Smart Communications vs. NTC
GR 151908, 12 August 2003; First Division, Ynares-Santiago (J)

Facts: On 16 June 2000, the NTC issued Memorandum Circular 13-6-2000, promulgating rules and regulations on the billing of telecommunications services; which includes provisions pertaining to the use and sale of pre-paid cards and unit of billing for cellular mobile telephone service (CMTS). On 30 August 2000, the NTC issued a memorandum to all CMTS operators which contained measures to minimize if not totally eliminate the incidence of stealing of cellular phone units. Another memorandum dated 6 October 2000 addressed to all telecommunications entities reminding them that the validity of all prepaid cards and SIM packs sold and used on 7 October 2000 and beyond shall be valid for at least 2 years from the date of first use. On 20 October 2000, Islacom and Piltel questioned the validity of the memoranda, and prayed for the issuance of a writ of preliminary injunction. The lower court granted the issuance of the injunction. NTC moved for reconsideration, but was denied. NTC thereafter filed a special civil action for certiorari and probation before the Court of Appeals. The appellate court granted the petition and dismissed the companies’ complaint without prejudice to the referral of their grievances with the NTC. Hence, the petition for review with the Supreme Court.

Issue: Whether a party should have exhausted administrative remedies before it filed the case in court.

Held: A party need not exhaust administrative remedies before going to Court, when questioning the validity or constitutionality of a rule or regulation issued by an administrative agency. The principle only applies when the act of the agency was performed pursuant to its quasi-judicial function, and not when the assailed and pertained to its rule-making or quasi-legislative power.

Issue: Whether the court or NTC has jurisdiction over the issues pertaining to the memoranda.

Held: The issues raised in the complaint do not entail highly technical matters, and thus are within the competence of a judge in the lower court. What is required of the judge who will resolve the issue is a basic familiarity with the workings of the cellular telephone service, including pre-paid SIM and call cards (which is within the knowledge of a good percentage of the Philippine population) and expertise in fundamental principles of civil law and the Constitution.

GMCR vs. Bell Telecommunication Philippines (BellTel)
GR 126496, 30 April 1997; First Division, Hermosisima Jr. (J)

Facts: On 19 October 1993, BellTel filed with the NTC an application for a certificate of public convenience with a further request for the issuance of a provisional authority (NTC Case 93-481). On 25 March 1994, RA 7692 was enacted granting BellTel a legislative franchise to operate business of providing telecommunication services. In 12 July 1994, BellTel a legislative franchise to operate business of providing telecommunication services. On 12 July 1994, BellTel filed a second application for a certificate of public convenience, proposing to install 2.6 million telephone lines in 10 years and to provide a 100% digital local exchange network (NTC Case 94-229). It also moved for the withdrawal of the first application, without prejudice, which was granted by the NTC. BellTel’s application (2nd ) was opposed by various telecommunication companies. BellTel’s application was referred to the Common Carriers Authorization Department (CCAD), which found BellTel’s proposal technically feasible and BellTel to be financially capable. The two deputy commissioners of the NTC signified their approval of the CCAD recommendation. The working draft was prepared by the legal department, was initialed by the two deputy commissioners, but was not signed by NTC Commissioner Simeon Kintanar. BellTel filed a motion to promulgate, after previously filing two urgent ex-parte motion to resolve application which were not acted upon by the NTC. On 4 July 1995, the NTC denied the motion in an order signed solely by Commissioner Kintanar. On 17 July 1995, BellTel filed a petition for certiorari, mandamus and prohibition against NTC before the Supreme Court. The Court referred the case to the Court of Appeals pursuant to Paragraph 1, Section 9 of BP 129. The Court of Appeals granted BellTel’s position. Hence, the petitions for review by the opposing telecommunication companies and Commissioner Kintanar.

Issue: Whether the vote of the Chairman of the Commission is sufficient to legally render an NTC order, resolution or decision.

Held: Having been organized under Executive Order 146 as a three-man commission, the NTC is a collegial body and was a collegial body even during the time it was acting as a one-man regime. NTC is a collegial body requiring a majority vote out of three members of the commission in order to validly decide a case or any incident therein. The vote alone of the chairman of the Commission, absent the required concurring vote coming from the rest of the membership of the commission to at least arrive at a majority decision, is not sufficient to legally render an NTC order, resolution or decision. NTC Circulars 1-1-93, 3-1-93 and the Order of Kintanar, declaring the NTC as a single entity or non-collegial entity, are contrary to law and thus are null and void.

Republic vs. Meralco
GR 141314, 15 November 2002; Third Divsiion, Puno (J)

Facts: On 23 December 1993, Meralco filed with the Energy Regulatory Board (ERB) an application for the revision of its rate schedules. On 28 January 1994, the ERB issued an order granting a provisional increase of P0.184/kwh subject to the condition that in event that the board finds that Meralco is entitled to a lesser increase in rates, all excess amounts collected shall be refunded or credited to its customers. Subsequently, ERB rendered its decision adopting the audit of the Commission on Audit (COA) and authorized Meralco to implement a rate adjustment of P0.017/kwh, but ordered the refund of the excess amount of P0.167/kwh collected from the billing cycles of February 1994 to February 1997, holding that income tax should not be treated as operating expense, and applying the net average investment method in the computation of the rate base. On appeal, the Court of Appeals set aside the ERB decision insofar as it directed the reduction of the rates by P0.167/kwh and the refund to Meralco’s customers. Motions for reconsideration were denied. Hence, the petition before the Supreme Court.

Issue: Whether the rates are just and reasonable.

Held: The ERB has the power to fix rates to be charged by public utilities involved in the distribution of electricity, under Executive Order 172. What is just, reasonable rate is a question of fact calling for the exercise of discretion, good sense, and a fair, enlightened and independent judgment. In determining the just and reasonable rates to be charged by a public utility, the regulating agency must consider the rate of return, the rate base, and the return itself or the computed revenue to be earned by the public utility based on the rate of return and rate base. Aside from the financial condition of the public utility, particular reasons involved for the request of the rate increase, the quality of the services rendered by the public utility, the existence of competition, the element of risk or hazard involved in the investment, the capacity of consumers, etc. should be considered for the purpose of rate regulation. Herein, the factual findings of the administrative body should be accorded great respect, even finality, if supported by substantial evidence. To the extent that the agency has not been arbitrary or capricious in the exercise of its powers, the courts should not interfere.

Issue: Whether income tax may be shifted to the public utility’s customer.

Held: Income tax should be borne by the taxpayer alone as they are payments made in exchange for benefits received by the taxpayer from the State. No benefit is derived by the customers of a public utility for such entity and no direct contribution is made by the payment of income tax to the operation of a public utility for purposes of generating revenue or profit. Thus, the burden of paying income tax should be Meralco’s alone and should not be shifted to the customers by including the same in the computation of its operating expenses.

Issue: Whether the net average investment method or the trending method should be used in determining the tax base.

Held: The administrative agency is not bound to apply any one particular formula or method simply because the same method has been previously used and applied. What constitutes a reasonable return for the public utility is necessarily determined and controlled by its peculiar environmental milieu. The reasonableness of the net average investment method is borne by the records of the case. By using the said method, the ERB and COA considered for determination of the rate base the value of the properties and equipment used by Meralco in proportion to the period that the same were actually used during the period in question. If the “trending method” is to be applied, the public utility may easily manipulate the valuation of its property entitled to a return (tax base) by simply including a highly capitalized asset in the computation of the rate base even if the same was used for a limited period if time during the test year.

PLDT vs. NTC
GR 88404, 18 October 1990; En Banc, Melencio-Herrera (J)

Facts: On 22 June 1958, RA 2090 was enacted granting Felix Alberto & Co. (later ETCI) a franchise to establish radio stations for domestic and transoceanic telecommunications. On 13 May 1987, ETCI filed an application with the NTC for the issuance of a certificate of public convenience and necessity to operate, etc. a Cellular Mobile Telephone System and an alpha numeric paging system in Metro Manila and in the Southern Luzon regions, with a prayer for provisional authority to operate within Metro Manila. PLDT filed an opposition with a motion to dismiss. On 12 November 1987, NTC overruled PLDT’s opposition and declared RA 2090 should be liberally construed so as to include the operation of a cellular mobile telephone service as part of services of the franchise. On 12 December 1988, NTC granted ETCI provisional authority to install, operate, and maintain a cellular mobile telephone service initially in Metro Manila subject to the terms and conditions set forth in its order, including an interconnection agreement to be entered with PLDT. PLDT filed a motion to set aside order which was denied by the NTC on 8 May 1989. PLDT challenged the 12 December 1988 and 8 May 1989 NTC orders before the Supreme Court through a special civil action for certiorari and prohibition.

Issue: Whether the provisional authority was properly granted.

Held: The provisional authority granted by the NTC (which is the regulatory agency of the National Government over all telecommunications entities) has a definite expiry period of 18 months unless sooner renewed; may be revoked, amended or revised by the NTC; covers one of four phases; limited to Metro Manila only; and does not authorize the installation and operation of an alphanumeric paging system. It was further issued after due hearing, with PLDT attending and granted after a prima facie showing that ETCI had the necessary legal, financial and technical capabilities; and that public interest, convenience and necessity so demanded. Provisional authority would be meaningless if the grantee were not allowed to operate, as its lifetime is limited and may be revoked by the NTC at any time in accordance with law.

