Judge Gener M. Gito Jesus Vda. De Nueca, et al. v.

The Manila Railroad Company – the parties in

a contract of carriage of passengers are the common carrier and the passenger. A passenger is
defined as one who travels in a public conveyance by virtue of contract, express or implied, with
the carrier subject to payment of fare or an equivalent thereof. ü A person who wants to board
a train in a railway station must purchase a ticket and must present himself at the proper place
and in the proper manner for transportation. Such person must have a bona fide intention to
use the facilities of the carrier, possess sufficient fare to pay for his passage, and present himself
to the carrier for transportation in the place and manner provided. If he does not do so, he will
not be considered a passenger.

Baliwag Transit Corporation v. Court of Appeals (1989) Since the suit was for a breach of
contract of carriage, the real party-in-interest was the injured passenger because the latter was
the contracting party. It is the person whose contractual right has been invaded who must bring
every action based on contract.

Sps. Fabre v. Court of Appeals – Breach of the agreement will entitle the other party to file an
action against the other. However, whether or not there is a written agreement, the carrier
owes a duty of extraordinay diligence directy to the passengers.

Everett Steamship Corporation v. Court of Appeals, et al. – The consignee is bound by the terms
and conditions of the bill of lading where it was established that he accepted the same and is
trying to enforce the agreement.

MOF Company, Inc. v. Shin Yang Brokerage Corporation (2009) citing Sea-Land Service v.
Intermediate Appellate Court - While the bill of lading is oftentimes drawn up by the
shipper/consignor and the carrier without the intervention of the consignee, however, the latter
can be bound by the stipulations of the bill of lading. A consigne 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:

i. The relationship of agency between the consignee and the shipper/consignor;

ii. The unequivocal acceptance of the bill of lading delivered to the consignee, with full
knowledge of its contents;

iii. Availment of the stipulation pour atrui (i.e. when the consignee, a third person,
demands before the carrier the fulfillment of the stipulation made by the consignor/shipper in
the consignee’s favor, specifically the delivery of the goods/cargoes shipped.

British Airways v. Court of Appeals – The Supreme Court has adopted in one case the view that
there are two types of contracts of carriage of passengers of passenger. The first type is the
contract to carry, that is, an agreement to carry the passenger at some future date. This contract
is consensual and is therefore perfected by mere consent. The second is the contract of carriage
or of common carriage itself that should be considered a real contract for not until the facilities
of the carrier are actually used can the carrier be said to have already assumed the obligation of
the carrier. That an action for damages may be sustained for breach of contract to carry. Even if
no tickets were issued, a verbal contract to carry is already a binding consensual contract.

Mauro Ganzon v. Court of Appeals – When the good are unconditionally placed in the
possession and control of the carrier, and upon theier receipt by the carrier for transportation,
the contract of carriage is perfected.

Compania Maritima v. Insurance Company of North America – 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 the receipt or bill of lading, the
issuance of a bill of lading is not necessary to complete delivery and acceptance. A written
contract is not essential/ necessary for the perfection of the contract of carriage. The Supreme
Court explained that the bill of lading is not essential to the contract, although it may become
obligatory by reason of the regulations of railroad companies, or as a condition imposed in the
contract by the agreement of the parties themselves. The Code does not demand, as a
necessary requisite in the contract of transportation, the delivery of the bill of lading to the
shipper, but gives right to both the carrier and the shipper to mutually demand of each other
the delivery of said bill.

Compania Maritima v. Insurance Company of North America citing Del Viso: There is a perfected
contract to carry passengers even if no tickets have been issued to said passengers so long as
there was already a meeting of minds with respect to the subject matter and the consideration.

Korean Airlines Co. Ltd. v. Court of Appeals – On the other hand, there is a perfected contract of
carriage between a passenger and an airline if it can be established that the passenger had
checked in at the departure counter, passed through customs and immigration, boarded the
shuttle bus and proceeded to the ramp of the aircraft and that his baggage had already been
loaded in the aircraft to be flown with the passenger to his destination.

Dangwa Transportation Co. Inc. v. Court of Appeals – The Supreme Court explained in Dangwa
Transportation Co. Inc. V. CA (1991) that once a public utility bus or jeepney stops, it is in effect
making a continuing offer to bus riders. Under this continuing offer rule it is the duty of the
drivers to stop their conveyances for a reasonable length of time in order to afford passengers
an opportunity to board and enter, and they are liable for injuries suffered by boarding
passensgers resulting from the sudden starting up of the carrier. Liability of the carrier is already
based on contract. It follows that the passenger is deemed to be accepting the offer if he is
already attempting to board the conveyances and the contract of carriage is perfected from that
point.

Light Rail Transit Authority (LRTA), et al. v. Marjorie Navidad, et al. – Mr. Navidad was treated as
a passenger because he entered the LRT station after having purchased a ‘token’ and he fell
while he was on the platform waiting for a train. Thus, Mr. Navidad was in the place designated
for boarding the train with the intention of riding the oncoming train.

De Guzman v. Court of Appeals – Definition of common carrier; It has been defines as “one that
holds himself out as a public employment and not as a casual occupation. ü The concept of
‘common carrier’ under Article 1732 the concept of common carrier under Art. 1732 may be
seen to neatly coincide with the notion of public service under the Public Service Act
(Commonwealth Act No. 1416, as amended) that at least partially supplements the law on
common carriers set forth in the Civil Code. Article 1732 makes no distinction between one
whose principal business activity is the carrying of the person or goods or both, and one who
does such carrying only as an ancillary activity (a sideline). ü 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 occassional, episodic or
unscheduled basis. ü Article 1732 does not distinguish between a carrier offering its services to
the general public and one who offers services or solicits business only from a narrow segment
of the general population. A person or entity is a common carrier and has the obligations of the
common carrier under the Civil Code even if he did not secure a Certificate of Public
Convenience.

First Philippine Industrial Corporation v. Court of Appeals – the Supreme Court reiterated that
the tests for determining whether a party is a common carrier of goods are: a. b. c. d. ü ü 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 persons generally as a
business and not as a casual occupation; He must undertake to carry goods of the kind to which
his business is confined; He must undertake to carry by the method by which his business is
conducted and over his established roads; and The transportation must be for hire. The Civil
Code made no distinction as to the means of transporting, as long as it is by land, water or air.
The Civil Code does not provide that the transportation should be by motor vehicle. Pipeline
operators are comon carriers that are subject to business taxes on common carriers even if the
oil or petroleum products are being transported not through motor vehicles but through
pipelines. The Court used the tests to determine the existence of common carriers enumerated
earlier.

National Steel Corporation v. Court of Appeals – the Supreme Court reiterated the ruling that
the test of a common carrier is the carriage of goods or passengers, provided it has space for all
who opt to avail themselves of its transportation for a fee.

The United States v. Tan Piaco, et al. citing Terminal Taxicab Co. v. Kutz – Public use means the
same as use by the public. The essential feature of public use is that it is not confined to the
privileged individuals, but is open to the indefinite public. It is this indefinite or unrestricted
quality that gives it its public character xxx Public use is not synonymous with public interest .
The true criterion by which to judge of the character of the use is whether the public may enjoy
it by right or only by permission.
 Bascos v. Court of Appeals – the Supreme Court explained that the test to determine a common
carrier is whether the given undertaking is 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.

Westwind Shipping Corp. v. UCPB General Insurance Co., Inc. – Otherwise stated, “as long as a
personor 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.” Customs brokers have been regarded as a common carrier
because the transportation of goods is an integral part of their business. The operation of an
arrastre operator starts on and its responsibility for the merchandise and goods begins from the
time they are placed upon the wharves or piers or delivered along sides of ships. However, the
liability of the carrier usually remains until delivery of the goods to the consignee; thus, the
custody of the carrier remains while the goods are being unloaded.

Sps. Cruz v. Sun Holidays, Inc. - The operator of a beach resort that accepts clients by virtue of a
tour package contracts that included transportation to and from the Resort and the point of
departure in Batangas is considered as a common carrier. The Court observed that its ferry
services are so intertwined with its 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 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.

Sps. Perena v. Sps. Nicolas – The Supreme Court summarized the rule in this case in this wise:
“As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of
the business actually transacted, or the number and character of the conveyances used in the
activity, but whether the undertaking is a part of the activity engaged in by the carrier that he
has held out to the general public as his business or occupation. If the undertaking is a single
transaction, not a part of the general business or occupation engaged in, as advertised and held
out to the general public, the individual or the entity rendering such service is a private, not a
common, carrier. The question must be determined by the character of the business actually
carried on by the carrier, not by any secret intention or mental reservation it may entertain or
assert when charged with the duties and obligations that the law imposes. “ Carriers that
provide bus service to school children are common carriers. Necessarily, the clientele of the so-
called school buses are limited to students of particular schools where their passengers study.
Despite catering to a limited clientele, the petitioners “operated as 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.

Asia Lighterage and Shipping, Inc. v. Court of Appeals – A person or entity may be a common
carrier even if he has no fixed and publicly known route, maintains no terminals, and issues no
tickets. The Supreme Court still ruled that the petitioner is a common carrier pointing out that
the principal business of the petitioner is that of lighterage and drayage and it offers its barges
to the public for carrying or transporting by water for compensation. Petitioner was considered
a common carrier whether its business of carrying goods is done on an irregular basis rather
than scheduled manner and with a limited clientele. A common carrier need not have a fixed
and publicly known route nor does it have to maintain terminals or issue tickets.

Fabre, Jr. v. Court of Appeals – A person or entity need not be engaged in the business of public
transportation for the provisions of the Civil Code on common carriers to apply to them.

Cebu Salvage Corporation v. Philippine Home Assurance Corp. – The carrier can also be a
common carrier even if the operator does not own the vehicle or vessel that he or she operates.

Luzon Stevedoring Co. Inc. v. The Public Service Commission – The Supreme Court explained that
it is not necessary , under this definition, that one holds himself out as serving and willing to
serve the public as a class or at large in order to be considered public service. The Supreme
Court ruled that just as the legislature may not declare a company or enterprise to be a public
utility when it is not inherently such, a public utility may not evade control and supervision of its
operation by the government by selecting its customers under the guise of private transactions.

Luzon Brokerage Company v. Public Service Commission – The Supreme Court declared that Act
454 is clear in the definition of a public service that which is rendered for compensation,
although limited exclusively to the customers of the petitioners.

Virgines Calvo v. UCPB General Insurance Co. – As a common carrier , she is bound to exercise
extraordinary diligence in transporting the goods and is presumed to be negligent when she
failed to deliver the same.

Phil. American General Insurance Company, et al. v. PKS Shipping Company – The Supreme
Court declared that PKS was a common carrier because it was engaged in the business of
carrying goods for others for a fee. “The regularity of its activities in the area indicates more
than just a casual activity on its part. Neither can the concept of a common carrier change
merely because individual contracts are executed or entered into with the patrons of the carrier.”

Saltis v. A.B.B. Daimler Benz (North America Inc.) (Court of Appeals of Georgia) citing Millar
Elevator Svc. Co. v. O’ Sheilds – It should be noted in this connection that in another jurisdiction,
a private entity that operates a shuttle train or “people mover,” which gives free transportation
inside the secured area of the airport between the passenger terminals and concourses to the
airline passengers, and the airline employees, is considered public transportation. It was held
that there is a duty of extraordinary care regarding the operation of a carrier of passengers on
such public conveyance.

Caltex (Phils.) v. Sulpicio Lines – A charter party may transfor a common carrier into a private
carrier. However, it must be a bareboat or demise charter where the charterer mans the vessel
with his own people and becomes, in effect, the owner for the voyage or service stipulated. In a
voyage charter, the carrier is answerable to the loss of the goods received for transportation.
Loadstar Shipping Co., Inc. v. Pioneer Asia Insurance Corp. – The common carrier is not
transformed into a private carrier if the charter party is a contract of affreightment like a voyage
charter or a time charter.

Planters Products, Inc. v. Court of Appeals, et al. – A ‘charter party’ is defined as a contract by
which an entire ship or some principal part thereof, is let by the owner to another personfor a
specified time or use; a contract of affreightment by which the owner of a ship or other vessel
lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a
particular voyage, in consideration of the payment of freight. 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 a general business or occupation,
although involving the carriage of goods for a fee, the person or corporation offering such
service is a private carrier.

