G.R. No.

47065

June 26, 1940

PANGASINAN TRANSPORTATION CO., INC., petitioner,

vs.
THE PUBLIC SERVICE COMMISSION, respondent.
C. de G. Alvear for petitioner.
Evaristo R. Sandoval for respondent.
LAUREL, J.:
The petitioner has been engaged for the past twenty years in the business of transporting
passengers in the Province of Pangasinan and Tarlac and, to a certain extent, in the Province of
Nueva Ecija and Zambales, by means of motor vehicles commonly known as TPU buses, in
accordance with the terms and conditions of the certificates of public convenience issued in its favor
by the former Public Utility Commission in cases Nos. 24948, 30973, 36830, 32014 and 53090. On
August 26, 1939, the petitioner filed with the Public Service Commission an application for
authorization to operate ten additional new Brockway trucks (case No. 56641), on the ground that
they were needed to comply with the terms and conditions of its existing certificates and as a result
of the application of the Eight Hour Labor Law. In the decision of September 26, 1939, granting the
petitioner's application for increase of equipment, the Public Service Commission ordered:
Y de acuerdo con que se provee por el articulo 15 de la ley No. 146 del Commonwealth, tal
como ha sido enmendada por el articulo 1 de la Ley No. 454, por la presente se enmienda
las condiciones de los certificados de convenciencia publica expedidos en los expedientes
Nos. 24948, 30973, 36831, 32014 y la authorizacion el el expediente No. 53090, asi que se
consideran incorporadas en los mismos las dos siguientes condiciones:
Que los certificados de conveniencia publica y authorizacion arriba mencionados seran
validos y subsistentes solamente durante de veinticinco (25) anos, contados desde la fecha
de la promulgacion de esta decision.
Que la empresa de la solicitante porda ser adquirida por el Commonwealth de Filipinas o por
alguna dependencia del mismo en cualquier tiempo que lo deseare previo pago del precio d
costo de su equipo util, menos una depreciacion razonable que se ha fijar por la Comision al
tiempo de su adquisicion.
Not being agreeable to the two new conditions thus incorporated in its existing certificates, the
petitioner filed on October 9, 1939 a motion for reconsideration which was denied by the Public
Service Commission on November 14, 1939. Whereupon, on November 20, 1939, the present
petition for a writ of certiorari was instituted in this court praying that an order be issued directing the
secretary of the Public Service Commission to certify forthwith to this court the records of all
proceedings in case No. 56641; that this court, after hearing, render a decision declaring section 1 of
Commonwealth Act No. 454 unconstitutional and void; that, if this court should be of the opinion that
section 1 of Commonwealth Act No. 454 is constitutional, a decision be rendered declaring that the

provisions thereof are not applicable to valid and subsisting certificates issued prior to June 8, 1939.
Stated in the language of the petitioner, it is contended:
1. That the legislative powers granted to the Public Service Commission by section 1 of
Commonwealth Act No. 454, without limitation, guide or rule except the unfettered discretion
and judgment of the Commission, constitute a complete and total abdication by the
Legislature of its functions in the premises, and for that reason, the Act, in so far as those
powers are concerned, is unconstitutional and void.
2. That even if it be assumed that section 1 of Commonwealth Act No. 454, is valid
delegation of legislative powers, the Public Service Commission has exceeded its authority
because: (a) The Act applies only to future certificates and not to valid and subsisting
certificates issued prior to June 8, 1939, when said Act took effect, and (b) the Act, as
applied by the Commission, violates constitutional guarantees.
Section 15 of Commonwealth Act No. 146, as amended by section 1 of Commonwealth Act No. 454,
invoked by the respondent Public Service Commission in the decision complained of in the present
proceedings, reads as follows:
With the exception to those enumerated in the preceding section, no public service shall
operate in the Philippines without possessing a valid and subsisting certificate from the
Public Service Commission, known as "certificate of public convenience," or "certificate of
convenience and public necessity," as the case may be, to the effect that the operation of
said service and the authorization to do business will promote the public interests in a proper
and suitable manner.
The Commission may prescribed as a condition for the issuance of the certificate provided in
the preceding paragraph that the service can be acquired by the Commonwealth of the
Philippines or by any instrumentality thereof upon payment of the cost price of its useful
equipment, less reasonable depreciation; and likewise, that the certificate shall valid only for
a definite period of time; and that the violation of any of these conditions shall produce the
immediate cancellation of the certificate without the necessity of any express action on the
part of the Commission.
In estimating the depreciation, the effect of the use of the equipment, its actual condition, the
age of the model, or other circumstances affecting its value in the market shall be taken into
consideration.
The foregoing is likewise applicable to any extension or amendment of certificates actually
force and to those which may hereafter be issued, to permits to modify itineraries and time
schedules of public services and to authorization to renew and increase equipment and
properties.
Under the first paragraph of the aforequoted section 15 of Act No. 146, as amended, no public
service can operate without a certificate of public convenience or certificate of convenience and
public necessity to the effect that the operation of said service and the authorization to do business

will "public interests in a proper and suitable manner." Under the second paragraph, one of the
conditions which the Public Service Commission may prescribed the issuance of the certificate
provided for in the first paragraph is that "the service can be acquired by the Commonwealth of the
Philippines or by any instrumental thereof upon payment of the cost price of its useful equipment,
less reasonable depreciation," a condition which is virtually a restatement of the principle already
embodied in the Constitution, section 6 of Article XII, which provides that "the State may, in the
interest of national welfare and defense, establish and operate industries and means of
transportation and communication, and, upon payment of just compensation, transfer to public
ownership utilities and other private enterprises to be operated by the Government. "Another
condition which the Commission may prescribed, and which is assailed by the petitioner, is that the
certificate "shall be valid only for a definite period of time." As there is a relation between the first and
second paragraphs of said section 15, the two provisions must be read and interpreted together.
That is to say, in issuing a certificate, the Commission must necessarily be satisfied that the
operation of the service under said certificate during a definite period fixed therein "will promote the
public interests in a proper and suitable manner." Under section 16 (a) of Commonwealth Act. No.
146 which is a complement of section 15, the Commission is empowered to issue certificates of
public convenience whenever it "finds that the operation of the public service proposed and the
authorization to do business will promote the public interests in a proper and suitable manner."
Inasmuch as the period to be fixed by the Commission under section 15 is inseparable from the
certificate itself, said period cannot be disregarded by the Commission in determining the question
whether the issuance of the certificate will promote the public interests in a proper and suitable
manner. Conversely, in determining "a definite period of time," the Commission will be guided by
"public interests," the only limitation to its power being that said period shall not exceed fifty years
(sec. 16 (a), Commonwealth Act No. 146; Constitution, Art. XIII, sec. 8.) We have already ruled that
"public interest" furnishes a sufficient standard. (People vs.Fernandez and Trinidad, G. R. No.
45655, promulgated June 15, 1938; People vs. Rosenthal and Osmea, G. R. Nos. 46076 and
46077, promulgated June 12, 1939, citing New York Central Securities Corporation vs. U.S.A., 287
U.S. 12, 24, 25, 77 Law. ed. 138, 145, 146; Schenchter Poultry Corporation vs. I.S., 295, 540, 79
Law. ed. 1570, 1585; Ferrazzini vs. Gsell, 34 Phil., 697, 711-712.)
Section 8 of Article XIII of the Constitution provides, among other things, that no franchise,
certificate, or any other form of authorization for the operation of a public utility shall be "for a longer
period than fifty years," and when it was ordained, in section 15 of Commonwealth Act No. 146, as
amended by Commonwealth Act No. 454, that the Public Service Commission may prescribed as a
condition for the issuance of a certificate that it "shall be valid only for a definite period of time" and,
in section 16 (a) that "no such certificates shall be issued for a period of more than fifty years," the
National Assembly meant to give effect to the aforesaid constitutional mandate. More than this, it has
thereby also declared its will that the period to be fixed by the Public Service Commission shall not
be longer than fifty years. All that has been delegated to the Commission, therefore, is the
administrative function, involving the use discretion, to carry out the will of the National Assembly
having in view, in addition, the promotion of "public interests in a proper and suitable manner." The
fact that the National Assembly may itself exercise the function and authority thus conferred upon
the Public Service Commission does not make the provision in question constitutionally
objectionable.

The theory of the separation of powers is designed by its originators to secure action and at the
same time to forestall overaction which necessarily results from undue concentration of powers, and
thereby obtain efficiency and prevent deposition. Thereby, the "rule of law" was established which
narrows the range of governmental action and makes it subject to control by certain devices. As a
corollary, we find the rule prohibiting delegation of legislative authority, and from the earliest time
American legal authorities have proceeded on the theory that legislative power must be exercised by
the legislature alone. It is frankness, however, to confess that as one delves into the mass of judicial
pronouncement, he finds a great deal of confusion. One thing, however, is apparent in the
development of the principle of separation of powers and that is that the maxim of delegatus non
potest delegari or delegata potestas non potest delegari, attributed to Bracton (De Legius et
Consuetedinious Angliae, edited by G. E. Woodbine, Yale University Press, 1922, vol. 2, p. 167) but
which is also recognized in principle in the Roman Law (D. 17.18.3), has been made to adapt itself
to the complexities of modern governments, giving rise to the adoption, within certain limits, of the
principle of "subordinate legislation," not only in the United States and England but in practically all
modern governments. (People vs. Rosenthal and Osmea, G. R. Nos. 46076 and 46077,
promulgated June 12, 1939.) Accordingly, with the growing complexity of modern life, the
multiplication of the subjects of governmental regulation, and the increased difficulty of administering
the laws, there is a constantly growing tendency toward the delegation of greater powers by the
legislature, and toward the approval of the practice by the court. (Dillon Catfish Drainage Dist, v.
Bank of Dillon, 141 S. E. 274, 275, 143 S. Ct. 178; State vs. Knox County, 54 S. W. 2d. 973, 976,
165 Tenn. 319.) In harmony with such growing tendency, this Court, since the decision in the case
of Compaia General de Tabacos de Filipinas vs. Board of Public Utility Commissioner (34 Phil.,
136), relied upon by the petitioner, has, in instances, extended its seal of approval to the "delegation
of greater powers by the legislature." (Inchausti Steamship Co. vs. Public Utility Commissioner, 44
Phil., Autobus Co. vs. De Jesus, 56 Phil., 446; People vs. Fernandez & Trinidad, G. R. No. 45655,
promulgated June 15, 1938; People vs. Rosenthal & Osmea, G. R. Nos. 46076, 46077,
promulgated June 12, 1939; and Robb and Hilscher vs. People, G. R. No. 45866, promulgated June
12, 1939.).
Under the fourth paragraph of section 15 of Commonwealth Act No. 146, as amended by
Commonwealth Act No. 454, the power of the Public Service Commission to prescribed the
conditions "that the service can be acquired by the Commonwealth of the Philippines or by any
instrumentality thereof upon payment of the cost price of its useful equipment, less reasonable," and
"that the certificate shall be valid only for a definite period of time" is expressly made applicable "to
any extension or amendment of certificates actually in force" and "to authorizations to renew and
increase equipment and properties." We have examined the legislative proceedings on the subject
and have found that these conditions were purposely made applicable to existing certificates of
public convenience. The history of Commonwealth Act No. 454 reveals that there was an attempt to
suppress, by way of amendment, the sentence "and likewise, that the certificate shall be valid only
for a definite period of time," but the attempt failed:
xxx

xxx

xxx

Sr. CUENCO. Seor Presidente, para otra enmienda. En la misma pagina, lineas 23 y 24,
pido que se supriman las palabras 'and likewise, that the certificate shall be valid only for a
definite period time.' Esta disposicion del proyecto autoriza a la Comision de Servicios

Publicos a fijar un plazo de vigencia certificado de conveniencia publica. Todo el mundo

sabe que bo se puede determinar cuando los intereses del servicio publico requiren la
explotacion de un servicio publico y ha de saber la Comision de Servisios, si en un tiempo
determinado, la explotacion de algunos buses en cierta ruta ya no tiene de ser, sobre todo,
si tiene en cuenta; que la explotacion de los servicios publicos depende de condiciones
flutuantes, asi como del volumen como trafico y de otras condiciones. Ademas, el servicio
publico se concede por la Comision de Servicios Publicos el interes publico asi lo exige. El
interes publico no tiene duracion fija, no es permanente; es un proceso mas o menos
indefinido en cuanto al tiempo. Se ha acordado eso en el caucus de anoche.
EL PRESIDENTE PRO TEMPORE. Que dice el Comite?
Sr. ALANO. El Comite siente tener que rechazar esa enmienda, en vista de que esto
certificados de conveniencia publica es igual que la franquicia: sepuede extender. Si los
servicios presentados por la compaia durante el tiempo de su certificado lo require, puede
pedir la extension y se le extendera; pero no creo conveniente el que nosotros demos un
certificado de conveniencia publica de una manera que podria pasar de cincuenta anos,
porque seria anticonstitucional.
xxx

xxx

xxx

By a majority vote the proposed amendment was defeated. (Sesion de 17 de mayo de 1939,
Asamblea Nacional.)
The petitioner is mistaken in the suggestion that, simply because its existing certificates had been
granted before June 8, 1939, the date when Commonwealth Act No. 454, amendatory of section 15
of Commonwealth Act No. 146, was approved, it must be deemed to have the right of holding them
in perpetuity. Section 74 of the Philippine Bill provided that "no franchise, privilege, or concession
shall be granted to any corporation except under the conditions that it shall be subject to
amendment, alteration, or repeal by the Congress of the United States." The Jones Law,
incorporating a similar mandate, provided, in section 28, that "no franchise or right shall be granted
to any individual, firm, or corporation except under the conditions that it shall be subject to
amendment, alteration, or repeal by the Congress of the United States." Lastly, the Constitution of
the Philippines provided, in section 8 of Article XIII, that "no franchise or right shall be granted to any
individual, firm, or corporation, except under the condition that it shall be subject to amendment,
alteration, or repeal by the National Assembly when the public interest so requires." The National
Assembly, by virtue of the Constitution, logically succeeded to the Congress of the United States in
the power to amend, alter or repeal any franchise or right granted prior to or after the approval of the
Constitution; and when Commonwealth Acts Nos. 146 and 454 were enacted, the National
Assembly, to the extent therein provided, has declared its will and purpose to amend or alter existing
certificates of public convenience.
Upon the other hand, statutes enacted for the regulation of public utilities, being a proper exercise by
the state of its police power, are applicable not only to those public utilities coming into existence
after its passage, but likewise to those already established and in operation.

