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, Peña & Nolasco for petitioner.

Monina P. Lee for private respondent.

NOCON, J.:

This is a petition for review on certiorari to annul and set aside the decision dated November 15, 1989 of the Court of
Appeals1 affirming the decision of the trial court2 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 job site within a period of 30 days.

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. Immediatety, 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.
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" and "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 but
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 on 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:

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 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:

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.

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 had
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. 13

However, private respondent is entitled to an award of moral and exemplary damages for the injury 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.

SO ORDERED.
G.R. No. 114061 August 3, 1994

KOREAN AIRLINES CO., LTD., petitioner,

vs.
COURT OF APPEALS and JUANITO C. LAPUZ, respondents.

G.R. No. 113842 August 3, 1994

JUANITO C. LAPUZ, petitioner,

vs.
COURT OF APPEALS and KOREAN AIRLINES CO., LTD., respondents.

M.A. Aguinaldo and Associates for Korean Airlines Co., Ltd.

Camacho and Associates for Juanito Lapuz.

CRUZ, J.:

Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was contracted for employment in Jeddah, Saudi
Arabia, for a period of one year through Pan Pacific Overseas Recruiting Services, Inc. Lapuz was supposed to leave
on November 8, 1980, via Korean Airlines. Initially, he was "wait-listed," which meant that he could only be
accommodated if any of the confirmed passengers failed to show up at the airport before departure. When two of such
passengers did not appear, Lapuz and another person by the name of Perico were given the two unclaimed seats.

According to Lapuz, he was allowed to check in with one suitcase and one shoulder bag at the check-in counter of
KAL. He passed through the customs and immigration sections for routine check-up and was cleared for departure
as Passenger No. 157 of KAL Flight No. KE 903. Together with the other passengers, he rode in the shuttle bus and
proceeded to the ramp of the KAL aircraft for boarding. However, when he was at the third or fourth rung of the stairs,
a KAL officer pointed to him and shouted "Down! Down!" He was thus barred from taking the flight. When he later
asked for another booking, his ticket was canceled by KAL. Consequently, he was unable to report for his work in
Saudi Arabia within the stipulated 2-week period and so lost his employment.

KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting Services Inc. coordinated with KAL
for the departure of 30 contract workers, of whom only 21 were confirmed and 9 were wait-listed passengers. The
agent of Pan Pacific, Jimmie Joseph, after being informed that there was a possibility of having one or two seats
becoming available, gave priority to Perico, who was one of the supervisors of the hiring company in Saudi Arabia.
The other seat was won through lottery by Lapuz. However, only one seat became available and so, pursuant to the
earlier agreement that Perico was to be given priority, he alone was allowed to board.

After trial, the Regional Trial Court of Manila, Branch 30, 1 adjudged KAL liable for damages, disposing as follows:

WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered sentencing the
defendant Korean Air Lines to pay plaintiff Juanito C. Lapuz the following:

1. The amount of TWO HUNDRED SEVENTY-TWO THOUSAND ONE HUNDRED SIXTY

(P272,160.00) PESOS as actual/compensatory damages, with legal interest thereon from the date of
the filing of the complaint until fully paid.

2. The sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS as and for attorney's fees; and

3. The costs of suit.

The case is hereby dismissed with respect to defendant Pan Pacific Overseas Recruiting Services,
Inc.

The counterclaims and cross-claim of defendant Korean Air Lines Co., Ltd. are likewise dismissed.
On appeal, this decision was modified by the Court of Appeals 2 as follows:

WHEREFORE, in view of all the foregoing, the appealed judgment is hereby AFFIRMED with
the following modifications: the amount of actual damages and compensatory damages is
reduced to P60,000.00 and defendant-appellant is hereby ordered to pay plaintiff-appellant
the sum of One Hundred Thousand Pesos (P100,000.00) by way of moral and exemplary
damages, at 6% interest per annum from the date of the filing of the Complaint until fully paid.

KAL and Lapuz filed their respective motions for reconsideration, which were both denied for lack of merit. Hence, the
present petitions for review which have been consolidated because of the identity of the parties and the similarity of
the issues.

In G. R. No. 114061, KAL assails the decision of the appellate court on the following grounds:

1. That the Court of Appeals erred in concluding that petitioner committed a breach of contract
of carriage notwithstanding lack of proper, competent and sufficient evidence of the existence
of such contract.

2. That the Court of Appeals erred in not according the proper evidentiary weight to some
evidence presented and the fact that private respondent did not have any boarding pass to
prove that he was allowed to board and to prove that his airline ticket was confirmed.

3. That the Court of Appeals erred in concluding that the standby passenger status of private
respondent Lapuz was changed to a confirmed status when his name was entered into the
passenger manifest.

4. That the Court of Appeals abused its discretion in awarding moral and exemplary damages
in the amount of P100,000.00 in favor of private respondent notwithstanding its lack of basis
and private respondent did not state such amount in his complaint nor had private respondent
proven the said damages.

5. That the Court of Appeals erred in dismissing the counterclaims.

6. That the Court of Appeals erred in dismissing the counterclaim of petitioner against Pan
Pacific.

7. That the Court of Appeals erred in ruling that the 6% per annum legal interest on the
judgment shall be computed from the filing of the complaint.

In G. R. No. 113842, Lapuz seeks: (a) the setting aside of the decision of the Court of Appeals insofar as it modifies
the award of damages; b) actual and compensatory damages in the sum equivalent to 5 years' loss of earnings based
on the petitioner's monthly salary of 1,600 Saudi rials at the current conversion rate plus the cost of baggage and
personal belongings worth P2,000 and the service fee of P3,000 paid to the recruiting agency, all with legal interest
from the filing of the complaint until fully paid; c) moral damages of not less than P1 million and exemplary damages
of not less than P500,000.00, both with interest at 6% per annum from the filing of the complaint; and d) attorney's
fees in the sum equivalent to 30% of the award of damages.

It is evident that the issues raised in these petitions relate mainly to the correctness of the factual findings of the Court
of Appeals and the award of damages. The Court has consistently affirmed that the findings of fact of the Court of
Appeals and the other lower courts are as a rule binding upon it, subject to certain exceptions. As nothing in the record
indicates any of such exceptions, the factual conclusions of the appellate court must be affirmed.

The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his name was entered
in the passenger manifest of KAL for its Flight No. KE 903. His clearance through immigration and customs clearly
shows that he had indeed been confirmed as a passenger of KAL in that flight. KAL thus committed a breach of the
contract of carriage between them when it failed to bring Lapuz to his destination.
This Court has held that a contract to transport passengers is different in kind and degree from any other contractual
relation. 3 The business of the carrier is mainly with the traveling public. It invites people to avail themselves of the
comforts and advantages it offers. The contract of air carriage generates a relation attended with a public duty.
Passengers have the right to be treated by the carrier's employees with kindness, respect, courtesy and due
consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and
abuses from such employees. 4 So it is that any discourteous conduct on the part of these employees toward a
passenger gives the latter an action for damages against the carrier.

The breach of contract was aggravated in this case when, instead of courteously informing Lapuz of his being a "wait-
listed" passenger, a KAL officer rudely shouted "Down! Down!" while pointing at him, thus causing him embarrassment
and public humiliation.

KAL argues that "the evidence of confirmation of a chance passenger status is not through the entry of the name of a
chance passenger in the passenger manifest nor the clearance from the Commission on Immigration and Deportation,
because they are merely means of facilitating the boarding of a chance passenger in case his status is confirmed."
We are not persuaded.

The evidence presented by Lapuz shows that he had indeed checked in at the departure counter, passed through
customs and immigration, boarded the shuttle bus and proceeded to the ramp of KAL's aircraft. In fact, his baggage
had already been loaded in KAL's aircraft, to be flown with him to Jeddah. The contract of carriage between him and
KAL had already been perfected when he was summarily and insolently prevented from boarding the aircraft.

KAL's allegation that the respondent court abused its discretion in awarding moral and exemplary damages is also
not tenable.

The Court of Appeals granted moral and exemplary damages because:

The findings of the court a quo that the defendant-appellant has committed breach of contract
of carriage in bad faith and in wanton, disregard of plaintiff-appellant's rights as passenger laid
the basis and justification of an award for moral damages.

xxxx

In the instant case, we find that defendant-appellant Korean Air Lines acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner when it "bumped off" plaintiff-appellant
on November 8, 1980, and in addition treated him rudely and arrogantly as a "patay gutom na
contract worker fighting Korean Air Lines," which clearly shows malice and bad faith, thus
entitling plaintiff-appellant to moral damages.

xxxx

Considering that the plaintiff-appellant's entitlement to moral damages has been fully
established by oral and documentary evidence, exemplary damages may be awarded. In fact,
exemplary damages may be awarded, even though not so expressly pleaded in the complaint
(Kapoe vs. Masa, 134 SCRA 231). By the same token, to provide an example for the public
good, an award of exemplary damages is also proper (Armovit vs. Court of Appeals, supra).

On the other hand, Lapuz's claim that the award of P100,000.00 as moral and exemplary damages is inadequate is
not acceptable either. His prayer for moral damages of not less than P1 million and exemplary damages of not less
than P500,000.00 is overblown.

The well-entrenched principle is that moral damages depend upon the discretion of the court based on the
circumstances of each case. 5 This discretion is limited by the principle that the "amount awarded should not be
palpably and scandalously excessive" as to indicate that it was the result of prejudice or corruption on the part of the
trial court. 6 Damages are not intended to enrich the complainant at the expense of the defendant. They are awarded
only to alleviate the moral suffering that the injured party had undergone by reason of the defendant's culpable
action. 7 There is no hard-and-fast rule in the determination of what would be a fair amount of moral damages since
each case must be governed by its own peculiar facts.

A review of the record of this case shows that the injury suffered by Lapuz is not so serious or extensive as to warrant
an award of P1.5 million. The assessment of P100,000 as moral and exemplary damages in his favor is, in our view,
reasonable and realistic.

Lapuz likewise claims that the respondent court could not rule upon the propriety of the award of actual damages
because it had not been assigned as an error by KAL. Not so. The rule is that only errors specifically assigned and
properly argued in the brief will be considered except errors affecting jurisdiction over the subject matter and plain as
well as clerical errors. 8 But this is not without qualification for, as the Court held in Vda. de Javellana vs. Court of
Appeals: 9

. . . [T]he Court is clothed with ample authority to review matters, even if they are not assigned
as errors in their appeal, if it finds that their consideration is necessary in arriving at a just
decision of the case.

A similar pronouncement was made in Baquiran vs. Court of Appeals 10 in this wise:

Issues, though not specifically raised in the pleading in the appellate court, may, in the interest
of justice, be properly considered by said court in deciding a case, if they are questions raised
in the trial court and are matters of record having some bearing on the issue submitted which
the parties failed to raise or the lower court ignored.

The Court of Appeals was therefore justified in decreasing the award of actual damages even if the issue was not
assigned as an error by KAL. Consideration of this question was necessary for the just and complete resolution of the
present case. Furthermore, there was enough evidence to warrant the reduction of the original award, as the
challenged decision correctly observed:

A perusal of the plaintiff-appellant's contract of employment shows that the effectivity of the
contract is for only one year, renewable every year for five years. Although plaintiff-appellant
intends to renew his contract, such renewal will still be subject to his foreign employer. Plaintiff-
appellant had not yet started working with his foreign employer, hence, there can be no basis
as to whether his contract will be renewed by his foreign employer or not. Thus, the damages
representing the loss of earnings of plaintiff-appellant in the renewal of the contract of
employment is at most speculative. Damages may not be awarded on the basis of speculation
or conjecture (Gachalian vs. Delim, 203 SCRA 126). Hence, defendant-appellant's liability is
limited to the one year contract only. Plaintiff-appellant is, therefore, entitled only to his lost
earnings for one year, i.e., P60,000.00, which is 1/5 of P300,000.00, the total amount of actual
damages, representing lost earnings for five years prayed for in the Complaint.

Plaintiff-appellant's contention that in computing his lost earnings, the current rate of the Saudi
Rial to the Philippine Peso at the time of payment should be used, is untenable, considering
that in his Complaint, plaintiff-appellant has quantified in Philippine Peso his lost earnings for
five years.

We disagree with the respondent court, however, on the date when the legal interest should commence to run. The
rule is that the legal interest of six percent (6%) on the amounts adjudged in favor of Lapuz should resume from the
time of the rendition of the trial court's decision instead of November 28, 1980, the date of the filing of the complaint.

On this matter, the Court has held:

If suit were for payment of a definite sum of money, the contention might be tenable. However,
if it is for damages, unliquidated and not known until definitely ascertained, assessed and
determined by the courts after proof, interest should be from the date of the decision. 11

xxxx
 The obligation to pay interest on a sum filed in a judgment exists from the date of the sentence,
when so declared; for until the net amount of the debtor's liability has been determined, he
cannot he considered delinquent in the fulfillment of his obligation to pay the debt with interest
thereon. 12

Finally, we find that the respondent court did not err in sustaining the trial court's dismissal of KAL's counterclaim
against Pan Pacific Overseas Recruiting Services Inc., whose responsibility ended with the confirmation by KAL of
Lapuz as its passenger in its Flight No. 903.

This is still another case of the maltreatment of our overseas contract workers, this time by the airline supposed to
bring the passenger to his foreign assignment. Our OCW's sacrifice much in seeking employment abroad, where they
are deprived of the company of their loved ones, the direct protection of our laws, and the comfort of our own native
culture and way of life. This Court shall exert every effort to vindicate their rights when they are abused and shall
accord them the commensurate reparation of their injuries consistent with their dignity and worth as members of the
working class.

WHEREFORE, the appealed judgment is AFFIRMED, but with the modification that the legal interest on the damages
awarded to private respondent should commence from the date of the decision of the trial court on November 14,
1990. The parties shall bear their own costs.

SO ORDERED.
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 GOJOCCO,
ALBERTO ROXAS CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA, YOLANDA CORDOVA, NOEL
ROQUE, EDWARD TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPES, JULIUS
CAESAR, GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA,
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.

MENDOZA, J.:p

This is a petition for review on certiorari of the decision of the Court of Appeals1 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, sot hat 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 Baay 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 down by a wooden seat which came off after being unscrewed. It took three
persons to safely remove her from this portion. 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 Baay, Lingayen. As this hospital was not
adequately equipped, she was transferred to the Sto. Niño 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 OF 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 supervisions 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 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 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 a 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 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 found 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 exercise 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 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.

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 findings 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
copassengers, 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. Buño, 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 latters' 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 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 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 coplaintiffs 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 coplaintiffs 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 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.

SO ORDERED.
G.R. No. L-47822 December 22, 1988

PEDRO DE GUZMAN, petitioner,

vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

FELICIANO, J.:

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of such
scrap material, respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material to Manila.
On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to differing establishments in Pangasinan.
For that service, respondent charged freight rates which were commonly lower than regular commercial rates.

Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk
Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750 cartons of
Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or
before 4 December 1970. Accordingly, on 1 December 1970, respondent loaded in Makati the merchandise on to his
trucks: 150 cartons were loaded on a truck driven by respondent himself, while 600 cartons were placed on board the
other truck which was driven by Manuel Estrada, respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached petitioner, since
the truck which carried these boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by
armed men who took with them the truck, its driver, his helper and the cargo.

On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of
Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost merchandise, plus damages and
attorney's fees. Petitioner argued that private respondent, being a common carrier, and having failed to exercise the
extraordinary diligence required of him by the law, should be held liable for the value of the undelivered goods.

In his Answer, private respondent denied that he was a common carrier and argued that he could not be held
responsible for the value of the lost goods, such loss having been due to force majeure.

On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a common carrier and
holding him liable for the value of the undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P
2,000.00 as attorney's fees.

On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a common
carrier; in finding that he had habitually offered trucking services to the public; in not exempting him from liability on
the ground of force majeure; and in ordering him to pay damages and attorney's fees.

The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in
transporting return loads of freight "as a casual
occupation — a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this Court by way
of a Petition for Review assigning as errors the following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)

We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts earlier set
forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as "a sideline"). Article
1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither
does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community
or population, and one who offers services or solicits business only from a narrow segment of the general population.
We think that Article 1733 deliberaom making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of
"public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public
Service Act, "public service" includes:

... every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire
or compensation, with general or limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight
or both, shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and
power petroleum, sewerage system, wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. ... (Emphasis supplied)

It appears to the Court that private respondent is properly characterized as a common carrier even though he merely
"back-hauled" goods for other merchants from Manila to Pangasinan, although such back-hauling was done on a
periodic or occasional rather than regular or scheduled manner, and even though private
respondent's principal occupation was not the carriage of goods for others. There is no dispute that private respondent
charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not
relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and
concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not a requisite
for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment
a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of
public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because
he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that
would be to reward private respondent precisely for failing to comply with applicable statutory requirements. The
business of a common carrier impinges directly and intimately upon the safety and well being and property of those
members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of those who utilize their services and the law cannot allow a common
carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and
authorizations.

We turn then to the liability of private respondent as a common carrier.

Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very high degree of
care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The specific import
of extraordinary diligence in the care of goods transported by a common carrier is, according to Article 1733, "further
expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.

Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration
of the goods which they carry, "unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the containers; and
(5) Order or act of competent public authority.

It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the common
carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they appear to
constitute a species of force majeure fall within the scope of Article 1735, which provides as follows:

In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the
goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence as required in
Article 1733. (Emphasis supplied)

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant case
— the hijacking of the carrier's truck — does not fall within any of the five (5) categories of exempting causes listed in
Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt with under the provisions
of Article 1735, in other words, that the private respondent as common carrier is presumed to have been at fault or to
have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on the part
of private respondent.

Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's goods.
Petitioner argues that in the circumstances of this case, private respondent should have hired a security guard
presumably to ride with the truck carrying the 600 cartons of Liberty filled milk. We do not believe, however, that in
the instant case, the standard of extraordinary diligence required private respondent to retain a security guard to ride
with the truck and to engage brigands in a firelight at the risk of his own life and the lives of the driver and his helper.

The precise issue that we address here relates to the specific requirements of the duty of extraordinary diligence in
the vigilance over the goods carried in the specific context of hijacking or armed robbery.

As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given additional
specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides
in relevant part:

Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to
public policy:

xxx xxx xxx

(5) that the common carrier shall not be responsible for the acts or omissions of his or
its employees;

(6) that the common carrier's liability for acts committed by thieves, or of robbers who
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.

We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is not liable for
the value of the undelivered merchandise which was lost because of an event entirely beyond private respondent's
control.

ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of Appeals
dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.

SO ORDERED.
 [G.R. No. 125948. December 29, 1998.]