Home Insurance Co. v. American Steamship Agencies, Inc. – Although the charter party in this
case was a contract of affreightment, the Court still ruled that it was a private carrier.

Philam Insurance Comapany, Inc. v. Heung-A Shipping Corporation, et al. - A a lot or space
charter agreement is in the nature of a contract of affreightment. Hence, the Court observed in
one case that the slot charter agreement did not divest the carrier of such characterization as a
carrier nor relieve it of any accountability for the shipment. The slot or space charter party not
only allowed the shipper to load its cargo for a certain specified space.

Cargolift Shipping, Inc. v. L. Actuario Marketing Corp. and Skyland Brokerage, Inc. – The party
that provides the service in a contract of towage is required to observe the due diligence of a
good father of the family. The negligence of the obligor in the performance of the obligation
renders him liable for damages for the resulting loss suffered by the obligee. Fault or negligence
of the obligor consists in his failure to exercise due care and prudence in the performance of the
obligation as the nature of the obligation so demands.

Standard Vacuum Oil Company v. Luzon Stevedoring Company, Inc. – Though it is engaged in a
limited contract of carriage in the sense that it chooses its customers and is not open to the
public, nevertheless, the continuity of its operationin this kind of business has earned for it the
level of a public utility.
G.R. No. 80447 January 31, 1989

BALIWAG TRANSIT, INC., petitioner,

vs.

HON. COURT OF APPEALS and SPS. SOTERO CAILIPAN, JR. and ZENAIDA LOPEZ and GEORGE L.
CAILIPAN, respondents.

Sta. Maria & Associates for petitioner.

Punzalan and Associates Law Office for respondents.

MELENCIO-HERRERA, J.:

On 10 April 1985 a Complaint for damages arising from breach of contract of carriage was filed
by private respondents, the Spouses Sotero Cailipan, Jr. and Zenaida Lopez, and their son
George, of legal age, against petitioner Baliwag Transit (Baliwag, for brevity). The Complaint
alleged that George, who was a paying passenger on a Baliwag bus on 17 December 1984,
suffered multiple serious physical injuries when he was thrown off said bus driven in a careless
and negligent manner by Leonardo Cruz, the authorized bus driver, along Barangay Patubig,
Marilao, Bulacan. As a result, he was confined in the hospital for treatment, incurring medical
expenses, which were borne by his parents, the respondent Spouses, in the sum of about
P200,000.00 plus other incidental expenses of about P10,000.00.

On 26 April 1985 an Answer was filed by petitioner alleging that the cause of the injuries
sustained by George was solely attributable to his own voluntary act in that, without warning
and provocation, he suddenly stood up from his seat and headed for the door of the bus as if in
a daze, opened it and jumped off while said bus was in motion, in spite of the protestations by
the driver and without the knowledge of the conductor.

Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company, Inc., on
its third-party liability insurance in the amount of P50,000.00. In its Answer, Fortune Insurance
claimed limited liability, the coverage being subject to a Schedule of Indemnities forming part of
the insurance policy.

On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and Baliwag
each filed Motions to Dismiss on the ground that George, in consideration of the sum of
P8,020.50 had executed a "Release of Claims" dated 16 May 1985. These Motions were denied
by the Trial Court in an Order dated 13 January 1986 as they were filed beyond the time for
pleading and after the Answer were already filed.

On 5 February 1986 Baliwag filed a Motion to Admit Amended Answer, which was granted by
the Trial Court. The Amended Answer incorporated the affirmative defense in the Motion to
Dismiss to the effect that on 16 May 1985, George bad been paid all his claims for damages
arising from the incident subject matter of the complaint when he executed the following
"Release of Claims":

For and in consideration of the payment to me/us of the sum of EIGHT THOUSAND TWENTY and
50/100 PESOS ONLY (P8,020.50), the receipt of which is hereby acknowledged, I/we, being of
lawful age, do hereby release, acquit and forever discharge Fortune Insurance and/or Baliwag
transit, Inc. his/her heirs, executors and assigns, from any and all liability now accrued or
hereafter to accrue on account of any and all claims or causes of action which I/we now or may
here after have for personal injuries, damage to property, loss of services, medical expenses,
losses or damages of any and every kind or nature whatsoever, now known or what may
hereafter develop by me/us sustained or received on or about 17th day of December, 1984
through Reckless Imprudence Resulting to Physical Injuries, and I/we hereby declare that I/we
fully understand the terms of this settlement and voluntarily accept said sum for the purpose of
making a full and final compromise adjustment and settlement of the injuries and damages,
expenses and inconvenience above mentioned. (Rollo, p. 11)

During the preliminary hearing on the aforementioned affirmative defense, Baliwag waived the
presentation of testimonial evidence and instead offered as its Exhibit "1" the "Release of
Claims" signed by George and witnessed by his brother Benjamin L. Cailipan, a licensed engineer.

By way of opposition to petitioner's affirmative defense, respondent Sotero Cailipan, Jr. testified
that be is the father of George, who at the time of the incident was a student, living with his
parents and totally dependent on them for their support; that the expenses for his
hospitalization were shouldered by his parents; and that they had not signed the "Release of
Claims."

In an Order dated 29 August 1986, the Regional Trial Court of Bulacan, Branch 20, 1 dismissed
the Complaint and Third-party Complaint, ruling that since the contract of carriage is between
Baliwag and George L. Cailipan, the latter, who is of legal age, had the exclusive right to execute
the Release of Claims despite the fact that he is still a student and dependent on his parents for
support. Consequently, the execution by George of the Release of Claims discharges Baliwag and
Fortune Insurance.

Aggrieved, the Spouses appealed to respondent Court of Appeals.

On 22 October 1987, the Appellate Court rendered a Decision 2 setting aside the appealed
Order and holding that the "Release of Claims" cannot operate as a valid ground for the
dismissal of the case because it does not have the conformity of all the parties, particularly
George's parents, who have a substantial interest in the case as they stand to be prejudiced by
the judgment because they spent a sizeable amount for the medical bills of their son; that the
Release of Claims was secured by Fortune Insurance for the consideration of P8,020.50 as the
full and final settlement of its liability under the insurance policy and not for the purpose of
releasing Baliwag from its liability as a carrier in this suit for breach of contract. The Appellate
Court also ordered the remand of the case to the lower Court for trial on the merits and for
George to return the amount of P8,020.50 to Fortune Insurance.

Hence, this Petition for Review on certiorari by Baliwag assailing the Appellate Court judgment.

The issue brought to the fore is the legal effect of the Release of Claims executed by George
during the pendency of this case.

We hold that since the suit is one for breach of contract of carriage, the Release of Claims
executed by him, as the injured party, discharging Fortune Insurance and Baliwag from any and
all liability is valid. He was then of legal age, a graduating student of Agricultural Engineering,
and had the capacity to do acts with legal effect (Article 37 in relation to Article 402, Civil Code).
Thus, he could sue and be sued even without the assistance of his parents.

Significantly, the contract of carriage was actually between George, as the paying passenger,
and Baliwag, as the common carrier. As such carrier, Baliwag was bound to carry its passengers
safely as far as human care and foresight could provide, and is liable for injuries to them through
the negligence or wilful acts of its employees (Articles 1755 and 1759, Civil Code). Thus, George
had the right to be safely brought to his destination and Baliwag had the correlative obligation
to do so. Since a contract may be violated only by the parties thereto, as against each other, in
an action upon that contract, the real parties in interest, either as plaintiff or as defendant, must
be parties to said contract (Marimperio Compania Naviera, S.A. vs. Court of Appeals, No. L-
40234, December 14, 1987, 156 SCRA 368). A real party-in-interest -plaintiff is one who has a
legal right while a real party-in-interest-defendant is one who has a correlative legal obligation
whose act or omission violates the legal right of the former (Lee vs. Romillo, Jr., G.R. No. 60973,
May 28, 1988). In the absence of any contract of carriage between Baliwag and George's parents,
the latter are not real parties-in-interest in an action for breach of that contract.

The general rule of the common law is that every action must be brought in the name of the
party whose legal right has been invaded or infringed. 15 Enc. P1. & Pr. p. 484. "For the
immediate wrong and damage the person injured is the only one who can maintain the action."
Id. p. 578. The person who sustains an injury is the person to bring an action for the injury
against the wrongdoer." Dicey parties to Actions, 347. (Cited in Green v. Shoemaker, 73 A 688,
23 L.R.A., N.S. 667).

There is no question regarding the genuineness and due execution of the Release of Claims. It is
a duly notarized public document. It clearly stipulates that the consideration of P8,020.50
received by George was "to release and forever discharge Fortune Insurance and/or Baliwag
from any and all liabilities now accrued or to accrue on account of any and all claims or causes of
action ... for personal injuries, damage to property, loss of services, medical expenses, losses or
damages of any and every kind or nature whatsoever, sustained by him on 17 December 1984
thru Reckless Imprudence Resulting to Physical Injuries." Consequently, the ruling of respondent
Appellate Court that the "Release of Claims" was intended only as the full and final settlement
of a third-party liability for bodily injury claim and not for the purpose of releasing Baliwag from
its liability, if any, in a breach of a contract of carriage, has to be rejected for being contrary to
the very terms thereof. If the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations shall control (Article
1370, Civil Code). The phraseology "any and all claims or causes of action" is broad enough to
include all damages that may accrue to the injured party arising from the unfortunate accident.

The Release of Claims had the effect of a compromise agreement since it was entered into for
the purpose of making a full and final compromise adjustment and settlement of the cause of
action involved. A compromise is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced (Article 2028, Civil
Code). The Release of Claims executed by the injured party himself wrote finish to this litigation.

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

SO ORDERED.

G.R. No. 111127 July 26, 1996

MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners,

vs.

COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE
ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA, ARLENE
GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA, YOLANDA
CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN, FRANCIS
NORMAN O. LOPES, JULIUS CAESAR, GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE
SENIEL, ROSARIO MARA-MARA, TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES,
JOSEFA CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y.
MORTIZ, LIZA MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE FERRER,
respondents.

MENDOZA, J.:p

This is a petition for review on certiorari of the decision of the Court of Appeals1 in CA-GR No.
28245, dated September 30, 1992, which affirmed with modification the decision of the
Regional Trial Court of Makati, Branch 58, ordering petitioners jointly and severally to pay
damages to private respondent Amyline Antonio, and its resolution which denied petitioners'
motion for reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They
used the bus principally in connection with a bus service for school children which they operated
in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after trying him
out for two weeks, His job was to take school children to and from the St. Scholastica's College
in Malate, Manila.

On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF)
arranged with petitioners for the transportation of 33 members of its Young Adults Ministry
from Manila to La Union and back in consideration of which private respondent paid petitioners
the amount of P3,000.00.

The group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the afternoon.
However, as several members of the party were late, the bus did not leave the Tropical Hut at
the corner of Ortigas Avenue and EDSA until 8:00 o'clock in the evening. Petitioner Porfirio Cabil
drove the minibus.

The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at
Carmen was under repair, sot hat petitioner Cabil, who was unfamiliar with the area (it being his
first trip to La Union), was forced to take a detour through the town of Baay in Lingayen,
Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway,
running on a south to east direction, which he described as "siete." The road was slippery
because it was raining, causing the bus, which was running at the speed of 50 kilometers per
hour, to skid to the left road shoulder. The bus hit the left traffic steel brace and sign along the
road and rammed the fence of one Jesus Escano, then turned over and landed on its left side,
coming to a full stop only after a series of impacts. The bus came to rest off the road. A coconut
tree which it had hit fell on it and smashed its front portion.

Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor
of the bus and pinned down by a wooden seat which came down by a wooden seat which came
off after being unscrewed. It took three persons to safely remove her from this portion. She was
in great pain and could not move.

The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was
not familiar with the area and he could not have seen the curve despite the care he took in
driving the bus, because it was dark and there was no sign on the road. He said that he saw the
curve when he was already within 15 to 30 meters of it. He allegedly slowed down to 30
kilometers per hour, but it was too late.

