Sie sind auf Seite 1von 74

1. G.R. No.

No. L-18965 October 30, 1964 was loaded free of charge and was not actually loaded on the S.S. Bowline Knot which would carry the
COMPAÑIA MARITIMA, petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, hemp to Manila and no bill of lading was issued therefore?; (2) Was the damage caused to the cargo or
respondent. 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
Sometime in October, 1952, Macleod and Company of the Philippines contacted by telephone the insurance contract as assignee of Macleod in spite of the fact that the liability of the carrier as insurer is
services of the Compañia Maritima, a shipping corporation, for the shipment of 2,645 bales of hemp not recognized in this jurisdiction?; (4) Has the Court of Appeals erred in regarding Exhibit NNN-1 as an
from the former's Sasa private pier at Davao City to Manila and for their subsequent transhipment to implied admission by the carrier of the correctness and sufficiency of the shipper's statement of
Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral contract was later on accounts contrary to the burden of proof rule?; and (5) Can the insurance company maintain this suit
confirmed by a formal and written booking issued by Macleod's branch office in Sasa and handcarried without proof of its personality to do so?
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, 1. This issue should be answered in the affirmative. As found by the Court of Appeals, Macleod and
1952. These two lighters were manned each by a patron and an assistant patron. The patrons of both Company contracted by telephone the services of petitioner to ship the hemp in question from the
barges issued the corresponding carrier's receipts and that issued by the patron of Barge No. 1025 former's private pier at Sasa, Davao City, to Manila, to be subsequently transhipped to Boston,
reads in part: 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
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND undertake the service. It also appears that the patrons of said lighters were employees of the carrier
COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel with due authority to undertake the transportation and to sign the documents that may be necessary
Navigator. therefor so much so that the patron of LCT No. 1025 signed the receipt covering the cargo of hemp
loaded therein as follows: .
FINAL DESTINATION: Boston.
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND
Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel
government's marginal wharf in the same place to await the arrival of the S.S. Bowline Knot belonging Navigator.
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 FINAL DESTINATION: Boston.
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 The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa
Madaum, Davao, for cleaning, washing, reconditioning, and redrying. During the period from November preparatory to its loading onto the ship Bowline Knot does not in any way impair the contract of carriage
1-15, 1952, the carrier's trucks and lighters hauled from Odell to Macleod at Sasa a total of 2,197.75 already entered into between the carrier and the shipper, for that preparatory step is but part and parcel
piculs of the reconditioned hemp out of the original cargo of 1,162 bales weighing 2,324 piculs which of said contract of carriage. The lighters were merely employed as the first step of the voyage, but once
had a total value of 116,835.00. After reclassification, the value of the reconditioned hemp was reduced that step was taken and the hemp delivered to the carrier's employees, the rights and obligations of the
to P84,887.28, or a loss in value of P31,947.72. Adding to this last amount the sum of P8,863.30 parties attached thereby subjecting them to the principles and usages of the maritime law. In other
representing Macleod's expenses in checking, grading, rebating, and other fees for washing, cleaning words, here we have a complete contract of carriage the consummation of which has already begun:
and redrying in the amount of P19.610.00, the total loss adds up to P60,421.02. 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
All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025, were secured to him by law for its safe transportation and delivery, and the carrier to the full payment of its
insured with the Insurance Company of North America against all losses and damages. In due time, freight upon completion of the voyage.
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 The receipt of goods by the carrier has been said to lie at the foundation of the contract to
which aside from being a receipt of the amount paid, was a subrogation agreement between Macleod carry and deliver, and if actually no goods are received there can be no such contract. The
and the insurance company wherein the former assigned to the latter its rights over the insured and liability and responsibility of the carrier under a contract for the carriage of goods commence
damaged cargo. Having failed to recover from the carrier the sum of P60,421.02, which is the only on their actual delivery to, or receipt by, the carrier or an authorized agent. ... and delivery to a
amount supported by receipts, the insurance company instituted the present action on October 28, lighter in charge of a vessel for shipment on the vessel, where it is the custom to deliver in that
1953. After trial, the court a quo rendered judgment ordering the carrier to pay the insurance company way, is a good delivery and binds the vessel receiving the freight, the liability commencing at
the sum of P60,421.02, with legal interest thereon from the date of the filing of the complaint until fully the time of delivery to the lighter. ... and, similarly, where there is a contract to carry goods
paid, and the costs. This judgment was affirmed by the Court of Appeals on December 14, 1960. from one port to another, and they cannot be loaded directly on the vessel and lighters are
Hence, this petition for review. 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
The issues posed before us are: (1) Was there a contract of carriage between the carrier and the C.J.S., p. 901, emphasis supplied)
shipper even if the loss occurred when the hemp was loaded on a barge owned by the carrier which

TRANSPORTATION LAW
... The test as to whether the relation of shipper and carrier had been established is, Had the Certainly, winds of 11 miles per hour, although stronger than the average 4.6 miles per hour
control and possession of the cotton been completely surrendered by the shipper to the then prevailing in Davao on October 29, 1952 (exh. 5), cannot be classified as storm. For
railroad company? Whenever the control and possession of goods passes to the carrier and according to Beaufort's wind scale, a storm has wind velocities of from 64 to 75 miles per hour;
nothing remains to be done by the shipper, then it can be said with certainty that the relation of and by Philippine Weather Bureau standards winds should have a velocity of from 55 to 74
shipper and carrier has been established. Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W. 419, miles per hour in order to be classified as storm (Northern Assurance Co., Ltd. vs. Visayan
46 A. St. Rep. 202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W. 834; Stevedore Transportation Co., CA-G.R. No. 23167-R, March 12, 1959).
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 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.
The claim that there can be no contract of affreightment because the hemp was not actually loaded on JJJ); and this report finds confirmation on the above-mentioned admission of two witnesses for
the ship that was to take it from Davao City to Manila is of no moment, for, as already stated, the appellant concerning the cracks of the lighter's bottom and the entrance of the rain water 'thru
delivery of the hemp to the carrier's lighter is in line with the contract. In fact, the receipt signed by the manholes'." We are not prepared to dispute this finding of the Court of Appeals.
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 3. There can also be no doubt that the insurance company can recover from the carrier as assignee of
of lading is not indispensable for the creation of a contract of carriage. 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
Bill of lading not indispensable to contract of carriage. — As to the issuance of a bill of lading, latter paid the amount represented by the loss, it is but fair that it be given the right to recover from the
although article 350 of the Code of Commerce provides that "the shipper as well as the carrier party responsible for the loss. The instant case, therefore, is not one between the insured and the
of merchandise or goods may mutua-lly demand that a bill of lading is not indispensable. As insurer, but one between the shipper and the carrier, because the insurance company merely stepped
regards the form of the contract of carriage it can be said that provided that there is a meeting into the shoes of the shipper. And since the shipper has a direct cause of action against the carrier on
of the minds and from such meeting arise rights and obligations, there should be no limitations account of the damage of the cargo, no valid reason is seen why such action cannot be asserted or
as to form." The bill of lading is not essential to the contract, although it may become obligatory availed of by the insurance company as a subrogee of the shipper. Nor can the carrier set up as a
by reason of the regulations of railroad companies, or as a condition imposed in the contract defense any defect in the insurance policy not only because it is not a privy to it but also because it
by the agreement of the parties themselves. The bill of lading is juridically a documentary proof cannot avoid its liability to the shipper under the contract of carriage which binds it to pay any loss that
of the stipulations and conditions agreed upon by both parties. (Del Viso, pp. 314-315; Robles may be caused to the cargo involved therein. Thus, we find fitting the following comments of the Court
vs. Santos, 44 O.G. 2268). In other words, the Code does not demand, as necessary requisite of Appeals:
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. It was not imperative and necessary for the trial court to pass upon the question of whether or
(Sp. Sup. Ct. Decision, May 6, 1895). (Martin, Philippine Commercial Laws, Vol. II, Revised not the disputed abaca cargo was covered by Marine Open Cargo Policy No. MK-134 isued by
Edition, pp. 12-13) 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,
The liability of the carrier as common carrier begins with the actual delivery of the goods for as the insurer, to reject the claim of Macleod, as the insured. Anyway, whatever defect the
transportation, and not merely with the formal execution of a receipt or bill of lading; the policy contained, if any, is deemed to have been waived by the subsequent payment of
issuance of a bill of lading is not necessary to complete delivery and acceptance. Even where Macleod's claim by appellee. Besides, appellant is herein sued in its capacity as a common
it is provided by statute that liability commences with the issuance of the bill of lading, actual carrier, and appellee is suing as the assignee of the shipper pursuant to exhibit MM. Since, as
delivery and acceptance are sufficient to bind the carrier. (13 C.J.S., p. 288) 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
2. Petitioner disclaims responsibility for the damage of the cargo in question shielding itself behind the by the patron of appellant's LCT No. 1025, it necessarily follows that appellant is likewise liable
claim of force majeure or storm which occurred on the night of October 29, 1952. But the evidence fails to appellee who, as assignee of Macleod, merely stepped into the shoes of and substi-tuted
to bear this out. the latter in demanding from appellant the payment for the loss and damage aforecited.

Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure, but to 4. It should be recalled in connection with this issue that during the trial of this case the carrier asked
lack of adequate precautions or measures taken by the carrier to prevent the loss as may be inferred the lower court to order the production of the books of accounts of the Odell Plantation containing the
from the following findings of the Court of Appeals: 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
Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had cracks notwithstanding, the shipper however pre-sented other documents to prove the damage it suffered in
on its bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which admitted sea water in the same manner connection with the cargo and on the strength thereof the court a quo ordered the carrier to pay the sum
as rain entered "thru tank man-holes", according to the patron of LCT No. 1023 (exh. JJJ-4) — of P60,421.02. And after the Court of Appeals affirmed this award upon the theory that the desistance of
conclusively showing that the barge was not seaworthy — it should be noted that on the night the carrier from producing the books of accounts of Odell Plantation implies an admission of the
of the nautical accident there was no storm, flood, or other natural disaster or calamity.

TRANSPORTATION LAW
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.

TRANSPORTATION LAW
2. G.R. No. 92288 February 9, 1993 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
BRITISH AIRWAYS, INC., petitioner, was denied by the petitioner.
vs. THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING
AND GENERAL SERVICES, respondents. On August 8, 1981, private respondent received a telex message from its principal cancelling the hiring
of the remaining recruited workers due to the delay in transporting the workers to Jeddah.5
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 On January 27, 1982, private respondent filed a complaint for damages against petitioner with the
message from its principal ROLACO Engineering and Contracting Services in Jeddah, Saudi Arabia to Regional Trial Court of Manila, Branch 1 in Civil Case No. 82-4653.
recruit Filipino contract workers in behalf of said principal.4
On the other hand, petitioner, alleged in its Answer with counterclaims that it received a telex message
During the early part of March 1981, said principal paid to the Jeddah branch of petitioner British from Jeddah on March 20, 1981 advising that the principal of private respondent had prepaid the
Airways, Inc. airfare tickets for 93 contract workers with specific instruction to transport said workers to airfares of 100 persons to transport private respondent's contract workers from Manila to Jeddah on or
Jeddah on or before March 30, 1981. 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
As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the 93 contract workers were booked in any of its flights.
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 On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract workers of
book the 93 workers with petitioner but the latter failed to fly said workers, thereby compelling private private respondent to Jeddah but the travel agent of the private respondent booked only 10 contract
respondent to borrow money in the amount of P304,416.00 in order to purchase airline tickets from the workers for petitioner's June 9, 1981 flight. However, only 9 contract workers boarded the scheduled
other airlines as evidenced by the cash vouchers (Exhibits "B", "C" and "C-1 to C-7") for the 93 workers flight with 1 passenger not showing up as evidenced by the Philippine Airlines' passenger manifest for
it had recruited who must leave immediately since the visas of said workers are valid only for 45 days Flight BA-020 (Exhibit "7", "7-A", "7-B" and "7-C").6
and the Bureau of Employment Services mandates that contract workers must be sent to the job site
within a period of 30 days. 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
Sometime in the first week of June, 1981, private respondent was again informed by the petitioner that it not show up on said flight.
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 Sometime in July 1981, the travel agent of the private respondent booked 7 more contract workers in
with the petitioner but the latter was only able to book and confirm 16 seats on its June 9, 1981 flight. addition to the previous 5 contract workers who were not able to board the July 4, 1981 flight with the
However, on the date of the scheduled flight only 9 workers were able to board said flight while the petitioner's July 7, 1981 flight which was accepted by petitioner subject to reconfirmation.
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. However on July 6, 1981, petitioner's computer system broke down which resulted to petitioner's failure
Unfortunately, the confirmed bookings of the 13 workers were again cancelled and rebooked to July 7, to get a reconfirmation from Saudi Arabia Airlines causing the automatic cancellation of the bookings of
1981. 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
On July 6, 1981, private respondent paid the travel tax of the said workers as required by the petitioner date and had to place the 12 workers on the wait list. Said information was duly relayed to the private
but when the receipt of the tax payments was submitted, the latter informed private respondent that it respondent and the 12 workers before the scheduled flight.
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 After due trial on or on August 27, 1985, the trial court rendered its decision, the dispositive portion of
tickets from the other airlines. which reads as follows:

As a result of these incidents, private respondent sent a letter to petitioner demanding compensation for WHEREFORE, in view of all the foregoing, this Court renders judgment:
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.

TRANSPORTATION LAW
1. Ordering the defendant to pay the plaintiff actual damages in the sum of for not until the carrier is actually used can the carrier be said to have already
P308,016.00; assumed the obligation of a carrier. (Paras, Civil Code Annotated, Vol. V, p. 429,
Eleventh Ed.)
2. Ordering defendant to pay moral damages to the plaintiff in the amount of
P20,000.00; 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.
3. Ordering the defendant to pay the plaintiff P10,000.00 by way of corrective or
exemplary damages; 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
4. Ordering the defendant to pay the plaintiff 30% of its total claim for and as hand, was manifested by its acceptance of the PTA or prepaid ticket advice that
attorney's fees; and 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.
5. To pay the costs.7
Even if a PTA is merely an advice from the sponsors that an airline is authorized to
On March 13, 1986, petitioner appealed said decision to respondent appellate court after the trial court issue a ticket and thus no ticket was yet issued, the fact remains that the passage
denied its Motion for Reconsideration on February 28, 1986. 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
On November 15, 1989, respondent appellate court affirmed the decision of the trial court, the questioned by the appellant in the lower court. Thus, the cause or consideration
dispositive portion of which reads: which is the fare paid for the passengers exists in this case.

WHEREFORE, the decision appealed from is hereby AFFIRMED with costs against The third essential requisite of a contract is an object certain. In this contract "to
the appellant.8 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.
On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied.
Accordingly, there could be no more pretensions as to the existence of an oral
Hence, this petition. contract of carriage imposing reciprocal obligations on both parties.

It is the contention of petitioner that private respondent has no cause of action against it there being no In the case of appellee, it has fully complied with the obligation, namely, the payment
perfected contract of carriage existing between them as no ticket was ever issued to private of the fare and its willingness for its contract workers to leave for their place of
respondent's contract workers and, therefore, the obligation of the petitioner to transport said contract destination.
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. 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
Petitioner's contention is untenable. by appellee's travelling agent.

Private respondent had a valid cause of action for damages against petitioner. A cause of action is an xxx xxx xxx
act or omission of one party in violation of the legal right or rights of the other.9 Petitioner's repeated
failures to transport private respondent's workers in its flight despite confirmed booking of said workers Besides, appellant knew very well that time was of the essence as the prepaid ticket
clearly constitutes breach of contract and bad faith on its part. In resolving petitioner's theory that advice had specified the period of compliance therewith, and with emphasis that it
private respondent has no cause of action in the instant case, the appellate court correctly held that: 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
In dealing with the contract of common carriage of passengers for purpose of at least inform appellee that it could not accommodate the contract workers.
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 xxx xxx xxx
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
TRANSPORTATION LAW
While there is no dispute that ROLACO Engineering advanced the payment for the As evidence had proved, there was complete failure on the part of the appellant to
airfares of the appellee's contract workers who were recruited for ROLACO transport the 93 contract workers of the appellee on or before March 30, 1981 despite
Engineering and the said contract workers were the intended passengers in the receipt of the payment for their airfares, and acceptance of the same by the appellant,
aircraft of the appellant, the said contract "to carry" also involved the appellee for as with specific instructions from the appellee's principal to transport the contract
recruiter he had to see to it that the contract workers should be transported to workers on or before March 30, 1981. No previous notice was ever registered by the
ROLACO Engineering in Jeddah thru the appellant's transportation. For that matter, appellant that it could not comply with the same. And then followed the detestable act
the involvement of the appellee in the said contract "to carry" was well demonstrated of appellant in unilaterally cancelling, booking and rebooking unreasonably the flight
when of appellee's contract workers in June to July, 1981 without prior notice. And all of
the appellant upon receiving the PTA immediately advised the appellee thereof. 10 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
Petitioner also contends that the appellate court erred in awarding actual damages in the amount of appellee. 14
P308,016.00 to private respondent since all expenses had already been subsequently reimbursed by
the latter's principal. 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
In awarding actual damages to private respondent, the appellate court held that the amount of occurrence therefore said counterclaims were mere afterthoughts when private respondent filed the
P308,016.00 representing actual damages refers to private respondent's second cause of action present case.
involving the expenses incurred by the latter which were not reimbursed by ROLACO Engineering.
However, in the Complaint 11 filed by private respondent, it was alleged that private respondent suffered WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the award
actual damages in the amount of P308,016.00 representing the money it borrowed from friends and of actual damages be deleted from said decision.
financiers which is P304,416.00 for the 93 airline tickets and P3,600.00 for the travel tax of the 12
workers. It is clear therefore that the actual damages private respondent seeks to recover are the airline
tickets and travel taxes it spent for its workers which were already reimbursed by its principal and not for
any other expenses it had incurred in the process of recruiting said contract workers. Inasmuch as all
expenses including the processing fees incurred by private respondent had already been paid for by the
latter's principal on a staggered basis as admitted in open court by its managing director, Mrs.
Bienvenida Brusellas. 12 We do not find anymore justification in the appellate court's decision in granting
actual damages to private respondent.

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

Article 2199 of the Civil Code provides that:

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


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

Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved, and
proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork
as to the fact and amount of damages, but must depend upon competent proof that they have suffered
and on evidence of the actual amount thereof. 13

However, private respondent is entitled to an award of moral and exemplary damages for the injury
suffered as a result of petitioner's failure to transport the former's workers because of the latter's patent
bad faith in the performance of its obligation. As correctly pointed out by the appellate court:
TRANSPORTATION LAW
3. G.R. No. 95582 October 7, 1991 3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual and
compensatory damages;
DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y MALECDAN, petitioners,
vs. COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO 4. The costs of this suit. 4
CUDLAMAT, MARRIETA CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL
CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late Pedrito Cudiamat represented by Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated October 4, 1990, 5
 hence this petition with the central
Inocencia Cudiamat, respondents. issue herein being whether respondent court erred in reversing the decision of the trial court and in
finding petitioners negligent and liable for the damages claimed.
On May 13, 1985, private respondents filed a complaint 1 for damages against petitioners for the death
of Pedrito Cudiamat as a result of a vehicular accident which occurred on March 25, 1985 at Marivic, It is an established principle that the factual findings of the Court of Appeals as a rule are final and may
Sapid, Mankayan, Benguet. Among others, it was alleged that on said date, while petitioner Theodore not be reviewed by this Court on appeal. However, this is subject to settled exceptions, one of which is
M. Lardizabal was driving a passenger bus belonging to petitioner corporation in a reckless and when the findings of the appellate court are contrary to those of the trial court, in which case a
imprudent manner and without due regard to traffic rules and regulations and safety to persons and reexamination of the facts and evidence may be undertaken. 6
property, it ran over its passenger, Pedrito Cudiamat. However, instead of bringing Pedrito immediately
to the nearest hospital, the said driver, in utter bad faith and without regard to the welfare of the victim, In the case at bar, the trial court and the Court of Appeal have discordant positions as to who between the petitioners an the victim is guilty of negligence. Perforce, we have had to
first brought his other passengers and cargo to their respective destinations before banging said victim conduct an evaluation of the evidence in this case for the prope calibration of their conflicting factual findings and legal conclusions.
to the Lepanto Hospital where he expired.
The lower court, in declaring that the victim was negligent, made the following findings:
On the other hand, petitioners alleged that they had observed and continued to observe the
extraordinary diligence required in the operation of the transportation company and the supervision of
the employees, even as they add that they are not absolute insurers of the safety of the public at large. This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle, especially with one of his hands holding an umbrella. And, without having given the

Further, it was alleged that it was the victim's own carelessness and negligence which gave rise to the driver or the conductor any indication that he wishes to board the bus. But defendants can also be found wanting of the necessary diligence. In this connection, it is safe to assume

subject incident, hence they prayed for the dismissal of the complaint plus an award of damages in their that when the deceased Cudiamat attempted to board defendants' bus, the vehicle's door was open instead of being closed. This should be so, for it is hard to believe that one

favor by way of a counterclaim. would even attempt to board a vehicle (i)n motion if the door of said vehicle is closed. Here lies the defendant's lack of diligence. Under such circumstances, equity demands that
there must be something given to the heirs of the victim to assuage their feelings. This, also considering that initially, defendant common carrier had made overtures to amicably
settle the case. It did offer a certain monetary consideration to the victim's heirs. 7 However, respondent court, in arriving at a different opinion, declares that:
On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with this decretal
portion:

IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito Cudiamat From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that the subject bus was at full stop when the victim Pedrito Cudiamat

was negligent, which negligence was the proximate cause of his death. Nonetheless, boarded the same as it was precisely on this instance where a certain Miss Abenoja alighted from the bus. Moreover, contrary to the assertion of the appellees, the

defendants in equity, are hereby ordered to pay the heirs of Pedrito Cudiamat the sum of victim did indicate his intention to board the bus as can be seen from the testimony of the said witness when he declared that Pedrito Cudiamat was no longer

P10,000.00 which approximates the amount defendants initially offered said heirs for the walking and made a sign to board the bus when the latter was still at a distance from him. It was at the instance when Pedrito Cudiamat was closing his umbrella at

amicable settlement of the case. No costs. the platform of the bus when the latter made a sudden jerk movement (as) the driver commenced to accelerate the bus.

SO ORDERED. 2 Evidently, the incident took place due to the gross negligence of the appellee-driver in prematurely stepping on the accelerator and in not waiting for the passenger
to first secure his seat especially so when we take into account that the platform of the bus was at the time slippery and wet because of a drizzle. The defendants-
appellees utterly failed to observe their duty and obligation as common carrier to the end that they should observe extra-ordinary diligence in the vigilance over the
Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision 3
 in CA-G.R. CV No. 19504 promulgated on goods and for the safety of the passengers transported by them according to the circumstances of each case (Article 1733, New Civil Code). 8
August 14, 1990, set aside the decision of the lower court, and ordered petitioners to pay private
respondents:

1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death of the victim After a careful review of the evidence on record, we find no reason to disturb the above holding of the Court of Appeals. Its aforesaid findings are supported by the testimony of

Pedrito Cudiamat; petitioners' own witnesses. One of them, Virginia Abalos, testified on cross-examination as follows:

2. The sum of Twenty Thousand (P20,000.00) by way of moral damages; Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident, there is a crossing?

TRANSPORTATION LAW
A The way going to the mines but it is not being pass(ed) by the bus.
The fact that passengers board and alight from slowly moving vehicle is a matter of common experience
both the driver and conductor in this case could not have been unaware of such an ordinary practice.
Q And the incident happened before bunkhouse 56, is that not correct?

The victim herein, by stepping and standing on the platform of the bus, is already considered a
A It happened between 54 and 53 bunkhouses. 9 passenger and is entitled all the rights and protection pertaining to such a contractual relation. Hence, it
has been held that the duty which the carrier passengers owes to its patrons extends to persons
The bus conductor, Martin Anglog, also declared: boarding cars as well as to those alighting therefrom. 15
Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court if there was anv unusual incident that occurred?
Common carriers, from the nature of their business and reasons of public policy, are bound to observe extraordina diligence for the safety of the passengers transported by the
according to all the circumstances of each case. 16
A When we delivered a baggage at Marivic because  a person alighted there between Bunkhouse 53 and 54.  A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence very cautious persons, with a due
Q What happened when you delivered this passenger at this particular place in Lepanto?
regard for all the circumstances. 17

It has also been repeatedly held that in an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order
A  When we reached the place, a passenger alighted and I signalled my driver. When we stopped we went out because I saw an umbrella about a split second and I
to hold it responsible to pay the damages sought by the passenger. By contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination
signalled again the driver, so the driver stopped and we went down and we saw Pedrito Cudiamat asking for help because he was lying down.
safely and observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault
or negligence of the carrier. This is an exception to the general rule that negligence must be proved, and it is therefore incumbent upon the carrier to prove that it has exercised

Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down — from the bus how far was he? extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. 18

A It is about two to three meters. Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to the hospital for medical treatment is a patent and
incontrovertible proof of their negligence. It defies understanding and can even be stigmatized as callous indifference. The evidence shows that after the accident the bus could
have forthwith turned at Bunk 56 and thence to the hospital, but its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight and to deliver a refrigerator,
Q  On what direction of the bus was he found about three meters from the bus, was it at the front or at the back?
despite the serious condition of the victim. The vacuous reason given by petitioners that it was the wife of the deceased who caused the delay was tersely and correctly confuted by
respondent court:
A At the back, sir. 10 (Emphasis supplied.) ... The pretension of the appellees that the delay was due to the fact that they had to wait for about twenty minutes for Inocencia Cudiamat to get dressed deserves

scant consideration. It is rather scandalous and deplorable for a wife whose husband is at the verge of dying to have the luxury of dressing herself up for about

The foregoing testimonies show that the place of the accident and the place where one of the passengers alighted were both between Bunkhouses 53 and 54, hence the finding of twenty minutes before attending to help her distressed and helpless husband. 19

the Court of Appeals that the bus was at full stop when the victim boarded the same is correct. They further confirm the conclusion that the victim fell from the platform of the bus
when it suddenly accelerated forward and was run over by the rear right tires of the vehicle, as shown by the physical evidence on where he was thereafter found in relation to the Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to inform the victim's family of the mishap, since it was not said bus driver nor the
bus when it stopped. Under such circumstances, it cannot be said that the deceased was guilty of negligence. conductor but the companion of the victim who informed his family thereof. 20
 In fact, it was only after the refrigerator was unloaded that
one of the passengers thought of sending somebody to the house of the victim, as shown by the
The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since the latter had supposedly not manifested his intention testimony of Virginia Abalos again, to wit:
to board the same, does not merit consideration. When the bus is not in motion there is no necessity for a person who wants to ride the same to signal his intention to board. A
public utility bus, once it stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every time the bus stops, to do no act
Q Why, what happened to your refrigerator at that particular time?
that would have the effect of increasing the peril to a passenger while he was attempting to board the same. The premature acceleration of the bus in this case was a breach of
such duty. 11
A I asked them to bring it down because that is the nearest place to our house and when I
went down and asked somebody to bring down the refrigerator, I also asked somebody to call
It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to
the family of Mr. Cudiamat.
afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their
conveyances while they are doing so. 12
COURT:
Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered negligent under the circumstances. As clearly explained in the
testimony of the aforestated witness for petitioners, Virginia Abalos, th bus had "just started" and "was still in slow motion" at the point where the victim had boarded and was on its Q Why did you ask somebody to call the family of Mr. Cudiamat?
platform. 13

A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr.
It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly. 14
 An ordinarily prudent person Cudiamat.
would have made the attempt board the moving conveyance under the same or similar circumstances.

TRANSPORTATION LAW
Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?

A No sir. 21

With respect to the award of damages, an oversight was, however, committed by respondent Court of Appeals in computing the actual damages based on the gross income of the
victim. The rule is that the amount recoverable by the heirs of a victim of a tort is not the loss of the entire earnings, but rather the loss of that portion of the earnings which the
beneficiary would have received. In other words, only net earnings, not gross earnings, are to be considered, that is, the total of the earnings less expenses necessary in the
creation of such earnings or income and minus living and other incidental expenses. 22

We are of the opinion that the deductible living and other expense of the deceased may fairly and reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the
actual or compensatory damages, respondent court found that the deceased was 48 years old, in good health with a remaining productive life expectancy of 12 years, and then
earning P24,000.00 a year. Using the gross annual income as the basis, and multiplying the same by 12 years, it accordingly awarded P288,000. Applying the aforestated rule on

computation based on the net earnings, said award must be, as it hereby is, rectified and reduced to P216,000.00. However, in accordance with prevailing jurisprudence, the death
indemnity is hereby increased to P50,000.00. 23

WHEREFORE, subject to the above modifications, the challenged judgment and resolution of
respondent Court of Appeals are hereby AFFIRMED in all other respects.

TRANSPORTATION LAW
4. G.R. No. 145804             February 6, 2003 "The compulsory counterclaim of LRTA and Roman are likewise dismissed."1

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated its now
vs. MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY assailed decision exonerating Prudent from any liability for the death of Nicanor Navidad and, instead,
AGENCY, respondents. holding the LRTA and Roman jointly and severally liable thusly:

On 14 October 1993, about half an hour past seven o’clock in the evening, Nicanor Navidad, then "WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from any
drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of the fare). liability for the death of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the Light Rail
While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security guard Transit Authority (LRTA) are held liable for his death and are hereby directed to pay jointly and severally
assigned to the area approached Navidad. A misunderstanding or an altercation between the two to the plaintiffs-appellees, the following amounts:
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 a) P44,830.00 as actual damages;
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.
b) P50,000.00 as nominal damages;
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 c) P50,000.00 as moral damages;
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 d) P50,000.00 as indemnity for the death of the deceased; and
answer, denied liability and averred that it had exercised due diligence in the selection and supervision
of its security guards. e) P20,000.00 as and for attorney’s fees."2

The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting The appellate court ratiocinated that while the deceased might not have then as yet boarded the train, a
evidence, filed a demurrer contending that Navidad had failed to prove that Escartin was negligent in his contract of carriage theretofore had already existed when the victim entered the place where
assigned task. On 11 August 1998, the trial court rendered its decision; it adjudged: 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
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants the death of Navidad. It said that Navidad failed to show that Escartin inflicted fist blows upon the victim
Prudent Security and Junelito Escartin ordering the latter to pay jointly and severally the plaintiffs the and the evidence merely established the fact of death of Navidad by reason of his having been hit by
following: 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
"a) 1) Actual damages of P44,830.00; emergency brakes could not have stopped the train.

2) Compensatory damages of P443,520.00; The appellate court denied petitioners’ motion for reconsideration in its resolution of 10 October 2000.

3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00; In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:

"b) Moral damages of P50,000.00; "I.

"c) Attorney’s fees of P20,000; THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE FINDINGS
OF FACTS BY THE TRIAL COURT
"d) Costs of suit.
"II.
"The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS ARE
LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.

TRANSPORTATION LAW
"III. passengers are within its premises and where they ought to be in pursuance to the contract of
carriage.6 The statutory provisions render a common carrier liable for death of or injury to passengers
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO ROMAN (a) through the negligence or wilful acts of its employees or b) on account of wilful acts or negligence of
IS AN EMPLOYEE OF LRTA."3 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.7 In case of such death or injury, a carrier
is presumed to have been at fault or been negligent, and8 by simple proof of injury, the passenger is
Petitioners would contend that the appellate court ignored the evidence and the factual findings of the relieved of the duty to still establish the fault or negligence of the carrier or of its employees and the
trial court by holding them liable on the basis of a sweeping conclusion that the presumption of burden shifts upon the carrier to prove that the injury is due to an unforeseen event or to force
negligence on the part of a common carrier was not overcome. Petitioners would insist that Escartin’s majeure.9 In the absence of satisfactory explanation by the carrier on how the accident occurred, which
assault upon Navidad, which caused the latter to fall on the tracks, was an act of a stranger that could petitioners, according to the appellate court, have failed to show, the presumption would be that it has
not have been foreseen or prevented. The LRTA would add that the appellate court’s conclusion on the been at fault,10 an exception from the general rule that negligence must be proved.11
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.
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
Respondents, supporting the decision of the appellate court, contended that a contract of carriage was the common carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier
deemed created from the moment Navidad paid the fare at the LRT station and entered the premises of may choose to hire its own employees or avail itself of the services of an outsider or an independent
the latter, entitling Navidad to all the rights and protection under a contractual relation, and that the firm to undertake the task. In either case, the common carrier is not relieved of its responsibilities under
appellate court had correctly held LRTA and Roman liable for the death of Navidad in failing to exercise the contract of carriage.
extraordinary diligence imposed upon a common carrier.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions
Law and jurisprudence dictate that a common carrier, both from the nature of its business and for of Article 217612 and related provisions, in conjunction with Article 2180,13 of the Civil Code. The
reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring the safety premise, however, for the employer’s liability is negligence or fault on the part of the employee. Once
of passengers.4 The Civil Code, governing the liability of a common carrier for death of or injury to its such fault is established, the employer can then be made liable on the basis of the presumption juris
passengers, provides: 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
"Article 1755. A common carrier is bound to carry the passengers safely as far as human care and selection and supervision of the employee, a factual matter that has not been shown. Absent such a
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the showing, one might ask further, how then must the liability of the common carrier, on the one hand, and
circumstances. 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
"Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have in culpa contractual and the other in culpa aquiliana, Article 219414 of the Civil Code can well apply.15 In
been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence fine, a liability for tort may arise even under a contract, where tort is that which breaches the
as prescribed in articles 1733 and 1755." contract.16 Stated differently, when an act which constitutes a breach of contract would have itself
constituted the source of a quasi-delictual liability had no contract existed between the parties, the
contract can be said to have been breached by tort, thereby allowing the rules on tort to apply.17
"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. 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
"This liability of the common carriers does not cease upon proof that they exercised all the diligence of a been duly proven x x x." This finding of the appellate court is not without substantial justification in our
good father of a family in the selection and supervision of their employees." own review of the records of the case.

"Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act or
willful acts or negligence of other passengers or of strangers, if the common carrier’s employees omission, he must also be absolved from liability. Needless to say, the contractual tie between the LRT
through the exercise of the diligence of a good father of a family could have prevented or stopped the and Navidad is not itself a juridical relation between the latter and Roman; thus, Roman can be made
act or omission." liable only for his own fault or negligence.

The law requires common carriers to carry passengers safely using the utmost diligence of very The award of nominal damages in addition to actual damages is untenable. Nominal damages are
cautious persons with due regard for all circumstances.5 Such duty of a common carrier to provide adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant,
safety to its passengers so obligates it not only during the course of the trip but for so long as the may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss
TRANSPORTATION LAW
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.

