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G.R. No.

47065 June 26, 1940


FACTS: The petitioner has been engaged for the past twenty years in the business of transporting passengers by means
of motor vehicles commonly known as TPU buses, in accordance with the terms and conditions of the certificates of public
convenience issued in its favor. On August 26, 1939, the petitioner filed with the Public Service Commission an
application for authorization to operate ten additional new Brockway trucks, on the ground that they were needed to
comply with the terms and conditions of its existing certificates. The Public Service Commission granted the petitioner's
application for increase of equipment with new conditions.

Not being agreeable to the two new conditions thus incorporated in its existing certificates, the petitioner filed a MR which
was denied by the Commission thus this petition praying that an order be issued declaring section 1 of Commonwealth
Act No. 454 unconstitutional and void and that if it be declared constitutional, a decision be rendered declaring that the
provisions thereof are not applicable to valid and subsisting certificates issued prior to June 8, 1939.

ISSUE: Whether Sec 1 of CA 454 is unconstitutional and if it is otherwise, it is not applicable to valid and subsisting
certificates issued prior to June 8, 1939.

RULING: Sec 1 of CA 454 is constitutional and it is applicable to valid and subsisting certificates issued prior to June 8,

Under Sec. 15 of Act No. 146, as amended by CA 454, no public service can operate without a certificate of public
convenience or certificate of convenience and public necessity to the effect that the operation of said service and the
authorization to do business will promote “public interests in a proper and suitable manner”. One of the conditions which
the Public Service Commission may prescribe is the issuance of the certificate provided for in the first paragraph that "the
service can be acquired by the Commonwealth of the Philippines or by any instrumental thereof upon payment of the cost
price of its useful equipment, less reasonable depreciation.” Another condition which the Commission may prescribe, and
which is assailed by the petitioner, is that the certificate "shall be valid only for a definite period of time." In determining "a
definite period of time," the Commission will be guided by "public interests," the only limitation to its power being that said
period shall not exceed fifty years (sec. 16 (a), Commonwealth Act No. 146; Constitution, Art. XIII, sec. 8.)

The petitioner is mistaken that CA 454 is not applicable to valid and subsisting certificates issued prior to June 8, 1939.
Statutes enacted for the regulation of public utilities, being a proper exercise by the state of its police power, are
applicable not only to those public utilities coming into existence after its passage, but likewise to those already
established and in operation.

The only distinction recognized in the statute between those established before and those established after the passage
of the act is in the method of the creation of their operative rights. A certificate of public convenience and necessity is
required for any new operation, but no such certificate is required of any transportation company for the operation which
was actually carried on in good faith on May 1, 1917. This distinction in the creation of their operative rights in no way
affects the power of the Commission to supervise and regulate them.

When private property is "affected with a public interest it ceased to be juris privati only." When, therefore, one devotes his
property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must
submit to be controlled by the public for the common good, to the extent of the interest he has thus created. He may
withdraw his grant by discounting the use, but so long as he maintains the use he must submit to control. Indeed, this right
of regulation is so far beyond question that it is well settled that the power of the state to exercise legislative control over
public utilities may be exercised through boards of commissioners. This right of the state to regulate public utilities is
founded upon the police power, and statutes for the control and regulation of utilities are a legitimate exercise thereof, for
the protection of the public as well as of the utilities themselves. Such statutes are, therefore, not unconstitutional, either
impairing the obligation of contracts, taking property without due process, or denying the equal protection of the laws,
especially inasmuch as the question whether or not private property shall be devoted to a public and the consequent
burdens assumed is ordinarily for the owner to decide; and if he voluntarily places his property in public service he cannot
complain that it becomes subject to the regulatory powers of the state. Certificate of public convenience constitutes
neither a franchise nor contract, confers no property right, and is mere license or privilege.

Whilst the challenged provisions of CA 454 are valid and constitutional, the decision of the Commission should be
reversed, and the case remanded thereto for further proceedings because on the matter of limitation to twenty five (25)
years of the life of its certificates of public convenience, there had been neither notice nor opportunity given the petitioner
to be heard or present evidence.

G.R. No. L-49407 August 19, 1988


In accordance with a memorandum agreement entered between defendants National Development Company (NDC) and
Maritime Co. of the Philippines (MCP), NDC as the first preferred mortgagee of three ocean going vessels including one
with the name “Dona Nati” appointed defendant MCP as its agent to manage and operate said vessel for and in its behalf
and account. Thus, E.Philipp Corporation loaded on board the vessel 1200 bales of American raw cotton consigned to the
order of Manila Banking Corporation, Manila and the People’s Bank and Trust Company acting for and in behalf of the
Pan Asiatic Commercial Company, Inc., who represents Riverside Mills Corporation; also loaded in the same vessel were
the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila Banking Corporation consisting of 200 cartons
of sodium lauryl sulfate and 10 cases of aluminum foil. En route to Manila the vessel figured in a collision with Japanese
vessel as a result of which 550 bales of aforesaid cargo of American raw cotton as well as the cargo of Kyokuto Boekui,
Kaisa, Ltd were lost and/or destroyed. Development Insurance & Surety Corp. paid the insurance and filed an action for
recovery of money against NDC and MCP.

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

“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” (Article 1753). Since the goods in question are transported from San Francisco,
California and Tokyo, Japan to the Philippines and that they were lost due to a collision which was found to have been
caused by the negligence or fault of both captains of the colliding vessels the laws of the Philippines will apply. Article
1734 provides that in all other than those mentioned in Article 1734 thereof, the common carrier shall be presumed to
have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required
by law. Collision is not one of those mentioned under Article 1734 hence, the carrier is presumed to be at fault or to have
acted negligently.

Article 826 of the Code of Commerce provides that where collision is imputable to the personnel of a vessel, the owner of
the vessel at fault, shall indemnify the losses and damages incurred after an expert appraisal. But Article 827 provides
that if the collision is imputable to both vessels, each one shall suffer its own damages and both shall be solidarily
responsible for the losses and damages suffered by their cargoes. Therefore, both the owner (NDC) and agent (MCP) of
the offending vessel are liable for the damage done where both are impleaded, that in case of collision, both the owner
and agent are civilly. Jointly and severally, responsible for the acts of the captain since the obligation which is the subject
of the action had its origin in a tortious act and did not arise from contract.

