and the Videogram Regulatory Board and the Civil Aeronautics Administration and the Department of Natural Resources and so on ad infinitumon their respective administrative regulations. Such an arrangement has been accepted as a fact of life of modern governments and cannot be considered violative of due process as long as the cardinal rights laid down by Justice Laurel in the landmark case of Ang Tibay v. Court of Industrial Relations 21 are observed. Whatever doubts may still remain regarding the rights of the parties in this case are resolved in favor of the private respondent, in line with the express mandate of the Labor Code and the principle that those with less in life should have more in law. When the conflicting interests of labor and capital are weighed on the scales of social justice, the heavier influence of the latter must be counter-balanced by the sympathy and compassion the law must accord the

underprivileged worker. This is only fair if he is to be given the opportunity and the right to assert and defend his cause not as a subordinate but as a peer of management, with which he can negotiate on even plane. Labor is not a mere employee of capital but its active and equal partner. WHEREFORE, the petition is DISMISSED, with costs against the petitioner. The temporary restraining order dated December 10, 1986 is hereby LIFTED. It is so ordered. SEAGULL MARITIME CORP. AND PHILIMARE SHIPPING & EQUIPMENT SUPPLY, petitioners vs. NERRY D. BALATONGAN, NATIONAL LABOR RELATIONS COMMISSION AND PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, respondents. Tanjuatco, Oreta, Tanjuatco, Berenguer & San Vicente for petitioners. The Solicitor General for public respondent. Benjamin B. Vergara for private respondent

GANCAYCO, J.: On November 2, 1982, a "crew Agreement" was entered into by private respondent Nerry D. Balatongan and Philimare Shipping and Equipment Supply (hereinafter called Philimare) whereby the latter employed the former as able seaman on board its vessel "Santa Cruz" (renamed "Turtle Bay") with a monthly salary of US $ 300.00. Said agreement was processed and approved by the National Seaman's Board (NSB) on November 3, 1982. 1 While on board said vessel the said parties entered into a supplementary contract of employment on December 6, 1982 2 which provides among others: 1. The employer shall be obliged to insure the employee during his engagement against death or permanent invalidity caused by accident on board up to: US $ 40,000 - for death caused by accident

US $ 50,000 - for permanent total disability caused by accident.

On October 6, 1983 Balatongan met an accident in the Suez Canal, Egypt as a result of which he was hospitalized at the Suez Canal Authority Hospital. Later, he was repatriated to the Philippines and was hospitalized at the Makati Medical Center from October 23, 1983 to March 27, 1984. On August 19, 1985 the medical certificate was issued describing his disability as "permanent in nature." Balatongan demanded payment for his claim for total disability insurance in the amount of US $ 50,000.00 as provided for in the contract of employment but his claim was denied for having been submitted to the insurers beyond the designated period for doing so. Thus, Balatongan filed on June 21, 1985 a complaint against Philimare and Seagull Maritime Corporation (hereinafter called Seagull) in the Philippine Overseas Employment Administration (POEA) for non-payment of his claim for permanent total disability with damages and attorney's fees. After the parties submitted their respective position papers with the corresponding documentary evidence, the officer-in-charge of the Workers Assistance and Adjudication Office of the POEA rendered a decision on May 2, 1986, the dispositive part of which reads as follows:

WHEREFORE, premises considered, respondents are hereby ordered to pay complainant the amount of US $ 50,000.00 representing permanent total disability insurance and attorney's fees at 10% of the award. Payment should be made in this Office within ten (10) days from receipt hereof at the prevailing rate of exchange. This Office cannot however rule on damages, having no jurisdiction on the matter.

SO ORDERED. 4
Seagull and Philimare appealed said decision to the National Labor Relations Commission (NLRC) on June 4, 1986. Pending resolution of their appeal because of the alleged transfer of the agency of Seagull to Southeast Asia Shipping Corporation, Seagull filed on April 28, 1987 a Motion For Substitution/Inclusion of Party Respondent which was opposed by Balatongan. 5 This was followed by an ex-parte motion for leave to file third party complaint on June 4, 1987 by Seagull. A decision was promulgated on December 7, 1987 denying both motions and dismissing the appeal for lack of merit. 6 A motion for reconsideration of said decision was denied for lack of merit in a resolution dated February 26, 1988. 7 Hence, Seagull and Philimare filed this petition for certiorari with a prayer for the issuance of a temporary restraining order based on the following grounds: 1. Respondent POEA erred in applying the Supplemental Contract; 2. Respondents POEA and NLRC acted with grave abuse of discretion in holding that the Supplemental Contract was signed on board MV Santa Cruz by and between private respondent and your petitioner; and

3. Respondent NLRC acted with grave abuse of discretion in not giving due course to your petitioners' Motion for Leave to File Third Party Complaint as well as their Motion for Inclusion/Substitution of respondents. 8
On March 21, 1988, the Court issued a temporary restraining order enjoining respondents from enforcing the questioned decision and resolution of public respondents. Petitioners argue that prior to private respondent's departure he executed a crew agreement on November 2, 1982 which was duly approved by the POEA; that the supplementary contract of employment that was entered into on board the vessel "Turtle Bay" which provides for a US $ 50,000.00 insurance benefit in case of permanent disability was neither approved nor verified by respondent POEA; and that the same violates Article 34(i) of the Labor Code, as amended, which provides as follows: Art. 34. Prohibited Practices. - It shall be unlawful for any individual, entity, licensee, or holder of authority: xxx xxx xxx xxx xxx xxx (i) to substitute or alter employment contracts approved and verified by the Department of Labor from the time of actual signing thereof by the parties up to and including the period of expiration of the same without the approval of the Department of Labor. Petitioners also call attention to Article VIII, paragraph 2 of the Supplementary Contract which provides as follows:

2. Notwithstanding his claim against the insurers the employee hereby expressly waives all claims of his own or his heirs for compensation of damages due to death or permanent invalidity which he suffered during his engagement against the employers ... unless his

death or permanent invalidity has been caused by willful act of any of the above-named persons. 9
Petitioners stress that while public respondents upheld the applicability of said supplementary contract insofar as it increased the benefits to private respondent, public respondents considered the provision on the waiver against all claims by private respondent to be contrary to public policy. In its questioned decision dated December 7, 1987, the respondent NLRC made the following disquisition: The focal issue for determination is the validity and enforceability of the second contract of employment entered into by and between complainant and respondents on board the vessel where the former had served as a member of its complement despite the absence of NSB verification or approval. With respect to the findings of facts in the appealed decision, We consider the same as duly supported by substantial evidence and the admissions of the parties in their pleadings. Much stress and emphasis are made by the respondents in their appeal that this claim has no legal basis or footing inasmuch as the second contract of employment containing a total disability insurance benefit of US $ 50,000.00, much more than that embodied in the first contract of employment which was approved by the defunct NSB, was not verified or approved by the latter. Accordingly, the respondents posit the argument that subject claim may not prosper pursuant to the provisions of Art. 34(i) of the Labor Code, as amended, which provides that it shall be unlawful for any individual, entity, licensee, or holder of authority '(T)o substitute or alter employment contracts approved and verified by the Department of Labor from the time of actual signing thereof by the parties up to and including the period of expiration of the same without the approval of the Department of Labor. Did the POEA commit a reversible error when it considered the second contract of employment as valid sans any verification or approval thereof by the NSB? Our answer to this query is in the negative. Apparently, the intention of the law when Art. 34 of the Labor Code was enacted is to provide for the prohibited and unlawful practices relative to recruitment and placement. As shown in the 'Explanatory Note' of Parliamentary Bill No. 4531, pertaining to Art. 34 (supra), thus: Many of the provisions are already existing and were simply restated. Some however were restated with modifications and new ones were introduced to reflect what in the past have been noted to be pernicious practices which tend to place workers at a disadvantage.'

it is indubitably clear that the purpose of having overseas contracts of employment approved by the NSB(POEA) is whether or not such contracts conform to the minimum terms and conditions prescribed by the NSB (POEA). In other words, the law did not at all prohibit any alteration which provided for increases in wages or other benefits voluntarily granted by the employer. Precisely, under Section 2, Rule 1, Book V of the Rules and Regulations of the POEA, '(t)he standard format of employment contracts shall set the minimum standards of the terms and conditions of employment. All employers and principals shall adopt the model contract in connection with the hiring of workers without prejudice to their adopting other terms and conditions of employment over and above the minimum standards of the Administration.' Where, as here, it is admitted that the second contract although not verified or approved by the NSB (POEA) granted more benefits by way of total disability insurance to the complainant, the respondents may not be allowed to disvow their own voluntary acts by insisting that such beneficial contract in favor of the seaman is null and void. (Emphasis supplied.) 10
We agree.

The supplementary contract of employment was entered into between petitioner and private respondent to modify the original contract of employment The reason why the law requires that the POEA should approve and verify a contract under Article 34(i) of the Labor Code is to insure that the employee shall not thereby be placed in a disadvantageous position and that the same are within the minimum standards of the terms and conditions of such employment contract set by the POEA. This is why a standard format for employment contracts has been adopted by the Department of Labor. However, there is no prohibition against stipulating in a contract more benefits to the employee than those required by law. Thus, in this case wherein a "supplementary contract" was entered into affording greater benefits to the employee than the previous one, and although the same was not submitted for the approval of the POEA, the public respondents properly considered said contract to be valid and enforceable. Indeed, said pronouncements of public respondents have the effect of an approval of said contract. Moreover, as said contract was voluntarily entered into by the parties the same is binding between them. 11 Not being contrary to law, morals, good customs, public policy or public order, its validity must be sustained. 12 By the same token, the court sustains the ruling of public respondents that the provision in the supplementary contract whereby private respondent waives any claim against petitioners for damages arising from death or permanent disability is against public policy, oppressive and inimical to the rights of private respondent. The said provision defeats and is inconsistent with the duty of petitioners to insure private respondent against said contingencies as clearly stipulated in the said contract. Petitioners however argue that they could not have entered into said supplementary contract of employment as Philimare was a mere manning agent in the Philippines of the shipping company managed by Navales Shipping Management and Marine Consultant (Pte) Ltd., its principal. Petitioners assert that the said supplementary contract was entered into by private respondent with their principal, Navales Shipping Management and Marine Consultant (Pte) Ltd. on board the vessel Turtle Bay so petitioners cannot be held responsible thereunder. This Court is not a trier of facts and the findings of the public respondents are conclusive in this proceeding. Public respondents found that petitioner Philimare and private respondent entered into said supplementary contract of employment on December 6, 1982. Assuming for the sake of argument that it was petitioners' principal which entered into said contract with private respondent, nevertheless petitioner, as its manning agent in the Philippines, is jointly responsible with its principal thereunder. 13 There is no question that under the said supplementary contract of employment, it is the duty of the employer, petitioners herein, to insure the employee, during his engagement, against death and permanent invalidity caused by accident on board up to $ 50,000.00. Consequently, it is also its concomitant obligation to see to it that the claim against the insurance company is duly filed by private respondent or in his behalf, and within the time provided for by the terms of the insurance contract. In this case, the private respondent met the accident on October 6, 1983. Since then, he was hospitalized at the Suez Canal Authority Hospital and thereafter be was repatriated to the Philippines wherein he was also hospitalized from October 22, 1983 to March 27, 1984. It was only on August 19, 1985 that he was issued a medical certificate describing his disability to be permanent in nature. It was not possible for private respondent to file a claim for permanent disability with the insurance company within the one-year period from the time of the injury, as his disability was ascertained to be permanent only thereafter. Petitioners did not exert any effort to assist private respondent to recover payment of his claim from the insurance company. They did not even care to dispute the finding of the insurer that the claim was not flied on time. 14 Petitioners must, therefore, be held responsible for its omission, if not negligence, by requiring them to pay the claim of private respondent. The Court finds that the respondent NLRC did not commit a grave abuse of discretion in denying petitioners, motion for leave to file third-party complaint and substitution inclusion of party respondent. Such motion is largely addressed to the discretion of the said Commission. Inasmuch as the alleged transfer of interest took place only after the POEA had rendered its decision, the denial of the motion so as to avoid further delay in the settlement of the claim of private respondent was well-taken. At any rate, petitioners may pursue their claim against their alleged successor-in-interest in a separate suit. WHEREFORE, the petition is hereby DISMISSED for lack of merit and the temporary restraining order issued by this Court on March 21, 1988 is hereby LIFTED. No costs. This decision is immediately executory.

SO ORDERED.

MITSUI O.S.K. LINES LTD., represented by MAGSAYSAY AGENCIES, INC., petitioner, vs. COURT OF APPEALS and LAVINE LOUNGEWEAR MFG. CORP., respondents. DECISION
MENDOZA, J.:

This is a petition for review on certiorari of the January 25, 1995 decision of the Court of Appeals[1] and its resolution of March 22, 1995 denying petitioners motion for reconsideration. The appellate court upheld orders of Branch 68 (Pasig) of the Regional Trial Court, National Capital Judicial Region, denying petitioners motion to dismiss in the original action filed against petitioner by private respondent. The facts are not in dispute.[2] Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage through Meister Transport, Inc., an international freight forwarder, with private respondent Lavine Loungewear Manufacturing Corporation to transport goods of the latter from Manila to Le Havre, France. Petitioner undertook to deliver the goods to France 28 days from initial loading. On July 24, 1991, petitioners vessel loaded private respondents container van for carriage at the said port of origin. However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with the result that the shipment arrived in Le Havre only on November 14, 1991. The consignee allegedly paid only half the value of the said goods on the ground that they did not arrive in France until the off season in that country. The remaining half was allegedly charged to the account of private respondent which in turn demanded payment from petitioner through its agent. As petitioner denied private respondents claim, the latter filed a case in the Regional Trial Court on April 14, 1992. In the original complaint, private respondent impleaded as defendants Meister Transport, Inc. and Magsaysay Agencies, Inc., the latter as agent of petitioner Mitsui O.S.K. Lines Ltd. On May 20, 1993, it amended its complaint by impleading petitioner as defendant in lieu of its agent. The parties to the case thus became private respondent as plaintiff, on one side, and Meister Transport Inc. and petitioner Mitsui O.S.K. Lines Ltd. as represented by Magsaysay Agencies, Inc., as defendants on the other. Petitioner filed a motion to dismiss alleging that the claim against it had prescribed under the Carriage of Goods by Sea Act. The Regional Trial Court, as aforesaid, denied petitioners motion as well as its subsequent motion for reconsideration. On petition for certiorari, the Court of Appeals sustained the trial courts orders. Hence this petition containing one assignment of error:

THE RESPONDENT COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN RULING THAT PRIVATE RESPONDENTS AMENDED COMPLAINT IS (sic) NOT PRESCRIBED PURSUANT TO SECTION 3(6) OF THE CARRIAGE OF GOODS BY SEA ACT.
The issue raised by the instant petition is whether private respondents action is for loss or damage to goods shipped, within the meaning of 3(6) of the Carriage of Goods by Sea Act (COGSA). Section 3 provides:

(6) Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or his agent at the port of discharge or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the loss or damage is not apparent, the notice must be given within three days of the delivery. Said notice of loss or damage may be endorsed upon the receipt for the goods given by the person taking delivery thereof. The notice in writing need not be given if the state of the goods has at the time of their receipt been the subject of joint survey or inspection. In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered: Provided, that, if a notice of loss or damage, either apparent or concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered. In the case of any actual or apprehended loss or damage, the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods.
In Ang v. American Steamship Agencies, Inc., the question was whether an action for the value of goods which had been delivered to a party other than the consignee is for loss or damage within the meaning of 3(6) of the COGSA. It was held that there was no loss because the goods had simply been misdelivered. Loss refers to the deterioration or disappearance of goods.[3]

As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, loss contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such a way that their existence is unknown or they cannot be recovered.[4]
Conformably with this concept of what constitutes loss or damage, this Court held in another case[5] that the deterioration of goods due to delay in their transportation constitutes loss or damage within the meaning of 3(6), so that as suit was not brought within one year the action was barred:

Whatever damage or injury is suffered by the goods while in transit would result in loss or damage to either the shipper or the consignee. As long as it is claimed, therefore, as it is done here, that the losses or damages suffered by the shipper or consignee were due to the arrival of the goods in damaged or deteriorated condition, the action is still basically one for damage to the goods, and must be filed within the period of one year from delivery or receipt, under the above-quoted provision of the Carriage of Goods by Sea Act.[6]
But the Court allowed that

There would be some merit in appellants insistence that the damages suffered by him as a result of the delay in the shipment of his cargo are not covered by the prescriptive provision of the Carriage of Goods by Sea Act above referred to, if such damages were due, not to the deterioration and decay of the goods while in transit, but to other causes independent of the condition of the cargo upon arrival, like a drop in their market value. . . .[7]
The rationale behind limiting the said definitions to such parameters is not hard to find or fathom. As this Court held in Ang:

Said one-year period of limitation is designed to meet the exigencies of maritime hazards. In a case where the goods shipped were neither lost nor damaged in transit but were, on the contrary, delivered in port to someone who claimed to be entitled thereto, the situation is different, and the special need for the short period of limitation in cases of loss or damage caused by maritime perils does not obtain.[8]
In the case at bar, there is neither deterioration nor disappearance nor destruction of goods caused by the carriers breach of contract. Whatever reduction there may have been in the value of the goods is not due to their deterioration or disappearance because they had been damaged in transit. Petitioner contends:

Although we agree that there are places in the section (Article III) in which the phrase need have no broader meaning than loss or physical damage to the goods, we disagree with the conclusion that it must so be limited wherever it is used. We take it that the phrase has a uniform meaning, not merely in Section 3, but throughout the Act; and there are a number of places in which the restricted interpretation suggested would be inappropriate. For example Section 4(2) [Article IV(2) (sic) exempts exempts (sic) the carrier, the ship (sic), from liability loss or damage (sic)resulting from certain courses beyond their control.[9]
Indeed, what is in issue in this petition is not the liability of petitioner for its handling of goods as provided by 3(6) of the COGSA, but its liability under its contract of carriage with private respondent as covered by laws of more general application. Precisely, the question before the trial court is not the particular sense of damages as it refers to the physical loss or damage of a shippers goods as specifically covered by 3(6) of COGSA but petitioners potential liability for the damages it has caused in the general sense and, as such, the matter is governed by the Civil Code, the Code of Commerce and COGSA, for the breach of its contract of carriage with private respondent. We conclude by holding that as the suit below is not for loss or damage to goods contemplated in 3(6), the question of prescription of action is governed not by the COGSA but by Art. 1144 of the Civil Code which provides for a prescriptive period of ten years. WHEREFORE, the decision of the Court of Appeals is AFFIRMED. SO ORDERED.
G.R. No. L-18924 October 19, 1922

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellant, vs. WONG CHENG (alias WONG CHUN), defendant-appellee. Attorney-General Villa-Real for appellant. Eduardo Gutierrez Repide for appellee. ROMUALDEZ, J.: In this appeal the Attorney-General urges the revocation of the order of the Court of First Instance of Manila, sustaining the demurrer presented by the defendant to the information that initiated this case and in which the appellee is accused of having illegally smoked opium, aboard the merchant vessel Changsa of English nationality while said vessel was anchored in Manila Bay two and a half miles from the shores of the city. The demurrer alleged lack of jurisdiction on the part of the lower court, which so held and dismissed the case.

