SECOND DIVISION

[G.R. No. 80447. January 31, 1989.]

BALIWAG TRANSIT, INC. petitioner, vs. HON. COURT OF APPEALS and
SPS. SOTERO CAILIPAN, JR. and ZENAIDA LOPEZ and GEORGE L.
CAILIPAN, respondents.
SYLLABUS
1.REMEDIAL LAW; CIVIL ACTIONS; ACTION FOR BREACH OF CONTRACT; RELEASE OF
CLAIMS EXECUTED BY INJURED PARTY OF LEGAL AGE, VALID. We hold that since the
suit is one for breach of contract of carriage, the Release of Claims executed by him, as the
injured party, discharging Fortune Insurance and Baliwag from any and all liability is valid. He
was then of legal age, a graduating student of Agricultural Engineering, and had the capacity to
do acts with legal effect (Article 37 in relation to Article 402, Civil Code). Thus, he could sue and
be sued even without the assistance of his parents.
2.CIVIL LAW; COMMON CARRIERS; CARRIER LIABLE FOR INQUIRIES CAUSED ITS
PASSENGERS. The contract of carriage was actually between George, as the paying
passenger, and Baliwag, as the common carrier. As such carrier, Baliwag was bound to carry its
passengers safely as far as human care and foresight could provide, and is liable for injuries to
them through the negligence or wilful acts of its employees (Articles 1755 and 1759, Civil Code).
Thus, George had the right to be safely brought to his destination and Baliwag had the
correlative obligation to do so. 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 (Marimperio Compania Naviera, S.A. vs. Court
of Appeals, No. L-40234, December 14, 1987, 156 SCRA 368).
3.REMEDIAL LAW; CIVIL ACTIONS; REAL PARTY-IN-INTEREST, DEFINED. A real party-
in-interest-plaintiff is one who has a legal right while a real party-in-interest-defendant is one
who has a correlative legal obligation whose act or omission violates the legal right of the former
(Lee vs. Romillo, Jr., G.R. No. 60973, May 28, 1988).
4.ID.; ID.; ACTION FOR BREACH OF CONTRACT, PERSONS NOT PARTIES TO
CONTRACT, NOT REAL PARTIES-IN-INTEREST. In the absence of any contract of carriage
between Baliwag and George's parents, the latter are not real parties-in-interest in an action for
breach of that contract.
5.STATUTORY CONSTRUCTION; IF THE TERMS OF THE CONTRACT ARE CLEAR AND
LEAVES NO ROOM FOR DOUBT, THE LITERAL MEANING OF STIPULATION CONTROLS.
If the terms of a contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall control (Article 1370, Civil Code).
6.ID.; ID.; CASE AT BAR. The phraseology "any and all claims or causes of action" is broad
enough to include all damages that may accrue to the injured party arising from the unfortunate
accident.
7.REMEDIAL LAW; CIVIL ACTIONS; RELEASE OF CLAIMS HAD THE EFFECT OF
COMPROMISE AGREEMENT. The Release of Claims had the effect of a compromise
agreement since it was entered into for the purpose of making a full and final compromise
adjustment and settlement of the cause of action involved.
8.ID.; ID.; COMPROMISE AGREEMENT; CONSTRUED. A compromise is a contract
whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one
already commenced (Article 2028, Civil Code). The Release of Claims executed by the injured
party himself wrote finish to this litigation.
D E C I S I O N
MELENCIO-HERRERA, J p:
On 10 April 1985 a Complaint for damages arising from breach of contract of carriage was filed
by private respondents, the Spouses Sotero Cailipan, Jr. and Zenaida Lopez, and their son
George, of legal age, against petitioner Baliwag Transit (Baliwag, for brevity). The Complaint
alleged that George, who was a paying passenger on a Baliwag bus on 17 December 1984,
suffered multiple serious physical injuries when he was thrown off said bus driven in a careless
and negligent manner by Leonardo Cruz, the authorized bus driver, along Barangay Patubig,
Marilao, Bulacan. As a result, he was confined in the hospital for treatment, incurring medical
expenses, which were borne by his parents, the respondent Spouses, in the sum of about
P200,000.00 plus other incidental expenses of about P10,000.00.
On 26 April 1985 an Answer was filed by petitioner alleging that the cause of the injuries
sustained by George was solely attributable to his own voluntary act in that, without warning and
provocation, he suddenly stood up from his seat and headed for the door of the bus as if in a
daze, opened it and jumped off while said bus was in motion, in spite of the protestations by the
driver and without the knowledge of the conductor.
Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company, Inc.,
on its third-party liability insurance in the amount of P50,000.00. In its Answer, Fortune
Insurance claimed limited liability, the coverage being subject to a Schedule of Indemnities
forming part of the insurance policy.
On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and Baliwag
each filed Motions to Dismiss on the ground that George, in consideration of the sum of
P8,020.50 had executed a "Release of Claims" dated 16 May 1985. These Motions were denied
by the Trial Court in an Order dated 13 January 1986 as they were filed beyond the time for
pleading and after the Answer were already filed. prcd
On 5 February 1986 Baliwag filed a Motion to Admit Amended Answer, which was granted by
the Trial Court. The Amended Answer incorporated the affirmative defense in the Motion to
Dismiss to the effect that on 16 May 1985, George had been paid all his claims for damages
arising from the incident subject matter of the complaint when he executed the following
"Release of Claims":
"For and in consideration of the payment to me/us of the sum of EIGHT
THOUSAND TWENTY and 50/100 PESOS ONLY (P8,020.50), the receipt of
which is hereby acknowledged, I/we, being of lawful age, do hereby release,
acquit and forever discharge Fortune Insurance and/or Baliwag Transit, Inc.
his/her heirs, executors and assigns, from any and all liability now accrued or
hereafter to accrue on account of any and all claims or causes of action which
I/we now or may hereafter have for personal injuries, damage to property, loss
of services, medical expenses, losses or damages of any and every kind or
nature whatsoever, now known or what may hereafter develop by me/us
sustained or received on or about 17th day of December, 1984 through
Reckless Imprudence Resulting to Physical Injuries, and I/we hereby declare
that I/we fully understand the terms of this settlement and voluntarily accept
said sum for the purpose of making a full and final compromise adjustment and
settlement of the injuries and damages, expenses and inconvenience above
mentioned." (Rollo, p. 11)
During the preliminary hearing on the aforementioned affirmative defense, Baliwag waived the
presentation of testimonial evidence and instead offered as its Exhibit "1" the "Release of
Claims" signed by George and witnessed by his brother Benjamin L. Cailipan, a licensed
engineer.
By way of opposition to petitioner's affirmative defense, respondent Sotero Cailipan, Jr. testified
that he is the father of George, who at the time of the incident was a student, living with his
parents and totally dependent on them for their support; that the expenses for his hospitalization
were shouldered by his parents; and that they had not signed the "Release of Claims."
In an Order dated 29 August 1986, the Regional Trial Court of Bulacan, Branch 20, 1 dismissed
the Complaint and Third-party Complaint, ruling that since the contract of carriage is between
Baliwag and George L. Cailipan, the latter, who is of legal age, had the exclusive right to
execute the Release of Claims despite the fact that he is still a student and dependent on his
parents for support. Consequently, the execution by George of the Release of Claims
discharges Baliwag and Fortune Insurance. Cdpr
Aggrieved, the Spouses appealed to respondent Court of Appeals.
On 22 October 1987, the Appellate Court rendered a Decision 2 setting aside the appealed
Order and holding that the "Release of Claims" cannot operate as a valid ground for the
dismissal of the case because it does not have the conformity of all the parties, particularly
George's parents, who have a substantial interest in the case as they stand to be prejudiced by
the judgment because they spent a sizeable amount for the medical bills of their son; that the
Release of Claims was secured by Fortune Insurance for the consideration of P8,020.50 as the
full and final settlement of its liability under the insurance policy and not for the purpose of
releasing Baliwag from its liability as a carrier in this suit for breach of contract. The Appellate
Court also ordered the remand of the case to the lower Court for trial on the merits and for
George to return the amount of P8,020.50 to Fortune Insurance.
Hence, this Petition for Review on Certiorari by Baliwag assailing the Appellate Court judgment.
The issue brought to the fore is the legal effect of the Release of Claims executed by George
during the pendency of this case.
We hold that since the suit is one for breach of contract of carriage, the Release of Claims
executed by him, as the injured party, discharging Fortune Insurance and Baliwag from any and
all liability is valid. He was then of legal age, a graduating student of Agricultural Engineering,
and had the capacity to do acts with legal effect (Article 37 in relation to Article 402, Civil Code).
Thus, he could sue and be sued even without the assistance of his parents.
Significantly, the contract of carriage was actually between George, as the paying passenger,
and Baliwag, as the common carrier. As such carrier, Baliwag was bound to carry its
passengers safely as far as human care and foresight could provide, and is liable for injuries to
them through the negligence or wilful acts of its employees (Articles 1755 and 1759, Civil Code).
Thus, George had the right to be safely brought to his destination and Baliwag had the
correlative obligation to do so. 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 (Marimperio Compania Naviera, S.A. vs. Court
of Appeals, No. L-40234, December 14, 1987, 156 SCRA 368). A real party-in-interest-plaintiff
is one who has a legal right while a real party-in-interest-defendant is one who has a correlative
legal obligation whose act or omission violates the legal right of the former (Lee vs. Romillo, Jr.,
G.R. No. 60973, May 28, 1988). In the absence of any contract of carriage between Baliwag
and George's parents, the latter are not real parties-in-interest in an action for breach of that
contract. Cdpr

"The general rule of the common law is that every action must be brought in the
name of the party whose legal right has been invaded or infringed." 15 Enc. P1.
& Pr. p. 484. "For the immediate wrong and damage the person injured is the
only one who can maintain the action." Id. p. 578. "The person who sustains an
injury is the person to bring an action for the injury against the wrongdoer."
Dicey, parties to Actions, 347. (Cited in Green v. Shoemaker, 73 A 688, 23
L.R.A., N.S. 667).
There is no question regarding the genuineness and due execution of the Release of Claims. It
is a duly notarized public document. It clearly stipulates that the consideration of P8,020.50
received by George was "to release and forever discharge Fortune Insurance and/or Baliwag
from any and all liabilities now accrued or to accrue on account of any and all claims or causes
of action . . . for personal injuries, damage to property, loss of services, medical expenses,
losses or damages of any and every kind or nature whatsoever, sustained by him on 17
December 1984 thru Reckless Imprudence Resulting to Physical Injuries." Consequently, the
ruling of respondent Appellate Court that the "Release of Claims" was intended only as the full
and final settlement of a third-party-liability for bodily injury claim and not for the purpose of
releasing Baliwag from its liability, if any, in a breach of a contract of carriage, has to be rejected
for being contrary to the very terms thereof. If the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall
control (Article 1370, Civil Code). The phraseology "any and all claims or causes of action" is
broad enough to include all damages that may accrue to the injured party arising from the
unfortunate accident.
The Release of Claims had the effect of a compromise agreement since it was entered into for
the purpose of making a full and final compromise adjustment and settlement of the cause of
action involved. A compromise is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced (Article 2028, Civil
Code). The Release of Claims executed by the injured party himself wrote finish to this litigation.
WHEREFORE, the Decision dated 22 October 1987 of respondent Court of Appeals is SET
ASIDE, the Decision of the Regional Trial Court of Bulacan, Branch 20, is REINSTATED, and
the Complaint and Third-Party-Complaint are hereby ordered DISMISSED. No costs.



















[G.R. No. 92288. February 9, 1993.]
BRITISH AIRWAYS, INC., petitioner, vs. THE HON. COURT OF APPEALS,
Twelfth Division, and FIRST INTERNATIONAL TRADING AND GENERAL
SERVICES, respondents.
Quasha, Asperilla, Ancheta, Pea & Nolasco for petitioner.
Monina P. Lee for private respondent.
SYLLABUS
1.CIVIL LAW; DAMAGES; THERE IS VALID CAUSE OF ACTION FOR DAMAGES AGAINST
PETITIONER FOR ITS BREACH OF CONTRACT AND BAD FAITH. Private respondent had
a valid cause of action for damages against petitioner. A cause of action is an act or omission of
one party in violation of the legal right or rights of the other.

petitioner's repeated failures to
transport private respondent's workers in its flight despite confirmed booking of said workers
clearly constitutes breach of contract and bad faith on its part.
2.ACTUAL OR COMPENSATORY DAMAGES CANNOT BE PRESUMED BUT MUST BE
PROVED WITH REASONABLE DEGREE OF CERTAINTY; PRIVATE RESPONDENT NOT
ENTITLED TO ACTUAL DAMAGES BECAUSE IT FAILED TO SUPPORT ITS CLAIM THAT IT
SUFFERED THEM. In the Complaint filed by private respondent. it was alleged that private
respondent suffered actual damages in the amount of P308,016.00 representing the money it
borrowed from friends and financiers which is P304,416.00 for the 93 airline tickets and
P3,600.00 for the travel tax of the 12 workers. It is clear therefore that the actual damages
private respondent seeks to recover are the airline tickets and travel taxes it spent for its
workers which were already reimbursed by its principal and not for any other expenses it had
incurred in the process of recruiting said contract workers. Inasmuch as all expenses including
the processing fees incurred by private respondent had already been paid for by the latter's
principal on a staggered basis as admitted in open court by its managing director, Mrs.
Bienvenida Brusellas,

We do not find anymore justification in the appellate court's decision in
granting actual damages to private respondent. Thus, while it may be true that private
respondent was compelled to borrow money for the airfare tickets of its contract workers when
petitioner failed to transport said workers, the reimbursements made by its principal to private
respondent failed to support the latter's claim that it suffered actual damages as a result of
petitioner's failure to transport said workers. It is undisputed that private respondent had
consistently admitted that its principal and reimbursed all its expenses. Article 2199 of the Civil
Code provides that: "Except as provided by law or by stipulations, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved. Such
compensation is referred to as actual or compensatory damages." Furthermore, actual or
compensatory damages cannot be presumed, but must be duly proved, and proved with
reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as
to the fact and amount of damages, but must depend upon competent proof that they have
suffered and on evidence of the actual amount thereof.
3.PRIVATE RESPONDENT, HOWEVER, IS ENTITLED TO AN AWARD OF MORAL AND
EXEMPLARY DAMAGES; REASON; PETITIONER'S ALLEGED DAMAGES WERE MERE
AFTERTHOUGHTS. However, private respondent is entitled to an award of moral and
exemplary damages for the injury it suffered as a result of petitioner's failure to transport the
former's workers because of the latter's patent bad faith in the performance of its obligation. As
to the alleged damages suffered by the petitioner as stated in its counterclaims, the record
shows that no claim for said damages was ever made by the petitioner immediately after their
alleged occurrence therefore said counterclaims were mere afterthoughts when private
respondent filed the present case.
D E C I S I O N
NOCON, J p:
This is a petition for review on certiorari to annul and set aside the decision dated November 15,
1989 of the Court of Appeals 1 affirming the decision of the trial court 2 in ordering petitioner
British Airways, Inc. to pay private respondent First International Trading and General Services
actual damages, moral damages, corrective or exemplary damages, attorney's fees and the
costs as well as the Resolution dated February 15, 1990 3 denying petitioner's Motion for
Reconsideration in the appealed decision.
It appears on record that on February 15, 1981, private respondent First International Trading
and General Services Co., a duly licensed domestic recruitment and placement agency,
received a telex message from its principal ROLACO Engineering and Contracting Services in
Jeddah, Saudi Arabia to recruit Filipino contract workers in behalf of said principal. 4
During the early part of March 1981, said principal paid to the Jeddah branch of petitioner British
Airways. Inc. airfare tickets for 93 contract workers with specific instruction to transport said
workers to Jeddah on or before March 30, 1981.
As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the 93
workers, private respondent was immediately informed by petitioner that its principal had
forwarded 93 prepaid tickets. Thereafter, private respondent instructed its travel agent, ADB
Travel and Tours, Inc., to book the 93 workers with petitioner but the latter failed to fly said
workers, thereby compelling private respondent to borrow money in the amount of P304.416.00
in order to purchase airline tickets from the other airlines as evidenced by the cash vouchers
(Exhibits "B", "C" and "C-1 to C-7") for the 93 workers it had recruited who must leave
immediately since the visas of said workers are valid only for 45 days and the Bureau of
Employment Services mandates that contract workers must be sent to the jobsite within a
period of 30 days. LexLib
Sometime in the first week of June, 1981, private respondent was again informed by the
petitioner that it had received a prepaid ticket advice from its Jeddah branch for the
transportation of 27 contract workers. Immediately, private respondent instructed its travel agent
to book the 27 contract workers with the petitioner but the latter was only able to book and
confirm 16 seats on its June 9, 1981 flight. However, on the date of the scheduled flight only 9
workers were able to board said flight while the remaining 7 workers were rebooked to June 30,
1981 which bookings were again cancelled by the petitioner without any prior notice to either
private respondent or the workers. Thereafter, the 7 workers were rebooked to the July 4, 1981
flight of petitioner with 6 more workers booked for said flight. Unfortunately, the confirmed
bookings of the 13 workers were again cancelled and rebooked to July 7, 1981.
On July 6, 1981, private respondent paid the travel tax of the said workers as required by the
petitioner but when the receipt of the tax payments was submitted, the latter informed private
respondent that it can only confirm the seats of the 12 workers on its July 7, 1981 flight.
However, the confirmed seats of said workers were again cancelled without any prior notice
either to the private respondent or said workers. The 12 workers were finally able to leave for
Jeddah after private respondent had bought tickets from the other airlines.
As a result of these incidents, private respondent sent a letter to petitioner demanding
compensation for the damages it had incurred by the latter's repeated failure to transport its
contract workers despite confirmed bookings and payment of the corresponding travel taxes.
cdll
On July 23, 1981, the counsel of private respondent sent another letter to the petitioner
demanding the latter to pay the amount of P350,000.00 representing damages and unrealized
profit or income which was denied by the petitioner.
On August 8, 1981, private respondent received a telex message from its principal cancelling
the hiring of the remaining recruited workers due to the delay in transporting the workers to
Jeddah. 5
On January 27, 1982, private respondent filed a complaint for damages against petitioner with
the Regional Trial Court of Manila, Branch 1 in Civil Case No. 82-4653.
On the other hand, petitioner alleged in its Answer with counterclaims that it received a telex
message from Jeddah on March 20, 1981 advising that the principal of private respondent had
prepaid the airfares of 100 persons to transport private respondent's contract workers from
Manila to Jeddah on or before March 30, 1981. However, due to the unavailability of space and
limited time, petitioner had to return to its sponsor in Jeddah the prepaid ticket advice
consequently not even one of the alleged 93 contract workers were booked in any of its flights.
On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract
workers of private respondent to Jeddah but the travel agent of the private respondent booked
only 10 contract workers for petitioner's June 9, 1981 flight. However, only 9 contract workers
boarded the scheduled flight with 1 passenger not showing up as evidenced by the Philippine
Airlines' passenger manifest for Flight BA-020 (Exhibit "7", "7-A", "7-B", & "7-C"). 6
Thereafter, private respondent's travel agent booked seats for 5 contract workers on petitioner's
July 4, 1981 flight but said travel agent cancelled the booking of 2 passengers while the other 3
passengers did not show up on said flight.
Sometime in July 1981, the travel agent of the private respondent booked 7 more contract
workers in addition to the previous 5 contract workers who were not able to board the July 4,
1981 flight with the petitioner's July 7, 1981 flight which was accepted by petitioner subject to
reconfirmation.
However on July 6, 1981, petitioner's computer system broke down which resulted to
petitioner's failure to get a reconfirmation from Saudi Arabia Airlines causing the automatic
cancellation of the bookings of private respondent's 12 contract workers. In the morning of July
7, 1981, the computer system of the petitioner was reinstalled and immediately petitioner tried to
reinstate the bookings of the 12 workers with either Gulf Air or Saudi Arabia Airlines out both
airlines replied that no seat was available on that date and had to place the 12 workers on the
wait list. Said information was duly relayed to the private respondent and the 12 workers before
the scheduled flight.

After due trial or on August 27, 1985, the trial court rendered its decision, the dispositive portion
of which reads as follows:
"WHEREFORE, in view of all the foregoing, this Court renders judgment: LLphil
"1.Ordering the defendant to pay the plaintiff actual damages in the sum of
P308,016.00;
"2.Ordering defendant to pay moral damages to the plaintiff in the amount of
P20,000.00;
"3.Ordering the defendant to pay to the plaintiff P10,000.00 by way of
corrective or exemplary damages;
"4.Ordering the defendant to pay the plaintiff 30% of its total claim for and as
attorney's fees; and
"5.To pay the costs." 7
On March 13, 1986, petitioner appealed said decision to respondent appellate court after the
trial court denied its Motion for Reconsideration on February 28, 1986.
On November 15, 1989, respondent appellate court affirmed the decision of the trial court, the
dispositive portion of which reads:
"WHEREFORE, the decision appealed from is hereby AFFIRMED with costs
against the appellant." 8
On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied.
Hence, this petition.
It is the contention of petitioner that private respondent has no cause of action against it there
being no perfected contract of carriage existing between them as no ticket was ever issued to
private respondent's contract workers and. therefore, the obligation of the petitioner to transport
said contract workers did not arise. Furthermore, private respondent's failure to attach any ticket
in the complaint further proved that it was never a party to the alleged transaction.
Petitioner's contention is untenable.
Private respondent had a valid cause of action for damages against petitioner. A cause of action
is an act or omission of one party in violation of the legal right or rights of the other. 9 petitioner's
repeated failures to transport private respondent's workers in its flight despite confirmed booking
of said workers clearly constitutes breach of contract and bad faith on its part. In resolving
petitioner's theory that private respondent has no cause of action in the instant case, the
appellate court correctly held that: prcd
"In dealing with the contract of common carriage of passengers, for purpose of
accuracy, there are two (2) aspects of the same, namely: (a) the contract 'to
carry (at some future time),' which contract is consensual and is necessarily
perfected by mere consent (See Article 1356, Civil Code of the Philippines) and
(b) the contract 'of carriage' or 'of common carriage' itself which should be
considered as a real contract for not until the carrier is actually used can the
carrier be said to have already assumed the obligation of a carrier. (Paras, Civil
Code Annotated, Vol. V. p. 429, Eleventh Ed.)
"In the instant case, the contract 'to carry' is the one involved, which is
consensual and is perfected by the mere consent of the parties.
"There is no dispute as to the appellee's consent to the said contract 'to carry'
its contract workers from Manila to Jeddah. The appellant's consent thereto, on
the other hand, was manifested by its acceptance of the PTA or prepaid ticket
advice that ROLACO Engineering has prepaid the airfares of the appellee's
contract workers advising the appellant that it must transport the contract
workers on or before the end of March, 1981 and the other batch in June,
1981.
"Even if a PTA is merely an advice from the sponsors that an airline is
authorized to issue a ticket and thus no ticket was yet issued, the fact remains
that the passage had already been paid for by the principal of the appellee, and
the appellant had accepted such payment. The existence of this payment was
never objected to nor questioned by the appellant in the lower court. Thus, the
cause or consideration which is the fare paid for the passengers exists in this
case.
"The third essential requisite of a contract is an object certain. In this contract
`to carry', such an object is the transport of the passengers from the place of
departure to the place of destination as stated in the telex.
"Accordingly, there could be no more pretensions as to the existence of an oral
contract of carriage imposing reciprocal obligations on both parties.
"In the case of appellee, it has fully complied with the obligation, namely, the
payment of the fare and its willingness for its contract workers to leave for their
place of destination.
"On the other hand, the facts clearly show that appellant was remiss in its
obligation to transport the contract workers on their flight despite confirmation
and bookings made by appellee's travelling agent. LLpr
"xxx xxx xxx.
"Besides, appellant knew very well that time was of the essence as the prepaid
ticket advice had specified the period of compliance therewith, and with
emphasis that it could only be used if the passengers fly on BA. Under the
circumstances, the appellant should have refused acceptance of the PTA from
appellee's principal or to at least inform appellee that it could not accommodate
the contract workers.
"xxx xxx xxx.
"While there is no dispute that ROLACO Engineering advanced the payment
for the airfares of the appellee's contract workers who were recruited for
ROLACO Engineering and the said contract workers were the intended
passengers in the aircraft of the appellant, the said contract `to carry' also
involved the appellee for as recruiter he had to see to it that the contract
workers should be transported to ROLACO Engineering in Jeddah thru the
appellant's transportation. For that matter, the involvement of the appellee in
the said contract `to carry' was well demonstrated when the appellant upon
receiving the PTA immediately advised the appellee thereof." 10
Petitioner also contends that the appellate court erred in awarding actual damages in the
amount of P308,016.00 to private respondent since all expenses had already been
subsequently reimbursed by the latter's principal.
In awarding actual damages to private respondent, the appellate court held that the amount of
P308,016.00 representing actual damages refers to private respondent's second cause of
action involving the expenses incurred by the latter which were not reimbursed by ROLACO
Engineering. However, in the Complaint 11 filed by private respondent. it was alleged that
private respondent suffered actual damages in the amount of P308,016.00 representing the
money it borrowed from friends and financiers which is P304,416.00 for the 93 airline tickets
and P3,600.00 for the travel tax of the 12 workers. It is clear therefore that the actual damages
private respondent seeks to recover are the airline tickets and travel taxes it spent for its
workers which were already reimbursed by its principal and not for any other expenses it had
incurred in the process of recruiting said contract workers. Inasmuch as all expenses including
the processing fees incurred by private respondent had already been paid for by the latter's
principal on a staggered basis as admitted in open court by its managing director, Mrs.
Bienvenida Brusellas, 12 We do not find anymore justification in the appellate court's decision in
granting actual damages to private respondent.
Thus, while it may be true that private respondent was compelled to borrow money for the
airfare tickets of its contract workers when petitioner failed to transport said workers, the
reimbursements made by its principal to private respondent failed to support the latter's claim
that it suffered actual damages as a result of petitioner's failure to transport said workers. It is
undisputed that private respondent had consistently admitted that its principal and reimbursed
all its expenses. cdll
Article 2199 of the Civil Code provides that:
"Except as provided by law or by stipulations, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly
proved. Such compensation is referred to as actual or compensatory
damages."
Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved,
and proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture
or guesswork as to the fact and amount of damages, but must depend upon competent proof
that they have suffered and on evidence of the actual amount thereof. 13
However, private respondent is entitled to an award of moral and exemplary damages for the
injury it suffered as a result of petitioner's failure to transport the former's workers because of
the latter's patent bad faith in the performance of its obligation. As correctly pointed out by the
appellate court:
"As evidence had proved, there was complete failure on the part of the
appellant to transport the 93 contract workers of the appellee on or before
March 30, 1981 despite receipt of the payment for their airfares, and
acceptance of the same by the appellant, with specific instructions from the
appellee's principal to transport the contract workers on or before March 30,
1981. No previous notice was ever registered by the appellant that it could not
comply with the same. And then followed the detestable act of appellant in
unilaterally cancelling, booking and rebooking unreasonably the flight of
appellee's contract workers in June to July, 1981 without prior notice. And all of
these actuations of the appellant indeed constitute malice and evident bad faith
which had caused damage and besmirched the reputation and business image
of the appellee." 14
As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record
shows that no claim for said damages was ever made by the petitioner immediately after their
alleged occurrence therefore said counterclaims were mere afterthoughts when private
respondent filed the present case.
WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the
award of actual damages be deleted from said decision.







