MOF COMPANY, INC. V.

SHIN YANG BROKERAGE CORPORATION

GR NO. 172822, 18 December 2009, SECOND DIVISION, (Del Castillo, J.)
A consignee, although not a signatory to the contract of carriage between the shipper and the carrier,
becomes a party to the contract by reason of either the relationship of agency between the consignee and the
shipper/ consignor; the unequivocal acceptance of the bill of lading delivered to the consignee, with full
knowledge of its contents or availment of the stipulation pour autrui.
FACTS
Halla Trading Co., a company based in Korea, shipped to Manila secondhand cars and other articles on
board the vessel Hanjin Busan 0238W. The bill of lading covering the shipment was prepared by the carrier
Hanjin Shipping Co., Ltd. (Hanjin), with Shin Yang Brokerage Corp. (Shin Yang) as the consignee. When the
shipment arrived, MOF Company, Inc. (MOF), Hanjins’ exclusive general agent demanded the payment of ocean
freight, documentation fee and terminal handling charges from Shin Yang. The latter refused to pay contending
that it did not cause importation of the goods, the ultimate consignee did not endorse in its favor the original bill
of lading and that the bill of lading was prepared without its consent, hence, it is not a party to the transaction.
The Metropolitan Trial Court ruled in favor of MOF. Shin Yang cannot disclaim being a party to the
contract of affreightment because it transacted with MOF which was evident in its letters asking for refunds for
the containers provided and that it would have not included in the bill of lading, had there been no prior agreement
to. A written contract need not be necessary; a mutual understanding would suffice. The Regional Trial Court
affirmed. Adding that, Although Article 652 of the Code of Commerce provides that the charter party must be in
writing, Article 653 says: If the cargo should be received without charter party having been signed, the contract
shall be understood as executed in accordance with what appears in the bill of lading, the sole evidence of title
with regard to the cargo for determining the rights and obligations of the ship agent, of the captain and of the
charterer.
The Court of Appeals favored Shin Yang. It said that except for the Bill of Lading, MOF has not presented
any other evidence that it entered into an agreement of affreightment with Shin Yang. While it is true that a bill
of lading serves two functions: first, it is a receipt for the goods shipped; second, it is a contract by which three
parties, namely, the shipper, the carrier and the consignee who undertake specific responsibilities and assume
stipulated obligations, if the same is not accepted, it is as if one party does not accept the contract.
MOF contends that the bill of lading is the best evidence of Shin Yang’s participation. Furthermore, a
carriers valid claim after it fulfilled its obligation cannot just be rejected by the named consignee upon a simple
denial that it ever consented to be a party in a contract of affreightment, or that it ever participated in the
preparation of the bill of lading. Shin Yang cannot avoid its obligation to pay, because it never objected to being
named as the consignee in the bill of lading and that it only protested when the shipment arrived. Shin Yang on
the other hand contends that a bill of lading is essentially a contract between the shipper and the carrier and
ordinarily, the shipper is the one liable for the freight charges. A consignee, on the other hand, is initially a stranger
to the bill of lading and can be liable only when the bill of lading specifies that the charges are to be paid by the
consignee.
ISSUE
Whether or not Shin Yang, a consignee, who is not a signatory to the bill of lading, is bound by the
stipulations thereof and is bound to pay.
RULING
Shin Yang is not bound by the stipulations and is not bound to pay.
 While it may be true that a consignee, though not a signatory to the contract of carriage, may become a
party to such due to the relationship of agency between the consignee and the shipper/ consignor, the unequivocal
acceptance of the bill of lading delivered to the consignee, with full knowledge of its contents or availment of the
stipulation pour autrui, This was not the case. Nothing in the records indicated that Shin Yang was an agent of
Halla Trading Co. or that it exercised any act that would bind it as a named consignee.
MOF failed to meet the required quantum of proof which was preponderance of evidence since this is a
civil case. Other than presenting the bill of lading, which only proves that the carrier acknowledged receipt of the
subject cargo from the shipper and that the consignee named is to shoulder the freightage, MOF has not adduced
any other credible evidence to support its contention. It did not even present any witness in support of its allegation
that it was Shin Yang which furnished all the details indicated in the bill of lading and that Shin Yang consented
to shoulder the shipment costs.
In Mendoza vs. PAL, the contract of carriage between LVN Pictures Inc. and the defendant carrier contains
the stipulations of delivery to Mendoza as consignee. ART. 1311 which said that should the contract contain any
stipulation in favor of a third person, he may demand its fulfillment provided he has given notice of his acceptance
to the person bound before the stipulation has been revoked was applied in the case. Mendoza’s demand for the
delivery of the can of film to him at the Pili Air Port may be regarded as a notice of his acceptance of the stipulation
of the delivery in his favor contained in the contract of carriage and delivery. In this case he also made himself a
party to the contract, or at least has come to court to enforce it. This is not applicable to the case. Shin Yang
consistently denied in all of its pleadings that it authorized Halla Trading, Co. to ship the goods on its behalf; or
that it got hold of the bill of lading covering the shipment or that it demanded the release of the cargo.
WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated March 22,
2006 dismissing petitioner’s complaint and the Resolution dated May 25, 2006 denying the motion for
reconsideration are AFFIRMED.
 BRITISH AIRWAYS v. COURT OF APPEALS
G.R. NO. 92288, 09 February 1993, SECOND DIVISION (Nocon, J.)

In dealing with the contract of common carriage of passengers, for purpose of accuracy, there are two (2)
aspects of the same, namely: (a) the contract ‘to carry (at some future time),’ which contract is consensual and
is necessarily perfected by mere consent (See Article 1356, Civil Code of the Philippines); and (b) the ‘contract
of carriage’ or ‘of common carriage’ itself which should be considered as a real contract for not until the carrier
is actually used can the carrier be said to have already assumed the obligation of a carrier. (Paras, Civil Code
Annotated, Vol. V, p.429, Eleventh Ed.)

FACTS

On February 15, 1981, private respondent First International Trading and General Services Co., (FITG) a
duly licensed domestic recruitment and placement agency, received a telex message from its principal ROLACO
Engineering and Contracting Services in Jeddah, Saudi Arabia to recruit Filipino contract workers in behalf of
said principal. During the early part of March 1981, said principal paid to the Jeddah branch of petitioner British
Airways, Inc. (BA) airfare tickets for 93 contract workers with specific instruction to transport said workers to
Jeddah on or before March 30, 1981.

As soon as BA received a prepaid ticket advice from its Jeddah branch to transport the 93 workers, FITG
was immediately informed by former that its principal ROLACO had forwarded 93 prepaid tickets. Thereafter,
FITG instructed its travel agent, ADB Travel and Tours, Inc., to book the 93 workers with BA but the latter failed
to fly said workers, thereby compelling FITG to borrow money in the amount of P304,416.00 in order to purchase
airline tickets from the other airlines as evidenced by the cash vouchers (Exhibits "B", "C" and "C-1 to C-7") for
the 93 workers it had recruited who must leave immediately since the visas of said workers are valid only for 45
days and the Bureau of Employment Services mandates, that contract workers must be sent to the jobsite within
a period of 30 days.

Sometime in the first week of June, 1981, FITG was again informed by BA that it had received a prepaid
ticket advice from its Jeddah branch for the transportation of 27 contract workers. Immediately, FITG instructed
its travel agent to book the 27 contract workers with BA but the latter was only able to book and confirm 16 seats
on its June 9, 1981 flight. However, on the date of the scheduled flight only 9 workers were able to board said
flight while the remaining 7 workers were rebooked to June 30, 1981 which bookings were again cancelled by
BA without any prior notice to either FITG or the workers. Thereafter, the 7 workers were rebooked to the July
4, 1981 flight of BA with 6 more workers booked for said flight. Unfortunately, the confirmed bookings of the
13 workers were again cancelled and rebooked to July 7, 1981.

On July 6, 1981, FITG paid the travel tax of the said workers as required by BA but when the receipt of
the tax payments was submitted, the latter informed FITG that it can only confirm the seats of the 12 workers on
its July 7, 1981 flight. However, the confirmed seats of said workers were again cancelled without any prior notice
either to FITG or said workers. The 12 workers were finally able to leave for Jeddah after FITG had bought tickets
from the other airlines.

As a result of these incidents, FITG sent a letter to BA demanding compensation for the damages it had
incurred by the latter's repeated failure to transport its contract workers despite confirmed bookings and payment
of the corresponding travel taxes. It is the contention of BA that FITG has no cause of action against it there being
no perfected contract of carriage existing between them as no ticket was ever issued to FITG’s contract workers
and, therefore, the obligation of BA to transport said contract workers did not arise. Furthermore, FITG’s failure
to attach any ticket in the complaint further proved that it was never a party to the alleged transaction. BA also
contends that the appellate court erred in awarding actual damages in the amount of P308,016.00 to FITG since
all expenses had already been subsequently reimbursed by the latter's principal. The Trial Court ruled in favor of
FITG. CA affirmed.

ISSUES

1. Whether or not there was a perfected contract?

2. Whether or not FITG is entitled to the award of actual damages?

RULING

1. YES.

There was a perfected contract. It was “a contract to carry”. FITG had a valid cause of action for damages
against BA. A cause of action is an act or omission of one party in violation of the legal right or rights of the
other. BA’s repeated failures to transport FITG’s workers in its flight despite confirmed booking of said workers
clearly constitutes breach of contract and bad faith on its part. The appellate court correctly held that:

“In dealing with the contract of common carriage of passengers, for purpose of accuracy, there are two (2)
aspects of the same, namely: (a) the contract ‘to carry (at some future time),’ which contract is consensual and is
necessarily perfected by mere consent (See Article 1356, Civil Code of the Philippines); and (b) the ‘contract of
carriage’ or ‘of common carriage’ itself which should be considered as a real contract for not until the carrier is
actually used can the carrier be said to have already assumed the obligation of a carrier. (Paras, Civil Code
Annotated, Vol. V, p.429, Eleventh Ed.)

In the instant case, the contract 'to carry' is the one involved, which is consensual and is perfected by the
mere consent of the parties. There is no dispute as to FITG’s consent to the said contract 'to carry' its contract
workers from Manila to Jeddah. BA’s consent thereto, on the other hand, was manifested by its acceptance of the
PTA or prepaid ticket advice that ROLACO Engineering has prepaid the airfares of FITG’s contract workers
advising BA that it must transport the contract workers on or before the end of March, 1981 and the other batch
in June, 1981. Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket
and thus no ticket was yet issued, the fact remains that the passage had already been paid for by the principal of
FITG, and BA had accepted such payment. The existence of this payment was never objected to nor questioned
by BA in the lower court. Thus, the cause or consideration which is the fare paid for the passengers exists in this
case.

The third essential requisite of a contract is an object certain. In this contract 'to carry', such an object is
the transport of the passengers from the place of departure to the place of destination as stated in the telex.
Accordingly, there could be no more pretensions as to the existence of an oral contract of carriage imposing
reciprocal obligations on both parties. In the case of FITG, it has fully complied with the obligation, namely, the
payment of the fare and its willingness for its contract workers to leave for their place of destination. On the other
hand, the facts clearly show that BA was remiss in its obligation to transport the contract workers on their flight
despite confirmation and bookings made by FITG’s travelling agent.

Besides, BA knew very well that time was of the essence as the prepaid ticket advice had specified the
period of compliance therewith, and with emphasis that it could only be used if the passengers fly on BA. Under
the circumstances, BA should have refused acceptance of the PTA from FITG's principal or to at least inform
FITG that it could not accommodate the contract workers.

While there is no dispute that ROLACO Engineering advanced the payment for the airfares of the FITG's
contract workers who were recruited for ROLACO Engineering and the said contract workers were the intended
passengers in the aircraft of BA, the said contract 'to carry' also involved FITG for as recruiter he had to see to it
that the contract workers should be transported to ROLACO Engineering in Jeddah thru the BA’s transportation.
For that matter, the involvement of FITG in the said contract 'to carry' was well demonstrated when BA upon
receiving the PTA immediately advised FITG thereof.”

2. NO.

Article 2199 of the Civil Code provides that: "Except as provided by law or by stipulations, one is entitled
to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such
compensation is referred to as actual or compensatory damages."

Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved, and proved
with reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact
and amount of damages, but must depend upon competent proof that they have suffered and on evidence of the
actual amount thereof. Thus, while it may be true that FITG was compelled to borrow money for the airfare tickets
of its contract workers when BA failed to transport said workers, the reimbursements made by its principal to
FITG failed to support the latter's claim that it suffered actual damages as a result of BA's failure to transport said
workers. It is undisputed that FITG had consistently admitted that its principal had reimbursed all its expenses.

WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the award
of actual damages be deleted from said decision.
 COMPAÑIA MARITIMA v. INSURANCE COMPANY OF NORTH AMERICA
G.R. No. L-18965, 30 October 1964, (Bautista Angelo, J.)

Whenever the control and possession of goods passes to the carrier and nothing remains to be done by
the shipper, then it can be said with certainty that the relation of shipper and carrier has been established.