The question that presents itself for our consideration is whether such ruling is erroneous or not; and it will or will not be erroneous according as said court has or has no jurisdiction over said offense. The point at issue is whether the courts of the Philippines have jurisdiction over crime, like the one herein involved, committed aboard merchant vessels anchored in our jurisdiction waters.
1aw ph!l.net

There are two fundamental rules on this particular matter in connection with International Law; to wit, the French rule, according to which crimes committed aboard a foreign merchant vessels should not be prosecuted in the courts of the country within whose territorial jurisdiction they were committed, unless their commission affects the peace and security of the territory; and the English rule, based on the territorial principle and followed in the United States, according to which, crimes perpetrated under such circumstances are in general triable in the courts of the country within territory they were committed. Of this two rules, it is the last one that obtains in this jurisdiction, because at present the theories and jurisprudence prevailing in the United States on this matter are authority in the Philippines which is now a territory of the United States. In the cases of The Schooner Exchange vs. M'Faddon and Others (7 Cranch [U. S.], 116), Chief Justice Marshall said: . . . When merchant vessels enter for the purposes of trade, it would be obviously inconvenient and dangerous to society, and would subject the laws to continual infraction, and the government to degradation, if such individuals or merchants did not owe temporary and local allegiance, and were not amenable to the jurisdiction of the country. . . . In United States vs. Bull (15 Phil., 7), this court held: . . . No court of the Philippine Islands had jurisdiction over an offense or crime committed on the high seas or within the territorial waters of any other country, but when she came within three miles of a line drawn from the headlands, which embrace the entrance to Manila Bay, she was within territorial waters, and a new set of principles became applicable. (Wheaton, International Law [Dana ed.], p. 255, note 105; Bonfils, Le Droit Int., secs. 490 et seq.; Latour, La Mer Ter., ch. 1.) The ship and her crew were then subject to the jurisdiction of the territorial sovereign subject to such limitations as have been conceded by that sovereignty through the proper political agency. . . . It is true that in certain cases the comity of nations is observed, as in Mali and Wildenhus vs. Keeper of the Common Jail (120 U.., 1), wherein it was said that: . . . The principle which governs the whole matter is this: Disorder which disturb only the peace of the ship or those on board are to be dealt with exclusively by the sovereignty of the home of the ship, but those which disturb the public peace may be suppressed, and, if need be, the offenders punished by the proper authorities of the local jurisdiction. It may not be easy at all times to determine which of the two jurisdictions a particular act of disorder belongs. Much will undoubtedly depend on the attending circumstances of the particular case, but all must concede that felonious homicide is a subject for the local jurisdiction, and that if the proper authorities are proceeding with the case in the regular way the consul has no right to interfere to prevent it. Hence in United States vs. Look Chaw (18 Phil., 573), this court held that: Although the mere possession of an article of prohibited use in the Philippine Islands, aboard a foreign vessel in transit in any local port, does not, as a general rule, constitute a crime triable by the courts of the Islands, such vessels being considered as an extension of its own nationality, the same rule does not apply when the article, the use of which is prohibited in the Islands, is landed from the vessels upon Philippine soil; in such a case an open violation of the laws of the land is committed with respect to which, as it is a violation of the penal law in force at the place of the commission of the crime, no court other than that established in the said place has jurisdiction of the offense, in the absence of an agreement under an international treaty.

As to whether the United States has ever consented by treaty or otherwise to renouncing such jurisdiction or a part thereof, we find nothing to this effect so far as England is concerned, to which nation the ship where the crime in question was committed belongs. Besides, in his work "Treaties, Conventions, etc.," volume 1, page 625, Malloy says the following: There shall be between the territories of the United States of America, and all the territories of His Britanic Majesty in Europe, a reciprocal liberty of commerce. The inhabitants of the two countries, respectively, shall have liberty freely and securely to come with their ships and cargoes to all such places, ports and rivers, in the territories aforesaid, to which other foreigners are permitted to come, to enter into the same, and to remain and reside in any parts of the said territories, respectively; also to hire and occupy houses and warehouses for the purposes of their commerce; and, generally, the merchants and traders of each nation respectively shall enjoy the most complete protection and security for their commerce, but subject always to the laws and statutes of the two countries, respectively. (Art. 1, Commerce and Navigation Convention.) We have seen that the mere possession of opium aboard a foreign vessel in transit was held by this court not triable by or courts, because it being the primary object of our Opium Law to protect the inhabitants of the Philippines against the disastrous effects entailed by the use of this drug, its mere possession in such a ship, without being used in our territory, does not being about in the said territory those effects that our statute contemplates avoiding. Hence such a mere possession is not considered a disturbance of the public order. But to smoke opium within our territorial limits, even though aboard a foreign merchant ship, is certainly a breach of the public order here established, because it causes such drug to produce its pernicious effects within our territory. It seriously contravenes the purpose that our Legislature has in mind in enacting the aforesaid repressive statute. Moreover, as the Attorney-General aptly observes: . . . The idea of a person smoking opium securely on board a foreign vessel at anchor in the port of Manila in open defiance of the local authorities, who are impotent to lay hands on him, is simply subversive of public order. It requires no unusual stretch of the imagination to conceive that a foreign ship may come into the port of Manila and allow or solicit Chinese residents to smoke opium on board. The order appealed from is revoked and the cause ordered remanded to the court of origin for further proceedings in accordance with law, without special findings as to costs. So ordered. Araullo, C.J., Street, Malcolm, Avancea, Villamor, Ostrand and Johns, JJ., concur.

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. ROGER P. TULIN, VIRGILIO I. LOYOLA, CECILIO O. CHANGCO, ANDRES C. INFANTE, CHEONG SAN HIONG, and JOHN DOES, accusedappellants. DECISION
MELO, J.:

This is one of the older cases which unfortunately has remained in docket of the Court for sometime. It was reassigned, together with other similar cases, to undersigned ponente in pursuance of A.M. No. 00-9-03-SC dated February 27, 2001. In the evening of March 2, 1991, M/T Tabangao, a cargo vessel owned by the PNOC Shipping and Transport Corporation, loaded with 2,000 barrels of kerosene, 2,600 barrels of regular gasoline, and 40,000 barrels of diesel oil, with a total value of P40,426,793,87. was sailing off the coast of Mindoro near Silonay Island.

The vessel, manned by 21 crew members, including Captain Edilberto Libo-on, Second Mate Christian Torralba, and Operator Isaias Ervas, was suddenly boarded, with the use of an aluminum ladder, by seven fully armed pirates led by Emilio Changco, older brother of accusedappellant Cecilio Changco. The pirates, including accused-appellants Tulin, Loyola, and Infante, Jr. were armed with M-16 rifles, .45 and .38 caliber handguns, and bolos. They detained the crew and took complete control of the vessel. Thereafter, accused-appellant Loyola ordered three crew members to paint over, using black paint, the name "M/T Tabangao" on the front and rear portions of the vessel, as well as the PNOC logo on the chimney of the vessel. The vessel was then painted with the name "Galilee," with registry at San Lorenzo, Honduras. The crew was forced to sail to Singapore, all the while sending misleading radio messages to PNOC that the ship was undergoing repairs. PNOC, after losing radio contact with the vessel, reported the disappearance of the vessel to the Philippine Coast Guard and secured the assistance of the Philippine Air Force and the Philippine Navy. However, search and rescue operations yielded negative results. On March 9, 1991, the ship arrived in the vicinity of Singapore and cruised around the area presumably to await another vessel which, however, failed to arrive. The pirates were thus forced to return to the Philippines on March 14, 1991, arriving at Calatagan, Batangas on March 20, 1991 where it remained at sea. On March 28, 1991, the "M/T Tabangao" again sailed to and anchored about 10 to 18 nautical miles from Singapore's shoreline where another vessel called "Navi Pride" anchored beside it. Emilio Changco ordered the crew of "M/T Tabangao" to transfer the vessel's cargo to the hold of "Navi Pride". Accused-appellant Cheong San Hiong supervised the crew of "Navi Pride" in receiving the cargo. The transfer, after an interruption, with both vessels leaving the area, was completed on March 30,1991. On March 30, 1991, "M/T Tabangao" returned to the same area and completed the transfer of cargo to "Navi Pride." On April 8, 1991, "M/T Tabangao" arrived at Calatagan, Batangas, but the vessel remained at sea. On April 10, 1991, the members of the crew were released in three batches with the stern warning not to report the incident to government authorities for a period of two days or until April 12, 1991, otherwise they would be killed. The first batch was fetched from the shoreline by a newly painted passenger jeep driven by accused-appellant Cecilio Changco, brother of Emilio Changco, who brought them to Imus, Cavite and gave P20,000.00 to Captain Libo-on for fare of the crew in proceeding to their respective homes. The second batch was fetched by accused-appellant Changco at midnight of April 10, 1991 and were brought to different places in Metro Manila. On April 12, 1991, the Chief Engineer, accompanied by the members of the crew, called the PNOC Shipping and Transport Corporation office to report the incident. The crew members were brought to the Coast Guard Office for investigation. The incident was also reported to the National Bureau of Investigation where the officers and members of the crew executed sworn statements regarding the incident. A series of arrests was thereafter effected as follows:

a. On May 19, 1991, the NBI received verified information that the pirates were present at U.K. Beach, Balibago, Calatagan, Batangas. After three days of surveillance, accused-appellant Tulin was arrested and brought to the NBI headquarters in Manila. b. Accused-appellants Infante, Jr. and Loyola were arrested by chance at Aguinaldo Hi-way by NBI agents as the latter were pursuing the mastermind, who managed to evade arrest. c. On May 20, 1991, accused-appellants Hiong and Changco were arrested at the lobby of Alpha Hotel in Batangas City. On October 24 1991, an Information charging qualified piracy or violation of Presidential Decree No. 532 (piracy in Philippine Waters) was filed against accused-appellants, as follows:

The undersigned State Prosecutor accuses ROGER P. TULIN, VIRGILIO I. LOYOLA, CECILIO O. CHANGCO, ANDRES C. INFANTE, and CHEONG SAN HIONG, and nine (9) other JOHN DOES of qualified piracy (Violation of P.D. No. 532), committed as follows: That on or about and during the period from March 2 to April 10, 1991, both dates inclusive, and for sometime prior and subsequent thereto, and within the jurisdiction of this Honorable Court, the said accused, then manning a motor launch and armed with high powered guns, conspiring and confederating together and mutually helping one another, did then and there, wilfully, unlawfully and feloniously fire upon, board and seize while in the Philippine waters M/T PNOC TABANGCO loaded with petroleum products, together with the complement and crew members, employing violence against or intimidation of persons or force upon things, then direct the vessel to proceed to Singapore where the cargoes were unloaded and thereafter returned to the Philippines on April 10, 1991, in violation of the aforesaid law. CONTRARY TO LAW. (pp. 119-20, Rollo.)
This was docketed as Criminal Case No. 91-94896 before Branch 49 of the Regional Trial Court of the National Capital Judicial Region stationed in Manila. Upon arraignment, accusedappellants pleaded not guilty to the charge. Trial thereupon ensued. Accused-appellants Tulin, Infante, Jr., and Loyola, notwithstanding some inconsistencies in their testimony as to where they were on March 1, 1991, maintained the defense of denial, and disputed the charge, as well as the transfer of any cargo from "M/T Tabangao" to the "Navi Pride." All of them claimed having their own respective sources of livelihood. Their story is to the effect that on March 2, 1991, while they were conversing by the beach, a red speedboat with Captain Edilberto Liboon and Second Mate Christian Torralba on board, approached the seashore. Captain Liboon inquired from the three if they wanted to work in a vessel. They were told that the work was light and that each worker was to be paid P3,000.00 a month with additional compensation if they worked beyond that period. They agreed even though they had

no sea-going experience. On board, they cooked, cleaned the vessel, prepared coffee, and ran errands for the officers. They denied having gone to Singapore, claiming that the vessel only went to Batangas. Upon arrival thereat in the morning of March 21, 1991, they were paid P1,000.00 each as salary for nineteen days of work, and were told that the balance would be remitted to their addresses. There was neither receipt nor contracts of employment signed by the parties. Accused-appellant Changco categorically denied the charge, averring that he was at home sleeping on April 10, 1991. He testified that he is the younger brother of Emilio Changco, Jr. Accused-appellant Cheong San Hiong, also known as Ramzan Ali, adduced evidence that he studied in Sydney, Australia, obtaining the "Certificate" as Chief Officer, and later completed the course as a "Master" of a vessel, working as such for two years on board a vessel. He was employed at Navi Marine Services, Pte., Ltd. as Port Captain. The company was engaged in the business of trading petroleum, including shipoil, bunker lube oil, and petroleum to domestic and international markets. It owned four vessels, one of which was "Navi Pride." On March 2, 1991, the day before "M/T Tabangao" was seized by Emilio Changco and his cohorts, Hiong's name was listed in the company's letter to the Mercantile Section of the Maritime Department of the Singapore government as the radio telephone operator on board the vessel "Ching Ma." The company was then dealing for the first time with Paul Gan, a Singaporean broker, who offered to sell to the former bunker oil for the amount of 300,000.00 Singapore dollars. After the company paid over one-half of the aforesaid amount to Paul Gan, the latter, together with Joseph Ng, Operations Superintendent of the firm, proceeded to the high seas on board "Navi Pride" but failed to locate the contact vessel. The transaction with Paul Gan finally pushed through on March 27, 1991. Hiong, upon his return on board the vessel "Ching Ma," was assigned to supervise a ship-to-ship transfer of diesel oil off the port of Singapore, the contact vessel to be designated by Paul Gan. Hiong was ordered to ascertain the quantity and quality of the oil and was given the amount of 300,000.00 Singapore Dollars for the purchase. Hiong, together with Paul Gan, and the surveyor William Yao, on board "Navi Pride" sailed toward a vessel called "M/T Galilee". Hiong was told that "M/T Galilee" would be making the transfer. Although no inspection of "Navi Pride" was made by the port authorities before departure, Navi Marine Services, Pte., Ltd. was able to procure a port clearance upon submission of General Declaration and crew list. Hiong, Paul Gan, and the brokers were not in the crew list submitted and did not pass through the immigration. The General Declaration falsely reflected that the vessel carried 11,900 tons. On March 28, 1991, "Navi Pride" reached the location of "M/T Galilee". The brokers then told the Captain of the vessel to ship-side with "M/T Galilee" and then transfer of the oil transpired. Hiong and the surveyor William Yao met the Captain of "M/T Galilee," called "Captain Bobby" (who later turned out to be Emilio Changco). Hiong claimed that he did not ask for the full name of Changco nor did he ask for the latter's personal card. Upon completion of the transfer, Hiong took the soundings of the tanks in the "Navi Pride" and took samples of the cargo. The surveyor prepared the survey report which "Captain Bobby" signed under the name "Roberto Castillo." Hiong then handed the payment to Paul Gan and

William Yao. Upon arrival at Singapore in the morning of March 29, 1991, Hiong reported the quantity and quality of the cargo to the company. Thereafter, Hiong was again asked to supervise another transfer of oil purchased by the firm " from "M/T Galilee" to "Navi Pride." The same procedure as in the first transfer was observed. This time, Hiong was told that that there were food and drinks, including beer, purchased by the company for the crew of "M/T Galilee. The transfer took ten hours and was completed on March 30, 1991. Paul Gan was paid in full for the transfer. On April 29 or 30, 1991, Emilio Changco intimated to Hiong that he had four vessels and wanted to offer its cargo to cargo operators. Hiong was asked to act as a broker or ship agent for the sale of the cargo in Singapore. Hiong went to the Philippines to discuss the matter with Emilio Changco, who laid out the details of the new transfer, this time with "M/T Polaris" as contact vessel. Hiong was told that the vessel was scheduled to arrive at the port of Batangas that weekend. After being billeted at Alpha Hotel in Batangas City, where Hiong checked in under the name "SONNY CSH." A person by the name of "KEVIN OCAMPO," who later turned out to be Emilio Changco himself, also checked in at Alpha Hotel. From accused-appellant Cecilio Changco, Hiong found out that the vessel was not arriving. Hiong was thereafter arrested by NBI agents. After trial, a 95-page decision was rendered convicting accused-appellants of the crime charged. The dispositive portion of said decision reads:

WHEREFORE, in the light of the foregoing considerations, judgment is hereby rendered by this Court finding the accused Roger Tulin, Virgilio Loyola, Andres Infante, Jr. and Cecilio Changco guilty beyond reasonable doubt, as principals, of the crime of piracy in Philippine Waters defined in Section 2(d) of Presidential Decree No. 532 and the accused Cheong San Hiong, as accomplice, to said crime. Under Section 3(a) of the said law, the penalty for the principals of said crime is mandatory death. However, considering that, under the 1987 Constitution, the Court cannot impose the death penalty, the accused Roger Tulin, Virgilio Loyola, Andres Infante, ]r., and Cecilio Changco are hereby each meted the penalty of RECLUSION PERPETUA, with all the accessory penalties of the law. The accused Cheong San Hiong is hereby meted the penalty of RECLUSION PERPETUA, pursuant to Article 52 of the Revised Penal Code in relation to Section 5 of PD 532. The accused Roger Tulin, Virgilio Loyola, Andres Infante, Jr. and Cecilio Changco are hereby ordered to return to the PNOC Shipping and Transport Corporation the "M/T Tabangao" or if the accused can no longer return the same, the said accused are hereby ordered to remit, jointly and severally, to said corporation the value thereof in the amount of P11,240,000.00 Philippine Currency, with interests thereon, at the rate of 6% per annum from March 2, 1991 until the said amount is paid in full. All the accused including Cheong San Hiong are hereby ordered to return to the Caltex Philippines, Inc. the cargo of the "M/T Tabangao", or if the accused can no longer return the said cargo to said corporation, all the accused are hereby condemned to pay, jointly and severally, to the Caltex Refinery, Inc., the value of said cargo in the amount of

P40,426,793.87, Philippine Currency plus interests until said amount is paid in full. After the accused Cheong San Hiong has served his sentence, he shall be deported to Singapore. All the accused shall be credited for the full period of their detention at the National Bureau of Investigation and the City Jail of Manila during the pendency of this case provided that they agreed in writing to abide by and comply strictly with the rules and regulations of the City Jail of Manila and the National Bureau of Investigation. With costs against all the accused. SO ORDERED. (pp. 149-150, Rollo.)
The matter was then elevated to this Court. The arguments of accused-appellants may be summarized as follows:

Roger P. Tulin Virgilio Loyola Andres C. Infante Jr., and Cecilio O. Changco Accused-appellants Tulin, Loyola, Infante, Jr., and Cecilio Changco assert that the trial court erred in allowing them to adopt the proceedings taken during the time they were being represented by Mr. Tomas Posadas, a non-lawyer, thereby depriving them of their constitutional right to procedural due process. In this regard, said accused-appellants narrate that Mr. Posadas entered his appearance as counsel for all of them. However, in the course of the proceedings, or on February 11, 1992, the trial court discovered that Mr. Posadas was not a member of the Philippine Bar. This was after Mr. Posadas had presented and examined seven witnesses for the accused. Further, accused-appellants Tulin, Loyola, Infante, Cecilio, Changco uniformly contend that during the custodial investigation, they were subjected to physical violence; were forced to sign statements without being given the opportunity to read the contents of the same; were denied assistance of counsel, and were not informed of their rights, in violation of their constitutional rights, Said accused-appellants also argue that the trial court erred in finding that the prosecution proved beyond reasonable doubt that they committed the crime of qualified piracy. They allege that the pirates were outnumbered by the crew who totaled 22 and who were not guarded at all times. The crew, so these accused-appellants conclude, could have overpowered the alleged pirates.