TRANSPORTATION LAW
5. G.R. No. 125948 December 29, 1998 Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, Section 133 (j) of the Local Government Code as said exemption applies only to "transportation
vs. COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and contractors and persons engaged in the transportation by hire and common carriers by air, land and
ADORACION C. ARELLANO, in her official capacity as City Treasurer of Batangas, respondents. 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
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, term "common carrier" under the said code pertains to the mode or manner by which a product is
install and operate oil pipelines. The original pipeline concession was granted in 19671 and renewed by delivered to its destination.8
the Energy Regulatory Board in 1992. 2
On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise:
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of . . . Plaintiff is either a contractor or other independent contractor.
Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer . . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are
required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the to be strictly construed against the taxpayer, taxes being the lifeblood of the government. Exemption
Local Government Code3. The respondent City Treasurer assessed a business tax on the petitioner may therefore be granted only by clear and unequivocal provisions of law.
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 Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387. (Exhibit A) whose
its operations, petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter of concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither said law nor the
1993. deed of concession grant any tax exemption upon the plaintiff.

On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax
pertinent portion of which reads: Code. Such being the situation obtained in this case (exemption being unclear and equivocal) resort to
Please note that our Company (FPIC) is a pipeline operator with a government concession granted distinctions or other considerations may be of help:
under the Petroleum Act. It is engaged in the business of transporting petroleum products from the 1. That the exemption granted under Sec. 133 (j) encompasses only common carriers  so as not to
Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, our Company is overburden the riding public or commuters with taxes.  Plaintiff is not a common carrier, but a special
exempt from paying tax on gross receipts under Section 133 of the Local Government Code of 1991 carrier extending its services and facilities to a single specific or "special customer" under a "special
contract."
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 2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy to local
contractors and other independent contractors" under Section 143, Paragraph (e) of the Local governments than the previous enactments, to make them economically and financially viable to serve
Government Code does not include the power to levy on transportation contractors. 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
The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 of are also taxed under Sec. 143 (e) and 151 of the Code.9
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, Petitioner assailed the aforesaid decision before this Court  via a petition for review. On February 27,
assuming arguendo that FPIC is liable for the license fee, the imposition thereof based on gross 1995, we referred the case to the respondent Court of Appeals for consideration and adjudication. 10 On
receipts is violative of the aforecited provision. The amount of P956,076.04 (P239,019.01 per quarter) is November 29, 1995, the respondent court rendered a decision 11 affirming the trial court's dismissal of
not commensurate to the cost of regulation, inspection and licensing. The fee is already a revenue petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18, 1996. 12
raising measure, and not a mere regulatory imposition.4
On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11,
be considered engaged in transportation business, thus it cannot claim exemption under Section 133 (j) 1996. 13 Petitioner moved for a reconsideration which was granted by this Court in a Resolution 14 of
of the Local Government Code.5 January 22, 1997. Thus, the petition was reinstated.
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint6 for tax
refund with prayer for writ of preliminary injunction against respondents City of Batangas and Adoracion Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a
Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the common carrier or a transportation contractor, and (2) the exemption sought for by petitioner is not clear
imposition and collection of the business tax on its gross receipts violates Section 133 of the Local under the law.
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 There is merit in the petition.
collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in
"contractors" excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously the business of transporting persons or property from place to place, for compensation, offering his
imposed and collected the said tax, thus meriting the immediate refund of the tax paid.7 services to the public generally.

TRANSPORTATION LAW
Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association the transportation of the passengers or goods should be by motor vehicle. In fact, in the United States,
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, oil pipe line operators are considered common carriers. 17
for compensation, offering their services to the public." Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common
carrier." Thus, Article 86 thereof provides that:
The test for determining whether a party is a common carrier of goods is: Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall have the preferential right to
1. He must be engaged in the business of carrying goods for others as a public employment, and must utilize installations for the transportation of petroleum owned by him, but is obligated to utilize the
hold himself out as ready to engage in the transportation of goods for person generally as a business remaining transportation capacity pro rata for the transportation of such other petroleum as may be
and not as a casual occupation; offered by others for transport, and to charge without discrimination such rates as may have been
2. He must undertake to carry goods of the kind to which his business is confined; approved by the Secretary of Agriculture and Natural Resources.
3. He must undertake to carry by the method by which his business is conducted and over his
established roads; and Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7
4. The transportation must be for hire. 15 thereof provides:
that everything relating to the exploration for and exploitation of petroleum . . . and everything relating to
Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. the manufacture, refining, storage, or transportation by special methods of petroleum, is hereby
It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a declared to be a  public utility. (Emphasis Supplied)
public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No.
to employ its services, and transports the goods by land and for compensation. The fact that petitioner 069-83, it declared:
has a limited clientele does not exclude it from the definition of a common carrier. In De Guzman vs. . . . since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum
Court of Appeals  16 we ruled that: 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.
The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore,
activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary exempt from the business tax as provided for in Section 133 (j), of the Local Government Code, to wit:
activity (in local idiom, as a "sideline"). Article 1732 . . . avoids making any distinction between a person Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. — Unless otherwise
or enterprise offering transportation service on a  regular  or scheduled basis and one offering such provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between shall not extend to the levy of the following:
a carrier offering its services to the "general public," i.e., the general community or population, and one x x x           x x x          x x x
who offers services or solicits business only from a narrow segment of the general population. We think (j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation
that Article 1877 deliberately refrained from making such distinctions. of passengers or freight by hire and common carriers by air, land or water, except as provided in this
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with Code.
the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) The deliberations conducted in the House of Representatives on the Local Government Code of 1991
which at least partially supplements the law on common carriers set forth in the Civil Code. Under are illuminating:
Section 13, paragraph (b) of the Public Service Act, "public service" includes: MR. AQUINO (A). Thank you, Mr. Speaker.
every person that now or hereafter may own, operate. manage, or control in the Philippines, for hire or Mr. Speaker, we would like to proceed to page 95, line
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done 1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the Taxing Powers of Local Government
for general business purposes, any common carrier, railroad, street railway, traction railway, subway Units." . . .
motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be MR. AQUINO (A.). Thank you Mr. Speaker.
its classification, freight or carrier service of any class, express service, steamboat, or steamship line, Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one of
pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, those being deemed to be exempted from the taxing powers of the local government units. May we
shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system know the reason why the transportation business is being excluded from the taxing powers of the local
gas, electric light heat and power, water supply and  power petroleum, sewerage system, wire or government units?
wireless communications systems, wire or wireless broadcasting stations and other similar public MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16,
services. (Emphasis Supplied) paragraph 5. It states that local government units may not impose taxes on the business of
transportation, except as otherwise provided in this code.
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that
Government Code refers only to common carriers transporting goods and passengers through moving provinces have the power to impose a tax on business enjoying a franchise at the rate of not more than
vehicles or vessels either by land, sea or water, is erroneous. 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.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government units
distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that 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

TRANSPORTATION LAW
not want a duplication of this tax, so we just provided for an exception under Section 125 [now Sec. 4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Bill of Lading within
137] that a province may impose this tax at a specific rate. fifteen (15) days.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . . 18
It is clear that the legislative intent in excluding from the taxing power of the local government unit the 5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
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 6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive
the National Internal Revenue Code. 19 To tax petitioner again on its gross receipts in its transportation hours, Sundays and Holidays Included).
of petroleum business would defeat the purpose of the Local Government Code.
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
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. 8. . . .

9. Cargo Insurance: Charterer's and/or Shipper's must insure the cargoes. Shipowners not responsible
6. G.R. No. 112287 December 12, 1997 for losses/damages except on proven willful negligence of the officers of the vessel.

NATIONAL STEEL CORPORATION, Petitioner, v. COURT OF APPEALS AND VLASONS SHIPPING, 10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized
INC., Respondents. Charter Party Agreement shall form part of this Contract.

G.R. No. 112350 December 12, 1997 xxx xxx xxx

VLASONS SHIPPING, INC., Petitioner, v. COURT OF APPEALS AND NATIONAL STEEL The terms "F.I.O.S.T." which is used in the shipping business is a standard provision in the NANYOZAI
CORPORATION, Respondents. Charter Party which stands for "Freight In and Out including Stevedoring and Trading", which means
that the handling, loading and unloading of the cargoes are the responsibility of the Charterer. Under
The Facts Paragraph 5 of the NANYOZAI Charter Party, it states, "Charterers to load, stow and discharge the
cargo free of risk and expenses to owners. . . . (Emphasis supplied).
The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or
shipment for the general public. Its services are available only to specific persons who enter into a Under paragraph 10 thereof, it is provided that "(o)wners shall, before and at the beginning of the
special contract of charter party with its owner. It is undisputed that the ship is a private carrier. And it is voyage, exercise due diligence to make the vessel seaworthy and properly manned, equipped and
in the capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for
of voyage charter hire with National Steel Corporation. its reception, carriage and preservation. Owners shall not be liable for loss of or damage of the cargo
arising or resulting from: unseaworthiness unless caused by want of due diligence on the part of the
The facts as found by Respondent Court of Appeals are as follows: owners to make the vessel seaworthy, and to secure that the vessel is properly manned, equipped and
supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for
its reception, carriage and preservation; . . . ; perils, dangers and accidents of the sea or other
(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons navigable waters; . . . ; wastage in bulk or weight or any other loss or damage arising from inherent
Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire (Exhibit "B"; also Exhibit defect, quality or vice of the cargo; insufficiency of packing; . . . ; latent defects not discoverable by due
"1") whereby NSC hired VSI's vessel, the MV "VLASONS I" to make one (1) voyage to load steel diligence; any other cause arising without the actual fault or privity of Owners or without the fault of the
products at Iligan City and discharge them at North Harbor, Manila, under the following terms and agents or servants of owners."
conditions, viz:
Paragraph 12 of said NANYOZAI Charter Party also provides that "(o)wners shall not be responsible for
1. . . . split, chafing and/or any damage unless caused by the negligence or default of the master and crew."

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

3. . . .

TRANSPORTATION LAW
(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV losses/damages except on proven willful negligence of the officers of the vessel, that the officers of said
"VLASONS I" loaded at plaintiffs pier at Iligan City, the NSC's shipment of 1,677 skids of tinplates and MV "VLASONS I" exercised due diligence and proper seamanship and were not willfully negligent; that
92 packages of hot rolled sheets or a total of 1,769 packages with a total weight of about 2,481.19 furthermore the Voyage Charter Party provides that loading and discharging of the cargo was on FIOST
metric tons for carriage to Manila. The shipment was placed in the three (3) hatches of the ship. Chief terms which means that the vessel was free of risk and expense in connection with the loading and
Mate Gonzalo Sabando, acting as agent of the vessel[,] acknowledged receipt of the cargo on board discharging of the cargo; that the damage, if any, was due to the inherent defect, quality or vice of the
and signed the corresponding bill of lading, B.L.P.P. No. 0233 (Exhibit "D") on August 8, 1974. cargo or to the insufficient packing thereof or to latent defect of the cargo not discoverable by due
diligence or to any other cause arising without the actual fault or privity of defendant and without the
(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The fault of the agents or servants of defendant; consequently, defendant is not liable; that the stevedores of
following day, August 13, 1974, when the vessel's three (3) hatches containing the shipment were plaintiff who discharged the cargo in Manila were negligent and did not exercise due care in the
opened by plaintiff's agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found discharge of the cargo; land that the cargo was exposed to rain and seawater spray while on the pier or
to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the Charterer. in transit from the pier to plaintiff's warehouse after discharge from the vessel; and that plaintiff's claim
Unloading was completed only on August 24, 1974 after incurring a delay of eleven (11) days due to the was highly speculative and grossly exaggerated and that the small stain marks or sweat marks on the
heavy rain which interrupted the unloading operations. (Exhibit "E") edges of the tinplates were magnified and considered total loss of the cargo. Finally, defendant claimed
that it had complied with all its duties and obligations under the Voyage Charter Hire Contract and had
no responsibility whatsoever to plaintiff. In turn, it alleged the following counterclaim:
(4) To determine the nature and extent of the wetting and rusting, NSC called for a survey of the
shipment by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated
March 17, 1975 (Exhibit "G"), MASCO made a report of its ocular inspection conducted on the cargo, (a) That despite the full and proper performance by defendant of its obligations under the Voyage
both while it was still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Charter Hire Contract, plaintiff failed and refused to pay the agreed charter hire of P75,000.00 despite
Manila where the cargo was taken and stored. MASCO reported that it found wetting and rusting of the demands made by defendant;
packages of hot rolled sheets and metal covers of the tinplates; that tarpaulin hatch covers were noted
torn at various extents; that container/metal casings of the skids were rusting all over. MASCO ventured (b) That under their Voyage Charter Hire Contract, plaintiff had agreed to pay defendant the sum of
the opinion that "rusting of the tinplates was caused by contact with SEA WATER sustained while still P8,000.00 per day for demurrage. The vessel was on demurrage for eleven (11) days in Manila waiting
on board the vessel as a consequence of the heavy weather and rough seas encountered while en for plaintiff to discharge its cargo from the vessel. Thus, plaintiff was liable to pay defendant demurrage
route to destination (Exhibit "F"). It was also reported that MASCO's surveyors drew at random samples in the total amount of P88,000.00.
of bad order packing materials of the tinplates and delivered the same to the M.I.T. Testing Laboratories
for analysis. On August 31, 1974, the M.I.T. Testing Laboratories issued Report No. 1770 (Exhibit "I") (c) For filing a clearly unfounded civil action against defendant, plaintiff should be ordered to pay
which in part, states, "The analysis of bad order samples of packing materials . . . shows that wetting defendant attorney's fees and all expenses of litigation in the amount of not less than P100,000.00.
was caused by contact with SEA WATER".
(8) From the evidence presented by both parties, the trial court came out with the following findings
(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the which were set forth in its decision:
defendant its claim for damages suffered due to the downgrading of the damaged tinplates in the
amount of P941,145.18. Then on October 3, 1974, plaintiff formally demanded payment of said claim
but defendant VSI refused and failed to pay. Plaintiff filed its complaint against defendant on April 21, (a) The MV "VLASONS I" is a vessel of Philippine registry engaged in the tramping service and is
1976 which was docketed as Civil Case No. 23317, CFI, Rizal. available for hire only under special contracts of charter party as in this particular case.

(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount of P941,145.18 as a (b) That for purposes of the voyage covered by the Contract of Voyage Charter Hire (Exh. "1"), the MV
result of the act, neglect and default of the master and crew in the management of the vessel as well as VLASONS I" was covered by the required seaworthiness certificates including the Certification of
the want of due diligence on the part of the defendant to make the vessel seaworthy and to make the Classification issued by an international classification society, the NIPPON KAIJI KYOKAI (Exh. "4");
holds and all other parts of the vessel in which the cargo was carried, fit and safe for its reception, Coastwise License from the Board of Transportation (Exh. "5"); International Loadline Certificate from
carriage and preservation - all in violation of defendant's undertaking under their Contract of Voyage the Philippine Coast Guard (Exh. "6"); Cargo Ship Safety Equipment Certificate also from the Philippine
Charter Hire. Coast Guard (Exh. "7"); Ship Radio Station License (Exh. "8"); Certificate of Inspection by the Philippine
Coast Guard (Exh. "12"); and Certificate of Approval for Conversion issued by the Bureau of Customs
(Exh. "9"). That being a vessel engaged in both overseas and coastwise trade, the MV "VLASONS I"
(7) In its answer, defendant denied liability for the alleged damage claiming that the MV "VLASONS I" has a higher degree of seaworthiness and safety.
was seaworthy in all respects for the carriage of plaintiff's cargo; that said vessel was not a "common
carrier" inasmuch as she was under voyage charter contract with the plaintiff as charterer under the
charter party; that in the course of the voyage from Iligan City to Manila, the MV "VLASONS I" (c) Before it proceeded to Iligan City to perform the voyage called for by the Contract of Voyage Charter
encountered very rough seas, strong winds and adverse weather condition, causing strong winds and Hire, the MV "VLASONS I" underwent drydocking in Cebu and was thoroughly inspected by the
big waves to continuously pound against the vessel and seawater to overflow on its deck and hatch Philippine Coast Guard. In fact, subject voyage was the vessel's first voyage after the drydocking. The
covers, that under the Contract of Voyage Charter Hire, defendant shall not be responsible for
TRANSPORTATION LAW
evidence shows that the MV "VLASONS I" was seaworthy and properly manned, equipped and same Voyage Charter Hire contract to pay demurrage of P8,000.00 per day of delay in the unloading of
supplied when it undertook the voyage. It has all the required certificates of seaworthiness. the cargoes. The delay amounted to eleven (11) days thereby making plaintiff liable to pay defendant
for demurrage in the amount of P88,000.00.
(d) The cargo/shipment was securely stowed in three (3) hatches of the ship. The hatch openings were
covered by hatchboards which were in turn covered by two or double tarpaulins. The hatch covers were Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:
water tight. Furthermore, under the hatchboards were steel beams to give support.
I
(e) The claim of the plaintiff that defendant violated the contract of carriage is not supported by
evidence. The provisions of the Civil Code on common carriers pursuant to which there exists a The trial court erred in finding that the MV "VLASONS I" was seaworthy, properly manned, equipped
presumption of negligence in case of loss or damage to the cargo are not applicable. As to the damage and supplied, and that there is no proof of willful negligence of the vessel's officers.
to the tinplates which was allegedly due to the wetting and rusting thereof, there is unrebutted testimony
of witness Vicente Angliongto that tinplates "sweat" by themselves when packed even without being in
contract (sic) with water from outside especially when the weather is bad or raining. The trust caused by II
sweat or moisture on the tinplates may be considered as a loss or damage but then, defendant cannot
be held liable for it pursuant to Article 1734 of the Civil Case which exempts the carrier from The trial court erred in finding that the rusting of NSC's tinplates was due to the inherent nature or
responsibility for loss or damage arising from the "character of the goods . . ." All the 1,769 skids of the character of the goods and not due to contact with seawater.
tinplates could not have been damaged by water as claimed by plaintiff. It was shown as claimed by
plaintiff that the tinplates themselves were wrapped in kraft paper lining and corrugated cardboards III
could not be affected by water from outside.

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

(g) It was also established that the vessel encountered rough seas and bad weather while en route from VI
Iligan City to Manila causing sea water to splash on the ship's deck on account of which the master of
the vessel (Mr. Antonio C. Dumlao) filed a "Marine Protest" on August 13, 1974 (Exh. "15"); which can The trial court erred in ordering NSC to pay freight, demurrage and attorney's fees, to VSI. 4
be invoked by defendant as a force majeure that would exempt the defendant from liability.
As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the demurrage
(h) Plaintiff did not comply with the requirement prescribed in paragraph 9 of the Voyage Charter Hire from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of litigation.
contract that it was to insure the cargo because it did not. Had plaintiff complied with the requirement, NSC and VSI filed separate motions for reconsideration. In a Resolution 5 dated October 20, 1993, the
then it could have recovered its loss or damage from the insurer. Plaintiff also violated the charter party appellate court denied both motions. Undaunted, NSC and VSI filed their respective petitions for review
contract when it loaded not only "steel products", i.e. steel bars, angular bars and the like but also before this Court. On motion of VSI, the Court ordered on February 14, 1994 the consolidation of these
tinplates and hot rolled sheets which are high grade cargo commanding a higher freight. Thus plaintiff petitions. 6
was able to ship grade cargo at a lower freight rate.
The Issues
(i) As regards defendant's counterclaim, the contract of voyage charter hire under Paragraph 4 thereof,
fixed the freight at P30.00 per metric ton payable to defendant carrier upon presentation of the bill of
In its petition 7 and memorandum, 8 NSC raises the following questions of law and fact:
lading within fifteen (15) days. Plaintiff has not paid the total freight due of P75,000.00 despite
demands. The evidence also showed that the plaintiff was required and bound under paragraph 7 of the

TRANSPORTATION LAW
Questions of Law 2. Effect of NSC's Failure to Insure the Cargo

1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading delays caused 3. Admissibility of Certificates Proving Seaworthiness
by weather interruption;
4. Demurrage and Attorney's Fees.
2. Whether or not the alleged "seaworthiness certificates" (Exhibits "3", "4", "5", "6", "7", "8", "9", "11"
and "12") were admissible in evidence and constituted evidence of the vessel's seaworthiness at the The Court's Ruling
beginning of the voyages; and
The Court affirms the assailed Decision of the Court of Appeals, except in respect of the demurrage.
3. Whether or not a charterer's failure to insure its cargo exempts the shipowner from liability for cargo
damage.
Preliminary Matter: Common Carrier or Private Carrier?
Questions of Fact
At the outset, it is essential to establish whether VSI contracted with NSC as a common carrier or as a
private carrier. The resolution of this preliminary question determines the law, standard of diligence and
1. Whether or not the vessel was seaworthy and cargo-worthy; burden of proof applicable to the present case.

2. Whether or not vessel's officers and crew were negligent in handling and caring for NSC's cargo; Article 1732 of the Civil Code defines a common carrier as "persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air,
3. Whether or not NSC's cargo of tinplates did sweat during the voyage and, hence, rusted on their for compensation, offering their services to the public." It has been held that the true test of a common
own; and carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail themselves
of its transportation service for a fee. 11 A carrier which does not qualify under the above test is deemed
4. Whether or not NSC's stevedores were negligent and caused the wetting[/]rusting of NSC's tinplates. a private carrier. "Generally, private carriage is undertaken by special agreement and the carrier does
not hold himself out to carry goods for the general public. The most typical, although not the only form of
private carriage, is the charter party, a maritime contract by which the charterer, a party other than the
In its separate petition, 9 VSI submits for the consideration of this Court the following alleged errors of shipowner, obtains the use and service of all or some part of a ship for a period of time or a voyage or
the CA: voyages." 12

A. The respondent Court of Appeals committed an error of law in reducing the award of demurrage from In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by
P88,000.00 to P44,000.00. the Regional Trial Court, it carried passengers or goods only for those it chose under a "special contract
of charter party." 13 As correctly concluded by the Court of Appeals, the MV Vlasons I "was not a
B. The respondent Court of Appeals committed an error of law in deleting the award of P100,000 for common but a private carrier." 14 Consequently, the rights and obligations of VSI and NSC, including
attorney's fees and expenses of litigation. their respective liability for damage to the cargo, are determined primarily by stipulations in their
contract of private carriage or charter party. 15 Recently, in Valenzuela Hardwood and Industrial Supply,
Amplifying the foregoing, VSI raises the following issues in its memorandum: 10 Inc.,  vs. Court of Appeals and Seven Brothers Shipping Corporation, 16 the Court ruled:

I. Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant to . . . in a contract of private carriage, the parties may freely stipulate their duties and obligations which
which there exist[s] a presumption of negligence against the common carrier in case of loss or damage perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage
to the cargo are applicable to a private carrier. does not involve the general public. Hence, the stringent provisions of the Civil Code on common
carriers protecting the general public cannot justifiably be applied to a ship transporting commercial
goods as a private carrier. Consequently, the public policy embodied therein is not contravened by
II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire, including the stipulations in a charter party that lessen or remove the protection given by law in contracts involving
Nanyozai Charter, are valid and binding on both contracting parties. common carriers. 17

The foregoing issues raised by the parties will be discussed under the following headings: Extent of VSI's Responsibility and
Liability Over NSC's Cargo
1. Questions of Fact

TRANSPORTATION LAW
It is clear from the parties' Contract of Voyage Charter Hire, dated July 17, 1974, that VSI "shall not be in the contract or bill of lading. However, in discharging the burden of proof, plaintiff is entitled to the
responsible for losses except on proven willful negligence of the officers of the vessel." The NANYOZAI benefit of the presumptions and inferences by which the law aids the bailor in an action against a bailee,
Charter Party, which was incorporated in the parties' contract of transportation further provided that the and since the carrier is in a better position to know the cause of the loss and that it was not one
shipowner shall not be liable for loss of or a damage to the cargo arising or resulting from involving its liability, the law requires that it come forward with the information available to it, and its
unseaworthiness, unless the same was caused by its lack of due diligence to make the vessel failure to do so warrants an inference or presumption of its liability. However, such inferences and
seaworthy or to ensure that the same was "properly manned, equipped and supplied," and to "make the presumptions, while they may affect the burden of coming forward with evidence, do not alter the
holds and all other parts of the vessel in which cargo [was] carried, fit and safe for its reception, carriage burden of proof which remains on plaintiff, and, where the carrier comes forward with evidence
and preservation." 18 The NANYOZAI Charter Party also provided that "[o]wners shall not be responsible explaining the loss or damage, the burden of going forward with the evidence is again on plaintiff.
for split, chafing and/or any damage unless caused by the negligence or default of the master or
crew." 19 Where the action is based on the shipowner's warranty of seaworthiness, the burden of proving a
breach thereof and that such breach was the proximate cause of the damage rests on plaintiff, and
Burden of Proof proof that the goods were lost or damaged while in the carrier's possession does not cast on it the
burden of proving seaworthiness. . . . Where the contract of carriage exempts the carrier from liability for
In view of the aforementioned contractual stipulations, NSC must prove that the damage to its shipment unseaworthiness not discoverable by due diligence, the carrier has the preliminary burden of proving
was caused by VSI's willful negligence or failure to exercise due diligence in making MV Vlasons the exercise of due diligence to make the vessel seaworthy. 20
I seaworthy and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden of proof was
placed on NSC by the parties' agreement. In the instant case, the Court of Appeals correctly found the NSC "has not taken the correct position in
relation to the question of who has the burden of proof. Thus, in its brief (pp. 10-11), after citing Clause
This view finds further support in the Code of Commerce which pertinently provides: 10 and Clause 12 of the NANYOZAI Charter Party (incidentally plaintiff-appellant's [NSC's]
interpretation of Clause 12 is not even correct), it argues that 'a careful examination of the evidence will
show that VSI miserably failed to comply with any of these obligation's as if defendant-appellee [VSI]
Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not had the burden of
been expressly stipulated. proof." 21

Therefore, the damage and impairment suffered by the goods during the transportation, due to First Issue: Questions of Fact
fortuitous event, force majeure, or the nature and inherent defect of the things, shall be for the account
and risk of the shipper.
Based on the foregoing, the determination of the following factual questions is manifestly relevant: (1)
whether VSI exercised due diligence in making MV Vlasons I seaworthy for the intended purpose under
The burden of proof of these accidents is on the carrier. the charter party; (2) whether the damage to the cargo should be attributed to the willful negligence of
the officers and crew of the vessel or of the stevedores hired by NSC; and (3) whether the rusting of the
Art. 362. The carrier, however, shall be liable for damages arising from the cause mentioned in the tinplates was caused by its own "sweat" or by contact with seawater.
preceding article if proofs against him show that they occurred on account of his negligence or his
omission to take the precautions usually adopted by careful persons, unless the shipper committed These questions of fact were threshed out and decided by the trial court, which had the firsthand
fraud in the bill of lading, making him to believe that the goods were of a class or quality different from opportunity to hear the parties' conflicting claims and to carefully weigh their respective evidence. The
what they really were. findings of the trial court were subsequently affirmed by the Court of Appeals. Where the factual findings
of both the trial court and the Court of Appeals coincide, the same are binding on this Court. 22 We
Because the MV Vlasons I  was a private carrier, the shipowner's obligations are governed by the stress that, subject to some exceptional instances, 23 only questions of law - not questions of fact - may
foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general rule, be raised before this Court in a petition for review under Rule 45 of the Rules of Court. After a thorough
places the prima facie presumption of negligence on a common carrier. It is a hornbook doctrine that: review of the case at bar, we find no reason to disturb the lower court's factual findings, as indeed NSC
has not successfully proven the application of any of the aforecited exceptions.
In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove
that the carrier was negligent or unseaworthy, and the fact that the goods were lost or damaged while in Was MV Vlasons I Seaworthy?
the carrier's custody does not put the burden of proof on the carrier.
In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy and fit for
Since . . . a private carrier is not an insurer but undertakes only to exercise due care in the protection of the carriage of NSC's cargo of steel and tinplates. This is shown by the fact that it was drylocked and
the goods committed to its care, the burden of proving negligence or a breach of that duty rests on inspected by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to Manila under
plaintiff and proof of loss of, or damage to, cargo while in the carrier's possession does not cast on it the the contract of voyage charter hire. 24 The vessel's voyage from Iligan to Manila was the vessel's  first
burden of proving proper care and diligence on its part or that the loss occurred from an excepted cause voyage after drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and
TRANSPORTATION LAW
equipped; it met all requirements for trading as cargo vessel. 25 The Court of Appeals itself sustained the Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the crew
conclusion of the trial court that MV Vlasons I was seaworthy. We find no reason to modify or reverse of MV Vlasons I. On the contrary, the records reveal that it was the stevedores of NSC who were
this finding of both the trial and the appellate courts. negligent in unloading the cargo from the ship.

Who Were Negligent: The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned
Seamen or Stevedores? by a passing typhoon disrupted the unloading of the cargo. This tent-like covering, however, was clearly
inadequate for keeping rain and seawater away from the hatches of the ship. Vicente Angliongto, an
As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused by the officer of VSI, testified thus:
negligence of the officers and the crew of MV Vlasons I  in making their vessel seaworthy and fit for the
carriage of tinplates. NSC failed to discharge this burden. NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain immediately
about the stevedores' negligence on the first day of unloading, pointing out that he wrote his letter to
Before us, NSC relies heavily on its claim that MV Vlasons I  had used an old and torn tarpaulin or petitioner only seven days later. 32 The Court is not persuaded. Angliongto's candid answer in his
canvas to cover the hatches through which the cargo was loaded into the cargo hold of the ship. It faults aforequoted testimony satisfactorily explained the delay. Seven days lapsed because he first called the
the Court of Appeals for failing to consider such claim as an "uncontroverted fact" 26 and denies that MV attention of the stevedores, then the NSC's representative, about the negligent and defective procedure
Vlasons I "was equipped with new canvas covers in tandem with the old ones as indicated in the Marine adopted in unloading the cargo. This series of actions constitutes a reasonable response in accord with
Protest . . ." 27 We disagree. common sense and ordinary human experience. Vicente Angliongto could not be blamed for calling the
stevedores' attention first and then the NSC's representative on location before formally informing NSC
of the negligence he had observed, because he was not responsible for the stevedores or the unloading
The records sufficiently support VSI's contention that the ship used the old tarpaulin, only in addition to operations. In fact, he was merely expressing concern for NSC which was ultimately responsible for the
the new one used primarily to make the ship's hatches watertight. The foregoing are clear from the stevedores it had hired and the performance of their task to unload the cargo.
marine protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the ship's
boatswain, Jose Pascua. The salient portions of said marine protest read:
We see no reason to reverse the trial and the appellate courts' findings and conclusions on this
point, viz:
. . . That the M/V "VLASONS I" departed Iligan City or about 0730 hours of August 8, 1974, loaded with
approximately 2,487.9 tons of steel plates and tin plates consigned to National Steel Corporation; that
before departure, the vessel was rigged, fully equipped and cleared by the authorities; that on or about Second Issue: Effect of NSC's Failure to
August 9, 1974, while in the vicinity of the western part of Negros and Panay, we encountered very Insure the Cargo
rough seas and strong winds and Manila office was advised by telegram of the adverse weather
conditions encountered; that in the morning of August 10, 1974, the weather condition changed to The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally
worse and strong winds and big waves continued pounding the vessel at her port side causing sea separate and distinct from the contractual or statutory responsibility that may be incurred by VSI for
water to overflow on deck andhatch (sic) covers and which caused the first layer of the canvass damage to the cargo caused by the willful negligence of the officers and the crew of MV Vlasons I.
covering to give way while the new canvass covering still holding on; Clearly, therefore, NSC's failure to insure the cargo will not affect its right, as owner and real party in
interest, to file an action against VSI for damages caused by the latter's willful negligence. We do not
That the weather condition improved when we reached Dumali Point protected by Mindoro; that we re- find anything in the charter party that would make the liability of VSI for damage to the cargo contingent
secured the canvass covering back to position; that in the afternoon of August 10, 1974, while entering on or affected in any manner by NSC's obtaining an insurance over the cargo.
Maricaban Passage, we were again exposed to moderate seas and heavy rains; that while approaching
Fortune Island, we encountered again rough seas, strong winds and big waves which caused the same Epilogue
canvass to give way and leaving the new canvass holding on;
At bottom, this appeal really hinges on a factual issue: when, how and who caused the damage to the
That due diligence was exercised by the officers and the crew of the MV Vlasons I  was further cargo? Ranged against NSC are two formidable truths. First, both lower courts found that such damage
demonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin did not give was brought about during the unloading process when rain and seawater seeped through the cargo due
way and the ship's hatches and cargo holds remained waterproof. As aptly stated by the Court of to the fault or negligence of the stevedores employed by it. Basic is the rule that factual findings of the
Appeals, ". . . we find no reason not to sustain the conclusion of the lower court based on overwhelming trial court, when affirmed by the Court of Appeals, are binding on the Supreme Court. Although there
evidence, that the MV 'VLASONS I' was seaworthy when it undertook the voyage on August 8, 1974 are settled exceptions, NSC has not satisfactorily shown that this case is one of them. Second, the
carrying on board thereof plaintiff-appellant's shipment of 1,677 skids of tinplates and 92 packages of agreement between the parties - the Contract of Voyage Charter Hire - placed the burden of proof for
hot rolled sheets or a total of 1,769 packages from NSC's pier in Iligan City arriving safely at North such loss or damage upon the shipper, not upon the shipowner. Such stipulation, while
Harbor, Port Area, Manila, on August 12, 1974; . . . 30 disadvantageous to NSC, is valid because the parties entered into a contract of private charter, not one
of common carriage. Basic too is the doctrine that courts cannot relieve a parry from the effects of a
private contract freely entered into, on the ground that it is allegedly one-sided or unfair to the plaintiff.
TRANSPORTATION LAW
The charter party is a normal commercial contract and its stipulations are agreed upon in consideration
of many factors, not the least of which is the transport price which is determined not only by the actual
costs but also by the risks and burdens assumed by the shipper in regard to possible loss or damage to
the cargo. In recognition of such factors, the parties even stipulated that the shipper should insure the
cargo to protect itself from the risks it undertook under the charter party. That NSC failed or neglected to
protect itself with such insurance should not adversely affect VSI, which had nothing to do with such
failure or neglect.

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

TRANSPORTATION LAW
7. G.R. No. 157917               August 29, 2012 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
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners, answers, with cross-claims against each other, but Alfaro could not be served with summons.
vs. SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the
COURT OF APPEALS Respondents. At the pre-trial, the parties stipulated on the facts and issues, viz:

The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to A. FACTS:
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 (1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
deceased passenger may only be an unemployed high school student at the time of the accident.