FIRST PHILIPPINE INDUSTRIAL CORPORATION, Petitioner, v. COURT OF APPEALS,

HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO, in her
official capacity as City Treasurer of Batangas, Respondents.
DECISION

MARTINEZ, J.:

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. chanroblesvirtualawli brary

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: jgc:chanrobles.com.ph

"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: jgc:chanrobles.com.ph

". . . 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: chanrob1es virtual 1aw library

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."cralaw virtua1aw library

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." cralaw virtua1aw library

The test for determining whether a party is a common carrier of goods is: chanrob1es virtual 1aw library

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 v. Court of Appeals 16 we ruled that: jgc:chanrobles.com.ph

"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: chanrobles virtual lawl ibrary

‘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: jgc:chanrobles.com.ph

"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." cralaw virtua1aw library

Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7
thereof provides: jgc:chanrobles.com.ph

"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: jgc:chanrobles.com.ph

". . . 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." cralaw virtua1aw lib rary

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:jgc:chanrobles.com.ph

"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: chanrob1es virtual 1aw library

x x x

(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." cralaw virtua1aw library

The deliberations conducted in the House of Representatives on the Local Government Code of 1991
are illuminating: jgc:chanrobles.com.ph

"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."
cralaw virtua1aw library

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. 147246. August 19, 2003.]

ASIA LIGHTERAGE AND SHIPPING, INC., Petitioner, v. COURT OF APPEALS and

PRUDENTIAL GUARANTEE AND ASSURANCE, INC., Respondents.

DECISION

PUNO, J.:

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.chanrob1es virtua1 1aw 1ibrary

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 protuberance 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: chanrob1es virtual 1aw library

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:
virtual 1aw
chanrob1es

library

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." cralaw virtua1aw library

(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: chanrob1es virtual 1aw library

(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 v. 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
Cendaña 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 v. 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: chanrob1es virtual 1aw library

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: chanrob1es virtual 1aw library

(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: chanrob1es virtual 1aw library

CROSS-EXAMINATION BY ATTY. DONN LEE: 31

x x x

q Can you tell us what else transpired after that incident?

a After 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.

q You said there was another accident, can court the nature of the second accident?

a The sinking, sir.

q Can you tell the nature . . . can you tell the court, if you know what caused the sinking?

a Mostly it was related to the first accident because there was already a whole (sic) on the bottom part
of the barge.

x x x

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: chanrob1es virtual 1aw library

DIRECT-EXAMINATION BY ATTY. LEE: 33

x x x

q Now, 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?

a Since 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.
q And this is the reason why you towed the Barge as you did?

a Yes, sir.

x x x

CROSS-EXAMINATION BY ATTY. IGNACIO: 34

x x x

q And then from ISLOFF Terminal you proceeded to the premises of the GMC? Am I correct?

a The next day, in the morning, we hired for additional two (2) tugboats as I have stated.

q Despite of the threats of an incoming typhoon as you testified a while ago?

a It 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.

q But the fact is, the typhoon was incoming? Yes or no?

a Yes.

q And 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?

a Yes, sir.

q So, more or less, you had the knowledge of the incoming typhoon, right?

a Yes, sir.

q And yet you proceeded to the premises of the GMC?

a ISLOFF 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. chanrob1es virtua1 1aw 1ibrary
 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.

DECISION

VITUG, J.:

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 oclock 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) Attorneys 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 cräläwvirt ualib räry

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 attorneys fees.2 cräläwvirtua libräry

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
virtualib räry
cräläw

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 Escartins 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 courts 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 formers 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 carriers 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 carriers 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 cräläwvirtual ibräry

The foundation of LRTAs 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
217612 and related provisions, in conjunction with Article 2180, 13 of the Civil Code. The premise, however, for the
employers 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 families 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 219414 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 cräläwvirtual ibräry

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 x x x. 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 cräläwvirtua libräry

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.
G.R. No. 157917 August 29, 2012

SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,

vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the COURT OF
APPEALS Respondents.

DECISION

BERSAMIN, J.:

The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to observe extraordinary
diligence in the conduct of his business. He is presumed to be negligent when death occurs to a passenger. His
liability may include indemnity for loss of earning capacity even if the deceased passenger may only be an unemployed
high school student at the time of the accident.

The Case

By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the adverse decision
promulgated on November 13, 2002, by which the Court of Appeals (CA) affirmed with modification the decision
rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch 260, in Parañaque City that had decreed
them jointly and severally liable with Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas and
Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school
student of Don Bosco Technical Institute (Don Bosco).

Antecedents

The Pereñas were engaged in the business of transporting students from their respective residences in Parañaque
City to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the Pereñas used a KIA Ceres Van (van)
with Plate No. PYA 896, which had the capacity to transport 14 students at a time, two of whom would be seated in
the front beside the driver, and the others in the rear, with six students on either side. They employed Clemente Alfaro
(Alfaro) as driver of the van.

In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco. On August 22, 1996, as
on previous school days, the van picked Aaron up around 6:00 a.m. from the Zarates’ residence. Aaron took his place
on the left side of the van near the rear door. The van, with its air-conditioning unit turned on and the stereo playing
loudly, ultimately carried all the 14 student riders on their way to Don Bosco. Considering that the students were due
at Don Bosco by 7:15 a.m., and that they were already running late because of the heavy vehicular traffic on the South
Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the narrow path underneath
the Magallanes Interchange that was then commonly used by Makati-bound vehicles as a short cut into Makati. At the
time, the narrow path was marked by piles of construction materials and parked passenger jeepneys, and the railroad
crossing in the narrow path had no railroad warning signs, or watchmen, or other responsible persons manning the
crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing open to traversing motorists.

At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), operated by Jhonny
Alano (Alano), was in the vicinity of the Magallanes Interchange travelling northbound. As the train neared the railroad
crossing, Alfaro drove the van eastward across the railroad tracks, closely tailing a large passenger bus. His view of
the oncoming train was blocked because he overtook the passenger bus on its left side. The train blew its horn to
warn motorists of its approach. When the train was about 50 meters away from the passenger bus and the van, Alano
applied the ordinary brakes of the train. He applied the emergency brakes only when he saw that a collision was
imminent. The passenger bus successfully crossed the railroad tracks, but the van driven by Alfaro did not. The train
hit the rear end of the van, and the impact threw nine of the 12 students in the rear, including Aaron, out of the van.
Aaron landed in the path of the train, which dragged his body and severed his head, instantaneously killing him. Alano
fled the scene on board the train, and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for damages against
Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR filed their respective answers, with cross-claims against
each other, but Alfaro could not be served with summons.

At the pre-trial, the parties stipulated on the facts and issues, viz:

A. FACTS:

(1)) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
(2)) Spouses Zarate engaged the services of spouses Pereña for the adequate and safe transportation
carriage of the former spouses' son from their residence in Parañaque to his school at the Don Bosco
Technical Institute in Makati City;
(3)) During the effectivity of the contract of carriage and in the implementation thereof, Aaron, the minor son
of spouses Zarate died in connection with a vehicular/train collision which occurred while Aaron was riding the
contracted carrier Kia Ceres van of spouses Pereña, then driven and operated by the latter's
employee/authorized driver Clemente Alfaro, which van collided with the train of PNR, at around 6:45 A.M. of
August 22, 1996, within the vicinity of the Magallanes Interchange in Makati City, Metro Manila, Philippines;
(4)) At the time of the vehicular/train collision, the subject site of the vehicular/train collision was a railroad
crossing used by motorists for crossing the railroad tracks;
(5)) During the said time of the vehicular/train collision, there were no appropriate and safety warning signs
and railings at the site commonly used for railroad crossing;
(6)) At the material time, countless number of Makati bound public utility and private vehicles used on a daily
basis the site of the collision as an alternative route and short-cut to Makati;
(7)) The train driver or operator left the scene of the incident on board the commuter train involved without
waiting for the police investigator;
(8)) The site commonly used for railroad crossing by motorists was not in fact intended by the railroad operator
for railroad crossing at the time of the vehicular collision;
(9)) PNR received the demand letter of the spouses Zarate;
(10)) PNR refused to acknowledge any liability for the vehicular/train collision;
(11)) The eventual closure of the railroad crossing alleged by PNR was an internal arrangement between the
former and its project contractor; and
(12)) The site of the vehicular/train collision was within the vicinity or less than 100 meters from the Magallanes
station of PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for negligence
constituting the proximate cause of the vehicular collision, which resulted in the death of plaintiff spouses' son;
(2) Whether or not the defendant spouses Pereña being the employer of defendant Alfaro are liable for any
negligence which may be attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being the operator of the railroad system is liable
for negligence in failing to provide adequate safety warning signs and railings in the area commonly used by
motorists for railroad crossings, constituting the proximate cause of the vehicular collision which resulted in
the death of the plaintiff spouses' son;
(4) Whether or not defendant spouses Pereña are liable for breach of the contract of carriage with plaintiff-
spouses in failing to provide adequate and safe transportation for the latter's son;
(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary damages, and
attorney's fees;
(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the diligence of employers
and school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John Zarate;
(8) Whether or not defendant PNR was grossly negligent in operating the commuter train involved in the
accident, in allowing or tolerating the motoring public to cross, and its failure to install safety devices or
equipment at the site of the accident for the protection of the public;
(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any and whatever
amount the latter may be held answerable or which they may be ordered to pay in favor of plaintiffs by reason
of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts claimed by the latter
in their Complaint by reason of its gross negligence;
 (11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and exemplary damages
and attorney's fees.2

The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the safe transport of Aaron;
but that against PNR was based on quasi-delict under Article 2176, Civil Code.

In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good father of the
family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a driver’s license and
had not been involved in any vehicular accident prior to the collision; that their own son had taken the van daily; and
that Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips transporting the students to school.

For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van
whose driver had not first stopped, looked and listened; and that the narrow path traversed by the van had not been
intended to be a railroad crossing for motorists.

Ruling of the RTC

On December 3, 1999, the RTC rendered its decision, 3 disposing:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants
ordering them to jointly and severally pay the plaintiffs as follows:

(1) (for) the death of Aaron- Php50,000.00;

(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorney’s fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.

On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration, 4 reiterating that the cooperative gross
negligence of the Pereñas and PNR had caused the collision that led to the death of Aaron; and that the damages
awarded to the Zarates were not excessive, but based on the established circumstances.

The CA’s Ruling

Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).

PNR assigned the following errors, to wit:5

The Court a quo erred in:

1. In finding the defendant-appellant Philippine National Railways jointly and severally liable together with
defendant-appellants spouses Teodorico and Nanette Pereña and defendant-appellant Clemente Alfaro to
pay plaintiffs-appellees for the death of Aaron Zarate and damages.

2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite overwhelming
documentary evidence on record, supporting the case of defendants-appellants Philippine National Railways.

The Pereñas ascribed the following errors to the RTC, namely:

The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and exemplary
damages and attorney’s fees with the other defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereñas against the Philippine National Railways
and in not holding the latter and its train driver primarily responsible for the incident.

The trial court erred in awarding excessive damages and attorney’s fees.

The trial court erred in awarding damages in the form of deceased’s loss of earning capacity in the absence of sufficient
basis for such an award.

On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but limited the moral
damages to ₱ 2,500,000.00; and deleted the attorney’s fees because the RTC did not state the factual and legal
bases, to wit:6

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260 of Parañaque
City is AFFIRMED with the modification that the award of Actual Damages is reduced to ₱ 59,502.76; Moral Damages
is reduced to ₱ 2,500,000.00; and the award for Attorney’s Fees is Deleted.

SO ORDERED.

The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance of the ruling in Cariaga v. Laguna
Tayabas Bus Company and Manila Railroad Company,7 wherein the Court gave the heirs of Cariaga a sum
representing the loss of the deceased’s earning capacity despite Cariaga being only a medical student at the time of
the fatal incident. Applying the formula adopted in the American Expectancy Table of Mortality:–

2/3 x (80 - age at the time of death) = life expectancy

the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy from age of 21
(the age when he would have graduated from college and started working for his own livelihood) instead of 15 years
(his age when he died). Considering that the nature of his work and his salary at the time of Aaron’s death were
unknown, it used the prevailing minimum wage of ₱ 280.00/day to compute Aaron’s gross annual salary to be ₱
110,716.65, inclusive of the thirteenth month pay. Multiplying this annual salary by Aaron’s life expectancy of 39.3
years, his gross income would aggregate to ₱ 4,351,164.30, from which his estimated expenses in the sum of ₱
2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net income. Due to Aaron’s computed net income
turning out to be higher than the amount claimed by the Zarates, only ₱ 2,109,071.00, the amount expressly prayed
for by them, was granted.

On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration. 8

Issues

In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:

I. The lower court erred when it upheld the trial court’s decision holding the petitioners jointly and severally liable to
pay damages with Philippine National Railways and dismissing their cross-claim against the latter.

II. The lower court erred in affirming the trial court’s decision awarding damages for loss of earning capacity of a minor
who was only a high school student at the time of his death in the absence of sufficient basis for such an award.

III. The lower court erred in not reducing further the amount of damages awarded, assuming petitioners are liable at
all.

Ruling

The petition has no merit.

1.Were the Pereñas and PNR jointly and severally liable for damages?
The Zarates brought this action for recovery of damages against both the Pereñas and the PNR, basing their claim
against the Pereñas on breach of contract of carriage and against the PNR on quasi-delict.

The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.

We concur with the CA.

To start with, the Pereñas’ defense was that they exercised the diligence of a good father of the family in the selection
and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a driver’s license and that he had not been
involved in any vehicular accident prior to the fatal collision with the train; that they even had their own son travel to
and from school on a daily basis; and that Teodoro Pereña himself sometimes accompanied Alfaro in transporting the
passengers to and from school. The RTC gave scant consideration to such defense by regarding such defense as
inappropriate in an action for breach of contract of carriage.

We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas operated as a common
carrier; and that their standard of care was extraordinary diligence, not the ordinary diligence of a good father of a
family.

Although in this jurisdiction the operator of a school bus service has been usually regarded as a private
carrier,9 primarily because he only caters to some specific or privileged individuals, and his operation is neither open
to the indefinite public nor for public use, the exact nature of the operation of a school bus service has not been finally
settled. This is the occasion to lay the matter to rest.

A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place to another,
gratuitously or for hire. The carrier is classified either as a private/special carrier or as a common/public carrier. 10 A
private carrier is one who, without making the activity a vocation, or without holding himself or itself out to the public
as ready to act for all who may desire his or its services, undertakes, by special agreement in a particular instance
only, to transport goods or persons from one place to another either gratuitously or for hire. 11 The provisions on ordinary
contracts of the Civil Code govern the contract of private carriage.The diligence required of a private carrier is only
ordinary, that is, the diligence of a good father of the family. In contrast, a common carrier is a 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 such services to the public.12 Contracts of common carriage are governed by the
provisions on common carriers of the Civil Code, the Public Service Act,13 and other special laws relating to
transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be at fault or to
have acted negligently in case of the loss of the effects of passengers, or the death or injuries to passengers. 14

In relation to common carriers, the Court defined public use in the following terms in United States v. Tan Piaco, 15 viz:

"Public use" is the same as "use by the public". The essential feature of the public use is not confined to privileged
individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public character.
In determining whether a use is public, we must look not only to the character of the business to be done, but also to
the proposed mode of doing it. If the use is merely optional with the owners, or the public benefit is merely incidental,
it is not a public use, authorizing the exercise of the jurisdiction of the public utility commission. There must be, in
general, a right which the law compels the owner to give to the general public. It is not enough that the general
prosperity of the public is promoted. Public use is not synonymous with public interest. The true criterion by which to
judge the character of the use is whether the public may enjoy it by right or only by permission.

In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided any distinction between
a person or an enterprise offering transportation on a regular or an isolated basis; and has not distinguished a carrier
offering his services to the general public, that is, the general community or population, from one offering his services
only to a narrow segment of the general population.

Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides neatly with the
notion of public service under the Public Service Act, which supplements the law on common carriers found in the
Civil Code. Public service, according to Section 13, paragraph (b) of the Public Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientèle, whether permanent or occasional, and done for the 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, 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. x x x. 17

Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as common
carriers pipeline operators,18 custom brokers and warehousemen,19 and barge operators20 even if they had limited
clientèle.

As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the business actually
transacted, or the number and character of the conveyances used in the activity, but whether the undertaking is a part
of the activity engaged in by the carrier that he has held out to the general public as his business or occupation. If the
undertaking is a single transaction, not a part of the general business or occupation engaged in, as advertised and
held out to the general public, the individual or the entity rendering such service is a private, not a common, carrier.
The question must be determined by the character of the business actually carried on by the carrier, not by any secret
intention or mental reservation it may entertain or assert when charged with the duties and obligations that the law
imposes.21

Applying these considerations to the case before us, there is no question that the Pereñas as the operators of a school
bus service were: (a) engaged in transporting passengers generally as a business, not just as a casual occupation;
(b) undertaking to carry passengers over established roads by the method by which the business was conducted; and
(c) transporting students for a fee. Despite catering to a limited clientèle, the Pereñas operated as a common carrier
because they held themselves out as a ready transportation indiscriminately to the students of a particular school
living within or near where they operated the service and for a fee.

The common carrier’s standard of care and vigilance as to the safety of the passengers is defined by law. Given the
nature of the business and for reasons of public policy, the common carrier is bound "to observe extraordinary
diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all
the circumstances of each case."22 Article 1755 of the Civil Code specifies that the common carrier should "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." To successfully fend off liability in an action upon the death or
injury to a passenger, the common carrier must prove his or its observance of that extraordinary diligence; otherwise,
the legal presumption that he or it was at fault or acted negligently would stand.23 No device, whether by stipulation,
posting of notices, statements on tickets, or otherwise, may dispense with or lessen the responsibility of the common
carrier as defined under Article 1755 of the Civil Code. 24

And, secondly, the Pereñas have not presented any compelling defense or reason by which the Court might now
reverse the CA’s findings on their liability. On the contrary, an examination of the records shows that the evidence
fully supported the findings of the CA.

As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be negligent at the time of the
accident because death had occurred to their passenger.25 The presumption of negligence, being a presumption of
law, laid the burden of evidence on their shoulders to establish that they had not been negligent. 26 It was the law no
less that required them to prove their observance of extraordinary diligence in seeing to the safe and secure carriage
of the passengers to their destination. Until they did so in a credible manner, they stood to be held legally responsible
for the death of Aaron and thus to be held liable for all the natural consequences of such death.