Nor is there any merit in petitioner's contention, that, because of the establishment of
petitioner's operations prior to May 1, 1917, they are not subject to the regulations of the
Commission. Statutes for the regulation of public utilities are a proper exercise by the state of
its police power. As soon as the power is exercised, all phases of operation of established
utilities, become at once subject to the police power thus called into operation. Procedures'
Transportation Co. v. Railroad Commission, 251 U. S. 228, 40 Sup. Ct. 131, 64 Law. ed. 239,
Law v. Railroad Commission, 184 Cal. 737, 195 Pac. 423, 14 A. L. R. 249. The statute is
applicable not only to those public utilities coming into existence after its passage, but
likewise to those already established and in operation. The 'Auto Stage and Truck
Transportation Act' (Stats. 1917, c. 213) is a statute passed in pursuance of the police power.
The only distinction recognized in the statute between those established before and those
established after the passage of the act is in the method of the creation of their operative
rights. A certificate of public convenience and necessity it required for any new operation, but
no such certificate is required of any transportation company for the operation which was
actually carried on in good faith on May 1, 1917, This distinction in the creation of their
operative rights in no way affects the power of the Commission to supervise and regulate
them. Obviously the power of the Commission to hear and dispose of complaints is as
effective against companies securing their operative rights prior to May 1, 1917, as against
those subsequently securing such right under a certificate of public convenience and
necessity. (Motor Transit Co. et al. v. Railroad Commission of California et al., 209 Pac. 586.)
Moreover, Commonwealth Acts Nos. 146 and 454 are not only the organic acts of the Public Service
Commission but are "a part of the charter of every utility company operating or seeking to operate a
franchise" in the Philippines. (Streator Aqueduct Co. v. et al., 295 Fed. 385.) The business of a
common carrier holds such a peculiar relation to the public interest that there is superinduced upon it
the right of public regulation. When private property is "affected with a public interest it ceased to
be juris privati only." When, therefore, one devotes his property to a use in which the public has an
interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by
the public for the common good, to the extent of the interest he has thus created. He may withdraw
his grant by discounting the use, but so long as he maintains the use he must submit to control.
Indeed, this right of regulation is so far beyond question that it is well settled that the power of the
state to exercise legislative control over public utilities may be exercised through boards of
commissioners. (Fisher vs.Yangco Steamship Company, 31 Phil., 1, citing Munn vs. Illinois, 94 U.S.
113; Georgia R. & Bkg. Co. vs. Smith, 128 U.S. 174; Budd vs. New York, 143 U.S. 517; New York
etc. R. Co. vs. Bristol 151 U.S. 556, 571; Connecticut etc. R. Co. vs. Woodruff, 153 U.S. 689;
Louisville etc. Ry Co. vs. Kentucky, 161 U.S. 677, 695.) This right of the state to regulate public
utilities is founded upon the police power, and statutes for the control and regulation of utilities are a
legitimate exercise thereof, for the protection of the public as well as of the utilities themselves. Such
statutes are, therefore, not unconstitutional, either impairing the obligation of contracts, taking
property without due process, or denying the equal protection of the laws, especially inasmuch as
the question whether or not private property shall be devoted to a public and the consequent
burdens assumed is ordinarily for the owner to decide; and if he voluntarily places his property in
public service he cannot complain that it becomes subject to the regulatory powers of the state. (51
C. J., sec. 21, pp. 9-10.) in the light of authorities which hold that a certificate of public convenience
constitutes neither a franchise nor contract, confers no property right, and is mere license or
privilege. (Burgess vs. Mayor & Alderman of Brockton, 235 Mass. 95, 100, 126 N. E. 456;

Roberto vs.Commisioners of Department of Public Utilities, 262 Mass. 583, 160 N. E. 321;
Scheible vs. Hogan, 113 Ohio St. 83, 148 N. E. 581; Martz vs. Curtis [J. L.] Cartage Co. [1937], 132
Ohio St. 271, 7 N. E. [d] 220; Manila Yellow Taxicab Co. vs. Sabellano, 59 Phil., 773.)
Whilst the challenged provisions of Commonwealth Act No. 454 are valid and constitutional, we are,
however, of the opinion that the decision of the Public Service Commission should be reversed and
the case remanded thereto for further proceedings for the reason now to be stated. The Public
Service Commission has power, upon proper notice and hearing, "to amend, modify or revoke at any
time any certificate issued under the provisions of this Act, whenever the facts and circumstances on
the strength of which said certificate was issued have been misrepresented or materially changed."
(Section 16, par. [m], Commonwealth Act No. 146.) The petitioner's application here was for an
increase of its equipment to enable it to comply with the conditions of its certificates of public
convenience. On the matter of limitation to twenty five (25) years of the life of its certificates of public
convenience, there had been neither notice nor opportunity given the petitioner to be heard or
present evidence. The Commission appears to have taken advantage of the petitioner to augment
petitioner's equipment in imposing the limitation of twenty-five (25) years which might as well be
twenty or fifteen or any number of years. This is, to say the least, irregular and should not be
sanctioned. There are cardinal primary rights which must be respected even in proceedings of this
character. The first of these rights is the right to a hearing, which includes the right of the party
interested or affected to present his own case and submit evidence in support thereof. In the
language of Chief Justice Hughes, in Morgan v. U.S., (304 U.S. 1, 58 S. Ct. 773, 999, 82 Law. ed.
1129), "the liberty and property of the citizen shall be protected by the rudimentary requirements of
fair play." Not only must the party be given an opportunity to present his case and to adduce
evidence tending to establish the rights which he asserts but the tribunal must consider the evidence
presented. (Chief Justice Hughes in Morgan vs. U.S., 298 U.S. 468, 56 S. Ct. 906, 80 :Law. ed.
1288.) In the language of this Court in Edwards vs. McCoy (22 Phil., 598), "the right to adduce
evidence, without the corresponding duty on the part of the board to consider it, is vain. Such right is
conspicuously futile if the person or persons to whom the evidence is presented can thrust it aside
without or consideration." While the duty to deliberate does not impose the obligation to decide right,
it does imply a necessity which cannot be disregarded, namely, that of having something to support
its decision. A decision with absolutely nothing to support it is a nullity, at least when directly
attacked. (Edwards vs. McCoy, supra.) This principle emanates from the more fundamental principle
that the genius of constitutional government is contrary to the vesting of unlimited power anywhere.
Law is both a grant and a limitation upon power.
The decision appealed from is hereby reversed and the case remanded to the Public Service
Commission for further proceedings in accordance with law and this decision, without any
pronouncement regarding costs. So ordered.
G.R. No. 119528 March 26, 1997
PHILIPPINE AIRLINES, INC., petitioner,
vs.
CIVIL AERONAUTICS BOARD and GRAND INTERNATIONAL AIRWAYS, INC., respondents.

TORRES, JR., J.:

This Special Civil Action for Certiorari and Prohibition under Rule 65 of the Rules of Court seeks to
prohibit respondent Civil Aeronautics Board from exercising jurisdiction over private respondent's
Application for the issuance of a Certificate of Public Convenience and Necessity, and to annul and
set aside a temporary operating permit issued by the Civil Aeronautics Board in favor of Grand
International Airways (GrandAir, for brevity) allowing the same to engage in scheduled domestic air
transportation services, particularly the Manila-Cebu, Manila-Davao, and converse routes.
The main reason submitted by petitioner Philippine Airlines, Inc. (PAL) to support its petition is the
fact that GrandAir does not possess a legislative franchise authorizing it to engage in air
transportation service within the Philippines or elsewhere. Such franchise is, allegedly, a requisite for
the issuance of a Certificate of Public Convenience or Necessity by the respondent Board, as
mandated under Section 11, Article XII of the Constitution.
Respondent GrandAir, on the other hand, posits that a legislative franchise is no longer a
requirement for the issuance of a Certificate of Public Convenience and Necessity or a Temporary
Operating Permit, following the Court's pronouncements in the case of Albano vs. Reyes, 1 as
restated by the Court of Appeals in Avia Filipinas International vs. Civil Aeronautics Board 2 and Silangan
Airways, Inc. vs. Grand International Airways, Inc., and the Hon. Civil Aeronautics Board. 3
On November 24, 1994, private respondent GrandAir applied for a Certificate of Public Convenience
and Necessity with the Board, which application was docketed as CAB Case No. EP12711. 4 Accordingly, the Chief Hearing Officer of the CAB issued a Notice of Hearing setting the
application for initial hearing on December 16, 1994, and directing GrandAir to serve a copy of the
application and corresponding notice to all scheduled Philippine Domestic operators. On December 14,
1994, GrandAir filed its Compliance, and requested for the issuance of a Temporary Operating Permit.
Petitioner, itself the holder of a legislative franchise to operate air transport services, filed an Opposition to
the application for a Certificate of Public Convenience and Necessity on December 16, 1995 on the
following grounds:
A. The CAB has no jurisdiction to hear the petitioner's application until the latter has
first obtained a franchise to operate from Congress.
B. The petitioner's application is deficient in form and substance in that:
1. The application does not indicate a route structure including a
computation of trunkline, secondary and rural available seat
kilometers (ASK) which shall always be maintained at a monthly level
at least 5% and 20% of the ASK offered into and out of the proposed
base of operations for rural and secondary, respectively.
2. It does not contain a project/feasibility study, projected profit and
loss statements, projected balance sheet, insurance coverage, list of
personnel, list of spare parts inventory, tariff structure, documents
supportive of financial capacity, route flight schedule, contracts on
facilities (hangars, maintenance, lot) etc.

C. Approval of petitioner's application would violate the equal protection clause of the
constitution.
D. There is no urgent need and demand for the services applied for.
E. To grant petitioner's application would only result in ruinous competition contrary to
Section 4(d) of R.A. 776. 5
At the initial hearing for the application, petitioner raised the issue of lack of jurisdiction of the Board
to hear the application because GrandAir did not possess a legislative franchise.
On December 20, 1994, the Chief Hearing Officer of CAB issued an Order denying petitioner's
Opposition. Pertinent portions of the Order read:
PAL alleges that the CAB has no jurisdiction to hear the petitioner's application until
the latter has first obtained a franchise to operate from Congress.
The Civil Aeronautics Board has jurisdiction to hear and resolve the application.
In Avia Filipina vs. CAB, CA G.R. No. 23365, it has been ruled that under Section 10
(c) (I) of R.A. 776, the Board possesses this specific power and duty.
In view thereof, the opposition of PAL on this ground is hereby denied.
SO ORDERED.
Meantime, on December 22, 1994, petitioner this time, opposed private respondent's application for
a temporary permit maintaining that:
1. The applicant does not possess the required fitness and capability of operating the
services applied for under RA 776; and,
2. Applicant has failed to prove that there is clear and urgent public need for the
services applied for.6
On December 23, 1994, the Board promulgated Resolution No. 119(92) approving the issuance of a
Temporary Operating Permit in favor of Grand Air 7 for a period of three months, i.e., from December
22, 1994 to March 22, 1994. Petitioner moved for the reconsideration of the issuance of the Temporary
Operating Permit on January 11, 1995, but the same was denied in CAB Resolution No. 02 (95) on
February 2, 1995. 8 In the said Resolution, the Board justified its assumption of jurisdiction over
GrandAir's application.
WHEREAS , the CAB is specifically authorized under Section 10-C (1) of Republic
Act No. 776 as follows:
(c) The Board shall have the following specific powers and duties:

(1) In accordance with the provision of Chapter IV of this Act, to issue, deny, amend
revise, alter, modify, cancel, suspend or revoke, in whole or in part, upon petitionercomplaint, or upon its own initiative, any temporary operating permit or Certificate of
Public Convenience and Necessity; Provided, however; that in the case of foreign air
carriers, the permit shall be issued with the approval of the President of the Republic
of the Philippines.
WHEREAS, such authority was affirmed in PAL vs. CAB, (23 SCRA 992), wherein
the Supreme Court held that the CAB can even on its own initiative, grant a TOP
even before the presentation of evidence;
WHEREAS, more recently, Avia Filipinas vs. CAB, (CA-GR No. 23365), promulgated
on October 30, 1991, held that in accordance with its mandate, the CAB can issue
not only a TOP but also a Certificate of Public Convenience and Necessity (CPCN) to
a qualified applicant therefor in the absence of a legislative franchise, citing therein
as basis the decision of Albano vs. Reyes (175 SCRA 264) which provides (inter alia)
that:
a) Franchises by Congress are not required before each and every public utility may
operate when the law has granted certain administrative agencies the power to grant
licenses for or to authorize the operation of certain public utilities;
b) The Constitutional provision in Article XII, Section 11 that the issuance of a
franchise, certificate or other form of authorization for the operation of a public utility
does not necessarily imply that only Congress has the power to grant such
authorization since our statute books are replete with laws granting specified
agencies in the Executive Branch the power to issue such authorization for certain
classes of public utilities.
WHEREAS, Executive Order No. 219 which took effect on 22 January 1995,
provides in Section 2.1 that a minimum of two (2) operators in each route/link shall
be encouraged and that routes/links presently serviced by only one (1) operator shall
be open for entry to additional operators.
RESOLVED, (T)HEREFORE, that the Motion for Reconsideration filed by Philippine
Airlines on January 05, 1995 on the Grant by this Board of a Temporary Operating
Permit (TOP) to Grand International Airways, Inc. alleging among others that the
CAB has no such jurisdiction, is hereby DENIED, as it hereby denied, in view of the
foregoing and considering that the grounds relied upon by the movant are not
indubitable.
On March 21, 1995, upon motion by private respondent, the temporary permit was extended for a
period of six (6) months or up to September 22, 1995.
Hence this petition, filed on April 3, 1995.

