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G.R. No.

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

SO ORDERED. 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.
SO ORDERED.
Fernan (Chairman), Gutierrez, Jr., Padilla, Bidin and Cortez, JJ., concur.
Alampay, J., took no part.

Footnotes
* Penned by Justice Carolina C. Griño-Aquino; concurred in by Justices Nestor
B. Alampay and Reynato S. Puno.
SECOND DIVISION Petitioner Lim shouldered the costs for hospitalization of the wounded,
compensated the heirs of the deceased passenger, and had the Ferroza
[G.R. No. 125817. January 16, 2002] restored to good condition. He also negotiated with private respondent and
ABELARDO LIM and ESMADITO GUNNABAN, petitioners, vs. COURT OF offered to have the passenger jeepney repaired at his shop. Private
APPEALS and DONATO H. GONZALES, respondents. respondent however did not accept the offer so Lim offered him P20,000.00,
the assessment of the damage as estimated by his chief mechanic. Again,
DECISION petitioner Lim's proposition was rejected; instead, private respondent
BELLOSILLO, J.: demanded a brand-new jeep or the amount of P236,000.00. Lim increased
his bid to P40,000.00 but private respondent was unyielding. Under the
When a passenger jeepney covered by a certificate of public convenience is circumstances, negotiations had to be abandoned; hence, the filing of the
sold to another who continues to operate it under the same certificate of complaint for damages by private respondent against petitioners.
public convenience under the so-called kabit system, and in the course
thereof the vehicle meets an accident through the fault of another vehicle, In his answer Lim denied liability by contending that he exercised due
may the new owner sue for damages against the erring vehicle? Otherwise diligence in the selection and supervision of his employees. He further
stated, does the new owner have any legal personality to bring the action, or asserted that as the jeepney was registered in Vallartas name, it was Vallarta
is he the real party in interest in the suit, despite the fact that he is not the and not private respondent who was the real party in interest.i For his part,
registered owner under the certificate of public convenience? petitioner Gunnaban averred that the accident was a fortuitous event which
was beyond his control.ii
Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu
passenger jeepney from Gomercino Vallarta, holder of a certificate of public Meanwhile, the damaged passenger jeepney was left by the roadside to
convenience for the operation of public utility vehicles plying the corrode and decay. Private respondent explained that although he wanted to
Monumento-Bulacan route. While private respondent Gonzales continued take his jeepney home he had no capability, financial or otherwise, to tow the
offering the jeepney for public transport services he did not have the damaged vehicle.iii
registration of the vehicle transferred in his name nor did he secure for The main point of contention between the parties related to the amount of
himself a certificate of public convenience for its operation. Thus Vallarta damages due private respondent. Private respondent Gonzales averred that
remained on record as its registered owner and operator. per estimate made by an automobile repair shop he would have to spend
On 22 July 1990, while the jeepney was running northbound along the North P236,000.00 to restore his jeepney to its original condition.iv On the other
Diversion Road somewhere in Meycauayan, Bulacan, it collided with a ten- hand, petitioners insisted that they could have the vehicle repaired for
wheeler-truck owned by petitioner Abelardo Lim and driven by his co- P20,000.00.v
petitioner Esmadito Gunnaban. Gunnaban owned responsibility for the On 1 October 1993 the trial court upheld private respondent's claim and
accident, explaining that while he was traveling towards Manila the truck awarded him P236,000.00 with legal interest from 22 July 1990 as
suddenly lost its brakes. To avoid colliding with another vehicle, he swerved compensatory damages and P30,000.00 as attorney's fees. In support of its
to the left until he reached the center island. However, as the center island decision, the trial court ratiocinated that as vendee and current owner of the
eventually came to an end, he veered farther to the left until he smashed into passenger jeepney private respondent stood for all intents and purposes as
a Ferroza automobile, and later, into private respondent's passenger jeepney the real party in interest. Even Vallarta himself supported private
driven by one Virgilio Gonzales. The impact caused severe damage to both respondent's assertion of interest over the jeepney for, when he was called
the Ferroza and the passenger jeepney and left one (1) passenger dead and to testify, he dispossessed himself of any claim or pretension on the property.
many others wounded. Gunnaban was found by the 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 In the early case of Dizon v. Octaviox the Court explained that one of the
superhighway then across the island and ultimately to the opposite lane primary factors considered in the granting of a certificate of public
where it collided with the jeepney. convenience for the business of public transportation is the financial capacity
of the holder of the license, so that liabilities arising from accidents may be
On the other hand, petitioner Lim's liability for Gunnaban's negligence was duly compensated. The kabit system renders illusory such purpose and,
premised on his want of diligence in supervising his employees. It was worse, may still be availed of by the grantee to escape civil liability caused by
admitted during trial that Gunnaban doubled as mechanic of the ill-fated a negligent use of a vehicle owned by another and operated under his license.
truck despite the fact that he was neither tutored nor trained to handle such If a registered owner is allowed to escape liability by proving who the
task.vi supposed owner of the vehicle is, it would be easy for him to transfer the
Forthwith, petitioners appealed to the Court of Appeals which, on 17 July subject vehicle to another who possesses no property with which to respond
1996, affirmed the decision of the trial court. In upholding the decision of the financially for the damage done. Thus, for the safety of passengers and the
court a quo the appeals court concluded that while an operator under the public who may have been wronged and deceived through the baneful kabit
kabit system could not sue without joining the registered owner of the vehicle system, the registered owner of the vehicle is not allowed to prove that
as his principal, equity demanded that the present case be made an another person has become the owner so that he may be thereby relieved of
exception.vii Hence this petition. responsibility. Subsequent cases affirm such basic doctrine.xi

It is petitioners' contention that the Court of Appeals erred in sustaining the It would seem then that the thrust of the law in enjoining the kabit system is
decision of the trial court despite their opposition to the well-established not so much as to penalize the parties but to identify the person upon whom
doctrine that an operator of a vehicle continues to be its operator as long as responsibility may be fixed in case of an accident with the end view of
he remains the operator of record. According to petitioners, to recognize an protecting the riding public. The policy therefore loses its force if the public
operator under the kabit system as the real party in interest and to at large is not deceived, much less involved.
countenance his claim for damages is utterly subversive of public policy. In the present case it is at once apparent that the evil sought to be prevented
Petitioners further contend that inasmuch as the passenger jeepney was in enjoining the kabit system does not exist. First, neither of the parties to the
purchased by private respondent for only P30,000.00, an award of pernicious kabit system is being held liable for damages. Second, the case
P236,000.00 is inconceivably large and would amount to unjust enrichment.viii arose from the negligence of another vehicle in using the public road to whom
Petitioners' attempt to illustrate that an affirmance of the appealed decision no representation, or misrepresentation, as regards the ownership and
could be supportive of the pernicious kabit system does not persuade. Their operation of the passenger jeepney was made and to whom no such
labored efforts to demonstrate how the questioned rulings of the courts a representation, or misrepresentation, was necessary. Thus it cannot be said
quo are diametrically opposed to the policy of the law requiring operators of that private respondent Gonzales and the registered owner of the jeepney
public utility vehicles to secure a certificate of public convenience for their were in estoppel for leading the public to believe that the jeepney belonged
operation is quite unavailing. to the registered owner. Third, the riding public was not bothered nor
inconvenienced at the very least by the illegal arrangement. On the contrary,
The kabit system is an arrangement whereby a person who has been granted it was private respondent himself who had been wronged and was seeking
a certificate of public convenience allows other persons who own motor compensation for the damage done to him. Certainly, it would be the height
vehicles to operate them under his license, sometimes for a fee or percentage of inequity to deny him his right.
of the earnings.ix Although the parties to such an agreement are not
outrightly penalized by law, the kabit system is invariably recognized as being In light of the foregoing, it is evident that private respondent has the right to
contrary to public policy and therefore void and inexistent under Art. 1409 of proceed against petitioners for the damage caused on his passenger jeepney
the Civil Code. as well as on his business. Any effort then to frustrate his claim of damages
by the ingenuity with which petitioners framed the issue should be unliquidated and not known until definitely ascertained, assessed and
discouraged, if not repelled. 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
In awarding damages for tortuous injury, it becomes the sole design of the which time the quantification of damages may be deemed to be reasonably
courts to provide for adequate compensation by putting the plaintiff in the ascertained).xiv
same financial position he was in prior to the tort. It is a fundamental principle
in the law on damages that a defendant cannot be held liable in damages for In this case, the matter was not a liquidated obligation as the assessment of
more than the actual loss which he has inflicted and that a plaintiff is entitled the damage on the vehicle was heavily debated upon by the parties with
to no more than the just and adequate compensation for the injury suffered. private respondent's demand for P236,000.00 being refuted by petitioners
His recovery is, in the absence of circumstances giving rise to an allowance of who argue that they could have the vehicle repaired easily for P20,000.00. In
punitive damages, limited to a fair compensation for the harm done. The law fine, the amount due private respondent was not a liquidated account that
will not put him in a position better than where he should be in had not the was already demandable and payable.
wrong happened.xii
One last word. We have observed that private respondent left his passenger
In the present case, petitioners insist that as the passenger jeepney was jeepney by the roadside at the mercy of the elements. Article 2203 of the Civil
purchased in 1982 for only P30,000.00 to award damages considerably Code exhorts parties suffering from loss or injury to exercise the diligence of
greater than this amount would be improper and unjustified. Petitioners are a good father of a family to minimize the damages resulting from the act or
at best reminded that indemnification for damages comprehends not only omission in question. One who is injured then by the wrongful or negligent
the value of the loss suffered but also that of the profits which the obligee act of another should exercise reasonable care and diligence to minimize the
failed to obtain. In other words, indemnification for damages is not limited to resulting damage. Anyway, he can recover from the wrongdoer money lost in
damnum emergens or actual loss but extends to lucrum cessans or the reasonable efforts to preserve the property injured and for injuries incurred
amount of profit lost.xiii in attempting to prevent damage to it.xv
Had private respondent's jeepney not met an accident it could reasonably be However we sadly note that in the present case petitioners failed to offer in
expected that it would have continued earning from the business in which it evidence the estimated amount of the damage caused by private
was engaged. Private respondent avers that he derives an average income of respondent's unconcern towards the damaged vehicle. It is the burden of
P300.00 per day from his passenger jeepney and this earning was included in petitioners to show satisfactorily not only that the injured party could have
the award of damages made by the trial court and upheld by the appeals mitigated his damages but also the amount thereof; failing in this regard, the
court. The award therefore of P236,000.00 as compensatory damages is not amount of damages awarded cannot be proportionately reduced.
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 WHEREFORE, the questioned Decision awarding private respondent Donato
jeepney and the income lost from his transportation business. Petitioners for Gonzales P236,000.00 with legal interest from 22 July 1990 as compensatory
their part did not offer any substantive evidence to refute the estimate made damages and P30,000.00 as attorney's fees is MODIFIED. Interest at the rate
by the courts a quo. 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
However, we are constrained to depart from the conclusion of the lower principal and interest remain unpaid thereafter, the interest shall be twelve
courts that upon the award of compensatory damages legal interest should percent (12%) per annum computed from the time judgment becomes final
be imposed beginning 22 July 1990, i.e. the date of the accident. Upon the and executory until it is fully satisfied.
provisions of Art. 2213 of the Civil Code, interest "cannot be recovered upon
unliquidated claims or damages, except when the demand can be established Costs against petitioners.
with reasonable certainty." It is axiomatic that if the suit were for damages, SO ORDERED.
G.R. No. L-9907 June 30, 1958 asked defendant if he could take him in his pick-up as there was then no other
means of transportation, to which defendant agreed, and in that same
LOURDES J. LARA, ET AL., plaintiffs-appellants, morning the pick-up left Parang bound for Davao taking along six passengers,
vs. including Lara.