(2) Spouses Zarate engaged the services of spouses Pereña for the adequate and safe
Antecedents
transportation carriage of the former spouses' son from their residence in Parañaque to his
school at the Don Bosco Technical Institute in Makati City;
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
(3) During the effectivity of the contract of carriage and in the implementation thereof, Aaron,
used a KIA Ceres Van (van) with Plate No. PYA 896, which had the capacity to transport 14 students at
the minor son of spouses Zarate died in connection with a vehicular/train collision which
a time, two of whom would be seated in the front beside the driver, and the others in the rear, with six
occurred while Aaron was riding the contracted carrier Kia Ceres van of spouses Pereña, then
students on either side. They employed Clemente Alfaro (Alfaro) as driver of the van.
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
In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco. On Magallanes Interchange in Makati City, Metro Manila, Philippines;
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 (4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision
on their way to Don Bosco. Considering that the students were due at Don Bosco by 7:15 a.m., and that was a railroad crossing used by motorists for crossing the railroad tracks;
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 (5) During the said time of the vehicular/train collision, there were no appropriate and safety
Magallanes Interchange that was then commonly used by Makati-bound vehicles as a short cut into warning signs and railings at the site commonly used for railroad crossing;
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
(6) At the material time, countless number of Makati bound public utility and private vehicles
watchmen, or other responsible persons manning the crossing. In fact, the bamboo barandilla was up,
used on a daily basis the site of the collision as an alternative route and short-cut to Makati;
leaving the railroad crossing open to traversing motorists.

(7) The train driver or operator left the scene of the incident on board the commuter train
At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train),
involved without waiting for the police investigator;
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 (8) The site commonly used for railroad crossing by motorists was not in fact intended by the
overtook the passenger bus on its left side. The train blew its horn to warn motorists of its approach. railroad operator for railroad crossing at the time of the vehicular collision;
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 (9) PNR received the demand letter of the spouses Zarate;
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 (10) PNR refused to acknowledge any liability for the vehicular/train collision;
severed his head, instantaneously killing him. Alano fled the scene on board the train, and did not wait
for the police investigator to arrive. (11) The eventual closure of the railroad crossing alleged by PNR was an internal
arrangement between the former and its project contractor; and

TRANSPORTATION LAW
(12) The site of the vehicular/train collision was within the vicinity or less than 100 meters from In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good
the Magallanes station of PNR. 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
B. ISSUES 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.

(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 For its part, PNR tended to show that the proximate cause of the collision had been the reckless
death of plaintiff spouses' son; 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.

(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; Issues

(3) Whether or not defendant Philippine National Railways being the operator of the railroad In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:
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 I. The lower court erred when it upheld the trial court’s decision holding the petitioners jointly and
cause of the vehicular collision which resulted in the death of the plaintiff spouses' son; severally liable to pay damages with Philippine National Railways and dismissing their cross-claim
against the latter.
(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; 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
(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary sufficient basis for such an award.
damages, and attorney's fees;
III. The lower court erred in not reducing further the amount of damages awarded, assuming petitioners
(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the diligence are liable at all.
of employers and school bus operators;
Ruling
(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John
Zarate; The petition has no merit.

(8) Whether or not defendant PNR was grossly negligent in operating the commuter train 1.
involved in the accident, in allowing or tolerating the motoring public to cross, and its failure to Were the Pereñas and PNR jointly
install safety devices or equipment at the site of the accident for the protection of the public; and severally liable for damages?

(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any The Zarates brought this action for recovery of damages against both the Pereñas and the PNR, basing
and whatever amount the latter may be held answerable or which they may be ordered to pay their claim against the Pereñas on breach of contract of carriage and against the PNR on quasi-delict.
in favor of plaintiffs by reason of the action;
The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.
(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; We concur with the CA.

(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and To start with, the Pereñas’ defense was that they exercised the diligence of a good father of the family
exemplary damages and attorney's fees.2 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
The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the safe they even had their own son travel to and from school on a daily basis; and that Teodoro Pereña
transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code. himself sometimes accompanied Alfaro in transporting the passengers to and from school. The RTC

TRANSPORTATION LAW
gave scant consideration to such defense by regarding such defense as inappropriate in an action for common carriers found in the Civil Code. Public service, according to Section 13, paragraph (b) of the
breach of contract of carriage. Public Service Act, includes:

We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas operated x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for
as a common carrier; and that their standard of care was extraordinary diligence, not the ordinary hire or compensation, with general or limited clientèle, whether permanent or occasional, and done for
diligence of a good father of a family. 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
Although in this jurisdiction the operator of a school bus service has been usually regarded as a private its classification, freight or carrier service of any class, express service, steamboat, or steamship line,
carrier,9 primarily because he only caters to some specific or privileged individuals, and his operation is pontines, ferries and water craft, engaged in the transportation of passengers or freight or both,
neither open to the indefinite public nor for public use, the exact nature of the operation of a school bus shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and
service has not been finally settled. This is the occasion to lay the matter to rest. power, water supply and power petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other similar public services. x x x.17
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 Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as
a common/public carrier.10 A private carrier is one who, without making the activity a vocation, or without common carriers pipeline operators,18 custom brokers and warehousemen,19 and barge operators20 even
holding himself or itself out to the public as ready to act for all who may desire his or its services, if they had limited clientèle.
undertakes, by special agreement in a particular instance only, to transport goods or persons from one
place to another either gratuitously or for hire.11 The provisions on ordinary contracts of the Civil Code As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the
govern the contract of private carriage. The diligence required of a private carrier is only ordinary, that business actually transacted, or the number and character of the conveyances used in the activity, but
is, the diligence of a good father of the family. In contrast, a common carrier is a person, corporation, whether the undertaking is a part of the activity engaged in by the carrier that he has held out to the
firm or association engaged in the business of carrying or transporting passengers or goods or both, by general public as his business or occupation. If the undertaking is a single transaction, not a part of the
land, water, or air, for compensation, offering such services to the public.12 Contracts of common general business or occupation engaged in, as advertised and held out to the general public, the
carriage are governed by the provisions on common carriers of the Civil Code, the Public Service individual or the entity rendering such service is a private, not a common, carrier. The question must be
Act,13 and other special laws relating to transportation. A common carrier is required to observe determined by the character of the business actually carried on by the carrier, not by any secret
extraordinary diligence, and is presumed to be at fault or to have acted negligently in case of the loss of intention or mental reservation it may entertain or assert when charged with the duties and obligations
the effects of passengers, or the death or injuries to passengers.14 that the law imposes.21

In relation to common carriers, the Court defined public use in the following terms in United States v. Applying these considerations to the case before us, there is no question that the Pereñas as the
Tan Piaco,15 viz: 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
"Public use" is the same as "use by the public". The essential feature of the public use is not confined to by the method by which the business was conducted; and (c) transporting students for a fee. Despite
privileged individuals but is open to the indefinite public. It is this indefinite or unrestricted quality that catering to a limited clientèle, the Pereñas operated as a common carrier because they held themselves
gives it its public character. In determining whether a use is public, we must look not only to the out as a ready transportation indiscriminately to the students of a particular school living within or near
character of the business to be done, but also to the proposed mode of doing it. If the use is merely where they operated the service and for a fee.
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 The common carrier’s standard of care and vigilance as to the safety of the passengers is defined by
law compels the owner to give to the general public. It is not enough that the general prosperity of the law. Given the nature of the business and for reasons of public policy, the common carrier is bound "to
public is promoted. Public use is not synonymous with public interest. The true criterion by which to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
judge the character of the use is whether the public may enjoy it by right or only by permission. transported by them, according to all the circumstances of each case."22 Article 1755 of the Civil Code
specifies that the common carrier should "carry the passengers safely as far as human care and
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided any foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the
distinction between a person or an enterprise offering transportation on a regular or an isolated basis; circumstances." To successfully fend off liability in an action upon the death or injury to a passenger,
and has not distinguished a carrier offering his services to the general public, that is, the general the common carrier must prove his or its observance of that extraordinary diligence; otherwise, the legal
community or population, from one offering his services only to a narrow segment of the general presumption that he or it was at fault or acted negligently would stand.23 No device, whether by
population. stipulation, posting of notices, statements on tickets, or otherwise, may dispense with or lessen the
responsibility of the common carrier as defined under Article 1755 of the Civil Code. 24
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
TRANSPORTATION LAW
And, secondly, the Pereñas have not presented any compelling defense or reason by which the Court The test by which to determine the existence of negligence in a particular case may be stated as
might now reverse the CA’s findings on their liability. On the contrary, an examination of the records follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution which
shows that the evidence fully supported the findings of the CA. 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
As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be negligent at conduct of the discreet paterfamilias of the Roman law. The existence of negligence in a given case is
the time of the accident because death had occurred to their passenger.25 The presumption of not determined by reference to the personal judgment of the actor in the situation before him. The law
negligence, being a presumption of law, laid the burden of evidence on their shoulders to establish that considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence and
they had not been negligent.26 It was the law no less that required them to prove their observance of prudence and determines liability by that.
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 The question as to what would constitute the conduct of a prudent man in a given situation must of
and thus to be held liable for all the natural consequences of such death. 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:
There is no question that the Pereñas did not overturn the presumption of their negligence by credible Reasonable men govern their conduct by the circumstances which are before them or known to them.
evidence. Their defense of having observed the diligence of a good father of a family in the selection They are not, and are not supposed to be, omniscient of the future. Hence they can be expected to take
and supervision of their driver was not legally sufficient. According to Article 1759 of the Civil Code, their care only when there is something before them to suggest or warn of danger. Could a prudent man, in
liability as a common carrier did not cease upon proof that they exercised all the diligence of a good the case under consideration, foresee harm as a result of the course actually pursued? If so, it was the
father of a family in the selection and supervision of their employee. This was the reason why the RTC duty of the actor to take precautions to guard against that harm. Reasonable foresight of harm, followed
treated this defense of the Pereñas as inappropriate in this action for breach of contract of carriage. 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
The Pereñas were liable for the death of Aaron despite the fact that their driver might have acted would have foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing
beyond the scope of his authority or even in violation of the orders of the common carrier.27 In this the conduct or guarding against its consequences. (Emphasis supplied)
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 Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent when he
shortcut into the Makati area, that fact alone did not excuse their driver into taking that route. On the traversed the railroad tracks at a point not allowed for a motorist’s crossing despite being fully aware of
other hand, with his familiarity with that shortcut, their driver was fully aware of the risks to his the grave harm to be thereby caused to his passengers; and when he disregarded the foresight of harm
passengers but he still disregarded the risks. Compounding his lack of care was that loud music was to his passengers by overtaking the bus on the left side as to leave himself blind to the approach of the
playing inside the air-conditioned van at the time of the accident. The loudness most probably reduced oncoming train that he knew was on the opposite side of the bus.
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 Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court,35 where the Court
vehicles traversed the railroad tracks. In so doing, he lost his view of the train that was then coming held the PNR solely liable for the damages caused to a passenger bus and its passengers when its
from the opposite side of the passenger bus, leading him to miscalculate his chances of beating the bus train hit the rear end of the bus that was then traversing the railroad crossing. But the circumstances of
in their race, and of getting clear of the train. As a result, the bus avoided a collision with the train but that case and this one share no similarities. In Philippine National Railways v. Intermediate Appellate
the van got slammed at its rear, causing the fatality. Lastly, he did not slow down or go to a full stop Court, no evidence of contributory negligence was adduced against the owner of the bus. Instead, it
before traversing the railroad tracks despite knowing that his slackening of speed and going to a full was the owner of the bus who proved the exercise of extraordinary diligence by preponderant evidence.
stop were in observance of the right of way at railroad tracks as defined by the traffic laws and Also, the records are replete with the showing of negligence on the part of both the Pereñas and the
regulations.28 He thereby violated a specific traffic regulation on right of way, by virtue of which he was PNR. Another distinction is that the passenger bus in Philippine National Railways v. Intermediate
immediately presumed to be negligent.29 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.
The omissions of care on the part of the van driver constituted negligence,30 which, according to
Layugan v. Intermediate Appellate Court,31 is "the omission to do something which a reasonable man, At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and severally" liable
guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the for damages arising from the death of Aaron. They had been impleaded in the same complaint as
doing of something which a prudent and reasonable man would not do,32 or as Judge Cooley defines it, defendants against whom the Zarates had the right to relief, whether jointly, severally, or in the
‘(t)he failure to observe for the protection of the interests of another person, that degree of care, alternative, in respect to or arising out of the accident, and questions of fact and of law were common as
precaution, and vigilance which the circumstances justly demand, whereby such other person suffers to the Zarates.36 Although the basis of the right to relief of the Zarates (i.e., breach of contract of
injury.’"33 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
The test by which to determine the existence of negligence in a particular case has been aptly stated in liable by virtue of their respective negligence combining to cause the death of Aaron. As to the PNR, the
the leading case of Picart v. Smith,34 thuswise: RTC rightly found the PNR also guilty of negligence despite the school van of the Pereñas traversing
TRANSPORTATION LAW
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.

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.

TRANSPORTATION LAW
8. [G.R. No. L-5458. September 16, 1953.] It was upon these findings that the Commission made the order now sought to be reviewed, upon
complaint of the Philippine Shipowners’ Association charging that the then respondents were engaged
LUZON STEVEDORING CO., INC., and VISAYAN STEVEDORE TRANSPORTATION in the transportation of cargo in the Philippines for hire or compensation without authority or approval of
CO., Petitioners, v. THE PUBLIC SERVICE COMMISSION and THE PHILIPPINE SHIPOWNERS the Commission, having adopted, filed and collected freight charges at the rate of P0.60 per bag or
ASSOCIATION, Respondents. picul, particularly sugar, loaded and transported in their lighters and towed by their tugboats between
different points in the Province of Negros Occidental and Manila, which said rates resulted in ruinous
DECISION competition with complainant.

Section 13 (b) of the Public Service Law (Commonwealth Act No. 146) defines public service
Petitioners apply for review of a decision of the Public Service Commission restraining them "from thus:jgc:chanrobles.com.ph
further operating their watercraft to transport goods for hire or compensation between points in the
Philippines until the rates they propose to charge are approved by this Commission."cralaw virtua1aw l "The term ’public service’ includes every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent,
The facts are summarized by the Commission as follows:jgc:chanrobles.com.ph 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
". . . respondents are corporations duly organized and existing under the laws of the Philippines, mainly fixed route and whatever may be its classification, freight or carrier service of any class, express
engaged in the stevedoring or lighterage and harbor towage business. At the same time, they are service, steamboat, or steamship line, pontines, ferries, and small water craft, engaged in the
engaged in interisland service which consists of hauling cargoes such as sugar, oil, fertilizer and other transportation of passengers and freight, shipyard, marine railway, marine repair shop, warehouse,
commercial commodities which are loaded in their barges and towed by their tugboats from Manila to wharf or dock, ice plant, ice-refrigeretion plant, canal, irrigation system, sewerage, gas, electric light,
various points in the Visayan Islands, particularly in the Provinces of Negros Occidental and Capiz, and heat and power, water supply and power, petroleum, sewerage system, telephone, wire or wireless
from said places to Manila. For this service respondents charge freightage on a unit price with rates telegraph system and broadcasting radio stations."cralaw virtua1aw library
ranging from P0.50 to P0.62 1/2 per bag or picul of sugar loaded or on a unit price per ton in the case of
fertilizer or sand. There is no fixed route in the transportation of these cargoes, the same being left at It is not necessary, under this definition, that one holds himself out as serving or willing to serve the
the indication of the owner or shipper of the goods. The barge and the tugboats are manned by the public in order to be considered public service.
crew of respondents and, in case of damage to the goods in transit caused by the negligence of said
crews, respondents are liable therefor. The service for which respondents charge freightage covers the In Luzon Brokerage Company v. Public Service Commission (40 Off. Gaz., 7th Supplement, p. 271),
hauling or carriage of the goods from the point of embarkation to the point of disembarkation either in this court declared that "Act 454 is clear in including in the definition of a public service that which is
Manila or in any point in the Visayan Islands, as the case may be. rendered for compensation, although limited exclusively to the customers of the petitioner."cralaw
virtua1aw library
"The evidence also sufficiently establishes that respondents are regularly engaged in this hauling
business serving a limited portion of the public. Respondent Luzon Stevedoring Company, Inc., has In that case, the Luzon Brokerage Company, a customs broker, had been receiving, depositing and
among its regular customers the San Miguel Glass Factory, PRATRA, Shell Co., of P.I., Ltd., Standard delivering goods discharged from ships at the pier to its customers. As here, the Luzon Brokerage was
Oil Co., of New York and Philippine-Hawaiian; while respondent Visayan Stevedore Transportation Co., then rendering transportation service for compensation to a limited clientele, not to the public at large.
has among its regular customers the Insular Lumber, Shell Company, Ltd., Kim Kee Chua Yu & Co.,
PRATRA and Luzon Merchandising Corporation. During the period from January, 1949 and up to the In the United States where, it is said, there is no fixed definition of what constitutes public service or
present, respondent Luzon Stevedoring Co. Inc., has been rendering to PRATRA regularly and on public utility, it is also held that it is not always necessary, in order to be a public service, that an
many occasions such service by carrying fertilizer from Manila to various points in the Provinces of organization be dedicated to public use, i.e., ready and willing to serve the public as a class. It is only
Negros Occidental and Capiz, such as Hinigatan, Silay, Fabrica, Marayo, Mambaquid, Victorias and necessary that it must in some way be impressed with a public interest; and whether the operation of a
Pilar, and on the return trip sugar was loaded from said provinces to Manila. For these services, as given business is a public utility depends upon whether or not the service rendered by it is of a public
evidenced by Exhibits A, A-1, A-2, A-3 and A-4, respondent Luzon Stevedoring Company, Inc., charged character and of public consequence and concern. (51 C. J. 5.) Thus, a business may be affected with
PRATRA at the rate of P0.60 per picul or bag of sugar and, according to Mr. Mauricio Rodriguez, chief public interest and regulated for public good although not under any duty to serve the public. (43 Am.
of the division in charge of sugar and fertilizer of the PRATRA, for the transportation of fertilizer, this Jur., 572.)
respondent charged P12 per metric ton. During practically the same period, respondent Visayan
Stevedore Transportation Company transported in its barges and towed by its tugboats sugar for Kim It can scarcely be denied that the contracts between the owners of the barges and the owners of the
Kee Chua Yu & Company coming from Victorias, Marayo and Pilar to Manila, and for Luzon cargo at bar were ordinary contracts of transportation and not of lease. Petitioners’ watercraft was
Merchandising Corporation, from Hinigaran, Bacolod, Marayo and Victorias to Manila. For such service manned entirely by crews in their employ and payroll, and the operation of the said craft was under their
respondent Visayan Stevedore Transportation Company charge Kim Kee Chua Yu Company for direction and control, the customers assuming no responsibility for the goods handled on the barges.
freightage P0.60 per picul or bag as shown in Exhibits C, C-1, C-2, C-3, C-4, C- 5, C-6, C-7 and C-8, The great preponderance of the evidence contradicts the assertion that there was any physical or
and Luzon Merchandising Corporation was also charged for the same service and at the same rate as symbolic conveyance of the possession of the tugboats and barges to the shippers. Whether the
shown in Exhibits B, B-1 and B-2."cralaw virtua1aw library agreements were written or verbal, the manner of payment of freight charges, the question who loaded

TRANSPORTATION LAW
and unloaded the cargo, the propriety of the admission of certain receipts in evidence, etc., to all of transportation, ice plants, etc., which cater to a limited portion of the public under private agreements.
which the parties have given much attention — these are matters of form which do not alter the To the extent that such agreements may tend to wreck or impair the financial stability and efficiency of
essential nature of the relationship of the parties to the transactions as revealed by the fundamental public utilities who do offer service to the public in general, they are affected with public interest and
facts of record. come within the police power of the state to regulate.

It is contended that "if the Public Service Act were to be construed in such manner as to include private Just as the legislature may not "declare a company or enterprise to be a public utility when it is not
lease contracts, said law would be unconstitutional," seemingly implying that, to prevent the law from inherently such," a public utility may not evade control and supervision of its operation by the
being in contravention of the Constitution, it should be so read as to embrace only those persons and government by selecting its customers under the guise of private transactions.
companies that are in fact engaged in public service" with its corresponding qualification of an offer to
serve indiscriminately the public."cralaw virtua1aw library For the rest, the constitutionality of Commonwealth Act No. 146 was upheld, implicitly in Luzon
Brokerage Company v. Public Service Commission, supra, and explicitly in Pangasinan Transportation
It has been already shown that the petitioners’ lighters and tugboats were not leased, but used to carry Company v. Public Service Commission (70 Phil., 221).
goods for compensation at a fixed rate for a fixed weight. At the very least, they were hired, hired in the
sense that the shippers did not have direction, control, and maintenance thereof, which is a Were there serious doubts, the courts should still be reluctant to invalidate the Public Service Law or
characteristic feature of lease. any provision thereof. Although the legislature can not, by its mere declaration, make something a
public utility which is not in fact such, "the public policy of the state as announced by the legislature will
On the second proposition, the Public Service Commission has, in our judgment, interpreted the law in be given due weight, and the determination of the legislature that a particular business is subject to the
accordance with legislative intent. Commonwealth Act No. 146 declares in unequivocal language that regulatory power, because the public welfare is dependent upon its proper conduct and regulation, will
an enterprise of any of the kinds therein enumerated is a public service if conducted for hire or not lightly be disregarded by the courts." (51 C. J. 5.)
compensation even if the operator deals only with a portion of the public or limited clientele.
The objection to the designation of Attorney Aspillera as commissioner to take the evidence was tardy.
It has been seen that public utility, even where the term is not defined by statute, is not determined by It was made for the first time after decision was rendered, following a prolonged hearing in which the
the number of people actually served. Nor does the mere fact that service is rendered only under petitioners crossexamined the complainant’s witnesses and presented their own evidence.
contract prevent a company from being a public utility. (43 Am. Jur., 573.) On the other hand, casual or
incidental service devoid of public character and interest, it must be admitted, is not brought within the The point is procedural, not jurisdictional, and may be waived by express consent or acquiescence. So
category of public utility. The demarkation line is not susceptible of exact description or definitions, each it was held in Everett Steamship Corporation v. Chua Hiong, 90 Phil. 64 and La Paz Ice Plant and Cold
case being governed by its peculiar circumstances. Storage Company v. Comision de Utilidades Públicas Et. Al., 89 Phil., 109.

"It is impossible to lay down any general rule on the subject whether the rendering of incidental service Upon the foregoing considerations, the appealed order of the Public Service Commission is affirmed,
to members of the public by an individual or corporation whose principal business is of a different nature with costs against the petitioners.
constitute such person a public utility. In the result reached, the cases are in conflict, as the question
involved depends on such factors as the extent of service, whether such person or company has held
himself or itself out as ready to serve the public or a portion of the public generally, or in other ways
conducted himself or itself as a public utility. Tn several cases, it has been held that the incidental
service rendered to others constituted such person or corporation a public utility, but in other cases, a
contrary decision has been reached." (43 Am. Jur., 573.)

The transportation service which was the subject of complaint was not casual or incidental. It had been
carried on regularly for years at almost uniform rates of charges. Although the number of the petitioners’
customers was limited, the value of goods transported was not inconsiderable. Petitioners did not have
the same customers all the time embraced in the complaint, and there was no reason to believe that
they would not accept, and there was nothing to prevent them from accepting, new customers that
might be willing to avail of their service to the extent of their capacity. Upon the well-established facts as
applied to the plain letter of Commonwealth Act No. 146, we are of the opinion that the Public Service
Commission’s order does not invade private rights of property or contract.

In at least one respect, the business complained of was a matter of public concern. The Public Service
Law was enacted not only to protect the public against unreasonable charges and poor, inefficient
service, but also to prevent ruinous competition. That, we venture to say, is the main purpose in
bringing under the jurisdiction of the Public Service Commission motor vehicles, other means of

TRANSPORTATION LAW
9. G.R. No. L-47822 December 22, 1988 this Court by way of a Petition for Review assigning as errors the following conclusions of the Court of
Appeals:
PEDRO DE GUZMAN, petitioner,
vs. COURT OF APPEALS and ERNESTO CENDANA, respondents. 1. that private respondent was not a common carrier;

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal 2. that the hijacking of respondent's truck was force majeure; and
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 3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p.
material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo 111)
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.
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.
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 The Civil Code defines "common carriers" in the following terms:
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 Article 1732. Common carriers are persons, corporations, firms or associations
truck driven by respondent himself, while 600 cartons were placed on board the other truck which was engaged in the business of carrying or transporting passengers or goods or both, by
driven by Manuel Estrada, respondent's driver and employee. land, water, or air for compensation, offering their services to the public.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached The above article makes no distinction between one whose principal business activity is the carrying of
petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur persons or goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as
Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise
cargo. 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
On 6 January 1971, petitioner commenced action against private respondent in the Court of First offering its services to the "general public," i.e., the general community or population, and one who
Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost offers services or solicits business only from a narrow segment of the general population. We think that
merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a Article 1733 deliberaom making such distinctions.
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. 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)
In his Answer, private respondent denied that he was a common carrier and argued that he could not be which at least partially supplements the law on common carriers set forth in the Civil Code. Under
held responsible for the value of the lost goods, such loss having been due to force majeure. Section 13, paragraph (b) of the Public Service Act, "public service" includes:

On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a common ... every person that now or hereafter may own, operate, manage, or control in the
carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as well as for P Philippines, for hire or compensation, with general or limited clientele, whether
4,000.00 as damages and P 2,000.00 as attorney's fees. 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
On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering classification, freight or carrier service of any class, express service, steamboat, or
him a common carrier; in finding that he had habitually offered trucking services to the public; in not steamship line, pontines, ferries and water craft, engaged in the transportation of
exempting him from liability on the ground of force majeure; and in ordering him to pay damages and passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant,
attorney's fees. ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless
The Court of Appeals reversed the judgment of the trial court and held that respondent had been communications systems, wire or wireless broadcasting stations and other similar
engaged in transporting return loads of freight "as a casual public services. ... (Emphasis supplied)
occupation — a sideline to his scrap iron business" and not as a common carrier. Petitioner came to
TRANSPORTATION LAW
It appears to the Court that private respondent is properly characterized as a common carrier even In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding
though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such article, if the goods are lost, destroyed or deteriorated, common carriers are
back-hauling was done on a periodic or occasional rather than regular or scheduled manner, and even presumed to have been at fault or to have acted negligently, unless they prove that
though private respondent's principal  occupation was not the carriage of goods for others. There is no they observed extraordinary diligence as required in Article 1733. (Emphasis
dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently supplied)
fell below commercial freight rates is not relevant here.
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the
The Court of Appeals referred to the fact that private respondent held no certificate of public instant case — the hijacking of the carrier's truck — does not fall within any of the five (5) categories of
convenience, and concluded he was not a common carrier. This is palpable error. A certificate of public exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's
convenience is not a requisite for the incurring of liability under the Civil Code provisions governing vehicle must be dealt with under the provisions of Article 1735, in other words, that the private
common carriers. That liability arises the moment a person or firm acts as a common carrier, without respondent as common carrier is presumed to have been at fault or to have acted negligently. This
regard to whether or not such carrier has also complied with the requirements of the applicable presumption, however, may be overthrown by proof of extraordinary diligence on the part of private
regulatory statute and implementing regulations and has been granted a certificate of public respondent.
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 Petitioner insists that private respondent had not observed extraordinary diligence in the care of
sound public policy; that would be to reward private respondent precisely for failing to comply with petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent should
applicable statutory requirements. The business of a common carrier impinges directly and intimately have hired a security guard presumably to ride with the truck carrying the 600 cartons of Liberty filled
upon the safety and well being and property of those members of the general community who happen milk. We do not believe, however, that in the instant case, the standard of extraordinary diligence
to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and required private respondent to retain a security guard to ride with the truck and to engage brigands in a
protection of those who utilize their services and the law cannot allow a common carrier to render such firelight at the risk of his own life and the lives of the driver and his helper.
duties and liabilities merely facultative by simply failing to obtain the necessary permits and
authorizations.
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.
We turn then to the liability of private respondent as a common carrier.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733,
Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very given additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5
high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of and 6, Article 1745 provides in relevant part:
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. Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy:
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 xxx xxx xxx
only:
(5) that the common carrier shall not be responsible for the acts or
(1) Flood, storm, earthquake, lightning or other natural disaster or omissions of his or its employees;
calamity;
(2) Act of the public enemy in war, whether international or civil; (6) that the common carrier's liability for acts committed by thieves,
(3) Act or omission of the shipper or owner of the goods; or of robbers who do  not act with grave or irresistible threat,
(4) The character-of the goods or defects in the packing or-in the violence or force, is dispensed with or diminished; and
containers; and
(5) Order or act of competent public authority. (7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the defective
It is important to point out that the above list of causes of loss, destruction or deterioration which exempt condition of the car vehicle, ship, airplane or other equipment used
the common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, in the contract of carriage. (Emphasis supplied)
even if they appear to constitute a species of force majeure fall within the scope of Article 1735, which
provides as follows: 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
TRANSPORTATION LAW
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.

TRANSPORTATION LAW
10. G.R. No. 186312               June 29, 2010 At the time of Ruelito’s death, he was 28 years old and employed as a contractual worker for Mitsui
Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900.3
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,
vs. SUN HOLIDAYS, INC., Respondent. Petitioners, by letter of October 26, 2000,4 demanded indemnification from respondent for the death of
their son in the amount of at least ₱4,000,000.
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 20011 against Sun
Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from Replying, respondent, by letter dated November 7, 2000,5 denied any responsibility for the incident
the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000 on which it considered to be a fortuitous event. It nevertheless offered, as an act of commiseration, the
board the boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental amount of ₱10,000 to petitioners upon their signing of a waiver.
Mindoro where the couple had stayed at Coco Beach Island Resort (Resort) owned and operated by
respondent. As petitioners declined respondent’s offer, they filed the Complaint, as earlier reflected, alleging that
respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III to sail
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by notwithstanding storm warning bulletins issued by the Philippine Atmospheric, Geophysical and
virtue of a tour package-contract with respondent that included transportation to and from the Resort Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of September 11, 2000.6
and the point of departure in Batangas.
In its Answer,7 respondent denied being a common carrier, alleging that its boats are not available to
Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his account of the the general public as they only ferry Resort guests and crew members. Nonetheless, it claimed that it
incident that led to the filing of the complaint as follows: exercised the utmost diligence in ensuring the safety of its passengers; contrary to petitioners’
allegation, there was no storm on September 11, 2000 as the Coast Guard in fact cleared the voyage;
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave the and M/B Coco Beach III was not filled to capacity and had sufficient life jackets for its passengers. By
Resort in the afternoon of September 10, 2000, but was advised to stay for another night because of way of Counterclaim, respondent alleged that it is entitled to an award for attorney’s fees and litigation
strong winds and heavy rains. expenses amounting to not less than ₱300,000.

On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including petitioners’ Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires four
son and his wife trekked to the other side of the Coco Beach mountain that was sheltered from the wind conditions to be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is clearance
where they boarded M/B Coco Beach III, which was to ferry them to Batangas. from the Coast Guard, (3) there is clearance from the captain and (4) there is clearance from the
Resort’s assistant manager.8 He added that M/B Coco Beach III met all four conditions on September
11, 2000,9 but a subasco or squall, characterized by strong winds and big waves, suddenly occurred,
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into the causing the boat to capsize.10
open seas, the rain and wind got stronger, causing the boat to tilt from side to side and the captain to
step forward to the front, leaving the wheel to one of the crew members.
By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed petitioners’ Complaint and
respondent’s Counterclaim.
The waves got more unwieldy. After getting hit by two big waves which came one after the other, M/B
Coco Beach III capsized putting all passengers underwater.
Petitioners’ Motion for Reconsideration having been denied by Order dated September 2, 2005,12 they
appealed to the Court of Appeals.
The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing the
captain, Matute and the other passengers who reached the surface asked him what they could do to
save the people who were still trapped under the boat. The captain replied "Iligtas niyo na lang ang By Decision of August 19, 2008,13 the appellate court denied petitioners’ appeal, holding, among other
sarili niyo" (Just save yourselves). things, that the trial court correctly ruled that respondent is a private carrier which is only required to
observe ordinary diligence; that respondent in fact observed extraordinary diligence in transporting its
guests on board M/B Coco Beach III; and that the proximate cause of the incident was a squall, a
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera fortuitous event.
passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting
of 18 passengers and four crew members, who were brought to Pisa Island. Eight passengers,
including petitioners’ son and his wife, died during the incident. Petitioners’ Motion for Reconsideration having been denied by Resolution dated January 16,
2009,14 they filed the present Petition for Review.15

TRANSPORTATION LAW
Petitioners maintain the position they took before the trial court, adding that respondent is a common Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as
carrier since by its tour package, the transporting of its guests is an integral part of its resort business. to be properly considered ancillary thereto. The constancy of respondent’s ferry services in its resort
They inform that another division of the appellate court in fact held respondent liable for damages to the operations is underscored by its having its own Coco Beach boats. And the tour packages it offers,
other survivors of the incident. 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.
Upon the other hand, respondent contends that petitioners failed to present evidence to prove that it is a
common carrier; that the Resort’s ferry services for guests cannot be considered as ancillary to its That respondent does not charge a separate fee or fare for its ferry services is of no moment. It would
business as no income is derived therefrom; that it exercised extraordinary diligence as shown by the be imprudent to suppose that it provides said services at a loss. The Court is aware of the practice of
conditions it had imposed before allowing M/B Coco Beach III to sail; that the incident was caused by a beach resort operators offering tour packages to factor the transportation fee in arriving at the tour
fortuitous event without any contributory negligence on its part; and that the other case wherein the package price. That guests who opt not to avail of respondent’s ferry services pay the same amount is
appellate court held it liable for damages involved different plaintiffs, issues and evidence.16 likewise inconsequential. These guests may only be deemed to have overpaid.