Issue: Whether ETCI’s franchise includes operation of cellular mobile telephone system (CMTS)

Held: The NTC construed the technical term “radiotelephony” liberally as to include the operation of a cellular mobile telephone system. The construction given by an administrative agency possessed of the necessary special knowledge, expertise and experience and deserves great weight and respect. It can only be set aside by judicial intervention on proof of gross abuse of discretion, fraud or error of law.

Issue: Whether PLDT can refuse interconnection with ETCI.

Held: The NTC merely exercised its delegated authority to regulate the use of telecommunication networks when it decreed interconnection. PLDT cannot refuse interconnection as such is mandated under RA 6949 or the Municipal Telephone Act of 1989. What interconnection seeks to accomplish is to enable the system to reach out to the greatest number of people possible in line with governmental policies. With the broader reach, public interest and convenience will be better served. Public need, public interest, and the common good are the decisive, if not the ultimate, considerations. To these public and national interests, public utility companies must yield.

The NTC order does not deprive PLDT due process as it allows the parties themselves to discuss and agree upon the specific terms and conditions of the interconnection agreement instead of the NTC itself laying down the standards of interconnection which it can very well impose.

Overseas Factors Inc. vs. South Sea Shipping (GR L-12138, 27 February 1962)
En Banc, Padilla (J): 9 concur

Facts: On 3 and 9 September 1954 the National Rice and Corn Corporation (NARIC) and the Overseas Factors, Inc. entered into two contracts whereby the latter undertook to supply the former with 5,000 metric tons of Kangni rice at P.51 per ganta and 5,000 metric tons of Joshi rice at P.49 per ganta. On 10 September 1954 the NARIC established for its account with the Philippine National Bank (PNB_ in Manila two irrevocable letters of credit (62655 & 62656) in the amounts of $529,125 and $508,375, in favor of the Pakistan Development Corporation, Ltd. (PDC), Karachi, Pakistan. On 30 October 1954, S. M. Yeung, authorized representative of the South Sea Shipping Co., Ltd., wrote to José W. Diokno, authorized representative of the Overseas Factors, in Karachi, Pakistan, enumerating the terms and conditions of the charter party they have agreed upon for shipment of the rice to be imported by the Overseas Factors from Pakistan aboard the SS Ocean Trader owned by the South Sea Shipping. At the foot of the letter, José W. Diokno affixed his signature signifying his intention to confirm the terms and conditions therein enumerated. On the same date, 30 October 1954, S. M. Yeung, in behalf of the South Sea Shipping, and Chung Kien Tieng, in behalf of the Overseas Factors, entered into a formal contract of charter party in Karachi, Pakistan, incorporating the terms and conditions enumerated in the letter. On 12 November 1954 the terms and conditions of the charter party regarding the rate and payment of freight were amended by the parties in Hongkong. On 4 November 1954 Juan A. Magsino, in behalf of Overseas Factors entered into an agreement with Abdulaye A. Badat, sole proprietor of Ivlom Corporation, in Karachi, Pakistan, whereby the said corporation undertook to supply the Overseas Factors, with 5,000 metric tons of Kangni rice of the quality and specifications enumerated in PNB Letter of Credit 62655. Badruddin H. Mavani undertook to supply the Overseas Factors with the needed Joshi rice. On 5 November 1954 the Overseas Factors and Gertrudes Carlos, co-financier of the former in its contract with the NARIC to supply it with the needed rice, jointly and severally applied to the South Sea Surety & Insurance Co., Inc. to act as surety upon a bond demanded by the South Sea Shipping in the amount of P315,000 to guarantee the payment by the charterers in Hongkong of the freight, demurrage, dead freight and other losses that might arise. On the same date, 5 November 1954, the Overseas Factors, as principal, and Carlos, as co-principal, and the South Sea Surety, as surety, executed a performance bond in the amount of P315,000 in favor of the South Sea Shipping to guarantee the full payment by the charterers at Hongkong of all freight, demurrage, dead freight and other losses that might arise, within 14 days from the date of departure of the vessel from Karachi, Pakistan. From 16 to 23 November 1954, 2,567.6053 metric tons gross of Joshi rice and from 20 to 25 November 1954, 5,054.0662 metric tons gross of Kangni rice or a total of 7,621.6715 metric tons of rice were loaded on board the SS Ocean Trader in Karachi, Pakistan. On 25 and 29 November the bills of lading covering the said shipments of rice duly signed by the shipper’s agent were issued in the name of the PNB, Manila, as consignee. It appears in the two bills of lading that the party to be notified upon arrival in Manila was the NARIC. On 25 November 1954 the SS Ocean Trader sailed from Karachi, Pakistan and arrived in Manila on 18 December 1954. The captain and crew members of the SS Ocean Trader refused to unload the cargo of rice unless the balance of the freight and other charges due were paid by the charterers.

An action was brought on 29 December 1954 in the Court of First Instance of Manila praying the Court to direct the captain and the crew of SS Ocean Trader to convert the amount in rupees paid by Overseas Factors and Carlos in Karachi, Pakistan, into British sterling pounds, computed at the legal rate of exchange as allowed by the Government of Pakistan; to deliver to Overseas Factors and Carlos the bills of lading of the cargo of rice; to permit the unloading by Overseas Factors and Carlos of the cargo of rice from the SS Ocean Trader pending trial of the case; to desist or refrain from interfering with such unloading upon the filing of an additional surety bond, if necessary, in an amount that the Court may fix to answer for damages that South Sea Shipping, A. Magsaysay, and the captain and crew of SS Ocean Trader may suffer as a result of such injunction, and to pay the costs; and the Collector of Customs to see to it that the cargo of rice from the SS Ocean Trader be unloaded. Overseas Factors and Carlos also prayed that the demurrages sought to be collected by South Sea Shipping, et. al. be computed at the rate L300 and not at L700 a day; and for other just and equitable relief (civil 24972). South Sea Shipping, et. al. answered the complaint and set up a counterclaim of P316,364.38 for freightage, demurrage, charges for detention and other expenses of the vessel while on detention. Overseas Factors and Carlos controverted South Sea Shipping, et. al.’s counterclaim. The NARIC filed a complaint in intervention to protect its interest and the South Sea Surety filed a cross-claim against Overseas Factors. After trial, the Court rendered judgment in favor of Overseas Factors and Carlos and against South Sea Shipping; holding therein that (1) the total amount of 369,000 Pakistan rupees received by S. M. Yeung was in full payment of the transportation of the rice in question from Karachi to Manila, and that the delay in the unloading of such rice in Manila was not due to Overseas Shipping and Carlos’ fault; and (2) the claim for lien on the shipment of rice has no legal basis for the reason that the freight had already been paid in Karachi, Pakistan, before such shipment arrived in Manila. The Court ordered the cancellation of the injunction bond filed by Overseas Factors and Carlos as well as the performance bond executed to guaranty the payment of freight. The Court dismissed the complaint with respect to A. Magsaysay, Inc., the Captain and the Crew of the S.S. Ocean Trader, and the Collector of Customs of Manila, it appearing that they have nothing to do with the controversy between Overseas Factors and South Sea Shipping. The Court dismissed the counterclaim, and ordered South Sea Shipping to pay the costs. South Sea Shipping and A. Magsaysay appealed.

The Supreme Court modified the judgment appealed by ordering Overseas Factors and Carlos to pay South Sea Shipping the sums of P203,449.57, the balance of the freightage still unpaid, P6,720 as demurrage in loading the cargo and P6,720 as demurrage for detention of the vessel, without prejudice to any amount sought to be collected for demurrage which is to be submitted to arbitration in London, against which the equivalent amount in Philippine currency of the sum of L12,838-0-6d or Rs119,221-5-0 as above stated is set off; and holding that South Sea Shipping did not lose its lien on the cargo of rice, without pronouncement as to costs. The Court dismissed the complaint and the complaint in intervention as to the other defendant appellants, and the counterclaim against South Sea Surety, and the latter’s cross-claim.

1.    Principal terms and conditions of the charter party
In the letter written by S. M. Yeung, authorized representative of the appellant shipping company, to José W. Diokno, authorized representative of the appellees, on 30 October 1954 in Karachi, Pakistan, summing up the principal terms and conditions of the charter party agreed upon by them, it appears that they have agreed, among others, as follows: (1) FREIGHT: Sterling one hundred shillings (100) per metric ton gross weight, F10 and free stowed; (2) PAYMENT OF FREIGHT: Charterers to pay full freight to the Owners at Hongkong in British Pound Sterling upon  signing of bill or bills of lading, ship lost or not lost; (3) PERFORMANCE BOND    : Charterers to arrange a performance bond in Hongkong satisfactory to the Owners at Hongkong, latest before noon on the 1st November 1954 to guarantee the due performance of this charter and full payment of all freight at Hongkong within 14 days from date of vessel’s departure from Karachi. Charter Party Form (as adopted 1922).

2.    Terms of contract of 30 October 1954
On 30 October 1954, the parties executed in Karachi, Pakistan, a formal contract of charter party in a printed form of the uniform general charter adopted by the documentary committee of the Chamber of Shipping of the United Kingdom, as revised in 1922. Chung Kien Tieng signed in behalf of the appellees and Yeung Siu Man in behalf of the appellant shipping company. The pertinent terms of the contract are: (1) Rate of Freight: Sterling One hundred Shillings (100/-) per metric ton, free in, free out and free stowed; (2) Payment of Freight: The freight to be paid in case without discount on signing bills of lading in British Pound Sterling transferable to the Owners at Hongkong within fourteen (14) days from the date of the vessel’s departure from Karachi.