TATAD V. GARCIA, JR. (G.R. NO. 114222)

APRIL 6, 1995.

DOTC planned to construct a light railway transit line along EDSA (EDSA LRT III) to provide a mass transit system and
alleviate the congestion and growing transportation problem in the metropolis. RA 6957 was enacted allowing for the
financing, construction and operation of government projects through private initiative and investment. Accordingly,
prequalification and bidding was made and EDSA LRT Corporation (organized under HK laws) was recommended to be
awarded with the contract. The President approved the awarding of the contract. Petitioners are senators praying for the
prohibition of respondents from further implementing and enforcing the contract.

Whether or not the EDSA LRT III, a public utility, can be owned by a foreign corporation.

Ruling: YES.

The Constitution, in no uncertain terms, requires a franchise for the operation of a public utility. However, it does not
require a franchise before one can own the facilities needed to operate a public utility so long as it does not operate them
to serve the public.

In law, there is a clear distinction between the “operation” of a public utility and the ownership of the facilities and
equipment used to serve the public. Ownership is defined as a relation in law by virtue of which a thing pertaining to one
person is completely subjected to his will in everything not prohibited by law or the concurrence with the rights of another.
The exercise of the rights encompassed in ownership is limited by law so that a property cannot be operated and used to
serve the public as a public utility unless the operator has a franchise. The operation of a rail system as a public utility
includes the transportation of passengers from one point to another point, their loading and unloading at designated
places and the movement of the trains at pre-scheduled times.

In sum, private respondent will not run the light rail vehicles and collect fees from the riding public. It will have no dealings
with the public and the public will have no right to demand any services from it. Even the mere formation of a public utility
corporation does not ipso facto characterize the corporation as one operating a public utility. The moment for determining
the requisite Filipino nationality is when the entity applies for a franchise, certificate or any other form of authorization for
that purpose.

GR No. L-68729 May 29, 1987

Radio Communications of the Philippines, Inc. VS NTC

RCPI operated a radio communications system since 1957 under legislative franchise granted by Republic Act No. 2036
(1957). The petitioner established a radio telegraph service in Sorsogon, Sorsogon (1968). in San Jose, Mindoro (1971),
and Catarman, Samar (1983).
Kayumanggi Radio, on the other hand, was given the rights by the NTC to operate radio networks in the same areas.

Kayumanggi filed a complaint in the NTC and contend that RCPI is operating without the required CPC. RCPI contend
that it was granted a legislative franchise by the Congress to which the PSC and its successor NTC respects.The NTC
ruled against the RTC’s favor and commanded RCPI to desist in the operation of radio telegraphs in the three areas.

RTC filed a MFR in 1984. This was denied.

In the SC, Petitioner alleged that the Public Service Law had sections that was still in effect even if the Public Service
Commission was abolished and the NTC was established.

Issue: Whether or not petitioner RCPI, a grantee of a legislative franchise to operate a radio company, is required to
secure a certificate of public convenience and necessity before it can validly operate its radio stations including radio
telephone services in the aforementioned areas

Held: Yes. Petition dismissed.

Presidential Decree No. 1- the Public Service Commission was abolished and its functions were transferred to three
specialized regulatory boards, as follows: The Board of Transportation, the Board of Communications and the Board of
Power and Waterworks. The functions so transferred were still subject to the limitations provided in sections 14 and 15 of
the Public Service Law, as amended.

The succeeding Executive Order No. 546- the Board of Communications and the Telecommunications Control Bureau
were abolished and their functions were transferred to the National Telecommunications Commission.

The exemption enjoyed by radio companies from the jurisdiction of the Public Service Commission and the Board of
Communications no longer exists because of the changes effected by the Reorganization Law and implementing
executive orders.

The petitioner's claim that its franchise cannot be affected by Executive Order No. 546 on the ground that it has long been
in operation since 1957 cannot be sustained.

Today, a franchise, being merely a privilege emanating from the sovereign power of the state and owing its existence to a
grant, is subject to regulation by the state itself by virtue of its police power through its administrative agencies. Executive
Order No. 546, being an implementing measure of P.D. No. I insofar as it amends the Public Service Law (CA No. 146, as
amended) is applicable to the petitioner who must be bound by its provisions.

The position of the petitioner that by the mere grant of its franchise under RA No. 2036 it can operate a radio
communications system anywhere within the Philippines is erroneous.

Sec. 4(a). This franchise shall not take effect nor shall any powers thereunder be exercised by the grantee until the
Secretary of Public works and Communications shall have allotted to the grantee the frequencies and wave lengths to be
used, and issued to the grantee a license for such case.
Thus, in the words of R.A. No. 2036 itself, approval of the then Secretary of Public Works and Communications was a
precondition before the petitioner could put up radio stations in areas where it desires to operate.
The records of the case do not show any grant of authority from the then Secretary of Public Works and Communications
before the petitioner installed the questioned radio telephone services in San Jose, Mindoro in 1971. The same is true as
regards the radio telephone services opened in Sorsogon, Sorsogon and Catarman, Samar in 1983. No certificate of
public convenience and necessity appears to have been secured by the petitioner from the public respondent when such
certificate, was required by the applicable public utility regulations.

The Constitution mandates that a franchise cannot be exclusive in nature nor can a franchise be granted except that it
must be subject to amendment, alteration, or even repeal by the legislature when the common good so requires.

MARCH 26, 1997

Grand Air applied for a Certificate of Public Convenience and Necessity with the Civil Aeronautics Board (CAB). The Chief
Hearing Officer issued a notice of hearing directing Grand Air to serve a copy of the application and notice to all
scheduled Philippine Domestic operators. Grand Air filed its compliance and requested for a Temporary Operating Permit
(TOP). PAL filed an opposition to the application on the ground that the CAB had no jurisdiction to hear the application
until Grand Air first obtains a franchise to operate from Congress. The Chief Hearing Officer denied the opposition and the
CAB approved the issuance of the TOP for a period of 3 months. The opposition for the TOP was likewise denied. The
CAB justified its assumption of jurisdiction over Grand Air’s application on the basis of Republic Act 776 which gives it the
specific power to issue any TOP or Certificate of Public Convenience and Necessity.