The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of
their finding they filed a criminal complaint against the driver, Porfirio Cabil. The case was later
filed with the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for
the damage to the latter's fence. On the basis of Escano's affidavit of desistance the case against
petitioners Fabre was dismissed.

Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro
Manila. As a result of the accident, she is now suffering from paraplegia and is permanently
paralyzed from the waist down. During the trial she described the operations she underwent
and adduced evidence regarding the cost of her treatment and therapy. Immediately after the
accident, she was taken to the Nazareth Hospital in Baay, Lingayen. As this hospital was not
adequately equipped, she was transferred to the Sto. Niño Hospital, also in the town of Ba-ay,
where she was given sedatives. An x-ray was taken and the damage to her spine was
determined to be too severe to be treated there. She was therefore brought to Manila, first to
the Philippine General Hospital and later to the Makati Medical Center where she underwent an
operation to correct the dislocation of her spine.

In its decision dated April 17, 1989, the trial court found that:

No convincing evidence was shown that the minibus was properly checked for travel to a long
distance trip and that the driver was properly screened and tested before being admitted for
employment. Indeed, all the evidence presented have shown the negligent act of the
defendants which ultimately resulted to the accident subject of this case.

Accordingly, it gave judgment for private respondents holding:

Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline
Antonio were the only ones who adduced evidence in support of their claim for damages, the
Court is therefore not in a position to award damages to the other plaintiffs.

WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr.
& Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the
Civil Code of the Philippines and said defendants are ordered to pay jointly and severally to the
plaintiffs the following amount:

1) P93,657.11 as compensatory and actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline

Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages; and

5) 25% of the recoverable amount as attorney's fees;

6) Costs of suit.

SO ORDERED.
The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio but
dismissed it with respect to the other plaintiffs on the ground that they failed to prove their
respective claims. The Court of Appeals modified the award of damages as follows:

1) P93,657.11 as actual damages;

2) P600,000.00 as compensatory damages;

3) P50,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) P10,000.00 as attorney's fees; and

6) Costs of suit.

The Court of Appeals sustained the trial court's finding that petitioner Cabil failed to exercise
due care and precaution in the operation of his vehicle considering the time and the place of the
accident. The Court of Appeals held that the Fabres were themselves presumptively negligent.
Hence, this petition. Petitioners raise the following issues:

I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.

II. WHETHER OF NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED BY PRIVATE
RESPONDENTS.

III WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO WHAT
EXTENT.

Petitioners challenge the propriety of the award of compensatory damages in the amount of
P600,000.00. It is insisted that, on the assumption that petitioners are liable an award of
P600,000.00 is unconscionable and highly speculative. Amyline Antonio testified that she was a
casual employee of a company called "Suaco," earning P1,650.00 a month, and a dealer of Avon
products, earning an average of P1,000.00 monthly. Petitioners contend that as casual
employees do not have security of tenure, the award of P600,000.00, considering Amyline
Antonio's earnings, is without factual basis as there is no assurance that she would be regularly
earning these amounts.

With the exception of the award of damages, the petition is devoid of merit.

First, it is unnecessary for our purpose to determine whether to decide this case on the theory
that petitioners are liable for breach of contract of carriage or culpa contractual or on the theory
of quasi delict or culpa aquiliana as both the Regional Trial Court and the Court of Appeals held,
for although the relation of passenger and carrier is "contractual both in origin and nature,"
nevertheless "the act that breaks the contract may be also a tort." 2 In either case, the question
is whether the bus driver, petitioner Porfirio Cabil, was negligent.

The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the
bus, failed to exercise the diligence of a good father of the family in the selection and
supervision of their employee is fully supported by the evidence on record. These factual
findings of the two courts we regard as final and conclusive, supported as they are by the
evidence. Indeed, it was admitted by Cabil that on the night in question, it was raining, and as a
consequence, the road was slippery, and it was dark. He averred these facts to justify his failure
to see that there lay a sharp curve ahead. However, it is undisputed that Cabil drove his bus at
the speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15
to 30 meters ahead. 3 By then it was too late for him to avoid falling off the road. Given the
conditions of the road and considering that the trip was Cabil's first one outside of Manila, Cabil
should have driven his vehicle at a moderate speed. There is testimony 4 that the vehicles
passing on that portion of the road should only be running 20 kilometers per hour, so that at 50
kilometers per hour, Cabil was running at a very high speed.

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

Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption
that his employers, the Fabres, were themselves negligent in the selection and supervisions of
their employee.

Due diligence in selection of employees is not satisfied by finding that the applicant possessed a
professional driver's license. The employer should also examine the applicant for his
qualifications, experience and record of service. 5 Due diligence in supervision, on the other
hand, requires the formulation of rules and regulations for the guidance of employees and
issuance of proper instructions as well as actual implementation and monitoring of consistent
compliance with the rules.

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not
consider the fact that Cabil had been driving for school children only, from their homes to the St.
Scholastica's College in Metro Manila. 7 They had hired him only after a two-week
apprenticeship. They had hired him only after a two-week apprenticeship. They had tested him
for certain matters, such as whether he could remember the names of the children he would be
taking to school, which were irrelevant to his qualification to drive on a long distance travel,
especially considering that the trip to La Union was his first. The existence of hiring procedures
and supervisory policies cannot be casually invoked to overturn the presumption of negligence
on the part of an employer.
Petitioners argue that they are not liable because (1) an earlier departure (made impossible by
the congregation's delayed meeting) could have a averted the mishap and (2) under the
contract, the WWCF was directly responsible for the conduct of the trip. Neither of these
contentions hold water. The hour of departure had not been fixed. Even if it had been, the delay
did not bear directly on the cause of the accident. With respect to the second contention, it was
held in an early case that:

[A] person who hires a public automobile and gives the driver directions as to the place to which
he wishes to be conveyed, but exercises no other control over the conduct of the driver, is not
responsible for acts of negligence of the latter or prevented from recovering for injuries suffered
from a collision between the automobile and a train, caused by the negligence or the
automobile driver.

As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did
not have to be engaged in the business of public transportation for the provisions of the Civil
Code on common carriers to apply to them. As this Court has held: 10

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

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

As common carriers, the Fabres were found to exercise "extraordinary diligence" for the safe
transportation of the passengers to their destination. This duty of care is not excused by proof
that they exercise the diligence of a good father of the family in the selection and supervision of
their employee. As Art. 1759 of the Code provides:

Common carriers are liable for the death of or injuries to passengers through the negligence or
willful acts of the former's employees although such employees may have acted beyond the
scope of their authority or in violation of the orders of the common carriers.

This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
The same circumstances detailed above, supporting the finding of the trial court and of the
appellate court that petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify
findings them guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the
Civil Code.

Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the
Court of Appeals erred in increasing the amount of compensatory damages because private
respondents did not question this award as inadequate. To the contrary, the award of
P500,000.00 for compensatory damages which the Regional Trial Court made is reasonable
considering the contingent nature of her income as a casual employee of a company and as
distributor of beauty products and the fact that the possibility that she might be able to work
again has not been foreclosed. In fact she testified that one of her previous employers had
expressed willingness to employ her again.

With respect to the other awards, while the decisions of the trial court and the Court of Appeals
do not sufficiently indicate the factual and legal basis for them, we find that they are
nevertheless supported by evidence in the records of this case. Viewed as an action for quasi
delict, this case falls squarely within the purview of Art. 2219(2) providing for the payment of
moral damages in cases of quasi delict. On the theory that petitioners are liable for breach of
contract of carriage, the award of moral damages is authorized by Art. 1764, in relation to Art.
2220, since Cabil's gross negligence amounted to bad faith. Amyline Antonio's testimony, as well
as the testimonies of her father and copassengers, fully establish the physical suffering and
mental anguish she endured as a result of the injuries caused by petitioners' negligence.

The award of exemplary damages and attorney's fees was also properly made. However, for the
same reason that it was error for the appellate court to increase the award of compensatory
damages, we hold that it was also error for it to increase the award of moral damages and
reduce the award of attorney's fees, inasmuch as private respondents, in whose favor the
awards were made, have not appealed.

As above stated, the decision of the Court of Appeals can be sustained either on the theory of
quasi delict or on that of breach of contract. The question is whether, as the two courts below
held, petitioners, who are the owners and driver of the bus, may be made to respond jointly and
severally to private respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of
Appeals, on facts similar to those in this case, this Court held the bus company and the driver
jointly and severally liable for damages for injuries suffered by a passenger. Again, in Bachelor
Express, Inc. v. Court of Appeals a driver found negligent in failing to stop the bus in order to let
off passengers when a fellow passenger ran amuck, as a result of which the passengers jumped
out of the speeding bus and suffered injuries, was held also jointly and severally liable with the
bus company to the injured passengers.
The same rule of liability was applied in situations where the negligence of the driver of the bus
on which plaintiff was riding concurred with the negligence of a third party who was the driver
of another vehicle, thus causing an accident. In Anuran v. Buño, Batangas Laguna Tayabas Bus
Co. v. Intermediate Appellate Court, and Metro Manila Transit Corporation v. Court of Appeals,
the bus company, its driver, the operator of the other vehicle and the driver of the vehicle were
jointly and severally held liable to the injured passenger or the latters' heirs. The basis of this
allocation of liability was explained in Viluan v. Court of Appeals, thus:

Nor should it make any difference that the liability of petitioner [bus owner] springs from
contract while that of respondents [owner and driver of other vehicle] arises from quasi-delict.
As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to
a passenger due to the negligence of the driver of the bus on which he was riding and of the
driver of another vehicle, the drivers as well as the owners of the two vehicles are jointly and
severally liable for damages. Some members of the Court, though, are of the view that under
the circumstances they are liable on quasi-delict.

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals this Court exonerated the
jeepney driver from liability to the injured passengers and their families while holding the
owners of the jeepney jointly and severally liable, but that is because that case was expressly
tried and decided exclusively on the theory of culpa contractual. As this Court there explained:

The trial court was therefore right in finding that Manalo (the driver) and spouses Mangune and
Carreon (the jeepney owners) were negligent. However, its ruling that spouses Mangune and
Carreon are jointly and severally liable with Manalo is erroneous. The driver cannot be held
jointly and severally liable with carrier in case of breach of the contract of carriage. The rationale
behind this is readily discernible. Firstly, the contract of carriage is between the carrier is
exclusively responsible therefore to the passenger, even if such breach be due to the negligence
of his driver (see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16
SCRA 742).

As in the case of BLTB, private respondents in this case and her coplaintiffs did not stake out
their claim against the carrier and the driver exclusively on one theory, much less on that of
breach of contract alone. After all, it was permitted for them to allege alternative causes of
action and join as many parties as may be liable on such causes of action so long as private
respondent and her coplaintiffs do not recover twice for the same injury. What is clear from the
cases is the intent of the plaintiff there to recover from both the carrier and the driver, thus,
justifying the holding that the carrier and the driver were jointly and severally liable because
their separate and distinct acts concurred to produce the same injury.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to award
of damages. Petitioners are ORDERED to PAY jointly and severally the private respondent
Amyline Antonio the following amounts:
1) P93,657.11 as actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline

Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) 25% of the recoverable amount as attorney's fees; and

6) costs of suit.

SO ORDERED.

G.R. No. 92288 February 9, 1993

BRITISH AIRWAYS, INC., petitioner,

vs.

THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING AND
GENERAL SERVICES, respondents.

Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioner.

Monina P. Lee for private respondent.

NOCON, J.:

This is a petition for review on certiorari to annul and set aside the decision dated November 15,
1989 of the Court of Appeals affirming the decision of the trial court in ordering petitioner
British Airways, Inc. to pay private respondent First International Trading and General Services
actual damages, moral damages, corrective or exemplary damages, attorney's fees and the costs
as well as the Resolution dated February 15, 1990 denying petitioner's Motion for
Reconsideration in the appealed decision.

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

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

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

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

As a result of these incidents, private respondent sent a letter to petitioner demanding

compensation for the damages it had incurred by the latter's repeated failure to transport its
contract workers despite confirmed bookings and payment of the corresponding travel taxes.

On July 23, 1981, the counsel of private respondent sent another letter to the petitioner
demanding the latter to pay the amount of P350,000.00 representing damages and unrealized
profit or income which was denied by the petitioner.