3.    Amendment clauses
On 12 November 1954 the two clauses were amended by adding the following to the first clause, “or according to Owners’ option of Forty Two Pesos (Pesos 42.-) per metric tons, free in, free out and free stowed”; and the following to the second clause: “or according to Owners’ option of payment at Manila at the rate stated in clause No. 1.”

4.    Stipulation in performance bond
In the performance bond executed and signed by Overseas Factors and Carlos in favor of South Sea Shipping and South Sea Surety, it was stipulated that “the condition of this bond is such that if the Principal and co- Principal shall well and duly comply with the conditions and stipulations enumerated in the above mentioned agreement charter and contract of charter party as well as pay all freight at Hongkong within 14 days from the date of vessel’s departure from Karachi, then this obligation shall be null and void; otherwise, it shall remain in full force and effect.”

5.    Amount paid, amount due to shipping company
According South Sea Shipping, the amount due from Overseas Factors and Carlos as freightage of the 7,621.6715 metric tons of rice at 100 shillings per metric ton was £38,108-7-1d and that the latter had paid it only £13,888-17-9d, as acknowledged by Yeung in a letter to Magsino, agent of Overseas Factors. However, South Sea Shipping denied having received the sum of £12,838-0-6d from Overseas Factors and Carlos and claim that the sum of 119,221-5-0 Pakistani rupees that Yeung received from Mavani could not be credited as part payment of the freight. By the evidence presented, the sum of £12,838-0-6d (in British Pound Sterling) due for freight on the Joshi rice shipped on board the SS Ocean Trader has not yet been paid to South Sea Shipping by Overseas Factors and Carlos in accordance with their contract. Moreover, payment of the sum of 119,221-5-0 Pakistani rupees to Yeung made by Mavani in check was held by Kazi & Kazi merely for the account of Overseas Factors and Carlos pending Government approval for transfer to the Office of South Sea Shipping in Hongkong.

6.    South Sea Shipping’s option to demand payment in British pounds or in Philippine currency
Under the charter party, South Sea Shipping has the option to demand payment of the freight in British pounds sterling payable in Hongkong at the rate of 100 shillings per metric ton or P42, Philippine currency, per metric ton. The amount due as freightage for 7,621.6715 metric tons of rice computed at P42, Philippine currency, per metric ton, is P320,110.20. Deducting therefrom the sum of L13,888.17-9d or P116,660.62, computed at P8.40 to £1 or P42 to £5 per metric ton, there is still due South Sea Shipping the sum of P203,449.57, Philippine currency.

7.    Clause 5 of the charter party
Clause 5 of the charter party provides “Cargo to be brought alongside in such a manner as to enable vessel to take the goods with her own tackle and to load the full cargo in nine (9) running days free of expense to the vessel. Charterers to procure and pay the necessary men on shore or on board the lighters to do the work there, vessel only heaving the cargo on board. Any pieces and/or packages of cargo over two tons weight, shall be loaded, stowed and discharged by Charterers at their risk and expense. Time shall commence at 1 p.m. on the 30th October 1954. Time lost in waiting for berth to count as loading time.”

8.    Clause 7 of the charter party
Clause 7 of the charter party provides “Four running days on demurrage at the rate of L300. — Sterling per day or pro rata for any part of a day, payable day by day, at Hongkong to be allowed Merchants altogether at ports of loading and discharging, L100. — per day for despatch.”

9.    Clause 11 of the charter party
Clause 11 of the charter party provides “    Should the cargo not be brought alongside to load (whether in berth or not) on or before the 8th Nov. 1954. Owners have the option of cancelling this contract.”

10.    Clause 20 of the charter party
Clause 20 of the charter party provides “Any dispute arising under this charter to be referred to arbitration in London, one Arbitrator to be nominated by the Owners and the other by the Charterers, and in case the Arbitrators shall not agree then to the decision of an Umpire to be appointed by them, the Award of the Arbitrators or the Umpire to be final and binding upon both parties.”

11.    Overseas Factors and Carlos cannot be charged for demurrage on remaining 13 days of delay
Overseas Factors and Carlos cannot be charged with L-700 a day for demurrage on the remaining 13 days of delay because they are only answerable for that much “for all detention charges” “if the ship is so detained after loading of the cargo.” The departure of the vessel was not delayed after the cargo was finally loaded. As a matter of fact it sailed for Manila on 25 November 1954 after it was loaded.

12.    Clause 5 of the charter party
Clause 6 of the charter party provides “Cargo to be received by Merchants at their risk and expense alongside the vessel not beyond the reach of her tackle and to be discharged in seven (7) running days, free of expenses to the vessel. Time to commence at 1 p.m. if notice of readiness to discharge is given before noon, and at 6 a.m. next working day if notice given during office hours after noon. Time lost in waiting for berth to count as discharging time.”

13.    South Sea Shipping entitled 4 running days on demurrage for detention; Demurrage for remaining detention subject to arbitration in London
Because of the refusal of Overseas Factors and Carlos to pay the balance of the freight and other charges, the captain and crew of the vessel refused to unload the cargo and the vessel was placed under detention from 1:00 p.m. of 27 December 1954 to 6:00 a.m. of 5 January 1955. During that time the cargo was unloaded pursuant to the order of the Court and deposited in the warehouse of the NARIC. The unloading was finished at 6:00 a.m. of 5 January 1955 resulting in 8 days and 17 hours of detention. Under clause 7 of the charter party, South Sea Shipping is entitled to collect from Overseas Factors and Carlos 4 running days on demurrage for detention at the rate of L300 or a total of L1,200. Computed at the rate of exchange prevailing in January 1955, which is P5.60 to L1, South Sea Shipping should be paid the sum of P6,720, Philippine currency. The demurrage for the remaining detention of 4 days and 17 hours and other charges claimed by South Sea Shipping are subject to arbitration in London pursuant to clause 20 of the charter party.

14.    Article 665 of Code of Commerce, NARIC vs. Macadaeg
As held in the case of National Rice and Corn Corporation vs. Macadaeg, the fact that the freight was already included in the purchase price paid by it to the appellees did not free the cargo of rice from the carrier’s lien provided for in article 665 of the Code of Commerce, if the freight has not yet been fully paid by the charterer.

15.    Clause 8 of Charter party
Clause 8 of the charter party provides: “Owners shall have a lien on the cargo for freight, dead-freight, demurrage and damages for detention. Charterers shall remain responsible for dead-freight and demurrage (including damages for detention), incurred at port of loading. Charterers shall also remain responsible for freight and demurrage (including damages for detention) incurred at port of discharge, but only to such extent as the Owners have been unable to obtain payment thereof by exercising the lien on the cargo.”

16.    Clause requiring charterer to file a performance bond in favor of shipowners not a waiver of shipowner’s or carrier’s lien on cargo
The last part of the letter, which says: “This agreement is subject to the arrangement of the performance bond being computed before the time as specified above. Two copies of the formal Charter Party shall be signed immediately upon confirmation of the performance bond being established at the stipulated bank,” shows that the letter was written before the formal contract of charter party was executed by the parties. Hence it cannot be said that the shipowners waived their lien provided for in the formal contract of charter party.

17.    Surety’s obligation in performance bond extinguished by novation
The addendum of the charter party contract executed by the parties on 12 November 1954 in Hongkong varying the clauses on the rate and payment of freight without the consent of the surety was a novation of the contract. For that reason the surety’s obligation in the performance bond was extinguished.

18.    Amount paid by Mayani to be set off against sum due to shipowner for freight or demurrage
The sum of Rs119,221-5-0 equivalent to £12,838-0-6d paid by Badruddin H. Mavani for the account of Overseas Factors and Carlos to pay the freight of 2,567.6053 metric tons gross of Joshi rice and received by S. M. Yeung as agent or representative of South Sea Shipping should be set off against the sum due the latter for freight and demurrages, at the official rate of exchange in Karachi, Pakistan, on the day of receipt thereof by the agent of South Sea Shipping, for aside from the fact that the latter should not be allowed to enrich itself at the expense of Overseas Factors and Carlos, the forfeiture of the amount to be deposited with the Chartered Bank of India, Australia and China in Karachi to the credit of South Sea Shipping, offered by Magsino, the agent of Overseas Factors and Carlos, to pay the freight of the cargo of rice was not accepted by S. M. Yeung, the agent of the shipowners.

19.    Legal rate of interest for difference; Reckoning period
The difference after the set off in favor of any party shall bear the legal rate of interest, to wit: if in favor of Overseas Factors and Carlos, from the date of receipt of the amount in Karachi, Pakistan, by the agent of South Sea Shipping; or, if in favor of South Sea Shipping, from the date of the filing of its counterclaim for the amount of freight and demurrages.