Petitioners argue that the respondent Board acted beyond its powers and jurisdiction in taking
cognizance of GrandAir's application for the issuance of a Certificate of Public Convenience and
Necessity, and in issuing a temporary operating permit in the meantime, since GrandAir has not
been granted and does not possess a legislative franchise to engage in scheduled domestic air
transportation. A legislative franchise is necessary before anyone may engage in air transport
services, and a franchise may only be granted by Congress. This is the meaning given by the
petitioner upon a reading of Section 11, Article XII, 9 and Section 1, Article VI, 10 of the Constitution.
To support its theory, PAL submits Opinion No. 163, S. 1989 of the Department of Justice, which
reads:
Dr. Arturo C. Corona
Executive Director
Civil Aeronautics Board
PPL Building, 1000 U.N. Avenue
Ermita, Manila
Sir:
This has reference to your request for opinion on the necessity of a legislative
franchise before the Civil Aeronautics Board ("CAB") may issue a Certificate of Public
Convenience and Necessity and/or permit to engage in air commerce or air
transportation to an individual or entity.
You state that during the hearing on the application of Cebu Air for a congressional
franchise, the House Committee on Corporations and Franchises contended that
under the present Constitution, the CAB may not issue the abovestated certificate or
permit, unless the individual or entity concerned possesses a legislative franchise.
You believe otherwise, however, for the reason that under R.A. No. 776, as
amended, the CAB is explicitly empowered to issue operating permits or certificates
of public convenience and necessity and that this statutory provision is not
inconsistent with the current charter.
We concur with the view expressed by the House Committee on Corporations and
Franchises. In an opinion rendered in favor of your predecessor-in-office, this
Department observed that,
. . . it is useful to note the distinction between the franchise to operate and a permit to
commence operation. The former is sovereign and legislative in nature; it can be
conferred only by the lawmaking authority (17 W and P, pp. 691-697). The latter is
administrative and regulatory in character (In re Application of Fort Crook-Bellevue
Boulevard Line, 283 NW 223); it is granted by an administrative agency, such as the
Public Service Commission [now Board of Transportation], in the case of land
transportation, and the Civil Aeronautics Board, in case of air services. While a
legislative franchise is a pre-requisite to a grant of a certificate of public convenience
and necessity to an airline company, such franchise alone cannot constitute the

authority to commence operations, inasmuch as there are still matters relevant to

such operations which are not determined in the franchise, like rates, schedules and
routes, and which matters are resolved in the process of issuance of permit by the
administrative. (Secretary of Justice opn No. 45, s. 1981)
Indeed, authorities are agreed that a certificate of public convenience and necessity
is an authorization issued by the appropriate governmental agency for the operation
of public services for which a franchise is required by law (Almario, Transportation
and Public Service Law, 1977 Ed., p. 293; Agbayani, Commercial Law of the Phil.,
Vol. 4, 1979 Ed., pp. 380-381).
Based on the foregoing, it is clear that a franchise is the legislative authorization to
engage in a business activity or enterprise of a public nature, whereas a certificate of
public convenience and necessity is a regulatory measure which constitutes the
franchise's authority to commence operations. It is thus logical that the grant of the
former should precede the latter.
Please be guided accordingly.
(SGD.)
SEDFR
EY A.
ORDO
NEZ
Secret
ary of
Justice
Respondent GrandAir, on the other hand, relies on its interpretation of the provisions of Republic Act
776, which follows the pronouncements of the Court of Appeals in the cases of Avia Filipinas
vs. Civil Aeronautics Board, and Silangan Airways, Inc. vs. Grand International Airways (supra).
In both cases, the issue resolved was whether or not the Civil Aeronautics Board can issue the
Certificate of Public Convenience and Necessity or Temporary Operating Permit to a prospective
domestic air transport operator who does not possess a legislative franchise to operate as such.
Relying on the Court's pronouncement in Albano vs. Reyes (supra), the Court of Appeals upheld the
authority of the Board to issue such authority, even in the absence of a legislative franchise, which
authority is derived from Section 10 of Republic Act 776, as amended by P.D. 1462. 11
The Civil Aeronautics Board has jurisdiction over GrandAir's Application for a Temporary Operating
Permit. This rule has been established in the case of Philippine Air Lines Inc., vs. Civil Aeronautics
Board, promulgated on June 13, 1968. 12 The Board is expressly authorized by Republic Act 776 to
issue a temporary operating permit or Certificate of Public Convenience and Necessity, and nothing
contained in the said law negates the power to issue said permit before the completion of the applicant's
evidence and that of the oppositor thereto on the main petition. Indeed, the CAB's authority to grant a
temporary permit "upon its own initiative" strongly suggests the power to exercise said authority, even

before the presentation of said evidence has begun. Assuming arguendo that a legislative franchise is
prerequisite to the issuance of a permit, the absence of the same does not affect the jurisdiction of the
Board to hear the application, but tolls only upon the ultimate issuance of the requested permit.

The power to authorize and control the operation of a public utility is admittedly a prerogative of the
legislature, since Congress is that branch of government vested with plenary powers of legislation.
The franchise is a legislative grant, whether made directly by the legislature itself, or
by any one of its properly constituted instrumentalities. The grant, when made, binds
the public, and is, directly or indirectly, the act of the state. 13
The issue in this petition is whether or not Congress, in enacting Republic Act 776, has delegated
the authority to authorize the operation of domestic air transport services to the respondent Board,
such that Congressional mandate for the approval of such authority is no longer necessary.
Congress has granted certain administrative agencies the power to grant licenses for, or to authorize
the operation of certain public utilities. With the growing complexity of modern life, the multiplication
of the subjects of governmental regulation, and the increased difficulty of administering the laws,
there is a constantly growing tendency towards the delegation of greater powers by the legislature,
and towards the approval of the practice by the courts. 14 It is generally recognized that a franchise may
be derived indirectly from the state through a duly designated agency, and to this extent, the power to
grant franchises has frequently been delegated, even to agencies other than those of a legislative
nature. 15 In pursuance of this, it has been held that privileges conferred by grant by local authorities as
agents for the state constitute as much a legislative franchise as though the grant had been made by an
act of the Legislature. 16
The trend of modern legislation is to vest the Public Service Commissioner with the power to
regulate and control the operation of public services under reasonable rules and regulations, and as
a general rule, courts will not interfere with the exercise of that discretion when it is just and
reasonable and founded upon a legal right. 17
It is this policy which was pursued by the Court in Albano vs. Reyes. Thus, a reading of the pertinent
issuances governing the Philippine Ports Authority, 18 proves that the PPA is empowered to undertake
by itself the operation and management of the Manila International Container Terminal, or to authorize its
operation and management by another by contract or other means, at its option. The latter power having
been delegated to the to PPA, a franchise from Congress to authorize an entity other than the PPA to
operate and manage the MICP becomes unnecessary.
Given the foregoing postulates, we find that the Civil Aeronautics Board has the authority to issue a
Certificate of Public Convenience and Necessity, or Temporary Operating Permit to a domestic air
transport operator, who, though not possessing a legislative franchise, meets all the other
requirements prescribed by the law. Such requirements were enumerated in Section 21 of R.A. 776.
There is nothing in the law nor in the Constitution, which indicates that a legislative franchise is an
indispensable requirement for an entity to operate as a domestic air transport operator. Although
Section 11 of Article XII recognizes Congress' control over any franchise, certificate or authority to
operate a public utility, it does not mean Congress has exclusive authority to issue the same.

Franchises issued by Congress are not required before each and every public utility may
operate. 19 In many instances, Congress has seen it fit to delegate this function to government agencies,
specialized particularly in their respective areas of public service.
A reading of Section 10 of the same reveals the clear intent of Congress to delegate the authority to
regulate the issuance of a license to operate domestic air transport services:
Sec. 10. Powers and Duties of the Board. (A) Except as otherwise provided herein,
the Board shall have the power to regulate the economic aspect of air transportation,
and shall have general supervision and regulation of, the jurisdiction and control over
air carriers, general sales agents, cargo sales agents, and air freight forwarders as
well as their property rights, equipment, facilities and franchise, insofar as may be
necessary for the purpose of carrying out the provision of this Act.
In support of the Board's authority as stated above, it is given the following specific powers and
duties:
(C) The Board shall have the following specific powers and duties:
(1) In accordance with the provisions of Chapter IV of this Act, to issue, deny, amend,
revise, alter, modify, cancel, suspend or revoke in whole or in part upon petition or
complaint or upon its own initiative any Temporary Operating Permit or Certificate of
Public Convenience and Necessity: Provided however, That in the case of foreign air
carriers, the permit shall be issued with the approval of the President of the Republic
of the Philippines.
Petitioner argues that since R.A. 776 gives the Board the authority to issue "Certificates of Public
Convenience and Necessity", this, according to petitioner, means that a legislative franchise is an
absolute requirement. It cites a number of authorities supporting the view that a Certificate of Public
Convenience and Necessity is issued to a public service for which a franchise is required by law, as
distinguished from a "Certificate of Public Convenience" which is an authorization issued for the
operation of public services for which no franchise, either municipal or legislative, is required by
law. 20
This submission relies on the premise that the authority to issue a certificate of public convenience
and necessity is a regulatory measure separate and distinct from the authority to grant a franchise
for the operation of the public utility subject of this particular case, which is exclusively lodged by
petitioner in Congress.
We do not agree with the petitioner.
Many and varied are the definitions of certificates of public convenience which courts and legal
writers have drafted. Some statutes use the terms "convenience and necessity" while others use
only the words "public convenience." The terms "convenience and necessity", if used together in a
statute, are usually held not to be separable, but are construed together. Both words modify each
other and must be construed together. The word 'necessity' is so connected, not as an additional

requirement but to modify and qualify what might otherwise be taken as the strict significance of the
word necessity. Public convenience and necessity exists when the proposed facility will meet a
reasonable want of the public and supply a need which the existing facilities do not adequately
afford. It does not mean or require an actual physical necessity or an indispensable thing. 21
The terms "convenience" and "necessity" are to be construed together, although they
are not synonymous, and effect must be given both. The convenience of the public
must not be circumscribed by according to the word "necessity" its strict meaning or
an essential requisites. 22
The use of the word "necessity", in conjunction with "public convenience" in a certificate of
authorization to a public service entity to operate, does not in any way modify the nature of such
certification, or the requirements for the issuance of the same. It is the law which determines the
requisites for the issuance of such certification, and not the title indicating the certificate.
Congress, by giving the respondent Board the power to issue permits for the operation of domestic
transport services, has delegated to the said body the authority to determine the capability and
competence of a prospective domestic air transport operator to engage in such venture. This is not
an instance of transforming the respondent Board into a mini-legislative body, with unbridled
authority to choose who should be given authority to operate domestic air transport services.
To be valid, the delegation itself must be circumscribed by legislative restrictions, not
a "roving commission" that will give the delegate unlimited legislative authority. It
must not be a delegation "running riot" and "not canalized with banks that keep it
from overflowing." Otherwise, the delegation is in legal effect an abdication of
legislative authority, a total surrender by the legislature of its prerogatives in favor of
the delegate. 23
Congress, in this instance, has set specific limitations on how such authority should be exercised.
Firstly, Section 4 of R.A. No. 776, as amended, sets out the following guidelines or policies:
Sec. 4. Declaration of policies. In the exercise and performance of its powers and
duties under this Act, the Civil Aeronautics Board and the Civil Aeronautics
Administrator shall consider the following, among other things, as being in the public
interest, and in accordance with the public convenience and necessity:
(a) The development and utilization of the air potential of the Philippines;
(b) The encouragement and development of an air transportation system properly
adapted to the present and future of foreign and domestic commerce of the
Philippines, of the Postal Service and of the National Defense;
(c) The regulation of air transportation in such manner as to recognize and preserve
the inherent advantages of, assure the highest degree of safety in, and foster sound

economic condition in, such transportation, and to improve the relations between,
and coordinate transportation by, air carriers;
(d) The promotion of adequate, economical and efficient service by air carriers at
reasonable charges, without unjust discriminations, undue preferences or
advantages, or unfair or destructive competitive practices;
(e) Competition between air carriers to the extent necessary to assure the sound
development of an air transportation system properly adapted to the need of the
foreign and domestic commerce of the Philippines, of the Postal Service, and of the
National Defense;
(f) To promote safety of flight in air commerce in the Philippines; and,
(g) The encouragement and development of civil aeronautics.
More importantly, the said law has enumerated the requirements to determine the competency of a
prospective operator to engage in the public service of air transportation.
Sec. 12. Citizenship requirement. Except as otherwise provided in the Constitution
and existing treaty or treaties, a permit authorizing a person to engage in domestic
air commerce and/or air transportation shall be issued only to citizens of the
Philippines 24
Sec. 21. Issuance of permit. The Board shall issue a permit authorizing the whole or any
part of the service covered by the application, if it finds: (1) that the applicant is fit, willing
and able to perform such service properly in conformity with the provisions of this Act and
the rules, regulations, and requirements issued thereunder; and (2) that such service is
required by the public convenience and necessity; otherwise the application shall be
denied.