FACTS

Macleod and Company of the Philippines contracted by telephone the services of the Compañia Maritima,
a shipping corporation, for the shipment of 2,645 bales of hemp from the former's Sasa private pier at Davao City
to Manila and for their subsequent transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel
Navigator. This oral contract was later on confirmed by a formal and written booking issued by Macleod's branch
office in Sasa and handcarried to Compañia Maritima's branch office in compliance with which the latter sent to
Macleod's private wharf LCT Nos. 1023 and 1025, manned each by a patron and an assistant patron which issued
carrier’s receipts upon loading of the hemp. Thereafter, the two loaded barges left Macleod's wharf and proceeded
to and moored at the government's marginal wharf in the same place to await the arrival of the S.S. Bowline Knot
on which the hemp was to be loaded. During the night, however, LCT No. 1025 sank, resulting in the damage or
loss of 1,162 bales of hemp loaded therein. The damaged hemp was brought to Odell Plantation in Madaum,
Davao, for cleaning, washing, reconditioning, and redrying. After reclassification, the value of the reconditioned
hemp was reduced. Adding to this the sum of P8,863.30 for Macleod's expenses in checking, grading, rebating,
and other fees for washing, cleaning and redrying in the amount of P19.610.00, the total loss adds up to
P60,421.02.

All shipments of Macleod were insured with the Insurance Company of North America against all losses
and damages. Macleod filed a claim for the loss it suffered and the sum of P64,018.55 was paid, which was noted
down in a document which aside from being a receipt of the amount paid, was a subrogation agreement between
Macleod and the insurance company wherein the former assigned to the latter its rights over the insured and
damaged cargo. Having failed to recover from the carrier, the insurance company instituted the present action.
After trial, the court a quo rendered judgment ordering the carrier to pay the insurance company the sum of
P60,421.02, with legal interest thereon from the date of the filing of the complaint until fully paid, and the costs.
This judgment was affirmed by the Court of Appeals.

ISSUES

(1) Whether or not there was a contract of carriage between the carrier and the shipper even if the loss
occurred when the hemp was loaded on a barge owned by the carrier which was loaded free of charge and was
not actually loaded on the S.S. Bowline Knot which would carry the hemp to Manila and no bill of lading was
issued therefore?

(2) Whether or not Insurance Company of North America can sue the carrier under its insurance contract as
assignee of Macleod in spite of the fact that the liability of the carrier as insurer is not recognized in this
jurisdiction?

RULING

1. YES.

The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa
preparatory to its loading onto the ship Bowline Knot does not in any way impair the contract of carriage already
entered into between the carrier and the shipper, for that preparatory step is but part and parcel of said contract of
carriage. The lighters were merely employed as the first step of the voyage, but once that step was taken and the
hemp delivered to the carrier's employees, the rights and obligations of the parties attached thereby subjecting
them to the principles and usages of the maritime law. In other words, here we have a complete contract of carriage
the consummation of which has already begun: the shipper delivering the cargo to the carrier, and the latter taking
possession thereof by placing it on a lighter manned by its authorized employees, under which Macleod became
entitled to the privilege secured to him by law for its safe transportation and delivery, and the carrier to the full
payment of its freight upon completion of the voyage.

The test as to whether the relation of shipper and carrier had been established is, Had the control and
possession of the cotton been completely surrendered by the shipper to the railroad company? Whenever the
control and possession of goods passes to the carrier and nothing remains to be done by the shipper, then it can
be said with certainty that the relation of shipper and carrier has been established.

The liability of the carrier as common carrier begins with the actual delivery of the goods for
transportation, and not merely with the formal execution of a receipt or bill of lading; the issuance of a bill of
lading is not necessary to complete delivery and acceptance. Even where it is provided by statute that liability
commences with the issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the carrier.

2. YES

The insurance company can recover from the carrier as assignee of the owner of the cargo for the insurance
amount it paid to the latter under the insurance contract. And this is so because since the cargo that was damaged
was insured with respondent company and the latter paid the amount represented by the loss, it is but fair that it
be given the right to recover from the party responsible for the loss. The instant case, therefore, is not one between
the insured and the insurer, but one between the shipper and the carrier, because the insurance company merely
stepped into the shoes of the shipper. And since the shipper has a direct cause of action against the carrier on
account of the damage of the cargo, no valid reason is seen why such action cannot be asserted or availed of by
the insurance company as a subrogee of the shipper. Nor can the carrier set up as a defense any defect in the
insurance policy not only because it is not a privy to it but also because it cannot avoid its liability to the shipper
under the contract of carriage which binds it to pay any loss that may be caused to the cargo involved therein.

WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.
KOREAN AIRLINES CO., LTD. v. COURT OF APPEALS and JUANITO C. LAPUZ and JUANITO C.
LAPUZ v. COURT OF APPEALS and KOREAN AIRLINES CO., LTD.
G.R. No. 114061 and G.R. No. 113842, 03 August 1994, ( Cruz, J.)
Entry of name in the passenger manifest of an airline and the clearance through immigration and customs
are enough evidence to regard an individual as a confirmed passenger of that airline. The contract of air carriage
generates a relation attended with a public duty.
FACTS
Juanito C. Lapuz (Lapuz) was supposed to leave for work in Jeddah, Saudi Arabia via Korean Airlines
(KAL). He was "wait-listed," and could only be accommodated if any of the confirmed passengers failed to show
up. When two of such passengers did not appear, Lapuz and supervisor, Perico, were given the two unclaimed
seats.
Lapuz alleged that he was allowed to check in at the check-in counter of KAL. He passed through the
customs and immigration sections for routine check-up and was cleared for departure. Together with the other
passengers, he proceeded to the ramp of the KAL aircraft for boarding. However, when he was at the stairs, a
KAL officer pointed to him and shouted "Down! Down!" and further rudely described him as a "patay gutom na
contract worker fighting Korean Air Lines." He was thus barred from taking the flight. When he later asked for
another booking, his ticket was canceled by KAL. Consequently, he was unable to report for his work in Saudi
Arabia and lost his employment.
KAL, on the other hand, alleged Pan Pacific Recruiting Services Inc. (Lapuz’ recruiting agency)
coordinated with them for the departure of 30 contract workers, of whom only 21 were confirmed and 9 were
wait-listed passengers. The agent of Pan Pacific, Jimmie Joseph, after being informed that there was a possibility
of having one or two seats becoming available, gave priority to Perico. The other seat was won through lottery
by Lapuz. However, only one seat became available and so was given to Perico. He alone was allowed to board.
The Regional Trial Court of Manila adjudged KAL liable for damages. KAL and Lapuz filed their
respective motions for reconsideration, which were both denied for lack of merit.
KAL argues that "the evidence of confirmation of a chance passenger status is not through the entry of the
name of a chance passenger in the passenger manifest nor the clearance from the Commission on Immigration
and Deportation, because they are merely means of facilitating the boarding of a chance passenger in case his
status is confirmed." In addition, Lapuz did not have any boarding pass to prove that he was allowed to board and
to prove that his airline ticket was confirmed.
ISSUE
Whether Lapuz was a confirmed passenger, thus, making KAL breach their contract of carriage.
RULING
YES.
The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his name
was entered in the passenger manifest of KAL. His clearance through immigration and customs clearly shows
that he had indeed been confirmed as a passenger of KAL in that flight. KAL thus committed a breach of the
contract of carriage between them when it failed to bring Lapuz to his destination.
The SC has held that a contract to transport passengers is different in kind and degree from any other
contractual relation. The business of the carrier is mainly with the traveling public. The contract of air carriage
generates a relation attended with a public duty. Passengers have the right to be treated by the carrier's employees
with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal
misconduct, injurious language, indignities and abuses from such employees. So it is that any discourteous
conduct on the part of these employees toward a passenger gives the latter an action for damages against the
carrier.
The breach of contract was aggravated in this case when, instead of courteously informing Lapuz of his
being a "wait-listed" passenger, a KAL officer rudely shouted "Down! Down!" while pointing at him, thus causing
him embarrassment and public humiliation. The Court find that KAL acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner when it "bumped off" Lapuz and in addition treated him rudely and arrogantly
as a "patay gutom na contract worker fighting Korean Air Lines," which clearly shows malice and bad faith, thus,
entitling Lapuz to moral damages.
WHEREFORE, the appealed judgment is AFFIRMED, but with the modification that the legal interest
on the damages awarded to private respondent should commence from the date of the decision of the trial court
on November 14, 1990. The parties shall bear their own costs.
 LRTA v. MARJORIE NAVIDAD
G.R. No. 145804, 06 February 2003, (Vitug, J.)
The law requires common carriers to carry passengers safely using the utmost diligence of very
cautious persons with due regard for all circumstances. Such duty of a common carrier to provide safety to its
passengers so obligates it not only during the course of the trip but for so long as the passengers are within its
premises and where they ought to be in pursuance to the contract of carriage. The statutory provisions render a
common carrier liable for death of or injury to passengers (a) through the negligence or wilful acts of its
employees or b) on account of wilful acts or negligence of other passengers or of strangers if the common
carrier’s employees through the exercise of due diligence could have prevented or stopped the act or omission.
In case of such death or injury, a carrier is presumed to have been at fault or been negligent, and by simple proof
of injury, the passenger is relieved of the duty to still establish the fault or negligence of the carrier or of its
employees and the burden shifts upon the carrier to prove that the injury is due to an unforeseen event or to force
majeure.
FACTS
On 14 October 1993, about half an hour past seven o’clock in the evening, Nicanor Navidad, then drunk,
entered the EDSA LRT station after purchasing a "token" (representing payment of the fare). While Navidad was
standing on the platform near the LRT tracks, Junelito Escartin, the security guard assigned to the area approached
Navidad. A misunderstanding or an altercation between the two apparently ensued that led to a fist fight. No
evidence, however, was adduced to indicate how the fight started or who, between the two, delivered the first
blow or how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated
by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was killed
instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her
children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit
Organization, Inc. (Metro Transit), and Prudent Security Agency for the death of her husband. LRTA and Roman
filed a counterclaim against Navidad and a cross-claim against Escartin and Prudent. Prudent, in its answer, denied
liability and averred that it had exercised due diligence in the selection and supervision of its security guards.
ISSUE
Whether the petitioners are liable for the death of Nicanor Navidad.
RULING
A contract of carriage was deemed created from the moment Navidad paid the fare at the LRT station and
entered the premises of the latter, entitling Navidad to all the rights and protection under a contractual relation.
The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the victim
arises from the breach of that contract by reason of its failure to exercise the high diligence required of the
common carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier may choose to
hire its own employees or avail itself of the services of an outsider or an independent firm to undertake the task.
In either case, the common carrier is not relieved of its responsibilities under the contract of carriage.
Should Prudent be made likewise liable? Regrettably for LRT, as well as perhaps the surviving spouse
and heirs of the late Nicanor Navidad, this Court is concluded by the factual finding of the Court of Appeals that
"there is nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of its
employee, Escartin, has not been duly proven x x x." This finding of the appellate court is not without substantial
justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act or
omission, he must also be absolved from liability. Needless to say, the contractual tie between the LRT and
Navidad is not itself a juridical relation between the latter and Roman; thus, Roman can be made liable only for
his own fault or negligence.
The award of nominal damages in addition to actual damages is untenable. Nominal damages are
adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be
vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. It is
an established rule that nominal damages cannot co-exist with compensatory damages.
WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION but
only in that (a) the award of nominal damages is DELETED and (b) petitioner Rodolfo Roman is absolved from
liability. No costs.
DANGWA TRANSPORTATION CO., INC. v. COURT OF APPEALS, G.R. No. 95582 October 7, 1991,
REGALADO, J.

The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger
and is entitled all the rights and protection pertaining to such a contractual relation. Hence, it has been held that
the duty which the carrier passengers owes to its patrons extends to persons boarding cars as well as to those
alighting therefrom.

FACTS

The heirs of Pedrito Cudiamat filed a complaint for damages against Dangwa Transportation for the death
of Pedrito Cudiamat as a result of a vehicular accident. It was alleged that on said date, that the victim Pedrito fell
from the platform of the bus when it suddenly accelerated forward and was run over by the rear right tires of the
vehicle. However, instead of bringing Pedrito immediately to the nearest hospital, Lardizabal, the driver of the
bus, in utter bad faith and without regard to the welfare of the victim, first brought his other passengers and cargo
to their respective destinations before bringing said victim to the Lepanto Hospital where he expired.

On the other hand, Dangwa Transportation alleged that they had observed and continued to observe the
extraordinary diligence required in the operation of the transportation company and the supervision of the
employees, even as they add that they are not absolute insurers of the safety of the public at large. Further, it was
alleged that it was the victim's own carelessness and negligence which gave rise to the subject incident, hence
they prayed for the dismissal of the complaint plus an award of damages in their favor by way of a counterclaim.

The trial court rendered a decision in favor of Dangwa Transportation. The heirs of Pedrito appealed to
the Court of Appeals (CA) which, in a decision set aside the decision of the lower court, and ordered Dangwa
Transportation to pay the heirs of Pedrito. Dangwa's motion for reconsideration was denied by the CA in its
resolution.

ISSUE

Whether or not CA erred in reversing the decision of the trial court and in finding petitioners negligent
and liable for the damages claimed.

RULING

NO.

The testimonies of the witnesses show that that the bus was at full stop when the victim boarded the same.
They further confirm the conclusion that the victim fell from the platform of the bus when it suddenly accelerated
forward and was run over by the rear right tires of the vehicle. Under such circumstances, it cannot be said that
the deceased was guilty of negligence.

