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De Guzman vs.

CA (GR L-47822, 22 December 1988)

Third Division, Feliciano (J): 4 concur
The Supreme Court denied the Petition for Review on
Facts: Ernesto Cendanñ a, a junk dealer, was engaged in buying Certiorari; and affirmed the Decision of the Court of Appeals
up used bottles and scrap metal in Pangasinan. Upon dated 3 August 1977; without pronouncement as to costs.
gathering sufficient quantities of such scrap material,
Cendanñ a would bring such material to Manila for resale. He 1. Common carriers defined; Article 1732 NCC
utilized 2 six-wheeler trucks which he owned for hauling the The Civil Code defines “common carriers” in the
material to Manila. On the return trip to Pangasinan, Cendanñ a following terms (Article 1732): “Common carriers
would load his vehicles with cargo which various merchants are persons, corporations, firms or associations
wanted delivered to differing establishments in Pangasinan. engaged in the business of carrying or transporting
For that service, Cendanñ a charged freight rates which were passengers or goods or both, by land, water, or air for
commonly lower than regular commercial rates. Sometime in compensation, offering their services to the public.”
November 1970, Pedro de Guzman, a merchant and 2. Article 1732 NCC makes no distinctions
authorized dealer of General Milk Company (Philippines), Inc. Article 1732 of the Civil Code makes no distinction
in Urdaneta, Pangasinan, contracted with Cendanñ a for the between one whose principal business activity is the
hauling of 750 cartons of Liberty filled milk from a carrying of persons or goods or both, and one who
warehouse of General Milk in Makati, Rizal, to de Guzman’s does such carrying only as an ancillary activity (in
establishment in Urdaneta on or before 4 December 1970. local idiom, as “a sideline”). Article 1732 also
Accordingly, on 1 December 1970, Cendanñ a loaded in Makati carefully avoids making any distinction between a
the merchandise on to his trucks: 150 cartons were loaded on person or enterprise offering transportation service
a truck driven by Cendanñ a himself; while 600 cartons were on a regular or scheduled basis and one offering such
placed on board the other truck which was driven by Manuel service on an occasional, episodic or unscheduled
Estrada, Cendanñ a ‘s driver and employee. Only 150 boxes of basis. Neither does Article 1732 distinguish between
Liberty filled milk were delivered to de Guzman. The other a carrier offering its services to the “general public,”
600 boxes never reached de Guzman, since the truck which i.e., the general community or population, and one
carried these boxes was hijacked somewhere along the who offers services or solicits business only from a
MacArthur Highway in Paniqui, Tarlac, by armed men who narrow segment of the general population. Article
took with them the truck, its driver, his helper and the cargo. 1733 deliberately refrained from making such
3. Concept of “common carrier” coincides neatly with
the notion of “public service” The concept of
On 6 January 1971, de Guzman commenced action against “common carrier” under Article 1732 may be seen to
Cendanñ a in the CFI of Pangasinan, demanding payment of coincide neatly with the notion of “public service,”
P22,150.00, the claimed value of the lost merchandise, plus under the Public Service Act (Commonwealth Act
damages and attorney’s fees. De Guzman argued that 1416, as amended) which at least partially
Cendanñ a, being a common carrier, and having failed to supplements the law on common carriers set forth in
exercise the extraordinary diligence required of him by the the Civil Code.
law, should be held liable for the value of the undelivered 4. Public Service; Section 13, paragraph (b) of the
goods. In his Answer, Cendanñ a denied that he was a common Public Service Act
carrier and argued that he could not be held responsible for Under Section 13, paragraph (b) of the Public Service
the value of the lost goods, such loss having been due to force Act, “public service” includes “every person that now
majeure. On 10 December 1975, the trial court rendered a or hereafter may own, operate, manage, or control in
Decision’ finding Cendanñ a to be a common carrier and the Philippines, for hire or compensation, with
holding him liable for the value of the undelivered goods general or limited clientele, whether permanent,
(P22,150.00) as well as for P4,000.00 as damages and occasional or accidental, and done for general
P2,000.00 as attorney’s fees. business purposes, any common carrier, railroad,
street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with
or without fixed route and whatever may be its
On appeal before the Court of Appeals, Cendanñ a urged that
classification, freight or carrier service of any class,
the trial court had erred in considering him a common
express service, steamboat, or steamship line,
carrier; in finding that he had habitually offered trucking
pontines, ferries and water craft, engaged in the
services to the public; in not exempting him from liability on
transportation of passengers or freight or both,
the ground of force majeure; and in ordering him to pay
shipyard, marine repair shop, wharf or dock, ice
damages and attorney’s fees. The Court of Appeals reversed
plant, ice-refrigeration plant, canal, irrigation system,
the judgment of the trial court and held that Cendanñ a had
gas, electric light, heat and power, water supply and
been engaged in transporting return loads of freight “as a
power petroleum, sewerage system, wire or wireless
casual occupation — a sideline to his scrap iron business”
communications systems, wire or wireless
and not as a common carrier. De Guzman came to the
broadcasting stations and other similar public
Supreme Court by way of a Petition for Review.
services. “
5. Cendanñ a a common carrier Cendanñ a is properly 10. Enumeration in Article 1734 NCC exclusive; Article
characterized as a common carrier even though he 1735 NCC
merely “back-hauled” goods for other merchants It is important to point out that the above list of
from Manila to Pangasinan, although such causes of loss, destruction or deterioration which
backhauling was done on a periodic or occasional exempt the common carrier for responsibility
rather than regular or scheduled manner, and even therefor, is a closed list. Causes falling outside the
though Cendanñ a’s principal occupation was not the foregoing list, even if they appear to constitute a
carriage of goods for others. There is no dispute that species of force majeure, fall within the scope of
Cendanñ a charged his customers a fee for hauling Article 1735, which provides that “In all cases other
their goods; that fee frequently fell below than those mentioned in numbers 1, 2, 3, 4 and 5 of
commercial freight rates is not relevant. the preceding article, if the goods are lost, destroyed
6. Certificate of public convenience not requisite for or deteriorated, common carriers are presumed to
incurring of liability as common carrier A certificate have been at fault or to have acted negligently, unless
of public convenience is not a requisite for the they prove that they observed extraordinary
incurring of liability under the Civil Code provisions diligence as required in Article 1733.”
governing common carriers. That liability arises the 11. Hold uppers of second truck armed Herein, armed
moment a person or firm acts as a common carrier, men held up the second truck owned by Cendanñ a
without regard to whether or not such carrier has which carried de Guzman’s cargo. The record shows
also complied with the requirements of the that an information for robbery in band was filed in
applicable regulatory statute and implementing the CFI of Tarlac, Branch 2, in Criminal Case 198
regulations and has been granted a certificate of entitled “People of the Philippines v. Felipe
public convenience or other franchise. Herein, to Boncorno, Napoleon Presno, Armando Mesina, Oscar
exempt Cendanñ a from the liabilities of a common Oria and one John Doe.” There, the accused were
carrier because he has not secured the necessary charged with willfully and unlawfully taking and
certificate of public convenience, would be offensive carrying away with them the second truck, driven by
to sound public policy; that would be to reward Manuel Estrada and loaded with the 600 cartons of
private respondent precisely for failing to comply Liberty filled milk destined for delivery at de
with applicable statutory requirements. Guzman’s store in Urdaneta, Pangasinan. The
7. Business of common carrier imbued with public decision of the trial court shows that the accused
interest The business of a common carrier impinges acted with grave, if not irresistible, threat, violence
directly and intimately upon the safety and well or force. 3 of the 5 holduppers were armed with
being and property of those members of the general firearms. The robbers not only took away the truck
community who happen to deal with such carrier. and its cargo but also kidnapped the driver and his
The law imposes duties and liabilities upon common helper, detaining them for several days and later
carriers for the safety and protection of those who releasing them in another province (in Zambales).
utilize their services and the law cannot allow a The hijacked truck was subsequently found by the
common carrier to render such duties and liabilities police in Quezon City. The CFI convicted all the
merely facultative by simply failing to obtain the accused of robbery, though not of robbery in band.
necessary permits and authorizations. 12. Specific requirements of the duty of extraordinary
8. Extraordinary diligence required of common carriers diligence in the vigilance over the goods carried in
Common carriers, “by the nature of their business the specific context of hijacking or armed robbery;
and for reasons of public policy,” are held to a very Armed robbery herein is fortuitous event The duty of
high degree of care and diligence (“extraordinary extraordinary diligence in the vigilance over goods is,
diligence”) in the carriage of goods as well as of under Article 1733, given additional specification not
passengers. The specific import of extraordinary only by Articles 1734 and 1735 but also by Article
diligence in the care of goods transported by a 1745, numbers 4, 5 and 6, Article 1745 provides in
common carrier is, according to Article 1733, relevant part: “Any of the following or similar
“further expressed in Articles 1734, 1735 and 1745, stipulations shall be considered unreasonable, unjust
numbers 5, 6 and 7” of the Civil Code. and contrary to public policy: xxx (5) that the
9. Article 1734 NCC Article 1734 establishes the common carrier shall not be responsible for the acts
general rule that common carriers are responsible or omissions of his or its employees; (6) that the
for the loss, destruction or deterioration of the goods common carrier’s liability for acts committed by
which they carry, “unless the same is due to any of thieves, or of robbers who do not act with grave or
the following causes only: (1) Flood, storm, irresistible threat, violence or force, is dispensed
earthquake, lightning, or other natural disaster or with or diminished; and (7) that the common carrier
calamity; (2) Act of the public enemy in war, whether shall not responsible for the loss, destruction or
international or civil; (3) Act or omission of the deterioration of goods on account of the defective
shipper or owner of the goods; (4) The character of condition of the car, vehicle, ship, airplane or other
the goods or defects in the packing or in the equipment used in the contract of carriage.” Under
containers; and (5) Order or act of competent public Article 1745 (6), a common carrier is held
authority.” responsible — and will not be allowed to divest or to
diminish such responsibility — even for acts of Traversing the complaint, the respondents argued that
strangers like thieves or robbers, except where such petitioner cannot be exempt from taxes under Sec. 133 (J) of
thieves or robbers in fact acted “with grave or the Local Government Code as said exemption applied only to
irresistible threat, violence or force.” The limits of the “transportation contractors and persons engaged in the
duty of extraordinary diligence in the vigilance over transportation by hire and common carriers by air land and
the goods carried are reached where the goods are water.” Respondents assert that pipelines are not included in
lost as a result of a robbery which is attended by the term “common carrier” which refers solely to ordinary
“grave or irresistible threat, violence or force.” In carriers as trucks, trains, ships and the like. Respondents
these circumstances, the occurrence of the loss must further posit that the term “common carrier” under the said
reasonably be regarded as quite beyond the control Code pertains to the mode or manner by which a product is
of the common carrier and properly regarded as a delivered to its destination.
fortuitous event.
13. Common carriers not absolute insurers against all Issue: Whether or not the petitioner is a common carrier so
risks of travel and of transport of goods that in the affirmative, he is not liable to pay the carriers tax
Even common carriers are not made absolute under the Local Government Code of 1991?
insurers against all risks of travel and of transport of
goods, and are not held liable for acts or events Held: Petitioner is a common carrier.
which cannot be foreseen or are inevitable, provided
that they shall have complied with the rigorous A “common carrier” may be defined, broadly, as one who
standard of extraordinary diligence. holds himself out to the public as engaged in the business of
transporting persons or property from place to place, for
compensation, offering his services to the public generally.