BRIGIDO R. VALENCIA, defendant-appellant. The pick-up has a front seat where the driver and two passengers can be
accommodated and the back has a steel flooring enclosed with a steel walling
Castillo, Cervantes, Occeña, Lozano, Montana, Cunanan, Sison and Castillo of 16 to 17 inches tall on the sides and with a 19 inches tall walling at the
and Eligio G. Lagman for defendant-appellant. back. Before leaving Parang, the sitting arrangement was as follows:
Donato C. Endriga and Emigdio Dakanay for plaintiffs-appellants. defendant was at the wheel and seated with him in the front seat were Mrs.
Valencia and Nicanor Quinain; on the back of the pick-up were two
BAUTISTA ANGELO, J.: improvised benches placed on each side, and seated on the right bench were
Ricardo Alojipan and Antonio Lagahit, and on the left one Bernardo and
This is an action for damages brought by plaintiffs against defendant in the
Pastor Geronimo. A person by the name of Leoning was seated on a box
Court of First Instance of Davao for the death of one Demetrio Lara, Sr.
located on the left side while in the middle Lara sat on a bag. Before leaving
allegedly caused by the negligent act of defendant. Defendant denied the
Parang, defendant invited Lara to sit with him on the front seat but Lara
charge of negligence and set up certain affirmative defenses and a
declined. It was their understanding that upon reaching barrio Samoay,
counterclaim.
Cotabato, the passengers were to alight and take a bus bound for Davao, but
The court after hearing rendered judgment ordering defendant to pay the when they arrived at that place, only Bernardo alighted and the other
plaintiffs the following amount: (a) P10,000 as moral damages; (b) P3,000 as passengers requested defendant to allow them to ride with him up to Davao
exemplary damages; and (c) P1,000 as attorney's fees, in addition to the costs because there was then no available bus that they could take in going to that
of action. Both parties appealed to this Court because the damages claimed place. Defendant again accommodated the passengers.
in the complaint exceed the sum of P50,000.
When they continued their trip, the sitting arrangement of the passengers
In their appeal, plaintiffs claim that the court a quo erred in disregarding their remained the same, Lara being seated on a bag in the middle with his arms
claim of P41,400 as actual or compensatory damages and in awarding as on a suitcase and his head cove red by a jacket. Upon reaching Km. 96, barrio
attorneys' fees only the sum of P1,000 instead of P3,000 as agreed upon Catidtuan, Lara accidentally fell from the pick-up and as a result he suffered
between plaintiffs and their counsel. Defendant, on the other hand, disputes serious injuries. Valencia stopped the pick-up to see what happened to Lara.
the finding of the court a quo that the oath of Demetrio Lara, Sr. was due to He sought the help of the residents of that place and applied water to Lara
the negligence of defendant and the portion of the judgment which orders but to no avail. They brought Lara to the nearest place where they could find
dependant to pay to plaintiffs moral and exemplary damages as well as a doctor and not having found any they took him to St. Joseph's Clinic of
attorneys' fees, said defendant contending that the court should have Kidapawan. But when Lara arrived he was already dead. From there they
declared that the death of Lara was due to unavoidable accident. proceeded to Davao City and immediately notified the local authorities. An
investigation was made regarding the circumstances surrounding the death
The deceased was an inspector of the Bureau of Forestry stationed in Davao of Lara but no criminal action was taken against defendant.
with an annual salary of P1,800. The defendant is engaged in the business of
exporting logs from his lumber concession in Cotabato. Lara went to said It should be noted that the deceased went to the lumber concession of
concession upon instructions of his chief to classify the logs of defendant defendant in Parang, Cotabato upon instructions of his chief in order to
which were about to be loaded on a ship anchored in the port of Parang. The classify the logs of defendant which were then ready to be exported and to
work Lara of lasted for six days during which he contracted malaria fever. In be loaded on a ship anchored in the port of Parang. It took Lara six days to do
the morning of January 9, 1954, Lara who then in a hurry to return to Davao his work during which he contracted malaria fever and for that reason he
evinced a desire to return immediately to Davao. At that time, there was no Oficina de Montes, asalariado por el gobierno, no pagado por el demandado
available bus that could take him back to Davao and so he requested the para classificar los trozos exportados; debido a los trabajos de classificacion
defendant if he could take him in his own pick-up. Defendant agreed and, que duro 6 dias, en su ultimo dia Lara no durmio toda la noche, al dia
together with Lara, other passengers tagged along, most of them were siguiente, Lara fue atacado de malaria, tenia inflamada la cara y cuerpo, sufria
employees of the Government. Defendant merely accommodated them and dolores de cabeza con erupciones en la cara y cuerpo; que en la manana, del
did not charge them any fee for the service. It was also their understanding dia 2 de enero de 1954, fecha en que Lara salio de Davao para Parang, en
that upon reaching barrio Samoay, the passengers would alight and transfer aeroplano para clasificar los trozos del demandado, el automobil de este
to a bus that regularly makes the trip to Davao but unfortunately there was condujo a aquel al aerodromo de Davao.
none available at the time and so the same passengers, including Lara, again
requested the defendant to drive them to Davao. Defendant again xxx xxx xxx
accommodated them and upon reaching Km. 96, Lara accidentally fell El viaje de Cotabato a Davao no es menos de 8 horas, su carretera esta en
suffering fatal injuries. malas condiciones, desnivelada, con piedras salientes y baches, que hacen del
It therefore appears that the deceased, as well his companions who rode in vehiculo no estable en su marcha. Lara estaba enfermo de cierta gravedad,
the pick-up of defendant, were merely accommodation passengers who paid tenia el cuerpo y cara inflamados, atacado de malaria, con dolores de cabeza
nothing for the service and so they can be considered as invited guests within y con erupciones en la cara y cuerpo.
the meaning of the law. As accommodation passengers or invited guests, A la vista de estos hechos, el demandado debia de saber que era sumamente
defendant as owner and driver of the pick-up owes to them merely the duty peligroso llevar 5 pasajeros en la parte trasera del pick-up; particularmente,
to exercise reasonable care so that they may be transported safely to their para la salud de Lara; el permitirlo, el demandado no ha tomado las
destination. Thus, "The rule is established by the weight of authority that the precausiones, para evitar un posible accidente fatal. La negative de Lara de
owner or operator of an automobile owes the duty to an invited guest to ocupar el asiento delantero del pick-up no constituye a juicio del Juzgado una
exercise reasonable care in its operation, and not unreasonably to expose him defensa, pues el demendado conociendo el estado delicado de salud de Lara,
to danger and injury by increasing the hazard of travel. This rule, as frequently no debio de haber permitido que aquel regrese a Davao en su pick-up; si
stated by the courts, is that an owner of an automobile owes a guest the duty querria prestar a aquel un favor, debio de haver provisto a Lara de un
to exercise ordinary or reasonable care to avoid injuring him. Since one riding automobil para su regrese a Davao, ya que el demendado es un millionario;
in an automobile is no less a guest because he asked for the privilege of doing si no podia prestar a aquel este favor, debio de haver dejado a Lara en Samuay
so, the same obligation of care is imposed upon the driver as in the case of para coger aquel un camion de pasajero de Cotabato a Davao.
one expressly invited to ride" (5 Am. Jur., 626-627). Defendant, therefore, is
only required to observe ordinary care, and is not in duty bound to exercise Even if we admit as true the facts found by the trial court, still we find that
extraordinary diligence as required of a common carrier by our law (Articles the same are not sufficient to show that defendant has failed to take the
1755 and 1756, new Civil Code). precaution necessary to conduct his passengers safely to their place of
destination for there is nothing there to indicate that defendant has acted
The question that now arises is: Is there enough evidence to show that with negligence or without taking the precaution that an ordinary prudent
defendant failed to observe ordinary care or diligence in transporting the man would have taken under similar circumstances. It should be noted that
deceased from Parang to Davao on the date in question? Lara went to the lumber concession of defendant in answer to a call of duty
The trial court answered the question in the affirmative but in so doing it took which he was bound to perform because of the requirement of his office and
into account only the following facts: he contracted the malaria fever in the course of the performance of that duty.
It should also be noted that defendant was not in duty bound to take the
No debe perderse de vista el hecho, que los negocios de exportacion de deceased in his own pick-up to Davao because from Parang to Cotabato there
trozos del demandado tiene un volumen de P1,200. Lara era empleado de la was a line of transportation that regularly makes trips for the public, and if
defendant agreed to take the deceased in his own car, it was only to
accommodate him considering his feverish condition and his request that he
be so accommodated. It should also be noted that the passengers who rode
in the pick-up of defendant took their respective seats therein at their own
choice and not upon indication of defendant with the particularity that
defendant invited the deceased to sit with him in the front seat but which
invitation the deceased declined. The reason for this can only be attributed
to his desire to be at the back so that he could sit on a bag and travel in a
reclining position because such was more convenient for him due to his
feverish condition. All the circumstances therefore clearly indicate that
defendant had done what a reasonable prudent man would have done under
the circumstances.
There is every reason to believe that the unfortunate happening was only due
to an unforeseen accident accused by the fact that at the time the deceased
was half asleep and must have fallen from the pick-up when it ran into some
stones causing it to jerk considering that the road was then bumpy, rough and
full of stones.
The finding of the trial court that the pick-up was running at more than 40
kilometers per hour is not supported by the evidence. This is a mere surmise
made by the trial court considering the time the pick-up left barrio Samoay
and the time the accident occured in relation to the distance covered by the
pick-up. And even if this is correct, still we say that such speed is not
unreasonable considering that they were traveling on a national road and the
traffic then was not heavy. We may rather attribute the incident to lack of
care on the part of the deceased considering that the pick-up was open and
he was then in a crouching position. Indeed, the law provides that "A
passenger must observe the diligence of a good father of a family to avoid
injury to himself" (Article 1761, new Civil Code), which means that if the injury
to the passenger has been proximately caused by his own negligence, the
carrier cannot be held liable.
All things considered, we are persuaded to conclude that the accident
occurred not due to the negligence of defendant but to circumstances
beyond his control and so he should be exempt from liability.
Wherefore, the decision appealed from is reversed, without pronouncement
as to costs.
Paras, C. J., Bengzon, Reyes, A., Concepcion, Reyes, J. B. L., Endencia and Felix,
JJ., concur.
G.R. No. 162267 July 4, 2008 amounts. However, no payment was made. Thus, plaintiff-appellee filed the
instant case on March 13, 1991.3
PCI LEASING AND FINANCE, INC., petitioner,
PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it could
vs. not be held liable for the collision, since the driver of the truck, Gonzaga, was
UCPB GENERAL INSURANCE CO., INC., respondent. not its employee, but that of its co-defendant Superior Gas & Equitable Co.,
Inc. (SUGECO).4 In fact, it was SUGECO, and not petitioner, that was the
DECISION actual operator of the truck, pursuant to a Contract of Lease signed by
AUSTRIA-MARTINEZ, J.: petitioner and SUGECO.5 Petitioner, however, admitted that it was the owner
of the truck in question.6
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court, seeking a reversal of the Decision1 of the Court of Appeals After trial, the RTC rendered its Decision dated April 15, 1999,7 the dispositive
(CA) dated December 12, 2003 affirming with modification the Decision of the portion of which reads:
Regional Trial Court (RTC) of Makati City which ordered petitioner and Renato WHEREFORE, premises considered, judgment is hereby rendered in favor of
Gonzaga (Gonzaga) to pay, jointly and severally, respondent the amount of plaintiff UCPB General Insurance [respondent], ordering the defendants PCI
P244,500.00 plus interest; and the CA Resolution2 dated February 18, 2004 Leasing and Finance, Inc., [petitioner] and Renato Gonzaga, to pay jointly and
denying petitioner's Motion for Reconsideration. severally the former the following amounts: the principal amount of
The facts, as found by the CA, are undisputed: P244,500.00 with 12% interest as of the filing of this complaint until the same
is paid; P50,000.00 as attorney's fees; and P20,000.00 as costs of suit.
On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with Plate
Number PHD-206 owned by United Coconut Planters Bank was traversing the SO ORDERED.8
Laurel Highway, Barangay Balintawak, Lipa City. The car was insured with Aggrieved by the decision of the trial court, petitioner appealed to the CA.
plantiff-appellee [UCPB General Insurance Inc.], then driven by Flaviano Isaac
with Conrado Geronimo, the Asst. Manager of said bank, was hit and bumped In its Decision dated December 12, 2003, the CA affirmed the RTC's decision,
by an 18-wheeler Fuso Tanker Truck with Plate No. PJE-737 and Trailer Plate with certain modifications, as follows:
No. NVM-133, owned by defendants-appellants PCI Leasing & Finance, Inc. WHEREFORE, the appealed decision dated April 15, 1999 is hereby AFFIRMED
allegedly leased to and operated by defendant-appellant Superior Gas & with modification that the award of attorney's fees is hereby deleted and the
Equitable Co., Inc. (SUGECO) and driven by its employee, defendant appellant rate of interest shall be six percent (6%) per annum computed from the time
Renato Gonzaga. of the filing of the complaint in the trial court until the finality of the
The impact caused heavy damage to the Mitsubishi Lancer car resulting in an judgment. If the adjudged principal and the interest remain unpaid
explosion of the rear part of the car. The driver and passenger suffered thereafter, the interest rate shall be twelve percent (12%) per annum
physical injuries. However, the driver defendant-appellant Gonzaga computed from the time the judgment becomes final and executory until it is
continued on its [sic] way to its [sic] destination and did not bother to bring fully satisfied.
his victims to the hospital. SO ORDERED.9
Plaintiff-appellee paid the assured UCPB the amount of P244,500.00 Petitioner filed a Motion for Reconsideration which the CA denied in its
representing the insurance coverage of the damaged car. Resolution dated February 18, 2004.
As the 18-wheeler truck is registered under the name of PCI Leasing, repeated Hence, herein Petition for Review.
demands were made by plaintiff-appellee for the payment of the aforesaid
The issues raised by petitioner are purely legal: the vehicle upon any public highway (section 5 [a], Act No. 3992, as
amended.) The main aim of motor vehicle registration is to identify the owner
Whether petitioner, as registered owner of a motor vehicle that figured in a
so that if any accident happens, or that any damage or injury is caused by the
quasi-delict may be held liable, jointly and severally, with the driver thereof, vehicle on the public highways, responsibility therefor can be fixed on a
for the damages caused to third parties. definite individual, the registered owner. Instances are numerous where
Whether petitioner, as a financing company, is absolved from liability by the vehicles running on public highways caused accidents or injuries to
enactment of Republic Act (R.A.) No. 8556, or the Financing Company Act of pedestrians or other vehicles without positive identification of the owner or
1998. drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor
Anent the first issue, the CA found petitioner liable for the damage caused by vehicle registration is primarily ordained, in the interest of the determination
the collision since under the Public Service Act, if the property covered by a of persons responsible for damages or injuries caused on public highways.
franchise is transferred or leased to another without obtaining the requisite
approval, the transfer is not binding on the Public Service Commission and, in "'One of the principal purposes of motor vehicles legislation is identification
contemplation of law, the grantee continues to be responsible under the of the vehicle and of the operator, in case of accident; and another is that the
franchise in relation to the operation of the vehicle, such as damage or injury knowledge that means of detection are always available may act as a
to third parties due to collisions.10 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
Petitioner claims that the CA's reliance on the Public Service Act is misplaced, subordinate at the last to the primary purpose of rendering it certain that the
since the said law applies only to cases involving common carriers, or those violator of the law or of the rules of safety shall not escape because of lack of
which have franchises to operate as public utilities. In contrast, the case means to discover him.' The purpose of the statute is thwarted, and the
before this Court involves a private commercial vehicle for business use, displayed number becomes a 'snare and delusion,' if courts would entertain
which is not offered for service to the general public.11 such defenses as that put forward by appellee in this case. No responsible
Petitioner's contention has partial merit, as indeed, the vehicles involved in person or corporation could be held liable for the most outrageous acts of
the case at bar are not common carriers, which makes the Public Service Act negligence, if they should be allowed to place a 'middleman' between them
inapplicable. and the public, and escape liability by the manner in which they recompense
their servants." (King vs. Brenham Automobile Co., 145 S.W. 278, 279.)
However, the registered owner of the vehicle driven by a negligent driver may
still be held liable under applicable jurisprudence involving laws on With the above policy in mind, the question that defendant-appellant poses
compulsory motor vehicle registration and the liabilities of employers for is: should not the registered owner be allowed at the trial to prove who the
quasi-delicts under the Civil Code. actual and real owner is, and in accordance with such proof escape or evade
responsibility and lay the same on the person actually owning the vehicle?
The principle of holding the registered owner of a vehicle liable for quasi- We hold with the trial court that the law does not allow him to do so; the law,
delicts resulting from its use is well-established in jurisprudence. Erezo v. with its aim and policy in mind, does not relieve him directly of the
Jepte,12 with Justice Labrador as ponente, wisely explained the reason responsibility that the law fixes and places upon him as an incident or
behind this principle, thus: consequence of registration. Were a registered owner allowed to evade
responsibility by proving who the supposed transferee or owner is, it would
Registration is required not to make said registration the operative act by
be easy for him, by collusion with others or otherwise, to escape said
which ownership in vehicles is transferred, as in land registration cases,
responsibility and transfer the same to an indefinite person, or to one who
because the administrative proceeding of registration does not bear any
possesses no property with which to respond financially for the damage or
essential relation to the contract of sale between the parties (Chinchilla vs.
injury done. A victim of recklessness on the public highways is usually without
Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of
means to discover or identify the person actually causing the injury or
damage. He has no means other than by a recourse to the registration in the respect to the public and all third persons.17 In contemplation of law, the
Motor Vehicles Office to determine who is the owner. The protection that the registered owner of a motor vehicle is the employer of its driver, with the
law aims to extend to him would become illusory were the registered owner actual operator and employer, such as a lessee, being considered as merely
given the opportunity to escape liability by disproving his ownership. If the the owner's agent.18 This being the case, even if a sale has been executed
policy of the law is to be enforced and carried out, the registered owner before a tortious incident, the sale, if unregistered, has no effect as to the
should not be allowed to prove the contrary to the prejudice of the person right of the public and third persons to recover from the registered owner.19
injured, that is, to prove that a third person or another has become the The public has the right to conclusively presume that the registered owner is
owner, so that he may thereby be relieved of the responsibility to the injured the real owner, and may sue accordingly.20
person.
In the case now before the Court, there is not even a sale of the vehicle
The above policy and application of the law may appear quite harsh and involved, but a mere lease, which remained unregistered up to the time of
would seem to conflict with truth and justice. We do not think it is so. A the occurrence of the quasi-delict that gave rise to the case. Since a lease,
registered owner who has already sold or transferred a vehicle has the unlike a sale, does not even involve a transfer of title or ownership, but the
recourse to a third-party complaint, in the same action brought against him mere use or enjoyment of property, there is more reason, therefore, in this
to recover for the damage or injury done, against the vendee or transferee of instance to uphold the policy behind the law, which is to protect the unwitting
the vehicle. The inconvenience of the suit is no justification for relieving him public and provide it with a definite person to make accountable for losses or
of liability; said inconvenience is the price he pays for failure to comply with injuries suffered in vehicular accidents.21 This is and has always been the
the registration that the law demands and requires. rationale behind compulsory motor vehicle registration under the Land
Transportation and Traffic Code and similar laws, which, as early as Erezo, has
In synthesis, we hold that the registered owner, the defendant-appellant
been guiding the courts in their disposition of cases involving motor vehicular
herein, is primarily responsible for the damage caused to the vehicle of the incidents. It is also important to emphasize that such principles apply to all
plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified vehicles in general, not just those offered for public service or utility.22
by the real or actual owner of the amount that he may be required to pay as
damage for the injury caused to the plaintiff-appellant.13 The Court recognizes that the business of financing companies has a
legitimate and commendable purpose.23 In earlier cases, it considered a
The case is still good law and has been consistently cited in subsequent financial lease or financing lease a legal contract,24 though subject to the
cases.14 Thus, there is no good reason to depart from its tenets. restrictions of the so-called Recto Law or Articles 1484 and 1485 of the Civil
For damage or injuries arising out of negligence in the operation of a motor Code.25 In previous cases, the Court adopted the statutory definition of a
vehicle, the registered owner may be held civilly liable with the negligent financial lease or financing lease, as:
driver either 1) subsidiarily, if the aggrieved party seeks relief based on a [A] mode of extending credit through a non-cancelable lease contract under
delict or crime under Articles 100 and 103 of the Revised Penal Code; or 2) which the lessor purchases or acquires, at the instance of the lessee,
solidarily, if the complainant seeks relief based on a quasi-delict under machinery, equipment, motor vehicles, appliances, business and office
Articles 2176 and 2180 of the Civil Code. It is the option of the plaintiff machines, and other movable or immovable property in consideration of the
whether to waive completely the filing of the civil action, or institute it with periodic payment by the lessee of a fixed amount of money sufficient to
the criminal action, or file it separately or independently of a criminal amortize at least seventy (70%) of the purchase price or acquisition cost,
action;15 his only limitation is that he cannot recover damages twice for the including any incidental expenses and a margin of profit over an obligatory
same act or omission of the defendant.16 period of not less than two (2) years during which the lessee has the right to
In case a separate civil action is filed, the long-standing principle is that the hold and use the leased property, x x x but with no obligation or option on his
registered owner of a motor vehicle is primarily and directly responsible for part to purchase the leased property from the owner-lessor at the end of the
the consequences of its operation, including the negligence of the driver, with lease contract. 26
Petitioner presented a lengthy discussion of the purported trend in other recorded on the face of all outstanding copies of the certificates of
jurisdictions, which apparently tends to favor absolving financing companies registration of the vehicle concerned.
from liability for the consequences of quasi-delictual acts or omissions
involving financially leased property.27 The petition adds that these Cancellation or foreclosure of such mortgages, attachments, and other
developments have been legislated in our jurisdiction in Republic Act (R.A.) encumbrances shall likewise be recorded, and in the absence of such
No. 8556,28 which provides: cancellation, no certificate of registration shall be issued without the
corresponding notation of mortgage, attachment and/or other
Section 12. Liability of lessors. - Financing companies shall not be liable for encumbrances.
loss, damage or injury caused by a motor vehicle, aircraft, vessel, equipment,
machinery or other property leased to a third person or entity except when x x x x (Emphasis supplied)
the motor vehicle, aircraft, vessel, equipment or other property is operated Neither is there an implied repeal of R.A. No. 4136. As a rule, repeal by
by the financing company, its employees or agents at the time of the loss, implication is frowned upon, unless there is clear showing that the later
damage or injury.1avvphi1 statute is so irreconcilably inconsistent and repugnant to the existing law that
Petitioner's argument that the enactment of R.A. No. 8556, especially its they cannot be reconciled and made to stand together.29 There is nothing in
addition of the new Sec. 12 to the old law, is deemed to have absolved R.A. No. 4136 that is inconsistent and incapable of reconciliation.
petitioner from liability, fails to convince the Court. Thus, the rule remains the same: a sale, lease, or financial lease, for that
These developments, indeed, point to a seeming emancipation of financing matter, that is not registered with the Land Transportation Office, still does
companies from the obligation to compensate claimants for losses suffered not bind third persons who are aggrieved in tortious incidents, for the latter
from the operation of vehicles covered by their lease. Such, however, are not need only to rely on the public registration of a motor vehicle as conclusive
applicable to petitioner and do not exonerate it from liability in the present evidence of ownership.30 A lease such as the one involved in the instant case
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
The new law, R.A. No. 8556, notwithstanding developments in foreign avoided is the exacerbation of the suffering of victims of tragic vehicular
jurisdictions, do not supersede or repeal the law on compulsory motor vehicle accidents in not being able to identify a guilty party. A contrary ruling will not
registration. No part of the law expressly repeals Section 5(a) and (e) of R.A. serve the ends of justice. The failure to register a lease, sale, transfer or
No. 4136, as amended, otherwise known as the Land Transportation and encumbrance, should not benefit the parties responsible, to the prejudice of
Traffic Code, to wit: innocent victims.
Sec. 5. Compulsory registration of motor vehicles. - (a) All motor vehicles and The non-registration of the lease contract between petitioner and its lessee
trailer of any type used or operated on or upon any highway of the Philippines precludes the former from enjoying the benefits under Section 12 of R.A. No.
must be registered with the Bureau of Land Transportation (now the Land 8556.
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 This ruling may appear too severe and unpalatable to leasing and financing
with the provisions of this Act. companies, but the Court believes that petitioner and other companies so
situated are not entirely left without recourse. They may resort to third-party
xxxx 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
(e) Encumbrances of motor vehicles. - Mortgages, attachments, and other between petitioner and SUGECO to the effect that the latter shall indemnify
encumbrances of motor vehicles, in order to be valid against third parties and hold the former free and harmless from any "liabilities, damages, suits,
must be recorded in the Bureau (now the Land Transportation Office). claims or judgments" arising from the latter's use of the motor vehicle.32
Voluntary transactions or voluntary encumbrances shall likewise be properly
Whether petitioner would act against SUGECO based on this provision is its
own option.
The burden of registration of the lease contract is minuscule compared to the
chaos that may result if registered owners or operators of vehicles are freed
from such responsibility. Petitioner pays the price for its failure to obey the
law on compulsory registration of motor vehicles for registration is a pre-
requisite for any person to even enjoy the privilege of putting a vehicle on
public roads.
WHEREFORE, the petition is DENIED. The Decision dated December 12, 2003
and Resolution dated February 18, 2004 of the Court of Appeals are
AFFIRMED.
Costs against petitioner.

SO ORDERED.
Ynares-Santiago, Chairperson, Chico-Nazario, Nachura, Reyes, JJ., concur.
G.R. No. 158793 June 8, 2006 2. Previously, pursuant to its mandate under R.A. 2000, DPWH issued on June
25, 1998 Department Order (DO) No. 215 declaring the Manila-Cavite
JAMES MIRASOL, RICHARD SANTIAGO, and LUZON MOTORCYCLISTS
(Coastal Road) Toll Expressway as limited access facilities.
FEDERATION, INC., Petitioners,
3. Accordingly, petitioners filed an Amended Petition on February 8, 2001
vs. wherein petitioners sought the declaration of nullity of the aforesaid
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and TOLL REGULATORY administrative issuances. Moreover, petitioners prayed for the issuance of a
BOARD, Respondents. temporary restraining order and/or preliminary injunction to prevent the
enforcement of the total ban on motorcycles along the entire breadth of
DECISION North and South Luzon Expressways and the Manila-Cavite (Coastal Road)
CARPIO, J.: Toll Expressway under DO 215.

This petition for review on certiorari1 seeks to reverse the Decision dated 10 4. On June 28, 2001, the trial court, thru then Presiding Judge Teofilo Guadiz,
March 2003 of the Regional Trial Court, Branch 147, Makati City (RTC) in Civil after due hearing, issued an order granting petitioners’ application for
Case No. 01-034, as well as the RTC’s Order dated 16 June 2003 which denied preliminary injunction. On July 16, 2001, a writ of preliminary injunction was
petitioners’ Motion for Reconsideration. Petitioners assert that Department issued by the trial court, conditioned upon petitioners’ filing of cash bond in
of Public Works and Highways’ (DPWH) Department Order No. 74 (DO 74), the amount of P100,000.00, which petitioners subsequently complied with.
Department Order No. 215 (DO 215), and the Revised Rules and Regulations 5. On July 18, 2001, the DPWH acting thru the TRB, issued Department Order
on Limited Access Facilities of the Toll Regulatory Board (TRB) violate Republic No. 123 allowing motorcycles with engine displacement of 400 cubic
Act No. 2000 (RA 2000) or the Limited Access Highway Act. Petitioners also centimeters inside limited access facilities (toll ways).
seek to declare Department Order No. 123 (DO 123) and Administrative
Order No. 1 (AO 1)2 unconstitutional. 6. Upon the assumption of Honorable Presiding Judge Ma. Cristina Cornejo,
both the petitioners and respondents were required to file their respective
Antecedent Facts Memoranda. Petitioners likewise filed [their] Supplemental Memorandum.
The facts are not in dispute. As summarized by the Solicitor General, the facts Thereafter, the case was deemed submitted for decision.
are as follows: 7. Consequently, on March 10, 2003, the trial court issued the assailed
1. On January 10, 2001, petitioners filed before the trial court a Petition for decision dismissing the petition but declaring invalid DO 123. Petitioners
Declaratory Judgment with Application for Temporary Restraining Order and moved for a reconsideration of the dismissal of their petition; but it was
Injunction docketed as Civil Case No. 01-034. The petition sought the denied by the trial court in its Order dated June 16, 2003.3
declaration of nullity of the following administrative issuances for being Hence, this petition.
inconsistent with the provisions of Republic Act 2000, entitled "Limited
Access Highway Act" enacted in 1957: The RTC’s Ruling

a. DPWH Administrative Order No. 1, Series of 1968; The dispositive portion of the RTC’s Decision dated 10 March 2003 reads:

b. DPWH Department Order No. 74, Series of 1993; WHEREFORE, [t]he Petition is denied/dismissed insofar as petitioners seek to
declare null and void ab initio DPWH Department Order No. 74, Series of
c. Art. II, Sec. 3(a) of the Revised Rules on Limited Access Facilities 1993, Administrative Order No. 1, and Art. II, Sec. 3(a) of the Revised Rules on
promulgated in 199[8] by the DPWH thru the Toll Regulatory Board (TRB). Limited Access Facilities promulgated by the DPWH thru the TRB, the
presumed validity thereof not having been overcome; but the petition is
granted insofar as DPWH Department Order No. 123 is concerned, declaring two issuances unduly expanded the power of the DPWH in Section 4 of RA
the same to be invalid for being violative of the equal protection clause of the 2000 to regulate toll ways. Petitioners assert that the DPWH’s regulatory
Constitution. authority is limited to acts like redesigning curbings or central dividing
sections. They claim that the DPWH is only allowed to re-design the physical
SO ORDERED.4 structure of toll ways, and not to determine "who or what can be qualified as
The Issues toll way users."10

Petitioners seek a reversal and raise the following issues for resolution: Section 4 of RA 200011 reads:

1. WHETHER THE RTC’S DECISION IS ALREADY BARRED BY RES JUDICATA; SEC. 4. Design of limited access facility. — The Department of Public Works
and Communications is authorized to so design any limited access facility and
2. WHETHER DO 74, DO 215 AND THE TRB REGULATIONS CONTRAVENE RA to so regulate, restrict, or prohibit access as to best serve the traffic for which
2000; AND such facility is intended; and its determination of such design shall be final. In
3. WHETHER AO 1 AND DO 123 ARE UNCONSTITUTIONAL.5 this connection, it is authorized to divide and separate any limited access
facility into separate roadways by the construction of raised curbings, central
The Ruling of the Court dividing sections, or other physical separations, or by designating such
separate roadways by signs, markers, stripes, and the proper lane for such
The petition is partly meritorious.
traffic by appropriate signs, markers, stripes and other devices. No person,
Whether the RTC’s Decision Dismissing Petitioners’ Case is Barred by Res shall have any right of ingress or egress to, from or across limited access
Judicata facilities to or from abutting lands, except at such designated points at which
access may be permitted, upon such terms and conditions as may be specified
Petitioners rely on the RTC’s Order dated 28 June 2001, which granted their from time to time. (Emphasis supplied)
prayer for a writ of preliminary injunction. Since respondents did not appeal
from that Order, petitioners argue that the Order became "a final judgment" On 19 February 1968, Secretary Antonio V. Raquiza of the Department of
on the issues. Petitioners conclude that the RTC erred when it subsequently Public Works and Communications issued AO 1, which, among others,
dismissed their petition in its Decision dated 10 March 2003. prohibited motorcycles on limited access highways. The pertinent provisions
of AO 1 read:
Petitioners are mistaken. As the RTC correctly stated, the Order dated 28 June
2001 was not an adjudication on the merits of the case that would trigger res SUBJECT: Revised Rules and Regulations Governing Limited Access Highways
judicata. A preliminary injunction does not serve as a final determination of
By virtue of the authority granted the Secretary [of] Public Works and
the issues. It is a provisional remedy, which merely serves to preserve the
Communications under Section 3 of R.A. 2000, otherwise known as the
status quo until the court could hear the merits of the case.6 Thus, Section 9
Limited Access Highway Act, the following rules and regulations governing
of Rule 58 of the 1997 Rules of Civil Procedure requires the issuance of a final
limited access highways are hereby promulgated for the guidance of all
injunction to confirm the preliminary injunction should the court during trial
concerned:
determine that the acts complained of deserve to be permanently enjoined.
A preliminary injunction is a mere adjunct, an ancillary remedy which exists xxxx
only as an incident of the main proceeding.7
Section 3 – On limited access highways, it is unlawful for any person or group
Validity of DO 74, DO 215 and the TRB Regulations of persons to:
Petitioners claim that DO 74,8 DO 215,9 and the TRB’s Rules and Regulations xxxx
issued under them violate the provisions of RA 2000. They contend that the
(h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not This Order shall take effect immediately.13
motorized);
On 25 June 1998, then DPWH Secretary Gregorio R. Vigilar issued DO 215:
x x x x12 (Emphasis supplied)
SUBJECT: Declaration of the R-1 Expressway, from Seaside drive to Zapote, C-
On 5 April 1993, Acting Secretary Edmundo V. Mir of the Department of Public 5 Link Expressway, from Zapote to Noveleta, of the Manila Cavite Toll
Works and Highways issued DO 74: Expressway as Limited Access Facility.
SUBJECT: Declaration of the North Luzon Expressway from Balintawak to Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is
Tabang and the South Luzon Expressway from Nichols to Alabang as Limited defined as "a highway or street especially designed for through traffic, and
Access Facilities over, from, or to which owners or occupants of abutting land or other persons
have no right or easement or only a limited right or easement of access, light,
Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is air or view by reason of the fact that their property abuts upon such limited
defined as "a highway or street especially designed for through traffic, and access facility or for any other reason. Such highways or streets may be
over, from, or to which owners or occupants of abutting land or other persons parkways, from which trucks, buses, and other commercial vehicles shall be
have no right or easement or only a limited right or easement of access, light, excluded; or they may be free ways open to use by all customary forms of
air or view by reason of the fact that their proper[t]y abuts upon such limited street and highway traffic."
access facility or for any other reason. Such highways or streets may be
parkways, from which trucks, buses, and other commerical [sic] vehicles shall Section 3 of the same Act authorizes the Department of Public Works and
be excluded; or they may be free ways open to use by all customary forms of Communications (now Department of Public Works and Highways) "to plan,
street and highway traffic." designate, establish, regulate, vacate, alter, improve, maintain, and provide
limited access facilities for public use wherever it is of the opinion that traffic
Section 3 of the same Act authorizes the Department of Public Works and
conditions, present or future, will justify such special facilities."
Communications (now Department of Public Works and Highways) "to plan,
designate, establish, regulate, vacate, alter, improve, maintain, and provide Therefore, by virtue of the authority granted above, the Department of Public
limited access facilities for public use wherever it is of the opinion that traffic Works and Highways hereby designates and declares the R-1 Expressway, C-
conditions, present or future, will justify such special facilities." 5 Link Expressway and the R-1 Extension Expressway Sections of the Manila
Cavite Toll Expressway to be LIMITED ACCESS HIGHWAYS/FACILITIES subject
Therefore, by virtue of the authority granted above, the Department of Public to such rules and regulations that may be imposed by the DPWH thru the Toll
Works and Highways hereby designates and declares the Balintawak to Regulatory Board (TRB).
Tabang Sections of the North Luzon Expressway, and the Nichols to Alabang
Sections of the South Luzon Expressways, to be LIMITED ACCESS In view thereof, the National Capital Region (NCR) of this Department is
HIGHWAYS/FACILITIES subject to such rules and regulations that may be hereby ordered, after consultation with the TRB and in coordination with the
imposed by the DPWH thru the Toll Regulatory Board (TRB). Philippine National Police (PNP), to close all illegal openings along the said
Limited Access Highways/Facilities. In this connection, the NCR is instructed
In view thereof, the National Capital Region (NCR) of this Department is to organize its own enforcement and security group for the purpose of
hereby ordered, after consultation with the TRB and in coordination with the assuring the continued closure of the right-of-way fences and the
Philippine National Police (PNP), to close all illegal openings along the said implementation of the rules and regulations that may be imposed by the
Limited Access Highways/Facilities. In this connection, the NCR is instructed DPWH thru the TRB.
to organize its own enforcement and security group for the purpose of
assuring the continued closure of the right-of-way fences and the This Order shall take effect immediately.14
implementation of the rules and regulations that may be imposed by the
DPWH thru the TRB.
The RTC held that Section 4 of RA 2000 expressly authorized the DPWH to Highways is "responsible for developing and implementing programs on the
design limited access facilities and to regulate, restrict, or prohibit access as construction and maintenance of roads, bridges and airport runways."
to serve the traffic for which such facilities are intended. According to the
RTC, such authority to regulate, restrict, or prohibit logically includes the With the amendment of the 1973 Philippine Constitution in 1976, resulting in
determination of who and what can and cannot be permitted entry or access the shift in the form of government, national agencies were renamed from
into the limited access facilities. Thus, the RTC concluded that AO 1, DO 74, Departments to Ministries. Thus, the Department of Public Works,
and the Revised Rules and Regulations on Limited Access Facilities, which ban Transportation and Communications became the Ministry of Public Works,
motorcycles’ entry or access to the limited access facilities, are not Transportation and Communications.
inconsistent with RA 2000. On 23 July 1979, then President Ferdinand E. Marcos issued Executive Order
RA 2000, otherwise known as the Limited Access Highway Act, was approved No. 546 (EO 546), creating a Ministry of Public Works and a Ministry of
Transportation and Communications.17 Under Section 1 of EO 546, the
on 22 June 1957. Section 4 of RA 2000 provides that "[t]he Department of
Public Works and Communications is authorized to so design any limited Ministry of Public Works assumed the public works functions of the Ministry
access facility and to so regulate, restrict, or prohibit access as to best serve of Public Works, Transportation and Communications. The functions of the
the traffic for which such facility is intended." The RTC construed this Ministry of Public Works were the "construction, maintenance and repair of
authorization to regulate, restrict, or prohibit access to limited access port works, harbor facilities, lighthouses, navigational aids, shore protection
facilities to apply to the Department of Public Works and Highways (DPWH). works, airport buildings and associated facilities, public buildings and school
buildings, monuments and other related structures, as well as undertaking
The RTC’s ruling is based on a wrong premise. The RTC assumed that the harbor and river dredging works, reclamation of foreshore and swampland
DPWH derived its authority from its predecessor, the Department of Public areas, water supply, and flood control and drainage works."18
Works and Communications, which is expressly authorized to regulate,
restrict, or prohibit access to limited access facilities under Section 4 of RA On the other hand, the Ministry of Transportation and Communications
2000. However, such assumption fails to consider the evolution of the became the "primary policy, planning, programming, coordinating,
Department of Public Works and Communications. implementing, regulating and administrative entity of the executive branch
of the government in the promotion, development, and regulation of a
Under Act No. 2711, otherwise known as the Revised Administrative Code, dependable and coordinated network of transportation and communication
approved on 10 March 1917, there were only seven executive departments, systems."19 The functions of the Ministry of Transportation and
namely: the Department of the Interior, the Department of Finance, the Communications were:
Department of Justice, the Department of Agriculture and Commerce, the
Department of Public Works and Communications, the Department of Public a. Coordinate and supervise all activities of the Ministry relative to
Instruction, and the Department of Labor.15 On 20 June 1964, Republic Act transportation and communications;
No. 413616 created the Land Transportation Commission under the b. Formulate and recommend national policies and guidelines for the
Department of Public Works and Communications. Later, the Department of preparation and implementation of an integrated and comprehensive
Public Works and Communications was restructured into the Department of transportation and communications system at the national, regional and local
Public Works, Transportation and Communications. levels;
On 16 May 1974, Presidential Decree No. 458 (PD 458) separated the Bureau c. Establish and administer comprehensive and integrated programs for
of Public Highways from the Department of Public Works, Transportation and transportation and communication, and for this purpose, may call on any
Communications and created it as a department to be known as Department agency, corporation, or organization, whether government or private, whose
of Public Highways. Under Section 3 of PD 458, the Department of Public development programs include transportation and communications as an
integral part to participate and assist in the preparation and implementation preparation and implementation of an integrated and comprehensive
of such programs; transportation and communications systems at the national, regional, and
local levels; and (2) regulate, whenever necessary, activities relative to
d. Regulate, whenever necessary, activities relative to transportation and transportation and communications and prescribe and collect fees in the
communications and prescribe and collect fees in the exercise of such power; exercise of such power. Clearly, under EO 546, it is the DOTC, not the DPWH,
e. Assess, review and provide direction to transportation and which has authority to regulate, restrict, or prohibit access to limited access
communications research and development programs of the government in facilities.
coordination with other institutions concerned; and Even under Executive Order No. 125 (EO 125)24 and Executive Order No. 125-
f. Perform such other functions as may be necessary to carry into effect the A (EO 125-A),25 which further reorganized the DOTC, the authority to
provisions of this Executive Order.20 (Emphasis supplied) administer and enforce all laws, rules and regulations relative to
transportation is clearly with the DOTC.26
On 27 July 1981, then President Marcos issued Executive Order No. 710 (EO
710), which merged the Ministry of Public Works and the Ministry of Public Thus, DO 74 and DO 215 are void because the DPWH has no authority to
Highways for "greater simplicity and economy in operations."21 The declare certain expressways as limited access facilities. Under the law, it is
restructured agency became known as the Ministry of Public Works and the DOTC which is authorized to administer and enforce all laws, rules and
Highways. Under Section 1 of EO 710 the functions of the Ministry of Public regulations in the field of transportation and to regulate related activities.
Works and the Ministry of Public Highways22 were transferred to the Since the DPWH has no authority to regulate activities relative to
Ministry of Public Works and Highways. transportation, the TRB27 cannot derive its power from the DPWH to issue
Upon the ratification of the 1987 Constitution in February 1987, the former regulations governing limited access facilities. The DPWH cannot delegate a
Ministry of Public Works and Highways became the Department of Public power or function which it does not possess in the first place. Since DO 74
Works and Highways (DPWH) and the former Ministry of Transportation and and DO 215 are void, it follows that the rules implementing them are likewise
Communications became the Department of Transportation and void.
Communications (DOTC). Whether AO 1 and DO 123 are Unconstitutional
DPWH issued DO 74 and DO 215 declaring certain expressways as limited DPWH Secretary Simeon A. Datumanong issued DO 123 on 18 July 2001. DO
access facilities on 5 April 1993 and 25 June 1998, respectively. Later, the TRB, 123 reads in part:
under the DPWH, issued the Revised Rules and Regulations on Limited Access
Facilities. However, on 23 July 1979, long before these department orders SUBJECT: Revised Rules and Regulations Governing Limited Access Highways
and regulations were issued, the Ministry of Public Works, Transportation and
Communications was divided into two agencies – the Ministry of Public Works By virtue of the authority granted the Secretary of Public Works and Highways
and the Ministry of Transportation and Communications – by virtue of EO under Section 3 of R.A. 2000, otherwise known as the Limited Access Highway
546. The question is, which of these two agencies is now authorized to Act, the following revised rules and regulations governing limited access
regulate, restrict, or prohibit access to limited access facilities?23 highways are hereby promulgated for the guidance of all concerned:

Under Section 1 of EO 546, the Ministry of Public Works (now DPWH) 1. Administrative Order No. 1 dated February 19, 1968, issued by the
assumed the public works functions of the Ministry of Public Works, Secretary of the then Department of Public Works and Communications, is
Transportation and Communications. On the other hand, among the hereby amended by deleting the word "motorcycles" mentioned in Section
functions of the Ministry of Transportation and Communications (now 3(h) thereof. Therefore, motorcycles are hereby allowed to operate inside the
Department of Transportation and Communications [DOTC]) were to (1) toll roads and limited access highways, subject to the following:
formulate and recommend national policies and guidelines for the
a. Motorcycles shall have an engine displacement of at least 400 cubic Section 3 of RA 200029 authorized the issuance of the guidelines. In contrast,
centimeters (cc) provided that: DPWH issued DO 74, DO 215 and DO 123 after EO 546 devolved to the DOTC
the authority to regulate limited access highways.
x x x x28 (Emphasis supplied)
We now discuss the constitutionality of AO 1. Administrative issuances have
The RTC’s Decision dated 10 March 2003 declared DO 123 unconstitutional the force and effect of law.30 They benefit from the same presumption of
on the ground that it violates the equal protection clause by allowing only validity and constitutionality enjoyed by statutes.31 These two precepts place
motorcycles with at least 400 cubic centimeters engine displacement to use a heavy burden upon any party assailing governmental regulations. The
the toll ways. The RTC reasoned that the creation of a distinction within the burden of proving unconstitutionality rests on such party.32 The burden
class of motorcycles was not based on real differences. becomes heavier when the police power is at issue.
We need not pass upon the constitutionality of the classification of The use of public highways by motor vehicles is subject to regulation as an
motorcycles under DO 123. As previously discussed, the DPWH has no exercise of the police power of the state.33 The police power is far-reaching
authority to regulate limited access highways since EO 546 has devolved this in scope and is the "most essential, insistent and illimitable" of all government
function to the DOTC. Thus, DO 123 is void for want of authority of the DPWH powers.34 The tendency is to extend rather than to restrict the use of police
to promulgate it. power. The sole standard in measuring its exercise is reasonableness.35 What
On the other hand, the assailed portion of AO 1 states: is "reasonable" is not subject to exact definition or scientific formulation. No
all-embracing test of reasonableness exists,36 for its determination rests
Section 3. On limited access highways, it is unlawful for any person or group upon human judgment applied to the facts and circumstances of each
of persons to: particular case.37
xxxx We find that AO 1 does not impose unreasonable restrictions. It merely
(h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not outlines several precautionary measures, to which toll way users must
motorized); adhere. These rules were designed to ensure public safety and the
uninhibited flow of traffic within limited access facilities. They cover several
xxxx subjects, from what lanes should be used by a certain vehicle, to maximum
vehicle height. The prohibition of certain types of vehicles is but one of these.
Petitioners assail the DPWH’s failure to provide "scientific" and "objective"
None of these rules violates reason. The purpose of these rules and the logic
data on the danger of having motorcycles plying our highways. They attack
behind them are quite evident. A toll way is not an ordinary road. The special
this exercise of police power as baseless and unwarranted. Petitioners
purpose for which a toll way is constructed necessitates the imposition of
belabor the fact that there are studies that provide proof that motorcycles
guidelines in the manner of its use and operation. Inevitably, such rules will
are safe modes of transport. They also claim that AO 1 introduces an
restrict certain rights. But the mere fact that certain rights are restricted does
unreasonable classification by singling-out motorcycles from other motorized
not invalidate the rules.
modes of transport. Finally, petitioners argue that AO 1 violates their right to
travel. Consider Section 3(g) of AO 1, which prohibits the conduct of rallies inside toll
ways.38 The regulation affects the right to peaceably assemble. The exercise
Petitioners’ arguments do not convince us.
of police power involves restriction, restriction being implicit in the power
We emphasize that the Secretary of the Department of Public Works and itself. Thus, the test of constitutionality of a police power measure is limited
Communications issued AO 1 on 19 February 1968. to an inquiry on whether the restriction imposed on constitutional rights is
reasonable, and not whether it imposes a restriction on those rights.
None of the rules outlined in AO 1 strikes us as arbitrary and capricious. The government will be able to act in situations demanding the exercise of its
DPWH, through the Solicitor General, maintains that the toll ways were not residual powers because it will be tied up conducting studies.
designed to accommodate motorcycles and that their presence in the toll
ways will compromise safety and traffic considerations. The DPWH points out A police power measure may be assailed upon proof that it unduly violates
that the same study the petitioners rely on cites that the inability of other constitutional limitations like due process and equal protection of the law.43
drivers to detect motorcycles is the predominant cause of accidents.39 Petitioners’ attempt to seek redress from the motorcycle ban under the aegis
Arguably, prohibiting the use of motorcycles in toll ways may not be the of equal protection must fail. Petitioners’ contention that AO 1 unreasonably
"best" measure to ensure the safety and comfort of those who ply the toll singles out motorcycles is specious. To begin with, classification by itself is not
ways. prohibited.44

However, the means by which the government chooses to act is not judged A classification can only be assailed if it is deemed invidious, that is, it is not
based on real or substantial differences. As explained by Chief Justice
in terms of what is "best," rather, on simply whether the act is reasonable.
The validity of a police power measure does not depend upon the absolute Fernando in Bautista v. Juinio:45
assurance that the purpose desired can in fact be probably fully x x x To assure that the general welfare be promoted, which is the end of law,
accomplished, or upon the certainty that it will best serve the purpose a regulatory measure may cut into the rights to liberty and property. Those
intended.40 Reason, not scientific exactitude, is the measure of the validity adversely affected may under such circumstances invoked the equal
of the governmental regulation. Arguments based on what is "best" are protection clause only if they can show that the governmental act assailed,
arguments reserved for the Legislature’s discussion. Judicial intervention in far from being inspired by the attainment of the common weal was prompted
such matters will only be warranted if the assailed regulation is patently by the spirit of hostility, or at the very least, discrimination that finds no
whimsical. We do not find the situation in this case to be so. support in reason. It suffices then that the laws operate equally and uniformly
Neither do we find AO 1 oppressive. Petitioners are not being deprived of on all persons under similar circumstances or that all persons must be treated
their right to use the limited access facility. They are merely being required, in the same manner, the conditions not being different, both in the privileges
just like the rest of the public, to adhere to the rules on how to use the facility. conferred and the liabilities imposed. Favoritism and undue preference
AO 1 does not infringe upon petitioners’ right to travel but merely bars cannot be allowed. For the principle is that equal protection and security shall
motorcycles, bicycles, tricycles, pedicabs, and any non- be given to every person under circumstances, which if not identical is
analogous. If law be looked upon in terms of burden or charges, those that
motorized vehicles as the mode of traveling along limited access highways.41 fall within a class should be treated in the same fashion, whatever restrictions
Several cheap, accessible and practical alternative modes of transport are cast on some in the group equally binding the rest.
open to petitioners. There is nothing oppressive in being required to take a
bus or drive a car instead of one’s scooter, bicycle, calesa, or motorcycle upon We find that it is neither warranted nor reasonable for petitioners to say that
using a toll way. the only justifiable classification among modes of transport is the motorized
against the non-motorized. Not all motorized vehicles are created equal. A
Petitioners’ reliance on the studies they gathered is misplaced. Police power 16-wheeler truck is substantially different from other light vehicles. The first
does not rely upon the existence of definitive studies to support its use. may be denied access to some roads where the latter are free to drive. Old
Indeed, no requirement exists that the exercise of police power must first be vehicles may be reasonably differentiated from newer models.46 We find
conclusively justified by research. The yardstick has always been simply that real and substantial differences exist between a motorcycle and other
whether the government’s act is reasonable and not oppressive.42 The use forms of transport sufficient to justify its classification among those
of "reason" in this sense is simply meant to guard against arbitrary and prohibited from plying the toll ways. Amongst all types of motorized
capricious government action. Scientific certainty and conclusiveness, though transport, it is obvious, even to a child, that a motorcycle is quite different
desirable, may not be demanded in every situation. Otherwise, no from a car, a bus or a truck. The most obvious and troubling difference would
be that a two-wheeled vehicle is less stable and more easily overturned than registered with that office entitle them to use all kinds of roads in the country.
a four-wheeled vehicle. Again, petitioners are mistaken. There exists no absolute right to drive. On
the contrary, this privilege, is heavily regulated. Only a qualified group is
A classification based on practical convenience and common knowledge is allowed to drive motor vehicles: those who pass the tests administered by
not unconstitutional simply because it may lack purely theoretical or scientific the LTO. A driver’s license issued by the LTO merely allows one to drive a
uniformity. Moreover, we take note that the Philippines is home to a host of particular mode of transport. It is not a license to drive or operate any form
unique motorized modes of transport ranging from modified hand-carts of transportation on any type of road. Vehicle registration in the LTO on the
(kuliglig) to bicycle "sidecars" outfitted with a motor. To follow petitioners’ other hand merely signifies the roadworthiness of a vehicle. This does not
argument to its logical conclusion would open up toll ways to all these preclude the government from prescribing which roads are accessible to
contraptions. Both safety and traffic considerations militate against any ruling certain vehicles.
that would bring about such a nightmare.
WHEREFORE, we PARTLY GRANT the petition. We MODIFY the Decision dated
Petitioners complain that the prohibition on the use of motorcycles in toll 10 March 2003 of the Regional Trial Court, Branch 147, Makati City and its
ways unduly deprive them of their right to travel. Order dated 16 June 2003 in Civil Case No. 01-034. We declare VOID
We are not persuaded. Department Order Nos. 74, 215, and 123 of the Department of Public Works
and Highways, and the Revised Rules and Regulations on Limited Access
A toll way is not an ordinary road. As a facility designed to promote the fastest Facilities of the Toll Regulatory Board. We declare VALID Administrative Order
access to certain destinations, its use, operation, and maintenance require No. 1 of the Department of Public Works and Communications.
close regulation. Public interest and safety require the imposition of certain
restrictions on toll ways that do not apply to ordinary roads. As a special kind SO ORDERED.
of road, it is but reasonable that not all forms of transport could use it.
The right to travel does not mean the right to choose any vehicle in traversing
a toll way. The right to travel refers to the right to move from one place to
another. Petitioners can traverse the toll way any time they choose using
private or public four-wheeled vehicles. Petitioners are not denied the right
to move from Point A to Point B along the toll way. Petitioners are free to
access the toll way, much as the rest of the public can. The mode by which
petitioners wish to travel pertains to the manner of using the toll way, a
subject that can be validly limited by regulation.
Petitioners themselves admit that alternative routes are available to them.
Their complaint is that these routes are not the safest and most convenient.
Even if their claim is true, it hardly qualifies as an undue curtailment of their
freedom of movement and travel. The right to travel does not entitle a person
to the best form of transport or to the most convenient route to his
destination. The obstructions found in normal streets, which petitioners
complain of (i.e., potholes, manholes, construction barriers, etc.), are not
suffered by them alone.
Finally, petitioners assert that their possession of a driver’s license from the
Land Transportation Office (LTO) and the fact that their vehicles are
G.R. No. L-24219 June 13, 1968 Filipinas Orient Airways, Inc., (FAIRWAYS) having presented to the Board
evidence showing prima facie its fitness, willingness and ability to operate the
PHILIPPINE AIR LINES, INC., petitioner, services applied for and the public need for more air transportation service,
vs. and to encourage and develop commercial air transportation, RESOLVED, to
grant, as the Board hereby grants, the said Filipinas Orient Airways, Inc.,
CIVIL AERONAUTICS BOARD, and FILIPINAS ORIENT AIRWAYS, INC., provisional authority to operate scheduled and non-scheduled domestic air
respondents. services with the use of DC-3 aircraft, subject to the following conditions;
Crispin D. Baizas, Edgardo Diaz de Rivera and Cenon S. Cervantes, Jr. for 1. The term of the provisional authority herein granted shall be until such
petitioner. time as the main application for a certificate of public convenience and
Office of the Solicitor General for respondent Civil Aeronautics Board. necessity is finally decided or for such period as the Board may at any time
determine;
Honorio Poblador and Ramon A. Pedrosa for respondent Filipinas Orient
Airways, Inc. xxx xxx xxx

CONCEPCION, C.J.: A reconsideration of this resolution having been denied, PAL filed the present
civil action alleging that, in issuing said resolution, CAB had acted illegally and
Original petition for certiorari, to set aside and annul a resolution of the Civil in excess of its jurisdiction or with grave abuse of discretion, because:
Aeronautics Board — hereinafter referred to as CAB — granting respondent
Filipinas Orient Airways Inc. — hereinafter referred to as Fairways — (1) CAB is not empowered to grant any provisional authority to operate, prior
"provisional authority to operate scheduled and non-scheduled domestic air to the submission for decision of the main application for a certificate of
services with the use of DC-3 aircrafts", subject to specified conditions. public convenience and necessity;