On August 8, 1981, private respondent received a telex message from its principal cancelling the
hiring of the remaining recruited workers due to the delay in transporting the workers to Jeddah.
On January 27, 1982, private respondent filed a complaint for damages against petitioner with
the Regional Trial Court of Manila, Branch 1 in Civil Case No. 82-4653.

On the other hand, petitioner, alleged in its Answer with counterclaims that it received a telex
message from Jeddah on March 20, 1981 advising that the principal of private respondent had
prepaid the airfares of 100 persons to transport private respondent's contract workers from
Manila to Jeddah on or before March 30, 1981. However, due to the unavailability of space and
limited time, petitioner had to return to its sponsor in Jeddah the prepaid ticket advice
consequently not even one of the alleged 93 contract workers were booked in any of its flights.

On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract
workers of private respondent to Jeddah but the travel agent of the private respondent booked
only 10 contract workers for petitioner's June 9, 1981 flight. However, only 9 contract workers
boarded the scheduled flight with 1 passenger not showing up as evidenced by the Philippine
Airlines' passenger manifest for Flight BA-020 (Exhibit "7", "7-A", "7-B" and "7-C").

Thereafter, private respondent's travel agent booked seats for 5 contract workers on
petitioner's July 4, 1981 flight but said travel agent cancelled the booking of 2 passengers while
the other 3 passengers did not show up on said flight.

Sometime in July 1981, the travel agent of the private respondent booked 7 more contract
workers in addition to the previous 5 contract workers who were not able to board the July 4,
1981 flight with the petitioner's July 7, 1981 flight which was accepted by petitioner subject to
reconfirmation.

However on July 6, 1981, petitioner's computer system broke down which resulted to
petitioner's failure to get a reconfirmation from Saudi Arabia Airlines causing the automatic
cancellation of the bookings of private respondent's 12 contract workers. In the morning of July
7, 1981, the computer system of the petitioner was reinstalled and immediately petitioner tried
to reinstate the bookings of the 12 workers with either Gulf Air or Saudi Arabia Airlines but both
airlines replied that no seat was available on that date and had to place the 12 workers on the
wait list. Said information was duly relayed to the private respondent and the 12 workers before
the scheduled flight.

After due trial on or on August 27, 1985, the trial court rendered its decision, the dispositive
portion of which reads as follows:

WHEREFORE, in view of all the foregoing, this Court renders judgment:

1. Ordering the defendant to pay the plaintiff actual damages in the sum of P308,016.00;

2. Ordering defendant to pay moral damages to the plaintiff in the amount of P20,000.00;

3. Ordering the defendant to pay the plaintiff P10,000.00 by way of corrective or

exemplary damages;
4. Ordering the defendant to pay the plaintiff 30% of its total claim for and as attorney's
fees; and

5. To pay the costs.

On March 13, 1986, petitioner appealed said decision to respondent appellate court after the
trial court denied its Motion for Reconsideration on February 28, 1986.

On November 15, 1989, respondent appellate court affirmed the decision of the trial court, the
dispositive portion of which reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED with costs against the appellant.

On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied.

Hence, this petition.

It is the contention of petitioner that private respondent has no cause of action against it there
being no perfected contract of carriage existing between them as no ticket was ever issued to
private respondent's contract workers and, therefore, the obligation of the petitioner to
transport said contract workers did not arise. Furthermore, private respondent's failure to
attach any ticket in the complaint further proved that it was never a party to the alleged
transaction.

Petitioner's contention is untenable.

Private respondent had a valid cause of action for damages against petitioner. A cause of action
is an act or omission of one party in violation of the legal right or rights of the other. Petitioner's
repeated failures to transport private respondent's workers in its flight despite confirmed
booking of said workers clearly constitutes breach of contract and bad faith on its part. In
resolving petitioner's theory that private respondent has no cause of action in the instant case,
the appellate court correctly held that:

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

In the instant case, the contract "to carry" is the one involved which is consensual and is
perfected by the mere consent of the parties.

There is no dispute as to the appellee's consent to the said contract "to carry" its contract
workers from Manila to Jeddah. The appellant's consent thereto, on the other hand, was
manifested by its acceptance of the PTA or prepaid ticket advice that ROLACO Engineering has
prepaid the airfares of the appellee's contract workers advising the appellant that it must
transport the contract workers on or before the end of March, 1981 and the other batch in June,
1981.

Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket
and thus no ticket was yet issued, the fact remains that the passage had already been paid for
by the principal of the appellee, and the appellant had accepted such payment. The existence of
this payment was never objected to nor questioned by the appellant in the lower court. Thus,
the cause or consideration which is the fare paid for the passengers exists in this case.

The third essential requisite of a contract is an object certain. In this contract "to carry", such an
object is the transport of the passengers from the place of departure to the place of destination
as stated in the telex.

Accordingly, there could be no more pretensions as to the existence of an oral contract of

carriage imposing reciprocal obligations on both parties.

In the case of appellee, it has fully complied with the obligation, namely, the payment of the
fare and its willingness for its contract workers to leave for their place of destination.

On the other hand, the facts clearly show that appellant was remiss in its obligation to transport
the contract workers on their flight despite confirmation and bookings made by appellee's
travelling agent.

xxx xxx xxx

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

xxx xxx xxx

While there is no dispute that ROLACO Engineering advanced the payment for the airfares of the
appellee's contract workers who were recruited for ROLACO Engineering and the said contract
workers were the intended passengers in the aircraft of the appellant, the said contract "to
carry" also involved the appellee for as recruiter he had to see to it that the contract workers
should be transported to ROLACO Engineering in Jeddah thru the appellant's transportation. For
that matter, the involvement of the appellee in the said contract "to carry" was well
demonstrated when the appellant upon receiving the PTA immediately advised the appellee
thereof.
Petitioner also contends that the appellate court erred in awarding actual damages in the
amount of P308,016.00 to private respondent since all expenses had already been subsequently
reimbursed by the latter's principal.

In awarding actual damages to private respondent, the appellate court held that the amount of
P308,016.00 representing actual damages refers to private respondent's second cause of action
involving the expenses incurred by the latter which were not reimbursed by ROLACO
Engineering. However, in the Complaint filed by private respondent, it was alleged that private
respondent suffered actual damages in the amount of P308,016.00 representing the money it
borrowed from friends and financiers which is P304,416.00 for the 93 airline tickets and
P3,600.00 for the travel tax of the 12 workers. It is clear therefore that the actual damages
private respondent seeks to recover are the airline tickets and travel taxes it spent for its
workers which were already reimbursed by its principal and not for any other expenses it had
incurred in the process of recruiting said contract workers. Inasmuch as all expenses including
the processing fees incurred by private respondent had already been paid for by the latter's
principal on a staggered basis as admitted in open court by its managing director, Mrs.
Bienvenida Brusellas. We do not find anymore justification in the appellate court's decision in
granting actual damages to private respondent.

Thus, while it may be true that private respondent was compelled to borrow money for the
airfare tickets of its contract workers when petitioner failed to transport said workers, the
reimbursements made by its principal to private respondent failed to support the latter's claim
that it suffered actual damages as a result of petitioner's failure to transport said workers. It is
undisputed that private respondent had consistently admitted that its principal had reimbursed
all its expenses.

Article 2199 of the Civil Code provides that:

Except as provided by law or by stipulations, one is entitled to an adequate compensation only

for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to
as actual or compensatory damages.

Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved,
and proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture
or guesswork as to the fact and amount of damages, but must depend upon competent proof
that they have suffered and on evidence of the actual amount thereof.

However, private respondent is entitled to an award of moral and exemplary damages for the
injury suffered as a result of petitioner's failure to transport the former's workers because of the
latter's patent bad faith in the performance of its obligation. As correctly pointed out by the
appellate court:

As evidence had proved, there was complete failure on the part of the appellant to transport
the 93 contract workers of the appellee on or before March 30, 1981 despite receipt of the
payment for their airfares, and acceptance of the same by the appellant, with specific
instructions from the appellee's principal to transport the contract workers on or before March
30, 1981. No previous notice was ever registered by the appellant that it could not comply with
the same. And then followed the detestable act of appellant in unilaterally cancelling, booking
and rebooking unreasonably the flight of appellee's contract workers in June to July, 1981
without prior notice. And all of these actuations of the appellant indeed constitute malice and
evident bad faith which had caused damage and besmirched the reputation and business image
of the appellee.

As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record
shows that no claim for said damages was ever made by the petitioner immediately after their
alleged occurrence therefore said counterclaims were mere afterthoughts when private
respondent filed the present case.

WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the award
of actual damages be deleted from said decision.

SO ORDERED.

G.R. No. L-18965 October 30, 1964

COMPAÑIA MARITIMA, petitioner,

vs.

INSURANCE COMPANY OF NORTH AMERICA, respondent.

Rafael Dinglasan for petitioner.

Ozaeta Gibbs & Ozaeta for respondent.

BAUTISTA ANGELO, J.:

Sometime in October, 1952, 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 Davao in compliance
with which the latter sent to Macleod's private wharf LCT Nos. 1023 and 1025 on which the
loading of the hemp was completed on October 29, 1952. These two lighters were manned each
by a patron and an assistant patron. The patrons of both barges issued the corresponding
carrier's receipts and that issued by the patron of Barge No. 1025 reads in part:

Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND
COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator.

FINAL DESTINATION: Boston.

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
belonging to Compañia Maritima on which the hemp was to be loaded. During the night of
October 29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting in the
damage or loss of 1,162 bales of hemp loaded therein. On October 30, 1952, Macleod promptly
notified the carrier's main office in Manila and its branch in Davao advising it of its liability. The
damaged hemp was brought to Odell Plantation in Madaum, Davao, for cleaning, washing,
reconditioning, and redrying. During the period from November 1-15, 1952, the carrier's trucks
and lighters hauled from Odell to Macleod at Sasa a total of 2,197.75 piculs of the reconditioned
hemp out of the original cargo of 1,162 bales weighing 2,324 piculs which had a total value of
116,835.00. After reclassification, the value of the reconditioned hemp was reduced to
P84,887.28, or a loss in value of P31,947.72. Adding to this last amount the sum of P8,863.30
representing 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 abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025,
were insured with the Insurance Company of North America against all losses and damages. In
due time, Macleod filed a claim for the loss it suffered as above stated with said insurance
company, and after the same had been processed, 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 sum of P60,421.02, which is the only amount supported by receipts, the
insurance company instituted the present action on October 28, 1953. 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 on December 14, 1960.
Hence, this petition for review.

The issues posed before us are: (1) Was there 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) Was the damage
caused to the cargo or the sinking of the barge where it was loaded due to a fortuitous event,
storm or natural disaster that would exempt the carrier from liability?; (3) Can respondent
insurance company 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?; (4) Has
the Court of Appeals erred in regarding Exhibit NNN-1 as an implied admission by the carrier of
the correctness and sufficiency of the shipper's statement of accounts contrary to the burden of
proof rule?; and (5) Can the insurance company maintain this suit without proof of its
personality to do so?

1. This issue should be answered in the affirmative. As found by the Court of Appeals,
Macleod and Company contracted by telephone the services of petitioner to ship the hemp in
question from the former's private pier at Sasa, Davao City, to Manila, to be subsequently
transhipped to Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a
formal and written booking issued by the shipper's branch office, Davao City, in virtue of which
the carrier sent two of its lighters to undertake the service. It also appears that the patrons of
said lighters were employees of the carrier with due authority to undertake the transportation
and to sign the documents that may be necessary therefor so much so that the patron of LCT No.
1025 signed the receipt covering the cargo of hemp loaded therein as follows: .

Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND
COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator.

FINAL DESTINATION: Boston.