The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger
and is entitled all the rights and protection pertaining to such a contractual relation. Hence, it has been held that
the duty which the carrier passengers owes to its patrons extends to persons boarding cars as well as to those
alighting therefrom.

The contention of Dangwa that the driver and the conductor had no knowledge that the victim would ride
on the bus, since the latter had supposedly not manifested his intention to board the same, does not merit
consideration. When the bus is not in motion there is no necessity for a person who wants to ride the same to
signal his intention to board. A public utility bus, once it stops, is in effect making a continuous offer to bus riders.
Hence, it becomes the duty of the driver and the conductor, every time the bus stops, to do no act that would have
the effect of increasing the peril to a passenger while he was attempting to board the same.

It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is
moving slowly. An ordinarily prudent person would have made the attempt board the moving conveyance under
the same or similar circumstances. The fact that passengers board and alight from slowly moving vehicle is a
matter of common experience both the driver and conductor in this case could not have been unaware of such an
ordinary practice.

Common carriers, from the nature of their business and reasons of public policy, are bound to observe
extraordinary diligence for the safety of the passengers transported by the according to all the circumstances of
each case. A common carrier is bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence very cautious persons, with a due regard for all the circumstances.

It has also been repeatedly held that in an action based on a contract of carriage, the court need not make
an express finding of fault or negligence on the part of the carrier in order to hold it responsible to pay the damages
sought by the passenger. By contract of carriage, the carrier assumes the express obligation to transport the
passenger to his destination safely and observe extraordinary diligence with a due regard for all the circumstances,
and any injury that might be suffered by the passenger is right away attributable to the fault or negligence of the
carrier. This is an exception to the general rule that negligence must be proved, and it is therefore incumbent upon
the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the
Civil Code.
 FIRST PHILIPPINE INDUSTRIAL CORPORATION v. COURT OF APPEALS
G.R. No. 125948, 29 December 1998, (Martinez, J)

A "common carrier" is any person, corporation, firm or association engaged in the business of carrying
or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to
the public. The Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or
air. It does not provide that the transportation of the passengers or goods should be by motor vehicle.

FACTS

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, to contract, install and operate
oil pipelines. The latter applied for a mayor's permit. However, before the permit could be issued, the respondent
City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant
to the Local Government Code (LGC). The respondent assessed a business tax on the petitioner for products
pumped at GPS-1 for the fiscal year 1993. Petitioner paid the tax under protest.

Petitioner filed a letter-protest addressed to the respondent stating that it is engaged in the business of
transporting petroleum products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals.
As such, their Company is exempt from paying tax on gross receipts under Section 133 of the LGC. Moreover,
“transportation contractors” are not included in the enumeration of contractors under Section 131, Paragraph (h)
of the LGC. Therefore, the authority to impose tax 'on contractors and other independent contractors' under
Section 143, Paragraph (e) of the LGC does not include the power to levy on transportation contractors. The
respondent denied the protest contending that petitioner cannot be considered engaged in transportation business,
thus it cannot claim tax exemption.

Petitioner filed for a tax refund against respondents alleging that it is a transportation contractor, hence
exempt from taxes. Respondents argued that petitioner cannot be exempt since it applies only to "transportation
contractors and persons engaged in the transportation by hire and common carriers by air, land and water."
Respondents assert that pipelines are not included in the term "common carrier" which refers solely to ordinary
carriers such as trucks, trains, ships and the like. Respondents further posit that the term "common carrier" under
the said code pertains to the mode or manner by which a product is delivered to its destination.

The trial court dismissed the complaint ruling that the exemption encompasses only common carriers so
as not to overburden the riding public or commuters with taxes. Plaintiff is not a common carrier, but a special
carrier extending its services and facilities to a single specific or "special customer" under a "special contract."

ISSUE

Whether or not petitioner is a common carrier.

RULING

YES. Article 1732 of the Civil Code defines a "common carrier" as "any person,
corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air, for compensation, offering their services to the public.”

The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public employment, and must
hold himself out as ready to engage in the transportation of goods for person generally as a business
and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
 3. He must undertake to carry by the method by which his business is conducted and over his established
roads; and
4. The transportation must be for hire.

Petitioner is a common carrier engaged in the business of transporting or carrying goods, i.e. petroleum
products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons
who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner
has a limited clientele does not exclude it from the definition of a common carrier.

Article 1732 avoids making any distinction between a person or enterprise offering transportation service
on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to the 'general public,' and one who
offers services or solicits business only from a narrow segment of the general population. The concept of 'common
carrier' under Article 1732 may be seen to coincide neatly with the notion of 'public service,' under the Public
Service Act (Commonwealth Act No. 1416, as amended), which at least partially supplements the law on common
carriers set forth in the Civil Code.

The Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air.
It does not provide that the transportation of the passengers or goods should be by motor vehicle.

Article 86 of the Petroleum Act of the Philippines (Republic Act 387) provides: "Pipe line concessionaire
as a common carrier. - A pipe line shall have the preferential right to utilize installations for the transportation
of petroleum owned by him, but is obligated to utilize the remaining transportation capacity pro rata for the
transportation of such other petroleum as may be offered by others for transport, and to charge without
discrimination such rates as may have been approved by the Secretary of Agriculture and Natural Resources.”
Article 7 thereof also provides: "that everything relating to the exploration for and exploitation of petroleum and
everything relating to the manufacture, refining, storage, or transportation by special methods of petroleum,
is hereby declared to be a public utility."
 ESTRELLITA M. BASCOS, vs. COURT OF APPEALS and RODOLFO A. CIPRIANO
G.R. No. 101089. April 7, 1993, (CAMPOS, JR., J.)

FACTS

Rodolfo Cipriano, representing Cipriano Trading Enterprise (CIPTRADE) entered into a hauling contract
2 with Jibfair Shipping Agency Corporation whereby CIPTRADE 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. CIPTRADE 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. Bascos, however, failed to deliver the cargo. As a consequence, Cipriano paid Jibfair the amount of the goods.
Cipriano demanded reimbursement from Bascos but she refused to pay. , Cipriano filed a complaint for a sum of
money and damages with writ of preliminary attachment 4 for breach of a contract of carriage.

In her defense, Bascos stated that the truck carrying the cargo was hijacked along Canonigo St., Paco,
Manila on the night of October 21, 1988. The hijacking was immediately reported to CIPTRADE and Bascos and
the police exerted all efforts to locate the hijacked properties.

The trial court ruled in favor of Cipriano and ordered Bascos to pay. This was affirmed by the CA.

ISSUES

1. Whether or not Bascos a common carrier?

2. Whether or not the hijacking referred to a force majeure?

HELD

1. YES.

Bascos herself has made the admission that she was in the trucking business, operating as A.M. Bascos
Trucking and offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence
is required to prove the same. Article 1732 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.

2. NO.

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. 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.

Hijacking, not being included in the provisions of Article 1734, must be dealt with under the provisions
of Article 1735. 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.
 MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL v. COURT OF APPEALS
G.R. No. 111127, 26 July 1996, SECOND DIVISION, (Mendoza, J.)

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 (in local
idiom, as a sideline).

FACTS

Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus which is
principally used as a bus service for school children. Spouses Fabre then hired Porfirio Cabil as the driver whose
primary job was to take school children to and from the St. Scholastica’s College in Malate, Manila. On November
2, 1984, the Fabres had an arrangement with the Word for the World Christian Fellowship Inc. (WWCF) for the
transportation of 33 members of its Young Adults Ministry from Manila to La Union and back for the
consideration of P3, 000.00. The group was scheduled to leave on November 2, 1984, at 5:00 oclock 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 oclock in the evening. Cabil drove the minibus.

The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was
under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was
forced to take a detour through the town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil
came upon a sharp curve on the highway, running on a south to east direction, which he described as siete. The
road was slippery because it was raining, causing the bus, which was running at the speed of 50 kilometers per
hour, to skid to the left road shoulder. The accident had rammed the fence of one Jesus Escano and caused injuries
to several passengers, among which is Amyline Antonio—who filed a case for damages in the Regional Trial
Court (RTC) of Makati against Mr. & Mrs. Fabre, Jr. and Porfirio Cabil.

The RTC held that Fabre Jr. and Cabil were solidary liable to private respondent Amyline Antonio. The
Court of Appeals (CA) affirmed the decision of the RTC with modification. Hence, this petition before the
Supreme Court (SC).

ISSUE
Whether or not Mr. and Mrs. Fabre, Jr and Capil be held solidary liable for the injuries suffered by Amyline
Antonio.

RULING

YES, Mr. and Mrs. Fabre, Jr and Capil should be held solidary liable for damages.

The Court held 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.
Considering the foregoing fact that it was raining and the road was slippery, that it was dark, that he drove his
bus at 50 kilometers an hour when even on a good day the normal speed was only 20 kilometers an hour, and that
he was unfamiliar with the terrain, Cabil was grossly negligent and should be held liable for the injuries suffered
by private respondent Amyline Antonio.

Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his
employers, the Fabres, were themselves negligent in the selection and supervision of their employee. Due
diligence in selection of employees is not satisfied by finding that the applicant possessed a professional driver’s
license. The employer should also examine the applicant for his qualifications, experience and record of service.
Due diligence in supervision, on the other hand, requires the formulation of rules and regulations for the guidance
of employees and the issuance of proper instructions as well as actual implementation and monitoring of
consistent compliance with the rules. n 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. Scholasticas College in Metro Manila. They had hired him only after a two-week apprenticeship.

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.

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 (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. The Court thinks that Article 1732 deliberately refrained from making
such distinctions.

As common carriers, the Fabres were bound to exercise extraordinary diligence for the safe transportation
of the passengers to their destination. This duty of care is not excused by proof that they exercised the diligence
of a good father of the family in the selection and supervision of their employee. As Art. 1759 of the Code
provides: Common carriers are liable for the death of or injuries to passengers through the negligence or willful
acts of the formers employees, although such employees may have acted beyond the scope of their authority or
in violation of the orders of the common carriers.

This liability of the common carriers does not cease upon proof that they exercised all the diligence of a
good father of a family in the selection and supervision of their employees.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to the
award of damages. Petitioners are ORDERED to PAY jointly and severally the private respondent Amyline
Antonio the following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) 25% of the recoverable amount as attorneys fees; and
6) costs of suit.
SO ORDERED.
SPOUSES TEODORO and NANETTE PERENA v. SPOUSES TERESITA NICOLAS and L. ZARATE,
PHILIPPINE NATIONAL RAILWAY AND THE COURT OF APPEALS
G.R. No. 157917, August 29, 2012 (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.
FACTS
Spouses Teodero and Nanette Pereña (The Pereñas) were engaged in the business of transporting students
from their respective residences in Parañaque City to Don Bosco School in Makati City, and back. In their
business, the Pereñas used a van 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.
Spouses Teresita Nicolas and L. Zarate (The Zarates) contracted the Pereñas to transport their son Aaron
to and from Don Bosco. One day, following the normal schedule of the bus route, the van picked Aaron up from
the Zarates’ residence. 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 highway, the
driver 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.
At about the time the van was to traverse the railroad crossing, Philippine National Railways (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.
The Zarates commenced an action for damages against Alfaro, the Pereñas, PNR and Alano for the death
of their son. The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the safe
transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code.
In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good
father of the family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a
driver’s license and had not been involved in any vehicular accident prior to the collision; that their own son had
taken the van daily; and that Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips transporting
the students to school.
The Regional Trial Court (RTC) found the Pereñas and the PNR negligent. The Court of Appeals (CA)
affirmed the findings.

ISSUE
 Whether or not Alfaro, as the driver of the van, the Pereñas, being the employer of Alfaro and PNR are
jointly and severally liable for damages?

HELD

YES, the parties are liable.

The Pereñas’ defense of employing the ordinary diligence of a good father of a family is untenable. The
Supreme Court discussed that 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. The true test for a common carrier is 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.

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

In the case at bar, the Pereñas, acting as a common carrier, were already presumed to be negligent at the
time of the accident because death had occurred to their passenger. 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.
However, the Pereñas did not overturn the presumption of their negligence by credible evidence. Their defense
of having observed the diligence of a good father of a family in the selection and supervision of their driver was
not legally sufficient.

The Supreme Court also ruled that both the RTC and CA’s decision of granting the Zarates indemnity for
loss of Aaron’s earning capacity as proper. The Supreme Court discussed that both lower courts took into
consideration that Aaron, while only a high school student, had been enrolled in one of the reputable schools in
the Philippines and that he had been a normal and able-bodied child prior to his death. The basis for the
computation of Aaron’s earning capacity was not what he would have become or what he would have wanted to
be if not for his untimely death, but the minimum wage in effect at the time of his death. Moreover, the RTC’s
computation of Aaron’s life expectancy rate was not reckoned from his age of 15 years at the time of his death,
but on 21 years, his age when he would have graduated from college. Hence, the Supreme Court finds the
considerations taken into account by the lower courts to be reasonable and fully warranted.

WHEREFORE, the Supreme Court denies the petition for review on certiorari; affirms the decision
promulgated on November 13, 2002; and orders the petitioners (the Peranas) to pay the costs of suit.
 NATIONAL STEEL CORPORATION V. COURT OF APPEAL AND VLASONS SHIPPING INC.
G.R. No. 112287, 12 December 1997, Third Division, (Panganiban, J.)