The petition is impressed with merit. As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has deliberately
refrained from making distinctions on whether the carrying of persons or goods is the carrier’s principal
Petitioners correctly rely on De Guzman v. Court of Appeals17 in characterizing respondent as a business, whether it is offered on a regular basis, or whether it is offered to the general public. The
common carrier. intent of the law is thus to not consider such distinctions. Otherwise, there is no telling how many other
distinctions may be concocted by unscrupulous businessmen engaged in the carrying of persons or
goods in order to avoid the legal obligations and liabilities of common carriers.
The Civil Code defines "common carriers" in the following terms:
Under the Civil Code, common carriers, from the nature of their business and for reasons of public
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business policy, are bound to observe extraordinary diligence for the safety of the passengers transported by
of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering them, according to all the circumstances of each case.19 They are bound to carry the passengers safely
their services to the public. as far as human care and foresight can provide, using the utmost diligence of very cautious persons,
with due regard for all the circumstances.20
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, When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that the
as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise common carrier is at fault or negligent. In fact, there is even no need for the court to make an express
offering transportation service on a regular or scheduled basis and one offering such service on finding of fault or negligence on the part of the common carrier. This statutory presumption may only be
an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier overcome by evidence that the carrier exercised extraordinary diligence.21
offering its services to the "general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general population. We think that
Article 1733 deliberately refrained from making such distinctions. Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions of voyage
before it allowed M/B Coco Beach III to sail on September 11, 2000. Respondent’s position does not
impress.
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 The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone
Section 13, paragraph (b) of the Public Service Act, "public service" includes: warnings for shipping on September 10 and 11, 2000 advising of tropical depressions in Northern Luzon
which would also affect the province of Mindoro.22 By the testimony of Dr. Frisco Nilo, supervising
weather specialist of PAGASA, squalls are to be expected under such weather condition.23
. . . 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, A very cautious person exercising the utmost diligence would thus not brave such stormy weather and
subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever put other people’s lives at risk. The extraordinary diligence required of common carriers demands that
may be its classification, freight or carrier service of any class, express service, steamboat, or they take care of the goods or lives entrusted to their hands as if they were their own. This respondent
steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight failed to do.
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 Respondent’s insistence that the incident was caused by a fortuitous event does not impress either.
or wireless communications systems, wire or wireless broadcasting stations and other similar public
services . . .18 (emphasis and underscoring supplied.)

TRANSPORTATION LAW
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected occurrence,
or the failure of the debtors to comply with their obligations, must have been independent of human will;
(b) the event that constituted the caso fortuito must have been impossible to foresee or, if foreseeable,
impossible to avoid; (c) the occurrence must have been such as to render it impossible for the debtors
to fulfill their obligation in a normal manner; and (d) the obligor must have been free from any
participation in the aggravation of the resulting injury to the creditor.24

To fully free a common carrier from any liability, the fortuitous event must have been the proximate and
only cause of the loss. And it should have exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the fortuitous event.25

Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned M/B
Coco Beach III. As reflected above, however, the occurrence of squalls was expected under the
weather condition of September 11, 2000. Moreover, evidence shows that M/B Coco Beach III suffered
engine trouble before it capsized and sank.26 The incident was, therefore, not completely free from
human intervention.

The Court need not belabor how respondent’s evidence likewise fails to demonstrate that it exercised
due diligence to prevent or minimize the loss before, during and after the occurrence of the squall.

Article 176427 vis-à-vis Article 220628 of the Civil Code holds the common carrier in breach of its contract
of carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death,
(2) indemnity for loss of earning capacity and (3) moral damages.

WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE.
Judgment is rendered in favor of petitioners ordering respondent to pay petitioners the following: (1)
₱50,000 as indemnity for the death of Ruelito Cruz; (2) ₱8,316,000 as indemnity for Ruelito’s loss of
earning capacity; (3) ₱100,000 as moral damages; (4) ₱100,000 as exemplary damages; (5) 10% of the
total amount adjudged against respondent as attorneys fees; and (6) the costs of suit.

The total amount adjudged against respondent shall earn interest at the rate of 12% per annum
computed from the finality of this decision until full payment.

TRANSPORTATION LAW
11. [G.R. NO. 150255. April 22, 2005] Earnest efforts on the part of both the consignee Little Giant and Industrial Insurance to recover the lost
cargoes proved futile.14
SCHMITZ TRANSPORT & BROKERAGE CORPORATION, Petitioners, v. TRANSPORT VENTURE,
INC., INDUSTRIAL INSURANCE COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL Little Giant thus filed a formal claim against Industrial Insurance which paid it the amount
now INCHCAPE SHIPPING SERVICES, Respondents. of P5,246,113.11. Little Giant thereupon executed a subrogation receipt15 in favor of Industrial
Insurance.
On Petition for Review is the June 27, 2001 Decision1 of the Court of Appeals, as well as its
Resolution2 dated September 28, 2001 denying the motion for reconsideration, which affirmed that of Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black Sea through its
Branch 21 of the Regional Trial Court (RTC) of Manila in Civil Case No. 92-631323 holding petitioner representative Inchcape (the defendants) before the RTC of Manila, for the recovery of the amount it
Schmitz Transport Brokerage Corporation (Schmitz Transport), together with Black Sea Shipping paid to Little Giant plus adjustment fees, attorney's fees, and litigation expenses.16
Corporation (Black Sea), represented by its ship agent Inchcape Shipping Inc. (Inchcape), and
Transport Venture (TVI), solidarily liable for the loss of 37 hot rolled steel sheets in coil that were Industrial Insurance faulted the defendants for undertaking the unloading of the cargoes while typhoon
washed overboard a barge. signal No. 1 was raised in Metro Manila.17

On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on By Decision of November 24, 1997, Branch 21 of the RTC held all the defendants negligent for
board M/V "Alexander Saveliev" (a vessel of Russian registry and owned by Black Sea) 545 hot rolled unloading the cargoes outside of the breakwater notwithstanding the storm signal.18 The dispositive
steel sheets in coil weighing 6,992,450 metric tons. portion of the decision reads:

The cargoes, which were to be discharged at the port of Manila in favor of the consignee, Little Giant WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, ordering the
Steel Pipe Corporation (Little Giant),4 were insured against all risks with Industrial Insurance Company defendants to pay plaintiff jointly and severally the sum of P5,246,113.11 with interest from the date the
Ltd. (Industrial Insurance) under Marine Policy No. M-91-3747-TIS.5 complaint was filed until fully satisfied, as well as the sum of P5,000.00 representing the adjustment fee
plus the sum of 20% of the amount recoverable from the defendants as attorney's fees plus the costs of
The vessel arrived at the port of Manila on October 24, 1991 and the Philippine Ports Authority (PPA) suit. The counterclaims and cross claims of defendants are hereby DISMISSED for lack of [m]erit.19
assigned it a place of berth at the outside breakwater at the Manila South Harbor.6
To the trial court's decision, the defendants Schmitz Transport and TVI filed a joint motion for
Schmitz Transport, whose services the consignee engaged to secure the requisite clearances, to reconsideration assailing the finding that they are common carriers and the award of excessive
receive the cargoes from the shipside, and to deliver them to its (the consignee's) warehouse at Cainta, attorney's fees of more than P1,000,000. And they argued that they were not motivated by gross or
Rizal,7 in turn engaged the services of TVI to send a barge and tugboat at shipside. evident bad faith and that the incident was caused by a fortuitous event.20

On October 26, 1991, around 4:30 p.m., TVI's tugboat "Lailani" towed the barge "Erika V" to shipside.8 By resolution of February 4, 1998, the trial court denied the motion for reconsideration.21

By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the barge alongside the vessel, left All the defendants appealed to the Court of Appeals which, by decision of June 27, 2001, affirmed in
and returned to the port terminal.9 At 9:00 p.m., arrastre operator Ocean Terminal Services Inc. toto the decision of the trial court, 22 it finding that all the defendants were common carriers - Black Sea
commenced to unload 37 of the 545 coils from the vessel unto the barge. and TVI for engaging in the transport of goods and cargoes over the seas as a regular business and not
as an isolated transaction,23 and Schmitz Transport for entering into a contract with Little Giant to
By 12:30 a.m. of October 27, 1991 during which the weather condition had become inclement due to an transport the cargoes from ship to port for a fee.24
approaching storm, the unloading unto the barge of the 37 coils was accomplished.10 No tugboat pulled
the barge back to the pier, however. In holding all the defendants solidarily liable, the appellate court ruled that "each one was essential such
that without each other's contributory negligence the incident would not have happened and so much so
At around 5:30 a.m. of October 27, 1991, due to strong waves,11 the crew of the barge abandoned it that the person principally liable cannot be distinguished with sufficient accuracy."25
and transferred to the vessel. The barge pitched and rolled with the waves and eventually capsized,
washing the 37 coils into the sea.12 At 7:00 a.m., a tugboat finally arrived to pull the already empty and In discrediting the defense of fortuitous event, the appellate court held that "although defendants
damaged barge back to the pier.13 obviously had nothing to do with the force of nature, they however had control of where to anchor the
vessel, where discharge will take place and even when the discharging will commence."26

TRANSPORTATION LAW
The defendants' respective motions for reconsideration having been denied by Resolution27 of negligence.35 It thus concluded that the proximate cause of the loss was Black Sea's negligence in
September 28, 2001, Schmitz Transport (hereinafter referred to as petitioner) filed the present petition deciding to unload the cargoes at an unsafe place and while a typhoon was approaching.36
against TVI, Industrial Insurance and Black Sea.
From a review of the records of the case, there is no indication that there was greater risk in loading the
Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting for its principal, cargoes outside the breakwater. As the defendants proffered, the weather on October 26, 1991
consignee Little Giant, hence, the transportation contract was by and between Little Giant and TVI.28 remained normal with moderate sea condition such that port operations continued and proceeded
normally.37
By Resolution of January 23, 2002, herein respondents Industrial Insurance, Black Sea, and TVI were
required to file their respective Comments.29 The weather data report,38 furnished and verified by the Chief of the Climate Data Section of PAG-ASA
and marked as a common exhibit of the parties, states that while typhoon signal No. 1 was hoisted over
By its Comment, Black Sea argued that the cargoes were received by the consignee through petitioner Metro Manila on October 23-31, 1991, the sea condition at the port of Manila at 5:00 p.m. - 11:00 p.m.
in good order, hence, it cannot be faulted, it having had no control and supervision thereover.30 of October 26, 1991 was moderate. It cannot, therefore, be said that the defendants were negligent in
not unloading the cargoes upon the barge on October 26, 1991 inside the breakwater.
For its part, TVI maintained that it acted as a passive party as it merely received the cargoes and
transferred them unto the barge upon the instruction of petitioner.31 That no tugboat towed back the barge to the pier after the cargoes were completely loaded by 12:30 in
the morning39 is, however, a material fact which the appellate court failed to properly consider and
appreciate40 - the proximate cause of the loss of the cargoes. Had the barge been towed back promptly
In issue then are: to the pier, the deteriorating sea conditions notwithstanding, the loss could have been avoided. But the
barge was left floating in open sea until big waves set in at 5:30 a.m., causing it to sink along with the
(1) Whether the loss of the cargoes was due to a fortuitous event, independent of any act of negligence cargoes.41 The loss thus falls outside the "act of God doctrine."
on the part of petitioner Black Sea and TVI, and
The proximate cause of the loss having been determined, who among the parties is/are responsible
(2) If there was negligence, whether liability for the loss may attach to Black Sea, petitioner and TVI. therefor?

When a fortuitous event occurs, Article 1174 of the Civil Code absolves any party from any and all Contrary to petitioner's insistence, this Court, as did the appellate court, finds that petitioner is a
liability arising therefrom: common carrier. For it undertook to transport the cargoes from the shipside of "M/V Alexander Saveliev"
to the consignee's warehouse at Cainta, Rizal. As the appellate court put it, "as long as a person or
ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by corporation holds [itself] to the public for the purpose of transporting goods as [a] business, [it] is
stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be already considered a common carrier regardless if [it] owns the vehicle to be used or has to hire
responsible for those events which could not be foreseen, or which though foreseen, were inevitable. one."42 That petitioner is a common carrier, the testimony of its own Vice-President and General
Manager Noel Aro that part of the services it offers to its clients as a brokerage firm includes the
transportation of cargoes reflects so.
In order, to be considered a fortuitous event, however, (1) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtor to comply with his obligation, must be independent of human will;
(2) it must be impossible to foresee the event which constitute the caso fortuito, or if it can be foreseen it Article 1732 does not distinguish between one whose principal business activity is the carrying of goods
must be impossible to avoid; (3) the occurrence must be such as to render it impossible for the debtor to and one who does such carrying only as an ancillary activity. The contention, therefore, of petitioner that
fulfill his obligation in any manner; and (4) the obligor must be free from any participation in the it is not a common carrier but a customs broker whose principal function is to prepare the correct
aggravation of the injury resulting to the creditor.32 customs declaration and proper shipping documents as required by law is bereft of merit. It suffices that
petitioner undertakes to deliver the goods for pecuniary consideration.45

[T]he principle embodied in the act of God doctrine strictly requires that the act must be occasioned
solely by the violence of nature. Human intervention is to be excluded from creating or entering into the And in Calvo v. UCPB General Insurance Co. Inc.,46 this Court held that as the transportation of goods
cause of the mischief. When the effect is found to be in part the result of the participation of man, is an integral part of a customs broker, the customs broker is also a common carrier. For to declare
whether due to his active intervention or neglect or failure to act, the whole occurrence is then otherwise "would be to deprive those with whom [it] contracts the protection which the law affords them
humanized and removed from the rules applicable to the acts of God.33 notwithstanding the fact that the obligation to carry goods for [its] customers, is part and parcel of
petitioner's business."47

The appellate court, in affirming the finding of the trial court that human intervention in the form of
contributory negligence by all the defendants resulted to the loss of the cargoes,34 held that unloading As for petitioner's argument that being the agent of Little Giant, any negligence it committed was
outside the breakwater, instead of inside the breakwater, while a storm signal was up constitutes deemed the negligence of its principal, it does not persuade.

TRANSPORTATION LAW
True, petitioner was the broker-agent of Little Giant in securing the release of the cargoes. In effecting While petitioner sent checkers54 and a supervisor55 on board the vessel to counter-check the operations
the transportation of the cargoes from the shipside and into Little Giant's warehouse, however, of TVI, it failed to take all available and reasonable precautions to avoid the loss. After noting that TVI
petitioner was discharging its own personal obligation under a contact of carriage. failed to arrange for the prompt towage of the barge despite the deteriorating sea conditions, it should
have summoned the same or another tugboat to extend help, but it did not.
Petitioner, which did not have any barge or tugboat, engaged the services of TVI as handler48 to provide
the barge and the tugboat. In their Service Contract,49 while Little Giant was named as the consignee, This Court holds then that petitioner and TVI are solidarily liable56 for the loss of the cargoes. The
petitioner did not disclose that it was acting on commission and was chartering the vessel for Little following pronouncement of the Supreme Court is instructive:
Giant.50 Little Giant did not thus automatically become a party to the Service Contract and was not,
therefore, bound by the terms and conditions therein. 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
Not being a party to the service contract, Little Giant cannot directly sue TVI based thereon but it can the common carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier
maintain a cause of action for negligence.51 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
In the case of TVI, while it acted as a private carrier for which it was under no duty to observe the contract of carriage.
extraordinary diligence, it was still required to observe ordinary diligence to ensure the proper and
careful handling, care and discharge of the carried goods. 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. x x x [O]ne
Thus, Articles 1170 and 1173 of the Civil Code provide: might ask further, how then must the liability of the common carrier, on 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
ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, contractual and the other in culpa aquiliana, Article 2194 of the Civil Code can well apply. In fine, a
and those who in any manner contravene the tenor thereof, are liable for damages. 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
ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is of a quasi-delictual liability had no contract existed between the parties, the contract can be said to have
required by the nature of the obligation and corresponds with the circumstances of the persons, of the been breached by tort, thereby allowing the rules on tort to apply.57
time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2202,
paragraph 2, shall apply. As for Black Sea, its duty as a common carrier extended only from the time the goods were surrendered
or unconditionally placed in its possession and received for transportation until they were delivered
If the law or contract does not state the diligence which is to be observed in the performance, that which actually or constructively to consignee Little Giant.58
is expected of a good father of a family shall be required.
Parties to a contract of carriage may, however, agree upon a definition of delivery that extends the
Was the reasonable care and caution which an ordinarily prudent person would have used in the same services rendered by the carrier. In the case at bar, Bill of Lading No. 2 covering the shipment provides
situation exercised by TVI?52 that delivery be made "to the port of discharge or so near thereto as she may safely get, always
afloat."59 The delivery of the goods to the consignee was not from "pier to pier" but from the shipside of
This Court holds not. "M/V Alexander Saveliev" and into barges, for which reason the consignee contracted the services of
petitioner. Since Black Sea had constructively delivered the cargoes to Little Giant, through petitioner, it
had discharged its duty.60
TVI's failure to promptly provide a tugboat did not only increase the risk that might have been
reasonably anticipated during the shipside operation, but was the proximate cause of the loss. A man
of ordinary prudence would not leave a heavily loaded barge floating for a considerable number of In fine, no liability may thus attach to Black Sea.
hours, at such a precarious time, and in the open sea, knowing that the barge does not have any power
of its own and is totally defenseless from the ravages of the sea. That it was nighttime and, therefore, Respecting the award of attorney's fees in an amount over P1,000,000.00 to Industrial Insurance, for
the members of the crew of a tugboat would be charging overtime pay did not excuse TVI from calling lack of factual and legal basis, this Court sets it aside. While Industrial Insurance was compelled to
for one such tugboat. litigate its rights, such fact by itself does not justify the award of attorney's fees under Article 2208 of the
Civil Code. For no sufficient showing of bad faith would be reflected in a party's persistence in a case
As for petitioner, for it to be relieved of liability, it should, following Article 173953 of the Civil Code, prove other than an erroneous conviction of the righteousness of his cause.61 To award attorney's fees to a
that it exercised due diligence to prevent or minimize the loss, before, during and after the occurrence of party just because the judgment is rendered in its favor would be tantamount to imposing a premium on
the storm in order that it may be exempted from liability for the loss of the goods. one's right to litigate or seek judicial redress of legitimate grievances.62

TRANSPORTATION LAW
On the award of adjustment fees: The adjustment fees and expense of divers were incurred by
Industrial Insurance in its voluntary but unsuccessful efforts to locate and retrieve the lost cargo. They
do not constitute actual damages.63

As for the court a quo's award of interest on the amount claimed, the same calls for modification
following the ruling in Eastern Shipping Lines, Inc. v. Court of Appeals64 that when the demand cannot
be reasonably established at the time the demand is made, the interest shall begin to run not from the
time the claim is made judicially or extrajudicially but from the date the judgment of the court is made (at
which the time the quantification of damages may be deemed to have been reasonably ascertained).65

WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport & Brokerage
Corporation, and Transport Venture Incorporation jointly and severally liable for the amount
of P5,246,113.11 with the MODIFICATION that interest at SIX PERCENT per annum of the amount due
should be computed from the promulgation on November 24, 1997 of the decision of the trial court.

TRANSPORTATION LAW
11B. See Case 5. 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
12. G.R. No. 101503 September 15, 1993 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
PLANTERS PRODUCTS, INC., petitioner, contain spillages of the ferilizer.9
vs. COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI
KAISHA, respondents.
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th
and 18th).10 A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior
New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk to and after discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19 July
on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer
Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, approximating 18 M/T was contaminated with dirt. The same results were contained in a Certificate of
Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued on Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered
the date of departure. 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. 12
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 Charter2 was entered into between Mitsubishi as shipper/charterer and KKKK as Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies
shipowner, in Tokyo, Japan.3 Riders to the aforesaid charter-party starting from par. 16 to 40 were (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged
attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also shortage in the goods shipped and the diminution in value of that portion said to have been
subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively. contaminated with dirt. 13

Before loading the fertilizer aboard the vessel, four (4) of her holds4 were all presumably inspected by Respondent SSA explained that they were not able to respond to the consignee's claim for payment
the charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the because, according to them, what they received was just a request for shortlanded certificate and not a
charter-party which reads: formal claim, and that this "request" was denied by them because they "had nothing to do with the
discharge of the shipment." 14 Hence, on 18 July 1975, PPI filed an action for damages with the Court of
16. . . . At loading port, notice of readiness to be accomplished by certificate from First Instance of Manila. The defendant carrier argued that the strict public policy governing common
National Cargo Bureau inspector or substitute appointed by charterers for his account carriers does not apply to them because they have become private carriers by reason of the provisions
certifying the vessel's readiness to receive cargo spaces. The vessel's hold to be of the charter-party. The court a quo however sustained the claim of the plaintiff against the defendant
properly swept, cleaned and dried at the vessel's expense and the vessel to be carrier for the value of the goods lost or damaged when it ruled thus: 15
presented clean for use in bulk to the satisfaction of the inspector before daytime
commences. (emphasis supplied) . . . 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
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper has to do in a suit to recover for loss or damage is to show receipt by the
shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, carrier of the goods and to delivery by it of less than what it received. After that, the
then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire burden of proving that the loss or damage was due to any of the causes which
voyage.5 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
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with defendants considered private carriers, it was still incumbent upon them to prove that
the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its steelbodied dump the shortage or contamination sustained by the cargo is attributable to the fault or
trucks which were parked alongside the berth, using metal scoops attached to the ship, pursuant to the negligence on the part of the shipper or consignee in the loading, stowing, trimming
terms and conditions of the charter-partly (which provided for an F.I.O.S. clause).6 The hatches and discharge of the cargo. This they failed to do. By this omission, coupled with their
remained open throughout the duration of the discharge.7 failure to destroy the presumption of negligence against them, the defendants are
liable (emphasis supplied).

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 On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability
warehouse, the trucks were made to pass through a weighing scale where they were individually for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home Insurance

TRANSPORTATION LAW
Co.  v. American Steamship Agencies, Inc.,17 the appellate court ruled that the cargo vessel M/V "Sun stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of
Plum" owned by private respondent KKKK was a private carrier and not a common carrier by reason of the ship.
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 — 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
. . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee ready to engage in carrying goods or transporting passengers or both for compensation as a public
to adduce sufficient evidence to prove the negligence of the defendant carrier as employment and not as a casual occupation. The distinction between a "common or public carrier" and
alleged in its complaint. It is an old and well settled rule that if the plaintiff, upon whom a "private or special carrier" lies in the character of the business, such that if the undertaking is a single
rests the burden of proving his cause of action, fails to show in a satisfactory manner transaction, not a part of the general business or occupation, although involving the carriage of goods
the facts upon which he bases his claim, the defendant is under no obligation to prove for a fee, the person or corporation offering such service is a private carrier. 24
his exception or defense (Moran, Commentaries on the Rules of Court, Volume 6, p.
2, citing Belen v. Belen, 13 Phil. 202). 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.25 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
Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of to have been at fault or to have acted negligently, and the burden of proving otherwise rests on
Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present controversy them.26 On the contrary, no such presumption applies to private carriers, for whosoever alleges damage
because the issue raised therein is the validity of a stipulation in the charter-party delimiting the liability to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the
of the shipowner for loss or damage to goods cause by want of due deligence on its part or that of its carrier.
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. 19 Petitioner It is not disputed that respondent carrier, in the ordinary course of business, operates as a common
further argues that since the possession and control of the vessel remain with the shipowner, absent carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V
any stipulation to the contrary, such shipowner should made liable for the negligence of the captain and "Sun Plum", the ship captain, its officers and compliment were under the employ of the shipowner and
crew. In fine, PPI faults the appellate court in not applying the presumption of negligence against therefore continued to be under its direct supervision and control. Hardly then can we charge the
respondent carrier, and instead shifting the onus probandi on the shipper to show want of due deligence charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer
on the part of the carrier, when he was not even at hand to witness what transpired during the entire did not have any control of the means in doing so. This is evident in the present case considering that
voyage. 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
As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by screened, chosen and hired by the shipowner. 27
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 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
It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so, we in the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and
find it fitting to first define important terms which are relevant to our discussion. 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
A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by property of the charterer. 28
the owner to another person for a specified time or use; 20 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; 21 Charter Respondent carrier's heavy reliance on the case of Home Insurance Co. v.  American Steamship
parties are of two types: (a) contract of affreightment which involves the use of shipping space on Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the validity of
vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise a stipulation in the charter-party exempting the shipowners from liability for loss due to the negligence of
or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him its agent, and not the effects of a special charter on common carriers. At any rate, the rule in the United
of its entire command and possession and consequent control over its navigation, including the master States that a ship chartered by a single shipper to carry special cargo is not a common carrier, 29 does
and the crew, who are his servants. Contract of affreightment may either be time charter, wherein the not find application in our jurisdiction, for we have observed that the growing concern for safety in the
vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased transportation of passengers and /or carriage of goods by sea requires a more exacting interpretation of
for a single voyage. 22 In both cases, the charter-party provides for the hire of vessel only, either for a admiralty laws, more particularly, the rules governing common carriers.
determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship's

TRANSPORTATION LAW
In an action for recovery of damages against a common carrier on the goods shipped, the shipper or negligence or by reason of his having failed to take the precautions which usage has established
consignee should first prove the fact of shipment and its consequent loss or damage while the same among careful persons. 38
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, Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and
damage or deterioration of the cargo was due to fortuitous event, or some other circumstances the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working with Atlas
inconsistent with its liability. 31 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.
To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage,
facie presumption of negligence. 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
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before to spillage during such operation amounting to one percent (1%) against the bill of lading is deemed
the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before "normal" or "tolerable." The primary cause of these spillages is the clamped shell which does not seal
the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. After very tightly. Also, the wind tends to blow away some of the materials during the unloading process.
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 The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an extremely
with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the high temperature in its place of storage, or when it comes in contact with water. When Urea is drenched
weight of the steel covers made it impossible for a person to open without the use of the ship's boom. 32 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.
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. 33 When The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was
M/V "Sun Plum" docked at its berthing place, representatives of the consignee boarded, and in the made greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical
presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor effects of the elements and the grimy condition of the various pieces of equipment used in transporting
representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The and hauling it.
stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the
whole operation on rotation basis. 34 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
Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the
overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have
cargo. This was confirmed by respondent appellate court thus — 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
The period during which private respondent was to observe the degree of diligence required of it as a CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bar order cargo" as
public carrier began from the time the cargo was unconditionally placed in its charge after the vessel's contained in their report to PPI was just an approximation or estimate made by them after the fertilizer
holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its was discharged from the vessel and segregated from the rest of the cargo.
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- The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo. It
party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the rained from time to time at the harbor area while the cargo was being discharged according to the
cargo was to be done by the charterer, free from all risk and expense to the carrier. 35 Moreover, a supply officer of PPI, who also testified that it was windy at the waterfront and along the shoreline where
shipowner is liable for damage to the cargo resulting from improper stowage only when the stowing is the dump trucks passed enroute to the consignee's warehouse.
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. 36 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
Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, unloading, as was the case at bar. This is a risk the shipper or the owner of the goods has to face.
destruction or deterioration of the goods if caused by the charterer of the goods or defects in the Clearly, respondent carrier has sufficiently proved the inherent character of the goods which makes it
packaging or in the containers. The Code of Commerce also provides that all losses and deterioration highly vulnerable to deterioration; as well as the inadequacy of its packaging which further contributed
which the goods may suffer during the transportation by reason of fortuitous event,  force majeure, or to the loss. On the other hand, no proof was adduced by the petitioner showing that the carrier was
the inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these remise in the exercise of due diligence in order to minimize the loss or damage to the goods it carried.
accidents is incumbent upon the carrier. 37 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

TRANSPORTATION LAW
WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which The boxes on one side of the van were in disarray while others were opened or damaged due to the
reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the First dampness. Caparoso further observed that parts of the container van were damaged and rusty. There
Instance, now Regional Trial Court, of Manila should be, as it is hereby DISMISSED. were also water droplets on the walls and the floor was wet. Since the damaged packaging materials
might contaminate the product they were meant to hold, Caparoso rejected the entire shipment.
12B. National Steel Corp v CA – See #6
Renato Layug and Mario Chin, duly certified adjusters of the Manila Adjusters and Surveyors Company
13 G.R. No. 187701               July 23, 2014 were forthwith hailed to inspect and conduct a survey of the shipment.6 Their Certificate of
Survey7 dated January 17, 2001 yielded results similar to the observations of Caparoso, thus:
PHILAM INSURANCE COMPANY, INC. (now CHARTIS PHILIPPINES INSURANCE,
INC.*), Petitioner, vs. HEUNG-A SHIPPING CORPORATION and WALLEM PHILIPPINES SHIPPING, [T]he sea van panels/sidings and roofing were noted with varying degrees of indentations and partly
INC., Respondents. corroded/rusty. Internally, water bead clung along the roofs from rear to front section. The mid section
dented/sagged with affected area was noted with minutes hole evidently due to thinning/corroded rusty
metal plates. The shipment was noted with several palletized cartons already in collapsed condition due
On December 19, 2000, Novartis Consumer Health Philippines, Inc. (NOVARTIS) imported from Jinsuk to wetting. The van’s entire floor length was also observed wet.8
Trading Co. Ltd., (JINSUK) in South Korea, 19 pallets of 200 rolls of Ovaltine Power 18 Glaminated
plastic packaging material.
All 17 pallets of the 184 cartons/rolls contained in the sea van were found wet/water damaged. Sixteen
(16)cartons/rolls supposedly contained in 2 pallets were unaccounted for although the surveyors
In order to ship the goods to the Philippines, JINSUK engaged the services of Protop Shipping remarked that this may be due to short shipment by the supplier considering that the sea van was fully
Corporation (PROTOP), a freight forwarder likewise based in South Korea, to forward the goods to their loaded and can no longer accommodate the said unaccounted items. The survey report further stated
consignee, NOVARTIS. that the "wetting sustained by the shipment may have reasonably be attributed to the water seepage
that gain entry into the sea van container damage roofs (minutes hole) during transit period[sic]."9
Based on Bill of Lading No. PROTAS 200387 issued by PROTOP, the cargo was on freight prepaid
basis and on "shipper’s load and count" which means that the "container [was] packed with cargo by Samples from the wet packing materials/boxes were submitted to the chemist of Precision Analytical
one shipper where the quantity, description and condition of the cargo is the sole responsibility of the Services, Inc. (PRECISION), Virgin Hernandez (Hernandez), and per Laboratory Report No. 042-07
shipper."4 Likewise stated in the bill of lading is the name Sagawa Express Phils., Inc., (SAGAWA) dated January 16, 2001, the cause of wetting in the carton boxes and kraft paper/lining materials as well
designated as the entity in the Philippines which will obtain the delivery contract. as the aluminum foil laminated plastic packaging material, was salt water.10

PROTOP shipped the cargo through Dongnama Shipping Co. Ltd. (DONGNAMA) which in turn loaded Aggrieved, NOVARTIS demanded indemnification for the lost/damaged shipment from PROTOP,
the same on M/V Heung-A Bangkok V-019 owned and operated by Heung-A Shipping Corporation, SAGAWA, ATI and STEPHANIE but was denied. Insurance claims were, thus, filed with PHILAM which
(HEUNG-A), a Korean corporation, pursuant to a ‘slot charter agreement’ whereby a space in the paid the insured value of the shipment inthe adjusted amount of One Million Nine Hundred Four
latter’s vessel was reserved for the exclusive use of the former. Wallem Philippines Shipping, Inc. Thousand Six Hundred Thirteen Pesos and Twenty Centavos (₱1,904,613.20). Claiming that after such
(WALLEM) is the ship agent of HEUNG-A in the Philippines. NOVARTIS insured the shipment with payment, it was subrogated to all the rights and claims of NOVARTIS against the parties liable for the
Philam Insurance Company, Inc. (PHILAM, now Chartis Philippines Insurance, Inc.) under All Risk lost/damaged shipment, PHILAM filed on June 4, 2001, a complaint for damages against PROTOP, as
Marine Open Insurance Policy No. MOP-0801011828 against all loss, damage, liability, or expense the issuer of Bill of Lading No. PROTAS 200387, its ship agent in the Philippines, SAGAWA, consignee,
before, during transit and even after the discharge of the shipment from the carrying vessel until its ATI and the broker, STEPHANIE.
complete delivery to the consignee’s premises. The vessel arrived at the port of Manila, South Harbor,
on December 27, 2000 and the subject shipment contained in Sea Van Container No. DNAU 420280-9
was discharged without exception into the possession, custody and care of Asian Terminals, Inc. (ATI) On October 12, 2001, PHILAM sent a demand letter to WALLEM for reimbursement of the insurance
as the customs arrastre operator. claims paid to NOVARTIS.11 When WALLEM ignored the demand, PHILAM impleaded it as additional
defendant in an Amended Complaint duly admitted by the trial court on October 19, 2001.12
The shipment was thereafter withdrawn on January 4, 2001, by NOVARTIS’ appointed broker,
Stephanie Customs Brokerage Corporation (STEPHANIE) from ATI’s container yard. On December 11, 2001, PHILAM filed a Motion to Admit Second Amended Complaint this time
designating PROTOP as the owner/operator of M/V Heung-A Bangkok V-019 and adding HEUNG-A as
party defendant for being the registered owner of the vessel.13 The motion was granted and the second
The shipment reached NOVARTIS’ premises on January 5, 2001 and was thereupon inspected by the amended complaint was admitted by the trial court on December 14, 2001.14
company’s Senior Laboratory Technician, Annie Rose Caparoso (Caparoso).5
PROTOP, SAGAWA, ATI, STEPHANIE, WALLEM and HEUNG-A denied liability for the lost/damaged
Upon initial inspection, Caparoso found the container van locked with its load intact. After opening the shipment.
same, she inspected its contents and discovered that the boxes of the shipment were wet and damp.
TRANSPORTATION LAW
SAGAWA refuted the allegation that it is the ship agent of PROTOP and argued that a ship agent PROTOP failed to file an answer to the complaint despite having been effectively served with alias
represents the owner of the vessel and not a mere freight forwarder like PROTOP. SAGAWA averred summons. It was declared in default in the RTC Order dated June 6, 2002.21
that its only role with respect to the shipment was to inform NOVARTIS of its arrival in the Philippines
and to facilitate the surrender of the original bill of lading issued by PROTOP. Ruling of the RTC

SAGAWA further remarked that it was deprived an opportunity to examine and investigate the nature …
and extent of the damage while the matter was still fresh so as tosafeguard itself from false/fraudulent
claims because NOVARTIS failed totimely give notice about the loss/damage.15
The RTC further observed that HEUNG-A failed to present evidence showing that it exercised the
diligence required of a common carrier in ensuring the safety of the shipment.
SAGAWA admitted that it has a non-exclusive agency agreement with PROTOP to serve as the latter’s
delivery contact person in the Philippines with respect to the subject shipment. SAGAWA is also a
freight forwarding company and that PROTOPwas not charged any fee for the services rendered by The RTC discounted the slot charter agreement between HEUNG-A and DONGNAMA, and held that it
SAGAWA with respect to the subject shipment and instead the latter was given US$10 as did not bind the consignee who was not a party thereto. Further, it was HEUNG-A’s duty to ensure that
commission.16 For having been dragged into court on a baseless cause, SAGAWA counterclaimed for the container van was in good condition by taking an initiative to state in its contract and demand from
damages in the form of attorney’s fees. the owner of the container van that it should be in a good condition all the time. Such initiative cannot be
shifted to the shipper because it is in no position to demand the same from the owner of the container
van.
ATI likewise interposed a counterclaim for damages against PHILAM for its allegedly baseless
complaint. ATI averred that it exercised due care and diligence in handling the subject container. Also,
NOVARTIS, through PHILAM, is now barred from filing any claim for indemnification because the latter WALLEM was held liable as HEUNG-A’s ship agent in the Philippines while PROTOP was adjudged
failed to file the same within 15 days from receipt of the shipment.17 Meanwhile, STEPHANIE asserted liable because the damage sustained by the shipment was due to the bad condition of the container
that its only role with respect to the shipment was its physical retrieval from ATI and thereafter its van. Also, based on the statement at the backof the bill of lading, it assumed responsibility for loss and
delivery to NOVARTIS. That entire time, the sealwas intact and not broken. Also, based on the damage as freight forwarder, viz:
Certificate of Survey, the damage to the shipment was due to salt water which means that it could not
have occurred while STEPHANIE was in possession thereof during its delivery from ATI’s container …
yard to NOVARTIS’ premises. STEPHANIE counterclaimed for moral damages and attorney’s fees.18
ATI and STEPHANIE were exonerated from any liability. SAGAWA was likewise adjudged not liable for
WALLEM alleged that the damage and shortages in the shipment were the responsibility of the shipper, the loss/damage to the shipment by virtue of the phrase "Shipper’s Load and Count" reflected in the bill
JINSUK, because it was taken on board on a "shipper’s load and count" basis which means that it was of lading issued by PROTOP…
the shipper that packed, contained and stuffed the shipment in the container van without the carrier’s
participation. The container van was already sealed when it was loaded on the vessel and hence, the …
carrier was in no position to verify the condition and other particulars of the shipment.

