Fisher vs. Yangco Steamship Company

Act No. 98 validly prohibits common carriers from making undue or unreasonable preferences or discriminations, and a common carrier cannot lawfully refuse to accept a particular class of goods for carriage unless the discrimination is shown to be reasonable and necessary under all the circumstances; the Supreme Court may decline to exercise its original jurisdiction in prohibition proceedings when the issues involve controverted factual questions better resolved by trial courts.

F.C. Fisher was a stockholder in the Yangco Steamship Company, which owned a large number of steam vessels duly licensed to engage in the coastwise trade of the Philippine Islands as a common carrier of passengers and property. Act No. 98 of the Philippine Commission regulated common carriers, prohibiting unreasonable preferences and discriminations and prescribing penal sanctions for willful violations. The Acting Collector of Customs, the Attorney-General, and the prosecuting attorney of the city of Manila were charged with enforcing the Act's provisions. The enactment of Acts No. 2307 and 2362, creating a Board of Public Utility Commissioners, occurred during the pendency of the proceedings and potentially modified the regulatory landscape for public service corporations.

F.C. Fisher was a stockholder in the Yangco Steamship Company, which owned a large number of steam vessels duly licensed to engage in the coastwise trade of the Philippine Islands as a common carrier. On or about June 10, 1912, the company's board of directors adopted a resolution, thereafter ratified by the shareholders, expressly declaring that the classes of merchandise to be carried by the company did not include dynamite, powder, or other explosives, and prohibiting the company's officers, agents, and servants from accepting such articles for carriage.

Thereafter, the Acting Collector of Customs, J.S. Stanley, demanded that the company accept and carry such explosives and refused to issue the necessary clearance documents for the company's vessels unless it consented. Fisher alleged that the Attorney-General and the prosecuting attorney of Manila intended to institute penal proceedings under sections 4, 5, and 6 of Act No. 98 against the company, its managers, agents, and servants to enforce compliance. Despite Fisher's demands as a stockholder, the company's management declined to cease carrying explosives, citing the severity of the penalties threatened for non-compliance with the Collector's demands.

Fisher filed an original action for prohibition in the Supreme Court, seeking to enjoin the company from accepting explosives for carriage, to prohibit the Collector of Customs from compelling the company to carry explosives, and to restrain the prosecuting officers from instituting proceedings under Act No. 98. He alleged that the Act, if construed to require the company to carry explosives, was unconstitutional and void. The respondents demurred, contending that the complaint did not state facts sufficient to constitute a cause of action and that the plaintiff lacked legal capacity to sue.

On November 5, 1914, the Court sustained the demurrer, holding that the original complaint did not state a cause of action. The Court ruled that Act No. 98, properly construed, merely prohibited unreasonable and unnecessary discriminations by common carriers and did not compel carriers to accept all kinds of freight regardless of facilities or suitability. Common carriers could not lawfully decline to accept a particular class of goods unless the discrimination was shown to be reasonable and necessary, but the complaint contained no allegation that any of the company's vessels were unsuitable for transporting explosives or that explosives could not be carried with reasonable safety.

Fisher filed an amended complaint on November 14, 1914, substantially identical to the original but adding allegations that every vessel of the company was dedicated to passenger carriage, that dynamite and other explosives were dangerous commodities whose risk could not be wholly eliminated even with the highest degree of care, and that the vessels lacked special means for handling explosives, which could not be installed without prohibitive cost. The respondent officials again demurred. The Court, on March 31, 1915, declined to exercise its original jurisdiction over the amended complaint, holding that the new allegations raised factual questions about whether government officials were exercising their discretion properly rather than constitutional questions about the validity of the statute, and that such factual questions were better resolved by the Courts of First Instance.