In a contract of private carriage, the parties may freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not
involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the
general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier.

FACTS

National Steel Corporation (NSC) as Charterer and Vlasons Shipping, Inc. (VSI) as Owner, entered into
a Contract of Voyage Charter Hire whereby NSC hired VSIs vessel, the MV VLASONS I to make one (1) voyage
to load steel products at Iligan City and discharge them at North Harbor, Manila. In accordance with the Contract
of Voyage Charter Hire, the MV VLASONS I loaded at NSC’s pier at Iligan City, the NSCs shipment of 1,677
skids of tinplates and 92 packages of hot rolled sheets for carriage to Manila. When the vessels three (3) hatches
containing the shipment were opened by NSC’s agents, nearly all the skids of tinplates and hot rolled sheets were
allegedly found to be wet and rusty.

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

In its answer, VSI denied liability for the alleged damage claiming that the MV VLASONS I was
seaworthy in all respects for the carriage of NSC’s cargo; that said vessel was not a common carrier inasmuch as
she was under voyage charter contract with the NSC as charterer under the charter party.

The Regional Trial Court (RTC) ruled in favor of VSI. The Court of Appeals (CA) affirmed the decision
but modified the demurrage and deleting the award of attorney’s fees and expenses of litigation. Hence, this
petition.

ISSUE

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

RULING:
.
NO. The Court affirmed the CA’s decision.

Article 1732 of the Civil Code defines a common carrier as persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public. It has been held that the true test of a common carrier is the
carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its transportation
service for a fee. A carrier which does not qualify under the above test is deemed a private carrier. Generally,
private carriage is undertaken by special agreement and the carrier does not hold himself out to carry goods for
the general public. The most typical, although not the only form of private carriage, is the charter party, a maritime
contract by which the charterer, a party other than the shipowner, obtains the use and service of all or some part
of a ship for a period of time or a voyage or voyages.
 In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by
the RTC, it carried passengers or goods only for those it chose under a special contract of charter
party. Consequently, the rights and obligations of VSI and NSC, including their respective liability for damage to
the cargo, are determined primarily by stipulations in their contract of private carriage or charter party. Recently,
in Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping
Corporation, the Court ruled:

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

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

In view of the aforementioned contractual stipulations, NSC must prove that the damage to its shipment
was caused by VSIs willful negligence or failure to exercise due diligence in making MV Vlasons I seaworthy
and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden of proof was placed on NSC by
the parties agreement.
 LUZON STEVEDORING CO., INC. v. THE PUBLIC SERVICE COMMISSION
G.R. No. L-5458. September 16, 1953

It is not necessary, that one holds himself out as serving or willing to serve the public in order to be considered
public service, as defined in Section 13 (b) of the Public Service Law.

FACTS

Philippine Shipowners' Association (PSA) filed a complaint against Luzon Stevedoring Co. Inc. and
Visayan Stevedore Corp. (petitioners) for engaging in the transportation of cargo in the Philippines for hire or
compensation without authority or approval of the Commission. PSA contends that petitioners adopted, filed and
collected freight charges at the rate of P0.60 per bag, loaded and transported in their lighters and towed by their
tugboats between different points in the Province of Negros Occidental and Manila, which said rates resulted in
ruinous competition with respondents.

The Public Service Commission restrained petitioners from further operating their watercraft to transport
goods for hire or compensation between points in the Philippines until the rates they propose to charge are
approved by this Commission. Hence, this petition for review by petitioners.

ISSUE:

1. Whether or not petitioners are engaged in public service despite rendering service to limited clients
2. Whether or not the Public Service Act would be unconstitutional if it would be construed in such manner
as to include private lease contracts

SC DECISION:

1. YES, petitioners are engaged in public service. Section 13 (b) of the Public Service Law (Commonwealth
Act No. 146) defines public service thus:

"The term 'public service' includes every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes any common carrier, railroad, street railway,
traction railway, subway, motor vehicle, either for freight or passenger, or both, with or without fixed route and
whatever may be its classification xxx”

It is not necessary, under this definition, that one holds himself out as serving or willing to serve the public
in order to be considered public service.

In Luzon Brokerage Company vs. Public Service Commission, the court declared that "Act 454 is clear in
including in the definition of a public service that which is rendered for compensation, although limited
exclusively to the customers of the petitioner.”

In American jurisprudence, it is also held that it is not always necessary, in order to be a public service,
that an organization be dedicated to public use. It is only necessary that it must in some way be impressed with a
public interest; and whether the operation of a given business is a public utility depends upon whether or not the
service rendered by it is of a public character and of public consequence and concern. Thus, a business may be
affected with public interest and regulated for public good although not under any duty to serve the public.

2. NO. The Public Service Commission has, in the court’s judgment, interpreted the law in accordance with
legislative intent. Commonwealth Act No. 146 declares in unequivocal language that an enterprise of any
 of the kinds therein enumerated is a public service if conducted for hire or compensation even if the
operator deals only with a portion of the public or limited clientele.

The business complained of was a matter of public concern. The Public Service Law was enacted not only
to protect the public against unreasonable charges and poor, inefficient service, but also to prevent ruinous
competition. If such private agreements tend to wreck or impair the financial stability and efficiency of public
utilities who do offer service to the public in general, they are affected with public interest and come within the
police power of the state to regulate.

DISPOSITIVE PORTION

Upon the foregoing considerations, the appealed order of the Public Service Commission is affirmed, with
costs against the petitioners.
 WESTWIND SHIPPING CORPORATION v. UCPB GENERAL INSURANCE CO., INC. and ASIAN
TERMINALS INC.
G. R. No. 200289, 25 November 2013, THIRD DIVISION (Peralta, J.)
The extraordinary responsibility of the common carrier 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. In the event
that the goods are lost, destroyed or deteriorated, the common carrier is presumed to have been at fault or to
have acted negligently unless it proves that it observed extraordinary diligence.
FACTS
A shipment of 197 metal containers/skids of tin-free steel from Japan was to be delivered by M/V Golden
Harvest Voyage No. 66, a vessel owned and operated by Westwind Shipping Corporation (Westwind), to the
consignee, San Miguel Corporation (SMC). The carriage was loaded and received in good condition on board.
SMC insured the cargoes against all risks with UCPB General Insurance Co., Inc. (UCPB).
The shipment arrived in Manila and was discharged in the custody of the arrastre operator, Asian
Terminals, Inc. (ATI). During the unloading operation, however, six containers/skids sustained dents and
punctures from the forklift used by the stevedores in centering and shuttling the containers/skids. The local ship
agent of the vessel issued two Bad Order Cargo Receipts. Orient Freight International, Inc. (OFII), the customs
broker of SMC, withdrew from ATI the 197 containers/skids, including the six in damaged condition, and
delivered the same at SMC’s warehouse through J.B. Limcaoco Trucking (JBL). It was discovered upon discharge
that additional nine containers/skids were also damaged due to the forklift operations.
Almost a year after, SMC filed a claim against UCPB, Westwind, ATI, and OFII to recover the amount
corresponding to the damaged 15 containers/skids. SMC signed a subrogation receipt when it received payment
from UCPB. Thereafter, in the exercise of its right of subrogation, UCPB instituted a complaint for damages
against Westwind, ATI, and OFII.
The Regional Trial Court dismissed UCPB’s complaint and the counterclaims of Westwind, ATI, and
OFII. The RTC opined that the claim against ATI already prescribed and Westwind and OFII should be absolved
from any liability. On appeal by UCPB, the CA reversed and set aside the trial court except as regards prescription
in favor of ATI. The appellate court ruled that Westwind is responsible for the six damaged containers/skids at
the time of its unloading. The CA also considered that OFII is liable for the additional nine damaged
containers/skids. Only Westwind filed a Motion for Reconsideration which the CA denied. Hence, this petition.
ISSUE
1. Whether or not Westwind, and not ATI, should be responsible for the damage or loss incurred by the
shipment during its unloading.
2. Whether or not OFII, although a customs broker, should be liable as a common carrier.
RULING
1. YES. Under Article 1734 of the Civil Code, common carriers are responsible for the loss, destruction,
or deterioration of the goods. The extraordinary responsibility of the common carrier 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. In this case, since the discharging of the containers/skids, which were covered by only one bill of lading,
had not yet been completed at the time the damage occurred, there is no reason to imply that there was already
delivery, actual or constructive, of the cargoes to ATI.
 The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and
warehouseman. The relationship between the consignee and the common carrier is similar to that of the consignee
and the arrastre operator. Both the ARRASTRE and the CARRIER are charged with and obligated to deliver the
goods in good condition to the consignee. Nevertheless, the arrastre operator and the carrier are not always and
necessarily solidarily liable as the facts of a case may vary the rule. The precise question is which entity had
custody of the shipment during its unloading from the vessel? The subject cargoes were still in the custody of
Westwind. The carrier still has in it the responsibility to guard and preserve the goods, a duty incident to its having
the goods transported. The bill of lading covering the subject shipment likewise stipulates that the carrier’s
liability for loss or damage to the goods ceases after its discharge from the vessel. Therefore, the cargoes while
being unloaded generally remain under the custody of the carrier.
2. YES. The contention of OFII that it is not a common carrier, but only a customs broker whose
participation is limited to facilitating withdrawal of the shipment in the custody of ATI i.e. to prepare the correct
customs declaration and proper shipping documents as required by law is untenable. A customs broker has been
regarded as a common carrier, as defined under Article 1732 of the Civil Code, because transportation of goods
is an integral part of its business. The aforementioned article does not distinguish between one whose principal
business activity is the carrying of goods and one who does such carrying only as an ancillary activity. It suffices
that petitioner undertakes to deliver the goods for pecuniary consideration.
That OFII is a common carrier is buttressed by the testimony of its own witness, that part of the services
it offers to clients is cargo forwarding, which includes the delivery of the shipment to the consignee. Thus, for
undertaking the transport of cargoes from ATI to SMC’s warehouse in Calamba, Laguna, OFII is considered a
common carrier. The latter cannot excuse itself from liability by insisting that JBL undertook the delivery of the
cargoes to SMC’s warehouse. As long as a person or corporation holds itself to the public for the purpose of
transporting goods as a business, it is already considered a common carrier regardless of whether it owns the
vehicle to be used or has to actually hire one.
Under Article 1735 of the Civil Code, in the event that the goods are lost, destroyed or deteriorated, it is
presumed to have been at fault or to have acted negligently unless it proves that it observed extraordinary
diligence. In the case at bar it was established that except for the six containers/skids already damaged OFII
received the cargoes from ATI in good order and condition; and that upon its delivery to SMC additional nine
containers/skids were found to be in bad order. Instead of merely excusing itself from liability by putting the
blame to ATI and SMC it is incumbent upon OFII to prove that it actively took care of the goods by exercising
extraordinary diligence in the carriage thereof. It failed to do so. Hence its presumed negligence under Article
1735 of the Civil Code remains unrebutted.
WHEREFORE, premises considered the petitions of Westwind and OFII in G.R. Nos. 200289 and
200314 respectively are DENIED. The September 13 2011 Decision and January 19 2012 Resolution of the Court
of Appeals in CA-G.R. CV No. 86752 which reversed and set aside the January 27 2006 Decision of the Manila
City Regional Trial Court Branch 30 are AFFIRMED..
 FIRST PHILIPPINE INDUSTRIAL CORPORATION v. COURT OF APPEALS
G.R. No. 125948, 29 December 1998, (Martinez, J)

A "common carrier" is any person, corporation, firm or association engaged in the business of carrying
or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to
the public. The Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or
air. It does not provide that the transportation of the passengers or goods should be by motor vehicle.

FACTS

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, to contract, install and operate
oil pipelines. The latter applied for a mayor's permit. However, before the permit could be issued, the respondent
City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant
to the Local Government Code (LGC). The respondent assessed a business tax on the petitioner for products
pumped at GPS-1 for the fiscal year 1993. Petitioner paid the tax under protest.

Petitioner filed a letter-protest addressed to the respondent stating that it is engaged in the business of
transporting petroleum products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals.
As such, their Company is exempt from paying tax on gross receipts under Section 133 of the LGC. Moreover,
“transportation contractors” are not included in the enumeration of contractors under Section 131, Paragraph (h)
of the LGC. Therefore, the authority to impose tax 'on contractors and other independent contractors' under
Section 143, Paragraph (e) of the LGC does not include the power to levy on transportation contractors. The
respondent denied the protest contending that petitioner cannot be considered engaged in transportation business,
thus it cannot claim tax exemption.

Petitioner filed for a tax refund against respondents alleging that it is a transportation contractor, hence
exempt from taxes. Respondents argued that petitioner cannot be exempt since it applies only to "transportation
contractors and persons engaged in the transportation by hire and common carriers by air, land and water."
Respondents assert that pipelines are not included in the term "common carrier" which refers solely to ordinary
carriers such as trucks, trains, ships and the like. Respondents further posit that the term "common carrier" under
the said code pertains to the mode or manner by which a product is delivered to its destination.

The trial court dismissed the complaint ruling that the exemption encompasses only common carriers so as
not to overburden the riding public or commuters with taxes. Plaintiff is not a common carrier, but a special carrier
extending its services and facilities to a single specific or "special customer" under a "special contract."

ISSUE

Whether or not petitioner is a common carrier.