Whether or not the CAB can issue a Certificate of Public Convenience and Necessity or TOP even though the prospective
operator does not have a legislative franchise?

Held: Yes.

As mentioned by the CAB, it is duly authorized to do so under Republic Act 776 and a legislative franchise is not
necessary before it may do so, since Congress has delegated the authority to authorize the operation of domestic air
transport services to the CAB, an administrative agency. The delegation of such authority is not without limits since
Congress had set specific standard and limitations on how such authority should be exercised.

Public convenience and necessity exists when the proposed facility will meet a reasonable want of the public and supply a
need which the existing facilities do not adequately afford.

Thus, the Board should be allowed to continue hearing the application, since it has jurisdiction over it provided that the
applicant meets all the requirements of the law.

JOSE MENDOZA, plaintiff-appellant, vs. PHILIPPINE AIR LINES, INC., defendant-appellee.

G.R. No. L-3678
February 29, 1952


Jose Mendoza, the owner of the Cita Theater located in the City of Naga, Camarines Sur, contracted with LVN Pictures
Inc., for him to show during the town fiesta the Tagalog film entitled "Himala ng Birhen" or Miracle of the Virgin. In
pursuance of the said agreement, the former delivered to Philippine Airlines (PAL) a can containing the film "Himala ng
Birhen" consigned to the Cita Theater. Unfortunately, the can of film was not unloaded at Pili Air Port and it was brought
back to Manila.

Mendoza sued for damages or unearned profits.

Issue: Is PAL Liable as common carrier?


Common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right
of prompt delivery, unless such common carriers previously assume the obligation.

National Steel Corporation vs. CA and Vlasons Shipping, Inc.

(G.R. No. 112287 December 12, 1997)
Vlasons Shipping, Inc. vs. CA and National Steel Corporation
(G.R. No. 112350. December 12, 1997)


The MV Vlasons I is a private carrier/vessel which renders tramping service and are available only to specific persons
who enter into a special contract of charter party with its owner. The NONYAZAI C/P or other internationally recognized
Charter Party Agreement formed part of the Contract. As part of the terms of the contract, the handling, loading and
unloading of the cargoes (also known as F.I.O.S.T. or Freight In and Out including Stevedoring and Trading as used in the
shipping business which is a standard provision in the NANYOZAI Charter Party ) are the responsibility of the
Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it states, Charterers to load, stow and discharge the
cargo free of risk and expenses to owners. It is in this capacity and agreement that its owner, Vlasons Shipping, Inc.
(VSA), entered into a contract of affreightment or contract of voyage charter hire with National Steel Corporation (NSC),
whereby NSC hired VSI’s vessel, the MV ‘VLASONS I’ to make one (1) voyage to load steel products at Iligan City and
discharge them at North Harbor, Manila.

When the vessel’s 3 hatches containing the shipment were opened at the port of discharge by NSC’s agents, nearly all
the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. The cargo was discharged and
unloaded by stevedores hired by the Charterer. Consequently, NSC filed with VSI its claim for damages suffered due to
the downgrading of the damaged tinplates. NSC formally demanded payment of said claim but VSI refused and failed to
pay. In its complaint, plaintiff claimed that it sustained losses as a result of the act, neglect and default of the master and
crew in the management of the vessel as well as the want of due diligence on the part of the defendant to make the
vessel seaworthy and to make the holds and all other parts of the vessel in which the cargo was carried, fit and safe for its
reception, carriage and preservation -- all in violation of defendants undertaking under their Contract of Voyage Charter


I. Whether or not MV Vlasons 1 is a common carrier


Common Carrier or Private Carrier? Extent of Liability

The resolution of this preliminary question determines the law, standard of diligence and burden of proof applicable to the
present case. Article 1732 of the Civil Code defines a common carrier as “persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.” It has been held that the true test of a common carrier is the carriage of passengers
or goods, provided it has space, for all who opt to avail themselves of its transportation service for a fee.

A carrier which does not qualify under the test of a common carrier 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.”Herein, VSI did not offer its services to the general public. It carried passengers or goods
only for those it chose under a “special contract of charter party.” The MV Vlasons I “was not a common but a private
carrier.” 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.
In Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation, the
Court ruled that “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.”

From the parties’ Contract of Voyage Charter Hire, dated 17 July 1974, 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.”

Burden of Proof

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

Article 361 of the Code of Commerce provides that “Merchandise shall be transported at the risk and venture of the
shipper, if the contrary has not been expressly stipulated. Therefore, the damage and impairment suffered by the goods
during the transportation, due to fortuitous event, force majeure, or the nature and inherent defect of the things, shall be
for the account and risk of the shipper. The burden of proof of these accidents is on the carrier.”

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

As the MV Vlasons I was a private carrier, the shipowner’s obligations are governed by the foregoing provisions of the
Code of Commerce and not by the Civil Code which, as a general rule, places the prima facie presumption of negligence
on a common carrier.(not governed by this)

The Supreme Court denied the consolidated petitions; and affirmed the questioned Decision of the Court of Appeals with
the modification that the demurrage awarded to VSI is deleted. No pronouncement as to costs.

G.R. No. 186312, June 29, 2010


Petitioners are the parents of Ruelito C. Cruz, who perished with his wife on September 11, 2000 on board the boat M/B
Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at
Coco Beach Island Resort (Resort) owned and operated by respondent. They demanded indemnification from respondent
for the death of their son in the amount of at least ₱4,000,000.

Respondents denied any responsibility for the incident which it considered to be a fortuitous event. It nevertheless offered,
as an act of commiseration, the amount of ₱10,000 to petitioners upon their signing of a waiver. Such offer was refused
by the petitioners alleging that respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III
to sail notwithstanding storm warning bulletins issued by the Philippine Atmospheric, Geophysical and Astronomical
Services Administration (PAGASA) as early as 5:00 a.m. of September 11, 2000.
The respondent denied being a common carrier, alleging that its boats are not available to the general public as they only
ferry Resort guests and crew members. Nonetheless, it claimed that it exercised the utmost diligence in ensuring the
safety of its passengers; contrary to petitioners’ allegation.