• Constitutionality of Act No. 98: Petitioner contended that Act No. 98, insofar as it imposed on a common carrier the obligation to accept for carriage merchandise of a class which the carrier had expressly or impliedly declined to carry from all shippers alike, was ultra vires, unconstitutional, and void.
• Common Law Limitation on Carrier's Duty: Petitioner maintained that a common carrier's duty to carry for all who offer arises from the public profession made and is limited by it, so that a carrier may decline any class of goods it has publicly professed not to carry from anyone.
• Confiscation of Property: Petitioner argued that requiring a carrier, as a condition of continuing in business, to carry anything and everything renders useless the carrier's facilities and constitutes a confiscation of property without due process of law, depriving the carrier of liberty by compelling him to engage in business against his will.
• Intimidating Penalties: Petitioner contended that the severity of penalties under Act No. 98 effectively denied equal protection by intimidating carriers from resorting to the courts to test the statute's validity, relying on Ex parte Young and Cotting vs. Goddard.
• Dangerous Nature of Explosives: Petitioner argued that the exceptional power and violence of dynamite and gunpowder in explosion always furnished the owner of a vessel with a reasonable excuse for refusing to accept them for carriage, and that the decision not to carry explosives rested on substantial grounds that were self-evident.

• Insufficiency of Complaint: Respondents demurred to the complaint on the ground that it did not set forth facts sufficient to constitute a cause of action.
• Lack of Legal Capacity to Sue: Respondents alleged that the plaintiff lacked legal capacity to sue, the complaint failing to allege the requisites for maintaining a shareholder's derivative action.

• Validity of Act No. 98: Whether Act No. 98 of the Philippine Commission, insofar as it requires common carriers to accept for carriage merchandise they have expressly declined to carry, is constitutional and valid.
• Common Carrier's Right to Refuse Goods: Whether a common carrier may lawfully refuse to accept a particular class of goods for carriage under Act No. 98 without constituting an unreasonable discrimination.
• Exercise of Original Jurisdiction: Whether the Supreme Court should exercise its original jurisdiction in prohibition proceedings over the amended complaint, which raised factual questions rather than constitutional ones.

• Validity of Act No. 98: Yes. Properly construed, Act No. 98 merely prohibits unreasonable and unnecessary discriminations by common carriers and does not compel carriers to carry any and all kinds of freight regardless of facilities or suitability; it is a valid exercise of the police power.
• Common Carrier's Right to Refuse Goods: No. A common carrier cannot lawfully decline to accept a particular class of goods for carriage to the prejudice of the traffic in those goods unless the discrimination is shown to be reasonable and necessary under all the circumstances; mere whim or caprice is insufficient.
• Exercise of Original Jurisdiction: No. The Court declined to exercise original jurisdiction over the amended complaint, which raised factual questions about whether officials were exercising discretion properly rather than constitutional questions about the statute's validity, such questions being better resolved by the Courts of First Instance.

• Validity of Act No. 98: The statutory language of sections 2, 3, and 4 of Act No. 98, read in context, was not to be construed literally so as to impose an imperative duty on all common carriers to accept any kind of freight regardless of facilities. The legislator could not have intended that a passenger automobile must transport coal, or that a tank steamer built for crude oil must accept other cargo, or that carriers must accept contraband or defectively packed goods. The mandatory and prohibitory provisions were intended merely to forbid failures or refusals to receive persons or property for carriage involving unreasonable or unnecessary preferences or discriminations. The statute's penalties, ranging from a nominal fine to a maximum certainly not excessive for willful violations by a great corporation, were not so severe as to intimidate carriers from resorting to the courts, unlike the statutes in Ex parte Young and Cotting vs. Goddard, which involved enormous fines and possible imprisonment for challenging rate regulations requiring complicated factual investigation. The legislature's jurisdiction over the subject was complete, and the validity of the Act did not depend on facts requiring technical investigation. The contention that the statute confiscated property without due process was rejected because the statute did not require a carrier to carry anything and everything; it merely forbade unreasonable discriminations, and a carrier who voluntarily entered the business of common carrier must submit to reasonable public regulation.