RULING

YES. Article 1732 of the Civil Code defines a "common carrier" as "any person,
corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air, for compensation, offering their services to the public.”

The test for determining whether a party is a common carrier of goods is: (1) He must be engaged in the
business of carrying goods for others as a public employment, and must hold himself out as ready to engage in
the transportation of goods for person generally as a business and not as a casual occupation; (2) He must
undertake to carry goods of the kind to which his business is confined; (3) He must undertake to carry by the
method by which his business is conducted and over his established roads; and (4)The transportation must be for
hire. Petitioner is a common carrier engaged in the business of transporting or carrying goods, i.e. petroleum
products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons
who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner
has a limited clientele does not exclude it from the definition of a common carrier.

Article 1732 avoids making any distinction between a person or enterprise offering transportation service
on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to the 'general public,' and one who
offers services or solicits business only from a narrow segment of the general population. The concept of 'common
carrier' under Article 1732 may be seen to coincide neatly with the notion of 'public service,' under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common
carriers set forth in the Civil Code.

The Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It
does not provide that the transportation of the passengers or goods should be by motor vehicle.

Under Article 86 of the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
"common carrier.” “Article 86: Pipe line concessionaire as a common carrier. - A pipe line shall have the
preferential right to utilize installations for the transportation of petroleum owned by him, but is obligated to
utilize the remaining transportation capacity pro rata for the transportation of such other petroleum as may be
offered by others for transport, and to charge without discrimination such rates as may have been approved by
the Secretary of Agriculture and Natural Resources.”

Article 7 of Republic Act 387 also regards petroleum operation as a public utility. "that everything relating
to the exploration for and exploitation of petroleum and everything relating to the manufacture, refining, storage,
or transportation by special methods of petroleum, is hereby declared to be a public utility.”

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals dated
November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
 FIRST PHILIPPINE INDUSTRIAL CORPORATION v. CA
G.R. No. 125948, 29 December 1998, (Martinez, J.)

A pipeline concessionaire is a common carrier; hence, it is exempt from paying local business tax on its
gross receipts.
FACTS
First Philippine Industrial Corporation (FPIC) is a grantee of a pipeline concession to contract, install and
operate oil pipelines. In its application for a mayor’s permit, the City Treasurer of Batangas required it to pay a
local tax which it paid under protest. FPIC’s letter-protest to the City Treasurer was denied, prompting it to file a
complaint for tax refund against the City of Batangas and the City Treasurer. FPIC alleged that the imposition
and collection of the business tax on its gross receipts violates Section 133 of the Local Government Code (LGC)
which exempts common carriers from such obligation. In answer, the City of Batangas argued that the exemption
applies only to transportation contractors and persons engaged in the transportation by hire and common carrier
by air, land and water. Both the Regional Trial Court and the Court of Appeals dismissed FPIC’s complaint on
the ground that it is not a common carrier.
ISSUE
Whether or not FPIC is a common carrier which falls under those exempt from local tax.
RULING
YES. Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or
association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air,
for compensation, offering their services to the public." The test for determining whether a party is a common
carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public employment, and must hold
himself out as ready to engage in the transportation of goods for person generally as a business and not as
a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his established
roads; and
4. The transportation must be for hire.
Based on the above definition and requirements, there is no doubt that FPIC is a common carrier. It is
engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public
employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its
services, and transports the goods by land and for compensation. The fact that FPIC has a limited clientele does
not exclude it from the definition of a common carrier.
Moreover, under the Petroleum Act of the Philippines, FPIC, being a pipeline concessionaire, is
considered a “common carrier.” Petroleum operation is regarded as a public utility, as well. The Bureau of Internal
Revenue, in its BIR Ruling No. 069-83, likewise considers FPIC a “common carrier,” it being a pipeline
concessionaire engaged in transporting petroleum products.
Based on the foregoing, there is no doubt that FPIC is a “common carrier” and, therefore, exempt from
the business tax, as provided for in Section 133 of the LGC. As may be gleaned from the House deliberations on
the LGC, the legislative intent in excluding from the taxing power of the local government unit the imposition of
business tax against common carriers is to prevent a duplication of the so-called "common carrier's tax.” Since
FPIC is already paying 3% common carrier's tax on its gross sales/earnings under the National Internal Revenue
Code, to tax it again on its gross receipts in its transportation of petroleum business would defeat the purpose of
the LGC.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals
dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
 PLANTERS PRODUCTS, INC. v. COURT OF APPEALS
G.R. No. 101503, 15 September 1993, FIRST DIVISION, (Bellosillo, J.)

A public carrier shall remain as such provided the charter is limited to the ship only, as in the case of a time-
charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or
demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-
party is concerned.

FACTS

Planters Products, Inc. (PPI) purchased from Mitsubishi International Corporation (Mitsubishi)
9,329.7069 metric tons of Urea 46% fertilizer which the latter shipped aboard the cargo vessel owned by Kyosei
Kisen Kabushiki Kaisha (KKKK). Prior to its voyage, a time charter-party was entered into between Mitsubishi
as shipper/charterer and KKKK as shipowner.

Before loading the fertilizer aboard the vessel, four of her holds were all presumably inspected by the
charterer's representative and found fit to take a load of urea in bulk. After the fertilizer was loaded, the steel
hatches remained tightly sealed throughout the entire voyage. Weather condition turned out unfavorable as it was
raining occasionally while the discharge was in progress and certain portions of the route to the warehouse were
sandy. Consequently, a survey report revealed a shortage of 106.726 metric tons, while another portion
approximating 18 metric tons were found to be contaminated with dirt making the cargo delivered unfit for
commerce.

PPI sent a claim letter to Soriamont Steamship Agencies (SSA), the resident agent of KKKK. SSA denied
the request, thus, PPI filed an action for damages with the Court of First Instance of Manila. KKKK contends that
the rule governing common carriers does not apply to them because they have become private carriers by reason
of the provisions of the charter-party. The lower court sustained PPI’s claim. On appeal, Court of Appeals reversed
the lower court and absolved the carrier from liability.

ISSUE

Whether or not a common carrier becomes a private carrier by reason of a charter-party.

RULING

NO.

The Court distinguished a charter-party and a common carrier. A "charter-party" is a contract by which
an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use.
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code as that which
extends to carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or
transporting passengers or both for compensation as a public employment and not as a casual occupation. The
distinction between a "common or public carrier" and a "private or special carrier" lies in the character of the
business, such that if the undertaking is a single transaction, not a part of the general business or occupation,
although involving the carriage of goods for a fee, the person or corporation offering such service is a private
carrier.

It is not disputed that KKKK, in the ordinary course of business, operates as a common carrier,
transporting goods indiscriminately for all persons. When PPI chartered the vessel, the ship captain, its officers
and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision
and control. Hardly then can we charge the charterer, a stranger to the crew and to the ship, with the duty of caring
for his cargo when the charterer did not have any control of the means in doing so. This is evident in the present
case considering that the steering of the ship, the manning of the decks, the determination of the course of the
voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were
screened, chosen and hired by the shipowner.

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case
of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the
charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control of
the ship, although her holds may, for the moment, be the property of the charterer.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which reversed
the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the First Instance, now
Regional Trial Court, of Manila should be, as it is hereby DISMISSED.
 HOME INSURANCE COMPANY v. AMERICAN STEAMSHIP AGENCIES, INC.
G.R. No. L-25599 , April 4, 1968, (Bengzon, J.P., J.)

A common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private
carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against
public policy, and is deemed valid.

FACTS

"Consorcio Pesquero del Peru of South America" shipped jute bags of Peruvian fish meal through SS Crowborough.
The cargo, consigned to San Miguel Brewery, Inc. (SMBI) and insured by Home Insurance Company (Home Insurance)
arrived in Manila and was discharged into the lighters of Luzon Stevedoring Company (Luzon Stevedoring). When the
cargo was delivered to consignee SMBI, there were shortages, causing SMBI to lay claims against Luzon Stevedoring,
Home Insurance and the American Steamship Agencies (American Steamship), owner and operator of SS Crowborough.

Because the others denied liability, Home Insurance paid SMBI the insurance value of the loss. Having been refused
reimbursement by both Luzon Stevedoring and American Steamship Agencies, Home Insurance, as subrogee to SMBI, filed
against them a complaint for recovery of the payment paid.

Luzon Stevedoring alleged that it delivered with due diligence the goods.

American Steamship denied liability by alleging that under the provisions of the Charter party, the charterer, not
the shipowner, was responsible for any loss or damage of the cargo. Furthermore, it claimed to have exercised due diligence
in stowing the goods.

The CFI absolved Luzon Stevedoring, having found the latter to have merely delivered what it received from the
carrier in the same condition and quality, and ordered American Steamship to pay Home Insurance.

ISSUE

Whether or not the stipulation in the charter party of the owner's non-liability is valid so as to absolve the American
Steamship Agencies from liability for loss.

RULING

YES.

Section 2, Paragraph 2 of the charter party provides that the owner is liable for loss or damage to the goods caused
by personal want of due diligence on its part or its manager to make the vessel in all respects seaworthy and to secure that
she be properly manned, equipped and supplied or by the personal act or default of the owner or its manager. Said paragraph,
however, exempts the owner of the vessel from any loss or damage or delay arising from any other source, even from the
neglect or fault of the captain or crew or some other person employed by the owner on board, for whose acts the owner
would ordinarily be liable except for said paragraph.

The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American
jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private
carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against
public policy, and is deemed valid.

The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as
a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its
agent would be void only if the strict public policy governing common carriers is applied. Such policy has no force where
the public at large is not involved, as in the case of a ship totally chartered for the use of a single party.

WHEREFORE, the judgment appealed from is reversed. American Steamship is absolved from liability to Home
Insurance.
 PHILAM INSURANCE COMPANY, INC. V. HEUNG-A SHIPPING CORPORATION
G.R. No. 187701, 23 July 2014, FIRST DIVISION (Reyes, J.)

In a contract of affreightment, the voyage remains under the responsibility of the carrier and it is
answerable for the loss of goods received for transportation. The charterer is free from liability to third persons
in respect of the ship.

FACTS

Novartis Consumer Health Philippines Inc. (NOVARTIS) imported from Jinsuk Trading Co. Ltd.
(JINSUK) in South Korea, 19 pallets of 200 rolls of Ovaltine Power 18 Glaminated plastic packaging material.
In order to ship, JINSUK engaged the services of Protop Shipping Corporation (PROTOP), a freight forwarder.
PROTOP shipped the cargo through DONGNAMA Shipping Co. Ltd. (DONGNAMA) which in turn loaded the
same on M/V Heung-A Bangkok V-019, owned and operated by Heung-A Shipping Corporation (HEUNG-A),
pursuant to a ‘slot charter arrangement’ whereby a space in the latter’s vessel was reserved for the exclusive use
of the former.

NOVARTIS insured the shipment with Philam Insurance Company Inc. (PHILAM)

The shipment reached NOVARTIS, and upon inspection, the boxes of the shipment were wet and damp.
The shipment is entirely damaged and was found out that the damage was caused by salt water. NOVARTIS
rejected the shipment and filed an insurance claim with PHILAM and the latter was subrogated to all the rights
and claims of NOVARTIS. PHILAM filed a complaint for damages against the parties to the shipment. HEUNG-
A denied liability by arguing that he is not the carrier in so far as NOVARTIS is concerned and asserted that its
only obligation was to provide DONGNAMA a space on board his ship.

The trial court ruled declaring HEUNG-A as the common carrier and held it liable. The ruling was
affirmed by the appellate court.

ISSUE

Whether or not HEUNG-A is the common carrier that should be liable to the damage sustained by the
package while on transit.

HELD

YES, HEUNG-A is the common carrier. HEUNG-A’s slot charter arrangement with DONGNAMA is a
charter party arrangement.

A charter party is a contract whereby an entire ship or some principal part thereof, is let by the owner to
another person for a specified time or use. It has two types. First it could be a contract of affreightment whereby
the use of shipping space on vessels were leased in part or as a whole, to carry goods for others. The charter-party
provides for the hire of vessel only, either for a definite period of time (time charter) of for a single or consecutive
voyage (voyage charter). The shipowner supplies the ship’s stores, pay for the wages of the master and the crew,
and defray the expenses for the maintenance of the ship. The voyage remains under the responsibility of the carrier
and it is answerable for the loss of goods received for transportation. The charterer is free from liability to third
persons in respect to the ship.

Second, charter by demise or bareboat charter under which the whole vessel is let to the charterer with
a transfer to him of its entire command and possession and consequent control over its navigation, including the
master and the crew, who are his servants. The charterer mans the vessel with his own people and becomes, in
effect, the owner for the voyage or service stipulated and hence liable for damages or loss sustained by the goods
transported.

Clearly, the ‘slot charter arrangement’ between HEUNG-A and DONGNAMA, where the latter is
reserved a space in the vessel is a contract of affreightment. The arrangement did not divest HEUNG-A its
character as the common carrier nor relieve it of any accountability for the shipment.

As a common carrier, it is presumed to have been at fault or negligent if the goods they transported
deteriorated or got lost or destroyed, unless they prove that they exercise extraordinary diligence in transporting
the same. HEUNG-A failed to rebut this prima facie presumption; hence, it is answerable for the damages incurred
by the goods received for transportation.