Cheong San Hiong

In his brief, Cheong argues that: (1) Republic Act No. 7659 in effect obliterated the crime committed by him; (2) the trial court erred in declaring that the burden is lodged on him to prove by clear and convincing evidence that he had no knowledge that Emilio Changco and his cohorts attacked and seized the "M/T Tabangao" and/or that the cargo of the vessel was stolen or the subject of theft or robbery or piracy; (3) the trial court erred in finding him guilty as an accomplice to the crime of qualified piracy under Section 4 of Presidential Decree No. 532 (Anti-Piracy and Anti-Robbery Law of 1974); (4) the trial court erred in convicting and punishing him as an accomplice when the acts allegedly committed by him were done or executed outside of Philippine waters and territory, stripping the Philippine courts of jurisdiction to hold him for trial, to convict, and sentence; (5) the trial court erred in making factual conclusions without evidence on record to prove the same and which in fact are contrary to the evidence adduced during trial; (6) the trial court erred in convicting him as an accomplice under Section 4 of Presidential Decree No. 532 when he was charged as a principal by direct participation under said decree, thus violating his constitutional right to be informed of the nature and cause of the accusation against him. Cheong also posits that the evidence against the other accused-appellants do not prove any participation on his part in the commission of the crime of qualified piracy. He further argues that he had not in any way participated in the seajacking of "M/T Tabangao" and in committing the crime of qualified piracy, and that he was not aware that the vessel and its cargo were pirated. As legal basis for his appeal, he explains that he was charged under the information with qualified piracy as principal under Section 2 of Presidential Decree No. 532 which refers to Philippine waters. In the case at bar, he argues that he was convicted for acts done outside Philippine waters or territory. For the State to have criminal jurisdiction, the act must have been committed within its territory. We affirm the conviction of all the accused-appellants. The issues of the instant case may be summarized as follows: (1) what are the legal effects and implications of the fact that a non-lawyer represented accused-appellants during the trial?; (2) what are the legal effects and implications of the absence of counsel during the custodial investigation?; (3) did the trial court err in finding that the prosecution was able to prove beyond reasonable doubt that accused-appellants committed the crime of qualified piracy?; (4) did Republic Act No. 7659 obliterate the crime committed by accused-appellant Cheong?; and (5) can accused-appellant Cheong be convicted as accomplice when he was not charged as such and when the acts allegedly committed by him were done or executed outside Philippine waters and territory? On the first issue, the record reveals that a manifestation (Exhibit "20", Record) was executed by accused-appellants Tulin, Loyola, Changco, and Infante, Jr. on February 11, 1991, stating that they were adopting the evidence adduced when they were represented by a nonlawyer. Such waiver of the right to sufficient representation during the trial as covered by the due process clause shall only be valid if made with the full assistance of a bona fide lawyer. During the trial, accused-appellants, as represented by Atty. Abdul Basar, made a categorical manifestation that said accused-appellants were apprised of the nature and legal consequences of the subject manifestation, and that they voluntarily and intelligently executed the same. They also affirmed the truthfulness of its contents when asked in open court (tsn, February 11, 1992, pp. 7-59). It is true that an accused person shall be entitled to be present and to defend himself in

person and by counsel at every stage of the proceedings, from arraignment to promulgation of judgment (Section 1, Rule 115, Revised Rules of Criminal Procedure). This is hinged on the fact that a layman is not versed on the technicalities of trial. However, it is also provided by law that "[r]ights may be waived, unless the waiver is contrary to law, public order, public policy, morals, or good customs or prejudicial to a third person with right recognized by law." (Article 6, Civil Code of the Philippines). Thus, the same section of Rule 115 adds that "[u]pon motion, the accused may be allowed to defend himself in person when it sufficiently appears to the court that he can properly protect his rights without the assistance of counsel." By analogy , but without prejudice to the sanctions imposed by law for the illegal practice of law, it is amply shown that the rights of accused-appellants were sufficiently and properly protected by the appearance of Mr. Tomas Posadas. An examination of the record will show that he knew the technical rules of procedure. Hence, we rule that there was a valid waiver of the right to sufficient representation during the trial, considering that it was unequivocally, knowingly, and intelligently made and with the full assistance of a bona fide lawyer, Atty. Abdul Basar. Accordingly, denial of due process cannot be successfully invoked where a valid waiver of rights has been made (People vs. Serzo, 274 SCRA 553 [1997]; Sayson vs. People, 166 SCRA 680 [1988]). However, we must quickly add that the right to counsel during custodial investigation may not be waived except in writing and in the presence of counsel. Section 12, Article III of the Constitution reads:

SEC. 12. (1) Any person under investigation for the commission of an offense shall have the right to be informed of his right to remain silent and to have competent and independent counsel preferably of his own choice. If the person cannot afford the services of counsel, he must be provided with one. These rights cannot be waived except in writing and in the presence of counsel. (2) No torture, force, violence, threat, intimidation, or any other means which vitiate the free will shall be used against him. Secret detention places, solitary, incommunicado, or other similar forms of detention are prohibited. (3) Any confession or admission obtained in violation of this or Section 17 hereof shall be inadmissible in evidence against him. (4) The law shall provide for penal and civil sanctions for violations of this section as well as compensation to and rehabilitation of victims of torture or similar practices, and their families.
Such rights originated from Miranda v. Arizona (384 U. S. 436 [1966]) which gave birth to the so-called Miranda doctrine which is to the effect that prior to any questioning during custodial investigation, the person must be warned that he has a right to remain silent, that any statement he gives may be used as evidence against him, and that he has the right to the presence of an attorney, either retained or appointed. The defendant may waive effectuation of these rights, provided the waiver is made voluntarily, knowingly, and intelligently. The Constitution

even adds the more stringent requirement that the waiver must be in writing and made in the presence of counsel. Saliently, the absence of counsel during the execution of the so-called confessions of the accused-appellants make them invalid. In fact, the very basic reading of the Miranda rights was not even shown in the case at bar. Paragraph [3] of the aforestated Section 12 sets forth the socalled "fruit from the poisonous tree doctrine," a phrase minted by Mr. Justice Felix Frankfurter in the celebrated case of Nardone vs. United States (308 U.S. 388 [1939]). According to this rule, once the primary source (the "tree") is shown to have been unlawfully obtained, any secondary or derivative evidence (the "fruit") derived from it is also inadmissible. The rule is based on the principle that evidence illegally obtained by the State should not be used to gain other evidence because the originally illegally obtained evidence taints all evidence subsequently obtained (People vs. Alicando, 251 SCRA 293 [1995]). Thus, in this case, the uncounselled extrajudicial confessions of accused-appellants, without a valid waiver of the right to counsel, are inadmissible and whatever information is derived therefrom shall be regarded as likewise inadmissible in evidence against them. However, regardless of the inadmissibility of the subject confessions, there is sufficient evidence to convict accused-appellants with moral certainty. We agree with the sound deduction of the trial court that indeed, Emilio Changco (Exhibits "U" and "UU") and accused-appellants Tulin, Loyola, .and Infante, Jr. did conspire and confederate to commit the crime charged. In the words of then trial judge, now Justice Romeo J. Callejo of the Court of Appeals -

...The Prosecution presented to the Court an array of witnesses, officers and members of the crew of the "M/T Tabangao" no less, who identified and pointed to the said Accused as among those who attacked and seized, the "M/T Tabangao" on March 2, 1991, at about 6:30 o'clock in the afternoon, off Lubang Island, Mindoro, with its cargo, and brought the said vessel, with its cargo, and the officers and crew of the vessel, in the vicinity of Horsebough Lighthouse, about sixty-six nautical miles off the shoreline of Singapore and sold its cargo to the Accused Cheong San Hiong upon which the cargo was discharged from the "M/T Tabangao" to the "Navi Pride" for the price of about $500,000.00 (American Dollars) on March 29, and 30, 1991... xxx xxx xxx The Master, the officers and members of the crew of the "M/T Tabangao" were on board the vessel with the Accused and their cohorts from March 2, 1991 up to April 10, 1991 or for more than one (1) month. There can be no scintilla of doubt in the mind of the Court that the officers and crew of the vessel could and did see and identify the seajackers and their leader. In fact, immediately after the Accused were taken into custody by the operatives of the National Bureau of Investigation,

Benjamin Suyo, Norberto Senosa, Christian Torralba and Isaias Wervas executed their "Joint Affidavit" (Exhibit "B") and pointed to and identified the said Accused as some of the pirates. xxx xxx xxx Indeed, when they testified before this Court on their defense, the three (3) Accused admitted to the Court that they, in fact, boarded the said vessel in the evening of March 2 1991 and remained on board when the vessel sailed to its, destination, which turned out to be off the port of Singapore. (pp. 106-112, Rollo.)
We also agree with the trial court's finding that accused-appellants' defense of denial is not supported by any hard evidence but their bare testimony. Greater weight is given to the categorical identification of the accused by the prosecution witnesses than to the accused's plain denial of participation in the commission of the crime (People v. Baccay, 284 SCRA 296 [1998]). Instead, accused-appellants Tulin, Loyola, and Infante, Jr. narrated a patently desperate tale that they were hired by three complete strangers (allegedly Captain Edilberto Liboon, Second Mate Christian Torralba, and their companion) while said accused-appellants were conversing with one another along the seashore at Apkaya, Balibago, Calatagan, Batangas, to work on board the "M/T Tabangao" which was then anchored off-shore. And readily, said accused-appellants agreed to work as cooks and handymen for an indefinite period of time without even saying goodbye to their families, without even knowing their destination or the details of their voyage, without the personal effects needed for a long voyage at sea. Such evidence is incredible and clearly not in accord with human experience. As pointed out by the trial court, it is incredible that Captain Liboon, Second Mate Torralba, and their companion "had to leave the vessel at 9:30 o'clock in the evening and venture in a completely unfamiliar place merely to recruit five (5) cooks or handymen (p. 113, Rollo)." Anent accused-appellant Changco's defense of denial with the alibi that on May 14 and 17, he was at his place of work and that on April 10, 1991, he was in his house in Bacoor, Cavite, sleeping, suffice it to state that alibi is fundamentally and inherently a weak defense, much more so when uncorroborated by other witnesses (People v. Adora, 275 SCRA 441 [1997]) considering that it is easy to fabricate and concoct, and difficult to disprove. Accused-appellant must adduce clear and convincing evidence that, at about midnight on April 10, 1991, it was physically impossible for him to have been in Calatagan, Batangas. Changco not only failed to do this, he was likewise unable to prove that he was in his place of work on the dates aforestated. It is doctrinal that the trial court's evaluation of the credibility of a testimony is accorded the highest respect, for trial courts have an untrammeled opportunity to observe directly the

demeanor of witnesses and, thus, to determine whether a certain witness is telling the truth (People v. Obello, 284 SCRA 79 [1998]). We likewise uphold the trial court's finding of conspiracy. A conspiracy exists when two or more persons come to an agreement concerning the commission of a felony and decide to commit it (Article 8, Revised Penal Code). To be a conspirator, one need not participate in every detail of execution; he need not even take part in every act or need not even know the exact part to be performed by the others in the execution of the conspiracy. As noted by the trial court, there are times when conspirators are assigned separate and different tasks which may appear unrelated to one another, but in fact, constitute a whole and collective effort to achieve a common criminal design. We affirm the trial court's finding that Emilio Changco, accused- appellants Tulin, Loyola, and Infante, Jr. and others, were the ones assigned to attack and seize the "M/T Tabangao" off Lubang, Mindoro, while accused-appellant Cecilio Changco was to fetch the master and the members of the crew from the shoreline of Calatagan, Batangas after the transfer, and bring them to Imus, Cavite, and to provide the crew and the officers of the vessel with money for their fare and food provisions on their way home. These acts had to be well-coordinated. Accusedappellant Cecilio Changco need not be present at the time of the attack and seizure of "M/T Tabangao" since he performed his task in view of an objective common to all other accusedappellants. Of notable importance is the connection of accused-appellants to one another. Accusedappellant Cecilio Changco is the younger brother of Emilio Changco (aka Captain Bobby/Captain Roberto Castillo/Kevin Ocampo), owner of Phil-Asia Shipping Lines. Cecilio worked for his brother in said corporation. Their residences are approximately six or seven kilometers away from each other. Their families are close. Accused-appellant Tulin, on the other hand, has known Cecilio since their parents were neighbors in Aplaya, Balibago, Calatagan, Batangas. Accused-appellant Loyola's wife is a relative of the Changco brothers by affinity .Besides, Loyola and Emilio Changco had both been accused in a seajacking case regarding "M/T Isla Luzon" and its cargo of steel coils and plates off Cebu and Bohol in 1989. Emilio Changco (aka Kevin Ocampo) was convicted of the crime while Loyola at that time remained at large. As for accused-appellant Hiong, he ratiocinates that he can no longer be convicted of piracy in Philippine waters as defined and penalized in Sections 2[d] and 3[a], respectively of Presidential Decree No. 532 because Republic Act No. 7659 (effective January 1, 1994) which amended Article 122 of the Revised Penal Code, has impliedly superseded Presidential Decree No. 532. He reasons out that Presidential Decree No. 532 has been rendered "superfluous or duplicitous" because both Article 122 of the Revised Penal Code, as amended, and Presidential Decree No. 532 punish piracy committed in Philippine waters. He maintains that in order to reconcile the two laws, the word "any person" mentioned in Section 1 [d] of Presidential Decree No. 532 must be omitted such that Presidential Decree No. 532 shall only apply to offenders who are members of the complement or to passengers of the vessel, whereas Republic Act No. 7659 shall apply to offenders who are neither members of the complement or passengers of the vessel, hence, excluding him from the coverage of the law. Article 122 of the Revised Penal Code, used to provide:

Article 122. Piracy in general and mutiny on the high seas. -The penalty of reclusion temporal shall be inflicted upon any person who, on the high seas, shall attack or seize a vessel or, not being a member of its complement nor a passenger, shall seize the whole or part of the cargo of said vessel, its equipment, or personal belongings of its complement or passengers. (Underscoring supplied.)
Article 122, as amended by Republic Act No. 7659 January 1, 1994), reads:

Article 122. Piracy in general and mutiny on the high seas or in Philippine waters. The penalty of reclusion perpetua shall be inflicted upon any person who, on the high seas, or in Philippine waters, shall attack or seize a vessel or, being a member of its complement nor a passenger, shall seize the whole or part of the cargo of said vessel, its equipment, or personal belongings of its complement or passengers. (Underscoring ours)
On the other hand, Section 2 of Presidential Decree No. 532 provides:

SEC. 2. Definition of Terms. - The following shall mean and be understood, as follows: d. Piracy. -Any attack upon or seizure of any vessel, or the taking away of the whole or part thereof or its cargo, equipment, or the personal belongings of its complement or passengers, irrespective of the value thereof, by means of violence against or intimidation of persons or force upon things, committed by any person. including a passenger or member of the complement of said vessel in Philippine waters, shall be considered as piracy. The offenders shall be considered as pirates and punished as hereinafter provided (underscoring supplied).
To summarize, Article 122 of the Revised Penal Code, before its amendment, provided that piracy must be committed on the high seas by any person not a member of its complement nor a passenger thereof. Upon its amendment by Republic Act No. 7659, the coverage of the pertinent provision was widened to include offenses committed "in Philippine waters." On the other hand, under Presidential Decree No. 532 (issued in 1974), the coverage of the law on piracy embraces any person including "a passenger or member of the complement of said vessel in Philippine waters." Hence, passenger or not, a member of the complement or not, any person is covered by the law. Republic Act No. 7659 neither superseded nor amended the provisions on piracy under Presidential Decree No. 532. There is no contradiction between the two laws. There is likewise no ambiguity and hence, there is no need to construe or interpret the law. All the presidential decree did was to widen the coverage of the law, in keeping with the intent to protect the

citizenry as well as neighboring states from crimes against the law of nations. As expressed in one of the "whereas" clauses of Presidential Decree No. 532, piracy is "among the highest forms of lawlessness condemned by the penal statutes of all countries." For this reason, piracy under the Article 122, as amended, and piracy under Presidential Decree No. 532 exist harmoniously as separate laws. As regards the contention that the trial court did not acquire jurisdiction over the person of accused-appellant Hiong since the crime was committed outside Philippine waters, suffice it to state that unquestionably, the attack on and seizure of "M/T Tabangao" (renamed "M/T Galilee" by the pirates) and its cargo were committed in Philippine waters, although the captive vessel was later brought by the pirates to Singapore where its cargo was off-loaded, transferred, and sold. And such transfer was done under accused-appellant Hiong's direct supervision. Although Presidential Decree No. 532 requires that the attack and seizure of the vessel and its cargo be committed in Philippine waters, the disposition by the pirates of the vessel and its cargo is still deemed part of the act of piracy, hence, the same need not be committed in Philippine waters. Moreover, piracy falls under Title One of Book Two of the Revised Penal Code. As such, it is an exception to the rule on territoriality in criminal law. The same principle applies even if Hiong, in the instant case, were charged, not with a violation of qualified piracy under the penal code but under a special law, Presidential Decree No. 532 which penalizes piracy in Philippine waters. Verily, Presidential Decree No. 532 should be applied with more force here since its purpose is precisely to discourage and prevent piracy in Philippine waters (People v. Catantan, 278 SCRA 761 [1997]). It is likewise, well-settled that regardless of the law penalizing the same, piracy is a reprehensible crime against the whole world (People v. Lol-lo, 43 Phil. 19 [1922]). However, does this constitute a violation of accused-appellant's constitutional right to be informed of the nature and cause of the accusation against him on the ground that he was convicted as an accomplice under Section 4 of Presidential Decree No. 532 even though he was charged as a principal by direct participation under Section 2 of said law? The trial court found that there was insufficiency of evidence showing: (a) that accused-appellant Hiong directly participated in the attack and seizure of "M/T Tabangao" and its cargo; (b) that he induced Emilio Changco and his group in the attack and seizure of "M/T Tabangao" and its cargo; ( c) and that his act was indispensable in the attack on and seizure of "M/T Tabangao" and its cargo. Nevertheless, the trial court found that accusedappellant Hiong's participation was indisputably one which aided or abetted Emilio Changco and his band of pirates in the disposition of the stolen cargo under Section 4 of Presidential Decree No. 532 which provides:

SEC. 4. Aiding pirates or highway robbers/brigands or abetting piracy or highway robbery brigandage. -Any person who knowingly and in any manner aids or protects pirates or highway robbers/brigands, such as giving them information about the movement of police or other peace officers of the government, or acquires or receives property taken by such pirates or brigands or in any manner derives any benefit therefrom; or any person who directly or indirectly abets the commission of piracy or highway robbery or brigandage, shall be considered as an accomplice of the principal

officers and be punished in accordance with Rules prescribed by the Revised Penal Code. It shall be presumed that any person who does any of the acts provided in this Section has performed them knowingly, unless the contrary is proven.
The ruling of the trial court is Within well-settle jurisprudence that if there is lack of complete evidence of conspiracy, the liability is that of an accomplice and not as principal (People v. Tolentino, 40 SCRA 514 [1971]). Any doubt as to the participation of an individual in the commission of the crime is always resolved in favor of lesser responsibility (People v. Corbes, 270 SCRA 465 [1997]; People vs. Elfano, Jr., 125 SCRA 792 [1983]; People v. Pastores, 40 SCRA 498 [1971]). Emphasis must also be placed on the last paragraph of Section 4 of Presidential Decree No 532 which presumes that any person who does any of the acts provided in said section has performed them knowingly, unless the contrary is proven. In the case at bar, accused-appellant Hiong had failed to overcome the legal presumption that he knowingly abetted or aided in the commission of piracy, received property taken by such pirates and derived benefit therefrom. The record discloses that accused-appellant Hiong aided the pirates in disposing of the stolen cargo by personally directing its transfer from "M/T Galilee" to "M/T Navi Pride". He profited therefrom by buying the hijacked cargo for Navi Marine Services, Pte., Ltd. (tsn, June 3, 1992, pp. 15-23). He even tested the quality and verified the quantity of the petroleum products, connived with Navi Marine Services personnel in falsifying the General Declarations and Crew List to ensure that the illegal transfer went through, undetected by Singapore Port Authorities, and supplied the pirates with food, beer, and other provisions for their maintenance while in port (tsn, June 3, 1992, pp. 133-134). We believe that the falsification of the General Declaration (Arrival and Departure) and Crew List was accomplished and utilized by accused-appellant Hiong and Navi Marine Services personnel in the execution of their scheme to avert detection by Singapore Port Authorities. Hence, had accused-appellant Hiong not falsified said entries, the Singapore Port Authorities could have easily discovered the illegal activities that took place and this would have resulted in his arrest and prosecution in Singapore. Moreover, the transfer of the stolen cargo from "M/T Galilee" to "Navi Pride" could not have been effected. We completely uphold the factual findings of the trial court showing in detail accusedappellant Hiong's role in the disposition of the pirated goods summarized as follows: that on March 27, 1991, Hiong with Captain Biddy Santos boarded the "Navi Pride," one of the vessels of the Navi Marine, to rendezvous with the "M/T Galilee"; that the firm submitted the crew list of the vessel (Exhibit "8-CSH", Record) to the port authorities, excluding the name of Hiong; that the "General Declaration" (for departure) of the "Navi Pride" for its voyage off port of Singapore (Exhibits "HH" and "8-A CSH", Record) falsely stated that the vessel was scheduled to depart at 2200 (10 o'clock in the evening), that there were no passengers on board, and the purpose of the voyage was for "cargo operation" and that the vessel was to unload and transfer 1,900 tons of cargo; that after the transfer of the fuel from "M/T Galilee" with' Emilio Changco a. k. a. Captain Bobby a. k. a. Roberto Castillo at the helm, the surveyor prepared the "Quantity Certificate" (Exhibit "11-C CSH, Record) stating that the cargo transferred to the "Navi Pride"

was 2,406 gross cubic meters; that although Hiong was not the Master of the vessel, he affixed his signature on the "Certificate" above the word "Master" (Exhibit "11-C-2 CSH", Record); that he then paid $150,000.00 but did not require any receipt for the amount; that Emilio Changco also did not issue one; and that in the requisite "General Declaration" upon its arrival at Singapore on March 29, 1991, at 7 o'clock in the evening, (Exhibits "JJ" and "13-A CSH", Record), it was made to falsely appear that the "Navi Pride" unloaded 1,700 tons of cargo on the high seas during said voyage when in fact it acquired from the "M/T Galilee" 2,000 metric tons of diesel oil. The second transfer transpired with the same irregularities as discussed above. It was likewise supervised by accused- appellant Cheong from his end while Emilio Changco supervised the transfer from his end. Accused-appellant Hiong maintains that he was merely following the orders of his superiors and that he has no knowledge of the illegality of the source of the cargo. First and foremost, accused-appellant Hiong cannot deny knowledge of the source and nature of the cargo since he himself received the same from "M/T Tabangao". Second, considering that he is a highly educated mariner, he should have avoided any participation in the cargo transfer given the very suspicious circumstances under which it was acquired. He failed to show a single piece of deed or bill of sale or even a purchase order or any contract of sale for the purchase by the firm; he never bothered to ask for and scrutinize the papers and documentation relative to the "M/T Galilee"; he did not even verify the identity of Captain Robert Castillo whom he met for the first time nor did he check the source of the cargo; he knew that the transfer took place 66 nautical miles off Singapore in the dead of the night which a marine vessel of his firm did not ordinarily do; it was also the first time Navi Marine transacted with Paul Gan involving a large sum of money without any receipt issued therefor; he was not even aware if Paul Gan was a Singaporean national and thus safe to deal with. It should also be noted that the value of the cargo was P40,426,793.87 or roughly more than US$l,000,000.00 (computed at P30.00 to $1, the exchange rate at that time). Manifestly, the cargo was sold for less than onehalf of its value. Accused-appellant Hiong should have been aware of this irregularity. Nobody in his right mind would go to far away Singapore, spend much time and money for transportation -only to sell at the aforestated price if it were legitimate sale involved. This, in addition to the act of falsifying records, clearly shows that accused-appellant Hiong was well aware that the cargo that his firm was acquiring was purloined. Lastly, it cannot be correctly said that accused-appellant was "merely following the orders of his superiors." An individual is justified in performing an act in obedience to an order issued by a superior if such order, is for some lawful purpose and that the means used by the subordinate to carry out said order is lawful (Reyes, Revised Penal Code, Vol. 1, 1981 ed., p. 212). Notably, the alleged order of Hiong's superior Chua Kim Leng Timothy, is a patent violation not only of Philippine, but of international law. Such violation was committed on board a Philippineoperated vessel. Moreover, the means used by Hiong in carrying out said order was equally unlawful. He misled port and immigration authorities, falsified records, using a mere clerk, Frankie Loh, to consummate said acts. During the trial, Hiong presented himself, and the trial court was convinced, that he was an intelligent and articulate Port Captain. These circumstances show that he must have realized the nature and the implications of the order of Chua Kim Leng Timothy. Thereafter, he could have refused to follow orders to conclude the deal and to effect the transfer of the cargo to the Navi Pride. He did not do so, for which reason, he must now suffer the consequences of his actions.

WHEREFORE, finding the conviction of accused-appellants justified by the evidence on record, the Court hereby AFFIRMS the judgment of the trial court in toto. SO ORDERED.
G.R. No. L-49407 August 19, 1988 NATIONAL DEVELOPMENT COMPANY, petitioner-appellant, vs. THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondentsappellees. No. L-49469 August 19, 1988 MARITIME COMPANY OF THE PHILIPPINES, petitioner-appellant, vs. THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondentsappellees. Balgos & Perez Law Office for private respondent in both cases.

PARAS, J.: These are appeals by certiorari from the decision * of the Court of Appeals in CA G.R. No: L- 46513-R entitled "Development Insurance and Surety Corporation plaintiff-appellee vs. Maritime Company of the Philippines and National Development Company defendant-appellants," affirming in toto the decision ** in Civil Case No. 60641 of the then Court of First Instance of Manila, Sixth Judicial District, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered ordering the defendants National Development Company and Maritime Company of the Philippines, to pay jointly and severally, to the plaintiff Development Insurance and Surety Corp., the sum of THREE HUNDRED SIXTY FOUR THOUSAND AND NINE HUNDRED FIFTEEN PESOS AND EIGHTY SIX CENTAVOS (364,915.86) with the legal interest thereon from the filing of plaintiffs complaint on April 22, 1965 until fully paid, plus TEN THOUSAND PESOS (Pl0,000.00) by way of damages as and for attorney's fee. On defendant Maritime Company of the Philippines' cross-claim against the defendant National Development Company, judgment is hereby rendered, ordering the National Development Company to pay the cross-claimant Maritime Company of the Philippines the total amount that the Maritime Company of the Philippines may voluntarily or by compliance to a writ of execution pay to the plaintiff pursuant to the judgment rendered in this case. With costs against the defendant Maritime Company of the Philippines. (pp. 34-35, Rollo, GR No. L-49469) The facts of these cases as found by the Court of Appeals, are as follows: The evidence before us shows that in accordance with a memorandum agreement entered into between defendants NDC and MCP on September 13, 1962, defendant NDC as the first preferred mortgagee of three ocean going vessels including one with the name 'Dona Nati' appointed defendant MCP as its agent to manage and operate said vessel for and in its behalf

and account (Exh. A). Thus, on February 28, 1964 the E. Philipp Corporation of New York loaded on board the vessel "Dona Nati" at San Francisco, California, a total of 1,200 bales of American raw cotton consigned to the order of Manila Banking Corporation, Manila and the People's Bank and Trust Company acting for and in behalf of the Pan Asiatic Commercial Company, Inc., who represents Riverside Mills Corporation (Exhs. K-2 to K7-A & L-2 to L-7A). Also loaded on the same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila Banking Corporation consisting of 200 cartons of sodium lauryl sulfate and 10 cases of aluminum foil (Exhs. M & M-1). En route to Manila the vessel Dofia Nati figured in a collision at 6:04 a.m. on April 15, 1964 at Ise Bay, Japan with a Japanese vessel 'SS Yasushima Maru' as a result of which 550 bales of aforesaid cargo of American raw cotton were lost and/or destroyed, of which 535 bales as damaged were landed and sold on the authority of the General Average Surveyor for Yen 6,045,-500 and 15 bales were not landed and deemed lost (Exh. G). The damaged and lost cargoes was worth P344,977.86 which amount, the plaintiff as insurer, paid to the Riverside Mills Corporation as holder of the negotiable bills of lading duly endorsed (Exhs. L-7-A, K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-3}. Also considered totally lost were the aforesaid shipment of Kyokuto, Boekui Kaisa Ltd., consigned to the order of Manila Banking Corporation, Manila, acting for Guilcon, Manila, The total loss was P19,938.00 which the plaintiff as insurer paid to Guilcon as holder of the duly endorsed bill of lading (Exhibits M-1 and S-3). Thus, the plaintiff had paid as insurer the total amount of P364,915.86 to the consignees or their successors-ininterest, for the said lost or damaged cargoes. Hence, plaintiff filed this complaint to recover said amount from the defendants-NDC and MCP as owner and ship agent respectively, of the said 'Dofia Nati' vessel. (Rollo, L-49469, p.38) On April 22, 1965, the Development Insurance and Surety Corporation filed before the then Court of First Instance of Manila an action for the recovery of the sum of P364,915.86 plus attorney's fees of P10,000.00 against NDC and MCP (Record on Appeal), pp. 1-6). Interposing the defense that the complaint states no cause of action and even if it does, the action has prescribed, MCP filed on May 12, 1965 a motion to dismiss (Record on Appeal, pp. 7-14). DISC filed an Opposition on May 21, 1965 to which MCP filed a reply on May 27, 1965 (Record on Appeal, pp. 14-24). On June 29, 1965, the trial court deferred the resolution of the motion to dismiss till after the trial on the merits (Record on Appeal, p. 32). On June 8, 1965, MCP filed its answer with counterclaim and cross-claim against NDC. NDC, for its part, filed its answer to DISC's complaint on May 27, 1965 (Record on Appeal, pp. 22-24). It also filed an answer to MCP's cross-claim on July 16, 1965 (Record on Appeal, pp. 39-40). However, on October 16, 1965, NDC's answer to DISC's complaint was stricken off from the record for its failure to answer DISC's written interrogatories and to comply with the trial court's order dated August 14, 1965 allowing the inspection or photographing of the memorandum of agreement it executed with MCP. Said order of October 16, 1965 likewise declared NDC in default (Record on Appeal, p. 44). On August 31, 1966, NDC filed a motion to set aside the order of October 16, 1965, but the trial court denied it in its order dated September 21, 1966. On November 12, 1969, after DISC and MCP presented their respective evidence, the trial court rendered a decision ordering the defendants MCP and NDC to pay jointly and solidarity to DISC the sum of P364,915.86 plus the legal rate of interest to be computed from the filing of the complaint on April 22, 1965, until fully paid and attorney's fees of P10,000.00. Likewise, in said decision, the trial court granted MCP's crossclaim against NDC. MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on February 17, 1970 after its motion to set aside the decision was denied by the trial court in its order dated February 13,1970. On November 17,1978, the Court of Appeals promulgated its decision affirming in toto the decision of the trial court. Hence these appeals by certiorari.

NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as G.R. No. 49469. On July 25,1979, this Court ordered the consolidation of the above cases (Rollo, p. 103). On August 27,1979, these consolidated cases were given due course (Rollo, p. 108) and submitted for decision on February 29, 1980 (Rollo, p. 136). In its brief, NDC cited the following assignments of error: I THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE CODE OF COMMERCE AND NOT SECTION 4(2a) OF COMMONWEALTH ACT NO. 65, OTHERWISE KNOWN AS THE CARRIAGE OF GOODS BY SEA ACT IN DETERMINING THE LIABILITY FOR LOSS OF CARGOES RESULTING FROM THE COLLISION OF ITS VESSEL "DONA NATI" WITH THE YASUSHIMA MARU"OCCURRED AT ISE BAY, JAPAN OR OUTSIDE THE TERRITORIAL JURISDICTION OF THE PHILIPPINES. II THE COURT OF APPEALS ERRED IN NOT DISMISSING THE C0MPLAINT FOR REIMBURSEMENT FILED BY THE INSURER, HEREIN PRIVATE RESPONDENT-APPELLEE, AGAINST THE CARRIER, HEREIN PETITIONER-APPELLANT. (pp. 1-2, Brief for Petitioner-Appellant National Development Company; p. 96, Rollo). On its part, MCP assigned the following alleged errors: I THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION HAS NO CAUSE OF ACTION AS AGAINST PETITIONER MARITIME COMPANY OF THE PHILIPPINES AND IN NOT DISMISSING THE COMPLAINT. II THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CAUSE OF ACTION OF RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION IF ANY EXISTS AS AGAINST HEREIN PETITIONER MARITIME COMPANY OF THE PHILIPPINES IS BARRED BY THE STATUTE OF LIMITATION AND HAS ALREADY PRESCRIBED. III THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE PRIVATE RESPONDENTS EXHIBIT "H" AND IN FINDING ON THE BASIS THEREOF THAT THE COLLISION OF THE SS DONA NATI AND THE YASUSHIMA MARU WAS DUE TO THE FAULT OF BOTH VESSELS INSTEAD OF FINDING THAT THE COLLISION WAS CAUSED BY THE FAULT, NEGLIGENCE AND LACK OF SKILL OF THE COMPLEMENTS OF THE YASUSHIMA MARU WITHOUT THE FAULT OR NEGLIGENCE OF THE COMPLEMENT OF THE SS DONA NATI IV THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT UNDER THE CODE OF COMMERCE PETITIONER APPELLANT MARITIME COMPANY OF THE PHILIPPINES IS A SHIP AGENT OR NAVIERO OF SS DONA NATI OWNED BY CO-PETITIONER APPELLANT NATIONAL DEVELOPMENT COMPANY AND THAT SAID PETITIONER-APPELLANT IS SOLIDARILY LIABLE WITH SAID COPETITIONER FOR LOSS OF OR DAMAGES TO CARGO RESULTING IN THE COLLISION OF SAID VESSEL, WITH THE JAPANESE YASUSHIMA MARU.

V THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE LOSS OF OR DAMAGES TO THE CARGO OF 550 BALES OF AMERICAN RAW COTTON, DAMAGES WERE CAUSED IN THE AMOUNT OF P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00 PER BALE AS ESTABLISHED IN THE BILLS OF LADING AND ALSO IN HOLDING THAT PARAGRAPH 1O OF THE BILLS OF LADING HAS NO APPLICATION IN THE INSTANT CASE THERE BEING NO GENERAL AVERAGE TO SPEAK OF. VI THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE PETITIONERS NATIONAL DEVELOPMENT COMPANY AND COMPANY OF THE PHILIPPINES TO PAY JOINTLY AND SEVERALLY TO HEREIN RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION THE SUM OF P364,915.86 WITH LEGAL INTEREST FROM THE FILING OF THE COMPLAINT UNTIL FULLY PAID PLUS P10,000.00 AS AND FOR ATTORNEYS FEES INSTEAD OF SENTENCING SAID PRIVATE RESPONDENT TO PAY HEREIN PETITIONERS ITS COUNTERCLAIM IN THE AMOUNT OF P10,000.00 BY WAY OF ATTORNEY'S FEES AND THE COSTS. (pp. 1-4, Brief for the Maritime Company of the Philippines; p. 121, Rollo) The pivotal issue in these consolidated cases is the determination of which laws govern loss or destruction of goods due to collision of vessels outside Philippine waters, and the extent of liability as well as the rules of prescription provided thereunder. The main thrust of NDC's argument is to the effect that the Carriage of Goods by Sea Act should apply to the case at bar and not the Civil Code or the Code of Commerce. Under Section 4 (2) of said Act, the carrier is not responsible for the loss or damage resulting from the "act, neglect or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship." Thus, NDC insists that based on the findings of the trial court which were adopted by the Court of Appeals, both pilots of the colliding vessels were at fault and negligent, NDC would have been relieved of liability under the Carriage of Goods by Sea Act. Instead, Article 287 of the Code of Commerce was applied and both NDC and MCP were ordered to reimburse the insurance company for the amount the latter paid to the consignee as earlier stated. This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (1 50 SCRA 469470 [1987]) where it was held under similar circumstance "that the law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration" (Article 1753, Civil Code). Thus, the rule was specifically laid down that for cargoes transported from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of commerce and by laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to the provision of the Civil Code. In the case at bar, it has been established that the goods in question are transported from San Francisco, California and Tokyo, Japan to the Philippines and that they were lost or due to a collision which was found to have been caused by the negligence or fault of both captains of the colliding vessels. Under the above ruling, it is evident that the laws of the Philippines will apply, and it is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan. Under Article 1733 of the Civil Code, common carriers from the nature of their business and for reasons of public policy are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them according to all circumstances of each case. Accordingly, under Article 1735 of the same Code, in all other than those mentioned is Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have acted negigently, unless it proves that it has observed the extraordinary diligence required by law.

It appears, however, that collision falls among matters not specifically regulated by the Civil Code, so that no reversible error can be found in respondent courses application to the case at bar of Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with collision of vessels. More specifically, Article 826 of the Code of Commerce provides that where collision is imputable to the personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and damages incurred after an expert appraisal. But more in point to the instant case is Article 827 of the same Code, which provides that if the collision is imputable to both vessels, each one shall suffer its own damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes. Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the shipowner or carrier, is not exempt from liability for damages arising from collision due to the fault or negligence of the captain. Primary liability is imposed on the shipowner or carrier in recognition of the universally accepted doctrine that the shipmaster or captain is merely the representative of the owner who has the actual or constructive control over the conduct of the voyage (Y'eung Sheng Exchange and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]). There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply only to domestic trade and not to foreign trade. Aside from the fact that the Carriage of Goods by Sea Act (Com. Act No. 65) does not specifically provide for the subject of collision, said Act in no uncertain terms, restricts its application "to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade." Under Section I thereof, it is explicitly provided that "nothing in this Act shall be construed as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its application." By such incorporation, it is obvious that said law not only recognizes the existence of the Code of Commerce, but more importantly does not repeal nor limit its application. On the other hand, Maritime Company of the Philippines claims that Development Insurance and Surety Corporation, has no cause of action against it because the latter did not prove that its alleged subrogers have either the ownership or special property right or beneficial interest in the cargo in question; neither was it proved that the bills of lading were transferred or assigned to the alleged subrogers; thus, they could not possibly have transferred any right of action to said plaintiff- appellee in this case. (Brief for the Maritime Company of the Philippines, p. 16). The records show that the Riverside Mills Corporation and Guilcon, Manila are the holders of the duly endorsed bills of lading covering the shipments in question and an examination of the invoices in particular, shows that the actual consignees of the said goods are the aforementioned companies. Moreover, no less than MCP itself issued a certification attesting to this fact. Accordingly, as it is undisputed that the insurer, plaintiff appellee paid the total amount of P364,915.86 to said consignees for the loss or damage of the insured cargo, it is evident that said plaintiff-appellee has a cause of action to recover (what it has paid) from defendant-appellant MCP (Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p. 43). MCP next contends that it can not be liable solidarity with NDC because it is merely the manager and operator of the vessel Dona Nati not a ship agent. As the general managing agent, according to MCP, it can only be liable if it acted in excess of its authority. As found by the trial court and by the Court of Appeals, the Memorandum Agreement of September 13, 1962 (Exhibit 6, Maritime) shows that NDC appointed MCP as Agent, a term broad enough to include the concept of Ship-agent in Maritime Law. In fact, MCP was even conferred all the powers of the owner of the vessel, including the power to contract in the name of the NDC (Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40). Consequently, under the circumstances, MCP cannot escape liability. It is well settled that both the owner and agent of the offending vessel are liable for the damage done where both are impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]); that in case of collision, both the owner and the agent are civilly responsible for the acts of the captain (Yueng Sheng Exchange and Trading Co. v. Urrutia & Co., supra citing Article 586 of the Code of Commerce; Standard Oil Co. of New York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that while it is true that the liability of the naviero in the sense of charterer or agent, is not expressly provided in Article 826 of the Code of Commerce, it is clearly deducible

from the general doctrine of jurisprudence under the Civil Code but more specially as regards contractual obligations in Article 586 of the Code of Commerce. Moreover, the Court held that both the owner and agent (Naviero) should be declared jointly and severally liable, since the obligation which is the subject of the action had its origin in a tortious act and did not arise from contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]). Consequently, the agent, even though he may not be the owner of the vessel, is liable to the shippers and owners of the cargo transported by it, for losses and damages occasioned to such cargo, without prejudice, however, to his rights against the owner of the ship, to the extent of the value of the vessel, its equipment, and the freight (Behn Meyer Y Co. v. McMicking et al. 11 Phil. 276 [1908]). As to the extent of their liability, MCP insists that their liability should be limited to P200.00 per package or per bale of raw cotton as stated in paragraph 17 of the bills of lading. Also the MCP argues that the law on averages should be applied in determining their liability. MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of lading and corroborated no less by invoices offered as evidence ' during the trial. Besides, common carriers, in the language of the court in Juan Ysmael & Co., Inc. v. Barrette et al., (51 Phil. 90 [1927]) "cannot limit its liability for injury to a loss of goods where such injury or loss was caused by its own negligence." Negligence of the captains of the colliding vessel being the cause of the collision, and the cargoes not being jettisoned to save some of the cargoes and the vessel, the trial court and the Court of Appeals acted correctly in not applying the law on averages (Articles 806 to 818, Code of Commerce). MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel SS Yasushima Maru and not to the Japanese Coast pilot navigating the vessel Dona Nati need not be discussed lengthily as said claim is not only at variance with NDC's posture, but also contrary to the factual findings of the trial court affirmed no less by the Court of Appeals, that both pilots were at fault for not changing their excessive speed despite the thick fog obstructing their visibility. Finally on the issue of prescription, the trial court correctly found that the bills of lading issued allow transshipment of the cargo, which simply means that the date of arrival of the ship Dona Nati on April 18,1964 was merely tentative to give allowances for such contingencies that said vessel might not arrive on schedule at Manila and therefore, would necessitate the trans-shipment of cargo, resulting in consequent delay of their arrival. In fact, because of the collision, the cargo which was supposed to arrive in Manila on April 18, 1964 arrived only on June 12, 13, 18, 20 and July 10, 13 and 15, 1964. Hence, had the cargoes in question been saved, they could have arrived in Manila on the above-mentioned dates. Accordingly, the complaint in the instant case was filed on April 22, 1965, that is, long before the lapse of one (1) year from the date the lost or damaged cargo "should have been delivered" in the light of Section 3, sub-paragraph (6) of the Carriage of Goods by Sea Act. PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the assailed decision of the respondent Appellate Court is AFFIRMED. SO ORDERED. THE UNITED STATES, plaintiff-appellee, vs. H. N. BULL, defendant-appellant. Bruce & Lawrence, for appellant. Office of the Solicitor-General Harvey, for appellee. ELLIOTT, J.: The appellant was convicted in the Court of First Instance of a violation of section 1 of Act No. 55, as amended by section 1 of Act No. 275, and from the judgment entered thereon appealed to this court, where under proper assignments of error he contends: (1) that the complaint does not state facts sufficient to confer jurisdiction upon the court; (2) that under the evidence the trial court was without jurisdiction to hear and determine the

case; (3) that Act No. 55 as amended is in violation of certain provisions of the Constitution of the United States, and void as applied to the facts of this case; and (4) that the evidence is insufficient to support the conviction. The information alleges: That on and for many months prior to the 2d day of December, 1908, the said H. N. Bull was then and there master of a steam sailing vessel known as the steamship Standard, which vessel was then and there engaged in carrying and transporting cattle, carabaos, and other animals from a foreign port and city of Manila, Philippine Islands; that the said accused H. N. Bull, while master of said vessel, as aforesaid, on or about the 2d day of December, 1908, did then and there willfully, unlawfully, and wrongly carry, transport, and bring into the port and city of Manila, aboard said vessel, from the port of Ampieng, Formosa, six hundred and seventy-seven (677) head of cattle and carabaos, without providing suitable means for securing said animals while in transit, so as to avoid cruelty and unnecessary suffering to the said animals, in this, to wit, that the said H. N. Bull, master, as aforesaid, did then and there fail to provide stalls for said animals so in transit and suitable means for trying and securing said animals in a proper manner, and did then and there cause some of said animals to be tied by means of rings passed through their noses, and allow and permit others to be transported loose in the hold and on the deck of said vessel without being tied or secured in stalls, and all without bedding; that by reason of the aforesaid neglect and failure of the accused to provide suitable means for securing said animals while so in transit, the noses of some of said animals were cruelly torn, and many of said animals were tossed about upon the decks and hold of said vessel, and cruelly wounded, bruised, and killed. All contrary to the provisions of Acts No. 55 and No. 275 of the Philippine Commission. Section 1 of Act No. 55, which went into effect January 1, 1901, provides that The owners or masters of steam, sailing, or other vessels, carrying or transporting cattle, sheep, swine, or other animals, from one port in the Philippine Islands to another, or from any foreign port to any port within the Philippine Islands, shall carry with them, upon the vessels carrying such animals, sufficient forage and fresh water to provide for the suitable sustenance of such animals during the ordinary period occupied by the vessel in passage from the port of shipment to the port of debarkation, and shall cause such animals to be provided with adequate forage and fresh water at least once in every twenty-four hours from the time that the animals are embarked to the time of their final debarkation. By Act No. 275, enacted October 23, 1901, Act No. 55 was amended by adding to section 1 thereof the following: The owners or masters of steam, sailing, or other vessels, carrying or transporting cattle, sheep, swine, or other animals from one port in the Philippine Islands to another, or from any foreign port to any port within the Philippine Islands, shall provide suitable means for securing such animals while in transit so as to avoid all cruelty and unnecessary suffering to the animals, and suitable and proper facilities for loading and unloading cattle or other animals upon or from vessels upon which they are transported, without cruelty or unnecessary suffering. It is hereby made unlawful to load or unload cattle upon or from vessels by swinging them over the side by means of ropes or chains attached to the thorns. Section 3 of Act No. 55 provides that Any owner or master of a vessel, or custodian of such animals, who knowingly and willfully fails to comply with the provisions of section one, shall, for every such failure, be liable to pay a penalty of not less that one hundred dollars nor more that five hundred dollars, United States money, for each offense. Prosecution under this Act may be instituted in any Court of First Instance or any provost court organized in the province or port in which such animals are disembarked.

1. It is contended that the information is insufficient because it does not state that the court was sitting at a port where the cattle were disembarked, or that the offense was committed on board a vessel registered and licensed under the laws of the Philippine Islands. Act No. 55 confers jurisdiction over the offense created thereby on Courts of First Instance or any provost court organized in the province or port in which such animals are disembarked, and there is nothing inconsistent therewith in Act No. 136, which provides generally for the organization of the courts of the Philippine Islands. Act No. 400 merely extends the general jurisdiction of the courts over certain offenses committed on the high seas, or beyond the jurisdiction of any country, or within any of the waters of the Philippine Islands on board a ship or water craft of any kind registered or licensed in the Philippine Islands, in accordance with the laws thereof. (U.S. vs.Fowler, 1 Phil. Rep., 614.) This jurisdiction may be exercised by the Court of First Instance in any province into which such ship or water upon which the offense or crime was committed shall come after the commission thereof. Had this offense been committed upon a ship carrying a Philippine registry, there could have been no doubt of the Jurisdiction of the court, because it is expressly conferred, and the Act is in accordance with well recognized and established public law. But the Standard was a Norwegian vessel, and it is conceded that it was not registered or licensed in the Philippine Islands under the laws thereof. We have then the question whether the court had jurisdiction over an offense of this character, committed on board a foreign ship by the master thereof, when the neglect and omission which constitutes the offense continued during the time the ship was within the territorial waters of the United States. No court of the Philippine Islands had jurisdiction over an offenses or crime committed on the high seas or within the territorial waters of any other country, but when she came within 3 miles of a line drawn from the headlines which embrace the entrance to Manila Bay, she was within territorial waters, and a new set of principles became applicable. (Wheaton, Int. Law (Dana ed.), p. 255, note 105; Bonfils, Le Droit Int., sec 490et seq.; Latour, La Mer Ter., ch. 1.) The ship and her crew were then subject to the jurisdiction of the territorial sovereign subject through the proper political agency. This offense was committed within territorial waters. From the line which determines these waters the Standard must have traveled at least 25 miles before she came to anchor. During that part of her voyage the violation of the statue continued, and as far as the jurisdiction of the court is concerned, it is immaterial that the same conditions may have existed while the vessel was on the high seas. The offense, assuming that it originated at the port of departure in Formosa, was a continuing one, and every element necessary to constitute it existed during the voyage across the territorial waters. The completed forbidden act was done within American waters, and the court therefore had jurisdiction over the subject-matter of the offense and the person of the offender. The offense then was thus committed within the territorial jurisdiction of the court, but the objection to the jurisdiction raises the further question whether that jurisdiction is restricted by the fact of the nationality of the ship. Every. Every state has complete control and jurisdiction over its territorial waters. According to strict legal right, even public vessels may not enter the ports of a friendly power without permission, but it is now conceded that in the absence of a prohibition such ports are considered as open to the public ship of all friendly powers. The exemption of such vessels from local jurisdiction while within such waters was not established until within comparatively recent times. In 1794, Attorney-General Bradford, and in 1796 Attorney-General Lee, rendered opinions to the effect that "the laws of nations invest the commander of a foreign ship of war with no exemption from the jurisdiction of the country into which he comes." (1, Op. U.S. Attys. Gen., 46, 87.) This theory was also supported by Lord Stowell in an opinion given by him to the British Government as late as 1820. In the leading case of the Schooner Exchange vs. McFadden (7 Cranch (U.S.), 116, 144), Chief Justice Marshall said that the implied license under which such vessels enter a friendly port may reasonably be construed as "containing exemption from the jurisdiction of the sovereign within whose territory she claims the rights of hospitality." The principle was accepted by the Geneva Arbitration Tribunal, which announced that "the priviledge of exterritoriality accorded to vessels of war has been admitted in the law of nations; not as an absolute right, but solely as a proceeding founded on the principle of courtesy and mutual deference between nations." (2 Moore, Int. Law Dig., secs. 252 and 254; Hall, Int. Law, sec. 55; Taylor, Int. Law, sec. 256; Ortolan, Dip de la Mer, 2. C.X.) Such vessels are therefore permitted during times of peace to come and go freely. Local official exercise but little control over their actions, and offenses committed by their crew are justiciable by their own officers acting under the laws to which they primarily owe allegiance. This limitation upon the general principle of territorial sovereignty is based entirely upon comity and convenience, and finds its justification in the fact that experience shows that such vessels are generally careful to respect local laws and regulation which are essential to the health, order, and well-being of the port. But comity and convenience does not require the extension of the

same degree of exemption to merchant vessels. There are two well-defined theories as to extent of the immunities ordinarily granted to them, According to the French theory and practice, matters happening on board a merchant ship which do not concern the tranquillity of the port or persons foreign to the crew, are justiciable only by the court of the country to which the vessel belongs. The French courts therefore claim exclusive jurisdiction over crimes committed on board French merchant vessels in foreign ports by one member of the crew against another. (See Bonfils, Le Droit Int. (quat. ed.), secs. 624-628; Martens, Le Droit Int., tome 2, pp. 338, 339; Ortolan, Dip. de la Mer, tit. 1, p. 292; Masse, Droit Int., tome 2, p. 63.) Such jurisdiction has never been admitted or claim by Great Britain as a right, although she has frequently conceded it by treaties. (Halleck, Int. Law (Baker's ed.), vol. 1, 231; British Territorial Waters Act, 1878.) Writers who consider exterritoriality as a fact instead of a theory have sought to restrict local jurisdiction, but Hall, who is doubtless the leading English authority, says that It is admitted by the most thoroughgoing asserters of the territoriality of merchant vessels that so soon as the latter enter the ports of a foreign state they become subject to the local jurisdiction on all points in which the interests of the country are touched. (Hall, Int. Law, p. 263.) The United States has adhered consistently to the view that when a merchant vessel enters a foreign port it is subject to the jurisdiction of the local authorities, unless the local sovereignty has by act of acquiescence or through treaty arrangements consented to waive a portion of such jurisdiction. (15 Op. Attys. Gen., U. S., 178; 2 Moore, Int. Law Dig., sec. 204; article by Dean Gregory, Mich. Law Review, Vol. II, No. 5.) Chief Justice Marshall, in the case of the Exchange, said that When merchant vessels enter for the purpose of trade, in would be obviously in convinient and dangerous to society and would subject the laws to continual infraction and the government to degradation if such individual merchants did not owe temporary and local allegiance, and were not amendable to the jurisdiction of the country. The Supreme Court of the United States has recently said that the merchant vessels of one country visiting the ports of another for the purpose of trade, subject themselves to the laws which govern the ports they visit, so long as they remain; and this as well in war as in peace, unless otherwise provided by treaty. (U. S. vs. Diekelman, 92 U. S., 520-525.) Certain limitations upon the jurisdiction of the local courts are imposed by article 13 of the treaty of commerce and navigation between Sweden and Norway and the United States, of July 4, 1827, which concedes to the consul, vice-consuls, or consular agents of each country "The right to sit as judges and arbitrators in such differences as may arise between the captains and crews of the vessels belonging to the nation whose interests are committed to their charge, without the interference of the local authorities, unless the conduct of the crews or of the captains should disturb the order or tranquillity of the country." (Comp. of Treaties in Force, 1904, p. 754.) This exception applies to controversies between the members of the ship's company, and particularly to disputes regarding wages. (2 Moore, Int. Law Dig., sec. 206, p. 318; Tellefsen vs. Fee, 168 Mass., 188.) The order and tranquillity of the country are affected by many events which do not amount to a riot or general public disturbance. Thus an assault by one member of the crew upon another, committed upon the ship, of which the public may have no knowledge whatever, is not by this treaty withdrawn from the cognizance of the local authorities. In 1876 the mates of the Swedish bark Frederike and Carolina engaged in a "quarrel" on board the vessel in the port of Galveston, Texas. They were prosecuted before a justice of the peace, but the United States district attorney was instructed by the Government to take the necessary steps to have the proceedings dismissed, and the aid of the governor of Texas was invoked with the view to "guard against a repetition of similar proceedings." (Mr. Fish, Secretary of State, to Mr. Grip, Swedish and Norwegian charged, May 16, 1876; Moore, Int. Law Dig.) It does not appear that this "quarrel" was of such a nature as to amount to a breach of the criminal laws of Texas, but when in 1879 the mate for the Norwegian bark Livingston was prosecuted in the courts of Philadelphia County for an assault and battery committed on board the ship while lying in the port of Philadelphia, it was held that there was nothing in the treaty which deprived the local courts of jurisdiction. (Commonwealth vs. Luckness, 14 Phila. (Pa.), 363.) Representations were made through diplomatic channels to the State Department, and on July 30, 1880, Mr. Evarts, Secretary of State, wrote to Count Lewenhaupt, the Swedish and Norwegian minister, as follows:

I have the honor to state that I have given the matter careful consideration in connection with the views and suggestion of your note and the provisions of the thirteenth article of the treaty of 1827 between the United States and Sweden and Norway. The stipulations contained in the last clause of that article . . . are those under which it is contended by you that jurisdiction is conferred on the consular officers, not only in regard to such differences of a civil nature growing out of the contract of engagement of the seamen, but also as to disposing of controversies resulting from personal violence involving offense for which the party may be held amenable under the local criminal law. This Government does not view the article in question as susceptible of such broad interpretation. The jurisdiction conferred upon the consuls is conceived to be limited to their right to sit as judges or abitratorsin such differences as may arise between captains and crews of the vessels, where such differences do not involve on the part of the captain or crew a disturbance of the order or tranquillity of the country. When, however, a complaint is made to a local magistrate, either by the captain or one or more of the crew of the vessel, involving the disturbance of the order or tranquillity of the country, it is competent for such magistrate to take cognizance of the matter in furtherance of the local laws, and under such circumstances in the United States it becomes a public duty which the judge or magistrate is not at liberty voluntarily to forego. In all such cases it must necessarily be left to the local judicial authorities whether the procedure shall take place in the United States or in Sweden to determine if in fact there had been such disturbance of the local order and tranquillity, and if the complaint is supported by such proof as results in the conviction of the party accused, to visit upon the offenders such punishment as may be defined against the offense by the municipal law of the place." (Moore, Int. Law Dig., vol. 2, p. 315.) The treaty does not therefore deprive the local courts of jurisdiction over offenses committed on board a merchant vessel by one member of the crew against another which amount to a disturbance of the order or tranquillity of the country, and a fair and reasonable construction of the language requires un to hold that any violation of criminal laws disturbs the order or traquillity of the country. The offense with which the appellant is charged had nothing to so with any difference between the captain and the crew. It was a violation by the master of the criminal law of the country into whose port he came. We thus find that neither by reason of the nationality of the vessel, the place of the commission of the offense, or the prohibitions of any treaty or general principle of public law, are the court of the Philippine Islands deprived of jurisdiction over the offense charged in the information in this case. It is further contended that the complaint is defective because it does not allege that the animals were disembarked at the port of Manila, an allegation which it is claimed is essential to the jurisdiction of the court sitting at that port. To hold with the appellant upon this issue would be to construe the language of the complaint very strictly against the Government. The disembarkation of the animals is not necessary in order to constitute the completed offense, and a reasonable construction of the language of the statute confers jurisdiction upon the court sitting at the port into which the animals are bought. They are then within the territorial jurisdiction of the court, and the mere fact of their disembarkation is immaterial so far as jurisdiction is concerned. This might be different if the disembarkation of the animals constituted a constitutional element in the offense, but it does not. It is also contended that the information is insufficient because it fails to allege that the defendant knowingly andwillfully failed to provide suitable means for securing said animals while in transit, so as to avoid cruelty and unnecessary suffering. The allegation of the complaint that the act was committed willfully includes the allegation that it was committed knowingly. As said in Woodhouse vs. Rio Grande R.R. Company (67 Texas, 416), "the word 'willfully' carries the idea, when used in connection with an act forbidden by law, that the act must be done knowingly or intentionally; that, with knowledge, the will consented to, designed, and directed the act." So in Wongvs. City of Astoria (13 Oregon, 538), it was said: "The first one is that the complaint did not show, in the words of the ordinance, that the appellant 'knowingly' did the act complained of. This point, I think, was fully answered by the respondent's counsel that the words 'willfully' and 'knowingly' conveyed the same meaning. To 'willfully' do an act implies that it was done by design done for a certain purpose; and I think that it would necessarily follow that it was 'knowingly' done." To the same effect is Johnson vs. The People (94 Ill., 505), which seems to be on all fours with the present case.

The evidence shows not only that the defendant's acts were knowingly done, but his defense rests upon the assertion that "according to his experience, the system of carrying cattle loose upon the decks and in the hold is preferable and more secure to the life and comfort of the animals." It was conclusively proven that what was done was done knowingly and intentionally. In charging an offense under section 6 of General Orders, No. 58, paragraph 3, it is only necessary to state the act or omission complained of as constituting a crime or public offense in ordinary and concise language, without repitition. It need not necessarily be in the words of the statute, but it must be in such form as to enable a person of common understanding to know what is intended and the court to pronounce judgment according to right. A complaint which complies with this requirement is good. (U.S. vs. Sarabia, 4 Phil. Rep., 556.) The Act, which is in the English language, impose upon the master of a vessel the duty to "provide suitable means for securing such animals while in transit, so as to avoid all cruelty and unnecessary suffering to the animals." The allegation of the complaint as it reads in English is that the defendant willfully, unlawfully, and wrongfully carried the cattle "without providing suitable means for securing said animals while in transit, so as to avoid cruelty and unnecessary suffering to the said animals in this . . . that by reason of the aforesaid neglect and failure of the accused to provide suitable means for securing said animals were cruelty torn, and many of said animals were tossed about upon the decks and hold of said vessels, and cruelty wounded, bruised, and killed." The appellant contends that the language of the Spanish text of the information does not charge him with failure to provide "sufficient" and "adequate" means. The words used are "medios suficientes" and "medios adecuados." In view of the fact that the original complaint was prepared in English, and that the word "suitable" is translatable by the words "adecuado," "suficiente," and "conveniente," according to the context and circumstances, we determine this point against the appellant, particularly in view of the fact that the objection was not made in the court below, and that the evidence clearly shows a failure to provide "suitable means for the protection of the animals." 2. The appellant's arguments against the constitutionality of Act No. 55 and the amendment thereto seems to rest upon a fundamentally erroneous conception of the constitutional law of these Islands. The statute penalizes acts and ommissions incidental to the transportation of live stock between foreign ports and ports of the Philippine Islands, and had a similar statute regulating commerce with its ports been enacted by the legislature of one of the States of the Union, it would doubtless have been in violation of Article I, section 3, of the Constitution of the United States. (Stubbs vs. People (Colo.), 11 L. R. A., N. S., 1071.) But the Philippine Islands is not a State, and its relation to the United States is controlled by constitutional principles different from those which apply to States of the Union. The importance of the question thus presented requires a statement of the principles which govern those relations, and consideration of the nature and extent of the legislative power of the Philippine Commission and the Legislature of the Philippines. After much discussion and considerable diversity of opinion certain applicable constitutional doctrines are established. The Constitution confers upon the United States the express power to make war and treaties, and it has the power possessed by all nations to acquire territory by conquest or treaty. Territory thus acquired belongs to the United States, and to guard against the possibility of the power of Congress to provide for its government being questioned, the framers of the Constitution provided in express terms that Congress should have the power "to dispose of and make all needful rules and regulations respecting territory and other property belonging to the United States." (Art. IV, sec. 3, par. 3.) Upon the acquisition of the territory by the United States, and until it is formally incorporated into the Union, the duty of providing a government therefor devolves upon Congress. It may govern the territory by its direct acts, or it may create a local government, and delegate thereto the ordinary powers required for local government. (Binns vs. U. S., 194 U. S., 486.) This has been the usual procedure. Congress has provided such governments for territories which were within the Union, and for newly acquired territory not yet incorporated therein. It has been customary to organize a government with the ordinary separation of powers into executive, legislative, and judicial, and to prescribe in an organic act certain general conditions in accordance with which the local government should act. The organic act thus became the constitution of the government of the territory which had not been formally incorporated into the Union, and the validity of legislation enacted by the local legislature was determined by its conformity with the requirements of

such organic act. (National Bank vs. Yankton, 11 Otto (U. S.), 129.) To the legislative body of the local government Congress has delegated that portion of legislative power which in its wisdom it deemed necessary for the government of the territory, reserving, however, the right to annul the action of the local legislature and itself legislate directly for the territory. This power has been exercised during the entire period of the history of the United States. The right of Congress to delegate such legislative power can no longer be seriously questioned. (Dorr vs. U. S., 195 U. S., 138; U. S. vs. Heinszen, 206 U. S., 370, 385.) The Constitution of the United States does not by its own force operate within such territory, although the liberality of Congress in legislating the Constitution into contiguous territory tended to create an impression upon the minds of many people that it went there by its own force. (Downes vs. Bidwell, 182 U. S., 289.) In legislating with reference to this territory, the power of Congress is limited only by those prohibitions of the Constitution which go to the very root of its power to act at all, irrespective of time or place. In all other respects it is plenary. (De Limavs. Bidwell, 182 U. S., 1; Downes vs. Bidwell, 182 U. S., 244; Hawaii vs. Mankichi, 190 U. S., 197; Dorr vs. U. S., 195 U. S., 138; Rassmussen vs. U. S., 197 U. S., 516.) This power has been exercised by Congress throughout the whole history of the United States, and legislation founded on the theory was enacted long prior to the acquisition of the present Insular possessions. Section 1891 of the Revised Statutes of 1878 provides that "The Constitution and all laws of the United States which are not locally inapplicable shall have the same force and effect within all the organized territories, and in every Territory hereafter organized, as elsewhere within the United States." When Congress organized a civil government for the Philippines, it expressly provided that this section of the Revised Statutes should not apply to the Philippine Islands. (Sec. 1, Act of 1902.) In providing for the government of the territory which was acquired by the United States as a result of the war with Spain, the executive and legislative authorities have consistently proceeded in conformity with the principles above state. The city of Manila was surrendered to the United States on August 13, 1898, and the military commander was directed to hold the city, bay, and harbor, pending the conclusion of a peace which should determine the control, disposition, and government of the Islands. The duty then devolved upon the American authorities to preserve peace and protect person and property within the occupied territory. Provision therefor was made by proper orders, and on August 26 General Merritt assumed the duties of military governor. The treaty of peace was signed December 10, 1898. On the 22d of December, 1898, the President announced that the destruction of the Spanish fleet and the surrender of the city had practically effected the conquest of the Philippine Islands and the suspension of the Spanish sovereignty therein, and that by the treaty of peace the future control, disposition, and government of the Islands had been ceded to the United States. During the periods of strict military occupation, before the treaty of peace was ratified, and the interim thereafter, until Congress acted (Santiago vs. Noueral, 214 U.S., 260), the territory was governed under the military authority of the President as commander in chief. Long before Congress took any action, the President organized a civil government which, however, had its legal justification, like the purely military government which it gradually superseded, in the war power. The military power of the President embraced legislative, executive personally, or through such military or civil agents as he chose to select. As stated by Secretary Root in his report for 1901 The military power in exercise in a territory under military occupation includes executive, legislative, and judicial authority. It not infrequently happens that in a single order of a military commander can be found the exercise of all three of these different powers the exercise of the legislative powers by provisions prescribing a rule of action; of judicial power by determination of right; and the executive power by the enforcement of the rules prescribed and the rights determined. President McKinley desired to transform military into civil government as rapidly as conditions would permit. After full investigation, the organization of civil government was initiated by the appointment of a commission to which civil authority was to be gradually transferred. On September 1, 1900, the authority to exercise, subject to the approval of the President. "that part of the military power of the President in the Philippine Islands which is legislative in its character" was transferred from the military government to the Commission, to be exercised under such rules and regulations as should be prescribed by the Secretary of War, until such time as complete civil government should be established, or congress otherwise provided. The legislative power thus conferred upon the Commission was declared to include "the making of rules and orders having the effect of law for the raising of revenue by taxes, customs duties, and imposts; the appropriation and expenditure of public funds of

the Islands; the establishment of an educational system to secure an efficient civil service; the organization and establishment of courts; the organization and establishment of municipal and departmental government, and all other matters of a civil nature which the military governor is now competent to provide by rules or orders of a legislative character." This grant of legislative power to the Commission was to be exercised in conformity with certain declared general principles, and subject to certain specific restrictions for the protection of individual rights. The Commission were to bear in mind that the government to be instituted was "not for our satisfaction or for the expression of our theoretical views, but for the happiness, peace, and prosperity of the people of the Philippine Island, and the measures adopted should be made to conforms to their customs, their habits, and even their prejudices, to the fullest extent consistent with the accomplishment of the indispensable requisites of just and effective government." The specific restrictions upon legislative power were found in the declarations that "no person shall be deprived of life, liberty, or property without due process of law; that private property shall not be taken for public use without just compensation; that in all criminal prosecutions the accused shall enjoy the right to a speedy and public trial, to be informed of the nature and cause of the accusation, to be confronted with the witnesses against him, to have compulsory process for obtaining witnesses in his favor, and to have the assistance of counsel for his defense; that excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishment inflicted; that no person shall be put twice in jeopardy for the same offense or be compelled in any criminal case to be a witness against himself; that the right to be secure against unreasonable searches and seizures shall not be violated; that neither slavery nor involuntary servitude shall exist except as a punishment for crime; that no bill of attainder or ex post facto law shall be passed; that no law shall be passed abridging the freedom of speech or of the press or of the rights of the people to peaceably assemble and petition the Government for a redress of grievances; that no law shall be made respecting an establishment of religion or prohibiting the free exercise thereof, and that the free exercise and enjoyment of religious profession and worship without discrimination or preference shall forever be allowed." To prevent any question as to the legality of these proceedings being raised, the Spooner amendment to the Army Appropriation Bill passed March 2, 1901, provided that "all military, civil, and judicial powers necessary to govern the Philippine Islands . . . shall until otherwise provided by Congress be vested in such person and persons, and shall be exercised in such manner, as the President of the United States shall direct, for the establishment of civil government, and for maintaining and protecting the inhabitants of said Islands in the free enjoyment of their liberty, property, and religion." Thereafter, on July 4, 1901, the authority, which had been exercised previously by the military governor, was transferred to that official. The government thus created by virtue of the authority of the President as Commander in Chief of the Army and Navy continued to administer the affairs of the Islands under the direction of the President until by the Act of July 1, 1902, Congress assumed control of the situation by the enactment of a law which, in connection with the instructions of April 7, 1900, constitutes the organic law of the Philippine Islands. The Act of July 1, 1902, made no substancial changes in the form of government which the President had erected. Congress adopted the system which was in operation, and approved the action of the President in organizing the government. Substantially all the limitations which had been imposed on the legislative power by the President's instructions were included in the law, Congress thus extending to the Islands by legislative act nor the Constitution, but all its provisions for the protection of the rights and privileges of individuals which were appropriate under the conditions. The action of the President in creating the Commission with designated powers of government, in creating the office of the Governor-General and Vice-Governor-General, and through the Commission establishing certain executive departments, was expressly approved and ratified. Subsequently the action of the President in imposing a tariff before and after the ratification of the treaty of peace was also ratified and approved by Congress. (Act of March 8, 1902; Act of July 1, 1902; U.S. vs. Heinszen, 206 U.S., 370; Lincoln vs. U.S., 197 U.S., 419.) Until otherwise provided by law the Islands were to continue to be governed "as thereby and herein provided." In the future the enacting clause of all statutes should read "By authority of the United States" instead of "By the authority of the President." In the course of time the legislative authority of the Commission in all parts of the Islands not inhabited by Moros or non-Christian tribes was to be transferred to a legislature consisting of two houses the Philippine Commission and the Philippine Assembly. The government of the Islands was thus assumed by Congress under its power to govern newly acquired territory not incorporated into the United States. This Government of the Philippine Islands is not a State or a Territory, although its form and organization somewhat resembles that of both. It stands outside of the constitutional relation which unites the States and Territories into the Union. The authority for its creation and maintenance is derived from the Constitution of the United States, which, however, operates on the President and Congress, and not directly on the Philippine

