You are on page 1of 10



Facts: Petitioner is a grantee of a pipeline concession under RA 387 to contract, install and operate oil pipelines. The
first pipeline concession was granted in 1967 and was renewed by the ERB in 1992. In 1995, petitioner applied for a
Mayors permit in Batangas City. Respondent treasurer required petitioner to pay a local tax based on its gross
receipts for the fiscal year in 1993 pursuant to the Local Government Code.
To avoid hampering its operations, petitioner paid the amount of tax for the first quarter under protest.
Petitioner argued that as a pipeline operator with a government concession engaged in transporting petroleum
products via pipeline it is exempted from payment of tax based on gross receipts. Respondent refused to make
reimbursement on the ground that petitioner is not a common carrier engaged in transportation business by land,
water or air.

Issue: Whether or not petitioner is liable to pay a local tax based on gross receipts since it is not a common carrier.

Held: No. Based on Article 1732 NCC, there is no doubt that petitioner is a common carrier. It is engaged in the
business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to
carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods
by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of
a common carrier. (De Guzman Ruling upheld)
Respondents argument that the term common carrier as used in Section 133(j) of the Local Government
Code refers only to common carriers transporting goods and passengers through moving vehicles or vessels either
by land, sea or water is erroneous. The definition of common carriers in NCC makes no distinction as to the means
of transporting as long as it is by land, water or air. It does not provide that the transporting of the passengers or
goods should be by motor vehicle.
It is clear that the legislative intent in excluding from the taxing power of the local government unit the
imposition of business tax against common carriers is to prevent a duplication of the so-called "common carrier's tax."
Petitioner is already paying 3% common carrier's tax on its gross sales/earnings under the National Internal Revenue
Code. To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the
purpose of the Local Government Code.


Facts: Respondent Ernesto Cendaa is a junk dealer who was engaged in buying up used bottles and scrap metal in
Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring such material to
Manila for resale. He utilized two six-wheeler trucks which he owned for hauling the material to Manila. On the return
trip to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to
different establishments in Pangasinan. For that service, respondent charged freight rates which were commonly
lower than regular commercial rates.
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 its
warehouse in Makati to petitioner's establishment in Urdaneta. 150 cartons were loaded on a truck driven by
respondent, while 600 cartons were placed on board the other truck which was driven by Manuel Estrada,
respondent's driver and employee. Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600
boxes never reached petitioner, since the truck which carried these boxes was hijacked somewhere along the
MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the
Petitioner commenced action against private respondent demanding payment of P22,150.00, the claimed
value of the lost merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a
common carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be held
liable for the value of the undelivered goods. Private respondent denied that he was a common carrier and argued
that he could not be held responsible for the value of the lost goods, such loss having been due to force majeure.
The RTC ruled that private respondent was a common carrier. CA reversed the decision and held that
respondent had been engaged in transporting return loads of freight "as a casual occupation, a sideline to his scrap
iron business.

Issue: 1. Whether or not respondent is a common carrier.
2. Whether or not respondent is liable.

Held: 1. Yes. Article 1732 makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as "a sideline").
Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the
general community or population, and one who offers services or solicits business only from a narrow segment of the
general population.
The Court of Appeals referred to the fact that private respondent held no certificate of public convenience. A
certificate of public convenience is not a requisite for the incurring of liability. That liability arises the moment a person
or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of
public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because
he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that
would be to reward private respondent precisely for failing to comply with applicable statutory requirements.

2. No. Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or
deterioration of the goods which they carry, "unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the containers; and
(5) Order or act of competent public authority.

Article 1735 also provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as required in Article 1733.

The hijacking of the carrier's truck does not fall within any of the five categories of exempting causes listed in Article
1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt with under the provisions of
Article 1735, in other words, that the private respondent as common carrier is presumed to have been at fault or to
have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on the
part of private respondent. Petitioner argues that in the circumstances of this case, private respondent should have
hired a security guard presumably to ride with the truck carrying the 600 cartons of Liberty filled milk. We do not
believe, however, that in the instant case, the standard of extraordinary diligence required private respondent to
retain a security guard to ride with the truck and to engage brigands in a firelight at the risk of his own life and the
lives of the driver and his helper.

Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:
(6) that the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave
or irresistible threat, violence or force, is dispensed with or diminished.

In the instant case, armed men held up the second truck owned by private respondent which carried
petitioner's cargo. Accused acted with grave, if not irresistible, threat, violence or force. 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.