Furthermore, the procedure for the processing of the application of a Certificate of Public
Convenience and Necessity had been established to ensure the weeding out of those entities that
are not deserving of public service. 25
In sum, respondent Board should now be allowed to continue hearing the application of GrandAir for
the issuance of a Certificate of Public Convenience and Necessity, there being no legal obstacle to
the exercise of its jurisdiction.
ACCORDINGLY, in view of the foregoing considerations, the Court RESOLVED to DISMISS the
instant petition for lack of merit. The respondent Civil Aeronautics Board is hereby DIRECTED to
CONTINUE hearing the application of respondent Grand International Airways, Inc. for the issuance
of a Certificate of Public Convenience and Necessity.
SO ORDERED.

G.R. No. 80447 January 31, 1989

BALIWAG TRANSIT, INC., petitioner,
vs.
HON. COURT OF APPEALS and SPS. SOTERO CAILIPAN, JR. and ZENAIDA LOPEZ and
GEORGE L. CAILIPAN, respondents.
Sta. Maria & Associates for petitioner.
Punzalan and Associates Law Office for respondents.

MELENCIO-HERRERA, J.:
On 10 April 1985 a Complaint for damages arising from breach of contract of carriage was filed by
private respondents, the Spouses Sotero Cailipan, Jr. and Zenaida Lopez, and their son George, of
legal age, against petitioner Baliwag Transit (Baliwag, for brevity). The Complaint alleged that
George, who was a paying passenger on a Baliwag bus on 17 December 1984, suffered multiple
serious physical injuries when he was thrown off said bus driven in a careless and negligent manner
by Leonardo Cruz, the authorized bus driver, along Barangay Patubig, Marilao, Bulacan. As a result,
he was confined in the hospital for treatment, incurring medical expenses, which were borne by his
parents, the respondent Spouses, in the sum of about P200,000.00 plus other incidental expenses
of about P10,000.00.
On 26 April 1985 an Answer was filed by petitioner alleging that the cause of the injuries sustained
by George was solely attributable to his own voluntary act in that, without warning and provocation,
he suddenly stood up from his seat and headed for the door of the bus as if in a daze, opened it and
jumped off while said bus was in motion, in spite of the protestations by the driver and without the
knowledge of the conductor.
Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company, Inc., on its
third-party liability insurance in the amount of P50,000.00. In its Answer, Fortune Insurance claimed
limited liability, the coverage being subject to a Schedule of Indemnities forming part of the insurance
policy.
On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and Baliwag each
filed Motions to Dismiss on the ground that George, in consideration of the sum of P8,020.50 had
executed a "Release of Claims" dated 16 May 1985. These Motions were denied by the Trial Court
in an Order dated 13 January 1986 as they were filed beyond the time for pleading and after the
Answer were already filed.
On 5 February 1986 Baliwag filed a Motion to Admit Amended Answer, which was granted by the
Trial Court. The Amended Answer incorporated the affirmative defense in the Motion to Dismiss to

the effect that on 16 May 1985, George bad been paid all his claims for damages arising from the
incident subject matter of the complaint when he executed the following "Release of Claims":
For and in consideration of the payment to me/us of the sum of EIGHT THOUSAND
TWENTY and 50/100 PESOS ONLY (P8,020.50), the receipt of which is hereby
acknowledged, I/we, being of lawful age, do hereby release, acquit and forever
discharge Fortune Insurance and/or Baliwag transit, Inc. his/her heirs, executors and
assigns, from any and all liability now accrued or hereafter to accrue on account of
any and all claims or causes of action which I/we now or may here after have for
personal injuries, damage to property, loss of services, medical expenses, losses or
damages of any and every kind or nature whatsoever, now known or what may
hereafter develop by me/us sustained or received on or about 17th day of December,
1984 through Reckless Imprudence Resulting to Physical Injuries, and I/we hereby
declare that I/we fully understand the terms of this settlement and voluntarily accept
said sum for the purpose of making a full and final compromise adjustment and
settlement of the injuries and damages, expenses and inconvenience above
mentioned. (Rollo, p. 11)
During the preliminary hearing on the aforementioned affirmative defense, Baliwag waived the
presentation of testimonial evidence and instead offered as its Exhibit "1" the "Release of Claims"
signed by George and witnessed by his brother Benjamin L. Cailipan, a licensed engineer.
By way of opposition to petitioner's affirmative defense, respondent Sotero Cailipan, Jr. testified that
be is the father of George, who at the time of the incident was a student, living with his parents and
totally dependent on them for their support; that the expenses for his hospitalization were shouldered
by his parents; and that they had not signed the "Release of Claims."
In an Order dated 29 August 1986, the Regional Trial Court of Bulacan, Branch 20, 1 dismissed the
Complaint and Third-party Complaint, ruling that since the contract of carriage is between Baliwag and
George L. Cailipan, the latter, who is of legal age, had the exclusive right to execute the Release of
Claims despite the fact that he is still a student and dependent on his parents for support. Consequently,
the execution by George of the Release of Claims discharges Baliwag and Fortune Insurance.
Aggrieved, the Spouses appealed to respondent Court of Appeals.
On 22 October 1987, the Appellate Court rendered a Decision 2 setting aside the appealed Order and
holding that the "Release of Claims" cannot operate as a valid ground for the dismissal of the case
because it does not have the conformity of all the parties, particularly George's parents, who have a
substantial interest in the case as they stand to be prejudiced by the judgment because they spent a
sizeable amount for the medical bills of their son; that the Release of Claims was secured by Fortune
Insurance for the consideration of P8,020.50 as the full and final settlement of its liability under the
insurance policy and not for the purpose of releasing Baliwag from its liability as a carrier in this suit for
breach of contract. The Appellate Court also ordered the remand of the case to the lower Court for trial on
the merits and for George to return the amount of P8,020.50 to Fortune Insurance.
Hence, this Petition for Review on certiorari by Baliwag assailing the Appellate Court judgment.

The issue brought to the fore is the legal effect of the Release of Claims executed by George during
the pendency of this case.
We hold that since the suit is one for breach of contract of carriage, the Release of Claims executed
by him, as the injured party, discharging Fortune Insurance and Baliwag from any and all liability is
valid. He was then of legal age, a graduating student of Agricultural Engineering, and had the
capacity to do acts with legal effect (Article 37 in relation to Article 402, Civil Code). Thus, he could
sue and be sued even without the assistance of his parents.
Significantly, the contract of carriage was actually between George, as the paying passenger, and
Baliwag, as the common carrier. As such carrier, Baliwag was bound to carry its passengers safely
as far as human care and foresight could provide, and is liable for injuries to them through the
negligence or wilful acts of its employees (Articles 1755 and 1759, Civil Code). Thus, George had
the right to be safely brought to his destination and Baliwag had the correlative obligation to do so.
Since a contract may be violated only by the parties thereto, as against each other, in an action upon
that contract, the real parties in interest, either as plaintiff or as defendant, must be parties to said
contract (Marimperio Compania Naviera, S.A. vs. Court of Appeals, No. L-40234, December 14,
1987, 156 SCRA 368). A real party-in-interest -plaintiff is one who has a legal right while a real partyin-interest-defendant is one who has a correlative legal obligation whose act or omission violates the
legal right of the former (Lee vs. Romillo, Jr., G.R. No. 60973, May 28, 1988). In the absence of any
contract of carriage between Baliwag and George's parents, the latter are not real parties-in-interest
in an action for breach of that contract.
The general rule of the common law is that every action must be brought in the name
of the party whose legal right has been invaded or infringed. 15 Enc. P1. & Pr. p.
484. "For the immediate wrong and damage the person injured is the only one who
can maintain the action." Id. p. 578. The person who sustains an injury is the person
to bring an action for the injury against the wrongdoer." Dicey parties to Actions, 347.
(Cited in Green v. Shoemaker, 73 A 688, 23 L.R.A., N.S. 667).
There is no question regarding the genuineness and due execution of the Release of Claims. It is a
duly notarized public document. It clearly stipulates that the consideration of P8,020.50 received by
George was "to release and forever discharge Fortune Insurance and/or Baliwag from any and all
liabilities now accrued or to accrue on account of any and all claims or causes of action ... for
personal injuries, damage to property, loss of services, medical expenses, losses or damages of any
and every kind or nature whatsoever, sustained by him on 17 December 1984 thru Reckless
Imprudence Resulting to Physical Injuries." Consequently, the ruling of respondent Appellate Court
that the "Release of Claims" was intended only as the full and final settlement of a third-party liability
for bodily injury claim and not for the purpose of releasing Baliwag from its liability, if any, in a breach
of a contract of carriage, has to be rejected for being contrary to the very terms thereof. If the terms
of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control (Article 1370, Civil Code). The phraseology "any and all
claims or causes of action" is broad enough to include all damages that may accrue to the injured
party arising from the unfortunate accident.

The Release of Claims had the effect of a compromise agreement since it was entered into for the
purpose of making a full and final compromise adjustment and settlement of the cause of action
involved. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a
litigation or put an end to one already commenced (Article 2028, Civil Code). The Release of Claims
executed by the injured party himself wrote finish to this litigation.
WHEREFORE, the Decision dated 22 October 1987 of respondent Court of Appeals is SET ASIDE,
the Decision of the Regional Trial Court of Bulacan, Branch 20, is REINSTATED, and the Complaint
and Third-Party Complaint are hereby ordered DISMISSED. No costs.
SO ORDERED.

G.R. No. 125524

August 25, 1999

BENITO MACAM doing business under the name and style BEN-MAC
ENTERPRISES, petitioner,
vs.
COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES
SHIPPING, INC.,respondents.
BELLOSILLO, J.:
On 4 April 1989 petitioner Benito Macam, doing business under the name and style Ben-Mac
Enterprises, shipped on board the vessel Nen Jiang, owned and operated by respondent China
Ocean Shipping Co., through local agent respondent Wallem Philippines Shipping, Inc. (hereinafter
WALLEM), 3,500 boxes of watermelons valued at US$5,950.00 covered by Bill of Lading No. HKG
99012 and exported through Letter of Credit No. HK 1031/30 issued by National Bank of Pakistan,
Hongkong (hereinafter PAKISTAN BANK) and 1,611 boxes of fresh mangoes with a value of
US$14,273.46 covered by Bill of Lading No. HKG 99013 and exported through Letter of Credit No.
HK 1032/30 also issued by PAKISTAN BANK. The Bills of Lading contained the following pertinent
provision: "One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods
or delivery order.1 The shipment was bound for Hongkong with PAKISTAN BANK as consignee and
Great Prospect Company of Kowloon, Hongkong (hereinafter GPC) as notify party.
On 6 April 1989, per letter of credit requirement, copies of the bills of lading and commercial invoices
were submitted to petitioner's depository bank, Consolidated Banking Corporation (hereinafter
SOLIDBANK), which paid petitioner in advance the total value of the shipment of US$20,223.46.
1wphi1.nt

Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM directly to GPC, not
to PAKISTAN BANK, and without the required bill of lading having been surrendered. Subsequently,
GPC failed to pay PAKISTAN BANK such that the latter, still in possession of the original bills of
lading, refused to pay petitioner through SOLIDBANK. Since SOLIDBANK already pre-paid
petitioner the value of the shipment, it demanded payment from respondent WALLEM through five