Government. It is the creation of the United States, acting through the President and Congress, both deriving power from the same source, but from different parts thereof. For its powers and the limitations thereon the Government of the Philippines looked to the orders of the President before Congress acted and the Acts of Congress after it assumed control. Its organic laws are derived from the formally and legally expressed will of the President and Congress, instead of the popular sovereign constituency which lies upon any subject relating to the Philippines is primarily in Congress, and when it exercise such power its act is from the viewpoint of the Philippines the legal equivalent of an amendment of a constitution in the United States. Within the limits of its authority the Government of the Philippines is a complete governmental organism with executive, legislative, and judicial departments exercising the functions commonly assigned to such departments. The separation of powers is as complete as in most governments. In neither Federal nor State governments is this separation such as is implied in the abstract statement of the doctrine. For instance, in the Federal Government the Senate exercises executive powers, and the President to some extent controls legislation through the veto power. In a State the veto power enables him to exercise much control over legislation. The Governor-General, the head of the executive department in the Philippine Government, is a member of the Philippine Commission, but as executive he has no veto power. The President and Congress framed the government on the model with which Americans are familiar, and which has proven best adapted for the advancement of the public interests and the protection of individual rights and priviliges. In instituting this form of government of intention must have been to adopt the general constitutional doctrined which are inherent in the system. Hence, under it the Legislature must enact laws subject to the limitations of the organic laws, as Congress must act under the national Constitution, and the States under the national and state constitutions. The executive must execute such laws as are constitutionally enacted. The judiciary, as in all governments operating under written constitutions, must determine the validity of legislative enactments, as well as the legality of all private and official acts. In performing these functions it acts with the same independence as the Federal and State judiciaries in the United States. Under no other constitutional theory could there be that government of laws and not of men which is essential for the protection of rights under a free and orderly government. Such being the constitutional theory of the Government of the Philippine Islands, it is apparent that the courts must consider the question of the validity of an act of the Philippine Commission or the Philippine Legislature, as a State court considers an act of the State legislature. The Federal Government exercises such powers only as are expressly or impliedly granted to it by the Constitution of the United States, while the States exercise all powers which have not been granted to the central government. The former operates under grants, the latter subject to restrictions. The validity of an Act of Congress depends upon whether the Constitution of the United States contains a grant of express or implied authority to enact it. An act of a State legislature is valid unless the Federal or State constitution expressly or impliedly prohibits its enaction. An Act of the legislative authority of the Philippines Government which has not been expressly disapproved by Congress is valid unless its subject-matter has been covered by congressional legislation, or its enactment forbidden by some provision of the organic laws. The legislative power of the Government of the Philippines is granted in general terms subject to specific limitations. The general grant is not alone of power to legislate on certain subjects, but to exercise the legislative power subject to the restrictions stated. It is true that specific authority is conferred upon the Philippine Government relative to certain subjects of legislation, and that Congress has itself legislated upon certain other subjects. These, however, should be viewed simply as enactments on matters wherein Congress was fully informed and ready to act, and not as implying any restriction upon the local legislative authority in other matters. (See Opinion of Atty. Gen. of U. S., April 16, 1908.) The fact that Congress reserved the power to annul specific acts of legislation by the Government of the Philippine tends strongly to confirm the view that for purposes of construction the Government of the Philippines should be regarded as one of general instead of enumerated legislative powers. The situation was unusual. The new government was to operate far from the source of its authority. To relieve Congress from the necessity of legislating with reference to details, it was thought better to grant general legislative power to the new government, subject to broad and easily understood prohibitions, and reserve to Congress the power to annul its acts if they met with disapproval. It was therefore provided "that all laws passed by the Government of the Philippine Islands shall be reported to Congress, which hereby reserves the power and authority to annul

the same." (Act of Congress, July 1, 1902, sec. 86.) This provision does not suspend the acts of the Legislature of the Philippines until approved by Congress, or when approved, expressly or by acquiescence, make them the laws of Congress. They are valid acts of the Government of the Philippine Islands until annulled. (Miners Bank vs. Iowa, 12 How. (U. S.), 1.) In order to determine the validity of Act No. 55 we must then ascertain whether the Legislature has been expressly or implication forbidden to enact it. Section 3, Article IV, of the Constitution of the United States operated only upon the States of the Union. It has no application to the Government of the Philippine Islands. The power to regulate foreign commerce is vested in Congress, and by virtue of its power to govern the territory belonging to the United States, it may regulate foreign commerce with such territory. It may do this directly, or indirectly through a legislative body created by it, to which its power in this respect if delegate. Congress has by direct legislation determined the duties which shall be paid upon goods imported into the Philippines, and it has expressly authorized the Government of the Philippines to provide for the needs of commerce by improving harbors and navigable waters. A few other specific provisions relating to foreign commerce may be found in the Acts of Congress, but its general regulation is left to the Government of the Philippines, subject to the reserved power of Congress to annul such legislation as does not meet with its approval. The express limitations upon the power of the Commission and Legislature to legislate do not affect the authority with respect to the regulation of commerce with foreign countries. Act No. 55 was enacted before Congress took over the control of the Islands, and this act was amended by Act No. 275 after the Spooner amendment of March 2, 1901, was passed. The military government, and the civil government instituted by the President, had the power, whether it be called legislative or administrative, to regulate commerce between foreign nations and the ports of the territory. (Cross vs. Harrison, 16 How. (U.S.), 164, 190; Hamilton vs. Dillin, 21 Wall. (U.S.), 73, 87.) This Act has remained in force since its enactment without annulment or other action by Congress, and must be presumed to have met with its approval. We are therefore satisfied that the Commission had, and the Legislature now has, full constitutional power to enact laws for the regulation of commerce between foreign countries and the ports of the Philippine Islands, and that Act No. 55, as amended by Act No. 275, is valid. 3. Whether a certain method of handling cattle is suitable within the meaning of the Act can not be left to the judgment of the master of the ship. It is a question which must be determined by the court from the evidence. On December 2, 1908, the defendant Bull brought into and disembarked in the port and city of Manila certain cattle, which came from the port of Ampieng, Formosa, without providing suitable means for securing said animals while in transit, so as to avoid cruelty and unnecessary suffering to said animals, contrary to the provisions of section 1 of Act No. 55, as amended by section 1 of Act No. 275. The trial court found the following facts, all of which are fully sustained by the evidence: That the defendant, H. N. Bull, as captain and master of the Norwegian steamer known as the Standard, for a period of six months or thereabouts prior to the 2d day of December, 1908, was engaged in the transportation of cattle and carabaos from Chines and Japanese ports to and into the city of Manila, Philippine Islands. That on the 2d day of December, 1908, the defendant, as such master and captain as aforesaid, brought into the city of Manila, aboard said ship, a large number of cattle, which ship was anchored, under the directions of the said defendant, behind the breakwaters in front of the city of Manila, in Manila Bay, and within the jurisdiction of this court; and that fifteen of said cattle then and there had broken legs and three others of said cattle were dead, having broken legs; and also that said cattle were transported and carried upon said ship as aforesaid by the defendant, upon the deck and in the hold of said ship, without suitable precaution and care for the transportation of said animals, and to avoid danger and risk to their lives and security; and further that said cattle were so transported abroad said ship by the defendant and brought into the said bay, and into the city of Manila, without any provisions being made whatever upon said decks of said ship and in the hold thereof to maintain said cattle in a suitable condition and position for such transportation. That a suitable and practicable manner in which to transport cattle abroad steamship coming into Manila Bay and unloading in the city of Manila is by way of individual stalls for such cattle, providing partitions between the cattle and supports at the front sides, and rear thereof, and cross-cleats upon the floor on which they stand and are transported, of that in case of storms, which are common in this

community at sea, such cattle may be able to stand without slipping and pitching and falling, individually or collectively, and to avoid the production of panics and hazard to the animals on account or cattle were transported in this case. Captain Summerville of the steamship Taming, a very intelligent and experienced seaman, has testified, as a witness in behalf of the Government, and stated positively that since the introduction in the ships with which he is acquainted of the stall system for the transportation of animals and cattle he has suffered no loss whatever during the last year. The defendant has testified, as a witness in his own behalf, that according to his experience the system of carrying cattle loose upon the decks and in the hold is preferable and more secure to the life and comfort of the animals, but this theory of the case is not maintainable, either by the proofs or common reason. It can not be urged with logic that, for instance, three hundred cattle supports for the feet and without stalls or any other protection for them individually can safely and suitably carried in times of storm upon the decks and in the holds of ships; such a theory is against the law of nature. One animal falling or pitching, if he is untied or unprotected, might produce a serious panic and the wounding of half the animals upon the ship if transported in the manner found in this case. The defendant was found guilty, and sentenced to pay a fine of two hundred and fifty pesos, with subsidiary imprisonment in case of insolvency, and to pay the costs. The sentence and judgment is affirmed. So ordered. Arellano, C.J., Torres, Johnson, Carson and Moreland, JJ., concur. G.R. No. 122494 October 8, 1998 EVERETT STEAMSHIP CORPORATION, petitioner, vs. COURT OF APPEALS and HERNANDEZ TRADING CO. INC., respondents.

MARTINEZ, J.: Petitioner Everett Steamship Corporation, through this petition for review, seeks the reversal of the decision 1 of the Court of Appeals, dated June 14, 1995, in CA-G.R. No. 428093, which affirmed the decision of the Regional Trial Court of Kalookan City, Branch 126, in Civil Case No. C-15532, finding petitioner liable to private respondent Hernandez Trading Co., Inc. for the value of the lost cargo. Private respondent imported three crates of bus spare parts marked as MARCO C/No. 12, MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The crates were shipped from Nagoya, Japan to Manila on board "ADELFAEVERETTE," a vessel owned by petitioner's principal, Everett Orient Lines. The said crates were covered by Bill of Lading No. NGO53MN. Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. This was confirmed and admitted by petitioner in its letter of January 13, 1992 addressed to private respondent, which thereafter made a formal claim upon petitioner for the value of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated November 14, 1991. However, petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading which limits the liability of petitioner. Private respondent rejected the offer and thereafter instituted a suit for collection docketed as Civil Case No. C15532, against petitioner before the Regional Trial Court of Caloocan City, Branch 126. At the pre-trial conference, both parties manifested that they have no testimonial evidence to offer and agreed instead to file their respective memoranda.

On July 16, 1993, the trial court rendered judgment 2 in favor of private respondent, ordering petitioner to pay: (a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the actual value of the lost cargo and the material and packaging cost; (c) 10% of the total amount as an award for and as contingent attorney's fees; and (d) to pay the cost of the suit. The trial court ruled: Considering defendant's categorical admission of loss and its failure to overcome the presumption of negligence and fault, the Court conclusively finds defendant liable to the plaintiff. The next point of inquiry the Court wants to resolve is the extent of the liability of the defendant. As stated earlier, plaintiff contends that defendant should be held liable for the whole value for the loss of the goods in the amount of Y1,552,500.00 because the terms appearing at the back of the bill of lading was so written in fine prints and that the same was not signed by plaintiff or shipper thus, they are not bound by clause stated in paragraph 18 of the bill of lading. On the other hand, defendant merely admitted that it lost the shipment but shall be liable only up to the amount of Y100,000.00. The Court subscribes to the provisions of Article 1750 of the New Civil Code Art. 1750. "A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon." It is required, however, that the contract must be reasonable and just under the circumstances and has been fairly and freely agreed upon. The requirements provided in Art. 1750 of the New Civil Code must be complied with before a common carrier can claim a limitation of its pecuniary liability in case of loss, destruction or deterioration of the goods it has undertaken to transport. In the case at bar, the Court is of the view that the requirements of said article have not been met. The fact that those conditions are printed at the back of the bill of lading in letters so small that they are hard to read would not warrant the presumption that the plaintiff or its supplier was aware of these conditions such that he had "fairly and freely agreed" to these conditions. It can not be said that the plaintiff had actually entered into a contract with the defendant, embodying the conditions as printed at the back of the bill of lading that was issued by the defendant to plaintiff. On appeal, the Court of Appeals deleted the award of attorney's fees but affirmed the trial court's findings with the additional observation that private respondent can not be bound by the terms and conditions of the bill of lading because it was not privy to the contract of carriage. It said: As to the amount of liability, no evidence appears on record to show that the appellee (Hernandez Trading Co.) consented to the terms of the Bill of Lading. The shipper named in the Bill of Lading is Maruman Trading Co., Ltd. whom the appellant (Everett Steamship Corp.) contracted with for the transportation of the lost goods. Even assuming arguendo that the shipper Maruman Trading Co., Ltd. accepted the terms of the bill of lading when it delivered the cargo to the appellant, still it does not necessarily follow that appellee Hernandez Trading, Company as consignee is bound thereby considering that the latter was never privy to the shipping contract. xxx xxx xxx Never having entered into a contract with the appellant, appellee should therefore not be bound by any of the terms and conditions in the bill of lading.

Hence, it follows that the appellee may recover the full value of the shipment lost, the basis of which is not the breach of contract as appellee was never a privy to the any contract with the appellant, but is based on Article 1735 of the New Civil Code, there being no evidence to prove satisfactorily that the appellant has overcome the presumption of negligence provided for in the law. Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling that the consent of the consignee to the terms and conditions of the bill of lading is necessary to make such stipulations binding upon it; (2) in holding that the carrier's limited package liability as stipulated in the bill of lading does not apply in the instant case; and (3) in allowing private respondent to fully recover the full alleged value of its lost cargo. We shall first resolve the validity of the limited liability clause in the bill of lading. A stipulation in the bill of lading limiting the common carrier's liability for loss or destruction of a cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which provide: Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and fairly agreed upon. Such limited-liability clause has also been consistently upheld by this Court in a number of cases. 3 Thus, in Sea Land Service, Inc. vs. Intermediate Appellate Court 4, we ruled: It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect of the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to questioning the justness and fairness of the law itself, and this the private respondent does not pretend to do. But over and above that consideration, the just and reasonable character of such stipulation is implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading. Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carrier's liability for loss must be "reasonable and just under the circumstances, and has been freely and fairly agreed upon." The bill of lading subject of the present controversy specifically provides, among others: 18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shipper's net invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any consequential loss. The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding One Hundred thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in any other currency per package or customary freight unit (whichever is least) unless the value of the goods higher than this amount is declared in writing by the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as required. (Emphasis supplied)

The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations. The trial court's ratiocination that private respondent could not have "fairly and freely" agreed to the limited liability clause in the bill of lading because the said conditions were printed in small letters does not make the bill of lading invalid. We ruled in PAL, Inc. vs. Court of Appeals 5 that the "jurisprudence on the matter reveals the consistent holding of the court that contracts of adhesion are not invalid per se and that it has on numerous occasions upheld the binding effect thereof." Also, in Philippine American General Insurance Co., Inc. vs. Sweet Lines, Inc. 6 this Court, speaking through the learned Justice Florenz D. Regalado, held: . . . Ong Yiu vs. Court of Appeals, et. al., instructs us that "contracts of adhesion wherein one party imposes a ready-made form of contract on the other . . . are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if the adheres he gives his consent." In the present case, not even an allegation of ignorance of a party excuses non-compliance with the contractual stipulations since the responsibility for ensuring full comprehension of the provisions of a contract of carriage devolves not on the carrier but on the owner, shipper, or consignee as the case may be. (Emphasis supplied) It was further explained in Ong Yiu vs. Court of Appeals 7 that stipulations in contracts of adhesion are valid and binding. While it may be true that petitioner had not signed the plane ticket . . ., he is nevertheless bound by the provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation." It is what is known as a contract of "adhesion," in regards which it has been said that contracts of adhesion wherein one party imposes a ready-made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. . . ., a contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence. (Emphasis supplied) Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in that the said contracts must be carefully scrutinized "in order to shield the unwary (or weaker party) from deceptive schemes contained in ready-made covenants," 8 such as the bill of lading in question. The stringent requirement which the courts are enjoined to observe is in recognition of Article 24 of the Civil Code which mandates that "(i)n all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection." The shipper, Maruman Trading, we assume, has been extensively engaged in the trading business. It can not be said to be ignorant of the business transactions it entered into involving the shipment of its goods to its customers. The shipper could not have known, or should know the stipulations in the bill of lading and there it should have declared a higher valuation of the goods shipped. Moreover, Maruman Trading has not been heard to complain that it has been deceived or rushed into agreeing to ship the cargo in petitioner's vessel. In fact, it was not even impleaded in this case. The next issue to be resolved is whether or not private respondent, as consignee, who is not a signatory to the bill of lading is bound by the stipulations thereof.

Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that even if the consignee was not a signatory to the contract of carriage between the shipper and the carrier, the consignee can still be bound by the contract. Speaking through Mr. Chief Justice Narvasa, we ruled: To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to recover from the carrier or shipper for loss of, or damage to goods being transported under said bill, although that document may have been-as in practice it oftentimes is-drawn up only by the consignor and the carrier without the intervention of the onsignee. . . . . . . . the right of a party in the same situation as respondent here, to recover for loss of a shipment consigned to him under a bill of lading drawn up only by and between the shipper and the carrier, springs from either a relation of agency that may exist between him and the shipper or consignor, or his status as stranger in whose favor some stipulation is made in said contract, and who becomes a party thereto when he demands fulfillment of that stipulation, in this case the delivery of the goods or cargo shipped. In neither capacity can he assert personally, in bar to any provision of the bill of lading, the alleged circumstance that fair and free agreement to such provision was vitiated by its being in such fine print as to be hardly readable. Parenthetically, it may be observed that in one comparatively recent case (Phoenix Assurance Company vs. Macondray & Co., Inc., 64 SCRA 15) where this Court found that a similar package limitation clause was "printed in the smallest type on the back of the bill of lading," it nonetheless ruled that the consignee was bound thereby on the strength of authority holding that such provisions on liability limitation are as much a part of a bill of lading as through physically in it and as though placed therein by agreement of the parties. There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and inserts it into said contract or bill. This proposition, moreover, rests upon an almost uniform weight of authority. (Emphasis supplied). When private respondent formally claimed reimbursement for the missing goods from petitioner and subsequently filed a case against the latter based on the very same bill of lading, it (private respondent) accepted the provisions of the contract and thereby made itself a party thereto, or at least has come to court to enforce it. 9 Thus, private respondent cannot now reject or disregard the carrier's limited liability stipulation in the bill of lading. In other words, private respondent is bound by the whole stipulations in the bill of lading and must respect the same. Private respondent, however, insists that the carrier should be liable for the full value of the lost cargo in the amount of Y1,552,500.00, considering that the shipper, Maruman Trading, had "fully declared the shipment . . ., the contents of each crate, the dimensions, weight and value of the contents," 10 as shown in the commercial Invoice No. MTM-941. This claim was denied by petitioner, contending that it did not know of the contents, quantity and value of "the shipment which consisted of three pre-packed crates described in Bill of Lading No. NGO-53MN merely as '3 CASES SPARE PARTS.'" 11 The bill of lading in question confirms petitioner's contention. To defeat the carrier's limited liability, the aforecited Clause 18 of the bill of lading requires that the shipper should have declared in writing a higher valuation of its goods before receipt thereof by the carrier and insert the said declaration in the bill of lading, with extra freight paid. These requirements in the bill of lading were never complied with by the shipper, hence, the liability of the carrier under the limited liability clause stands. The commercial Invoice No. MTM-941 does not in itself sufficiently and convincingly show that petitioner has knowledge of the value of the cargo as contended by private respondent. No other evidence was proffered by private respondent to support is contention. Thus, we are convinced that petitioner should be liable for the full value of the lost cargo.