Ruling of the CA
WALLEM also asserted that the shipment was opened long after it was discharged from the vessel and
that WALLEM or HEUNG-A were not present during the inspection, examination and survey.
An appeal to the CA was interposed by PHILAM, WALLEM and HEUNG-A. In a Decision25 dated
January 30, 2009, the CA agreed with the RTC that PROTOP, HEUNG-A and WALLEM are liable for
WALLEM pointed the blame to PROTOP because its obligation to the shipper as freight forwarder the damaged shipment. The fact that HEUNG-A was not a party to the bill of lading did not negate the
carried the concomitant responsibility of ensuring the shipment’s safety from the port of loading until the existence of a contract of carriage between HEUNG-A and/or WALLEM and NOVARTIS. A bill of lading
final place of delivery. WALLEM claimed to have exercised due care and diligence in handling the is not indispensable for the creation of a contract of carriage. By agreeing to transport the goods
shipment. contained in the sea van providedby DONGNAMA, HEUNG-A impliedly entered into a contract of
carriage with NOVARTIS with whom the goods were consigned. Hence, it assumed the obligations of a
In the alternative, WALLEM averred that any liability which may be imputed to it is limited only to common carrier to observe extraordinary diligence in the vigilance over the goods transported by it.
US$8,500.00 pursuant to the Carriage of Goods by Sea Act (COGSA).19 Further the Slot Charter Agreement did not change HEUNG-A’s character as a common carrier.

HEUNG-A argued that it is not the carrier insofar as NOVARTIS is concerned. The carrier was either Moreover, the proximate cause of the damage was the failure of HEUNG-A to inspect and examine the
PROTOP, a freight forwarder considered as a non-vessel operating common carrier or DONGNAMA actual condition of the sea van before loading it on the vessel. Also, proper measures in handling and
which provided the container van to PROTOP.20 HEUNG-A denied being the carrier of the subject stowage should have been adopted to prevent seepage of sea water into the sea van.
shipment and asserted that its only obligation was to provide DONGNAMA a space on board M/V
Heung-A Bangkok V-019.
TRANSPORTATION LAW
WHEREFORE, premises considered, the appealed Decision is hereby AFFIRMED with failure to demonstrate how it exercised due diligence in handling and preserving the container van while
MODIFICATION. Defendants PROTOP SHIPPING CORPORATION, HEUNG-A SHIPPING in transit, it is liable for the damages sustained thereby.
CORPORATION [and] WALLEM PHILIPPINES SHIPPING,INC.’s solidary liability to PHILAM
INSURANCE COMPANY, INC. is reduced. As the carrier of the subject shipment, HEUNG-A was bound to exercise extraordinary diligence in
conveying the same and its slot charter agreement with DONGNAMA did not divest it of such
PHILAM thereafter filed a petition for review before the Court docketed as G.R. No. 187701. WALLEM characterization nor relieve it of any accountability for the shipment.
and HEUNG-A followed suit and their petition was docketed as G.R. No. 187812. Considering that both
petitions involved similar parties and issue, emanated from the same Civil Case No. 01-889 and Based on the testimony of Gonzales,33 WALLEM’s employee and witness, the charter party between
assailed the same CA judgment, they were ordered consolidated in a Resolution28 dated January 13, HEUNG-A and DONGNAMA was a contract of affreightment and not a bare boat or demise charter, …
2010.
A charter party has been defined in Planters Products, Inc. v. Court of Appeals35 as:

[A] contract by which an entire ship, orsome principal part thereof, is let by the owner to another person
Issues 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
The arguments proffered by the parties can be summed up into the following issues: (1) Whether the voyage, in consideration of the payment of freight. x x x.36 (Citations omitted)
shipment sustained damage while in the possession and custody of HEUNG-A, and if so, whether
HEUNG-A’s liability can be limited to US$500 per package pursuant tothe COGSA; (2) Whether or not A charter party has two types. First, it could be a contract of affreightment whereby the use of shipping
NOVARTIS/PHILAM failed to file a timely claim against HEUNG-A and/or WALLEM. space on vessels is leased in part or as a whole, to carry goods for others. The charter-party provides
for the hire of vessel only, either for a determinate period of time (time charter) or for a single or
Ruling of the Court consecutive voyage (voyage charter). The shipowner supplies the ship’s stores, pay for the wages of
the master and the crew, and defray the expenses for the maintenance of the ship.37 The voyage
It must be stressed that the question on whether the subject shipment sustained damaged while in the remains under the responsibility of the carrier and it is answerable for the loss of goods received for
possession and custody of HEUNG-A is a factual matter which has already been determined by the transportation. The charterer is free from liability to third persons in respect of the ship.38
RTC and the CA. The courts a quo were uniform in finding that the goods inside the container van were
damaged by sea water while in transit on board HEUNG-A’s vessel. Second, charter by demise or bareboat charter under which the whole vessel is let to the charterer with
a transfer to him of its entire command and possession and consequent control over its navigation,
… including the master and the crew, who are his servants.39 The charterer mans the vessel with his own
people and becomes, in effect, the owner for the voyage or service stipulated and hence liable for
damages or loss sustained by the goods transported.40
The uncontested results of the inspection survey conducted by Manila Adjusters Surveyors Company
showed that sea water seeped into the panels/sidings and roofing of the container van. This was
confirmed by the examination conducted by Hernandez, the chemist of PRECISION, on samples from Clearly then, despite its contract of affreightment with DONGNAMA, HEUNG-A remained responsible
the cartons, boxes, aluminum foil and laminated plastic packaging materials. Based on the laboratory as the carrier, hence, answerable for the damages incurred by the goods received for transportation.
examination results, the contents of the van were drenched by sea water, an element which is highly "[C]ommon carriers, from the nature of their business and for reasons of public policy, are bound to
conspicuous in the high seas. It can thus be reasonably concluded that negligence occurred while the observe extraordinary diligence and vigilance with respect to the safety of the goods and the
container van was in transit, in HEUNG-A’s possession, control and custody as the carrier. passengers they transport. Thus, common carriers are required to render service with the greatest skill
and foresight and ‘to use all reasonable means to ascertain the nature and characteristics of the goods
tendered for shipment, and to exercise due care in the handling and stowage, including such methods
Although the container van had defects, they were not, however, so severe as to accommodate heavy as their nature requires.’"41
saturation of sea water. The holes were tiny and the rusty portions did not cause gaps or tearing.
Hence, the van was still in a suitable condition to hold the goods and protect them from natural weather
elements or even the normal flutter of waves in the seas. "[C]ommon carriers, as a general rule, are presumed to have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised
extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage,
The scale of the damage sustained by the cargo inside the van could have been only caused by large therefore, they have the burden of proving that they observed such diligence."42 Further, under Article
volume of sea water since not a single package inside was spared. Aside from the defective condition of 1742 of the Civil Code, even if the loss, destruction, or deterioration of the goods should be caused by
the van, some other circumstance or occurrence contributed to the damages sustained by the shipment. the faulty nature of the containers, the common carrier must exercise due diligence to forestall or lessen
Since the presence of sea water is highly concentrated in the high seas and considering HEUNG-A’s the loss.

TRANSPORTATION LAW
Here, HEUNG-A failed to rebut this prima facie presumption when it failed to give adequate explanation The Court likewise affirms the CA in pronouncing HEUNG-A, WALLEM and PROTOP liable only for the
as to how the shipment inside the container van was handled, stored and preserved to forestall or lost/damaged 17 pallets instead of 19 pallets stated in the bill of lading. This is because, per the
prevent any damage or loss while the same was inits possession, custody and control. "Shipper’s Load and Count" arrangement, the contents are not required to be checked and inventoried
by the carrier at the port of loading or before said carrier enters the port of unloading in the Philippines
PROTOP is solidarily liable with HEUNG-A for the lost/damaged shipment in view of the bill of lading since it is the shipper who has the sole responsibility for the quantity, description and condition of the
the former issued to NOVARTIS. "A bill of lading is a written acknowledgement of the receipt of goods cargoes shipped in container vans.46 As such, the carrier cannot be held responsible for any
and an agreement to transport and to deliver them at a specified place to a person named or on his or discrepancy if the description in the bill of lading is different from the actual contents of the container.47
her order. It operates both as a receipt and as a contract. It is a receipt for the goods shipped and a
contract to transport and deliver the same as therein stipulated."43 PROTOP breached its contract with Consonant with the ruling in the recent Asian Terminals, Inc. v. Philam Insurance Co., Inc.,48 the
NOVARTIS when it failed to deliver the goods in the same quantity, quality and description as stated in prescriptive period for filing an action for lost/damaged goods governed by contracts of carriage by sea
Bill of Lading No. PROTAS 200387. to and from Philippine ports in foreign trade is governed by paragraph 6,Section 3 of the COGSA which
states:
The CA did not err in applying the provisions of the COGSA specifically, the rule on Package Liability
Limitation. (6) Unless notice of loss or damage and the general nature of such loss or damage be given in writing
to the carrier or his agent at the port of discharge before or at the time of the removal of the goods into
Under Article 1753 of the Civil Code, the law of the country to which the goods are to be transported the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall
shall govern the liability of the common carrier for their loss, destruction or deterioration. Since the be prima facieevidence of the delivery by the carrier of the goods as described in the bill of lading. If the
subject shipment was being transported from South Korea to the Philippines, the Civil Code provisions loss or damage is not apparent, the notice must be given within three days of the delivery.
shall apply. In all matters not regulated by the Civil Code, the rights and obligations of common carriers
shall be governed by the Code of Commerce and by special laws,44 such as the COGSA. Said notice of loss or damage maybe endorsed upon the receipt for the goods given by the person
taking delivery thereof.
While the Civil Code contains provisions making the common carrier liable for loss/damage to the goods
transported, it failed to outline the manner of determining the amount of such liability. Article372 of the The notice in writing need not be given if the state of the goods has at the time of their receipt been the
Code of Commerce fills in this gap, thus: subject of joint survey or inspection. In any event the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought withinone year after delivery of the goods or
Article 372. The value of the goods which the carrier must pay in cases if loss or misplacement shall be the date when the goods should have been delivered: Provided, That if a notice of loss or damage,
determined in accordance with that declared in the bill of lading, the shipper not being allowed to either apparent or concealed, is not given as provided for in this section, that fact shall not affect or
present proof that among the goods declared therein there were articles of greater value and money. prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date
when the goods should have been delivered.

It was further ruled in Asian Terminals that pursuant to the foregoing COGSA prov:sion, failure to
comply with the notice requirement shall not affect or prejudice the right of the shipper to bring suit
In case, however, of the shipper’s failure to declare the value of the goods in the bill of lading, Section 4, within one year after delivery of the goods.
paragraph 5 of the COGSA provides:
The consignee, NOVARTIS, received the subject shipment on January 5, 2001. PHILAM, as the
Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in subrogee of NOVARTIS, filed a claim against PROTOP on June 4, 2001, against WALLEM on October
connection with the transportation of goods in an amount exceeding $500 per package lawful money of 12, 2001 and against HEUNG-A on December 11, 2001, or all within the one-year prescriptive period.
the United States, or in case of goods not shipped in packages, per customary freight unit, or the Verily then, despite NOV AR TIS' failure to comply with the three-day notice requirement, its subrogee
equivalent of that sum in other currency, unless the nature and value of such goods have been declared PHILAM is not barred from seeking reimbursement from PROTOP, HEUNG-A and WALLEM because
by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill the demands for payment were timely filed.
of lading shall be prima facie evidence, but shall be conclusive on the carrier.
The amount which PHILAM is entitled to receive shall earn a legal interest at the rate of six percent
Hence, when there is a loss/damage to goods covered by contracts of carriage from a foreign port to a (6%) per annum from the date of finality of this judgment until its full satisfaction pursuant to Nacar v.
Philippine port and in the absence a shipper’s declaration of the value of the goods in the bill of lading, Gallery Frames.49
as in the present case, the foregoing provisions of the COGSA shall apply. The CA, therefore, did not
err in ruling that HEUNG-A, WALLEM and PROTOP’s liability is limited to $500 per package or pallet.45
WHEREFORE, all the foregoing considered, the Decision dated January 30, 2009 of the Court of
Appeals in CA-G.R. CV No. 89482 is hereby AFFlRMED with MODIFICATION in that the interest rate

TRANSPORTATION LAW
on the award of US$8,500.00 shall be six percent (6%) per annum from the date of finality of this
judgment until fully paid.

TRANSPORTATION LAW
13B – See #12 Planter’s v CA … Having been signed by its representative, the Metro Port is bound by the contents of the
13C – See #7 Pereña v Zarate cargo receipts.
13D – See #6 National Steel Corporation v CA
On the other hand, the Metro Port's shortlanded certificate could not be given much weight
14 G.R. No. 84680             February 5, 1996 considering that, as correctly argued by counsel for defendant NGSC, it was issued by Metro
Port alone and was not countersigned by the representatives of the shipping company and the
SUMMA INSURANCE CORPORATION, petitioner, consignee.
vs. COURT OF APPEALS and METRO PORT SERVICE, INCs., respondents.
On appeal, the Court of Appeals modified the decision of the trial court and reduced private
Is an arrastre operator legally liable for the loss of a shipment in its custody? If so, what is the extent of respondent's liability to P3,500.00 as follows3 :
its liability?
The Issues
On November 22, 1981, the S/S "Galleon Sapphire", a vessel owned by the National Galleon Shipping
Corporation (NGSC), arrived at Pier 3, South Harbor, Manila, carrying a shipment consigned to the The issues brought by the parties could be stated as follows:
order of Caterpillar Far East Ltd. with Semirara Coal Corporation (Semirara) as "notify party". The
shipment, including a bundle of PC 8 U blades, was covered by marine insurance under Certificate No. (1) Is the private respondent legally liable for the loss of the shipment in question?
82/012-FEZ issued by petitioner and Bill of Lading No. SF/MLA 1014. The shipment was discharged
from the vessel to the custody of private respondent, formerly known as E. Razon, Inc., the exclusive
arrastre operator at the South Harbor. Accordingly, three good-order cargo receipts were issued by (2) If so, what is the extent of its liability?
NGSC, duly signed by the ship's checker and a representative of private respondent.
The First Issue: Liability for Loss of Shipment
On February 24, 1982, the forwarder, Sterling International Brokerage Corporation, withdrew the
shipment from the pier and loaded it on the barge "Semirara 8104". The barge arrived at its port of Petitioner was subrogated to the rights of the consignee. The relationship therefore between the
destination, Semirara Island, on March 9, 1982. When Semirara inspected the shipment at its consignee and the arrastre operator must be examined. This relationship is much akin to that existing
warehouse, it discovered that the bundle of PC8U blades was missing. between the consignee or owner of shipped goods and the common carrier, or that between a depositor
and a warehouseman4 . In the performance of its obligations, an arrastre operator should observe the
On March 15, 1982, private respondent issued a short-landed certificate-stating that the bundle of same degree of diligence as that required of a common carrier and a warehouseman as enunciated
PC8U blades was already missing when it received the shipment from the NGSC vessel. Semirara then under Article 1733 of the Civil Code and Section 3(8) of the Warehouse Receipts Law, respectively.
filed with petitioner, private respondent and NGSC its claim for P280,969.68, the alleged value of the Being the custodian of the goods discharged from a vessel, an arrastre operator's duty is to take good
lost bundle. care of the goods and to turn them over to the party entitled to their possession.

On September 29, 1982, petitioner paid Semirara the invoice value of the lost shipment. Semirara In this case, it has been established that the shipment was lost while in the custody of private
thereafter executed a release of claim and subrogation receipt. Consequently, petitioner filed its claims respondent. We find private respondent liable for the loss. This is an issue of fact determined by the trial
with NGSC and private respondent but it was unsuccessful. court and respondent Court, which is not reviewable in a petition under Rule 45 of the Rules of Court.

Petitioner then filed a complaint (Civil Case No. 8213988) with the Regional Trial Court, Branch XXIV, The Second Issue: Extent of Liability
Manila, against NGSC and private respondent for collection of a sum of money, damages and
attorney's fees. In the performance of its job, an arrastre operator is bound by the management contract it had executed
with the Bureau of Customs. However, a management contract, which is a sort of a stipulation  pour
On August 2, 1984, the trial court rendered a decision absolving NGSC from any liability but finding autrui within the meaning of Article 1311 of the Civil Code, is also binding on a consignee because it is
private respondent liable to petitioner. The dispositive portion of the decision reads as follows: incorporated in the gate pass and delivery receipt which must be presented by the consignee before
delivery can be effected to5 .The insurer, as successor-in-interest of the consignee, is likewise bound by
the management contract6 . Indeed, upon taking delivery of the cargo, a consignee (and necessarily its
In resolving the issue as to who had custody of the shipment when it was lost, the trial court relied more successor-in-interest) tacitly accepts the provisions of the management contract, including those which
on the good-order cargo receipts issued by NGSC than on the short-landed certificate issued by private are intended to limit the liability of one of the contracting parties, the arrastre operator.7
respondent. The trial court held:

TRANSPORTATION LAW
However, a consignee who does not avail of the services of the arrastre operator is not bound by the contending that to sustain the validity of the limitation would be to encourage acts of
management contract8 . Such an exception to the rule does not obtain here as the consignee did in fact conversion and unjust enrichment on the part of the arrastre operator. Appellant, however,
accept delivery of the cargo from the arrastre operator. overlooks the fact that the limitation of appellee's liability under said provision, is not absolute
or unqualified, for if the value of the merchandise is specified or manifested by the consignee,
Section 1, Article VI of the Management Contract between private respondent and the Bureau of and the corresponding arrastre charges are paid on the basis of the declared value, the
Customs9 provides: limitation does not apply. Consequently, the questioned provision is neither unfair nor abitrary,
as contended, because the consignee has it in his hands to hold, if he so wishes, the arrastre
operator responsible for the full value of his merchandise by merely specifying it in any of the
1. Responsibility and Liability for Losses and Damages The CONTRACTOR shall, at its own various documents required of him, in clearing the merchandise from the customs. For then,
expense handle all merchandise in the piers and other designated places and at its own the appellee arrastre operator, by reasons of the payment to it of a commensurate charge
expense perform all work undertaken by it hereunder diligently and in a skillful workmanlike based on the higher declared value of the merchandise, could and should take extraordinary
and efficient manner; that the CONTRACTOR shall be solely responsible as an independent care of the special or valuable cargo. In this manner, there would be mutuality. What would,
CONTRACTOR, and hereby agrees to accept liability and to promptly pay to the steamship indeed, be unfair and arbitrary is to hold the arrastre operator liable for the full value of the
company, consignee, consignor or other interested party or parties for the loss, damage, or merchandise after the consignee has paid the arrastre charges only (on) a basis much lower
non-delivery of cargoes to the extent of the actual invoice value of each package which in no than the true value of the goods.
case shall be more than Three Thousand Five Hundred Pesos (P3,500.00) for each package
unless the value of the importation is otherwise specified or manifested or communicated in
writing together with the invoice value and supported by a certified packing list to the In this case, no evidence was offered by petitioner proving the amount of arrastre fees paid to private
CONTRACTOR by the interested party or parties before the discharge of the goods, as well as respondent so as to put the latter on notice of the value of the cargo. EWhile petitioner alleged that prior
all damage that may be suffered on account of loss, damage, or destruction of any to the loss of the package, its value had been relayed to private respondent through the documents the
merchandise while in custody or under the control of the CONTRACTOR in any pier, shed, latter had processed, petitioner does not categorically state that among the submitted documents were
warehouse, facility or other designated place under the supervision of the BUREAU, . . . the pro forma invoice value and the certified packing list. Neither does petitioner pretend that these two
(Emphasis supplied). documents were prerequisites to the issuance of a permit to deliver or were attachments thereto. Even
the permit to deliver, upon which petitioner anchors its arguments, may not be considered by the Court
because it was not identified and formally offered in evidence 13 .
Interpreting a similar provision in the management contract between private respondent's predecessor,
E. Razon, Inc. and the Bureau of Customs, the Court said in E. Razon Inc. vs. Court of Appeals 10 :
In civil cases, the burden of proof is on the party who would be defeated if no evidence is given on
either side. Said party must establish his case by a preponderance of evidence, which means that the
Indeed, the provision in the management contract regarding the declaration of the actual evidence as a whole adduced by one side is superior to that of the other 14 . Petitioner having asserted
invoice value "before the arrival of the goods" must be understood to mean a declaration the affirmative of the issue in this case, it should have presented evidence required to obtain a favorable
before the arrival of the goods in the custody of the arrastre operator, whether it be done long judgment.
before the landing of the shipment at port, or immediately before turn-over thereof to the
arrastre operator's custody. What is essential is knowledge beforehand of the extent of the risk
to be undertaken by the arrastre operator, as determined by the value of the property On the other hand, on top of its denial that it had received the invoice value and the packing list before
committed to its care that it may define its responsibility for loss or damage to such cargo and the discharge of the shipment, private respondent was able to prove that it was apprised of the value of
to ascertain compensation commensurate to such risk assumed . . . . the cargo only after its discharge from the vessel, ironically through petitioner's claim for the lost
package to which were attached the invoice and packing list. All told, petitioner failed to convince the
Court that the requirement of the management contract had been complied with to entitle it to recover
In the same case, the Court added that the advance notice of the actual invoice of the goods entrusted the actual invoice value of the lost shipment.
to the arrastre operator is "for the purpose of determining its liability, that it may obtain compensation
commensurable to the risk it assumes, (and) not for the purpose of determining the degree of care or
diligence it must exercise as a depository or warehouseman" 11 since the arrastre operator should not Anent the attorney 's fees, we find the award to be proper considering that the acts and omissions of
discriminate between cargoes of substantial and small values, nor exercise care and caution only for private respondent have compelled petitioner to litigate or incur expenses to protect its rights 15 .
the handling of goods announced to it beforehand to be of sizeable value, for that would be spurning the However, as to the amount of the award, we find no reason to re-examine the appellate court's
public service nature of its business. determination thereon in view of the amount of the principal obligation. Otherwise, we would be
disregarding the doctrine that discretion, when well exercised, should not be disturbed.
On the same provision limiting the arrastre operator's liability, the Court held in Northern Motors,
Inc. v. Prince Line12 : WHEREFORE, the petition for review on certiorari is DENIED and the decision of the Court of Appeals
is AFFIRMED. Costs against petitioner.
Appellant claims that the above quoted provision is null and void, as it limits the liability of
appellee for the loss, destruction or damage of any merchandise, to P500.00 per package,
TRANSPORTATION LAW
15. G.R. No. 138334. August 25, 2003 blame for missing the flight, as she did not bother to read or confirm her flight schedule as printed on
the ticket.
ESTELA L. CRISOSTOMO, petitioner, vs. the Court of Appeals and CARAVAN TRAVEL & TOURS
INTERNATIONAL, INC., respondents. Respondent explained that it can no longer reimburse the amount paid for Jewels of Europe,
considering that the same had already been remitted to its principal in Singapore, Lotus Travel Ltd.,
In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and which had already billed the same even if petitioner did not join the tour. Lotus European tour organizer,
Tours International, Inc. to arrange and facilitate her booking, ticketing and accommodation in a tour Insight International Tours Ltd., determines the cost of a package tour based on a minimum number of
dubbed Jewels of Europe. The package tour included the countries of England, Holland, Germany, projected participants. For this reason, it is accepted industry practice to disallow refund for individuals
Austria, Liechstenstein, Switzerland and France at a total cost of P74,322.70. Petitioner was given a 5% who failed to take a booked tour.3cräläwvirtualibräry
discount on the amount, which included airfare, and the booking fee was also waived because
petitioners niece, Meriam Menor, was respondent companys ticketing manager. Lastly, respondent maintained that the British Pageant was not a substitute for the package tour that
petitioner missed. This tour was independently procured by petitioner after realizing that she made a
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a Wednesday to deliver mistake in missing her flight for Jewels of Europe. Petitioner was allowed to make a partial payment of
petitioners travel documents and plane tickets. Petitioner, in turn, gave Menor the full payment for the only US$300.00 for the second tour because her niece was then an employee of the travel agency.
package tour. Menor then told her to be at the Ninoy Aquino International Airport (NAIA) Consequently, respondent prayed that petitioner be ordered to pay the balance of P12,901.00 for the
on Saturday,two hours before her flight on board British Airways. British Pageant package tour.

Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to take the After due proceedings, the trial court rendered a decision,4 the dispositive part of which reads:
flight for the first leg of her journey from Manila to Hongkong. To petitioners dismay, she discovered that
the flight she was supposed to take had already departed the previous day. She learned that her plane WHEREFORE, premises considered, judgment is hereby rendered as follows:
ticket was for the flight scheduled on June 14, 1991. She thus called up Menor to complain.
1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty Three Thousand
Subsequently, Menor prevailed upon petitioner to take another tour the British Pageant which included Nine Hundred Eighty Nine Pesos and Forty Three Centavos (P53,989.43) with legal interest thereon at
England, Scotland and Wales in its itinerary. For this tour package, petitioner was asked anew to pay the rate of twelve percent (12%) per annum starting January 16, 1992, the date when the complaint was
US$785.00 or P20,881.00 (at the then prevailing exchange rate of P26.60). She gave respondent filed;
US$300 or P7,980.00 as partial payment and commenced the trip in July 1991.

Upon petitioners return from Europe, she demanded from respondent the reimbursement of
P61,421.70, representing the difference between the sum she paid for Jewels of Europe and the The trial court held that respondent was negligent in erroneously advising petitioner of her departure
amount she owed respondent for the British Pageant tour. Despite several demands, respondent date through its employee, Menor, who was not presented as witness to rebut petitioners testimony.
company refused to reimburse the amount, contending that the same was non-refundable.1 Petitioner However, petitioner should have verified the exact date and time of departure by looking at her ticket
was thus constrained to file a complaint against respondent for breach of contract of carriage and and should have simply not relied on Menors verbal representation. The trial court thus declared that
damages, which was docketed as Civil Case No. 92-133 and raffled to Branch 59 of the Regional Trial petitioner was guilty of contributory negligence and accordingly, deducted 10% from the amount being
Court of Makati City. claimed as refund.

In her complaint,2 petitioner alleged that her failure to join Jewels of Europe was due to respondents Respondent appealed to the Court of Appeals, which likewise found both parties to be at fault.
fault since it did not clearly indicate the departure date on the plane ticket. Respondent was also However, the appellate court held that petitioner is more negligent than respondent because as a
negligent in informing her of the wrong flight schedule through its employee Menor. She insisted that the lawyer and well-traveled person, she should have known better than to simply rely on what was told to
British Pageant was merely a substitute for the Jewels of Europe tour, such that the cost of the former her. This being so, she is not entitled to any form of damages. Petitioner also forfeited her right to the
should be properly set-off against the sum paid for the latter. Jewels of Europe tour and must therefore pay respondent the balance of the price for the British
Pageant tour. The dispositive portion of the judgment appealed from reads as follows:
For its part, respondent company, through its Operations Manager, Concepcion Chipeco, denied
responsibility for petitioners failure to join the first tour. Chipeco insisted that petitioner was informed of WHEREFORE, premises considered, the decision of the Regional Trial Court dated October 26, 1995 is
the correct departure date, which was clearly and legibly printed on the plane ticket. The travel hereby REVERSED and SET ASIDE. A new judgment is hereby ENTERED requiring the plaintiff-
documents were given to petitioner two days ahead of the scheduled trip. Petitioner had only herself to appellee to pay to the defendant-appellant the amount of P12,901.00, representing the balance of the
price of the British Pageant Package Tour, the same to earn legal interest at the rate of SIX PERCENT
TRANSPORTATION LAW
(6%) per annum, to be computed from the time the counterclaim was filed until the finality of this object of a contract of carriage is the transportation  of passengers or goods. It is in this sense that the
decision. After this decision becomes final and executory, the rate of TWELVE PERCENT (12%) contract between the parties in this case was an ordinary one for services and not one of carriage.
interest per annum shall be additionally imposed on the total obligation until payment thereof is Petitioners submission is premised on a wrong assumption.
satisfied. The award of attorneys fees is DELETED. Costs against the plaintiff-appellee.
The nature of the contractual relation between petitioner and respondent is determinative of the degree
I. It is respectfully submitted that the Honorable Court of Appeals committed a reversible error in of care required in the performance of the latters obligation under the contract. For reasons of public
reversing and setting aside the decision of the trial court by ruling that the petitioner is not entitled to a policy, a common carrier in a contract of carriage is bound by law to carry passengers as far as human
refund of the cost of unavailed Jewels of Europe tour she being equally, if not more, negligent than the care and foresight can provide using the utmost diligence of very cautious persons and with due regard
private respondent, for in the contract of carriage the common carrier is obliged to observe utmost care for all the circumstances.11 As earlier stated, however, respondent is not a common carrier but a travel
and extra-ordinary diligence which is higher in degree than the ordinary diligence required of the agency. It is thus not bound under the law to observe extraordinary diligence in the performance of its
passenger. Thus, even if the petitioner and private respondent were both negligent, the petitioner obligation, as petitioner claims.
cannot be considered to be equally, or worse, more guilty than the private respondent. At best,
petitioners negligence is only contributory while the private respondent [is guilty] of gross negligence Since the contract between the parties is an ordinary one for services, the standard of care required of
making the principle of pari delicto inapplicable in the case;… respondent is that of a good father of a family under Article 1173 of the Civil Code.12 This connotes
reasonable care consistent with that which an ordinarily prudent person would have observed when
Petitioner contends that respondent did not observe the standard of care required of a common carrier confronted with a similar situation. The test to determine whether negligence attended the performance
when it informed her wrongly of the flight schedule. She could not be deemed more negligent than of an obligation is: did the defendant in doing the alleged negligent act use that reasonable care and
respondent since the latter is required by law to exercise extraordinary diligence in the fulfillment of its caution which an ordinarily prudent person would have used in the same situation? If not, then he is
obligation. If she were negligent at all, the same is merely contributory and not the proximate cause of guilty of negligence.13cräläwvirtualibräry
the damage she suffered. Her loss could only be attributed to respondent as it was the direct
consequence of its employees gross negligence. In the case at bar, the lower court found Menor negligent when she allegedly informed petitioner of the
wrong day of departure. Petitioners testimony was accepted as indubitable evidence of Menors alleged
Petitioners contention has no merit. negligent act since respondent did not call Menor to the witness stand to refute the allegation. The lower
court applied the presumption under Rule 131, Section 3 (e)14 of the Rules of Court that evidence
By definition, a contract of carriage or transportation is one whereby a certain person or association of willfully suppressed would be adverse if produced and thus considered petitioners uncontradicted
persons obligate themselves to transport persons, things, or news from one place to another for a fixed testimony to be sufficient proof of her claim.
price.9 Such person or association of persons are regarded as carriers and are classified as private or
special carriers and common or public carriers.10 A common carrier is defined under Article 1732 of the On the other hand, respondent has consistently denied that Menor was negligent and maintains that
Civil Code as persons, corporations, firms or associations engaged in the business of carrying or petitioners assertion is belied by the evidence on record. The date and time of departure was legibly
transporting passengers or goods or both, by land, water or air, for compensation, offering their services written on the plane ticket and the travel papers were delivered two days in advance precisely so that
to the public. petitioner could prepare for the trip. It performed all its obligations to enable petitioner to join the tour
and exercised due diligence in its dealings with the latter.
It is obvious from the above definition that respondent is not an entity engaged in the business of
transporting either passengers or goods and is therefore, neither a private nor a common carrier. We agree with respondent.
Respondent did not undertake to transport petitioner from one place to another since its covenant with
its customers is simply to make travel arrangements in their behalf. Respondents services as a travel Respondents failure to present Menor as witness to rebut petitioners testimony could not give rise to an
agency include procuring tickets and facilitating travel permits or visas as well as booking customers for inference unfavorable to the former. Menor was already working in France at the time of the filing of the
tours. complaint,15 thereby making it physically impossible for respondent to present her as a witness. Then
too, even if it were possible for respondent to secure Menors testimony, the presumption under Rule
While petitioner concededly bought her plane ticket through the efforts of respondent company, this 131, Section 3(e) would still not apply. The opportunity and possibility for obtaining Menors testimony
does not mean that the latter ipso facto is a common carrier. At most, respondent acted merely as an belonged to both parties, considering that Menor was not just respondents employee, but also
agent of the airline, with whom petitioner ultimately contracted for her carriage to Europe. Respondents petitioners niece. It was thus error for the lower court to invoke the presumption that respondent willfully
obligation to petitioner in this regard was simply to see to it that petitioner was properly booked with the suppressed evidence under Rule 131, Section 3(e). Said presumption would logically be inoperative if
airline for the appointed date and time. Her transport to the place of destination, meanwhile, pertained the evidence is not intentionally omitted but is simply unavailable, or when the same could have been
directly to the airline. obtained by both parties.16cräläwvirtualibräry

The object of petitioners contractual relation with respondent is the latters service of arranging and In sum, we do not agree with the finding of the lower court that Menors negligence concurred with the
facilitating petitioners booking, ticketing and accommodation in the package tour. In contrast, the negligence of petitioner and resultantly caused damage to the latter. Menors negligence was not
TRANSPORTATION LAW
sufficiently proved, considering that the only evidence presented on this score was petitioners
uncorroborated narration of the events. It is well-settled that the party alleging a fact has the burden of
proving it and a mere allegation cannot take the place of evidence.17 If the plaintiff, upon whom rests the
burden of proving his cause of action, fails to show in a satisfactory manner facts upon which he bases
his claim, the defendant is under no obligation to prove his exception or defense.18cräläwvirtualibräry

Contrary to petitioners claim, the evidence on record shows that respondent exercised due diligence in
performing its obligations under the contract and followed standard procedure in rendering its services
to petitioner. As correctly observed by the lower court, the plane ticket19 issued to petitioner clearly
reflected the departure date and time, contrary to petitioners contention. The travel documents,
consisting of the tour itinerary, vouchers and instructions, were likewise delivered to petitioner two days
prior to the trip. Respondent also properly booked petitioner for the tour, prepared the necessary
documents and procured the plane tickets. It arranged petitioners hotel accommodation as well as food,
land transfers and sightseeing excursions, in accordance with its avowed undertaking.