Marimperio Compania Naviera vs. CA (GR L-40234, 14 December 1987)
First Division, Paras (J): 4 concur

Facts: In 1964 Philin Traders Corporation and Union Import and Export Corporation entered into a joint business venture for the purchase of copra from Indonesia for sale in Europe. James Liu, President and General Manager of the Union took charge of the European market and the chartering of a vessel to take the copra to Europe. Peter Yap of Philin on the other hand, found one P.T. Karkam in Dumai, Sumatra who had around 4,000 tons of copra for sale. Exequiel Toeg of Interocean was commissioned to look for a vessel and he found the vessel “SS Paxoi” of Marimperio Compañia Naviera, S.A. available. Philin and Union authorized Toeg to negotiate for its charter but with instructions to keep confidential the fact that they are the real charterers. Consequently on 21 March 1965, in London England, a “Uniform Time Charter” for the hire of vessel “Paxoi” was entered into by the owner, Marimperio through its agents N. & J. Vlassopulos, Ltd. and Matthews Wrightson, Burbridge, Ltd. (Matthews), representing Interocean Shipping Corporation, which was made to appear as charterer, although it merely acted in behalf of the real charterers.  In view of the Charter, on 30 March 1965 plaintiff Charterer cabled a firm offer to P.T. Karkam to buy the 4,000 tons of copra for U.S. $180.00 per ton, the same to be loaded either in April or May, 1965. The offer was accepted and plaintiffs opened two irrevocable letters of Credit in favor of P.T. Karkam. On March 29, 1965, the Charterer was notified by letter by Vlassopulos through Matthews that the vessel “PAXOI” had sailed from Hsinkang at noontime on 27 March 1965 and that it had left on hire at that time and date under the Uniform Time-Charter. The Charterer was however twice in default in its payments which were supposed to have been done in advance. The first 15-day hire comprising the period from March 27 to April 11, 1965 was paid despite follow-ups only on 6 April 1965 and the second 15-day hire for the period from April 12 to April 27, 1965 was paid also despite follow-ups only on 26 April 1965. On 14 April 1965 upon representation of Toeg, the Esso Standard Oil (Hongkong) Company supplied the vessel with 400 tons of bunker oil at a cost of US $6,982.73. Although the late payments for the charter of the vessel were received and acknowledged by Vlassopulos without comment or protest, said agent notified Matthews, by telex on 23 April 1965 that the shipowners in accordance with Clause 6 of the Charter Party were withdrawing the vessel from Charterer’s service and holding said Charterer responsible for unpaid hirings and all legal claims. On 29 April 1965, the shipowners entered into another charter agreement with another Charterer, the Nederlansche Stoomvart of Amsterdam, the delivery date of which was around 3 May 1965 for a trip via Indonesia to Antwep/Hamburg at an increased charter cost. Meanwhile, the original Charterer again remitted on 30 April 1965, the amount corresponding to the 3rd 15-day hire of the vessel PAXOI, but this time the remittance was refused.

On 3 May 1965, Union and Philin filed a complaint with the Court of First Instance of Manila, Branch VIII, against the Unknown Owners of the Vessel “SS Paxoi”, for specific performance with prayer for preliminary attachment. Union and Philin obtained a writ of preliminary attachment of vessel “PAXOI” which was anchored at Davao on 5 May 1969, upon the filing of the corresponding bond of P1,663,030.00. On 11 May 1965, the complaint was amended to identify the defendant as Marimperio Compañia Naviera S.A. However, the attachment was lifted on 15 May 1969 upon Marimperio’s motion and filing of a counterbond for P1,663,030. On 16 March 1966, Interocean Shipping Corporation filed a complaint-in-intervention to collect what it claims to be its loss of income by way of commission and expenses in the amount of P15,000.00 and the sum of P2,000.00 for attorney’s fees. On 22 November 1969 the CFI of Manila rendered its decision in favor of Marimperio, and against Union and Philin, dismissing the amended complaint, and ordering the latter on the counterclaim to pay Marimperio, jointly and severally, the amount of L8,011.38 or its equivalent in Philippine currency of P76,303.40, at the exchange rate of P9.40 to 1 for the unearned charter hire due to the attachment of the vessel “PAXOI” in Davao, plus premiums paid on the counterbond as of 22 April 1968 plus the telex and cable charges and the sum of P10,000.00 as attorney’s fees and costs. The trial court dismissed the complaint-in-intervention, ordering Interocean to pay Marimperio the sum of P10,000.00 as attorney’s fees, and the costs. Union and Philin filed a Motion for Reconsideration and/or new trial of the decision of the trial court on 23 December 1969. Interocean filed its motion for reconsideration and/or new trial on 7 January 1970. Acting on the two motions for reconsideration, the trial court reversed its stand in its amended decision dated 24 January 1978.  The Court rendered judgment for Union, Philin and Interocean, and ordered Marimperio to pay the former the sum of (1) US$22,500.00 representing the remittance of Union and Philin to Marimperio for the first 15-day hire of the vessel ‘SS PAXOI’, including overtime and an overpayment of US$254.00; (2) US$16,000.00 corresponding to the remittance of Union and Philin to Marimperio for the second 15-day hire of the vessel; (3) US$6,982.72 representing the cost of bunker oil, survey and watering of the said vessel; (4) US$220,000.00 representing the unrealized profits; and (5) P100,000.00, as and for attorney’s fees. The Court further ordered Marimperio to pay Interocean the amount of P15,450.44, representing the latter’s commission as broker, with interest thereon at 6% per annum from the date of the filing of the complaint-in-intervention, until fully paid, plus the sum of P2,000.00 as attorney’s fees, and to pay the costs. The Court ordered the dismissal of the counterclaims filed by Marimperio against Union, Philin and Interocean, as well as its motion for the award of damages in connection with the issuance of the writ of preliminary attachment. Marimperio, filed a motion for reconsideration and/or new trial of the amended decision on 19 February 1970. Meanwhile a new Judge was assigned to the Trial Court. On 10 September 1970 the trial court issued its order of 10 September 1970  denying Marimperio’s motion for reconsideration.

On Appeal, the Court of Appeals affirmed the amended decision of the lower court except the portion granting commission to Interocean, which it reversed thereby dismissing the complaint-in-intervention. Its two motions (1) for reconsideration and/or new trial and (2) for new trial having been denied by the Court of Appeals in its Resolution of 17 February 1975 which, however, fixed the amount of attorney’s fees at P100,000.00 instead of $100,000.00, Marimperio filed with the Supreme Court its petition for review on certiorari on 19 March 1975.

The Supreme Court reversed and set aside the decision of the Court of Appeals affirming the amended decision of the CFI of Manila; except for that portion of the decision dismissing the complaint-in-intervention; and reinstated the original decision of the trial court.

1.    Article 1311 NCC; To whom contract binding
According to Article 1311 of the Civil Code, a contract takes effect between the parties who made it, and also their assigns and heirs, except in cases where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. Since a contract may be violated only by the parties, thereto as against each other, in an action upon that contract, the real parties in interest, either as plaintiff or as defendant, must be parties to said contract. Therefore, a party who has not taken part in it cannot sue or be sued for performance or for cancellation thereof, unless he shows that he has a real interest affected thereby.

2.    Charter party entered between Marimperio and Interocean; Interocean sublet vessel to Union, who in turn sublet the same to Philin
The charter party was entered into between Marimperio, through its duly authorized agent in London, the N & J Vlassopulos, Ltd., and Interocean through the latter’s duly authorized broker, the Overseas Steamship Co., Inc., represented by Matthews, Wrightson Burbridge Ltd., for the Charter of the “SS PAXOI.” Interocean sublet the said vessel to Union which in turn sublet the same to Philin. It is admitted by Union and Philin that the charterer is Interocean Even paragraph 3 of the complaint-in-intervention alleges that Union and Philin were given the use of the vessel “pursuant to paragraph 20 of the Uniform Time Charter” which precisely provides for the subletting of the vessel by the charterer.

3.    Article 652 of the Code of Commerce
Article 652 of the Code of Commerce provides that the charter party shall contain, among others, the name, surname, and domicile of the charterer, and if he states that he is acting by commission, that of the person for whose account he makes the contract. It is obvious from the disclosure made in the charter party by the authorized broker, the Overseas Steamship, that the real charterer is the Interocean Shipping Company (which sublet the vessel to Union which in turn sublet it to Philin).

4.    Nature of sub-lease; Personality of lessee does not disappear in contract of sublease
In a sub-lease, there are two leases and two distinct judicial relations although intimately connected and related to each other, unlike in a case of assignment of lease, where the lessee transmits absolutely his right, and his personality disappears; there only remains in the juridical relation two persons, the lessor and the assignee who is converted into a lessee (Moreno, Philippine Law Dictionary, 2nd ed., p. 594). In other words, in a contract of sub-lease, the personality of the lessee does not disappear; he does not transmit absolutely his rights and obligations to the sub-lessee; and the sub-lessee generally does not have any direct action against the owner of the premises as lessor, to require the compliance of the obligations contracted with the plaintiff as lessee, or vice versa (10 Manresa, Spanish Civil Code, 438).

5.    Instances where lessor allowed to bring action directly against sublessee (not vice versa)
There are at least two instances in the Civil Code which allow the lessor to bring an action directly (accion directa) against the sub-lessee (use and preservation of the premises under Article 1651, and rentals under Article 1652). In Articles 1651 and 1652, it is not the sub-lessee, but the lessor, who can bring the action. Herein, it is clear that the sub-lessee as such cannot maintain the suit they filed with the trial court (See A. Maluenda and Co. v. Enriquez, 46 Phil. 916).

6.    Article 1651 NCC
Article 1651 reads “Without prejudice to his obligation toward the sub-lessor, the sub-lessee is bound to the lessor for all acts which refer to the use and preservation of the thing leased in the manner stipulated between the lessor and the lessee.”

7.    Article 1652 NCC
Article 1652 reads: “The sub-lessee is subsidiarily liable to the lessor for any rent due from the lessee. However, the sub-lessee shall not be responsible beyond the amount of rent due from him, in accordance with the terms of the sub-lease, at the time of the extra-judicial demand by the lessor. Payments of rent in advance by the sub-lessee shall be deemed not to have been made, so far as the lessor’s claim is concerned, unless said payments were effected in virtue of the custom of the place.”