In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the bill of lading. WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in C.A.-G.R. CV No. 42803 is hereby REVERSED and SET ASIDE. SO ORDERED. G.R. No. L-69044 May 29, 1987 EASTERN SHIPPING LINES, INC., petitioner, vs. INTERMEDIATE APPELLATE COURT and DEVELOPMENT INSURANCE & SURETY CORPORATION,respondents. No. 71478 May 29, 1987 EASTERN SHIPPING LINES, INC., petitioner, vs. THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE & MARINE INSURANCE CO., LTD.,respondents.

MELENCIO-HERRERA, J.: These two cases, both for the recovery of the value of cargo insurance, arose from the same incident, the sinking of the M/S ASIATICA when it caught fire, resulting in the total loss of ship and cargo. The basic facts are not in controversy: In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel operated by petitioner Eastern Shipping Lines, Inc., (referred to hereinafter as Petitioner Carrier) loaded at Kobe, Japan for transportation to Manila, 5,000 pieces of calorized lance pipes in 28 packages valued at P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc. Both sets of goods were insured against marine risk for their stated value with respondent Development Insurance and Surety Corporation. In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons of garment fabrics and accessories, in two (2) containers, consigned to Mariveles Apparel Corporation, and two cases of surveying instruments consigned to Aman Enterprises and General Merchandise. The 128 cartons were insured for their stated value by respondent Nisshin Fire & Marine Insurance Co., for US $46,583.00, and the 2 cases by respondent Dowa Fire & Marine Insurance Co., Ltd., for US $11,385.00. Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respective respondent Insurers paid the corresponding marine insurance values to the consignees concerned and were thus subrogated unto the rights of the latter as the insured. G.R. NO. 69044 On May 11, 1978, respondent Development Insurance & Surety Corporation (Development Insurance, for short), having been subrogated unto the rights of the two insured companies, filed suit against petitioner Carrier for the recovery of the amounts it had paid to the insured before the then Court of First instance of Manila, Branch XXX (Civil Case No. 6087).

Petitioner-Carrier denied liability mainly on the ground that the loss was due to an extraordinary fortuitous event, hence, it is not liable under the law. On August 31, 1979, the Trial Court rendered judgment in favor of Development Insurance in the amounts of P256,039.00 and P92,361.75, respectively, with legal interest, plus P35,000.00 as attorney's fees and costs. Petitioner Carrier took an appeal to the then Court of Appeals which, on August 14, 1984, affirmed. Petitioner Carrier is now before us on a Petition for Review on Certiorari. G.R. NO. 71478 On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short), and Dowa Fire & Marine Insurance Co., Ltd. (DOWA, for brevity), as subrogees of the insured, filed suit against Petitioner Carrier for the recovery of the insured value of the cargo lost with the then Court of First Instance of Manila, Branch 11 (Civil Case No. 116151), imputing unseaworthiness of the ship and non-observance of extraordinary diligence by petitioner Carrier. Petitioner Carrier denied liability on the principal grounds that the fire which caused the sinking of the ship is an exempting circumstance under Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established, the burden of proving negligence of the vessel is shifted to the cargo shipper. On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and DOWA in the amounts of US $46,583.00 and US $11,385.00, respectively, with legal interest, plus attorney's fees of P5,000.00 and costs. On appeal by petitioner, the then Court of Appeals on September 10, 1984, affirmed with modification the Trial Court's judgment by decreasing the amount recoverable by DOWA to US $1,000.00 because of $500 per package limitation of liability under the COGSA. Hence, this Petition for Review on certiorari by Petitioner Carrier. Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16, 1985 by the First Division, and G. R. No. 71478 on September 25, 1985 by the Second Division. Upon Petitioner Carrier's Motion for Reconsideration, however, G.R. No. 69044 was given due course on March 25, 1985, and the parties were required to submit their respective Memoranda, which they have done. On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of the Resolution denying the Petition for Review and moved for its consolidation with G.R. No. 69044, the lower-numbered case, which was then pending resolution with the First Division. The same was granted; the Resolution of the Second Division of September 25, 1985 was set aside and the Petition was given due course. At the outset, we reject Petitioner Carrier's claim that it is not the operator of the M/S Asiatica but merely a charterer thereof. We note that in G.R. No. 69044, Petitioner Carrier stated in its Petition:

There are about 22 cases of the "ASIATICA" pending in various courts where various plaintiffs are represented by various counsel representing various consignees or insurance companies. The common defendant in these cases is petitioner herein, being the operator of said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a general rule, the facts alleged in a party's pleading are deemed admissions of that party and binding upon it. 2 And an admission in one pleading in one action may be received in evidence against the pleader or his successor-in-interest on the trial of another action to which he is a party, in favor of a party to the latter action. 3 The threshold issues in both cases are: (1) which law should govern the Civil Code provisions on Common carriers or the Carriage of Goods by Sea Act? and (2) who has the burden of proof to show negligence of the carrier?

On the Law Applicable The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration. 4 As the cargoes in question were transported from Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the Civil Code. 5 However, in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws. 6 Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code. 7 On the Burden of Proof Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over goods, according to all the circumstances of each case. 8 Common carriers are responsible for the loss, destruction, or deterioration of the goods unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning or other natural disaster or calamity;

xxx xxx xxx 9

Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase "natural disaster or calamity. " However, we are of the opinion that fire may not be considered a natural disaster or calamity. This must be so as it arises almost invariably from some act of man or by human means. 10 It does not fall within the category of an act of God unless caused by lightning 11 or by other natural disaster or calamity. 12 It may even be caused by the actual fault or privity of the carrier. 13 Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases of rural lands where a reduction of the rent is allowed when more than one-half of the fruits have been lost due to such event, considering that the law adopts a protection policy towards agriculture. 14 As the peril of the fire is not comprehended within the exception in Article 1734, supra, Article 1735 of the Civil Code provides that all cases than those mention in Article 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary deligence required by law. In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that the transported goods have been lost. Petitioner Carrier has also proved that the loss was caused by fire. The burden then is upon Petitioner Carrier to proved that it has exercised the extraordinary diligence required by law. In this regard, the Trial Court, concurred in by the Appellate Court, made the following Finding of fact: The cargoes in question were, according to the witnesses defendant placed in hatches No, 2 and 3 cf the vessel, Boatswain Ernesto Pastrana noticed that smoke was coming out from hatch No. 2 and hatch No. 3; that where the smoke was noticed, the fire was already big; that the fire must have started twenty-four 24) our the same was noticed; that carbon dioxide was ordered released and the crew was ordered to open the hatch covers of No, 2 tor commencement of fire fighting by sea water: that all of these effort were not enough to control the fire.

Pursuant to Article 1733, common carriers are bound to extraordinary diligence in the vigilance over the goods. The evidence of the defendant did not show that extraordinary vigilance was observed by the vessel to prevent the occurrence of fire at hatches numbers 2 and 3. Defendant's evidence did not likewise show he amount of diligence made by the crew, on orders, in the care of the cargoes. What appears is that after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage. Consequently, the crew could not have even explain what could have

caused the fire. The defendant, in the Court's mind, failed to satisfactorily show that extraordinary vigilance and care had been made by the crew to prevent the occurrence of the fire. The defendant, as a common carrier, is liable to the consignees for said lack of deligence required of it under Article 1733 of the Civil Code. 15
Having failed to discharge the burden of proving that it had exercised the extraordinary diligence required by law, Petitioner Carrier cannot escape liability for the loss of the cargo. And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is required under Article 1739 of the same Code that the "natural disaster" must have been the "proximate and only cause of the loss," and that the carrier has "exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster. " This Petitioner Carrier has also failed to establish satisfactorily. Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act, It is provided therein that: Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from (b) Fire, unless caused by the actual fault or privity of the carrier. xxx xxx xxx In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that there was "actual fault" of the carrier shown by "lack of diligence" in that "when the smoke was noticed, the fire was already big; that the fire must have started twenty-four (24) hours before the same was noticed; " and that "after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage." The foregoing suffices to show that the circumstances under which the fire originated and spread are such as to show that Petitioner Carrier or its servants were negligent in connection therewith. Consequently, the complete defense afforded by the COGSA when loss results from fire is unavailing to Petitioner Carrier. On the US $500 Per Package Limitation: Petitioner Carrier avers that its liability if any, should not exceed US $500 per package as provided in section 4(5) of the COGSA, which reads: (5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in bill of lading. This declaration if embodied in the bill of lading shall be prima facie evidence, but all be conclusive on the carrier. By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, That such maximum shall not be less than the figure above named. In no event shall the carrier be Liable for more than the amount of damage actually sustained. xxx xxx xxx Article 1749 of the New Civil Code also allows the limitations of liability in this wise:

Art. 1749. A stipulation that the common carrier's liability as limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed amount per package although the Code expressly permits a stipulation limiting such liability. Thus, the COGSA which is suppletory to the provisions of the Civil Code, steps in and supplements the Code by establishing a statutory provision limiting the carrier's liability in the absence of a declaration of a higher value of the goods by the shipper in the bill of lading. The provisions of the Carriage of Goods by.Sea Act on limited liability are as much a part of a bill of lading as though physically in it and as much a part thereof as though placed therein by agreement of the parties. 16 In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for the loss or destruction of the goods. Nor is there a declaration of a higher value of the goods. Hence, Petitioner Carrier's liability should not exceed US $500 per package, or its peso equivalent, at the time of payment of the value of the goods lost, but in no case "more than the amount of damage actually sustained." The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 (Exhibit "C"), which was exactly the amount of the insurance coverage by Development Insurance (Exhibit "A"), and the amount affirmed to be paid by respondent Court. The goods were shipped in 28 packages (Exhibit "C-2") Multiplying 28 packages by $500 would result in a product of $14,000 which, at the current exchange rate of P20.44 to US $1, would be P286,160, or "more than the amount of damage actually sustained." Consequently, the aforestated amount of P256,039 should be upheld. With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value was P92,361.75 (Exhibit "I"), which is likewise the insured value of the cargo (Exhibit "H") and amount was affirmed to be paid by respondent Court. however, multiplying seven (7) cases by $500 per package at the present prevailing rate of P20.44 to US $1 (US $3,500 x P20.44) would yield P71,540 only, which is the amount that should be paid by Petitioner Carrier for those spare parts, and not P92,361.75. In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are concerned, the amount awarded to DOWA which was already reduced to $1,000 by the Appellate Court following the statutory $500 liability per package, is in order. In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and insured with NISSHIN, the Appellate Court also limited Petitioner Carrier's liability to $500 per package and affirmed the award of $46,583 to NISSHIN. it multiplied 128 cartons (considered as COGSA packages) by $500 to arrive at the figure of $64,000, and explained that "since this amount is more than the insured value of the goods, that is $46,583, the Trial Court was correct in awarding said amount only for the 128 cartons, which amount is less than the maximum limitation of the carrier's liability." We find no reversible error. The 128 cartons and not the two (2) containers should be considered as the shipping unit. In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of tin ingots and the shipper of floor covering brought action against the vessel owner and operator to recover for loss of ingots and floor covering, which had been shipped in vessel supplied containers. The U.S. District Court for the Southern District of New York rendered judgment for the plaintiffs, and the defendant appealed. The United States Court of Appeals, Second Division, modified and affirmed holding that: When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the "package" referred to in liability limitation provision of Carriage of Goods by Sea Act. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A.& 1304(5).

Even if language and purposes of Carriage of Goods by Sea Act left doubt as to whether carrier-furnished containers whose contents are disclosed should be treated as packages, the interest in securing international uniformity would suggest that they should not be so treated. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5). ... After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that treating a container as a package is inconsistent with the congressional purpose of establishing a reasonable minimum level of liability, Judge Beeks wrote, 414 F. Supp. at 907 (footnotes omitted): Although this approach has not completely escaped criticism, there is, nonetheless, much to commend it. It gives needed recognition to the responsibility of the courts to construe and apply the statute as enacted, however great might be the temptation to "modernize" or reconstitute it by artful judicial gloss. If COGSA's package limitation scheme suffers from internal illness, Congress alone must undertake the surgery. There is, in this regard, obvious wisdom in the Ninth Circuit's conclusion in Hartford that technological advancements, whether or not forseeable by the COGSA promulgators, do not warrant a distortion or artificial construction of the statutory term "package." A ruling that these large reusable metal pieces of transport equipment qualify as COGSA packages at least where, as here, they were carrier owned and supplied would amount to just such a distortion. Certainly, if the individual crates or cartons prepared by the shipper and containing his goods can rightly be considered "packages" standing by themselves, they do not suddenly lose that character upon being stowed in a carrier's container. I would liken these containers to detachable stowage compartments of the ship. They simply serve to divide the ship's overall cargo stowage space into smaller, more serviceable loci. Shippers' packages are quite literally "stowed" in the containers utilizing stevedoring practices and materials analogous to those employed in traditional on board stowage. In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on other grounds, 595 F 2nd 943 (4 Cir. 1979), another district with many maritime cases followed Judge Beeks' reasoning in Matsushita and similarly rejected the functional economics test. Judge Kellam held that when rolls of polyester goods are packed into cardboard cartons which are then placed in containers, the cartons and not the containers are the packages. xxx xxx xxx The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test: Eurygenes concerned a shipment of stereo equipment packaged by the shipper into cartons which were then placed by the shipper into a carrier- furnished container. The number of cartons was disclosed to the carrier in the bill of lading. Eurygenes followed the Mitsui test and treated the cartons, not the container, as the COGSA packages. However, Eurygenes indicated that a carrier could limit its liability to $500 per container if the bill of lading failed to disclose the number of cartons or units within the container, or if the parties indicated, in clear and unambiguous language, an agreement to treat the container as the package. (Admiralty Litigation in Perpetuum: The Continuing Saga of Package Limitations and Third World Delivery Problems by Chester D. Hooper & Keith L. Flicker, published in Fordham International Law Journal, Vol. 6, 1982-83, Number 1) (Emphasis supplied)

In this case, the Bill of Lading (Exhibit "A") disclosed the following data: 2 Containers (128) Cartons) Men's Garments Fabrics and Accessories Freight Prepaid Say: Two (2) Containers Only. Considering, therefore, that the Bill of Lading clearly disclosed the contents of the containers, the number of cartons or units, as well as the nature of the goods, and applying the ruling in the Mitsui and Eurygenes cases it is clear that the 128 cartons, not the two (2) containers should be considered as the shipping unit subject to the $500 limitation of liability. True, the evidence does not disclose whether the containers involved herein were carrier-furnished or not. Usually, however, containers are provided by the carrier. 19 In this case, the probability is that they were so furnished for Petitioner Carrier was at liberty to pack and carry the goods in containers if they were not so packed. Thus, at the dorsal side of the Bill of Lading (Exhibit "A") appears the following stipulation in fine print: 11. (Use of Container) Where the goods receipt of which is acknowledged on the face of this Bill of Lading are not already packed into container(s) at the time of receipt, the Carrier shall be at liberty to pack and carry them in any type of container(s). The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the Bill of Lading, meaning that the goods could probably fit in two (2) containers only. It cannot mean that the shipper had furnished the containers for if so, "Two (2) Containers" appearing as the first entry would have sufficed. and if there is any ambiguity in the Bill of Lading, it is a cardinal principle in the construction of contracts that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. 20 This applies with even greater force in a contract of adhesion where a contract is already prepared and the other party merely adheres to it, like the Bill of Lading in this case, which is draw. up by the carrier. 21 On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No. 69044 only) Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the depositions of its witnesses in Japan by written interrogatories. We do not agree. petitioner Carrier was given- full opportunity to present its evidence but it failed to do so. On this point, the Trial Court found: xxx xxx xxx Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time from June 27, 1978, when its answer was prepared and filed in Court, until September 26, 1978, when the pre-trial conference was conducted for the last time, the defendant had more than nine months to prepare its evidence. Its belated notice to take deposition on written interrogatories of its witnesses in Japan, served upon the plaintiff on August 25th, just two days before the hearing set for August 27th, knowing fully well that it was its undertaking on July 11 the that the deposition of the witnesses would be dispensed with if by next time it had not yet been obtained, only proves the lack of merit of the defendant's motion for postponement, for which reason it deserves no sympathy from the Court in that regard. The defendant has told the Court since February 16, 1979, that it was going to take the deposition of its witnesses in Japan. Why did it take until August 25, 1979, or more than six months, to prepare its written interrogatories. Only the defendant itself is to blame for its failure to adduce evidence in support of its defenses.

xxx xxx xxx 22

Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot complain now that it was denied due process when the Trial Court rendered its Decision on the basis of the evidence adduced. What due process abhors is absolute lack of opportunity to be heard. 24 On the Award of Attorney's Fees: Petitioner Carrier questions the award of attorney's fees. In both cases, respondent Court affirmed the award by the Trial Court of attorney's fees of P35,000.00 in favor of Development Insurance in G.R. No. 69044, and P5,000.00 in favor of NISSHIN and DOWA in G.R. No. 71478. Courts being vested with discretion in fixing the amount of attorney's fees, it is believed that the amount of P5,000.00 would be more reasonable in G.R. No. 69044. The award of P5,000.00 in G.R. No. 71478 is affirmed. WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern Shipping Lines shall pay the Development Insurance and Surety Corporation the amount of P256,039 for the twenty-eight (28) packages of calorized lance pipes, and P71,540 for the seven (7) cases of spare parts, with interest at the legal rate from the date of the filing of the complaint on June 13, 1978, plus P5,000 as attorney's fees, and the costs. 2) In G.R.No.71478,the judgment is hereby affirmed. SO ORDERED.