WHEREFORE, all the foregoing considered, the Decision dated January 30, 2009 of the Court of Appeals
in CA-G.R. CV No. 89482 is hereby AFFIRMED with MODIFICATION in that the interest rate on the award of
US$8,500.00 shall be six percent (6%) per annum from the date of finality of this judgment until fully paid.
 SUMMA INSURANCE CORPORATION v. COURT OF APPEALS and METRO PORT SERVICE,
INC.
G.R. No. 84680, February 5, 1996, (Panganiban, J.)

The Supreme Court said in E. Razon Inc. vs. Court of Appeals:

Indeed, the provision in the management contract regarding the declaration of the actual invoice value
before the arrival of the goods must be understood to mean a declaration before the arrival of the goods in the
custody of the arrastre operator, whether it be done long before the landing of the shipment at port, or
immediately before turn-over thereof to the arrastre operators custody. What is essential is knowledge beforehand
of the extent of the risk to be undertaken by the arrastre operator, as determined by the value of the property
committed to its care that it may define its responsibility for loss or damage to such cargo and to ascertain
compensation commensurate to such risk assumed.

In the same case, the Supreme Court added that the advance notice of the actual invoice of the goods
entrusted to the arrastre operator is for the purpose of determining its liability, that it may obtain compensation
commensurable to the risk it assumes, (and) not for the purpose of determining the degree of care or diligence it
must exercise as a depository or warehouseman since the arrastre operator should not discriminate between
cargoes of substantial and small values, nor exercise care and caution only for the handling of goods announced
to it beforehand to be of sizeable value, for that would be spurning the public service nature of its business.

FACTS

On November 22, 1981, the S/S Galleon Sapphire, a vessel owned by the National Galleon Shipping
Corporation (NGSC), arrived at Pier 3, South Harbor, Manila, carrying a shipment consigned to the order of
Caterpillar Far East Ltd. with Semirara Coal Corporation (Semirara) as notify party. The shipment, including a
bundle of PC 8 U blades, was covered by marine insurance under Certificate No. 82/012-FEZ issued by petitioner
and Bill of Lading No. SF/MLA 1014. The shipment was discharged from the vessel to the custody of Metro Port
Service, Inc. (MPSI), formerly known as E. Razon, Inc., the exclusive arrastre operator at the South
Harbor. Accordingly, three good-order cargo receipts were issued by NGSC, duly signed by the ships checker
and a representative of private respondent.

On February 24, 1982, the forwarder, Sterling International Brokerage Corporation, withdrew the
shipment from the pier and loaded it on the barge Semirara 8104. When Semirara inspected the shipment at its
warehouse, it discovered that the bundle of PC8U blades was missing. Thus, MPSI issued a shortlanded certificate
stating that the bundle of PC8U blades was already missing when it received the shipment from the NGSC vessel.
Semirara then filed with petitioner, private respondent and NGSC its claim for P280,969.68, the alleged value of
the lost bundle.

On September 29, 1982, Summa Insurance Corporation (SIC) paid Semirara the invoice value of the lost
shipment. Semirara thereafter executed a release of claim and subrogation receipt. Consequently, SIC filed its
claims with NGSC and MPSI but it was unsuccessful.

SIC then filed a complaint with the Regional Trial Court, Branch XXIV, Manila, against NGSC and MPSI
for collection of a sum of money, damages and attorneys fees.

On August 2, 1984, the trial court rendered a decision absolving NGSC from any liability but finding
MPSI liable to SIC in the sum of P20,000.00, with costs of suit. In resolving the issue as to who had custody of
the shipment when it was lost, the trial court relied more on the good-order cargo receipts issued by NGSC than
on the short-landed certificate issued by private respondent. The trial court held:
 As between the aforementioned two documentary exhibits, the Court is more inclined to give
credence to the cargo receipts. Said cargo receipts were signed by a checker of defendant NGSC
and a representative of Metro Port. It is safe to presume that the cargo receipts accurately describe
the quantity and condition of the shipment when it was discharged from the vessel. Metro Ports
representative would not have signed the cargo receipts if only 4 packages were discharged from
the vessel and given to the possession and custody of the arrastre operator. Having been signed
by its representative, the Metro Port is bound by the contents of the cargo receipts.

On the other hand, the Metro Ports shortlanded certificate could not be given much weight
considering that, as correctly argued by counsel for defendant NGSC, it was issued by Metro
Port alone and was not countersigned by the representatives of the shipping company and the
consignee. Besides, the certificate was prepared by Atty. Servillano V. Dolina, Second Deputy
General Manager of Metro Port, and there is no proof on record that he was present at the time
the subject shipment was unloaded from the vessel and received by the arrastre
operator. Moreover, the shortlanded certificate bears the date of March 15, 1982, more than three
months after the discharge of the cargo from the carrying vessel.

Neither could the Court give probative value to the marine report . The attending surveyor who
attended the unloading of the shipment did not take the witness stand to testify on said
report. Although Transnational Adjustment Co.s general manager, Mariano C. Remorin, was
presented as a witness, his testimony is not competent because he was not present at the time of
the discharge of the cargo.

Under the foregoing considerations, the Court finds that the 1 bundle of PC8U blade in question
was not lost while the cargo was in the custody of the carrying vessel. Considering that the
missing bundle was discharged from the vessel unto the custody of defendant arrastre operator
and considering further that the consignee did not receive this cargo from the arrastre operator,
it is safe to conclude from these facts that said missing cargo was lost while same was in the
possession and control of defendant Metro Port. Defendant Metro Port has not introduced
competent evidence to prove that the loss was not due to its fault or negligence.Consequently,
only the Metro Port must answer for the value of the missing cargo. Defendant NGSC is absolved
of any liability for such loss.

On appeal, the Court of Appeals modified the decision of the trial court and reduced MPSI’s liability to
P3,500.00.

ISSUE/S
1. Whether or not an arrastre operator is legally liable for the loss of a shipment in its custody
2. If so liable, what is the extent of its liability

RULING

1. YES, since it has been established that the shipment was lost while in the custody of MPSI, the
Supreme Court found MPSI liable for the loss. This is an issue of fact determined by the trial court and
respondent Court of Appeals, which is not reviewable in a petition under Rule 45 of the Rules of Court.

SIC was subrogated to the rights of the consignee. The relationship therefore between the consignee and
the arrastre operator must be examined. This relationship is much akin to that existing between the consignee or
owner of shipped goods and the common carrier, or that between a depositor and a warehouseman. In the
performance of its obligations, an arrastre operator should observe the same degree of diligence as that required
of a common carrier and a warehouseman as enunciated under Article 1733 of the Civil Code and Section 3(b)
of the Warehouse Receipts Law, respectively. Being the custodian of the goods discharged from a vessel, an
arrastre operator’s duty is to take good care of the goods and to turn them over to the party entitled to their
possession.

2. The basis of extent of liability is the Management Contract. In the performance of its job, an arrastre
operator is bound by the management contract it had executed with the Bureau of Customs. However, a
management contract, which is a sort of a stipulation pour autrui within the meaning of Article 1311 of the Civil
Code, is also binding on a consignee because it is incorporated in the gate pass and delivery receipt which must
be presented by the consignee before delivery can be effected to it. The insurer, as successor-in-interest of the
consignee, is likewise bound by the management contract. Indeed, upon taking delivery of the cargo, a consignee
(and necessarily its successor-in- interest) tacitly accepts the provisions of the management contract,
including those which are intended to limit the liability of one of the contracting parties, the arrastre operator.

However, a consignee who does not avail of the services of the arrastre operator is not bound by the
management contract. Such an exception to the rule does not obtain here as the consignee did in fact accept
delivery of the cargo from the arrastre operator.

Section 1, Article VI of the Management Contract between MPSI and the Bureau of Customs provides:
1. Responsibility and Liability for Losses and Damages - The CONTRACTOR shall, at its own
expense handle all merchandise in the piers and other designated places and at its own expense
perform all work undertaken by it hereunder diligently and in a skillful workmanlike and efficient
manner; that the CONTRACTOR shall be solely responsible as an independent CONTRACTOR,
and hereby agrees to accept liability and to promptly pay to the steamship company, consignee,
consignor or other interested party or parties for the loss, damage, or non-delivery of cargoes to the
extent of the actual invoice value of each package which in no case shall be more than Three
Thousand Five Hundred Pesos (P3,500.00) for each package unless the value of the importation is
otherwise specified or manifested or communicated in writing together with the invoice value and
supported by a certified packing list to the CONTRACTOR by the interested party or parties before
the discharge of the goods, as well as all damage that may be suffered on account of loss, damage,
or destruction of any merchandise while in custody or under the control of the CONTRACTOR in
any pier, shed, warehouse, facility or other designated place under the supervision of the BUREAU,
xxx

Interpreting a similar provision in the management contract between MPSI’s predecessor, E. Razon, Inc. and
the Bureau of Customs, the Court said in E. Razon Inc. vs. Court of Appeals:

Indeed, the provision in the management contract regarding the declaration of the
actual invoice value before the arrival of the goods must be understood to mean a
declaration before the arrival of the goods in the custody of the arrastre operator, whether
it be done long before the landing of the shipment at port, or immediately before turn-
over thereof to the arrastre operators custody. What is essential is knowledge
beforehand of the extent of the risk to be undertaken by the arrastre operator, as
determined by the value of the property committed to its care that it may define its
responsibility for loss or damage to such cargo and to ascertain compensation
commensurate to such risk assumed x x x.

In the abovementioned case, the Supreme Court added that the advance notice of the actual invoice of
the goods entrusted to the arrastre operator is for the purpose of determining its liability, that it may obtain
compensation commensurable to the risk it assumes, and not for the purpose of determining the degree of
care or diligence it must exercise as a depository or warehouseman since the arrastre operator should not
discriminate between cargoes of substantial and small values, nor exercise care and caution only for the
handling of goods announced to it beforehand to be of sizeable value, for that would be spurning the public
service nature of its business.
 In case at bar, no evidence was offered by SIC proving the amount of arrastre fees paid to MPSI so as to
put the latter on notice of the value of the cargo. While SIC alleged that prior to the loss of the package, its value
had been relayed to MPSI through the documents the latter had processed, SIC does not categorically state that
among the submitted documents were the pro forma invoice value and the certified packing list. Neither does SIC
pretend that these two documents were prerequisites to the issuance of a permit to deliver or were attachments
thereto. Even the permit to deliver, upon which petitioner anchors its arguments, may not be considered by the
Supreme Court because it was not identified and formally offered in evidence. On the other hand, on top of its
denial that it had received the invoice value and the packing list before the discharge of the shipment, MPSI was
able to prove that it was apprised of the value of the cargo only after its discharge from the vessel, ironically
through SIC’s claim for the lost package to which were attached the invoice and packing list. Thus, SIC failed to
convince the Supreme Court that the requirement of the management contract had been complied with to entitle
it to recover the actual invoice value of the lost shipment.

WHEREFORE, the petition for review on certiorari is DENIED and the decision of the Court of Appeals
is AFFIRMED. Costs against petitioner SIC.
EASTERN SHIPPING LINES, INC. v. INTERMEDIATE APPELLATE COURT and DEVELOPMENT
INSURANCE & SURETY CORPORATION
G.R. No. L-69044, May 29, 1987, FIRST DIVISION (Melencio- Herrera, J.)

The common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over goods, according to all the circumstances of each case.

FACTS

In G.R. No. 69044, a vessel operated by Eastern Shipping Lines, Inc. (Eastern Shipping), loaded at Kobe,
Japan for transportation to Manila, 5000 pieces of calorized lance pipes in 28 packages consigned to Philippine
Blooming Mills Co., Inc., and 7 cases of spare parts consigned to Central Textile Mills, Inc.; Both sets of goods
were insured with Development Insurance and Surety Corp (Development Insurance).

In G.R. No. 71478, the same vessel took on board 128 cartons of garment fabrics and accessories, in 2
containers, consigned to Mariveles Apparel Corporation which was insured by Nisshin Fire and Marine Insurance
Co. (Nishin), and two cases of surveying instruments consigned to Aman Enterprises and General Merchandise
which was insured by Dow Fire and Marine Insurance Co., Ltd (Dowa).

Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and
cargo. Development Insurance, Nishin, and Dowa paid the corresponding marine insurance values to the
consignees concerned and were thus subrogated unto the rights of the latter as the insured.

Development Insurance filed a suit against Eastern Shipping for the recovery of the amounts it had paid
to the insured. The latter denied liability mainly on the ground that the loss was due to an extraordinary fortuitous
event, hence, it is not liable under the law. Nishin and Dowa also filed suit against Eastern Shipping for the
recovery of the insured value of the cargo lost imputing unseaworthiness of the ship and non- observance of
extraordinary diligence by Eastern Shipping. The latter denied liability on the principal grounds that the fire which
caused the sinking of the ship is an exempting circumstance under Section 4(2) (b) of the Carriage of Goods by
Sea Act (COGSA); and that when the loss of fire is established, the burden of proving negligence of the vessel is
shifted to the cargo shipper.