(5) letters but was refused. Petitioner was thus allegedly constrained to return the amount involved
to SOLIDBANK, then demanded payment from respondent WALLEM in writing but to no avail.
On 25 September 1991 petitioner sought collection of the value of the shipment of US$20,223.46 or
its equivalent of P546,033.42 from respondents before the Regional Trial Court of Manila, based on
delivery of the shipment to GPC without presentation of the bills of lading and bank guarantee.
Respondents contended that the shipment was delivered to GPC without presentation of the bills of
lading and bank guarantee per request of petitioner himself because the shipment consisted of
perishable goods. The telex dated 5 April 1989 conveying such request read
AS PER SHPR'S REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO
RESPECTIVE CNEES WITHOUT PRESENTATION OF OB/L2 and bank guarantee since for
prepaid shipt ofrt charges already fully paid our end . . . .3
Respondents explained that it is a standard maritime practice, when immediate delivery is of the
essence, for the shipper to request or instruct the carrier to deliver the goods to the buyer upon
arrival at the port of destination without requiring presentation of the bill of lading as that usually
takes time. As proof thereof, respondents apprised the trial court that for the duration of their twoyear business relationship with petitioner concerning similar shipments to GPC deliveries were
effected without presentation of the bills of lading. 4 Respondents advanced next that the refusal of
PAKISTAN BANK to pay the letters of credit to SOLIDBANK was due to the latter's failure to submit a
Certificate of Quantity and Quality. Respondents counterclaimed for attorney's fees and costs of suit.
On 14 May 1993 the trial court ordered respondents to pay, jointly and severally, the following
amounts: (1) P546,033.42 plus legal interest from 6 April 1989 until full payment; (2) P10,000.00 as
attorney's fees; and, (3) the costs. The counterclaims were dismissed for lack of merit. 5 The trial
court opined that respondents breached the provision in the bill of lading requiring that "one of the
Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order,"
when they released the shipment to GPC without presentation of the bills of lading and the bank
guarantee that should have been issued by PAKISTAN BANK in lieu of the bills of lading. The trial
court added that the shipment should not have been released to GPC at all since the instruction
contained in the telex was to arrange delivery to the respective consignees and not to any party. The
trial court observed that the only role of GPC in the transaction as notify party was precisely to be
notified of the arrival of the cargoes in Hongkong so it could in turn duly advise the consignee.
Respondent Court of Appeals appreciated the evidence in a different manner. According to it, as
established by previous similar transactions between the parties, shipped cargoes were sometimes
actually delivered not to the consignee but to notify party GPC without need of the bills of lading or
bank guarantee.6 Moreover, the bills of lading were viewed by respondent court to have been
properly superseded by the telex instruction and to implement the instruction, the delivery of the
shipment must be to GPC, the real importer/buyer of the goods as shown by the export
invoices,7 and not to PAKISTAN BANK since the latter could very well present the bills of lading in its
possession; likewise, if it were the PAKISTAN BANK to which the cargoes were to be strictly
delivered it would no longer be proper to require a bank guarantee. Respondent court noted that
besides, GPC was listed as a consignee in the telex. It observed further that the demand letter of

petitioner to respondents never complained of misdelivery of goods. Lastly, respondent court found
that petitioner's claim of having reimbursed the amount involved to SOLIDBANK was
unsubstantiated. Thus, on 13 March 1996 respondent court set aside the decision of the trial court
and dismissed the complaint together with the counterclaims. 8 On 5 July 1996 reconsideration was
denied.9
Petitioner submits that the fact that the shipment was not delivered to the consignee as stated in the
bill of lading or to a party designated or named by the consignee constitutes a misdelivery thereof.
Moreover, petitioner argues that from the text of the telex, assuming there was such an instruction,
the delivery of the shipment without the required bill of lading or bank guarantee should be made
only to the designated consignee, referring to PAKISTAN BANK.
We are not persuaded. The submission of petitioner that "the fact that the shipment was not
delivered to the consignee as stated in the Bill of Lading or to a party designated or named by the
consignee constitutes a misdelivery thereof" is a deviation from his cause of action before the trial
court. It is clear from the allegation in his complaint that it does not deal with misdelivery of the
cargoes but of delivery to GPC without the required bills of lading and bank guarantee
6. The goods arrived in Hongkong and were released by the defendant Wallem directly to the
buyer/notify party, Great Prospect Company and not to the consignee, the National Bank of
Pakistan, Hongkong, without the required bills of lading and bank guarantee for the release
of the shipment issued by the consignee of the goods . . . .10
Even going back to an event that transpired prior to the filing of the present case or when petitioner
wrote respondent WALLEM demanding payment of the value of the cargoes, misdelivery of the
cargoes did not come into the picture
We are writing you on behalf of our client, Ben-Mac Enterprises who informed us that Bills of
Lading No. 99012 and 99013 with a total value of US$20,223.46 were released to Great
Prospect, Hongkong without the necessary bank guarantee. We were further informed that
the consignee of the goods, National Bank of Pakistan, Hongkong, did not release or
endorse the original bills of lading. As a result thereof, neither the consignee, National Bank
of Pakistan, Hongkong, nor the importer, Great Prospect Company, Hongkong, paid our
client for the goods . . . .11
At any rate, we shall dwell on petitioner's submission only as a prelude to our discussion on the
imputed liability of respondents concerning the shipped goods. Article 1736 of the Civil Code
provides
Art. 1736. The extraordinary responsibility of the common carriers lasts from the time the
goods are unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive them, without prejudice to the
provisions of article 1738.12

We emphasize that the extraordinary responsibility of the common carriers lasts until actual or
constructive delivery of the cargoes to the consignee or to the person who has a right to receive
them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the
notify party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner
also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint
before the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC as
buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive
them14 was proper.
The real issue is whether respondents are liable to petitioner for releasing the goods to GPC without
the bills of lading or bank guarantee.
Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to
GPC without the bills of lading and bank guarantee. The telex instructed delivery of various
shipments to the respective consignees without need of presenting the bill of lading and bank
guarantee per the respective shipper's request since "for prepaid shipt ofrt charges already fully
paid." Petitioner was named therein as shipper and GPC as consignee with respect to Bill of Lading
Nos. HKG 99012 and HKG 99013. Petitioner disputes the existence of such instruction and claims
that this evidence is self-serving.
From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer
for around two (2) or three (3) years already. When mangoes and watermelons are in season, his
shipment to GPC using the facilities of respondents is twice or thrice a week. The goods are
released to GPC. It has been the practice of petitioner to request the shipping lines to immediately
release perishable cargoes such as watermelons and fresh mangoes through telephone calls by
himself or his "people." In transactions covered by a letter of credit, bank guarantee is normally
required by the shipping lines prior to releasing the goods. But for buyers using telegraphic transfers,
petitioner dispenses with the bank guarantee because the goods are already fully paid. In his several
years of business relationship with GPC and respondents, there was not a single instance when the
bill of lading was first presented before the release of the cargoes. He admitted the existence of the
telex of 3 July 1989 containing his request to deliver the shipment to the consignee without
presentation of the bill of lading15 but not the telex of 5 April 1989 because he could not remember
having made such request.
Consider pertinent portions of petitioner's testimony
Q: Are you aware of any document which would indicate or show that your request to the
defendant Wallem for the immediate release of your fresh fruits, perishable goods, to Great
Prospect without the presentation of the original Bill of Lading?
A: Yes, by telegraphic transfer, which means that it is fully paid. And I requested immediate
release of the cargo because there was immediate payment.
Q: And you are referring, therefore, to this copy Telex release that you mentioned where your
Company's name appears Ben-Mac?

Atty. Hernandez: Just for the record, Your Honor, the witness is showing a Bill of
Lading referring to SKG (sic) 93023 and 93026 with Great Prospect Company.
Atty. Ventura:
Q: Is that the telegraphic transfer?
A: Yes, actually, all the shippers partially request for the immediate release of the goods
when they are perishable. I thought Wallem Shipping Lines is not neophyte in the business.
As far as LC is concerned, Bank guarantee is needed for the immediate release of the goods
. . . .15
Q: Mr. Witness, you testified that if is the practice of the shipper of the perishable goods to
ask the shipping lines to release immediately the shipment. Is that correct?
A: Yes, sir.
Q: Now, it is also the practice of the shipper to allow the shipping lines to release the
perishable goods to the importer of goods without a Bill of Lading or Bank guarantee?
A: No, it cannot be without the Bank Guarantee.
Atty. Hernandez:
Q: Can you tell us an instance when you will allow the release of the perishable goods by the
shipping lines to the importer without the Bank guarantee and without the Bill of Lading?
A: As far as telegraphic transfer is concerned.
Q: Can you explain (to) this Honorable Court what telegraphic transfer is?
A: Telegraphic transfer, it means advance payment that I am already fully paid . . . .
Q: Mr. Macam, with regard to Wallem and to Great Prospect, would you know and can you
recall that any of your shipment was released to Great Prospect by Wallem through
telegraphic transfer?
A: I could not recall but there were so many instances sir.
Q: Mr. Witness, do you confirm before this Court that in previous shipments of your goods
through Wallem, you requested Wallem to release immediately your perishable goods to the
buyer?
A: Yes, that is the request of the shippers of the perishable goods . . . . 16

Q: Now, Mr. Macam, if you request the Shipping Lines for the release of your goods
immediately even without the presentation of OBL, how do you course it?
A: Usually, I call up the Shipping Lines, sir . . . .17
Q: You also testified you made this request through phone calls. Who of you talked
whenever you made such phone call?
A: Mostly I let my people to call, sir. (sic)
Q: So everytime you made a shipment on perishable goods you let your people to call? (sic)
A: Not everytime, sir.
Q: You did not make this request in writing?
A: No, sir. I think I have no written request with Wallem . . . . 18
Against petitioner's claim of "not remembering" having made a request for delivery of subject
cargoes to GPC without presentation of the bills of lading and bank guarantee as reflected in the
telex of 5 April 1989 are damaging disclosures in his testimony. He declared that it was his practice
to ask the shipping lines to immediately release shipment of perishable goods through telephone
calls by himself or his "people." He no longer required presentation of a bill of lading nor of a bank
guarantee as a condition to releasing the goods in case he was already fully paid. Thus, taking into
account that subject shipment consisted of perishable goods and SOLIDBANK pre-paid the full
amount of the value thereof, it is not hard to believe the claim of respondent WALLEM that petitioner
indeed requested the release of the goods to GPC without presentation of the bills of lading and
bank guarantee.
The instruction in the telex of 5 April 1989 was "to deliver the shipment to respective consignees."
And so petitioner argues that, assuming there was such an instruction, the consignee referred to
was PAKISTAN BANK. We find the argument too simplistic. Respondent court analyzed the telex in
its entirety and correctly arrived at the conclusion that the consignee referred to was not PAKISTAN
BANK but GPC
There is no mistake that the originals of the two (2) subject Bills of Lading are still in the
possession of the Pakistani Bank. The appealed decision affirms this fact. Conformably, to
implement the said telex instruction, the delivery of the shipment must be to GPC, the notify
party or real importer/buyer of the goods and not the Pakistani Bank since the latter can very
well present the original Bills of Lading in its possession. Likewise, if it were the Pakistani
Bank to whom the cargoes were to be strictly delivered, it will no longer be proper to require
a bank guarantee as a substitute for the Bill of Lading. To construe otherwise will render
meaningless the telex instruction. After all, the cargoes consist of perishable fresh fruits and
immediate delivery thereof to the buyer/importer is essentially a factor to reckon with.
Besides, GPC is listed as one among the several consignees in the telex (Exhibit 5-B) and

the instruction in the telex was to arrange delivery of A/M shipment (not any party) to
respective consignees without presentation of OB/L and bank guarantee . . . . 20
Apart from the foregoing obstacles to the success of petitioner's cause, petitioner failed to
substantiate his claim that he returned to SOLIDBANK the full amount of the value of the cargoes. It
is not far-fetched to entertain the notion, as did respondent court, that he merely accommodated
SOLIDBANK in order to recover the cost of the shipped cargoes from respondents. We note that it
was SOLIDBANK which initially demanded payment from respondents through five (5) letters.
SOLIDBANK must have realized the absence of privity of contract between itself and respondents.
That is why petitioner conveniently took the cudgels for the bank.
In view of petitioner's utter failure to establish the liability of respondents over the cargoes, no
reversible error was committed by respondent court in ruling against him.
WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals of 13 March
1996 dismissing the complaint of petitioner Benito Macam and the counterclaims of respondents
China Ocean Shipping Co. and/or Wallem Philippines Shipping, Inc., as well as its resolution of 5
July 1996 denying reconsideration, is AFFIRMED.
1wphi1.nt

SO ORDERED.

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 Paraaque 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 Pereas were engaged in the business of transporting students from their respective residences
in Paraaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the
Pereas 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 Pereas 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 Pereas, PNR and Alano. The Pereas 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 Perea for the adequate and safe
transportation carriage of the former spouses' son from their residence in Paraaque 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 Perea,
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 Perea 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 Perea 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 Perea 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 Pereas 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 Pereas 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 drivers 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 Perea had sometimes
accompanied Alfaro in the vans 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) Attorneys fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereas motion for reconsideration, 4 reiterating that the
cooperative gross negligence of the Pereas 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 CAs Ruling
Both the Pereas 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 Perea and defendantappellant 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 defendantsappellants Philippine National Railways.
The Pereas 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 attorneys fees with the other defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereas 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 attorneys fees.
The trial court erred in awarding damages in the form of deceaseds 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 P 2,500,000.00; and deleted the attorneys 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 Paraaque City is AFFIRMED with the modification that the award of Actual Damages is reduced
to P59,502.76; Moral Damages is reduced to P 2,500,000.00; and the award for Attorneys Fees is
Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aarons 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 deceaseds 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 Aarons death were unknown, it used the prevailing minimum wage
of P 280.00/day to compute Aarons gross annual salary to be P 110,716.65, inclusive of the
thirteenth month pay. Multiplying this annual salary by Aarons life expectancy of 39.3 years, his
gross income would aggregate to P 4,351,164.30, from which his estimated expenses in the sum
of P 2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net income. Due to Aarons

computed net income turning out to be higher than the amount claimed by the Zarates,
only P 2,109,071.00, the amount expressly prayed for by them, was granted.
On April 4, 2003, the CA denied the Pereas motion for reconsideration. 8
Issues
In this appeal, the Pereas list the following as the errors committed by the CA, to wit:
I. The lower court erred when it upheld the trial courts 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 courts 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 Pereas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the Pereas and the PNR,
basing their claim against the Pereas on breach of contract of carriage and against the PNR on
quasi-delict.
The RTC found the Pereas and the PNR negligent. The CA affirmed the findings.
We concur with the CA.
To start with, the Pereas 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
drivers 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 Perea 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 Pereas
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,9primarily 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. 11The 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.12Contracts 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,15viz:
"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 clientle, 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 clientle.
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 Pereas 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 clientle, the Pereas 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 carriers 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 Pereas have not presented any compelling defense or reason by which the
Court might now reverse the CAs 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 Pereas, 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 Pereas 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 Pereas as inappropriate in this action for breach of
contract of carriage.
The Pereas 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 drivers 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 Pereas driver was entirely negligent when he
traversed the railroad tracks at a point not allowed for a motorists 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 Pereas 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 Pereas 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 Pereas school van traversed the railroad tracks at a point not
intended for that purpose.
At any rate, the lower courts correctly held both the Pereas 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 Pereas 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 Pereas 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 Pereas and the PNR were joint tortfeasors.
2.
Was the indemnity for loss of
Aarons earning capacity proper?
The RTC awarded indemnity for loss of Aarons 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
Aarons 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
RTCs computation of Aarons 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 Pereas submit that the indemnity for loss of earning capacity was speculative and
unfounded. They cited People v. Teehankee, Jr.,37 where the Court deleted the indemnity for victim
Jussi Leinos 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
1wphi1

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 Pereas 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 Aarons 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." 38Accordingly, we emphatically
hold in favor of the indemnification for Aarons 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 deceaseds 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 Carriagas
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 P 10,000.00 to P 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 Baos, the countrys leading educational institution in agriculture.
3.
Were the amounts of damages excessive?
The Pereas plead for the reduction of the moral and exemplary damages awarded to the Zarates in
the respective amounts of P 2,500,000.00 and P 1,000,000.00 on the ground that such amounts
were excessive.
The plea is unwarranted.