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 receipt of goods by the carrier has been said to lie at the foundation of the contract to carry
and deliver, and if actually no goods are received there can be no such contract. The liability and
responsibility of the carrier under a contract for the carriage of goods commence on their actual
delivery to, or receipt by, the carrier or an authorized agent. ... and delivery to a lighter in charge
of a vessel for shipment on the vessel, where it is the custom to deliver in that way, is a good
delivery and binds the vessel receiving the freight, the liability commencing at the time of
delivery to the lighter. ... and, similarly, where there is a contract to carry goods from one port
to another, and they cannot be loaded directly on the vessel and lighters are sent by the vessel
to bring the goods to it, the lighters are for the time its substitutes, so that the bill of landing is
applicable to the goods as soon as they are placed on the lighters. (80 C.J.S., p. 901, emphasis
supplied)

... 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. Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W. 419, 46 A. St. Rep.
202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W. 834; Matthews & Hood v.
St. L., I.M. & S.R. Co., 123 Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart & Co., et al. v.
Wade, et al., 200 S.W. 148).

The claim that there can be no contract of affreightment because the hemp was not actually
loaded on the ship that was to take it from Davao City to Manila is of no moment, for, as already
stated, the delivery of the hemp to the carrier's lighter is in line with the contract. In fact, the
receipt signed by the patron of the lighter that carried the hemp stated that he was receiving
the cargo "in behalf of S.S. Bowline Knot in good order and condition." On the other hand, the
authorities are to the effect that a bill of lading is not indispensable for the creation of a contract
of carriage.

Bill of lading not indispensable to contract of carriage. — As to the issuance of a bill of lading,
although article 350 of the Code of Commerce provides that "the shipper as well as the carrier
of merchandise or goods may mutua-lly demand that a bill of lading is not indispensable. As
regards the form of the contract of carriage it can be said that provided that there is a meeting
of the minds and from such meeting arise rights and obligations, there should be no limitations
as to form." The bill of lading is not essential to the contract, although it may become obligatory
by reason of the regulations of railroad companies, or as a condition imposed in the contract by
the agreement of the parties themselves. The bill of lading is juridically a documentary proof of
the stipulations and conditions agreed upon by both parties. (Del Viso, pp. 314-315; Robles vs.
Santos, 44 O.G. 2268). In other words, the Code does not demand, as necessary requisite in the
contract of transportation, the delivery of the bill of lading to the shipper, but gives right to both
the carrier and the shipper to mutually demand of each other the delivery of said bill. (Sp. Sup.
Ct. Decision, May 6, 1895). (Martin, Philippine Commercial Laws, Vol. II, Revised Edition, pp. 12-
13)

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. (13 C.J.S., p. 288)
2. Petitioner disclaims responsibility for the damage of the cargo in question shielding
itself behind the claim of force majeure or storm which occurred on the night of October 29,
1952. But the evidence fails to bear this out.

Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure,
but to lack of adequate precautions or measures taken by the carrier to prevent the loss as may
be inferred from the following findings of the Court of Appeals:

Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had cracks
on its bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which admitted sea water in the same manner as
rain entered "thru tank man-holes", according to the patron of LCT No. 1023 (exh. JJJ-4) —
conclusively showing that the barge was not seaworthy — it should be noted that on the night
of the nautical accident there was no storm, flood, or other natural disaster or calamity.
Certainly, winds of 11 miles per hour, although stronger than the average 4.6 miles per hour
then prevailing in Davao on October 29, 1952 (exh. 5), cannot be classified as storm. For
according to Beaufort's wind scale, a storm has wind velocities of from 64 to 75 miles per hour;
and by Philippine Weather Bureau standards winds should have a velocity of from 55 to 74 miles
per hour in order to be classified as storm (Northern Assurance Co., Ltd. vs. Visayan Stevedore
Transportation Co., CA-G.R. No. 23167-R, March 12, 1959).

The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine surveyors,
attributes the sinking of LCT No. 1025 to the 'non-water-tight conditions of various buoyancy
compartments' (exh. JJJ); and this report finds confirmation on the above-mentioned admission
of two witnesses for appellant concerning the cracks of the lighter's bottom and the entrance of
the rain water 'thru manholes'." We are not prepared to dispute this finding of the Court of
Appeals.

3. There can also be no doubt that 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. Thus, we find fitting the following comments of the Court
of Appeals:
It was not imperative and necessary for the trial court to pass upon the question of whether or
not the disputed abaca cargo was covered by Marine Open Cargo Policy No. MK-134 isued by
appellee. Appellant was neither a party nor privy to this insurance contract, and therefore
cannot avail itself of any defect in the policy which may constitute a valid reason for appellee, as
the insurer, to reject the claim of Macleod, as the insured. Anyway, whatever defect the policy
contained, if any, is deemed to have been waived by the subsequent payment of Macleod's
claim by appellee. Besides, appellant is herein sued in its capacity as a common carrier, and
appellee is suing as the assignee of the shipper pursuant to exhibit MM. Since, as above
demonstrated, appellant is liable to Macleod and Company of the Philippines for the los or
damage to the 1,162 bales of hemp after these were received in good order and condition by
the patron of appellant's LCT No. 1025, it necessarily follows that appellant is likewise liable to
appellee who, as assignee of Macleod, merely stepped into the shoes of and substi-tuted the
latter in demanding from appellant the payment for the loss and damage aforecited.

4. It should be recalled in connection with this issue that during the trial of this case the
carrier asked the lower court to order the production of the books of accounts of the Odell
Plantation containing the charges it made for the loss of the damaged hemp for verification of
its accountants, but later it desisted therefrom on the claim that it finds their production no
longer necessary. This desistance notwithstanding, the shipper however pre-sented other
documents to prove the damage it suffered in connection with the cargo and on the strength
thereof the court a quo ordered the carrier to pay the sum of P60,421.02. And after the Court of
Appeals affirmed this award upon the theory that the desistance of the carrier from producing
the books of accounts of Odell Plantation implies an admission of the correctness of the
statements of accounts contained therein, petitioner now contends that the Court of Appeals
erred in basing the affirmance of the award on such erroneous interpretation.

There is reason to believe that the act of petitioner in waiving its right to have the books of
accounts of Odell Plantation presented in court is tantamount to an admission that the
statements contained therein are correct and their verification not necessary because its main
defense here, as well as below, was that it is not liable for the loss because there was no
contract of carriage between it and the shipper and the loss caused, if any, was due to a
fortuitous event. Hence, under the carrier's theory, the correctness of the account representing
the loss was not so material as would necessitate the presentation of the books in question. At
any rate, even if the books of accounts were not produced, the correctness of the accounts
cannot now be disputed for the same is supported by the original documents on which the
entries in said books were based which were presented by the shipper as part of its evidence.
And according to the Court of Appeals, these documents alone sufficiently establish the award
of P60,412.02 made in favor of respondent.
5. Finally, with regard to the question concerning the personality of the insurance
company to maintain this action, we find the same of no importance, for the attorney himself of
the carrier admitted in open court that it is a foreign corporation doing business in the
Philippines with a personality to file the present action.

WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.

G.R. No. 145804 February 6, 2003

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners,

vs.

MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY AGENCY,
respondents.

VITUG, J.:

The case before the Court is an appeal from the decision and resolution of the Court of Appeals,
promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV No. 60720,
entitled "Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et. al.,"
which has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266, Pasig
City, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail Transit
Authority (LRTA) and Rodolfo Roman liable for damages on account of the death of Nicanor
Navidad.

On 14 October 1993, about half an hour past seven o’clock in the evening, Nicanor Navidad,
then drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of
the fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the
security guard assigned to the area approached Navidad. A misunderstanding or an altercation
between the two apparently ensued that led to a fist fight. No evidence, however, was adduced
to indicate how the fight started or who, between the two, delivered the first blow or how
Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train,
operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train,
and he was killed instantaneously.

On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with
her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA,
the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband.
LRTA and Roman filed a counterclaim against Navidad and a cross-claim against Escartin and
Prudent. Prudent, in its answer, denied liability and averred that it had exercised due diligence
in the selection and supervision of its security guards.

The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting
evidence, filed a demurrer contending that Navidad had failed to prove that Escartin was
negligent in his assigned task. On 11 August 1998, the trial court rendered its decision; it
adjudged:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants
Prudent Security and Junelito Escartin ordering the latter to pay jointly and severally the
plaintiffs the following:

"a) 1) Actual damages of P44,830.00;

2) Compensatory damages of P443,520.00;

3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;

"b) Moral damages of P50,000.00;

"c) Attorney’s fees of P20,000;

"d) Costs of suit.

"The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.

"The compulsory counterclaim of LRTA and Roman are likewise dismissed."

Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated
its now assailed decision exonerating Prudent from any liability for the death of Nicanor Navidad
and, instead, holding the LRTA and Roman jointly and severally liable thusly:

"WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from
any liability for the death of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the Light
Rail Transit Authority (LRTA) are held liable for his death and are hereby directed to pay jointly
and severally to the plaintiffs-appellees, the following amounts:

a) P44,830.00 as actual damages;

b) P50,000.00 as nominal damages;

c) P50,000.00 as moral damages;

d) P50,000.00 as indemnity for the death of the deceased; and

e) P20,000.00 as and for attorney’s fees."

The appellate court ratiocinated that while the deceased might not have then as yet boarded
the train, a contract of carriage theretofore had already existed when the victim entered the
place where passengers were supposed to be after paying the fare and getting the
corresponding token therefor. In exempting Prudent from liability, the court stressed that there
was nothing to link the security agency to the death of Navidad. It said that Navidad failed to
show that Escartin inflicted fist blows upon the victim and the evidence merely established the
fact of death of Navidad by reason of his having been hit by the train owned and managed by
the LRTA and operated at the time by Roman. The appellate court faulted petitioners for their
failure to present expert evidence to establish the fact that the application of emergency brakes
could not have stopped the train.

The appellate court denied petitioners’ motion for reconsideration in its resolution of 10
October 2000.

In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:

"I.THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE FINDINGS OF

FACTS BY THE TRIAL COURT

"II.THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS ARE
LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.

"III.THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO ROMAN
IS AN EMPLOYEE OF LRTA."

Petitioners would contend that the appellate court ignored the evidence and the factual findings
of the trial court by holding them liable on the basis of a sweeping conclusion that the
presumption of negligence on the part of a common carrier was not overcome. Petitioners
would insist that Escartin’s assault upon Navidad, which caused the latter to fall on the tracks,
was an act of a stranger that could not have been foreseen or prevented. The LRTA would add
that the appellate court’s conclusion on the existence of an employer-employee relationship
between Roman and LRTA lacked basis because Roman himself had testified being an employee
of Metro Transit and not of the LRTA.

Respondents, supporting the decision of the appellate court, contended that a contract of
carriage was deemed created from the moment Navidad paid the fare at the LRT station and
entered the premises of the latter, entitling Navidad to all the rights and protection under a
contractual relation, and that the appellate court had correctly held LRTA and Roman liable for
the death of Navidad in failing to exercise extraordinary diligence imposed upon a common
carrier.

Law and jurisprudence dictate that a common carrier, both from the nature of its business and
for reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring
the safety of passengers. The Civil Code, governing the liability of a common carrier for death of
or injury to its passengers, provides:

"Article 1755. A common carrier is bound to carry the passengers safely as far as human care
and foresight can provide, using the utmost diligence of very cautious persons, with a due
regard for all the circumstances.

"Article 1756. In case of death of or injuries to passengers, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in articles 1733 and 1755."

"Article 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the former’s employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.

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

"Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of
the willful acts or negligence of other passengers or of strangers, if the common carrier’s
employees through the exercise of the diligence of a good father of a family could have
prevented or stopped the act or omission."

The law requires common carriers to carry passengers safely using the utmost diligence of very
cautious persons with due regard for all circumstances. 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. In the absence of
satisfactory explanation by the carrier on how the accident occurred, which petitioners,
according to the appellate court, have failed to show, the presumption would be that it has
been at fault, an exception from the general rule that negligence must be proved.

The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the
victim arises from the breach of that contract by reason of its failure to exercise the high
diligence required of the common carrier. In the discharge of its commitment to ensure the
safety of passengers, a carrier may choose to hire its own employees or avail itself of the
services of an outsider or an independent firm to undertake the task. In either case, the
common carrier is not relieved of its responsibilities under the contract of carriage.