[G.R. No. 145804. February 6, 2003.]
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, vs.
MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT
SECURITY AGENCY, respondents.
SYNOPSIS
On 14 October 1993, Nicanor Navidad, then drunk, entered the EDSA LRT station after
purchasing a "token" (representing payment of the fare). Junelito Escartin, the security guard
assigned to the area, approached Navidad. A misunderstanding or an altercation between the
two apparently ensued that led to a fist fight. At the exact moment that Navidad fell, an LRT
train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving
train, and he was killed instantaneously. Private respondent Marjorie Navidad, the widow of
Nicanor, along with her children, filed a complaint for damages against Junelito Escartin,
Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. and Prudent Security Agency
for the death of her husband. The trial court ruled in favor of private respondent by awarding
actual, moral and compensatory damages. Prudent Security Agency appealed to the Court of
Appeals. The appellate court exonerated Prudent from any liability for the death of Nicanor and
instead held LRTA and Roman jointly and severally liable. In exempting Prudent from liability,
the appellate court stressed that there was nothing to link the security agency to the death of
Navidad. It ruled that Navidad failed to show that Escartin inflicted fist blows upon the victim and
the evidence merely established the fact of death of Navidad by reason of his having been hit by
the train owned and managed by the LRTA and operated at the time by Roman. The appellate
court faulted petitioners for their failure to present expert evidence to establish the fact that the
application of emergency brakes could not have stopped the train. Hence, the present petition
for review. IcTEaC
The Supreme Court affirmed the decision of the Court of Appeals. If there is any liability that
could be attributed to Prudent, it could only be for tort under the provisions of Article 2176 and
related provisions, in conjunction with Article 2180, of the Civil Code. In the absence of
satisfactory explanation by the carrier on how the accident occurred, which petitioners,
according to the appellate court, have failed to show, the presumption would be that it has been
at fault, an exception from the general rule that negligence must be proved. Regrettably for LRT,
as well as the surviving spouse and heirs of the late Nicanor Navidad, the Court is concluded by
the factual finding of the Court of Appeals that there was nothing to link Prudent to the death of
Nicanor Navidad, for the reason that the negligence of its employee, Escartin, has not been duly
proven. The Court also absolved petitioner Rodolfo Roman, there being no showing that he is
guilty of any culpable act or omission and also for the reason that the contractual tie between
the LRT and Navidad is not itself a juridical relation between the latter and Roman; thus, Roman
can be made liable only for his own fault or negligence. The Court also ruled that the award of
nominal damages, in addition to actual damages, is untenable stressing that nominal damages
are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff
for any loss suffered by him. It is also an established rule that nominal damages cannot co-exist
with compensatory damages.
SYLLABUS
1.CIVIL LAW; COMMON CARRIERS; LIABILITY FOR DEATH OR INJURY TO PASSENGERS.
The law requires common carriers to carry passengers safely using the utmost diligence of
very cautious persons with due regard for all circumstances. Such duty of a common carrier to
provide safety to its passengers so obligates it not only during the course of the trip but for so
long as the passengers are within its premises and where they ought to be in pursuance to the
contract of carriage. The statutory provisions render a common carrier liable for death of or
injury to passengers (a) through the negligence or willful acts of its employees or b) on account
of willful acts or negligence of other passengers or of strangers if the common carrier's
employees through the exercise of due diligence could have prevented or stopped the act or
omission. In case of such death or injury, a carrier is presumed to have been at fault or been
negligent, and by simple proof of injury, the passenger is relieved of the duty to still establish the
fault or negligence of the carrier or of its employees and the burden shifts upon the carrier to
prove that the injury is due to an unforeseen event or to force majeure. In the absence of
satisfactory explanation by the carrier on how the accident occurred, which petitioners,
according to the appellate court, have failed to show, the presumption would be that it has been
at fault, an exception from the general rule that negligence must be proved.
2.ID.; EXTRA CONTRACTUAL OBLIGATIONS; QUASI-DELICTS; AN EMPLOYER CANNOT
BE HELD LIABLE FOR DAMAGES ABSENT PROOF OF FAULT OR NEGLIGENCE ON THE
PART OF ITS EMPLOYEE; CASE AT BAR. The foundation of LRTA's liability is the contract
of carriage and its obligation to indemnify the victim arises from the breach of that contract by
reason of its failure to exercise the high diligence required of the common carrier. In the
discharge of its commitment to ensure the safety of passengers, a carrier may choose to hire its
own employees or avail itself of the services of an outsider or an independent firm to undertake
the task. In either case, the common carrier is not relieved of its responsibilities under the
contract of carriage. Should Prudent be made likewise liable? If at all, that liability could only be
for tort under the provisions of Article 2176 and related provisions, in conjunction with Article
2180, of the Civil Code. The premise, however, for the employer's liability is negligence or fault
on the part of the employee. Once such fault is established, the employer can then be made
liable on the basis of the presumption juris tantum that the employer failed to exercise
diligentissimi patris familias in the selection and supervision of its employees. The liability is
primary and can only be negated by showing due diligence in the selection and supervision of
the employee, a factual matter that has not been shown. Absent such a showing, one might ask
further, how then must the liability of the common carrier, on the one hand, and an independent
contractor, on the other hand, be described? It would be solidary. A contractual obligation can
be breached by tort and when the same act or omission causes the injury, one resulting in culpa
contractual and the other in culpa aquiliana, Article 2194 of the Civil Code can well apply. In
fine, a liability for tort may arise even under a contract, where tort is that which breaches the
contract. Stated differently, when an act which constitutes a breach of contract would have itself
constituted the source of a quasi-delictual liability had no contract existed between the parties,
the contract can be said to have been breached by tort, thereby allowing the rules on tort to
apply. Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late
Nicanor Navidad, this Court is concluded by the factual finding of the Court of Appeals that
"there is nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the
negligence of its employee, Escartin, has not been duly proven . . . ." This finding of the
appellate court is not without substantial justification in our own review of the records of the
case. There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any
culpable act or omission, he must also be absolved from liability. Needless to say, the
contractual tie between the LRT and Navidad is not itself a juridical relation between the latter
and Roman; thus, Roman can be made liable only for his own fault or negligence.
3.ID.; DAMAGES; AWARD OF NOMINAL DAMAGES IN ADDITION TO ACTUAL DAMAGES IS
UNTENABLE; NOMINAL DAMAGES CANNOT CO-EXIST WITH COMPENSATORY
DAMAGES. The award of nominal damages in addition to actual damages is untenable.
Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him. It is an established rule that nominal
damages cannot co-exist with compensatory damages. ISAcHD
D E C I S I O N
VITUG, J p:
The case before the Court is an appeal from the decision and resolution of the Court of Appeals,
promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV No. 60720,
entitled "Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et al.,"
which has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266,
Pasig City, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail
Transit Authority (LRTA) and Rodolfo Roman liable for damages on account of the death of
Nicanor Navidad.
On 14 October 1993, about half an hour past seven o'clock in the evening, Nicanor Navidad,
then drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of
the fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin,
the security guard assigned to the area approached Navidad. A misunderstanding or an
altercation between the two apparently ensued that led to a fist fight. No evidence, however,
was adduced to indicate how the fight started or who, between the two, delivered the first blow
or how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train,
operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train,
and he was killed instantaneously.

On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with
her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA,
the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband.
LRTA and Roman filed a counterclaim against Navidad and a cross-claim against Escartin and
Prudent. Prudent, in its answer, denied liability and averred that it had exercised due diligence
in the selection and supervision of its security guards.
The LRTA and Roman presented their evidence while Prudent and Escartin, instead of
presenting evidence, filed a demurrer contending that Navidad had failed to prove that Escartin
was negligent in his assigned task. On 11 August 1998, the trial court rendered its decision; it
adjudged:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
against the defendants Prudent Security and Junelito Escartin ordering the
latter to pay jointly and severally the plaintiffs the following:
"a)1)Actual damages of P44,830.00;
2)Compensatory damages of P443,520.00;
3)Indemnity for the death of Nicanor Navidad in the sum of
P50,000.00;
"b)Moral damages of P50,000.00;
"c)Attorney's fees of P20,000;
"d)Costs of suit.
"The complaint against defendants LRTA and Rodolfo Roman are dismissed
for lack of merit.
"The compulsory counterclaim of LRTA and Roman are likewise dismissed." 1
Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated
its now assailed decision exonerating Prudent from any liability for the death of Nicanor Navidad
and, instead, holding the LRTA and Roman jointly and severally liable thusly:
"WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating
the appellants from any liability for the death of Nicanor Navidad, Jr. Instead,
appellees Rodolfo Roman and the Light Rail Transit Authority (LRTA) are held
liable for his death and are hereby directed to pay jointly and severally to the
plaintiffs-appellees, the following amounts:
a)P44,830.00 as actual damages;
b)P50,000.00 as nominal damages;
c)P50,000.00 as moral damages;
d)P50,000.00 as indemnity for the death of the deceased; and
e)P20,000.00 as and for attorney's fees." 2
The appellate court ratiocinated that while the deceased might not have then as yet boarded the
train, a contract of carriage theretofore had already existed when the victim entered the place
where passengers were supposed to be after paying the fare and getting the corresponding
token therefor. In exempting Prudent from liability, the court stressed that there was nothing to
link the security agency to the death of Navidad. It said that Navidad failed to show that Escartin
inflicted fist blows upon the victim and the evidence merely established the fact of death of
Navidad by reason of his having been hit by the train owned and managed by the LRTA and
operated at the time by Roman. The appellate court faulted petitioners for their failure to present
expert evidence to establish the fact that the application of emergency brakes could not have
stopped the train.
The appellate court denied petitioners' motion for reconsideration in its resolution of 10 October
2000.
In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:
"I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY
DISREGARDING THE FINDINGS OF FACTS BY THE TRIAL COURT.
"II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR
NAVIDAD, JR.
"III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT RODOLFO ROMAN IS AN EMPLOYEE OF LRTA." 3
Petitioners would contend that the appellate court ignored the evidence and the factual findings
of the trial court by holding them liable on the basis of a sweeping conclusion that the
presumption of negligence on the part of a common carrier was not overcome. Petitioners would
insist that Escartin's assault upon Navidad, which caused the latter to fall on the tracks, was an
act of a stranger that could not have been foreseen or prevented. The LRTA would add that the
appellate court's conclusion on the existence of an employer-employee relationship between
Roman and LRTA lacked basis because Roman himself had testified being an employee of
Metro Transit and not of the LRTA.
Respondents, supporting the decision of the appellate court, contended that a contract of
carriage was deemed created from the moment Navidad paid the fare at the LRT station and
entered the premises of the latter, entitling Navidad to all the rights and protection under a
contractual relation, and that the appellate court had correctly held LRTA and Roman liable for
the death of Navidad in failing to exercise extraordinary diligence imposed upon a common
carrier.
Law and jurisprudence dictate that a common carrier, both from the nature of its business and
for reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring
the safety of passengers. 4 The Civil Code, governing the liability of a common carrier for death
of or injury to its passengers, provides:
"Article 1755.A common carrier is bound to carry the passengers safely as far
as human care and foresight can provide, using the utmost diligence of very
cautious persons, with a due regard for all the circumstances.
"Article 1756.In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as prescribed in Articles 1733 and
1755."
"Article 1759.Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the former's employees,
although such employees may have acted beyond the scope of their authority
or in violation of the orders of the common carriers.
"This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees."
"Article 1763.A common carrier is responsible for injuries suffered by a
passenger on account of the willful acts or negligence of other passengers or of
strangers, if the common carrier's employees through the exercise of the
diligence of a good father of a family could have prevented or stopped the act
or omission."
The law requires common carriers to carry passengers safely using the utmost diligence of very
cautious persons with due regard for all circumstances. 5 Such duty of a common carrier to
provide safety to its passengers so obligates it not only during the course of the trip but for so
long as the passengers are within its premises and where they ought to be in pursuance to the
contract of carriage. 6 The statutory provisions render a common carrier liable for death of or
injury to passengers (a) through the negligence or wilful acts of its employees or b) on account
of wilful acts or negligence of other passengers or of strangers if the common carrier's
employees through the exercise of due diligence could have prevented or stopped the act or
omission. 7 In case of such death or injury, a carrier is presumed to have been at fault or been
negligent, and 8 by simple proof of injury, the passenger is relieved of the duty to still establish
the fault or negligence of the carrier or of its employees and the burden shifts upon the carrier to
prove that the injury is due to an unforeseen event or to force majeure. 9 In the absence of
satisfactory explanation by the carrier on how the accident occurred, which petitioners,
according to the appellate court, have failed to show, the presumption would be that it has been
at fault, 10 an exception from the general rule that negligence must be proved. 11
The foundation of LRTA's liability is the contract of carriage and its obligation to indemnify the
victim arises from the breach of that contract by reason of its failure to exercise the high
diligence required of the common carrier. In the discharge of its commitment to ensure the
safety of passengers, a carrier may choose to hire its own employees or avail itself of the
services of an outsider or an independent firm to undertake the task. In either case, the common
carrier is not relieved of its responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the
provisions of Article 2176 12 and related provisions, in conjunction with Article 2180, 13 of the
Civil Code. The premise, however, for the employer's liability is negligence or fault on the part of
the employee. Once such fault is established, the employer can then be made liable on the
basis of the presumption juris tantum that the employer failed to exercise diligentissimi patris
familias in the selection and supervision of its employees. The liability is primary and can only
be negated by showing due diligence in the selection and supervision of the employee, a factual
matter that has not been shown. Absent such a showing, one might ask further, how then must
the liability of the common carrier, on the one hand, and an independent contractor, on the other
hand, be described? It would be solidary. A contractual obligation can be breached by tort and
when the same act or omission causes the injury, one resulting in culpa contractual and the
other in culpa aquiliana, Article 2194 14 of the Civil Code can well apply. 15 In fine, a liability for
tort may arise even under a contract, where tort is that which breaches the contract. 16 Stated
differently, when an act which constitutes a breach of contract would have itself constituted the
source of a quasi-delictual liability had no contract existed between the parties, the contract can
be said to have been breached by tort, thereby allowing the rules on tort to apply. 17
Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor
Navidad, this Court is concluded by the factual finding of the Court of Appeals that "there is
nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of
its employee, Escartin, has not been duly proven . . . ." This finding of the appellate court is not
without substantial justification in our own review of the records of the case.

There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any
culpable act or omission, he must also be absolved from liability. Needless to say, the
contractual tie between the LRT and Navidad is not itself a juridical relation between the latter
and Roman; thus, Roman can be made liable only for his own fault or negligence.
The award of nominal damages in addition to actual damages is untenable. Nominal damages
are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff
for any loss suffered by him. 18 It is an established rule that nominal damages cannot co-exist
with compensatory damages. 19
WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION
but only in that (a) the award of nominal damages is DELETED and (b) petitioner Rodolfo
Roman is absolved from liability. No costs. DaAIHC









[G.R. No. L-47822. December 22, 1988.]
PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and ERNESTO
CENDAA, respondents.
1.CIVIL CODE; COMMON CARRIERS; ARTICLE 1732, DEFINITION UNDER ARTICLE 1732
OF THE CODE. The Civil Code defines "common carriers" in the following terms: "Article
1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public." The above article makes no distinction
between one whose principal business activity is the carrying of persons or goods or both, and
one who does such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article
1732 also carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general community or population, and
one who offers services or solicits business only from a narrow segment of the general
population. We think that Article 1733 deliberately refrained from making such distinctions.
2.ID.; ID.; ID.; LAW ON COMMON CARRIERS SUPPLEMENTED BY THE PUBLIC SERVICE
ACT; SCOPE OF PUBLIC SERVICE. So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the notion of "public service," under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements
the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the
Public Service Act, "public service" includes: ". . . every person that now or hereafter may own,
operate, manage, or control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or steamship
line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or
both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system, gas, electric light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless broadcasting
stations and other similar public services . . ." (Emphasis supplied) It appears to the Court that
private respondent is properly characterized as a common carrier even though he merely "back-
hauled" goods for other merchants from Manila to Pangasinan, although such backhauling was
done on a periodic or occasional rather than regular or scheduled manner, and even though
private respondent's principal occupation was not the carriage of goods for others. There is no
dispute that private respondent charged his customers a fee for hauling their goods; that fee
frequently fell below commercial freight rates is not relevant here.
3.ID.; ID.; ID.; ID.; CERTIFICATE OF PUBLIC CONVENIENCE; NOT A REQUISITE FOR
INCURRING LIABILITY AS A COMMON CARRIER; NATURE OF THE BUSINESS OF A
COMMON CARRIER. The Court of Appeals referred to the fact that private respondent held
no certificate of public convenience, and concluded he was not a common carrier. This is
palpable error. A certificate of public convenience is not a requisite for the incurring of liability
under the Civil Code provisions governing common carriers. That liability arises the moment a
person or firm acts as a common carrier, without regard to whether or not such carrier has also
complied with the requirements of the applicable regulatory statute and implementing
regulations and has been granted a certificate of public convenience or other franchise. To
exempt private respondent from the liabilities of a common carrier because he has not secured
the necessary certificate of public convenience, would be offensive to sound public policy; that
would be to reward private respondent precisely for failing to comply with applicable statutory
requirements. The business of a common carrier impinges directly and intimately upon the
safety and well being and property of those members of the general community who happen to
deal with such carrier. The law imposes duties and liabilities upon common carriers for the
safety and protection of those who utilize their services and the law cannot allow a common
carrier to render such duties and liabilities merely facultative by simply failing to obtain the
necessary permits and authorizations.
4.ID.; ID.; DEGREE OF DILIGENCE REQUIRED OF, COMMON CARRIERS. Common
carriers, "by the nature of their business and for reasons of public policy," are held to a very high
degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of
passengers. The specific import of extraordinary diligence in the care of goods transported by a
common carrier is, according to Article 1733, "further expressed in Articles 1734, 1735 and
1745, numbers 5, 6 and 7" of the Civil Code.
5.ID.; ID.; ID.; LIABILITY OF COMMON CARRIERS. Article 1734 establishes the general
rule that common carriers are responsible for the loss, destruction or deterioration of the goods
which they carry, "unless the same is due to any of the following causes only: (1) Flood, storm,
earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war,
whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The
character of the goods or defects in the packing or in the containers; and (5) Order or act of
competent public authority." It is important to point out that the above list of causes of loss,
destruction or deterioration which exempt the common carrier for responsibility therefor, is a
closed list. Causes falling outside the foregoing list, even if they appear to constitute a species
of force majeure, fall within the scope of Article 1735, which provides as follows: "In all cases
other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are
lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary diligence as required in
Article 1733." (Emphasis supplied)
6.ID.; ID.; ID.; ID.; COMMON CARRIER'S ARE NOT ABSOLUTE INSURERS AGAINST ALL
RISKS; NO LIABILITY ATTACHES IN CASE OF FORTUITOUS EVENTS. Under Article
1745 (6) above, a common carrier is held responsible and will not be allowed to divest or to
diminish such responsibility even for acts of strangers like thieves or robbers, except where
such thieves or robbers in fact acted "with grave or irresistible threat, violence or force." We
believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the
goods carried are reached where the goods are lost as a result of a robbery which is attended
by "grave or irresistible threat, violence or force." In these circumstances, we hold that the
occurrence of the loss must reasonably be regarded as quite beyond the control of the common
carrier and properly regarded as a fortuitous event. It is necessary to recall that even common
carriers are not made absolute insurers against all risks of travel and of transport of goods, and
are not held liable for acts or events which cannot be foreseen or are inevitable, provided that
they shall have complied with the rigorous standard of extraordinary diligence.
D E C I S I O N
FELICIANO, J p:
Respondent Ernesto Cendaa, a junk dealer, was engaged in buying up used bottles and scrap
metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent
would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he
owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would
load his vehicles with cargo which various merchants wanted delivered to differing
establishments in Pangasinan. For that service, respondent charged freight rates which were
commonly lower than regular commercial rates. llcd
Sometime in November 1970, petitioner Pedro de Guzman, a merchant and authorized dealer
of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with
respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk
in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970.
Accordingly, on 1 December 1970, respondent loaded in Makati the merchandise on to his
trucks: 150 cartons were loaded on a truck driven by respondent himself; while 600 cartons
were placed on board the other truck which was driven by Manuel Estrada, respondent's driver
and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never
reached petitioner, since the truck which carried these boxes was hijacked somewhere along
the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its
driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court of
First Instance of Pangasinan, demanding payment of P22,150.00, the claimed value of the lost
merchandise, plus damages and attorney's fees. Petitioner argued that private respondent,
being a common carrier, and having failed to exercise the extraordinary diligence required of
him by the law, should be held liable for the value of the undelivered goods.

In his Answer, private respondent denied that he was a common carrier and argued that he
could not be held responsible for the value of the lost goods, such loss having been due to force
majeure.
On 10 December 1975, the trial court rendered a Decision' finding private respondent to be a
common carrier and holding him liable for the value of the undelivered goods (P22,150.00) as
well as for P4,000.00 as damages and P2,000.00 as attorney's fees. cdrep
On appeal before the Court of Appeals, respondent urged that the trial court had erred in
considering him a common carrier; in finding that he had habitually offered trucking services to
the public; in not exempting him from liability on the ground of force majeure; and in ordering
him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent had
been engaged in transporting return loads of freight "as a casual occupation a sideline to his
scrap iron business" and not as a common carrier.
Petitioner came to this Court by way of a Petition for Review assigning as errors the following
conclusions of the Court of Appeals:
1.that private respondent was not a common carrier;
2.that the hijacking of respondent's truck was force majeure; and
3.that respondent was not liable for the value of the undelivered cargo. (Rollo,
p. 111)
We consider first the issue of whether or not private respondent Ernesto Cendaa may, under
the facts earlier set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
"Article 1732.Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air for compensation, offering their services to the
public."
The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the
general community or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1733 deliberately refrained from
making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide
neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:
". . . every person that now or hereafter may own, operate, manage, or control
in the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed
route and whatever may be its classification, freight or carrier service of any
class, express service, steamboat, or steamship line, pontines, ferries and
water craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant,
canal, irrigation system, gas, electric light, heat and power, water supply and
power petroleum, sewerage system, wire or wireless communications systems,
wire or wireless broadcasting stations and other similar public services . . ."
(Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a common carrier
even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan,
although such backhauling was done on a periodic or occasional rather than regular or
scheduled manner, and even though private respondent's principal occupation was not the
carriage of goods for others. There is no dispute that private respondent charged his customers
a fee for hauling their goods; that fee frequently fell below commercial freight rates is not
relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate
of public convenience is not a requisite for the incurring of liability under the Civil Code
provisions governing common carriers. That liability arises the moment a person or firm acts as
a common carrier, without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations and has been
granted a certificate of public convenience or other franchise. To exempt private respondent
from the liabilities of a common carrier because he has not secured the necessary certificate of
public convenience, would be offensive to sound public policy; that would be to reward private
respondent precisely for failing to comply with applicable statutory requirements. The business
of a common carrier impinges directly and intimately upon the safety and well being and
property of those members of the general community who happen to deal with such carrier. The
law imposes duties and liabilities upon common carriers for the safety and protection of those
who utilize their services and the law cannot allow a common carrier to render such duties and
liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.
cdphil
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy," 2 are held to
a very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as
well as of passengers. The specific import of extraordinary diligence in the care of goods
transported by a common carrier is, according to Article 1733, "further expressed in Articles
1734, 1735 and 1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss,
destruction or deterioration of the goods which they carry, "unless the same is due to any of the
following causes only:
(1)Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2)Act of the public enemy in war, whether international or civil;
(3)Act or omission of the shipper or owner of the goods;
(4)The character of the goods or defects in the packing or in the containers;
and
(5)Order or act of competent public authority."
It is important to point out that the above list of causes of loss, destruction or deterioration
which exempt the common carrier for responsibility therefor, is a closed list. Causes falling
outside the foregoing list, even if they appear to constitute a species of force majeure, fall
within the scope of Article 1735, which provides as follows:
"In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as required in Article
1733." (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause
alleged in the instant case the hijacking of the carrier's truck - does not fall within any of the
five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the
hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other
words, that the private respondent as common carrier is presumed to have been at fault or to
have acted negligently. This presumption, however, may be overthrown by proof of
extraordinary diligence on the part of private respondent. cdll
Petitioner insists that private respondent had not observed extraordinary diligence in the care of
petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent
should have hired a security guard presumably to ride with the truck carrying the 600 cartons of
Liberty filled milk. We do not believe, however, that in the instant case, the standard of
extraordinary diligence required private respondent to retain a security guard to ride with the
truck and to engage brigands in a fire fight at the risk of his own life and the lives of the driver
and his helper.
The precise issue that we address here relates to the specific requirements of the duty of
extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking
or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article
1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745,
numbers 4, 5 and 6, Article 1745 provides in relevant part:
"Any of the following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy:
xxx xxx xxx
(5)that the common carrier shall not be responsible for the acts
or omissions of his or its employees;
(6)that the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or irresistible threat,
violence or force, is dispensed with or diminished; and
(7)that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the defective
condition of the car, vehicle, ship, airplane or other equipment used in
the contract of carriage." (Emphasis supplied)

Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to
divest or to diminish such responsibility even for acts of strangers like thieves or robbers,
except where such thieves or robbers in fact acted "with grave or irresistible threat, violence or
force." We believe and so hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private respondent which
carried petitioner's cargo. The record shows that an information for robbery in band was filed in
the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the
Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John
Doe." There, the accused were charged with willfully and unlawfully taking and carrying away
with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of
Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The
decision of the trial court shows that the accused acted with grave, if not irresistible, threat,
violence or force. 3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers
not only took away the truck and its cargo but also kidnapped the driver and his helper,
detaining them for several days and later releasing them in another province (in Zambales). The
hijacked truck was subsequently found by the police in Quezon City. The Court of First Instance
convicted all the accused of robbery, though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as
quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is
necessary to recall that even common carriers are not made absolute insurers against all risks
of travel and of transport of goods, and are not held liable for acts or events which cannot be
foreseen or are inevitable, provided that they shall have complied with the rigorous standard of
extraordinary diligence. prLL
We, therefore, agree with the result reached by the Court of Appeals that private respondent
Cendaa is not liable for the value of the undelivered merchandise which was lost because of
an event entirely beyond private respondent's control.
ACCORDINGLY, the Petition for Review on Certiorari is hereby DENIED and the Decision of
the Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
THIRD DIVISION
[G.R. No. 186312. June 29, 2010.]
SPOUSES DANTE CRUZ and LEONORA CRUZ, petitioners, vs. SUN
HOLIDAYS, INC., respondent.
CARPIO MORALES, J p:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001 1
against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for
damages arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife
on September 11, 2000 on board the boat M/B Coco Beach III that capsized en route to
Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach
Island Resort (Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was
by virtue of a tour package-contract with respondent that included transportation to and from the
Resort and the point of departure in Batangas.
Miguel C. Matute (Matute), 2 a scuba diving instructor and one of the survivors, gave his
account of the incident that led to the filing of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to
leave the Resort in the afternoon of September 10, 2000, but was advised to stay for another
night because of strong winds and heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
petitioners' son and his wife trekked to the other side of the Coco Beach mountain that was
sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them to
Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and
into the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and
the captain to step forward to the front, leaving the wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which came one after the
other,M/B Coco Beach III capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing
the captain, Matute and the other passengers who reached the surface asked him what they
could do to save the people who were still trapped under the boat. The captain replied "Iligtas
niyo na lang ang sarili niyo" (Just save yourselves). AcCTaD
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto
Galera passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22
persons, consisting of 18 passengers and four crew members, who were brought to Pisa Island.
Eight passengers, including petitioners' son and his wife, died during the incident.
At the time of Ruelito's death, he was 28 years old and employed as a contractual worker for
Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of
$900. 3
Petitioners, by letter of October 26, 2000, 4 demanded indemnification from respondent for the
death of their son in the amount of at least P4,000,000.
Replying, respondent, by letter dated November 7, 2000, 5 denied any responsibility for the
incident which it considered to be a fortuitous event. It nevertheless offered, as an act of
commiseration, the amount of P10,000 to petitioners upon their signing of a waiver.
As petitioners declined respondent's offer, they filed the Complaint, as earlier reflected, alleging
that respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III
to sail notwithstanding storm warning bulletins issued by the Philippine Atmospheric,
Geophysical and Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of
September 11, 2000. 6
In its Answer, 7 respondent denied being a common carrier, alleging that its boats are not
available to the general public as they only ferry Resort guests and crew members.
Nonetheless, it claimed that it exercised the utmost diligence in ensuring the safety of its
passengers; contrary to petitioners' allegation, there was no storm on September 11, 2000 as
the Coast Guard in fact cleared the voyage; and M/B Coco Beach III was not filled to capacity
and had sufficient life jackets for its passengers. By way of Counterclaim, respondent alleged
that it is entitled to an award for attorney's fees and litigation expenses amounting to not less
than P300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires
four conditions to be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is
clearance from the Coast Guard, (3) there is clearance from the captain and (4) there is
clearance from the Resort's assistant manager. 8 He added that M/B Coco Beach III met all four
conditions on September 11, 2000, 9 but a subasco or squall, characterized by strong winds
and big waves, suddenly occurred, causing the boat to capsize. 10
By Decision of February 16, 2005, 11 Branch 267 of the Pasig RTC dismissed petitioners'
Complaint and respondent's Counterclaim.
Petitioners' Motion for Reconsideration having been denied by Order dated September 2, 2005,
12 they appealed to the Court of Appeals.
By Decision of August 19, 2008, 13 the appellate court denied petitioners' appeal, holding,
among other things, that the trial court correctly ruled that respondent is a private carrier which
is only required to observe ordinary diligence; that respondent in fact observed extraordinary
diligence in transporting its guests on board M/B Coco Beach III; and that the proximate cause
of the incident was a squall, a fortuitous event.
Petitioners' Motion for Reconsideration having been denied by Resolution dated January 16,
2009, 14 they filed the present Petition for Review. 15
Petitioners maintain the position they took before the trial court, adding that respondent is a
common carrier since by its tour package, the transporting of its guests is an integral part of its
resort business. They inform that another division of the appellate court in fact held respondent
liable for damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to prove
that it is a common carrier; that the Resort's ferry services for guests cannot be considered as
ancillary to its business as no income is derived therefrom; that it exercised extraordinary
diligence as shown by the conditions it had imposed before allowing M/B Coco Beach III to sail;
that the incident was caused by a fortuitous event without any contributory negligence on its
part; and that the other case wherein the appellate court held it liable for damages involved
different plaintiffs, issues and evidence. 16
The petition is impressed with merit. ETDHSa
Petitioners correctly rely on De Guzman v. Court of Appeals 17 in characterizing respondent as
a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732.Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public.
The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity (in local idiom, as "a
sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general community
or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1733
deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be
seen to coincide neatly with the notion of "public service," under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code. Under
Section 13, paragraph (b) of the Public Service Act, "public service" includes:
. . . every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or
limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for freight
or passenger, or both, with or without fixed route and whatever may be
its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged
in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system, gas, electric light, heat and power, water supply and
power petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other similar public
services . . . 18 (emphasis and underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main
business as to be properly considered ancillary thereto. The constancy of respondent's ferry
services in its resort operations is underscored by its having its own Coco Beach boats. And the
tour packages it offers, which include the ferry services, may be availed of by anyone who can
afford to pay the same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of no moment. It
would be imprudent to suppose that it provides said services at a loss. The Court is aware of the
practice of beach resort operators offering tour packages to factor the transportation fee in
arriving at the tour package price. That guests who opt not to avail of respondent's ferry
services pay the same amount is likewise inconsequential. These guests may only be deemed
to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has
deliberately refrained from making distinctions on whether the carrying of persons or goods is
the carrier's principal business, whether it is offered on a regular basis, or whether it is offered to
the general public. The intent of the law is thus to not consider such distinctions. Otherwise,
there is no telling how many other distinctions may be concocted by unscrupulous businessmen
engaged in the carrying of persons or goods in order to avoid the legal obligations and liabilities
of common carriers.
Under the Civil Code, common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence for the safety of the passengers
transported by them, according to all the circumstances of each case. 19 They are bound to
carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances. 20
When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed
that the common carrier is at fault or negligent. In fact, there is even no need for the court to
make an express finding of fault or negligence on the part of the common carrier. This statutory
presumption may only be overcome by evidence that the carrier exercised extraordinary
diligence. 21
Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions of
voyage before it allowed M/B Coco Beach III to sail on September 11, 2000. Respondent's
position does not impress. ITcCaS
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone
warnings for shipping on September 10 and 11, 2000 advising of tropical depressions in
Northern Luzon which would also affect the province of Mindoro. 22 By the testimony of Dr.
Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be expected under such
weather condition. 23
A very cautious person exercising the utmost diligence would thus not brave such stormy
weather and put other people's lives at risk. The extraordinary diligence required of common
carriers demands that they take care of the goods or lives entrusted to their hands as if they
were their own. This respondent failed to do.
Respondent's insistence that the incident was caused by a fortuitous event does not impress
either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtors to comply with their obligations, must have been
independent of human will; (b) the event that constituted the caso fortuito must have been
impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been
such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and
(d) the obligor must have been free from any participation in the aggravation of the resulting
injury to the creditor. 24
To fully free a common carrier from any liability, the fortuitous event must have been the
proximate and only cause of the loss. And it should have exercised due diligence to prevent or
minimize the loss before, during and after the occurrence of the fortuitous event. 25
Respondent cites the squall that occurred during the voyage as the fortuitous event that
overturned M/B Coco Beach III. As reflected above, however, the occurrence of squalls was
expected under the weather condition of September 11, 2000. Moreover, evidence shows that
M/B Coco Beach III suffered engine trouble before it capsized and sank. 26 The incident was,
therefore, not completely free from human intervention.
The Court need not belabor how respondent's evidence likewise fails to demonstrate that it
exercised due diligence to prevent or minimize the loss before, during and after the occurrence
of the squall.
Article 1764 27 vis--vis Article 2206 28 of the Civil Code holds the common carrier in breach of
its contract of carriage that results in the death of a passenger liable to pay the following: (1)
indemnity for death, (2) indemnity for loss of earning capacity and (3) moral damages.
Petitioners are entitled to indemnity for the death of Ruelito which is fixed at P50,000. 29
As for damages representing unearned income, the formula for its computation is:
Net Earning Capacity=life expectancy x (gross annual income - reasonable and
necessary living expenses).
Life expectancy is determined in accordance with the formula:
2/3 x [80 age of deceased at the time of death] 30
The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 age at
death]) adopted in the American Expectancy Table of Mortality or the Actuarial of Combined
Experience Table of Mortality. 31
The second factor is computed by multiplying the life expectancy by the net earnings of the
deceased, i.e., the total earnings less expenses necessary in the creation of such earnings or
income and less living and other incidental expenses. 32 The loss is not equivalent to the entire
earnings of the deceased, but only such portion as he would have used to support his
dependents or heirs. Hence, to be deducted from his gross earnings are the necessary
expenses supposed to be used by the deceased for his own needs. 33
In computing the third factor necessary living expense, Smith Bell Dodwell Shipping Agency
Corp. v. Borja 34 teaches that when, as in this case, there is no showing that the living
expenses constituted the smaller percentage of the gross income, the living expenses are fixed
at half of the gross income.
Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:
Life expectancy = 2/3 x [80 age of deceased at the time of death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic monthly salary of $900 35
which, when converted to Philippine peso applying the annual average exchange rate of $1 =
P44 in 2000, 36 amounts to P39,600. Ruelito's net earning capacity is thus computed as
follows:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and
necessary living expenses).
= 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Net Earning Capacity = P8,316,000
Respecting the award of moral damages, since respondent common carrier's breach of contract
of carriage resulted in the death of petitioners' son, following Article 1764 vis--vis Article 2206
of the Civil Code, petitioners are entitled to moral damages. DAETHc
Since respondent failed to prove that it exercised the extraordinary diligence required of
common carriers, it is presumed to have acted recklessly, thus warranting the award too of
exemplary damages, which are granted in contractual obligations if the defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner. 37
Under the circumstances, it is reasonable to award petitioners the amount of P100,000 as moral
damages and P100,000 as exemplary damages. 38
Pursuant to Article 2208 39 of the Civil Code, attorney's fees may also be awarded where
exemplary damages are awarded. The Court finds that 10% of the total amount adjudged
against respondent is reasonable for the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals 40 teaches that when an obligation,
regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached,
the contravenor can be held liable for payment of interest in the concept of actual and
compensatory damages, subject to the following rules, to wit
1.When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthermore, the interest due shall
itself earn legal interest from the time it is judicially demanded. In the absence
of stipulation, the rate of interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2.When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at
the discretion of the court at the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall begin to run
from the time the claim is made judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so reasonably established at the time
the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may
be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally
adjudged. TcaAID
3.When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1
or paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit. (emphasis supplied).
Since the amounts payable by respondent have been determined with certainty only in the
present petition, the interest due shall be computed upon the finality of this decision at the rate
of 12% per annum until satisfaction, in accordance with paragraph number 3 of the immediately
cited guideline in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET
ASIDE. Judgment is rendered in favor of petitioners ordering respondent to pay petitioners the
following: (1) P50,000 as indemnity for the death of Ruelito Cruz; (2) P8,316,000 as indemnity
for Ruelito's loss of earning capacity; (3) P100,000 as moral damages; (4) P100,000 as
exemplary damages; (5) 10% of the total amount adjudged against respondent as attorneys
fees; and (6) the costs of suit.
The total amount adjudged against respondent shall earn interest at the rate of 12% per annum
computed from the finality of this decision until full payment.
SO ORDERED.