Facts: PPI purchased from Mitsubishi metric tons of Urea fertilizer which the latter shipped aboard the cargo vessel
owned by KKKK from US to La Union. Prior to its voyage, a time charter-party on the vessel was entered into
between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. Before loading the fertilizer
aboard the vessel, they were all presumably inspected by the charterer's representative and found fit to take a load of
urea. After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the
steel hatches were closed with heavy iron lids, covered with three layers of tarpaulin, then tied with steel bonds. The
hatches remained closed and tightly sealed throughout the entire voyage.
A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to
determine the "outturn" of the cargo shipped. The survey report submitted revealed a shortage in the cargo and that
a portion of the Urea fertilizer approximating was contaminated with dirt.
PPI sent a claim letter to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for
the cost of the shortage in the and the diminution in value of that portion contaminated with dirt. SSA explained that
they did not respond to the consignee's claim because it was not a formal claim, and that they had nothing to do with
the discharge of the shipment.
PPI filed an action for damages. The defendant carrier argued that the strict public policy governing
common carriers does not apply to them because they have become private carriers by reason of the provisions of
the charter-party. RTC ruled in favor of plaintiff, stating that common carriers are presumed negligent, all that a
shipper has to do in a suit to recover for loss or damage is to show receipt by the carrier of the goods and to delivery
by it of less than what it received. After that, the burden of proving that the loss or damage was due to any of the
causes which exempt him from liability is shifted to the carrier, common or private he may be. Even if the provisions
of the charter-party are deemed valid, and the defendants considered private carriers, it was still incumbent upon
them to prove that the shortage or contamination sustained by the cargo is attributable to the fault or negligence on
the part of the shipper or consignee in the loading, stowing, trimming and discharge of the cargo. This they failed to
do. CA reversed the decision, relying on the 1968 case of Home Insurance Co. v. American Steamship Agencies,
Inc., it ruled that the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and not a
common carrier by reason of the time charterer-party. Accordingly, the Civil Code provisions on common carriers
which set forth a presumption of negligence do not find application in the case at bar.

Issue: 1) Whether a common carrier becomes a private carrier by reason of a charter-party.
2) Whether the shipowner was able to prove that he had exercised that degree of diligence required of him
under the law.

Held: 1.) Not necessarily. It is not disputed that respondent carrier, in the ordinary course of business, operates as a
common carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun
Plum", the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued
to be under its direct supervision and control. Hardly then can the charterer be charged, a stranger to the crew and to
the ship, with the duty of caring for his cargo when the charterer did not have any control of the means in doing so.
This is evident in the present case considering that the steering of the ship, the manning of the decks, the
determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to
the officers and crew who were screened, chosen and hired by the shipowner. It is therefore imperative that a public
carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons,
provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter. It is only when the
charter includes both the vessel and its crew, that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter
retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer.
Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies,
is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-
party exempting the shipowners from liability for loss due to the negligence of its agent, and not the effects of a
special charter on common carriers. At any rate, the rule in the United States that a ship chartered by a single
shipper to carry special cargo is not a common carrier, does not find application in our jurisdiction, for we have
observed that the growing concern for safety in the transportation of passengers and /or carriage of goods by sea
requires a more exacting interpretation of admiralty laws, more particularly, the rules governing common carriers.

2.) Yes. In an action for recovery of damages against a common carrier on the goods shipped, the RTCs statement
on the requirements of the law was reiterated. SC held that respondent carrier has sufficiently overcome, by clear
and convincing proof, the prima facie presumption of negligence.
It was shown during the trial that after the loading of the cargo in bulk in the ships holds, the steel pontoon
hatches were closed and sealed with iron lids, then covered with 3 layers of serviceable tarpaulins which were tied
with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight of the
steel covers made it impossible for a person to open without the use of the ships boom. Also shown, was 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.
SC agreed that the bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or
damage. Moreso, with a variable weather condition prevalent during its unloading, as was the case at bar. This is a
risk the shipper or the owner of the goods has to face. Clearly, respondent carrier has sufficiently proved the inherent
character of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its packaging
which further contributed to the loss.


A. Vigilance over Goods


Facts: Bienvenido Gelisan is the owner of a freight truck. Defendant Bienveido Gelisan and Roberto Roberto entered
into a contact underwhich Espiritu hired the same freight truck of Gelisan for the purpose of hauling rice, sugar, flour
and fertilizer. It also agreed that Espiritu shall bear and pay all losses and damages attending the carriage of the
goods to be hauled by him.
Benito Alday, a trucking operator had known Roberto Espiritu. Alday had a contact to haul the fertilizer of
the Atlas Fertilizer Corporation from Pier 4, North Harbor, to its Warehouse in Mandaluyong.
Alday met Espiritu at the gate of Pier 4 and the latter offered the use of his truck with the driver and helper.
The offer was accepted by Alday and he instructed his checker to let Roberto Espiritu haul the fertilizer. Espiritu
made two hauls of zoobags of fertilizer per trip. The fertilizer was delivered to the driver and helper of Espiritu with
the necessary waybill receipts. Espiritu, however, did not deliver the fertilizer to the Atlas Fertilizer bodega at
Thus, Benito Alday was compelled to pay the value of the 400 bags of fertilizers to Atlas Fertilizer
Corporation and filed a compliant against Roberto Espiritu and Bienvenido Gelisan with the CFI of Manila.
The CFI of Manila ruled that Roberto Espiritu was the only one liable. On appeal, CA ruled that Bienvenido
Gelisan is likewise liable for being the registered owner of the truck.