There is no question that the Pereñas did not overturn the presumption of their negligence by credible evidence. Their
defense of having observed the diligence of a good father of a family in the selection and supervision of their driver
was not legally sufficient. According to Article 1759 of the Civil Code, their liability as a common carrier did not cease
upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their
employee. This was the reason why the RTC treated this defense of the Pereñas as inappropriate in this action for
breach of contract of carriage.
The Pereñas were liable for the death of Aaron despite the fact that their driver might have acted beyond the scope
of his authority or even in violation of the orders of the common carrier.27 In this connection, the records showed their
driver’s actual negligence. There was a showing, to begin with, that their driver traversed the railroad tracks at a point
at which the PNR did not permit motorists going into the Makati area to cross the railroad tracks. Although that point
had been used by motorists as a shortcut into the Makati area, that fact alone did not excuse their driver into taking
that route. On the other hand, with his familiarity with that shortcut, their driver was fully aware of the risks to his
passengers but he still disregarded the risks. Compounding his lack of care was that loud music was playing inside
the air-conditioned van at the time of the accident. The loudness most probably reduced his ability to hear the warning
horns of the oncoming train to allow him to correctly appreciate the lurking dangers on the railroad tracks. Also, he
sought to overtake a passenger bus on the left side as both vehicles traversed the railroad tracks. In so doing, he lost
his view of the train that was then coming from the opposite side of the passenger bus, leading him to miscalculate
his chances of beating the bus in their race, and of getting clear of the train. As a result, the bus avoided a collision
with the train but the van got slammed at its rear, causing the fatality. Lastly, he did not slow down or go to a full stop
before traversing the railroad tracks despite knowing that his slackening of speed and going to a full stop were in
observance of the right of way at railroad tracks as defined by the traffic laws and regulations.28 He thereby violated a
specific traffic regulation on right of way, by virtue of which he was immediately presumed to be negligent.29

The omissions of care on the part of the van driver constituted negligence, 30 which, according to Layugan v.
Intermediate Appellate Court,31 is "the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a
prudent and reasonable man would not do, 32 or as Judge Cooley defines it, ‘(t)he failure to observe for the protection
of the interests of another person, that degree of care, precaution, and vigilance which the circumstances justly
demand, whereby such other person suffers injury.’"33

The test by which to determine the existence of negligence in a particular case has been aptly stated in the leading
case of Picart v. Smith,34 thuswise:

The test by which to determine the existence of negligence in a particular case may be stated as follows: 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. The law here in effect adopts the
standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the Roman law. The
existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the
situation before him. The law considers what would be reckless, blameworthy, or negligent in the man of ordinary
intelligence and prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation must of course be always
determined in the light of human experience and in view of the facts involved in the particular case. Abstract
speculation cannot here be of much value but this much can be profitably said: Reasonable men govern their conduct
by the circumstances which are before them or known to them. They are not, and are not supposed to be, omniscient
of the future. Hence they can be expected to take care only when there is something before them to suggest or warn
of danger. Could a prudent man, in the case under consideration, foresee harm as a result of the course actually
pursued? If so, it was the duty of the actor to take precautions to guard against that harm. Reasonable foresight of
harm, followed by the ignoring of the suggestion born of this prevision, is always necessary before negligence can be
held to exist. Stated in these terms, the proper criterion for determining the existence of negligence in a given case is
this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have foreseen that an
effect harmful to another was sufficiently probable to warrant his foregoing the conduct or guarding against its
consequences. (Emphasis supplied)

Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent when he traversed the
railroad tracks at a point not allowed for a motorist’s crossing despite being fully aware of the grave harm to be thereby
caused to his passengers; and when he disregarded the foresight of harm to his passengers by overtaking the bus
on the left side as to leave himself blind to the approach of the oncoming train that he knew was on the opposite side
of the bus.

Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court, 35 where the Court held the PNR
solely liable for the damages caused to a passenger bus and its passengers when its train hit the rear end of the bus
that was then traversing the railroad crossing. But the circumstances of that case and this one share no similarities.
In Philippine National Railways v. Intermediate Appellate Court, no evidence of contributory negligence was adduced
against the owner of the bus. Instead, it was the owner of the bus who proved the exercise of extraordinary diligence
by preponderant evidence. Also, the records are replete with the showing of negligence on the part of both the Pereñas
and the PNR. Another distinction is that the passenger bus in Philippine National Railways v. Intermediate Appellate
Court was traversing the dedicated railroad crossing when it was hit by the train, but the Pereñas’ school van traversed
the railroad tracks at a point not intended for that purpose.

At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and severally" liable for damages
arising from the death of Aaron. They had been impleaded in the same complaint as defendants against whom the
Zarates had the right to relief, whether jointly, severally, or in the alternative, in respect to or arising out of the accident,
and questions of fact and of law were common as to the Zarates.36 Although the basis of the right to relief of the Zarates
(i.e., breach of contract of carriage) against the Pereñas was distinct from the basis of the Zarates’ right to relief
against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held jointly and severally
liable by virtue of their respective negligence combining to cause the death of Aaron. As to the PNR, the RTC rightly
found the PNR also guilty of negligence despite the school van of the Pereñas traversing the railroad tracks at a point
not dedicated by the PNR as a railroad crossing for pedestrians and motorists, because the PNR did not ensure the
safety of others through the placing of crossbars, signal lights, warning signs, and other permanent safety barriers to
prevent vehicles or pedestrians from crossing there. The RTC observed that the fact that a crossing guard had been
assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks to others
as well as the need to control the vehicular and other traffic there. Verily, the Pereñas and the PNR were joint
tortfeasors.

2.
Was the indemnity for loss of
Aaron’s earning capacity proper?

The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing with the RTC on the liability, the
CA modified the amount. Both lower courts took into consideration that Aaron, while only a high school student, had
been enrolled in one of the reputable schools in the Philippines and that he had been a normal and able-bodied child
prior to his death. The basis for the computation of Aaron’s earning capacity was not what he would have become or
what he would have wanted to be if not for his untimely death, but the minimum wage in effect at the time of his death.
Moreover, the RTC’s computation of Aaron’s life expectancy rate was not reckoned from his age of 15 years at the
time of his death, but on 21 years, his age when he would have graduated from college.

We find the considerations taken into account by the lower courts to be reasonable and fully warranted.

Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and unfounded. They cited 1âwphi1

People v. Teehankee, Jr.,37 where the Court deleted the indemnity for victim Jussi Leino’s loss of earning capacity as
a pilot for being speculative due to his having graduated from high school at the International School in Manila only
two years before the shooting, and was at the time of the shooting only enrolled in the first semester at the Manila
Aero Club to pursue his ambition to become a professional pilot. That meant, according to the Court, that he was for
all intents and purposes only a high school graduate.

We reject the Pereñas’ submission.

First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino was not akin to
that of Aaron here. The CA and the RTC were not speculating that Aaron would be some highly-paid professional,
like a pilot (or, for that matter, an engineer, a physician, or a lawyer). Instead, the computation of Aaron’s earning
capacity was premised on him being a lowly minimum wage earner despite his being then enrolled at a prestigious
high school like Don Bosco in Makati, a fact that would have likely ensured his success in his later years in life and at
work.

And, secondly, the fact that Aaron was then without a history of earnings should not be taken against his parents and
in favor of the defendants whose negligence not only cost Aaron his life and his right to work and earn money, but
also deprived his parents of their right to his presence and his services as well. Our law itself states that the loss of
the earning capacity of the deceased shall be the liability of the guilty party in favor of the heirs of the deceased, and
shall in every case be assessed and awarded by the court "unless the deceased on account of permanent physical
disability not caused by the defendant, had no earning capacity at the time of his death." 38 Accordingly, we emphatically
hold in favor of the indemnification for Aaron’s loss of earning capacity despite him having been unemployed, because
compensation of this nature is awarded not for loss of time or earnings but for loss of the deceased’s power or ability
to earn money.39

This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus Company
and Manila Railroad Company,40 fourth-year medical student Edgardo Carriaga’s earning capacity, although he
survived the accident but his injuries rendered him permanently incapacitated, was computed to be that of the
physician that he dreamed to become. The Court considered his scholastic record sufficient to justify the assumption
that he could have finished the medical course and would have passed the medical board examinations in due time,
and that he could have possibly earned a modest income as a medical practitioner. Also, in People v. Sanchez,41 the
Court opined that murder and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed
good-paying jobs had they graduated in due time, and that their jobs would probably pay them high monthly salaries
from ₱ 10,000.00 to ₱ 15,000.00 upon their graduation. Their earning capacities were computed at rates higher than
the minimum wage at the time of their deaths due to their being already senior agriculture students of the University
of the Philippines in Los Baños, the country’s leading educational institution in agriculture.

3.
Were the amounts of damages excessive?

The Pereñas plead for the reduction of the moral and exemplary damages awarded to the Zarates in the respective
amounts of ₱ 2,500,000.00 and ₱ 1,000,000.00 on the ground that such amounts were excessive.

The plea is unwarranted.

The moral damages of ₱ 2,500,000.00 were really just and reasonable under the established circumstances of this
case because they were intended by the law to assuage the Zarates’ deep mental anguish over their son’s unexpected
and violent death, and their moral shock over the senseless accident. That amount would not be too much, considering
that it would help the Zarates obtain the means, diversions or amusements that would alleviate their suffering for the
loss of their child. At any rate, reducing the amount as excessive might prove to be an injustice, given the passage of
a long time from when their mental anguish was inflicted on them on August 22, 1996.

Anent the ₱ 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to render effective
the desired example for the public good. As a common carrier, the Pereñas needed to be vigorously reminded to
observe their duty to exercise extraordinary diligence to prevent a similarly senseless accident from happening again.
Only by an award of exemplary damages in that amount would suffice to instill in them and others similarly situated
like them the ever-present need for greater and constant vigilance in the conduct of a business imbued with public
interest.

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on November 13,
2002; and ORDER the petitioners to pay the costs of suit.
G.R. No. 186312 June 29, 2010

SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,

vs.
SUN HOLIDAYS, INC., Respondent.

DECISION

CARPIO MORALES, J.:

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).

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 ₱4,000,000.

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 ₱10,000 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 ₱300,000.

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.

Petitioners correctly rely on De Guzman v. Court of Appeals17 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.

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 176427 vis-à-vis Article 220628 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 ₱50,000.29

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 $90035 which, when converted to
Philippine peso applying the annual average exchange rate of $1 = ₱44 in 2000,36 amounts to ₱39,600. Ruelito’s net
earning capacity is thus computed as follows:

Net Earning = life expectancy x (gross annual income - reasonable and necessary living
Capacity expenses).
= 35 x (₱475,200 - ₱237,600)
= 35 x (₱237,600)

Net Earning
= ₱8,316,000
Capacity

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-à-vis Article 2206 of the Civil Code, petitioners are entitled
to moral damages.

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 ₱100,000 as moral damages and
₱100,000 as exemplary damages.38 1avvphi1

Pursuant to Article 220839 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 Appeals40 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.

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) ₱50,000 as indemnity for the
death of Ruelito Cruz; (2) ₱8,316,000 as indemnity for Ruelito’s loss of earning capacity; (3) ₱100,000 as moral
damages; (4) ₱100,000 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.
 G.R. No. 112287 December 12, 1997

NATIONAL STEEL CORPORATION, Petitioner, v. COURT OF APPEALS AND VLASONS SHIPPING,

INC., Respondents.

G.R. No. 112350 December 12, 1997

VLASONS SHIPPING, INC., Petitioner, v. COURT OF APPEALS AND NATIONAL STEEL

CORPORATION, Respondents.

PANGANIBAN, J.:

The Court finds occasion to apply the rules on the seaworthiness of private carrier, its owner's responsibility for
damage to the cargo and its liability for demurrage and attorney's fees. The Court also reiterates the well-known
rule that findings of facts of trial courts, when affirmed by the Court of Appeals, are binding on this Court.

The Case

Before us are two separate petitions for review filed by National Steel Corporation (NSC) and Vlasons Shipping,
Inc. (VSI), both of which assail the August 12, 1993 Decision of the Court of Appeals. 1 The Court of Appeals
modified the decision of the Regional Trial Court of Pasig, Metro Manila, Branch 163 in Civil Case No. 23317.
The RTC disposed as follows:

WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff dismissing the
complaint with cost against plaintiff, and ordering plaintiff to pay the defendant on the counterclaim as follows:

1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal rate on both
amounts from April 7, 1976 until the same shall have been fully paid;

2. Attorney's fees and expenses of litigation in the sum of P100,000.00; and

3. Costs of suit.

SO ORDERED. 2

On the other hand, the Court of Appeals ruled:

WHEREFORE, premises considered, the decision appealed from is modified by reducing the award for
demurrage to P44,000.00 and deleting the award for attorney's fees and expenses of litigation. Except as thus
modified, the decision is AFFIRMED. There is no pronouncement as to costs.

SO ORDERED. 3

The Facts

The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or shipment
for the general public. Its services are available only to specific persons who enter into a special contract of
charter party with its owner. It is undisputed that the ship is a private carrier. And it is in the capacity that its
owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of voyage charter hire with
National Steel Corporation.

The facts as found by Respondent Court of Appeals are as follows:

(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons Shipping,
Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire (Exhibit "B"; also Exhibit "1") whereby NSC
hired VSI's vessel, the MV "VLASONS I" to make one (1) voyage to load steel products at Iligan City and
discharge them at North Harbor, Manila, under the following terms and conditions, viz:

1. . . .

2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option.

3. . . .

4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Bill of Lading within fifteen
(15) days.

5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.

6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive hours,
Sundays and Holidays Included).

7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.

8. . . .

9. Cargo Insurance: Charterer's and/or Shipper's must insure the cargoes. Shipowners not responsible for
losses/damages except on proven willful negligence of the officers of the vessel.

10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized Charter Party
Agreement shall form part of this Contract.

xxx xxx xxx

The terms "F.I.O.S.T." which is used in the shipping business is a standard provision in the NANYOZAI Charter
Party which stands for "Freight In and Out including Stevedoring and Trading", which means that the handling,
loading and unloading of the cargoes are the responsibility of the Charterer. Under Paragraph 5 of the
NANYOZAI Charter Party, it states, "Charterers to load, stow and discharge the cargo free of risk and expenses
to owners. . . . (Emphasis supplied).

Under paragraph 10 thereof, it is provided that "(o)wners shall, before and at the beginning of the voyage,
exercise due diligence to make the vessel seaworthy and properly manned, equipped and supplied and to make
the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and
preservation. Owners shall not be liable for loss of or damage of the cargo arising or resulting from:
unseaworthiness unless caused by want of due diligence on the part of the owners to make the vessel seaworthy,
and to secure that the vessel is properly manned, equipped and supplied and to make the holds and all other
parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and preservation; . . . ; perils,
dangers and accidents of the sea or other navigable waters; . . . ; wastage in bulk or weight or any other loss or
damage arising from inherent defect, quality or vice of the cargo; insufficiency of packing; . . . ; latent defects not
discoverable by due diligence; any other cause arising without the actual fault or privity of Owners or without the
fault of the agents or servants of owners."

Paragraph 12 of said NANYOZAI Charter Party also provides that "(o)wners shall not be responsible for split,
chafing and/or any damage unless caused by the negligence or default of the master and crew."

(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV "VLASONS I"
loaded at plaintiffs pier at Iligan City, the NSC's shipment of 1,677 skids of tinplates and 92 packages of hot
rolled sheets or a total of 1,769 packages with a total weight of about 2,481.19 metric tons for carriage to Manila.
The shipment was placed in the three (3) hatches of the ship. Chief Mate Gonzalo Sabando, acting as agent of
the vessel[,] acknowledged receipt of the cargo on board and signed the corresponding bill of lading, B.L.P.P.
No. 0233 (Exhibit "D") on August 8, 1974.

(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The following day,
August 13, 1974, when the vessel's three (3) hatches containing the shipment were opened by plaintiff's agents,
nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. The cargo was
discharged and unloaded by stevedores hired by the Charterer. Unloading was completed only on August 24,
1974 after incurring a delay of eleven (11) days due to the heavy rain which interrupted the unloading operations.
(Exhibit "E")

(4) To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment by
the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated March 17, 1975 (Exhibit
"G"), MASCO made a report of its ocular inspection conducted on the cargo, both while it was still on board the
vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was taken and stored.
MASCO reported that it found wetting and rusting of the packages of hot rolled sheets and metal covers of the
tinplates; that tarpaulin hatch covers were noted torn at various extents; that container/metal casings of the skids
were rusting all over. MASCO ventured the opinion that "rusting of the tinplates was caused by contact with SEA
WATER sustained while still on board the vessel as a consequence of the heavy weather and rough seas
encountered while en route to destination (Exhibit "F"). It was also reported that MASCO's surveyors drew at
random samples of bad order packing materials of the tinplates and delivered the same to the M.I.T. Testing
Laboratories for analysis. On August 31, 1974, the M.I.T. Testing Laboratories issued Report No. 1770 (Exhibit
"I") which in part, states, "The analysis of bad order samples of packing materials . . . shows that wetting was
caused by contact with SEA WATER".

(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the defendant its
claim for damages suffered due to the downgrading of the damaged tinplates in the amount of P941,145.18.
Then on October 3, 1974, plaintiff formally demanded payment of said claim but defendant VSI refused and
failed to pay. Plaintiff filed its complaint against defendant on April 21, 1976 which was docketed as Civil Case
No. 23317, CFI, Rizal.

(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount of P941,145.18 as a result
of the act, neglect and default of the master and crew in the management of the vessel as well as the want of
due diligence on the part of the defendant to make the vessel seaworthy and to make the holds and all other
parts of the vessel in which the cargo was carried, fit and safe for its reception, carriage and preservation - all in
violation of defendant's undertaking under their Contract of Voyage Charter Hire.

(7) In its answer, defendant denied liability for the alleged damage claiming that the MV "VLASONS I" was
seaworthy in all respects for the carriage of plaintiff's cargo; that said vessel was not a "common carrier"
inasmuch as she was under voyage charter contract with the plaintiff as charterer under the charter party; that
in the course of the voyage from Iligan City to Manila, the MV "VLASONS I" encountered very rough seas, strong
winds and adverse weather condition, causing strong winds and big waves to continuously pound against the
vessel and seawater to overflow on its deck and hatch covers, that under the Contract of Voyage Charter Hire,
defendant shall not be responsible for losses/damages except on proven willful negligence of the officers of the
vessel, that the officers of said MV "VLASONS I" exercised due diligence and proper seamanship and were not
willfully negligent; that furthermore the Voyage Charter Party provides that loading and discharging of the cargo
was on FIOST terms which means that the vessel was free of risk and expense in connection with the loading
and discharging of the cargo; that the damage, if any, was due to the inherent defect, quality or vice of the cargo
or to the insufficient packing thereof or to latent defect of the cargo not discoverable by due diligence or to any
other cause arising without the actual fault or privity of defendant and without the fault of the agents or servants
of defendant; consequently, defendant is not liable; that the stevedores of plaintiff who discharged the cargo in
Manila were negligent and did not exercise due care in the discharge of the cargo; land that the cargo was
exposed to rain and seawater spray while on the pier or in transit from the pier to plaintiff's warehouse after
discharge from the vessel; and that plaintiff's claim was highly speculative and grossly exaggerated and that the
small stain marks or sweat marks on the edges of the tinplates were magnified and considered total loss of the
cargo. Finally, defendant claimed that it had complied with all its duties and obligations under the Voyage Charter
Hire Contract and had no responsibility whatsoever to plaintiff. In turn, it alleged the following counterclaim:

(a) That despite the full and proper performance by defendant of its obligations under the Voyage Charter Hire
Contract, plaintiff failed and refused to pay the agreed charter hire of P75,000.00 despite demands made by
defendant;

(b) That under their Voyage Charter Hire Contract, plaintiff had agreed to pay defendant the sum of P8,000.00
per day for demurrage. The vessel was on demurrage for eleven (11) days in Manila waiting for plaintiff to
discharge its cargo from the vessel. Thus, plaintiff was liable to pay defendant demurrage in the total amount of
P88,000.00.