Therefore, it is clear that respondent performed its prestation under the contract as well as everything
else that was essential to book petitioner for the tour. Had petitioner exercised due diligence in the
conduct of her affairs, there would have been no reason for her to miss the flight. Needless to say, after
the travel papers were delivered to petitioner, it became incumbent upon her to take ordinary care of her
concerns. This undoubtedly would require that she at least read the documents in order to assure
herself of the important details regarding the trip.

The negligence of the obligor in the performance of the obligation renders him liable for damages for the
resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to exercise
due care and prudence in the performance of the obligation as the nature of the obligation so
demands.20 There is no fixed standard of diligence applicable to each and every contractual obligation
and each case must be determined upon its particular facts. The degree of diligence required depends
on the circumstances of the specific obligation and whether one has been negligent is a question of fact
that is to be determined after taking into account the particulars of each case.21cräläwvirtualibräry

The lower court declared that respondents employee was negligent. This factual finding, however, is not
supported by the evidence on record. While factual findings below are generally conclusive upon this
court, the rule is subject to certain exceptions, as when the trial court overlooked, misunderstood, or
misapplied some facts or circumstances of weight and substance which will affect the result of the
case.22cräläwvirtualibräry

In the case at bar, the evidence on record shows that respondent company performed its duty diligently
and did not commit any contractual breach. Hence, petitioner cannot recover and must bear her own
damage.

WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of Appeals in
CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner is ordered to pay respondent the amount
of P12,901.00 representing the balance of the price of the British Pageant Package Tour, with legal
interest thereon at the rate of 6% per annum, to be computed from the time the counterclaim was filed
until the finality of this Decision. After this Decision becomes final and executory, the rate of 12% per
annum shall be imposed until the obligation is fully settled, this interim period being deemed to be by
then an equivalent to a forbearance of credit.

TRANSPORTATION LAW
16. G.R. No. 185891, June 26, 2013 number for PNR No. J76TH and had it cancelled the following day, while the PNR Nos. HDWC3 and
HTFMG of Juanita and Michael do not exist.
CATHAY PACIFIC AIRWAYS, Petitioner, v. JUANITA REYES, WILFI EDO REYES, MICHAEL ROY
REYES, SIXTA LAPUZ, AND SAMPAGUITA TRAVEL CORP., Respondents. The Answer

Sometime in March 1997, respondent Wilfredo Reyes (Wilfredo) made a travel reservation with also contained a cross-claim against Sampaguita Travel and blamed the same for the cancellation of
Sampaguita Travel for his family’s trip to Adelaide, Australia scheduled from 12 April 1997 to 4 May respondents’ return flights. Cathay Pacific likewise counterclaimed for payment of attorney’s fees.
1997. Upon booking and confirmation of their flight schedule, Wilfredo paid for the airfare and was
issued four (4) Cathay Pacific round-trip airplane tickets for Manila-HongKong-Adelaide-HongKong- On the other hand, Sampaguita Travel, in its Answer, denied Cathay Pacific’s claim that it was the
Manila with the following record locators:cralavvonlinelawlibrary cause of the cancellation of the bookings. Sampaguita Travel maintained that it made the necessary
reservation with Cathay Pacific for respondents’ trip to Adelaide. After getting confirmed bookings with
On 12 April 1997, Wilfredo, together with his wife Juanita Reyes (Juanita), son Michael Roy Reyes Cathay Pacific, Sampaguita Travel issued the corresponding tickets to respondents. Their confirmed
(Michael) and mother-in-law Sixta Lapuz (Sixta), flew to Adelaide, Australia without a hitch. bookings were covered with the following PNRs:cralavvonlinelawlibrary

One week before they were scheduled to fly back home, Wilfredo reconfirmed his family’s return flight Sampaguita Travel explained that the Reyeses had two (2) PNRs each because confirmation from
with the Cathay Pacific office in Adelaide. They were advised that the reservation was "still okay as Cathay Pacific was made one flight segment at a time. Sampaguita Travel asserted that it only issued
scheduled." the tickets after Cathay Pacific confirmed the bookings. Furthermore, Sampaguita Travel exonerated
itself from liability for damages because respondents were claiming for damages arising from a breach
On the day of their scheduled departure from Adelaide, Wilfredo and his family arrived at the airport on of contract of carriage. Sampaguita Travel likewise filed a cross-claim against Cathay Pacific and a
time. When the airport check-in counter opened, Wilfredo was informed by a staff from Cathay Pacific counterclaim for damages.
that the Reyeses did not have confirmed reservations, and only Sixta’s flight booking was confirmed.
Nevertheless, they were allowed to board the flight to HongKong due to adamant pleas from Wilfredo. During the pre-trial, the parties agreed on the following stipulation of facts:
When they arrived in HongKong, they were again informed of the same problem. Unfortunately this
time, the Reyeses were not allowed to board because the flight to Manila was fully booked. Only Sixta That the plane tickets issued to plaintiffs were valid, which is why they were able to
was allowed to proceed to Manila from HongKong.  On the following day, the Reyeses were finally depart from Manila to Adelaide, Australia and that the reason why they were not able
allowed to board the next flight bound for Manila. to board their return flight from Adelaide was because of the alleged cancellation of
their booking by Cathay Pacific Airways at Adelaide, save for that of Sixta Lapuz
Upon arriving in the Philippines, Wilfredo went to Sampaguita Travel to report the incident. He was whose booking was confirmed by Cathay Pacific Airways;
informed by Sampaguita Travel that it was actually Cathay Pacific which cancelled their bookings.

On 16 June 1997, respondents as passengers, through counsel, sent a letter to Cathay Pacific advising That several reservations and bookings for the plaintiffs were done by defendant
the latter of the incident and demanding payment of damages. Sampaguita Travel Corporation through the computer reservation system and each of
such request was issued a PNR;
After a series of exchanges and with no resolution in sight, respondents filed a Complaint for damages
against Cathay Pacific and Sampaguita Travel and prayed for the following relief: a) P1,000,000.00 as After trial on the merits, the Regional Trial Court (RTC) rendered a
moral damages; b) P300,000.00 as actual damages; c) P100,000.00 as exemplary damages; and d) Decision,9 the dispositive part of which reads:cralavvonlinelawlibrary
P100,000.00 as attorney’s fees.5
WHEREFORE, premises considered, judgment is hereby rendered in favor of the defendants and
In its Answer, Cathay Pacific alleged that based on its computerized booking system, several and against the herein plaintiff. Accordingly, plaintiffs’ complaint is hereby ordered DISMISSED for lack of
confusing bookings were purportedly made under the names of respondents through two (2) travel merit. Defendants’ counterclaims and cross-claims are similarly ordered dismissed for lack of merit. No
agencies, namely: Sampaguita Travel and Rajah Travel Corporation. Cathay Pacific explained that only pronouncement as to cost.10
the following Passenger Name Records (PNRs) appeared on its system: PNR No. H9V15, PNR No.
HTFMG, PNR No. J9R6E, PNR No. J76TH, and PNR No. H9VSE. Cathay Pacific went on to detail The trial court found that respondents were in possession of valid tickets but did not have confirmed
each and every booking, to wit: reservations for their return trip to Manila. Additionally, the trial court observed that the several PNRs
opened by Sampaguita Travel created confusion in the bookings. The trial court however did not find
Cathay Pacific asserted that in the case of Wilfredo with PNR No. J76TH, no valid ticket number was any basis to establish liability on the part of either Cathay Pacific or Sampaguita Travel considering that
inputted within a prescribed period which means that no ticket was sold. Thus, Cathay Pacific had the the cancellation was not without any justified reason. Finally, the trial court denied the claims for
right to cancel the booking. Cathay Pacific found that Sampaguita Travel initially inputted a ticket damages for being unsubstantiated.

TRANSPORTATION LAW
Respondents appealed to the Court of Appeals. On 22 October 2008, the Court of Appeals ordered Respondents’ cause of action against Cathay Pacific stemmed from a breach of contract of carriage. A
Cathay Pacific to pay P25,000.00 each to respondents as nominal damages. contract of carriage is defined as one whereby a certain person or association of persons obligate
themselves to transport persons, things, or news from one place to another for a fixed price.13 Under
A. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR AND REVERSIBLE Article 1732 of the Civil Code, this "persons, corporations, firms, or associations engaged in the
ERROR IN HOLDING THAT CATHAY PACIFIC AIRWAYS IS LIABLE FOR NOMINAL DAMAGES FOR business of carrying or transporting passengers or goods or both, by land, water, or air, for
ITS ALLEGED INITIAL BREACH OF CONTRACT WITH THE PASSENGERS EVEN THOUGH compensation, offering their services to the public" is called a common carrier.
CATHAY PACIFIC AIRWAYS WAS ABLE TO PROVE BEYOND REASONABLE DOUBT THAT IT WAS
NOT AT FAULT FOR THE PREDICAMENT OF THE RESPONDENT PASSENGERS. Respondents entered into a contract of carriage with Cathay Pacific. As far as respondents are
concerned, they were holding valid and confirmed airplane tickets. The ticket in itself is a valid written
contract of carriage whereby for a consideration, Cathay Pacific undertook to carry respondents in its
D. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR AND REVERSIBLE airplane for a round-trip flight from Manila to Adelaide, Australia and then back to Manila. In fact,
ERROR IN NOT HOLDING SAMPAGUITA TRAVEL CORP. [LIABLE] TO CATHAY PACIFIC AIRWAYS Wilfredo called the Cathay Pacific office in Adelaide one week before his return flight to re-confirm his
FOR WHATEVER DAMAGES THAT THE AIRLINE COMPANY WOULD BE ADJUDGED THE booking. He was even assured by a staff of Cathay Pacific that he does not need to re- confirm his
RESPONDENT PASSENGERS. booking.

Cathay Pacific assails the award of nominal damages in favor of respondents on the ground that its In its defense, Cathay Pacific posits that Wilfredo’s booking was cancelled because a ticket number was
action of cancelling the flight bookings was justifiable. Cathay Pacific reveals that upon investigation, not inputted by Sampaguita Travel, while bookings of Juanita and Michael were not honored for being
the respondents had no confirmed bookings for their return flights. Hence, it was not obligated to fictitious. Cathay Pacific clearly blames Sampaguita Travel for not finalizing the bookings for the
transport the respondents. In fact, Cathay Pacific adds, it exhibited good faith in accommodating the respondents’ return flights. Respondents are not privy to whatever misunderstanding and confusion that
respondents despite holding unconfirmed bookings. may have transpired in their bookings. On its face, the airplane ticket is a valid written contract of
carriage. This Court has held that when an airline issues a ticket to a passenger confirmed on a
Cathay Pacific also scores the Court of Appeals in basing the award of nominal damages on the alleged particular flight, on a certain date, a contract of carriage arises, and the passenger has every right to
asthmatic condition of passenger Michael and old age of Sixta. Cathay Pacific points out that the expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a
records, including the testimonies of the witnesses, did not make any mention of Michael’s asthma. And suit for breach of contract of carriage.14
Sixta was in fact holding a confirmed booking but she refused to take her confirmed seat and instead
stayed in HongKong with the other respondents. As further elucidated by the Court of Appeals:cralavvonlinelawlibrary

Cathay Pacific blames Sampaguita Travel for negligence in not ensuring that respondents had Now, Article 1370 of the Civil Code mandates that "[i]f the terms of a contract are clear and leave no
confirmed bookings for their return trips. doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control."
Under Section 9, Rule 130 of the Rules of Court, once the terms of an agreement have been reduced to
Lastly, assuming arguendo that the award of nominal damages is proper, Cathay Pacific contends that writing, it is deemed to contain all the terms agreed upon by the parties and no evidence of such terms
the amount should be reduced to P5,000.00 for each passenger. other than the contents of the written agreement shall be admissible. The terms of the agreement of
appellants and appellee Cathay Pacific embodied in the tickets issued by the latter to the former are
At the outset, it bears pointing out that respondent Sixta had no cause of action against Cathay Pacific plain — appellee Cathay Pacific will transport appellants to Adelaide, Australia from Manila via
or Sampaguita Travel. The elements of a cause of action consist of: (1) a right existing in favor of the Hongkong on 12 April 1991 and back to Manila from Adelaide, Australia also via Hongkong on 4 May
plaintiff, (2) a duty on the part of the defendant to respect the plaintiff’s right, and (3) an act or omission 1997. In addition, the tickets reveal that all appellants have confirmed bookings for their flight to
of the defendant in violation of such right.12 As culled from the records, there has been no violation of Adelaide, Australia and back to Manila as manifested by the words "Ok" indicated therein. Arlene
any right or breach of any duty on the part of Cathay Pacific and Sampaguita Travel. As a holder of a Ansay, appellee Cathay Pacific’s Reservation Supervisor, validated this fact in her testimony saying that
valid booking, Sixta had the right to expect that she would fly on the flight and on the return flights of all appellants to the Philippines on 4 May 1997 were confirmed as appearing on the
the date specified on her airplane ticket. Cathay Pacific met her expectations and Sixta was indeed able tickets. Indubitably, when appellee Cathay Pacific initially refused to transport appellants to the
to complete her flight without any trouble. The absence of any violation to Sixta’s right as passenger Philippines on 4 May 1997 due to the latter’s lack of reservation, it has, in effect, breached their contract
effectively deprived her of any relief against either Cathay Pacific or Sampaguita Travel. of carriage. Appellants, however, were eventually accommodated and transported by appellee Cathay
Pacific to Manila.15
With respect to the three remaining respondents, we rule as follows:
Cathay Pacific breached its contract of carriage with respondents when it disallowed them to board the
The determination of whether or not the award of damages is correct depends on the nature of the plane in Hong Kong going to Manila on the date reflected on their tickets. Thus, Cathay Pacific opened
respondents’ contractual relations with Cathay Pacific and Sampaguita Travel. It is beyond dispute that itself to claims for compensatory, actual, moral and exemplary damages, attorney’s fees and costs of
respondents were holders of Cathay Pacific airplane tickets and they made the booking through suit.
Sampaguita Travel.

TRANSPORTATION LAW
In contrast, the contractual relation between Sampaguita Travel and respondents is a contract for allowed to board the next available flight on the following day. Second, upon receiving the complaint
services. The object of the contract is arranging and facilitating the latter’s booking and ticketing. It was letter of respondents, Cathay Pacific immediately addressed the complaint and gave an explanation on
even Sampaguita Travel which issued the tickets. the cancellation of their flight bookings.

Since the contract between the parties is an ordinary one for services, the standard of care required of The Court of Appeals is correct in stating that "what may be attributed to x x x Cathay Pacific is
respondent is that of a good father of a family under Article 1173 of the Civil Code. This connotes negligence concerning the lapses in their process of confirming passenger bookings and reservations,
reasonable care consistent with that which an ordinarily prudent person would have observed when done through travel agencies. But this negligence is not so gross so as to amount to bad faith."20 
confronted with a similar situation. The test to determine whether negligence attended the performance Cathay Pacific was not motivated by malice or bad faith in not allowing respondents to board on their
of an obligation is: did the defendant in doing the alleged negligent act use that reasonable care and return flight to Manila. It is evident and was in fact proven by Cathay Pacific that its refusal to honor the
caution which an ordinarily prudent person would have used in the same situation? If not, then he is return flight bookings of respondents was due to the cancellation of one booking and the two other
guilty of negligence.16 bookings were not reflected on its computerized booking system.

There was indeed failure on the part of Sampaguita Travel to exercise due diligence in performing its Likewise, Sampaguita Travel cannot be held liable for moral damages. True, Sampaguita Travel was
obligations under the contract of services. It was established by Cathay Pacific, through the generation negligent in the conduct of its booking and ticketing which resulted in the cancellation of flights. But its
of the PNRs, that Sampaguita Travel failed to input the correct ticket number for Wilfredo’s ticket. actions were not proven to have been tainted with malice or bad faith. Under these circumstances,
Cathay Pacific even asserted that Sampaguita Travel made two fictitious bookings for Juanita and respondents are not entitled to moral and exemplary damages. With respect to attorney’s fees, we
Michael. uphold the appellate court’s finding on lack of factual and legal justification to award attorney’s fees.

The negligence of Sampaguita Travel renders it also liable for damages. We however sustain the award of nominal damages in the amount of P25,000.00 to only three of the
four respondents who were aggrieved by the last-minute cancellation of their flights. Nominal damages
For one to be entitled to actual damages, it is necessary to prove the actual amount of loss with a are recoverable where a legal right is technically violated and must be vindicated against an invasion
reasonable degree of certainty, premised upon competent proof and the best evidence obtainable by that has produced no actual present loss of any kind or where there has been a breach of contract and
the injured party. To justify an award of actual damages, there must be competent proof of the actual no substantial injury or actual damages whatsoever have been or can be shown.21 Under Article 2221 of
amount of loss. Credence can be given only to claims which are duly supported by receipts.17 the Civil Code, nominal damages may be awarded to a plaintiff whose right has been violated or
invaded by the defendant, for the purpose of vindicating or recognizing that right, not for indemnifying
We echo the findings of the trial court that respondents failed to show proof of actual damages. Wilfredo the plaintiff for any loss suffered.
initially testified that he personally incurred losses amounting to P300,000.00 which represents the
amount of the contract that he was supposedly scheduled to sign had his return trip not been cancelled. Considering that the three respondents were denied boarding their return flight from HongKong to
During the cross-examination however, it appears that the supposed contract-signing was a mere Manila and that they had to wait in the airport overnight for their return flight, they are deemed to have
formality and that an agreement had already been hatched beforehand. Hence, we cannot fathom how technically suffered injury. Nonetheless, they failed to present proof of actual damages. Consequently,
said contract did not materialize because of Wilfredo’s absence, and how Wilfredo incurred such losses they should be compensated in the form of nominal damages.
when he himself admitted that he entered into said contract on behalf of Parsons Engineering
Consulting Firm, where he worked as construction manager. Thus, if indeed there were losses, these The amount to be awarded as nominal damages shall be equal or at least commensurate to the injury
were losses suffered by the company and not by Wilfredo. Moreover, he did not present any sustained by respondents considering the concept and purpose of such damages. The amount of
documentary evidence, such as the actual contract or affidavits from any of the parties to said contract, nominal damages to be awarded may also depend on certain special reasons extant in the case.22
to substantiate his claim of losses. With respect to the remaining passengers, they likewise failed to
present proof of the actual losses they suffered. Cathay Pacific and Sampaguita Travel acted together in creating the confusion in the bookings which
led to the erroneous cancellation of respondents’ bookings. Their negligence is the proximate cause of
Under Article 2220 of the Civil Code of the Philippines, an award of moral damages, in breaches of the technical injury sustained by respondents. Therefore, they have become joint tortfeasors, whose
contract, is in order upon a showing that the defendant acted fraudulently or in bad faith.18 What the law responsibility for quasi-delict, under Article 2194 or the Civil Code, is solidary.
considers as bad faith which may furnish the ground for an award of moral damages would be bad faith
in securing the contract and in the execution thereof, as well as in the enforcement of its terms, or any Based on the foregoing, Cathay Pacific and Sampaguita Travel arc jointly and solidarily liable for
other kind of deceit. In the same vein, to warrant the award of exemplary damages, defendant must nominal damages awarded to respondents Wilfredo, Juanita and Michael Roy.
have acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.19
VHEREFORE, the Petition is DENIED.  The 22 October 2008 Decision of the Court of Appeals
In the instant case, it was proven by Cathay Pacific that first, it extended all possible accommodations is AFFIRMED with MODIFICATION that Sampaguita Travel is held to be solidarily liable with Cathay
to respondents. They were promptly informed of the problem in their bookings while they were still at Pacilic in the payment of nominal damages of P25,000.00 each for Wilfredo Reyes, Juanita Reyes, and
the Adelaide airport. Despite the non-confirmation of their bookings, respondents were still allowed to Michael Rox I eyes. The complaint of respondent Sixta Lapuz is DISMISSED for Jack of cause of
board the Adelaide to Hong Kong flight. Upon arriving in Hong Kong, they were again informed that they action.
could not be accommodated on the next flight because it was already fully booked. They were however

TRANSPORTATION LAW
17.) G.R. No. 174156               June 20, 2012 The Regional Trial Court (RTC) of Manila, Branch 20, in the exercise of its appellate jurisdiction,
affirmed the MeTC decision.5 The RTC ruled that Filcar failed to prove that Floresca was not its
FILCAR TRANSPORT SERVICES, Petitioner, employee as no proof was adduced that Floresca was personally hired by Atty. Flor. The RTC agreed
vs. JOSE A. ESPINAS, Respondent. with the MeTC that the registered owner of a vehicle is directly and primarily liable for the damages
sustained by third persons as a consequence of the negligent or careless operation of a vehicle
On November 22, 1998, at around 6:30 p.m., respondent Jose A. Espinas was driving his car along registered in its name. The RTC added that the victim of recklessness on the public highways is without
Leon Guinto Street in Manila. Upon reaching the intersection of Leon Guinto and President Quirino means to discover or identify the person actually causing the injury or damage. Thus, the only recourse
Streets, Espinas stopped his car. When the signal light turned green, he proceeded to cross the is to determine the owner, through the vehicle’s registration, and to hold him responsible for the
intersection. He was already in the middle of the intersection when another car, traversing President damages.
Quirino Street and going to Roxas Boulevard, suddenly hit and bumped his car. As a result of the
impact, Espinas’ car turned clockwise. The other car escaped from the scene of the incident, but The CA Decision
Espinas was able to get its plate number.
On appeal, the CA partly granted the petition in CA-G.R. SP No. 86603; it modified the RTC decision by
After verifying with the Land Transportation Office, Espinas learned that the owner of the other car, with ruling that Carmen Flor, President and General Manager of Filcar, is not personally liable to Espinas.
plate number UCF-545, is Filcar. The appellate court pointed out that, subject to recognized exceptions, the liability of a corporation is not
the liability of its corporate officers because a corporate entity – subject to well-recognized exceptions –
Espinas sent several letters to Filcar and to its President and General Manager Carmen Flor, has a separate and distinct personality from its officers and shareholders. Since the circumstances in
demanding payment for the damages sustained by his car. On May 31, 2001, Espinas filed a complaint the case at bar do not fall under the exceptions recognized by law, the CA concluded that the liability for
for damages against Filcar and Carmen Flor before the Metropolitan Trial Court (MeTC) of Manila, and damages cannot attach to Carmen Flor.
the case was raffled to Branch 13. In the complaint, Espinas demanded that Filcar and Carmen Flor pay
the amount of ₱97,910.00, representing actual damages sustained by his car. The CA, however, affirmed the liability of Filcar to pay Espinas damages. According to the CA, even
assuming that there had been no employer-employee relationship between Filcar and the driver of the
Filcar argued that while it is the registered owner of the car that hit and bumped Espinas’ car, the car vehicle, Floresca, the former can be held liable under the registered owner rule.
was assigned to its Corporate Secretary Atty. Candido Flor, the husband of Carmen Flor. Filcar further
stated that when the incident happened, the car was being driven by Atty. Flor’s personal driver, The CA relied on the rule that the registered owner of a vehicle is directly and primarily responsible to
Timoteo Floresca. the public and to third persons while the vehicle is being operated. Citing Erezo, et al. v. Jepte,6 the CA
said that the rationale behind the rule is to avoid circumstances where vehicles running on public
Atty. Flor, for his part, alleged that when the incident occurred, he was attending a birthday celebration highways cause accidents or injuries to pedestrians or other vehicles without positive identification of
at a nearby hotel, and it was only later that night when he noticed a small dent on and the cracked the owner or drivers, or with very scant means of identification. In Erezo, the Court said that the main
signal light of the car. On seeing the dent and the crack, Atty. Flor allegedly asked Floresca what aim of motor vehicle registration is to identify the owner, so that if a vehicle causes damage or injury to
happened, and the driver replied that it was a result of a "hit and run" while the car was parked in front pedestrians or other vehicles, responsibility can be traced to a definite individual and that individual is
of Bogota on Pedro Gil Avenue, Manila. the registered owner of the vehicle.7

Filcar denied any liability to Espinas and claimed that the incident was not due to its fault or negligence The CA did not accept Filcar’s argument that it cannot be held liable for damages because the driver of
since Floresca was not its employee but that of Atty. Flor. Filcar and Carmen Flor both said that they the vehicle was not its employee. In so ruling, the CA cited the case of Villanueva v. Domingo8 where
always exercised the due diligence required of a good father of a family in leasing or assigning their the Court said that the question of whether the driver was authorized by the actual owner is irrelevant in
vehicles to third parties. determining the primary and direct responsibility of the registered owner of a vehicle for accidents,
injuries and deaths caused by the operation of his vehicle.
The MeTC Decision
The Issue

The MeTC, in its decision dated January 20, 2004, ruled in favor of Espinas, and ordered Filcar and
Carmen Flor, jointly and severally, to pay Espinas ₱97,910.00 as actual damages, representing the cost Simply stated, the issue for the consideration of this Court is: whether Filcar, as registered owner of the
of repair, with interest at 6% per annum from the date the complaint was filed; ₱50,000.00 as moral motor vehicle which figured in an accident, may be held liable for the damages caused to Espinas.
damages; ₱20,000.00 as exemplary damages; and ₱20,000.00 as attorney’s fees. The MeTC ruled that
Filcar, as the registered owner of the vehicle, is primarily responsible for damages resulting from the Our Ruling
vehicle’s operation.
The petition is without merit.
The RTC Decision

TRANSPORTATION LAW
Filcar, as registered owner, is deemed the employer of the driver, Floresca, and is thus vicariously liable As its core defense, Filcar contends that Article 2176, in relation with Article 2180, of the Civil Code is
under Article 2176 in relation with Article 2180 of the Civil Code inapplicable because it presupposes the existence of an employer-employee relationship. According to
Filcar, it cannot be held liable under the subject provisions because the driver of its vehicle at the time
It is undisputed that Filcar is the registered owner of the motor vehicle which hit and caused damage to of the accident, Floresca, is not its employee but that of its Corporate Secretary, Atty. Flor.
Espinas’ car; and it is on the basis of this fact that we hold Filcar primarily and directly liable to Espinas
for damages. We cannot agree. It is well settled that in case of motor vehicle mishaps, the registered owner of the
motor vehicle is considered as the employer of the tortfeasor-driver, and is made primarily liable for the
As a general rule, one is only responsible for his own act or omission.9 Thus, a person will generally be tort committed by the latter under Article 2176, in relation with Article 2180, of the Civil Code.
held liable only for the torts committed by himself and not by another. This general rule is laid down in
Article 2176 of the Civil Code, which provides to wit: In Equitable Leasing Corporation v. Suyom,11 we ruled that in so far as third persons are concerned, the
registered owner of the motor vehicle is the employer of the negligent driver, and the actual employer is
Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is considered merely as an agent of such owner.
obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. In that case, a tractor registered in the name of Equitable Leasing Corporation (Equitable) figured in an
accident, killing and seriously injuring several persons. As part of its defense, Equitable claimed that the
Based on the above-cited article, the obligation to indemnify another for damage caused by one’s act or tractor was initially leased to Mr. Edwin Lim under a Lease Agreement, which agreement has been
omission is imposed upon the tortfeasor himself, i.e., the person who committed the negligent act or overtaken by a Deed of Sale entered into by Equitable and Ecatine Corporation (Ecatine). Equitable
omission. The law, however, provides for exceptions when it makes certain persons liable for the act or argued that it cannot be held liable for damages because the tractor had already been sold to Ecatine at
omission of another. the time of the accident and the negligent driver was not its employee but of Ecatine.

One exception is an employer who is made vicariously liable for the tort committed by his employee. In upholding the liability of Equitable, as registered owner of the tractor, this Court said that "regardless
Article 2180 of the Civil Code states: of sales made of a motor vehicle, the registered owner is the lawful operator insofar as the public and
third persons are concerned; consequently, it is directly and primarily responsible for the consequences
Article 2180. The obligation imposed by Article 2176 is demandable not only for one’s own acts or of its operation."12 The Court further stated that "[i]n contemplation of law, the owner/operator of record
omissions, but also for those of persons for whom one is responsible. is the employer of the driver, the actual operator and employer being considered as merely its
agent."13 Thus, Equitable, as the registered owner of the tractor, was considered under the law on quasi
delict to be the employer of the driver, Raul Tutor; Ecatine, Tutor’s actual employer, was deemed
xxxx
merely as an agent of Equitable.
Employers shall be liable for the damages caused by their employees and household helpers acting
Thus, it is clear that for the purpose of holding the registered owner of the motor vehicle primarily and
within the scope of their assigned tasks, even though the former are not engaged in any business or
directly liable for damages under Article 2176, in relation with Article 2180, of the Civil Code, the
industry.
existence of an employer-employee relationship, as it is understood in labor relations law, is not
required. It is sufficient to establish that Filcar is the registered owner of the motor vehicle causing
xxxx damage in order that it may be held vicariously liable under Article 2180 of the Civil Code.

The responsibility treated of in this article shall cease when the persons herein mentioned prove that Rationale for holding the registered owner vicariously liable
they observed all the diligence of a good father of a family to prevent damage.
The rationale for the rule that a registered owner is vicariously liable for damages caused by the
Under Article 2176, in relation with Article 2180, of the Civil Code, an action predicated on an operation of his motor vehicle is explained by the principle behind motor vehicle registration, which has
employee’s act or omission may be instituted against the employer who is held liable for the negligent been discussed by this Court in Erezo, and cited by the CA in its decision:
act or omission committed by his employee.
The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or
Although the employer is not the actual tortfeasor, the law makes him vicariously liable on the basis of that any damage or injury is caused by the vehicle on the public highways, responsibility therefor can be
the civil law principle of pater familias for failure to exercise due care and vigilance over the acts of fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on
one’s subordinates to prevent damage to another.10 In the last paragraph of Article 2180 of the Civil public highways caused accidents or injuries to pedestrians or other vehicles without positive
Code, the employer may invoke the defense that he observed all the diligence of a good father of a identification of the owner or drivers, or with very scant means of identification. It is to forestall these
family to prevent damage. circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is primarily
ordained, in the interest of the determination of persons responsible for damages or injuries caused on
public highways. [emphasis ours]

TRANSPORTATION LAW
Thus, whether there is an employer-employee relationship between the registered owner and the driver damages caused to Espinas’ car. This interpretation is consistent with the strong public policy of
is irrelevant in determining the liability of the registered owner who the law holds primarily and directly maintaining road safety, thereby reinforcing the aim of the State to promote the responsible operation of
responsible for any accident, injury or death caused by the operation of the vehicle in the streets and motor vehicles by its citizens.
highways.
This does not mean, however, that Filcar is left without any recourse against the actual employer of the
As explained by this Court in Erezo, the general public policy involved in motor vehicle registration is the driver and the driver himself. Under the civil law principle of unjust enrichment, the registered owner of
protection of innocent third persons who may have no means of identifying public road malefactors and, the motor vehicle has a right to be indemnified by the actual employer of the driver of the amount that
therefore, would find it difficult – if not impossible – to seek redress for damages they may sustain in he may be required to pay as damages for the injury caused to another.
accidents resulting in deaths, injuries and other damages; by fixing the person held primarily and
directly liable for the damages sustained by victims of road mishaps, the law ensures that relief will The set-up may be inconvenient for the registered owner of the motor vehicle, but the inconvenience
always be available to them. cannot outweigh the more important public policy being advanced by the law in this case which is the
protection of innocent persons who may be victims of reckless drivers and irresponsible motor vehicle
To identify the person primarily and directly responsible for the damages would also prevent a situation owners.
where a registered owner of a motor vehicle can easily escape liability by passing on the blame to
another who may have no means to answer for the damages caused, thereby defeating the claims of WHEREFORE, the petition is DENIED. The decision dated February 16, 2006 and the resolution dated
victims of road accidents. We take note that some motor vehicles running on our roads are driven not July 6, 2006 of the Court of Appeals are AFFIRMED. Costs against petitioner Filcar Transport Services.
by their registered owners, but by employed drivers who, in most instances, do not have the financial
means to pay for the damages caused in case of accidents.

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

Neither can Filcar use the defenses available under Article 2180 of the Civil Code - that the employee
acts beyond the scope of his assigned task or that it exercised the due diligence of a good father of a
family to prevent damage - because the motor vehicle registration law, to a certain extent, modified
Article 2180 of the Civil Code by making these defenses unavailable to the registered owner of the
motor vehicle.1awp++i1 Thus, for as long as Filcar is the registered owner of the car involved in the
vehicular accident, it could not escape primary liability for the damages caused to Espinas.

The public interest involved in this case must not be underestimated. Road safety is one of the most
common problems that must be addressed in this country. We are not unaware of news of road
accidents involving reckless drivers victimizing our citizens. Just recently, such pervasive recklessness
among most drivers took the life of a professor of our state university.14 What is most disturbing is that
our existing laws do not seem to deter these road malefactors from committing acts of recklessness.

We understand that the solution to the problem does not stop with legislation. An effective
administration and enforcement of the laws must be ensured to reinforce discipline among drivers and
to remind owners of motor vehicles to exercise due diligence and vigilance over the acts of their drivers
to prevent damage to others.