First Philippine Industrial Corp. vs. Court of Appeals Article 1732 of the Civil Code defines a “common carrier” as
“any person, corporation, firm or association engaged in the
300 SCRA 661, 1998 business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their
Facts: Petitioner is a grantee of a pipeline concession under services to the public.
R.A. No. 387, as amended, a contract, install and operate oil
pipelines. The original pipeline concession was granted in The test for determining whether a party is a common carrier
1967 and renewed by the Energy Regulatory Board in 1992. of goods is:

Sometime in January 1995, petitioner applied for a mayor’s 1. He must be engaged in the carrying of goods for others as a
permit with the Office of the Mayor of Batangas City. However, public employment, and must hold himself out as ready to
before the mayor’s permit could be issued, the respondent engage in the transportation of goods or persons generally as
City Treasurer required petitioner to pay a local tax based on a business and not as a casual occupation.
its gross receipts for the fiscal year 1993 pursuant to the 2. He must undertake to carry goods of the kind to which his
Local Government Code. The respondent City Treasure business is confined;
assessed a business tax on the petitioner amounting to 3. He must undertake to carry by the method by which his
P956,076.04 payable in four installments based on the gross business is conducted and over his established roads; and
receipts for products pumped at GPS-1 for the fiscal year 4. The transportation must be for hire.
1993 which amounted to P181,681,151.00. in order not to
hamper its operations, petitioner paid the tax under protest
in the amount of P239, 019.01 for the first quarter of 1993. G.R. No. 157917 August 29, 2012
On June 15, 1994, petitioner filed with the RTC of Batangas
City a complaint for tax refund with prayer for writ of
preliminary injunction against respondents City of Batangas
and Adoracion Arellano in her capacity as City Treasurer. In
its complaint, petitioner alleged, inter alia, that: (1) the
APPEALS Respondents.
imposition and collection of the business tax on its gross
receipts violates Sec. 133 of the Local Government Code; (2)
the authority of cities to impose and collect a tax on the gross DECISION
receipts of “contractors and independent contractors” under
Sec. 141(e) and 151 does not include the authority to collect BERSAMIN, J.:
such taxes on transportation contractors for, as defined under
Sec. 131(h), the term “contractors” excludes transportation The operator of a. school bus service is a common carrier in
contactors; and (3) the City Treasurer illegally and the eyes of the law. He is bound to observe extraordinary
erroneously imposed and collected the said tax, thus meriting diligence in the conduct of his business. He is presumed to be
the immediate refund of the tax paid. negligent when death occurs to a passenger. His liability may
include indemnity for loss of earning capacity even if the
deceased passenger may only be an unemployed high school applied the ordinary brakes of the train. He applied the
student at the time of the accident. emergency brakes only when he saw that a collision was
imminent. The passenger bus successfully crossed the
The Case railroad tracks, but the van driven by Alfaro did not. The train
hit the rear end of the van, and the impact threw nine of the
By petition for review on certiorari, Spouses Teodoro and 12 students in the rear, including Aaron, out of the van. Aaron
Nanette Perefia (Perefias) appeal the adverse decision landed in the path of the train, which dragged his body and
promulgated on November 13, 2002, by which the Court of severed his head, instantaneously killing him. Alano fled the
Appeals (CA) affirmed with modification the decision scene on board the train, and did not wait for the police
rendered on December 3, 1999 by the Regional Trial Court investigator to arrive.
(RTC), Branch 260, in Paranñ aque City that had decreed them
jointly and severally liable with Philippine National Railways Devastated by the early and unexpected death of Aaron, the
(PNR), their co-defendant, to Spouses Nicolas and Teresita Zarates commenced this action for damages against Alfaro,
Zarate (Zarates) for the death of their 15-year old son, Aaron the Perenñ as, PNR and Alano. The Perenñ as and PNR filed their
John L. Zarate (Aaron), then a high school student of Don respective answers, with cross-claims against each other, but
Bosco Technical Institute (Don Bosco). Alfaro could not be served with summons.

Antecedents At the pre-trial, the parties stipulated on the facts and issues,
The Perenñ as were engaged in the business of transporting
students from their respective residences in Paranñ aque City A. FACTS:
to Don Bosco in Pasong Tamo, Makati City, and back. In their
business, the Perenñ as used a KIA Ceres Van (van) with Plate (1) That spouses Zarate were the legitimate parents
No. PYA 896, which had the capacity to transport 14 students of Aaron John L. Zarate;
at a time, two of whom would be seated in the front beside (2) Spouses Zarate engaged the services of spouses
the driver, and the others in the rear, with six students on Perenñ a for the adequate and safe transportation
either side. They employed Clemente Alfaro (Alfaro) as driver carriage of the former spouses' son from their
of the van. residence in Paranñ aque to his school at the Don
Bosco Technical Institute in Makati City;
In June 1996, the Zarates contracted the Perenñ as to transport (3) During the effectivity of the contract of carriage
Aaron to and from Don Bosco. On August 22, 1996, as on and in the implementation thereof, Aaron, the minor
previous school days, the van picked Aaron up around 6:00 son of spouses Zarate died in connection with a
a.m. from the Zarates’ residence. Aaron took his place on the vehicular/train collision which occurred while Aaron
left side of the van near the rear door. The van, with its air- was riding the contracted carrier Kia Ceres van of
conditioning unit turned on and the stereo playing loudly, spouses Perenñ a, then driven and operated by the
ultimately carried all the 14 student riders on their way to latter's employee/authorized driver Clemente Alfaro,
Don Bosco. Considering that the students were due at Don which van collided with the train of PNR, at around
Bosco by 7:15 a.m., and that they were already running late 6:45 A.M. of August 22, 1996, within the vicinity of
because of the heavy vehicular traffic on the South the Magallanes Interchange in Makati City, Metro
Superhighway, Alfaro took the van to an alternate route at Manila, Philippines;
about 6:45 a.m. by traversing the narrow path underneath (4) At the time of the vehicular/train collision, the
the Magallanes Interchange that was then commonly used by subject site of the vehicular/train collision was a
Makati-bound vehicles as a short cut into Makati. At the time, railroad crossing used by motorists for crossing the
the narrow path was marked by piles of construction railroad tracks;
materials and parked passenger jeepneys, and the railroad (5) During the said time of the vehicular/train
crossing in the narrow path had no railroad warning signs, or collision, there were no appropriate and safety
watchmen, or other responsible persons manning the warning signs and railings at the site commonly used
crossing. In fact, the bamboo barandilla was up, leaving the for railroad crossing;
railroad crossing open to traversing motorists. (6) At the material time, countless number of Makati
bound public utility and private vehicles used on a
At about the time the van was to traverse the railroad daily basis the site of the collision as an alternative
crossing, PNR Commuter No. 302 (train), operated by Jhonny route and short-cut to Makati;
Alano (Alano), was in the vicinity of the Magallanes (7) The train driver or operator left the scene of the
Interchange travelling northbound. As the train neared the incident on board the commuter train involved
railroad crossing, Alfaro drove the van eastward across the without waiting for the police investigator;
railroad tracks, closely tailing a large passenger bus. His view (8) The site commonly used for railroad crossing by
of the oncoming train was blocked because he overtook the motorists was not in fact intended by the railroad
passenger bus on its left side. The train blew its horn to warn operator for railroad crossing at the time of the
motorists of its approach. When the train was about 50 vehicular collision;
meters away from the passenger bus and the van, Alano
(9) PNR received the demand letter of the spouses or which they may be ordered to pay in favor of
Zarate; plaintiffs by reason of the action;
(10) PNR refused to acknowledge any liability for
the vehicular/train collision; (10) Whether or not defendant PNR should pay
(11) The eventual closure of the railroad crossing plaintiffs directly and fully on the amounts claimed
alleged by PNR was an internal arrangement by the latter in their Complaint by reason of its gross
between the former and its project contractor; and negligence;
(12) The site of the vehicular/train collision was
within the vicinity or less than 100 meters from the (11) Whether or not defendant PNR is liable to
Magallanes station of PNR. defendants spouses for actual, moral and exemplary
damages and attorney's fees.2
(1) Whether or not defendant-driver of the van is, in
the performance of his functions, liable for The petition has no merit.
negligence constituting the proximate cause of the
vehicular collision, which resulted in the death of 1.
plaintiff spouses' son; Were the Pereñas and PNR jointly
and severally liable for damages?
(2) Whether or not the defendant spouses Perenñ a
being the employer of defendant Alfaro are liable for The Zarates brought this action for recovery of damages
any negligence which may be attributed to defendant against both the Perenñ as and the PNR, basing their claim
Alfaro; against the Perenñ as on breach of contract of carriage and
against the PNR on quasi-delict.
(3) Whether or not defendant Philippine National
Railways being the operator of the railroad system is The RTC found the Perenñ as and the PNR negligent. The CA
liable for negligence in failing to provide adequate affirmed the findings.
safety warning signs and railings in the area
commonly used by motorists for railroad crossings,
constituting the proximate cause of the vehicular We concur with the CA.
collision which resulted in the death of the plaintiff
spouses' son; To start with, the Perenñ as’ defense was that they exercised
the diligence of a good father of the family in the selection
(4) Whether or not defendant spouses Perenñ a are and supervision of Alfaro, the van driver, by seeing to it that
liable for breach of the contract of carriage with Alfaro had a driver’s license and that he had not been
plaintiff-spouses in failing to provide adequate and involved in any vehicular accident prior to the fatal collision
safe transportation for the latter's son; with the train; that they even had their own son travel to and
from school on a daily basis; and that Teodoro Perenñ a himself
sometimes accompanied Alfaro in transporting the
(5) Whether or not defendants spouses are liable for passengers to and from school. The RTC gave scant
actual, moral damages, exemplary damages, and consideration to such defense by regarding such defense as
attorney's fees; inappropriate in an action for breach of contract of carriage.