(c) For filing a clearly unfounded civil action against defendant, plaintiff should be ordered to pay defendant
attorney's fees and all expenses of litigation in the amount of not less than P100,000.00.

(8) From the evidence presented by both parties, the trial court came out with the following findings which were
set forth in its decision:

(a) The MV "VLASONS I" is a vessel of Philippine registry engaged in the tramping service and is available for
hire only under special contracts of charter party as in this particular case.

(b) That for purposes of the voyage covered by the Contract of Voyage Charter Hire (Exh. "1"), the MV VLASONS
I" was covered by the required seaworthiness certificates including the Certification of Classification issued by
an international classification society, the NIPPON KAIJI KYOKAI (Exh. "4"); Coastwise License from the Board
of Transportation (Exh. "5"); International Loadline Certificate from the Philippine Coast Guard (Exh. "6"); Cargo
Ship Safety Equipment Certificate also from the Philippine Coast Guard (Exh. "7"); Ship Radio Station License
(Exh. "8"); Certificate of Inspection by the Philippine Coast Guard (Exh. "12"); and Certificate of Approval for
Conversion issued by the Bureau of Customs (Exh. "9"). That being a vessel engaged in both overseas and
coastwise trade, the MV "VLASONS I" has a higher degree of seaworthiness and safety.

(c) Before it proceeded to Iligan City to perform the voyage called for by the Contract of Voyage Charter Hire,
the MV "VLASONS I" underwent drydocking in Cebu and was thoroughly inspected by the Philippine Coast
Guard. In fact, subject voyage was the vessel's first voyage after the drydocking. The evidence shows that the
MV "VLASONS I" was seaworthy and properly manned, equipped and supplied when it undertook the voyage.
It has all the required certificates of seaworthiness.

(d) The cargo/shipment was securely stowed in three (3) hatches of the ship. The hatch openings were covered
by hatchboards which were in turn covered by two or double tarpaulins. The hatch covers were water tight.
Furthermore, under the hatchboards were steel beams to give support.

(e) The claim of the plaintiff that defendant violated the contract of carriage is not supported by evidence. The
provisions of the Civil Code on common carriers pursuant to which there exists a presumption of negligence in
case of loss or damage to the cargo are not applicable. As to the damage to the tinplates which was allegedly
due to the wetting and rusting thereof, there is unrebutted testimony of witness Vicente Angliongto that tinplates
"sweat" by themselves when packed even without being in contract (sic) with water from outside especially when
the weather is bad or raining. The trust caused by sweat or moisture on the tinplates may be considered as a
loss or damage but then, defendant cannot be held liable for it pursuant to Article 1734 of the Civil Case which
exempts the carrier from responsibility for loss or damage arising from the "character of the goods . . ." All the
1,769 skids of the tinplates could not have been damaged by water as claimed by plaintiff. It was shown as
claimed by plaintiff that the tinplates themselves were wrapped in kraft paper lining and corrugated cardboards
could not be affected by water from outside.

(f) The stevedores hired by the plaintiff to discharge the cargo of tinplates were negligent in not closing the hatch
openings of the MV "VLASONS I" when rains occurred during the discharging of the cargo thus allowing
rainwater to enter the hatches. It was proven that the stevedores merely set up temporary tents to cover the
hatch openings in case of rain so that it would be easy for them to resume work when the rains stopped by just
removing the tent or canvas. Because of this improper covering of the hatches by the stevedores during the
discharging and unloading operations which were interrupted by rains, rainwater drifted into the cargo through
the hatch openings. Pursuant to paragraph 5 of the NANYOSAI [sic] Charter Party which was expressly made
part of the Contract of Voyage Charter Hire, the loading, stowing and discharging of the cargo is the sole
responsibility of the plaintiff charterer and defendant carrier has no liability for whatever damage may occur or
maybe [sic] caused to the cargo in the process.

(g) It was also established that the vessel encountered rough seas and bad weather while en route from Iligan
City to Manila causing sea water to splash on the ship's deck on account of which the master of the vessel (Mr.
Antonio C. Dumlao) filed a "Marine Protest" on August 13, 1974 (Exh. "15"); which can be invoked by defendant
as a force majeure that would exempt the defendant from liability.

(h) Plaintiff did not comply with the requirement prescribed in paragraph 9 of the Voyage Charter Hire contract
that it was to insure the cargo because it did not. Had plaintiff complied with the requirement, then it could have
recovered its loss or damage from the insurer. Plaintiff also violated the charter party contract when it loaded not
only "steel products", i.e. steel bars, angular bars and the like but also tinplates and hot rolled sheets which are
high grade cargo commanding a higher freight. Thus plaintiff was able to ship grade cargo at a lower freight rate.

(i) As regards defendant's counterclaim, the contract of voyage charter hire under Paragraph 4 thereof, fixed the
freight at P30.00 per metric ton payable to defendant carrier upon presentation of the bill of lading within fifteen
(15) days. Plaintiff has not paid the total freight due of P75,000.00 despite demands. The evidence also showed
that the plaintiff was required and bound under paragraph 7 of the same Voyage Charter Hire contract to pay
demurrage of P8,000.00 per day of delay in the unloading of the cargoes. The delay amounted to eleven (11)
days thereby making plaintiff liable to pay defendant for demurrage in the amount of P88,000.00.

Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:

The trial court erred in finding that the MV "VLASONS I" was seaworthy, properly manned, equipped and
supplied, and that there is no proof of willful negligence of the vessel's officers.

II

The trial court erred in finding that the rusting of NSC's tinplates was due to the inherent nature or character of
the goods and not due to contact with seawater.

III

The trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of NSC's
shipment.

IV

The trial court erred in exempting VSI from liability on the ground of force majeure.

The trial court erred in finding that NSC violated the contract of voyage charter hire.

VI

The trial court erred in ordering NSC to pay freight, demurrage and attorney's fees, to VSI. 4
As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the demurrage from
P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of litigation. NSC and VSI
filed separate motions for reconsideration. In a Resolution 5 dated October 20, 1993, the appellate court denied
both motions. Undaunted, NSC and VSI filed their respective petitions for review before this Court. On motion of
VSI, the Court ordered on February 14, 1994 the consolidation of these petitions. 6

The Issues

In its petition 7 and memorandum, 8 NSC raises the following questions of law and fact:

Questions of Law

1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading delays caused by weather
interruption;

2. Whether or not the alleged "seaworthiness certificates" (Exhibits "3", "4", "5", "6", "7", "8", "9", "11" and "12")
were admissible in evidence and constituted evidence of the vessel's seaworthiness at the beginning of the
voyages; and

3. Whether or not a charterer's failure to insure its cargo exempts the shipowner from liability for cargo damage.

Questions of Fact

1. Whether or not the vessel was seaworthy and cargo-worthy;

2. Whether or not vessel's officers and crew were negligent in handling and caring for NSC's cargo;

3. Whether or not NSC's cargo of tinplates did sweat during the voyage and, hence, rusted on their own; and

4. Whether or not NSC's stevedores were negligent and caused the wetting[/]rusting of NSC's tinplates.

In its separate petition, 9 VSI submits for the consideration of this Court the following alleged errors of the CA:

A. The respondent Court of Appeals committed an error of law in reducing the award of demurrage from
P88,000.00 to P44,000.00.

B. The respondent Court of Appeals committed an error of law in deleting the award of P100,000 for attorney's
fees and expenses of litigation.

Amplifying the foregoing, VSI raises the following issues in its memorandum: 10

I. Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant to which there
exist[s] a presumption of negligence against the common carrier in case of loss or damage to the cargo are
applicable to a private carrier.

II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire, including the Nanyozai
Charter, are valid and binding on both contracting parties.

The foregoing issues raised by the parties will be discussed under the following headings:

1. Questions of Fact

2. Effect of NSC's Failure to Insure the Cargo

3. Admissibility of Certificates Proving Seaworthiness

4. Demurrage and Attorney's Fees.

The Court's Ruling

The Court affirms the assailed Decision of the Court of Appeals, except in respect of the demurrage.

Preliminary Matter: Common Carrier or Private Carrier?

At the outset, it is essential to establish whether VSI contracted with NSC as a common carrier or as a private
carrier. The resolution of this preliminary question determines the law, standard of diligence and burden of proof
applicable to the present case.

Article 1732 of the Civil Code defines a common carrier 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 has been held that the true test of a common carrier is the carriage of
passengers or goods, provided it has space, for all who opt to avail themselves of its transportation service for
a fee. 11 A carrier which does not qualify under the above test is deemed a private carrier. "Generally, private
carriage is undertaken by special agreement and the carrier does not hold himself out to carry goods for the
general public. The most typical, although not the only form of private carriage, is the charter party, a maritime
contract by which the charterer, a party other than the shipowner, obtains the use and service of all or some part
of a ship for a period of time or a voyage or voyages." 12

In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by the
Regional Trial Court, it carried passengers or goods only for those it chose under a "special contract of charter
party." 13 As correctly concluded by the Court of Appeals, the MV Vlasons I "was not a common but a private
carrier." 14 Consequently, the rights and obligations of VSI and NSC, including their respective liability for damage
to the cargo, are determined primarily by stipulations in their contract of private carriage or charter
party. 15 Recently, in Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers
Shipping Corporation, 16 the Court ruled:

. . . in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce
would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the
general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public
cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the
public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the
protection given by law in contracts involving common carriers. 17

Extent of VSI's Responsibility and

Liability Over NSC's Cargo

It is clear from the parties' Contract of Voyage Charter Hire, dated July 17, 1974, that VSI "shall not be
responsible for losses except on proven willful negligence of the officers of the vessel." The NANYOZAI Charter
Party, which was incorporated in the parties' contract of transportation further provided that the shipowner shall
not be liable for loss of or a damage to the cargo arising or resulting from unseaworthiness, unless the same
was caused by its lack of due diligence to make the vessel seaworthy or to ensure that the same was "properly
manned, equipped and supplied," and to "make the holds and all other parts of the vessel in which cargo [was]
carried, fit and safe for its reception, carriage and preservation." 18 The NANYOZAI Charter Party also provided
that "[o]wners shall not be responsible for split, chafing and/or any damage unless caused by the negligence or
default of the master or crew." 19

Burden of Proof
In view of the aforementioned contractual stipulations, NSC must prove that the damage to its shipment was
caused by VSI's willful negligence or failure to exercise due diligence in making MV Vlasons I seaworthy and fit
for holding, carrying and safekeeping the cargo. Ineluctably, the burden of proof was placed on NSC by the
parties' agreement.

This view finds further support in the Code of Commerce which pertinently provides:

Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been
expressly stipulated.

Therefore, the damage and impairment suffered by the goods during the transportation, due to fortuitous
event, force majeure, or the nature and inherent defect of the things, shall be for the account and risk of the
shipper.

The burden of proof of these accidents is on the carrier.

Art. 362. The carrier, however, shall be liable for damages arising from the cause mentioned in the preceding
article if proofs against him show that they occurred on account of his negligence or his omission to take the
precautions usually adopted by careful persons, unless the shipper committed fraud in the bill of lading, making
him to believe that the goods were of a class or quality different from what they really were.

Because the MV Vlasons I was a private carrier, the shipowner's obligations are governed by the foregoing
provisions of the Code of Commerce and not by the Civil Code which, as a general rule, places the prima
facie presumption of negligence on a common carrier. It is a hornbook doctrine that:

In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove that the
carrier was negligent or unseaworthy, and the fact that the goods were lost or damaged while in the carrier's
custody does not put the burden of proof on the carrier.

Since . . . a private carrier is not an insurer but undertakes only to exercise due care in the protection of the
goods committed to its care, the burden of proving negligence or a breach of that duty rests on plaintiff and proof
of loss of, or damage to, cargo while in the carrier's possession does not cast on it the burden of proving proper
care and diligence on its part or that the loss occurred from an excepted cause in the contract or bill of lading.
However, in discharging the burden of proof, plaintiff is entitled to the benefit of the presumptions and inferences
by which the law aids the bailor in an action against a bailee, and since the carrier is in a better position to know
the cause of the loss and that it was not one involving its liability, the law requires that it come forward with the
information available to it, and its failure to do so warrants an inference or presumption of its liability. However,
such inferences and presumptions, while they may affect the burden of coming forward with evidence, do not
alter the burden of proof which remains on plaintiff, and, where the carrier comes forward with evidence
explaining the loss or damage, the burden of going forward with the evidence is again on plaintiff.

Where the action is based on the shipowner's warranty of seaworthiness, the burden of proving a breach thereof
and that such breach was the proximate cause of the damage rests on plaintiff, and proof that the goods were
lost or damaged while in the carrier's possession does not cast on it the burden of proving seaworthiness. . . .
Where the contract of carriage exempts the carrier from liability for unseaworthiness not discoverable by due
diligence, the carrier has the preliminary burden of proving the exercise of due diligence to make the vessel
seaworthy. 20

In the instant case, the Court of Appeals correctly found the NSC "has not taken the correct position in relation
to the question of who has the burden of proof. Thus, in its brief (pp. 10-11), after citing Clause 10 and Clause
12 of the NANYOZAI Charter Party (incidentally plaintiff-appellant's [NSC's] interpretation of Clause 12 is not
even correct), it argues that 'a careful examination of the evidence will show that VSI miserably failed to comply
with any of these obligation's as if defendant-appellee [VSI] had the burden of
proof." 21
First Issue: Questions of Fact

Based on the foregoing, the determination of the following factual questions is manifestly relevant: (1) whether
VSI exercised due diligence in making MV Vlasons I seaworthy for the intended purpose under the charter party;
(2) whether the damage to the cargo should be attributed to the willful negligence of the officers and crew of the
vessel or of the stevedores hired by NSC; and (3) whether the rusting of the tinplates was caused by its own
"sweat" or by contact with seawater.

These questions of fact were threshed out and decided by the trial court, which had the firsthand opportunity to
hear the parties' conflicting claims and to carefully weigh their respective evidence. The findings of the trial court
were subsequently affirmed by the Court of Appeals. Where the factual findings of both the trial court and the
Court of Appeals coincide, the same are binding on this Court. 22 We stress that, subject to some exceptional
instances, 23 only questions of law - not questions of fact - may be raised before this Court in a petition for review
under Rule 45 of the Rules of Court. After a thorough review of the case at bar, we find no reason to disturb the
lower court's factual findings, as indeed NSC has not successfully proven the application of any of the aforecited
exceptions.

Was MV Vlasons I Seaworthy?

In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy and fit for the
carriage of NSC's cargo of steel and tinplates. This is shown by the fact that it was drylocked and inspected by
the Philippine Coast Guard before it proceeded to Iligan City for its voyage to Manila under the contract of voyage
charter hire. 24 The vessel's voyage from Iligan to Manila was the vessel's first voyage after drydocking. The
Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it met all requirements for
trading as cargo vessel. 25 The Court of Appeals itself sustained the conclusion of the trial court that MV Vlasons
I was seaworthy. We find no reason to modify or reverse this finding of both the trial and the appellate courts.

Who Were Negligent:

Seamen or Stevedores?

As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused by the negligence
of the officers and the crew of MV Vlasons I in making their vessel seaworthy and fit for the carriage of tinplates.
NSC failed to discharge this burden.

Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn tarpaulin or canvas to
cover the hatches through which the cargo was loaded into the cargo hold of the ship. It faults the Court of
Appeals for failing to consider such claim as an "uncontroverted fact" 26 and denies that MV Vlasons I "was
equipped with new canvas covers in tandem with the old ones as indicated in the Marine Protest . . ." 27 We
disagree.

The records sufficiently support VSI's contention that the ship used the old tarpaulin, only in addition to the new
one used primarily to make the ship's hatches watertight. The foregoing are clear from the marine protest of the
master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the ship's boatswain, Jose Pascua. The
salient portions of said marine protest read:

. . . That the M/V "VLASONS I" departed Iligan City or about 0730 hours of August 8, 1974, loaded with
approximately 2,487.9 tons of steel plates and tin plates consigned to National Steel Corporation; that before
departure, the vessel was rigged, fully equipped and cleared by the authorities; that on or about August 9, 1974,
while in the vicinity of the western part of Negros and Panay, we encountered very rough seas and strong winds
and Manila office was advised by telegram of the adverse weather conditions encountered; that in the morning
of August 10, 1974, the weather condition changed to worse and strong winds and big waves continued pounding
the vessel at her port side causing sea water to overflow on deck andhatch (sic) covers and which caused the
first layer of the canvass covering to give way while the new canvass covering still holding on;
That the weather condition improved when we reached Dumali Point protected by Mindoro; that we re-secured
the canvass covering back to position; that in the afternoon of August 10, 1974, while entering Maricaban
Passage, we were again exposed to moderate seas and heavy rains; that while approaching Fortune Island, we
encountered again rough seas, strong winds and big waves which caused the same canvass to give way and
leaving the new canvass holding on;

xxx xxx xxx 28

And the relevant portions of Jose Pascua's deposition are as follows:

q What is the purpose of the canvas cover?

a So that the cargo would not be soaked with water.

q And will you describe how the canvas cover was secured on the hatch opening?

WITNESS

a It was placed flat on top of the hatch cover, with a little canvas flowing over the sides and we place[d] a flat bar
over the canvas on the side of the hatches and then we place[d] a stopper so that the canvas could not be
removed.

ATTY DEL ROSARIO

q And will you tell us the size of the hatch opening? The length and the width of the hatch opening.

a Forty-five feet by thirty-five feet, sir.

xxx xxx xxx

q How was the canvas supported in the middle of the hatch opening?

a There is a hatch board.

ATTY DEL ROSARIO

q What is the hatch board made of?

a It is made of wood, with a handle.

q And aside from the hatch board, is there any other material there to cover the hatch?

a There is a beam supporting the hatch board.

q What is this beam made of?

a It is made of steel, sir.

q Is the beam that was placed in the hatch opening covering the whole hatch opening?

a No, sir.

q How many hatch beams were there placed across the opening?
a There are five beams in one hatch opening.

ATTY DEL ROSARIO

q And on top of the beams you said there is a hatch board. How many pieces of wood are put on top?

a Plenty, sir, because there are several pieces on top of the hatch beam.

q And is there a space between the hatch boards?

a There is none, sir.

q They are tight together?

a Yes, sir.

q How tight?

a Very tight, sir.

q Now, on top of the hatch boards, according to you, is the canvass cover. How many canvas covers?

a Two, sir. 29

That due diligence was exercised by the officers and the crew of the MV Vlasons I was further demonstrated by
the fact that, despite encountering rough weather twice, the new tarpaulin did not give way and the ship's hatches
and cargo holds remained waterproof. As aptly stated by the Court of Appeals, ". . . we find no reason not to
sustain the conclusion of the lower court based on overwhelming evidence, that the MV 'VLASONS I' was
seaworthy when it undertook the voyage on August 8, 1974 carrying on board thereof plaintiff-appellant's
shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages from
NSC's pier in Iligan City arriving safely at North Harbor, Port Area, Manila, on August 12, 1974; . . . 30

Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the crew of MV
Vlasons I. On the contrary, the records reveal that it was the stevedores of NSC who were negligent in unloading
the cargo from the ship.