• Common Carrier's Right to Refuse Goods: The business of a common carrier is affected with a public interest, and when one devotes property to a use in which the public has an interest, he grants the public an interest in that use and must submit to public control for the common good. The right to enter public employment as a common carrier does not carry the right to conduct the business free from reasonable regulations for the protection of the public. Under Act No. 98, a common carrier cannot lawfully decline to accept a particular class of goods for carriage to the prejudice of the traffic in those goods unless the discrimination is reasonable and necessary. Mere whim or caprice is insufficient; the grounds must be substantial. The complaint alleged no facts showing that any of the company's vessels were unsuitable for transporting explosives, that explosives could not be carried with reasonable safety, or that the nature of the company's business precluded a finding that refusal would subject the traffic in explosives to undue prejudice. Whether refusal to carry explosives constitutes unreasonable discrimination is a question of fact dependent on the suitability of the vessel, the danger involved, and all attendant circumstances. The traffic in dynamite, gunpowder, and other explosives is vitally essential to the welfare of the Islands, and these articles must be transported by water between ports; a general refusal by common carriers to accept them would involve many persons and enterprises in ruin and disastrously affect the public welfare.

• Exercise of Original Jurisdiction: The original complaint raised a question as to the validity of a public statute of vital interest to shippers, shipowners, and the public, presenting no complicated questions of fact, which justified the Court's assumption of original jurisdiction. The amended complaint, however, no longer challenged the constitutionality of the statute but rather alleged that government officials were exercising their authority improvidently or mistakenly — a contention that the officials were acting within their jurisdiction but abusing their discretion. Under sections 226 and 516 of the Code of Civil Procedure, prohibition lies when the proceedings of an inferior tribunal, corporation, board, or person are without or in excess of jurisdiction. The amended complaint's allegations, even if true, would not sustain a writ of prohibition unless construed as charging that the officials were abusing their discretion so as to act without or in excess of jurisdiction. The Court's original jurisdiction in prohibition is concurrent with that of the Courts of First Instance, and the legislature could not have intended that the Supreme Court assume original jurisdiction in all cases a plaintiff elects to invoke it. Such a practice would overwhelm the Court with original proceedings involving contested factual issues better adjudicated in trial courts. Absent special reasons, the Court should decline to permit its original jurisdiction to be invoked in prohibition proceedings, especially when adjudication requires taking evidence and making findings on controverted facts.

• Business Affected with Public Interest — When private property is used in a manner that makes it of public consequence and affects the community at large, it becomes clothed with a public interest, and the owner must submit to public control for the common good to the extent of the interest created. The owner may withdraw by discontinuing the use, but so long as he maintains the use, he must submit to control. Applied in this case to uphold the legislature's power to regulate common carriers, whose business is a public employment with duties in which the public is interested, and to prohibit unreasonable discriminations in the conduct of that business.

• Proper Construction of Common Carrier Statutes — Statutory provisions requiring common carriers to receive for carriage any person or property offering for carriage are not to be construed literally so as to compel carriers to accept all kinds of freight regardless of facilities, suitability, or legality. Such provisions are to be read in context as merely forbidding failures or refusals that involve unreasonable or unnecessary preferences or discriminations. A carrier may restrict its business to exclude particular classes of goods, but only if the exclusion does not constitute an unreasonable or unnecessary discrimination against any person, locality, or kind of traffic. The grounds for discrimination must be substantial, not based on mere whim or caprice.

• Discretionary Exercise of Original Jurisdiction in Prohibition — The Supreme Court's original jurisdiction in prohibition proceedings is concurrent with that of the Courts of First Instance. Absent special reasons, the Court should decline to permit its original jurisdiction to be invoked, especially when adjudication of the issues involves taking evidence and making findings on controverted factual questions that can be better resolved by trial courts in the first instance.

• "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 prejudice or whim will not suffice. The grounds of 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." — This passage states the ratio decidendi on the proper construction of Act No. 98 and the standard for lawful refusal by a common carrier, defining the controlling doctrine on carrier discrimination.

• "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." — This passage, quoting Munn vs. Illinois, articulates the foundational principle that property devoted to public use is subject to public regulation, grounding the Court's validation of Act No. 98 as a legitimate exercise of police power.

• "unless special reasons appear therefor, this court should decline to permit its original jurisdiction to be invoked in prohibition proceedings, and this especially when the adjudication of the issues raised involves the taking of evidence and the making of findings touching controverted facts, which, as a rule, can be done so much better in the first instance by a trial court than an appellate court organized as is ours." — This passage establishes the doctrine governing the Supreme Court's discretionary exercise of original jurisdiction in prohibition, frequently cited in subsequent jurisprudence on the Court's willingness to entertain original actions.