[G.R. No. 147246. August 19, 2003.]
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF
APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE, INC.,
respondents.
SYNOPSIS
Petitioner was contracted as carrier by a corporation from Portland, Oregon to deliver a cargo to
the consignee's warehouse at Pasig City. The cargo, however, never reached the consignee as
the barge that carried the cargo sank completely, resulting in damage to the cargo. Private
respondent, as insurer, indemnified the consignee for the lost cargo and thus, as subrogee,
sought recovery from petitioner. Both the trial court and the appellate court ruled in favor of
private respondent.
The Court ruled in favor of private respondent. Whether or not petitioner is a common carrier,
the Court ruled in the affirmative. The principal business of petitioner is that of lighterage and
drayage, offering its barges to the public, although for limited clientele, for carrying or
transporting goods by water for compensation. Whether or not petitioner failed to exercise
extraordinary diligence in its care and custody of the consignee's goods, the Court also ruled in
the affirmative. The barge completely sank after its towing bits broke, resulting in the loss of the
cargo. Petitioner failed to prove that the typhoon was the proximate and only cause of the loss
and that it has exercised due diligence before, during and after the occurrence.
SYLLABUS
1.CIVIL LAW; SPECIAL CONTRACTS; COMMON CARRIERS; DEFINITION; ELUCIDATED.
Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air, for compensation.. offering their services to the public. Petitioner contends
that it is not a common carrier but a private carrier. Allegedly, it has no fixed and publicly known
route, maintains no terminals, and issues no tickets. It points out that it is not obliged to carry
indiscriminately for any person. It is not bound to carry goods unless it consents. In short, it
does not hold out its services to the general public. In De Guzman vs. Court of Appeals, we held
that the definition of common carriers in Article 1732 of the Civil Code makes no distinction
between one whose principal business activity is the carrying of persons or goods or both, and
one who does such carrying only as an ancillary activity. We also did not distinguish between a
person or enterprise offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Further, we ruled that
Article 1732 does not distinguish between a carrier offering its services to the general public,
and one who offers services or solicits business only from a narrow segment of the general
population.
2.ID.; ID.; ID.; HOW DETERMINED. Petitioner is a common carrier whether its carrying of
goods is done on an irregular rather than scheduled manner, and with an only limited clientele.
A common carrier need not have fixed and publicly known routes. Neither does it have to
maintain terminals or issue tickets. To be sure, petitioner fits the test of a common carrier as laid
down in Bascos vs. Court of Appeals. The test to determine a common carrier is "whether the
given undertaking is a part of the business engaged in by the carrier which he has held out to
the general public as his occupation rather than the quantity or extent of the business
transacted." In the case at bar, the petitioner admitted that it is engaged in the business of
shipping and lighterage, offering its barges to the public, despite its limited clientele for carrying
or transporting goods by water for compensation.
3.ID.; ID.; ID.; REQUIRED TO OBSERVE EXTRAORDINARY DILIGENCE; PRESUMPTION OF
NEGLIGENCE IN CASE OF LOSS, DESTRUCTION OR DETERIORATION OF GOODS;
EXCEPTIONS. Common carriers are bound to observe extraordinary diligence in the
vigilance over the goods transported by them. They are presumed to have been at fault or to
have acted negligently if the goods are lost, destroyed or deteriorated. To overcome the
presumption of negligence in the case of loss, destruction or deterioration of the goods,
deterioration of the goods, the common carrier must prove that it exercised extraordinary
diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code enumerates
the instances when the presumption of negligence does not attach: Art. 1734. Common carriers
are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to
any of the following causes only: (1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or
omission of the shipper or owner of the goods; (4) The character of the goods or defects in the
packing or in the containers; (5) Order or act of competent public authority.
4.ID.; ID.; ID.; ID.; ID.; ID.; TYPHOON; NOT APPRECIATED IN THE ABSENCE OF PROOF
THAT IT WAS THE PROXIMATE AND ONLY CAUSE OF LOSS AND DUE DILIGENCE
EXERCISED BEFORE, DURING AND AFTER THE TYPHOON. In the case at bar, the barge
completely sank after its towing bits broke, resulting in the total loss of its cargo. Petitioner
claims that this was caused by a typhoon, hence, it should not be held liable for the loss of the
cargo. However, petitioner failed to prove that the typhoon is the proximate and only cause of
the loss of the goods, and that it has exercised due diligence before, during and after the
occurrence of the typhoon to prevent or minimize the loss. The evidence show that, even before
the towing bits of the barge broke, it had already previously sustained damage when it hit a
sunken object while docked at the Engineering Island. It even suffered a hole. Clearly, this could
not be solely attributed to the typhoon. The partly-submerged vessel was refloated but its hole
was patched with only clay and cement. The patch work was merely a provisional remedy, not
enough for the barge to sail safely. Thus, when petitioner persisted to proceed with the voyage,
it recklessly exposed the cargo to further damage.
D E C I S I O N
PUNO, J p:
On appeal is the Court of Appeals' May 11, 2000 Decision 1 in CA-G.R. CV No. 49195 and
February 21, 2001 Resolution 2 affirming with modification the April 6, 1994 Decision 3 of the
Regional Trial Court of Manila which found petitioner liable to pay private respondent the
amount of indemnity and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at
US$423,192.35 4 was shipped by Marubeni American Corporation of Portland, Oregon on
board the vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling
Corporation in Manila, evidenced by Bill of Lading No. PTD/Man-4. 5 The shipment was insured
by the private respondent Prudential Guarantee and Assurance, Inc. against loss or damage for
P14,621,771.75 under Marine Cargo Risk Note RN 11859/90. 6
On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the
custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by the
consignee as carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III, evidenced
by Lighterage Receipt No. 0364 7 for delivery to consignee. The cargo did not reach its
destination.
It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning
of an incoming typhoon. On August 22, 1990, the petitioner proceeded to pull the barge to
Engineering Island off Baseco to seek shelter from the approaching typhoon. PSTSI III was tied
down to other barges which arrived ahead of it while weathering out the storm that night. A few
days after, the barge developed a list because of a hole it sustained after hitting an unseen
protruberance underneath the water. The petitioner filed a Marine Protest on August 28, 1990. 8
It likewise secured the services of Gaspar Salvaging Corporation which refloated the barge. 9
The hole was then patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally headed towards the consignee's
wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran
aground due to strong current. To avoid the complete sinking of the barge, a portion of the
goods was transferred to three other barges. 10
The next day, September 6, 1990, the towing bits of the barge broke. It sank completely,
resulting in the total loss of the remaining cargo. 11 A second Marine Protest was filed on
September 7, 1990. 12
On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved
and loaded on the three other barges. 13 The total proceeds from the sale of the salvaged
cargo was P201,379.75. 14
On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and
another letter dated September 18, 1990 to the private respondent for the value of the lost
cargo.
On January 30, 1991, the private respondent indemnified the consignee in the amount of
P4,104,654.22. 15 Thereafter, as subrogee, it sought recovery of said amount from the
petitioner, but to no avail.
On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of
the amount of indemnity, attorney's fees and cost of suit. 16 Petitioner filed its answer with
counterclaim. 17
The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of its
Decision states:
WHEREFORE, premises considered, judgment is hereby rendered ordering
defendant Asia Lighterage & Shipping, Inc. liable to pay plaintiff Prudential
Guarantee & Assurance Co., Inc. the sum of P4,104,654.22 with interest from
the date complaint was filed on July 3, 1991 until fully satisfied plus 10% of the
amount awarded as and for attorney's fees. Defendant's counterclaim is hereby
DISMISSED. With costs against defendant. 18

Petitioner appealed to the Court of Appeals insisting that it is not a common carrier. The
appellate court affirmed the decision of the trial court with modification. The dispositive portion
of its decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with
modification in the sense that the salvage value of P201,379.75 shall be
deducted from the amount of P4,104,654.22. Costs against appellant.
SO ORDERED.
Petitioner's Motion for Reconsideration dated June 3, 2000 was likewise denied by the appellate
court in a Resolution promulgated on February 21, 2001.
Hence, this petition. Petitioner submits the following errors allegedly committed by the appellate
court, viz: 19
(1)THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT
IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT HELD THAT
PETITIONER IS A COMMON CARRIER.
(2)THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT
IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT AFFIRMED THE
FINDING OF THE LOWER COURT A QUO THAT ON THE BASIS OF
THE PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON
CARRIERS, "THE LOSS OF THE CARGO IS, THEREFORE, BORNE
BY THE CARRIER IN ALL CASES EXCEPT IN THE FIVE (5) CASES
ENUMERATED."
(3)THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT
IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT EFFECTIVELY
CONCLUDED THAT PETITIONER FAILED TO EXERCISE DUE
DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE AND CUSTODY
OF THE CONSIGNEE'S CARGO.
The issues to be resolved are:
(1)Whether the petitioner is a common carrier; and,
(2)Assuming the petitioner is a common carrier, whether it exercised extraordinary diligence in
its care and custody of the consignee's cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air, for compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed
and publicly known route, maintains no terminals, and issues no tickets. It points out that it is not
obliged to carry indiscriminately for any person. It is not bound to carry goods unless it
consents. In short, it does not hold out its services to the general public. 20
We disagree.
In De Guzman vs. Court of Appeals, 21 we held that the definition of common carriers in Article
1732 of the Civil Code makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity. We also did not distinguish between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Further, we ruled that Article 1732 does not distinguish between
a carrier offering its services to the general public, and one who offers services or solicits
business only from a narrow segment of the general population.
In the case at bar, the principal business of the petitioner is that of lighterage and drayage 22
and it offers its barges to the public for carrying or transporting goods by water for
compensation. Petitioner is clearly a common carrier. In De Guzman, supra, 23 we considered
private respondent Ernesto Cendaa to be a common carrier even if his principal occupation
was not the carriage of goods for others, but that of buying used bottles and scrap metal in
Pangasinan and selling these items in Manila.
We therefore hold that petitioner is a common carrier whether its carrying of goods is done on
an irregular rather than scheduled manner, and with an only limited clientele. A common carrier
need not have fixed and publicly known routes. Neither does it have to maintain terminals or
issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of
Appeals. 24 The test to determine a common carrier is "whether the given undertaking is a part
of the business engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted." 25 In the case at bar,
the petitioner admitted that it is engaged in the business of shipping and lighterage, 26 offering
its barges to the public, despite its limited clientele for carrying or transporting goods by water
for compensation. 27
On the second issue, we uphold the findings of the lower courts that petitioner failed to exercise
extraordinary diligence in its care and custody of the consignee's goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over the goods
transported by them. 28 They are presumed to have been at fault or to have acted negligently if
the goods are lost, destroyed or deteriorated. 29 To overcome the presumption of negligence in
the case of loss, destruction or deterioration of the goods, the common carrier must prove that it
exercised extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of
the Civil Code enumerates the instances when the presumption of negligence does not attach:
Art. 1734.Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following
causes only:
(1)Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
(2)Act of the public enemy in war, whether international or civil;
(3)Act or omission of the shipper or owner of the goods;
(4)The character of the goods or defects in the packing or in the
containers;
(5)Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing bits broke, resulting in the total
loss of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be
held liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the
proximate and only cause of the loss of the goods, and that it has exercised due diligence
before, during and after the occurrence of the typhoon to prevent or minimize the loss. 30 The
evidence show that, even before the towing bits of the barge broke, it had already previously
sustained damage when it hit a sunken object while docked at the Engineering Island. It even
suffered a hole. Clearly, this could not be solely attributed to the typhoon. The partly-submerged
vessel was refloated but its hole was patched with only clay and cement. The patch work was
merely a provisional remedy, not enough for the barge to sail safely. Thus, when petitioner
persisted to proceed with the voyage, it recklessly exposed the cargo to further damage. A
portion of the cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue Adjustment
Co., Inc., states:
CROSS-EXAMINATION BY ATTY. DONN LEE: 31
xxx xxx xxx
qCan you tell us what else transpired after that incident?
aAfter the first accident, through the initiative of the barge owners, they tried to
pull out the barge from the place of the accident, and bring it to the
anchor terminal for safety, then after deciding if the vessel is stabilized,
they tried to pull it to the consignee's warehouse, now while on route
another accident occurred, now this time the barge totally hitting
something in the course.
qYou said there was another accident, can you tell the court nature of the
second accident?
aThe sinking, sir.
qCan you tell the nature . . . can you tell the court, if you know what caused the
sinking?
aMostly it was related to the first accident because there was already a whole
(sic) on the bottom part of the barge.
xxx xxx xxx
This is not all. Petitioner still headed to the consignee's wharf despite knowledge of an incoming
typhoon. During the time that the barge was heading towards the consignee's wharf on
September 5, 1990, typhoon "Loleng" has already entered the Philippine area of responsibility.
32 A part of the testimony of Robert Boyd, Cargo Operations Supervisor of the petitioner,
reveals:
DIRECT-EXAMINATION BY ATTY. LEE: 33
xxx xxx xxx
qNow, Mr. Witness, did it not occur to you it might be safer to just allow the
Barge to lie where she was instead of towing it?
aSince that time that the Barge was refloated, GMC (General Milling
Corporation, the consignee) as I have said was in a hurry for their
goods to be delivered at their Wharf since they needed badly the wheat
that was loaded in PSTSI-3. It was needed badly by the consignee.
qAnd this is the reason why you towed the Barge as you did?
aYes, sir.
xxx xxx xxx
CROSS-EXAMINATION BY ATTY. IGNACIO: 34
xxx xxx xxx
qAnd then from ISLOFF Terminal you proceeded to the premises of the GMC?
Am I correct?
aThe next day, in the morning, we hired for additional two (2) tugboats as I
have stated.
qDespite of the threats of an incoming typhoon as you testified a while ago?
aIt is already in an inner portion of Pasig River. The typhoon would be coming
and it would be dangerous if we are in the vicinity of Manila Bay.
qBut the fact is, the typhoon was incoming? Yes or no?
aYes.
qAnd yet as a standard operating procedure of your Company, you have to
secure a sort of Certification to determine the weather condition, am I
correct?
aYes, sir.
qSo, more or less, you had the knowledge of the incoming typhoon, right?
aYes, sir.
qAnd yet you proceeded to the premises of the GMC?
aISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if
you are already inside the vicinity or inside Pasig entrance, it is a safe
place to tow upstream.

Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to
escape liability for the loss sustained by the private respondent. Surely, meeting a typhoon
head-on falls short of due diligence required from a common carrier. More importantly, the
officers/employees themselves of petitioner admitted that when the towing bits of the vessel
broke that caused its sinking and the total loss of the cargo upon reaching the Pasig River, it
was no longer affected by the typhoon. The typhoon then is not the proximate cause of the loss
of the cargo; a human factor, i.e., negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R.
CV No. 49195 dated May 11, 2000 and its Resolution dated February 21, 2001 are hereby
AFFIRMED. Costs against petitioner. HIEAcC






[G.R. No. 125948. December 29, 1998.]
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF
APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and
ADORACION C. ARELLANO, in her official capacity as City Treasurer of
Batangas, respondents.
SYLLABUS
1.CIVIL LAW; TRANSPORTATION; COMMON CARRIER; DEFINED; APPLICATION IN CASE
AT BAR. A "common carrier" may be defined, broadly, as one who holds himself out to the
public as engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally. Article 1732 of the Civil Code
defines a "common carrier" as "any person, corporation, firm or association engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public." The test for determining whether a party is a
common carrier of goods is: 1. He must be engaged in the business of carrying goods for others
as a public employment, and must hold himself out as ready to engage in the transportation of
goods for person generally as a business and not as a casual occupation; 2. He must undertake
to carry goods of the kind to which his business is confined; 3. He must undertake to carry by
the method by which his business is conducted and over his established roads: and 4. The
transportation must be for hire. Based on the above definitions and requirements, there is no
doubt that petitioner is a common carrier. It is engaged in the business of transporting or
carrying goods, i.e., petroleum products, for hire as a public employment. It undertakes to carry
for all persons indifferently, that is, to all persons who choose to employ its services and
transports the goods by land and for compensation. The fact that petitioner has a limited
clientele does not exclude it from the definition of a common carrier. As correctly pointed out by
petitioner, the definition of "common carrier" in the Civil Code makes no distinction as to the
means of transporting, as long as it is by land, water or air. It does not provide that the
transportation of the passengers or goods should be by motor vehicle. In fact, in the United
Sates, oil pipe line operators are considered common carriers.
2.TAXATION; WHEN COMMON CARRIER MAY BE EXEMPT FROM BUSINESS TAX; CASE
AT BAR. Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is
considered a "common carrier." Thus, Article 86 thereof provides that: "Article 86. Pipe line
concessionaire as common carrier. A pipe line shall have the preferential right to utilize
installations for the transportation of petroleum owned by him, but is obligated to utilize the
remaining transportation capacity pro rata for the transportation of such other petroleum as may
be offered by others for transport and to charge without discrimination such rates as may have
been approved by the Secretary of Agriculture and Natural Resources." Republic Act 387 also
regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof provides:
"that everything relating to the exploration for and exploitation of petroleum . . . and everything
relating to the manufacturer, refining, storage or transportation by special methods of petroleum,
is hereby declared to be a public utility." The Bureau of Internal Revenue likewise considers the
petitioner a "common carrier." The BIR Ruling No. 069-83, it declared: " . . . since [petitioner] is
a pipeline concessionaire that is engaged only in transporting petroleum products, it is
considered a common carrier under Republic Act No. 387 . . .. Such being the case, it is not
subject to withholding tax prescribed by Revenue Regulations No. 13-78 as amended." From
the foregoing disquisition there is no doubt that petitioner is a "common carrier" and, therefore,
exempt from the business tax as provided for in Section 133 (j) of the Local Government Code,
to wit: "Section 133. Common Limitations on the Taxing Power of Local Government Units.
Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following: . . . (j) Taxes on the
gross receipts of transportation contractors and persons engaged in the transportation of
passengers or freight by hire and common carriers by air, land or water except as provided in
this Code.
D E C I S I O N
MARTINEZ, J p:
This petition for review on certiorari assails the Decision of the Court of Appeals dated
November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial
Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners'
complaint for a business tax refund imposed by the City of Batangas. cdll
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to
contract, install and operate oil pipelines. The original pipeline concession was granted in 1967
1 and renewed by the Energy Regulatory Board in 1992. 2
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor
of Batangas City. However, before the mayor's permit could be issued, the respondent City
Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year
1993 pursuant to the Local Government Code. 3 The respondent City Treasurer assessed a
business tax on the petitioner amounting to P956,076.04 payable in four installments based on
the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted to
P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in
the amount of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City
Treasurer, the pertinent portion of which reads:
"Please note that our Company (FPIC) is a pipeline operator with a government
concession granted under the Petroleum Act. It is engaged in the business of
transporting petroleum products from the Batangas refineries, via pipeline, to
Sucat and JTF Pandacan Terminals. As such, our Company is exempt from
paying tax on gross receipts under Section 133 of the Local Government Code
of 1991 . . .
"Moreover, Transportation contractors are not included in the enumeration of
contractors under Section 131, Paragraph (h) of the Local Government Code.
Therefore, the authority to impose tax on contractors and other independent
contractors' under Section 143, Paragraph (e) of the Local Government Code
does not include the power to levy on transportation contractors.
"The imposition and assessment cannot be categorized as a mere fee
authorized under Section 147 of the Local Government Code. The said section
limits the imposition of fees and charges on business to such amounts as may
be commensurate to the cost of regulation, inspection, and licensing. Hence,
assuming arguendo that FPIC is liable for the license fee, the imposition
thereof based on gross receipts is violative of the aforecited provision. The
amount of P956,076.04 (P239,019.01 per quarter) is not commensurate to the
cost of regulation, inspection and licensing. The fee is already a revenue
raising measure, and not a mere regulatory imposition." 4
On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner
cannot be considered engaged in transportation business, thus it cannot claim exemption under
Section 133 (j) of the Local Government Code. 5
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint 6
for tax refund with prayer for writ of preliminary injunction against respondents City of Batangas
and Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged,
inter alia, that: (1) the imposition and collection of the business tax on its gross receipts violates
Section 133 of the Local Government Code; (2) the authority of cities to impose and collect a tax
on the gross receipts of "contractors and independent contractors" under Sec. 141(e) and 151
does not include the authority to collect such taxes on transportation contractors for, as defined
under Sec. 131 (h), the term "contractors" excludes transportation contractors; and, (3) the City
Treasurer illegally and erroneously imposed and collected the said tax, thus meriting the
immediate refund of the tax paid. 7
Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes
under Section 133 (j) of the Local Government Code as said exemption applies only to
"transportation contractors and persons engaged in the transportation by hire and common
carriers by air, land and water." Respondents assert that pipelines are not included in the term
"common carrier" which refers solely to ordinary carriers such as trucks, trains, ships and the
like. Respondents further posit that the term "common carrier" under the said code pertains to
the mode or manner by which a product is delivered to its destination. 8
On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this
wise:
". . . Plaintiff is either a contractor or other independent contractor.
. . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule
that tax exemptions are to be strictly construed against the taxpayer, taxes
being the lifeblood of the government. Exemption may therefore be granted
only by clear and unequivocal provisions of law.
"Plaintiff claims that it is a grantee of a pipeline concession under Republic Act
387, (Exhibit A) whose concession was lately renewed by the Energy
Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession
grant any tax exemption upon the plaintiff.
"Even the Local Government Code imposes a tax on franchise holders under
Sec. 137 of the Local Tax Code. Such being the situation obtained in this case
(exemption being unclear and equivocal) resort to distinctions or other
considerations may be of help:

1.That the exemption granted under Sec. 133 (j) encompasses only
common carriers so as not to overburden the riding public or
commuters with taxes. Plaintiff is not a common carrier, but a
special carrier extending its services and facilities to a single
specific or "special customer" under a "special contract."
2.The Local Tax Code of 1992 was basically enacted to give more and
effective local autonomy to local governments than the previous
enactments, to make them economically and financially viable to
serve the people and discharge their functions with a
concomitant obligation to accept certain devolution of powers, . .
. So, consistent with this policy even franchise grantees are
taxed (Sec. 137) and contractors are also taxed under Sec. 143
(e) and 151 of the Code." 9
Petitioner assailed the aforesaid decision before this Court via a petition for review. On February
27, 1995, we referred the case to the respondent Court of Appeals for consideration and
adjudication. 10 On November 29, 1995, the respondent court rendered a decision 11 affirming
the trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was
denied on July 18, 1996. 12
Hence, this petition. At first, the petition was denied due course in a Resolution dated November
11, 1996. 13 Petitioner moved for a reconsideration which was granted by this Court in a
Resolution 14 of January 22, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is
not a common carrier or a transportation contractor, and (2) the exemption sought for by
petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as
engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or
association engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1.He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the
transportation of goods for person generally as a business and not as a
casual occupation;
2.He must undertake to carry goods of the kind to which his business is
confined;
3.He must undertake to carry by the method by which his business is
conducted and over his established roads; and
4.The transportation must be for hire. 15
Based on the above definitions and requirements, there is no doubt that petitioner is a common
carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products,
for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all
persons who choose to employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele does not exclude it from the
definition of a common carrier. In De Guzman vs. Court of Appeals 16 we ruled that:
"The above article (Art. 1732, Civil Code) makes no distinction between one
whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity (in local idiom, as
a 'sideline'). Article 1732 . . . avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to
the 'general public,' i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general
population. We think that Article 1877 deliberately refrained from making such
distinctions.
So understood, the concept of 'common carrier' under Article 1732 may be
seen to coincide neatly with the notion of 'public service,' under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code. Under
Section 13, paragraph (b) of the Public Service Act, 'public service' includes:
Cdpr
'every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or
limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for freight
or passenger, or both, with or without fixed route and whatever may be
its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged
in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system gas, electric light heat and power, water supply and
power petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other similar public
services." (Emphasis supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the
Local Government Code refers only to common carriers transporting goods and passengers
through moving vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code
makes no distinction as to the means of transporting, as long as it is by land, water or air. It
does not provide that the transportation of the passengers or goods should be by motor vehicle.
In fact, in the United States, oil pipe line operators are considered common carriers. 17
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
"common carrier." Thus, Article 86 thereof provides that:
"Art. 86.Pipe line concessionaire as common carrier. A pipe line shall have
the preferential right to utilize installations for the transportation of petroleum
owned by him, but is obliged to utilize the remaining transportation capacity pro
rata for the transportation of such other petroleum as may be offered by others
for transport, and to change without discrimination such rates as may have
been approved by the Secretary of Agriculture and Natural Resources."
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article
7 thereof provides:
"that everything relating to the exploration for and exploitation of petroleum . . .
and everything relating to the manufacture, refining, storage, or transportation
by special methods of petroleum, is hereby declared to be a public utility."
(Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR
Ruling No. 069-83, it declared:
". . . since (petitioner) is a pipeline concessionaire that is engaged only in
transporting petroleum products, it is considered a common carrier under
Republic Act No. 387 . . . Such being the case, it is not subject to withholding
tax prescribed by Revenue Regulations No. 13-78, as amended."
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and,
therefore, exempt from the business tax as provided for in Section 133 (j), of the Local
Government Code, to wit:
"Sec. 133.Common Limitations on the Taxing Powers of Local Government
Units. Unless otherwise provided herein, the exercise of the taxing powers
of provinces, cities, municipalities, and barangays shall not extend to the levy
of the following:
xxx xxx xxx
(j.)Taxes on the gross receipts of transportation contractors and
persons engaged in the transportation of passengers or freight
by hire and common carriers by air, land or water, except as
provided in this Code."
The deliberations conducted in the House of Representatives on the Local Government Code of
1991 are illuminating:
"MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line 1. It states: "SEC. 121
(now Sec. 131). Common Limitations on the Taxing Powers of Local
Government Units." . . .
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of transportation.
This appears to be one of those being deemed to be exempted from the taxing
powers of the local government units. May we know the reason why the
transportation business is being excluded from the taxing powers of the local
government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121
(now Sec. 131), line 16, paragraph 5. It states that local government units may
not impose taxes on the business of transportation, except as otherwise
provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II,
one can see there that provinces have the power to impose a tax on business
enjoying a franchise at the rate of not more than one-half of 1 percent of the
gross annual receipts. So, transportation contractors who are enjoying a
franchise would be subject to tax by the province. That is the exception, Mr.
Speaker.
What we want to guard against here, Mr. Speaker is the imposition of taxes by
local government units on the carrier business. Local government units may
impose taxes on top of what is already being imposed by the National Internal
Revenue Code which is the so-called "common carriers tax." We do not want a
duplication of this tax, so we just provided for an exception under Section 125
(now Section 137) that a province may impose this tax at a specific rate.

MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . . 18
It is clear that the legislative intent in excluding from the taxing power of the local government
unit the imposition of business tax against common carriers is to prevent a duplication of the so-
called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings
under the National Internal Revenue Code. 19 To tax petitioner again on its gross receipts in its
transportation of petroleum business would defeat the purpose of the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of
Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
[G.R. No. 101503. September 15, 1993.]
PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF APPEALS,
SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI
KAISHA, respondents.
Gonzales, Sinense, Jimenez & Associates for petitioner.
Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.
D E C I S I O N
BELLOSILLO, J p:
Does a charter-party 1 between a shipowner and a charterer transform a common carrier into a
private one as to negate the civil law presumption of negligence in case of loss or damage to its
cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation
(MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which
the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by
private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro
Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by
the master of the vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum"
pursuant to the Uniform General Charter 2 was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3 Riders to the aforesaid charter-
party starting from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos. 1,
2, 3 and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and
27th of May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably
inspected by the charterer's representative and found fit to take a load of urea in bulk pursuant
to par. 16 of the charter-party which reads:
"16.. . . At loading port, notice of readiness to be accomplished by certificate
from National Cargo Bureau inspector or substitute appointed by charterers for
his account certifying the vessel's readiness to receive cargo spaces. The
vessel's hold to be properly swept, cleaned and dried at the vessel's expense
and the vessel to be presented clean for use in bulk to the satisfaction of the
inspector before daytime commences" (emphasis supplied).
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of
the shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of
tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout
the entire voyage. 5
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were
opened with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its
steel-bodied dump trucks which were parked alongside the berth, using metal scoops attached
to the ship, pursuant to the terms and conditions of the charter-party (which provided for an
F.I.O.S. clause). 6 The hatches remained open throughout the duration of the discharge. 7
Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was
transported to the consignee's warehouse located some fifty (50) meters from the wharf.
Midway to the warehouse, the trucks were made to pass through a weighing scale where they
were individually weighed for the purpose of ascertaining the net weight of the cargo. The port
area was windy, certain portions of the route to the warehouse were sandy and the weather was
variable, raining occasionally while the discharge was in progress. 8 The petitioner's warehouse
was made of corrugated galvanized iron (GI) sheets, with an opening at the front where the
dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI
sheets were placed in-between and alongside the trucks to contain spillages of the fertilizer. 9
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974
(except July 12th, 14th and 18th). 10 A private marine and cargo surveyor, Cargo
Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the
cargo shipped, by taking draft readings of the vessel prior to and after discharge. 11 The
survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a
shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating
18 M/T was contaminated with dirt. The same results were contained in a Certificate of
Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo
delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for
commerce, having been polluted with sand, rust and dirt. 12
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship
Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost
of the alleged shortage in the goods shipped and the diminution in value of that portion said to
have been contaminated with dirt. 13
Respondent SSA explained that they were not able to respond to the consignee's claim for
payment because, according to them, what they received was just a request for shortlanded
certificate and not a formal claim, and that this "request" was denied by them because they "had
nothing to do with the discharge of the shipment." 14 Hence, on 18 July 1975, PPI filed an
action for damages with the Court of First Instance of Manila. The defendant carrier argued that
the strict public policy governing common carriers does not apply to them because they have
become private carriers by reason of the provisions of the charter-party. The court a quo
however sustained the claim of the plaintiff against the defendant carrier for the value of the
goods lost or damaged when it ruled thus: 15
". . . Prescinding from the provision of the law that a common carrier is
presumed negligent in case of loss or damage of the goods it contracts to
transport, all that a shipper has to do in a suit to recover for loss or damage is
to show receipt by the carrier of the goods and delivery by it of less than what it
received. After that, the burden of proving that the loss or damage was due to
any of the causes which exempt him from liability is shifted to the carrier,
common or private he may be. Even if the provisions of the charter-party
aforequoted are deemed valid, and the defendants considered private carriers,
it was still incumbent upon them to prove that the shortage or contamination
sustained by the cargo is attributable to the fault or negligence on the part of
the shipper or consignee in the loading, stowing, trimming and discharge of the
cargo. This they failed to do. By this omission, coupled with their failure to
destroy the presumption of negligence against them, the defendants are liable"
(italics supplied).
On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from
liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of
Home Insurance Co. v. American Steamship Agencies, Inc., 17 the appellate court ruled that
the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and
not a common carrier by reason of the time charter-party. Accordingly, the Civil Code provisions
on common carriers which set forth a presumption of negligence do not find application in the
case at bar. Thus
". . . In the absence of such presumption, it was incumbent upon the plaintiff-
appellee to adduce sufficient evidence to prove the negligence of the defendant
carrier as alleged in its complaint. It is an old and well settled rule that if the
plaintiff, upon whom rests the burden of proving his cause of action, fails to
show in a satisfactory manner the facts upon which he bases his claim, the
defendant is under no obligation to prove his exception or defense (Moran,
Commentaries on the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13
Phil. 202).
"But, the record shows that the plaintiff-appellee dismally failed to prove the
basis of its cause of action, i.e., the alleged negligence of defendant carrier. It
appears that the plaintiff was under the impression that it did not have to
establish defendant's negligence. Be that as it may, contrary to the trial court's
finding, the record of the instant case discloses ample evidence showing that
defendant carrier was not negligent in performing its obligations . . ." 18
(emphasis supplied).
Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of
Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present
controversy because the issue raised therein is the validity of a stipulation in the charter-party
delimiting the liability of the shipowner for loss or damage to goods caused by want of due
diligence on its part or that of its manager to make the vessel seaworthy in all respects, and not
whether the presumption of negligence provided under the Civil Code applies only to common
carriers and not to private carriers. 19 Petitioner further argues that since the possession and
control of the vessel remain with the shipowner, absent any stipulation to the contrary, such
shipowner should be made liable for the negligence of the captain and crew. In fine, PPI faults
the appellate court in not applying the presumption of negligence against respondent carrier,
and instead shifting the onus probandi on the shipper to show want of due diligence on the part
of the carrier, when he was not even at hand to witness what transpired during the entire
voyage.
As earlier stated, the primordial issue here is whether a common carrier becomes a private
carrier by reason of a charter-party; in the negative, whether the shipowner in the instant case
was able to prove that he had exercised that degree of diligence required of him under the law.

It is said that etymology is the basis of reliable judicial decisions in commercial cases. This
being so, we find it fitting to first define important terms which are relevant to our discussion.
A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof,
is let by the owner to another person for a specified time or use; 20 a contract of affreightment
by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or
other person for the conveyance of goods, on a particular voyage, in consideration of the
payment of freight; 21 Charter parties are of two types: (a) contract of affreightment which
involves the use of shipping space on vessels leased by the owner in part or as a whole, to
carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the
whole vessel is let to the charterer with a transfer to him of its entire command and possession
and consequent control over its navigation, including the master and the crew, who are his
servants. Contract of affreightment may either be time charter, wherein the vessel is leased to
the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single
voyage. 22 In both cases, the charter-party provides for the hire of the vessel only, either for a
determinate period of time or for a single or consecutive voyage, the shipowner to supply the
ship's stores, pay for the wages of the master and the crew, and defray the expenses for the
maintenance of the ship.
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil
Code. 23 The definition extends to carriers either by land, air or water which hold themselves
out as ready to engage in carrying goods or transporting passengers or both for compensation
as a public employment and not as a casual occupation. The distinction between a "common or
public carrier" and a "private or special carrier" lies in the character of the business, such that if
the undertaking is a single transaction, not a part of the general business or occupation,
although involving the carriage of goods for a fee, the person or corporation offering such
service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of
their business, should observe extraordinary diligence in the vigilance over the goods they
carry. 25 In the case of private carriers, however, the exercise of ordinary diligence in the
carriage of goods will suffice. Moreover, in case of loss, destruction or deterioration of the
goods, common carriers are presumed to have been at fault or to have acted negligently, and
the burden of proving otherwise rests on them. 26 On the contrary, no such presumption applies
to private carriers, for whosoever alleges damage to or deterioration of the goods carried has
the onus of proving that the cause was the negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course of business, operates as a
common carrier, transporting goods indiscriminately for all persons. When petitioner chartered
the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ
of the shipowner and therefore continued to be under its direct supervision and control. Hardly
then can we charge the charterer, a stranger to the crew and to the ship, with the duty of caring
for his cargo when the charterer did not have any control of the means in doing so. This is
evident in the present case considering that the steering of the ship, the manning of the decks,
the determination of the course of the voyage and other technical incidents of maritime
navigation were all consigned to the officers and crew who were screened, chosen and hired by
the shipowner. 27
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter
of the whole or portion of a vessel by one or more persons, provided the charter is limited to the
ship only, as in the case of a time-charter or voyage-charter. It is only when the charter includes
both the vessel and its crew, as in a bareboat or demise that a common carrier becomes
private, at least insofar as the particular voyage covering the charter-party is concerned.
Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship,
although her holds may, for the moment, be the property of the charterer. 28
Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship
Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the
validity of a stipulation in the charter-party exempting the shipowner from liability for loss due to
the negligence of its agent, and not the effects of a special charter on common carriers. At any
rate, the rule in the United States that a ship chartered by a single shipper to carry special cargo
is not a common carrier, 29 does not find application in our jurisdiction, for we have observed
that the growing concern for safety in the transportation of passengers and/or carriage of goods
by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules
governing common carriers.
We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30
"As a matter of principle, it is difficult to find a valid distinction between cases in
which a ship is used to convey the goods of one and of several persons. Where
the ship herself is let to a charterer, so that he takes over the charge and
control of her, the case is different; the shipowner is not then a carrier. But
where her services only are let, the same grounds for imposing a strict
responsibility exist, whether he is employed by one or many. The master and
the crew are in each case his servants, the freighter in each case is usually
without any representative on board the ship; the same opportunities for fraud
or collussion occur; and the same difficulty in discovering the truth as to what
has taken place arises . . ."
In an action for recovery of damages against a common carrier on the goods shipped, the
shipper or consignee should first prove the fact of shipment and its consequent loss or damage
while the same was in the possession, actual or constructive, of the carrier. Thereafter, the
burden of proof shifts to respondent to prove that he has exercised extraordinary diligence
required by law or that the loss, damage or deterioration of the cargo was due to fortuitous
event, or some other circumstances inconsistent with its liability. 31
To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the
prima facie presumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19
April 1977 before the Philippine Consul and Legal Attache in the Philippine Embassy in
Tokyo, Japan, testified that before the fertilizer was loaded, the four (4) hatches of the
vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk
in the ship's holds, the steel pontoon hatches were closed and sealed with iron lids, then
covered with three (3) layers of serviceable tarpaulins which were tied with steel bonds. The
hatches remained close and tightly sealed while the ship was in transit as the weight of the
steel covers made it impossible for a person to open without the use of the ship's boom. 32
It was also shown during the trial that the hull of the vessel was in good condition, foreclosing
the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the
vessel. 33 When M/V "Sun Plum" docked at its berthing place, representatives of the consignee
boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores,
and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the
hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates
who were overseeing the whole operation on rotation basis. 34
Verily, the presumption of negligence on the part of respondent carrier has been efficaciously
overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care
of the cargo. This was confirmed by respondent appellate court thus
". . . Be that as it may, contrary to the trial court's finding, the record of the
instant case discloses ample evidence showing that defendant carrier was not
negligent in performing its obligations. Particularly, the following testimonies of
plaintiff-appellee's own witnesses clearly show absence of negligence by the
defendant carrier; that the hull of the vessel at the time of the discharge of the
cargo was sealed and nobody could open the same except in the presence of
the owner of the cargo and the representatives of the vessel (TSN, 20 July
1977, p. 14); that the cover of the hatches was made of steel and it was
overlaid with tarpaulins, three layers of tarpaulins and therefore their contents
were protected from the weather (TSN, 5 April 1978, p. 24); and, that to open
these hatches, the seals would have to be broken, all the seals were found to
be intact (TSN, 20 July 1977, pp. 15-16)" (italics supplied).
The period during which private respondent was to observe the degree of diligence required of it
as a public carrier began from the time the cargo was unconditionally placed in its charge after
the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the
vessel reached its destination and its hull was re-examined by the consignee, but prior to
unloading. This is clear from the limitation clause agreed upon by the parties in the Addendum
to the standard "GENCON" time charter-party which provided for an F.I.O.S., meaning, that the
loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free
from all risk and expense to the carrier. 35 Moreover, a shipowner is liable for damage to the
cargo resulting from improper stowage only when the stowing is done by stevedores employed
by him, and therefore under his control and supervision, not when the same is done by the
consignee or stevedores under the employ of the latter. 36

Article 1734 of the New Civil Code provides that common carriers are not responsible for the
loss, destruction or deterioration of the goods if caused by the character of the goods or defects
in the packaging or in the containers. The Code of Commerce also provides that all losses and
deteriorations which the goods may suffer during the transportation by reason of fortuitous
event, force majeure, or the inherent defect of the goods, shall be for the account and risk of the
shipper, and that proof of these accidents is incumbent upon the carrier. 37 The carrier,
nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is
proved, as against him, that they arose through his negligence or by reason of his having failed
to take the precautions which usage has established among careful persons. 38
Respondent carrier presented a witness who testified on the characteristics of the fertilizer
shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical
engineer working with Atlas Fertilizer, described Urea as a chemical compound consisting
mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea also
contains 46% nitrogen and is highly soluble in water. However, during storage, nitrogen and
ammonia do not normally evaporate even on a long voyage, provided that the temperature
inside the hull does not exceed eighty (80) degrees centigrade. Mr. Chupungco further added
that in unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during
such operation amounting to one percent (1%) against the bill of lading is deemed "normal" or
"tolerable." The primary cause of these spillages is the clamped shell which does not seal very
tightly. Also, the wind tends to blow away some of the materials during the unloading process.
The dissipation of quantities of fertilizer, or its deterioration in value, is caused either by an
extremely high temperature in its place of storage, or when it comes in contact with water. When
Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged
portion which is in liquid form still remains potent and usable although no longer saleable in its
original market value.
The probability of the cargo being damaged or getting mixed or contaminated with foreign
particles was made greater by the fact that the fertilizer was transported in "bulk," thereby
exposing it to the inimical effects of the elements and the grimy condition of the various pieces
of equipment used in transporting and hauling it.
The evidence of respondent carrier also showed that it was highly improbable for sea water to
seep into the vessel's holds during the voyage since the hull of the vessel was in good condition
and her hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all
respects seaworthy to carry the cargo she was chartered for. If there was loss or contamination
of the cargo, it was more likely to have occurred while the same was being transported from the
ship to the dump trucks and finally to the consignee's warehouse. This may be gleaned from the
testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He
explained that the 18 M/T of alleged "bad order cargo" as contained in their report to PPI was
just an approximation or estimate made by them after the fertilizer was discharged from the
vessel and segregated from the rest of the cargo.
The Court notes that it was in the month of July when the vessel arrived port and unloaded her
cargo. It rained from time to time at the harbor area while the cargo was being discharged
according to the supply officer of PPI, who also testified that it was windy at the waterfront and
along the shoreline where the dump trucks passed enroute to the consignee's warehouse.
Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like
fertilizer carries with it the risk of loss or damage. More so, with a variable weather condition
prevalent during its unloading, as was the case at bar. This is a risk the shipper or the owner of
the goods has to face. Clearly, respondent carrier has sufficiently proved the inherent character
of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its
packaging which further contributed to the loss. On the other hand, no proof was adduced by
the petitioner showing that the carrier was remiss in the exercise of due diligence in order to
minimize the loss or damage to the goods it carried.
WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which
reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of
the First Instance, now Regional Trial Court, of Manila should be, as it is hereby, DISMISSED.























[G.R. No. 111127. July 26, 1996.]
MR. & MRS. ENGRACIO FABRE, JR. * and PORFIRIO CABIL, petitioners, vs.
COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN
FELLOWSHIP, INC., AMYLINE ANTONIO, JOHN RICHARDS, GONZALO
GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA, ARLENE GOJOCO,
ALBERTO ROXAS CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA,
YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO
NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPEZ, JULIUS
CAESAR GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE
SENIEL, ROSARIO MARAMARA, TERESITA REGALA, MELINDA TORRES,
MARELLA MIJARES, JOSEFA CABATINGAN, MARA NADOC, DIANE
MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA
MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE
FERRER, respondents.
Maria del Valle for petitioners.
Eduardo Claudio II for private respondents.
SYLLABUS
1.CIVIL LAW; TRANSPORTATION; COMMON CARRIERS; UNDER THE PRINCIPLE THAT
"THE ACT THAT BREAKS THE CONTRACT MAY BE ALSO A TORT" PETITIONERS IN THE
INSTANT CASES ARE JOINTLY AND SEVERALLY LIABLE FOR THE INJURIES SUFFERED
BY THE PRIVATE RESPONDENT. First, it is unnecessary for our purpose to determine
whether to decide this case on the theory that petitioners are liable for breach of contract of
carriage or culpa contractual or on the theory of quasi delict or culpa aquiliana as both the
Regional Trial Court and the Court of Appeals held, for although the relation of passenger and
carrier is "contractual both in origin and nature," nevertheless "the act that breaks the contract
may be also a tort." In either case, the question is whether the bus driver, petitioner Porfirio
Cabil, was negligent. The finding that Cabil drove his bus negligently, while his employer, the
Fabres, who owned the bus, failed to exercise the diligence of a good father of the family in the
selection and supervision of their employee is fully supported by the evidence on record. These
factual findings of the two courts we regard as final and conclusive, supported as they are by
the evidence. Indeed, it was admitted by Cabil that on the night in question, it was raining, and,
as a consequence, the road was slippery, and it was dark. He averred these facts to justify his
failure to see that there lay a sharp curve ahead. However, it is undisputed that Cabil drove his
bus at the speed of 50 kilometers per hour and only slowed down when he noticed the curve
some 15 to 30 meters ahead. By then it was too late for him to avoid falling off the road. Given
the conditions of the road and considering that the trip was Cabil's first one outside of Manila,
Cabil should have driven his vehicle at a moderate speed. There is testimony that the vehicles
passing on that portion of the road should only be running 20 kilometers per hour, so that at 50
kilometers per hour, Cabil was running at a very high speed. Considering the foregoing the
fact that it was raining and the road was slippery, that it was dark, that he drove his bus at 50
kilometers an hour when even on a good day the normal speed was only 20 kilometers an hour,
and that he was unfamiliar with the terrain, Cabil was grossly negligent and should be held liable
for the injuries suffered by private respondent Amyline Antonio.
2.ID.; NEGLIGENCE OF AN EMPLOYEE GIVES RISE TO THE PRESUMPTION THAT HIS
EMPLOYERS ARE THEMSELVES NEGLIGENT IN THE SELECTION AND SUPERVISION OF
THEIR EMPLOYEE. Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave
rise to the presumption that his employers, the Fabres, were themselves negligent in the
selection and supervision of their employee. Due diligence in selection of employees is not
satisfied by finding that the applicant possessed a professional driver's license. The employer
should also examine the applicant for his qualifications, experience and record of service. Due
diligence in supervision, on the other hand, requires the formulation of rules and regulations for
the guidance of employees and the issuance of proper instructions as well as actual
implementation and monitoring of consistent compliance with the rules.
3.ID.; CONTRACT OF CARRIAGE; PETITIONERS DID NOT HAVE TO BE ENGAGED IN THE
BUSINESS OF PUBLIC TRANSPORTATION FOR THE PROVISIONS OF THE CIVIL CODE
ON COMMON CARRIERS TO APPLY TO THEM. This case actually involves a contract of
carriage. Petitioners, the Fabres, did not have to be engaged in the business of public
transportation for the provisions of the Civil Code on common carriers to apply to them. As this
Court has held: Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land,
water, or air for compensation, offering their services to the public. The above article makes no
distinction between one whose principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary activity (in local idiom, as "a
sideline"). Article 1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1732 deliberately refrained from making such
distinctions.
4.ID.; PETITIONER'S DUTY TO EXERCISE "EXTRAORDINARY DILIGENCE" IS NOT
EXCUSED BY PROOF THAT THEY EXERCISE THE DILIGENCE OF A GOOD FATHER OF
THE FAMILY IN THE SELECTION AND SUPERVISION OF THEIR EMPLOYEE. As
common carriers, the Fabres were bound to exercise "extraordinary diligence" for the safe
transportation of the passengers to their destination. This duty of care is not excused by proof
that they exercised the diligence of a good father of the family in the selection and supervision
of their employee. As Art. 1759 of the Code provides: Common carriers are liable for the death
of or injuries to passengers through the negligence or wilful acts of the former's employees,
although such employees may have acted beyond the scope of their authority or in violation of
the orders of the common carriers. This liability of the common carriers does not cease upon
proof that they exercised all the diligence of a good father of a family in the selection and
supervision of their employees.
5.ID.; DAMAGES; COMPENSATORY DAMAGES; THE COURT OF APPEALS ERRED IN
INCREASING THE AMOUNT OF COMPENSATORY DAMAGES BECAUSE PRIVATE
RESPONDENT DID NOT QUESTION THIS AWARD AS INADEQUATE. We sustain the
award of damages in favor of Amyline Antonio. However, we think the Court of Appeals erred in
increasing the amount of compensatory damages because private respondents did not question
this award as inadequate. To the contrary, the award of P500,000.00 for compensatory
damages which the Regional Trial Court made is reasonable considering the contingent nature
of her income as a casual employee of a company and as distributor of beauty products and the
fact that the possibility that she might be able to work again has not been foreclosed. In fact she
testified that one of her previous employers had expressed willingness to employ her again.
6.ID.; MORAL DAMAGES; AWARD OF MORAL DAMAGES IN CASES OF QUASI DELICT IS
ALLOWED BY ART. 2219(2); IN CASES OF BREACH OF CONTRACT OF CARRIAGE, THE
AWARD OF MORAL DAMAGES IS AUTHORIZED BY ART. 1764 IN RELATION TO ART.
2220. Viewed as an action for quasi-delict, this case falls squarely within the purview of Art.
2219(2) providing for the payment of moral damages in cases of quasi delict. On the theory that
petitioners are liable for breach of contract of carriage, the award of moral damages is
authorized by Art. 1764, in relation to Art. 2220, since Cabil's gross negligence amounted to bad
faith. Amyline Antonio's testimony, as well as the testimonies of her father and co-passengers,
fully establish the physical suffering and mental anguish she endured as a result of the injuries
caused by petitioners' negligence.
7.ID.; OWNERS AND DRIVER OF THE BUS MAY BE MADE JOINTLY AND SEVERALLY
LIABLE FOR DAMAGES FOR INJURIES SUFFERED BY A PASSENGER. The question is
whether, as the two courts below held, petitioners, who are the owners and driver of the bus,
may be made to respond jointly and severally to private respondent. We hold that they may be.
In Dangwa Trans. Co. Inc. v. Court of Appeals, 202 SCRA 574 (1991) on facts similar to those
in this case, this Court held the bus company and the driver jointly and severally liable for
damages for injuries suffered by a passenger. Again, in Bachelor Express, Inc. v. Court of
Appeals, 188 SCRA 216 (1990) a driver found negligent in failing to stop the bus in order to let
off passengers when a fellow passenger ran amuck, as a result of which the passengers
jumped out of the speeding bus and suffered injuries, was held also jointly and severally liable
with the bus company to the injured passengers. The same rule of liability was applied in
situations where the negligence of the driver of the bus on which plaintiff was riding concurred
with the negligence of a third party who was the driver of another vehicle, thus causing an
accident. Nor should it make any difference that the liability of petitioner [bus owner] springs
from contract while that of respondents [owner and driver of other vehicle] arises from quasi-
delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of
injury to a passenger due to the negligence of the driver of the bus on which he was riding and
of the driver of another vehicle, the drivers as well as the owners of the two vehicles are jointly
and severally liable for damages. Some members of the Court, though, are of the view that
under the circumstances they are liable on quasi-delict.

D E C I S I O N
MENDOZA, J p:
This is a petition for review on certiorari of the decision of the Court of Appeals 1 in CA-GR No.
28245, dated September 30, 1992, which affirmed with modification the decision of the Regional
Trial Court of Makati, Branch 58, ordering petitioners jointly and severally to pay damages to
private respondent Amyline Antonio, and its resolution which denied petitioners' motion for
reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They
used the bus principally in connection with a bus service for school children which they operated
in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after trying him
out for two weeks. His job was to take school children to and from the St. Scholastica's College
in Malate, Manila.
On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF)
arranged with petitioners for the transportation of 33 members of its Young Adults Ministry from
Manila to La Union and back in consideration of which private respondent paid petitioners the
amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the afternoon.
However, as several members of the party were late, the bus did not leave the Tropical Hut at
the corner of Ortigas Avenue and EDSA until 8:00 o'clock in the evening. Petitioner Porfirio
Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at
Carmen was under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his
first trip to La Union), was forced to take a detour through the town of Ba-ay in Lingayen,
Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway,
running on a south to east direction, which he described as "siete." The road was slippery
because it was raining, causing the bus, which was running at the speed of 50 kilometers per
hour, to skid to the left road shoulder. The bus hit the left traffic steel brace and sign along the
road and rammed the fence of one Jesus Escano, then turned over and landed on its left side,
coming to a full stop only after a series of impacts. The bus came to rest off the road. A coconut
tree which it had hit fell on it and smashed its front portion.
Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor
of the bus and pinned down by a wooden seat which came off after being unscrewed. It took
three persons to safely remove her from this position. She was in great pain and could not
move.
The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he
was not familiar with the area and he could not have seen the curve despite the care he took in
driving the bus, because it was dark and there was no sign on the road. He said that he saw the
curve when he was already within 15 to 30 meters of it. He allegedly slowed down to 30
kilometers per hour, but it was too late.
The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of
their finding they filed a criminal complaint against the driver, Porfirio Cabil. The case was later
filed with the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for
the damage to the latter's fence. On the basis of Escano's affidavit of desistance the case
against petitioners Fabre was dismissed.
Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro
Manila. As a result of the accident, she is now suffering from paraplegia and is permanently
paralyzed from the waist down. During the trial she described the operations she underwent and
adduced evidence regarding the cost of her treatment and therapy. Immediately after the
accident, she was taken to the Nazareth Hospital in Ba-ay, Lingayen. As this hospital was not
adequately equipped, she was transferred to the Sto. Nio Hospital, also in the town of Ba-ay,
where she was given sedatives. An x-ray was taken and the damage to her spine was
determined to be too severe to be treated there. She was therefore brought to Manila, first to the
Philippine General Hospital and later to the Makati Medical Center where she underwent an
operation to correct the dislocation of her spine.
In its decision dated April 17, 1989, the trial court found that:
No convincing evidence was shown that the minibus was properly checked for
travel to a long distance trip and that the driver was properly screened and
tested before being admitted for employment. Indeed, all the evidence
presented have shown the negligent act of the defendants which ultimately
resulted to the accident subject of this case.
Accordingly, it gave judgment for private respondents holding:
Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms.
Amyline Antonio were the only ones who adduced evidence in support of their
claim for damages, the Court is therefore not in a position to award damages to
the other plaintiffs.
WHEREFORE, premises considered, the Court hereby renders judgment
against defendants Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil
pursuant to articles 2176 and 2180 of the Civil Code of the Philippines and said
defendants are ordered to pay jointly and severally to the plaintiffs the following
amount:
1)P93,657.11 as compensatory and actual damages;
2)P500,000.00 as the reasonable amount of loss of earning capacity of
plaintiff Amyline Antonio;
3)P20,000.00 as moral damages;
4)P20,000.00 as exemplary damages; and
5)25% of the recoverable amount as attorney's fees;
6)Costs of suit.
SO ORDERED.
The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio but
dismissed it with respect to the other plaintiffs on the ground that they failed to prove their
respective claims. The Court of Appeals modified the award of damages as follows:
1)P93,657.11 as actual damages;
2)P600,000.00 as compensatory damages;
3)P50,000.00 as moral damages;
4)P20,000.00 as exemplary damages;
5)P10,000.00 as attorney's fees; and
6)Costs of suit.
The Court of Appeals sustained the trial court's finding that petitioner Cabil failed to exercise
due care and precaution in the operation of his vehicle considering the time and the place of the
accident. The Court of Appeals held that the Fabres were themselves presumptively negligent.
Hence, this petition. Petitioners raise the following issues:
I.WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
II.WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES
SUFFERED BY PRIVATE RESPONDENTS.
III.WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE
POSITIVE, UP TO WHAT EXTENT.
Petitioners challenge the propriety of the award of compensatory damages in the amount of
P600,000.00. It is insisted that, on the assumption that petitioners are liable, an award of
P600,000.00 is unconscionable and highly speculative. Amyline Antonio testified that she was a
casual employee of a company called "Suaco," earning P1,650.00 a month, and a dealer of
Avon products, earning an average of P1,000.00 monthly. Petitioners contend that as casual
employees do not have security of tenure, the award of P600,000.00, considering Amyline
Antonio's earnings, is without factual basis as there is no assurance that she would be regularly
earning these amounts.
With the exception of the award of damages, the petition is devoid of merit.
First, it is unnecessary for our purpose to determine whether to decide this case on the theory
that petitioners are liable for breach of contract of carriage or culpa contractual or on the theory
of quasi delict or culpa aquiliana as both the Regional Trial Court and the Court of Appeals held,
for although the relation of passenger and carrier is "contractual both in origin and nature,"
nevertheless "the act that breaks the contract may be also a tort." 2 In either case, the question
is whether the bus driver, petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the
bus, failed to exercise the diligence of a good father of the family in the selection and
supervision of their employee is fully supported by the evidence on record. These factual
findings of the two courts we regard as final and conclusive, supported as they are by the
evidence. Indeed, it was admitted by Cabil that on the night in question, it was raining, and, as a
consequence, the road was slippery, and it was dark. He averred these facts to justify his failure
to see that there lay a sharp curve ahead. However, it is undisputed that Cabil drove his bus at
the speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15
to 30 meters ahead. 3 By then it was too late for him to avoid falling off the road. Given the
conditions of the road and considering that the trip was Cabil's first one outside of Manila, Cabil
should have driven his vehicle at a moderate speed. There is testimony 4 that the vehicles
passing on that portion of the road should only be running 20 kilometers per hour, so that at 50
kilometers per hour, Cabil was running at a very high speed.
Considering the foregoing the fact that it was raining and the road was slippery, that it was
dark, that he drove his bus at 50 kilometers an hour when even on a good day the normal speed
was only 20 kilometers an hour, and that he was unfamiliar with the terrain, Cabil was grossly
negligent and should be held liable for the injuries suffered by private respondent Amyline
Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption
that his employers, the Fabres, were themselves negligent in the selection and supervision of
their employee.
Due diligence in selection of employees is not satisfied by finding that the applicant possessed a
professional driver's license. The employer should also examine the applicant for his
qualifications, experience and record of service. 5 Due diligence in supervision, on the other
hand, requires the formulation of rules and regulations for the guidance of employees and the
issuance of proper instructions as well as actual implementation and monitoring of consistent
compliance with the rules. 6