Pursuant to Republic Act No. 4147, granting thereto "a franchise to establish, (2) CAB had no evidence before it that could have justified the granting of the
operate and maintain transport services for the carriage of passengers, mail, provisional authority complained of;
industrial flights and cargo by air in and between any and all points and places (3) PAL was denied due process when CAB granted said authority before the
throughout the Philippines and other countries", on September 16, 1964, presentation of its evidence on Fairway's main application; and
Fairways filed with CAB the corresponding application for a "certificate of
public convenience and necessity", which was Docketed as economic (4) In granting said provisional authority, the CAB had prejudged the merits
proceedings (EP) No. 625, and was objected to by herein petitioner, Philippine of said application.
Air Lines, Inc., hereinafter referred to as PAL. Subsequently, a CAB hearing The first ground is devoid of merit. Section 10-C(1) of Republic Act No. 776,
officer began to receive evidence on said application. After several hearings reading:
before said officer, or on December 14, 1964, Fairways filed an "urgent
petition for provisional authority to operate" under a detailed "program of (C) The Board shall have the following specific powers and duties:
implementation" attached to said petition, and for the approval of its bond
therefor, as well as the provisional approval of its "tariff regulations and the (1) In accordance with the provisions of Chapter IV of this Act, to issue, deny,
conditions of carriage to be printed at the back of the passenger tickets." amend, revise, alter, modify, cancel suspend or revoke, in whole or in part,
Despite PAL's opposition thereto, in a resolution issued on January 5, 1965, upon petitioner complaint, or upon its own initiative, any temporary
CAB granted said urgent petition of Fairways. The pertinent part of said operating permit or Certificate of Public Convenience and Necessity;
resolution provides: Provided, however, That in the case of foreign air carriers, the permit shall be
issued with the approval of the President of the Republic of the Philippines....
explicitly authorizes CAB to issue a "temporary operating permit," and has not satisfactorily shown that the aforementioned findings of the CAB are
nothing contained, either in said section, or in Chapter IV of Republic Act No. lacking in the necessary evidentiary support.
776, negates the power to issue said "permit", before the completion of the
applicant's evidence and that of the oppositor thereto on the main petition. Needless to say, the case of Ang Tibay vs. C.I.R.5 on which petitioner relies, is
Indeed, the CAB's authority to grant a temporary permit "upon its own not in point. Said case refers to the conditions essential to a valid decision on
initiative," strongly suggests the power to exercise said authority, even before the merits, from the viewpoint of due process, whereas, in the case at bar,
the presentation of said evidence has begun. we are concerned with an interlocutory order prior to the rendition of said
decision. In fact, interlocutory orders may sometimes be issued ex parte,
Moreover, we perceive no cogent reason to depart, in connection with the particularly, in administrative proceedings, without previous notice and
commercial air transport service, from the policy of our public service law, hearing, consistently with due process.6 Again, the constitutional provision
which sanctions the issuance of temporary or provisional permits or to the effect that "no decision shall be rendered by any court of record
certificates of public convenience and necessity, before the submission of a without expressing therein clearly and distinctly the facts and the law on
case for decision on the merits.1 The overriding considerations in both which it is based",7 applies, not to such interlocutory orders, but to the
instances are the same, namely, that the service be required by public determination of the case on the merits.8
convenience and necessity, and, that the applicant is fit, as well as willing and
able to render such service properly, in conformity with law and the pertinent Lastly, the provisional nature of the permit granted to Fairways refutes the
rules, regulations and requirements.2 assertion that it prejudges the merits of Fairways' application and PAL's
opposition thereto. As stated in the questioned order, CAB's findings therein
As regards PAL's second contention, we have no more than PAL's assertion made reflect its view merely on the prima facie effect of the evidence so far
and conclusion regarding the absence of substantial evidence in support of introduced and do not connote a pronouncement or an advanced expression
the finding, in the order complained of, to the effect that Fairways' evidence of opinion on the merits of the case.
had established " prima facie its fitness, willingness and ability to operate the
services applied for and the public need for more transportation service ...". WHEREFORE, the petition herein should be, as it is hereby, dismissed, and the
Apart from PAL's assertion being contradicted by the tenor of said order, writ prayed for, denied, with costs against petitioner Philippine Air Lines, Inc.
there is the legal presumption that official duty has been duly performed. It is so ordered.

Such presumption is particularly strong as regards administrative agencies,


like the CAB, vested with powers said to be quasi-judicial in nature, in
connection with the enforcement of laws affecting particular fields of activity,
the proper regulation and/or promotion of which requires a technical or
special training, aside from a good knowledge and grasp of the overall
conditions, relevant to said field, obtaining in the nation.3 The consequent
policy and practice underlying our Administrative Law is that courts of justice
should respect the findings of fact of said administrative agencies, unless
there is absolutely no evidence in support thereof or such evidence is clearly,
manifestly and patently insubstantial.4 This, in turn, is but a recognition of
the necessity of permitting the executive department to adjust law
enforcement to changing conditions, without being unduly hampered by the
rigidity and the delays often attending ordinary court proceedings or the
enactment of new or amendatory legislations. In the case at bar, petitioner
G.R. No. L-47822 December 22, 1988 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.
PEDRO DE GUZMAN, petitioner,
In his Answer, private respondent denied that he was a common carrier and
vs. argued that he could not be held responsible for the value of the lost goods,
COURT OF APPEALS and ERNESTO CENDANA, respondents. such loss having been due to force majeure.

Vicente D. Millora for petitioner. On 10 December 1975, the trial court rendered a Decision 1 finding private
respondent to be a common carrier and holding him liable for the value of
Jacinto Callanta for private respondent. the undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and
P 2,000.00 as attorney's fees.

FELICIANO, J.: On appeal before the Court of Appeals, respondent urged that the trial court
had erred in considering him a common carrier; in finding that he had
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used habitually offered trucking services to the public; in not exempting him from
bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities liability on the ground of force majeure; and in ordering him to pay damages
of such scrap material, respondent would bring such material to Manila for and attorney's fees.
resale. He utilized two (2) six-wheeler trucks which he owned for hauling the
material to Manila. On the return trip to Pangasinan, respondent would load The Court of Appeals reversed the judgment of the trial court and held that
his vehicles with cargo which various merchants wanted delivered to differing respondent had been engaged in transporting return loads of freight "as a
establishments in Pangasinan. For that service, respondent charged freight casual
rates which were commonly lower than regular commercial rates. occupation — a sideline to his scrap iron business" and not as a common
Sometime in November 1970, petitioner Pedro de Guzman a merchant and carrier. Petitioner came to this Court by way of a Petition for Review assigning
authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta, as errors the following conclusions of the Court of Appeals:
Pangasinan, contracted with respondent for the hauling of 750 cartons of 1. that private respondent was not a common carrier;
Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to
petitioner's establishment in Urdaneta on or before 4 December 1970. 2. that the hijacking of respondent's truck was force majeure; and
Accordingly, on 1 December 1970, respondent loaded in Makati the 3. that respondent was not liable for the value of the undelivered cargo.
merchandise on to his trucks: 150 cartons were loaded on a truck driven by (Rollo, p. 111)
respondent himself, while 600 cartons were placed on board the other truck
which was driven by Manuel Estrada, respondent's driver and employee. We consider first the issue of whether or not private respondent Ernesto
Cendana may, under the facts earlier set forth, be properly characterized as
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other a common carrier.
600 boxes never reached petitioner, since the truck which carried these boxes
was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by The Civil Code defines "common carriers" in the following terms:
armed men who took with them the truck, its driver, his helper and the cargo.
Article 1732. Common carriers are persons, corporations, firms or
On 6 January 1971, petitioner commenced action against private respondent associations engaged in the business of carrying or transporting passengers
in the Court of First Instance of Pangasinan, demanding payment of P or goods or both, by land, water, or air for compensation, offering their
22,150.00, the claimed value of the lost merchandise, plus damages and services to the public.
attorney's fees. Petitioner argued that private respondent, being a common
The above article makes no distinction between one whose principal business customers a fee for hauling their goods; that fee frequently fell below
activity is the carrying of persons or goods or both, and one who does such commercial freight rates is not relevant here.
carrying only as an ancillary activity (in local Idiom as "a sideline"). Article
1732 also carefully avoids making any distinction between a person or The Court of Appeals referred to the fact that private respondent held no
enterprise offering transportation service on a regular or scheduled basis and certificate of public convenience, and concluded he was not a common
one offering such service on an occasional, episodic or unscheduled basis. carrier. This is palpable error. A certificate of public convenience is not a
Neither does Article 1732 distinguish between a carrier offering its services requisite for the incurring of liability under the Civil Code provisions governing
to the "general public," i.e., the general community or population, and one common carriers. That liability arises the moment a person or firm acts as a
who offers services or solicits business only from a narrow segment of the common carrier, without regard to whether or not such carrier has also
general population. We think that Article 1733 deliberaom making such complied with the requirements of the applicable regulatory statute and
distinctions. implementing regulations and has been granted a certificate of public
convenience or other franchise. To exempt private respondent from the
So understood, the concept of "common carrier" under Article 1732 may be liabilities of a common carrier because he has not secured the necessary
seen to coincide neatly with the notion of "public service," under the Public certificate of public convenience, would be offensive to sound public policy;
Service Act (Commonwealth Act No. 1416, as amended) which at least that would be to reward private respondent precisely for failing to comply
partially supplements the law on common carriers set forth in the Civil Code. with applicable statutory requirements. The business of a common carrier
Under Section 13, paragraph (b) of the Public Service Act, "public service" impinges directly and intimately upon the safety and well being and property
includes: of those members of the general community who happen to deal with such
carrier. The law imposes duties and liabilities upon common carriers for the
... every person that now or hereafter may own, operate, manage, or control
safety and protection of those who utilize their services and the law cannot
in the Philippines, for hire or compensation, with general or limited clientele, allow a common carrier to render such duties and liabilities merely facultative
whether permanent, occasional or accidental, and done for general business by simply failing to obtain the necessary permits and authorizations.
purposes, any common carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger, or both, with or We turn then to the liability of private respondent as a common carrier.
without fixed route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship line, pontines, Common carriers, "by the nature of their business and for reasons of public
ferries and water craft, engaged in the transportation of passengers or freight policy" 2 are held to a very high degree of care and diligence ("extraordinary
or both, shipyard, marine repair shop, wharf or dock, ice plant, diligence") in the carriage of goods as well as of passengers. The specific
import of extraordinary diligence in the care of goods transported by a
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and common carrier is, according to Article 1733, "further expressed in Articles
power, water supply and power petroleum, sewerage system, wire or 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.
wireless communications systems, wire or wireless broadcasting stations and
other similar public services. ... (Emphasis supplied) Article 1734 establishes the general rule that common carriers are
responsible for the loss, destruction or deterioration of the goods which they
It appears to the Court that private respondent is properly characterized as a carry, "unless the same is due to any of the following causes only:
common carrier even though he merely "back-hauled" goods for other
merchants from Manila to Pangasinan, although such back-hauling was done (1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
on a periodic or occasional rather than regular or scheduled manner, and (2) Act of the public enemy in war, whether international or civil;
even though private respondent's principal occupation was not the carriage
of goods for others. There is no dispute that private respondent charged his (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; 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745
and provides in relevant part:
(5) Order or act of competent public authority. Any of the following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy:
It is important to point out that the above list of causes of loss, destruction or
deterioration which exempt the common carrier for responsibility therefor, xxx xxx xxx
is a closed list. Causes falling outside the foregoing list, even if they appear to
constitute a species of force majeure fall within the scope of Article 1735, (5) that the common carrier shall not be responsible for the acts or omissions
which provides as follows: of his or its employees;

In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the (6) that the common carrier's liability for acts committed by thieves, or of
preceding article, if the goods are lost, destroyed or deteriorated, common robbers who do not act with grave or irresistible threat, violence or force, is
carriers are presumed to have been at fault or to have acted negligently, dispensed with or diminished; and
unless they prove that they observed extraordinary diligence as required in (7) that the common carrier shall not responsible for the loss, destruction or
Article 1733. (Emphasis supplied) deterioration of goods on account of the defective condition of the car
Applying the above-quoted Articles 1734 and 1735, we note firstly that the vehicle, ship, airplane or other equipment used in the contract of carriage.
specific cause alleged in the instant case — the hijacking of the carrier's truck (Emphasis supplied)
— does not fall within any of the five (5) categories of exempting causes listed Under Article 1745 (6) above, a common carrier is held responsible — and will
in Article 1734. It would follow, therefore, that the hijacking of the carrier's not be allowed to divest or to diminish such responsibility — even for acts of
vehicle must be dealt with under the provisions of Article 1735, in other strangers like thieves or robbers, except where such thieves or robbers in fact
words, that the private respondent as common carrier is presumed to have acted "with grave or irresistible threat, violence or force." We believe and so
been at fault or to have acted negligently. This presumption, however, may hold that the limits of the duty of extraordinary diligence in the vigilance over
be overthrown by proof of extraordinary diligence on the part of private the goods carried are reached where the goods are lost as a result of a
respondent. robbery which is attended by "grave or irresistible threat, violence or force."
Petitioner insists that private respondent had not observed extraordinary In the instant case, armed men held up the second truck owned by private
diligence in the care of petitioner's goods. Petitioner argues that in the respondent which carried petitioner's cargo. The record shows that an
circumstances of this case, private respondent should have hired a security information for robbery in band was filed in the Court of First Instance of
guard presumably to ride with the truck carrying the 600 cartons of Liberty Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines
filled milk. We do not believe, however, that in the instant case, the standard v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one
of extraordinary diligence required private respondent to retain a security John Doe." There, the accused were charged with willfully and unlawfully
guard to ride with the truck and to engage brigands in a firelight at the risk of taking and carrying away with them the second truck, driven by Manuel
his own life and the lives of the driver and his helper. Estrada and loaded with the 600 cartons of Liberty filled milk destined for
The precise issue that we address here relates to the specific requirements of delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial
the duty of extraordinary diligence in the vigilance over the goods carried in court shows that the accused acted with grave, if not irresistible, threat,
the specific context of hijacking or armed robbery. 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
As noted earlier, the duty of extraordinary diligence in the vigilance over kidnapped the driver and his helper, detaining them for several days and later
goods is, under Article 1733, given additional specification not only by Articles releasing them in another province (in Zambales). The hijacked truck was
subsequently found by the police in Quezon City. The Court of First Instance
convicted all the accused of robbery, though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must
reasonably be regarded as quite beyond the control of the common carrier
and properly regarded as a fortuitous event. It is necessary to recall that even
common carriers are not made absolute insurers against all risks of travel and
of transport of goods, and are not held liable for acts or events which cannot
be foreseen or are inevitable, provided that they shall have complied with the
rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that
private respondent Cendana is not liable for the value of the undelivered
merchandise which was lost because of an event entirely beyond private
respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the
Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
G.R. No. 101089. April 7, 1993. with writ of preliminary attachment 4 for breach of a contract of carriage. The
prayer for a Writ of Preliminary Attachment was supported by an affidavit 5
ESTRELLITA M. BASCOS, petitioners, which contained the following allegations:
vs. "4. That this action is one of those specifically mentioned in Sec. 1, Rule 57
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents. the Rules of Court, whereby a writ of preliminary attachment may lawfully
issue, namely:
Modesto S. Bascos for petitioner.
"(e) in an action against a party who has removed or disposed of his property,
Pelaez, Adriano & Gregorio for private respondent. or is about to do so, with intent to defraud his creditors;"
DECISION 5. That there is no sufficient security for the claim sought to be enforced by
CAMPOS, JR., J p: the present action;

This is a petition for review on certiorari of the decision ** of the Court of 6. That the amount due to the plaintiff in the above-entitled case is above all
Appeals in "RODOLFO A. CIPRIANO, doing business under the name CIPRIANO legal counterclaims;"
TRADING ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing The trial court granted the writ of preliminary attachment on February 17,
business under the name of BASCOS TRUCKING, defendant-appellant," C.A.- 1987.
G.R. CV No. 25216, the dispositive portion of which is quoted hereunder:
In her answer, petitioner interposed the following defenses: that there was
"PREMISES considered, We find no reversible error in the decision appealed no contract of carriage since CIPTRADE leased her cargo truck to load the
from, which is hereby affirmed in toto. Costs against appellant." 1 cargo from Manila Port Area to Laguna; that CIPTRADE was liable to petitioner
The facts, as gathered by this Court, are as follows: in the amount of P11,000.00 for loading the cargo; that the truck carrying the
cargo was hijacked along Canonigo St., Paco, Manila on the night of October
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for 21, 1988; that the hijacking was immediately reported to CIPTRADE and that
short) entered into a hauling contract 2 with Jibfair Shipping Agency petitioner and the police exerted all efforts to locate the hijacked properties;
Corporation whereby the former bound itself to haul the latter's 2,000 that after preliminary investigation, an information for robbery and
m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the carnapping were filed against Jose Opriano, et al.; and that hijacking, being a
warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its force majeure, exculpated petitioner from any liability to CIPTRADE.
obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita
Bascos (petitioner) to transport and to deliver 400 sacks of soya bean meal After trial, the trial court rendered a decision *** the dispositive portion of
worth P156,404.00 from the Manila Port Area to Calamba, Laguna at the rate which reads as follows:
of P50.00 per metric ton. Petitioner failed to deliver the said cargo. As a "WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount defendant ordering the latter to pay the former:
of the lost goods in accordance with the contract which stated that:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to FOUR PESOS (P156,404.00) as an (sic) for actual damages with legal interest
theft, hijacking and non-delivery or damages to the cargo during transport at of 12% per cent per annum to be counted from December 4, 1986 until fully
market value, . . ." 3 paid;
Cipriano demanded reimbursement from petitioner but the latter refused to 2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's
pay. Eventually, Cipriano filed a complaint for a sum of money and damages fees; and
3. The costs of the suit. truck helper, Juanito Morden, was also an employee of petitioner; and the
fact that control of the cargo was placed in petitioner's care.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March
10, 1987 filed by defendant is DENIED for being moot and academic. In disputing the conclusion of the trial and appellate courts that petitioner
was a common carrier, she alleged in this petition that the contract between
SO ORDERED." 6 her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of the truck.
Petitioner appealed to the Court of Appeals but respondent Court affirmed She cited as evidence certain affidavits which referred to the contract as
the trial court's judgment. "lease". These affidavits were made by Jesus Bascos 8 and by petitioner
herself. 9 She further averred that Jesus Bascos confirmed in his testimony
Consequently, petitioner filed this petition where she makes the following his statement that the contract was a lease contract. 10 She also stated that:
assignment of errors; to wit: she was not catering to the general public. Thus, in her answer to the
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL amended complaint, she said that she does business under the same style of
RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS A.M. Bascos Trucking, offering her trucks for lease to those who have cargo
CARRIAGE OF GOODS AND NOT LEASE OF CARGO TRUCK. to move, not to the general public but to a few customers only in view of the
fact that it is only a small business. 11
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE
RESPONDENT COURT THAT THE CONTRACTUAL RELATIONSHIP BETWEEN We agree with the respondent Court in its finding that petitioner is a common
PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS IS carrier.
CORRECT, NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE Article 1732 of the Civil Code defines a common carrier as "(a) person,
THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE TO FORCE corporation or firm, or association engaged in the business of carrying or
MAJEURE, NAMELY, HIJACKING. transporting passengers or goods or both, by land, water or air, for
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE compensation, offering their services to the public." The test to determine a
TRIAL COURT THAT PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF common carrier is "whether the given undertaking is a part of the business
PRELIMINARY ATTACHMENT HAS BEEN RENDERED MOOT AND ACADEMIC BY engaged in by the carrier which he has held out to the general public as his
THE DECISION OF THE MERITS OF THE CASE." 7 occupation rather than the quantity or extent of the business transacted." 12
In this case, petitioner herself has made the admission that she was in the
The petition presents the following issues for resolution: (1) was petitioner a trucking business, offering her trucks to those with cargo to move. Judicial
common carrier?; and (2) was the hijacking referred to a force majeure? admissions are conclusive and no evidence is required to prove the same. 13
The Court of Appeals, in holding that petitioner was a common carrier, found But petitioner argues that there was only a contract of lease because they
that she admitted in her answer that she did business under the name A.M. offer their services only to a select group of people and because the private
Bascos Trucking and that said admission dispensed with the presentation by respondents, plaintiffs in the lower court, did not object to the presentation
private respondent, Rodolfo Cipriano, of proofs that petitioner was a of affidavits by petitioner where the transaction was referred to as a lease
common carrier. The respondent Court also adopted in toto the trial court's contract.
decision that petitioner was a common carrier, Moreover, both courts
appreciated the following pieces of evidence as indicators that petitioner was Regarding the first contention, the holding of the Court in De Guzman vs.
a common carrier: the fact that the truck driver of petitioner, Maximo Court of Appeals 14 is instructive. In referring to Article 1732 of the Civil Code,
Sanglay, received the cargo consisting of 400 bags of soya bean meal as it held thus:
evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the "The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in local idiom, as a "sideline"). "Art. 1745. Any of the following or similar stipulations shall be considered
Article 1732 also carefully avoids making any distinction between a person or unreasonable, unjust and contrary to public policy;
enterprise offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled basis. xxx xxx xxx
Neither does Article 1732 distinguish between a carrier offering its services (6) That the common carrier's liability for acts committed by thieves, or of
to the "general public," i.e., the general community or population, and one robbers who do not act with grave or irresistible threat, violences or force, is
who offers services or solicits business only from a narrow segment of the dispensed with or diminished;"
general population. We think that Article 1732 deliberately refrained from
making such distinctions." In the same case, 21 the Supreme Court also held that:

Regarding the affidavits presented by petitioner to the court, both the trial "Under Article 1745 (6) above, a common carrier is held responsible — and
and appellate courts have dismissed them as self-serving and petitioner will not be allowed to divest or to diminish such responsibility — even for acts
contests the conclusion. We are bound by the appellate court's factual of strangers like thieves or robbers except where such thieves or robbers in
conclusions. Yet, granting that the said evidence were not self-serving, the fact acted with grave or irresistible threat, violence or force. We believe and
same were not sufficient to prove that the contract was one of lease. It must so hold that the limits of the duty of extraordinary diligence in the vigilance
be understood that a contract is what the law defines it to be and not what it over the goods carried are reached where the goods are lost as a result of a
is called by the contracting parties. 15 Furthermore, petitioner presented no robbery which is attended by "grave or irresistible threat, violence or force."
other proof of the existence of the contract of lease. He who alleges a fact To establish grave and irresistible force, petitioner presented her accusatory
has the burden of proving it. 16 affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay".
Likewise, We affirm the holding of the respondent court that the loss of the However, both the trial court and the Court of Appeals have concluded that
goods was not due to force majeure. these affidavits were not enough to overcome the presumption. Petitioner's
affidavit about the hijacking was based on what had been told her by Juanito
Common carriers are obliged to observe extraordinary diligence in the Morden. It was not a first-hand account. While it had been admitted in court
vigilance over the goods transported by them. 17 Accordingly, they are for lack of objection on the part of private respondent, the respondent Court
presumed to have been at fault or to have acted negligently if the goods are had discretion in assigning weight to such evidence. We are bound by the
lost, destroyed or deteriorated. 18 There are very few instances when the conclusion of the appellate court. In a petition for review on certiorari, We
presumption of negligence does not attach and these instances are are not to determine the probative value of evidence but to resolve questions
enumerated in Article 1734. 19 In those cases where the presumption is of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the
applied, the common carrier must prove that it exercised extraordinary hijacking took place. Thirdly, while the affidavit of Juanito Morden, the truck
diligence in order to overcome the presumption. helper in the hijacked truck, was presented as evidence in court, he himself
was a witness as could be gleaned from the contents of the petition. Affidavits
In this case, petitioner alleged that hijacking constituted force majeure which
exculpated her from liability for the loss of the cargo. In De Guzman vs. Court are not considered the best evidence if the affiants are available as witnesses.
of Appeals, 20 the Court held that hijacking, not being included in the 25 The subsequent filing of the information for carnapping and robbery
provisions of Article 1734, must be dealt with under the provisions of Article against the accused named in said affidavits did not necessarily mean that the
1735 and thus, the common carrier is presumed to have been at fault or contents of the affidavits were true because they were yet to be determined
negligent. To exculpate the carrier from liability arising from hijacking, he in the trial of the criminal cases.
must prove that the robbers or the hijackers acted with grave or irresistible The presumption of negligence was raised against petitioner. It was
threat, violence, or force. This is in accordance with Article 1745 of the Civil petitioner's burden to overcome it. Thus, contrary to her assertion, private
Code which provides: respondent need not introduce any evidence to prove her negligence. Her
own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial
issues involved, We find no reason to disturb the conclusion that the motion
to lift/dissolve the writ of preliminary attachment has been rendered moot
and academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's
claim cannot be sustained. The petition is DISMISSED and the decision of the
Court of Appeals is hereby AFFIRMED.
SO ORDERED.
G.R. No. 101503 September 15, 1993 and the vessel to be presented clean for use in bulk to the satisfaction of the
inspector before daytime commences. (emphasis supplied)
PLANTERS PRODUCTS, INC., petitioner,
After the Urea fertilizer was loaded in bulk by stevedores hired by and under
vs. the supervision of the shipper, the steel hatches were closed with heavy iron
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN lids, covered with three (3) layers of tarpaulin, then tied with steel bonds. The
KABUSHIKI KAISHA, respondents. hatches remained closed and tightly sealed throughout the entire voyage.5

Gonzales, Sinense, Jimenez & Associates for petitioner. Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon
hatches were opened with the use of the vessel's boom. Petitioner unloaded
Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents. the cargo from the holds into its steelbodied dump trucks which were parked
alongside the berth, using metal scoops attached to the ship, pursuant to the
terms and conditions of the charter-partly (which provided for an F.I.O.S.
BELLOSILLO, J.: clause).6 The hatches remained open throughout the duration of the
discharge.7
Does a charter-party1 between a shipowner and a charterer transform a
common carrier into a private one as to negate the civil law presumption of Each time a dump truck was filled up, its load of Urea was covered with
negligence in case of loss or damage to its cargo? tarpaulin before it was transported to the consignee's warehouse located
some fifty (50) meters from the wharf. Midway to the warehouse, the trucks
Planters Products, Inc. (PPI), purchased from Mitsubishi International
were made to pass through a weighing scale where they were individually
Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T)
weighed for the purpose of ascertaining the net weight of the cargo. The port
of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard
area was windy, certain portions of the route to the warehouse were sandy
the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen
and the weather was variable, raining occasionally while the discharge was in
Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San
progress.8 The petitioner's warehouse was made of corrugated galvanized
Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed
iron (GI) sheets, with an opening at the front where the dump trucks entered
by the master of the vessel and issued on the date of departure.
and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel were placed in-between and alongside the trucks to contain spillages of the
M/V "Sun Plum" pursuant to the Uniform General Charter2 was entered into ferilizer.9
between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo,
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974
Japan.3 Riders to the aforesaid charter-party starting from par. 16 to 40 were
(except July 12th, 14th and 18th).10 A private marine and cargo surveyor,
attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the
Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine
charter-party were also subsequently entered into on the 18th, 20th, 21st
the "outturn" of the cargo shipped, by taking draft readings of the vessel prior
and 27th of May 1974, respectively.
to and after discharge. 11 The survey report submitted by CSCI to the
Before loading the fertilizer aboard the vessel, four (4) of her holds4 were all consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of
presumably inspected by the charterer's representative and found fit to take 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T
a load of urea in bulk pursuant to par. 16 of the charter-party which reads: was contaminated with dirt. The same results were contained in a Certificate
of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which
16. . . . At loading port, notice of readiness to be accomplished by certificate showed that the cargo delivered was indeed short of 94.839 M/T and about
from National Cargo Bureau inspector or substitute appointed by charterers 23 M/T were rendered unfit for commerce, having been polluted with sand,
for his account certifying the vessel's readiness to receive cargo spaces. The rust and
vessel's hold to be properly swept, cleaned and dried at the vessel's expense
dirt. 12 Civil Code provisions on common carriers which set forth a presumption of
negligence do not find application in the case at bar. Thus —
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont
Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for . . . In the absence of such presumption, it was incumbent upon the plaintiff-
P245,969.31 representing the cost of the alleged shortage in the goods appellee to adduce sufficient evidence to prove the negligence of the
shipped and the diminution in value of that portion said to have been defendant carrier as alleged in its complaint. It is an old and well settled rule
contaminated with dirt. 13 that if the plaintiff, upon whom rests the burden of proving his cause of
action, fails to show in a satisfactory manner the facts upon which he bases
Respondent SSA explained that they were not able to respond to the his claim, the defendant is under no obligation to prove his exception or
consignee's claim for payment because, according to them, what they defense (Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing
received was just a request for shortlanded certificate and not a formal claim, Belen v. Belen, 13 Phil. 202).
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 But, the record shows that the plaintiff-appellee dismally failed to prove the
action for damages with the Court of First Instance of Manila. The defendant basis of its cause of action, i.e. the alleged negligence of defendant carrier. It
carrier argued that the strict public policy governing common carriers does appears that the plaintiff was under the impression that it did not have to
not apply to them because they have become private carriers by reason of establish defendant's negligence. Be that as it may, contrary to the trial
the provisions of the charter-party. The court a quo however sustained the court's finding, the record of the instant case discloses ample evidence
claim of the plaintiff against the defendant carrier for the value of the goods showing that defendant carrier was not negligent in performing its obligation
lost or damaged when it ruled thus: 15 . . . 18 (emphasis supplied).
. . . Prescinding from the provision of the law that a common carrier is Petitioner PPI appeals to us by way of a petition for review assailing the
presumed negligent in case of loss or damage of the goods it contracts to decision of the Court of Appeals. Petitioner theorizes that the Home
transport, all that a shipper has to do in a suit to recover for loss or damage Insurance case has no bearing on the present controversy because the issue
is to show receipt by the carrier of the goods and to delivery by it of less than raised therein is the validity of a stipulation in the charter-party delimiting the
what it received. After that, the burden of proving that the loss or damage liability of the shipowner for loss or damage to goods cause by want of due
was due to any of the causes which exempt him from liability is shipted to the deligence on its part or that of its manager to make the vessel seaworthy in
carrier, common or private he may be. Even if the provisions of the charter- all respects, and not whether the presumption of negligence provided under
party aforequoted are deemed valid, and the defendants considered private the Civil Code applies only to common carriers and not to private carriers. 19
carriers, it was still incumbent upon them to prove that the shortage or Petitioner further argues that since the possession and control of the vessel
contamination sustained by the cargo is attributable to the fault or negligence remain with the shipowner, absent any stipulation to the contrary, such
on the part of the shipper or consignee in the loading, stowing, trimming and shipowner should made liable for the negligence of the captain and crew. In
discharge of the cargo. This they failed to do. By this omission, coupled with fine, PPI faults the appellate court in not applying the presumption of
their failure to destroy the presumption of negligence against them, the negligence against respondent carrier, and instead shifting the onus probandi
defendants are liable (emphasis supplied). on the shipper to show want of due deligence on the part of the carrier, when
he was not even at hand to witness what transpired during the entire voyage.
On appeal, respondent Court of Appeals reversed the lower court and
absolved the carrier from liability for the value of the cargo that was lost or As earlier stated, the primordial issue here is whether a common carrier
damaged. 16 Relying on the 1968 case of Home Insurance Co. v. American becomes a private carrier by reason of a charter-party; in the negative,
Steamship Agencies, Inc.,17 the appellate court ruled that the cargo vessel whether the shipowner in the instant case was able to prove that he had
M/V "Sun Plum" owned by private respondent KKKK was a private carrier and exercised that degree of diligence required of him under the law.
not a common carrier by reason of the time charterer-party. Accordingly, the
It is said that etymology is the basis of reliable judicial decisions in commercial alleges damage to or deterioration of the goods carried has the onus of
cases. This being so, we find it fitting to first define important terms which proving that the cause was the negligence of the carrier.
are relevant to our discussion.
It is not disputed that respondent carrier, in the ordinary course of business,
A "charter-party" is defined as a contract by which an entire ship, or some operates as a common carrier, transporting goods indiscriminately for all
principal part thereof, is let by the owner to another person for a specified persons. When petitioner chartered the vessel M/V "Sun Plum", the ship
time or use; 20 a contract of affreightment by which the owner of a ship or captain, its officers and compliment were under the employ of the shipowner
other vessel lets the whole or a part of her to a merchant or other person for and therefore continued to be under its direct supervision and control. Hardly
the conveyance of goods, on a particular voyage, in consideration of the then can we charge the charterer, a stranger to the crew and to the ship, with
payment of freight; 21 Charter parties are of two types: (a) contract of the duty of caring for his cargo when the charterer did not have any control
affreightment which involves the use of shipping space on vessels leased by of the means in doing so. This is evident in the present case considering that
the owner in part or as a whole, to carry goods for others; and, (b) charter by the steering of the ship, the manning of the decks, the determination of the
demise or bareboat charter, by the terms of which the whole vessel is let to course of the voyage and other technical incidents of maritime navigation
the charterer with a transfer to him of its entire command and possession were all consigned to the officers and crew who were screened, chosen and
and consequent control over its navigation, including the master and the hired by the shipowner. 27
crew, who are his servants. Contract of affreightment may either be time
charter, wherein the vessel is leased to the charterer for a fixed period of It is therefore imperative that a public carrier shall remain as such,
time, or voyage charter, wherein the ship is leased for a single voyage. 22 In notwithstanding the charter of the whole or portion of a vessel by one or
both cases, the charter-party provides for the hire of vessel only, either for a 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
determinate period of time or for a single or consecutive voyage, the
shipowner to supply the ship's stores, pay for the wages of the master and the vessel and its crew, as in a bareboat or demise that a common carrier
the crew, and defray the expenses for the maintenance of the ship. becomes private, at least insofar as the particular voyage covering the
charter-party is concerned. Indubitably, a shipowner in a time or voyage
Upon the other hand, the term "common or public carrier" is defined in Art. charter retains possession and control of the ship, although her holds may,
1732 of the Civil Code. 23 The definition extends to carriers either by land, air for the moment, be the property of the charterer. 28
or water which hold themselves out as ready to engage in carrying goods or
transporting passengers or both for compensation as a public employment Respondent carrier's heavy reliance on the case of Home Insurance Co. v.
and not as a casual occupation. The distinction between a "common or public American Steamship Agencies, supra, is misplaced for the reason that the
carrier" and a "private or special carrier" lies in the character of the business, meat of the controversy therein was the validity of a stipulation in the
such that if the undertaking is a single transaction, not a part of the general charter-party exempting the shipowners from liability for loss due to the
business or occupation, although involving the carriage of goods for a fee, the negligence of its agent, and not the effects of a special charter on common
person or corporation offering such service is a private carrier. 24 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, 29 does not find
Article 1733 of the New Civil Code mandates that common carriers, by reason application in our jurisdiction, for we have observed that the growing concern
of the nature of their business, should observe extraordinary diligence in the for safety in the transportation of passengers and /or carriage of goods by sea
vigilance over the goods they carry.25 In the case of private carriers, however, requires a more exacting interpretation of admiralty laws, more particularly,
the exercise of ordinary diligence in the carriage of goods will suffice. the rules governing common carriers.
Moreover, in the case of loss, destruction or deterioration of the goods,
common carriers are presumed to have been at fault or to have acted We quote with approval the observations of Raoul Colinvaux, the learned
negligently, and the burden of proving otherwise rests on them.26 On the barrister-at-law 30 —
contrary, no such presumption applies to private carriers, for whosoever
As a matter of principle, it is difficult to find a valid distinction between cases cargo under the watchful eyes of the shipmates who were overseeing the
in which a ship is used to convey the goods of one and of several persons. whole operation on rotation basis. 34
Where the ship herself is let to a charterer, so that he takes over the charge
and control of her, the case is different; the shipowner is not then a carrier. Verily, the presumption of negligence on the part of the respondent carrier
But where her services only are let, the same grounds for imposing a strict has been efficaciously overcome by the showing of extraordinary zeal and
responsibility exist, whether he is employed by one or many. The master and assiduity exercised by the carrier in the care of the cargo. This was confirmed
the crew are in each case his servants, the freighter in each case is usually by respondent appellate court thus —
without any representative on board the ship; the same opportunities for . . . Be that as it may, contrary to the trial court's finding, the record of the
fraud or collusion occur; and the same difficulty in discovering the truth as to instant case discloses ample evidence showing that defendant carrier was not
what has taken place arises . . . negligent in performing its obligations. Particularly, the following testimonies
of plaintiff-appellee's own witnesses clearly show absence of negligence by
In an action for recovery of damages against a common carrier on the goods
shipped, the shipper or consignee should first prove the fact of shipment and the defendant carrier; that the hull of the vessel at the time of the discharge
its consequent loss or damage while the same was in the possession, actual of the cargo was sealed and nobody could open the same except in the
or constructive, of the carrier. Thereafter, the burden of proof shifts to presence of the owner of the cargo and the representatives of the vessel
respondent to prove that he has exercised extraordinary diligence required (TSN, 20 July 1977, p. 14); that the cover of the hatches was made of steel
by law or that the loss, damage or deterioration of the cargo was due to and it was overlaid with tarpaulins, three layers of tarpaulins and therefore
fortuitous event, or some other circumstances inconsistent with its liability. their contents were protected from the weather (TSN, 5 April 1978, p. 24);
31 and, that to open these hatches, the seals would have to be broken, all the
seals were found to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis
To our mind, respondent carrier has sufficiently overcome, by clear and supplied).
convincing proof, the prima facie presumption of negligence.
The period during which private respondent was to observe the degree of
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken diligence required of it as a public carrier began from the time the cargo was
on 19 April 1977 before the Philippine Consul and Legal Attache in the unconditionally placed in its charge after the vessel's holds were duly
Philippine Embassy in Tokyo, Japan, testified that before the fertilizer was inspected and passed scrutiny by the shipper, up to and until the vessel
loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. reached its destination and its hull was reexamined by the consignee, but
After completing the loading of the cargo in bulk in the ship's holds, the steel prior to unloading. This is clear from the limitation clause agreed upon by the
pontoon hatches were closed and sealed with iron lids, then covered with parties in the Addendum to the standard "GENCON" time charter-party which
three (3) layers of serviceable tarpaulins which were tied with steel bonds. provided for an F.I.O.S., meaning, that the loading, stowing, trimming and
The hatches remained close and tightly sealed while the ship was in transit as discharge of the cargo was to be done by the charterer, free from all risk and
the weight of the steel covers made it impossible for a person to open without expense to the carrier. 35 Moreover, a shipowner is liable for damage to the
the use of the ship's boom. 32 cargo resulting from improper stowage only when the stowing is done by
stevedores employed by him, and therefore under his control and
It was also shown during the trial that the hull of the vessel was in good supervision, not when the same is done by the consignee or stevedores under
condition, foreclosing the possibility of spillage of the cargo into the sea or the employ of the latter. 36
seepage of water inside the hull of the vessel. 33 When M/V "Sun Plum"
docked at its berthing place, representatives of the consignee boarded, and Article 1734 of the New Civil Code provides that common carriers are not
in the presence of a representative of the shipowner, the foreman, the responsible for the loss, destruction or deterioration of the goods if caused
stevedores, and a cargo surveyor representing CSCI, opened the hatches and by the charterer of the goods or defects in the packaging or in the containers.
inspected the condition of the hull of the vessel. The stevedores unloaded the The Code of Commerce also provides that all losses and deterioration which
the goods may suffer during the transportation by reason of fortuitous event, cargo, it was more likely to have occurred while the same was being
force majeure, or the inherent defect of the goods, shall be for the account transported from the ship to the dump trucks and finally to the consignee's
and risk of the shipper, and that proof of these accidents is incumbent upon warehouse. This may be gleaned from the testimony of the marine and cargo
the carrier. 37 The carrier, nonetheless, shall be liable for the loss and damage surveyor of CSCI who supervised the unloading. He explained that the 18 M/T
resulting from the preceding causes if it is proved, as against him, that they of alleged "bar order cargo" as contained in their report to PPI was just an
arose through his negligence or by reason of his having failed to take the approximation or estimate made by them after the fertilizer was discharged
precautions which usage has established among careful persons. 38 from the vessel and segregated from the rest of the cargo.
Respondent carrier presented a witness who testified on the characteristics The Court notes that it was in the month of July when the vessel arrived port
of the fertilizer shipped and the expected risks of bulk shipping. Mr. Estanislao and unloaded her cargo. It rained from time to time at the harbor area while
Chupungco, a chemical engineer working with Atlas Fertilizer, described Urea the cargo was being discharged according to the supply officer of PPI, who
as a chemical compound consisting mostly of ammonia and carbon monoxide also testified that it was windy at the waterfront and along the shoreline
compounds which are used as fertilizer. Urea also contains 46% nitrogen and where the dump trucks passed enroute to the consignee's warehouse.
is highly soluble in water. However, during storage, nitrogen and ammonia do
not normally evaporate even on a long voyage, provided that the Indeed, we agree with respondent carrier that bulk shipment of highly soluble
temperature inside the hull does not exceed eighty (80) degrees centigrade. goods like fertilizer carries with it the risk of loss or damage. More so, with a
Mr. Chupungco further added that in unloading fertilizer in bulk with the use variable weather condition prevalent during its unloading, as was the case at
of a clamped shell, losses due to spillage during such operation amounting to bar. This is a risk the shipper or the owner of the goods has to face. Clearly,
one percent (1%) against the bill of lading is deemed "normal" or "tolerable." respondent carrier has sufficiently proved the inherent character of the
goods which makes it highly vulnerable to deterioration; as well as the
The primary cause of these spillages is the clamped shell which does not seal
very tightly. Also, the wind tends to blow away some of the materials during inadequacy of its packaging which further contributed to the loss. On the
the unloading process. other hand, no proof was adduced by the petitioner showing that the carrier
was remise in the exercise of due diligence in order to minimize the loss or
The dissipation of quantities of fertilizer, or its daterioration in value, is damage to the goods it carried.
caused either by an extremely high temperature in its place of storage, or
when it comes in contact with water. When Urea is drenched in water, either WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of
fresh or saline, some of its particles dissolve. But the salvaged portion which Appeals, which reversed the trial court, is AFFIRMED. Consequently, Civil Case
is in liquid form still remains potent and usable although no longer saleable No. 98623 of the then Court of the First Instance, now Regional Trial Court,
in its original market value. of Manila should be, as it is hereby DISMISSED.