The moral damages of P 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 sons 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 P 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 Pereas
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.
SO ORDERED.

G.R. No. 101089. April 7, 1993.

ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
Modesto S. Bascos for petitioner.
Pelaez, Adriano & Gregorio for private respondent.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER.
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or
association engaged in the business of carrying or transporting passengers or goods or both, by
land, water or air, for compensation, offering their services to the public." The test to determine a
common carrier is "whether the given undertaking is a part of the business engaged in by the carrier
which he has held out to the general public as his occupation rather than the quantity or extent of the
business transacted." . . . The holding of the Court in De Guzman vs. Court of Appeals is instructive.
In referring to Article 1732 of the Civil Code, it held thus: "The above article makes no distinction
between one whose principal business activity is the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 also

carefully avoids making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguished between a carrier offering its services to
the "general public," i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think that Article 1732
deliberately refrained from making such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN
PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN
PRESUMPTION MADE ABSOLUTE. Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to
have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There
are very few instances when the presumption of negligence does not attach and these instances are
enumerated in Article 1734. In those cases where the presumption is applied, the common carrier
must prove that it exercised extraordinary diligence in order to overcome the presumption . . . The
presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it.
Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her
negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER
ABSOLVED FROM LIABILITY. In De Guzman vs. Court of Appeals, the Court held that hijacking,
not being included in the provisions of Article 1734, must be dealt with under the provisions of Article
1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate the
carrier from liability arising from hijacking, he must prove that the robbers or the hijackers acted with
grave or irresistible threat, violence, or force. This is in accordance with Article 1745 of the Civil Code
which provides: "Art. 1745. Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy . . . (6) That the common carrier's liability for acts
committed by thieves, or of robbers who do not act with grave or irresistible threat, violences or
force, is dispensed with or diminished"; In the same case, the Supreme Court also held that: "Under
Article 1745 (6) above, a common carrier is held responsible and will not be allowed to divest or
to diminish such responsibility even for acts of strangers like thieves or robbers, except where
such thieves or robbers in fact acted "with grave of irresistible threat, violence of force," We believe
and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods
carried are reached where the goods are lost as a result of a robbery which is attended by "grave or
irresistible threat, violence or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. In this case, petitioner
herself has made the admission that she was in the trucking business, offering her trucks to those
with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the
same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. Petitioner
presented no other proof of the existence of the contract of lease. He who alleges a fact has the
burden of proving it.

6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS

WITNESSES. While the affidavit of Juanito Morden, the truck helper in the hijacked truck, was
presented as evidence in court, he himself was a witness as could be gleaned from the contents of
the petition. Affidavits are not considered the best evidence if the affiants are available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO BE.
Granting that the said evidence were not self-serving, the same were not sufficient to prove that
the contract was one of lease. It must be understood that a contract is what the law defines it to be
and not what it is called by the contracting parties.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO A.
CIPRIANO, doing business under the name CIPRIANO TRADING ENTERPRISES plaintiff-appellee,
vs. ESTRELLITA M. BASCOS, doing business under the name of BASCOS TRUCKING, defendantappellant," C.A.-G.R. CV No. 25216, the dispositive portion of which is quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed from, which is hereby
affirmed in toto. Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a
hauling contract 2 with Jibfair Shipping Agency Corporation whereby the former bound itself to haul
the latter's 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the
warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its obligation, CIPTRADE,
through Rodolfo Cipriano, subcontracted with Estrellita Bascos (petitioner) to transport and to deliver
400 sacks of soya bean meal worth P156,404.00 from the Manila Port Area to Calamba, Laguna at
the rate of P50.00 per metric ton. Petitioner failed to deliver the said cargo. As a consequence of that
failure, Cipriano paid Jibfair Shipping Agency the amount of the lost goods in accordance with the
contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and
non-delivery or damages to the cargo during transport at market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano
filed a complaint for a sum of money and damages with writ of preliminary attachment 4 for breach of
a contract of carriage. The prayer for a Writ of Preliminary Attachment was supported by an affidavit
5 which contained the following allegations:
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court,
whereby a writ of preliminary attachment may lawfully issue, namely:

"(e) in an action against a party who has removed or disposed of his property, or is about to do so,
with intent to defraud his creditors;"
5. That there is no sufficient security for the claim sought to be enforced by the present action;
6. That the amount due to the plaintiff in the above-entitled case is above all legal counterclaims;"
The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no contract of carriage
since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to Laguna; that
CIPTRADE was liable to petitioner in the amount of P11,000.00 for loading the cargo; that the truck
carrying the cargo was hijacked along Canonigo St., Paco, Manila on the night of October 21, 1988;
that the hijacking was immediately reported to CIPTRADE and that petitioner and the police exerted
all efforts to locate the hijacked properties; that after preliminary investigation, an information for
robbery and carnapping were filed against Jose Opriano, et al.; and that hijacking, being a force
majeure, exculpated petitioner from any liability to CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering the
latter to pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS
(P156,404.00) as an (sic) for actual damages with legal interest of 12% per cent per annum to be
counted from December 4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by
defendant is DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's judgment.
Consequently, petitioner filed this petition where she makes the following assignment of errors; to
wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP
BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT
LEASE OF CARGO TRUCK.

II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT
THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE
RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN
FINDING PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE
TO FORCE MAJEURE, NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT
THAT PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT
HAS BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE MERITS OF THE
CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a common carrier?; and
(2) was the hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted in her
answer that she did business under the name A.M. Bascos Trucking and that said admission
dispensed with the presentation by private respondent, Rodolfo Cipriano, of proofs that petitioner
was a common carrier. The respondent Court also adopted in toto the trial court's decision that
petitioner was a common carrier, Moreover, both courts appreciated the following pieces of evidence
as indicators that petitioner was a common carrier: the fact that the truck driver of petitioner, Maximo
Sanglay, received the cargo consisting of 400 bags of soya bean meal as evidenced by a cargo
receipt signed by Maximo Sanglay; the fact that the truck helper, Juanito Morden, was also an
employee of petitioner; and the fact that control of the cargo was placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she
alleged in this petition that the contract between her and Rodolfo A. Cipriano, representing
CIPTRADE, was lease of the truck. She cited as evidence certain affidavits which referred to the
contract as "lease". These affidavits were made by Jesus Bascos 8 and by petitioner herself. 9 She
further averred that Jesus Bascos confirmed in his testimony his statement that the contract was a
lease contract. 10 She also stated that: she was not catering to the general public. Thus, in her
answer to the amended complaint, she said that she does business under the same style of A.M.
Bascos Trucking, offering her trucks for lease to those who have cargo to move, not to the general
public but to a few customers only in view of the fact that it is only a small business. 11
We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or
association engaged in the business of carrying or transporting passengers or goods or both, by
land, water or air, for compensation, offering their services to the public." The test to determine a
common carrier is "whether the given undertaking is a part of the business engaged in by the carrier
which he has held out to the general public as his occupation rather than the quantity or extent of the
business transacted." 12 In this case, petitioner herself has made the admission that she was in the
trucking business, offering her trucks to those with cargo to move. Judicial admissions are
conclusive and no evidence is required to prove the same. 13

But petitioner argues that there was only a contract of lease because they offer their services only to
a select group of people and because the private respondents, plaintiffs in the lower court, did not
object to the presentation of affidavits by petitioner where the transaction was referred to as a lease
contract.
Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is
instructive. In referring to Article 1732 of the Civil Code, it held thus:
"The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in
local idiom, as a "sideline"). Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one offering
such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1732 deliberately refrained from making such distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts have
dismissed them as self-serving and petitioner contests the conclusion. We are bound by the
appellate court's factual conclusions. Yet, granting that the said evidence were not self-serving, the
same were not sufficient to prove that the contract was one of lease. It must be understood that a
contract is what the law defines it to be and not what it is called by the contracting parties. 15
Furthermore, petitioner presented no other proof of the existence of the contract of lease. He who
alleges a fact has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the goods was not due to
force majeure.
Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods
transported by them. 17 Accordingly, they are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated. 18 There are very few instances when
the presumption of negligence does not attach and these instances are enumerated in Article 1734.
19 In those cases where the presumption is applied, the common carrier must prove that it exercised
extraordinary diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from
liability for the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court held that
hijacking, not being included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the robbers
or the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with
Article 1745 of the Civil Code which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy;

xxx xxx xxx

(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act
with grave or irresistible threat, violences or force, is dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to
divest or to diminish such responsibility even for acts of strangers like thieves or robbers except
where such thieves or robbers in fact acted with grave or irresistible threat, violence or force. We
believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the
goods carried are reached where the goods are lost as a result of a robbery which is attended by
"grave or irresistible threat, violence or force."
To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus
Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial court and the Court
of Appeals have concluded that these affidavits were not enough to overcome the presumption.
Petitioner's affidavit about the hijacking was based on what had been told her by Juanito Morden. It
was not a first-hand account. While it had been admitted in court for lack of objection on the part of
private respondent, the respondent Court had discretion in assigning weight to such evidence. We
are bound by the conclusion of the appellate court. In a petition for review on certiorari, We are not
to determine the probative value of evidence but to resolve questions of law. Secondly, the affidavit
of Jesus Bascos did not dwell on how the hijacking took place. Thirdly, while the affidavit of Juanito
Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a
witness as could be gleaned from the contents of the petition. Affidavits are not considered the best
evidence if the affiants are available as witnesses. 25 The subsequent filing of the information for
carnapping and robbery against the accused named in said affidavits did not necessarily mean that
the contents of the affidavits were true because they were yet to be determined in the trial of the
criminal cases.
The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome
it. Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her
negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial issues involved, We find no
reason to disturb the conclusion that the motion to lift/dissolve the writ of preliminary attachment has
been rendered moot and academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be sustained.
The petition is DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.

G.R. No. 141910

August 6, 2002

FGU INSURANCE CORPORATION, petitioner,

vs.
G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M. EROLES, respondents.
VITUG, J.:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of
Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles, from the
plant site of Concepcion Industries, Inc., along South Superhighway in Alabang, Metro Manila, to the
Central Luzon Appliances in Dagupan City. While the truck was traversing the north diversion road
along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck,
causing it to fall into a deep canal, resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc.,
the value of the covered cargoes in the sum of P204,450.00. FGU, in turn, being the subrogee of the
rights and interests of Concepcion Industries, Inc., sought reimbursement of the amount it had paid
to the latter from GPS. Since the trucking company failed to heed the claim, FGU filed a complaint
for damages and breach of contract of carriage against GPS and its driver Lambert Eroles with the
Regional Trial Court, Branch 66, of Makati City. In its answer, respondents asserted that GPS was
the exclusive hauler only of Concepcion Industries, Inc., since 1988, and it was not so engaged in
business as a common carrier. Respondents further claimed that the cause of damage was purely
accidental.
1wphi1.nt

The issues having thus been joined, FGU presented its evidence, establishing the extent of damage
to the cargoes and the amount it had paid to the assured. GPS, instead of submitting its evidence,
filed with leave of court a motion to dismiss the complaint by way of demurrer to evidence on the
ground that petitioner had failed to prove that it was a common carrier.
The trial court, in its order of 30 April 1996,1 granted the motion to dismiss, explaining thusly:
"Under Section 1 of Rule 131 of the Rules of Court, it is provided that Each party must prove
his own affirmative allegation, xxx.
"In the instant case, plaintiff did not present any single evidence that would prove that
defendant is a common carrier.
"x x x

xxx

xxx

"Accordingly, the application of the law on common carriers is not warranted and the
presumption of fault or negligence on the part of a common carrier in case of loss, damage
or deterioration of goods during transport under 1735 of the Civil Code is not availing.