The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned by a
passing typhoon disrupted the unloading of the cargo. This tent-like covering, however, was clearly inadequate
for keeping rain and seawater away from the hatches of the ship. Vicente Angliongto, an officer of VSI, testified
thus:

ATTY ZAMORA:

Q Now, during your testimony on November 5, 1979, you stated on August 14 you went on board the vessel
upon notice from the National Steel Corporation in order to conduct the inspection of the cargo. During the course
of the investigation, did you chance to see the discharging operation?

WITNESS:

A Yes, sir, upon my arrival at the vessel, I saw some of the tinplates already discharged on the pier but majority
of the tinplates were inside the hall, all the hatches were opened.

Q In connection with these cargoes which were unloaded, where is the place.
A At the Pier.

Q What was used to protect the same from weather?

ATTY LOPEZ:

We object, your Honor, this question was already asked. This particular matter . . . the transcript of stenographic
notes shows the same was covered in the direct examination.

ATTY ZAMORA:

Precisely, your Honor, we would like to go on detail, this is the serious part of the testimony.

COURT:

All right, witness may answer.

ATTY LOPEZ:

Q What was used in order to protect the cargo from the weather?

A A base of canvas was used as cover on top of the tin plates, and tents were built at the opening of the hatches.

Q You also stated that the hatches were already opened and that there were tents constructed at the opening
of the hatches to protect the cargo from the rain. Now, will you describe [to] the Court the tents constructed.

A The tents are just a base of canvas which look like a tent of an Indian camp raise[d] high at the middle with
the whole side separated down to the hatch, the size of the hatch and it is soaks [sic] at the middle because of
those weather and this can be used only to temporarily protect the cargo from getting wet by rains.

Q Now, is this procedure adopted by the stevedores of covering tents proper?

A No, sir, at the time they were discharging the cargo, there was a typhoon passing by and the hatch tent was
not good enough to hold all of it to prevent the water soaking through the canvass and enter the cargo.

Q In the course of your inspection, Mr. Anglingto [sic], did you see in fact the water enter and soak into the
canvass and tinplates.

A Yes, sir, the second time I went there, I saw it.

Q As owner of the vessel, did you not advise the National Steel Corporation [of] the procedure adopted by its
stevedores in discharging the cargo particularly in this tent covering of the hatches?

A Yes, sir, I did the first time I saw it, I called the attention of the stevedores but the stevedores did not mind at
all, so, called the attention of the representative of the National Steel but nothing was done, just the same. Finally,
I wrote a letter to them. 31

NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain immediately about
the stevedores' negligence on the first day of unloading, pointing out that he wrote his letter to petitioner only
seven days later. 32 The Court is not persuaded. Angliongto's candid answer in his aforequoted testimony
satisfactorily explained the delay. Seven days lapsed because he first called the attention of the stevedores, then
the NSC's representative, about the negligent and defective procedure adopted in unloading the cargo. This
series of actions constitutes a reasonable response in accord with common sense and ordinary human
experience. Vicente Angliongto could not be blamed for calling the stevedores' attention first and then the NSC's
representative on location before formally informing NSC of the negligence he had observed, because he was
not responsible for the stevedores or the unloading operations. In fact, he was merely expressing concern for
NSC which was ultimately responsible for the stevedores it had hired and the performance of their task to unload
the cargo.

We see no reason to reverse the trial and the appellate courts' findings and conclusions on this point, viz:

In the THIRD assigned error, [NSC] claims that the trial court erred in finding that the stevedores hired by NSC
were negligent in the unloading of NSC's shipment. We do not think so. Such negligence according to the trial
court is evident in the stevedores hired by [NSC], not closing the hatch of MV 'VLASONS I' when rains occurred
during the discharging of the cargo thus allowing rain water and seawater spray to enter the hatches and to drift
to and fall on the cargo. It was proven that the stevedores merely set up temporary tents or canvas to cover the
hatch openings when it rained during the unloading operations so that it would be easier for them to resume
work after the rains stopped by just removing said tents or canvass. It has also been shown that on August 20,
1974, VSI President Vicente Angliongto wrote [NSC] calling attention to the manner the stevedores hired by
[NSC] were discharging the cargo on rainy days and the improper closing of the hatches which allowed
continuous heavy rain water to leak through and drip to the tinplates' covers and [Vicente Angliongto] also
suggesting that due to four (4) days continuos rains with strong winds that the hatches be totally closed down
and covered with canvas and the hatch tents lowered. (Exh. "13"). This letter was received by [NSC] on 22
August 1974 while discharging operations were still going on (Exhibit "13-A"). 33

The fact that NSC actually accepted and proceeded to remove the cargo from the ship during unfavorable
weather will not make VSI liable for any damage caused thereby. In passing, it may be noted that the NSC may
seek indemnification, subject to the laws on prescription, from the stevedoring company at fault in the discharge
operations. "A stevedore company engaged in discharging cargo . . . has the duty to load the cargo . . . in a
prudent manner, and it is liable for injury to, or loss of, cargo caused by its negligence . . . and where the officers
and members and crew of the vessel do nothing and have no responsibility in the discharge of cargo by
stevedores . . . the vessel is not liable for loss of, or damage to, the cargo caused by the negligence of the
stevedores . . ." 34 as in the instant case.

Do Tinplates "Sweat"?

The trial court relied on the testimony of Vicente Angliongto in finding that ". . . tinplates 'sweat' by themselves
when packed even without being in contact with water from outside especially when the weather is bad or
raining . . ." 35 The Court of Appeals affirmed the trial court's finding.

A discussion of this issue appears inconsequential and unnecessary. As previously discussed, the damage to
the tinplates was occasioned not by airborne moisture but by contact with rain and seawater which the
stevedores negligently allowed to seep in during the unloading.

Second Issue: Effect of NSC's Failure to

Insure the Cargo

The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally separate
and distinct from the contractual or statutory responsibility that may be incurred by VSI for damage to the cargo
caused by the willful negligence of the officers and the crew of MV Vlasons I. Clearly, therefore, NSC's failure to
insure the cargo will not affect its right, as owner and real party in interest, to file an action against VSI for
damages caused by the latter's willful negligence. We do not find anything in the charter party that would make
the liability of VSI for damage to the cargo contingent on or affected in any manner by NSC's obtaining an
insurance over the cargo.

Third Issue: Admissibility of Certificates

Proving Seaworthiness
NSC's contention that MV Vlasons I was not seaworthy is anchored on the alleged inadmissibility of the
certificates of seaworthiness offered in evidence by VSI. The said certificates include the following:

1. Certificate of Inspection of the Philippines Coast Guard at Cebu

2. Certificate of Inspection from the Philippine Coast Guard

3. International Load Line Certificate from the Philippine Coast Guard

4. Coastwise License from the Board of Transportation

5. Certificate of Approval for Conversion issued by the Bureau of Customs 36

NSC argues that the certificates are hearsay for not having been presented in accordance with the Rules of
Court. It points out that Exhibits 3, 4 and 11 allegedly are "not written records or acts of public officers"; while
Exhibits 5, 6, 7, 8, 9, 11 and 12 are not "evidenced by official publications or certified true copies" as required by
Sections 25 and 26, Rule 132, of the Rules of Court. 37

After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are
inadmissible, for they have not been properly offered as evidence. Exhibits 3 and 4 are certificates issued by
private parties, but they have not been proven by one who saw the writing executed, or by evidence of the
genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits, 5, 6, 7, 8, 9, and 12 are
photocopies, but their admission under the best evidence rule have not been demonstrated.

We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay rule per Section 44
of Rule 130 of the Rules of Court, which provides that "(e)ntries in official records made in the performance of a
duty by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined by law,
are prima facie evidence of the facts therein stated." 38 Exhibit 11 is an original certificate of the Philippine Coast
Guard in Cebu issued by Lieutenant Junior Grade Noli C. Flores to the effect that "the vessel 'VLASONS I' was
drydocked . . . and PCG Inspectors were sent on board for inspection . . . After completion of drydocking and
duly inspected by PCG Inspectors, the vessel 'VLASONS I', a cargo vessel, is in seaworthy condition, meets all
requirements, fitted and equipped for trading as a cargo vessel was cleared by the Philippine Coast Guard and
sailed for Cebu Port on July 10, 1974." (sic) NSC's claim, therefore, is obviously misleading and erroneous.

At any rate, it should be stressed that NSC has the burden of proving that MV Vlasons I was not seaworthy. As
observed earlier, the vessel was a private carrier and, as such, it did not have the obligation of a common carrier
to show that it was seaworthy. Indeed, NSC glaringly failed to discharge its duty of proving the willful negligence
of VSI in making the ship seaworthy resulting in damage to its cargo. Assailing the genuineness of the certificate
of seaworthiness is not sufficient proof that the vessel was not seaworthy.

Fourth Issue: Demurrage and Attorney's Fees

The contract of voyage charter hire provides inter alia:

xxx xxx xxx

2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option.

xxx xxx xxx

6. Loading/Discharging Rate: 750 tons per WWDSHINC.

7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day. 39

The Court defined demurrage in its strict sense as the compensation provided for in the contract of affreightment
for the detention of the vessel beyond the laytime or that period of time agreed on for loading and unloading of
cargo. 40 It is given to compensate the shipowner for the nonuse of the vessel. On the other hand, the following
is well-settled:

Laytime runs according to the particular clause of the charter party. . . . If laytime is expressed in "running days,"
this means days when the ship would be run continuously, and holidays are not excepted. A qualification of
"weather permitting" excepts only those days when bad weather reasonably prevents the work contemplated. 41

In this case, the contract of voyage charter hire provided for a four-day laytime; it also qualified laytime as
WWDSHINC or weather working days Sundays and holidays included. 42 The running of laytime was thus made
subject to the weather, and would cease to run in the event unfavorable weather interfered with the unloading of
cargo. 43 Consequently, NSC may not be held liable for demurrage as the four-day laytime allowed it did not
lapse, having been tolled by unfavorable weather condition in view of the WWDSHINC qualification agreed upon
by the parties. Clearly, it was error for the trial court and the Court of Appeals to have found and affirmed
respectively that NSC incurred eleven days of delay in unloading the cargo. The trial court arrived at this
erroneous finding by subtracting from the twelve days, specifically August 13, 1974 to August 24, 1974, the only
day of unloading unhampered by unfavorable weather or rain, which was August 22, 1974. Based on our
previous discussion, such finding is a reversible error. As mentioned, the respondent appellate court also erred
in ruling that NSC was liable to VSI for demurrage, even if it reduced the amount by half.

Attorney's Fees

VSI assigns as error of law the Court of Appeals' deletion of the award of attorney's fees. We disagree. While
VSI was compelled to litigate to protect its rights, such fact by itself will not justify an award of attorney's fees
under Article 2208 of the Civil Code when ". . . no sufficient showing of bad faith would be reflected in a party's
persistence in a case other than an erroneous conviction of the righteousness of his cause . . ." 44 Moreover,
attorney's fees may not be awarded to a party for the reason alone that the judgment rendered was favorable to
the latter, as this is tantamount to imposing a premium on one's right to litigate or seek judicial redress of
legitimate grievances. 45

Epilogue

At bottom, this appeal really hinges on a factual issue: when, how and who caused the damage to the cargo?
Ranged against NSC are two formidable truths. First, both lower courts found that such damage was brought
about during the unloading process when rain and seawater seeped through the cargo due to the fault or
negligence of the stevedores employed by it. Basic is the rule that factual findings of the trial court, when affirmed
by the Court of Appeals, are binding on the Supreme Court. Although there are settled exceptions, NSC has not
satisfactorily shown that this case is one of them. Second, the agreement between the parties - the Contract of
Voyage Charter Hire - placed the burden of proof for such loss or damage upon the shipper, not upon the
shipowner. Such stipulation, while disadvantageous to NSC, is valid because the parties entered into a contract
of private charter, not one of common carriage. Basic too is the doctrine that courts cannot relieve a parry from
the effects of a private contract freely entered into, on the ground that it is allegedly one-sided or unfair to the
plaintiff. The charter party is a normal commercial contract and its stipulations are agreed upon in consideration
of many factors, not the least of which is the transport price which is determined not only by the actual costs but
also by the risks and burdens assumed by the shipper in regard to possible loss or damage to the cargo. In
recognition of such factors, the parties even stipulated that the shipper should insure the cargo to protect itself
from the risks it undertook under the charter party. That NSC failed or neglected to protect itself with such
insurance should not adversely affect VSI, which had nothing to do with such failure or neglect.

WHEREFORE, premises considered, the instant consolidated petitions are hereby DENIED. The questioned
Decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the demurrage awarded to VSI is
deleted. No pronouncement as to costs.
G.R. No. 174156 June 20, 2012

FILCAR TRANSPORT SERVICES, Petitioner,

vs.
JOSE A. ESPINAS, Respondent.

DECISION

BRION, J.:

We resolve the present petition for review on certiorari1 filed by petitioner Filcar Transport Services (Filcar), challenging
the decision2 and the resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 86603.

The facts of the case, gathered from the records, are briefly summarized below.

On November 22, 1998, at around 6:30 p.m., respondent Jose A. Espinas was driving his car along Leon Guinto
Street in Manila. Upon reaching the intersection of Leon Guinto and President Quirino Streets, Espinas stopped his
car. When the signal light turned green, he proceeded to cross the intersection. He was already in the middle of the
intersection when another car, traversing President Quirino Street and going to Roxas Boulevard, suddenly hit and
bumped his car. As a result of the impact, Espinas’ car turned clockwise. The other car escaped from the scene of
the incident, but Espinas was able to get its plate number.

After verifying with the Land Transportation Office, Espinas learned that the owner of the other car, with plate number
UCF-545, is Filcar.

Espinas sent several letters to Filcar and to its President and General Manager Carmen Flor, demanding payment for
the damages sustained by his car. On May 31, 2001, Espinas filed a complaint for damages against Filcar and Carmen
Flor before the Metropolitan Trial Court (MeTC) of Manila, and the case was raffled to Branch 13. In the complaint,
Espinas demanded that Filcar and Carmen Flor pay the amount of ₱97,910.00, representing actual damages
sustained by his car.

Filcar argued that while it is the registered owner of the car that hit and bumped Espinas’ car, the car was assigned
to its Corporate Secretary Atty. Candido Flor, the husband of Carmen Flor. Filcar further stated that when the incident
happened, the car was being driven by Atty. Flor’s personal driver, Timoteo Floresca.

Atty. Flor, for his part, alleged that when the incident occurred, he was attending a birthday celebration at a nearby
hotel, and it was only later that night when he noticed a small dent on and the cracked signal light of the car. On seeing
the dent and the crack, Atty. Flor allegedly asked Floresca what happened, and the driver replied that it was a result
of a "hit and run" while the car was parked in front of Bogota on Pedro Gil Avenue, Manila.

Filcar denied any liability to Espinas and claimed that the incident was not due to its fault or negligence since Floresca
was not its employee but that of Atty. Flor. Filcar and Carmen Flor both said that they always exercised the due
diligence required of a good father of a family in leasing or assigning their vehicles to third parties.

The MeTC Decision

The MeTC, in its decision dated January 20, 2004,4 ruled in favor of Espinas, and ordered Filcar and Carmen Flor,
jointly and severally, to pay Espinas ₱97,910.00 as actual damages, representing the cost of repair, with interest at
6% per annum from the date the complaint was filed; ₱50,000.00 as moral damages; ₱20,000.00 as exemplary
damages; and ₱20,000.00 as attorney’s fees. The MeTC ruled that Filcar, as the registered owner of the vehicle, is
primarily responsible for damages resulting from the vehicle’s operation.

The RTC Decision

The Regional Trial Court (RTC) of Manila, Branch 20, in the exercise of its appellate jurisdiction, affirmed the MeTC
decision.5 The RTC ruled that Filcar failed to prove that Floresca was not its employee as no proof was adduced that
Floresca was personally hired by Atty. Flor. The RTC agreed with the MeTC that the registered owner of a vehicle is
directly and primarily liable for the damages sustained by third persons as a consequence of the negligent or careless
operation of a vehicle registered in its name. The RTC added that the victim of recklessness on the public highways
is without means to discover or identify the person actually causing the injury or damage. Thus, the only recourse is
to determine the owner, through the vehicle’s registration, and to hold him responsible for the damages.

The CA Decision

On appeal, the CA partly granted the petition in CA-G.R. SP No. 86603; it modified the RTC decision by ruling that
Carmen Flor, President and General Manager of Filcar, is not personally liable to Espinas. The appellate court pointed
out that, subject to recognized exceptions, the liability of a corporation is not the liability of its corporate officers
because a corporate entity – subject to well-recognized exceptions – has a separate and distinct personality from its
officers and shareholders. Since the circumstances in the case at bar do not fall under the exceptions recognized by
law, the CA concluded that the liability for damages cannot attach to Carmen Flor.

The CA, however, affirmed the liability of Filcar to pay Espinas damages. According to the CA, even assuming that
there had been no employer-employee relationship between Filcar and the driver of the vehicle, Floresca, the former
can be held liable under the registered owner rule.

The CA relied on the rule that the registered owner of a vehicle is directly and primarily responsible to the public and
to third persons while the vehicle is being operated. Citing Erezo, et al. v. Jepte, 6 the CA said that the rationale behind
the rule is to avoid circumstances where vehicles running on public highways cause accidents or injuries to
pedestrians or other vehicles without positive identification of the owner or drivers, or with very scant means of
identification. In Erezo, the Court said that the main aim of motor vehicle registration is to identify the owner, so that if
a vehicle causes damage or injury to pedestrians or other vehicles, responsibility can be traced to a definite individual
and that individual is the registered owner of the vehicle.7

The CA did not accept Filcar’s argument that it cannot be held liable for damages because the driver of the vehicle
was not its employee. In so ruling, the CA cited the case of Villanueva v. Domingo 8 where the Court said that the
question of whether the driver was authorized by the actual owner is irrelevant in determining the primary and direct
responsibility of the registered owner of a vehicle for accidents, injuries and deaths caused by the operation of his
vehicle.

Filcar filed a motion for reconsideration which the CA denied in its Resolution dated July 6, 2006.

Hence, the present petition.

The Issue

Simply stated, the issue for the consideration of this Court is: whether Filcar, as registered owner of the motor vehicle
which figured in an accident, may be held liable for the damages caused to Espinas.

Our Ruling

The petition is without merit.

Filcar, as registered owner, is deemed the employer of the driver, Floresca, and is thus vicariously liable under Article
2176 in relation with Article 2180 of the Civil Code

It is undisputed that Filcar is the registered owner of the motor vehicle which hit and caused damage to Espinas’ car;
and it is on the basis of this fact that we hold Filcar primarily and directly liable to Espinas for damages.