Issue: Whether or not Gelisan should be held solidarily liable with Espiritu, being the registered owner of the truck.

Held: Yes, Gelisan should be held solidarily liable with Espiritu, being the registered owner of the truck.
The Court has invariably held in several decisions that the registered owner of a public service vehicle is
responsible for damages that may arise from consequences incident to its operation or that may be caused to any of
the passengers therein. The claim of the petitioner that he is not liable in view of the lease contract executed by and
between him and Roberto Espiritu which exempts him from liability to third persons, cannot be sustained because it
appears that the lease contract, adverted to, had not been approved by the Public service Commission. It is settled in
our jurisprudence that if the property covered by a franchise is transferred or leased to another without obtaining the
requisite approval, the transfer is not binding upon the public or third persons. However, Gelisan is not without
recourse because he has a right to be indemnified by Roberto Espiritu for the amount that he may be required to pay
as damages for the injury caused to Benito Alday, since the lease contract in question, although not effective against
the public for not having been approved by the Public Service Commission, is valid and binding between the
contracting parties.
The Court ruled that the petitioner is DENIED. With costs against the petitioner.


Facts: Private respondent Greenhills Wood Industries Company, Inc., a lumber manufacturing firm, operates a
sawmill in Quirino.
Sometime in May 1980, private respondent bound itself to sell and deliver to Blue Star Mahogany, Inc.
(Blue Star), a company in Bulacan 100,000 board feet of sawn lumber with the understanding that an initial delivery
would be made on May 15, 1980. To effect its first delivery, private respondents resident manager Dominador Cruz,
contracted Virgilio Licuden, the driver of a cargo truck to transport its sawn lumber to the consignee Blue Star in
Valenzuela, Bulacan. The cargo truck was registered in the name of petitioner Ma. Luisa Benedicto, the proprietor of
Macoren Trucking, a business enterprise engaged in hauling freight.
On May 15, 1980, cruz in the presence and with the consent of driver Licuden, supervised the loading of
sawn lumber with invoice aboard the cargo truck. Thereafter, the Manager of Blue Star called up Greenhills
president, informing him that the sawn lumber on board the subject cargo truck had not yet arrived in Bulacan. The
latter then informed Greenhills resident manager. Still, Blue Star had not received the sawn lumber and were
constrained to look for other suppliers.
Thus, private respondent Greenhills filed criminal case against driver Luciden for estafa and also against
petitioner Benedicto for recovery of the value of the lost sawn lumber plus damages before the RTC of Dagupan City.
The trial court ruled against Benedicto and Luciden. On appeal, the IAC affirmed the decision of the trial
court in toto.

Issue: Whether or not petitioner Benedicto, being the registered owner of the carrier, should be held liable for the
value of the undelivered or lost sawn lumber.

Held: Yes, Benedicto is liable for the undelivered or lost sawn lumber as registered owner. There is no dispute that
petitioner Benedicto has been holding herself out to the public as engaged in the business of hauling or transporting
goods for hire or compensation. Petitioner Benedicto is, in brief, a common carrier.
The prevailing doctrine on common carrier makes the registered owner liable for consequences flowing from
the operations of the carrier, even though the specific vehicle involved may already have been transferred to another
person. This doctrine rests upon the principle that in dealing with vehicles registered under the Public Service Law,
the public has the right to assume that the registered owner is the actual or lawful owner thereof. It would be very
difficult and often impossible as a practical matter, for members of the general public to enforce the rights of action
that they may have for injuries inflicted by the vehicles being negligently operated if they should be required to prove
who the actual owner is. The registered owner is not allowed to deny liability by proving the identity of the alleged
In the case at bar, private respondent is not required to go beyond the vehicles certificate of registration to
ascertain the owner of the carrier. In this regard, the letter presented by petitioner allegedly written by Benjamin Tee
admitting that Licuden was his driver, had no evidentiary value not only because Benjamin Tee was not presented in
court to testify on this matter but because of the afore mentioned doctrine. To permit the ostensible or registered
owner to prove who the actual owner is, would be to set at naught the purpose or public policy which infuses that
The Court ruled that the Petition fro Review is Denied.