"Thus, the laws governing the contract between the owner of the cargo to whom the plaintiff
was subrogated and the owner of the vehicle which transports the cargo are the laws on
obligation and contract of the Civil Code as well as the law on quasi delicts.
"Under the law on obligation and contract, negligence or fault is not presumed. The law on
quasi delict provides for some presumption of negligence but only upon the attendance of
some circumstances. Thus, Article 2185 provides:
Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a
motor vehicle has been negligent if at the time of the mishap, he was violating any
traffic regulation.
"Evidence for the plaintiff shows no proof that defendant was violating any traffic regulation.
Hence, the presumption of negligence is not obtaining.
"Considering that plaintiff failed to adduce evidence that defendant is a common carrier and
defendants driver was the one negligent, defendant cannot be made liable for the damages
of the subject cargoes."2
The subsequent motion for reconsideration having been denied,3 plaintiff interposed an appeal to the
Court of Appeals, contending that the trial court had erred (a) in holding that the appellee corporation
was not a common carrier defined under the law and existing jurisprudence; and (b) in dismissing
the complaint on a demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate
court, in its decision of 10 June 1999,4 discoursed, among other things, that "x x x in order for the presumption of negligence provided for under the law governing
common carrier (Article 1735, Civil Code) to arise, the appellant must first prove that the
appellee is a common carrier. Should the appellant fail to prove that the appellee is a
common carrier, the presumption would not arise; consequently, the appellant would have to
prove that the carrier was negligent.
"x x x

xxx

xxx

"Because it is the appellant who insists that the appellees can still be considered as a
common carrier, despite its `limited clientele, (assuming it was really a common carrier), it
follows that it (appellant) has the burden of proving the same. It (plaintiff-appellant) `must
establish his case by a preponderance of evidence, which means that the evidence as a
whole adduced by one side is superior to that of the other. (Summa Insurance Corporation
vs. Court of Appeals, 243 SCRA 175). This, unfortunately, the appellant failed to do -- hence,
the dismissal of the plaintiffs complaint by the trial court is justified.
"x x x

xxx

xxx

"Based on the foregoing disquisitions and considering the circumstances that the appellee
trucking corporation has been `its exclusive contractor, hauler since 1970, defendant has no
choice but to comply with the directive of its principal, the inevitable conclusion is that the
appellee is a private carrier.
"x x x

xxx

xxx

"x x x the lower court correctly ruled that 'the application of the law on common carriers is not
warranted and the presumption of fault or negligence on the part of a common carrier in case
of loss, damage or deterioration of good[s] during transport under [article] 1735 of the Civil
Code is not availing.' x x x.
"Finally, We advert to the long established rule that conclusions and findings of fact of a trial
court are entitled to great weight on appeal and should not be disturbed unless for strong
and valid reasons."5
Petitioner's motion for reconsideration was likewise denied; 6 hence, the instant petition,7 raising the
following issues:
I
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS
DEFINED UNDER THE LAW AND EXISTING JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE
CARRIER, MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS IT
UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED WHILE IN
ITS PROTECTIVE CUSTODY AND POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT
CASE.
On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be
amply justified. GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc.,
rendering or offering its services to no other individual or entity, cannot be considered a common
carrier. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for hire or compensation,
offering their services to the public,8 whether to the public in general or to a limited clientele in
particular, but never on an exclusive basis.9 The true test of a common carrier is the carriage of
passengers or goods, providing space for those who opt to avail themselves of its transportation
service for a fee.10 Given accepted standards, GPS scarcely falls within the term "common carrier."

The above conclusion nothwithstanding, GPS cannot escape from liability.

In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion
Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance
justify, prima facie, a corresponding right of relief.11 The law, recognizing the obligatory force of
contracts,12 will not permit a party to be set free from liability for any kind of misperformance of the
contractual undertaking or a contravention of the tenor thereof. 13 A breach upon the contract confers
upon the injured party a valid cause for recovering that which may have been lost or suffered. The
remedy serves to preserve the interests of the promisee that may include his "expectation interest,"
which is his interest in having the benefit of his bargain by being put in as good a position as he
would have been in had the contract been performed, or his "reliance interest," which is his interest
in being reimbursed for loss caused by reliance on the contract by being put in as good a position as
he would have been in had the contract not been made; or his "restitution interest," which is his
interest in having restored to him any benefit that he has conferred on the other party.14 Indeed,
agreements can accomplish little, either for their makers or for society, unless they are made the
basis for action.15 The effect of every infraction is to create a new duty, that is, to make recompense
to the one who has been injured by the failure of another to observe his contractual
obligation16 unless he can show extenuating circumstances, like proof of his exercise of due
diligence (normally that of the diligence of a good father of a family or, exceptionally by stipulation or
by law such as in the case of common carriers, that of extraordinary diligence) or of the attendance
of fortuitous event, to excuse him from his ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of carriage between it and
petitioners assured, and admits that the cargoes it has assumed to deliver have been lost or
damaged while in its custody. In such a situation, a default on, or failure of compliance with, the
obligation in this case, the delivery of the goods in its custody to the place of destination - gives
rise to a presumption of lack of care and corresponding liability on the part of the contractual obligor
the burden being on him to establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not
himself be ordered to pay petitioner. The driver, not being a party to the contract of carriage between
petitioners principal and defendant, may not be held liable under the agreement. A contract can only
bind the parties who have entered into it or their successors who have assumed their personality or
their juridical position.17 Consonantly with the axiom res inter alios acta aliis neque nocet prodest,
such contract can neither favor nor prejudice a third person. Petitioners civil action against the driver
can only be based on culpa aquiliana, which, unlike culpa contractual, would require the claimant for
damages to prove negligence or fault on the part of the defendant. 18
A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant liable
where the thing which caused the injury complained of is shown to be under the latters management
and the accident is such that, in the ordinary course of things, cannot be expected to happen if those
who have its management or control use proper care. It affords reasonable evidence, in the absence
of explanation by the defendant, that the accident arose from want of care. 19 It is not a rule of
substantive law and, as such, it does not create an independent ground of liability. Instead, it is
regarded as a mode of proof, or a mere procedural convenience since it furnishes a substitute for,
and relieves the plaintiff of, the burden of producing specific proof of negligence. The maxim simply

places on the defendant the burden of going forward with the proof. 20 Resort to the doctrine,
however, may be allowed only when (a) the event is of a kind which does not ordinarily occur in the
absence of negligence; (b) other responsible causes, including the conduct of the plaintiff and third
persons, are sufficiently eliminated by the evidence; and (c) the indicated negligence is within the
scope of the defendant's duty to the plaintiff.21 Thus, it is not applicable when an unexplained
accident may be attributable to one of several causes, for some of which the defendant could not be
responsible.22
Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists between
the plaintiff and the defendant, for the inference of negligence arises from the circumstances and
nature of the occurrence and not from the nature of the relation of the parties. 23 Nevertheless, the
requirement that responsible causes other than those due to defendants conduct must first be
eliminated, for the doctrine to apply, should be understood as being confined only to cases of pure
(non-contractual) tort since obviously the presumption of negligence in culpa contractual, as
previously so pointed out, immediately attaches by a failure of the covenant or its tenor. In the case
of the truck driver, whose liability in a civil action is predicated on culpa acquiliana, while he
admittedly can be said to have been in control and management of the vehicle which figured in the
accident, it is not equally shown, however, that the accident could have been exclusively due to his
negligence, a matter that can allow, forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant
shall be deemed to have waived the right to present evidence. 24 Thus, respondent corporation may
no longer offer proof to establish that it has exercised due care in transporting the cargoes of the
assured so as to still warrant a remand of the case to the trial court.
1wphi1.nt

WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati City,
and the decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED only insofar as
respondent Lambert M. Eroles is concerned, but said assailed order of the trial court and decision of
the appellate court are REVERSEDas regards G.P. Sarmiento Trucking Corporation which, instead,
is hereby ordered to pay FGU Insurance Corporation the value of the damaged and lost cargoes in
the amount of P204,450.00. No costs.
SO ORDERED.

G.R. No. 147246

August 19, 2003

ASIA LIGHTERAGE AND SHIPPING, INC., petitioner,

vs.
COURT OF APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents.
PUNO, J.:
On appeal is the Court of Appeals' May 11, 2000 Decision1 in CA-G.R. CV No. 49195 and February
21, 2001 Resolution2 affirming with modification the April 6, 1994 Decision3 of the Regional Trial

Court of Manila which found petitioner liable to pay private respondent the amount of indemnity and
attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at
US$423,192.354 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-4.5The 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. 03647 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 P4,104,654.22.15Thereafter, as subrogee, it sought recovery of said amount from the petitioner,
but to no avail.

On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of the
amount of indemnity, attorney's fees and cost of suit.16 Petitioner filed its answer with counterclaim.17
The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of its
Decision states:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Asia
Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance Co., Inc.
the sum of P4,104,654.22 with interest from the date complaint was filed on July 3, 1991
until fully satisfied plus 10% of the amount awarded as and for attorney's fees. Defendant's
counterclaim is hereby DISMISSED. With costs against defendant. 18
Petitioner appealed to the Court of Appeals insisting that it is not a common carrier. The appellate
court affirmed the decision of the trial court with modification. The dispositive portion of its decision
reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the
sense that the salvage value of P201,379.75 shall be deducted from the amount
of P4,104,654.22. Costs against appellant.
SO ORDERED.
Petitioner's Motion for Reconsideration dated June 3, 2000 was likewise denied by the appellate
court in a Resolution promulgated on February 21, 2001.
Hence, this petition. Petitioner submits the following errors allegedly committed by the appellate
court, viz:19
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD
WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT HELD THAT PETITIONER IS A COMMON CARRIER.
(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD
WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT AFFIRMED THE FINDING OF THE LOWER COURT A QUO THAT ON THE
BASIS OF THE PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON
CARRIERS, "THE LOSS OF THE CARGO IS, THEREFORE, BORNE BY THE CARRIER IN
ALL CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED."
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD
WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO EXERCISE DUE
DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE AND CUSTODY OF THE
CONSIGNEE'S CARGO.
The issues to be resolved are:

(1) Whether the petitioner is a common carrier; and,

(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary diligence
in its care and custody of the consignee's cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed and
publicly known route, maintains no terminals, and issues no tickets. It points out that it is not obliged
to carry indiscriminately for any person. It is not bound to carry goods unless it consents. In short, it
does not hold out its services to the general public.20
We disagree.
In De Guzman vs. Court of Appeals,21 we held that the definition of common carriers in Article 1732
of the Civil Code makes no distinction between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying only as an ancillary activity. We also
did not distinguish between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.
Further, we ruled that Article 1732 does not distinguish between a carrier offering its services to
the general public, and one who offers services or solicits business only from a narrow segment of
the general population.
In the case at bar, the principal business of the petitioner is that of lighterage and drayage 22 and it
offers its barges to the public for carrying or transporting goods by water for compensation.
Petitioner is clearly a common carrier. In De Guzman, supra,23 we considered private respondent
Ernesto Cendaa to be a common carrier even if his principal occupation was not the carriage of
goods for others, but that of buying used bottles and scrap metal in Pangasinan and selling these
items in Manila.
We therefore hold that petitioner is a common carrier whether its carrying of goods is done on an
irregular rather than scheduled manner, and with an only limited clientele. A common carrier need
not have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of
Appeals.24 The test to determine a common carrier is "whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to the general public as his occupation
rather than the quantity or extent of the business transacted." 25 In the case at bar, the petitioner
admitted that it is engaged in the business of shipping and lighterage, 26 offering its barges to the
public, despite its limited clientele for carrying or transporting goods by water for compensation. 27

On the second issue, we uphold the findings of the lower courts that petitioner failed to exercise
extraordinary diligence in its care and custody of the consignee's goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over the goods
transported by them.28 They are presumed to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated.29 To overcome the presumption of negligence in the case
of loss, destruction or deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code
enumerates the instances when the presumption of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of
its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for
the loss of the cargo. However, petitioner failed to prove that the typhoon is the proximate and only
cause of the loss of the goods, and that it has exercised due diligence before, during and after the
occurrence of the typhoon to prevent or minimize the loss. 30 The evidence show that, even before
the towing bits of the barge broke, it had already previously sustained damage when it hit a sunken
object while docked at the Engineering Island. It even suffered a hole. Clearly, this could not be
solely attributed to the typhoon. The partly-submerged vessel was refloated but its hole was patched
with only clay and cement. The patch work was merely a provisional remedy, not enough for the
barge to sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly
exposed the cargo to further damage. A portion of the cross-examination of Alfredo Cunanan, cargosurveyor of Tan-Gatue Adjustment Co., Inc., states:
CROSS-EXAMINATION BY ATTY. DONN LEE:31
xxx
q

xxx

xxx

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 you tell the 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.
xxx

xxx

xxx

This is not all. Petitioner still headed to the consignee's wharf despite knowledge of an incoming
typhoon. During the time that the barge was heading towards the consignee's wharf on September
5, 1990, typhoon "Loleng" has already entered the Philippine area of responsibility.32 A part of the
testimony of Robert Boyd, Cargo Operations Supervisor of the petitioner, reveals:
DIRECT-EXAMINATION BY ATTY. LEE:33
xxx

xxx

xxx

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?

Yes, sir.
xxx

xxx

xxx

CROSS-EXAMINATION BY ATTY. IGNACIO:34

xxx

xxx

xxx

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?

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.

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

Yes, sir.