8.    Agency with an undisclosed principal, Article 1883 NCC
In the law of agency “with an undisclosed principal, the Civil Code in Article 1883 reads: “If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent.”

9.    Union and Philin not allowed to bring action against adverse party
The true charterers of the vessel were Union and Philin and they chartered the vessel through an intermediary which upon instructions from them did not disclose their names. Article 1883 cannot help Union and Philin, because although they were the actual principals in the charter of the vessel, the law does not allow them to bring any action against the adverse party and vice-versa.

10.    Default of charterer in payment gives shipowner right to rescind charter party extrajudicially
The default of charterer in the payment of the charter hire within the time agreed upon gives Marimperio a right to rescind the charter party extrajudicially. Clause 6 of the Charter party specifically provides that Marimperio has the right to withdraw the vessel from the service of the charterers, without noting any protest and without interference of any court or any formality in the event that the charterer defaults in the payment of hire. The payment of hire was to be made every 15 days in advance. Herein, as of 23 April 1965, when Vlassopulos notified Matthews of the withdrawal of the vessel from the Charterers’ service, the latter was already in default. Accordingly, under Clause 6 of the charter party the owners had the right to withdraw “SS PAXOI” from the service of charterers, which withdrawal they did.

11.    Contract the law between contracting parties; When contract provides for revocation
A contract is the law between the contracting parties, and when there is nothing in it which is contrary to law, morals, good customs, public policy or public order, the validity of the contract must be sustained. A judicial action for the rescission of a contract is not necessary where the contract provides that it may be revoked and cancelled for violation of any of its terms and conditions.

Yu Con vs. Ipil (GR 10195, 29 December 1916)
En Banc, Araullo (J): 4 concur

Facts: Yu Con, a merchant and a resident of the town of San Nicolas, of the city of Cebu, engaged in the sale of cloth and domestic articles and having a share in a shop, or small store, situated in the town of Catmon, of said province, had several times chartered from Narciso Lauron, a banca named Maria belonging to the latter, of which Glicerio Ipil was master and Justo Solamo, supercargo, for the transportation of certain merchandise and some money to and from the said town and the port of Cebu. On 17 October, 1911 Yu Con chartered the said banca from Lauron for the transportation of various merchandise from the port of Cebu to Catmon, at the price of P45 for the round trip, which merchandise was loaded on board the said craft which was then at anchor in front of one of the graded fills of the wharf of said port. In the afternoon of the following day, he delivered to the other two defendants, Ipil, and Solamo, master and supercargo, respectively, of the banca, the sum of P450, which was in a trunk belonging to Yu Con and was taken charge of by Ipil and Solamo, who received this money from Yu Con, for the purpose of its delivery to the latter’s shop in Catmon for the purchase of corn in this town. While the money was still in said trunk aboard the vessel, on the night of 18 October, the time scheduled for the departure of the Maria from the port of Cebu, said master and said supercargo transferred the P450 from Yu Con’s trunk, where it was, to theirs, which was in a stateroom of the banca, from which stateroom both the trunk and the money disappeared during that same night, and that the investigations, made to ascertain their whereabouts, produced no result.

Yu Con brought action to enable him to recover from Ipil, Lauron, and Solamo in solidum the sum of P450 lost. Yu Conbased his action on the charge that the disappearance of said sum was due to the abandonment, negligence, or voluntary breach, on the part of the defendants, of the duty they had in respect to the safe-keeping of said sum.

At the termination of the trial, the court, held that the sole cause of the disappearance of the money from the said banca was the negligence of the master and the supercargo, Ipil and Solamo, respectively, and that Lauron was responsible for that negligence, as owner of the banca, pursuant to articles 586, 587, and 618 of the Code of Commerce, Yu Con therefore being entitled to recover the amount lost. Judgment was rendered on 20 April 1914, in favor of Yu Con and against Ipil, et. al. jointly and severally for the sum of P450, with interest thereon at the rate of 6% per annum from the date of filing of the complaint, 24 October 1911, with costs. Yu Con was absolved from the counterclaim. From this judgment Ipil, et. al. excepted and at the same time moved for a new trial. Their motion was denied, to which ruling they also excepted, and, through the proper bill of exceptions, entered an appeal to the Supreme Court.

The Supreme Court affirmed the judgment appealed from, with the costs of this instance against Ipil, et. al.

1.    Master and supercargo gave no satisfactory explanation in regard disappearance of trunk and money
The master and the supercargo, gave no satisfactory explanation in regard to the disappearance of the trunk and the money therein contained, from the stateroom in which the trunk was, nor as to who stole or might have stolen it. The master and the supercargo of the banca merely testified that they did not know who the robbers were, for, when the robbery was committed, they were sound asleep, as they were tired, and that he believed that the guard Simeon also fell asleep because he, too, was tired. Both of them testified that the small window of the stateroom had been broken, and the first of them, i. e., the master, stated that all the window-blinds had been removed from the windows, as well as part of the partition in which they were and that the trunk in which the money was contained could have been passed through said small window, because the Chinaman’s trunk, which differed but a little from the one stolen, could be passed through the same opening. However, no evidence whatever was offered to prove that it might have been possible to remove the trunk from the stateroom through the opening made by the breaking of the small window, neither was the size of the trunk proven, so that it might be verified whether the statement made by the latter was true, viz., that it might have been possible to remove from the stateroom through said opening the trunk in which the P450 were contained, which sum, the same as the trunk, its container, had not been found, in spite of the investigation made for the purpose. Furthermore, it was not proven, nor is there any circumstantial evidence to show, that the robbery in question was committed by persons not belonging to the craft.

2.    Loss occurred through manifest fault and negligence of Ipil, et. al.; No force majeure
The loss or disappearance of the property of Yu Con, which, were in the possession of Ipil and Solamo, the master and the supercargo of the banca Maria, occurred through the manifest fault and negligence of the latter, for, not only did they fail to take the necessary precautions in order that the stateroom containing the trunk in which they kept the money should be properly guarded by members of the crew and put in such condition that it would be impossible to steal the trunk from it or that persons not belonging to the vessel might force an entrance into the stateroom from the outside, but also they did not expressly station some person inside the stateroom for the guarding and safe-keeping of the trunk, for it was not proven that the cabin-boy Gabriel slept there, nor that the other cabin-boy, Simeon Solamo, was on guard that night. On the contrary, it was proven that all the people on the vessel slept soundly that night; which fact cannot, in any manner, serve them as an excuse, nor can it be accepted as an explanation of the statement that they were not aware of what was then occurring on board. If the trunk was actually stolen by outsiders and removed through the small window of the stateroom, a detail which also was not proven, but, on the contrary, increases their liability, because it is very strange that none of them who were six and were around or near the stateroom, should have heard the noise which the robbers must have made in breaking its window. All of these circumstances, together with that of its having been impossible to know who took the trunk and the money and the failure to recover the one or the other, make the conduct of master and supercargo and of the other members of the crew of the banca, eminently suspicious and prevent the Court holding that the disappearance or loss of the money was due to a fortuitous event, to force majeure, or that it was an occurrence which could not have been foreseen, or which, if foreseen, was inevitable.

3.    Manresa; Liability of Carriers
Manresa, in his Commentaries on the Civil Code (Vol. 10 p. 773), in treating of the provisions of the said code concerning transportation by sea and by land of both persons and things, says ‘’Liability of carriers. — In order that a thing may be transported, it must be delivered to the carrier, as the Code says. From the time it is delivered to the carrier or shipper until it is received by the consignee, the carrier has it in his possession, as a necessary condition for its transportation, and is obliged to preserve and guard it; wherefore it is but natural and logical that he should be responsible for it. The Code discovers in the relation of all these elements the factors which go to make up the conception of a trust. and, taking into account that the delivery of the thing on the part of the shipper is unavoidable, if the transportation is to take place, esteems that, at least in certain respects, such trusts are necessary.”

4.    Ipil and Solamo depositories, are liable under Article 1770, and Articles 1601 and 1602 in relation to Articles 1783 and 1784
Ipil and Solamo, being the depositaries of the sum in question, and they having failed to exercise for its safe-keeping the diligence required by the nature of the obligation assumed by them and by the circumstances of the time and the place, in pursuance of the provisions of articles 1601 and 1602, in their relation to articles 1783 and 1784, and as prescribed in article 1770, of the Civil Code, they are liable for its loss or misplacement and must restore it to Yu Con, together with the corresponding interest thereon as an indemnity for the losses and damages caused him through the loss of the said sum.

5.    Lauron has responsibility as to selection and supervision of Ipil and Solamo; Lauron party to contract with Yu Con
Narciso Lauron was the owner of the vessel in which the loss or misplacement of the P450 occurred, of which vessel, Glicerio Ipil was master and Justo Solamo, supercargo, both of whom were appointed to, or chosen for, the positions they held, by Lauron himself. The sum was delivered to the said master, Ipil, and the merchandise to be transported by means of said vessel from the port of Cebu to the town of Catmon was laden by virtue of a contract executed by and between Yucon and the owner of the vessel, Narciso Lauron. Said vessel was engaged in the transportation of merchandise by sea and made voyages to and from the port of Cebu to Catmon, and had been equipped and victualed for this purpose by its owner, with whom, Yu Con contracted for the transportation of the merchandise which was to be carried from the port of Cebu to the town of Catmon.