Pasig RTC dismissed petitioners’ Complaint and respondent’s Counterclaim. The appellate court denied petitioners’
appeal, holding, among other things, that the trial court correctly ruled that respondent is a private carrier which is only
required to observe ordinary diligence; that respondent in fact observed extraordinary diligence in transporting its guests
on board M/B Coco Beach III; and that the proximate cause of the incident was a squall, a fortuitous event. Thus, this
present petition.


1. Whether or not respondent is a common carrier.

2. Whether or not respondent is guilty of negligence in allowing M/B Coco Beach III sail notwithstanding storm warning
bulletins issued by PAGASA.

1. Yes, the respondent is a common carrier. Pursuant to Article 1732, common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public. The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity

Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be properly
considered ancillary thereto. The constancy of respondent’s ferry services in its resort operations is underscored by its
having its own Coco Beach boats. And the tour packages it offers, which include the ferry services, may be availed of by
anyone who can afford to pay the same. These services are thus available to the public.

2. Yes, the respondent is guilty of negligence; thus, liable for the damages suffered by the petitioners. Under the Civil
Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence for the safety of the passengers transported by them, according to all the circumstances of each
case. They are bound to carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances.

Here, the evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone warnings for
shipping on September 10 and 11, 2000 advising of tropical depressions in Northern Luzon which would also affect the
province of Mindoro. A very cautious person exercising the utmost diligence would thus not brave such stormy weather
and put other people’s lives at risk. The extraordinary diligence required of common carriers demands that they take care
of the goods or lives entrusted to their hands as if they were their own. Respondent failed to do the same, hence, they are
liable for negligence and must indemnify the petitioners.
CORPORATION, respondents.
[G.R. No. 147079. December 21, 2004]


On July 8, 1992, Wyeth-Pharma in Germany shipped oral contraceptives for delivery to Manila in favor of the consignee,
Wyeth-Suaco Laboratories, Inc. Wyeth-Suaco insured the shipment against all risks with FGU Insurance (the
Respondent). The shipment arrived at NAIA and delivered to the warehouse of the Philippine Skylanders, Inc. (PSI)
located also at the NAIA for safekeeping.

In order to secure the release of the cargoes from the PSI and the Bureau of Customs, Wyeth-Suaco engaged the
services of Sanchez (the petitioner). As its customs broker, Sanchez Brokerage calculates and pays the customs
duties, taxes and storage fees for the cargo and thereafter delivers it to Wyeth-Suaco.

Prior to the loading of the cargoes to the brokers’ trucks at the NAIA, they were inspected and found to be in apparent
good condition. Thus representatives of petitioner, paid PSI storage and acknowledged that they received the
cargoes consisting of three pieces in good condition. These cargoes were thus loaded inside two transport
vehicles hired by Sanchez Brokerage.

The cargoes were delivered to Hizon Laboratories Inc. and it was discovered that 44 cartons were in bad order.
The remaining 160 cartons of oral contraceptives were accepted as complete and in good order.
Wyeth-Suaco rejected the 44 cartons on the ground that they were delivered to Hizon Laboratories with heavy water
damage causing the cartons to sag emitting a foul order and easily attracted flies.

Wyeth-Suaco later demanded from Sanchez Brokerage the payment of damages, but Sanchez Brokerage refused.

As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an insurance claim against FGU
Insurance which paid Wyeth-Suaco the amount of P181,431.49. Wyeth-Suaco thus issued Subrogation Receipt in
favor of FGU Insurance. Thus FGU Insurance now had the right to claim the damages from Sanchez Brokerage.

On demand by FGU insurance, petitioner disclaimed liability for the damaged goods, positing that the damage was
due to improper and insufficient export packaging, that even before it received the goods in PSI it was already

FGU thus filed a complaint for damages against petitioner. The RTC dismissed the complaint. However, the appellate
court reversed the decision of the trial court, it holding that the Sanchez Brokerage engaged not only in the
business of customs brokerage but also in the transportation and delivery of the cargo of its clients, hence, a
common carrier within the context of Article 1732 of the New Civil Code.

Wyeth-Suaco adduced evidence that the cargoes were delivered to petitioner in good order and condition but were in a
damaged state when delivered to Wyeth-Suaco, the appellate court held that Sanchez Brokerage is presumed negligent
and upon it rested the burden of proving that it exercised extraordinary negligence not only in instances when negligence
is directly proven but also in those cases when the cause of the damage is not known or unknown.

Petitioner denies that it was a common carrier.


Whether the petitioner is liable as a common carrier within the context of Article 1732 of the New Civil Code


YES. Petitioner, a customs broker, is also a common carrier, as defined under Article 1732 of the Civil Code:

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

Article 1732 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. The contention, therefore, of petitioner that it is not a common
carrier but a customs broker whose principal function is to prepare the correct customs declaration and proper shipping
documents as required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary

In this light, petitioner as a common carrier is mandated to observe, under Article 1733[45] of the Civil Code, extraordinary
diligence in the vigilance over the goods it transports according to all the circumstances of each case. 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.

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know
and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage
and delivery. It requires common carriers to render service with the greatest skill and foresight and to use all reasonable
means to ascertain the nature and characteristics of goods tendered for shipment, and to exercise due care in the
handling and storage, including such methods as their nature requires.

It was established that petitioner received the cargoes from the PSI warehouse in NAIA in good order and condition; and
that upon delivery by petitioner to Hizon Laboratories Inc., some of the cargoes were found to be in bad order.

While paragraph No. 4 of Article 1734 of the Civil Code exempts a common carrier from liability if the loss or damage is
due to the character of the goods or defects in the packing or in the containers, the rule is that if the improper packing is
known to the carrier or his employees or is apparent upon ordinary observation, but he nevertheless accepts the same
without protest or exception notwithstanding such condition, he is not relieved of liability for the resulting damage.
If the claim of petitioner that some of the cartons were already damaged upon delivery to it were true, then it should
naturally have received the cargo under protest or with reservations duly noted on the receipt issued by PSI. But it made
no such protest or reservation.