(6) Whether or not defendants spouses Teodorico We find no adequate cause to differ from the conclusions of
and Nanette Perenñ a observed the diligence of the lower courts that the Perenñ as operated as a common
employers and school bus operators; carrier; and that their standard of care was extraordinary
diligence, not the ordinary diligence of a good father of a
(7) Whether or not defendant-spouses are civilly family.
liable for the accidental death of Aaron John Zarate;
Although in this jurisdiction the operator of a school bus
(8) Whether or not defendant PNR was grossly service has been usually regarded as a private
negligent in operating the commuter train involved carrier,9primarily because he only caters to some specific or
in the accident, in allowing or tolerating the privileged individuals, and his operation is neither open to
motoring public to cross, and its failure to install the indefinite public nor for public use, the exact nature of the
safety devices or equipment at the site of the operation of a school bus service has not been finally settled.
accident for the protection of the public; This is the occasion to lay the matter to rest.

(9) Whether or not defendant PNR should be made A carrier is a person or corporation who undertakes to
to reimburse defendant spouses for any and transport or convey goods or persons from one place to
whatever amount the latter may be held answerable another, gratuitously or for hire. The carrier is classified
either as a private/special carrier or as a common/public permanent or occasional, and done for the general business
carrier.10 A private carrier is one who, without making the purposes, any common carrier, railroad, street railway,
activity a vocation, or without holding himself or itself out to traction railway, subway motor vehicle, either for freight or
the public as ready to act for all who may desire his or its passenger, or both, with or without fixed route and whatever
services, undertakes, by special agreement in a particular may be its classification, freight or carrier service of any class,
instance only, to transport goods or persons from one place express service, steamboat, or steamship line, pontines,
to another either gratuitously or for hire.11 The provisions on ferries and water craft, engaged in the transportation of
ordinary contracts of the Civil Code govern the contract of passengers or freight or both, shipyard, marine repair shop,
private carriage.The diligence required of a private carrier is ice-refrigeration plant, canal, irrigation system, gas, electric
only ordinary, that is, the diligence of a good father of the light, heat and power, water supply and power petroleum,
family. In contrast, a common carrier is a person, corporation, sewerage system, wire or wireless communications systems,
firm or association engaged in the business of carrying or wire or wireless broadcasting stations and other similar
transporting passengers or goods or both, by land, water, or public services. x x x.17
air, for compensation, offering such services to the
public.12 Contracts of common carriage are governed by the Given the breadth of the aforequoted characterization of a
provisions on common carriers of the Civil Code, the Public common carrier, the Court has considered as common
Service Act,13 and other special laws relating to carriers pipeline operators,18 custom brokers and
transportation. A common carrier is required to observe warehousemen, and barge operators20 even if they had

extraordinary diligence, and is presumed to be at fault or to limited clienteè le.

have acted negligently in case of the loss of the effects of
passengers, or the death or injuries to passengers. 14 As all the foregoing indicate, the true test for a common
carrier is not the quantity or extent of the business actually
In relation to common carriers, the Court defined public use transacted, or the number and character of the conveyances
in the following terms in United States v. Tan Piaco,15viz: used in the activity, but whether the undertaking is a part of
the activity engaged in by the carrier that he has held out to
"Public use" is the same as "use by the public". The essential the general public as his business or occupation. If the
feature of the public use is not confined to privileged undertaking is a single transaction, not a part of the general
individuals, but is open to the indefinite public. It is this business or occupation engaged in, as advertised and held out
indefinite or unrestricted quality that gives it its public to the general public, the individual or the entity rendering
character. In determining whether a use is public, we must such service is a private, not a common, carrier. The question
look not only to the character of the business to be done, but must be determined by the character of the business actually
also to the proposed mode of doing it. If the use is merely carried on by the carrier, not by any secret intention or
optional with the owners, or the public benefit is merely mental reservation it may entertain or assert when charged
incidental, it is not a public use, authorizing the exercise of with the duties and obligations that the law imposes. 21
the jurisdiction of the public utility commission. There must
be, in general, a right which the law compels the owner to Applying these considerations to the case before us, there is
give to the general public. It is not enough that the general no question that the Perenñ as as the operators of a school bus
prosperity of the public is promoted. Public use is not service were: (a) engaged in transporting passengers
synonymous with public interest. The true criterion by which generally as a business, not just as a casual occupation; (b)
to judge the character of the use is whether the public may undertaking to carry passengers over established roads by
enjoy it by right or only by permission. the method by which the business was conducted; and (c)
transporting students for a fee. Despite catering to a limited
In De Guzman v. Court of Appeals,16 the Court noted that clienteè le, the Perenñ as operated as a common carrier because
Article 1732 of the Civil Code avoided any distinction they held themselves out as a ready transportation
between a person or an enterprise offering transportation on indiscriminately to the students of a particular school living
a regular or an isolated basis; and has not distinguished a within or near where they operated the service and for a fee.
carrier offering his services to the general public, that is, the
general community or population, from one offering his The common carrier’s standard of care and vigilance as to the
services only to a narrow segment of the general population. safety of the passengers is defined by law. Given the nature of
the business and for reasons of public policy, the common
Nonetheless, the concept of a common carrier embodied in carrier is bound "to observe extraordinary diligence in the
Article 1732 of the Civil Code coincides neatly with the notion vigilance over the goods and for the safety of the passengers
of public service under the Public Service Act, which transported by them, according to all the circumstances of
supplements the law on common carriers found in the Civil each case."22 Article 1755 of the Civil Code specifies that the
Code. Public service, according to Section 13, paragraph (b) of common carrier should "carry the passengers safely as far as
the Public Service Act, includes: human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all
x x x every person that now or hereafter may own, operate, the circumstances." To successfully fend off liability in an
manage, or control in the Philippines, for hire or action upon the death or injury to a passenger, the common
compensation, with general or limited clienteè le, whether carrier must prove his or its observance of that extraordinary
diligence; otherwise, the legal presumption that he or it was of getting clear of the train. As a result, the bus avoided a
at fault or acted negligently would stand. 23 No device, whether collision with the train but the van got slammed at its rear,
by stipulation, posting of notices, statements on tickets, or causing the fatality. Lastly, he did not slow down or go to a full
otherwise, may dispense with or lessen the responsibility of stop before traversing the railroad tracks despite knowing
the common carrier as defined under Article 1755 of the Civil that his slackening of speed and going to a full stop were in
Code. 24 observance of the right of way at railroad tracks as defined by
the traffic laws and regulations. 28He thereby violated a
And, secondly, the Perenñ as have not presented any specific traffic regulation on right of way, by virtue of which
compelling defense or reason by which the Court might now he was immediately presumed to be negligent.29
reverse the CA’s findings on their liability. On the contrary, an
examination of the records shows that the evidence fully The omissions of care on the part of the van driver
supported the findings of the CA. constituted negligence,30 which, according to Layugan v.
Intermediate Appellate Court,31 is "the omission to do
As earlier stated, the Perenñ as, acting as a common carrier, something which a reasonable man, guided by those
were already presumed to be negligent at the time of the considerations which ordinarily regulate the conduct of
accident because death had occurred to their passenger. 25 The human affairs, would do, or the doing of something which a
presumption of negligence, being a presumption of law, laid prudent and reasonable man would not do, 32 or as Judge
the burden of evidence on their shoulders to establish that Cooley defines it, ‘(t)he failure to observe for the protection of
they had not been negligent. 26 It was the law no less that the interests of another person, that degree of care,
required them to prove their observance of extraordinary precaution, and vigilance which the circumstances justly
diligence in seeing to the safe and secure carriage of the demand, whereby such other person suffers injury.’" 33
passengers to their destination. Until they did so in a credible
manner, they stood to be held legally responsible for the The test by which to determine the existence of negligence in
death of Aaron and thus to be held liable for all the natural a particular case has been aptly stated in the leading case of
consequences of such death. Picart v. Smith,34 thuswise:

There is no question that the Perenñ as did not overturn the The test by which to determine the existence of negligence in
presumption of their negligence by credible evidence. Their a particular case may be stated as follows: Did the defendant
defense of having observed the diligence of a good father of a in doing the alleged negligent act use that reasonable care
family in the selection and supervision of their driver was not and caution which an ordinarily prudent person would have
legally sufficient. According to Article 1759 of the Civil Code, used in the same situation? If not, then he is guilty of
their liability as a common carrier did not cease upon proof negligence. The law here in effect adopts the standard
that they exercised all the diligence of a good father of a supposed to be supplied by the imaginary conduct of the
family in the selection and supervision of their employee. discreet paterfamilias of the Roman law. The existence of
This was the reason why the RTC treated this defense of the negligence in a given case is not determined by reference to
Perenñ as as inappropriate in this action for breach of contract the personal judgment of the actor in the situation before
of carriage. him. The law considers what would be reckless, blameworthy,
or negligent in the man of ordinary intelligence and prudence
The Perenñ as were liable for the death of Aaron despite the and determines liability by that.
fact that their driver might have acted beyond the scope of his
authority or even in violation of the orders of the common The question as to what would constitute the conduct of a
carrier.27 In this connection, the records showed their driver’s prudent man in a given situation must of course be always
actual negligence. There was a showing, to begin with, that determined in the light of human experience and in view of
their driver traversed the railroad tracks at a point at which the facts involved in the particular case. Abstract speculation
the PNR did not permit motorists going into the Makati area cannot here be of much value but this much can be profitably
to cross the railroad tracks. Although that point had been said: Reasonable men govern their conduct by the
used by motorists as a shortcut into the Makati area, that fact circumstances which are before them or known to them.
alone did not excuse their driver into taking that route. On They are not, and are not supposed to be, omniscient of the
the other hand, with his familiarity with that shortcut, their future. Hence they can be expected to take care only when
driver was fully aware of the risks to his passengers but he there is something before them to suggest or warn of danger.
still disregarded the risks. Compounding his lack of care was Could a prudent man, in the case under consideration,
that loud music was playing inside the air-conditioned van at foresee harm as a result of the course actually pursued? If so,
the time of the accident. The loudness most probably reduced it was the duty of the actor to take precautions to guard
his ability to hear the warning horns of the oncoming train to against that harm. Reasonable foresight of harm, followed by
allow him to correctly appreciate the lurking dangers on the the ignoring of the suggestion born of this prevision, is always
railroad tracks. Also, he sought to overtake a passenger bus necessary before negligence can be held to exist. Stated in
on the left side as both vehicles traversed the railroad tracks. these terms, the proper criterion for determining the
In so doing, he lost his view of the train that was then coming existence of negligence in a given case is this: Conduct is said
from the opposite side of the passenger bus, leading him to to be negligent when a prudent man in the position of the
miscalculate his chances of beating the bus in their race, and tortfeasor would have foreseen that an effect harmful to
another was sufficiently probable to warrant his foregoing 2.
the conduct or guarding against its consequences. (Emphasis Was the indemnity for loss of
supplied) Aaron’s earning capacity proper?

Pursuant to the Picart v. Smith test of negligence, the Perenñ as’ The RTC awarded indemnity for loss of Aaron’s earning
driver was entirely negligent when he traversed the railroad capacity. Although agreeing with the RTC on the liability, the
tracks at a point not allowed for a motorist’s crossing despite CA modified the amount. Both lower courts took into
being fully aware of the grave harm to be thereby caused to consideration that Aaron, while only a high school student,
his passengers; and when he disregarded the foresight of had been enrolled in one of the reputable schools in the
harm to his passengers by overtaking the bus on the left side Philippines and that he had been a normal and able-bodied
as to leave himself blind to the approach of the oncoming child prior to his death. The basis for the computation of
train that he knew was on the opposite side of the bus. Aaron’s earning capacity was not what he would have
become or what he would have wanted to be if not for his
Unrelenting, the Perenñ as cite Phil. National Railways v. untimely death, but the minimum wage in effect at the time of
Intermediate Appellate Court,35 where the Court held the PNR his death. Moreover, the RTC’s computation of Aaron’s life
solely liable for the damages caused to a passenger bus and expectancy rate was not reckoned from his age of 15 years at
its passengers when its train hit the rear end of the bus that the time of his death, but on 21 years, his age when he would
was then traversing the railroad crossing. But the have graduated from college.
circumstances of that case and this one share no similarities.
In Philippine National Railways v. Intermediate Appellate We find the considerations taken into account by the lower
Court, no evidence of contributory negligence was adduced courts to be reasonable and fully warranted.
against the owner of the bus. Instead, it was the owner of the
bus who proved the exercise of extraordinary diligence by Yet, the Perenñ as submit that the indemnity for loss of earning
preponderant evidence. Also, the records are replete with the capacity was speculative and unfounded.1âwphi1 They cited
showing of negligence on the part of both the Perenñ as and the People v. Teehankee, Jr.,37 where the Court deleted the
PNR. Another distinction is that the passenger bus in indemnity for victim Jussi Leino’s loss of earning capacity as a
Philippine National Railways v. Intermediate Appellate Court pilot for being speculative due to his having graduated from
was traversing the dedicated railroad crossing when it was high school at the International School in Manila only two
hit by the train, but the Perenñ as’ school van traversed the years before the shooting, and was at the time of the shooting
railroad tracks at a point not intended for that purpose. only enrolled in the first semester at the Manila Aero Club to
pursue his ambition to become a professional pilot. That
At any rate, the lower courts correctly held both the Perenñ as meant, according to the Court, that he was for all intents and
and the PNR "jointly and severally" liable for damages arising purposes only a high school graduate.
from the death of Aaron. They had been impleaded in the
same complaint as defendants against whom the Zarates had We reject the Perenñ as’ submission.
the right to relief, whether jointly, severally, or in the
alternative, in respect to or arising out of the accident, and First of all, a careful perusal of the Teehankee, Jr. case shows
questions of fact and of law were common as to the that the situation there of Jussi Leino was not akin to that of
Zarates.36 Although the basis of the right to relief of the Aaron here. The CA and the RTC were not speculating that
Zarates (i.e., breach of contract of carriage) against the Aaron would be some highly-paid professional, like a pilot (or,
Perenñ as was distinct from the basis of the Zarates’ right to for that matter, an engineer, a physician, or a lawyer). Instead,
relief against the PNR (i.e., quasi-delict under Article 2176, the computation of Aaron’s earning capacity was premised on
Civil Code), they nonetheless could be held jointly and him being a lowly minimum wage earner despite his being
severally liable by virtue of their respective negligence then enrolled at a prestigious high school like Don Bosco in
combining to cause the death of Aaron. As to the PNR, the Makati, a fact that would have likely ensured his success in
RTC rightly found the PNR also guilty of negligence despite his later years in life and at work.
the school van of the Perenñ as traversing the railroad tracks at
a point not dedicated by the PNR as a railroad crossing for
pedestrians and motorists, because the PNR did not ensure And, secondly, the fact that Aaron was then without a history
the safety of others through the placing of crossbars, signal of earnings should not be taken against his parents and in
lights, warning signs, and other permanent safety barriers to favor of the defendants whose negligence not only cost Aaron
prevent vehicles or pedestrians from crossing there. The RTC his life and his right to work and earn money, but also
observed that the fact that a crossing guard had been deprived his parents of their right to his presence and his
assigned to man that point from 7 a.m. to 5 p.m. was a good services as well. Our law itself states that the loss of the
indicium that the PNR was aware of the risks to others as well earning capacity of the deceased shall be the liability of the
as the need to control the vehicular and other traffic there. guilty party in favor of the heirs of the deceased, and shall in
Verily, the Perenñ as and the PNR were joint tortfeasors. every case be assessed and awarded by the court "unless the
deceased on account of permanent physical disability not
caused by the defendant, had no earning capacity at the time
of his death."38 Accordingly, we emphatically hold in favor of
the indemnification for Aaron’s loss of earning capacity
despite him having been unemployed, because compensation WHEREFORE, we DENY the petition for review
of this nature is awarded not for loss of time or earnings but on certiorari; AFFIRM the decision promulgated on
for loss of the deceased’s power or ability to earn money. 39 November 13, 2002; and ORDER the petitioners to pay the
costs of suit.
This favorable treatment of the Zarates’ claim is not
unprecedented. In Cariaga v. Laguna Tayabas Bus Company SO ORDERED.
and Manila Railroad Company, 40 fourth-year medical student
Edgardo Carriaga’s earning capacity, although he survived the
accident but his injuries rendered him permanently
incapacitated, was computed to be that of the physician that PHILTRANCO SERVICE ENTERPRISES, INC.,
he dreamed to become. The Court considered his scholastic Petitioner,
record sufficient to justify the assumption that he could have -versus-
finished the medical course and would have passed the FELIX PARAS AND INLAND TRAILWAYS, INC., AND HON.
medical board examinations in due time, and that he could COURT OF APPEALS,
have possibly earned a modest income as a medical Respondents.
practitioner. Also, in People v. Sanchez, 41 the Court opined
that murder and rape victim Eileen Sarmienta and murder BERSAMIN, J.:
victim Allan Gomez could have easily landed good-paying
jobs had they graduated in due time, and that their jobs In an action for breach of contract of carriage
would probably pay them high monthly salaries from ₱ commenced by a passenger against his common carrier, the
10,000.00 to ₱ 15,000.00 upon their graduation. Their plaintiff can recover damages from a third-party defendant
earning capacities were computed at rates higher than the brought into the suit by the common carrier upon a claim
minimum wage at the time of their deaths due to their being based on tort or quasi-delict. The liability of the third-party
already senior agriculture students of the University of the defendant is independent from the liability of the common
Philippines in Los Banñ os, the country’s leading educational carrier to the passenger.
institution in agriculture.
Philtranco Service Enterprises, Inc. (Philtranco)
3. appeals the affirmance with modifications by the Court of
Were the amounts of damages excessive? Appeals (CA) of the decision of the Regional Trial Court (RTC)
awarding moral, actual and temperate damages, as well as
The Perenñ as plead for the reduction of the moral and attorneys fees and costs of suit, to respondent Felix Paras
exemplary damages awarded to the Zarates in the respective (Paras), and temperate damages to respondent Inland
amounts of ₱ 2,500,000.00 and ₱ 1,000,000.00 on the ground Trailways, Inc. (Inland), respectively the plaintiff and the
that such amounts were excessive. defendant/third-party plaintiff in this action for breach of
contract of carriage, upon a finding that the negligence of the
petitioner and its driver had caused the serious physical
The plea is unwarranted.
injuries Paras sustained and the material damage Inlands bus
suffered in a vehicular accident.
The moral damages of ₱ 2,500,000.00 were really just and
reasonable under the established circumstances of this case Antecedents
because they were intended by the law to assuage the
Zarates’ deep mental anguish over their son’s unexpected and The antecedent facts, as summarized by the CA, are
violent death, and their moral shock over the senseless as follows:
accident. That amount would not be too much, considering
that it would help the Zarates obtain the means, diversions or Plaintiff-appellant [respondent]
amusements that would alleviate their suffering for the loss Felix Paras (Paras for brevity), who hails
of their child. At any rate, reducing the amount as excessive from Cainta, Rizal is engaged in the buy and
might prove to be an injustice, given the passage of a long sell of fish products. Sometime on 08
time from when their mental anguish was inflicted on them February 1987, on his way home
on August 22, 1996. to Manila from Bicol Region, he boarded a
bus with Body No. 101 and Plate No. EVE
Anent the ₱ 1,000,000.00 allowed as exemplary damages, we 508, owned and operated by Inland
should not reduce the amount if only to render effective the Trailways, Inc. (Inland for brevity) and
desired example for the public good. As a common carrier, the driven by its driver Calvin Coner (Coner for
Perenñ as needed to be vigorously reminded to observe their brevity).
duty to exercise extraordinary diligence to prevent a similarly
senseless accident from happening again. Only by an award of At approximately 3:50 oclock in the
exemplary damages in that amount would suffice to instill in morning of 09 February 1987, while the said
them and others similarly situated like them the ever-present bus was travelling along Maharlika Highway,
need for greater and constant vigilance in the conduct of a Tiaong, Quezon, it was bumped at the rear
business imbued with public interest. by another bus with Plate No. EVB 259,
owned and operated by Philtranco Service complaint, Inland, sought for exoneration of
Enterprises, Inc. (Philtranco for brevity). As its liabilities to Paras, asserting that the
a result of the strong and violent impact, the latters cause of action should be directed
Inland bus was pushed forward and against Philtranco considering that the
smashed into a cargo truck parked along the accident was caused by Miralles lack of care,
outer right portion of the highway and the negligence and reckless imprudence. (pp. 50
shoulder thereof. Consequently, the said to 56, records).
accident bought considerable damage to the
vehicles involved and caused physical
injuries to the passengers and crew of the After trial, the RTC (Branch 71) in Antipolo, Rizal
two buses, including the death of Coner who rendered its judgment on July 18, 1997,[1] viz:
was the driver of the Inland Bus at the time
of the incident. WHEREFORE, third-party defendant
Philtranco and Apolinar Miralles are hereby
Paras was not spared from the ordered to pay plaintiff jointly and severally,
pernicious effects of the accident. After an the following amounts:
emergency treatment at the San
Pablo Medical Center, San Pablo City, Laguna, 1.P54,000.00 as actual damages;
Paras was taken to
the NationalOrthopedic Hospital. At the 2.P50,000.00 as moral damages;
latter hospital, he was found and diagnosed
by Dr. Antonio Tanchuling, Jr. to be affected 3.P20,000.00 as attorneys fees and
with the following injuries: a) costs.
contusion/hematoma; b) dislocation of hip
upon fracture of the fibula on the right leg; SO ORDERED.
c) fractured small bone on the right leg; and
d) close fracture on the tibial plateau of the All the parties appealed to the CA on different
left leg. (Exh. A, p. 157, record) grounds.