ISSUES

1. Which law shall govern- the Civil Code provisions on Common Carriers or the Carriage of goods by Sea
Act?

2. Who has the burden of proof to show negligence of the carrier?

RULING

1. The law of the country to which the goods are to be transported governs the liability of the common
carrier in case of their loss, destruction or deterioration. The liability of Eastern Shipping is governed primarily
by the Civil Code. However, in all matters not regulated by said Code, the rights and obligations of common
carrier shall be governed by the Code of Commerce and by special laws. Thus, the Carriage of Goods by Sea Act,
a special law, is suppletory to the provisions of the Civil Code.

2. The burden is upon Eastern Shipping Lines to prove that it has exercised the extraordinary diligence
required by law. Under the Civil Code, the common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the vigilance over goods, according to all the
circumstances of each case. Common carriers are responsible for the loss, destruction, or deterioration of the
goods unless the same is found on any of the cases under Article 1734 of the Civil Code. Eastern Shipping claims
that the loss of the vessel by fire exempts it from liability under the phrase “natural disaster or calamity in the said
article. However, the Supreme Court is of the opinion that fire may not be considered a natural disaster or calamity
as it arises almost invariably from some act of man or by human means.

Pursuant to Article 1733, common carriers are bound to extraordinary diligence in the vigilance over the
goods. Eastern Shipping, as a common carrier, is liable to the consignees for said lack of diligence required of it
under Article 1733 of the Civil Code. And even if fire were to be considered a “natural disaster” within the
meaning of Article 1734 of the Civil Code, it is required under Article 1739 of the same Code that the “natural
disaster” must have been the “proximate and only cause of the loss,” and that the carrier has “exercised due
diligence to prevent or minimize the loss before, during or after the occurrence of the disaster”, which in this case,
Eastern Shipping failed to establish.

Section 4(2) of The Carriage of Goods by Sea Act is also not applicable in this case since in order for such
provision to take effect, there must be no actual fault or privity coming from the carrier. In this case however,
both the Trial Court and the Appellate Court found that there was “actual fault” of Eastern Shipping as shown by
“lack of diligence” in that “when the smoke was noticed, the fire was already big; that the fire must have started
twenty- four (24) hours before the same was noticed; and that “after the cargoes were stored in the hatches, no
regular inspection was made as to their condition during the voyage.” The foregoing suffices to show that Eastern
Shipping or its servants were negligent in connection therewith.

Wherefore in G.R. No. 69044, the judgment is modified in that petitioner Eastern Shipping Lines shall
pay the Development Insurance and Surety Corporation the amount of P256,039 for the twenty-eight (28)
packages of calorized lance pipes, and P71,540 for the seven (7) cases of spare parts, with interest at the legal rate
from the date of the filing of the complaint on June 13, 1978, plus P5,000 as attorney's fees, and the costs. In
G.R.No.71478,the judgment is hereby affirmed.
 NATIONAL DEVELOPMENT COMPANY V. CA
G.R. No. L-49407 19 August 1988, (Paras, J.)

The law of the country to which the goods are to be transported governs the liability of the common carrier in
case of their loss, destruction or deterioration outside the Philippine waters.

FACTS

In accordance with a memorandum agreement entered into between National Development Company
(NDC) and Maritime Company of the Philippines (MCP), NDC 'Dona Nati' appointed MCP as its agent to manage
and operate vessel ‘Dona Nati’ for and in its behalf and account.

E. Philipp Corporation of New York loaded on board the said vessel at San Francisco, California, a total
of 1,200 bales of American raw cotton. Also loaded on the same vessel at Tokyo, Japan, were the cargo of
Kyokuto Boekui, Kaisa, Ltd., consisting of 200 cartons of sodium lauryl sulfate and 10 cases of aluminum foil.

En route to Manila, the vessel ‘Dofia Nati' figured in a collision at Ise Bay, Japan with a Japanese vessel
'SS Yasushima Maru’. As a result of which, Development Insurance and Surety Company paid as insurer the total
amount of P364,915.86 to the consignees or their successors-in-interest, for the lost or damaged cargoes. Hence,
this complaint to recover said amount from NDC and MCP as owner and ship agent respectively, of the said
'Dofia Nati' vessel.

ISSUE

Which laws govern loss or destruction of goods due to collision of vessels outside Philippine waters, and
the extent of liability as well as the rules of prescription provided thereunder.

RULING

Philippines laws.

It is NDC's argument that the Carriage of Goods by Sea Act should apply to the case at bar and not the
Civil Code or the Code of Commerce. Under said Act, the carrier is not responsible for the loss or damage
resulting from the "act, neglect or default of the master, mariner, pilot or the servants of the carrier in the
navigation or in the management of the ship." Thus, NDC insists that based on the findings of the trial court which
were adopted by the Court of Appeals, both pilots of the colliding vessels were at fault and negligent, NDC would
have been relieved of liability.

This issue has already been laid to rest by the SC in the case of Eastern Shipping Lines Inc. v. IAC. It was
held, that the law of the country to which the goods are to be transported governs the liability of the common
carrier in case of their loss, destruction or deterioration outside the Philippine waters. Thus, for cargoes
transported from Japan to the Philippines, the liability of the carrier is governed primarily by the Philippine laws;
i.e. Civil Code and in all matters not regulated by said Code, by the Code of commerce and by laws (Article 1766,
Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to the provisions of
the Civil Code.

However, the collision at bar falls among matters not specifically regulated by the Civil Code. Hence, the
application to the case at bar of the Code of Commerce, which deal exclusively with collision of vessels.
Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the shipowner or
carrier, is not exempt from liability for damages arising from collision due to the fault or negligence of the captain.
Primary liability is imposed on the shipowner or carrier in recognition of the universally accepted doctrine that
the shipmaster or captain is merely the representative of the owner who has the actual or constructive control over
the conduct of the voyage.

PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the assailed decision
of the respondent Appellate Court is AFFIRMED. I.E.:

WHEREFORE, judgment is hereby rendered ordering the defendants National Development Company
and Maritime Company of the Philippines, to pay jointly and severally, to the plaintiff Development Insurance
and Surety Corp., the sum of THREE HUNDRED SIXTY FOUR THOUSAND AND NINE HUNDRED
FIFTEEN PESOS AND EIGHTY SIX CENTAVOS (364,915.86) with the legal interest thereon from the filing
of plaintiffs complaint on April 22, 1965 until fully paid, plus TEN THOUSAND PESOS (Pl0,000.00) by way of
damages as and for attorney's fee.
 Erezo v. Jepte
G.R. No. L-9605, 30 September 1957, EN BANC (Labrador, J.)

The registered owner of a motor vehicle is primarily responsible for the damage caused to the vehicle of
the plaintiff-appellee but the registered owner has a right to be indemnified by the real or actual owner of the
amount that he may be required to pay as damage for the injury caused to the plaintiff-appellant.

FACTS

Aguedo Jepte is the registered owner of a six by six truck. On August, 9, 1949, while the same was being
driven by Rodolfo Espino y Garcia, it collided with a taxicab. As the truck went off the street, it hit Ernesto Erezo
and another, and the former suffered injuries, as a result of which he died. The driver was prosecuted for homicide
through reckless negligence where he pleaded guilty and was sentenced to suffer imprisonment and to pay the
heirs of Ernesto Erezo the sum of P3,000. As the amount of the judgment could not be enforced against him,
Gaudioso Erezo (Father of Ernesto Erezo) brought this action against the registered owner of the truck, Aguedo
Jepte.

Aguedo Jepte does not deny at the time of the fatal accident the cargo truck driven by Rodolfo Espino y
Garcia was registered in his name. He, however, claims that the vehicle belonged to the Port Brokerage, of which
he was the broker at the time of the accident. He explained, and his explanation was corroborated by Policarpio
Franco, the manager of the corporation, that the trucks of the corporation were registered in his name as a
convenient arrangement so as to enable the corporation to pay the registration fee with his backpay as a pre-war
government employee. Franco, however, admitted that the arrangement was not known to the Motor Vehicle
Office.

The trial court held that as Aguedo Jepte represented himself to be the owner of the truck and the Motor
Vehicle Office, relying on his representation, registered the vehicles in his name, the Government and all persons
affected by the representation had the right to rely on his declaration of ownership and registration. It, therefore,
held that Aguedo Jepte is liable because he cannot be permitted to repudiate his own declaration

ISSUE

Whether or not Jepte is liable for the injuries occasioned to Erezo because of the negligence of the driver
even if the Jepte was no longer the owner of the vehicle at the time of the damage because he had previously sold
it to another.

RULING

The judgment appealed from is hereby affirmed, with costs against defendant-appellant

YES.

In synthesis, the Court held that the registered owner, Aguedo Jepte, primarily responsible for the damage
caused to the vehicle of Erezo, but he has a right to be indemnified by the real or actual owner of the amount that
he may be required to pay as damage for the injury caused to Erezo.

Registered owner of a certificate of public convenience is liable to the public for the injuries or damages
suffered by passengers or third persons caused by the operation of said vehicle, even though the same had been
transferred to a third person at the time of the accident.
 The Revised Motor Vehicle Law provides that no vehicle may be used or operated upon any public
highway unless the same is properly registered. It has been stated that the system of licensing and the requirement
that each machine must carry a registration number, conspicuously displayed, is one of the precautions taken to
reduce the danger of injury to pedestrians and other travelers from the careless management of automobiles, and
to furnish a means of ascertaining the identity of persons violating the laws and ordinances, regulating the speed
and operation of machines upon the highways. Not only are vehicles to be registered and that no motor vehicles
are to be used or operated without being properly registered for the current year, but that dealers in motor vehicles
shall furnish the Motor Vehicles Office a report showing the name and address of each purchaser of motor vehicle
during the previous month and the manufacturer's serial number and motor number

Registration is required not to make said registration the operative act by which ownership in vehicles is
transferred, as in land registration cases, because the administrative proceeding of registration does not bear any
essential relation to the contract of sale between the parties, but to permit the use and operation of the vehicle
upon any public. The main aim of motor vehicle registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the vehicles on the public highways, responsibility therefore
can be fixed on a definite individual, the registered owner.

Moreover, the law does not allow the registered owner to prove who the actual owner is; the law, with its
aim and policy in mind, does not relieve him directly of the responsibility that the law fixes and places upon him
as an incident or consequence of registration. Were the registered owner allowed to evade responsibility by
proving who the supposed transferee or owner is, it would be easy for him by collusion with others or otherwise,
to escape said responsibility and transfer the same to an indefinite person, or to one who possesses no property
with which to respond financially for the damage or injury done.
 FILCAR TRANSPORT SERVICES v. ESPINAS
GR No. 174156, 20 June 2012, Second Division, (Brion, J.)
Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation
between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.

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

xxxx

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

xxxx

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

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

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

Espinas sent several letters to Filcar and to its President and General Manager Carmen Flor, demanding
payment for the damages sustained by his car. On May 31, 2001, Espinas filed a complaint for damages against
Filcar and Carmen Flor before the Metropolitan Trial Court (MeTC) of Manila.

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

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

ISSUE
Whether or not Filcar, as registered owner of the motor vehicle which figured in an accident, may be held
liable for the damages caused to Espinas.

RULING
 The petition is without merit.

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

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

As a general rule, one is only responsible for his own act or omission. Thus, a person will generally be
held liable only for the torts committed by himself and not by another. This general rule is laid down in Article
2176 of the Civil Code, which provides to wit:

Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation
between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.

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

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

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

xxxx

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

xxxx

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

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

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

As its core defense, Filcar contends that Article 2176, in relation with Article 2180, of the Civil Code is
inapplicable because it presupposes the existence of an employer-employee relationship. According to Filcar, it
cannot be held liable under the subject provisions because the driver of its vehicle at the time of the accident,
Floresca, is not its employee but that of its Corporate Secretary, Atty. Flor.
 We cannot agree. It is well settled that in case of motor vehicle mishaps, the registered owner of the motor
vehicle is considered as the employer of the tortfeasor-driver, and is made primarily liable for the tort committed
by the latter under Article 2176, in relation with Article 2180, of the Civil Code.

WHEREFORE, the petition is DENIED. The decision dated February 16, 2006 and the resolution dated
July 6, 2006 of the Court of Appeals are AFFIRMED. Costs against petitioner Filcar Transport Services.
 DUAVIT V. CA
G.R. No. 82318, 18 May 1989, (GUTIERREZ, JR., J.)

An owner of a vehicle cannot be held liable for an accident involving the said vehicle if the same was
driven without his consent or knowledge and by a person not employed by him.

FACTS

Antonio Sarmiento, Sr. and Virgilio Catuar were aboard a jeep owned by Ruperto Catuar. Virgilio Catuar
was driving the said jeep and was running moderately at 20 to 35 kilometers per hour. Suddenly, another jeep
driven by Oscar Sabiniano hit and bumped Catuar’s jeep on the portion near the left rear wheel, and as a result of
the impact, Catuar’s jeep fell on its right and skidded by about 30 yards. Consequently, Catuar’s jeep was
damaged, particularly the windshield, the differential, the part near the left rear wheel and the top cover of the
jeep. Catuar was thrown to the middle of the road, his wrist was broken and he sustained contusions on the head.
Likewise Sarmiento, Sr. was trapped inside the fallen jeep, and one of his legs was fractured.