Thus, whether the driver of the motor vehicle, Floresca, is an employee of Filcar is irrelevant in arriving
at the conclusion that Filcar is primarily and directly liable for the damages sustained by Espinas. While
Republic Act No. 4136 or the Land Transportation and Traffic Code does not contain any provision on
the liability of registered owners in case of motor vehicle mishaps, Article 2176, in relation with Article
2180, of the Civil Code imposes an obligation upon Filcar, as registered owner, to answer for the

TRANSPORTATION LAW
18.) G.R. No. 82318 May 18, 1989 On January 7, 1988, the Court of Appeals rendered the questioned decision holding the petitioner jointly
and severally liable with Sabiniano. The appellate court in part ruled:
GILBERTO M. DUAVIT, petitioner, vs. THE HON. COURT OF APPEALS, Acting through the Third
Division, as Public Respondent, and ANTONIO SARMIENTO, SR. & VIRGILIO We cannot go along with appellee's argument. It will be seen that in Vargas v. Langcay, supra, it was
CATUAR respondents. held that it is immaterial whether or not the driver was actually employed by the operator of record or
registered owner, and it is even not necessary to prove who the actual owner of the vehicle and who the
The facts are summarized in the contested decision, as follows: employer of the driver is. When the Supreme Court ruled, thus: 'We must hold and consider such
owner-operator of record (registered owner) as the employer in contemplation of law, of the driver,' it
From the evidence adduced by the plaintiffs, consisting of the testimonies of witnesses Virgilio Catuar, cannot be construed other than that the registered owner is the employer of the driver in contemplation
Antonio Sarmiento, Jr., Ruperto Catuar, Jr. and Norberto Bernarte it appears that on July 28, 1971 of law. It is a conclusive presumption of fact and law, and is not subject to rebuttal of proof to the
plaintiffs Antonio Sarmiento, Sr. and Virgilio Catuar were aboard a jeep with plate number 77-99-F-I contrary. Otherwise, as stated in the decision, we quote:
Manila, 1971, owned by plaintiff, Ruperto Catuar was driving the said jeep on Ortigas Avenue, San
Juan, Rizal; that plaintiff's jeep, at the time, was running moderately at 20 to 35 kilometers per hour and …
while approaching Roosevelt Avenue, Virgilio Catuar slowed down; that suddenly, another jeep with
plate number 99-97-F-J Manila 1971 driven by defendant Oscar Sabiniano hit and bumped plaintiff's Along the same vein, the defendant-appellee Gualberto Duavit cannot be allowed to prove that the
jeep on the portion near the left rear wheel, and as a result of the impact plaintiff's jeep fell on its right driver Sabiniano was not his employee at the time of the vehicular accident.
and skidded by about 30 yards; that as a result plaintiffs jeep was damaged, particularly the windshield,
the differential, the part near the left rear wheel and the top cover of the jeep; that plaintiff Virgilio Catuar The ruling laid down in Amar V. Soberano (1966), 63 O.G. 6850, by this Court to the effect that the
was thrown to the middle of the road; his wrist was broken and he sustained contusions on the head; burden of proving the non-existence of an employer-employee relationship is upon the defendant and
that likewise plaintiff Antonio Sarmiento, Sr. was trapped inside the fallen jeep, and one of his legs was this he must do by a satisfactory preponderance of evidence, has to defer to the doctrines evolved by
fractured. the Supreme Court in cases of damages arising from vehicular mishaps involving registered motor
vehicle. (See Tugade v. Court of Appeals, 85 SCRA 226, 230). (Rollo, pp. 26-27)

The petitioner contends that the respondent appellate court committed grave abuse of discretion in
The plaintiffs have filed this case both against Oscar Sabiniano as driver, and against Gualberto Duavit holding him jointly and severally liable with Sabiniano in spite of the absence of an employer-employee
as owner of the jeep. relationship between them and despite the fact that the petitioner's jeep was taken out of his garage
and was driven by Sabiniano without his consent.
Defendant Gualberto Duavit, while admitting ownership of the other jeep (Plate No. 99-07-F-J Manila,
1971), denied that the other defendant (Oscar Sabiniano) was his employee. Duavit claimed that he has As early as in 1939, we have ruled that an owner of a vehicle cannot be held liable for an accident
not been an employer of defendant Oscar Sabiniano at any time up to the present. involving the said vehicle if the same was driven without his consent or knowledge and by a person not
employed by him. Thus, in Duquillo v. Bayot (67 Phil. 131-133-134) [1939] we said:
On the other hand documentary and testimonial evidence show that defendant Oscar Sabiniano was an
employee of the Board of Liquidators from November 14, 1966 up to January 4, 1973 (Annex A of Under the facts established, the defendant cannot be held liable for anything. At the time of the
Answer). accident, James McGurk was driving the truck, and he was not an employee of the defendant, nor did
he have anything to do with the latter's business; neither the defendant nor Father Ayson, who was in
Defendant Sabiniano, in his testimony, categorically admitted that he took the jeep from the garage of charge of her business, consented to have any of her trucks driven on the day of the accident, as it was
defendant Duavit without the consent or authority of the latter (TSN, September 7, 1978, p. 8). He a holy day, and much less by a chauffeur who was not in charge of driving it; the use of the defendant's
testified further, that Duavit even filed charges against him for theft of the jeep, but which Duavit did not truck in the circumstances indicated was done without her consent or knowledge; it may, therefore, be
push through as his (Sabiniano's) parents apologized to Duavit on his behalf. said, that there was not the remotest contractual relation between the deceased Pio Duquillo and the
defendant. It necessarily follows from all this that articles 1101 and following of the Civil Code, cited by
Defendant Oscar Sabiniano, on the other hand in an attempt to exculpate himself from liability, makes it the appellant, have no application in this case, and, therefore, the errors attributed to the inferior court
appear that he was taking all necessary precaution while driving and the accident occurred due to the are without basis.
negligence of Virgilio Catuar. Sabiniano claims that it was plaintiffs vehicle which hit and bumped their
jeep. (Reno, pp. 21-23) The respondent court's misplaced reliance on the cases of Erezo v. Jepte (102 Phil. 103 [1957]
and Vargas v. Langcay (6 SCRA 174 [1962]) cannot be sustained. In the Erezo case, Jepte, the
The trial court found Oscar Sabiniano negligent in driving the vehicle but found no employer-employee registered owner of the truck which collided with a taxicab, and which resulted in the killing of Erezo,
relationship between him and the petitioner because the latter was then a government employee and he claimed that at the time of the accident, the truck belonged to the Port Brokerage in an arrangement
took the vehicle without the authority and consent of the owner. The petitioner was, thus, absolved from with the corporation but the same was not known to the Motor Vehicles Office. This Court sustained the
liability under Article 2180 of the Civil Code. trial court's ruling that since Jepte represented himself to be the owner of the truck and the Motor

TRANSPORTATION LAW
Vehicles Office, relying on his representation, registered the vehicle in his name, the Government and
all persons affected by the representation had the right to rely on his declaration of ownership and
registration. Thus, even if Jepte were not the owner of the truck at the time of the accident, he was still
held liable for the death of Erezo significantly, the driver of the truck was fully authorized to drive it.

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

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

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

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

WHEREFORE, the petition is GRANTED and the decision and resolution appealed from are hereby
ANNULLED and SET ASIDE. The decision of the then Court of First Instance (now Regional Trial
Court) of Laguna, 8th Judicial District, Branch 6, dated July 30, 1981 is REINSTATED

TRANSPORTATION LAW
19.) G.R. No. 162267             July 4, 2008 The issues raised by petitioner are purely legal:

PCI LEASING AND FINANCE, INC., petitioner, Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-delict may be held
vs. UCPB GENERAL INSURANCE CO., INC., respondent. liable, jointly and severally, with the driver thereof, for the damages caused to third parties.

On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with Plate Number PHD-206 owned Whether petitioner, as a financing company, is absolved from liability by the enactment of Republic Act
by United Coconut Planters Bank was traversing the Laurel Highway, Barangay Balintawak, Lipa City. (R.A.) No. 8556, or the Financing Company Act of 1998.
The car was insured with plantiff-appellee [UCPB General Insurance Inc.], then driven by Flaviano Isaac
with Conrado Geronimo, the Asst. Manager of said bank, was hit and bumped by an 18-wheeler Fuso Anent the first issue, the CA found petitioner liable for the damage caused by the collision since under
Tanker Truck with Plate No. PJE-737 and Trailer Plate No. NVM-133, owned by defendants-appellants the Public Service Act, if the property covered by a franchise is transferred or leased to another without
PCI Leasing & Finance, Inc. allegedly leased to and operated by defendant-appellant Superior Gas & obtaining the requisite approval, the transfer is not binding on the Public Service Commission and, in
Equitable Co., Inc. (SUGECO) and driven by its employee, defendant appellant Renato Gonzaga. contemplation of law, the grantee continues to be responsible under the franchise in relation to the
operation of the vehicle, such as damage or injury to third parties due to collisions.10
The impact caused heavy damage to the Mitsubishi Lancer car resulting in an explosion of the rear part
of the car. The driver and passenger suffered physical injuries. However, the driver defendant-appellant Petitioner claims that the CA's reliance on the Public Service Act is misplaced, since the said law
Gonzaga continued on its [sic] way to its [sic] destination and did not bother to bring his victims to the applies only to cases involving common carriers, or those which have franchises to operate as public
hospital. utilities. In contrast, the case before this Court involves a private commercial vehicle for business use,
which is not offered for service to the general public.11
Plaintiff-appellee paid the assured UCPB the amount of P244,500.00 representing the insurance
coverage of the damaged car. Petitioner's contention has partial merit, as indeed, the vehicles involved in the case at bar are not
common carriers, which makes the Public Service Act inapplicable.
As the 18-wheeler truck is registered under the name of PCI Leasing, repeated demands were made by
plaintiff-appellee for the payment of the aforesaid amounts. However, no payment was made. Thus, However, the registered owner of the vehicle driven by a negligent driver may still be held liable under
plaintiff-appellee filed the instant case on March 13, 1991.3 applicable jurisprudence involving laws on compulsory motor vehicle registration and the liabilities of
employers for quasi-delicts under the Civil Code.
PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it could not be held liable for the
collision, since the driver of the truck, Gonzaga, was not its employee, but that of its co-defendant The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting from its use is
Superior Gas & Equitable Co., Inc. (SUGECO).4 In fact, it was SUGECO, and not petitioner, that was well-established in jurisprudence. Erezo v. Jepte,12 with Justice Labrador as ponente, wisely explained
the actual operator of the truck, pursuant to a Contract of Lease signed by petitioner and the reason behind this principle, thus:
SUGECO.5 Petitioner, however, admitted that it was the owner of the truck in question.6
Registration is required not to make said registration the operative act by which ownership in vehicles is
After trial, the RTC rendered its Decision dated April 15, 1999,7 the dispositive portion of which reads: transferred, as in land registration cases, because the administrative proceeding of registration does not
bear any essential relation to the contract of sale between the parties (Chinchilla vs. Rafael and
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff UCPB General Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon any public highway
Insurance [respondent], ordering the defendants PCI Leasing and Finance, Inc., [petitioner] and Renato (section 5 [a], Act No. 3992, as amended.) The main aim of motor vehicle registration is to identify the
Gonzaga, to pay jointly and severally the former the following amounts: the principal amount owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the
of P244,500.00 with 12% interest as of the filing of this complaint until the same is paid; P50,000.00 as public highways, responsibility therefor can be fixed on a definite individual, the registered owner.
attorney's fees; and P20,000.00 as costs of suit. Instances are numerous where vehicles running on public highways caused accidents or injuries to
pedestrians or other vehicles without positive identification of the owner or drivers, or with very scant
Aggrieved by the decision of the trial court, petitioner appealed to the CA. means of identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public,
that the motor vehicle registration is primarily ordained, in the interest of the determination of persons
In its Decision dated December 12, 2003, the CA affirmed the RTC's decision, with certain responsible for damages or injuries caused on public highways.
modifications, as follows:
"'One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the
… operator, in case of accident; and another is that the knowledge that means of detection are always
available may act as a deterrent from lax observance of the law and of the rules of conservative and
safe operation. Whatever purpose there may be in these statutes, it is subordinate at the last to the
Hence, herein Petition for Review.
primary purpose of rendering it certain that the violator of the law or of the rules of safety shall not
escape because of lack of means to discover him.' The purpose of the statute is thwarted, and the
TRANSPORTATION LAW
displayed number becomes a 'snare and delusion,' if courts would entertain such defenses as that put registered owner of a motor vehicle is the employer of its driver, with the actual operator and employer,
forward by appellee in this case. No responsible person or corporation could be held liable for the most such as a lessee, being considered as merely the owner's agent.18 This being the case, even if a sale
outrageous acts of negligence, if they should be allowed to place a 'middleman' between them and the has been executed before a tortious incident, the sale, if unregistered, has no effect as to the right of
public, and escape liability by the manner in which they recompense their servants." (King vs. Brenham the public and third persons to recover from the registered owner.19 The public has the right to
Automobile Co., 145 S.W. 278, 279.) conclusively presume that the registered owner is the real owner, and may sue accordingly.20

With the above policy in mind, the question that defendant-appellant poses is: should not the registered In the case now before the Court, there is not even a sale of the vehicle involved, but a mere lease,
owner be allowed at the trial to prove who the actual and real owner is, and in accordance with such which remained unregistered up to the time of the occurrence of the quasi-delict that gave rise to the
proof escape or evade responsibility and lay the same on the person actually owning the vehicle? We case. Since a lease, unlike a sale, does not even involve a transfer of title or ownership, but the mere
hold with the trial court that the law does not allow him to do so; the law, with its aim and policy in mind, use or enjoyment of property, there is more reason, therefore, in this instance to uphold the policy
does not relieve him directly of the responsibility that the law fixes and places upon him as an incident behind the law, which is to protect the unwitting public and provide it with a definite person to make
or consequence of registration. Were a registered owner allowed to evade responsibility by proving who accountable for losses or injuries suffered in vehicular accidents.21 This is and has always been the
the supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to rationale behind compulsory motor vehicle registration under the Land Transportation and Traffic Code
escape said responsibility and transfer the same to an indefinite person, or to one who possesses no and similar laws, which, as early as Erezo, has been guiding the courts in their disposition of cases
property with which to respond financially for the damage or injury done. A victim of recklessness on the involving motor vehicular incidents. It is also important to emphasize that such principles apply to all
public highways is usually without means to discover or identify the person actually causing the injury or vehicles in general, not just those offered for public service or utility.22
damage. He has no means other than by a recourse to the registration in the Motor Vehicles Office to
determine who is the owner. The protection that the law aims to extend to him would become illusory The Court recognizes that the business of financing companies has a legitimate and commendable
were the registered owner given the opportunity to escape liability by disproving his ownership. If the purpose.23 In earlier cases, it considered a financial lease or financing lease a legal contract,24 though
policy of the law is to be enforced and carried out, the registered owner should not be allowed to prove subject to the restrictions of the so-called Recto Law or Articles 1484 and 1485 of the Civil Code.25 In
the contrary to the prejudice of the person injured, that is, to prove that a third person or another has previous cases, the Court adopted the statutory definition of a financial lease or financing lease, as:
become the owner, so that he may thereby be relieved of the responsibility to the injured person.
[A] mode of extending credit through a non-cancelable lease contract under which the lessor purchases
The above policy and application of the law may appear quite harsh and would seem to conflict with or acquires, at the instance of the lessee, machinery, equipment, motor vehicles, appliances, business
truth and justice. We do not think it is so. A registered owner who has already sold or transferred a and office machines, and other movable or immovable property in consideration of the periodic payment
vehicle has the recourse to a third-party complaint, in the same action brought against him to recover by the lessee of a fixed amount of money sufficient to amortize at least seventy (70%) of the purchase
for the damage or injury done, against the vendee or transferee of the vehicle. The inconvenience of the price or acquisition cost, including any incidental expenses and a margin of profit over an obligatory
suit is no justification for relieving him of liability; said inconvenience is the price he pays for failure to period of not less than two (2) years during which the lessee has the right to hold and use the leased
comply with the registration that the law demands and requires. property, x x x but with no obligation or option on his part to purchase the leased property from the
owner-lessor at the end of the lease contract. 26
In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible
for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to Petitioner presented a lengthy discussion of the purported trend in other jurisdictions, which apparently
be indemnified by the real or actual owner of the amount that he may be required to pay as damage for tends to favor absolving financing companies from liability for the consequences of quasi-delictual acts
the injury caused to the plaintiff-appellant.13 or omissions involving financially leased property.27 The petition adds that these developments have
been legislated in our jurisdiction in Republic Act (R.A.) No. 8556,28 which provides:
The case is still good law and has been consistently cited in subsequent cases.14 Thus, there is no good
reason to depart from its tenets. Section 12. Liability of lessors. - Financing companies shall not be liable for loss, damage or injury
caused by a motor vehicle, aircraft, vessel, equipment, machinery or other property leased to a third
For damage or injuries arising out of negligence in the operation of a motor vehicle, the registered person or entity except when the motor vehicle, aircraft, vessel, equipment or other property is operated
owner may be held civilly liable with the negligent driver either 1) subsidiarily, if the aggrieved party by the financing company, its employees or agents at the time of the loss, damage or injury.1avvphi1
seeks relief based on a delict  or crime under Articles 100 and 103 of the Revised Penal Code; or
2) solidarily, if the complainant seeks relief based on a quasi-delict under Articles 2176 and 2180 of the Petitioner's argument that the enactment of R.A. No. 8556, especially its addition of the new Sec. 12 to
Civil Code. It is the option of the plaintiff whether to waive completely the filing of the civil action, or the old law, is deemed to have absolved petitioner from liability, fails to convince the Court.
institute it with the criminal action, or file it separately or independently of a criminal action;15 his only
limitation is that he cannot recover damages twice for the same act or omission of the defendant.16 These developments, indeed, point to a seeming emancipation of financing companies from the
obligation to compensate claimants for losses suffered from the operation of vehicles covered by their
In case a separate civil action is filed, the long-standing principle is that the registered owner of a motor lease. Such, however, are not applicable to petitioner and do not exonerate it from liability in the present
vehicle is primarily and directly responsible for the consequences of its operation, including the case.
negligence of the driver, with respect to the public and all third persons.17 In contemplation of law, the

TRANSPORTATION LAW
The new law, R.A. No. 8556, notwithstanding developments in foreign jurisdictions, do not supersede or The burden of registration of the lease contract is minuscule compared to the chaos that may result if
repeal the law on compulsory motor vehicle registration. No part of the law expressly repeals Section registered owners or operators of vehicles are freed from such responsibility. Petitioner pays the price
5(a) and (e) of R.A. No. 4136, as amended, otherwise known as the Land Transportation and Traffic for its failure to obey the law on compulsory registration of motor vehicles for registration is a pre-
Code, to wit: requisite for any person to even enjoy the privilege of putting a vehicle on public roads.

Sec. 5. Compulsory registration of motor vehicles. - (a) All motor vehicles and trailer of any type WHEREFORE, the petition is DENIED. The Decision dated December 12, 2003 and Resolution dated
used or operated on or upon any highway of the Philippines must be registered with the Bureau of Land February 18, 2004 of the Court of Appeals are AFFIRMED.
Transportation (now the Land Transportation Office, per Executive Order No. 125, January 30, 1987,
and Executive Order No. 125-A, April 13, 1987) for the current year in accordance with the provisions of
this Act.

xxxx

(e) Encumbrances of motor vehicles. - Mortgages, attachments, and other encumbrances of motor
vehicles, in order to be valid against third parties must be recorded in the Bureau (now the Land
Transportation Office). Voluntary transactions or voluntary encumbrances shall likewise be properly
recorded on the face of all outstanding copies of the certificates of registration of the vehicle concerned.

Cancellation or foreclosure of such mortgages, attachments, and other encumbrances shall likewise be
recorded, and in the absence of such cancellation, no certificate of registration shall be issued without
the corresponding notation of mortgage, attachment and/or other encumbrances.

x x x x (Emphasis supplied)

Neither is there an implied repeal of R.A. No. 4136. As a rule, repeal by implication is frowned upon,
unless there is clear showing that the later statute is so irreconcilably inconsistent and repugnant to the
existing law that they cannot be reconciled and made to stand together.29 There is nothing in R.A. No.
4136 that is inconsistent and incapable of reconciliation.

Thus, the rule remains the same: a sale, lease, or financial lease, for that matter, that is not registered
with the Land Transportation Office, still does not bind third persons who are aggrieved in tortious
incidents, for the latter need only to rely on the public registration of a motor vehicle as conclusive
evidence of ownership.30 A lease such as the one involved in the instant case is an encumbrance in
contemplation of law, which needs to be registered in order for it to bind third parties.31 Under this
policy, the evil sought to be avoided is the exacerbation of the suffering of victims of tragic vehicular
accidents in not being able to identify a guilty party. A contrary ruling will not serve the ends of justice.
The failure to register a lease, sale, transfer or encumbrance, should not benefit the parties responsible,
to the prejudice of innocent victims.

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

This ruling may appear too severe and unpalatable to leasing and financing companies, but the Court
believes that petitioner and other companies so situated are not entirely left without recourse. They may
resort to third-party complaints against their lessees or whoever are the actual operators of their
vehicles. In the case at bar, there is, in fact, a provision in the lease contract between petitioner and
SUGECO to the effect that the latter shall indemnify and hold the former free and harmless from any
"liabilities, damages, suits, claims or judgments" arising from the latter's use of the motor
vehicle.32 Whether petitioner would act against SUGECO based on this provision is its own option.
TRANSPORTATION LAW
20.) ABELARDO LIM and ESMADITO GUNNABAN, Petitioners, v. COURT OF APPEALS and testify, he dispossessed himself of any claim or pretension on the property. Gunnaban was found by the
DONATO H. GONZALES, Respondents. trial court to have caused the accident since he panicked in the face of an emergency which was rather
palpable from his act of directing his vehicle to a perilous streak down the fast lane of the superhighway
Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu passenger jeepney from then across the island and ultimately to the opposite lane where it collided with the jeepney.
Gomercino Vallarta, holder of a certificate of public convenience for the operation of public utility
vehicles plying the Monumento-Bulacan route. While private respondent Gonzales continued offering On the other hand, petitioner Lim's liability for Gunnaban's negligence was premised on his want of
the jeepney for public transport services he did not have the registration of the vehicle transferred in his diligence in supervising his employees. It was admitted during trial that Gunnaban doubled as mechanic
name nor did he secure for himself a certificate of public convenience for its operation. Thus Vallarta of the ill-fated truck despite the fact that he was neither tutored nor trained to handle such
remained on record as its registered owner and operator. task.6cräläwvirtualibräry

On 22 July 1990, while the jeepney was running northbound along the North Diversion Road Forthwith, petitioners appealed to the Court of Appeals which, on 17 July 1996, affirmed the decision of
somewhere in Meycauayan, Bulacan, it collided with a ten-wheeler-truck owned by petitioner Abelardo the trial court. In upholding the decision of the court a quo the appeals court concluded that while an
Lim and driven by his co-petitioner Esmadito Gunnaban. Gunnaban owned responsibility for the operator under the kabit system could not sue without joining the registered owner of the vehicle as his
accident, explaining that while he was traveling towards Manila the truck suddenly lost its brakes. To principal, equity demanded that the present case be made an exception.7 Hence this petition.
avoid colliding with another vehicle, he swerved to the left until he reached the center island. However,
as the center island eventually came to an end, he veered farther to the left until he smashed into a It is petitioners' contention that the Court of Appeals erred in sustaining the decision of the trial court
Ferroza automobile, and later, into private respondent's passenger jeepney driven by one Virgilio despite their opposition to the well-established doctrine that an operator of a vehicle continues to be its
Gonzales. The impact caused severe damage to both the Ferroza and the passenger jeepney and left operator as long as he remains the operator of record. According to petitioners, to recognize an
one (1) passenger dead and many others wounded. operator under the kabit system as the real party in interest and to countenance his claim for damages
is utterly subversive of public policy. Petitioners further contend that inasmuch as the passenger
Petitioner Lim shouldered the costs for hospitalization of the wounded, compensated the heirs of the jeepney was purchased by private respondent for only P30,000.00, an award of P236,000.00 is
deceased passenger, and had the Ferroza restored to good condition. He also negotiated with private inconceivably large and would amount to unjust enrichment.8cräläwvirtualibräry
respondent and offered to have the passenger jeepney repaired at his shop. Private respondent
however did not accept the offer so Lim offered him P20,000.00, the assessment of the damage as Petitioners' attempt to illustrate that an affirmance of the appealed decision could be supportive of the
estimated by his chief mechanic. Again, petitioner Lim's proposition was rejected; instead, private pernicious kabit system does not persuade. Their labored efforts to demonstrate how the questioned
respondent demanded a brand-new jeep or the amount of P236,000.00. Lim increased his bid rulings of the courts a quo are diametrically opposed to the policy of the law requiring operators of
to P40,000.00 but private respondent was unyielding. Under the circumstances, negotiations had to be public utility vehicles to secure a certificate of public convenience for their operation is quite unavailing.
abandoned; hence, the filing of the complaint for damages by private respondent against petitioners.
The kabit system is an arrangement whereby a person who has been granted a certificate of public
In his answer Lim denied liability by contending that he exercised due diligence in the selection and convenience allows other persons who own motor vehicles to operate them under his license,
supervision of his employees. He further asserted that as the jeepney was registered in Vallartas name, sometimes for a fee or percentage of the earnings.9 Although the parties to such an agreement are not
it was Vallarta and not private respondent who was the real party in interest.1 For his part, petitioner outrightly penalized by law, the kabit system is invariably recognized as being contrary to public policy
Gunnaban averred that the accident was a fortuitous event which was beyond his and therefore void and inexistent under Art. 1409 of the Civil Code.
control.2cräläwvirtualibräry
In the early case of Dizon v. Octavio10 the Court explained that one of the primary factors considered in
Meanwhile, the damaged passenger jeepney was left by the roadside to corrode and decay. Private
the granting of a certificate of public convenience for the business of public transportation is the
respondent explained that although he wanted to take his jeepney home he had no capability, financial
financial capacity of the holder of the license, so that liabilities arising from accidents may be duly
or otherwise, to tow the damaged vehicle.3cräläwvirtualibräry
compensated. The kabit  system renders illusory such purpose and, worse, may still be availed of by the
grantee to escape civil liability caused by a negligent use of a vehicle owned by another and operated
The main point of contention between the parties related to the amount of damages due private under his license. If a registered owner is allowed to escape liability by proving who the supposed
respondent. Private respondent Gonzales averred that per estimate made by an automobile repair shop owner of the vehicle is, it would be easy for him to transfer the subject vehicle to another who
he would have to spend P236,000.00 to restore his jeepney to its original condition.4 On the other hand, possesses no property with which to respond financially for the damage done. Thus, for the safety of
petitioners insisted that they could have the vehicle repaired for P20,000.00.5cräläwvirtualibräry passengers and the public who may have been wronged and deceived through the
baneful kabit system, the registered owner of the vehicle is not allowed to prove that another person
On 1 October 1993 the trial court upheld private respondent's claim and awarded him P236,000.00 with has become the owner so that he may be thereby relieved of responsibility. Subsequent cases affirm
legal interest from 22 July 1990 as compensatory damages and P30,000.00 as attorney's fees. In such basic doctrine.11cräläwvirtualibräry
support of its decision, the trial court ratiocinated that as vendee and current owner of the passenger
jeepney private respondent stood for all intents and purposes as the real party in interest. Even Vallarta It would seem then that the thrust of the law in enjoining the kabit  system is not so much as to penalize
himself supported private respondent's assertion of interest over the jeepney for, when he was called to the parties but to identify the person upon whom responsibility may be fixed in case of an accident with
TRANSPORTATION LAW
the end view of protecting the riding public. The policy therefore loses its force if the public at large is certainty." It is axiomatic that if the suit were for damages, unliquidated and not known until definitely
not deceived, much less involved. ascertained, assessed and determined by the courts after proof, interest at the rate of six percent (6%)
per annum should be from the date the judgment of the court is made (at which time the quantification
In the present case it is at once apparent that the evil sought to be prevented in enjoining of damages may be deemed to be reasonably ascertained).14cräläwvirtualibräry
the kabit  system does not exist. First, neither of the parties to the pernicious kabit system is being held
liable for damages. Second, the case arose from the negligence of another vehicle in using the public In this case, the matter was not a liquidated obligation as the assessment of the damage on the vehicle
road to whom no representation, or misrepresentation, as regards the ownership and operation of the was heavily debated upon by the parties with private respondent's demand for P236,000.00 being
passenger jeepney was made and to whom no such representation, or misrepresentation, was refuted by petitioners who argue that they could have the vehicle repaired easily for P20,000.00. In fine,
necessary. Thus it cannot be said that private respondent Gonzales and the registered owner of the the amount due private respondent was not a liquidated account that was already demandable and
jeepney were in estoppel for leading the public to believe that the jeepney belonged to the registered payable.
owner. Third, the riding public was not bothered nor inconvenienced at the very least by the illegal
arrangement. On the contrary, it was private respondent himself who had been wronged and was One last word. We have observed that private respondent left his passenger jeepney by the roadside at
seeking compensation for the damage done to him. Certainly, it would be the height of inequity to deny the mercy of the elements. Article 2203 of the Civil Code exhorts parties suffering from loss or injury to
him his right. exercise the diligence of a good father of a family to minimize the damages resulting from the act or
omission in question. One who is injured then by the wrongful or negligent act of another should
In light of the foregoing, it is evident that private respondent has the right to proceed against petitioners exercise reasonable care and diligence to minimize the resulting damage. Anyway, he can recover from
for the damage caused on his passenger jeepney as well as on his business. Any effort then to frustrate the wrongdoer money lost in reasonable efforts to preserve the property injured and for injuries incurred
his claim of damages by the ingenuity with which petitioners framed the issue should be discouraged, if in attempting to prevent damage to it.15cräläwvirtualibräry
not repelled.
However we sadly note that in the present case petitioners failed to offer in evidence the estimated
In awarding damages for tortuous injury, it becomes the sole design of the courts to provide for amount of the damage caused by private respondent's unconcern towards the damaged vehicle. It is
adequate compensation by putting the plaintiff in the same financial position he was in prior to the tort. It the burden of petitioners to show satisfactorily not only that the injured party could have mitigated his
is a fundamental principle in the law on damages that a defendant cannot be held liable in damages for damages but also the amount thereof; failing in this regard, the amount of damages awarded cannot be
more than the actual loss which he has inflicted and that a plaintiff is entitled to no more than the just proportionately reduced.
and adequate compensation for the injury suffered. His recovery is, in the absence of circumstances
giving rise to an allowance of punitive damages, limited to a fair compensation for the harm done. The WHEREFORE, the questioned Decision awarding private respondent Donato Gonzales P236,000.00
law will not put him in a position better than where he should be in had not the wrong with legal interest from 22 July 1990 as compensatory damages and P30,000.00 as attorney's fees is
happened.12cräläwvirtualibräry MODIFIED. Interest at the rate of six percent (6%) per annum shall be computed from the time the
judgment of the lower court is made until the finality of this Decision. If the adjudged principal and
In the present case, petitioners insist that as the passenger jeepney was purchased in 1982 for interest remain unpaid thereafter, the interest shall be twelve percent (12%) per annum computed from
only P30,000.00 to award damages considerably greater than this amount would be improper and the time judgment becomes final and executory until it is fully satisfied.
unjustified. Petitioners are at best reminded that indemnification for damages comprehends not only the
value of the loss suffered but also that of the profits which the obligee failed to obtain. In other words,
indemnification for damages is not limited to damnum emergens  or actual loss but extends to lucrum
cessans or the amount of profit lost.13cräläwvirtualibräry

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

However, we are constrained to depart from the conclusion of the lower courts that upon the award of
compensatory damages legal interest should be imposed beginning 22 July 1990, i.e. the date of the
accident. Upon the provisions of Art. 2213 of the Civil Code, interest "cannot be recovered upon
unliquidated claims or damages, except when the demand can be established with reasonable

TRANSPORTATION LAW
21.) [G.R. No. L-57493. January 7, 1987.] Hence, this petition.

BALIWAG TRANSIT, INC., Petitioner, v. THE HON. COURT OF APPEALS AND ROMAN Petitioners raised the following assignment of errors:chanrob1es virtual 1aw library
MARTINEZ, Respondents.
I. THAT THE FINDINGS OF THE RESPONDENT HONORABLE COURT OF APPEALS TO THE
Two passenger bus lines with similar buses and similar routes were being operated by firm names EFFECT THAT THE VEHICLES OF THE LATE PASCUAL TUAZON WERE "ATTACHED" OR "KABIT"
"Baliwag Transit" and "Baliwag Transit, Inc." (BTI) the herein petitioner. The former was owned by the WITH PETITIONER, BALIWAG TRANSIT, INC. MAY NOT HAVE BEEN SUPPORTED BY
late Pascual Tuazon who continued to operate it until his death on January 26, 1972, while the latter SUBSTANTIAL EVIDENCE.
was owned by petitioner corporation, incorporated in the year 1968 and existing until the present time.
Both bus lines operate under different grants of franchises by the Public Service Commission (Brief for II. GRANTING THAT THE VEHICLES OF THE LATE PASCUAL TUAZON WERE INDEED
Petitioner, p. 11), but were issued only one ID Number 03-22151 by the Social Security System (Rollo, "ATTACHED" OR "KABIT" WITH PETITIONER BALIWAG TRANSIT, INC. EMPLOYER-EMPLOYEE
p. 66). RELATIONS MAY NOT EXTENT TO COVER OR INCLUDE THE EMPLOYEES OF THE ACTUAL
OWNER OF THE VEHICLES AS EMPLOYEES ALSO OF THE HOLDER OF THE CERTIFICATE OF
Private respondent claiming to be an employee of both bus lines with one ID Number, filed a petition PUBLIC CONVENIENCE WHICH IS IN THIS CASE, PETITIONER BALIWAG TRANSIT, INC.
with the Social Security Commission on August 14, 1975 which was docketed as SSC Case No. 3272
to compel BTI to remit to the Social Security System private respondent’s SSS Premium contributions However, the main issue in this case is whether or not the issuance by the Social Security System of
for the years 1958 to March, 1963 and from 1967 to March, 1971. He alleged that he was employed by one SSS-ID-Number to two bus lines necessarily indicates that one of them, operates his buses under
petitioner from 1947 to 1971 as conductor and later as inspector with corresponding salary increases the "Kabit System."cralaw virtua1aw library
and that petitioner deducted from his salaries, premium contributions, but what was remitted to the SSS
was only for a period covering June, 1963 to 1966, at a much lesser amount. The answer is in the negative.