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not
consider the fact that Cabil had been driving for school children only, from their homes to the St.
Scholastica's College in Metro Manila. 7 They had hired him only after a two-week
apprenticeship. They had tested him for certain matters, such as whether he could remember
the names of the children he would be taking to school, which were irrelevant to his qualification
to drive on a long distance travel, especially considering that the trip to La Union was his first.
The existence of hiring procedures and supervisory policies cannot be casually invoked to
overturn the presumption of negligence on the part of an employer. 8
Petitioners argue that they are not liable because (1) an earlier departure (made impossible by
the congregation's delayed meeting) could have averted the mishap and (2) under the contract,
the WWCF was directly responsible for the conduct of the trip. Neither of these contentions hold
water. The hour of departure had not been fixed. Even if it had been, the delay did not bear
directly on the cause of the accident. With respect to the second contention, it was held in an
early case that:
[A] person who hires a public automobile and gives the driver directions as to
the place to which he wishes to be conveyed, but exercises no other control
over the conduct of the driver, is not responsible for acts of negligence of the
latter or prevented from recovering for injuries suffered from a collision between
the automobile and a train, caused by the negligence either of the locomotive
engineer or the automobile driver. 9
As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did
not have to be engaged in the business of public transportation for the provisions of the Civil
Code on common carriers to apply to them. As this Court has held: 10
Art. 1732.Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air for compensation, offering their services to the
public.
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732
also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering
such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services
or solicits business only from a narrow segment of the general population. We
think that Article 1732 deliberately refrained from making such distinctions.
As common carriers, the Fabres were bound to exercise "extraordinary diligence" for the
safe transportation of the passengers to their destination. This duty of care is not excused
by proof that they exercised the diligence of a good father of the family in the selection and
supervision of their employee. As Art. 1759 of the Code provides:
Common carriers are liable for the death of or injuries to passengers through
the negligence or wilful acts of the former's employees, although such
employees may have acted beyond the scope of their authority or in violation of
the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees.
The same circumstances detailed above, supporting the finding of the trial court and of the
appellate court that petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify
finding them guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the Civil
Code.
Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the
Court of Appeals erred in increasing the amount of compensatory damages because private
respondents did not question this award as inadequate. 11 To the contrary, the award of
P500,000.00 for compensatory damages which the Regional Trial Court made is reasonable
considering the contingent nature of her income as a casual employee of a company and as
distributor of beauty products and the fact that the possibility that she might be able to work
again has not been foreclosed. In fact she testified that one of her previous employers had
expressed willingness to employ her again.
With respect to the other awards, while the decisions of the trial court and the Court of Appeals
do not sufficiently indicate the factual and legal basis for them, we find that they are
nevertheless supported by evidence in the records of this case. Viewed as an action for quasi
delict, this case falls squarely within the purview of Art. 2219(2) providing for the payment of
moral damages in cases of quasi delict. On the theory that petitioners are liable for breach of
contract of carriage, the award of moral damages is authorized by Art. 1764, in relation to Art.
2220, since Cabil's gross negligence amounted to bad faith. 12 Amyline Antonio's testimony as
well as the testimonies of her father and co-passengers, fully establish the physical suffering
and mental anguish she endured as a result of the injuries caused by petitioners' negligence.
The award of exemplary damages and attorney's fees was also properly made. However, for the
same reason that it was error for the appellate court to increase the award of compensatory
damages, we hold that it was also error for it to increase the award of moral damages and
reduce the award of attorney's fees, inasmuch as private respondents, in whose favor the
awards were made, have not appealed. 13
As above stated, the decision of the Court of Appeals can be sustained either on the theory of
quasi delict or on that of breach of contract. The question is whether, as the two courts below
held, petitioners, who are the owners and driver of the bus, may be made to respond jointly and
severally to private respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court
of Appeals, 14 on facts similar to those in this case, this Court held the bus company and the
driver jointly and severally liable for damages for injuries suffered by a passenger. Again, in
Bachelor Express, Inc. v. Court of Appeals 15 a driver found negligent in failing to stop the bus
in order to let off passengers when a fellow passenger ran amuck, as a result of which the
passengers jumped out of the speeding bus and suffered injuries, was held also jointly and
severally liable with the bus company to the injured passengers.
The same rule of liability was applied in situations where the negligence of the driver of the bus
on which plaintiff was riding concurred with the negligence of a third party who was the driver of
another vehicle, thus causing an accident. In Anuran v. Buo, 16 Batangas Laguna Tayabas
Bus Co. v. Intermediate Appellate Court, 17 and Metro Manila Transit Corporation v. Court of
Appeals, 18 the bus company, its driver, the operator of the other vehicle and the driver of the
vehicle were jointly and severally held liable to the injured passenger or the latter's heirs. The
basis of this allocation of liability was explained in Viluan v. Court of Appeals, 19 thus:
Nor should it make any difference that the liability of petitioner [bus owner]
springs from contract while that of respondents [owner and driver of other
vehicle] arises from quasi-delict. As early as 1913, we already ruled in
Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due
to the negligence of the driver of the bus on which he was riding and of the
driver of another vehicle, the drivers as well as the owners of the two vehicles
are jointly and severally liable for damages. Some members of the Court,
though, are of the view that under the circumstances they are liable on quasi-
delict. 20
It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals 21 this Court exonerated
the jeepney driver from liability to the injured passengers and their families while holding the
owners of the jeepney jointly and severally liable, but that is because that case was expressly
tried and decided exclusively on the theory of culpa contractual. As this Court there explained:
The trial court was therefore right in finding that Manalo [the driver] and
spouses Mangune and Carreon [the jeepney owners] were negligent. However,
its ruling that spouses Mangune and Carreon are jointly and severally liable
with Manalo is erroneous. The driver cannot be held jointly and severally liable
with the carrier in case of breach of the contract of carriage. The rationale
behind this is readily discernible. Firstly, the contract of carriage is between the
carrier and the passenger, and in the event of contractual liability, the carrier is
exclusively responsible therefore to the passenger, even if such breach be due
to the negligence of his driver (see Viluan v. The Court of Appeals, et al., G.R.
Nos. L-21477-81, April 29, 1966, 16 SCRA 742) . . . 22
As in the case of BLTB, private respondents in this case and her co-plaintiffs did not stake out
their claim against the carrier and the driver exclusively on one theory, much less on that of
breach of contract alone. After all, it was permitted for them to allege alternative causes of
action and join as many parties as may be liable on such causes of action 23 so long as private
respondent and her co-plaintiffs do not recover twice for the same injury. What is clear from the
cases is the intent of the plaintiff there to recover from both the carrier and the driver, thus
justifying the holding that the carrier and the driver were jointly and severally liable because their
separate and distinct acts concurred to produce the same injury.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to
the award of damages. Petitioners are ORDERED to PAY jointly and severally the private
respondent Amyline Antonio the following amounts:
1)P93, 657.11 as actual damages;
2)P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff
Amyline Antonio;
3)P20,000.00 as moral damages;
4)P20,000.00 as exemplary damages;
5)25% of the recoverable amount as attorney's fees; and
6)costs of suit.








[G.R. No. 101089. April 7, 1993.]
ESTRELLITA M. BASCOS, petitioners, vs. COURT OF APPEALS and
RODOLFO A. CIPRIANO, respondents.
SYLLABUS
1.CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER.
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or
association engaged in the business of carrying or transporting passengers or goods or both, by
land, water or air, for compensation, offering their services to the public." The test to determine
a common carrier is "whether the given undertaking is a part of the business engaged in by the
carrier which he has held out to the general public as his occupation rather than the quantity or
extent of the business transacted." . . . The holding of the Court in De Guzman vs. Court of
Appeals is instructive. In referring to Article 1732 of the Civil Code, it held thus: "The above
article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local
idiom, as a "sideline"). Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguished between a carrier offering its services to the "general public," i.e., the
general community or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1732 deliberately refrained from
making such distinctions."
2.ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN
PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN
PRESUMPTION MADE ABSOLUTE. Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by them. Accordingly, they are presumed
to have been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. There are very few instances when the presumption of negligence does not attach
and these instances are enumerated in Article 1734. In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary diligence in order to
overcome the presumption . . . The presumption of negligence was raised against petitioner. It
was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need
not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of
extraordinary diligence made the presumption conclusive against her.
3.ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER
ABSOLVED FROM LIABILITY. In De Guzman vs. Court of Appeals, the Court held that
hijacking, not being included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the
robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides: "Art. 1745. Any of the following
or similar stipulations shall be considered unreasonable, unjust and contrary to public policy . . .
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not
act with grave or irresistible threat, violences or force, is dispensed with or diminished"; In the
same case, the Supreme Court also held that: "Under Article 1745 (6) above, a common carrier
is held responsible and will not be allowed to divest or to diminish such responsibility even
for acts of strangers like thieves or robbers, except where such thieves or robbers in fact acted
"with grave of irresistible threat, violence of force," We believe and so hold that the limits of the
duty of extraordinary diligence in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence
or force."
4.REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. In this case,
petitioner herself has made the admission that she was in the trucking business, offering her
trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is
required to prove the same.
5.ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. Petitioner
presented no other proof of the existence of the contract of lease. He who alleges a fact has the
burden of proving it.
6.ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS
WITNESSES. While the affidavit of Juanito Morden, the truck helper in the hijacked truck,
was presented as evidence in court, he himself was a witness as could be gleaned from the
contents of the petition. Affidavits are not considered the best evidence if the affiants are
available as witnesses.
7.CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO
BE. Granting that the said evidence were not self-serving, the same were not sufficient to
prove that the contract was one of lease. It must be understood that a contract is what the law
defines it to be and not what it is called by the contracting parties.
D E C I S I O N
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO
A. CIPRIANO, doing business under the name CIPRIANO TRADING ENTERPRISES plaintiff-
appellee, vs. ESTRELLITA M. BASCOS, doing business under the name of BASCOS
TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion of which is
quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed
from, which is hereby affirmed in toto. Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into
a hauling contract 2 with Jibfair Shipping Agency Corporation whereby the former bound itself to
haul the latter's 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the
warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its obligation,
CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos (petitioner) to
transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from the Manila Port
Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner failed to deliver the
said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount
of the lost goods in accordance with the contract which stated that:
"1.CIPTRADE shall be held liable and answerable for any loss in bags due to
theft, hijacking and non-delivery or damages to the cargo during transport at
market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually,
Cipriano filed a complaint for a sum of money and damages with writ of preliminary attachment
4 for breach of a contract of carriage. The prayer for a Writ of Preliminary Attachment was
supported by an affidavit 5 which contained the following allegations:
"4.That this action is one of those specifically mentioned in Sec. 1, Rule 57 the
Rules of Court, whereby a writ of preliminary attachment may lawfully issue,
namely:
"(e)in an action against a party who has removed or disposed of
his property, or is about to do so, with intent to defraud his creditors;"
5.That there is no sufficient security for the claim sought to be enforced by the
present action;
6.That the amount due to the plaintiff in the above-entitled case is above all
legal counterclaims;"
The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no contract of
carriage since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to
Laguna; that CIPTRADE was liable to petitioner in the amount of P11,000.00 for loading the
cargo; that the truck carrying the cargo was hijacked along Canonigo St., Paco, Manila on the
night of October 21, 1988; that the hijacking was immediately reported to CIPTRADE and that
petitioner and the police exerted all efforts to locate the hijacked properties; that after
preliminary investigation, an information for robbery and carnapping were filed against Jose
Opriano, et al.; and that hijacking, being a force majeure, exculpated petitioner from any liability
to CIPTRADE. prLL
After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
defendant ordering the latter to pay the former:
1.The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED
FOUR PESOS (P156,404.00) as an (sic) for actual damages with legal interest
of 12% per cent per annum to be counted from December 4, 1986 until fully
paid;
2.The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's
fees; and
3.The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10,
1987 filed by defendant is DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's
judgment.
Consequently, petitioner filed this petition where she makes the following assignment of errors;
to wit:
"I.THE RESPONDENT COURT ERRED IN HOLDING THAT THE
CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE
RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE OF CARGO
TRUCK.
II.GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE
RESPONDENT COURT THAT THE CONTRACTUAL RELATIONSHIP
BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF
GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING
PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF THE CARGO
WAS DUE TO FORCE MAJEURE, NAMELY, HIJACKING.

III.THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF
THE TRIAL COURT THAT PETITIONER'S MOTION TO DISSOLVE/LIFT THE
WRIT OF PRELIMINARY ATTACHMENT HAS BEEN RENDERED MOOT
AND ACADEMIC BY THE DECISION OF THE MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a common carrier?;
and (2) was the hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted
in her answer that she did business under the name A.M. Bascos Trucking and that said
admission dispensed with the presentation by private respondent, Rodolfo Cipriano, of proofs
that petitioner was a common carrier. The respondent Court also adopted in toto the trial court's
decision that petitioner was a common carrier, Moreover, both courts appreciated the following
pieces of evidence as indicators that petitioner was a common carrier: the fact that the truck
driver of petitioner, Maximo Sanglay, received the cargo consisting of 400 bags of soya bean
meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the truck helper,
Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo was
placed in petitioner's care. cdphil
In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier,
she alleged in this petition that the contract between her and Rodolfo A. Cipriano, representing
CIPTRADE, was lease of the truck. She cited as evidence certain affidavits which referred to the
contract as "lease". These affidavits were made by Jesus Bascos 8 and by petitioner herself. 9
She further averred that Jesus Bascos confirmed in his testimony his statement that the contract
was a lease contract. 10 She also stated that: she was not catering to the general public. Thus,
in her answer to the amended complaint, she said that she does business under the same style
of A.M. Bascos Trucking, offering her trucks for lease to those who have cargo to move, not to
the general public but to a few customers only in view of the fact that it is only a small business.
11
We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or
association engaged in the business of carrying or transporting passengers or goods or both, by
land, water or air, for compensation, offering their services to the public." The test to determine
a common carrier is "whether the given undertaking is a part of the business engaged in by the
carrier which he has held out to the general public as his occupation rather than the quantity or
extent of the business transacted." 12 In this case, petitioner herself has made the admission
that she was in the trucking business, offering her trucks to those with cargo to move. Judicial
admissions are conclusive and no evidence is required to prove the same. 13
But petitioner argues that there was only a contract of lease because they offer their services
only to a select group of people and because the private respondents, plaintiffs in the lower
court, did not object to the presentation of affidavits by petitioner where the transaction was
referred to as a lease contract.
Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is
instructive. In referring to Article 1732 of the Civil Code, it held thus:
"The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732
also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering
such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services
or solicits business only from a narrow segment of the general population. We
think that Article 1732 deliberately refrained from making such distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts
have dismissed them as self-serving and petitioner contests the conclusion. We are bound by
the appellate court's factual conclusions. Yet, granting that the said evidence were not self-
serving, the same were not sufficient to prove that the contract was one of lease. It must be
understood that a contract is what the law defines it to be and not what it is called by the
contracting parties. 15 Furthermore, petitioner presented no other proof of the existence of the
contract of lease. He who alleges a fact has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the goods was not due
to force majeure.
Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods
transported by them. 17 Accordingly, they are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated. 18 There are very few instances
when the presumption of negligence does not attach and these instances are enumerated in
Article 1734. 19 In those cases where the presumption is applied, the common carrier must
prove that it exercised extraordinary diligence in order to overcome the presumption. Cdpr
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her
from liability for the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held that
hijacking, not being included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the
robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides:
"Art. 1745.Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy;
xxx xxx xxx
(6)That the common carrier's liability for acts committed by thieves, or of
robbers who do not act with grave or irresistible threat, violences or force, is
dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible and will
not be allowed to divest or to diminish such responsibility even for acts of
strangers like thieves or robbers except where such thieves or robbers in fact
acted with grave or irresistible threat, violence or force. We believe and so hold
that the limits of the duty of extraordinary diligence in the vigilance over the
goods carried are reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat, violence or force."
To establish grave and irresistible force, petitioner presented her accusatory affidavit,
22 Jesus Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial
court and the Court of Appeals have concluded that these affidavits were not enough to
overcome the presumption. Petitioner's affidavit about the hijacking was based on what had
been told her by Juanito Morden. It was not a first-hand account. While it had been admitted
in court for lack of objection on the part of private respondent, the respondent Court had
discretion in assigning weight to such evidence. We are bound by the conclusion of the
appellate court. In a petition for review on certiorari, We are not to determine the probative
value of evidence but to resolve questions of law. Secondly, the affidavit of Jesus Bascos
did not dwell on how the hijacking took place. Thirdly, while the affidavit of Juanito Morden,
the truck helper in the hijacked truck, was presented as evidence in court, he himself was a
witness as could be gleaned from the contents of the petition. Affidavits are not considered
the best evidence if the affiants are available as witnesses. 25 The subsequent filing of the
information for carnapping and robbery against the accused named in said affidavits did not
necessarily mean that the contents of the affidavits were true because they were yet to be
determined in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was petitioner's burden to
overcome it. Thus, contrary to her assertion, private respondent need not introduce any
evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary
diligence made the presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial issues involved, We find
no reason to disturb the conclusion that the motion to lift/dissolve the writ of preliminary
attachment has been rendered moot and academic by the decision on the merits. llcd
In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be
sustained. The petition is DISMISSED and the decision of the Court of Appeals is hereby
AFFIRMED.
















[G.R. No. 141910. August 6, 2002.]
FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO
TRUCKING CORPORATION and LAMBERT M. EROLES, respondents.
SYNOPSIS
Respondent G.P. Sarmiento trucking company (GTS) undertook to transport cargoes for
Concepcion Industries, Inc. when it collided with an unidentified truck, causing damage to the
cargoes. Petitioner, FGU, insurer of the shipment, paid to Concepcion Industries the value of
the covered cargoes. Then, as subrogee of Concepcion Industries, Inc., petitioner FGU sued
GPS for breach of contract of carriage for reimbursement. Instead of filing an answer, GPS filed
a demurrer to evidence, claiming that it cannot be held liable as a common carrier because it
was only a private carrier, being the exclusive hauler only of Concepcion Industries, Inc. since
1988.
The lower court granted the motion, ruling that plaintiff FGU failed to prove that GPS is a
common carrier. The CA affirmed the trial court's order.
On appeal, the Supreme Court held; that GPS cannot be considered a common carrier as it
renders service exclusively to Concepcion Industries; that notwithstanding, GPS cannot escape
from liability since in culpa contractual, mere proof of the existence of the contract and the
failure of its compliance justify prima facie a corresponding right of relief. Respondent driver,
however, who is not a party to the contract of carriage, may not be held liable under the
agreement without concrete proof of his negligence or fault. HScAEC
Hence, the Supreme Court affirmed the assailed order of the trial court and the CA insofar as
the respondent driver was concerned but GPS trucking company was ordered to pay the
petitioner FGU the value of the damaged and lost cargoes.
SYLLABUS
1.CIVIL LAW; COMMON CARRIERS; DEFINED; CASE AT BAR. The Court finds the
conclusion of the trial court and the Court of Appeals to be amply justified. GPS, being an
exclusive contractor and hauler of Concepcion Industries, Inc., rendering or offering its services
to no other individual or entity, cannot be considered a common carrier. Common carriers are
persons, corporations, firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for hire or compensation, offering their
services to the public, whether to the public in general or to a limited clientele in particular, but
never on an exclusive basis. The true test of a common carrier is the carriage of passengers or
goods, providing space for those who opt to avail themselves of its transportation service for a
fee. Given accepted standards, GPS scarcely falls within the term "common carrier."
2.ID.; OBLIGATIONS AND CONTRACTS; CULPA CONTRACTUAL; MERE PROOF OF THE
EXISTENCE OF THE CONTRACT AND FAILURE OF ITS COMPLIANCE JUSTIFY, PRIMA
FACIE, A CORRESPONDING RIGHT OF RELIEF; CASE AT BAR. In culpa contractual,
upon which the action of petitioner rests as being the subrogee of Concepcion Industries, Inc.,
the mere proof of the existence of the contract and the failure of its compliance justify, prima
facie, a corresponding right of relief. The law, recognizing the obligatory force of contracts, will
not permit a party to be set free from liability for any kind of misperformance of the contractual
undertaking or a contravention of the tenor thereof. A breach upon the contract confers upon the
injured party a valid cause for recovering that which may have been lost or suffered. The
remedy serves to preserve the interests of the promisee that may include his "expectation
interest," which is his interest in having the benefit of his bargain by being put in as good a
position as he would have been in had the contract been performed, or his "reliance interest,"
which is his interest in being reimbursed for loss caused by reliance on the contract by being put
in as good a position as he would have been in had the contract not been made; or his
"restitution interest," which is his interest in having restored to him any benefit that he has
conferred on the other party. Indeed, agreements can accomplish little, either for their makers or
for society, unless they are made the basis for action. The effect of every infraction is to create a
new duty, that is, to make recompense to the one who has been injured by the failure of another
to observe his contractual obligation unless he can show extenuating circumstances, like proof
of his exercise of due diligence (normally that of the diligence of a good father of a family or,
exceptionally by stipulation or by law such as in the case of common carriers, that of
extraordinary diligence) or of the attendance of fortuitous event, to excuse him from his ensuing
liability. Respondent trucking corporation recognizes the existence of a contract of carriage
between it and petitioner's assured, and admits that the cargoes it has assumed to deliver have
been lost or damaged while in its custody. In such a situation, a default on, or failure of
compliance with, the obligation in this case, the delivery of the goods in its custody to the
place of destination gives rise to a presumption of lack of care and corresponding liability on
the part of the contractual obligor the burden being on him to establish otherwise. GPS has
failed to do so.
3.ID.; ID.; ID.; ID.; CONTRACT CAN BIND ONLY THE PARTIES WHO HAVE ENTERED INTO
IT; CASE AT BAR. Respondent driver, on the other hand, without concrete proof of his
negligence or fault, may not himself be ordered to pay petitioner. The driver, not being a party to
the contract of carriage between petitioner's principal and defendant, may not be held liable
under the agreement. A contract can only bind the parties who have entered into it or their
successors who have assumed their personality or their juridical position. Consonantly with the
axiom res inter alios acta aliis neque nocet prodest, such contract can neither favor nor
prejudice a third person. Petitioner's civil action against the driver can only be based on culpa
aquiliana, which, unlike culpa contractual, would require the claimant for damages to prove
negligence or fault on the part of the defendant.
4.ID.; ID.; RESIPSA LOQUITOR; RELIEVES THE PLAINTIFF OF THE BURDEN OF
PRODUCING SPECIFIC PROOF OF NEGLIGENCE; CASE AT BAR. Res ipsa loquitur, a
doctrine being invoked by petitioner, holds a defendant liable where the thing which caused the
injury complained of is shown to be under the latter's management and the accident is such
that, in the ordinary course of things, cannot be expected to happen if those who have its
management or control use proper care. It affords reasonable evidence, in the absence of
explanation by the defendant, that the accident arose from want of care. It is not a rule of
substantive law and, as such, it does not create an independent ground of liability. Instead, it is
regarded as a mode of proof, or a mere procedural convenience since it furnishes a substitute
for, and relieves the plaintiff of, the burden of producing specific proof of negligence. The maxim
simply places on the defendant the burden of going forward with the proof. Resort to the
doctrine, however, may be allowed only when (a) the event is of a kind which does not ordinarily
occur in the absence of negligence; (b) other responsible causes, including the conduct of the
plaintiff and third persons, are sufficiently eliminated by the evidence; and (c) the indicated
negligence is within the scope of the defendant's duty to the plaintiff. Thus, it is not applicable
when an unexplained accident may be attributable to one of several causes, for some of which
the defendant could not be responsible. Res ipsa loquitur generally finds relevance whether or
not a contractual relationship exists between the plaintiff and the defendant, for the inference of
negligence arises from the circumstances and nature of the occurrence and not from the nature
of the relation of the parties. Nevertheless, the requirement that responsible causes other than
those due to defendant's conduct must first be eliminated, for the doctrine to apply, should be
understood as being confined only to cases of pure (non-contractual) tort since obviously the
presumption of negligence in culpa contractual, as previously so pointed out, immediately
attaches by a failure of the covenant or its tenor. In the case of the truck driver, whose liability in
a civil action is predicated on culpa acquiliana, while he admittedly can be said to have been in
control and management of the vehicle which figured in the accident, it is not equally shown,
however, that the accident could have been exclusively due to his negligence, a matter that can
allow, forthwith, res ipsa loquitur to work against him. TcSaHC
D E C I S I O N
VITUG, J p:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30)
units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert
Eroles, from the plant site of Concepcion Industries, Inc., along South Superhighway in
Alabang, Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck was
traversing the north diversion road along McArthur highway in Barangay Anupol, Bamban,
Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal, resulting in
damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries,
Inc., the value of the covered cargoes in the sum of P204,450.00. FGU, in turn, being the
subrogee of the rights and interests of Concepcion Industries, Inc., sought reimbursement of the
amount it had paid to the latter from GPS. Since the trucking company failed to heed the claim,
FGU filed a complaint for damages and breach of contract of carriage against GPS and its
driver Lambert Eroles with the a Regional Trial Court, Branch 66, of Makati City. In its answer,
respondents asserted that GPS was the exclusive hauler only of Concepcion Industries, Inc.,
since 1988, and it was not so engaged in business as a common carrier. Respondents further
claimed that the cause of damage was purely accidental.

The issues having thus been joined, FGU presented its evidence, establishing the extent of
damage to the cargoes and the amount it had paid to the assured. GPS, instead of submitting
its evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to
evidence on the ground that petitioner had failed to prove that it was a common carrier.
The trial court, in its order of 30 April 1996, 1 granted the motion to dismiss, explaining thusly:
"Under Section 1 of Rule 131 of the Rules of Court, it is provided that 'Each
party must prove his own affirmative allegation, . . . '
"In the instant case, plaintiff did not present any single evidence that would
prove that defendant is a common carrier.
"xxx xxx xxx
"Accordingly, the application of the law on common carriers is not warranted
and the presumption of fault or negligence on the part of a common carrier in
case of loss, damage or deterioration of goods during transport under 1735 of
the Civil Code is not availing.
"Thus, the laws governing the contract between the owner of the cargo to
whom the plaintiff was subrogated and the owner of the vehicle which
transports the cargo are the laws on obligation and contract of the Civil Code
as well as the law on quasi delicts.
"Under the law on obligation and contract, negligence or fault is not presumed.
The law on quasi delict provides for some presumption of negligence but only
upon the attendance of some circumstances. Thus, Article 2185 provides:
'Art. 2185.Unless there is proof to the contrary, it is presumed that a
person driving a motor vehicle has been negligent if at the time of the
mishap, he was violating any traffic regulation.'
"Evidence for the plaintiff shows no proof that defendant was violating any
traffic regulation. Hence, the presumption of negligence is not obtaining.
"Considering that plaintiff failed to adduce evidence that defendant is a
common carrier and defendant's driver was the one negligent, defendant
cannot be made liable for the damages of the subject cargoes." 2
The subsequent motion for reconsideration having been denied, 3 plaintiff interposed an appeal
to the Court of Appeals, contending that the trial court had erred (a) in holding that the appellee
corporation was not a common carrier defined under the law and existing jurisprudence; and (b)
in dismissing the complaint on a demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate
court, in its decision of 10 June 1999, 4 discoursed, among other things, that
". . . in order for the presumption of negligence provided for under the law
governing common carrier (Article 1735, Civil Code) to arise, the appellant
must first prove that the appellee is a common carrier. Should the appellant fail
to prove that the appellee is a common carrier, the presumption would not
arise; consequently, the appellant would have to prove that the carrier was
negligent.
"xxx xxx xxx
"Because it is the appellant who insists that the appellees can still be
considered as a common carrier, despite its 'limited clientele', (assuming it was
really a common carrier), it follows that it (appellant) has the burden of proving
the same. It (plaintiff-appellant) 'must establish his case by a preponderance of
evidence, which means that the evidence as a whole adduced by one side is
superior to that of the other.' (Summa Insurance Corporation vs. Court of
Appeals, 243 SCRA 175). This, unfortunately, the appellant failed to do
hence, the dismissal of the plaintiffs complaint by the trial court is justified.
"xxx xxx xxx
"Based on the foregoing disquisitions and considering the circumstances that
the appellee trucking corporation has been 'its exclusive contractor, hauler
since 1970, defendant has no choice but to comply with the directive of its
principal,' the inevitable conclusion is that the appellee is a private carrier.
"xxx xxx xxx
". . . the lower court correctly ruled that 'the application of the law on common
carriers is not warranted and the presumption of fault or negligence on the part
of a common carrier in case of loss, damage or deterioration of good[s] during
transport under [article] 1735 of the Civil Code is not availing.' . . .
"Finally, We advert to the long established rule that conclusions and findings of
fact of a trial court are entitled to great weight on appeal and should not be
disturbed unless for strong and valid reasons." 5
Petitioner's motion for reconsideration was likewise denied; 6 hence, the instant petition, 7
raising the following issues:
I
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON
CARRIER AS DEFINED UNDER THE LAW AND EXISTING
JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A
PRIVATE CARRIER, MAY BE PRESUMED TO HAVE BEEN NEGLIGENT
WHEN THE GOODS IT UNDERTOOK TO TRANSPORT SAFELY WERE
SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE CUSTODY AND
POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN
THE INSTANT CASE.
On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be
amply justified. GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc.,
rendering or offering its services to no other individual or entity, cannot be considered a
common carrier. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air, for
hire or compensation, offering their services to the public, 8 whether to the public in general or
to a limited clientele in particular, but never on an exclusive basis. 9 The true test of a common
carrier is the carriage of passengers or goods, providing space for those who opt to avail
themselves of its transportation service for a fee. 10 Given accepted standards, GPS scarcely
falls within the term "common carrier."
The above conclusion notwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief. 11 The law, recognizing the
obligatory force of contracts, 12 will not permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a contravention of the tenor thereof. 13 A
breach upon the contract confers upon the injured party a valid cause for recovering that which
may have been lost or suffered. The remedy serves to preserve the interests of the promisee
that may include his "expectation interest," which is his interest in having the benefit of his
bargain by being put in as good a position as he would have been in had the contract been
performed, or his "reliance interest," which is his interest in being reimbursed for loss caused by
reliance on the contract by being put in as good a position as he would have been in had the
contract not been made; or his "restitution interest," which is his interest in having restored to
him any benefit that he has conferred on the other party. 14 Indeed, agreements can
accomplish little, either for their makers or for society, unless they are made the basis for action.
15 The effect of every infraction is to create a new duty, that is, to make recompense to the one
who has been injured by the failure of another to observe his contractual obligation 16 unless he
can show extenuating circumstances, like proof of his exercise of due diligence (normally that of
the diligence of a good father of a family or, exceptionally by stipulation or by law such as in the
case of common carriers, that of extraordinary diligence) or of the attendance of fortuitous
event, to excuse him from his ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of carriage between it
and petitioner's assured, and admits that the cargoes it has assumed to deliver have been lost
or damaged while in its custody. In such a situation, a default on, or failure of compliance with,
the obligation in this case, the delivery of the goods in its custody to the place of destination
gives rise to a presumption of lack of care and corresponding liability on the part of the
contractual obligor the burden being on him to establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not
himself be ordered to pay petitioner. The driver, not being a party to the contract of carriage
between petitioner's principal and defendant, may not be held liable under the agreement. A
contract can only bind the parties who have entered into it or their successors who have
assumed their personality or their juridical position. 17 Consonantly with the axiom res inter
alios acta aliis neque nocet prodest, such contract can neither favor nor prejudice a third
person. Petitioner's civil action against the driver can only be based on culpa aquiliana, which,
unlike culpa contractual, would require the claimant for damages to prove negligence or fault on
the part of the defendant. 18
A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant
liable where the thing which caused the injury complained of is shown to be under the latter's
management and the accident is such that, in the ordinary course of things, cannot be expected
to happen if those who have its management or control use proper care. It affords reasonable
evidence, in the absence of explanation by the defendant, that the accident arose from want of
care. 19 It is not a rule of substantive law and, as such, it does not create an independent
ground of liability. Instead, it is regarded as a mode of proof, or a mere procedural convenience
since it furnishes a substitute for, and relieves the plaintiff of, the burden of producing specific
proof of negligence. The maxim simply places on the defendant the burden of going forward
with the proof. 20 Resort to the doctrine, however, may be allowed only when (a) the event is of
a kind which does not ordinarily occur in the absence of negligence; (b) other responsible
causes, including the conduct of the plaintiff and third persons, are sufficiently eliminated by the
evidence; and (c) the indicated negligence is within the scope of the defendant's duty to the
plaintiff. 21 Thus, it is not applicable when an unexplained accident may be attributable to one of
several causes, for some of which the defendant could not be responsible. 22

Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists
between the plaintiff and the defendant, for the inference of negligence arises from the
circumstances and nature of the occurrence and not from the nature of the relation of the
parties. 23 Nevertheless, the requirement that responsible causes other than those due to
defendant's conduct must first be eliminated, for the doctrine to apply, should be understood as
being confined only to cases of pure (non-contractual) tort since obviously the presumption of
negligence in culpa contractual, as previously so pointed out, immediately attaches by a failure
of the covenant or its tenor. In the case of the truck driver, whose liability in a civil action is
predicated on culpa acquiliana, while he admittedly can be said to have been in control and
management of the vehicle which figured in the accident, it is not equally shown, however, that
the accident could have been exclusively due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the
movant shall be deemed to have waived the right to present evidence. 24 Thus, respondent
corporation may no longer offer proof to establish that it has exercised due care in transporting
the cargoes of the assured so as to still warrant a remand of the case to the trial court.
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati
City, and the decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED only insofar
as respondent Lambert M. Eroles is concerned, but said assailed order of the trial court and
decision of the appellate court are REVERSED as regards G.P. Sarmiento Trucking Corporation
which, instead, is hereby ordered to pay FGU Insurance Corporation the value of the damaged
and lost cargoes in the amount of P204,450.00. No costs.