Facts: Sometime in 1966, the spouses Nicasio Ocampo and Francisca Garcia, herein private respondent purchased
in installment from the Delta Motor Sales Corp. five Toyota Corona Standard cars to be used as taxicabs. Since they
had no franchise to operate taxicabs, they contracted with petitioner, for the use of the latters certificate of public
convenience in consideration of an initial payment of P1,000 and a monthly rental of P200 per taxi cab unit.
About a year later, one of said taxicabs driven by their employee, Emeterio Martin, collided with a
motorcycle whose driver, Florante Galvez, died from the head injuries sustained. A criminal case was filed against
the driver while a civil case was filed against Lita enterprises seeking for damages. In the CFI of Manila, petitioner
Lita Enterprises was adjudged liable for damages as the registered owner of the taxicab. Thus, a writ of execution
was issued and one of the vehicles of respondent spouses was levied upon and sold at public auction.
Thereafter, respondent Nicasio Ocampo decided to register his taxicab in his name, but Lita Enterprises
allegedly refused. Hence, the spouses filed a complaint. The CFI of Manila ordered Lita Enterprises to transfer the
registration certificate. On Appeal, the IAC modified the decision.

Issue: Whether or not the parties entered into a kabit system

Held: Yes, the parties entered into a kabit system. The parties herein operated under an arrangement, commonly
known as the kabit system, whereby a person who has been granted a certificate of 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 services. Thus, the concept of Kabit system being contrary to public
policy and void and existent, the court cannot allow either of the parties to enforce an illegal contract bu leaves them
both where it finds them.
The Court ruled that the decisions rendered by the CFI of Manila and IAC are hereby annulled and set


Facts: On May 9, 1975, the defendant bought from the plaintiff a motorcycle with complete accessories and a
sidecar in the total consideration of P8,000.00. Out of the total purchase price the defendant gave a down payment
of P1,700.00 with a promise that he would pay plaintiff the balance within sixty days. The defendant, however, failed
to comply with his promise and so 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
the same the defendant failed to comply thus forcing plaintiff to consult a lawyer and file this action for his damage.
It also appears and the court so finds that the defendant purchased the motorcycle in question and the
Court so finds that defendant purchased the motorcycle in question, particularly for the purpose of engaging and
using the same in transportation business and for this purpose said trimobile unit was attached to the plaintiffs
transportation line who had the franchise, so much so that in the registration certificate, the plaintiff appears to be the
owner of the unit. Furthermore, 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
unit for the year 1976, per agreement, the defendant gave to the plaintiff the amount of P82.00 of rits registration, as
well as the insurance coverage of the unit.
Petitioner Teja Marketing and/or Angel Jaucian filed an action for the sum of money with damages. The
city court rendered judgment in favor of petitioner. On appeal, the decision was affirmed in toto.

Issue: Whether or not kabit system applies in the instant case.

Held: Yes, the parties operated under an agreement called kabit system. This is a 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.
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 1404 of the Civil Code. Thus, court will not aid either
party to enforce an illegal contract, but will leave both where it finds them.
The court ruled that the petition is hereby dismissed for lack of merit. The assailed decision of the IAC now


Facts: The spouses Magboo are the parents of the 8-year old child killed in a motor vehicle accident, the vehicle
owned by the defendant Bernardo. At the time of the accident, said passenger jeepney was driven by Corado Roque.
The contract between Conrado Roque and defendant Delfin Bernardo was that Roque was to pay to defendant the
sum of P8.00, which he paid to said defendant, for privilege of driving the jeepney, it being their agreement that
whatever earnings Roque could make out of the use of the jeepney in transporting passengers from one point to
another would belong entirely to Conrado Roque.
As a result of the accident, Conrado Roque was prosecuted for homicide thru reckless imprudence before
the CFI of Manila, and that upon arraignment, Conrado Roque pleaded guilty to the information and was sentenced
to a jail term, to indemnify the heirs of the deceased in the sum of P3, 000.00 with subsidiary imprisonment in case of
insolvency. Conrado Roque served his sentence but he was not able to pay the indemnity because he was insolvent.

Issue: Whether or not an employer-employee relationship exists between a jeepney- owner and a driver under a
boundary system agreement.

Held: Yes, there exist an employer-employee relationship under a boundary system arrangement. The features
which characterize the boundary system- namely, the fact that the driver does not receive a fixed wage but gets only
the excess of the amount of fares collected by him over the amount he pays to the jeep- owner, and that the gasoline
consumed by the jeepney is for the account of the driver- are not sufficient to withdraw the relationship between them
from that of employer- employee. Consequently, the jeepney- owner is subsidiarily liable as employer in accordance
with article 103 of the Revised Penal Code.
The Court ruled that the judgment appealed from is hereby affirmed.