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.
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 Appeals 1 in CA-GR No. 28245,
dated September 30, 1992, which affirmed with modification the decision of the Regional Trial Court of
Makati, Branch 58, ordering petitioners jointly and severally to pay damages to private respondent
Amyline Antonio, and its resolution which denied petitioners' motion for reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They
used the bus principally in connection with a bus service for school children which they operated in
Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after trying him out for
two weeks, His job was to take school children to and from the St. Scholastica's College in Malate,
Manila.
On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF)
arranged with petitioners for the transportation of 33 members of its Young Adults Ministry from
Manila to La Union and back in consideration of which private respondent paid petitioners the
amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the afternoon. However,
as several members of the party were late, the bus did not leave the Tropical Hut at the corner of
Ortigas Avenue and EDSA until 8:00 o'clock in the evening. Petitioner Porfirio Cabil drove the
minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at
Carmen was under repair, 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. Nio Hospital, also in the town of Ba-ay, where she was given sedatives. An xray 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. Buo, 16 Batangas Laguna Tayabas Bus
Co. v. Intermediate Appellate Court, 17 and Metro Manila Transit Corporation v. Court of Appeals, 18 the
bus company, its driver, the operator of the other vehicle and the driver of the vehicle were jointly and

severally held liable to the injured passenger or the 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. 138334

August 25, 2003

ESTELA L. CRISOSTOMO, Petitioner,

vs.
The Court of Appeals and CARAVAN TRAVEL & TOURS INTERNATIONAL, INC., Respondents.
DECISION
YNARES-SANTIAGO, J.:
In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel
and Tours International, Inc. to arrange and facilitate her booking, ticketing and accommodation in a
tour dubbed "Jewels of Europe". The package tour included the countries of England, Holland,
Germany, Austria, Liechstenstein, Switzerland and France at a total cost of P74,322.70. Petitioner
was given a 5% discount on the amount, which included airfare, and the booking fee was also
waived because petitioners niece, Meriam Menor, was respondent companys ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a Wednesday to
deliver petitioners travel documents and plane tickets. Petitioner, in turn, gave Menor the full
payment for the package tour. Menor then told her to be at the Ninoy Aquino International Airport
(NAIA) on Saturday, two hours before her flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to take
the flight for the first leg of her journey from Manila to Hongkong. To petitioners dismay, she
discovered that the flight she was supposed to take had already departed the previous day. She
learned that her plane ticket was for the flight scheduled on June 14, 1991. She thus called up
Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the "British Pageant" which
included England, Scotland and Wales in its itinerary. For this tour package, petitioner was asked
anew to pay US$785.00 or P20,881.00 (at the then prevailing exchange rate of P26.60). She gave
respondent US$300 or P7,980.00 as partial payment and commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the reimbursement of
P61,421.70, representing the difference between the sum she paid for "Jewels of Europe" and the
amount she owed respondent for the "British Pageant" tour. Despite several demands, respondent
company refused to reimburse the amount, contending that the same was nonrefundable.1 Petitioner was thus constrained to file a complaint against respondent for breach of

contract of carriage and damages, which was docketed as Civil Case No. 92-133 and raffled to
Branch 59 of the Regional Trial Court of Makati City.
In her complaint,2 petitioner alleged that her failure to join "Jewels of Europe" was due to
respondents fault since it did not clearly indicate the departure date on the plane ticket. Respondent
was also negligent in informing her of the wrong flight schedule through its employee Menor. She
insisted that the "British Pageant" was merely a substitute for the "Jewels of Europe" tour, such that
the cost of the former should be properly set-off against the sum paid for the latter.
For its part, respondent company, through its Operations Manager, Concepcion Chipeco, denied
responsibility for petitioners failure to join the first tour. Chipeco insisted that petitioner was informed
of the correct departure date, which was clearly and legibly printed on the plane ticket. The travel
documents were given to petitioner two days ahead of the scheduled trip. Petitioner had only herself
to blame for missing the flight, as she did not bother to read or confirm her flight schedule as printed
on the ticket.
Respondent explained that it can no longer reimburse the amount paid for "Jewels of Europe",
considering that the same had already been remitted to its principal in Singapore, Lotus Travel Ltd.,
which had already billed the same even if petitioner did not join the tour. Lotus European tour
organizer, Insight International Tours Ltd., determines the cost of a package tour based on a
minimum number of projected participants. For this reason, it is accepted industry practice to
disallow refund for individuals who failed to take a booked tour.3
Lastly, respondent maintained that the "British Pageant" was not a substitute for the package tour
that petitioner missed. This tour was independently procured by petitioner after realizing that she
made a mistake in missing her flight for "Jewels of Europe". Petitioner was allowed to make a partial
payment of only US$300.00 for the second tour because her niece was then an employee of the
travel agency. Consequently, respondent prayed that petitioner be ordered to pay the balance of
P12,901.00 for the "British Pageant" package tour.
After due proceedings, the trial court rendered a decision,4 the dispositive part of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty Three
Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos (P53,989.43) with
legal interest thereon at the rate of twelve percent (12%) per annum starting January 16,
1992, the date when the complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand (P5,000.00)
Pesos as and for reasonable attorneys fees;
3. Dismissing the defendants counterclaim, for lack of merit; and
4. With costs against the defendant.

SO ORDERED.5
The trial court held that respondent was negligent in erroneously advising petitioner of her departure
date through its employee, Menor, who was not presented as witness to rebut petitioners testimony.
However, petitioner should have verified the exact date and time of departure by looking at her ticket
and should have simply not relied on Menors verbal representation. The trial court thus declared
that petitioner was guilty of contributory negligence and accordingly, deducted 10% from the amount
being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties to be at fault.
However, the appellate court held that petitioner is more negligent than respondent because as a
lawyer and well-traveled person, she should have known better than to simply rely on what was told
to her. This being so, she is not entitled to any form of damages. Petitioner also forfeited her right to
the "Jewels of Europe" tour and must therefore pay respondent the balance of the price for the
"British Pageant" tour. The dispositive portion of the judgment appealed from reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court dated October 26,
1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby ENTERED requiring the
plaintiff-appellee to pay to the defendant-appellant the amount of P12,901.00, representing the
balance of the price of the British Pageant Package Tour, the same to earn legal interest at the rate
of SIX PERCENT (6%) per annum, to be computed from the time the counterclaim was filed until the
finality of this decision. After this decision becomes final and executory, the rate of TWELVE
PERCENT (12%) interest per annum shall be additionally imposed on the total obligation until
payment thereof is satisfied. The award of attorneys fees is DELETED. Costs against the plaintiffappellee.
SO ORDERED.6
Upon denial of her motion for reconsideration,7 petitioner filed the instant petition under Rule 45 on
the following grounds:
I
It is respectfully submitted that the Honorable Court of Appeals committed a reversible error
in reversing and setting aside the decision of the trial court by ruling that the petitioner is not
entitled to a refund of the cost of unavailed "Jewels of Europe" tour she being equally, if not
more, negligent than the private respondent, for in the contract of carriage the common
carrier is obliged to observe utmost care and extra-ordinary diligence which is higher in
degree than the ordinary diligence required of the passenger. Thus, even if the petitioner and
private respondent were both negligent, the petitioner cannot be considered to be equally, or
worse, more guilty than the private respondent. At best, petitioners negligence is only
contributory while the private respondent [is guilty] of gross negligence making the principle
of pari delicto inapplicable in the case;
II

The Honorable Court of Appeals also erred in not ruling that the "Jewels of Europe" tour was
not indivisible and the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the petitioner the consequential damages due
her as a result of breach of contract of carriage. 8
Petitioner contends that respondent did not observe the standard of care required of a common
carrier when it informed her wrongly of the flight schedule. She could not be deemed more negligent
than respondent since the latter is required by law to exercise extraordinary diligence in the
fulfillment of its obligation. If she were negligent at all, the same is merely contributory and not the
proximate cause of the damage she suffered. Her loss could only be attributed to respondent as it
was the direct consequence of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain person or association
of persons obligate themselves to transport persons, things, or news from one place to another for a
fixed price.9 Such person or association of persons are regarded as carriers and are classified as
private or special carriers and common or public carriers.10 A common carrier is defined under Article
1732 of the Civil Code as persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water or air, for compensation,
offering their services to the public.
It is obvious from the above definition that respondent is not an entity engaged in the business of
transporting either passengers or goods and is therefore, neither a private nor a common carrier.
Respondent did not undertake to transport petitioner from one place to another since its covenant
with its customers is simply to make travel arrangements in their behalf. Respondents services as a
travel agency include procuring tickets and facilitating travel permits or visas as well as booking
customers for tours.
While petitioner concededly bought her plane ticket through the efforts of respondent company, this
does not mean that the latter ipso facto is a common carrier. At most, respondent acted merely as an
agent of the airline, with whom petitioner ultimately contracted for her carriage to Europe.
Respondents obligation to petitioner in this regard was simply to see to it that petitioner was
properly booked with the airline for the appointed date and time. Her transport to the place of
destination, meanwhile, pertained directly to the airline.
The object of petitioners contractual relation with respondent is the latters service of arranging and
facilitating petitioners booking, ticketing and accommodation in the package tour. In contrast, the
object of a contract of carriage is the transportation of passengers or goods. It is in this sense that
the contract between the parties in this case was an ordinary one for services and not one of
carriage. Petitioners submission is premised on a wrong assumption.

The nature of the contractual relation between petitioner and respondent is determinative of the
degree of care required in the performance of the latters obligation under the contract. For reasons
of public policy, a common carrier in a contract of carriage is bound by law to carry passengers as far
as human care and foresight can provide using the utmost diligence of very cautious persons and
with due regard for all the circumstances.11 As earlier stated, however, respondent is not a common
carrier but a travel agency. It is thus not bound under the law to observe extraordinary diligence in
the performance of its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the standard of care required
of respondent is that of a good father of a family under Article 1173 of the Civil Code. 12 This connotes
reasonable care consistent with that which an ordinarily prudent person would have observed when
confronted with a similar situation. The test to determine whether negligence attended the
performance of an obligation is: did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person would have used in the same
situation? If not, then he is guilty of negligence.13
In the case at bar, the lower court found Menor negligent when she allegedly informed petitioner of
the wrong day of departure. Petitioners testimony was accepted as indubitable evidence of Menors
alleged negligent act since respondent did not call Menor to the witness stand to refute the
allegation. The lower court applied the presumption under Rule 131, Section 3 (e) 14 of the Rules of
Court that evidence willfully suppressed would be adverse if produced and thus considered
petitioners uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was negligent and maintains that
petitioners assertion is belied by the evidence on record. The date and time of departure was legibly
written on the plane ticket and the travel papers were delivered two days in advance precisely so
that petitioner could prepare for the trip. It performed all its obligations to enable petitioner to join the
tour and exercised due diligence in its dealings with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut petitioners testimony could not give rise
to an inference unfavorable to the former. Menor was already working in France at the time of the
filing of the complaint,15 thereby making it physically impossible for respondent to present her as a
witness. Then too, even if it were possible for respondent to secure Menors testimony, the
presumption under Rule 131, Section 3(e) would still not apply. The opportunity and possibility for
obtaining Menors testimony belonged to both parties, considering that Menor was not just
respondents employee, but also petitioners niece. It was thus error for the lower court to invoke the
presumption that respondent willfully suppressed evidence under Rule 131, Section 3(e). Said
presumption would logically be inoperative if the evidence is not intentionally omitted but is simply
unavailable, or when the same could have been obtained by both parties. 16
In sum, we do not agree with the finding of the lower court that Menors negligence concurred with
the negligence of petitioner and resultantly caused damage to the latter. Menors negligence was not
sufficiently proved, considering that the only evidence presented on this score was petitioners
uncorroborated narration of the events. It is well-settled that the party alleging a fact has the burden

of proving it and a mere allegation cannot take the place of evidence. 17 If the plaintiff, upon whom
rests the burden of proving his cause of action, fails to show in a satisfactory manner facts upon
which he bases his claim, the defendant is under no obligation to prove his exception or defense. 18
Contrary to petitioners claim, the evidence on record shows that respondent exercised due diligence
in performing its obligations under the contract and followed standard procedure in rendering its
services to petitioner. As correctly observed by the lower court, the plane ticket 19 issued to petitioner
clearly reflected the departure date and time, contrary to petitioners contention. The travel
documents, consisting of the tour itinerary, vouchers and instructions, were likewise delivered to
petitioner two days prior to the trip. Respondent also properly booked petitioner for the tour,
prepared the necessary documents and procured the plane tickets. It arranged petitioners hotel
accommodation as well as food, land transfers and sightseeing excursions, in accordance with its
avowed undertaking.
Therefore, it is clear that respondent performed its prestation under the contract as well as
everything else that was essential to book petitioner for the tour. Had petitioner exercised due
diligence in the conduct of her affairs, there would have been no reason for her to miss the flight.
Needless to say, after the travel papers were delivered to petitioner, it became incumbent upon her
to take ordinary care of her concerns. This undoubtedly would require that she at least read the
documents in order to assure herself of the important details regarding the trip.
The negligence of the obligor in the performance of the obligation renders him liable for damages for
the resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to
exercise due care and prudence in the performance of the obligation as the nature of the obligation
so demands.20 There is no fixed standard of diligence applicable to each and every contractual
obligation and each case must be determined upon its particular facts. The degree of diligence
required depends on the circumstances of the specific obligation and whether one has been
negligent is a question of fact that is to be determined after taking into account the particulars of
each case.21
1wphi1

The lower court declared that respondents employee was negligent. This factual finding, however, is
not supported by the evidence on record. While factual findings below are generally conclusive upon
this court, the rule is subject to certain exceptions, as when the trial court overlooked,
misunderstood, or misapplied some facts or circumstances of weight and substance which will affect
the result of the case.22
In the case at bar, the evidence on record shows that respondent company performed its duty
diligently and did not commit any contractual breach. Hence, petitioner cannot recover and must
bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of Appeals
in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner is ordered to pay respondent the
amount of P12,901.00 representing the balance of the price of the British Pageant Package Tour,
with legal interest thereon at the rate of 6% per annum, to be computed from the time the
counterclaim was filed until the finality of this Decision. After this Decision becomes final and

executory, the rate of 12% per annum shall be imposed until the obligation is fully settled, this interim
period being deemed to be by then an equivalent to a forbearance of credit. 23
SO ORDERED.