Since petitioner received all the cargoes in good order and condition at the time they were turned over by the PSI
warehouseman, and upon their delivery to Hizon Laboratories, Inc. a portion thereof was found to be in bad order, it was
incumbent on petitioner to prove that it exercised extraordinary diligence in the carriage of the goods. It did not, however.
Hence, its presumed negligence under Article 1735 of the Civil Code remains unrebutted.

Hence, the petitioner is still liable as a common carrier for damages.

Estela L. Crisostomo v. CA and Caravan Travel and Tours

G.R No. 138334, August 25, 2003

Facts: Petitioner contracted the services of respondent Caravan Travel and Tours International, Inc. to arrange and
facilitate her booking, ticketing and accommodation in a tour dubbed as Jewels of Europe. Pursuant to the said contract,
the travel documents and plane tickets were delivered to the petitioner who in turn gave the full payment for the package
tour on June 12, 1991. Without checking her travel documents, petitioner went to NAIA on June 15, to take the flight for
the first leg of her journey from Manila to Hongkong. However, she discovered that her plane ticket was for the flight
scheduled on June 14. She thus called up the agent to complain. The agent prevailed upon petitioner to take another tour
named The British Pageant. Upon petitioner’s return for the tour, she demanded from respondent the reimbursement of
the difference between the sum paid for Jewels of Europe and the amount she owed for the British Pageant tour. It was
refused by the respondent.

Petitioner filed a complaint against respondent for breach of contract of carriage and damages alleging that her failure to
join Jewels of Europe was due to the respondent’s fault since it did not clearly indicate the departure date on the plane,
failing to observe the standard of care required by law to a common carrier when it informed her wrongly of the flight

Issue: Whether or not there was a contract of carriage between petitioner and respondent.

Ruling: No.

By definition, a contract of carriage or transportation is one whereby a certain person or association of persons obligate
themselves to transport persons, things or news from one place to another for a fixed price. From given definition, the
respondent is clearly not an entity engaged in the business of transporting either passengers or goods and is therefore,
neither a private nor a common carrier. The respondent did not undertake to transport petitioner from one place to another
but only to make travel arrangements in her behalf. Respondent’s travel and tour services as travel agency include
procuring tickets and facilitating travel permits or visas as well as booking customers for tours.

G.R. No. 125948 December 29, 1998

TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO, in her official capacity as City Treasurer of
Batangas, respondents.

Facts: Petitioner is a grantee of a pipeline concession under the Petroleum Act, to contract, install and operate oil
pipelines since 1967. It is engaged in the business of transporting petroleum products from the Batangas refineries, via
pipeline, to Sucat and JTF Pandacan Terminals. On 1995, petitioner applied for a mayor’s permit with the Office of the
Mayor of Batangas City. The City Treasurer required petitioner to pay a local tax pursuant to the Local Government Code
before the mayor’s permit could be issue.

Petitioner argues that Transportation contractors are not included in the enumeration of contractors under Section 131,
Paragraph (h) of the Local Government Code. Therefore, the authority to impose tax "on contractors and other
independent contractors" under Section 143, Paragraph (e) of the Local Government Code does not include the power to
levy on transportation contractors. (They are already paying common carrier’s tax under the NIRC, so he cannot be taxed
of a local tax following the rule on the taxation with regard to the exemption of common carriers.)
Respondent City Treasurer denied the protest contending that petitioner cannot be considered engaged in transportation
business, thus it cannot claim exemption under Section 133 (j) of the Local Government Code.

Issue: W/N the petitioner is a common carrier.

Held: Petitioner is a common carrier. A "common carrier" may be defined, broadly, as one who holds himself out to the
public as engaged in the business of transporting persons or property from place to place, for compensation, offering his
services to the public generally.
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 definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in
the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to
carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by
land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a
common carrier.

Planters Products, Inc. vs Court of Appeals, Soriamont Steamship Agencies and Kyosei Kisen Kabushiki Kaisha

G.R. 101503, September 15, 1993


Planters Products, Inc. (PPI) purchased 9,329.7069 metric tons of Urea 46% fertilizer from Mitsubishi International
Corporation of New York. It was shipped in bulk aboard the cargo vessel M/V "Sun Plum" owned by private respondent
Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines.
Prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in Tokyo, Japan. The vessel arrived and petitioner unloaded the cargo from
the holds into its steelbodied dump trucks, and then transported it to the consignee's warehouse. An inspection revealed a
shortage in the cargo of and that it was contaminated with sand, rust and dirt, and thus, unfit for commerce. PPI claimed
for damages against Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK but to no avail,
prompting the former to file an action for damages with CFI Manila. The CFI sustained the claim but the CA reversed the


1. Does a charter-party between a shipowner and a charterer transform a common carrier into a private one as to negate
the civil law presumption of negligence in case of loss or damage to its cargo?

2. Whether the shipowner was able to prove that he had exercised that degree of diligence required of him under the law


1. No.

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. It can be of two types: (a) contract of affreightment which involves the use of shipping space
on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat
charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and
possession and consequent control over its navigation, including the master and the crew.
As to the presumption of negligence in case of loss or damage, common carriers are presumed to have acted negligently,
and the burden of proving otherwise rests on them. No such presumption applies to private carriers, for whosoever
alleges loss or damage has bears the burden of proof. Respondent carrier operates as a common carrier, transporting
goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers
and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and
control. Hardly then can the charterer, a stranger to the crew and to the ship, be charged with the duty of caring for his
cargo when the charterer did not have any control of the means in doing so. It is 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.