Catuar and Sarmiento filed a civil case both against Oscar Sabiniano as driver, and against Gualberto
Duavit as owner of the jeep for the damage to the jeep and medical expenses for the injuries they have suffered.
Duavit, admitted ownership of the jeep but claimed that he has not employed Sabiniano. Sabiniano admitted that
he took the jeep from the garage of Duavit without the latter’s consent or authority. But, in an attempt to exculpate
himself from liability, Sabiniano makes it appear that he was taking all necessary precaution while driving and
the accident occurred due to the negligence of Catuar. Sabiniano claims that it was Catuar’s vehicle which hit and
bumped their jeep.

The trial court found Sabiniano negligent in driving the vehicle but found no employer-employee
relationship between him and the Duavit. But the Court of Appeals (CA) held Duavit jointly and severally liable
with Sabiniano relying on Erezo v. Jepte and Vargas v. Langcay. CA ruled that the registered owner is the
employer of the driver in contemplation of law. It is a conclusive presumption of fact and law, and is not subject
to rebuttal of proof to the contrary. Hence a petition to annul the decision of the CA was filed by Duavit before
the Supreme Court.

ISSUE

Whether or not the owner of a private vehicle which figured in an accident can be held liable under Art.
2180 of the Civil Code when it was neither driven by an employee of the owner nor taken with the consent of the
latter.

RULING

NO. As early as in 1939, The Court has ruled that an owner of a vehicle cannot be held liable for an
accident involving the said vehicle if the same was driven without his consent or knowledge and by a person not
employed by him. Thus, in Duquillo v. Bayot the Court said that registered owner cannot be held liable for
anything for at the time of the accident, the driver was not an employee of the registered owner, nor did he have
anything to do with the latter's business. Moreover, the use of the defendant's truck in the circumstances indicated
was done without her consent or knowledge.

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

WHEREFORE, the petition is GRANTED and the decision and resolution appealed from are hereby
ANNULLED and SET ASIDE. The decision of the Regional Trial Court of Laguna, 8th Judicial District, Branch
6 REINSTATED.
 BA FINANCE CORPORATION v. COURT OF APPEALS, REGIONAL
G.R. No. 98275, 13 November 1992, THIRD DIVISION (Melo, J.)

The registered owner is liable to the public for the injuries or damages suffered by passengers or third
persons caused by the operation of said vehicle, even though the same had been transferred to a third person.

An accident occurred involving BA Finance Corporation’s (BA Finance) Isuzu ten-wheeler truck driven
by an employee of Lino Castro, Rogelio Villar y Amera (Amera). The lower court ascertained after trial that
Amare, was at fault when the mishap occurred, and was found guilty beyond reasonable doubt of reckless
imprudence resulting in triple homicide with multiple physical injuries with damage to property. Also, BA
Finance was adjudged liable for damages because the truck was registered in its name during the incident. On the
other hand, Rock Component Philippines, Inc. was ordered to reimburse BA Finance for any amount that the
latter may be adjudged liable to, as expressly stipulated in the contract of lease between them. Moreover, the trial
court applied Article 2194 of the new Civil Code on solidary accountability of joint tortfeasors insofar as the
liability of the driver, BA Finance and Rock Component Philippines was concerned.

The Court of Appeals affirmed the appealed disposition in toto. On the question of whether petitioner can
be held responsible to the victims albeit the truck was leased to Rock Component Philippines when the incident
occurred, the appellate court answered in the affirmative on the basis of the jurisprudential dogmas.

Hence, a petition for review on certiorari was filed before the Supreme Court by the BA Finance with
regard its responsibility for damages on the accident occurred.

ISSUE

Whether or not BA Finance can be held responsible to the victims albeit the truck was leased to Rock
Component Philippines when the incident occurred.

RULING

YES, BA finance can be held responsible to the victims.

In the previous decisions by the Court, the registered owner of a certificate of public convenience is liable
to the public for the injuries or damages suffered by passengers or third persons caused by the operation of said
vehicle, even though the same had been transferred to a third person. The principle upon which the doctrine is
based is that in dealing with vehicles registered under the Public Service Law, the public has the right to assume
or presume that the registered owner is the actual owner thereof, for it would be difficult for the public to enforce
the actions that they may have for injuries caused to them by the vehicles being negligently operated if the public
should be required to prove who the actual owner is. However, the Court does not imply by this doctrine, that the
registered owner may not recover whatever amount he had paid by virtue of his liability to third persons from the
person to whom he had actually sold, assigned or conveyed the vehicle.
The Revised Motor Vehicles Law (Act No. 3992, as amended) provides that no vehicle may be used or
operated upon any public highway unless the same is properly registered. The main aim of motor vehicle
registration is to identify the owner so that if any accident happens, or that any damage or injury is caused by the
vehicle on the public highways, responsibility therefor can be fixed on a definite individual, the registered owner.
In synthesis, the Court hold that the registered owner, is primarily responsible for the damage caused to
the vehicle, but he has a right to be indemnified by the real or actual owner of the amount that he may be required
to pay as damage for the injury caused.
 Applying the foregoing in solving the circumstance, where the vehicle had been alienated or sold to
another, there is no exception against utilizing the same rationale to the antecedents of this case where the subject
vehicle was merely leased by BA Finance to Rock Component Philippines, Inc., with BA Finance retaining
ownership over the vehicle.
WHEREFORE, the petition is hereby DISMISSED and decision under review AFFIRMED without
special pronouncement as to costs.
TEJA MARKETING AND/OR ANGEL JAUCIAN V. HON. INTERMEDIATE APPELLATE COURT
AND PEDRO NALE
G.R. No. L-65510, 09 March 1987, SECOND DIVISION (Paras, J.)

Kabit system is an arrangement whereby a person who has been granted a certificate of public
convenience allows another person who owns motor vehicle to operate under such franchise for a fee. The said
certificate is a special privilege and abuse of such by the grantee should not be countenanced.

FACTS

Pedro Nale (Nale) bought from Teja Marketing (and/or Angel Jaucian) a motorcycle with complete
accessories and a sidecar. Out of the P8,000 purchase price, Nale gave a downpayment pf P1,700 with a promise
to pay the balance. The period to pay was extende duntil Nale stopped paying. In this transaction, the motorcycle
sold to Nale was mortgaged to Teja Marketing by Angel Jaucian though Teja Marketing and Angel Jaucian are
one and the same, it was made to appear that way since Nale had no franchise of his own. They agreed that Teja
Marketing will undertake the yearly registration of the motorcycle with Land Transportation Commission but the
it failed to do so because of the alleged non- compliance of Nale with some requirements. Teja Marketing made
demands but Nale failed to comply. Teja Marketing filed an action for damages. Nale did not dispute the sale and
outstanding balance. However, he claimed that he was induced to buy the motorcycle because of Teja Marketing’s
representation that it will undertake yearly registration. He also disputed the claim that he was hiding the
motorcycle. The truth being that it was being used for transporting passengers. Nale counterclaimed that because
of the failure of Teja Marketing to comply with its obligation to register the motorcycle, he suffered damages.

The City Court ordered Nale to pay the unpaid balance after finding that Nale indeed bought the
motorcycle for the purpose of engaging in the transportation business and with this, said trimobile unit was
attached to Angel Jaucian’s registration certificate, the latter appearing to be the owner of the unit. The Court of
the First Instance affirmed the decision in toto. Intermediate Appellate Court (IAC), on the basis of in pari delicto,
dismissed the complaint and counterclaim ruling that the purchase of the motorcycle for operation as trimobile
under franchise of Jaucian pursuant to “kabit system” without prior approval of the Board of Transportation was
an illegal transaction. It involved fictitious registration of the motorcycle in the name of Jaucian so that Nale may
enjoy the privileges of the franchise or certificate of public convenience.

ISSUE

Whether or not IAC erred in applying the doctrine of in pari delicto resulting to dismissal of the case

RULING

NO.

The Supreme Court ruled that IAC properly dismissed the case. Ex pacto illicito non oritur actio (No
action arises out of illicit bargain) is the time honored maxim that must be applied to parties in the case at bar.
Having entered into illegal contract, neither can seek relief from court. Basic is the rule that the court will not aid
either party to enforce an illegal contract.

The parties herein operated under the “kabit system” whereby a person who has been granted a certificate
of public convenience allows another person who owns motor vehicle to operate under such franchise for a fee.
A certificate of public convenience is a special privilege granted by the government. Abuse of this privilege by
the grantees thereof cannot be countenanced. The “kabit sytem” has been one of the root causes of the prevalence
of graft and corruption in the government transportation offices. Although it is outrightly penalized as a criminal
offense, it is recognized as contrary to public policy; thus, void under Article 1409 of the Civil Code. Article 1412
of the Civil Code provides that if the unlawful or forbidden cause of an act does not constitute a criminal offense
and when the fault is on the part of both parties, neither may recover that he has given by virtue of the contract or
demand the performance of other’s undertaking.

“WHEREFORE, the petition is hereby dismissed for lack of merit. The assailed decision of the
Intermediate Appellate Court (now the Court of Appeals) is AFFIRMED. No costs.”
 ZAMBOANGA TRANSPORTATION COMPANY, INC., and ZAMBOANGA RAPIDS COMPANY,
INC., v. THE COURT OF APPEALS and JOSE MARIO DAGAMANUEL, represented by PASCUALA
JULIAN PUNZALAN
G. R. No. L-25292, 29 November 1969, EN BANC (BARREDO, J.)

It is for the better protection of the public that both the owner of record and the actual operator, as held
by us in the past, should be adjudged jointly and severally liable with the driver.

FACTS

The spouses Ramon and Josefina Dagamanuel boarded a bus at Manicahan, Zamboanga City, to attend a
benefit dance at the Bunguiao Elementary School where Josefina was a public school teacher. After the dance,
the couple boarded the same bus to return to Manicahan. Unfortunately the bus driven by Valeriano Marcos, fell
off the road and pinned to death the said spouses and several other passengers. Jose Mario Dagamanuel, the
only child of the deceased spouses instituted the action against Zamboanga Transportation Co., Inc. and the
Zamboanga Rapids Co., Inc (hereinafter referred to as Zamtranco and Zambraco, respectively) for breach of
contract of carriage, alleging that the accident was due to the fault and negligence of the driver in operating the
bus and due to the negligence of the defendant companies in their supervision of their driver. Dagamanuel asks
for actual or compensatory damages in the sum of P40,000, moral damages in the sum of P40,000, exemplary
damages in the sum of P20,000, attorney's fees in the sum of P5,000 and costs.

Both Zamtranco and Zambraco filed a third-party complaint against the driver Marcos contending that
he had no authority to drive the bus, hence, the driver alone should be adjudged liable. In addition, the said
defendant company alleged that with intent to place his property beyond the reach of the creditors, the driver
sold his property to his brother, hence its additional prayer that the sale executed by the driver be declared null
and void.

The Trial Court rendered judgment (1) sentencing Zamtranco, Zambraco and Marcos, jointly and
severally, to pay the plaintiff P16,000 for the death of the spouses, P4,000 as exemplary damages, P2,000 as
attorney's fees, and costs; and (2) annulling the deed of sale executed by Marcos. However all the three
defendants appealed. Marcos' appeal was later dismissed. In the joint brief, the two appellant companies allege
that the trial court erred in deciding the case. The Court of Appeals made modification with the following
damages hereby awarded, to wit, (1) P12,000 for the death of the spouses Ramon and Josefina Dagamanuel, (2)
P11,520 for the loss of earnings of both spouses, (3) P5,000 as moral damages, and (4) P5,000 as exemplary
damages, the judgment a quo is affirmed in all other respects, at defendants-appellants' cost.

ISSUES

I. The Court of Appeals erred in holding petitioner Zamtranco, the unregistered owner of the fated
vehicle, jointly and severally liable with Zambraco, the registered owner.

II. The Court of Appeals erred in awarding excessive damages for the death of the parents of
Dagamanuel; excessive compensatory damages and excessive damages to Dagamanuel.

RULING

I. NO. The CA did not commit error. The registered owner, the Zambraco, admits whatever liability it
has and vigorously objects to any finding that the actual operator, the Zamtranco, is also liable with
it, claiming that as registered owner, it alone should be adjudged liable. It is the view of the Court
that it is for the better protection of the public that both the owner of record and the actual operator,
as held by us in the past, should be adjudged jointly and severally liable with the driver
 II. YES. The CA erred in awarding excessive damages. The Court contend that to award damages
when none was allowed by the lower Court, and to increase damages when the successful party did
not appeal, is simply improper and amounts to pure abuse of discretion on the part of the respondent
appellate Court, contrary to the doctrines laid down by the Honorable Supreme Court. Furthermore,
it is respectfully submitted, that a child 3-year old cannot yet feel the mental anguish resulting from
their death, as to warrant such excessive award of P5,000.00 moral damages. The Court believes that
the measure of moral damages must be commensurate with the mental anguish suffered by the heir.
Therefore the Court considered the judgment of the Court of Appeals in respect to the matter of
damages to be more in accordance with the facts, except perhaps, as to the item of moral damages,
considering the tender age of the above-named respondent child. Indeed, the Court of Appeals
properly interpreted the P16,000 awarded by the trial court as including not only damages for the
deceased couple but also the other items of recoverable damages, like compensatory or actual, etc.
Thus viewed, the amounts awarded by the trial court cannot be considered excessive.

IN VIEW OF ALL THE FOREGOING, the judgment of the Court of Appeals is affirmed, with the
modification that as to damages, petitioners are sentenced to pay jointly and severally no more than the amounts
of damages adjudged by the trial court.