[G.R. No. 138334. August 25, 2003.]
ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT OF APPEALS and
CARAVAN TRAVEL & TOURS INTERNATIONAL, INC., respondents.
SYNOPSIS
Petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and
Tours International, Inc. to facilitate her tour known as "Jewels of Europe." On June 12, 1991,
Meriam Menor, respondent's ticketing manager as well as petitioner's niece, delivered
petitioner's travel documents and plane tickets and informed her to be at the airport on June 15,
1991, two hours before departure. On the stated date when the petitioner went to the airport, the
flight that she was supposed to take had departed the previous day. She complained to Menor,
but the latter prevailed upon her to take another tour known as "British Pageant." Upon
petitioner's return from Europe, she demanded from respondent the reimbursement of
P61,421.70 representing the difference between the sum she paid for "Jewels of Europe" and
the amount she owed respondent for the "British Pageant" tour, but despite several demands,
respondent company refused to reimburse the amount, contending that the same was non-
refundable. Thus, she filed a complaint against respondent for breach of contract of carriage
and damages. In its answer, respondent denied the responsibility and insisted that petitioner
was duly informed of the correct departure as legibly printed on the plane ticket two days ahead
of the scheduled trip. After trial, the lower court awarded damages to the petitioner on the basis
that the respondent was negligent, but it deducted 10% from the amount for the contributory
negligence of petitioner. On appeal, the Court of Appeals found petitioner to be more negligent,
hence, it directed her to pay the balance of the price for the "British Pageant." Hence, this
petition.
The Court did not agree with the finding of the lower court that Menor's negligence concurred
with the negligence of petitioner and resultantly caused damage to the latter. Menor's
negligence was not sufficiently proved, considering that the only evidence presented was
petitioner's uncorroborated narration of the events. It is well-settled that the party alleging a fact
has the burden of proving it and a mere allegation cannot take the place of evidence. If the
plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a
satisfactory manner facts upon which he bases his claim, the defendant is under no obligation to
prove his exception or defense. Contrary to petitioner's claim, the evidence on record showed
that respondent exercised due diligence in performing its obligation under the contract and
followed standard procedure in rendering its services to petitioner. Accordingly, petitioner was
ordered to pay respondent the amount of P12,901.00 representing the balance of the price of
the British Pageant Package tour.
SYLLABUS
1.CIVIL LAW; LEASE; COMMON CARRIERS; CONTRACT OF CARRIAGE; ELUCIDATED.
By definition, a contract of carriage or transportation is one whereby a certain person or
association of persons obligate themselves to transport persons, things, or news from one place
to another for a fixed price. Such person or association of persons are regarded as carriers and
are classified as private or special carriers and common or public carriers. A common carrier is
defined under Article 1732 of the Civil Code as persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water
or air, for compensation, offering their services to the public.
2.ID.; ID.; ID.; TRAVEL AGENCY IS NOT A COMMON CARRIER. It is obvious from the
above definition that respondent is not an entity engaged in the business of transporting either
passengers or goods and is therefore, neither a private nor a common carrier. Respondent did
not undertake to transport petitioner from one place to another since its covenant with its
customers is simply to make travel arrangements in their behalf. Respondent's services as a
travel agency include procuring tickets and facilitating travel permits or visas as well as booking
customers for tours. While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a common carrier. At most,
respondent acted merely as an agent of the airline, with whom petitioner ultimately contracted
for her carriage to Europe.
3.ID.; OBLIGATIONS AND CONTRACTS; CONTRACT BETWEEN THE TRAVEL AGENCY
AND ITS CLIENT IS ONE FOR SERVICES AND NOT ONE OF CARRIAGE. Respondent's
obligation to petitioner in this regard was simply to see to it that petitioner was properly booked
with the airline for the appointed date and time. Her transport to the place of destination,
meanwhile, pertained directly to the airline. The object of petitioner's contractual relation with
respondent is the latter's service of arranging and facilitating petitioner's booking, ticketing and
accommodation in the package tour. In contrast, the object of a contract of carriage is the
transportation of passengers or goods. It is in this sense that the contract between the parties in
this case was an ordinary one for services and not one of carriage. Petitioner's submission is
premised on a wrong assumption.
4.ID.; ID.; TRAVEL AGENCY IS NOT BOUND TO OBSERVE EXTRAORDINARY DILIGENCE
IN THE PERFORMANCE OF ITS OBLIGATION. The nature of the contractual relation
between petitioner and respondent is determinative of the degree of care required in the
performance of the latter's obligation under the contract. For reasons of public policy, a common
carrier in a contract of carriage is bound by law to carry passengers as far as human care and
foresight can provide using the utmost diligence of very cautious persons and with due regard
for all the circumstances. As earlier stated, however, respondent is not a common carrier but a
travel agency. It is thus not bound under the law to observe extraordinary diligence in the
performance of its obligation, as petitioner claims.
5.ID.; ID.; STANDARD OF CARE REQUIRED FOR THE TRAVEL AGENCY IS THAT OF A
GOOD FATHER OF A FAMILY. Since the contract between the parties is an ordinary one for
services, the standard of care required of respondent is that of a good father of a family under
Article 1173 of the Civil Code. This connotes reasonable care consistent with that which an
ordinarily prudent person would have observed when confronted with a similar situation. The
test to determine whether negligence attended the performance of an obligation is: did the
defendant in doing the alleged negligent act use that reasonable care and caution which an
ordinarily prudent person would have used in the same situation? If not, then he is guilty of
negligence.
6.REMEDIAL LAW; EVIDENCE; PRESUMPTIONS; EVIDENCE WILLFULLY SUPPRESSED
WOULD BE ADVERSE IF PRODUCED; EXCEPTIONS. Respondent's failure to present
Menor as witness to rebut petitioner's testimony could not give rise to an inference unfavorable
to the former. Menor was already working in France at the time of the filing of the complaint,
thereby making it physically impossible for respondent to present her as a witness. Then too,
even if it were possible for respondent to secure Menor's testimony, the presumption under Rule
131, Section 3(e) would still not apply. The opportunity and possibility for obtaining Menor's
testimony belonged to both parties, considering that Menor was not just respondent's employee,
but also petitioner's niece. It was thus error for the lower court to invoke the presumption that
respondent willfully suppressed evidence under Rule 131, Section 3(e). Said presumption would
logically be inoperative if the evidence is not intentionally omitted but is simply unavailable, or
when the same could have been obtained by both parties.
7.ID.; ID.; WEIGHT AND SUFFICIENCY; MERE ALLEGATION CANNOT TAKE THE PLACE
OF EVIDENCE. In sum, we do not agree with the finding of the lower court that Menor's
negligence concurred with the negligence of petitioner and resultantly caused damage to the
latter. Menor's negligence was not sufficiently proved, considering that the only evidence
presented on this score was petitioner's uncorroborated narration of the events. It is well-settled
that the party alleging a fact has the burden of proving it and a mere allegation cannot take the
place of evidence. If the plaintiff, upon whom rests the burden of proving his cause of action,
fails to show in a satisfactory manner facts upon which he bases his claim, the defendant is
under no obligation to prove his exception or defense.
8.CIVIL LAW; OBLIGATIONS AND CONTRACTS; TRAVEL AGENCY EXERCISED DUE
DILIGENCE IN PERFORMING ITS OBLIGATIONS UNDER THE CONTRACT; CASE AT BAR.
Contrary to petitioner's claim the evidence on record shows that respondent exercised due
diligence in performing its obligations under the contract and followed standard procedure in
rendering its services to petitioner. As correctly observed by the lower court, the plane ticket
issued to petitioner clearly reflected the departure date and time, contrary to petitioner's
contention. The travel documents, consisting of the tour itinerary, vouchers and instructions,
were likewise delivered to petitioner two days prior to the trip. Respondent also properly booked
petitioner for the tour, prepared the necessary documents and procured the plane tickets. It
arranged petitioner's hotel accommodation as well as food, land transfers and sightseeing
excursions, in accordance with its avowed undertaking. Therefore, it is clear that respondent
performed its prestation under the contract as well as everything else that was essential to book
petitioner for the tour. Had petitioner exercised due diligence in the conduct of her affairs, there
would have been no reason for her to miss the flight. Needless to say, after the travel papers
were delivered to petitioner, it became incumbent upon her to take ordinary care of her
concerns. This undoubtedly would require that she at least read the documents in order to
assure herself of the important details regarding the trip.

9.ID.; ID.; NEGLIGENCE OF THE OBLIGOR IN THE PERFORMANCE OF THE OBLIGATION
RENDERS HIM LIABLE FOR DAMAGES FOR THE RESULTING LOSS SUFFERED BY THE
OBLIGEE. The negligence of the obligor in the performance of the obligation renders him
liable for damages for the resulting loss suffered by the obligee. Fault or negligence of the
obligor consists in his failure to exercise due care and prudence in the performance of the
obligation as the nature of the obligation so demands. There is no fixed standard of diligence
applicable to each and every contractual obligation and each case must be determined upon its
particular facts. The degree of diligence required depends on the circumstances of the specific
obligation and whether one has been negligent is a question of fact that is to be determined
after taking into account the particulars of each case.
10.REMEDIAL LAW; EVIDENCE; CREDIBILITY OF WITNESSES; FACTUAL FINDINGS OF
THE TRIAL COURT ARE GENERALLY CONCLUSIVE UPON THE SUPREME COURT;
EXCEPTIONS. The lower court declared that respondent's employee was negligent. This
factual finding, however, is not supported by the evidence on record. While factual findings
below are generally conclusive upon this court, the rule is subject to certain exceptions, as when
the trial court overlooked, misunderstood, or misapplied some facts or circumstances of weight
and substance which will affect the result of the case.
D E C I S I O N
YNARES-SANTIAGO, J p:
In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan
Travel and Tours International, Inc. to arrange and facilitate her booking, ticketing and
accommodation in a tour dubbed "Jewels of Europe." The package tour included the countries
of England, Holland, Germany, Austria, Liechtenstein, Switzerland and France at a total cost of
P74,322.70. Petitioner was given a 5% discount on the amount, which included airfare, and the
booking fee was also waived because petitioner's niece, Meriam Menor, was respondent
company's ticketing manager.
Pursuant to said contract, Menor went to her aunt's residence on June 12, 1991 a
Wednesday to deliver petitioner's travel documents and plane tickets. Petitioner, in turn, gave
Menor the full payment for the package tour. Menor then told her to be at the Ninoy Aquino
International Airport (NAIA) on Saturday, two hours before her flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to
take the flight for the first leg of her journey from Manila to Hongkong. To petitioner's dismay,
she discovered that the flight she was supposed to take had already departed the previous day.
She learned that her plane ticket was for the flight scheduled on June 14, 1991. She thus called
up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the "British Pageant"
which included England, Scotland and Wales in its itinerary. For this tour package, petitioner
was asked anew to pay US$785.00 or P20,881.00 (at the then prevailing exchange rate of
P26.60). She gave respondent US$300 or P7,980.00 as partial payment and commenced the
trip in July 1991.
Upon petitioner's return from Europe, she demanded from respondent the reimbursement of
P61,421.70, representing the difference between the sum she paid for "Jewels of Europe" and
the amount she owed respondent for the "British Pageant" tour. Despite several demands,
respondent company refused to reimburse the amount, contending that the same was non-
refundable. 1 Petitioner was thus constrained to file a complaint against respondent for breach
of contract of carriage and damages, which was docketed as Civil Case No. 92-133 and raffled
to Branch 59 of the Regional Trial Court of Makati City.
In her complaint, 2 petitioner alleged that her failure to join "Jewels of Europe" was due to
respondent's fault since it did not clearly indicate the departure date on the plane ticket.
Respondent was also negligent in informing her of the wrong flight schedule through its
employee Menor. She insisted that the "British Pageant" was merely a substitute for the "Jewels
of Europe" tour, such that the cost of the former should be properly set-off against the sum paid
for the latter.
For its part, respondent company, through its Operations Manager, Concepcion Chipeco,
denied responsibility for petitioner's failure to join the first tour. Chipeco insisted that petitioner
was informed of the correct departure date, which was clearly and legibly printed on the plane
ticket. The travel documents were given to petitioner two days ahead of the scheduled trip.
Petitioner had only herself to blame for missing the flight, as she did not bother to read or
confirm her flight schedule as printed on the ticket.
Respondent explained that it can no longer reimburse the amount paid for "Jewels of Europe,"
considering that the same had already been remitted to its principal in Singapore, Lotus Travel
Ltd., which had already billed the same even if petitioner did not join the tour. Lotus' European
tour organizer, Insight International Tours Ltd., determines the cost of a package tour based on
a minimum number of projected participants. For this reason, it is accepted industry practice to
disallow refund for individuals who failed to take a booked tour. 3
Lastly, respondent maintained that the "British Pageant" was not a substitute for the package
tour that petitioner missed. This tour was independently procured by petitioner after realizing
that she made a mistake in missing her flight for "Jewels of Europe." Petitioner was allowed to
make a partial payment of only US$300.00 for the second tour because her niece was then an
employee of the travel agency. Consequently, respondent prayed that petitioner be ordered to
pay the balance of P12,901.00 for the "British Pageant" package tour.
After due proceedings, the trial court rendered a decision, 4 the dispositive part of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1.Ordering the defendant to return and/or refund to the plaintiff the amount of
Fifty Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three
Centavos (P53,989.43) with legal interest thereon at the rate of twelve
percent (12%) per annum starting January 16, 1992, the date when the
complaint was filed;
2.Ordering the defendant to pay the plaintiff the amount of Five Thousand
(P5,000.00) Pesos as and for reasonable attorney's fees;
3.Dismissing the defendant's counterclaim, for lack of merit; and
4.With costs against the defendant.
SO ORDERED. 5
The trial court held that respondent was negligent in erroneously advising petitioner of her
departure date through its employee, Menor, who was not presented as witness to rebut
petitioner's testimony. However, petitioner should have verified the exact date and time of
departure by looking at her ticket and should have simply not relied on Menor's verbal
representation. The trial court thus declared that petitioner was guilty of contributory negligence
and accordingly, deducted 10% from the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties to be at fault.
However, the appellate court held that petitioner is more negligent than respondent because as
a lawyer and well-traveled person, she should have known better than to simply rely on what
was told to her. This being so, she is not entitled to any form of damages. Petitioner also
forfeited her right to the "Jewels of Europe" tour and must therefore pay respondent the balance
of the price for the "British Pageant" tour. The dispositive portion of the judgment appealed from
reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court
dated October 26, 1995 is hereby REVERSED and SET ASIDE. A new
judgment is hereby ENTERED requiring the plaintiff-appellee to pay to the
defendant-appellant the amount of P12,901.00, representing the balance of the
price of the British Pageant Package Tour, the same to earn legal interest at
the rate of SIX PERCENT (6%) per annum, to be computed from the time the
counterclaim was filed until the finality of this decision. After this decision
becomes final and executory, the rate of TWELVE PERCENT (12%) interest
per annum shall be additionally imposed on the total obligation until payment
thereof is satisfied. The award of attorney's fees is DELETED. Costs against
the plaintiff-appellee.
SO ORDERED. 6
Upon denial of her motion for reconsideration, 7 petitioner filed the instant petition under Rule
45 on the following grounds:
I
It is respectfully submitted that the Honorable Court of Appeals committed a
reversible error in reversing and setting aside the decision of the trial court by
ruling that the petitioner is not entitled to a refund of the cost of unavailed
"Jewels of Europe" tour she being equally, if not more, negligent than the
private respondent, for in the contract of carriage the common carrier is obliged
to observe utmost care and extra-ordinary diligence which is higher in degree
than the ordinary diligence required of the passenger. Thus, even if the
petitioner and private respondent were both negligent, the petitioner cannot be
considered to be equally, or worse, more guilty than the private respondent. At
best, petitioner's negligence is only contributory while the private respondent [is
guilty] of gross negligence making the principle of pari delicto inapplicable in
the case;
II
The Honorable Court of Appeals also erred in not ruling that the "Jewels of
Europe" tour was not indivisible and the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the petitioner the consequential
damages due her as a result of breach of contract of carriage. 8
Petitioner contends that respondent did not observe the standard of care required of a common
carrier when it informed her wrongly of the flight schedule. She could not be deemed more
negligent than respondent since the latter is required by law to exercise extraordinary diligence
in the fulfillment of its obligation. If she were negligent at all, the same is merely contributory and
not the proximate cause of the damage she suffered. Her loss could only be attributed to
respondent as it was the direct consequence of its employee's gross negligence.

Petitioner's contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain person or
association of persons obligate themselves to transport persons, things, or news from one place
to another for a fixed price. 9 Such person or association of persons are regarded as carriers
and are classified as private or special carriers and common or public carriers. 10 A common
carrier is defined under Article 1732 of the Civil Code as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both,
by land, water or air, for compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an entity engaged in the business
of transporting either passengers or goods and is therefore, neither a private nor a common
carrier. Respondent did not undertake to transport petitioner from one place to another since its
covenant with its customers is simply to make travel arrangements in their behalf. Respondent's
services as a travel agency include procuring tickets and facilitating travel permits or visas as
well as booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts of respondent company,
this does not mean that the latter ipso facto is a common carrier. At most, respondent acted
merely as an agent of the airline, with whom petitioner ultimately contracted for her carriage to
Europe. Respondent's obligation to petitioner in this regard was simply to see to it that petitioner
was properly booked with the airline for the appointed date and time. Her transport to the place
of destination, meanwhile, pertained directly to the airline.
The object of petitioner's contractual relation with respondent is the latter's service of arranging
and facilitating petitioner's booking, ticketing and accommodation in the package tour. In
contrast, the object of a contract of carriage is the transportation of passengers or goods. It is in
this sense that the contract between the parties in this case was an ordinary one for services
and not one of carriage. Petitioner's submission is premised on a wrong assumption.
The nature of the contractual relation between petitioner and respondent is determinative of the
degree of care required in the performance of the latter's obligation under the contract. For
reasons of public policy, a common carrier in a contract of carriage is bound by law to carry
passengers as far as human care and foresight can provide using the utmost diligence of very
cautious persons and with due regard for all the circumstances. 11 As earlier stated, however,
respondent is not a common carrier but a travel agency. It is thus not bound under the law to
observe extraordinary diligence in the performance of its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the standard of care
required of respondent is that of a good father of a family under Article 1173 of the Civil Code.
12 This connotes reasonable care consistent with that which an ordinarily prudent person would
have observed when confronted with a similar situation. The test to determine whether
negligence attended the performance of an obligation is: did the defendant in doing the alleged
negligent act use that reasonable care and caution which an ordinarily prudent person would
have used in the same situation? If not, then he is guilty of negligence. 13
In the case at bar, the lower court found Menor negligent when she allegedly informed petitioner
of the wrong day of departure. Petitioner's testimony was accepted as indubitable evidence of
Menor's alleged negligent act since respondent did not call Menor to the witness stand to refute
the allegation. The lower court applied the presumption under Rule 131, Section 3 (e) 14 of the
Rules of Court that evidence willfully suppressed would be adverse if produced and thus
considered petitioner's uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was negligent and maintains
that petitioner's assertion is belied by the evidence on record. The date and time of departure
was legibly written on the plane ticket and the travel papers were delivered two days in advance
precisely so that petitioner could prepare for the trip. It performed all its obligations to enable
petitioner to join the tour and exercised due diligence in its dealings with the latter.
We agree with respondent.
Respondent's failure to present Menor as witness to rebut petitioner's testimony could not give
rise to an inference unfavorable to the former. Menor was already working in France at the time
of the filing of the complaint, 15 thereby making it physically impossible for respondent to
present her as a witness. Then too, even if it were possible for respondent to secure Menor's
testimony, the presumption under Rule 131, Section 3(e) would still not apply. The opportunity
and possibility for obtaining Menor's testimony belonged to both parties, considering that Menor
was not just respondent's employee, but also petitioner's niece. It was thus error for the lower
court to invoke the presumption that respondent willfully suppressed evidence under Rule 131,
Section 3(e). Said presumption would logically be inoperative if the evidence is not intentionally
omitted but is simply unavailable, or when the same could have been obtained by both parties.
16
In sum, we do not agree with the finding of the lower court that Menor's negligence concurred
with the negligence of petitioner and resultantly caused damage to the latter. Menor's
negligence was not sufficiently proved, considering that the only evidence presented on this
score was petitioner's uncorroborated narration of the events. It is well-settled that the party
alleging a fact has the burden of proving it and a mere allegation cannot take the place of
evidence. 17 If the plaintiff, upon whom rests the burden of proving his cause of action, fails to
show in a satisfactory manner facts upon which he bases his claim, the defendant is under no
obligation to prove his exception or defense. 18
Contrary to petitioner's claim, the evidence on record shows that respondent exercised due
diligence in performing its obligations under the contract and followed standard procedure in
rendering its services to petitioner. As correctly observed by the lower court, the plane ticket 19
issued to petitioner clearly reflected the departure date and time, contrary to petitioner's
contention. The travel documents, consisting of the tour itinerary, vouchers and instructions,
were likewise delivered to petitioner two days prior to the trip. Respondent also properly booked
petitioner for the tour, prepared the necessary documents and procured the plane tickets. It
arranged petitioner's hotel accommodation as well as food, land transfers and sightseeing
excursions, in accordance with its avowed undertaking.
Therefore, it is clear that respondent performed its prestation under the contract as well as
everything else that was essential to book petitioner for the tour. Had petitioner exercised due
diligence in the conduct of her affairs, there would have been no reason for her to miss the
flight. Needless to say, after the travel papers were delivered to petitioner, it became incumbent
upon her to take ordinary care of her concerns. This undoubtedly would require that she at least
read the documents in order to assure herself of the important details regarding the trip.
The negligence of the obligor in the performance of the obligation renders him liable for
damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor
consists in his failure to exercise due care and prudence in the performance of the obligation as
the nature of the obligation so demands. 20 There is no fixed standard of diligence applicable to
each and every contractual obligation and each case must be determined upon its particular
facts. The degree of diligence required depends on the circumstances of the specific obligation
and whether one has been negligent is a question of fact that is to be determined after taking
into account the particulars of each case. 21
The lower court declared that respondent's employee was negligent. This factual finding,
however, is not supported by the evidence on record. While factual findings below are generally
conclusive upon this court, the rule is subject to certain exceptions, as when the trial court
overlooked, misunderstood, or misapplied some facts or circumstances of weight and substance
which will affect the result of the case. 22
In the case at bar, the evidence on record shows that respondent company performed its duty
diligently and did not commit any contractual breach. Hence, petitioner cannot recover and must
bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of
Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner is ordered to pay
respondent the amount of P12,901.00 representing the balance of the price of the British
Pageant Package Tour, with legal interest thereon at the rate of 6% per annum, to be computed
from the time the counterclaim was filed until the finality of this Decision. After this Decision
becomes final and executory, the rate of 12% per annum shall be imposed until the obligation is
fully settled, this interim period being deemed to be by then an equivalent to a forbearance of
credit. 23






[G.R. No. L-9605. September 30, 1957.]
GAUDIOSO EREZO, ET AL., plaintiffs. GAUDIOSO EREZO, plaintiff-
appellee, vs. AGUEDO JEPTE, defendant-appellant.
1.DAMAGES; MOTOR VEHICLES; PUBLIC SERVICE LAW; REGISTERED OWNER AS
ACTUAL OWNER. In the dealing with vehicles registered under the Public Service Law,
the public has the right to assume or presume that the registered owner is the actual owner
thereof, for it would be difficult for the Public to enforce the actions that they may have foe
injuries caused to them by the vehicles being negligently operated if the public should be
required to prove who the actual owner is.
2.ID.; ID.; REGISTERED OWNER PRIMARILY RESPONSIBLE FOR INJURIES.
The registered owner of any vehicle, even if not used for a public service, should primarily
be responsible to the public or to third persons for injuries caused the latter while the vehicle
is being driven on the highways or streets.
3.ID.; MOTOR VEHICLES OFFICE; REGISTRATION REQUIRED AS PERMISSION
TO USE PUBLIC HIGHWAY. Registration is required not to make said registration the
operative act by which ownership in vehicles is transferred as in land registration cases,
because the administrative proceeding of registration does not bear any essential relation to
the contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer 39 Phil. 886),
but to permit the use and operation of the vehicle upon any public highway (Section 5 (a)
Act No. 3992, as amended).
4.ID.; ID.; IS.; AIM OR PURPOSE OF MOTOR VEHICLE REGISTRATION. The
main aim of motor vehicle registration is to identify the owner so that if any accidents
happens, or that any damage or injury is caused, by the vehicle on the public highways,
responsibility therefor can be fixed on a definite individual, the registered owner.
5.ID.; ID.; EVIDENCE; REGISTERED OWNER NOT ALLOWED TO PROVE
ACTUAL OWNER OF VEHICLE; POLICY OF THE LAW. The law does not allow the
registered owner to prove who the actual owner is; the law, with its claim and policy in mind,
does not relieve him directly of the responsibility that the law fixes and places upon him as
an incident or consequence of registration. Were the registered owner allowed to evade
responsibility by proving who the supposed transferee or owner is, it would be easy for him
by collusion with others or otherwise, to escape said responsibility and transfer the same to
an indefinite person. or to one who possesses no property with which to respond financially
for the damage or injury done.
6.ID.; ID.; ID.; ID.; ID.; REGISTRATION AS MEANS TO IDENTIFY PERSON
CAUSING INJURY OR DAMAGE. A victim of recklessness on the public is usually
without means to discover or identify the person actually causing the injury or damage. He
has no means other than by a recourse to the registration in the Motor Vehicles Office to
determine who is the owner. The protection that the law aims to extend to him would
become illusory were the registered owner given the opportunity to escape the liability by
disproving his ownership. If the policy of the law is to be enforced and carried out, the
registered owner should not be allowed to prove the contrary to the prejudice of the person
injured, that is to prove that a third person or another has become the owner, so that he may
thereby be relieved of the responsibility to the injured person.
7.ID.; MOTOR VEHICLE REGISTERED OWNER AS PRIMARILY RESPONSIBLE;
RIGHT OF REIMBURSEMENT. The registered owner of a motor vehicle is primarily
responsible for the damage caused to the vehicle of the plaintiff-appellee but the registered
owner has a right to be indemnified by the real or actual owner of the amount that he may
be required to pay as damage for the injury caused to the plaintiff-appellant.
LABRADOR, J p:
Appeal from a judgment of the Court of First Instance of Manila ordering defendant to
pay plaintiff Gaudioso Erezo P3,000 on the death of Ernesto Erezo, son of plaintiff Gaudioso
Erezo.
Defendant-appellant is the registered owner of a six by six truck bearing plate No.
TC-1253. On August 9, 1949, while the same was being driven by Rodolfo Espino y Garcia,
it collided with a taxicab at the intersection of San Andres and Dakota Streets, Manila. As
the truck went off the street, it hit Ernesto Erezo and another, and the former suffered
injuries, as a result of which he died. The driver was prosecuted for homicide through
reckless negligence in criminal case No. 10663 of the Court of First Instance of Manila. The
accused pleaded guilty and was sentenced to suffer imprisonment and to pay the heirs of
Ernesto Erezo the sum of P3,000. As the amount of the judgment could not be enforced
against him, plaintiff brought this action against the registered owner of the truck, the
defendant-appellant. The circumstances material to the case are stated by the court in its
decision:
"The defendant does not deny that at the time of the fatal accident the
cargo truck driven by Rodolfo Espino y Garcia was registered in his name. He,
however, claims that the vehicle belonged to the Port Brokerage, of which he
was the broker at the time of the accident. He explained, and his explanation
was corroborated by Policarpio Franco, the manager of the corporation, that
the trucks of the corporation were registered in his name as a convenient
arrangement so as to enable the corporation to pay the registration fee with his
backpay as a pre-war government employee. Franco, however, admitted that
the arrangement was not known to the Motor Vehicles Office."
The trial court held that as the defendant-appellant represented himself to be the
owner of the truck and the Motor Vehicles Office, relying on his representation, registered
the vehicles in his name, the Government and all persons affected by the representation
had the right to rely on his declaration of ownership and registration. It, therefore, held that
defendant-appellant is liable because he cannot be permitted to repudiate his own
declaration. (Section 68 [a], Rule 123, and Art. 1431, New Civil Code.)
Against the judgment, the defendant has prosecuted this appeal claiming that at the
time of the accident the relation of employer and employee between the driver and
defendant-appellant was not established, it having been proved at the trial that the owner of
the truck was the Port Brokerage, of which defendant-appellant was merely a broker. We
find no merit or justice in the above contention. In previous decisions, We already have held
that the registered owner of a certificate of public convenience is liable to the public for the
injuries or damages suffered by passengers or third persons caused by the operation of said
vehicle, even though the same had been transferred to a third person. (Montoya vs. Ignacio,
94 Phil., 182, 50 Off. Gaz., 108; Roque vs. Malibay Transit Inc., 1 G. R. No. L-8561,
November 18, 1955; Vda. de Medina vs. Cresencia, 99 Phil., 506, 52 Off. Gaz., [10], 4606.)
The principle upon which this doctrine is based is that in dealing with vehicles registered
under the Public Service Law, the public has the right to assume or presume that the
registered owner is the actual owner thereof, for it would be difficult for the public to enforce
the actions that they may have for injuries caused to them by the vehicles being negligently
operated if the public should be required to prove who the actual owner is. How would the
public or third persons know against whom to enforce their rights in case of subsequent
transfers of the vehicles? We do not imply by this doctrine, however, that the registered
owner may not recover whatever amount he had paid by virtue of his liability to third persons
from the person to whom he had actually sold, assigned or conveyed the vehicle.
Under the same principle the registered owner of any vehicle, even if not used for a
public service, should primarily be responsible to the public or to third persons for injuries
caused the latter while the vehicle is being driven on the highways or streets. The members
of the Court are in agreement that the defendant-appellant should be held liable to plaintiff-
appellee for the injuries occasioned to the latter because of the negligence of the driver,
even if the defendant- appellant was no longer the owner of the vehicle at the time of the
damage because he had previously sold it to another. What is the legal basis for his
(defendant-appellant's) liability?
There is a presumption that the owner of the guilty vehicle is the defendant-appellant
as he is the registered owner in the Motor Vehicles Office. Should he not be allowed to
prove the truth, that he had sold it to another and thus shift the responsibility for the injury to
the real and actual owner? The defendant holds the affirmative of this proposition; the trial
court held the negative.
The Revised Motor Vehicles Law (Act No. 3992, as amended) provides that no
vehicle may be used or operated upon any public highway unless the same is properly
registered. It has been stated that the system of licensing and the requirement that each
machine must carry a registration number, conspicuously displayed, is one of the
precautions taken to reduce the danger of injury to pedestrians and other travellers from the
careless management of automobiles, and to furnish a means of ascertaining the identity of
persons violating the laws and ordinances, regulating the speed and operation of machines
upon the highways (2 R. C. L. 1176). Not only are vehicles to be registered and that no
motor vehicles are to be used or operated without being properly registered for the current
year, but that dealers in motor vehicles shall furnish the Motor Vehicles Office a report
showing the name and address of each purchaser of motor vehicle during the previous
month and the manufacturer's serial number and motor number. (Section 5 [c], Act No.
3992, as amended.)