The probability of the cargo being damaged or getting mixed or contaminated Costs against petitioner.
with foreign particles was made greater by the fact that the fertilizer was SO ORDERED.
transported in "bulk," thereby exposing it to the inimical effects of the
elements and the grimy condition of the various pieces of equipment used in
transporting and hauling it.
The evidence of respondent carrier also showed that it was highly improbable
for sea water to seep into the vessel's holds during the voyage since the hull
of the vessel was in good condition and her hatches were tightly closed and
firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry
the cargo she was chartered for. If there was loss or contamination of the
SECOND DIVISION not leave the Tropical Hut at the corner of Ortigas Avenue and EDSA until 8:00
oclock in the evening. Petitioner Porfirio Cabil drove the minibus.
[G.R. No. 111127. July 26, 1996]
The usual route to Caba, La Union was through Carmen, Pangasinan.
MR. & MRS. ENGRACIO FABRE, JR.* and PORFIRIO CABIL, petitioners, vs. However, the bridge at Carmen was under repair, so that petitioner Cabil,
COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, who was unfamiliar with the area (it being his first trip to La Union), was
INC., AMYLINE ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V. forced to take a detour through the town of Ba-ay in Lingayen, Pangasinan.
QUE, JR., ICLI CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway,
RICHARD BAUTISTA, JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE, running on a south to east direction, which he described as siete. The road
EDWARD TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O. was slippery because it was raining, causing the bus, which was running at
LOPEZ, JULIUS CAESAR GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, the speed of 50 kilometers per hour, to skid to the left road shoulder. The bus
ELVIE SENIEL, ROSARIO MARA-MARA, TERESITA REGALA, MELINDA TORRES,
hit the left traffic steel brace and sign along the road and rammed the fence
MARELLA MIJARES, JOSEFA CABATINGAN, MARA NADOC, DIANE MAYO, TESS of one Jesus Escano, then turned over and landed on its left side, coming to a
PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO, CARLOS RANARIO, full stop only after a series of impacts. The bus came to rest off the road. A
ROSAMARIA T. RADOC and BERNADETTE FERRER, respondents. coconut tree which it had hit fell on it and smashed its front portion.
DECISION Several passengers were injured. Private respondent Amyline Antonio was
MENDOZA, J.: thrown on the floor of the bus and pinned down by a wooden seat which
came off after being unscrewed. It took three persons to safely remove her
This is a petition for review on certiorari of the decision of the Court of from this position. She was in great pain and could not move.
Appeals[1] in CA-GR No. 28245, dated September 30, 1992, which affirmed
with modification the decision of the Regional Trial Court of Makati, Branch The driver, petitioner Cabil, claimed he did not see the curve until it was too
58, ordering petitioners jointly and severally to pay damages to private late. He said he was not familiar with the area and he could not have seen the
respondent Amyline Antonio, and its resolution which denied petitioners curve despite the care he took in driving the bus, because it was dark and
motion for reconsideration for lack of merit. there was no sign on the road. He said that he saw the curve when he was
already within 15 to 30 meters of it. He allegedly slowed down to 30
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model kilometers per hour, but it was too late.
Mazda minibus. They used the bus principally in connection with a bus service
for school children which they operated in Manila. The couple had a driver, The Lingayen police investigated the incident the next day, November 3,
Porfirio J. Cabil, whom they hired in 1981, after trying him out for two weeks. 1984. On the basis of their finding they filed a criminal complaint against the
His job was to take school children to and from the St. Scholasticas College in driver, Porfirio Cabil. The case was later filed with the Lingayen Regional Trial
Malate, Manila. Court. Petitioners Fabre paid Jesus Escano P1,500.00 for the damage to the
latters fence. On the basis of Escanos affidavit of desistance the case against
On November 2, 1984 private respondent Word for the World Christian petitioners Fabre was dismissed.
Fellowship Inc. (WWCF) arranged with petitioners for the transportation of
33 members of its Young Adults Ministry from Manila to La Union and back Amyline Antonio, who was seriously injured, brought this case in the RTC of
in consideration of which private respondent paid petitioners the amount of Makati, Metro Manila. As a result of the accident, she is now suffering from
P3,000.00. paraplegia and is permanently paralyzed from the waist down. During the
trial she described the operations she underwent and adduced evidence
The group was scheduled to leave on November 2, 1984, at 5:00 oclock in the regarding the cost of her treatment and therapy. Immediately after the
afternoon. However, as several members of the party were late, the bus did accident, she was taken to the Nazareth Hospital in Ba-ay, Lingayen. As this
hospital was not adequately equipped, she was transferred to the Sto. Nio
Hospital, also in the town of Ba-ay, where she was given sedatives. An x-ray ground that they failed to prove their respective claims. The Court of Appeals
was taken and the damage to her spine was determined to be too severe to modified the award of damages as follows:
be treated there. She was therefore brought to Manila, first to the Philippine
General Hospital and later to the Makati Medical Center where she 1) P93,657.11 as actual damages;
underwent an operation to correct the dislocation of her spine. 2) P600,000.00 as compensatory damages;
In its decision dated April 17, 1989, the trial court found that: 3) P50,000.00 as moral damages;
No convincing evidence was shown that the minibus was properly checked 4) P20,000.00 as exemplary damages;
for travel to a long distance trip and that the driver was properly screened
and tested before being admitted for employment. Indeed, all the evidence 5) P10,000.00 as attorneys fees; and
presented have shown the negligent act of the defendants which ultimately 6) Costs of suit.
resulted to the accident subject of this case.
The Court of Appeals sustained the trial courts finding that petitioner Cabil
Accordingly, it gave judgment for private respondents holding: failed to exercise due care and precaution in the operation of his vehicle
Considering that plaintiffs Word for the World Christian Fellowship, Inc. and considering the time and the place of the accident. The Court of Appeals held
Ms. Amyline Antonio were the only ones who adduced evidence in support that the Fabres were themselves presumptively negligent. Hence, this
of their claim for damages, the Court is therefore not in a position to award petition. Petitioners raise the following issues:
damages to the other plaintiffs. I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
WHEREFORE, premises considered, the Court hereby renders judgment II. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED
against defendants Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil BY PRIVATE RESPONDENTS.
pursuant to articles 2176 and 2180 of the Civil Code of the Philippines and
said defendants are ordered to pay jointly and severally to the plaintiffs the III. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP
following amount: TO WHAT EXTENT.
1) P93,657.11 as compensatory and actual damages; Petitioners challenge the propriety of the award of compensatory damages
in the amount of P600,000.00. It is insisted that, on the assumption that
2) P500,000.00 as the reasonable amount of loss of earning capacity of petitioners are liable, an award of P600,000.00 is unconscionable and highly
plaintiff Amyline Antonio; speculative. Amyline Antonio testified that she was a casual employee of a
3) P20,000.00 as moral damages; company called Suaco, earning P1,650.00 a month, and a dealer of Avon
products, earning an average of P1,000.00 monthly. Petitioners contend that
4) P20,000.00 as exemplary damages; and as casual employees do not have security of tenure, the award of
5) 25% of the recoverable amount as attorneys fees; P600,000.00, considering Amyline Antonios earnings, is without factual basis
as there is no assurance that she would be regularly earning these amounts.
6) Costs of suit.
With the exception of the award of damages, the petition is devoid of merit.
SO ORDERED.
First, it is unnecessary for our purpose to determine whether to decide this
The Court of Appeals affirmed the decision of the trial court with respect to case on the theory that petitioners are liable for breach of contract of carriage
Amyline Antonio but dismissed it with respect to the other plaintiffs on the or culpa contractual or on the theory of quasi delict or culpa aquiliana as both
the Regional Trial Court and the Court of Appeals held, for although the
relation of passenger and carrier is contractual both in origin and nature, In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union,
nevertheless the act that breaks the contract may be also a tort.[2] In either apparently did not consider the fact that Cabil had been driving for school
case, the question is whether the bus driver, petitioner Porfirio Cabil, was children only, from their homes to the St. Scholasticas College in Metro
negligent. Manila.[7] They had hired him only after a two-week apprenticeship. They
had tested him for certain matters, such as whether he could remember the
The finding that Cabil drove his bus negligently, while his employer, the names of the children he would be taking to school, which were irrelevant to
Fabres, who owned the bus, failed to exercise the diligence of a good father his qualification to drive on a long distance travel, especially considering that
of the family in the selection and supervision of their employee is fully the trip to La Union was his first. The existence of hiring procedures and
supported by the evidence on record. These factual findings of the two courts supervisory policies cannot be casually invoked to overturn the presumption
we regard as final and conclusive, supported as they are by the evidence. of negligence on the part of an employer.[8]
Indeed, it was admitted by Cabil that on the night in question, it was raining,
and, as a consequence, the road was slippery, and it was dark. He averred Petitioners argue that they are not liable because (1) an earlier departure
these facts to justify his failure to see that there lay a sharp curve ahead. (made impossible by the congregations delayed meeting) could have averted
However, it is undisputed that Cabil drove his bus at the speed of 50 the mishap and (2) under the contract, the WWCF was directly responsible
kilometers per hour and only slowed down when he noticed the curve some for the conduct of the trip. Neither of these contentions hold water. The hour
15 to 30 meters ahead.[3] By then it was too late for him to avoid falling off of departure had not been fixed. Even if it had been, the delay did not bear
the road. Given the conditions of the road and considering that the trip was directly on the cause of the accident. With respect to the second contention,
Cabils first one outside of Manila, Cabil should have driven his vehicle at a it was held in an early case that:
moderate speed. There is testimony[4] that the vehicles passing on that
[A] person who hires a public automobile and gives the driver directions as to
portion of the road should only be running 20 kilometers per hour, so that at
50 kilometers per hour, Cabil was running at a very high speed. the place to which he wishes to be conveyed, but exercises no other control
over the conduct of the driver, is not responsible for acts of negligence of the
Considering the foregoing the fact that it was raining and the road was latter or prevented from recovering for injuries suffered from a collision
slippery, that it was dark, that he drove his bus at 50 kilometers an hour when between the automobile and a train, caused by the negligence either of the
even on a good day the normal speed was only 20 kilometers an hour, and locomotive engineer or the automobile driver.[9]
that he was unfamiliar with the terrain, Cabil was grossly negligent and should
be held liable for the injuries suffered by private respondent Amyline As already stated, this case actually involves a contract of carriage.
Antonio. Petitioners, the Fabres, did not have to be engaged in the business of public
transportation for the provisions of the Civil Code on common carriers to
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to apply to them. As this Court has held:[10]
the presumption that his employers, the Fabres, were themselves negligent
in the selection and supervision of their employee. Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or
Due diligence in selection of employees is not satisfied by finding that the both, by land, water, or air for compensation, offering their services to the
applicant possessed a professional drivers license. The employer should also public.
examine the applicant for his qualifications, experience and record of
service.[5] Due diligence in supervision, on the other hand, requires the The above article makes no distinction between one whose principal business
formulation of rules and regulations for the guidance of employees and the activity is the carrying of persons or goods or both, and one who does such
issuance of proper instructions as well as actual implementation and carrying only as an ancillary activity (in local idiom, as a sideline). Article 1732
monitoring of consistent compliance with the rules.[6] 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 moral damages in cases of quasi delict. On the theory that petitioners are
general public, i.e., the general community or population, and one who offers liable for breach of contract of carriage, the award of moral damages is
services or solicits business only from a narrow segment of the general authorized by Art. 1764, in relation to Art. 2220, since Cabils gross negligence
population. We think that Article 1732 deliberately refrained from making amounted to bad faith.[12] Amyline Antonios testimony, as well as the
such distinctions. testimonies of her father and co-passengers, fully establish the physical
suffering and mental anguish she endured as a result of the injuries caused
As common carriers, the Fabres were bound to exercise extraordinary by petitioners negligence.
diligence for the safe transportation of the passengers to their destination.
This duty of care is not excused by proof that they exercised the diligence of The award of exemplary damages and attorneys fees was also properly made.
a good father of the family in the selection and supervision of their employee. However, for the same reason that it was error for the appellate court to
As Art. 1759 of the Code provides: increase the award of compensatory damages, we hold that it was also error
for it to increase the award of moral damages and reduce the award of
Common carriers are liable for the death of or injuries to passengers through attorneys fees, inasmuch as private respondents, in whose favor the awards
the negligence or wilful acts of the formers employees, although such were made, have not appealed.[13]
employees may have acted beyond the scope of their authority or in violation
of the orders of the common carriers. As above stated, the decision of the Court of Appeals can be sustained either
on the theory of quasi delict or on that of breach of contract. The question is
This liability of the common carriers does not cease upon proof that they whether, as the two courts below held, petitioners, who are the owners and
exercised all the diligence of a good father of a family in the selection and
driver of the bus, may be made to respond jointly and severally to private
supervision of their employees. respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of
The same circumstances detailed above, supporting the finding of the trial Appeals,[14] on facts similar to those in this case, this Court held the bus
court and of the appellate court that petitioners are liable under Arts. 2176 company and the driver jointly and severally liable for damages for injuries
and 2180 for quasi delict, fully justify finding them guilty of breach of contract suffered by a passenger. Again, in Bachelor Express, Inc. v. Court of
of carriage under Arts. 1733, 1755 and 1759 of the Civil Code. Appeals[15] a driver found negligent in failing to stop the bus in order to let
off passengers when a fellow passenger ran amuck, as a result of which the
Secondly, we sustain the award of damages in favor of Amyline Antonio. passengers jumped out of the speeding bus and suffered injuries, was held
However, we think the Court of Appeals erred in increasing the amount of also jointly and severally liable with the bus company to the injured
compensatory damages because private respondents did not question this passengers.
award as inadequate.[11] To the contrary, the award of P500,000.00 for
compensatory damages which the Regional Trial Court made is reasonable The same rule of liability was applied in situations where the negligence of
considering the contingent nature of her income as a casual employee of a the driver of the bus on which plaintiff was riding concurred with the
company and as distributor of beauty products and the fact that the negligence of a third party who was the driver of another vehicle, thus causing
possibility that she might be able to work again has not been foreclosed. In an accident. In Anuran v. Buo,[16] Batangas Laguna Tayabas Bus Co. v.
fact she testified that one of her previous employers had expressed Intermediate Appellate Court,[17] and Metro Manila Transit Corporation v.
willingness to employ her again. Court of Appeals,[18] the bus company, its driver, the operator of the other
vehicle and the driver of the vehicle were jointly and severally held liable to
With respect to the other awards, while the decisions of the trial court and the injured passenger or the latters heirs. The basis of this allocation of
the Court of Appeals do not sufficiently indicate the factual and legal basis for liability was explained in Viluan v. Court of Appeals,[19] thus:
them, we find that they are nevertheless supported by evidence in the
records of this case. Viewed as an action for quasi delict, this case falls Nor should it make any difference that the liability of petitioner [bus owner]
squarely within the purview of Art. 2219(2) providing for the payment of springs from contract while that of respondents [owner and driver of other
vehicle] arises from quasi-delict. As early as 1913, we already ruled in 1) P93,657.11 as actual damages;
Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due
2) P500,000.00 as the reasonable amount of loss of earning capacity of
to the negligence of the driver of the bus on which he was riding and of the
driver of another vehicle, the drivers as well as the owners of the two vehicles plaintiff Amyline Antonio;
are jointly and severally liable for damages. Some members of the Court, 3) P20,000.00 as moral damages;
though, are of the view that under the circumstances they are liable on quasi-
delict.[20] 4) P20,000.00 as exemplary damages;

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals[21] this 5) 25% of the recoverable amount as attorneys fees; and
Court exonerated the jeepney driver from liability to the injured passengers 6) costs of suit.
and their families while holding the owners of the jeepney jointly and
severally liable, but that is because that case was expressly tried and decided SO ORDERED.
exclusively on the theory of culpa contractual. As this Court there explained:
The trial court was therefore right in finding that Manalo [the driver] and
spouses Mangune and Carreon [the jeepney owners] were negligent.
However, its ruling that spouses Mangune and Carreon are jointly and
severally liable with Manalo is erroneous. The driver cannot be held jointly
and severally liable with the carrier in case of breach of the contract of
carriage. The rationale behind this is readily discernible. Firstly, the contract
of carriage is between the carrier and the passenger, and in the event of
contractual liability, the carrier is exclusively responsible therefore to the
passenger, even if such breach be due to the negligence of his driver (see
Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16
SCRA 742) . . .[22]
As in the case of BLTB, private respondents in this case and her co-plaintiffs
did not stake out their claim against the carrier and the driver exclusively on
one theory, much less on that of breach of contract alone. After all, it was
permitted for them to allege alternative causes of action and join as many
parties as may be liable on such causes of action[23] so long as private
respondent and her co-plaintiffs do not recover twice for the same injury.
What is clear from the cases is the intent of the plaintiff there to recover from
both the carrier and the driver, thus justifying the holding that the carrier and
the driver were jointly and severally liable because their separate and distinct
acts concurred to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with
MODIFICATION as to the award of damages. Petitioners are ORDERED to PAY
jointly and severally the private respondent Amyline Antonio the following
amounts:
SECOND DIVISION exempt from paying tax on gross receipts under Section 133 of the Local
Government Code of 1991 x x x x
[G.R. No. 125948. December 29, 1998]
"Moreover, Transportation contractors are not included in the enumeration
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF of contractors under Section 131, Paragraph (h) of the Local Government
APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and Code. Therefore, the authority to impose tax 'on contractors and other
ADORACION C. ARELLANO, in her official capacity as City Treasurer of independent contractors' under Section 143, Paragraph (e) of the Local
Batangas, respondents. Government Code does not include the power to levy on transportation
DECISION contractors.