2. Yes. The Court ruled that respondent carrier has sufficiently overcome the presumption of negligence. Particularly, with
the following established facts: that the hull of the vessel at the time of the discharge of the cargo was sealed and nobody
could open the same except in the presence of the owner of the cargo and the representatives of the vessel; that the
cover of the hatches was made of steel and it was overlaid with tarpaulins, and their contents were protected from the
weather; and, that to open these hatches, the seals would have to be broken, all the seals were found to be intact. If there
was loss or contamination of the cargo, it was more likely to have occurred while the same was being transported from the
ship to the dump trucks and finally to the consignee's warehouse. Also, bulk shipment of highly soluble goods like fertilizer
carries with it the risk of loss or damage, more seo with a variable weather condition as it was in this case. This is a risk
the shipper or the owner of the goods has to face.

Bascos v. CA (G.R. No. 101089)

Facts: Rodolfo Cipriano, representing CIPTRADE, entered into a hauling contract with Jibfair Shipping Agency
Corporation whereby the former bound itself to haul the latter’s 2000m/tons of soya bean meal from Manila to Calamba.
CIPTRADE subcontracted with petitioner Estrellita Bascos to transport and deliver the 400 sacks of soya beans. Petitioner
failed to deliver the cargo, and as a consequence, Cipriano paid Jibfair the amount of goods lost in accordance with their
contract. Cipriano demanded reimbursement from petitioner but the latter refused to pay. Cipriano filed a complaint for
breach of contract of carriage. Petitioner denied that there was no contract of carriage since CIPTRADE leased her cargo
truck, and that the hijacking was a force majeure. The trial court ruled against petitioner.

Issues: (1) Whether petitioner is a common carrier. (2) Whether hijacking is referred to as a force majeure.

(1) Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged in
the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their
services to the public." The test to determine a common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent
of the business transacted." In this case, petitioner herself has made the admission that she was in the trucking business,
offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to prove
the same.

(2) Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them.
Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are
enumerated in Article 1734. In those cases where the presumption is applied, the common carrier must prove that it
exercised extraordinary diligence in order to overcome the presumption. The presumption of negligence was raised
against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need not
introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made
the presumption conclusive against her.

G.R. No. 141910, August 06, 2002
FACTS: Respondent G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver 30 units of Condura white
refrigerators aboard one of its Isuzu truck driven by Lambert Eroles from the plant site of Concepcion Industries, Inc. to
the Central Luzon Appliances along South Superhighway in Alabang. While traversing, the truck collided with another
truck resulting in damage to the cargoes. FGU Insurance Corporation (FGU), insurer of the shipment, paid to Concepcion
Industries, Inc. the value of the covered cargoes. FGU then sought reimbursement to GPS. However, GPS failed to heed
the claim. Hence, FGU filed a complaint for damages and breach of contract of carriage against GPS and Eroles with the
RTC Makati City. GPS basically asserted that it was only an exclusive hauler of Concepcion Industries and not engaged
in business as a common carrier. It filed a motion to dismiss by way of demurrer to evidence which the trial court granted.
The Court of Appeals likewise ruled in favor of GPS stating that the application of the law on common carriers and the
presumption of fault or negligence is unavailing.

ISSUE/S: 1. Whether GPS is a common carrier defined under the law and existing jurisprudence? NO. PRIVATE
2. Whether GPS, either as a common carrier or a private carrier, may still be held liable for the damage caused. YES.

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

RULING: 1. GPS is not a common carrier. GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc.,
rendering or offering its services to no other individual or entity, cannot be considered a common carrier. Common carriers
are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods
or both, by land, water, or air, for hire or compensation, offering their services to the public, whether to the public in
general or to a limited clientele in particular, but never on an exclusive basis.

2. Notwithstanding the conclusion that GPS is a private carrier, it cannot escape liability. In culpa contractual, upon which
the action of petitioner rests as being the subrogee of Concepcion Industries, Inc., the mere proof of the existence of the
contract and the failure of its compliance justify, prima facie, a corresponding right of relief. GPS recognizes the existence
of a contract of carriage between it and petitioner’s assured, and admits that the cargoes it has assumed to deliver have
been lost or damaged while in its custody. In such a situation, a default on, or failure of compliance with, the obligation –
in this case, the delivery of the goods in its custody to the place of destination - gives rise to a presumption of lack of care
and corresponding liability on the part of the contractual obligor the burden being on him to establish otherwise. GPS has
failed to do so. The driver, not being a party to the contract of carriage between petitioners’ principal and defendant, may
not be held liable under the agreement, constant with the axiom res inter alios acta aliis neque nocet prodest, such
contract can neither favor nor prejudice a third person.

GEORGE L. CAILIPAN G.R. No. 80447, January 31, 1989
FACTS: A complaint for damages arising from breach of contract of carriage was filed by private respondents against
petitioner Baliwag. The complaint alleged that George suffered multiple serious physical injuries when he was thrown off
the bus driven in a careless and negligent manner by Leonardo Cruz, the authorized bus driver. Consequently, he
incurred medical expenses of about Php. 200,000.00. Petitioner countered that the injuries sustained by George was
solely attributable to his own voluntary act. When petitioner’s motion to dismiss was denied for being filed beyond the time
for pleading and an Answer was already filed, petitioner filed an Amended Answer which incorporated its affirmative
defense that George has been paid all his claims for damages when he executed a “Release of Claims”. George’s
parents, however, opposed petitioner’s affirmative defense stating that they were the one who shouldered the
hospitalization of George, who was at the time their dependent, and that they had not signed the “Release of Claims”. The
trial court dismissed the complaint and reasoned out that the contract of carriage is between Baliwag and George, who is,
though a dependent, of legal age, and the latter had the exclusive right to execute the “Release of Claim” discharging
petitioner from liability. On appeal, the Court of Appeals reversed the ruling of the lower court. Hence, the present petition
for review on certiorari.

ISSUE: Can the Release of Claims executed by George during the pendency of this case produce a legal effect?

DISPOSITIVE PORTION: WHEREFORE, the Decision dated 22 October 1987 of respondent Court of Appeals is SET
ASIDE, the Decision of the Regional Trial Court of Bulacan, Branch 20, is REINSTATED, and the Complaint and Third-
Party-Complaint are hereby ordered DISMISSED. No costs.