As a general rule, one is only responsible for his own act or omission.9 Thus, a person will generally be held liable only
for the torts committed by himself and not by another. This general rule is laid down in Article 2176 of the Civil Code,
which provides to wit:
Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties,
is called a quasi-delict and is governed by the provisions of this Chapter.

Based on the above-cited article, the obligation to indemnify another for damage caused by one’s act or omission is
imposed upon the tortfeasor himself, i.e., the person who committed the negligent act or omission. The law, however,
provides for exceptions when it makes certain persons liable for the act or omission of another.

One exception is an employer who is made vicariously liable for the tort committed by his employee. Article 2180 of
the Civil Code states:

Article 2180. The obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions, but also
for those of persons for whom one is responsible.

xxxx

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope
of their assigned tasks, even though the former are not engaged in any business or industry.

xxxx

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed
all the diligence of a good father of a family to prevent damage.

Under Article 2176, in relation with Article 2180, of the Civil Code, an action predicated on an employee’s act or
omission may be instituted against the employer who is held liable for the negligent act or omission committed by his
employee.

Although the employer is not the actual tortfeasor, the law makes him vicariously liable on the basis of the civil law
principle of pater familias for failure to exercise due care and vigilance over the acts of one’s subordinates to prevent
damage to another.10 In the last paragraph of Article 2180 of the Civil Code, the employer may invoke the defense that
he observed all the diligence of a good father of a family to prevent damage.

As its core defense, Filcar contends that Article 2176, in relation with Article 2180, of the Civil Code is inapplicable
because it presupposes the existence of an employer-employee relationship. According to Filcar, it cannot be held
liable under the subject provisions because the driver of its vehicle at the time of the accident, Floresca, is not its
employee but that of its Corporate Secretary, Atty. Flor.

We cannot agree. It is well settled that in case of motor vehicle mishaps, the registered owner of the motor vehicle is
considered as the employer of the tortfeasor-driver, and is made primarily liable for the tort committed by the latter
under Article 2176, in relation with Article 2180, of the Civil Code.

In Equitable Leasing Corporation v. Suyom, 11 we ruled that in so far as third persons are concerned, the registered
owner of the motor vehicle is the employer of the negligent driver, and the actual employer is considered merely as
an agent of such owner.

In that case, a tractor registered in the name of Equitable Leasing Corporation (Equitable) figured in an accident,
killing and seriously injuring several persons. As part of its defense, Equitable claimed that the tractor was initially
leased to Mr. Edwin Lim under a Lease Agreement, which agreement has been overtaken by a Deed of Sale entered
into by Equitable and Ecatine Corporation (Ecatine). Equitable argued that it cannot be held liable for damages
because the tractor had already been sold to Ecatine at the time of the accident and the negligent driver was not its
employee but of Ecatine.

In upholding the liability of Equitable, as registered owner of the tractor, this Court said that "regardless of sales made
of a motor vehicle, the registered owner is the lawful operator insofar as the public and third persons are concerned;
consequently, it is directly and primarily responsible for the consequences of its operation." 12 The Court further stated
that "[i]n contemplation of law, the owner/operator of record is the employer of the driver, the actual operator and
employer being considered as merely its agent."13 Thus, Equitable, as the registered owner of the tractor, was
considered under the law on quasi delict to be the employer of the driver, Raul Tutor; Ecatine, Tutor’s actual employer,
was deemed merely as an agent of Equitable.

Thus, it is clear that for the purpose of holding the registered owner of the motor vehicle primarily and directly liable
for damages under Article 2176, in relation with Article 2180, of the Civil Code, the existence of an employer-employee
relationship, as it is understood in labor relations law, is not required. It is sufficient to establish that Filcar is the
registered owner of the motor vehicle causing damage in order that it may be held vicariously liable under Article 2180
of the Civil Code.

Rationale for holding the registered owner vicariously liable

The rationale for the rule that a registered owner is vicariously liable for damages caused by the operation of his motor
vehicle is explained by the principle behind motor vehicle registration, which has been discussed by this Court in
Erezo, and cited by the CA in its decision:

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. [emphasis ours]

Thus, whether there is an employer-employee relationship between the registered owner and the driver is irrelevant
in determining the liability of the registered owner who the law holds primarily and directly responsible for any accident,
injury or death caused by the operation of the vehicle in the streets and highways.

As explained by this Court in Erezo, the general public policy involved in motor vehicle registration is the protection of
innocent third persons who may have no means of identifying public road malefactors and, therefore, would find it
difficult – if not impossible – to seek redress for damages they may sustain in accidents resulting in deaths, injuries
and other damages; by fixing the person held primarily and directly liable for the damages sustained by victims of road
mishaps, the law ensures that relief will always be available to them.

To identify the person primarily and directly responsible for the damages would also prevent a situation where a
registered owner of a motor vehicle can easily escape liability by passing on the blame to another who may have no
means to answer for the damages caused, thereby defeating the claims of victims of road accidents. We take note
that some motor vehicles running on our roads are driven not by their registered owners, but by employed drivers
who, in most instances, do not have the financial means to pay for the damages caused in case of accidents.

These same principles apply by analogy to the case at bar. Filcar should not be permitted to evade its liability for
damages by conveniently passing on the blame to another party; in this case, its Corporate Secretary, Atty. Flor and
his alleged driver, Floresca. Following our reasoning in Equitable, the agreement between Filcar and Atty. Flor to
assign the motor vehicle to the latter does not bind Espinas who was not a party to and has no knowledge of the
agreement, and whose only recourse is to the motor vehicle registration.

Neither can Filcar use the defenses available under Article 2180 of the Civil Code - that the employee acts beyond
the scope of his assigned task or that it exercised the due diligence of a good father of a family to prevent damage -
because the motor vehicle registration law, to a certain extent, modified Article 2180 of the Civil Code by making these
defenses unavailable to the registered owner of the motor vehicle. Thus, for as long as Filcar is the registered owner
1awp++i1

of the car involved in the vehicular accident, it could not escape primary liability for the damages caused to Espinas.

The public interest involved in this case must not be underestimated. Road safety is one of the most common problems
that must be addressed in this country. We are not unaware of news of road accidents involving reckless drivers
victimizing our citizens. Just recently, such pervasive recklessness among most drivers took the life of a professor of
our state university.14 What is most disturbing is that our existing laws do not seem to deter these road malefactors
from committing acts of recklessness.
We understand that the solution to the problem does not stop with legislation. An effective administration and
enforcement of the laws must be ensured to reinforce discipline among drivers and to remind owners of motor vehicles
to exercise due diligence and vigilance over the acts of their drivers to prevent damage to others.

Thus, whether the driver of the motor vehicle, Floresca, is an employee of Filcar is irrelevant in arriving at the
conclusion that Filcar is primarily and directly liable for the damages sustained by Espinas. While Republic Act No.
4136 or the Land Transportation and Traffic Code does not contain any provision on the liability of registered owners
in case of motor vehicle mishaps, Article 2176, in relation with Article 2180, of the Civil Code imposes an obligation
upon Filcar, as registered owner, to answer for the damages caused to Espinas’ car. This interpretation is consistent
with the strong public policy of maintaining road safety, thereby reinforcing the aim of the State to promote the
responsible operation of motor vehicles by its citizens.

This does not mean, however, that Filcar is left without any recourse against the actual employer of the driver and the
driver himself. Under the civil law principle of unjust enrichment, the registered owner of the motor vehicle has a right
to be indemnified by the actual employer of the driver of the amount that he may be required to pay as damages for
the injury caused to another.

The set-up may be inconvenient for the registered owner of the motor vehicle, but the inconvenience cannot outweigh
the more important public policy being advanced by the law in this case which is the protection of innocent persons
who may be victims of reckless drivers and irresponsible motor vehicle owners.

WHEREFORE, the petition is DENIED. The decision dated February 16, 2006 and the resolution dated July 6, 2006
of the Court of Appeals are AFFIRMED. Costs against petitioner Filcar Transport Services.

SO ORDERED.
G.R. No. 82318 May 18, 1989

GILBERTO M. DUAVIT, petitioner,

vs.
THE HON. COURT OF APPEALS, Acting through the Third Division, as Public Respondent, and ANTONIO
SARMIENTO, SR. & VIRGILIO CATUAR respondents.

Rodolfo d. Dela Cruz for petitioner.

Bito, Lozada, Ortega & Castillo for respondents.

GUTIERREZ, JR., J.:

This petition raises the sole issue of whether or not the owner of a private vehicle which figured in an accident can be
held liable under Article 2180 of the Civil Code when the said vehicle was neither driven by an employee of the owner
nor taken with the consent of the latter.

The facts are summarized in the contested decision, as follows:

From the evidence adduced by the plaintiffs, consisting of the testimonies of witnesses Virgilio Catuar,
Antonio Sarmiento, Jr., Ruperto Catuar, Jr. and Norberto Bernarte it appears that on July 28, 1971
plaintiffs Antonio Sarmiento, Sr. and Virgilio Catuar were aboard a jeep with plate number 77-99-F-I
Manila, 1971, owned by plaintiff, Ruperto Catuar was driving the said jeep on Ortigas Avenue, San
Juan, Rizal; that plaintiff's jeep, at the time, was running moderately at 20 to 35 kilometers per hour
and while approaching Roosevelt Avenue, Virgilio Catuar slowed down; that suddenly, another jeep
with plate number 99-97-F-J Manila 1971 driven by defendant Oscar Sabiniano hit and bumped
plaintiff's jeep on the portion near the left rear wheel, and as a result of the impact plaintiff's jeep fell
on its right and skidded by about 30 yards; that as a result plaintiffs jeep was damaged, particularly
the windshield, the differential, the part near the left rear wheel and the top cover of the jeep; that
plaintiff Virgilio Catuar was thrown to the middle of the road; his wrist was broken and he sustained
contusions on the head; that likewise plaintiff Antonio Sarmiento, Sr. was trapped inside the fallen
jeep, and one of his legs was fractured.

Evidence also shows that the plaintiff Virgilio Catuar spent a total of P2,464.00 for repairs of the jeep,
as shown by the receipts of payment of labor and spare parts (Exhs. H to H-7 Plaintiffs likewise tried
to prove that plaintiff Virgilio Catuar, immediately after the accident was taken to Immaculate
Concepcion Hospital, and then was transferred to the National Orthopedic Hospital; that while plaintiff
Catuar was not confined in the hospital, his wrist was in a plaster cast for a period of one month, and
the contusions on his head were under treatment for about two (2) weeks; that for hospitalization,
medicine and allied expenses, plaintiff Catuar spent P5,000.00.

Evidence also shows that as a result of the incident, plaintiff Antonio Sarmiento, Sr. sustained injuries
on his leg; that at first, he was taken to the National Orthopedic Hospital (Exh. K but later he was
confined at the Makati Medical Center from July 29, to August 29, 1971 and then from September 15
to 25, 1971; that his leg was in a plaster cast for a period of eight (8) months; and that for hospitalization
and medical attendance, plaintiff Antonio Sarmiento, Sr. spent no less than P13,785.25 as evidenced
by receipts in his possession. (Exhs. N to N-1).

Proofs were adduced also to show that plaintiff Antonio sarmiento Sr. is employed as Assistant
Accountant of the Canlubang Sugar Estate with a salary of P1,200.00 a month; that as sideline he
also works as accountant of United Haulers Inc. with a salary of P500.00 a month; and that as a result
of this incident, plaintiff Sarmiento was unable to perform his normal work for a period of at least 8
months. On the other hand, evidence shows that the other plaintiff Virgilio Catuar is a Chief Clerk in
Canlubang Sugar Estate with a salary of P500.00 a month, and as a result of the incident, he was
incapacitated to work for a period of one (1) month.
 The plaintiffs have filed this case both against Oscar Sabiniano as driver, and against Gualberto Duavit
as owner of the jeep.
Defendant Gualberto Duavit, while admitting ownership of the other jeep (Plate No. 99-07-F-J Manila,
1971), denied that the other defendant (Oscar Sabiniano) was his employee. Duavit claimed that he
has not been an employer of defendant Oscar Sabiniano at any time up to the present.
On the other hand documentary and testimonial evidence show that defendant Oscar Sabiniano was
an employee of the Board of Liquidators from November 14, 1966 up to January 4, 1973 (Annex A of
Answer).
Defendant Sabiniano, in his testimony, categorically admitted that he took the jeep from the garage of
defendant Duavit without the consent or authority of the latter (TSN, September 7, 1978, p. 8). He
testified further, that Duavit even filed charges against him for theft of the jeep, but which Duavit did
not push through as his (Sabiniano's) parents apologized to Duavit on his behalf.
Defendant Oscar Sabiniano, on the other hand in an attempt to exculpate himself from liability, makes
it appear that he was taking all necessary precaution while driving and the accident occurred due to
the negligence of Virgilio Catuar. Sabiniano claims that it was plaintiffs vehicle which hit and bumped
their jeep. (Reno, pp. 21-23)

The trial court found Oscar Sabiniano negligent in driving the vehicle but found no employer-employee relationship
between him and the petitioner because the latter was then a government employee and he took the vehicle without
the authority and consent of the owner. The petitioner was, thus, absolved from liability under Article 2180 of the Civil
Code.

The private respondents appealed the case.

On January 7, 1988, the Court of Appeals rendered the questioned decision holding the petitioner jointly and severally
liable with Sabiniano. The appellate court in part ruled:

We cannot go along with appellee's argument. It will be seen that in Vargas v. Langcay, supra, it was
held that it is immaterial whether or not the driver was actually employed by the operator of record or
registered owner, and it is even not necessary to prove who the actual owner of the vehicle and who
the employer of the driver is. When the Supreme Court ruled, thus: 'We must hold and consider such
owner-operator of record (registered owner) as the employer in contemplation of law, of the driver,' it
cannot be construed other than that the registered owner is the employer of the driver in contemplation
of law. It is a conclusive presumption of fact and law, and is not subject to rebuttal of proof to the
contrary. Otherwise, as stated in the decision, we quote:

The purpose of the principles evolved by the decisions in these matters will be defeated and thwarted
if we entertain the argument of petitioner that she is not liable because the actual owner and employer
was established by the evidence. . . .

Along the same vein, the defendant-appellee Gualberto Duavit cannot be allowed to prove that the driver Sabiniano
was not his employee at the time of the vehicular accident.

The ruling laid down in Amar V. Soberano (1966), 63 O.G. 6850, by this Court to the effect that the
burden of proving the non-existence of an employer-employee relationship is upon the defendant and
this he must do by a satisfactory preponderance of evidence, has to defer to the doctrines evolved by
the Supreme Court in cases of damages arising from vehicular mishaps involving registered motor
vehicle. (See Tugade v. Court of Appeals, 85 SCRA 226, 230). (Rollo, pp. 26-27)

The appellate court also denied the petitioner's motion for reconsideration. Hence, this petition.

The petitioner contends that the respondent appellate court committed grave abuse of discretion in holding him jointly
and severally liable with Sabiniano in spite of the absence of an employer-employee relationship between them and
despite the fact that the petitioner's jeep was taken out of his garage and was driven by Sabiniano without his consent.

As early as in 1939, we have ruled that an owner of a vehicle cannot be held liable for an accident involving the said
vehicle if the same was driven without his consent or knowledge and by a person not employed by him. Thus,
in Duquillo v. Bayot (67 Phil. 131-133-134) [1939] we said:
 Under the facts established, the defendant cannot be held liable for anything. At the time of the
accident, James McGurk was driving the truck, and he was not an employee of the defendant, nor did
he have anything to do with the latter's business; neither the defendant nor Father Ayson, who was in
charge of her business, consented to have any of her trucks driven on the day of the accident, as it
was a holy day, and much less by a chauffeur who was not in charge of driving it; the use of the
defendant's truck in the circumstances indicated was done without her consent or knowledge; it may,
therefore, be said, that there was not the remotest contractual relation between the deceased Pio
Duquillo and the defendant. It necessarily follows from all this that articles 1101 and following of the
Civil Code, cited by the appellant, have no application in this case, and, therefore, the errors attributed
to the inferior court are without basis.

The Court upholds the above ruling as still relevant and better applicable to present day circumstances.

The respondent court's misplaced reliance on the cases of Erezo v. Jepte (102 Phil. 103 [1957] and Vargas v.
Langcay (6 SCRA 174 [1962]) cannot be sustained. In the Erezo case, Jepte, the registered owner of the truck which
collided with a taxicab, and which resulted in the killing of Erezo, claimed that at the time of the accident, the truck
belonged to the Port Brokerage in an arrangement with the corporation but the same was not known to the Motor
Vehicles Office. This Court sustained the trial court's ruling that since Jepte represented himself to be the owner of
the truck and the Motor Vehicles Office, relying on his representation, registered the vehicle in his name, the
Government and all persons affected by the representation had the right to rely on his declaration of ownership and
registration. Thus, even if Jepte were not the owner of the truck at the time of the accident, he was still held liable for
the death of Erezo significantly, the driver of the truck was fully authorized to drive it.

Likewise, in the Vargas case, just before the accident occurred Vargas had sold her jeepney to a third person, so that
at the time of the accident she was no longer the owner of the jeepney. This court, nevertheless, affirmed Vargas'
liability since she failed to surrender to the Motor Vehicles Office the corresponding AC plates in violation of the
Revised Motor Vehicle Law and Commonwealth Act No. 146. We further ruled that the operator of record continues
to be the operator of the vehicle in contemplation of law, as regards the public and third persons, and as such is
responsible for the consequences incident to its operator. The vehicle involved was a public utility jeepney for hire. In
such cases, the law does not only require the surrender of the AC plates but orders the vendor operator to stop the
operation of the jeepney as a form of public transportation until the matter is reported to the authorities.

As can be seen, the circumstances of the above cases are entirely different from those in the present case. Herein
petitioner does not deny ownership of the vehicle involved in tire mishap but completely denies having employed the
driver Sabiniano or even having authorized the latter to drive his jeep. The jeep was virtually stolen from the petitioner's
garage. To hold, therefore, the petitioner liable for the accident caused by the negligence of Sabiniano who was
neither his driver nor employee would be absurd as it would be like holding liable the owner of a stolen vehicle for an
accident caused by the person who stole such vehicle. In this regard, we cannot ignore the many cases of vehicles
forcibly taken from their owners at gunpoint or stolen from garages and parking areas and the instances of service
station attendants or mechanics of auto repair shops using, without the owner's consent, vehicles entrusted to them
for servicing or repair.

We cannot blindly apply absolute rules based on precedents whose facts do not jibe four square with pending cases.
Every case must be determined on its own peculiar factual circumstances. Where, as in this case, the records of the
petition fail to indicate the slightest indicia of an employer-employee relationship between the owner and the erring
driver or any consent given by the owner for the vehicle's use, we cannot hold the owner liable.

We, therefore, find that the respondent appellate court committed reversible error in holding the petitioner jointly and
severally liable with Sabiniano to the private respondent.

WHEREFORE, the petition is GRANTED and the decision and resolution appealed from are hereby ANNULLED and
SET ASIDE. The decision of the then Court of First Instance (now Regional Trial Court) of Laguna, 8th Judicial District,
Branch 6, dated July 30, 1981 is REINSTATED.
G.R. No. 162267 July 4, 2008

PCI LEASING AND FINANCE, INC., petitioner,

vs.
UCPB GENERAL INSURANCE CO., INC., respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking a reversal of the
Decision1 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.