MARTINEZ, J.: "The imposition and assessment cannot be categorized as a mere fee
authorized under Section 147 of the Local Government Code. The said section
This petition for review on certiorari assails the Decision of the Court of limits the imposition of fees and charges on business to such amounts as may
Appeals dated November 29, 1995, in CA-G.R. SP No. 36801, affirming the be commensurate to the cost of regulation, inspection, and licensing. Hence,
decision of the Regional Trial Court of Batangas City, Branch 84, in Civil Case assuming arguendo that FPIC is liable for the license fee, the imposition
No. 4293, which dismissed petitioners' complaint for a business tax refund thereof based on gross receipts is violative of the aforecited provision. The
imposed by the City of Batangas. amount of P956,076.04 (P239,019.01 per quarter) is not commensurate to
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, the cost of regulation, inspection and licensing. The fee is already a revenue
as amended, to contract, install and operate oil pipelines. The original raising measure, and not a mere regulatory imposition."[4]
pipeline concession was granted in 1967[1] and renewed by the Energy On March 8, 1994, the respondent City Treasurer denied the protest
Regulatory Board in 1992.[2] contending that petitioner cannot be considered engaged in transportation
Sometime in January 1995, petitioner applied for a mayor's permit with the business, thus it cannot claim exemption under Section 133 (j) of the Local
Office of the Mayor of Batangas City. However, before the mayor's permit Government Code.[5]
could be issued, the respondent City Treasurer required petitioner to pay a On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas
local tax based on its gross receipts for the fiscal year 1993 pursuant to the City a complaint[6] for tax refund with prayer for a writ of preliminary
Local Government Code.[3] The respondent City Treasurer assessed a injunction against respondents City of Batangas and Adoracion Arellano in her
business tax on the petitioner amounting to P956,076.04 payable in four capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that:
installments based on the gross receipts for products pumped at GPS-1 for (1) the imposition and collection of the business tax on its gross receipts
the fiscal year 1993 which amounted to P181,681,151.00. In order not to violates Section 133 of the Local Government Code; (2) the authority of cities
hamper its operations, petitioner paid the tax under protest in the amount of to impose and collect a tax on the gross receipts of "contractors and
P239,019.01 for the first quarter of 1993. independent contractors" under Sec. 141 (e) and 151 does not include the
On January 20, 1994, petitioner filed a letter-protest addressed to the authority to collect such taxes on transportation contractors for, as defined
respondent City Treasurer, the pertinent portion of which reads: under Sec. 131 (h), the term "contractors" excludes transportation
contractors; and, (3) the City Treasurer illegally and erroneously imposed and
"Please note that our Company (FPIC) is a pipeline operator with a collected the said tax, thus meriting the immediate refund of the tax paid.[7]
government concession granted under the Petroleum Act. It is engaged in the
business of transporting petroleum products from the Batangas refineries, via Traversing the complaint, the respondents argued that petitioner cannot be
pipeline, to Sucat and JTF Pandacan Terminals. As such, our Company is exempt from taxes under Section 133 (j) of the Local Government Code as
said exemption applies only to "transportation contractors and persons
engaged in the transportation by hire and common carriers by air, land and
water." Respondents assert that pipelines are not included in the term the respondent court rendered a decision[11] affirming the trial court's
"common carrier" which refers solely to ordinary carriers such as trucks, dismissal of petitioner's complaint. Petitioner's motion for reconsideration
trains, ships and the like. Respondents further posit that the term "common was denied on July 18, 1996.[12]
carrier" under the said code pertains to the mode or manner by which a
product is delivered to its destination.[8] Hence, this petition. At first, the petition was denied due course in a
Resolution dated November 11, 1996.[13] Petitioner moved for a
On October 3, 1994, the trial court rendered a decision dismissing the reconsideration which was granted by this Court in a Resolution[14] of
complaint, ruling in this wise: January 20, 1997. Thus, the petition was reinstated.
"xxx Plaintiff is either a contractor or other independent contractor. Petitioner claims that the respondent Court of Appeals erred in holding that
(1) the petitioner is not a common carrier or a transportation contractor, and
xxx the exemption to tax claimed by the plaintiff has become unclear. It is a (2) the exemption sought for by petitioner is not clear under the law.
rule that tax exemptions are to be strictly construed against the taxpayer,
taxes being the lifeblood of the government. Exemption may therefore be There is merit in the petition.
granted only by clear and unequivocal provisions of law.
A "common carrier" may be defined, broadly, as one who holds himself out
"Plaintiff claims that it is a grantee of a pipeline concession under Republic to the public as engaged in the business of transporting persons or property
Act 387, (Exhibit A) whose concession was lately renewed by the Energy from place to place, for compensation, offering his services to the public
Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession generally.
grant any tax exemption upon the plaintiff.
Article 1732 of the Civil Code defines a "common carrier" as "any person,
"Even the Local Government Code imposes a tax on franchise holders under corporation, firm or association engaged in the business of carrying or
Sec. 137 of the Local Tax Code. Such being the situation obtained in this case transporting passengers or goods or both, by land, water, or air, for
(exemption being unclear and equivocal) resort to distinctions or other compensation, offering their services to the public."
considerations may be of help:
The test for determining whether a party is a common carrier of goods is:
1. That the exemption granted under Sec. 133 (j) encompasses only common
carriers so as not to overburden the riding public or commuters with taxes. 1. He must be engaged in the business of carrying goods for others as a public
Plaintiff is not a common carrier, but a special carrier extending its services employment, and must hold himself out as ready to engage in the
and facilities to a single specific or "special customer" under a "special transportation of goods for person generally as a business and not as a casual
occupation;
contract."
2. The Local Tax Code of 1992 was basically enacted to give more and 2. He must undertake to carry goods of the kind to which his business is
effective local autonomy to local governments than the previous enactments, confined;
to make them economically and financially viable to serve the people and 3. He must undertake to carry by the method by which his business is
discharge their functions with a concomitant obligation to accept certain conducted and over his established roads; and
devolution of powers, x x x So, consistent with this policy even franchise
grantees are taxed (Sec. 137) and contractors are also taxed under Sec. 143 4. The transportation must be for hire.[15]
(e) and 151 of the Code."[9] Based on the above definitions and requirements, there is no doubt that
Petitioner assailed the aforesaid decision before this Court via a petition for petitioner is a common carrier. It is engaged in the business of transporting
review. On February 27, 1995, we referred the case to the respondent Court or carrying goods, i.e. petroleum products, for hire as a public employment.
of Appeals for consideration and adjudication.[10] On November 29, 1995, 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 transporting goods and passengers through moving vehicles or vessels either
compensation. The fact that petitioner has a limited clientele does not by land, sea or water, is erroneous.
exclude it from the definition of a common carrier. In De Guzman vs. Court of
Appeals[16] we ruled that: As correctly pointed out by petitioner, the definition of "common carriers" in
the Civil Code makes no distinction as to the means of transporting, as long
"The above article (Art. 1732, Civil Code) makes no distinction between one as it is by land, water or air. It does not provide that the transportation of the
whose principal business activity is the carrying of persons or goods or both, passengers or goods should be by motor vehicle. In fact, in the United States,
and one who does such carrying only as an ancillary activity (in local idiom, as oil pipe line operators are considered common carriers.[17]
a 'sideline'). Article 1732 x x x avoids making any distinction between a person
or enterprise offering transportation service on a regular or scheduled basis Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is
and one offering such service on an occasional, episodic or unscheduled basis. considered a "common carrier." Thus, Article 86 thereof provides that:
Neither does Article 1732 distinguish between a carrier offering its services "Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have
to the 'general public,' i.e., the general community or population, and one the preferential right to utilize installations for the transportation of
who offers services or solicits business only from a narrow segment of the petroleum owned by him, but is obligated to utilize the remaining
general population. We think that Article 1877 deliberately refrained from transportation capacity pro rata for the transportation of such other
making such distinctions. petroleum as may be offered by others for transport, and to charge without
So understood, the concept of 'common carrier' under Article 1732 may be discrimination such rates as may have been approved by the Secretary of
Agriculture and Natural Resources."
seen to coincide neatly with the notion of 'public service,' under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least Republic Act 387 also regards petroleum operation as a public utility.
partially supplements the law on common carriers set forth in the Civil Code. Pertinent portion of Article 7 thereof provides:
Under Section 13, paragraph (b) of the Public Service Act, 'public service'
includes: "that everything relating to the exploration for and exploitation of petroleum
x x and everything relating to the manufacture, refining, storage, or
'every person that now or hereafter may own, operate, manage, or control in transportation by special methods of petroleum, is hereby declared to be a
the Philippines, for hire or compensation, with general or limited clientele, public utility." (Underscoring Supplied)
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, The Bureau of Internal Revenue likewise considers the petitioner a "common
subway motor vehicle, either for freight or passenger, or both, with or carrier." In BIR Ruling No. 069-83, it declared:
without fixed route and whatever may be its classification, freight or carrier "x x x since [petitioner] is a pipeline concessionaire that is engaged only in
service of any class, express service, steamboat, or steamship line, pontines, transporting petroleum products, it is considered a common carrier under
ferries and water craft, engaged in the transportation of passengers or freight Republic Act No. 387 x x x. Such being the case, it is not subject to withholding
or both, shipyard, marine repair shop, wharf or dock, ice plant, ice- tax prescribed by Revenue Regulations No. 13-78, as amended."
refrigeration plant, canal, irrigation system gas, electric light heat and power,
water supply and power petroleum, sewerage system, wire or wireless From the foregoing disquisition, there is no doubt that petitioner is a
communications systems, wire or wireless broadcasting stations and other "common carrier" and, therefore, exempt from the business tax as provided
similar public services.' "(Underscoring Supplied) for in Section 133 (j), of the Local Government Code, to wit:
Also, respondent's argument that the term "common carrier" as used in "Section 133. Common Limitations on the Taxing Powers of Local
Section 133 (j) of the Local Government Code refers only to common carriers Government Units. - Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not Section 125 [now Sec. 137] that a province may impose this tax at a specific
extend to the levy of the following : rate.
xxxxxxxxx MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x[18]
(j) Taxes on the gross receipts of transportation contractors and persons It is clear that the legislative intent in excluding from the taxing power of the
engaged in the transportation of passengers or freight by hire and common local government unit the imposition of business tax against common carriers
carriers by air, land or water, except as provided in this Code." is to prevent a duplication of the so-called "common carrier's tax."
The deliberations conducted in the House of Representatives on the Local Petitioner is already paying three (3%) percent common carrier's tax on its
Government Code of 1991 are illuminating: gross sales/earnings under the National Internal Revenue Code.[19] To tax
petitioner again on its gross receipts in its transportation of petroleum
"MR. AQUINO (A). Thank you, Mr. Speaker. business would defeat the purpose of the Local Government Code.
Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 WHEREFORE, the petition is hereby GRANTED. The decision of the
[now Sec. 131]. Common Limitations on the Taxing Powers of Local respondent Court of Appeals dated November 29, 1995 in CA-G.R. SP No.
Government Units." x x x 36801 is REVERSED and SET ASIDE.
MR. AQUINO (A.). Thank you Mr. Speaker. SO ORDERED.
Still on page 95, subparagraph 5, on taxes on the business of transportation.
This appears to be one of those being deemed to be exempted from the
taxing powers of the local government units. May we know the reason why
the transportation business is being excluded from the taxing powers of the
local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121
(now Sec. 131), line 16, paragraph 5. It states that local government units may
not impose taxes on the business of transportation, except as otherwise
provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II,
one can see there that provinces have the power to impose a tax on business
enjoying a franchise at the rate of not more than one-half of 1 percent of the
gross annual receipts. So, transportation contractors who are enjoying a
franchise would be subject to tax by the province. That is the exception, Mr.
Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes
by local government units on the carrier business. Local government units
may impose taxes on top of what is already being imposed by the National
Internal Revenue Code which is the so-called "common carriers tax." We do
not want a duplication of this tax, so we just provided for an exception under
Synopsis/Syllabi On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI,
alleging that the sinking of the vessel was due to the fault and negligence of
FIRST DIVISION LOADSTAR and its employees. It also prayed that PGAI be ordered to pay the
[G.R. No. 131621. September 28, 1999] insurance proceeds from the loss of the vessel directly to MIC, said amount
to be deducted from MICs claim from LOADSTAR.
LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS and THE
MANILA INSURANCE CO., INC., respondents. In its answer, LOADSTAR denied any liability for the loss of the shippers goods
and claimed that the sinking of its vessel was due to force majeure. PGAI, on
DECISION the other hand, averred that MIC had no cause of action against it, LOADSTAR
DAVIDE, JR., C.J.: being the party insured. In any event, PGAI was later dropped as a party
defendant after it paid the insurance proceeds to LOADSTAR.
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition
for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, As stated at the outset, the court a quo rendered judgment in favor of MIC,
seeks to reverse and set aside the following: (a) the 30 January 1997 prompting LOADSTAR to elevate the matter to the Court of Appeals, which,
decision[1] of the Court of Appeals in CA-G.R. CV No. 36401, which affirmed however, agreed with the trial court and affirmed its decision in toto.
the decision of 4 October 1991[2] of the Regional Trial Court of Manila, In dismissing LOADSTARs appeal, the appellate court made the following
Branch 16, in Civil Case No. 85-29110, ordering LOADSTAR to pay private observations:
respondent Manila Insurance Co. (hereafter MIC) the amount of P6,067,178,
with legal interest from the filing of the complaint until fully paid, P8,000 as 1) LOADSTAR cannot be considered a private carrier on the sole ground that
attorneys fees, and the costs of the suit; and (b) its resolution of 19 November there was a single shipper on that fateful voyage. The court noted that the
1997,[3] denying LOADSTARs motion for reconsideration of said decision. charter of the vessel was limited to the ship, but LOADSTAR retained control
over its crew.[4]
The facts are undisputed.
2) As a common carrier, it is the Code of Commerce, not the Civil Code, which
On 19 November 1984, LOADSTAR received on board its M/V Cherokee should be applied in determining the rights and liabilities of the parties.
(hereafter, the vessel) the following goods for shipment:
3) The vessel was not seaworthy because it was undermanned on the day of
a) 705 bales of lawanit hardwood; the voyage. If it had been seaworthy, it could have withstood the natural and
b) 27 boxes and crates of tilewood assemblies and others; and inevitable action of the sea on 20 November 1984, when the condition of the
sea was moderate. The vessel sank, not because of force majeure, but
c) 49 bundles of mouldings R & W (3) Apitong Bolidenized. because it was not seaworthy. LOADSTARS allegation that the sinking was
probably due to the convergence of the winds, as stated by a PAGASA expert,
The goods, amounting to P6,067,178, were insured for the same amount with
was not duly proven at the trial. The limited liability rule, therefore, is not
MIC against various risks including TOTAL LOSS BY TOTAL LOSS OF THE
applicable considering that, in this case, there was an actual finding of
VESSEL. The vessel, in turn, was insured by Prudential Guarantee &
negligence on the part of the carrier.[5]
Assurance, Inc. (hereafter PGAI) for P4 million. On 20 November 1984, on its
way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along 4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not
with its cargo, sank off Limasawa Island. As a result of the total loss of its apply because said provisions bind only the shipper/consignee and the
shipment, the consignee made a claim with LOADSTAR which, however, carrier. When MIC paid the shipper for the goods insured, it was subrogated
ignored the same. As the insurer, MIC paid P6,075,000 to the insured in full to the latters rights as against the carrier, LOADSTAR.[6]
settlement of its claim, and the latter executed a subrogation receipt
therefor.
5) There was a clear breach of the contract of carriage when the shippers LOADSTAR also maintains that the vessel was seaworthy. Before the fateful
goods never reached their destination. LOADSTARs defense of diligence of a voyage on 19 November 1984, the vessel was allegedly dry docked at Keppel
good father of a family in the training and selection of its crew is unavailing Philippines Shipyard and was duly inspected by the maritime safety engineers
because this is not a proper or complete defense in culpa contractual. of the Philippine Coast Guard, who certified that the ship was fit to undertake
a voyage. Its crew at the time was experienced, licensed and unquestionably
6) Art. 361 (of the Code of Commerce) has been judicially construed to mean competent. With all these precautions, there could be no other conclusion
that when goods are delivered on board a ship in good order and condition, except that LOADSTAR exercised the diligence of a good father of a family in
and the shipowner delivers them to the shipper in bad order and condition, ensuring the vessels seaworthiness.
it then devolves upon the shipowner to both allege and prove that the goods
were damaged by reason of some fact which legally exempts him from LOADSTAR further claims that it was not responsible for the loss of the cargo,
liability. Transportation of the merchandise at the risk and venture of the such loss being due to force majeure. It points out that when the vessel left
shipper means that the latter bears the risk of loss or deterioration of his Nasipit, Agusan del Norte, on 19 November 1984, the weather was fine until
goods arising from fortuitous events, force majeure, or the inherent nature the next day when the vessel sank due to strong waves. MICs witness,
and defects of the goods, but not those caused by the presumed negligence Gracelia Tapel, fully established the existence of two typhoons, WELFRING
or fault of the carrier, unless otherwise proved.[7] and YOLING, inside the Philippine area of responsibility. In fact, on 20
November 1984, signal no. 1 was declared over Eastern Visayas, which
The errors assigned by LOADSTAR boil down to a determination of the includes Limasawa Island. Tapel also testified that the convergence of winds
following issues: brought about by these two typhoons strengthened wind velocity in the area,
(1) Is the M/V Cherokee a private or a common carrier? naturally producing strong waves and winds, in turn, causing the vessel to list
and eventually sink.
(2) Did LOADSTAR observe due and/or ordinary diligence in these premises?
LOADSTAR goes on to argue that, being a private carrier, any agreement
Regarding the first issue, LOADSTAR submits that the vessel was a private limiting its liability, such as what transpired in this case, is valid. Since the
carrier because it was not issued a certificate of public convenience, it did not cargo was being shipped at owners risk, LOADSTAR was not liable for any loss
have a regular trip or schedule nor a fixed route, and there was only one or damage to the same. Therefore, the Court of Appeals erred in holding that
shipper, one consignee for a special cargo. the provisions of the bills of lading apply only to the shipper and the carrier,
In refutation, MIC argues that the issue as to the classification of the M/V and not to the insurer of the goods, which conclusion runs counter to the
Cherokee was not timely raised below; hence, it is barred by estoppel. While Supreme Courts ruling in the case of St. Paul Fire & Marine Insurance Co. v.
it is true that the vessel had on board only the cargo of wood products for Macondray & Co., Inc.,[9] and National Union Fire Insurance Company of
delivery to one consignee, it was also carrying passengers as part of its regular Pittsburg v. Stolt-Nielsen Phils., Inc.[10]
business. Moreover, the bills of lading in this case made no mention of any Finally, LOADSTAR avers that MICs claim had already prescribed, the case
charter party but only a statement that the vessel was a general cargo carrier. having been instituted beyond the period stated in the bills of lading for
Neither was there any special arrangement between LOADSTAR and the instituting the same suits based upon claims arising from shortage, damage,
shipper regarding the shipment of the cargo. The singular fact that the vessel or non-delivery of shipment shall be instituted within sixty days from the
was carrying a particular type of cargo for one shipper is not sufficient to accrual of the right of action. The vessel sank on 20 November 1984; yet, the
convert the vessel into a private carrier. case for recovery was filed only on 4 February 1985.
As regards the second error, LOADSTAR argues that as a private carrier, it MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding
cannot be presumed to have been negligent, and the burden of proving that the loss of the cargo was due to force majeure, because the same
otherwise devolved upon MIC.[8] concurred with LOADSTARs fault or negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the court below; case of De Guzman v. Court of Appeals,[15] the Court juxtaposed the
hence, the same must be deemed waived. statutory definition of common carriers with the peculiar circumstances of
that case, viz.:
Thirdly, the limited liability theory is not applicable in the case at bar because
LOADSTAR was at fault or negligent, and because it failed to maintain a The Civil Code defines common carriers in the following terms:
seaworthy vessel. Authorizing the voyage notwithstanding its knowledge of a
typhoon is tantamount to negligence. Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers
We find no merit in this petition. or goods or both, by land, water, or air for compensation, offering their
services to the public.
Anent the first assigned error, we hold that LOADSTAR is a common carrier.
It is not necessary that the carrier be issued a certificate of public The above article makes no distinction between one whose principal business
convenience, and this public character is not altered by the fact that the activity is the carrying of persons or goods or both, and one who does such
carriage of the goods in question was periodic, occasional, episodic or carrying only as an ancillary activity (in local idiom, as a sideline. Article 1732
unscheduled. also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one
In support of its position, LOADSTAR relied on the 1968 case of Home offering such service on an occasional, episodic or unscheduled basis. Neither
Insurance Co. v. American Steamship Agencies, Inc.,[11] where this Court held does Article 1732 distinguish between a carrier offering its services to the
that a common carrier transporting special cargo or chartering the vessel to general public, i.e., the general community or population, and one who offers
a special person becomes a private carrier that is not subject to the provisions services or solicits business only from a narrow segment of the general
of the Civil Code. Any stipulation in the charter party absolving the owner population. We think that Article 1733 deliberately refrained from making
from liability for loss due to the negligence of its agent is void only if the strict such distinctions.
policy governing common carriers is upheld. Such policy has no force where
the public at large is not involved, as in the case of a ship totally chartered for xxx
the use of a single party. LOADSTAR also cited Valenzuela Hardwood and
Industrial Supply, Inc. v. Court of Appeals[12] and National Steel Corp. v. Court It appears to the Court that private respondent is properly characterized as a
of Appeals,[13] both of which upheld the Home Insurance doctrine. common carrier even though he merely back-hauled goods for other
merchants from Manila to Pangasinan, although such backhauling was done
These cases invoked by LOADSTAR are not applicable in the case at bar for on a periodic or occasional rather than regular or scheduled manner, and
simple reason that the factual settings are different. The records do not even though private respondents principal occupation was not the carriage
disclose that the M/V Cherokee, on the date in question, undertook to carry of goods for others. There is no dispute that private respondent charged his
a special cargo or was chartered to a special person only. There was no customers a fee for hauling their goods; that that fee frequently fell below
charter party. The bills of lading failed to show any special arrangement, but commercial freight rates is not relevant here.
only a general provision to the effect that the M/V Cherokee was a general
cargo carrier.[14] Further, the bare fact that the vessel was carrying a The Court of Appeals referred to the fact that private respondent held no
particular type of cargo for one shipper, which appears to be purely certificate of public convenience, and concluded he was not a common
coincidental, is not reason enough to convert the vessel from a common to a carrier. This is palpable error. A certificate of public convenience is not a
private carrier, especially where, as in this case, it was shown that the vessel requisite for the incurring of liability under the Civil Code provisions governing
was also carrying passengers. common carriers. That liability arises the moment a person or firm acts as a
common carrier, without regard to whether or not such carrier has also
Under the facts and circumstances obtaining in this case, LOADSTAR fits the complied with the requirements of the applicable regulatory statute and
definition of a common carrier under Article 1732 of the Civil Code. In the implementing regulations and has been granted a certificate of public
convenience or other franchise. To exempt private respondent from the subrogee is necessarily subject to the same limitations and restrictions. We
liabilities of a common carrier because he has not secured the necessary do not agree. In the first place, the cases relied on by LOADSTAR involved a
certificate of public convenience, would be offensive to sound public policy; limitation on the carriers liability to an amount fixed in the bill of lading which
that would be to reward private respondent precisely for failing to comply the parties may enter into, provided that the same was freely and fairly
with applicable statutory requirements. The business of a common carrier agreed upon (Articles 1749-1750). On the other hand, the stipulation in the
impinges directly and intimately upon the safety and well being and property case at bar effectively reduces the common carriers liability for the loss or
of those members of the general community who happen to deal with such destruction of the goods to a degree less than extraordinary (Articles 1744
carrier. The law imposes duties and liabilities upon common carriers for the and 1745), that is, the carrier is not liable for any loss or damage to shipments
safety and protection of those who utilize their services and the law cannot made at owners risk. Such stipulation is obviously null and void for being
allow a common carrier to render such duties and liabilities merely facultative contrary to public policy.[20] It has been said:
by simply failing to obtain the necessary permits and authorizations.
Three kinds of stipulations have often been made in a bill of lading. The first
Moving on to the second assigned error, we find that the M/V Cherokee was is one exempting the carrier from any and all liability for loss or damage
not seaworthy when it embarked on its voyage on 19 November 1984. The occasioned by its own negligence. The second is one providing for an
vessel was not even sufficiently manned at the time. For a vessel to be unqualified limitation of such liability to an agreed valuation. And the third is
seaworthy, it must be adequately equipped for the voyage and manned with one limiting the liability of the carrier to an agreed valuation unless the
a sufficient number of competent officers and crew. The failure of a common shipper declares a higher value and pays a higher rate of freight. According to
carrier to maintain in seaworthy condition its vessel involved in a contract of an almost uniform weight of authority, the first and second kinds of
carriage is a clear breach of its duty prescribed in Article 1755 of the Civil stipulations are invalid as being contrary to public policy, but the third is valid
Code.[16] and enforceable.[21]
Neither do we agree with LOADSTARs argument that the limited liability Since the stipulation in question is null and void, it follows that when MIC paid
theory should be applied in this case. The doctrine of limited liability does not the shipper, it was subrogated to all the rights which the latter has against
apply where there was negligence on the part of the vessel owner or the common carrier, LOADSTAR.
agent.[17] LOADSTAR was at fault or negligent in not maintaining a seaworthy
vessel and in having allowed its vessel to sail despite knowledge of an Neither is there merit to the contention that the claim in this case was barred
approaching typhoon. In any event, it did not sink because of any storm that by prescription. MICs cause of action had not yet prescribed at the time it was
may be deemed as force majeure, inasmuch as the wind condition in the area concerned. Inasmuch as neither the Civil Code nor the Code of Commerce
where it sank was determined to be moderate. Since it was remiss in the states a specific prescriptive period on the matter, the Carriage of Goods by
performance of its duties, LOADSTAR cannot hide behind the limited liability Sea Act (COGSA) which provides for a one-year period of limitation on claims
doctrine to escape responsibility for the loss of the vessel and its cargo. for loss of, or damage to, cargoes sustained during transit may be applied
suppletorily to the case at bar. This one-year prescriptive period also applies
LOADSTAR also claims that the Court of Appeals erred in holding it liable for to the insurer of the good.[22] In this case, the period for filing the action for
the loss of the goods, in utter disregard of this Courts pronouncements in St. recovery has not yet elapsed. Moreover, a stipulation reducing the one-year
Paul Fire & Marine Ins. Co. v. Macondray & Co., Inc.,[18] and National Union period is null and void;[23] it must, accordingly, be struck down.
Fire Insurance v. Stolt-Nielsen Phils., Inc.[19] It was ruled in these two cases
that after paying the claim of the insured for damages under the insurance WHEREFORE, the instant petition is DENIED and the challenged decision of 30
policy, the insurer is subrogated merely to the rights of the assured, that is, it January 1997 of the Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED.
can recover only the amount that may, in turn, be recovered by the latter. Costs against petitioner.
Since the right of the assured in case of loss or damage to the goods is limited SO ORDERED.
or restricted by the provisions in the bills of lading, a suit by the insurer as
FIRST DIVISION British Pageant tour. Despite several demands, respondent company refused
to reimburse the amount, contending that the same was non-refundable.[1]
[G.R. No. 138334. August 25, 2003] Petitioner was thus constrained to file a complaint against respondent for
ESTELA L. CRISOSTOMO, petitioner, vs. the Court of Appeals and CARAVAN breach of contract of carriage and damages, which was docketed as Civil Case
TRAVEL & TOURS INTERNATIONAL, INC., respondents. No. 92-133 and raffled to Branch 59 of the Regional Trial Court of Makati City.

DECISION In her complaint,[2] petitioner alleged that her failure to join Jewels of Europe
was due to respondents fault since it did not clearly indicate the departure
YNARES-SANTIAGO, J.: date on the plane ticket. Respondent was also negligent in informing her of
In May 1991, petitioner Estela L. Crisostomo contracted the services of the wrong flight schedule through its employee Menor. She insisted that the
respondent Caravan Travel and Tours International, Inc. to arrange and British Pageant was merely a substitute for the Jewels of Europe tour, such
facilitate her booking, ticketing and accommodation in a tour dubbed Jewels that the cost of the former should be properly set-off against the sum paid
of Europe. The package tour included the countries of England, Holland, for the latter.
Germany, Austria, Liechstenstein, Switzerland and France at a total cost of For its part, respondent company, through its Operations Manager,
P74,322.70. Petitioner was given a 5% discount on the amount, which Concepcion Chipeco, denied responsibility for petitioners failure to join the
included airfare, and the booking fee was also waived because petitioners first tour. Chipeco insisted that petitioner was informed of the correct
niece, Meriam Menor, was respondent companys ticketing manager. departure date, which was clearly and legibly printed on the plane ticket. The
Pursuant to said contract, Menor went to her aunts residence on June 12, travel documents were given to petitioner two days ahead of the scheduled
1991 a Wednesday to deliver petitioners travel documents and plane tickets. trip. Petitioner had only herself to blame for missing the flight, as she did not
Petitioner, in turn, gave Menor the full payment for the package tour. Menor bother to read or confirm her flight schedule as printed on the ticket.
then told her to be at the Ninoy Aquino International Airport (NAIA) on Respondent explained that it can no longer reimburse the amount paid for
Saturday, two hours before her flight on board British Airways. Jewels of Europe, considering that the same had already been remitted to its
Without checking her travel documents, petitioner went to NAIA on Saturday, principal in Singapore, Lotus Travel Ltd., which had already billed the same
June 15, 1991, to take the flight for the first leg of her journey from Manila to even if petitioner did not join the tour. Lotus European tour organizer, Insight
Hongkong. To petitioners dismay, she discovered that the flight she was International Tours Ltd., determines the cost of a package tour based on a
supposed to take had already departed the previous day. She learned that minimum number of projected participants. For this reason, it is accepted
her plane ticket was for the flight scheduled on June 14, 1991. She thus called industry practice to disallow refund for individuals who failed to take a
up Menor to complain. booked tour.[3]

Subsequently, Menor prevailed upon petitioner to take another tour the Lastly, respondent maintained that the British Pageant was not a substitute
British Pageant which included England, Scotland and Wales in its itinerary. for the package tour that petitioner missed. This tour was independently
For this tour package, petitioner was asked anew to pay US$785.00 or procured by petitioner after realizing that she made a mistake in missing her
P20,881.00 (at the then prevailing exchange rate of P26.60). She gave flight for Jewels of Europe. Petitioner was allowed to make a partial payment
respondent US$300 or P7,980.00 as partial payment and commenced the trip of only US$300.00 for the second tour because her niece was then an
in July 1991. employee of the travel agency. Consequently, respondent prayed that
petitioner be ordered to pay the balance of P12,901.00 for the British Pageant
Upon petitioners return from Europe, she demanded from respondent the package tour.
reimbursement of P61,421.70, representing the difference between the sum
she paid for Jewels of Europe and the amount she owed respondent for the After due proceedings, the trial court rendered a decision,[4] the dispositive
part of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows: annum shall be additionally imposed on the total obligation until payment
thereof is satisfied. The award of attorneys fees is DELETED. Costs against the
1. Ordering the defendant to return and/or refund to the plaintiff the amount
plaintiff-appellee.
of Fifty Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three
Centavos (P53,989.43) with legal interest thereon at the rate of twelve SO ORDERED.[6]
percent (12%) per annum starting January 16, 1992, the date when the
complaint was filed; Upon denial of her motion for reconsideration,[7] petitioner filed the instant
petition under Rule 45 on the following grounds:
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand
(P5,000.00) Pesos as and for reasonable attorneys fees; I