On 04 March 1987 and 15 April

1987, Paras underwent two (2) operations On his part, Paras ascribed the following errors to
affecting the fractured portions of his body. the RTC, to wit:
(Exhs. A-2 and A-3, pp. 159 and 160
respectively, record)
Unable to obtain sufficient financial
assistance from Inland for the costs of his
operations, hospitalization, doctors fees and
other miscellaneous expenses, on 31 July
1989, Paras filed a complaint for damages
based on breach of contract of
carriage against Inland.
In its answer, defendant Inland
denied responsibility, by alleging, among
others, that its driver Coner had observed an
utmost and extraordinary care and diligence
to ensure the safety of its passengers. In
support of its disclaimer of responsibility,
Inland invoked the Police Investigation
Report which established the fact that the
Philtranco bus driver of [sic] Apolinar
Miralles was the one which violently
bumped the rear portion of the Inland bus,
and therefore, the direct and proximate
cause of Paras injuries.
On the other hand, Inland assigned the following
On 02 March 1990, upon leave of
errors to the RTC, namely:
court, Inland filed a third-party complaint
against Philtranco and Apolinar Miralles
(Third Party defendants). In this third-party
CLEAR FINDING THAT: On September 25, 2002, the CA promulgated its
decision,[2] disposing:
It is clear from the evidence that
the plaintiff sustained injuries WHEREFORE, in consideration of
because of the reckless, the foregoing premises, the assailed decision
negligence, and lack of dated 18 July 19(9)7 is perforce affirmed
precaution of third party with the following modifications:
defendant Apolinar Miralles, an
employee of Philtranco. 1. Third party defendants-
appellants Philtranco and Apolinar Miralles
AND, COMPLETELY DISREGARDED THE are ordered to pay plaintiff-appellant Felix
UNCONTROVERTED ORAL AND Paras jointly and severally the following
SUSTAINED BY THE THIRD PARTY a) P1,397.95 as actual damages;
PLAINTIFF. b) P50,000.00 as temperate damages;
c) P50,000.00 as moral damages; and
Lastly, Philtranco stated that the RTC erred d) P20,000.00 as attorneys fees and costs of suit.
2. On the third party plaintiff-
appellant Inlands claims, the third party
I defendant-appellants Philtranco and
THE COURT A QUO MISERABLY ERRED IN Apolinar Miralles are hereby ordered to pay
AWARDING ACTUAL DAMAGES GREATER the former (Inland) jointly and severally the
THAN WHAT WAS ALLEGED IN THE amount of P250,000.00 as and by way of