6.    Vessel construed; Reus
The word vessel serves to designate every kind of craft by whatever particular or technical name it may now be known or which nautical advancements may give it in the future. (Commentaries on the Code of Commerce, in the General Review of Legislation and Jurisprudence, founded by D. Jose Reus y Garcia, Vol. 2, p. 136.)

7.    Vessel construed; Escriche
According to the Dictionary of Legislation and Jurisprudence by Escriche, a vessel is any kind of craft, considering solely the hull.

8.    Ship and Vessel construed; Blanco
Blanco, the commentator on mercantile law, in referring to the grammatical meaning of the words “ship” and “vessels,” says, in his work, that these terms designate every kind of craft, large or small, whether belonging to the merchant marine or to the navy. And referring to their juridical meaning, he adds: “This does not differ essentially from the grammatical meaning; the words ’ship’ and ‘vessel’ also designate every craft, large or small, so long as it be not an accessory of another, such as the small boat of a vessel, of greater or less tonnage. This definition comprises both the craft intended for ocean or for coastwise navigation, as well as the floating docks, mud lighters, dredges, dumpscows or any other floating apparatus used in the service of an industry or in that of maritime commerce. . . .” (Vol. 1, p. 389.)

9.    Banca in present case a vessel
According to the definitions, the banca called Maria, chartered by Yu Con from Narciso Lauron, was a “vessel”, pursuant to the meaning this word has in mercantile law, that is, in accordance with the provisions of the Code of Commerce in force.

10.    Ipil is also considered as captain; Article 609
Glicerio Ipil, the master of the said banca, Maria, must also be considered as its captain, in the legal acceptation of this word. The same Code of Commerce in force in these Islands compares, in its article 609, masters with captains. It is to be noted that in the Code of Commerce of Spain the denomination of arraeces is not included in said article as equivalent to that of masters, as it is in the Code of these Islands.

11.    Article 609; General Review of Legislation and Jurisprudence
Commenting on Article 609, the General Review of Legislation and Jurisprudence says: “The name of captain or master is given, according to the kind of vessel, to the person in charge of it. The first denomination is applied to those who govern vessels that navigate the high seas or ships of large dimensions and importance, although they be engaged in the coastwise trade. Masters are those who command smaller ships engaged exclusively in the coastwise trade. For the purposes of maritime commerce, the words ‘captain’ and ‘master’ have the same meaning; both being the chiefs or commanders of ships.” (Vol. 2, p. 168.)

12.    Article 587 of the Code of Commerce
Article 587 of the Code of Commerce in force provides that “The agent shall be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself herefrom by abandoning the vessel with all her equipments and the freight he may have earned during the trip.”

13.    Article 618 of the Code of Commerce
Article 618 of the same Code also prescribes that “The captain shall be civilly liable to the agent and the latter to the third persons who may have made contracts with the former — (1) For all the damages suffered by the vessel and its cargo by reason of want of skill or negligence on his part, If a misdemeanor or crime has been committed he shall be liable in accordance with the Penal Code. (2) For all the thefts committed by the crew, reserving his right of action against the guilty parties.”

14.    Article 624 of the 1829 Code of Commerce
The Code of Commerce previous to the one now in force, to wit, that of 1829, in its article 624, provided that the agent or shipowner should not be liable for any excesses which, during the navigation, might be committed by the captain and crew, and that, for the reason of such excesses it was only proper to bring action against the persons and property of those found guilty.

15.    Reasons for fundamental difference between provisions of old and new Code of Commerce; Estasen
Estasen, in his work on the Institutes of Mercantile Law (Vol. 4, p. 280), makes the remarks, in referring to the exposition of reasons presented by the Code Commission which prepared and presented for approval the Code of Commerce now in force, in which exposition of reasons were set forth the fundamental differences between the provisions contained in both codes. He says: “Another very important innovation introduced by the Code is that relative to the liability for misdemeanors and crimes committed by the captain or by members of the crew This is a matter of the greatest importance on which a variety of opinions has been expressed by different juris-consults. The old code declares the captain civilly liable for all damage sustained by the vessel or its cargo through lack of skill or care on his part, through violations of the law, or through unlawful acts committed by the crew. As regards the agent or shipowner, it declares in unmistakable terms that he shall in no wise be liable for any excesses which, during the navigation, may be committed by the captain and the crew. Upon an examination, in the light of the principles of modern law, of the standing legal doctrine on the nonliability of the shipowner for the unlawful acts, that is, the crimes or quasi crimes, committed by the captain and the crew, it is observed that it cannot by maintained in the absolute and categorical terms in which it is formulated. It is well and good that the shipowner be not held criminally liable for such crimes or quasi crimes; but he cannot be excused from liability for the damage and harm which, in consequence of those acts, may be suffered by the third parties who contracted with the captain, in his double capacity of agent and subordinate of the shipowner himself. In maritime commerce, the shippers and passengers in making contracts with the captain do so through the confidence they have in the shipowner who appointed him; they presume that the owner made a most careful investigation before appointing him, and, above all, they themselves are unable to make such an investigation, and even though they should do so, they could not obtain complete security, inasmuch as the shipowner can, whenever he sees fit, appoint another captain instead. The shipowner is in the same case with respect to the members of the crew, for, though he does not appoint directly, yet, expressly or tacitly, he contributes to their appointment. On the other hand, if the shipowner derives profits from the results of the choice of the captain and the crew, when the choice turns out successful, it is also just that he should suffer the consequences of an unsuccessful appointment, by application of the rule of natural law contained in the Partidas, viz., that he who enjoys the benefits derived from a thing must likewise suffer the losses that ensue therefrom. Moreover, the Penal Code contains a general principle that resolves the question under consideration, for it declares that such persons as undertake and carry on any industry shall be civilly liable, in default of those who may be criminally liable, for the misdemeanors and crimes committed by their subordinates in the discharge of their duties. The Code of Commerce in force omits the declaration of non-liability contained in the old code, and clearly makes the shipowner liable civilly for the loss suffered by those who contracted with the captain, in consequence of the misdemeanors and crimes committed by the latter or by the members of the crew.”

16.    Lauron civilly liable to Yu Con
In accordance with the provisions of the Code of Commerce in force, Narciso Lauron, as the proprietor and owner of the craft of which Glicerio Ipil was the master and in which, through the fault and negligence of the latter and of the supercargo Justo Solamo, there occurred the loss, theft, or robbery of the P450 that belonged to Yu Con and were delivered to said master and supercargo, a theft which, on the other hand, does not appear to have been committed by a person not belonging to the craft, should, for said loss or theft, be held civilly liable to Yu Con, who executed with Lauron the contract for the transportation of the merchandise and money between the port of Cebu and the town of Catmon, by means of the said craft.

Fisher vs. Yangco Steamship (GR 8085, 5 November 1914)
En Banc, Carson (J): 2 concur, 2 concur in result

Facts: FC Fisher was a stockholder in the Yangco Steamship Company, the owner of a large number of steam vessels, duly licensed to engage in the coastwise trade of the Philippine Islands. On 10 June 1912, the directors of the company adopted a’ resolution which was thereafter ratified and affirmed by the shareholders of the company, “expressly declaring and providing that the classes of merchandise to be carried by the company in its business as a common carrier do not include dynamite, powder or other explosives, and expressly prohibiting the officers, agents and servants of the company from offering to carry, accepting for carriage or carrying said dynamite, powder or other explosives.” Thereafter the Acting Collector of Customs (JS Stanley) demanded and required of the company the acceptance and carriage of such explosives. He has refused and suspended the issuance of the necessary clearance documents of the vessels of the company unless and until the company consents to accept such explosives for carriage. Fisher was advised and believed that should the company decline to accept such explosives for carriage, the Attorney-General of the Philippine Islands (Ignacio Villamor) and the the prosecuting attorney of the city of Manila (WH Bishop) intend to institute proceedings under the penal provisions of sections 4, 5, and 6 of Act 98 of the Philippine Commission against the company, its managers, agents and servants, to enforce the requirements of the Acting-Collector of Customs as to the acceptance of such explosives for carriage. Notwithstanding the demands of Fisher, the manager, agents and servants of the company decline and refuse to cease the carriage of such explosives, on the ground that by reason of the severity of the penalties with which they are threatened upon failure to carry such explosives, they cannot subject themselves to “the ruinous consequences which would inevitably result” from failure on their part to obey the demands and requirements of the Acting Collector of Customs as to the acceptance for carriage of explosives. Fisher believes that the Acting Collector of Customs erroneously construes the provisions of Act 98 in holding that they require the company to accept such explosives for carriage notwithstanding the resolution of the directors and stockholders of the company, and that if the Act does in fact require the company to carry such explosives it is to that extent unconstitutional and void.

Fisher filed a complaint, the respondents demurred.

The Supreme Court sustained the demurrer , on the ground that the complaint does not set forth facts sufficient to constitute a cause of action. It ordered thus that “unless an amended complaint be filed in the meantime let judgment be entered ten days hereafter sustaining the demurrer and dismissing the complaint with costs against the complainant, and twenty days thereafter let the record be filed in the archives of original actions in this court.”

1.    Duties and liabilities of common carriers defined and set forth in Act 98; Court bound by its provisions
The duties and liabilities of common carriers in this jurisdiction are defined and fully set forth in Act 98 of the Philippine Commission, and, until and unless that statute be declared invalid or unconstitutional, the Court is bound by its provisions.