3. Dismissing the defendants counterclaim, for lack of merit; and It is respectfully submitted that the Honorable Court of Appeals committed a
reversible error in reversing and setting aside the decision of the trial court
4. With costs against the defendant. by ruling that the petitioner is not entitled to a refund of the cost of unavailed
Jewels of Europe tour she being equally, if not more, negligent than the
SO ORDERED.[5] private respondent, for in the contract of carriage the common carrier is
The trial court held that respondent was negligent in erroneously advising obliged to observe utmost care and extra-ordinary diligence which is higher
petitioner of her departure date through its employee, Menor, who was not in degree than the ordinary diligence required of the passenger. Thus, even if
presented as witness to rebut petitioners testimony. However, petitioner the petitioner and private respondent were both negligent, the petitioner
should have verified the exact date and time of departure by looking at her cannot be considered to be equally, or worse, more guilty than the private
ticket and should have simply not relied on Menors verbal representation. respondent. At best, petitioners negligence is only contributory while the
The trial court thus declared that petitioner was guilty of contributory private respondent [is guilty] of gross negligence making the principle of pari
negligence and accordingly, deducted 10% from the amount being claimed as delicto inapplicable in the case;
refund. II
Respondent appealed to the Court of Appeals, which likewise found both The Honorable Court of Appeals also erred in not ruling that the Jewels of
parties to be at fault. However, the appellate court held that petitioner is Europe tour was not indivisible and the amount paid therefor refundable;
more negligent than respondent because as a lawyer and well-traveled
person, she should have known better than to simply rely on what was told III
to her. This being so, she is not entitled to any form of damages. Petitioner
also forfeited her right to the Jewels of Europe tour and must therefore pay The Honorable Court erred in not granting to the petitioner the consequential
respondent the balance of the price for the British Pageant tour. The damages due her as a result of breach of contract of carriage.[8]
dispositive portion of the judgment appealed from reads as follows: Petitioner contends that respondent did not observe the standard of care
WHEREFORE, premises considered, the decision of the Regional Trial Court required of a common carrier when it informed her wrongly of the flight
dated October 26, 1995 is hereby REVERSED and SET ASIDE. A new judgment schedule. She could not be deemed more negligent than respondent since
is hereby ENTERED requiring the plaintiff-appellee to pay to the defendant- the latter is required by law to exercise extraordinary diligence in the
appellant the amount of P12,901.00, representing the balance of the price of fulfillment of its obligation. If she were negligent at all, the same is merely
the British Pageant Package Tour, the same to earn legal interest at the rate contributory and not the proximate cause of the damage she suffered. Her
of SIX PERCENT (6%) per annum, to be computed from the time the loss could only be attributed to respondent as it was the direct consequence
counterclaim was filed until the finality of this decision. After this decision of its employees gross negligence.
becomes final and executory, the rate of TWELVE PERCENT (12%) interest per Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain however, respondent is not a common carrier but a travel agency. It is thus
person or association of persons obligate themselves to transport persons, not bound under the law to observe extraordinary diligence in the
things, or news from one place to another for a fixed price.[9] Such person or performance of its obligation, as petitioner claims.
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 Since the contract between the parties is an ordinary one for services, the
defined under Article 1732 of the Civil Code as persons, corporations, firms standard of care required of respondent is that of a good father of a family
or associations engaged in the business of carrying or transporting passengers under Article 1173 of the Civil Code.[12] This connotes reasonable care
or goods or both, by land, water or air, for compensation, offering their consistent with that which an ordinarily prudent person would have observed
services to the public. when confronted with a similar situation. The test to determine whether
negligence attended the performance of an obligation is: did the defendant
It is obvious from the above definition that respondent is not an entity in doing the alleged negligent act use that reasonable care and caution which
engaged in the business of transporting either passengers or goods and is an ordinarily prudent person would have used in the same situation? If not,
therefore, neither a private nor a common carrier. Respondent did not then he is guilty of negligence.[13]
undertake to transport petitioner from one place to another since its
covenant with its customers is simply to make travel arrangements in their In the case at bar, the lower court found Menor negligent when she allegedly
behalf. Respondents services as a travel agency include procuring tickets and informed petitioner of the wrong day of departure. Petitioners testimony was
facilitating travel permits or visas as well as booking customers for tours. accepted as indubitable evidence of Menors alleged negligent act since
respondent did not call Menor to the witness stand to refute the allegation.
While petitioner concededly bought her plane ticket through the efforts of The lower court applied the presumption under Rule 131, Section 3 (e)[14] of
respondent company, this does not mean that the latter ipso facto is a the Rules of Court that evidence willfully suppressed would be adverse if
common carrier. At most, respondent acted merely as an agent of the airline, produced and thus considered petitioners uncontradicted testimony to be
with whom petitioner ultimately contracted for her carriage to Europe. sufficient proof of her claim.
Respondents obligation to petitioner in this regard was simply to see to it that
petitioner was properly booked with the airline for the appointed date and On the other hand, respondent has consistently denied that Menor was
time. Her transport to the place of destination, meanwhile, pertained directly negligent and maintains that petitioners assertion is belied by the evidence
to the airline. on record. The date and time of departure was legibly written on the plane
ticket and the travel papers were delivered two days in advance precisely so
The object of petitioners contractual relation with respondent is the latters that petitioner could prepare for the trip. It performed all its obligations to
service of arranging and facilitating petitioners booking, ticketing and enable petitioner to join the tour and exercised due diligence in its dealings
accommodation in the package tour. In contrast, the object of a contract of with the latter.
carriage is the transportation of passengers or goods. It is in this sense that
the contract between the parties in this case was an ordinary one for services We agree with respondent.
and not one of carriage. Petitioners submission is premised on a wrong Respondents failure to present Menor as witness to rebut petitioners
assumption. testimony could not give rise to an inference unfavorable to the former.
The nature of the contractual relation between petitioner and respondent is Menor was already working in France at the time of the filing of the
determinative of the degree of care required in the performance of the latters complaint,[15] thereby making it physically impossible for respondent to
obligation under the contract. For reasons of public policy, a common carrier present her as a witness. Then too, even if it were possible for respondent to
in a contract of carriage is bound by law to carry passengers as far as human secure Menors testimony, the presumption under Rule 131, Section 3(e)
care and foresight can provide using the utmost diligence of very cautious would still not apply. The opportunity and possibility for obtaining Menors
persons and with due regard for all the circumstances.[11] As earlier stated, testimony belonged to both parties, considering that Menor was not just
respondents employee, but also petitioners niece. It was thus error for the
lower court to invoke the presumption that respondent willfully suppressed so demands.[20] There is no fixed standard of diligence applicable to each
evidence under Rule 131, Section 3(e). Said presumption would logically be and every contractual obligation and each case must be determined upon its
inoperative if the evidence is not intentionally omitted but is simply particular facts. The degree of diligence required depends on the
unavailable, or when the same could have been obtained by both parties.[16] 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
In sum, we do not agree with the finding of the lower court that Menors particulars of each case.[21]
negligence concurred with the negligence of petitioner and resultantly
caused damage to the latter. Menors negligence was not sufficiently proved, The lower court declared that respondents employee was negligent. This
considering that the only evidence presented on this score was petitioners factual finding, however, is not supported by the evidence on record. While
uncorroborated narration of the events. It is well-settled that the party factual findings below are generally conclusive upon this court, the rule is
alleging a fact has the burden of proving it and a mere allegation cannot take subject to certain exceptions, as when the trial court overlooked,
the place of evidence.[17] If the plaintiff, upon whom rests the burden of misunderstood, or misapplied some facts or circumstances of weight and
proving his cause of action, fails to show in a satisfactory manner facts upon substance which will affect the result of the case.[22]
which he bases his claim, the defendant is under no obligation to prove his
exception or defense.[18] In the case at bar, the evidence on record shows that respondent company
performed its duty diligently and did not commit any contractual breach.
Contrary to petitioners claim, the evidence on record shows that respondent Hence, petitioner cannot recover and must bear her own damage.
exercised due diligence in performing its obligations under the contract and
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of
followed standard procedure in rendering its services to petitioner. As
correctly observed by the lower court, the plane ticket[19] issued to the Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly,
petitioner clearly reflected the departure date and time, contrary to petitioner is ordered to pay respondent the amount of P12,901.00
petitioners contention. The travel documents, consisting of the tour itinerary, representing the balance of the price of the British Pageant Package Tour,
vouchers and instructions, were likewise delivered to petitioner two days with legal interest thereon at the rate of 6% per annum, to be computed from
prior to the trip. Respondent also properly booked petitioner for the tour, the time the counterclaim was filed until the finality of this Decision. After
prepared the necessary documents and procured the plane tickets. It this Decision becomes final and executory, the rate of 12% per annum shall
arranged petitioners hotel accommodation as well as food, land transfers and be imposed until the obligation is fully settled, this interim period being
sightseeing excursions, in accordance with its avowed undertaking. deemed to be by then an equivalent to a forbearance of credit.[23]

Therefore, it is clear that respondent performed its prestation under the SO ORDERED.
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
G.R. No. 186312 June 29, 2010 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
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners, underwater.
vs. The passengers, who had put on their life jackets, struggled to get out of the
SUN HOLIDAYS, INC., Respondent. 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
DECISION were still trapped under the boat. The captain replied "Iligtas niyo na lang ang
CARPIO MORALES, J.: sarili niyo" (Just save yourselves).

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January Help came after about 45 minutes when two boats owned by Asia Divers in
25, 20011 against Sun Holidays, Inc. (respondent) with the Regional Trial Sabang, Puerto Galera passed by the capsized M/B Coco Beach III. Boarded
Court (RTC) of Pasig City for damages arising from the death of their son on those two boats were 22 persons, consisting of 18 passengers and four
Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000 crew members, who were brought to Pisa Island. Eight passengers, including
on board the boat M/B Coco Beach III that capsized en route to Batangas from petitioners’ son and his wife, died during the incident.
Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach At the time of Ruelito’s death, he was 28 years old and employed as a
Island Resort (Resort) owned and operated by respondent. contractual worker for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi
The stay of the newly wed Ruelito and his wife at the Resort from September Arabia, with a basic monthly salary of $900.3
9 to 11, 2000 was by virtue of a tour package-contract with respondent that Petitioners, by letter of October 26, 2000,4 demanded indemnification from
included transportation to and from the Resort and the point of departure in respondent for the death of their son in the amount of at least ₱4,000,000.
Batangas.
Replying, respondent, by letter dated November 7, 2000,5 denied any
Miguel C. Matute (Matute),2 a scuba diving instructor and one of the responsibility for the incident which it considered to be a fortuitous event. It
survivors, gave his account of the incident that led to the filing of the nevertheless offered, as an act of commiseration, the amount of ₱10,000 to
complaint as follows: petitioners upon their signing of a waiver.
Matute stayed at the Resort from September 8 to 11, 2000. He was originally As petitioners declined respondent’s offer, they filed the Complaint, as earlier
scheduled to leave the Resort in the afternoon of September 10, 2000, but reflected, alleging that respondent, as a common carrier, was guilty of
was advised to stay for another night because of strong winds and heavy negligence in allowing M/B Coco Beach III to sail notwithstanding storm
rains. warning bulletins issued by the Philippine Atmospheric, Geophysical and
On September 11, 2000, as it was still windy, Matute and 25 other Resort Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of
guests including petitioners’ son and his wife trekked to the other side of the September 11, 2000.6
Coco Beach mountain that was sheltered from the wind where they boarded In its Answer,7 respondent denied being a common carrier, alleging that its
M/B Coco Beach III, which was to ferry them to Batangas. boats are not available to the general public as they only ferry Resort guests
Shortly after the boat sailed, it started to rain. As it moved farther away from and crew members. Nonetheless, it claimed that it exercised the utmost
Puerto Galera and into the open seas, the rain and wind got stronger, causing diligence in ensuring the safety of its passengers; contrary to petitioners’
the boat to tilt from side to side and the captain to step forward to the front, allegation, there was no storm on September 11, 2000 as the Coast Guard in
leaving the wheel to one of the crew members. fact cleared the voyage; and M/B Coco Beach III was not filled to capacity and
had sufficient life jackets for its passengers. By way of Counterclaim,
respondent alleged that it is entitled to an award for attorney’s fees and The petition is impressed with merit.
litigation expenses amounting to not less than ₱300,000.
Petitioners correctly rely on De Guzman v. Court of Appeals17 in
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort characterizing respondent as a common carrier.
customarily requires four conditions to be met before a boat is allowed to
sail, to wit: (1) the sea is calm, (2) there is clearance from the Coast Guard, (3) The Civil Code defines "common carriers" in the following terms:
there is clearance from the captain and (4) there is clearance from the Article 1732. Common carriers are persons, corporations, firms or
Resort’s assistant manager.8 He added that M/B Coco Beach III met all four associations engaged in the business of carrying or transporting passengers
conditions on September 11, 2000,9 but a subasco or squall, characterized by or goods or both, by land, water, or air for compensation, offering their
strong winds and big waves, suddenly occurred, causing the boat to services to the public.
capsize.10
The above article makes no distinction between one whose principal business
By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed activity is the carrying of persons or goods or both, and one who does such
petitioners’ Complaint and respondent’s Counterclaim. carrying only as an ancillary activity (in local idiom, as "a sideline"). Article
Petitioners’ Motion for Reconsideration having been denied by Order dated 1732 also carefully avoids making any distinction between a person or
September 2, 2005,12 they appealed to the Court of Appeals. enterprise offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled basis.
By Decision of August 19, 2008,13 the appellate court denied petitioners’ Neither does Article 1732 distinguish between a carrier offering its services
appeal, holding, among other things, that the trial court correctly ruled that to the "general public," i.e., the general community or population, and one
respondent is a private carrier which is only required to observe ordinary who offers services or solicits business only from a narrow segment of the
diligence; that respondent in fact observed extraordinary diligence in general population. We think that Article 1733 deliberately refrained from
transporting its guests on board M/B Coco Beach III; and that the proximate making such distinctions.
cause of the incident was a squall, a fortuitous event.
So understood, the concept of "common carrier" under Article 1732 may be
Petitioners’ Motion for Reconsideration having been denied by Resolution seen to coincide neatly with the notion of "public service," under the Public
dated January 16, 2009,14 they filed the present Petition for Review.15 Service Act (Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in the Civil Code.
Petitioners maintain the position they took before the trial court, adding that Under Section 13, paragraph (b) of the Public Service Act, "public service"
respondent is a common carrier since by its tour package, the transporting of includes:
its guests is an integral part of its resort business. They inform that another
division of the appellate court in fact held respondent liable for damages to . . . every person that now or hereafter may own, operate, manage, or control
the other survivors of the incident. in the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
Upon the other hand, respondent contends that petitioners failed to present purposes, any common carrier, railroad, street railway, traction railway,
evidence to prove that it is a common carrier; that the Resort’s ferry services subway motor vehicle, either for freight or passenger, or both, with or
for guests cannot be considered as ancillary to its business as no income is without fixed route and whatever may be its classification, freight or carrier
derived therefrom; that it exercised extraordinary diligence as shown by the service of any class, express service, steamboat, or steamship line, pontines,
conditions it had imposed before allowing M/B Coco Beach III to sail; that the ferries and water craft, engaged in the transportation of passengers or freight
incident was caused by a fortuitous event without any contributory or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-
negligence on its part; and that the other case wherein the appellate court refrigeration plant, canal, irrigation system, gas, electric light, heat and
held it liable for damages involved different plaintiffs, issues and evidence.16 power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations and Respondent nevertheless harps on its strict compliance with the earlier
other similar public services . . .18 (emphasis and underscoring supplied.) mentioned conditions of voyage before it allowed M/B Coco Beach III to sail
on September 11, 2000. Respondent’s position does not impress.
Indeed, respondent is a common carrier. Its ferry services are so intertwined
with its main business as to be properly considered ancillary thereto. The The evidence shows that PAGASA issued 24-hour public weather forecasts
constancy of respondent’s ferry services in its resort operations is and tropical cyclone warnings for shipping on September 10 and 11, 2000
underscored by its having its own Coco Beach boats. And the tour packages advising of tropical depressions in Northern Luzon which would also affect
it offers, which include the ferry services, may be availed of by anyone who the province of Mindoro.22 By the testimony of Dr. Frisco Nilo, supervising
can afford to pay the same. These services are thus available to the public. weather specialist of PAGASA, squalls are to be expected under such weather
condition.23
That respondent does not charge a separate fee or fare for its ferry services
is of no moment. It would be imprudent to suppose that it provides said A very cautious person exercising the utmost diligence would thus not brave
services at a loss. The Court is aware of the practice of beach resort operators such stormy weather and put other people’s lives at risk. The extraordinary
offering tour packages to factor the transportation fee in arriving at the tour diligence required of common carriers demands that they take care of the
package price. That guests who opt not to avail of respondent’s ferry services goods or lives entrusted to their hands as if they were their own. This
pay the same amount is likewise inconsequential. These guests may only be respondent failed to do.
deemed to have overpaid.
Respondent’s insistence that the incident was caused by a fortuitous event
As De Guzman instructs, Article 1732 of the Civil Code defining "common does not impress either.
carriers" has deliberately refrained from making distinctions on whether the
carrying of persons or goods is the carrier’s principal business, whether it is The elements of a "fortuitous event" are: (a) the cause of the unforeseen and
offered on a regular basis, or whether it is offered to the general public. The unexpected occurrence, or the failure of the debtors to comply with their
intent of the law is thus to not consider such distinctions. Otherwise, there is obligations, must have been independent of human will; (b) the event that
no telling how many other distinctions may be concocted by unscrupulous constituted the caso fortuito must have been impossible to foresee or, if
businessmen engaged in the carrying of persons or goods in order to avoid foreseeable, impossible to avoid; (c) the occurrence must have been such as
the legal obligations and liabilities of common carriers. 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
Under the Civil Code, common carriers, from the nature of their business and the aggravation of the resulting injury to the creditor.24
for reasons of public policy, are bound to observe extraordinary diligence for
the safety of the passengers transported by them, according to all the To fully free a common carrier from any liability, the fortuitous event must
circumstances of each case.19 They are bound to carry the passengers safely have been the proximate and only cause of the loss. And it should have
as far as human care and foresight can provide, using the utmost diligence of exercised due diligence to prevent or minimize the loss before, during and
very cautious persons, with due regard for all the circumstances.20 after the occurrence of the fortuitous event.25

When a passenger dies or is injured in the discharge of a contract of carriage, Respondent cites the squall that occurred during the voyage as the fortuitous
it is presumed that the common carrier is at fault or negligent. In fact, there event that overturned M/B Coco Beach III. As reflected above, however, the
is even no need for the court to make an express finding of fault or negligence occurrence of squalls was expected under the weather condition of
on the part of the common carrier. This statutory presumption may only be September 11, 2000. Moreover, evidence shows that M/B Coco Beach III
overcome by evidence that the carrier exercised extraordinary diligence.21 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 2/3 x [80 - 28]
demonstrate that it exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the squall. 2/3 x [52]

Article 176427 vis-à-vis Article 220628 of the Civil Code holds the common Life expectancy =
carrier in breach of its contract of carriage that results in the death of a 35
passenger liable to pay the following: (1) indemnity for death, (2) indemnity
for loss of earning capacity and (3) moral damages. Documentary evidence shows that Ruelito was earning a basic monthly salary
of $90035 which, when converted to Philippine peso applying the annual
Petitioners are entitled to indemnity for the death of Ruelito which is fixed at average exchange rate of $1 = ₱44 in 2000,36 amounts to ₱39,600. Ruelito’s
₱50,000.29 net earning capacity is thus computed as follows:
As for damages representing unearned income, the formula for its Net Earning Capacity
computation is:
= life expectancy x (gross annual income - reasonable and necessary living
Net Earning Capacity = life expectancy x (gross annual income - reasonable expenses).
and necessary living expenses).
= 35 x (₱475,200 - ₱237,600)
Life expectancy is determined in accordance with the formula:
= 35 x (₱237,600)
2 / 3 x [80 — age of deceased at the time of death]30
Net Earning Capacity
The first factor, i.e., life expectancy, is computed by applying the formula (2/3
x [80 — age at death]) adopted in the American Expectancy Table of Mortality = ₱8,316,000
or the Actuarial of Combined Experience Table of Mortality.31 Respecting the award of moral damages, since respondent common carrier’s
The second factor is computed by multiplying the life expectancy by the net breach of contract of carriage resulted in the death of petitioners’ son,
earnings of the deceased, i.e., the total earnings less expenses necessary in following Article 1764 vis-à-vis Article 2206 of the Civil Code, petitioners are
the creation of such earnings or income and less living and other incidental entitled to moral damages.
expenses.32 The loss is not equivalent to the entire earnings of the deceased, Since respondent failed to prove that it exercised the extraordinary diligence
but only such portion as he would have used to support his dependents or required of common carriers, it is presumed to have acted recklessly, thus
heirs. Hence, to be deducted from his gross earnings are the necessary warranting the award too of exemplary damages, which are granted in
expenses supposed to be used by the deceased for his own needs.33 contractual obligations if the defendant acted in a wanton, fraudulent,
In computing the third factor – necessary living expense, Smith Bell Dodwell reckless, oppressive or malevolent manner.37
Shipping Agency Corp. v. Borja34 teaches that when, as in this case, there is Under the circumstances, it is reasonable to award petitioners the amount of
no showing that the living expenses constituted the smaller percentage of the ₱100,000 as moral damages and ₱100,000 as exemplary
gross income, the living expenses are fixed at half of the gross income. damages.381avvphi1
Applying the above guidelines, the Court determines Ruelito's life expectancy Pursuant to Article 220839 of the Civil Code, attorney's fees may also be
as follows: awarded where exemplary damages are awarded. The Court finds that 10%
Life expectancy = of the total amount adjudged against respondent is reasonable for the
purpose.
2/3 x [80 - age of deceased at the time of death]
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40 teaches that when respondent to pay petitioners the following: (1) ₱50,000 as indemnity for the
an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, death of Ruelito Cruz; (2) ₱8,316,000 as indemnity for Ruelito’s loss of earning
delicts or quasi-delicts is breached, the contravenor can be held liable for capacity; (3) ₱100,000 as moral damages; (4) ₱100,000 as exemplary
payment of interest in the concept of actual and compensatory damages, damages; (5) 10% of the total amount adjudged against respondent as
subject to the following rules, to wit — attorneys fees; and (6) the costs of suit.
1. When the obligation is breached, and it consists in the payment of a sum The total amount adjudged against respondent shall earn interest at the rate
of money, i.e., a loan or forbearance of money, the interest due should be of 12% per annum computed from the finality of this decision until full
that which may have been stipulated in writing. Furthermore, the interest payment.
due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be SO ORDERED.
computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed
at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except when
or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which
time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in
any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality
until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit. (emphasis supplied).
Since the amounts payable by respondent have been determined with
certainty only in the present petition, the interest due shall be computed
upon the finality of this decision at the rate of 12% per annum until
satisfaction, in accordance with paragraph number 3 of the immediately cited
guideline in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED
and SET ASIDE. Judgment is rendered in favor of petitioners ordering