RULING: Yes, the Court held that since the suit is one for breach of contract of carriage, the Release of Claims executed
by him, as the injured party, discharging Fortune Insurance and Baliwag from any and all liability is valid. He was then of
legal age, a graduating student of Agricultural Engineering, and had the capacity to do acts with legal effect (Article 37 in
relation to Article 402, Civil Code). Thus, he could sue and be sued even without the assistance of his parents.
Significantly, the contract of carriage was actually between George, as the paying passenger, and Baliwag, as the
common carrier. As such carrier, Baliwag was bound to carry its passengers safely as far as human care and foresight
could provide, and is liable for injuries to them through the negligence or wilful acts of its employees (Articles 1755 and
1759, Civil Code). Thus, George had the right to be safely brought to his destination and Baliwag had the correlative
obligation to do so. Since a contract may be violated only by the parties thereto, as against each other, in an action upon
that contract, the real parties in interest, either as plaintiff or as defendant, must be parties to said contract. In the absence
of any contract of carriage between Baliwag and George’s parents, the latter are not real parties-in-interest in an action for
breach of that contract.

British Airways v. CA (G.R. No. 121824)

Facts: On April 16, 1989, Mahtani is on his way to Bombay, India from Manila. His trip was Manila-Hong Kong via PAL
and then Hong Kong-India via British Airways. Prior to his departure, he checked in two pieces of luggage containing his
clothing and other personal effects, confident that the same would be transferred to his BA flight. Unfortunately, when he
arrived in India, he discovered that his luggage was missing. The RTC awarded Mahtani damages which was affirmed by

Issue: Whether in a contract of air carriage a declaration by the passenger is needed to recover a greater amount.

Ruling: American jurisprudence provides that an air carrier is not liable for the loss of baggage in an amount in excess of
the limits specified in the tariff which was filed with the proper authorities, such tariff being binding on the passenger
regardless of the passenger’s lack of knowledge thereof or assent thereto. This doctrine is recognized in this jurisdiction.
The inescapable conclusion that BA had waived the defense of limited liability when it allowed Mahtani to testify as to the
actual damages he incurred due to misplacement of his luggage, without any objection. It is a well-settled doctrine that
where the proponent offers evidence deemed by counsel of the adverse party to be inadmissible for any reason, the latter
has the right to object. However, such right is a mere privilege which can be waived. Necessarily, the objection must be
made at the earliest opportunity, in case of silence when there is opportunity to speak may operate as a waiver of

Abelardo Lim and Esmadito Gunnaban VS Court of Appeals and Donato Gonzales
GR No. 125817 January 16, 2002

Facts: Private respondent Gonzales purchased a jeepney from Vallarta who is a holder of a certificate of public
convenience for the operation of PUV. Gonzales continued operating for public transport services, however he did not
transfer the registration of the vehicle under his name nor did he secure himself a certificate of public convenience for its
operation. Hence, Vallarta remained the registered owner and operator.
While the jeepney was traveling northbound, it met an accident with herein petitioner Lim’s ten wheeler truck
driven by Gunnaban. Petitioner Lim shouldered the costs of all the damages caused. He offered P20,000 to the
respondent, however, it was rejected and respondent demanded for payment worth P236,000. No settlement was
reached, hence, claim for payment of damages was filed against herein petitioner.

Issue: Whether or not Donato Gonzales is a real party in interest given he is working under the Kabit System

Held: Yes. The purpose of the liability under the Kabit system is to identify the person to be held liable by passengers who
are injured by those operating under such system. It is absent in the case at hand. It would seem that the thrust of the law
in enjoining the Kabit system is not so much as to penalize the parties but to identify the person upon whom responsibility
may be fixed in case of an accident with the end view of protecting the riding public. The policy, therefore, loses its force if
the public at large is not deceived, much less involved. The evil sought to be presented is not present here because, first,
neither of the parties to the Kabit system is being held liable for damages. Secondly, the case arose from the negligence
of another vehicle. Third, the riding public was not bothered or inconvenienced.
Kabit System is an arrangement whereby a person who has been granted a certificate of public convenience
allows other persons who own motor vehicles to operate them under his license, sometimes for a fee or percentage of the
earnings. Although the parties to such an agreement are not out rightly penalized by law, the kabit system is invariably
recognized as being contrary to public policy and therefore void and inexistent under Art 1409 of the Civil Code.


G.R. No. L-9605, September 30, 1957


Aguedo Jepte is the registered owner of a six by six truck. While the same was being driven by Rodolfo Espino y Garcia, it
collided with a taxicab at the intersection of San Andres and Dakota Streets, Manila. As the truck went off the street, it hit
Ernesto Erezo and another, and the former suffered injuries, as a result of which he died.
The accused(Driver) 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, Erezo brought this action against the
registered owner of the truck, Jepte. He, however, claims that the vehicle belonged to the Port Brokerage, of which he
was the broker at the time of the accident. 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. However, such arrangement was not known to the Motor Vehicle Office.

The trial court held that as the defendant-appellant 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. Hence, this appeal from a judgment of
the Court of First Instance of Manila ordering Jepte to pay plaintiff Gaudioso Erezo.


Whether or not Jepte should be liable to Erezo for the injuries suffered by the latter due to the negligence of the truck
driver despite not being the owner of the vehicle at the time of the incident.


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

The principle upon which this doctrine is based is that in dealing with vehicles registered under the Public Service Law,
the public has the right to assume or presume that the registered owner is the actual owner thereof, for it would be difficult
for the public to enforce the actions that they may have for injuries caused to them by the vehicles being negligently
operated if the public should be required to prove who the actual owner is. 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.

In synthesis, SC held that the registered owner, the defendant-appellant herein, is primarily responsible for the damage
caused to the vehicle of the plaintiff-appellee, 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 the plaintiff-appellant.

JUNE 29, 2011

An Isuzu oil tanker running along Del Monte Avenue, Quezon City and bearing plate number TDY 712 hit Loretta
V. Baylon, daughter of respondent spouses Baylon. At the time of the accident, the oil tanker was registered in the name
of petitioner FEB Leasing and Finance Corporation. The oil tanker was leased to BG Hauler and was being driven by the
latter’s driver, M. Estilloso. The oil tanker was insured by FGU Insurance.