2.    Section 2 of Act 98
Section 2 of Act 98 provides that “It shall be unlawful for any common carrier engaged in the transportation of passengers or property as above set forth to make or give any unnecessary or unreasonable preference or advantage to any particular person, company, firm, corporation or locality, or any particular kind of traffic in any respect whatsoever, or to subject any particular person, company, firm, corporation or locality, or any particular kind of traffic, to any undue or unreasonable prejudice or discrimination whatsoever, and such unjust preference or discrimination is also hereby prohibited and declared to be unlawful.”

3.    Section 3 of Act 98
Section 3 of Act 98 provides that “No common carrier engaged in the carriage of passengers or property as aforesaid shall, under any pretense whatsoever, fail or refuse to receive for carriage, and as promptly as it is able to do so without discrimination, to carry any person or property offering for carriage, and in the order in which such persons or property are offered for carriage, nor shall any such common carrier enter into any arrangement, contract or agreement with any other person or corporation whereby the latter is given an exclusive or preferential privilege over any other person or persons to control or monopolize the carriage of any class or kind of property to the exclusion or partial exclusion of any other person or persons, and the entering into any such arrangement, contract or agreement, under any form or pretense whatsoever, is hereby prohibited and declared to be unlawful.”

4.    Section 4 of Act 98
Section 4 of Act 98 provides that “Any willful violation of the provisions of this Act by any common carrier engaged in the transportation of passengers or property as hereinbefore set forth is hereby declared to be punishable by a fine not exceeding five thousand dollars money of the United States, or by imprisonment not exceeding two years, or both, within the discretion of the court.”

5.    Statute valid
The validity of the Act has been questioned on various grounds, and it is vigorously contended that in so far as it imposes any obligation on a common carrier to accept for carriage merchandise of a class which he makes no public profession to carry, or which he has expressly or impliedly announced his intention to decline to accept for carriage from all shippers alike, it is ultra vires, unconstitutional and void. The Court may dismiss without extended discussion any argument or contention as to the invalidity of the statute based on alleged absurdities inherent in its provisions or on alleged unreasonable or impossible requirements which may be read into it by a strained construction of its terms.

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

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

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

9.    Pains and penalties prescribed within province of legislator; Courts will not interfere in absence of proof as to its excessiveness and cruelty
The Court may dismiss without much discussion the contentions as to the invalidity of the statute, which are based on the alleged excessive severity of the penalties prescribed for violation of its provisions. Upon general principles it is peculiarly and exclusively within the province of the legislator to prescribe the pains and penalties which may be imposed upon persons convicted of violations of the laws in force within his territorial jurisdiction. With the exercise of his discretion in this regard the courts have nothing to do, save only in cases where it is alleged that excessive fines or cruel and unusual punishments have been prescribed, and even in such cases the courts will not presume to interfere in the absence of the clearest and most convincing argument and proof in support of such contentions. There is no ground upon which to rest a contention that the penalties prescribed in the statute under consideration are either excessive or cruel and unusual, in the sense in which these terms are used in the organic legislation in force in the Philippine Islands.

10.    Ex parte Young (209 U. S., 123, 147, 148); Cotting vs. Godard (183 U. S., 79, 102); Mercantile Trust Co. vs. Texas Co. (51 Fed., 529); Louisville Ry. vs. McCord (103 Fed., 216); Cons. Gas Co. vs. Mayer (416 Fed., 150) not applicable; Different circumstances in the law’s creation and application
An examination of the general provisions of the statute, of the circumstances under which it was enacted, the mischief which it sought to remedy and of the nature of the penalties prescribed for violations of its terms convinces us that, unlike the statutes under consideration in the cases of Ex parte Young; Cotting vs. Godard; Mercantile Trust Co. vs. Texas Co.; Louisville Ry. vs. McCord; Cons. Gas Co. vs. Mayer, its enactment involved no attempt to prevent common carriers “from resorting to the courts to test the validity of the legislation;” no “effort to prevent any inquiry” as to its validity. It imposes no arbitrary obligation upon the company to do or to refrain from doing anything. It makes no attempt to compel such carriers to do business at a fixed or arbitrarily designated rate, at the risk of separate criminal prosecutions for every demand of a higher or a different rate. Its penalties can be imposed only upon proof of “unreasonable,” “unnecessary” and “unjust” discriminations, and range from a maximum which is certainly not excessive for willful, deliberate and contumacious violations of its provisions by a great and powerful corporation, to a minimum which may be a merely nominal fine. With so wide a range of discretion conferred upon the courts, there is no substantial basis for a contention on the part of any common carrier that it or its officers are “intimidated from resorting to the courts to test the validity” of the provisions of the statute prohibiting such “unreasonable,” “unnecessary” and “unjust” discriminations, or to test in any particular case whether a given course of conduct does in fact involve such discrimination.

11.    Court will not presume that the lower courts will abuse discretion to intimidate a common carrier from resorting to courts to test the validity
The Court will not presume, for the purpose of declaring the statute invalid, that there is so real a danger that the Courts of First Instance and this court on appeal will abuse the discretion thus conferred upon the Court, as to intimidate any common carrier, acting in good faith, from resorting to the courts to test the validity of the statute. Legislative enactments, penalizing unreasonable discriminations, unreasonable restraints of trade, and unreasonable conduct in various forms of human activity are so familiar and have been so frequently sustained in the courts, as to render extended discussion unnecessary to refute any contention as to the invalidity of the statute under consideration, merely because it imposes upon the carrier the obligation of adopting one of various courses of conduct open to it, at the risk of incurring a prescribed penalty in the event that the course of conduct actually adopted by it should be held to have involved an unreasonable, unnecessary or unjust discrimination.

12.    Application of the test announced in Ex parte Young; Plenary power of legislature
Applying the test announced in Ex parte Young, it will be seen that the validity of the Act does not depend upon the existence of a fact which can be determined only after investigation of a very complicated and technical character,” and that “the jurisdiction of the legislature’” over the subject with which the statute deals “is complete in any event.” There can be no real question as to the plenary power of the legislature to prohibit and to penalize the making of undue, unreasonable and unjust discriminations by common carriers to the prejudice of any person, locality or particular kind of traffic.

13.    Statute does not require carrier, as condition to continue business, that he must carry anything and everything
The statute does not “require of a carrier, as a condition to his continuing in said business, that he must carry anything and everything,” and thereby “render useless the facilities he may have for the carriage of certain lines of freight.” It merely forbids failures or refusals to receive persons or property for carriage which have the effect of giving an “unreasonable or unnecessary preference or advantage” to any person, locality or particular kind of traffic, or of subjecting any person, locality or particular kind of traffic to any undue or unreasonable prejudice or discrimination.

14.    Nothing in statute that would deprive person of his liberty
There is nothing in the statute which would deprive any person of his liberty “by requiring him to engage in business against his will.” The prohibitions of the statute against undue, unnecessary or unreasonable preferences and discriminations are merely the reasonable regulations which the legislator has seen fit to prescribe for the conduct of the business in which the carrier is engaged of his own free will and accord. In so far as the self-imposed limitations by the carrier upon the business conducted by him, in the various examples given by counsel, do not involve an unreasonable or unnecessary discrimination the statute would not control his action in any wise whatever. It operates only in cases involving such unreasonable or unnecessary preferences or discriminations.

15.    Nature of business of common carrier as public employment; State has power to impose just and reasonable regulations
The nature of the business of a common carrier as a public employment is such that it is clearly within the power of the state to impose such just and reasonable regulations thereon in the interest of the public as the legislator’ may deem proper. Of course such regulations must not have the effect of depriving an owner of his property without due process of law, nor of confiscating or appropriating private property without just compensation, nor of limiting or prescribing irrevocably vested rights or privileges lawfully acquired under a charter or franchise. But aside from such constitutional limitations, the determination of the nature and extent of the regulations which should be prescribed rests in the hands of the legislator. Common carriers exercise a sort of public office, and have duties to perform in which the public is interested. Their business is, therefore, affected with a public interest, and is subject of public regulation. Indeed, this right of regulation is so far beyond question that it is well settled that the power of the state to exercise legislative control over railroad companies and other carriers “in all respects necessary to protect the public against danger, injustice and oppression” may be exercised through boards of commissioners.

16.    Examples of regulations controlling free exercise of carrier’s discretion in conduct of business
Regulations limiting the number of passengers that may be carried in a particular vehicle or steam vessel, or forbidding the loading of a vessel beyond a certain point, or prescribing the number and qualifications of the personnel in the employ of a common carrier, or forbidding unjust discrimination as to rates, all tend to limit and restrict his liberty and to control to some degree the free exercise of his discretion in the conduct of his business.

17.    No one questions power of legislator to prescribe reasonable regulations upon property with public interest
Since the Granger cases were decided by the Supreme Court of the United States no one questions the power of the legislator to prescribe such reasonable regulations upon property clothed with a public interest as he may deem expedient or necessary to protect the public against danger, injustice or oppression.

18.    Right to enter public employment does not carry right to conduct business as one pleases
The right to enter the public employment as a common carrier and to offer one’s services to the public for hire does not carry with it the right to conduct that business as one pleases, without regard to the interests of the public and free from such reasonable and just regulations as may be prescribed for the protection of the public from the reckless or careless indifference of the carrier as to the public welfare and for the prevention of unjust and unreasonable discrimination of any kind whatsoever in the performance of the carrier’s duties as a servant of the public.

19.    When private property becomes clothed with public interest
Business of certain kinds, including the business of a common carrier, holds such a peculiar relation to the public interest that there is super induced upon it the right of public regulation. When private property is “affected with a public interest it ceases to be juris privati only.” Property becomes clothed with a public interest when used in a manner to make it of public consequence and affect the community at large. “When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created. He may withdraw his grant by discontinuing the use, but so long as he maintains the use he must submit to control.”