Should Prudent be made likewise liable? If at all, that liability could only be for tort under the
provisions of Article 2176 and related provisions, in conjunction with Article 2180, of the Civil
Code. The premise, however, for the employer’s liability is negligence or fault on the part of the
employee. Once such fault is established, the employer can then be made liable on the basis of
the presumption juris tantum that the employer failed to exercise diligentissimi patris families in
the selection and supervision of its employees. The liability is primary and can only be negated
by showing due diligence in the selection and supervision of the employee, a factual matter that
has not been shown. Absent such a showing, one might ask further, how then must the liability
of the common carrier, on the one hand, and an independent contractor, on the other hand, be
described? It would be solidary. A contractual obligation can be breached by tort and when the
same act or omission causes the injury, one resulting in culpa contractual and the other in culpa
aquiliana, Article 2194 of the Civil Code can well apply. In fine, a liability for tort may arise even
under a contract, where tort is that which breaches the contract. Stated differently, when an act
which constitutes a breach of contract would have itself constituted the source of a quasi-
delictual liability had no contract existed between the parties, the contract can be said to have
been breached by tort, thereby allowing the rules on tort to apply.

Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor
Navidad, this Court is concluded by the factual finding of the Court of Appeals that "there is
nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of
its employee, Escartin, has not been duly proven x x x." This finding of the appellate court is not
without substantial justification in our own review of the records of the case.

There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any
culpable act or omission, he must also be absolved from liability. Needless to say, the
contractual tie between the LRT and Navidad is not itself a juridical relation between the latter
and Roman; thus, Roman can be made liable only for his own fault or negligence.

The award of nominal damages in addition to actual damages is untenable. Nominal damages
are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.18 It is an established rule that nominal damages cannot
co-exist with compensatory damages.19

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.

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

PEDRO DE GUZMAN, petitioner,

vs.

COURT OF APPEALS and ERNESTO CENDANA, respondents.

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

FELICIANO, J.:

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

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

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

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

In his Answer, private respondent denied that he was a common carrier and argued that he
could not be held responsible for the value of the lost goods, such loss having been due to force
majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a
common carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as
well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.

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

The Court of Appeals reversed the judgment of the trial court and held that respondent had
been engaged in transporting return loads of freight "as a casual

occupation — a sideline to his scrap iron business" and not as a common carrier. Petitioner
came to this Court by way of a Petition for Review assigning as errors the following conclusions
of the Court of Appeals:

1. that private respondent was not a common carrier;

2. that the hijacking of respondent's truck was force majeure; and

3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)

We consider first the issue of whether or not private respondent Ernesto Cendana may, under
the facts earlier set forth, be properly characterized as a common carrier.

The Civil Code defines "common carriers" in the following terms:

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

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

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

... every person that now or hereafter may own, operate, manage, or control in the Philippines,
for hire or compensation, with general or limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any common carrier, railroad, street railway,
traction railway, subway motor vehicle, either for freight or passenger, or both, with or without
fixed route and whatever may be its classification, freight or carrier service of any class, express
service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice
plant,

ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply
and power petroleum, sewerage system, wire or wireless communications systems, wire or
wireless broadcasting stations and other similar public services. ... (Emphasis supplied)

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

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

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

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

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

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

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character-of the goods or defects in the packing or-in the containers; and

(5) Order or act of competent public authority.

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

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

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

Petitioner insists that private respondent had not observed extraordinary diligence in the care of
petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent
should have hired a security guard presumably to ride with the truck carrying the 600 cartons of
Liberty filled milk. We do not believe, however, that in the instant case, the standard of
extraordinary diligence required private respondent to retain a security guard to ride with the
truck and to engage brigands in a firelight at the risk of his own life and the lives of the driver
and his helper.
The precise issue that we address here relates to the specific requirements of the duty of
extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking
or armed robbery.

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

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

xxx xxx xxx

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

(6) that the common carrier's liability for acts committed by thieves, or of robbers who do
not act with grave or irresistible threat, violence or force, is dispensed with or diminished; and

(7) that the common carrier shall not responsible for the loss, destruction or deterioration
of goods on account of the defective condition of the car vehicle, ship, airplane or other
equipment used in the contract of carriage. (Emphasis supplied)

Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to
divest or to diminish such responsibility — even for acts of strangers like thieves or robbers,
except where such thieves or robbers in fact acted "with grave or irresistible threat, violence or
force." We believe and so hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat, violence or force."

In the instant case, armed men held up the second truck owned by private respondent which
carried petitioner's cargo. The record shows that an information for robbery in band was filed in
the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the
Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John
Doe." There, the accused were charged with willfully and unlawfully taking and carrying away
with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of
Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The
decision of the trial court shows that the accused acted with grave, if not irresistible, threat,
violence or force.3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers
not only took away the truck and its cargo but also kidnapped the driver and his helper,
detaining them for several days and later releasing them in another province (in Zambales). The
hijacked truck was subsequently found by the police in Quezon City. The Court of First Instance
convicted all the accused of robbery, though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as
quite beyond the control of the common carrier and properly regarded as a fortuitous event. It
is necessary to recall that even common carriers are not made absolute insurers against all risks
of travel and of transport of goods, and are not held liable for acts or events which cannot be
foreseen or are inevitable, provided that they shall have complied with the rigorous standard of
extraordinary diligence.

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

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

SO ORDERED.

G.R. No. 125948 December 29, 1998

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,

vs.

COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C.

ARELLANO, in her official capacity as City Treasurer of Batangas, respondents.

MARTINEZ, J.:

This petition for review on certiorari assails the Decision of the Court of Appeals dated
November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial Court
of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners' complaint for a
business tax refund imposed by the City of Batangas.

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to
contract, install and operate oil pipelines. The original pipeline concession was granted in 1967
and renewed by the Energy Regulatory Board in 1992.

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor
of Batangas City. However, before the mayor's permit could be issued, the respondent City
Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year
1993 pursuant to the Local Government Code3. The respondent City Treasurer assessed a
business tax on the petitioner amounting to P956,076.04 payable in four installments based on
the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted to
P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in
the amount of P239,019.01 for the first quarter of 1993.

On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer,
the pertinent portion of which reads:

Please note that our Company (FPIC) is a pipeline operator with a government concession
granted under the Petroleum Act. It is engaged in the business of transporting petroleum
products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As
such, our Company is exempt from paying tax on gross receipts under Section 13 of the Local
Government Code of 1991 . . . .

Moreover, Transportation contractors are not included in the enumeration of contractors under
Section 131, Paragraph (h) of the Local Government Code. Therefore, the authority to impose
tax "on contractors and other independent contractors" under Section 143, Paragraph (e) of the
Local Government Code does not include the power to levy on transportation contractors.

The imposition and assessment cannot be categorized as a mere fee authorized under Section
147 of the Local Government Code. The said section limits the imposition of fees and charges on
business to such amounts as may be commensurate to the cost of regulation, inspection, and
licensing. Hence, assuming arguendo that FPIC is liable for the license fee, the imposition
thereof based on gross receipts is violative of the aforecited provision. The amount of
P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of regulation,
inspection and licensing. The fee is already a revenue raising measure, and not a mere
regulatory imposition.

On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner
cannot be considered engaged in transportation business, thus it cannot claim exemption under
Section 133 (j) of the Local Government Code.

On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint for
tax refund with prayer for writ of preliminary injunction against respondents City of Batangas
and Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged,
inter alia, that: (1) the imposition and collection of the business tax on its gross receipts violates
Section 133 of the Local Government Code; (2) the authority of cities to impose and collect a tax
on the gross receipts of "contractors and independent contractors" under Sec. 141 (e) and 151
does not include the authority to collect such taxes on transportation contractors for, as defined
under Sec. 131 (h), the term "contractors" excludes transportation contractors; and, (3) the City
Treasurer illegally and erroneously imposed and collected the said tax, thus meriting the
immediate refund of the tax paid.

Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes
under Section 133 (j) of the Local Government Code as said exemption applies only to
"transportation contractors and persons engaged in the transportation by hire and common
carriers by air, land and water." Respondents assert that pipelines are not included in the term
"common carrier" which refers solely to ordinary carriers such as trucks, trains, ships and the
like. Respondents further posit that the term "common carrier" under the said code pertains to
the mode or manner by which a product is delivered to its destination.

On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this
wise:

. . . Plaintiff is either a contractor or other independent contractor.

. . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax
exemptions are to be strictly construed against the taxpayer, taxes being the lifeblood of the
government. Exemption may therefore be granted only by clear and unequivocal provisions of
law.

Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387. (Exhibit A)
whose concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither
said law nor the deed of concession grant any tax exemption upon the plaintiff.

Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local
Tax Code. Such being the situation obtained in this case (exemption being unclear and equivocal)
resort to distinctions or other considerations may be of help:

1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as
not to overburden the riding public or commuters with taxes. Plaintiff is not a common carrier,
but a special carrier extending its services and facilities to a single specific or "special customer"
under a "special contract."

2. The Local Tax Code of 1992 was basically enacted to give more and effective local
autonomy to local governments than the previous enactments, to make them economically and
financially viable to serve the people and discharge their functions with a concomitant
obligation to accept certain devolution of powers, . . . So, consistent with this policy even
franchise grantees are taxed (Sec. 137) and contractors are also taxed under Sec. 143 (e) and
151 of the Code.

Petitioner assailed the aforesaid decision before this Court via a petition for review. On February
27, 1995, we referred the case to the respondent Court of Appeals for consideration and
adjudication. On November 29, 1995, the respondent court rendered a decision affirming the
trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was
denied on July 18, 1996.

Hence, this petition. At first, the petition was denied due course in a Resolution dated
November 11, 1996. 13 Petitioner moved for a reconsideration which was granted by this Court
in a Resolution 14 of January 22, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is
not a common carrier or a transportation contractor, and (2) the exemption sought for by
petitioner is not clear under the law.

There is merit in the petition.

A "common carrier" may be defined, broadly, as one who holds himself out to the public as
engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally.

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. In De Guzman vs. Court of Appeals we ruled that:

The above article (Art. 1732, Civil Code) makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 . . . avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1877
deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide
neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:

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

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the
Local Government Code refers only to common carriers transporting goods and passengers
through moving vehicles or vessels either by land, sea or water, is erroneous.

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code
makes no distinction as to the means of transporting, as long as it is by land, water or air. It does
not provide that the transportation of the passengers or goods should be by motor vehicle. In
fact, in the United States, oil pipe line operators are considered common carriers.

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
"common carrier." Thus, Article 86 thereof provides that:

Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall have the preferential
right to utilize installations for the transportation of petroleum owned by him, but is obligated
to utilize the remaining transportation capacity pro rata for the transportation of such other
petroleum as may be offered by others for transport, and to charge without discrimination such
rates as may have been approved by the Secretary of Agriculture and Natural Resources.

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

that everything relating to the exploration for and exploitation of petroleum . . . and everything
relating to the manufacture, refining, storage, or transportation by special methods of
petroleum, is hereby declared to be a public utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR
Ruling No. 069-83, it declared:

. . . since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum

products, it is considered a common carrier under Republic Act No. 387 . . . . Such being the case,
it is not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended.

From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and,
therefore, exempt from the business tax as provided for in Section 133 (j), of the Local
Government Code, to wit:

Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. — Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:

xxx xxx xxx

(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or water, except
as provided in this Code.

The deliberations conducted in the House of Representatives on the Local Government Code of
1991 are illuminating:

MR. AQUINO (A). Thank you, Mr. Speaker.

Mr. Speaker, we would like to proceed to page 95, line

1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the Taxing Powers of Local
Government Units." . . .

MR. AQUINO (A.). Thank you Mr. Speaker.

Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be
one of those being deemed to be exempted from the taxing powers of the local government
units. May we know the reason why the transportation business is being excluded from the
taxing powers of the local government units?

MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line
16, paragraph 5. It states that local government units may not impose taxes on the business of
transportation, except as otherwise provided in this code.

Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there
that provinces have the power to impose a tax on business enjoying a franchise at the rate of
not more than one-half of 1 percent of the gross annual receipts. So, transportation contractors
who are enjoying a franchise would be subject to tax by the province. That is the exception, Mr.
Speaker.