Spouses Baylon filed with the RTC a Complaint for damages against petitioner, BG Hauler, the driver, and FGU
Insurance. Petitioner FEB contended that the lease contract between BG Hauler and petitioner specifically provides that
BG Hauler shall be liable for any loss, damage, or injury the leased oil tanker may cause even if petitioner is the
registered owner of the said oil tanker. It further claimed that the CA erred in holding petitioner solidarily liable with BG
Hauler despite having found the latter liable under the lease contract.

RTC found FEB Leasing, BG Hauler, and driver jointly and severally liable; While, the insurer’s obligation has been
satisfactorily fulfilled upon payment of P450, 000.00. CA affirmed with RTC.

Whether registered owner (FEB Leasing) of a financially leased vehicle remains liable for loss, damage, or injury caused
by the vehicle notwithstanding an exemption provision in the financial lease contract.

Under Section 5 of Republic Act No. 4136, as amended, all motor vehicles used or operated on or upon any highway of
the Philippines must be registered with the Bureau of Land Transportation (now Land Transportation Office) for the
current year. Furthermore, any encumbrances of motor vehicles must be recorded with the Land Transportation Office in
order to be valid against third parties.

In accordance with the law on compulsory motor vehicle registration, this Court has consistently ruled that, with respect to
the public and third persons, the registered owner of a motor vehicle is directly and primarily responsible for the
consequences of its operation regardless of who the actual vehicle owner might be. Well-settled is the rule that the
registered owner of the vehicle is liable for quasi-delicts resulting from its use.

The policy behind the rule is to enable the victim to find redress by the expedient recourse of identifying the registered
vehicle owner in the records of the LTO. The registered owner can be reimbursed by the actual owner, lessee or
transferee who is known to him. Unlike the registered owner, the innocent victim is not privy to the lease, sale, transfer or
encumbrance of the vehicle. Hence, the victim should not be prejudiced by the failure to register such transaction or

In this case, petitioner admits that it is the registered owner of the oil tanker that figured in an accident causing the death
of Loretta. As the registered owner, it cannot escape liability for the loss arising out of negligence in the operation of the oil
tanker. Its liability remains even if at the time of the accident, the oil tanker was leased to BG Hauler and was being driven
by the latter’s driver, and despite a provision in the lease contract exonerating the registered owner from liability.

G.R. No. 162267 July 4, 2008



Facts: A Mitsubishi Lancer car insured with the responded, UCPB, was hit and bumped by an 18-wheeler Fuso Tanker
Truck owned by the petitioner, PCI, allegedly leased to and operated by Superior Gas & Equitable Co., Inc.(SUGECO)
The impact caused heavy damage to the Mitsubishi Lancer car resulting in an explosion of the rear part of the car. The
driver and passenger suffered physical injuries. However, the driver of the truck, Gonzaga, continued on its way to its
destination and did not bother to bring his victims to the hospital. The respondent demands payment to PCI but no
payment was made.

PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it could not be held liable for the collision, since the
driver of the truck, Gonzaga, was not its employee, but that of its co-defendant Superior Gas & Equitable Co., Inc.
(SUGECO). In fact, it was SUGECO, and not petitioner, that was the actual operator of the truck, pursuant to a Contract of
Lease signed by petitioner and SUGECO. Petitioner, however, admitted that it was the owner of the truck in question.

The RTC render its decision ordering PCI Leasing and Finance, Inc., [petitioner] and Renato Gonzaga, to pay jointly and
severally UCPB.

Petitioner filed a Motion for Reconsideration which the CA denied in its Resolution dated February 18, 2004. Hence,
herein Petition for Review.

Issues: 1. Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-delict may be held liable,
jointly and severally, with the driver thereof, for the damages caused to third parties.

2. Whether petitioner, as a financing company, is absolved from liability by the enactment of Republic Act (R.A.) No. 8556,
or the Financing Company Act of 1998.


1. The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting from its use is well-established
in jurisprudence. A registered owner who has already sold or transferred a vehicle has the recourse to a third-party
complaint, in the same action brought against him to recover for the damage or injury done, against the vendee or
transferee of the vehicle. The inconvenience of the suit is no justification for relieving him of liability; said inconvenience is
the price he pays for failure to comply with the registration that the law demands and requires.

In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage
caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by the real or
actual owner of the amount that he may be required to pay as damage for the injury caused to the plaintiff-appellant.

2. The rule remains the same: a sale, lease, or financial lease, for that matter that is not registered with the Land
Transportation Office still does not bind third persons who are aggrieved in tortious incidents, for the latter need only to
rely on the public registration of a motor vehicle as conclusive evidence of ownership. A lease such as the one involved in
the instant case is an encumbrance in contemplation of law, which needs to be registered in order for it to bind third
parties. Under this policy, the evil sought to be avoided is the exacerbation of the suffering of victims of tragic vehicular
accidents in not being able to identify a guilty party. A contrary ruling will not serve the ends of justice. The failure to
register a lease, sale, transfer or encumbrance, should not benefit the parties responsible, to the prejudice of innocent

The non-registration of the lease contract between petitioner and its lessee precludes the former from enjoying the
benefits under Section 12 of R.A. No. 8556.

This ruling may appear too severe and unpalatable to leasing and financing companies, but the Court believes that
petitioner and other companies so situated are not entirely left without recourse. They may resort to third-party complaints
against their lessees or whoever are the actual operators of their vehicles. In the case at bar, there is, in fact, a provision
in the lease contract between petitioner and SUGECO to the effect that the latter shall indemnify and hold the former free
and harmless from any "liabilities, damages, suits, claims or judgments" arising from the latter's use of the motor
vehicle. Whether petitioner would act against SUGECO based on this provision is its own option.

The burden of registration of the lease contract is miniscule compared to the chaos that may result if registered owners or
operators of vehicles are freed from such responsibility. Petitioner pays the price for its failure to obey the law on
compulsory registration of motor vehicles for registration is a pre-requisite for any person to even enjoy the privilege of
putting a vehicle on public roads.