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.

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.

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 a quasi-delict may be held liable,
jointly and severally, with the driver thereof, for the damages caused to third parties.

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.

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.

"'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.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.

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:

[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, x x x 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. 1avvphi1

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.

xxxx

(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.
 x x x x (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.

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.

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.

Costs against petitioner.

G.R. No. L-65510 March 9, 1987

TEJA MARKETING AND/OR ANGEL JAUCIAN, petitioner,

vs.
HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N. NALE, respondents.

Cirilo A. Diaz, Jr. for petitioner.

Henry V. Briguera for private respondent.

PARAS, J.:

"'Ex pacto illicito' non oritur actio" (No action arises out of 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." (Lita Enterprises vs. IAC, 129 SCRA 81.)

The factual background of this case is undisputed. The same is narrated by the respondent court in its now assailed
decision, as follows:

On May 9, 1975, the defendant bought from the plaintiff a motorcycle with complete accessories and
a sidecar in the total consideration of P8,000.00 as shown by Invoice No. 144 (Exh. "A"). Out of the
total purchase price the defendant gave a downpayment of P1,700.00 with a promise that he would
pay plaintiff the balance within sixty days. The defendant, however, failed to comply with his promise
and so upon his own request, the period of paying the balance was extended to one year in monthly
installments until January 1976 when he stopped paying anymore. The plaintiff made demands but
just the same the defendant failed to comply with the same thus forcing the plaintiff to consult a lawyer
and file this action for his damage in the amount of P546.21 for attorney's fees and P100.00 for
expenses of litigation. The plaintiff also claims that as of February 20, 1978, the total account of the
defendant was already P2,731.06 as shown in a statement of account (Exhibit. "B"). This amount
includes not only the balance of P1,700.00 but an additional 12% interest per annum on the said
balance from January 26, 1976 to February 27, 1978; a 2% service charge; and P 546.21 representing
attorney's fees.

In this particular transaction a chattel mortgage (Exhibit 1) was constituted as a security for the
payment of the balance of the purchase price. It has been the practice of financing firms that whenever
there is a balance of the purchase price the registration papers of the motor vehicle subject of the sale
are not given to the buyer. The records of the LTC show that the motorcycle sold to the defendant was
first mortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing and Angel Jaucian
are one and the same, because it was made to appear that way only as the defendant had no franchise
of his own and he attached the unit to the plaintiff's MCH Line. The agreement also of the parties here
was for the plaintiff to undertake the yearly registration of the motorcycle with the Land Transportation
Commission. Pursuant to this agreement the defendant on February 22, 1976 gave the plaintiff
P90.00, the P8.00 would be for the mortgage fee and the P82.00 for the registration fee of the
motorcycle. The plaintiff, however failed to register the motorcycle on that year on the ground that the
defendant failed to comply with some requirements such as the payment of the insurance premiums
and the bringing of the motorcycle to the LTC for stenciling, the plaintiff saying that the defendant was
hiding the motorcycle from him. Lastly, the plaintiff explained also that though the ownership of the
motorcycle was already transferred to the defendant the vehicle was still mortgaged with the consent
of the defendant to the Rural Bank of Camaligan for the reason that all motorcycle purchased from the
plaintiff on credit was rediscounted with the bank.

On his part the defendant did not dispute the sale and the outstanding balance of P1,700. 00 still
payable to the plaintiff. The defendant was persuaded to buy from the plaintiff the motorcycle with the
side car because of the condition that the plaintiff would be the one to register every year the
motorcycle with the Land Transportation Commission. In 1976, however, the plaintfff failed to register
both the chattel mortgage and the motorcycle with the LTC notwithstanding the fact that the defendant
 gave him P90.00 for mortgage fee and registration fee and had the motorcycle insured with La Perla
Compana de Seguros (Exhibit "6") as shown also by the Certificate of cover (Exhibit "3"). Because of
this failure of the plaintiff to comply with his obligation to register the motorcycle the defendant suffered
damages when he failed to claim any insurance indemnity which would amount to no less than
P15,000.00 for the more than two times that the motorcycle figured in accidents aside from the loss of
the daily income of P15.00 as boundary fee beginning October 1976 when the motorcycle was
impounded by the LTC for not being registered.

The defendant disputed the claim of the plaintiff that he was hiding from the plaintiff the motorcycle
resulting in its not being registered. The truth being that the motorcycle was being used for transporting
passengers and it kept on travelling from one place to another. The motor vehicle sold to him was
mortgaged by the plaintiff with the Rural Bank of Camaligan without his consent and knowledge and
the defendant was not even given a copy of the mortgage deed. The defendant claims that it is not
true that the motorcycle was mortgaged because of re-discounting for rediscounting is only true with
Rural Banks and the Central Bank. The defendant puts the blame on the plaintiff for not registering
the motorcycle with the LTC and for not giving him the registration papers inspite of demands made.
Finally, the evidence of the defendant shows that because of the filing of this case he was forced to
retain the services of a lawyer for a fee on not less than P1,000.00.

xxx xxx xxx

... it also appears and the Court so finds that defendant purchased the motorcycle in question,
particularly for the purpose of engaging and using the same in the transportation business and for this
purpose said trimobile unit was attached to the plaintiffs transportation line who had the franchise, so
much so that in the registration certificate, the plaintiff appears to be the owner of the
unit. Furthermore, it appears to have been agreed, further between the plaintiff and the defendant, that
plaintiff would undertake the yearly registration of the unit in question with the LTC. Thus, for the
registration of the unit for the year 1976, per agreement, the defendant gave to the plaintiff the amount
of P82.00 for its registration, as well as the insurance coverage of the unit.

Eventually, petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of Money with Damages" against
private respondent Pedro N. Nale in the City Court of Naga City. The City Court rendered judgment in favor of
petitioner, the dispositive portion of which reads:

WHEREFORE, decision is hereby rendered dismissing the counterclaim and ordering the defendant
to pay plaintiff the sum of P1,700.00 representing the unpaid balance of the purchase price with legal
rate of interest from the date of the filing of the complaint until the same is fully paid; to pay plaintiff the
sum of P546.21 as attorney's fees; to pay plaintiff the sum of P200.00 as expenses of litigation; and
to pay the costs.

SO ORDERED.

On appeal to the Court of First Instance of Camarines Sur, the decision was affirmed in toto. Private respondent filed
a petition for review with the Intermediate Appellate Court and on July 18, 1983 the said Court promulgated its
decision, the pertinent portion of which reads —

However, as the purchase of the motorcycle for operation as a trimobile under the franchise of the
private respondent Jaucian, pursuant to what is commonly known as the "kabit system", without the
prior approval of the Board of Transportation (formerly the Public Service Commission) was an illegal
transaction involving the fictitious registration of the motor vehicle in the name of the private
respondent so that he may traffic with the privileges of his franchise, or certificate of public
convenience, to operate a tricycle service, the parties being in pari delicto, neither of them may bring
an action against the other to enforce their illegal contract [Art. 1412 (a), Civil Code].

xxx xxx xxx

WHEREFORE, the decision under review is hereby set aside. The complaint of respondent Teja
Marketing and/or Angel Jaucian, as well as the counterclaim of petitioner Pedro Nale in Civil Case No.
 1153 of the Court of First Instance of Camarines Sur (formerly Civil Case No. 5856 of the City Court
of Naga City) are dismissed. No pronouncement as to costs.

SO ORDERED.

The decision is now before Us on a petition for review, petitioner Teja Marketing and/or Angel Jaucian presenting a
lone assignment of error — whether or not respondent court erred in applying the doctrine of "pari delicto."

We find the petition devoid of merit.

Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit system" whereby
a person who has been granted a certificate of public 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.

Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to
public policy and, therefore, void and in existent 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 both where it finds then. Upon this premise
it would be error to accord 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 that he has given by
virtue of the contract, or demand, the performance of the other's undertaking.

The defect of in existence of a contract is permanent and cannot be cured by ratification or by prescription. The mere
lapse of time cannot give efficacy to contracts that are null and void.

WHEREFORE, the petition is hereby dismissed for lack of merit. The assailed decision of the Intermediate Appellate
Court (now the Court of Appeals) is AFFIRMED. No costs.
G.R. No. L-64693 April 27, 1984

LITA ENTERPRISES, INC., petitioner,

vs.
SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and
FRANCISCA P. GARCIA, respondents.

Manuel A. Concordia for petitioner.

Nicasio Ocampo for himself and on behalf of his correspondents.

ESCOLIN, J.: ñé+.£ªwph!1

"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-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.

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 Id agreement, the
aforesaid cars were registered in the name of petitioner Lita Enterprises, Inc, Possession, however, remained with tile
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 12,150.00 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.

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: têñ.£îhqwâ£

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: têñ.£îhqwâ£

In the event the condition of the three Toyota rears 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, then 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: têñ.£îhqwâ£

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 ot the gross
negligence of private respondents' driver while driving one private respondents' taxicabs. (p. 39, Rollo.)

Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit system", whereby
a person who has been granted a certificate of convenience allows another person who owns motors 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, 1 "this is a pernicious system that cannot be too severely condemned. It constitutes an imposition upon the
goo faith of the government.

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. It provides: têñ.£îhqwâ£

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 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 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 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.

WHEREFORE, all proceedings had in Civil Case No. 90988 entitled "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. Garica, Plaintiffs-Appellees, versus Lita Enterprises, Inc.,
Defendant-Appellant," of the Intermediate Appellate Court, as well as the decisions rendered therein are hereby
annuleled and set aside. No costs.
 [G.R. No. 125817. January 16, 2002.]

ABELARDO LIM and ESMADITO GUNNABAN, Petitioners, v. COURT OF APPEALS and

DONATO H. GONZALES, Respondents.

DECISION

BELLOSILLO, J.:

When a passenger jeepney covered by a certificate of public convenience is sold to another who
continues to operate it under the same certificate of public convenience under the so-called kabit
system, and in the course thereof the vehicle meets an accident through the fault of another vehicle,
may the new owner sue for damages against the erring vehicle? Otherwise stated, does the new owner
have any legal personality to bring the action, or is he the real party in interest in the suit, despite the
fact that he is not the registered owner under the certificate of public convenience? chanrob1es virtua1 1aw 1ibrary

Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu passenger jeepney from
Gomercindo Vallarta, holder of a certificate of public convenience for the operation of public utility
vehicle plying the Monumento-Bulacan route. While private respondent Gonzales continued offering
the jeepney for public transport services he did not have the registration of the vehicle transferred in
his name nor did he source for himself a certificate of public convenience for its operation. Thus Vallarta
remained on record as its registered owner and operator.

On 22 July 1990, while the jeepney was running northbound along the North diversion road somewhere
in Meycauayan, Bulacan, it collided with a ten-wheeler-truck owned by petitioner Abelardo Lim and
driven by his co-petitioner Esmadito Gunnaban. Gunnaban owned responsibility for the accident,
explaining that while he was traveling towards Manila the truck suddenly lost its brakes. To avoid
colliding with another vehicle, he swerved to the left until he reached the center island. However, as
the center island eventually came to an end, he veered farther to the left until he smashed into a
Ferroza automobile, and later, into private respondent’s passenger jeepney driven by one Virgilio
Gonzales. The impact caused severe damage to both the Ferroza and the passenger jeepney and left
one (1) passenger dead and many others wounded.

Petitioner Lim shouldered the costs for hospitalization of the wounded, compensated the heirs of the
deceased passenger, and had the Ferroza restored to good condition. He also negotiated with private
respondent and offered to have the passenger jeepney repaired at his shop. Private respondent
however did not accept the offer so Lim offered him P20,000.00, the assessment of the damage as
estimated by his chief mechanic. Again, petitioner Lim’s proposition was rejected; instead, private
respondent was unyielding. Under the circumstances, negotiations had to be abandoned; hence, the
filing of the complaint for damages by private respondent against petitioners.

In his answer Lim denied liability by contending that he exercised due diligence in the selection and
supervision of his employees. He further asserted that as the jeepney was registered in Vallarta’s
name, it was Vallarta and not private respondent who was the real party in interest. 1 For his part,
petitioner Gunnaban averred that the accident was a fortuitous event which was beyond his control. 2

Meanwhile, the damaged passenger jeepney was left by the roadside to corrode and decay. Private
respondent explained that although he wanted to take his jeepney home he had no capability, financial
or otherwise, to tow the damaged vehicle. 3 chanrob1es virtua1 1aw 1ibrary

The main point of contention between the parties related to the amount of damages due
private Respondent. Private respondent Gonzales averred that per estimate made by an automobile
repair shop he would have to spend P236,000.00 to restore his jeepney to its original condition. 4 On
the other hand, petitioners insisted that they could have the vehicle repaired for P20,000.00. 5
On 1 October 1993 the trial court upheld private respondent’s claim and awarded him P236,000.00
with legal interest from 22 July 1990 as compensatory damages and P30,000.00 as attorney’s fees. In
support of its decision, the trial court ratiocinated that as vendee and current owner of the passenger
jeepney private respondent stood for all intents and purposes as the real party in interest. Even Vallarta
himself supported private respondent’s assertion of interest over the jeepney for, when he was called
to testify, he dispossessed himself of any claim or pretention on the property. Gunnaban was found by
the trial court to have caused the accident since he panicked in the face of an emergency which was
rather palpable from his act of directing his vehicle to a perilous streak down the fast lane of the
superhighway then across the island and ultimately to the opposite lane where it collided with the
jeepney.

On the other hand, petitioner Lim’s liability for Gunnaban’s negligence was premised on his want of
diligence in supervising his employees. It was admitted during the trial that Gunnaban doubled as
mechanic of the ill-fated truck despite the fact that he was neither tutored nor trained to handle such
task. 6

Forthwith, petitioners appealed to the Court of Appeals which, on 17 July 1996, affirmed the decision
of the trial court. In upholding the decision of the court a quo the appeals court concluded that while
an operator under the kabit system could not sue without joining the registered owner of the vehicle
as his principal, equity demanded that the present case be made an exception. 7 Hence this petition.
virtua1 1aw
chanrob1es

1ibrary

It is petitioner’s contention that the Court of Appeals erred in sustaining the decision of the trial court
despite their opposition to the well-established doctrine that an operator of a vehicle continues to be
its operator as long as he remains the operator of record. According to petitioners, to recognize an
operator under the kabit system as the real party in interest and to countenance his claim for damages
is utterly subversive of public policy. Petitioners further contend that inasmuch as the passenger
jeepney was purchased by private respondent for only P30,000.00, an award of P236,000.00 is
inconceivably large and would amount to unjust enrichment. 8

Petitioner’s attempt to illustrate that an affirmance of the appealed decision could be supportive of the
pernicious kabit system does not persuade. Their labored efforts to demonstrate how the questioned
rulings of the courts a quo are diametrically opposed to the policy of the law requiring operators of
public utility vehicles to secure a certificate of public convenience for their operation is quite unavailing.

The kabit system is an arrangement whereby a person who has been granted a certificate of public
convenience allows other persons who own motor vehicles to operate them under his license,
sometimes for a fee or percentage of the earnings. 9 Although the parties to such an agreement are
not outrightly penalized by law, the kabit system is invariably recognized as being contrary to public
policy and therefore void and inexistent under Art. 1409 of the Civil Code.

In the early case of Dizon v. Octavio 10 the Court explained that one of the primary factors considered
in the granting of a certificate of public convenience for the business of public transportation is the
financial capacity of the holder of the license, so that liabilities arising from accidents may be duly
compensated. The kabit system renders illusory such purpose and, worse, may still be availed of by
the grantee to escape civil liability caused by a negligent use of a vehicle owned by another and
operated under his license. If a registered owner is allowed to escape liability by proving who the
supposed owner of the vehicle is, it would be easy for him to transfer the subject vehicle to another
who possesses no property with which to respond financially for the damage done. Thus, for the safety
of passengers and public who may have been wronged and deceived through the baneful kabit system,
the registered owner of the vehicle is not allowed to prove that another person has become the owner
so that he may be thereby relieved of responsibility. Subsequent cases affirm such basic doctrine. 11

It would seem then that the thrust of the law in enjoining the kabit system is not so much as to penalize
the parties but to identify the person upon whom responsibility may be fixed in case of an accident
with the end view of protecting the riding public. The policy therefore loses its force if the public at
large is not deceived, much less involved. chanrob1es virtua1 1aw 1ibrary

In the present case it is at once apparent that the evil sought to be prevented in enjoining the kabit
system does not exist. First, neither of the parties to the pernicious kabit system is being held liable
for damages. Second, the case arose from the negligence of another vehicle in using the public road
to whom no representation, or misrepresentation, was necessary. Thus it cannot be said that private
respondent Gonzales and the registered owner of the jeepney were in estoppel for leading the public
to believe that the jeepney belonged to the registered owner. Third, the riding public was not bothered
nor inconvenienced at the very least by the illegal arrangement. On the contrary, it was private
respondent himself who had been wronged and was seeking compensation for the damage done to
him. Certainly, it would be the height of inequity to deny him his right.

In light of the foregoing, it is evident that private respondent has the right to proceed against
petitioners for the damage caused on his passenger jeepney as well as on his business. Any effort then
to frustrate his claim of damages by the ingenuity with which petitioners framed the issue should be
discouraged, if not repelled.