In its answer, BTI denied having employed private respondent Ramon Martinez, the truth being that he The "Kabit System" has been defined by the Supreme Court as an arrangement "whereby a person who
was employed by Pascual Tuazon who since 1948 owned and operated buses under the trade name has been granted a certificate of convenience allows another person who owns motor vehicles to
Baliwag Transit which were separate and distinct from the buses operated by petitioner company operate under such franchise for a fee." (Lita Enterprises, Inc. v. Second Civil Cases Division, IAC, Et
owned by Mrs. Victoria Vda. de Tengco. Both bus lines had different offices, different maintenance and Al., G.R. No. 64693, April 27, 1984).
repair shops, garages, books of account, and managers. The employment of private respondent lasted
until 1971 when his employer Pascual Tuazon became bankrupt. It was the latter which deducted from The determining factor, therefore, is the possession of a franchise to operate which negates the
private respondent the amount corresponding to his SSS contributions for the years in question but existence of the "Kabit System" and not the issuance of one SSS ID Number for both bus lines from
allegedly did not remit the same. Finally, herein petitioner BTI claims that private respondent allowed 17 which the existence of said system was inferred.chanrobles.com : virtual law library
years to elapse and at a time when Pascual Tuazon was already dead before filing the subject petition
with the Social Security Commission. (Rollo, p. 18). In the instant case, the findings of the Court of Appeals are as follows:jgc:chanrobles.com.ph

After trial on the merits, the Social Security Commission on September 12, 1979, entered a resolution in ". . . It is very obvious from the foregoing narration of facts that the late Pascual Tuazon, during the time
SSC Case No. 3272, the dispositive portion of which reads:jgc:chanrobles.com.ph material to this case, operated his houses under the "kabit" system; that is, while actually he was the
owner and operator of public utility buses, maintaining his own drivers, conductors, inspectors and other
"PREMISES CONSIDERED, this Commission finds and so holds that there existed no employer- employees, his buses were not registered with the Public Service Commission (now the Bureau of Land
employee relationship between the petitioner and respondent as would warrant further remittance of Transportation) in his own name. Instead, his buses were absorbed and registered as owned and
SSS contributions for and in behalf of petitioner Roman Martinez. operated by the "Baliwag Transit," which was the firm name owned and used by his niece," Victoria
Vda. de Tengco."cralaw virtua1aw library
"Consequently, this petition is hereby dismissed for lack of merit.
"It is well settled that the findings of facts of the Court of Appeals . . . are conclusive on the parties and
On appeal, the Court of Appeals finding- that the late Pascual Tuazon operated his buses under the on this Court, unless: . . . (2) the inference made is manifestly mistaken; . . . (4) the judgment is based
"Kabit" System, reversed and set aside the foregoing resolution as follows: on misapprehension of facts; . . . (6) the Court of Appeals went beyond the issues of the case and its
findings are contrary to the admissions of both appellant and appellees; (7) the findings of facts of the
"WHEREFORE, the resolution (decision) of the Social Security Commission in SSC Case No. 3272 is Court of Appeals are contrary to those of the trial court; . . ." (Sacay v. Sandiganbayan, G.R. No. 66497-
hereby set aside and another one entered ordering respondent Baliwag Transit, Inc. to remit to the 98, July 10, 1986).
Social Security Commission the premium contributions for the petitioner for the years 1958 to May 1963
and from 1967 to March 1971, inclusive, plus penalties thereon at the rate of 3% per month of In the case at bar, it is undisputed that as testified to, not only by seven (7) witnesses presented by the
delinquency; petitioner but also by the Social Security System witness Mangowan Macalaba, Clerk I, of the R & A
Division of the Board of Transportation, who had access to the records of said office with respect to

TRANSPORTATION LAW
applications and grant of franchises of public utility vehicles, that Victoria Vda. de Tengco and Pascual National Labor Relations Commission, a claim against both the late Pascual Tuazon and
Tuazon were granted separate franchises to operate public utility buses, under Cases Nos. 15904, the Respondent. He is now concentrating his action against the respondent in view of the death of
114913, 11564, 103366, 64157 and 65894 for the former and Case No. 69-4592 and Case No. 697775 Pascual Tuazon who during his lifetime sold his trucks and became bankrupt Exhibit "2") —Resolution,
for the latter, both operating between Manila and Baliuag routes. However, the franchises of Pascual September 14, 1979, pp. 29-31)." (Rollo, pp. 28-30)
Tuazon were cancelled on December 16, 1971 and May 14, 1972 respectively (Rollo, p. 22), when the
latter terminated his operation. It has been uniformly held by this Court that it is sufficient that administrative findings of fact are
supported by evidence on the record, or stated negatively, it is sufficient that findings of fact are not
It is thus evident that both bus lines operated under their own franchises but opted to retain the firm shown to be unsupported by evidence.cralawnad
name "Baliwag Transit" with slight modification, by the inclusion of the word "Inc." in the case of herein
petitioner, obviously to take advantage of the goodwill such firm name enjoys with the riding public. The Court has also held further that "in reviewing administrative decisions, the reviewing court cannot
Conversely, the conclusion of the Court of Appeals that the late Pascual Tuazon, during the time re-examine the sufficiency of the evidence as if originally instituted therein, and receive additional
material to this case operated his buses under the "Kabit System" on the ground that while he was evidence that was not submitted to the administrative agency concerned. The findings of fact must be
actually the owner and operator, his buses were not registered with the Public Service Commission respected, so long as they are supported by substantial evidence, even if not overwhelming or
(now the Bureau of Land Transportation) in his own name, is not supported by the records. Much less preponderant." (Police Commission v. Lood, 127 SCRA 758 [1984].
can it be said that there is an analogy between the case at bar and the cited case of Doligosa, Et. Al. v.
Decolongon, Et. Al. (3 CA Nos. 1135,1142-43) to the extent that Baliwag Transit, Inc. being the Thus, the employer-employee relationship between the late Pascual Tuazon and herein private
ostensible operator of the buses actually owned by Pascual Tuazon, should be held liable for the respondent, having been established, the remittance of SSS contributions of the latter, is the
contributions collected or ought to be collected from private respondent (Rollo, pp. 53-54), presumably responsibility of his employer Tuazon, regardless of the existence or non-existence of the "Kabit
to discourage the proliferating "Kabit System" in public utility vehicles. System."cralaw virtua1aw library

While it is admitted that petitioner was the one who remitted the SSS premiums of private respondent, it Moreover, private respondent having allowed seventeen (17) years to elapse before filing his petition
has also been established by testimonies of witnesses that such arrangement was done purposely to with the Social Security System, has undoubtedly slept on his rights and his cause of action has already
accommodate the request of the late Pascual Tuazon, the uncle of Victoria Vda. de Tengco and the prescribed under Article 1144(2) of the Civil Code (Central Azucarrera del Davao v. Court of Appeals,
money came from him. On the other hand, there is no reason why such testimonies should not be given 137 SCRA 296 [1985]; applied by analogy).
credence as the records fail to show that said witnesses have any motive or reason to falsify or perjure
their testimonies (Rollo, pp. 23-24). PREMISES CONSIDERED, the decision of respondent Court of Appeals dated June 4, 1981 is hereby
REVERSED and SET ASIDE, and the Resolution of the Social Security Commission dated September
Moreover, the Social Security Commission after several hearings had been conducted, arrived at the 12, 1979 is hereby REINSTATED.
following conclusion:chanrobles.com.ph : virtual law library

"It was established during the hearings that petitioner Roman Martinez was employed by, worked for
and took orders from Pascual Tuazon and was authorized to get ‘vales’ from the conductors of the
trucks of Mr. Tuazon. This was admitted got ‘vales’ from the buses of Pascual Tuazon (TSN pp. 24-25,
May 7, 1976 and Exhibits "3" to "49").

"On the other hand, there is no evidence introducted to show that petitioner ever received salaries from
respondent or from Mrs. Victoria Vda. de Tengco and neither had he been under the orders of the latter.
The only basis upon which petitioner anchors his claim despite his actual employment by Pascual
Tuazon was the use by the latter of the trade name, Baliwag Transit, in the operation of his (Mr.
Tuazon’s) own buses which the latter had every reason to do since he laboriously helped and organized
said firm until it gained cognizance by the public.

"It is, therefore, clear that even long before the incorporation of the Baliwag Transit in 1968 petitioner
was already an employee of the late Pascual Tuazon who despite having separate office, employees
and buses which were operated under the line of the Baliwag Transit did not report him for coverage to
the SSS. Sadly enough, petitioner who claims to be an employee of the respondent did not refute, by
way of submitting rebuttal evidence, the testimonies given by respondent’s witnesses that he was an
employee of the late Pascual Tuazon and not of said respondent or of Mrs. Victoria Tuazon and not of
said respondent or of Mr. Victoria Vda. de Tengco. Indeed, there is a reasonable basis to believe that
he would not attempt to do so if only to be consistent with his stand when he filed a case before the

TRANSPORTATION LAW
22.) G.R. No. L-65510 March 9, 1987 P15,000.00 for the more than two times that the motorcycle figured in accidents aside from the loss of
the daily income of P15.00 as boundary fee beginning October 1976 when the motorcycle was
TEJA MARKETING AND/OR ANGEL JAUCIAN, petitioner, impounded by the LTC for not being registered.
vs. HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N. NALE, respondents.
The defendant disputed the claim of the plaintiff that he was hiding from the plaintiff the motorcycle
"'Ex pacto illicito' non oritur actio" (No action arises out of illicit bargain) is the time-honored maxim that resulting in its not being registered. The truth being that the motorcycle was being used for transporting
must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can passengers and it kept on travelling from one place to another. The motor vehicle sold to him was
seek relief from the courts, and each must bear the consequences of his acts." (Lita Enterprises vs. mortgaged by the plaintiff with the Rural Bank of Camaligan without his consent and knowledge and the
IAC, 129 SCRA 81.) defendant was not even given a copy of the mortgage deed. The defendant claims that it is not true that
the motorcycle was mortgaged because of re-discounting for rediscounting is only true with Rural Banks
On May 9, 1975, the defendant bought from the plaintiff a motorcycle with complete accessories and a and the Central Bank. The defendant puts the blame on the plaintiff for not registering the motorcycle
sidecar in the total consideration of P8,000.00 as shown by Invoice No. 144 (Exh. "A"). Out of the total with the LTC and for not giving him the registration papers inspite of demands made. Finally, the
purchase price the defendant gave a downpayment of P1,700.00 with a promise that he would pay evidence of the defendant shows that because of the filing of this case he was forced to retain the
plaintiff the balance within sixty days. The defendant, however, failed to comply with his promise and so services of a lawyer for a fee on not less than P1,000.00.
upon his own request, the period of paying the balance was extended to one year in monthly
installments until January 1976 when he stopped paying anymore. The plaintiff made demands but just xxx xxx xxx
the same the defendant failed to comply with the same thus forcing the plaintiff to consult a lawyer and
file this action for his damage in the amount of P546.21 for attorney's fees and P100.00 for expenses of ... it also appears and the Court so finds that defendant purchased the motorcycle in question,
litigation. The plaintiff also claims that as of February 20, 1978, the total account of the defendant was particularly for the purpose of engaging and using the same in the transportation business and for this
already P2,731.06 as shown in a statement of account (Exhibit. "B"). This amount includes not only the purpose said trimobile unit was attached to the plaintiffs transportation line who had the franchise, so
balance of P1,700.00 but an additional 12% interest per annum on the said balance from January 26, much so that in the registration certificate, the plaintiff appears to be the owner of the unit. Furthermore,
1976 to February 27, 1978; a 2% service charge; and P 546.21 representing attorney's fees. it appears to have been agreed, further between the plaintiff and the defendant, that plaintiff would
undertake the yearly registration of the unit in question with the LTC. Thus, for the registration of the
In this particular transaction a chattel mortgage (Exhibit 1) was constituted as a security for the payment unit for the year 1976, per agreement, the defendant gave to the plaintiff the amount of P82.00 for its
of the balance of the purchase price. It has been the practice of financing firms that whenever there is a registration, as well as the insurance coverage of the unit.
balance of the purchase price the registration papers of the motor vehicle subject of the sale are not
given to the buyer. The records of the LTC show that the motorcycle sold to the defendant was first Eventually, petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of Money with
mortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing and Angel Jaucian are Damages" against private respondent Pedro N. Nale in the City Court of Naga City. The City Court
one and the same, because it was made to appear that way only as the defendant had no franchise of rendered judgment in favor of petitioner, the dispositive portion of which reads:
his own and he attached the unit to the plaintiff's MCH Line. The agreement also of the parties here was
for the plaintiff to undertake the yearly registration of the motorcycle with the Land Transportation WHEREFORE, decision is hereby rendered dismissing the counterclaim and ordering the defendant to
Commission. Pursuant to this agreement the defendant on February 22, 1976 gave the plaintiff P90.00, pay plaintiff the sum of P1,700.00 representing the unpaid balance of the purchase price with legal rate
the P8.00 would be for the mortgage fee and the P82.00 for the registration fee of the motorcycle. The of interest from the date of the filing of the complaint until the same is fully paid; to pay plaintiff the sum
plaintiff, however failed to register the motorcycle on that year on the ground that the defendant failed to of P546.21 as attorney's fees; to pay plaintiff the sum of P200.00 as expenses of litigation; and to pay
comply with some requirements such as the payment of the insurance premiums and the bringing of the the costs.
motorcycle to the LTC for stenciling, the plaintiff saying that the defendant was hiding the motorcycle
from him. Lastly, the plaintiff explained also that though the ownership of the motorcycle was already SO ORDERED.
transferred to the defendant the vehicle was still mortgaged with the consent of the defendant to the
Rural Bank of Camaligan for the reason that all motorcycle purchased from the plaintiff on credit was
On appeal to the Court of First Instance of Camarines Sur, the decision was affirmed in toto. Private
rediscounted with the bank.
respondent filed a petition for review with the Intermediate Appellate Court and on July 18, 1983 the
said Court promulgated its decision, the pertinent portion of which reads —
On his part the defendant did not dispute the sale and the outstanding balance of P1,700. 00 still
payable to the plaintiff. The defendant was persuaded to buy from the plaintiff the motorcycle with the
However, as the purchase of the motorcycle for operation as a trimobile under the franchise of the
side car because of the condition that the plaintiff would be the one to register every year the
private respondent Jaucian, pursuant to what is commonly known as the "kabit system", without the
motorcycle with the Land Transportation Commission. In 1976, however, the plaintfff failed to register
prior approval of the Board of Transportation (formerly the Public Service Commission) was an illegal
both the chattel mortgage and the motorcycle with the LTC notwithstanding the fact that the defendant
transaction involving the fictitious registration of the motor vehicle in the name of the private respondent
gave him P90.00 for mortgage fee and registration fee and had the motorcycle insured with La Perla
so that he may traffic with the privileges of his franchise, or certificate of public convenience, to operate
Compana de Seguros (Exhibit "6") as shown also by the Certificate of cover (Exhibit "3"). Because of
a tricycle service, the parties being in pari delicto, neither of them may bring an action against the other
this failure of the plaintiff to comply with his obligation to register the motorcycle the defendant suffered
to enforce their illegal contract [Art. 1412 (a), Civil Code].
damages when he failed to claim any insurance indemnity which would amount to no less than
TRANSPORTATION LAW
WHEREFORE, the decision under review is hereby set aside. The complaint of respondent Teja
Marketing and/or Angel Jaucian, as well as the counterclaim of petitioner Pedro Nale in Civil Case No.
1153 of the Court of First Instance of Camarines Sur (formerly Civil Case No. 5856 of the City Court of
Naga City) are dismissed. No pronouncement as to costs.

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

We find the petition devoid of merit.

Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit
system" whereby a person who has been granted a certificate of public convenience allows another
person who owns motor vehicles to operate under such franchise for a fee. A certificate of public
convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees
thereof cannot be countenanced. The "kabit system" has been Identified as one of the root causes of
the prevalence of graft and corruption in the government transportation offices.

Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as
being contrary to public policy and, therefore, void and in existent under Article 1409 of the Civil Code. It
is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will
leave both where it finds then. Upon this premise it would be error to accord the parties relief from their
predicament. Article 1412 of the Civil Code denies them such aid. It provides:

Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal
offense, the following rules shall be observed:

1. When the fault is on the part of both contracting parties, neither may recover that he has given by
virtue of the contract, or demand, the performance of the other's undertaking.

The defect of in existence of a contract is permanent and cannot be cured by ratification or by


prescription. The mere lapse of time cannot give efficacy to contracts that are null and void.

WHEREFORE, the petition is hereby dismissed for lack of merit. The assailed decision of the
Intermediate Appellate Court (now the Court of Appeals) is AFFIRMED. No costs.

TRANSPORTATION LAW
23.) G.R. No. L-64693 April 27, 1984 Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears for the certificate of
convenience from March 1973 up to May 1973 at the rate of P200 a month per unit for the three cars.
LITA ENTERPRISES, INC., petitioner, (Annex A, Record on Appeal, p. 102-103, Rollo)
vs. SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M.
OCAMPO and FRANCISCA P. GARCIA, respondents. Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was denied by
the court a quo on October 27, 1975. (p. 121, Ibid.)
"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored maxim
that must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate Appellate Court modified
seek relief from the courts, and each must bear the consequences of his acts. the decision by including as part of its dispositive portion another paragraph, to wit: têñ.£îhqwâ£

Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents, In the event the condition of the three Toyota rears will no longer serve the purpose of the deed of
purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars conveyance because of their deterioration, or because they are no longer serviceable, or because they
to be used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner are no longer available, then Lita Enterprises, Inc. is ordered to pay the plaintiffs their fair market value
Lita Enterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate as of July 22, 1975. (Annex "D", p. 167, Rollo.)
of public convenience in consideration of an initial payment of P1,000.00 and a monthly rental of
P200.00 per taxicab unit. To effectuate Id agreement, the aforesaid cars were registered in the name of Its first and second motions for reconsideration having been denied, petitioner came to Us, praying
petitioner Lita Enterprises, Inc, Possession, however, remained with tile spouses Ocampo who operated that: têñ.£îhqwâ£
and maintained the same under the name Acme Taxi, petitioner's trade name.
1. ...
About a year later, on March 18, 1967, one of said taxicabs driven by their employee, Emeterio Martin,
collided with a motorcycle whose driver, one Florante Galvez, died from the head injuries sustained
therefrom. A criminal case was eventually filed against the driver Emeterio Martin, while a civil case for 2. ... after legal proceedings, decision be rendered or resolution be issued, reversing, annulling or
damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, amending the decision of public respondent so that:
Inc., as registered owner of the taxicab in the latter case, Civil Case No. 72067 of the Court of First
Instance of Manila, petitioner Lita Enterprises, Inc. was adjudged liable for damages in the amount of (a) the additional paragraph added by the public respondent to the DECISION of the lower court (CFI)
P25,000.00 and P7,000.00 for attorney's fees. be deleted;

This decision having become final, a writ of execution was issued. One of the vehicles of respondent (b) that private respondents be declared liable to petitioner for whatever amount the latter has paid or
spouses with Engine No. 2R-914472 was levied upon and sold at public auction for 12,150.00 to one was declared liable (in Civil Case No. 72067) of the Court of First Instance of Manila to Rosita
Sonnie Cortez, the highest bidder. Another car with Engine No. 2R-915036 was likewise levied upon Sebastian Vda. de Galvez, as heir of the victim Florante Galvez, who died as a result ot the gross
and sold at public auction for P8,000.00 to a certain Mr. Lopez. negligence of private respondents' driver while driving one private respondents' taxicabs. (p. 39, Rollo.)

Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs in his name. He Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit
requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration papers to him, but system", whereby a person who has been granted a certificate of convenience allows another person
the latter allegedly refused. Hence, he and his wife filed a complaint against Lita Enterprises, Inc., who owns motors vehicles to operate under such franchise for a fee. A certificate of public convenience
Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for is a special privilege conferred by the government . Abuse of this privilege by the grantees thereof
reconveyance of motor vehicles with damages, docketed as Civil Case No. 90988 of the Court of First cannot be countenanced. The "kabit system" has been Identified as one of the root causes of the
Instance of Manila. Trial on the merits ensued and on July 22, 1975, the said court rendered a decision, prevalence of graft and corruption in the government transportation offices. In the words of Chief Justice
the dispositive portion of which reads: têñ.£îhqw⣠Makalintal, 1 "this is a pernicious system that cannot be too severely condemned. It constitutes an
imposition upon the goo faith of the government.
WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita Sebastian Vda. de
Galvez, Visayan Surety & Insurance Company and the Sheriff of Manila are concerned.

Defendant Lita Enterprises, Inc., is ordered to transfer the registration certificate of the three Toyota
cars not levied upon with Engine Nos. 2R-230026, 2R-688740 and 2R-585884 [Exhs. A, B, C and D] by
executing a deed of conveyance in favor of the plaintiff.

TRANSPORTATION LAW
Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as
being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It
is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will
leave them both where it finds them. Upon this premise, it was flagrant error on the part of both the trial
and appellate courts to have accorded the parties relief from their predicament. Article 1412 of the Civil
Code denies them such aid. It provides:têñ.£îhqwâ£

ART. 1412. if the act in which the unlawful or forbidden cause consists does not constitute a criminal
offense, the following rules shall be observed;

(1) when the fault, is on the part of both contracting parties, neither may recover what he has given by
virtue of the contract, or demand the performance of the other's undertaking.

The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification
or by prescription. As this Court said in Eugenio v. Perdido, 2 "the mere lapse of time cannot give
efficacy to contracts that are null void."

The principle of in pari delicto  is well known not only in this jurisdiction but also in the United States
where common law prevails. Under American jurisdiction, the doctrine is stated thus: "The proposition is
universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for
its specific performance, or to recover the property agreed to be sold or delivered, or damages for its
property agreed to be sold or delivered, or damages for its violation. The rule has sometimes been laid
down as though it was equally universal, that where the parties are in pari delicto,  no affirmative relief of
any kind will be given to one against the other." 3 Although certain exceptions to the rule are provided by
law, We see no cogent reason why the full force of the rule should not be applied in the instant case.

WHEREFORE, all proceedings had in Civil Case No. 90988 entitled "Nicasio Ocampo and Francisca P.
Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of the Court of First Instance of
Manila and CA-G.R. No. 59157-R entitled "Nicasio Ocampo and Francisca P. Garica, Plaintiffs-
Appellees, versus Lita Enterprises, Inc., Defendant-Appellant,"  of the Intermediate Appellate Court, as
well as the decisions rendered therein are hereby annuleled and set aside. No costs.

SO ORDERED.1äwphï1.ñët

TRANSPORTATION LAW
24.) G.R. No. 160286             July 30, 2004 distance of three meters away. The passenger jeepney was traveling fast when it bumped the owner
type jeep.7 Moreover, the evidence presented by respondents before the trial court showed that
SPOUSES FRANCISCO M. HERNANDEZ and ANICETA ABEL-HERNANDEZ and JUAN petitioner Juan Gonzales obtained his professional driver's license only on September 24, 1986, or
GONZALES, petitioners, three months before the accident. Prior to this, he was holder of a student driver's permit issued on April
vs. 10, 1986.8
SPOUSES LORENZO DOLOR and MARGARITA DOLOR, FRED PANOPIO, JOSEPH SANDOVAL,
RENE CASTILLO, SPOUSES FRANCISCO VALMOCINA and VIRGINIA VALMOCINA, SPOUSES On November 24, 1997, the trial court rendered a decision in favor of respondents, the dispositive
VICTOR PANOPIO and MARTINA PANOPIO, and HON. COURT OF APPEALS, respondents. portion of which states:

This is a petition for review under Rule 45 of the Rules of Court seeking the reversal of the decision1 of Premises duly considered and the plaintiffs having satisfactorily convincingly and credibly presented
the Court of Appeals, dated April 29, 2003, in CA-G.R. CV No. 60357, which affirmed with modification evidence clearly satisfying the requirements of preponderance of evidence to sustain the complaint, this
the amount of damages awarded in the November 24, 1997 decision2 of the Regional Trial Court of Court hereby declares judgment in favor of the plaintiffs and against the defendants. Defendants-
Batangas City, Branch IV. spouses Francisco Hernandez and Aniceta Abel Hernandez and Juan Gonzales are therefore directed
to pay jointly and severally, the following:
The undisputed facts are as follows:
1) To spouses Lorenzo Dolor and Margarita Dolor:
At about 3:00 p.m. of December 19, 1986, Lorenzo Menard "Boyet" Dolor, Jr. was driving an owner-type
jeepney with plate no. DEB 804 owned by her mother, Margarita, towards Anilao, Batangas. As he was a) P50,000.00 – for the death of their son, Lorenzo Menard "Boyet" Dolor, Jr.;
traversing the road at Barangay Anilao East, Mabini, Batangas, his vehicle collided with a passenger
jeepney bearing plate no. DEG 648, driven by petitioner Juan Gonzales and owned by his co-petitioner b) P142,000.00 – as actual and necessary funeral expenses;
Francisco Hernandez, which was travelling towards Batangas City.
c) P50,000.00 – reasonable value of the totally wrecked owner-type jeep with plate no. DEB 804 Phil
Boyet Dolor and his passenger, Oscar Valmocina, died as a result of the collision. Fred Panopio, Rene '85;
Castillo and Joseph Sandoval, who were also on board the owner-type jeep, which was totally wrecked,
suffered physical injuries. The collision also damaged the passenger jeepney of Francisco Hernandez
and caused physical injuries to its passengers, namely, Virgie Cadavida, Fiscal Artemio Reyes and d) P20,000.00 – as moral damages;
Francisca Corona.3
e) P20,000.00 as reasonable litigation expenses and attorney's fees.
Consequently, respondents commenced an action4 for damages against petitioners before the Regional
Trial Court of Batangas City, alleging that driver Juan Gonzales was guilty of negligence and lack of 2) To spouses Francisco Valmocina and Virginia Valmocina:
care and that the Hernandez spouses were guilty of negligence in the selection and supervision of their
employees.5 a) P50,000.00 – for the death of their son, Oscar Balmocina (sic);

Petitioners countered that the proximate cause of the death and injuries sustained by the passengers of b) P20,000.00 – as moral damages;
both vehicles was the recklessness of Boyet Dolor, the driver of the owner-type jeepney, who was
driving in a zigzagging manner under the influence of alcohol. Petitioners also alleged that Gonzales
was not the driver-employee of the Hernandez spouses as the former only leased the passenger c) P18,400.00 – for funeral expenses;
jeepney on a daily basis. The Hernandez spouses further claimed that even if an employer-employee
relationship is found to exist between them, they cannot be held liable because as employers they d) P10,000.00 – for litigation expenses and attorney's fees.
exercised due care in the selection and supervision of their employee.
3) To spouses Victor Panopio and Martina Panopio:
During the trial of the case, it was established that the drivers of the two vehicles were duly licensed to
drive and that the road where the collision occurred was asphalted and in fairly good condition.6 The
a) P10,450.00 – for the cost of the artificial leg and crutches being used by their son Fred Panopio;
owner-type jeep was travelling uphill while the passenger jeepney was going downhill. It was further
established that the owner-type jeep was moderately moving and had just passed a road bend when its
passengers, private respondents Joseph Sandoval and Rene Castillo, saw the passenger jeepney at a

TRANSPORTATION LAW
b) P25,000.00 – for hospitalization and medical expenses they incurred for the treatment of their son, d) P10,000.00 – as reasonable litigation expenses and attorney's fees.
Fred Panopio.
3) To Spouses Victor Panopio and Martina Panopio:
4) To Fred Panopio:
a) P10,352.59 – as actual hospitalization and medical expenses;
a) P25,000.00 – for the loss of his right leg;
b) P5,000.00 – as temperate damages.
b) P10,000.00 – as moral damages.
4) To Fred Panopio:
5) To Joseph Sandoval:
a) P50,000.00 – as moral damages.
a) P4,000.00 for medical treatment.
5) To Joseph Sandoval:
The defendants are further directed to pay the costs of this proceedings.
a) P3,000.00 as temperate damages.
SO ORDERED.9
SO ORDERED.11
10 
Petitioners appealed the decision to the Court of Appeals, which affirmed the same with modifications
as to the amount of damages, actual expenses and attorney's fees awarded to the private respondents. Hence the present petition raising the following issues:
The decretal portion of the decision of the Court of Appeals reads:
1. Whether the Court of Appeals was correct when it pronounced the Hernandez spouses as solidarily
WHEREFORE, the foregoing premises considered, the appealed decision is AFFIRMED. However, the liable with Juan Gonzales, although it is of record that they were not in the passenger jeepney driven by
award for damages, actual expenses and attorney's fees shall be MODIFIED as follows: latter when the accident occurred;

1) To spouses Lorenzo Dolor and Margarita Dolor: 2. Whether the Court of Appeals was correct in awarding temperate damages to private respondents
namely the Spouses Dolor, Spouses Valmocina and Spouses Panopio and to Joseph Sandoval,
a) P50,000.00 – civil indemnity for their son Lorenzo Menard Dolor, Jr.; although the grant of temperate damages is not provided for in decision of the court a quo;

b) P58,703.00 – as actual and necessary funeral expenses; 3. Whether the Court of Appeals was correct in increasing the award of moral damages to respondents,
Spouses Dolor, Spouses Valmocina and Fred Panopio;
c) P25,000,00 – as temperate damages;
4. Whether the Court of Appeals was correct in affirming the grant of attorney's fees to Spouses Dolor
d) P100,000.00 – as moral damages; and to Spouses Valmocina although the lower court did not specify the fact and the law on which it is
based.
e) P20,000.00 – as reasonable litigation expenses and attorney's fees.
Petitioners contend that the absence of the Hernandez spouses inside the passenger jeepney at the
time of the collision militates against holding them solidarily liable with their co-petitioner, Juan
2) To Spouses Francisco Valmocina and Virginia Valmocina: Gonzales, invoking Article 2184 of the Civil Code, which provides:

a) P50,000.00 – civil indemnity for the death of their son, Oscar Valmocina; ARTICLE 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver, if the former, who
was in the vehicle, could have, by the use of the due diligence, prevented the misfortune. It is disputably
b) P100,000.00 – as moral damages; presumed that a driver was negligent, if he had been found guilty of reckless driving or violating traffic
regulations at least twice within the next preceding two months.
c) P10,000.00 – as temperate damages;
If the owner was not in the motor vehicle, the provisions of article 2180 are applicable.
TRANSPORTATION LAW
The Hernandez spouses argues that since they were not inside the jeepney at the time of the collision, Moreover, Article 2180 should be read with Article 2194 of the same Code, which categorically states
the provisions of Article 2180 of the Civil Code, which does not provide for solidary liability between that the responsibility of two or more persons who are liable for quasi-delict is solidary. In other words,
employers and employees, should be applied. the liability of joint tortfeasors is solidary.12 Verily, under Article 2180 of the Civil Code, an employer may
be held solidarily liable for the negligent act of his employee.13
We are not persuaded.
The solidary liability of employers with their employees for quasi-delicts having been established, the
Article 2180 provides: next question is whether Julian Gonzales is an employee of the Hernandez spouses. An affirmative
answer will put to rest any issue on the solidary liability of the Hernandez spouses for the acts of Julian
Gonzales. The Hernandez spouses maintained that Julian Gonzales is not their employee since their
ARTICLE 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or relationship relative to the use of the jeepney is that of a lessor and a lessee. They argue that Julian
omissions, but also for those of persons for whom one is responsible. Gonzales pays them a daily rental of P150.00 for the use of the jeepney.14 In essence, petitioners are
practicing the "boundary system" of jeepney operation albeit disguised as a lease agreement between
The father and, in case of his death or incapacity, the mother, are responsible for the damages caused them for the use of the jeepney.
by the minor children who live in their company.
We hold that an employer-employee relationship exists between the Hernandez spouses and Julian
Guardians are liable for damages caused by the minors or incapacitated persons who are under their Gonzales.
authority and live in their company.
Indeed to exempt from liability the owner of a public vehicle who operates it under the "boundary
The owners and managers of an establishment or enterprise are likewise responsible for damages system" on the ground that he is a mere lessor would be not only to abet flagrant violations of the Public
caused by their employees in the service of the branches in which the latter are employed or on the Service Law, but also to place the riding public at the mercy of reckless and irresponsible drivers —
occasion of their functions. reckless because the measure of their earnings depends largely upon the number of trips they make
and, hence, the speed at which they drive; and irresponsible because most if not all of them are in no
Employers shall be liable for the damages caused by their employees and household helpers position to pay the damages they might cause.15
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry. Anent the award of temperate damages to the private respondents, we hold that the appellate court
committed no reversible error in awarding the same to the respondents.
The State is responsible in like manner when it acts through a special agent; but not when the damage
has been caused by the official to whom the task done properly pertains, in which case what is provided Temperate or moderate damages are damages which are more than nominal but less than
in article 2176 shall be applicable. compensatory which may be recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be proved with certainty.16 Temperate
Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by damages are awarded for those cases where, from the nature of the case, definite proof of pecuniary
their pupils and students or apprentices, so long as they remain in their custody. loss cannot be offered, although the court is convinced that there has been such loss. A judge should
be empowered to calculate moderate damages in such cases, rather than the plaintiff should suffer,
without redress, from the defendant's wrongful act.17 The assessment of temperate damages is left to
The responsibility treated of in this article shall cease when the persons herein mentioned prove that the sound discretion of the court provided that such an award is reasonable under the circumstances.18
they observed all the diligence of a good father of a family to prevent damage. (Underscoring supplied)
We have gone through the records of this case and we find that, indeed, respondents suffered losses
On the other hand, Article 2176 provides – which cannot be quantified in monetary terms. These losses came in the form of the damage sustained
by the owner type jeep of the Dolor spouses; the internment and burial of Oscar Valmocina; the
Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to hospitalization of Joseph Sandoval on account of the injuries he sustained from the collision and the
pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation artificial leg and crutches that respondent Fred Panopio had to use because of the amputation of his
between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. right leg. Further, we find that the amount of temperate damages awarded to the respondents were
reasonable under the circumstances.
While the above provisions of law do not expressly provide for solidary liability, the same can be
inferred from the wordings of the first paragraph of Article 2180 which states that the obligation imposed As to the amount of moral damages which was awarded to respondents, a review of the records of this
by article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for case shows that there exists no cogent reason to overturn the action of the appellate court on this
whom one is responsible. aspect.

TRANSPORTATION LAW
Under Article 2206, the "spouse, legitimate and illegitimate descendants and ascendants of the WHEREFORE, the petition is DENIED. The assailed decision of the Court of Appeals is AFFIRMED
deceased may demand moral damages for mental anguish for the death of the deceased." The reason with the MODIFICATION that the grant of attorney's fees is DELETED for lack of basis.
for the grant of moral damages has been explained, thus:

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

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

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

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

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

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

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

Likewise, this Court held in Stronghold Insurance Company, Inc. vs. Court of Appeals that:

"In Abrogar v. Intermediate Appellate Court G.R. No. 67970, January 15, 1988, 157 SCRA 57], the
Court had occasion to state that '[t]he reason for the award of attorney's fees must be stated in the text
of the court's decision, otherwise, if it is stated only in the dispositive portion of the decision, the same
must be disallowed on appeal.' x x x."24

TRANSPORTATION LAW