Registration is required not to make said registration the operative act by which
ownership in vehicles is transferred, as in land registration cases, because the
administrative proceeding of registration does not bear any essential relation to the contract
of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit
the use and operation of the vehicle upon any public highway (section 5 [a], Act No. 3992,
as amended). The main aim of motor vehicle registration is to identify the owner so that if
any accident happens, or that any damage or injury is caused by the vehicle on the public
highways, responsibility therefor can be fixed on a definite individual, the registered owner.
Instances are numerous where vehicles running on public highways caused accidents or
injuries to pedestrians or other vehicles without positive identification of the owner or drivers,
or with very scant means of identification. It is to forestall these circumstances, so
inconvenient or prejudicial to the public, that the motor vehicle registration is primarily
ordained, in the interest of the determination of persons responsible for damages or injuries
caused on public highways.
"'One of the principal purposes of motor vehicles legislation is
identification of the vehicle and of the operator, in case of accident; and
another is that the knowledge that means of detection are always available
may act as a deterrent from lax observance of the law and of the rules of
conservative and safe operation. Whatever purpose there may be in these
statutes, it is subordinate at the last to the primary purpose of rendering it
certain that the violator of the law or of the rules of safety shall not escape
because of lack of means to discover him.' The purpose of the statute is
thwarted, and the displayed number becomes a 'snare and delusion,' if courts
would entertain such defenses as that put forward by appellee in this case. No
responsible person or corporation could be held liable for the most outrageous
acts of negligence, if they should be allowed to place a "middleman' between
them and the public, and escape liability by the manner in which they
recompense their servants." (King vs. Brenham Automobile Co., 145 S. W.
278, 279.)
With the above policy in mind, the question that defendant- appellant poses is:
should not the registered owner be allowed at the trial to prove who the actual and real
owner is, and in accordance with such proof escape or evade responsibility and lay the
same on the person actually owning the vehicle? We hold with the trial court that the law
does not allow him to do so; the law, with its aim and policy in mind, does not relieve him
directly of the responsibility that the law fixes and places upon him as an incident or
consequence of registration. Were a registered owner allowed to evade responsibility by
proving who the supposed transferee or owner is, it would be easy for him, by collusion with
others or otherwise, to escape said responsibility and transfer the same to an indefinite
person, or to one who possesses no property with which to respond financially for the
damage or injury done. A victim of recklessness on the public highways is usually without
means to discover or identify the person actually causing the injury or damage. He has no
means other than by a recourse to the registration in the Motor Vehicles Office to determine
who is the owner. The protection that the law aims to extend to him would become illusory
were the registered owner given the opportunity to escape liability by disproving his
ownership. If the policy of the law is to be enforced and carried out, the registered owner
should not be allowed to prove the contrary to the prejudice of the person injured, that is, to
prove that a third person or another has become the owner, so that he may thereby be
relieved of the responsibility to the injured person.
The above policy and application of the law may appear quite harsh and would seem
to conflict with truth and justice. We do not think it is so. A registered owner who has already
sold or transferred a vehicle has the recourse to a third-party complaint, in the same action
brought against him to recover for the damage or injury done, against the vendee or
transferee of the vehicle. The inconvenience of the suit is no justification for relieving him of
liability; said inconvenience is the price he pays for failure to comply with the registration that
the law demands and requires.
In synthesis, we hold that the registered owner, the defendant- appellant herein, is
primarily responsible for the damage caused to the vehicle of the plaintiff-appellee, but he
(defendant-appellant) has a right to be indemnified by the real or actual owner of the amount
that he may be required to pay as damage for the injury caused to the plaintiff-appellant.
The judgment appealed from is hereby affirmed, with costs against defendant-
appellant.



[G.R. No. L-26815. May 26, 1981.]
ADOLFO L. SANTOS, petitioner, vs. ABRAHAM SIBUG and COURT OF
APPEALS, respondents.
SYNOPSIS
The Sheriff of Manila levied on a passenger jeepney which humped private respondent,
pursuant to a judgment of the Court of First Instance of Manila, Branch XVII, on an action for
damages sentencing both the operator and driver of aforesaid vehicle to pay said respondent
jointly and severally. Petitioner filed a third party claim with the Sheriff and instituted an action
for Damages and Injunction with a prayer for Preliminary Injunction in Branch X of the same
court against private respondent, the operator, the Sheriff and later the bonding company,
alleging among others, that he was the actual owner of the jeepney and that he executed a
fictitious Deed of Sale for purposes of operating said vehicle under the operator's franchise,
known as the Kabit System. Branch X issued an order restraining the public sale thereof and
later rendered judgment affirming petitioner's ownership of said vehicle. An Order was also
issued authorizing immediate execution of the judgment. On appeal, the Court of Appeals
nullified the judgment and permanently restrained Branch X from taking cognizance of the
Branch X case.
On review by certiorari, the Supreme Court in upholding the judgment of the Court of Appeals
ruled that petitioner, as the Kabit should not be allowed to defeat the levy on his vehicle and to
avoid his responsibilities as a Kabit owner for he had led the public to believe that the vehicle
belonged to the operator.
Petition dismissed.
SYLLABUS
1.REMEDIAL LAW; JUDGMENT; LEVY ON EXECUTION; THIRD-PARTY CLAIM; SHERIFF
CANNOT BE RESTRAINED BY ANOTHER COURT OR BY ANOTHER BRANCH OF THE
SAME COURT. Under the provisions of Section 17, Rule 39, the action taken by the Sheriff
cannot be restrained by another Court or by another Branch of the same Court. The Sheriff has
the right to continue with the public sale on his own responsibility, or he can desist from
conducting the public sale unless the attaching creditor files a bond securing him against the
third-party claim.
2.ID.; ID.; ID.; ID.; POWERS OF THE SHERIFF; NATURE. The decision to proceed or not
with the public sale lies with the Sheriff. As said in Uy Paoco vs. Osmea, 9 Phil. 299, 307, "the
powers of the Sheriff involve both discretional power and personal liability." This discretional
power and personal liability have been further elucidated in Planas and Verdon vs. Madrigal &
Co., et al., 94 Phil. 734, that if the attaching creditor should furnish an adequate bond, the
Sheriff has to proceed with the public auction. When such bond is not filed, then the Sheriff shall
decide whether to proceed, or to desist from proceeding, with the public auction. If he decides to
proceed, he will incur personal liability in favor of the successful third-party claimant.
3.ID.; ID.; ID.; ID.; LIABILITY OF THE BONDING COMPANY UNDER THE BOND; EXTENT;
CASE AT BAR. There was no reason for promulgating judgment against the BONDING
COMPANY where the undertaking furnished to the Sheriff by said company did not become
effective for the reason that the jeep in question was not sold, the public sale thereof having
been restrained and the Complaint against the operator was dismissed.
4.COMMERCIAL LAW; PUBLIC SERVICE ACT; ILLEGAL PRACTICES; KABIT SYSTEM
DEFINED; CASE AT BAR. Section 20 (g) of the Public Service Act, then the applicable law,
specifically provided: ". . . it shall be unlawful for any public service or for the owner, lessee or
operator thereof, without the approval and authorization of the Commission previously had . . .
(g) to sell, alienate, mortgage, encumber or lease its property, franchise, certificates, privileges,
or rights or any part thereof." In the case at bar, SANTOS had fictitiously sold the jeepney to
VIDAD, who had become the registered owner and operator of record at the time of the
accident. It is true that VIDAD had executed a re-sale to SANTOS, but the document was not
registered. In asserting his rights of ownership to the vehicle in question, SANTOS candidly
admitted his participation in the illegal and pernicious practice in the transportation business
known as the kabit system.
5.ID.; ID.; ID.; ID.; RESPONSIBILITY OF THE REGISTERED OWNER/OPERATOR TO THE
TRAVELLING PUBLIC; CASE AT BAR. Although SANTOS, as the kabit, was the true owner
as against VIDAD, the latter, as the registered owner/operator and grantee of the franchise, is
directly and primarily responsible and liable for the damages caused to SIBUG, the injured
party, as a consequence of the negligent or careless operation of the vehicle. This ruling is
based on the principle that the operator of record is considered the operator of the vehicle in
contemplation of law as regards the public and third persons even if the vehicle involved in the
accident had been sold to another where such sale had not been approved by the then Public
Service Commission.
6.REMEDIAL LAW; JUDGMENT; LEVY ON EXECUTION; KABIT SYSTEM CANNOT DEFEAT
THE LEVY ON THE MOTOR VEHICLE; CASE AT BAR. For the same basic reason, as the
vehicle here in question was registered in Vidad's name, the levy on execution against said
vehicle should be enforced so that the judgment in the BRANCH XVII CASE may be satisfied,
notwithstanding the fact that the secret ownership of the vehicle belonged to another SANTOS,
as the kabit, should not be allowed to defeat the levy on this vehicle and to avoid his
responsibilities as a kabit owner for he had led the public to believe that the vehicle belonged to
VIDAD. This is one way of curbing the pernicious kabit system that facilitates the commission of
fraud against the travelling public.
7.ID.; ID.; ID.; REMEDIES OF THE REAL OWNER. The real owner of the motor vehicle can
go against the actual operator who was responsible for the accident, for the recovery of
whatever damages the real owner may suffer by reason of the execution. In fact, if the real
owner, as the kabit, had been impleaded as a party defendant in the action for damages, he
should be held jointly and severally liable with the operator and the driver for damages suffered
by the victim, u well as for exemplary damages.
8.ID.; COURTS; JURISDICTION; DOCTRINE ON INTERFERENCE BETWEEN COURTS OF
CONCURRENT JURISDICTION; GENERAL RULE. "It is noteworthy that, generally, the rule,
that no court has authority to interfere by injunction with the judgments or decrees of a
concurrent or coordinate jurisdiction having equal power to grant the injunctive relief, is applied
in cases, where no third-party claimant is involved, in order to prevent one court from nullifying
the judgment or process of another court of the same rank or category, a power which devolves
upon the proper appellate court." [Arabay Inc. vs. Hon. Serafin Salvador, 82 SCRA 138 (1978)]
"For this doctrine to apply, the injunction issued by one court most interfere with the judgment or
decree issued by another court of equal or coordinate jurisdiction and the relief sought by such
injunction must be one which could be granted by the court which rendered the judgment or
issued the decree." (Abiera vs. Hon. Court of Appeals, et al., 45 SCRA 314 (1972)]
9.ID.; ID.; ID.; ID.; EXCEPTION. "When the sheriff, acting beyond the bounds of his authority,
seizes a stranger's property, the writ of injunction which is issued to stop the auction sale of that
property, is not an interference with the writ of execution issued by another court because the
writ of execution was improperly implemented by the sheriff. Under the writ, he could attach the
property of the judgment debtor. He is not authorized to levy upon the property of the third party
claimant (Polaris Marketing Corp. vs. Plan, L-40666, January 22, 1976, 69 SCRA 93, 97; Manila
Herald Publishing Co., Inc. vs. Ramos, 88 Phil. 94, 102)."
10.ID.; ID.; ID.; ID.; THIRD-PARTY CLAIM; VINDICATION BY SEPARATE ACTION
AUTHORIZED UNDER THE RULES OF COURT. Under Section 17 of Rule 39 of the Rules
of Court, a third person who claims property levied upon on execution may vindicate such claim
by action. A judgment rendered in his favor declaring him to be the owner of the property
would not constitute interference with the powers or processes of the court which rendered the
judgment to enforce which the execution was levied. If that be so and it is so because the
property, being that of a stranger, is not subject to levy then an interlocutory order, such as
injunction, upon a claim and prima facie showing of ownership by the claimant, cannot be
considered as such interference either. The right of a person who claims to be the owner of
property levied upon on execution to file a third-party claim with the sheriff is not exclusive, and
he may file an action to vindicate his claim even if the judgment creditor files an indemnity bond
in favor of the sheriff to answer for any damages that may be suffered by the third-party
claimant. By 'action' as stated in the Rule, what is meant is a separate independent action.
(Abiera vs. Hon. Court of Appeals, et al., supra)
11.ID.; ID.; ID.; ID.; APPLICATION TO THE CASE AT BAR; AS A MATTER OF PROCEDURE.
In the case at bar, contrary to the rationale in the Decision of the respondent Court, it was
appropriate, as a matter of procedure, for SANTOS, as an ordinary third party claimant, to
vindicate his claim of ownership in a separate action under Section 17 of Rule 39. The judgment
rendered in his favor by Branch X, declaring him to be the owner of the property, did not as a
basic proposition, constitute interference with the powers or processes of Branch XVII which
rendered the judgment, to enforce which the jeepney was levied upon and this is so because
property belonging to a stranger is not ordinarily subject to levy. While it is true that the vehicle
in question was in custodia legis, and should not be interfered with without the permission of the
proper Court, the property must be one in which the defendant has proprietary interest. Where
the Sheriff seizes a stranger's property, the rule does not apply and interference with his
custody is not interference with another Court's Order of attachment.

12.ID.; ID.; ID.; ID.; ID.; AS A MATTER OF SUBSTANCE AND ON THE MERITS. As a
matter of substance and on the merits the ultimate conclusion of respondent Court nullifying the
Decision of Branch X permanently enjoining the auction sale, should be upheld, where legally
speaking, it was not a "stranger's property" that was levied upon by the Sheriff pursuant to the
judgment tendered by Branch XVII as the vehicle was, in fact, registered in the name of the
operator, one of the judgment debtors and where the aspect of public service, with its effects on
the riding public, is involved. Whatever legal technicalities may be invoked, the judgment of
respondent Court of Appeals was found to be in consonance with justice.
D E C I S I O N
MELENCIO-HERRERA, J p:
The controversy in this case will be resolved on the basis of the following facts and expositions.
Prior to April 26, 1963 (the ACCIDENT DATE), Vicente U. Vidad (VIDAD, for short) was a duly
authorized passenger jeepney operator. Also prior to the ACCIDENT DATE, petitioner Adolfo L.
Santos (SANTOS, for short) was the owner of a passenger jeep, but he had no certificate of
public convenience for the operation of the vehicle as a public passenger jeep. SANTOS then
transferred his jeep to the name of VIDAD so that it could be operated under the latter's
certificate of public convenience. In other words, SANTOS became what is known in ordinary
parlance as a kabit operator. For the protection of SANTOS, VIDAD executed a re-transfer
document to the former, which was to be a private document presumably to be registered if and
when it was decided that the passenger jeep of SANTOS was to be withdrawn from the kabit
arrangement.
On the ACCIDENT DATE, private respondent Abraham Sibug (SIBUG, for short) was bumped
by a passenger jeepney operated by VIDAD and driven by Severo Gragas. As a result thereof,
SIBUG filed a complaint for damages against VIDAD and Gragas with the Court of First
Instance of Manila, Branch XVII, then presided by Hon. Arsenio Solidum. That Civil Case will
hereinafter be referred to as the BRANCH XVII CASE.
On December 5, 1963, a judgment was rendered by Branch XVII, sentencing VIDAD and
Gragas, jointly and severally, to pay SIBUG the sums of P506.20 as actual damages; P3,000.00
as moral damages; P500.00 as attorney's fees, and costs. 1
On April 10, 1964, the Sheriff of Manila levied on a motor vehicle, with Plate No. PUJ-343-64,
registered in the name of VIDAD, and scheduled the public auction sale thereof on May 8, 1964.
On April 11, 1964, SANTOS presented a third-party claim with the Sheriff alleging actual
ownership of the motor vehicle levied upon, and stating that registration thereof in the name of
VIDAD was merely to enable SANTOS to make use of VIDAD's Certificate of Public
Convenience. After the third-party complaint was filed, SIBUG submitted to the Sheriff a bond
issued by the Philippine Surety Insurance Company (THE BONDING COMPANY, for short), to
save the Sheriff from liability if he were to proceed with the sale and if SANTOS' third-party
claim should be ultimately upheld.
On April 22, 1964, that is, before the scheduled sale of May 8, 1964, SANTOS instituted an
action for Damages and Injunction with a prayer for Preliminary Mandatory Injunction against
SIBUG; VIDAD; and the Sheriff in Civil Case No. 56842 of Branch X, of the same Court of First
Instance of Manila (hereinafter referred to as the BRANCH X CASE). The complaint was later
amended to include the BONDING COMPANY as a party defendant although its bond had not
become effective. In the Complaint, SANTOS alleged essentially that he was the actual owner
of the motor vehicle subject of levy; that a fictitious Deed of Sale of said motor vehicle was
executed by him in VIDAD's favor for purposes of operating said vehicle as a passenger
jeepney under the latter's franchise; that SANTOS did not receive any payment from VIDAD in
consideration of said sale; that to protect SANTOS' proprietary interest over the vehicle in
question, VIDAD in turn had executed a Deed of Sale in favor of SANTOS on June 27, 1962;
that SANTOS was not a party in the BRANCH XVII CASE and was not in any manner liable to
the registered owner VIDAD and the driver Gragas; that SANTOS derived a daily income of
P30.00 from the operation of said motor vehicle as a passenger jeepney and stood to suffer
irreparable damage if possession of said motor vehicle were not restored to him. SANTOS then
prayed that 1) pending trial, a Writ of Preliminary Mandatory Injunction be issued ex-parte
commanding the Sheriff of Manila to restore the motor vehicle to him and that the Sheriff be
enjoined from proceeding with its sale; 2) that, after trial, the Deed of Sale in favor of VIDAD be
declared absolutely fictitious and, therefore, null and void, and adjudging SANTOS to be the
absolute owner of the vehicle in question; and 3) that damages be awarded to SANTOS as
proven during the trial plus attorney's fees in the amount of P450.00 and costs. 2
No public sale was conducted on May 8, 1964. On May 11, 1964, Branch X issued a
Restraining Order enjoining the Sheriff from conducting the public auction sale of the motor
vehicle levied upon. 3 The Restraining Order was issued wrongfully. Under the provisions of
Section 17, Rule 39, the action taken by the Sheriff cannot be restrained by another Court or by
another Branch of the same Court. The Sheriff has the right to continue with the public sale on
his own responsibility, or he can desist from conducting the public sale unless the attaching
creditor files a bond securing him against the third-party claim. But the decision to proceed or
not with the public sale lies with him. As said in Uy Piaoco vs. Osmea, 9 Phil. 299, 307, "the
powers of the Sheriff involve both discretional power and personal liability." The mentioned
discretional power and personal liability have been further elucidated in Planas and Verdon vs.
Madrigal & Co., et al., 94 Phil. 754, where it was held.
"The duty of the Sheriff in connection with the execution and satisfaction of
judgment of the court is governed by Rule 39 of the Rules of Court. Section 15
thereof provides for the procedure to be followed where the property levied on
execution is claimed by a third person. If the third-party claim is sufficient, the
sheriff, upon receiving it, is not bound to proceed with the levy of the property,
unless he is given by the judgment creditor an indemnity bond against the
claim (Mangaoang vs. Provincial Sheriff, 91 Phil., 368). Of course, the sheriff
may proceed with the levy even without the indemnity bond, but in such case
he will answer for any damages with his own personal funds (Waite vs.
Peterson, et al., 8 Phil., 419; Alzua, et al. vs. Johnson, 21 Phil., 308; Consulta
No. 341 de los abogados de Smith, Bell & Co., 48 Phil., 565). And the rule also
provides that nothing therein contained shall prevent a third person from
vindicating his claim to the property by any proper action (Sec. 15 of Rule 39)."
It appears from the above that if the attaching creditor should furnish an adequate bond, the
Sheriff has to proceed with the public auction. When such bond is not filed, then the Sheriff shall
decide whether to proceed, or to desist from proceeding, with the public auction. If he decides to
proceed, he will incur personal liability in favor of the successful third-party claimant.
On October 14, 1965, Branch X affirmed SANTOS' ownership of the jeepney in question based
on the evidence adduced, and decreed:
"WHEREFORE, judgment is hereby rendered, enjoining the defendants from
proceeding with the sale of the vehicle in question ordering its return to the
plaintiff and furthermore sentencing the defendant Abrabam Sibug to pay the
plaintiff the sum of P15.00 a day from April 10, 1964 until the vehicle is
returned to him, and P500.00 as attorney's fees as well as the costs." 4
This was subsequently amended on December 5, 1965, upon motion for reconsideration filed by
SANTOS, to include the BONDING COMPANY as jointly and severally liable with SIBUG. 5
". . . provided that the liability of the Philippine Surety & Insurance Co., Inc.
shall in no case exceed P6,500.00. Abrabam Sibug is furthermore condemned
to pay the Philippine Surety & Insurance Co., Inc., the same sums it is ordered
to pay under this decision."
The judgment in the Branch X CASE appears to be quite legally unpalatable. For instance,
since the undertaking furnished to the Sheriff by the BONDING COMPANY did not become
effective for the reason that the jeep was not sold, the public sale thereof having been
restrained, there was no reason for promulgating judgment against the BONDING COMPANY. It
has also been noted that the Complaint against VIDAD was dismissed.
Most important of all, the judgment against SIBUG was inequitable. In asserting his rights of
ownership to the vehicle in question, SANTOS candidly admitted his participation in the illegal
and pernicious practice in the transportation business known as the kabit system. Sec. 20 (g) of
the Public Service Act, then the applicable law, specifically provided:
". . . it shall be unlawful for any public service or for the owner, lessee or
operator thereof, without the approval and authorization of the Commission
previously had . . . (g) to sell, alienate, mortgage, encumber or lease its
property, franchise, certificates, privileges, or rights, or any part thereof."
In this case, SANTOS had fictitiously sold the jeepney to VIDAD, who had become the
registered owner and operator of record at the time of the accident. It is true that VIDAD had
executed a re-sale to SANTOS, but the document was not registered. Although SANTOS, as
the kabit, was the true owner as against VIDAD, the latter, as the registered owner/operator and
grantee of the franchise, is directly and primarily responsible and liable for the damages caused
to SIBUG, the injured party, as a consequence of the negligent or careless operation of the
vehicle. 6 This ruling is based on the principle that the operator of record is considered the
operator of the vehicle in contemplation of law as regards the public and third persons 7 even if
the vehicle involved in the accident had been sold to another where such sale had not been
approved by the then Public Service Commission. 8 For the same basic reason, as the vehicle
here in question was registered in VIDAD's name, the levy on execution against said vehicle
should be enforced so that the judgment in the BRANCH XVII CASE may be satisfied,
notwithstanding the fact that the secret ownership of the vehicle belonged to another. SANTOS,
as the kabit, should not be allowed to defeat the levy on his vehicle and to avoid his
responsibilities as a kabit owner for he had led the public to believe that the vehicle belonged to
VIDAD. This is one way of curbing the pernicious kabit system that facilitates the commission of
fraud against the travelling public.