20.    Power to regulate not power to destroy, limitation is not confiscation
The power to regulate is not a power to destroy, and limitation is not the equivalent of confiscation. Under pretense of regulating fares and freight the state can not require a railroad corporation to carry persons or property without reward. Nor can it do that which in law amounts to a taking of private property for public use without just compensation, or without due process of law.

21.    Judiciary would not interfere with regulations unless there is flagrant attack upon rights of property
The judiciary ought not to interfere with regulations established under legislative sanction unless they are so plainly and palpably unreasonable as to make their enforcement equivalent to the taking of property for public use without such compensation as under all the circumstances is just both to the owner and to the public, that is, judicial interference should never occur unless the case presents, clearly and beyond all doubt, such a flagrant attack upon the rights of property under the guise of regulations as to compel the court to say that the regulation in question will have the effect to deny just compensation for private property taken for the public use.

22.    Common law rules themselves are regulations
Under the common law of England it was early recognized that common carriers owe to the public the duty of carrying indifferently for all who may employ them, and in the order in which application is made, and without discrimination as to terms. True, they were allowed to restrict their business so as to exclude particular classes of goods, but as to the kinds of property which the carrier was in the habit of carrying in the prosecution of his business he was bound to serve all customers alike; and it is to be observed in passing that these common law rules are themselves regulations controlling, limiting and prescribing the conditions under which common carriers were permitted to conduct their business.

23.    Correction of abuses precipitated adoption of statutory regulations; Examples
The correction of abuses which had grown up with the enormously increasing business of common carriers necessitated the adoption of statutory regulations controlling the business of common carriers, and imposing severe and drastic penalties for violations of their terms. In England, the Railway Clauses Consolidation Act was enacted in 1845, the Railway and Canal Traffic Act in 1854, and since the passage of those Acts much additional legislation has been adopted tending to limit and control the conduct of their business by common carriers. In the United States, the business of common carriers has been subjected to a great variety of statutory regulations. Among others Congress enacted “The Interstate Commerce Act” (1887 ) and its amendments, and the Elkins Act as amended (1906); and most if not all of the States of the Union have adopted similar legislation regulating the business of common carriers within their respective jurisdictions Unending litigation has arisen under these statutes and their amendments, but nowhere has the right of the state to prescribe just and reasonable regulations controlling and limiting the conduct of the business of common carriers in the public interest and for the general welfare been successfully challenged, though of course there has been wide divergence of opinion as to the reasonableness, the validity and legality of many of the regulations actually adopted.

24.    Power of Philippine legislator to prohibit and penalize unnecessary or unreasonable discrimination by common carrier; Discrimination must be substantial
The power of the Philippine legislator to prohibit and to penalize all and any unnecessary or unreasonable discriminations by common carriers may be maintained upon the same reasoning which justified the enactment by the Parliament of England and the Congress of the United States of the statutes prohibiting and penalizing the granting of certain preferences and discriminations in those countries.  The legislator having enacted a regulation prohibiting common carriers from giving unnecessary or unreasonable preferences or advantages to any particular kind of traffic or subjecting any particular kind of traffic to any undue or unreasonable prejudice or discrimination whatsoever, it is clear that whatever may have been the rule at the common law, common carriers in this jurisdiction cannot lawfully decline to accept a particular class of goods for carriage, to the prejudice of the traffic in those goods, unless it appears that for some sufficient reason the discrimination against the traffic in such goods is reasonable and necessary. Mere whim or prejudice will not suffice. The grounds for the discrimination must be substantial ones, such as will justify the courts in holding the discrimination to have been reasonable and necessary under all the circumstances of the case.

25.    Whether refusal to carry explosives involves an unnecessary or unreasonable preference or advantage to any person borne by particular circumstances of each case; Nothing in pleadings support contention that traffic of explosive unnecessary or unreasonable
The answer to the question whether such a refusal to carry explosives involves an unnecessary or unreasonable preference or advantage to any person, locality or particular kind of traffic or subjects any person, locality or particular kind of traffic to an undue or unreasonable prejudice or discrimination is by no means “self-evident,” and that it is a question of fact to be determined by the particular circumstances of each case. Herein, it is not alleged in the complaint that “dynamite, gunpowder and other explosives” can in no event be transported with reasonable safety on board steam vessels engaged in the business of common carriers. It is not alleged that all, or indeed any of the Yangco Steamship’s vessels are unsuited for the carriage of such explosives. It is not alleged that the nature of the business in which the steamship company is engaged is such as to preclude a finding that a refusal to accept such explosives on any of its vessels would subject the traffic in such explosives to an undue and unreasonable prejudice and discrimination.

26.    Inclusions to the words “dynamite, powder or other explosives
The words “dynamite, powder or other explosives” are broad enough to include matches, and other articles of like nature, and may fairly be held to include also kerosene oil, gasoline and similar products of a highly inflammable and explosive character. Many of these articles of merchandise are in the nature of necessities in any country open to modern progress and advancement.

27.    Methods of transportation possible for the transport of dynamite, etc.
The Court is not fully advised as to the methods of transportation by which they are made commercially available throughout the world, but certain it is that dynamite, gunpowder, matches, kerosene oil and gasoline are transported on many vessels sailing the high seas. Indeed it is matter of common knowledge that common carriers throughout the world transport enormous quantities of these explosives, on both land and sea, and there can be little doubt that a general refusal of the common carriers in any country to accept such explosives for carriage would involve many persons, firms and enterprises in utter ruin, and would disastrously affect the interests of the public and the general welfare of the community.

28.    Attendant circumstances determines whether refusal to carry products prejudiced or discriminatory
In any case of a refusal to carry products which would subject any person, locality or the traffic in such products to any prejudice or discrimination whatsoever, it would be necessary to hear evidence before making an affirmative finding that such prejudice or discrimination was or was not unnecessary, undue or unreasonable. The making of such a finding would involve a consideration of the suitability of the vessel for the transportation of such products; the reasonable possibility of danger or disaster resulting from their transportation in the form and under the conditions in which they are offered for carriage; the general nature of the business done by the carrier and, in a word, all the attendant circumstances which might affect the question of the reasonable necessity for the refusal by the carrier to undertake the transportation of this class of merchandise.

29.    Behavior of dynamite; Determining its hazards and transportability
The Court would not be justified in making such a holding unaided by evidence sustaining the proposition that dynamite and gunpowder can never be carried with reasonable safety on any vessel engaged in the business of a common carrier. It is said that dynamite is so erratic and uncontrollable in its action that it is impossible to assert that it can be handled with safety in any given case. On the other hand it is contended that while this may be true of some kinds of dynamite, it is a fact that dynamite can be and is manufactured so as to eliminate any real danger from explosion during transportation. These are of course questions of fact upon which we are not qualified to pass judgment without the assistance of expert witnesses who have made special studies as to the chemical composition and reactions of the different kinds of dynamite, or attained a thorough knowledge of its properties as a result of wide experience in its manufacture and transportation.

30.    Violent and destructive explosions attributable to dynamite, in itself, would not justify refusal of common carrier
The mere fact that violent and destructive explosions can be obtained by the use of dynamite under certain conditions would not be sufficient in itself to justify the refusal of a vessel, duly licensed as a common carrier of merchandise, to accept it for carriage, if it can be proven that in the condition in which it is offered for carriage there is no real danger to the carrier, nor reasonable ground to fear that his vessel or those on board his vessel will be exposed to unnecessary and unreasonable risk in transporting it, having in mind the nature of his business as a common carrier engaged in the coastwise trade in the Philippine Islands, and his duty as a servant of the public engaged in a public employment. So also, if by the exercise of due diligence and the taking of reasonable precautions the danger of explosions can be practically eliminated, the carrier would not be justified in subjecting the traffic in this commodity to prejudice or discrimination by proof that there would be a possibility of danger from explosion when no such precautions are taken.

31.    Traffic in dynamite, gunpowder and other explosives essential to the material and general welfare of country
The traffic in dynamite, gunpowder and other explosives is vitally essential to the material and general welfare of the people of these Islands. If dynamite, gunpowder and other explosives are to continue in general use throughout the Philippines, they must be transported by water from port to port in the various islands which make up the Archipelago.

32.    Refusal of particular vessel to accept explosives for carriage constitutes violation of statute, unless evidence of substantial danger of disaster is shown
The refusal by a particular vessel, engaged as a common carrier of merchandise in the coastwise trade of the Philippine Islands, to accept any or all of these explosives for carriage would constitute a violation of the prohibitions against discriminations penalized under the statute, unless it can be shown by affirmative evidence that there is so real and substantial a danger of disaster necessarily involved in the carriage of any or all of these articles of merchandise as to render such refusal a due or a necessary or a reasonable exercise of prudence and discretion on the part of the shipowner.

33.    Demurrer must be sustained
The complaint in the present case lacks the necessary allegations under the ruling, the demurrer must be sustained on the ground that the facts alleged do not constitute a cause of action.

34.    Interesting questions of procedure not passed upon as it may appear that discussion would make it appear that facts alleged in complaint constitute a cause of action
A number of interesting questions of procedure are raised and discussed in the briefs of counsel. As to all of these questions we expressly reserve our opinion, believing as we do that in sustaining the demurrer on the grounds indicated in this opinion we are able to dispose of the real issue involved in the proceedings without entering upon the discussion of the nice questions which it might have been necessary to pass upon