What we want to guard against here, Mr. Speaker, is the imposition of taxes by local
government units on the carrier business. Local government units may impose taxes on top of
what is already being imposed by the National Internal Revenue Code which is the so-called
"common carriers tax." We do not want a duplication of this tax, so we just provided for an
exception under Section 125 [now Sec. 137] that a province may impose this tax at a specific
rate.

MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . .

It is clear that the legislative intent in excluding from the taxing power of the local government
unit the imposition of business tax against common carriers is to prevent a duplication of the so-
called "common carrier's tax."

Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings
under the National Internal Revenue Code. 19 To tax petitioner again on its gross receipts in its
transportation of petroleum business would defeat the purpose of the Local Government Code.

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals
dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.

SO ORDERED.

G.R. No. 157917 August 29, 2012

SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,

vs.

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

DECISION

BERSAMIN, J.:

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

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

Antecedents

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

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

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

Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for
damages against Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR filed their respective
answers, with cross-claims against each other, but Alfaro could not be served with summons.

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

A. FACTS:

(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;

(2) Spouses Zarate engaged the services of spouses Pereña for the adequate and safe
transportation carriage of the former spouses' son from their residence in Parañaque to his
school at the Don Bosco Technical Institute in Makati City;

(3) During the effectivity of the contract of carriage and in the implementation thereof, Aaron,
the minor son of spouses Zarate died in connection with a vehicular/train collision which
occurred while Aaron was riding the contracted carrier Kia Ceres van of spouses Pereña, then
driven and operated by the latter's employee/authorized driver Clemente Alfaro, which van
collided with the train of PNR, at around 6:45 A.M. of August 22, 1996, within the vicinity of the
Magallanes Interchange in Makati City, Metro Manila, Philippines;

(4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision
was a railroad crossing used by motorists for crossing the railroad tracks;

(5) During the said time of the vehicular/train collision, there were no appropriate and safety
warning signs and railings at the site commonly used for railroad crossing;

(6) At the material time, countless number of Makati bound public utility and private vehicles
used on a daily basis the site of the collision as an alternative route and short-cut to Makati;

(7) The train driver or operator left the scene of the incident on board the commuter train
involved without waiting for the police investigator;

(8) The site commonly used for railroad crossing by motorists was not in fact intended by the
railroad operator for railroad crossing at the time of the vehicular collision;

(9) PNR received the demand letter of the spouses Zarate;

(10) PNR refused to acknowledge any liability for the vehicular/train collision;

(11) The eventual closure of the railroad crossing alleged by PNR was an internal arrangement
between the former and its project contractor; and
(12) The site of the vehicular/train collision was within the vicinity or less than 100 meters from
the Magallanes station of PNR.

B. ISSUES

(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for
negligence constituting the proximate cause of the vehicular collision, which resulted in the
death of plaintiff spouses' son;

(2) Whether or not the defendant spouses Pereña being the employer of defendant Alfaro are
liable for any negligence which may be attributed to defendant Alfaro;

(3) Whether or not defendant Philippine National Railways being the operator of the railroad
system is liable for negligence in failing to provide adequate safety warning signs and railings in
the area commonly used by motorists for railroad crossings, constituting the proximate cause of
the vehicular collision which resulted in the death of the plaintiff spouses' son;

(4) Whether or not defendant spouses Pereña are liable for breach of the contract of carriage
with plaintiff-spouses in failing to provide adequate and safe transportation for the latter's son;

(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary
damages, and attorney's fees;

(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the diligence of
employers and school bus operators;

(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John
Zarate;

(8) Whether or not defendant PNR was grossly negligent in operating the commuter train
involved in the accident, in allowing or tolerating the motoring public to cross, and its failure to
install safety devices or equipment at the site of the accident for the protection of the public;

(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any and
whatever amount the latter may be held answerable or which they may be ordered to pay in
favor of plaintiffs by reason of the action;

(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts
claimed by the latter in their Complaint by reason of its gross negligence;

(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and
exemplary damages and attorney's fees.

The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the safe
transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil
Code.
In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of
a good father of the family in the selection and supervision of Alfaro, by making sure that Alfaro
had been issued a driver’s license and had not been involved in any vehicular accident prior to
the collision; that their own son had taken the van daily; and that Teodoro Pereña had
sometimes accompanied Alfaro in the van’s trips transporting the students to school.

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

Ruling of the RTC

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

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

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

(2) Actual damages in the amount of Php100,000.00;

(3) For the loss of earning capacity- Php2,109,071.00;

(4) Moral damages in the amount of Php4,000,000.00;

(5) Exemplary damages in the amount of Php1,000,000.00;

(6) Attorney’s fees in the amount of Php200,000.00; and

(7) Cost of suit.

SO ORDERED.

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

The CA’s Ruling

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

PNR assigned the following errors, to wit:

The Court a quo erred in:

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

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

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

The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral
and exemplary damages and attorney’s fees with the other defendants.

The trial court erred in dismissing the cross-claim of the appellants Pereñas against the
Philippine National Railways and in not holding the latter and its train driver primarily
responsible for the incident.

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

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

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

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

SO ORDERED.

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

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

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

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

Issues

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

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

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

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

Ruling

The petition has no merit.

1. Were the Pereñas and PNR jointly and severally liable for damages?

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

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

We concur with the CA.

To start with, the Pereñas’ defense was that they exercised the diligence of a good father of the
family in the selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a
driver’s license and that he had not been involved in any vehicular accident prior to the fatal
collision with the train; that they even had their own son travel to and from school on a daily
basis; and that Teodoro Pereña himself sometimes accompanied Alfaro in transporting the
passengers to and from school. The RTC gave scant consideration to such defense by regarding
such defense as inappropriate in an action for breach of contract of carriage.
We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas
operated as a common carrier; and that their standard of care was extraordinary diligence, not
the ordinary diligence of a good father of a family.

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

A carrier is a person or corporation who undertakes to transport or convey goods or persons

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

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

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

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

Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code
coincides neatly with the notion of public service under the Public Service Act, which
supplements the law on common carriers found in the Civil Code. Public service, according to
Section 13, paragraph (b) of the Public Service Act, includes:

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

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

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

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

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

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

As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be
negligent at the time of the accident because death had occurred to their passenger. 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. It was the law no less that required
them to prove their observance of extraordinary diligence in seeing to the safe and secure
carriage of the passengers to their destination. Until they did so in a credible manner, they
stood to be held legally responsible for the death of Aaron and thus to be held liable for all the
natural consequences of such death.

There is no question that the Pereñas did not overturn the presumption of their negligence by
credible evidence. Their defense of having observed the diligence of a good father of a family in
the selection and supervision of their driver was not legally sufficient. According to Article 1759
of the Civil Code, their liability as a common carrier did not cease upon proof that they exercised
all the diligence of a good father of a family in the selection and supervision of their employee.
This was the reason why the RTC treated this defense of the Pereñas as inappropriate in this
action for breach of contract of carriage.

The Pereñas were liable for the death of Aaron despite the fact that their driver might have
acted beyond the scope of his authority or even in violation of the orders of the common carrier.
In this connection, the records showed their driver’s actual negligence. There was a showing, to
begin with, that their driver traversed the railroad tracks at a point at which the PNR did not
permit motorists going into the Makati area to cross the railroad tracks. Although that point had
been used by motorists as a shortcut into the Makati area, that fact alone did not excuse their
driver into taking that route. On the other hand, with his familiarity with that shortcut, their
driver was fully aware of the risks to his passengers but he still disregarded the risks.
Compounding his lack of care was that loud music was playing inside the air-conditioned van at
the time of the accident. The loudness most probably reduced his ability to hear the warning
horns of the oncoming train to allow him to correctly appreciate the lurking dangers on the
railroad tracks. Also, he sought to overtake a passenger bus on the left side as both vehicles
traversed the railroad tracks. In so doing, he lost his view of the train that was then coming from
the opposite side of the passenger bus, leading him to miscalculate his chances of beating the
bus in their race, and of getting clear of the train. As a result, the bus avoided a collision with the
train but the van got slammed at its rear, causing the fatality. Lastly, he did not slow down or go
to a full stop before traversing the railroad tracks despite knowing that his slackening of speed
and going to a full stop were in observance of the right of way at railroad tracks as defined by
the traffic laws and regulations. He thereby violated a specific traffic regulation on right of way,
by virtue of which he was immediately presumed to be negligent.

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

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

The test by which to determine the existence of negligence in a particular case may be stated as
follows: Did the defendant in doing the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used in the same situation? If not, then
he is guilty of negligence. The law here in effect adopts the standard supposed to be supplied by
the imaginary conduct of the discreet paterfamilias of the Roman law. The existence of
negligence in a given case is not determined by reference to the personal judgment of the actor
in the situation before him. The law considers what would be reckless, blameworthy, or
negligent in the man of ordinary intelligence and prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation
must of course be always determined in the light of human experience and in view of the facts
involved in the particular case. Abstract speculation cannot here be of much value but this much
can be profitably said: Reasonable men govern their conduct by the circumstances which are
before them or known to them. They are not, and are not supposed to be, omniscient of the
future. Hence they can be expected to take care only when there is something before them to
suggest or warn of danger. Could a prudent man, in the case under consideration, foresee harm
as a result of the course actually pursued? If so, it was the duty of the actor to take precautions
to guard against that harm. Reasonable foresight of harm, followed by the ignoring of the
suggestion born of this prevision, is always necessary before negligence can be held to exist.
Stated in these terms, the proper criterion for determining the existence of negligence in a given
case is this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor
would have foreseen that an effect harmful to another was sufficiently probable to warrant his
foregoing the conduct or guarding against its consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent
when he traversed the railroad tracks at a point not allowed for a motorist’s crossing despite
being fully aware of the grave harm to be thereby caused to his passengers; and when he
disregarded the foresight of harm to his passengers by overtaking the bus on the left side as to
leave himself blind to the approach of the oncoming train that he knew was on the opposite
side of the bus.

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

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

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

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

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

Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and
unfounded.1âwphi1 They cited People v. Teehankee, Jr., where the Court deleted the indemnity
for victim Jussi Leino’s loss of earning capacity as a pilot for being speculative due to his having
graduated from high school at the International School in Manila only two years before the
shooting, and was at the time of the shooting only enrolled in the first semester at the Manila
Aero Club to pursue his ambition to become a professional pilot. That meant, according to the
Court, that he was for all intents and purposes only a high school graduate.

We reject the Pereñas’ submission.

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

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

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

3. Were the amounts of damages excessive?

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

The plea is unwarranted.

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

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

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated
on November 13, 2002; and ORDER the petitioners to pay the costs of suit.

SO ORDERED.
G.R. No. 101503 September 15, 1993

PLANTERS PRODUCTS, INC., petitioner,

vs.

COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA,
respondents.

Gonzales, Sinense, Jimenez & Associates for petitioner.

Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.

BELLOSILLO, J.:

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?

Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI)
of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter
shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private
respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San
Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of
the vessel and issued on the date of departure.

On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum"
pursuant to the Uniform General Charter was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in Tokyo, Japan. Riders to the aforesaid charter-party
starting from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos. 1, 2, 3
and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and 27th
of May 1974, respectively.

Before loading the fertilizer aboard the vessel, four (4) of her holds were all presumably
inspected by the charterer's representative and found fit to take a load of urea in bulk pursuant
to par. 16 of the charter-party which reads:

16. . . . At loading port, notice of readiness to be accomplished by certificate from National

Cargo Bureau inspector or substitute appointed by charterers for his account certifying the
vessel's readiness to receive cargo spaces. The vessel's hold to be properly swept, cleaned and
dried at the vessel's expense and the vessel to be presented clean for use in bulk to the
satisfaction of the inspector before daytime commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of
the shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of
tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed
throughout the entire voyage.

Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were
opened with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its
steelbodied dump trucks which were parked alongside the berth, using metal scoops attached
to the ship, pursuant to the terms and conditions of the charter-partly (which provided for an
F.I.O.S. clause). The hatches remained open throughout the duration of the discharge.

Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was
transported to the consignee's warehouse located some fifty (50) meters from the wharf.
Midway to the warehouse, the trucks were made to pass through a weighing scale where they
were individually weighed for the purpose of ascertaining the net weight of the cargo. The port
area was windy, certain portions of the route to the warehouse were sandy and the weather
was variable, raining occasionally while the discharge was in progress.8 The petitioner's
warehouse was made of corrugated galvanized iron (GI) sheets, with an opening at the front
where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins
and GI sheets were placed in-between and alongside the trucks to contain spillages of the
ferilizer.9

It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th,
14th and 18th). A private marine and cargo surveyor, Cargo Superintendents Company Inc.
(CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft
readings of the vessel prior to and after discharge. The survey report submitted by CSCI to the
consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of 106.726 M/T and that a
portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same
results were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared
by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and about 23
M/T were rendered unfit for commerce, having been polluted with sand, rust and

dirt.

Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies
(SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the
alleged shortage in the goods shipped and the diminution in value of that portion said to have
been contaminated with dirt.

Respondent SSA explained that they were not able to respond to the consignee's claim for
payment because, according to them, what they received was just a request for shortlanded
certificate and not a formal claim, and that this "request" was denied by them because they
"had nothing to do with the discharge of the shipment." Hence, on 18 July 1975, PPI filed an
action for damages with the Court of First Instance of Manila. The defendant carrier argued that
the strict public policy governing common carriers does not apply to them because they have
become private carriers by reason of the provisions of the charter-party. The court a quo
however sustained the claim of the plaintiff against the defendant carrier for the value of the
goods lost or damaged when it ruled thus:

. . . Prescinding from the provision of the law that a common carrier is presumed negligent in
case of loss or damage of the goods it contracts to transport, all that a shipper has to do in a suit
to recover for loss or damage is to show receipt by the carrier of the goods and to delivery by it
of less than what it received. After that, the burden of proving that the loss or damage was due
to any of the causes which exempt him from liability is shipted to the carrier, common or private
he may be. Even if the provisions of the charter-party aforequoted are deemed valid, and the
defendants considered private carriers, it was still incumbent upon them to prove that the
shortage or contamination sustained by the cargo is attributable to the fault or negligence on
the part of the shipper or consignee in the loading, stowing, trimming and discharge of the cargo.
This they failed to do. By this omission, coupled with their failure to destroy the presumption of
negligence against them, the defendants are liable (emphasis supplied).

On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from
liability for the value of the cargo that was lost or damaged. Relying on the 1968 case of Home
Insurance Co. v. American Steamship Agencies, Inc., the appellate court ruled that the cargo
vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and not a
common carrier by reason of the time charterer-party. Accordingly, the Civil Code provisions on
common carriers which set forth a presumption of negligence do not find application in the case
at bar. Thus —

. . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee to adduce
sufficient evidence to prove the negligence of the defendant carrier as alleged in its complaint. It
is an old and well settled rule that if the plaintiff, upon whom rests the burden of proving his
cause of action, fails to show in a satisfactory manner the facts upon which he bases his claim,
the defendant is under no obligation to prove his exception or defense (Moran, Commentaries
on the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202).

But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause of
action, i.e. the alleged negligence of defendant carrier. It appears that the plaintiff was under
the impression that it did not have to establish defendant's negligence. Be that as it may,
contrary to the trial court's finding, the record of the instant case discloses ample evidence
showing that defendant carrier was not negligent in performing its obligation . . . (emphasis
supplied).

Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of
Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present
controversy because the issue raised therein is the validity of a stipulation in the charter-party
delimiting the liability of the shipowner for loss or damage to goods cause by want of due
deligence on its part or that of its manager to make the vessel seaworthy in all respects, and not
whether the presumption of negligence provided under the Civil Code applies only to common
carriers and not to private carriers. Petitioner further argues that since the possession and
control of the vessel remain with the shipowner, absent any stipulation to the contrary, such
shipowner should made liable for the negligence of the captain and crew. In fine, PPI faults the
appellate court in not applying the presumption of negligence against respondent carrier, and
instead shifting the onus probandi on the shipper to show want of due deligence on the part of
the carrier, when he was not even at hand to witness what transpired during the entire voyage.

As earlier stated, the primordial issue here is whether a common carrier becomes a private
carrier by reason of a charter-party; in the negative, whether the shipowner in the instant case
was able to prove that he had exercised that degree of diligence required of him under the law.

It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being
so, we find it fitting to first define important terms which are relevant to our discussion.

A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof,
is let by the owner to another person for a specified time or use; a contract of affreightment by
which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other
person for the conveyance of goods, on a particular voyage, in consideration of the payment of
freight; Charter parties are of two types: (a) contract of affreightment which involves the use of
shipping space on vessels leased by the owner in part or as a whole, to carry goods for others;
and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to
the charterer with a transfer to him of its entire command and possession and consequent
control over its navigation, including the master and the crew, who are his servants. Contract of
affreightment may either be time charter, wherein the vessel is leased to the charterer for a
fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both
cases, the charter-party provides for the hire of vessel only, either for a determinate period of
time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the
wages of the master and the crew, and defray the expenses for the maintenance of the ship.

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil
Code. 23 The definition extends to carriers either by land, air or water which hold themselves
out as ready to engage in carrying goods or transporting passengers or both for compensation
as a public employment and not as a casual occupation. The distinction between a "common or
public carrier" and a "private or special carrier" lies in the character of the business, such that if
the undertaking is a single transaction, not a part of the general business or occupation,
although involving the carriage of goods for a fee, the person or corporation offering such
service is a private carrier.

Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of
their business, should observe extraordinary diligence in the vigilance over the goods they carry.
In the case of private carriers, however, the exercise of ordinary diligence in the carriage of
goods will suffice. Moreover, in the case of loss, destruction or deterioration of the goods,
common carriers are presumed to have been at fault or to have acted negligently, and the
burden of proving otherwise restsn them.26 On the contrary, no such presumption applies to
private carriers, for whosoever alleges damage to or deterioration of the goods carried has the
onus of proving that the cause was the negligence of the carrier.

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

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.

Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship
Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the
validity of a stipulation in the charter-party exempting the shipowners from liability for loss due
to the negligence of its agent, and not the effects of a special charter on common carriers. At
any rate, the rule in the United States that a ship chartered by a single shipper to carry special
cargo is not a common carrier, does not find application in our jurisdiction, for we have
observed that the growing concern for safety in the transportation of passengers and /or
carriage of goods by sea requires a more exacting interpretation of admiralty laws, more
particularly, the rules governing common carriers.

We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law —

As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is
used to convey the goods of one and of several persons. Where the ship herself is let to a
charterer, so that he takes over the charge and control of her, the case is different; the
shipowner is not then a carrier. But where her services only are let, the same grounds for
imposing a strict responsibility exist, whether he is employed by one or many. The master and
the crew are in each case his servants, the freighter in each case is usually without any
representative on board the ship; the same opportunities for fraud or collusion occur; and the
same difficulty in discovering the truth as to what has taken place arises . . .

In an action for recovery of damages against a common carrier on the goods shipped, the
shipper or consignee should first prove the fact of shipment and its consequent loss or damage
while the same was in the possession, actual or constructive, of the carrier. Thereafter, the
burden of proof shifts to respondent to prove that he has exercised extraordinary diligence
required by law or that the loss, damage or deterioration of the cargo was due to fortuitous
event, or some other circumstances inconsistent with its liability.

To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the
prima facie presumption of negligence.

The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977
before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan,
testified that before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned,
dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds, the
steel pontoon hatches were closed and sealed with iron lids, then covered with three (3) layers
of serviceable tarpaulins which were tied with steel bonds. The hatches remained close and
tightly sealed while the ship was in transit as the weight of the steel covers made it impossible
for a person to open without the use of the ship's boom.

It was also shown during the trial that the hull of the vessel was in good condition, foreclosing
the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the
vessel. When M/V "Sun Plum" docked at its berthing place, representatives of the consignee
boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores,
and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the
hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates
who were overseeing the whole operation on rotation basis.

Verily, the presumption of negligence on the part of the respondent carrier has been
efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo. This was confirmed by respondent appellate court thus —

. . . Be that as it may, contrary to the trial court's finding, the record of the instant case discloses
ample evidence showing that defendant carrier was not negligent in performing its obligations.
Particularly, the following testimonies of plaintiff-appellee's own witnesses clearly show
absence of negligence by the defendant carrier; that the hull of the vessel at the time of the
discharge of the cargo was sealed and nobody could open the same except in the presence of
the owner of the cargo and the representatives of the vessel (TSN, 20 July 1977, p. 14); that the
cover of the hatches was made of steel and it was overlaid with tarpaulins, three layers of
tarpaulins and therefore their contents were protected from the weather (TSN, 5 April 1978, p.
24); and, that to open these hatches, the seals would have to be broken, all the seals were
found to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis supplied).
The period during which private respondent was to observe the degree of diligence required of
it as a public carrier began from the time the cargo was unconditionally placed in its charge after
the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the
vessel reached its destination and its hull was reexamined by the consignee, but prior to
unloading. This is clear from the limitation clause agreed upon by the parties in the Addendum
to the standard "GENCON" time charter-party which provided for an F.I.O.S., meaning, that the
loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free
from all risk and expense to the carrier. Moreover, a shipowner is liable for damage to the cargo
resulting from improper stowage only when the stowing is done by stevedores employed by him,
and therefore under his control and supervision, not when the same is done by the consignee or
stevedores under the employ of the latter.

Article 1734 of the New Civil Code provides that common carriers are not responsible for the
loss, destruction or deterioration of the goods if caused by the charterer of the goods or defects
in the packaging or in the containers. The Code of Commerce also provides that all losses and
deterioration which the goods may suffer during the transportation by reason of fortuitous
event, force majeure, or the inherent defect of the goods, shall be for the account and risk of
the shipper, and that proof of these accidents is incumbent upon the carrier. The carrier,
nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is
proved, as against him, that they arose through his negligence or by reason of his having failed
to take the precautions which usage has established among careful persons.

Respondent carrier presented a witness who testified on the characteristics of the fertilizer
shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer
working with Atlas Fertilizer, described Urea as a chemical compound consisting mostly of
ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46%
nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not
normally evaporate even on a long voyage, provided that the temperature inside the hull does
not exceed eighty (80) degrees centigrade. Mr. Chupungco further added that in unloading
fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation
amounting to one percent (1%) against the bill of lading is deemed "normal" or "tolerable." The
primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the
wind tends to blow away some of the materials during the unloading process.

The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an

extremely high temperature in its place of storage, or when it comes in contact with water.
When Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the
salvaged portion which is in liquid form still remains potent and usable although no longer
saleable in its original market value.

The probability of the cargo being damaged or getting mixed or contaminated with foreign
particles was made greater by the fact that the fertilizer was transported in "bulk," thereby
exposing it to the inimical effects of the elements and the grimy condition of the various pieces
of equipment used in transporting and hauling it.

The evidence of respondent carrier also showed that it was highly improbable for sea water to
seep into the vessel's holds during the voyage since the hull of the vessel was in good condition
and her hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all
respects seaworthy to carry the cargo she was chartered for. If there was loss or contamination
of the cargo, it was more likely to have occurred while the same was being transported from the
ship to the dump trucks and finally to the consignee's warehouse. This may be gleaned from the
testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He explained
that the 18 M/T of alleged "bar order cargo" as contained in their report to PPI was just an
approximation or estimate made by them after the fertilizer was discharged from the vessel and
segregated from the rest of the cargo.

The Court notes that it was in the month of July when the vessel arrived port and unloaded her
cargo. It rained from time to time at the harbor area while the cargo was being discharged
according to the supply officer of PPI, who also testified that it was windy at the waterfront and
along the shoreline where the dump trucks passed enroute to the consignee's warehouse.

Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like
fertilizer carries with it the risk of loss or damage. More so, with a variable weather condition
prevalent during its unloading, as was the case at bar. This is a risk the shipper or the owner of
the goods has to face. Clearly, respondent carrier has sufficiently proved the inherent character
of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its
packaging which further contributed to the loss. On the other hand, no proof was adduced by
the petitioner showing that the carrier was remise in the exercise of due diligence in order to
minimize the loss or damage to the goods it carried.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which
reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of
the First Instance, now Regional Trial Court, of Manila should be, as it is hereby DISMISSED.

Costs against petitioner.

SO ORDERED.