As indicated in the Erezo case, supra, SANTOS' remedy, as the real owner of the vehicle, is to
go against VIDAD, the actual operator who was responsible for the accident, for the recovery of
whatever damages SANTOS may suffer by reason of the execution. In fact, if SANTOS, as the
kabit, had been impleaded as a party defendant in the BRANCH XVII CASE, he should be held
jointly and severally liable with VIDAD and the driver for damages suffered by SIBUG, 9 as well
as for exemplary damages. 10
From the judgment in the BRANCH X CASE, SIBUG appealed. Meanwhile, SANTOS moved for
immediate execution. SIBUG opposed it on the ground that Branch X had no jurisdiction over
the BRANCH XVII CASE, and that Branch X had no power to interfere by injunction with the
judgment of Branch XVII, a Court of concurrent or coordinate jurisdiction. 11
On November 13, 1965, Branch X released an Order authorizing immediate execution on the
theory that the BRANCH X CASE is "principally an action for the issuance of a writ of prohibition
to forbid the Sheriff from selling at public auction property not belonging to the judgment creditor
(sic) and there being no attempt in this case to interfere with the judgment or decree of another
court of concurrent jurisdiction." 12
Without waiting for the resolution of his Motion for Reconsideration, SIBUG sought relief from
respondent Appellate Court in a Petition for Certiorari with Preliminary Injunction. On November
18, 1965, respondent Court of Appeals enjoined the enforcement of the Branch X Decision and
the Order of execution issued by said Branch. 13 On September 28, 1966, respondent Court of
Appeals rendered the herein challenged Decision nullifying the judgment rendered in the Branch
X Case and permanently restraining Branch X from taking cognizance of the BRANCH X CASE
filed by SANTOS. It ruled that:
". . . the respondent Court Branch X, indeed, encroached and interfered with
the judgment of Branch XVII when it issued a restraining order and finally a
decision permanently enjoining the other court from executing the decision
rendered in Civil Case No. 54335. This to our mind constitutes an interference
with the powers and authority of the other court having co-equal and coordinate
jurisdiction. To rule otherwise, would indubitably lead to confusion which might
hamper or hinder the proper administration of justice . . ." 14
Respondent Court further held that SANTOS may not be permitted to prove his ownership over
a particular vehicle being levied upon but registered in another's name in a separate action,
observing that:
"As the vehicle in question was registered in the name of Vicente U. Vidad, the
government or any person affected by the representation that said vehicle is
registered under the name of a particular person had the right to rely on his
declaration of ownership and registration; and the registered owner or any
other person for that matter cannot be permitted to repudiate said declaration
with the objective of proving that said registered vehicle is owned by another
person and not by the registered owner (sec. 68, (a), Rule 123, and art. 1431,
New Civil Code)"
xxx xxx xxx
"Were we to allow a third person to prove that he is the real owner of a
particular vehicle and not the registered owner it would in effect be tantamount
to sanctioning the attempt of the registered owner of the particular vehicle in
evading responsibility for it cannot be dispelled that the door would be opened
to collusion between a person and a registered owner for the latter to escape
said responsibility to the public or to any person."
SANTOS now seeks a review of respondent Court's Decision contending that:
1)he respondent Court of Appeals erred in holding that Branch X of the Court of
First Instance of Manila has no jurisdiction to restrain by Writ of Injunction the
auction sale of petitioner's motor vehicle to satisfy the judgment indebtedness
of another person;
2)he respondent Court of Appeals erred in holding that petitioner as owner of a
motor vehicle that was levied upon pursuant to a Writ of Execution issued by
branch XVII of the Court of First Instance of Manila in Civil Case No. 54335
cannot be allowed to prove in a separate suit filed in Branch X of the same
court (Civil Case No. 56842) that he is the true owner of the said motor vehicle
and not its registered owner;
3)he respondent Court of Appeals erred in declaring null and void the decision
of the Court of First Instance of Manila (Branch X) in Civil Case No. 56482.
We gave due course to the Petition for Review on Certiorari on December 14, 1966 and
considered the case submitted for decision on July 20, 1967.
One of the issues ventilated for resolution is the general question of jurisdiction of a Court of
First Instance to issue, at the instance of a third-party claimant, an Injunction restraining the
execution sale of a passenger jeepney levied upon by a judgment creditor in another Court of
First Instance. The corollary issue is whether or not the third-party claimant has a right to
vindicate his claim to the vehicle levied upon through a separate action.
Since this case was submitted for decision in July, 1967, this Court, in Arabay, Inc. vs. Hon.
Serafin Salvador, 15 speaking through Mr. Justice Ramon Aquino, succinctly held:
"It is noteworthy that, generally, the rule, that no court has authority to interfere
by injunction with the judgments or decrees of a concurrent or coordinate
jurisdiction having equal power to grant the injunctive relief, is applied in cases,
where no third-party claimant is involved, in order to prevent one court from
nullifying the judgment or process of another court of the same rank or
category, a power which devolves upon the proper appellate court."
xxx xxx xxx
"When the sheriff, acting beyond the bounds of his authority, seizes a
stranger's property, the writ of injunction, which is issued to stop the auction
sale of that property, is not an interference with the writ of execution issued by
another court because the writ of execution was improperly implemented by the
sheriff. Under the writ, he could attach the property of the judgment debtor. He
is not authorized to levy upon the property of the third-party claimant (Polaris
Marketing Corporation vs. Plan, L-40666, January 22, 1976, 69 SCRA 93, 97;
Manila Herald Publishing Co., Inc. vs. Ramos, 88 Phil. 94, 102)."
An earlier case, Abiera vs. Hon. Court of Appeals, et al., 16 explained the doctrine more
extensively:
"Courts; Jurisdiction; Courts without power to interfere by injunction with
judgments or decrees of a court of concurrent jurisdiction. No court has
power to interfere by injunction with the judgments or decrees of a court of
concurrent or coordinate jurisdiction having equal power to grant the relief
sought by injunction.
"Same; Same; Same; When applicable. For this doctrine to apply, the
injunction issued by one court must interfere with the judgment or decree
issued by another court of equal or coordinate jurisdiction and the relief sought
by such injunction must be one which could be granted by the court which
rendered the judgment or issued the decree.
"Same; Same; Same; Exception; Judgment rendered by another court in favor
of a third person who claims property levied upon on execution. Under
Section 17 of Rule 39 a third person who claims property levied upon on
execution may vindicate such claim by action. A judgment rendered in his favor
declaring him to be the owner of the property would not constitute
interference with the powers or processes of the court which rendered the
judgment to enforce which the execution was levied. If that be so and it is so
because the property, being that of a stranger, is not subject to levy then an
interlocutory order, such as injunction, upon a claim and prima facie showing of
ownership by the claimant, cannot be considered as such interference either.
"Execution; Where property levied on claimed by third person; 'Action' in
section 17, Rule 39 of the Rules of Court, interpreted. The right of a person
who claims to be the owner of property levied upon on execution to file a third-
party claim with the sheriff is not exclusive, and he may file an action to
vindicate his claim even if the judgment creditor files an indemnity bond in favor
of the sheriff to answer for any damages that may be suffered by the third party
claimant. By 'action' as stated in the Rule, what is meant is a separate and
independent action."
Applied to the case at bar, it will have to be held that, contrary to the rationale in the Decision of
respondent Court, it was appropriate, as a matter of procedure, for SANTOS, as an ordinary
third-party claimant, to vindicate his claim of ownership in a separate action under Section 17 of
Rule 39. And the judgment rendered in his favor by Branch X , declaring him to be the owner of
the property, did not as a basic proposition, constitute interference with the powers or processes
of Branch XVII which rendered the judgment, to enforce which the jeepney was levied upon.
And this is so because property belonging to a stranger is not ordinarily subject to levy. While it
is true that the vehicle in question was in custodia legis, and should not be interfered with
without the permission of the proper Court, the property must be one in which the defendant has
proprietary interest. Where the Sheriff seizes a stranger's property, the rule does not apply and
interference with his custody is not interference with another Court's Order of attachment. 17
However, as a matter of substance and on the merits, the ultimate conclusion of respondent
Court nullifying the Decision of Branch X permanently enjoining the auction sale, should be
upheld. Legally speaking, it was not a "stranger's property" that was levied upon by the Sheriff
pursuant to the judgment rendered by Branch XVII. The vehicle was, in fact, registered in the
name of VIDAD, one of the judgment debtors. And what is more, the aspect of public service,
with its effects on the riding public, is involved. Whatever legal technicalities may be invoked, we
find the judgment of respondent Court of Appeals to be in consonance with justice.

WHEREFORE, as prayed for by private respondent Abraham Sibug, the petition for review on
certiorari filed by Adolfo L. Santos is dismissed, with costs against the petitioner.
SO ORDERED.

















[G.R. No. 162267. July 4, 2008.]
PCI LEASING AND FINANCE, INC., petitioner, vs. UCPB GENERAL
INSURANCE CO., INC., respondent.
D E C I S I O N
AUSTRIA-MARTINEZ, J p:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
seeking a reversal of the Decision 1 of the Court of Appeals (CA) dated December 12, 2003
affirming with modification the Decision of the Regional Trial Court (RTC) of Makati City which
ordered petitioner and Renato Gonzaga (Gonzaga) to pay, jointly and severally, respondent the
amount of P244,500.00 plus interest; and the CA Resolution 2 dated February 18, 2004 denying
petitioner's Motion for Reconsideration. TSIDaH
The facts, as found by the CA, are undisputed:
On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with Plate
Number PHD-206 owned by United Coconut Planters Bank was traversing the
Laurel Highway, Barangay Balintawak, Lipa City. The car was insured with
plantiff-appellee [UCPB General Insurance Inc.], then driven by Flaviano Isaac
with Conrado Geronimo, the Asst. Manager of said bank, was hit and bumped
by an 18-wheeler Fuso Tanker Truck with Plate No. PJE-737 and Trailer Plate
No. NVM-133, owned by defendants-appellants PCI Leasing & Finance, Inc.
allegedly leased to and operated by defendant-appellant Superior Gas &
Equitable Co., Inc. (SUGECO) and driven by its employee, defendant appellant
Renato Gonzaga.
The impact caused heavy damage to the Mitsubishi Lancer car resulting in an
explosion of the rear part of the car. The driver and passenger suffered
physical injuries. However, the driver defendant-appellant Gonzaga continued
on its [sic] way to its [sic] destination and did not bother to bring his victims to
the hospital. CacEID
Plaintiff-appellee paid the assured UCPB the amount of P244,500.00
representing the insurance coverage of the damaged car.
As the 18-wheeler truck is registered under the name of PCI Leasing, repeated
demands were made by plaintiff-appellee for the payment of the aforesaid
amounts. However, no payment was made. Thus, plaintiff-appellee filed the
instant case on March 13, 1991. 3
PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it could not be held liable
for the collision, since the driver of the truck, Gonzaga, was not its employee, but that of its co-
defendant Superior Gas & Equitable Co., Inc. (SUGECO). 4 In fact, it was SUGECO, and not
petitioner, that was the actual operator of the truck, pursuant to a Contract of Lease signed by
petitioner and SUGECO. 5 Petitioner, however, admitted that it was the owner of the truck in
question. 6
After trial, the RTC rendered its Decision dated April 15, 1999, 7 the dispositive portion of which
reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
plaintiff UCPB General Insurance [respondent], ordering the defendants PCI
Leasing and Finance, Inc., [petitioner] and Renato Gonzaga, to pay jointly and
severally the former the following amounts: the principal amount of
P244,500.00 with 12% interest as of the filing of this complaint until the same is
paid; P50,000.00 as attorney's fees; and P20,000.00 as costs of suit. DHTECc
SO ORDERED. 8
Aggrieved by the decision of the trial court, petitioner appealed to the CA.
In its Decision dated December 12, 2003, the CA affirmed the RTC's decision, with certain
modifications, as follows:
WHEREFORE, the appealed decision dated April 15, 1999 is hereby
AFFIRMED with modification that the award of attorney's fees is hereby deleted
and the rate of interest shall be six percent (6%) per annum computed from the
time of the filing of the complaint in the trial court until the finality of the
judgment. If the adjudged principal and the interest remain unpaid thereafter,
the interest rate shall be twelve percent (12%) per annum computed from the
time the judgment becomes final and executory until it is fully satisfied.
SO ORDERED. 9
Petitioner filed a Motion for Reconsideration which the CA denied in its Resolution dated
February 18, 2004.
Hence, herein Petition for Review.
The issues raised by petitioner are purely legal:
Whether petitioner, as registered owner of a motor vehicle that figured in
aquasi-delict may be held liable, jointly and severally, with the driver thereof, for
the damages caused to third parties. aSADIC
Whether petitioner, as a financing company, is absolved from liability by the
enactment of Republic Act (R.A.) No. 8556, or the Financing Company Act of
1998.
Anent the first issue, the CA found petitioner liable for the damage caused by the collision since
under the Public Service Act, if the property covered by a franchise is transferred or leased to
another without obtaining the requisite approval, the transfer is not binding on the Public Service
Commission and, in contemplation of law, the grantee continues to be responsible under the
franchise in relation to the operation of the vehicle, such as damage or injury to third parties due
to collisions. 10
Petitioner claims that the CA's reliance on the Public Service Act is misplaced, since the said
law applies only to cases involving common carriers, or those which have franchises to operate
as public utilities. In contrast, the case before this Court involves a private commercial vehicle
for business use, which is not offered for service to the general public. 11
Petitioner's contention has partial merit, as indeed, the vehicles involved in the case at bar are
not common carriers, which makes the Public Service Act inapplicable. cSEAHa
However, the registered owner of the vehicle driven by a negligent driver may still be held liable
under applicable jurisprudence involving laws on compulsory motor vehicle registration and the
liabilities of employers for quasi-delicts under the Civil Code.
The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting from
its use is well-established in jurisprudence. Erezo v. Jepte, 12 with Justice Labrador as ponente,
wisely explained the reason behind this principle, thus:
Registration is required not to make said registration the operative act by which
ownership in vehicles is transferred, as in land registration cases, because the
administrative proceeding of registration does not bear any essential relation to
the contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer,
39 Phil. 888), but to permit the use and operation of the vehicle upon any public
highway (section 5 [a], Act No. 3992, as amended). The main aim of motor
vehicle registration is to identify the owner so that if any accident happens, or
that any damage or injury is caused by the vehicle on the public highways,
responsibility therefor can be fixed on a definite individual, the registered
owner. Instances are numerous where vehicles running on public highways
caused accidents or injuries to pedestrians or other vehicles without positive
identification of the owner or drivers, or with very scant means of identification.
It is to forestall these circumstances, so inconvenient or prejudicial to the
public, that the motor vehicle registration is primarily ordained, in the interest of
the determination of persons responsible for damages or injuries caused on
public highways. STCDaI
"'One of the principal purposes of motor vehicles legislation is
identification of the vehicle and of the operator, in case of accident; and
another is that the knowledge that means of detection are always
available may act as a deterrent from lax observance of the law and of
the rules of conservative and safe operation. Whatever purpose there
may be in these statutes, it is subordinate at the last to the primary
purpose of rendering it certain that the violator of the law or of the rules
of safety shall not escape because of lack of means to discover him'.
The purpose of the statute is thwarted, and the displayed number
becomes a 'snare and delusion', if courts would entertain such defenses
as that put forward by appellee in this case. No responsible person or
corporation could be held liable for the most outrageous acts of
negligence, if they should be allowed to place a 'middleman' between
them and the public, and escape liability by the manner in which they
recompense their servants". (King vs. Brenham Automobile Co., 145
S.W. 278, 279).
With the above policy in mind, the question that defendant-appellant poses is:
should not the registered owner be allowed at the trial to prove who the actual
and real owner is, and in accordance with such proof escape or evade
responsibility and lay the same on the person actually owning the vehicle? We
hold with the trial court that the law does not allow him to do so; the law, with its
aim and policy in mind, does not relieve him directly of the responsibility that
the law fixes and places upon him as an incident or consequence of
registration. Were a registered owner allowed to evade responsibility by
proving who the supposed transferee or owner is, it would be easy for him, by
collusion with others or otherwise, to escape said responsibility and transfer the
same to an indefinite person, or to one who possesses no property with which
to respond financially for the damage or injury done. A victim of recklessness
on the public highways is usually without means to discover or identify the
person actually causing the injury or damage. He has no means other than by
a recourse to the registration in the Motor Vehicles Office to determine who is
the owner. The protection that the law aims to extend to him would become
illusory were the registered owner given the opportunity to escape liability by
disproving his ownership. If the policy of the law is to be enforced and carried
out, the registered owner should not be allowed to prove the contrary to the
prejudice of the person injured, that is, to prove that a third person or another
has become the owner, so that he may thereby be relieved of the responsibility
to the injured person. SICDAa

The above policy and application of the law may appear quite harsh and would
seem to conflict with truth and justice. We do not think it is so. A registered
owner who has already sold or transferred a vehicle has the recourse to a third-
party complaint, in the same action brought against him to recover for the
damage or injury done, against the vendee or transferee of the vehicle. The
inconvenience of the suit is no justification for relieving him of liability; said
inconvenience is the price he pays for failure to comply with the registration
that the law demands and requires.
In synthesis, we hold that the registered owner, the defendant-appellant herein,
is primarily responsible for the damage caused to the vehicle of the plaintiff-
appellee, but he (defendant-appellant) has a right to be indemnified by the real
or actual owner of the amount that he may be required to pay as damage for
the injury caused to the plaintiff-appellant. 13
The case is still good law and has been consistently cited in subsequent cases. 14 Thus, there
is no good reason to depart from its tenets. ACTESI
For damage or injuries arising out of negligence in the operation of a motor vehicle, the
registered owner may be held civilly liable with the negligent driver either 1) subsidiarily, if the
aggrieved party seeks relief based on a delict or crime under Articles 100 and 103 of the
Revised Penal Code; or 2) solidarily, if the complainant seeks relief based on a quasi-delict
under Articles 2176 and 2180 of the Civil Code. It is the option of the plaintiff whether to waive
completely the filing of the civil action, or institute it with the criminal action, or file it separately
or independently of a criminal action; 15 his only limitation is that he cannot recover damages
twice for the same act or omission of the defendant. 16
In case a separate civil action is filed, the long-standing principle is that the registered owner of
a motor vehicle is primarily and directly responsible for the consequences of its operation,
including the negligence of the driver, with respect to the public and all third persons. 17 In
contemplation of law, the registered owner of a motor vehicle is the employer of its driver, with
the actual operator and employer, such as a lessee, being considered as merely the owner's
agent. 18 This being the case, even if a sale has been executed before a tortious incident, the
sale, if unregistered, has no effect as to the right of the public and third persons to recover from
the registered owner. 19 The public has the right to conclusively presume that the registered
owner is the real owner, and may sue accordingly. 20
In the case now before the Court, there is not even a sale of the vehicle involved, but a mere
lease, which remained unregistered up to the time of the occurrence of the quasi-delict that
gave rise to the case. Since a lease, unlike a sale, does not even involve a transfer of title or
ownership, but the mere use or enjoyment of property, there is more reason, therefore, in this
instance to uphold the policy behind the law, which is to protect the unwitting public and provide
it with a definite person to make accountable for losses or injuries suffered in vehicular
accidents. 21 This is and has always been the rationale behind compulsory motor vehicle
registration under the Land Transportation and Traffic Code and similar laws, which, as early as
Erezo, has been guiding the courts in their disposition of cases involving motor vehicular
incidents. It is also important to emphasize that such principles apply to all vehicles in general,
not just those offered for public service or utility. 22
The Court recognizes that the business of financing companies has a legitimate and
commendable purpose. 23 In earlier cases, it considered a financial lease or financing lease a
legal contract, 24 though subject to the restrictions of the so-called Recto Law or Articles 1484
and 1485 of the Civil Code. 25 In previous cases, the Court adopted the statutory definition of a
financial lease or financing lease, as: SCHIac
[A] mode of extending credit through a non-cancelable lease contract under
which the lessor purchases or acquires, at the instance of the lessee,
machinery, equipment, motor vehicles, appliances, business and office
machines, and other movable or immovable property in consideration of the
periodic payment by the lessee of a fixed amount of money sufficient to
amortize at least seventy (70%) of the purchase price or acquisition cost,
including any incidental expenses and a margin of profit over an obligatory
period of not less than two (2) years during which the lessee has the right to
hold and use the leased property, . . . but with no obligation or option on his
part to purchase the leased property from the owner-lessor at the end of the
lease contract. 26
Petitioner presented a lengthy discussion of the purported trend in other jurisdictions, which
apparently tends to favor absolving financing companies from liability for the consequences of
quasi-delictual acts or omissions involving financially leased property. 27 The petition adds that
these developments have been legislated in our jurisdiction in Republic Act (R.A.) No. 8556, 28
which provides:
Section 12.Liability of lessors. Financing companies shall not be liable for
loss, damage or injury caused by a motor vehicle, aircraft, vessel, equipment,
machinery or other property leased to a third person or entity except when the
motor vehicle, aircraft, vessel, equipment or other property is operated by the
financing company, its employees or agents at the time of the loss, damage or
injury. IHCDAS
Petitioner's argument that the enactment of R.A. No. 8556, especially its addition of the new
Sec. 12 to the old law, is deemed to have absolved petitioner from liability, fails to convince the
Court.
These developments, indeed, point to a seeming emancipation of financing companies from the
obligation to compensate claimants for losses suffered from the operation of vehicles covered
by their lease. Such, however, are not applicable to petitioner and do not exonerate it from
liability in the present case.
The new law, R.A. No. 8556, notwithstanding developments in foreign jurisdictions, do not
supersede or repeal the law on compulsory motor vehicle registration. No part of the law
expressly repeals Section 5 (a) and (e) of R.A. No. 4136, as amended, otherwise known as the
Land Transportation and Traffic Code, to wit:
Sec. 5.Compulsory registration of motor vehicles. (a) All motor vehicles
and trailer of any type used or operated on or upon any highway of the
Philippines must be registered with the Bureau of Land Transportation (now the
Land Transportation Office, per Executive Order No. 125, January 30, 1987,
and Executive Order No. 125-A, April 13, 1987) for the current year in
accordance with the provisions of this Act. ECDAcS
xxx xxx xxx
(e)Encumbrances of motor vehicles. Mortgages, attachments, and other
encumbrances of motor vehicles, in order to be valid against third parties
must be recorded in the Bureau (now the Land Transportation Office).
Voluntary transactions or voluntary encumbrances shall likewise be properly
recorded on the face of all outstanding copies of the certificates of registration
of the vehicle concerned.
Cancellation or foreclosure of such mortgages, attachments, and other
encumbrances shall likewise be recorded, and in the absence of such
cancellation, no certificate of registration shall be issued without the
corresponding notation of mortgage, attachment and/or other encumbrances.
xxx xxx xxx (Emphasis supplied)
Neither is there an implied repeal of R.A. No. 4136. As a rule, repeal by implication is
frowned upon, unless there is clear showing that the later statute is so irreconcilably
inconsistent and repugnant to the existing law that they cannot be reconciled and made to
stand together. 29 There is nothing in R.A. No. 4136 that is inconsistent and incapable of
reconciliation. EIAScH
Thus, the rule remains the same: a sale, lease, or financial lease, for that matter, that is not
registered with the Land Transportation Office, still does not bind third persons who are
aggrieved in tortious incidents, for the latter need only to rely on the public registration of a
motor vehicle as conclusive evidence of ownership. 30 A lease such as the one involved in the
instant case is an encumbrance in contemplation of law, which needs to be registered in order
for it to bind third parties. 31 Under this policy, the evil sought to be avoided is the exacerbation
of the suffering of victims of tragic vehicular accidents in not being able to identify a guilty party.
A contrary ruling will not serve the ends of justice. The failure to register a lease, sale, transfer
or encumbrance, should not benefit the parties responsible, to the prejudice of innocent victims.
The non-registration of the lease contract between petitioner and its lessee precludes the former
from enjoying the benefits under Section 12 of R.A. No. 8556.
This ruling may appear too severe and unpalatable to leasing and financing companies, but the
Court believes that petitioner and other companies so situated are not entirely left without
recourse. They may resort to third-party complaints against their lessees or whoever are the
actual operators of their vehicles. In the case at bar, there is, in fact, a provision in the lease
contract between petitioner and SUGECO to the effect that the latter shall indemnify and hold
the former free and harmless from any "liabilities, damages, suits, claims or judgments" arising
from the latter's use of the motor vehicle. 32 Whether petitioner would act against SUGECO
based on this provision is its own option. EIcSDC

The burden of registration of the lease contract is minuscule compared to the chaos that may
result if registered owners or operators of vehicles are freed from such responsibility. Petitioner
pays the price for its failure to obey the law on compulsory registration of motor vehicles for
registration is a pre-requisite for any person to even enjoy the privilege of putting a vehicle on
public roads.
WHEREFORE, the petition is DENIED. The Decision dated December 12, 2003 and Resolution
dated February 18, 2004 of the Court of Appeals are AFFIRMED.







EN BANC
[G.R. No. 64693. April 27, 1984.]
LITA ENTERPRISES, INC., petitioner, vs. SECOND CIVIL CASES DIVISION,
INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and
FRANCISCA P. GARCIA, respondents.
SYLLABUS
1.MERCANTILE LAW; TRANSPORTATION; CERTIFICATE OF PUBLIC CONVENIENCE; USE
OF SAME UNDER "KABIT SYSTEM p" CONDEMNED. The parties herein operated under
an arrangement, commonly known as the "kabit system," whereby a person who has been
granted a certificate of convenience allows another person who owns motor vehicles to operate
under such franchise for a fee. A certificate of public convenience is a special privilege
conferred by the government. Abuse of this privilege by the grantees thereof cannot be
countenanced. The "kabit system" has been identified as one of the root causes of the
prevalence of graft and corruption in the government transportation offices. In the words of Chief
Justice Makalintal, (Dizon vs. Octavio, 51 O.G. 4059) "this is a pernicious system that cannot be
too severely condemned. It constitutes an imposition upon the good faith of the government."
2.ID.; ID.; ID.; ID.; AGREEMENT UNDER THE SYSTEM, VOID FOR BEING CONTRARY TO
PUBLIC POLICY. Although not outrightly penalized as a criminal offense, the "kabit system"
is invariably recognized as being contrary to public policy and, therefore, void and inexistent
under Article 1409 of the Civil Code. It is a fundamental principle that the court will not aid either
party to enforce an illegal contract, but will leave them both where it finds them. Upon this
premise, it was flagrant error on the part of both the trial and appellate courts to have accorded
the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid.
3.CIVIL LAW; OBLIGATIONS AND CONTRACTS; VOID CONTRACTS, CANNOT BE CURED
BY RATIFICATION OR PRESCRIPTION. The defect of inexistence of a contract is
permanent and incurable, and cannot be cured by ratification or by prescription. As this Court
said in Eugenio vs. Perdido, 97 Phil. 41, "the mere lapse of time cannot give efficacy to
contracts that are null and void."
4.ID.; PRINCIPLES OF IN PARI DELICTO, DEFINED; APPLIED IN CASE AT BAR. The
principle of in pari delicto is well known not only in this jurisdiction but also in the United States
where common law prevails. Under American jurisdiction, the doctrine is stated thus: "The
proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit
can be maintained for its specific performance, or to recover the property agreed to be sold or
delivered, or damages for its violation. The rule has sometimes been laid down as though it was
equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will
be given to one against the other." (Pomeroy's Equity Jurisprudence, Vol. 3, 5th ed. p. 728)
Although certain exceptions to the rule are provided by law, We see no cogent reason why the
full force of the rule should not be applied in the instant case.
D E C I S I O N
ESCOLIN, J p:
"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the time-honored
maxim that must be applied to the parties in the case at bar. Having entered into an illegal
contract, neither can seek relief from the courts, and each must bear the consequences of his
acts. LLpr
The factual background of this case is undisputed.
Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private
respondents, purchased in installment from the Delta Motor Sales Corporation five (5) Toyota
Corona Standard cars to be used as taxicabs. Since they had no franchise to operate taxicabs,
they contracted with petitioner Lita Enterprises, Inc., through its representative, Manuel
Concordia, for the use of the latter's certificate of public convenience in consideration of an
initial payment of P1,000.00 and a monthly rental of P200.00 per taxicab unit. To effectuate said
agreement, the aforesaid cars were registered in the name of petitioner Lita Enterprises, Inc.
Possession, however, remained with the spouses Ocampo who operated and maintained the
same under the name Acme Taxi, petitioner's trade name.
About a year later, on March 18, 1967, one of said taxicabs driven by their employee, Emeterio
Martin, collided with a motorcycle whose driver, one Florante Galvez, died from the head
injuries sustained therefrom. A criminal case was eventually filed against the driver Emeterio
Martin, while a civil case for damages was instituted by Rosita Sebastian Vda. de Galvez, heir
of the victim, against Lita Enterprises, Inc., as registered owner of the taxicab. In the latter case,
Civil Case No. 72067 of the Court of First Instance of Manila, petitioner Lita Enterprises, Inc.
was adjudged liable for damages in the amount of P25,000.00 and P7,000.00 for attorney's
fees.
This decision having become final, a writ of execution was issued. One of the vehicles of
respondent spouses with Engine No. 2R- 914472 was levied upon and sold at public auction for
P2,150.00 to one Sonnie Cortez, the highest bidder. Another car with Engine No. 2R-915036
was likewise levied upon and sold at public auction for P8,000.00 to a certain Mr. Lopez. LibLex
Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs in his
name. He requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration
papers to him, but the latter allegedly refused. Hence, he and his wife filed a complaint against
Lita Enterprises, Inc., Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and
the Sheriff of Manila for reconveyance of motor vehicles with damages, docketed as Civil Case
No. 90988 of the Court of First Instance of Manila. Trial on the merits ensued and on July 22,
1975, the said court rendered a decision, the dispositive portion of which reads:
"WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita
Sebastian Vda. de Galvez, Visayan Surety & Insurance Company and the
Sheriff of Manila are concerned.
"Defendant Lita Enterprises, Inc., is ordered to transfer the registration
certificate of the three Toyota cars not levied upon with Engine Nos. 2R-
230026, 2R-688740 and 2R-585884 [Exhs. A, B, C and D] by executing a deed
of conveyance in favor of the plaintiff.
"Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears
for the certificate of convenience from March 1973 up to May 1973 at the rate
of P200 a month per unit for the three cars." (Annex A, Record on Appeal, p.
102-103, Rollo).
Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was
denied by the court a quo on October 27, 1975. (p. 121, Ibid.)
On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate Appellate Court
modified the decision by including as part of its dispositive portion another paragraph, to wit:
"In the event the condition of the three Toyota cars will no longer serve the
purpose of the deed of conveyance because of their deterioration, or because
they are no longer serviceable, or because they are no longer available, the
Lita Enterprises, Inc. is ordered to pay the plaintiffs their fair market value as of
July 22, 1975." (Annex "D", p. 167, Rollo.).
Its first and second motions for reconsideration having been denied, petitioner came to Us,
praying that:
"1.. . .
"2.. . . after legal proceedings, decision be rendered or resolution be issued,
reversing, annulling or amending the decision of public respondent so that:
"(a)the additional paragraph added by the public respondent to the DECISION
of the lower court (CFI) be deleted;
"(b)that private respondents be declared liable to petitioner for whatever
amount the latter has paid or was declared liable (in Civil Case No. 72067) of
the Court of First Instance of Manila to Rosita Sebastian Vda. de Galvez, as
heir of the victim Florante Galvez, who died as a result of the gross negligence
of private respondents' driver while driving one private respondents' taxicabs."
(p. 39, Rollo.)
Unquestionably, the parties herein operated under an arrangement, commonly known as the
"kabit system", whereby a person who has been granted a certificate of convenience allows
another person who owns motor vehicles to operate under such franchise for a fee. A certificate
of public convenience is a special privilege conferred by the government. Abuse of this privilege
by the grantees thereof cannot be countenanced. The "kabit system" has been identified as one
of the root causes of this prevalence of graft and corruption in the government transportation
offices. In the words of Chief Justice Makalintal, 1 "this is a pernicious system that cannot be too
severely condemned. It constitutes an imposition upon the good faith of the government." Cdpr
Although not outrightly penalized as a criminal offense, the "kabit system" is invariably
recognized as being contrary to public policy and, therefore, void and inexistent under Artic1e
1409 of the Civil Code. It is a fundamental principle that the court will not aid either party to
enforce an illegal contract, but will leave them both where it finds them. Upon this premise, it
was flagrant error on the part of both the trial and appellate courts to have accorded the parties
relief from their predicament. Article 1412 of the Civil Code denies them such aid. It provides:
"ART. 1412.If the act in which the unlawful or forbidden cause consists does
not constitute a criminal offense, the following rules shall be observed:
"(1)when the fault is on the part of both contracting parties, neither may recover
what he has given by virtue of the contract, or demand the performance of the
other's undertaking."
The defect of inexistence of a contract is permanent and incurable, and cannot be cured by
ratification or by prescription. As this Court said in Eugenio v. Perdido, 2 "the mere lapse of time
cannot give efficacy to contracts that are null and void."

The principle of in pari delicto is well known not only in this jurisdiction but also in the United
States where common law prevails. Under American jurisdiction, the doctrina is stated thus:
"The proposition is universal that no action arises, in equity or at law, from an illegal contract; no
suit can be maintained for its specific performance, or to recover the property agreed to be sold
or delivered, or damages for its violation. The rule has sometimes been laid down as though it
was equally universal, that where the parties are in pari delicto, no affirmative relief of any kind
will be given to one against the other." 3 Although certain exceptions to the rule are provided by
law, We see no cogent reason why the full force of the rule should not be applied in the instant
case. LLphil
WHEREFORE, all proceedings had in Civil Case No. 90988 entitle "Nicasio Ocampo and
Francisca P. Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of the Court of
First Instance of Manila and CA-G.R. No. 59157-R entitled "Nicasio Ocampo and Francisca P.
Garcia, Plaintiffs-Appellees, versus Lita Enterprises, Inc., Defendant-Appellant," of the
Intermediate Appellate Court, as well as the decisions rendered therein are hereby annulled and
set aside. No costs.
SO ORDERED.