II The CA agreed with the RTCs finding that no trace of

THE COURT A QUO SERIOUSLY ERRED IN negligence at the time of the accident was attributable to
AWARDING MORAL DAMAGES TO A CAUSE Inlands driver, rendering Inland not guilty of breach of
OF ACTION OF CULPA-CONTRACTUAL EVEN contract of carriage; that faulty brakes had caused
WITHOUT ANY EVIDENCE OF GROSS BAD Philtrancos bus to forcefully bump Inlands bus from behind,
FAITH; HENCE, CONTRARY TO THE making it hit the rear portion of a parked cargo truck; that the
ESTABLISHED DOCTRINE IN THE CASES OF impact had resulted in considerable material damage to the
PHIL. RABBIT BUS LINES VS. ESGUERRA; three vehicles; and that Paras and others had sustained
SOBERANO VS. BENGUET AUTO LINE AND various physical injuries.
Accordingly, the CA: (a) sustained the award of moral
III damages of P50,000.00 in favor of Paras pursuant to Article
THE COURT A QUO MISERABLY ERRED IN 2219 of the Civil Code based on quasi-delict committed by
HOLDING THAT MIRALLES WAS THE ONE Philtranco and its driver; (b) reduced the actual damages to
AT FAULT MERELY ON THE STRENGHT OF be paid by Philtranco to Paras from P54,000.00 to P1,397.95
THE TESTIMONY OF THE POLICE because only the latter amount had been duly supported by
INVESTIGATOR WHICH IS IN TURN BASED receipts; (c) granted temperate damages of P50,000.00 (in
ON THE STATEMENTS OF ALLEGED lieu of actual damages in view of the absence of competent
WITNESSES WHO WERE NEVER proof of actual damages for his hospitalization and
PRESENTED ON THE WITNESS STAND. therapy) to be paid by Philtranco to Paras; and (d) awarded
temperate damages of P250,000.00 under the same premise
IV to be paid by Philtranco to Inland for the material damage
THE COURT A QUO COMMITTED A caused to Inlands bus.
TESTIMONY OF APPELLANTS WITNESSES Philtranco moved for reconsideration, [3] but the CA
WHO TESTIFIED AS TO THE DEFENSE OF denied its motion for reconsideration on January 21, 2004.[4]
been the negligent, reckless and imprudent manner
Hence, this appeal, in which the petitioner submits defendant Apolinar Miralles drove and operated his driven
that the CA committed grave abuse of discretion amounting unit, the Philtranco Bus with Plate No. 259, owned and
to lack of jurisdiction in awarding moral damages to Paras operated by third-party defendant Philtranco Service
despite the fact that the complaint had been anchored on Enterprises, Inc.[10] The apparent objective of Inland was not
breach of contract of carriage; and that the CA committed a to merely subrogate the third-party defendants for itself, as
reversible error in substituting its own judgment by motu Philtranco appears to suggest, [11] but, rather, to obtain a
proprio awarding temperate damages of P250,000.00 to different relief whereby the third-party defendants would be
Inland and P50,000.00 to Paras despite the clear fact that held directly, fully and solely liable to Paras and Inland for
temperate damages were not raised on appeal by Paras and whatever damages each had suffered from the negligence
Inland. committed by Philtranco and its driver. In other words,
Philtranco and its driver were charged here as joint
Ruling tortfeasors who would be jointly and severally be liable to
Paras and Inland.
The appeal lacks merit.
Impleading Philtranco and its driver through the third-party
The Court does not disturb the unanimous findings by the CA
complaint filed on March 2, 1990 was correct. The device of
and the RTC on the negligence of Philtranco and its driver
the third-party action, also known as impleader, was in
being the direct cause of the physical injuries of Paras and the
accord with Section 12, Rule 6 of the Revised Rules of Court,
material damage of Inland.
the rule then applicable, viz:
Nonetheless, we feel bound to pass upon the
Section 12. Third-party complaint. A
disparate results the CA and the RTC reached on the liabilities
third-party complaint is a claim that a
of Philtranco and its driver.
defending party may, with leave of court, file
against a person not a party to the action,
called the third-party defendant, for
Paras can recover moral damages
contribution, indemnity, subrogation or any
in this suit based on quasi-delict
other relief, in respect of his opponents
Philtranco contends that Paras could not recover
moral damages because his suit was based on breach of
contract of carriage, pursuant to which moral damages could
be recovered only if he had died, or if the common carrier had
Explaining the application of Section 12, Rule
been guilty of fraud or bad faith. It argues that Paras had
6, supra, the Court said in Balbastro v. Court of Appeals,[13] to
suffered only physical injuries; that he had not adduced
evidence of fraud or bad faith on the part of the common
carrier; and that, consequently, Paras could not recover moral
Section 12 of Rule 6 of the Revised
damages directly from it (Philtranco), considering that it was
Rules of Court authorizes a defendant to
only being subrogated for Inland.
bring into a lawsuit any person not a party
to the action . . . for contribution, indemnity,
The Court cannot uphold the petitioners contention.
subrogation or any other relief in respect of
As a general rule, indeed, moral damages are not
his opponent's claim. From its explicit
recoverable in an action predicated on a breach of contract.
language it does not compel the defendant
This is because such action is not included in Article 2219 of
to bring the third-parties into the litigation,
the Civil Code[5] as one of the actions in which moral damages
rather it simply permits the inclusion of
may be recovered. By way of exception, moral damages are
anyone who meets the standard set forth in
recoverable in an action predicated on a breach of contract:
the rule. The secondary or derivative
(a) where the mishap results in the death of a passenger, as
liability of the third-party is central whether
provided in Article 1764,[6] in relation to Article 2206, (3),
the basis is indemnity, subrogation,
of the Civil Code; and (b) where the common carrier has
contribution, express or implied warranty or
been guilty of fraud or bad faith, [8] as provided in Article
some other theory. The impleader of new
2220[9] of the Civil Code.
parties under this rule is proper only
Although this action does not fall under either of the
when a right to relief exists under the
exceptions, the award of moral damages to Paras was
applicable substantive law. This rule is
nonetheless proper and valid. There is no question
merely a procedural mechanism, and
that Inland filed its third-party complaint against Philtranco
cannot be utilized unless there is some
and its driver in order to establish in this action that they,
substantive basis under applicable law.
instead of Inland, should be directly liable to Paras for the
physical injuries he had sustained because of their negligence.
Apart from the requirement that
To be precise, Philtranco and its driver were brought into the
the third-party complainant should
action on the theory of liability that the proximate cause of
assert a derivative or secondary claim for
the collision between Inlands bus and Philtrancos bus had
relief from the third-party defendant
there are other limitations on said partys mentioned prove that they observed all the
ability to implead. The rule requires that diligence of a good father of a family to
the third-party defendant is not a party prevent damage. (1903a)
to the action for otherwise the proper
procedure for asserting a claim against Paras cause of action against Inland (breach of contract of
one who is already a party to the suit is carriage) did not need to be the same as the cause of action of
by means of counterclaim or cross-claim Inland against Philtranco and its driver (tort or quasi-delict)
under sections 6 and 7 of Rule 6. In in the impleader. It is settled that a defendant in a contract
addition to the aforecited requirement, action may join as third-party defendants those who may be
the claim against the third-party liable to him in tort for the plaintiffs claim against him, or
defendant must be based upon plaintiff's even directly to the plaintiff. [15] Indeed, Prof. Wright, et al.,
claim against the original defendant commenting on the provision of the Federal Rules of
(third-party claimant). The crucial Procedure of the United States from which Section 12, supra,
characteristic of a claim under section 12 was derived, observed so, to wit:[16]
of Rule 6, is that the original defendant is
attempting to transfer to the third-party The third-party claim need not be
defendant the liability asserted against based on the same theory as the main claim.
him by the original plaintiff. For example, there are cases in which the
third-party claim is based on an express
indemnity contract and the original
Accordingly, the requisites for a third-party action complaint is framed in terms of negligence.
are, firstly, that the party to be impleaded must not yet be a Similarly, there need not be any legal
party to the action; secondly, that the claim against the third- relationship between the third-party
party defendant must belong to the original defendant and any of the other parties to the
defendant; thirdly, the claim of the original defendant against action. Impleader also is proper even though
the third-party defendant must be based upon the plaintiffs the third partys liability is contingent, and
claim against the original defendant; and, fourthly, the technically does not come into existence
defendant is attempting to transfer to the third-party until the original defendants liability has
defendant the liability asserted against him by the original been established. In addition, the words is or
plaintiff.[14] may be liable in Rule 14(a) make it clear that
impleader is proper even though the third-
As the foregoing indicates, the claim that the third- party defendants liability is not
party complaint asserts against the third-party defendant automatically established once the third-
must be predicated on substantive law. Here, the substantive party plaintiffs liability to the original
law on which the right of Inland to seek such other relief plaintiff has been determined.
through its third-party complaint rested were Article 2176
and Article 2180 of the Civil Code, which read: Nor was it a pre-requisite for attachment of the
liability to Philtranco and its driver that Inland be first
Article 2176. Whoever by act or declared and found liable to Paras for the breach of its
omission causes damage to another, there contract of carriage with him. [17] As the Court has cogently
being fault or negligence, is obliged to pay discoursed in Samala v. Judge Victor:[18]
for the damage done. Such fault or
negligence, if there is no pre-existing Appellants argue that since
contractual relation between the parties, is plaintiffs filed a complaint for damages
called a quasi-delict and is governed by the against the defendants on a breach of
provisions of this chapter. (1902a) contract of carriage, they cannot recover
from the third-party defendants on a cause
Article 2180. The obligation of action based on quasi-delict. The third
imposed by article 2176 is demandable not party defendants, they allege, are never
only for ones own acts or omissions, but also parties liable with respect to plaintiff s claim
for those of persons for whom one is although they are with respect to the
responsible. defendants for indemnification, subrogation,
xxx contribution or other reliefs. Consequently,
Employers shall be liable for the damages they are not directly liable to the plaintiffs.
caused by their employees and household Their liability commences only when the
helpers acting within the scope of their defendants are adjudged liable and not
assigned tasks, even though the former are when they are absolved from liability as in
not engaged in any business or industry. the case at bar.
The responsibility treated of in this article Quite apparent from these
shall cease when the persons herein arguments is the misconception entertained
by appellants with respect to the nature and issue as to their rights
office of a third party complaint. respecting the claim.

Section 16, Rule 6 of the Revised The provision in the

Rules of Court defines a third party rule that, The third-party
complaint as a claim that a defending party defendant may assert any
may, with leave of court, file against a person defense which the third-
not a party to the action, called the third- party plaintiff may assert to
party defendant, for contribution, the plaintiffs claim, applies
indemnification, subrogation, or any other to the other subject,
relief, in respect of his opponents claim. In namely, the alleged liability
the case of Viluan vs. Court of Appeals, et of third party defendant.
al., 16 SCRA 742 [1966], this Court had The next sentence in the
occasion to elucidate on the subjects rule, The third-party
covered by this Rule, thus: defendant is bound by the
adjudication of the third
... As explained in the party plaintiffs liability to
Atlantic Coast Line R. Co. the plaintiff, as well as of
vs. U.S. Fidelity & Guaranty his own to the plaintiff or to
Co., 52 F. Supp. 177 (1943:) the third-party plaintiff
applies to both subjects. If
From the sources of third party is brought in as
Rule 14 and the decisions liable only to defendant and
herein cited, it is clear that judgment is rendered
this rule, like the admiralty adjudicating plaintiff's
rule, covers two distinct right to recover against
subjects, the addition of defendant and defendants
parties defendant to the rights to recover against
main cause of action, and third party, he is bound by
the bringing in of a third both adjudications.That
party for a defendants part of the sentence refers
remedy over. xxx to the second subject. If
third party is brought in as
If the third party liable to plaintiff, then third
complaint alleges facts party is bound by the
showing a third partys adjudication as between
direct liability to plaintiff him and plaintiff. That
on the claim set out in refers to the first subject. If
plaintiffs petition, then third party is brought in as
third party shall make his liable to plaintiff and also
defenses as provided in over to defendant, then
Rule 12 and his third party is bound by
counterclaims against both adjudications. xxx
plaintiff as provided in
Rule 13. In the case of Under this Rule, a person not a
alleged direct liability, no party to an action may be impleaded by the
amendment (to the defendant either (a) on an allegation of
complaint) is necessary liability to the latter; (b) on the ground of
or required. The subject- direct liability to the plaintiff-; or, (c) both
matter of the claim is (a) and (b). The situation in (a) is covered by
contained in plaintiff's the phrase for contribution, indemnity or
complaint, the ground of subrogation; while (b) and (c) are subsumed
third partys liability on under the catch all or any other relief, in
that claim is alleged in respect of his opponents claim.
third party complaint,
and third partys defense The case at bar is one in which
to set up in his answer to the third party defendants are brought
plaintiff's complaint. At into the action as directly liable to the
that point and without plaintiffs upon the allegation that the
amendment, the plaintiff primary and immediate cause as shown
and third party are at by the police investigation of said
vehicular collision between (sic) the The receipts formally submitted and offered by Paras
above-mentioned three vehicles was the were limited to the costs of medicines purchased on various
recklessness and negligence and lack of times in the period from February 1987 to July 1989
imprudence (sic) of the third-party (Exhibits E to E-35, inclusive) totaling only P1,397.95.[22] The
defendant Virgilio (should be Leonardo) receipts by no means included hospital and medical
Esguerra y Ledesma then driver of the expenses, or the costs of at least two surgeries as well as
passenger bus. The effects are that rehabilitative therapy. Consequently, the CA fixed actual
plaintiff and third party are at issue as to damages only at that small sum of P1,397.95. On its part,
their rights respecting the claim and the Inland offered no definite proof on the repairs done on its
third party is bound by the adjudication vehicle, or the extent of the material damage except the
as between him and plaintiff. It is not testimony of its witness, Emerlinda Maravilla, to the effect
indispensable in the premises that the that the bus had been damaged beyond economic repair.
defendant be first adjudged liable to [23]
The CA rejected Inlands showing of unrealized income
plaintiff before the third-party defendant worth P3,945,858.50 for 30 months (based on
may be held liable to the plaintiff, as alleged average weekly income of P239,143.02 multiplied by
precisely, the theory of defendant is that its guaranteed revenue amounting to 55% thereof, then
it is the third party defendant, and not he, spread over a period of 30 months, the equivalent to the
who is directly liable to plaintiff. The remaining 40% of the vehicles un-depreciated or net book
situation contemplated by appellants value), finding such showing arbitrary, uncertain and
would properly pertain to situation (a) speculative.[24] As a result, the CA allowed no compensation to
above wherein the third party defendant Inland for unrealized income.
is being sued for contribution, indemnity
or subrogation, or simply stated, for a Nonetheless, the CA was convinced that Paras should
defendant's remedy over.[19] not suffer from the lack of definite proof of his actual
expenses for the surgeries and rehabilitative therapy; and
that Inland should not be deprived of recourse to recover its
It is worth adding that allowing the recovery of loss of the economic value of its damaged vehicle. As the
damages by Paras based on quasi-delict, despite his records indicated, Paras was first rushed for emergency
complaint being upon contractual breach, served the judicial treatment to the San Pablo Medical Center in San Pablo City,
policy of avoiding multiplicity of suits and circuity of actions Laguna, and was later brought to the National Orthopedic
by disposing of the entire subject matter in a single litigation. Hospital in Quezon City where he was diagnosed to have
suffered a dislocated hip, fracture of the fibula on the right
leg, fracture of the small bone of the right leg, and closed
2. fracture on the tibial plateau of the left leg. He underwent
Award of temperate damages was in surgeries on March 4, 1987 and April 15, 1987 to repair the
order fractures.[25] Thus, the CA awarded to him temperate damages
of P50,000.00 in the absence of definite proof of his actual
expenses towards that end. As to Inland, Maravillas testimony
Philtranco assails the award of temperate damages by the CA of the bus having been damaged beyond economic repair
considering that, firstly, Paras and Inland had not raised the showed a definitely substantial pecuniary loss, for which the
matter in the trial court and in their respective CA fixed temperate damages of P250,000.00. We cannot
appeals; secondly, the CA could not substitute the temperate disturb the CAs determination, for we are in no position
damages granted to Paras if Paras could not properly today to judge its reasonableness on account of the lapse of a
establish his actual damages despite evidence of his actual long time from when the accident occurred.[26]
expenses being easily available to him; and, thirdly, the CA
gravely abused its discretion in granting motu proprio the In awarding temperate damages in lieu of actual
temperate damages of P250,000.00 to Inland although Inland damages, the CA did not err, because Paras and Inland were
had not claimed temperate damages in its pleading or during definitely shown to have sustained substantial pecuniary
trial and even on appeal. losses. It would really be a travesty of justice were the CA
now to be held bereft of the discretion to calculate moderate
The Court cannot side with Philtranco. or temperate damages, and thereby leave Paras and Inland
without redress from the wrongful act of Philtranco and its
Actual damages, to be recoverable, must not only be capable driver.[27] We are satisfied that the CA exerted effort and
of proof, but must actually be proved with a reasonable practiced great care to ensure that the causal link between
degree of certainty. The reason is that the court cannot simply the physical injuries of Paras and the material loss of Inland,
rely on speculation, conjecture or guesswork in determining on the one hand, and the negligence of Philtranco and its
the fact and amount of damages, but there must be driver, on the other hand, existed in fact. It also rejected
competent proof of the actual amount of loss, credence can be arbitrary or speculative proof of loss. Clearly, the costs of
given only to claims which are duly supported by receipts.[21] Paras surgeries and consequential rehabilitation, as well as
the fact that repairing Inlands vehicle would no longer be
economical justly warranted the CA to calculate temperate
damages of P50,000.00 and P250,000.00 respectively for without redress from the
Paras and Inland. defendants wrongful act.