In awarding damages for the tortuous injury, it becomes the sole design of the courts to provide for
adequate compensation by putting the plaintiff in the same financial position he was in prior to the
tort. It is fundamental principle in the law on damages that a defendant cannot be held liable in
damages for more than actual loss which he has inflicted and that a plaintiff is entitled to no more than
the just and adequate compensation for the injury suffered. His recovery is, in the absence of
circumstances giving rise to an allowance of punitive damages, limited to a fair compensation for the
harm done. The law will not put him in a position better than where he should be in had not the wrong
happened. 12 chanrob1es virtua1 1aw 1ibrary

In the present case, petitioners insist that as the passenger jeepney was purchased in 1982 for only
P30,000.00 to award damages considerably greater than this amount would be improper and
unjustified. Petitioners are at best reminded that indemnification for damages comprehends not only
the value of the loss suffered but also that of the profits which the obligee failed to obtain. In other
words, indemnification for damages is not limited to damnum emergens or actual loss but extends to
lucrum cessans or the amount of profit lost. 13

Had private respondent’s jeepney not met an accident it could reasonably be expected that it would
have continued earning from the business in which it was engaged. Private respondent avers that he
derives an average income of P300.00 per day from his passenger jeepney and this earning was
included in the award of damages made by the trial court and upheld by the appeals court. The award
therefore of P236,000.00 as compensatory damages is not beyond reason nor speculative as it is based
on a reasonable estimate of the total damage suffered by private respondent, i.e. damage wrought
upon his jeepney and the income lost from his transportation business. Petitioners for their part did
not offer any substantive evidence to refute the estimate made by the courts a quo. chanrob1es virtua1 1aw 1ibrary

However, we are constrained to depart from the conclusion of the lower courts that upon the award of
compensatory damages legal interest should be imposed beginning 22 July 1990, i.e. the date of the
accident. Upon the provisions of Art. 2213 of the Civil Code, interest "cannot be recovered upon
unliquidated claims or damages, except when the demand can be established with reasonable
certainty." It is axiomatic that if the suit were for damages, unliquidated and not known until definitely
ascertained, assessed and determined by the courts after proof, interest at the rate of six percent (6%)
per annum should be from the date the judgment of the court is made (at which time the quantification
of damages may be deemed to be reasonably ascertained). 14

In this case, the matter was not a liquidated obligation as the assessment of the damage on the vehicle
was heavily debated upon by the parties with private respondent’s demand for P236,000.00 being
refuted by petitioners who argue that they could have the vehicle repaired easily for P20,000.00. In
fine, the amount due private respondent was not a liquidated account that was already demandable
and payable.chanrob1es virtua1 1aw 1ibrary
One last word. We have observed that private respondent left his passenger jeepney by the roadside
at the mercy of the elements. Article 2203 of the Civil Code exhorts parties suffering from loss or injury
to exercise the diligence of a good father of a family to minimize the damages resulting from the act
or omission in question. One who is injured then by the wrongful or negligent act of another should
exercise reasonable care and diligence to minimize the resulting damage. Anyway, he can recover from
the wrongdoer money lost in reasonable efforts to preserve the property injured and for injuries
incurred in attempting to prevent damage to it. 15

However we sadly note that in the present case petitioners failed to offer in evidence the estimated
amount of the damage caused by private respondent’s unconcern towards the damaged vehicle. It is
the burden of petitioners to show satisfactorily not only that the injured party could have mitigated his
damages but also the amount thereof; failing in this regard, the amount of damages awarded cannot
be proportionately reduced.chanrob1es virtua1 1aw 1ibrary

WHEREFORE, the questioned Decision awarding private respondent Donato Gonzales P236,000.00 with
legal interest from 22 July 1990 as compensatory damages and P30,000.00 as attorney’s fees is
modified. Interest at the rate of six percent (6%) per annum shall be computed from the time the
judgment of the lower court is made until the finality of this Decision. If the adjudged principal and
interest remain unpaid thereafter, the interest shall be twelve percent (12%) per annum computed
from the time judgment becomes final and executory until it is fully satisfied.

Costs against petitioners.

 [G.R. NO. 160286. July 30, 2004]

SPOUSES FRANCISCO M. HERNANDEZ and ANICETA ABEL-HERNANDEZ and JUAN

GONZALES, Petitioners, v. SPOUSES LORENZO DOLOR and MARGARITA DOLOR, FRED PANOPIO,
JOSEPH SANDOVAL, RENE CASTILLO, SPOUSES FRANCISCO VALMOCINA and VIRGINIA
VALMOCINA, SPOUSES VICTOR PANOPIO and MARTINA PANOPIO, and HON. COURT OF
APPEALS, Respondents.

DECISION

YNARES-SANTIAGO, J.:

This is a Petition for Review under Rule 45 of the Rules of Court seeking the reversal of the
decision1 of the Court of Appeals, dated April 29, 2003, in CA-G.R. CV No. 60357, which affirmed
with modification the amount of damages awarded in the November 24, 1997 decision 2 of the
Regional Trial Court of Batangas City, Branch IV.

The undisputed facts are as follows: ςηαñrοbl εš νιr†υαl lαω lιbrα rÿ

At about 3:00 p.m. of December 19, 1986, Lorenzo Menard Boyet Dolor, Jr. was driving an owner-
type jeepney with plate no. DEB 804 owned by her mother, Margarita, towards Anilao, Batangas.As
he was traversing the road at Barangay Anilao East, Mabini, Batangas, his vehicle collided with a
passenger jeepney bearing plate no. DEG 648, driven by petitioner Juan Gonzales and owned by
his co-petitioner Francisco Hernandez, which was travelling towards Batangas City.

Boyet Dolor and his passenger, Oscar Valmocina, died as a result of the collision. Fred Panopio,
Rene Castillo and Joseph Sandoval, who were also on board the owner-type jeep, which was totally
wrecked, suffered physical injuries.The collision also damaged the passenger jeepney of Francisco
Hernandez and caused physical injuries to its passengers, namely, Virgie Cadavida, Fiscal Artemio
Reyes and Francisca Corona.3 ςrνll

Consequently, respondents commenced an action 4 for damages against petitioners before the
Regional Trial Court of Batangas City, alleging that driver Juan Gonzales was guilty of negligence
and lack of care and that the Hernandez spouses were guilty of negligence in the selection and
supervision of their employees.5 ςrνll

Petitioners countered that the proximate cause of the death and injuries sustained by the
passengers of both vehicles was the recklessness of Boyet Dolor, the driver of the owner-type
jeepney, who was driving in a zigzagging manner under the influence of alcohol.Petitioners also
alleged that Gonzales was not the driver-employee of the Hernandez spouses as the former only
leased the passenger jeepney on a daily basis. The Hernandez spouses further claimed that even
if an employer-employee relationship is found to exist between them, they cannot be held liable
because as employers they exercised due care in the selection and supervision of their employee.

During the trial of the case, it was established that the drivers of the two vehicles were duly
licensed to drive and that the road where the collision occurred was asphalted and in fairly good
condition.6 The owner-type jeep was travelling uphill while the passenger jeepney was going
downhill. It was further established that the owner-type jeep was moderately moving and had just
passed a road bend when its passengers, private respondents Joseph Sandoval and Rene Castillo,
saw the passenger jeepney at a distance of three meters away. The passenger jeepney was
traveling fast when it bumped the owner type jeep. 7 Moreover, the evidence presented by
respondents before the trial court showed that petitioner Juan Gonzales obtained his professional
drivers license only on September 24, 1986, or three months before the accident. Prior to this, he
was holder of a student drivers permit issued on April 10, 1986. 8 ςrνll

On November 24, 1997, the trial court rendered a decision in favor of respondents, the dispositive
portion of which states: ςηαñrοblεš νιr†υαl lαω lιb rαrÿ

Premises duly considered and the plaintiffs having satisfactorily convincingly and credibly
presented evidence clearly satisfying the requirements of preponderance of evidence to sustain
the complaint, this Court hereby declares judgment in favor of the plaintiffs and against the
defendants. Defendants-spouses Francisco Hernandez and Aniceta Abel Hernandez and Juan
Gonzales are therefore directed to pay jointly and severally, the following: ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

1) To spouses Lorenzo Dolor and Margarita Dolor: ςηαñrοblεš νιr†υαl lαω l ιbrαrÿ

a) P50,000.00 for the death of their son, Lorenzo Menard Boyet Dolor, Jr.; chanroblesvirtual lawlib rary

b) P142,000.00 as actual and necessary funeral expenses; chanroblesvirtuallaw libra ry

c) P50,000.00 reasonable value of the totally wrecked owner-type jeep with plate no. DEB 804
Phil 85;
chanroblesvirtua llawl ibrary

d) P20,000.00 as moral damages;

e) P20,000.00 as reasonable litigation expenses and attorneys fees.
2) To spouses Francisco Valmocina and Virginia Valmocina: ςηαñrοblεš νιr†υαl lαω lιbrα rÿ

a) P50,000.00 for the death of their son, Oscar Balmocina (sic) ; chanroblesvirtuallawlib rary

b) P20,000.00 as moral damages; chanroblesvirtual lawl ibrary

c) P18,400.00 for funeral expenses; chanroblesvirtuallawl ibrary

d) P10,000.00 for litigation expenses and attorneys fees.

3) To spouses Victor Panopio and Martina Panopio: ςηαñrοblεš νιr†υαl l αω lιbr αrÿ

a) P10,450.00 for the cost of the artificial leg and crutches being used by their son Fred Panopio;
b) P25,000.00 for hospitalization and medical expenses they incurred for the treatment of their
son, Fred Panopio.
4) To Fred Panopio: ςηαñ rοblεš νιr†υαl l αω lιbrα rÿ

a) P25,000.00 for the loss of his right leg; chanroblesvirtual lawli brary

b) P10,000.00 as moral damages.

5) To Joseph Sandoval: ςηαñrοblεš νιr†υα l lαω lι brαrÿ

a) P4,000.00 for medical treatment.

The defendants are further directed to pay the costs of this proceedings.

SO ORDERED.9 ςrνll

Petitioners appealed10 the decision to the Court of Appeals, which affirmed the same with
modifications as to the amount of damages, actual expenses and attorneys fees awarded to the
private respondents. The decretal portion of the decision of the Court of Appeals reads: ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

WHEREFORE, the foregoing premises considered, the appealed decision is AFFIRMED. However,
the award for damages, actual expenses and attorneys fees shall be MODIFIED as follows: ςηαñrοblεš νιr†υα l lαω lι brαrÿ

1) To spouses Lorenzo Dolor and Margarita Dolor: ςηαñrοblεš νιr†υαl lαω l ιbrαrÿ

a) P50,000.00 civil indemnity for their son Lorenzo Menard Dolor, Jr.; chanroblesvirtual lawl ibrary

b) P58,703.00 as actual and necessary funeral expenses; chanroblesvirtuallawl ibrary

c) P25,000,00 as temperate damages; chanroblesvirtuallaw library

d) P100,000.00 as moral damages;

e) P20,000.00 as reasonable litigation expenses and attorneys fees.
2) To Spouses Francisco Valmocina and Virginia Valmocina:
a) P50,000.00 civil indemnity for the death of their son, Oscar Valmocina;
b) P100,000.00 as moral damages;
c) P10,000.00 as temperate damages;
d) P10,000.00 as reasonable litigation expenses and attorneys fees.
3) To Spouses Victor Panopio and Martina Panopio: ςηαñrοblεš νιr†υαl lαω lιbr αrÿ

a) P10,352.59 as actual hospitalization and medical expenses;

b) P5,000.00 as temperate damages.
4) To Fred Panopio: ςηαñ rοblεš νιr†υαl l αω lιbrα rÿ

a) P50,000.00 as moral damages.

5) To Joseph Sandoval: ςηαñrοblεš νιr†υα l lαω lι brαrÿ

a) P3,000.00 as temperate damages.

SO ORDERED.11 ςrνl l

Hence the present petition raising the following issues: ςηαñrοblεš νιr†υαl lαω lιbr αrÿ

1.Whether the Court of Appeals was correct when it pronounced the Hernandez spouses as
solidarily liable with Juan Gonzales, although it is of record that they were not in the passenger
jeepney driven by latter when the accident occurred; chanroblesvirtuallawli brary

2.Whether the Court of Appeals was correct in awarding temperate damages to private
respondents namely the Spouses Dolor, Spouses Valmocina and Spouses Panopio and to Joseph
Sandoval, although the grant of temperate damages is not provided for in decision of the court a
quo;chanroblesvirtua llawl ibrary

3.Whether the Court of Appeals was correct in increasing the award of moral damages to
respondents, Spouses Dolor, Spouses Valmocina and Fred Panopio; chanroblesvirtua llawl ibrary

4.Whether the Court of Appeals was correct in affirming the grant of attorneys fees to Spouses
Dolor and to Spouses Valmocina although the lower court did not specify the fact and the law on
which it is based.

Petitioners contend that the absence of the Hernandez spouses inside the passenger jeepney at
the time of the collision militates against holding them solidarily liable with their co-petitioner,
Juan Gonzales, invoking Article 2184 of the Civil Code, which provides: ςηαñrοblεš νιr†υαl lαω lι brαr ÿ

ARTICLE 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver, if the former,
who was in the vehicle, could have, by the use of the due diligence, prevented the misfortune. It
is disputably presumed that a driver was negligent, if he had been found guilty of reckless driving
or violating traffic regulations at least twice within the next preceding two months.

If the owner was not in the motor vehicle, the provisions of article 2180 are applicable.

The Hernandez spouses argues that since they were not inside the jeepney at the time of the
collision, the provisions of Article 2180 of the Civil Code, which does not provide for solidary liability
between employers and employees, should be applied.

We are not persuaded.

Article 2180 provides: ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

ARTICLE 2180. The obligation imposed by article 2176 is demandable not only for one's own acts
or omissions, but also for those of persons for whom one is responsible.
The father and, in case of his death or incapacity, the mother, are responsible for the damages
caused by the minor children who live in their company.

Guardians are liable for damages caused by the minors or incapacitated persons who are under
their authority and live in their company.

The owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in the service of the branches in which the latter are employed or on
the occasion of their functions.

Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former are not engaged in any business
or industry.

The State is responsible in like manner when it acts through a special agent; but not when the
damage has been caused by the official to whom the task done properly pertains, in which case
what is provided in article 2176 shall be applicable.

Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused
by their pupils and students or apprentices, so long as they remain in their custody.

The responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage. (Underscoring
supplied)ςrαlαωlιb rαrÿ

On the other hand, Article 2176 provides

Whoever by act or omission causes damage to another, there being fault or negligence, is obliged
to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed by the provisions of this
Chapter.

While the above provisions of law do not expressly provide for solidary liability, the same can be
inferred from the wordings of the first paragraph of Article 2180 which states that the obligation
imposed by article 2176 is demandable not only for one's own acts or omissions, but also for those
of persons for whom one is responsible.

Moreover, Article 2180 should be read with Article 2194 of the same Code, which categorically
states that the responsibility of two or more persons who are liable for quasi-delict is solidary. In
other words, the liability of joint tortfeasors is solidary. 12 Verily, under Article 2180 of the Civil
Code, an employer may be held solidarily liable for the negligent act of his employee. 13 ςrνll

The solidary liability of employers with their employees for quasi-delicts having been established,
the next question is whether Julian Gonzales is an employee of the Hernandez spouses.An
affirmative answer will put to rest any issue on the solidary liability of the Hernandez spouses for
the acts of Julian Gonzales. The Hernandez spouses maintained that Julian Gonzales is not their
employee since their relationship relative to the use of the jeepney is that of a lessor and a lessee.
They argue that Julian Gonzales pays them a daily rental of P150.00 for the use of the jeepney. 14 In
essence, petitioners are practicing the boundary system of jeepney operation albeit disguised as
a lease agreement between them for the use of the jeepney.

We hold that an employer-employee relationship exists between the Hernandez spouses and Julian
Gonzales.
Indeed to exempt from liability the owner of a public vehicle who operates it under the boundary
system on the ground that he is a mere lessor would be not only to abet flagrant violations of the
Public Service Law, but also to place the riding public at the mercy of reckless and irresponsible
drivers reckless because the measure of their earnings depends largely upon the number of trips
they make and, hence, the speed at which they drive; and irresponsible because most if not all of
them are in no position to pay the damages they might cause. 15 ςrνll

Anent the award of temperate damages to the private respondents, we hold that the appellate
court committed no reversible error in awarding the same to the Respondents.

Temperate or moderate damages are damages which are more than nominal but less than
compensatory which may be recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be proved with certainty. 16 Temperate
damages are awarded for those cases where, from the nature of the case, definite proof of
pecuniary loss cannot be offered, although the court is convinced that there has been such loss.
A judge should be empowered to calculate moderate damages in such cases, rather than the
plaintiff should suffer, without redress, from the defendants wrongful act. 17 The assessment of
temperate damages is left to the sound discretion of the court provided that such an award is
reasonable under the circumstances.18 ςrνll

We have gone through the records of this case and we find that, indeed, respondents suffered
losses which cannot be quantified in monetary terms. These losses came in the form of the damage
sustained by the owner type jeep of the Dolor spouses; the internment and burial of Oscar
Valmocina; the hospitalization of Joseph Sandoval on account of the injuries he sustained from
the collision and the artificial leg and crutches that respondent Fred Panopio had to use because
of the amputation of his right leg. Further, we find that the amount of temperate damages awarded
to the respondents were reasonable under the circumstances.

As to the amount of moral damages which was awarded to respondents, a review of the records
of this case shows that there exists no cogent reason to overturn the action of the appellate
court on this aspect.

Under Article 2206, the spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish for the death of the deceased. The
reason for the grant of moral damages has been explained, thus: ςηαñrοblεš νιr†υαl lαω lιbrα rÿ

.. . the award of moral damages is aimed at a restoration, within the limits possible, of the
spiritual status quo ante; and therefore, it must be proportionate to the suffering inflicted. The
intensity of the pain experienced by the relatives of the victim is proportionate to the intensity of
affection for him and bears no relation whatsoever with the wealth or means of the offender. 19 ςrνl l

Moral damages are emphatically not intended to enrich a plaintiff at the expense of the
defendant. They are awarded to allow the former to obtain means, diversion or amusements
that will serve to alleviate the moral suffering he has undergone due to the defendants culpable
action and must, perforce, be proportional to the suffering inflicted. 20 ςrνll

Truly, the pain of the sudden loss of ones offspring, especially of a son who was in the prime of
his youth, and who holds so much promise waiting to be fulfilled is indeed a wellspring of intense
pain which no parent should be made to suffer. While it is true that there can be no exact or
uniform rule for measuring the value of a human life and the measure of damages cannot be
arrived at by a precise mathematical calculation, 21 we hold that the Court of Appeals award of
moral damages of P100,000.00 each to the Spouses Dolor and Spouses Valmocina for the death
of their respective sons, Boyet Dolor and Oscar Valmocina, is in full accord with prevailing
jurisprudence.22 ςrνll

With respect to the award of attorneys fees to respondents, no sufficient basis was established
for the grant thereof.

It is well settled that attorneys fees should not be awarded in the absence of stipulation except
under the instances enumerated in Article 2208 of the Civil Code. As we have held in Rizal
Surety and Insurance Company v. Court of Appeals :23 ςrνl l

Article 2208 of the Civil Code allows attorneys fees to be awarded by a court when its claimant is
compelled to litigate with third persons or to incur expenses to protect his interest by reason of
an unjustified act or omission of the party from whom it is sought. While judicial discretion is
here extant, an award thereof demands, nevertheless, a factual, legal or equitable justification.
The matter cannot and should not be left to speculation and conjecture (Mirasol v. De la Cruz,
84 SCRA 337; Stronghold Insurance Company, Inc. v. Court of Appeals, 173 SCRA 619).

In the case at bench, the records do not show enough basis for sustaining the award for
attorneys fees and to adjudge its payment by petitioner. x x x.

Likewise, this Court held in Stronghold Insurance Company, Inc. v. Court of Appeals that: ςηαñrοblεš νιr†υαl lαω lιbr αrÿ

In Abrogar v. Intermediate Appellate Court [G.R. NO. 67970, January 15, 1988, 157 SCRA 57],
the Court had occasion to state that [t]he reason for the award of attorneys fees must be stated
in the text of the courts decision, otherwise, if it is stated only in the dispositive portion of the
decision, the same must be disallowed on appeal. x x x. 24 ςrνll

WHEREFORE, the petition is DENIED. The assailed decision of the Court of Appeals is AFFIRMED
with the MODIFICATION that the grant of attorneys fees is DELETED for lack of basis.

Costs against petitioners.