• Munn vs. Illinois, 94 U.S. 113 — Controlling authority on the principle that business affected with a public interest is subject to public regulation; cited extensively to sustain the legislature's power to impose reasonable regulations on common carriers and to reject the confiscation argument.
• Ex parte Young, 209 U.S. 123 — Distinguished; the Court found that unlike the statutes in that case, Act No. 98 did not impose penalties so severe as to intimidate carriers from resorting to the courts, and the validity of the Act did not depend on facts requiring complicated technical investigation.
• Cotting vs. Goddard, 183 U.S. 79 — Distinguished for the same reasons as Ex parte Young; the penalties under Act No. 98 were not so enormous as to close all approaches to the courts.
• Hawes vs. Oakland, 104 U.S. 450 — Cited in Justice Moreland's concurrence for the requisites of a shareholder's derivative action, supporting his view that the complaint should be dismissed for lack of standing rather than on the merits.
• Chicago & N.W. Ry. vs. Dey, 35 Fed. Rep. 866 — Cited by petitioner for the proposition that requiring a carrier to carry anything and everything is confiscatory; the Court found the argument inapplicable because the statute, properly construed, imposed no such requirement.

• Sections 2, 3, and 4, Act No. 98 of the Philippine Commission — Section 2 prohibits common carriers from making unnecessary or unreasonable preferences or advantages or subjecting any person, locality, or kind of traffic to undue or unreasonable prejudice or discrimination. Section 3 prohibits common carriers from failing or refusing to receive for carriage any person or property offering for carriage, without discrimination and in the order offered. Section 4 prescribes penalties for willful violations. The Court construed these provisions in context as merely forbidding unreasonable discriminations, not as compelling carriers to accept all freight regardless of facilities or suitability.
• Acts No. 2307 and No. 2362 — Created the Board of Public Utility Commissioners and potentially modified the regulatory framework for public service corporations. The Court noted these enactments may have materially modified the right to institute and maintain prohibition proceedings, but refrained from ruling on their effect because the demurrer had been submitted before their enactment.
• Sections 226 and 516, Code of Civil Procedure (Act No. 190) — Confer jurisdiction in prohibition proceedings upon the courts when the proceedings of any inferior tribunal, corporation, board, or person are without or in excess of jurisdiction. The Court held that the amended complaint's allegations, even if true, would not sustain a writ of prohibition unless construed as charging abuse of discretion amounting to excess of jurisdiction.

• Arellano, C.J. and Trent, J. — concurred with the majority opinion in both decisions.
• Torres, J. and Johnson, J. — concurred in the result of the first decision.
• Moreland, J. (concurring separately) — Agreed that the complaint should be dismissed but on entirely different grounds. He maintained that the plaintiff lacked standing to maintain a shareholder's derivative action under the doctrine of Hawes vs. Oakland, as the complaint failed to allege fraud, breach of trust, or ultra vires conduct by the directors, and affirmatively showed that the company had acted in conformity with the plaintiff's wishes. He further argued that the case was collusive, that no actual violation of Act No. 98 had occurred, that the Act had been repealed by Acts 2307 and 2362 with jurisdiction transferred to the Board of Public Utility Commissioners, and that the Court should not decide the merits. On the merits, he contended that the universal doctrine — supported by treatises and American, English, and U.S. statutory law — held that common carriers are not obliged to receive dangerous explosives for carriage, especially on passenger vessels, and that U.S. law affirmatively prohibited passenger ships from carrying dynamite.

• Araullo, J. — Dissented on two grounds: first, that the majority failed to address the demurrer's first ground — lack of legal capacity to sue on the part of the plaintiff — which should have been considered before the sufficiency of the complaint; and second, that notwithstanding the failure to rule on the capacity issue, the plaintiff was nevertheless permitted to file an amended complaint, an authorization that would have been improper if the plaintiff indeed lacked capacity to sue.