There is no question that Article 2224 of the Civil 3.

Code expressly authorizes the courts to award temperate Paras loss of earning capacity
damages despite the lack of certain proof of actual damages, must be compensated
to wit:
In the body of its decision, the CA concluded that
Article 2224. Temperate or considering that Paras had a minimum monthly income
moderate damages, which are more than of P8,000.00 as a trader he was entitled to recover
nominal but less than compensatory compensation for unearned income during the 3-month
damages, may be recovered when the court period of his hospital confinement and the 6-month period of
finds that some pecuniary loss has been his recovery and rehabilitation; and aggregated his unearned
suffered but its amount cannot, from the income for those periods to P72,000.00.[29] Yet, the CA
nature of the case, be proved with certainty. omitted the unearned income from the dispositive portion.

The rationale for Article 2224 has been stated in Premiere The omission should be rectified, for there was
Development Bank v. Court of Appeals[28] in the following credible proof of Paras loss of income during his disability.
manner: According to Article 2205, (1), of the Civil Code, damages may
be recovered for loss or impairment of earning capacity in
Even if not recoverable as cases of temporary or permanent personal injury. Indeed,
compensatory damages, Panacor may still be indemnification for damages comprehends not only the loss
awarded damages in the concept of suffered (actual damages or damnum emergens) but also the
temperate or moderate damages. When the claimants lost profits (compensatory damages or lucrum
court finds that some pecuniary loss has cessans).[30] Even so, the formula that has gained acceptance
been suffered but the amount cannot, from over time has limited recovery to net earning capacity; hence,
the nature of the case, be proved with the entire amount of P72,000.00 is not allowable. The
certainty, temperate damages may be premise is obviously that net earning capacity is the persons
recovered. Temperate damages may be capacity to acquire money, less the necessary expense for his
allowed in cases where from the nature of own living.[31] To simplify the determination, therefore, the
the case, definite proof of pecuniary loss net earning capacity of Paras during the 9-month period of
cannot be adduced, although the court is his confinement, surgeries and consequential therapy is
convinced that the aggrieved party suffered pegged at only half of his unearned monthly gross income
some pecuniary loss. of P8,000.00 as a trader, or a total of P36,000.00 for the 9-
month period, the other half being treated as the necessary
The Code Commission, in explaining expense for his own living in that period.
the concept of temperate damages under
Article 2224, makes the following comment: It is relevant to clarify that awarding the temperate
damages (for the substantial pecuniary losses corresponding
In some States of to Parass surgeries and rehabilitation and for the
the American Union, irreparability of Inlands damaged bus) and the actual
temperate damages are damages to compensate lost earnings and costs of medicines
allowed. There are cases give rise to no incompatibility. These damages cover distinct
where from the nature of pecuniary losses suffered by Paras and Inland, [32] and do not
the case, definite proof of infringe the statutory prohibition against recovering damages
pecuniary loss cannot be twice for the same act or omission.[33]
offered, although the court
is convinced that there has 4.
been such loss. For Increase in award of attorneys fees
instance, injury to ones
commercial credit or to the
goodwill of a business firm Although it is a sound policy not to set a premium on the
is often hard to show with right to litigate,[34] we consider the grant to Paras and Inland
certainty in terms of of reasonable attorneys fees warranted. Their entitlement to
money. Should damages be attorneys fees was by virtue of their having been compelled
denied for that reason? The to litigate or to incur expenses to protect their interests, [35] as
judge should be well as by virtue of the Court now further deeming attorneys
empowered to calculate fees to be just and equitable.[36]
moderate damages in such
cases, rather than that the In view of the lapse of a long time in the prosecution of the
plaintiff should suffer, claim,[37] the Court considers it reasonable and proper to
grant attorneys fees to each of Paras and Inland equivalent to
10% of the total amounts hereby awarded to them, in lieu of
only P20,000.00 for that purpose granted to Paras. CEBU SALVAGE CORPORATION

5. Vs
Legal interest on the amounts awarded
Pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals,
legal interest at the rate of 6% per annum accrues on the
amounts adjudged reckoned from July 18, 1997, the date
when the RTC rendered its judgment; and legal interest at the
rate of 12% per annum shall be imposed from the finality of
the judgment until its full satisfaction, the interim period
being regarded as the equivalent of a forbearance of credit.

May a carrier be held liable for the loss of cargo resulting

from the sinking of a ship it does not own?
MODIFICATION the decision of the Court of Appeals
promulgated on September 25, 2002, by
This is the issue presented for the Courts resolution in this
petition for review on certiorari [1] assailing the March 16,
INC. and APOLINAR MIRALLES to pay, jointly and severally,
2001 decision[2] and September 17, 2001 resolution [3] of the
as follows:
Court of Appeals (CA) in CA-G.R. CV No. 40473 which in turn
affirmed the December 27, 1989 decision[4] of the Regional
1. To Felix Paras:
Trial Court (RTC), Branch 145, Makati, MetroManila.[5]
The pertinent facts follow.
(a) P1,397.95, as reimbursement for the
costs of medicines purchased between
On November 12, 1984, petitioner Cebu Salvage
February 1987 and July 1989;
Corporation (as carrier) and Maria Cristina Chemicals
Industries, Inc. [MCCII] (as charterer) entered into a voyage
(b) P50,000.00 as temperate damages;
charter[6] wherein petitioner was to load 800 to 1,100 metric
tons of silica quartz on board the
(c) P50,000.00 as moral damages;
M/T Espiritu Santo[7] at Ayungon, Negros Occidental for
transport to and discharge at Tagoloan, Misamis Oriental to
(d) P36,000.00 for lost earnings;
consignee Ferrochrome Phils., Inc.[8]
(e) 10% of the total of items (a) to (d) hereof
Pursuant to the contract, on December 23, 1984,
as attorneys fees; and
petitioner received and loaded 1,100 metric tons of silica
quartz on board the M/T Espiritu Santo which
(f) Interest of 6% per annum from July 18,
left Ayungon for Tagoloan the next day.[9] The shipment never
1997 on the total of items (a) to (d)
reached its destination, however, because the
hereof until finality of this decision, and
M/T Espiritu Santo sank in the afternoon of December 24,
12% per annum thereafter until full
1984 off the beach of Opol, Misamis Oriental, resulting in the
total loss of the cargo.[10]
2. To Inland Trailways, Inc.:
MCCII filed a claim for the loss of the shipment with its
insurer, respondent Philippine Home Assurance Corporation.
(a) P250,000.00 as temperate damages; [11]
Respondent paid the claim in the amount of P211,500and
was subrogated to the rights of MCCII. [12] Thereafter, it filed a
(b) 10% of item (a) hereof; and
case in the RTC[13] against petitioner for reimbursement of the
amount it paid MCCII.
(c) Interest of 6% per annum on item (a)
hereof from July 18, 1997 until finality
After trial, the RTC rendered judgment in favor of
of this decision, and 12% per
respondent. It ordered petitioner to pay
annum thereafter until full payment.
respondent P211,500 plus legal interest, attorneys fees
equivalent to 25% of the award and costs of suit.
3. The petitioner shall pay the costs of suit.
On appeal, the CA affirmed the decision of the
RTC. Hence, this petition.
Petitioner and MCCII entered into a voyage charter, contract of carriage if it should be required to know who the
also known as a contract of affreightment wherein the ship actual owner of the vessel is. [25] In fact, in this case, the voyage
was leased for a single voyage for the conveyance of goods, in charter itself denominated petitioner as the owner/operator
consideration of the payment of freight. [14] Under a voyage of the vessel.[26]
charter, the shipowner retains the possession, command and
navigation of the ship, the charterer or freighter merely Petitioner next contends that if there was a contract
having use of the space in the vessel in return for his payment of carriage, then it was between MCCII and ALS as evidenced
of freight.[15] An owner who retains possession of the ship by the bill of lading ALS issued.[27]
remains liable as carrier and must answer for loss or non-
delivery of the goods received for transportation.[16] Again, we disagree.

Petitioner argues that the CA erred when it affirmed The bill of lading was merely a receipt issued by ALS
the RTC finding that the voyage charter it entered into with to evidence the fact that the goods had been received for
MCCII was a contract of carriage. [17] It insists that the transportation. It was not signed by MCCII, as in fact it was
agreement was merely a contract of hire wherein MCCII hired simply signed by the supercargo of ALS. [28] This is consistent
the vessel from its owner, ALS Timber Enterprises (ALS). with the fact that MCCII did not contract directly with ALS.
Not being the owner of the M/T Espiritu Santo, petitioner While it is true that a bill of lading may serve as the contract
did not have control and supervision over the vessel, its of carriage between the parties, [29] it cannot prevail over the
master and crew.[19] Thus, it could not be held liable for the express provision of the voyage charter that MCCII and
loss of the shipment caused by the sinking of a ship it did not petitioner executed:
[I]n cases where a Bill of Lading has been
We disagree. issued by a carrier covering goods shipped
aboard a vessel under a charter party, and
the charterer is also the holder of the bill of
Based on the agreement signed by the parties and lading, the bill of lading operates as the
the testimony of petitioners operations manager, it is clear receipt for the goods, and as document of
that it was a contract of carriage petitioner signed with title passing the property of the goods, but
MCCII.It actively negotiated and solicited MCCIIs account, not as varying the contract between
offered its services to ship the silica quartz and proposed to the charterer and the shipowner. The Bill of
utilize the M/T Espiritu Santo in lieu of the M/T Seebees or Lading becomes, therefore, only a receipt
the M/T Shirley (as previously agreed upon in the voyage and not the contract of carriage in a charter
charter) since these vessels had broken down. [20] of the entire vessel, for the contract is the
Charter Party, and is the law between the
There is no dispute that petitioner was a common parties who are bound by its terms and
carrier. At the time of the loss of the cargo, it was engaged in condition provided that these are not
the business of carrying and transporting goods by water, for contrary to law, morals, good customs,
compensation, and offered its services to the public.[21] public order and public policy. [30]
Finally, petitioner asserts that MCCII should be held
From the nature of their business and for reasons of liable for its own loss since the voyage charter stipulated that
public policy, common carriers are bound to observe cargo insurance was for the charterers account.[31] This
extraordinary diligence over the goods they transport deserves scant consideration. This simply meant that
according to the circumstances of each case. [22] In the event of the charterer would take care of having the goods insured. It
loss of the goods, common carriers are responsible, unless could not exculpate the carrier from liability for the breach of
they can prove that this was brought about by the causes its contract of carriage. The law, in fact, prohibits it and
specified in Article 1734 of the Civil Code. [23] In all other condemns it as unjust and contrary to public policy. [32]
cases, common carriers are presumed to be at fault or to have
acted negligently, unless they prove that they observed To summarize, a contract of carriage of goods was
extraordinary diligence.[24] shown to exist; the cargo was loaded on board the vessel; loss
or non-delivery of the cargo was proven; and petitioner failed
Petitioner was the one which contracted with MCCII to prove that it exercised extraordinary diligence to prevent
for the transport of the cargo. It had control over what vessel such loss or that it was due to some casualty
it would use. All throughout its dealings with MCCII, it or force majeure. The voyage charter here being a contract
represented itself as a common carrier. The fact that it did not of affreightment, the carrier was answerable for the loss of
own the vessel it decided to use to consummate the contract the goods received for transportation.[33]
of carriage did not negate its character and duties as a
common carrier. The MCCII (respondents subrogor) could The idea proposed by petitioner is not only
not be reasonably expected to inquire about the ownership of preposterous, it is also dangerous. It says that a carrier that
the vessels which petitioner carrier offered to utilize. As a enters into a contract of carriage is not liable to
practical matter, it is very difficult and often impossible for the charterer or shipper if it does not own the vessel it
the general public to enforce its rights of action under a chooses to use. MCCII never dealt with ALS and yet petitioner
insists that MCCII should sue ALS for reimbursement for its Subrogation Receipt issued by Unilab in favor of private
loss. Certainly, to permit a common carrier to escape its respondent, the latter filed a complaint for Damages against
responsibility for the goods it agreed to transport (by the APL, UTI and petitioner with the RTC of Makati.
expedient of alleging non-ownership of the vessel it
employed) would radically derogate from the carrier's duty of Issue: Whether or not petitioner is a common carrier.
extraordinary diligence. It would also open the door to
collusion between the carrier and the supposed owner and to Held: Admittedly, petitioner is a freight forwarder. The term
the possible shifting of liability from the carrier to one "freight forwarder" refers to a firm holding itself out to the
without any financial capability to answer for the resulting general public (other than as a pipeline, rail, motor, or water
damages.[34] carrier) to provide transportation of property for
compensation and, in the ordinary course of its business, (1)
WHEREFORE, the petition is hereby DENIED. to assemble and consolidate, or to provide for assembling and
consolidating, shipments, and to perform or provide for
Costs against petitioner. break-bulk and distribution operations of the shipments; (2)
to assume responsibility for the transportation of goods from
the place of receipt to the place of destination; and (3) to use
for any part of the transportation a carrier subject to the
G.R. No. 166250 July 26, 2010 federal law pertaining to common carriers.
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), A freight forwarder’s liability is limited to damages
INC., Petitioner, arising from its own negligence, including negligence in
vs. choosing the carrier; however, where the forwarder contracts
COURT OF APPEALS and PIONEER INSURANCE AND to deliver goods to their destination instead of merely
SURETY CORPORATION, Respondents. arranging for their transportation, it becomes liable as a
common carrier for loss or damage to goods. A freight
Facts: On August 31, 1992, the shipper Sylvex Purchasing forwarder assumes the responsibility of a carrier, which
Corporation delivered to UTI a shipment of 27 drums of actually executes the transport, even though the forwarder
various raw materials for pharmaceutical manufacturing, does not carry the merchandise itself.
consisting of: "1) 3 drums (of) extracts, flavoring liquid, Undoubtedly, UTI is liable as a common carrier.
flammable liquid x x x banana flavoring; 2) 2 drums (of) Common carriers, as a general rule, are presumed to have
flammable liquids x x x turpentine oil; 2 pallets. STC: 40 bags been at fault or negligent if the goods they transported
dried yeast; and 3) 20 drums (of) Vitabs: Vitamin B Complex deteriorated or got lost or destroyed. That is, unless they
Extract." UTI issued Bill of Lading No. C320/C15991- prove that they exercised extraordinary diligence in
2, covering the aforesaid shipment. The subject shipment was transporting the goods. In order to avoid responsibility for
insured with private respondent Pioneer Insurance and any loss or damage, therefore, they have the burden of
Surety Corporation in favor of Unilab against all risks in the proving that they observed such diligence. Mere proof of
amount of P1,779,664.77 under and by virtue of Marine Risk delivery of the goods in good order to a common carrier and
Note Number MC RM UL 0627 92 and Open Cargo Policy No. of their arrival in bad order at their destination constitutes a
HO-022-RIU. prima facie case of fault or negligence against the carrier. If
On the same day that the bill of lading was issued, no adequate explanation is given as to how the deterioration,
the shipment was loaded in a sealed 1x40 container van, with loss, or destruction of the goods happened, the transporter
no. APLU-982012, boarded on APL’s vessel M/V "Pres. shall be held responsible.
Jackson," Voyage 42, and transshipped to APL’s M/V "Pres.
Taft" for delivery to petitioner in favor of the consignee
United Laboratories, Inc. (Unilab).
On September 30, 1992, the shipment arrived at the
port of Manila. On October 6, 1992, petitioner received the
said shipment in its warehouse after it stamped the Permit to
Deliver Imported Goods procured by the Champs Customs
Brokerage. Three days thereafter, or on October 9, 1992,
Oceanica Cargo Marine Surveyors Corporation (OCMSC)
conducted a stripping survey of the shipment located in
petitioner’s warehouse.
Consequently, Unilab’s quality control representative
rejected one paper bag containing dried yeast and one steel
drum containing Vitamin B Complex as unfit for the intended
purpose. On November 7, 1992, Unilab filed a formal
claim for the damage against private respondent and UTI. On
November 20, 1992, UTI denied liability on the basis of the
gate pass issued by Jardine that the goods were in complete
and good condition; while private respondent paid the
claimed amount on March 23, 1993. By virtue of the Loss and